0000720005us-gaap:0000720005rjf:PrivateClientGroupMemberus-gaap:OperatingSegmentsMemberrjf:CapitalMarketsMemberrjf:BrokerageRevenueSecuritiesCommissionsMember2022-04-012022-06-30InvestmentBankingRevenueMergersAndAcquisitionAndAdvisoryMember2022-04-012022-06-30
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark one)
| | | | | |
☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF |
| THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended June 30, 20222023
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 Number: 1-9109
RAYMOND JAMES FINANCIAL, INC.
(Exact name of registrant as specified in its charter)
| | | | | | | | |
Florida | | 59-1517485 |
(State or other jurisdiction of incorporation or organization) | | (I.R.S. Employer Identification No.) |
880 Carillon Parkway, St. Petersburg, Florida 33716
(Address of principal executive offices) (Zip Code)
(727) 567-1000
(Registrant’s telephone number, including area code)
None
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Exchange Act:
| | | | | | | | |
Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
Common Stock, $.01 par value | RJF | New York Stock Exchange |
Depositary Shares, Each Representing a 1/40th Interest in a Share of 6.75% Fixed-to-Floating Rate Series A Non-Cumulative Perpetual Preferred Stock | RJF PrA | New York Stock Exchange |
Depositary Shares, Each Representing a 1/40th Interest in a Share of 6.375% Fixed-to-Floating Rate Series B Non-Cumulative Perpetual Preferred Stock | RJF PrB | New York Stock Exchange |
Indicate by check mark whether the 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 x No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or such shorter period that the registrant was required to submit such files). Yes x 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 filer | x | Accelerated filer | ☐ |
Non-accelerated filer | ☐ | 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 ☒
Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date.
215,824,993208,841,543 shares of common stock as of August 4, 20222, 2023
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
| | | | | | | | | | | |
INDEX |
| | | PAGE |
PART I | | FINANCIAL INFORMATION | |
Item 1. | | | |
| | Condensed Consolidated Statements of Financial Condition (Unaudited) | |
| | Condensed Consolidated Statements of Income and Comprehensive Income (Unaudited) | |
| | Condensed Consolidated Statements of Changes in Shareholders’ Equity (Unaudited) | |
| | Condensed Consolidated Statements of Cash Flows (Unaudited) | |
| | | |
| | Note 1 - Organization and basis of presentation | |
| | Note 2 - Update of significant accounting policies | |
| | | |
| | Note 3 - AcquisitionsFair value | |
| | Note 4 - Fair valueAvailable-for-sale securities | |
| | Note 5 - Available-for-sale securitiesDerivative assets and derivative liabilities | |
| | Note 6 - Derivative assetsCollateralized agreements and derivative liabilitiesfinancings | |
| | Note 7 - Collateralized agreements and financingsBank loans, net | |
| | Note 8 - Bank loans,Loans to financial advisors, net | |
| | Note 9 - Loans to financial advisors, netVariable interest entities | |
| | Note 10 - Variable interest entities | |
| | Note 11 - Goodwill and identifiable intangible assets, net | |
| | Note 11 - Other assets | |
| | Note 12 - Other assetsLeases | |
| | Note 13 - LeasesBank deposits | |
| | Note 14 - Bank depositsOther borrowings | |
| | | |
| | | |
| | Note 15 - Other borrowingsIncome taxes | |
| | Note 16 - Commitments, contingencies and guarantees | |
| | Note 17 - Shareholders’ equity | |
| | Note 1618 - Senior notes payableRevenues | |
| | Note 17 - Income taxes | |
| | Note 18 - Commitments, contingencies and guarantees | |
| | Note 19 - Shareholders’ equityInterest income and interest expense | |
| | Note 20 - RevenuesShare-based compensation | |
| | Note 21 - Interest income and interest expenseRegulatory capital requirements | |
| | Note 22 - Share-based compensationEarnings per share | |
| | Note 23 - Regulatory capital requirements | |
| | Note 24 - Earnings per share | |
| | Note 25 - Segment information | |
Item 2. | | | |
Item 3. | | | |
Item 4. | | | |
PART II | | | |
Item 1. | | | |
Item 1A. | | | |
Item 2. | | Unregistered Sales of Equity Securities and Use of Proceeds | |
Item 3. | | | |
Item 4. | | Mine Safety Disclosures | |
Item 5. | | | |
Item 6. | | | |
| | | |
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Unaudited)
| $ in millions, except per share amounts | $ in millions, except per share amounts | | June 30, 2022 | | September 30, 2021 | $ in millions, except per share amounts | | June 30, 2023 | | September 30, 2022 |
Assets: | Assets: | | | | | Assets: | | | | |
Cash and cash equivalents | Cash and cash equivalents | | $ | 5,958 | | | $ | 7,201 | | Cash and cash equivalents | | $ | 8,375 | | | $ | 6,178 | |
Assets segregated for regulatory purposes and restricted cash ($2,000 and $2,100 at fair value) | | 16,251 | | | 11,348 | | |
Assets segregated for regulatory purposes and restricted cash | | Assets segregated for regulatory purposes and restricted cash | | 3,839 | | | 8,481 | |
Collateralized agreements | Collateralized agreements | | 631 | | | 480 | | Collateralized agreements | | 410 | | | 704 | |
Financial instruments, at fair value: | Financial instruments, at fair value: | | Financial instruments, at fair value: | |
Trading assets ($349 and $326 pledged as collateral) | | 458 | | | 610 | | |
Available-for-sale securities ($51 and $20 pledged as collateral) | | 10,464 | | | 8,315 | | |
Trading assets ($980 and $1,188 pledged as collateral) | | Trading assets ($980 and $1,188 pledged as collateral) | | 1,156 | | | 1,270 | |
Available-for-sale securities ($23 and $74 pledged as collateral) | | Available-for-sale securities ($23 and $74 pledged as collateral) | | 9,566 | | | 9,885 | |
Derivative assets | Derivative assets | | 152 | | | 255 | | Derivative assets | | 229 | | | 188 | |
Other investments ($22 and $22 pledged as collateral) | | 365 | | | 357 | | |
Other investments ($6 and $14 pledged as collateral) | | Other investments ($6 and $14 pledged as collateral) | | 306 | | | 292 | |
Brokerage client receivables, net | Brokerage client receivables, net | | 2,954 | | | 2,831 | | Brokerage client receivables, net | | 2,364 | | | 2,934 | |
Other receivables, net | Other receivables, net | | 1,230 | | | 999 | | Other receivables, net | | 1,612 | | | 1,615 | |
Bank loans, net | Bank loans, net | | 41,843 | | | 24,994 | | Bank loans, net | | 43,345 | | | 43,239 | |
Loans to financial advisors, net | Loans to financial advisors, net | | 1,125 | | | 1,057 | | Loans to financial advisors, net | | 1,122 | | | 1,152 | |
Deferred income taxes, net | Deferred income taxes, net | | 479 | | | 305 | | Deferred income taxes, net | | 612 | | | 630 | |
Goodwill and identifiable intangible assets, net | Goodwill and identifiable intangible assets, net | | 1,810 | | | 882 | | Goodwill and identifiable intangible assets, net | | 1,928 | | | 1,931 | |
Other assets | Other assets | | 2,391 | | | 2,257 | | Other assets | | 2,769 | | | 2,452 | |
Total assets | Total assets | | $ | 86,111 | | | $ | 61,891 | | Total assets | | $ | 77,633 | | | $ | 80,951 | |
| Liabilities and shareholders’ equity: | Liabilities and shareholders’ equity: | | Liabilities and shareholders’ equity: | |
Bank deposits | Bank deposits | | $ | 49,887 | | | $ | 32,495 | | Bank deposits | | $ | 53,768 | | | $ | 51,357 | |
Collateralized financings | Collateralized financings | | 437 | | | 277 | | Collateralized financings | | 181 | | | 466 | |
Financial instrument liabilities, at fair value: | Financial instrument liabilities, at fair value: | | Financial instrument liabilities, at fair value: | |
Trading liabilities | Trading liabilities | | 158 | | | 176 | | Trading liabilities | | 768 | | | 836 | |
Derivative liabilities | Derivative liabilities | | 379 | | | 228 | | Derivative liabilities | | 393 | | | 530 | |
Brokerage client payables | Brokerage client payables | | 19,055 | | | 13,991 | | Brokerage client payables | | 6,035 | | | 11,446 | |
Accrued compensation, commissions and benefits | Accrued compensation, commissions and benefits | | 1,604 | | | 1,825 | | Accrued compensation, commissions and benefits | | 1,700 | | | 1,787 | |
Other payables | Other payables | | 1,708 | | | 1,701 | | Other payables | | 1,727 | | | 1,768 | |
Other borrowings | Other borrowings | | 1,353 | | | 858 | | Other borrowings | | 1,100 | | | 1,291 | |
Senior notes payable | Senior notes payable | | 2,038 | | | 2,037 | | Senior notes payable | | 2,039 | | | 2,038 | |
Total liabilities | Total liabilities | | 76,619 | | | 53,588 | | Total liabilities | | 67,711 | | | 71,519 | |
Commitments and contingencies (see Note 18) | | 0 | | 0 | |
Commitments and contingencies (see Note 16) | | Commitments and contingencies (see Note 16) | |
Shareholders’ equity | Shareholders’ equity | | Shareholders’ equity | |
Preferred stock | Preferred stock | | 120 | | | — | | Preferred stock | | 79 | | | 120 | |
Common stock; $.01 par value; 650,000,000 shares authorized, 247,945,777 shares issued, and 215,478,025 shares outstanding as of June 30, 2022; 350,000,000 shares authorized, 239,062,254 shares issued, and 205,738,821 shares outstanding as of September 30, 2021 | | 2 | | | 2 | | |
Common stock; $.01 par value; 650,000,000 shares authorized; 248,561,711 shares issued and 208,498,326 shares outstanding as of June 30, 2023; 248,018,564 shares issued and 215,122,523 shares outstanding as of September 30, 2022 | | Common stock; $.01 par value; 650,000,000 shares authorized; 248,561,711 shares issued and 208,498,326 shares outstanding as of June 30, 2023; 248,018,564 shares issued and 215,122,523 shares outstanding as of September 30, 2022 | | 2 | | | 2 | |
Additional paid-in capital | Additional paid-in capital | | 2,948 | | | 2,088 | | Additional paid-in capital | | 3,099 | | | 2,987 | |
Retained earnings | Retained earnings | | 8,478 | | | 7,633 | | Retained earnings | | 9,870 | | | 8,843 | |
Treasury stock, at cost; 32,467,752 and 33,323,433 common shares as of June 30, 2022 and September 30, 2021, respectively | | (1,457) | | | (1,437) | | |
Treasury stock, at cost; 40,063,385 and 32,896,041 common shares as of June 30, 2023 and September 30, 2022, respectively | | Treasury stock, at cost; 40,063,385 and 32,896,041 common shares as of June 30, 2023 and September 30, 2022, respectively | | (2,259) | | | (1,512) | |
Accumulated other comprehensive loss | Accumulated other comprehensive loss | | (576) | | | (41) | | Accumulated other comprehensive loss | | (842) | | | (982) | |
Total equity attributable to Raymond James Financial, Inc. | Total equity attributable to Raymond James Financial, Inc. | | 9,515 | | | 8,245 | | Total equity attributable to Raymond James Financial, Inc. | | 9,949 | | | 9,458 | |
Noncontrolling interests | Noncontrolling interests | | (23) | | | 58 | | Noncontrolling interests | | (27) | | | (26) | |
Total shareholders’ equity | Total shareholders’ equity | | 9,492 | | | 8,303 | | Total shareholders’ equity | | 9,922 | | | 9,432 | |
Total liabilities and shareholders’ equity | Total liabilities and shareholders’ equity | | $ | 86,111 | | | $ | 61,891 | | Total liabilities and shareholders’ equity | | $ | 77,633 | | | $ | 80,951 | |
See accompanying Notes to Condensed Consolidated Financial Statements (Unaudited).
3
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(Unaudited)
| | | | Three months ended June 30, | | Nine months ended June 30, | | | Three months ended June 30, | | Nine months ended June 30, |
in millions, except per share amounts | in millions, except per share amounts | | 2022 | | 2021 | | 2022 | | 2021 | in millions, except per share amounts | | 2023 | | 2022 | | 2023 | | 2022 |
Revenues: | Revenues: | | | | | | | | | Revenues: | | | | | | | | |
Asset management and related administrative fees | Asset management and related administrative fees | | $ | 1,427 | | | $ | 1,262 | | | $ | 4,273 | | | $ | 3,502 | | Asset management and related administrative fees | | $ | 1,373 | | | $ | 1,427 | | | $ | 3,917 | | | $ | 4,273 | |
Brokerage revenues: | Brokerage revenues: | | Brokerage revenues: | |
Securities commissions | Securities commissions | | 385 | | | 415 | | | 1,232 | | | 1,239 | | Securities commissions | | 356 | | | 385 | | | 1,077 | | | 1,232 | |
Principal transactions | Principal transactions | | 128 | | | 137 | | | 403 | | | 432 | | Principal transactions | | 105 | | | 128 | | | 364 | | | 403 | |
Total brokerage revenues | Total brokerage revenues | | 513 | | | 552 | | | 1,635 | | | 1,671 | | Total brokerage revenues | | 461 | | | 513 | | | 1,441 | | | 1,635 | |
Account and service fees | Account and service fees | | 211 | | | 161 | | | 567 | | | 465 | | Account and service fees | | 264 | | | 211 | | | 811 | | | 567 | |
Investment banking | Investment banking | | 223 | | | 276 | | | 883 | | | 779 | | Investment banking | | 151 | | | 223 | | | 446 | | | 883 | |
Interest income | Interest income | | 374 | | | 205 | | | 841 | | | 608 | | Interest income | | 987 | | | 374 | | | 2,729 | | | 841 | |
Other | Other | | 30 | | | 55 | | | 108 | | | 155 | | Other | | 57 | | | 30 | | | 133 | | | 108 | |
Total revenues | Total revenues | | 2,778 | | | 2,511 | | | 8,307 | | | 7,180 | | Total revenues | | 3,293 | | | 2,778 | | | 9,477 | | | 8,307 | |
Interest expense | Interest expense | | (60) | | | (40) | | | (135) | | | (115) | | Interest expense | | (386) | | | (60) | | | (911) | | | (135) | |
Net revenues | Net revenues | | 2,718 | | | 2,471 | | | 8,172 | | | 7,065 | | Net revenues | | 2,907 | | | 2,718 | | | 8,566 | | | 8,172 | |
Non-interest expenses: | Non-interest expenses: | | | | | | | | | Non-interest expenses: | | | | | | | | |
Compensation, commissions and benefits | Compensation, commissions and benefits | | 1,834 | | | 1,661 | | | 5,570 | | | 4,809 | | Compensation, commissions and benefits | | 1,851 | | | 1,834 | | | 5,407 | | | 5,570 | |
Non-compensation expenses: | Non-compensation expenses: | | Non-compensation expenses: | |
Communications and information processing | Communications and information processing | | 129 | | | 109 | | | 368 | | | 315 | | Communications and information processing | | 149 | | | 129 | | | 441 | | | 368 | |
Occupancy and equipment | Occupancy and equipment | | 65 | | | 58 | | | 186 | | | 172 | | Occupancy and equipment | | 68 | | | 65 | | | 202 | | | 186 | |
Business development | Business development | | 58 | | | 31 | | | 127 | | | 75 | | Business development | | 66 | | | 58 | | | 176 | | | 127 | |
Investment sub-advisory fees | Investment sub-advisory fees | | 38 | | | 34 | | | 116 | | | 93 | | Investment sub-advisory fees | | 40 | | | 38 | | | 110 | | | 116 | |
Professional fees | Professional fees | | 38 | | | 30 | | | 93 | | | 85 | | Professional fees | | 35 | | | 38 | | | 105 | | | 93 | |
Bank loan provision/(benefit) for credit losses | | 56 | | | (19) | | | 66 | | | (37) | | |
Losses on extinguishment of debt | | — | | | 98 | | | — | | | 98 | | |
| Bank loan provision for credit losses | | Bank loan provision for credit losses | | 54 | | | 56 | | | 96 | | | 66 | |
| Other | Other | | 85 | | | 84 | | | 240 | | | 224 | | Other | | 158 | | | 85 | | | 334 | | | 240 | |
Total non-compensation expenses | Total non-compensation expenses | | 469 | | | 425 | | | 1,196 | | | 1,025 | | Total non-compensation expenses | | 570 | | | 469 | | | 1,464 | | | 1,196 | |
Total non-interest expenses | Total non-interest expenses | | 2,303 | | | 2,086 | | | 6,766 | | | 5,834 | | Total non-interest expenses | | 2,421 | | | 2,303 | | | 6,871 | | | 6,766 | |
Pre-tax income | Pre-tax income | | 415 | | | 385 | | | 1,406 | | | 1,231 | | Pre-tax income | | 486 | | | 415 | | | 1,695 | | | 1,406 | |
Provision for income taxes | Provision for income taxes | | 114 | | | 78 | | | 336 | | | 257 | | Provision for income taxes | | 117 | | | 114 | | | 390 | | | 336 | |
Net income | Net income | | 301 | | | 307 | | | 1,070 | | | 974 | | Net income | | 369 | | | 301 | | | 1,305 | | | 1,070 | |
Preferred stock dividends | Preferred stock dividends | | 2 | | | — | | | 2 | | | — | | Preferred stock dividends | | — | | | 2 | | | 4 | | | 2 | |
Net income available to common shareholders | Net income available to common shareholders | | $ | 299 | | | $ | 307 | | | $ | 1,068 | | | $ | 974 | | Net income available to common shareholders | | $ | 369 | | | $ | 299 | | | $ | 1,301 | | | $ | 1,068 | |
| Earnings per common share – basic | Earnings per common share – basic | | $ | 1.41 | | | $ | 1.49 | | | $ | 5.12 | | | $ | 4.73 | | Earnings per common share – basic | | $ | 1.75 | | | $ | 1.41 | | | $ | 6.09 | | | $ | 5.12 | |
Earnings per common share – diluted | Earnings per common share – diluted | | $ | 1.38 | | | $ | 1.45 | | | $ | 4.99 | | | $ | 4.61 | | Earnings per common share – diluted | | $ | 1.71 | | | $ | 1.38 | | | $ | 5.95 | | | $ | 4.99 | |
Weighted-average common shares outstanding – basic | Weighted-average common shares outstanding – basic | | 210.7 | | | 205.8 | | 208.1 | | 205.8 | Weighted-average common shares outstanding – basic | | 210.1 | | 210.7 | | 213.0 | | 208.1 |
Weighted-average common and common equivalent shares outstanding – diluted | Weighted-average common and common equivalent shares outstanding – diluted | | 215.7 | | 211.7 | | 213.5 | | 210.9 | Weighted-average common and common equivalent shares outstanding – diluted | | 214.8 | | 215.7 | | 218.0 | | 213.5 |
| Net income | Net income | | $ | 301 | | | $ | 307 | | | $ | 1,070 | | | $ | 974 | | Net income | | $ | 369 | | | $ | 301 | | | $ | 1,305 | | | $ | 1,070 | |
Other comprehensive income/(loss), net of tax: | Other comprehensive income/(loss), net of tax: | | | | | | Other comprehensive income/(loss), net of tax: | | | | | |
Available-for-sale securities | Available-for-sale securities | | (157) | | | 25 | | | (532) | | | (68) | | Available-for-sale securities | | (76) | | | (157) | | | 68 | | | (532) | |
Currency translations, net of the impact of net investment hedges | Currency translations, net of the impact of net investment hedges | | (40) | | | 5 | | | (51) | | | 25 | | Currency translations, net of the impact of net investment hedges | | 20 | | | (40) | | | 73 | | | (51) | |
Cash flow hedges | Cash flow hedges | | 10 | | | (2) | | | 48 | | | 22 | | Cash flow hedges | | 12 | | | 10 | | | (1) | | | 48 | |
Total other comprehensive income/(loss), net of tax | Total other comprehensive income/(loss), net of tax | | (187) | | | 28 | | | (535) | | | (21) | | Total other comprehensive income/(loss), net of tax | | (44) | | | (187) | | | 140 | | | (535) | |
Total comprehensive income | Total comprehensive income | | $ | 114 | | | $ | 335 | | | $ | 535 | | | $ | 953 | | Total comprehensive income | | $ | 325 | | | $ | 114 | | | $ | 1,445 | | | $ | 535 | |
See accompanying Notes to Condensed Consolidated Financial Statements (Unaudited).
4
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
(Unaudited)
| | | | Three months ended June 30, | | Nine months ended June 30, | | | Three months ended June 30, | | Nine months ended June 30, |
$ in millions, except per share amounts | $ in millions, except per share amounts | | 2022 | | 2021 | | 2022 | | 2021 | $ in millions, except per share amounts | | 2023 | | 2022 | | 2023 | | 2022 |
Preferred stock: | Preferred stock: | | | | | | | | | Preferred stock: | | | | | | | | |
Balance beginning of period | Balance beginning of period | | $ | — | | | $ | — | | | $ | — | | | $ | — | | Balance beginning of period | | $ | 120 | | | $ | — | | | $ | 120 | | | $ | — | |
| Preferred stock issued for TriState Capital Holdings, Inc. (“TriState Capital”) acquisition | Preferred stock issued for TriState Capital Holdings, Inc. (“TriState Capital”) acquisition | | 120 | | | — | | | 120 | | | — | | Preferred stock issued for TriState Capital Holdings, Inc. (“TriState Capital”) acquisition | | — | | | 120 | | | — | | | 120 | |
Redemption of preferred stock | | Redemption of preferred stock | | (41) | | | — | | | (41) | | | — | |
Balance end of period | Balance end of period | | 120 | | | — | | | 120 | | | — | | Balance end of period | | 79 | | | 120 | | | 79 | | | 120 | |
| Common stock, par value $.01 per share: | Common stock, par value $.01 per share: | | | | | | Common stock, par value $.01 per share: | | | | | |
Balance beginning of period | Balance beginning of period | | 2 | | | 2 | | | 2 | | | 2 | | Balance beginning of period | | 2 | | | 2 | | | 2 | | | 2 | |
Share issuances | Share issuances | | — | |
| — | | | — | | | — | | Share issuances | | — | |
| — | | | — | | | — | |
Balance end of period | Balance end of period | | 2 | | | 2 | | | 2 | | | 2 | | Balance end of period | | 2 | | | 2 | | | 2 | | | 2 | |
| Additional paid-in capital: | Additional paid-in capital: | | | | | | Additional paid-in capital: | | | | | |
Balance beginning of period | Balance beginning of period | | 2,093 | |
| 2,028 | | | 2,088 | | | 2,007 | | Balance beginning of period | | 3,035 | |
| 2,093 | | | 2,987 | | | 2,088 | |
Common stock issued for TriState Capital acquisition | Common stock issued for TriState Capital acquisition | | 778 | | | — | | | 778 | | | — | | Common stock issued for TriState Capital acquisition | | — | | | 778 | | | — | | | 778 | |
Restricted stock awards issued for TriState Capital acquisition | Restricted stock awards issued for TriState Capital acquisition | | 28 | | | — | | | 28 | | | — | | Restricted stock awards issued for TriState Capital acquisition | | — | | | 28 | | | — | | | 28 | |
Employee stock purchases | Employee stock purchases | | 13 | |
| 8 | | | 35 | | | 23 | | Employee stock purchases | | 13 | |
| 13 | | | 35 | | | 35 | |
Distributions due to vesting of restricted stock units and exercise of stock options, net of forfeitures | Distributions due to vesting of restricted stock units and exercise of stock options, net of forfeitures | | (3) | |
| (4) | | | (125) | | | (70) | | Distributions due to vesting of restricted stock units and exercise of stock options, net of forfeitures | | — | |
| (3) | | | (110) | | | (125) | |
Share-based compensation amortization | Share-based compensation amortization | | 39 | |
| 28 | | | 144 | | | 100 | | Share-based compensation amortization | | 51 | |
| 39 | | | 187 | | | 144 | |
| Balance end of period | Balance end of period | | 2,948 | | | 2,060 | | | 2,948 | | | 2,060 | | Balance end of period | | 3,099 | | | 2,948 | | | 3,099 | | | 2,948 | |
| Retained earnings: | Retained earnings: | | | | | | Retained earnings: | | | | | |
Balance beginning of period | Balance beginning of period | | 8,256 | |
| 7,004 | | | 7,633 | | | 6,484 | | Balance beginning of period | | 9,590 | |
| 8,256 | | | 8,843 | | | 7,633 | |
Net income attributable to Raymond James Financial, Inc. | | 301 | |
| 307 | | | 1,070 | | | 974 | | |
Common stock cash dividends declared | | (77) | | | (54) | | | (223) | | | (166) | | |
Preferred stock cash dividends declared | | (2) | | | — | | | (2) | | | — | | |
Cumulative adjustments for changes in accounting principles | | — | | | — | | | — | | | (35) | | |
Net income | | Net income | | 369 | |
| 301 | | | 1,305 | | | 1,070 | |
Common and preferred stock cash dividends declared (see Note 17) | | Common and preferred stock cash dividends declared (see Note 17) | | (89) | | | (79) | | | (278) | | | (225) | |
| | Balance end of period | Balance end of period | | 8,478 | | | 7,257 | | | 8,478 | | | 7,257 | | Balance end of period | | 9,870 | | | 8,478 | | | 9,870 | | | 8,478 | |
| Treasury stock: | Treasury stock: | | | | | | Treasury stock: | | | | | |
Balance beginning of period | Balance beginning of period | | (1,360) | | | (1,404) | | | (1,437) | | | (1,390) | | Balance beginning of period | | (1,954) | | | (1,360) | | | (1,512) | | | (1,437) | |
Purchases/surrenders | Purchases/surrenders | | (100) | | | (48) | | | (110) | | | (127) | | Purchases/surrenders | | (305) | | | (100) | | | (810) | | | (110) | |
Reissuances due to vesting of restricted stock units and exercise of stock options | Reissuances due to vesting of restricted stock units and exercise of stock options | | 3 | | | 6 | | | 90 | | | 71 | | Reissuances due to vesting of restricted stock units and exercise of stock options | | — | | | 3 | | | 63 | | | 90 | |
Balance end of period | Balance end of period | | (1,457) | | | (1,446) | | | (1,457) | | | (1,446) | | Balance end of period | | (2,259) | | | (1,457) | | | (2,259) | | | (1,457) | |
| Accumulated other comprehensive income/(loss): | | | | | | |
Accumulated other comprehensive loss: | | Accumulated other comprehensive loss: | | | | | |
Balance beginning of period | Balance beginning of period | | (389) | | | (38) | | | (41) | | | 11 | | Balance beginning of period | | (798) | | | (389) | | | (982) | | | (41) | |
Other comprehensive income/(loss), net of tax | Other comprehensive income/(loss), net of tax | | (187) | | | 28 | | | (535) | | | (21) | | Other comprehensive income/(loss), net of tax | | (44) | | | (187) | | | 140 | | | (535) | |
| Balance end of period | Balance end of period | | (576) | | | (10) | | | (576) | | | (10) | | Balance end of period | | (842) | | | (576) | | | (842) | | | (576) | |
Total equity attributable to Raymond James Financial, Inc. | Total equity attributable to Raymond James Financial, Inc. | | $ | 9,515 | | | $ | 7,863 | | | $ | 9,515 | | | $ | 7,863 | | Total equity attributable to Raymond James Financial, Inc. | | $ | 9,949 | | | $ | 9,515 | | | $ | 9,949 | | | $ | 9,515 | |
| Noncontrolling interests: | Noncontrolling interests: | | Noncontrolling interests: | |
Balance beginning of period | Balance beginning of period | | $ | 7 | | | $ | 45 | | | $ | 58 | | | $ | 62 | | Balance beginning of period | | $ | (26) | | | $ | 7 | | | $ | (26) | | | $ | 58 | |
Net income attributable to noncontrolling interests | | 1 | | | 12 | | | 1 | | | 24 | | |
Net income/(loss) attributable to noncontrolling interests | | Net income/(loss) attributable to noncontrolling interests | | (1) | | | 1 | | | (1) | | | 1 | |
| Deconsolidations and sales | Deconsolidations and sales | | (31) | | | (2) | | | (82) | | | (31) | | Deconsolidations and sales | | — | | | (31) | | | — | | | (82) | |
| Balance end of period | Balance end of period | | (23) | | | 55 | | | (23) | | | 55 | | Balance end of period | | (27) | | | (23) | | | (27) | | | (23) | |
Total shareholders’ equity | Total shareholders’ equity | | $ | 9,492 | | | $ | 7,918 | | | $ | 9,492 | | | $ | 7,918 | | Total shareholders’ equity | | $ | 9,922 | | | $ | 9,492 | | | $ | 9,922 | | | $ | 9,492 | |
See accompanying Notes to Condensed Consolidated Financial Statements (Unaudited).
5
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
| | | Nine months ended June 30, | | Nine months ended June 30, |
$ in millions | $ in millions | | 2022 | | 2021 | $ in millions | | 2023 | | 2022 |
Cash flows from operating activities: | Cash flows from operating activities: | | | | | Cash flows from operating activities: | | | | |
Net income | Net income | | $ | 1,070 | | | $ | 974 | | Net income | | $ | 1,305 | | | $ | 1,070 | |
Adjustments to reconcile net income to net cash provided by/(used in) operating activities: | | | | | |
Adjustments to reconcile net income to net cash used in operating activities: | | Adjustments to reconcile net income to net cash used in operating activities: | | | | |
Depreciation and amortization | Depreciation and amortization | | 105 | | | 97 | | Depreciation and amortization | | 123 | | | 105 | |
Deferred income taxes, net | Deferred income taxes, net | | 23 | | | (24) | | Deferred income taxes, net | | (22) | | | 23 | |
Premium and discount amortization on available-for-sale securities and net (gain)/loss on other investments | | 40 | | | 12 | | |
Provisions/(benefits) for credit losses and legal and regulatory proceedings | | 72 | | | (29) | | |
Premium and discount amortization on available-for-sale securities and bank loans and net unrealized gain/loss on other investments | | Premium and discount amortization on available-for-sale securities and bank loans and net unrealized gain/loss on other investments | | (37) | | | 40 | |
Provisions for credit losses and legal and regulatory proceedings | | Provisions for credit losses and legal and regulatory proceedings | | 191 | | | 72 | |
Share-based compensation expense | Share-based compensation expense | | 149 | | | 103 | | Share-based compensation expense | | 192 | | | 149 | |
Unrealized (gain)/loss on company-owned life insurance policies, net of expenses | Unrealized (gain)/loss on company-owned life insurance policies, net of expenses | | 136 | | | (159) | | Unrealized (gain)/loss on company-owned life insurance policies, net of expenses | | (125) | | | 136 | |
Losses on extinguishment of debt | | — | | | 98 | | |
| Other | Other | | 25 | | | 47 | | Other | | (1) | | | 25 | |
Net change in: | Net change in: | | | | | Net change in: | | | | |
Assets segregated for regulatory purposes excluding cash and cash equivalents | Assets segregated for regulatory purposes excluding cash and cash equivalents | | 101 | | | (3,000) | | Assets segregated for regulatory purposes excluding cash and cash equivalents | | — | | | 101 | |
Collateralized agreements, net of collateralized financings | Collateralized agreements, net of collateralized financings | | 10 | | | (178) | | Collateralized agreements, net of collateralized financings | | 9 | | | 10 | |
Loans provided to financial advisors, net of repayments | | (85) | | | (69) | | |
Loans (provided to) financial advisors, net of repayments | | Loans (provided to) financial advisors, net of repayments | | 16 | | | (85) | |
Brokerage client receivables and other receivables, net | Brokerage client receivables and other receivables, net | | (57) | | | (425) | | Brokerage client receivables and other receivables, net | | 456 | | | (57) | |
Trading instruments, net | Trading instruments, net | | 126 | | | 42 | | Trading instruments, net | | 62 | | | 126 | |
Derivative instruments, net | Derivative instruments, net | | 246 | | | 41 | | Derivative instruments, net | | (224) | | | 246 | |
Other assets | Other assets | | (97) | | | (238) | | Other assets | | (43) | | | (97) | |
Brokerage client payables and other payables | Brokerage client payables and other payables | | 2,985 | | | 4,694 | | Brokerage client payables and other payables | | (5,764) | | | 2,985 | |
Accrued compensation, commissions and benefits | Accrued compensation, commissions and benefits | | (261) | | | 160 | | Accrued compensation, commissions and benefits | | (95) | | | (261) | |
Purchases and originations of loans held for sale, net of proceeds from sales of securitizations and loans held for sale | Purchases and originations of loans held for sale, net of proceeds from sales of securitizations and loans held for sale | | (18) | | | (1) | | Purchases and originations of loans held for sale, net of proceeds from sales of securitizations and loans held for sale | | 9 | | | (18) | |
Net cash provided by operating activities | | 4,570 | | | 2,145 | | |
Net cash provided by/(used in) operating activities | | Net cash provided by/(used in) operating activities | | (3,948) | | | 4,570 | |
| Cash flows from investing activities: | Cash flows from investing activities: | | | | | Cash flows from investing activities: | | | | |
Increase in bank loans, net | Increase in bank loans, net | | (5,377) | | | (2,620) | | Increase in bank loans, net | | (762) | | | (5,377) | |
Proceeds from sales of loans held for investment | Proceeds from sales of loans held for investment | | 191 | | | 248 | | Proceeds from sales of loans held for investment | | 600 | | | 191 | |
| Purchases of available-for-sale securities | Purchases of available-for-sale securities | | (2,743) | | | (3,081) | | Purchases of available-for-sale securities | | (561) | | | (2,743) | |
Available-for-sale securities maturations, repayments and redemptions | Available-for-sale securities maturations, repayments and redemptions | | 1,346 | | | 1,658 | | Available-for-sale securities maturations, repayments and redemptions | | 977 | | | 1,346 | |
Proceeds from sales of available-for-sale securities | Proceeds from sales of available-for-sale securities | | 2 | | | 969 | | Proceeds from sales of available-for-sale securities | | — | | | 2 | |
Cash and cash equivalents acquired in business acquisitions, including those segregated for regulatory purposes, net of cash paid for acquisitions | Cash and cash equivalents acquired in business acquisitions, including those segregated for regulatory purposes, net of cash paid for acquisitions | | 1,769 | | | (245) | | Cash and cash equivalents acquired in business acquisitions, including those segregated for regulatory purposes, net of cash paid for acquisitions | | — | | | 1,769 | |
Additions to property and equipment | Additions to property and equipment | | (68) | | | (99) | | Additions to property and equipment | | (122) | | | (68) | |
Sales of Federal Home Loan Bank stock, net | | Sales of Federal Home Loan Bank stock, net | | 3 | | | — | |
| Investment in note receivable | Investment in note receivable | | (125) | | | — | | Investment in note receivable | | — | | | (125) | |
(Purchases)/sales of other investments, net | | (33) | | | 21 | | |
Purchases of other investments, net | | Purchases of other investments, net | | (6) | | | (33) | |
Other investing activities, net | Other investing activities, net | | (81) | | | (8) | | Other investing activities, net | | (61) | | | (81) | |
Net cash used in investing activities | | (5,119) | | | (3,157) | | |
Net cash provided by/(used in) investing activities | | Net cash provided by/(used in) investing activities | | 68 | | | (5,119) | |
|
See accompanying Notes to Condensed Consolidated Financial Statements (Unaudited).
6
| | | RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) | RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) | RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) |
| | Nine months ended June 30, | | Nine months ended June 30, |
$ in millions | $ in millions | | 2022 | | 2021 | $ in millions | | 2023 | | 2022 |
Cash flows from financing activities: | Cash flows from financing activities: | | | | | Cash flows from financing activities: | | | | |
| Proceeds from senior notes issuances, net of debt issuance costs paid | | — | | | 737 | | |
Extinguishment of senior notes payable | | — | | | (844) | | |
| Increase in bank deposits | Increase in bank deposits | | 4,800 | | | 3,539 | | Increase in bank deposits | | 2,411 | | | 4,800 | |
Repurchases of common stock and share-based awards withheld for payment of withholding tax requirements | Repurchases of common stock and share-based awards withheld for payment of withholding tax requirements | | (160) | | | (148) | | Repurchases of common stock and share-based awards withheld for payment of withholding tax requirements | | (860) | | | (160) | |
Dividends on common stock | | (200) | | | (163) | | |
Dividends on preferred and common stock | | Dividends on preferred and common stock | | (266) | | | (200) | |
Exercise of stock options and employee stock purchases | Exercise of stock options and employee stock purchases | | 44 | | | 42 | | Exercise of stock options and employee stock purchases | | 37 | | | 44 | |
Redemption of preferred stock | | Redemption of preferred stock | | (40) | | | — | |
Proceeds from Federal Home Loan Bank advances | Proceeds from Federal Home Loan Bank advances | | 1,025 | | | — | | Proceeds from Federal Home Loan Bank advances | | 2,550 | | | 1,025 | |
Repayments of Federal Home Loan Bank advances and other borrowed funds | Repayments of Federal Home Loan Bank advances and other borrowed funds | | (906) | | | (29) | | Repayments of Federal Home Loan Bank advances and other borrowed funds | | (2,741) | | | (906) | |
Other financing, net | Other financing, net | | (5) | | | (6) | | Other financing, net | | (2) | | | (5) | |
Net cash provided by financing activities | Net cash provided by financing activities | | 4,598 | | | 3,128 | | Net cash provided by financing activities | | 1,089 | | | 4,598 | |
| Currency adjustment: | Currency adjustment: | | | | | Currency adjustment: | | | | |
Effect of exchange rate changes on cash | | (289) | | | 114 | | |
Net increase in cash and cash equivalents, including those segregated for regulatory purposes and restricted cash | | 3,760 | | | 2,230 | | |
Effect of exchange rate changes on cash and cash equivalents, including those segregated for regulatory purposes | | Effect of exchange rate changes on cash and cash equivalents, including those segregated for regulatory purposes | | 346 | | | (289) | |
Net increase/(decrease) in cash and cash equivalents, including those segregated for regulatory purposes and restricted cash | | Net increase/(decrease) in cash and cash equivalents, including those segregated for regulatory purposes and restricted cash | | (2,445) | | | 3,760 | |
Cash and cash equivalents, including those segregated for regulatory purposes and restricted cash at beginning of year | Cash and cash equivalents, including those segregated for regulatory purposes and restricted cash at beginning of year | | 16,449 | | | 9,634 | | Cash and cash equivalents, including those segregated for regulatory purposes and restricted cash at beginning of year | | 14,659 | | | 16,449 | |
Cash and cash equivalents, including those segregated for regulatory purposes and restricted cash at end of period | Cash and cash equivalents, including those segregated for regulatory purposes and restricted cash at end of period | | $ | 20,209 | | | $ | 11,864 | | Cash and cash equivalents, including those segregated for regulatory purposes and restricted cash at end of period | | $ | 12,214 | | | $ | 20,209 | |
| Cash and cash equivalents | Cash and cash equivalents | | $ | 5,958 | | | $ | 5,982 | | Cash and cash equivalents | | $ | 8,375 | | | $ | 5,958 | |
Cash and cash equivalents segregated for regulatory purposes and restricted cash | Cash and cash equivalents segregated for regulatory purposes and restricted cash | | 14,251 | | | 5,882 | | Cash and cash equivalents segregated for regulatory purposes and restricted cash | | 3,839 | | | 14,251 | |
Total cash and cash equivalents, including those segregated for regulatory purposes and restricted cash at end of period | Total cash and cash equivalents, including those segregated for regulatory purposes and restricted cash at end of period | | $ | 20,209 | | | $ | 11,864 | | Total cash and cash equivalents, including those segregated for regulatory purposes and restricted cash at end of period | | $ | 12,214 | | | $ | 20,209 | |
| Supplemental disclosures of cash flow information: | Supplemental disclosures of cash flow information: | | | | | Supplemental disclosures of cash flow information: | | | | |
Cash paid for interest | Cash paid for interest | | $ | 137 | | | $ | 113 | | Cash paid for interest | | $ | 858 | | | $ | 137 | |
Cash paid for income taxes, net | Cash paid for income taxes, net | | $ | 386 | | | $ | 335 | | Cash paid for income taxes, net | | $ | 536 | | | $ | 386 | |
Cash outflows for lease liabilities | Cash outflows for lease liabilities | | $ | 80 | | | $ | 84 | | Cash outflows for lease liabilities | | $ | 92 | | | $ | 80 | |
Non-cash right-of-use assets recorded for new and modified leases | Non-cash right-of-use assets recorded for new and modified leases | | $ | 39 | | | $ | 101 | | Non-cash right-of-use assets recorded for new and modified leases | | $ | 112 | | | $ | 39 | |
Common stock issued as consideration for TriState Capital acquisition | Common stock issued as consideration for TriState Capital acquisition | | $ | 778 | | | $ | — | | Common stock issued as consideration for TriState Capital acquisition | | $ | — | | | $ | 778 | |
Restricted stock awards issued as consideration for TriState Capital acquisition | Restricted stock awards issued as consideration for TriState Capital acquisition | | $ | 28 | | | $ | — | | Restricted stock awards issued as consideration for TriState Capital acquisition | | $ | — | | | $ | 28 | |
Issuance of preferred stock as consideration for TriState Capital acquisition | | $ | 120 | | | $ | — | | |
Preferred stock issued as consideration for TriState Capital acquisition | | Preferred stock issued as consideration for TriState Capital acquisition | | $ | — | | | $ | 120 | |
Effective settlement of note receivable for TriState Capital acquisition | Effective settlement of note receivable for TriState Capital acquisition | | $ | 123 | | | $ | — | | Effective settlement of note receivable for TriState Capital acquisition | | $ | — | | | $ | 123 | |
See accompanying Notes to Condensed Consolidated Financial Statements (Unaudited).
7
| | | | | | | | |
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements (Unaudited) | |
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
June 30, 20222023
NOTE 1 – ORGANIZATION AND BASIS OF PRESENTATION
Organization
Raymond James Financial, Inc. (“RJF” or the “firm”) is a financial holding company which, together with its subsidiaries, is engaged in various financial services activities, including providing investment management services to retail and institutional clients, merger & acquisition and advisory services, the underwriting, distribution, trading and brokerage of equity and debt securities, and the sale of mutual funds and other investment products. The firm also provides corporate and retail banking services, and trust services.
As a result of our acquisition of TriState Capital Holdings, Inc. (“TriState Capital”) on June 1, 2022, which included TriState Capital Bank, a Pennsylvania-chartered state bank, we renamed our Raymond James Bank segment to “Bank” segment. The Bank segment reflects the results of our banking operations and includes the results of Raymond James Bank and, since June 1, 2022, TriState Capital Bank. There were no changes to the prior period presentation of the Bank segment. For further information about the acquisition of TriState Capital and our business segments, see Note 3 and Note 25, respectively. As used herein, the terms “our,” “we,” or “us” refer to RJF and/or one or more of its subsidiaries.
Basis of presentation
The accompanying unaudited condensed consolidated financial statements include the accounts of RJF and its consolidated subsidiaries that are generally controlled through a majority voting interest. We consolidate all of our 100%-owned subsidiaries. In addition, we consolidate any variable interest entity (“VIE”) in which we are the primary beneficiary. Additional information on these VIEs is provided in Note 2 of our Annual Report on Form 10-K (“20212022 Form 10-K”) for the year ended September 30, 2021,2022, as filed with the United States (“U.S.”) Securities and Exchange Commission (“SEC”) and in Note 109 of this Quarterly Report on Form 10-Q (“Form 10-Q”). When we do not have a controlling interest in an entity, but we exert significant influence over the entity, we apply the equity method of accounting. All material intercompany balances and transactions have been eliminated in consolidation.
Accounting estimates and assumptions
Certain financial information that is normally included in annual financial statements prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) but is not required for interim reporting purposes has been condensed or omitted. These unaudited condensed consolidated financial statements reflect, in the opinion of management, all adjustments necessary for a fair presentation of our consolidated financial position and results of operations for the periods presented.
The nature of our business is such that the results of any interim period are not necessarily indicative of results for a full year. These unaudited condensed consolidated financial statements should be read in conjunction with Management’s Discussion and Analysis of Financial Condition and Results of Operations and the Consolidated Financial Statements and Notes thereto included in our 20212022 Form 10-K. To prepare condensed consolidated financial statements in accordance with GAAP, we must make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements, and the reported amounts of revenues and expenses for the reporting period. Actual results could differ from those estimates and could have a material impact on the condensed consolidated financial statements.
Reclassifications
Beginning with our fiscal third quarter of 2022, we reclassified acquisition-related expenses which were previously reported in “Acquisition-related expenses” on our Condensed Consolidated Statements of Income and Comprehensive Income to the respective income statement line items that align with the nature of the expenses, including reclassifications to “Compensation, commissions, and benefits,” “Professional fees,” or “Other” expenses, as appropriate. Prior periods have been conformed to the current presentation.
In addition to the reclassifications discussed above, certain otherCertain prior period amounts have been reclassified to conform to the current period’s presentation.
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
NOTE 2 – UPDATE OF SIGNIFICANT ACCOUNTING POLICIES
A summary of our significant accounting policies is included in Note 2 of our 20212022 Form 10-K. Refer to Note 8 for a description of our allowance for credit losses policy related to TriState Capital Bank. Except as discussed in Note 8, thereThere have been no significant changes in our significant accounting policies since September 30, 2021.
NOTE 3 – ACQUISITIONS
Acquisitions completed during the nine months ended June 30, 2022
TriState Capital
On June 1, 2022, we completed our acquisition of all the outstanding shares of TriState Capital, including its wholly owned subsidiaries, TriState Capital Bank and Chartwell Investment Partners, LLC (“Chartwell”), in a cash and stock transaction valued at $1.4 billion. TriState Capital Bank serves the commercial banking needs of middle-market businesses and financial services providers and focused private banking needs of high-net-worth individuals nation-wide. Chartwell, a registered investment adviser, provides investment management services primarily to institutional investors, mutual funds, and individual investors. TriState Capital Bank will continue to operate as a separately branded firm and as an independently-chartered bank. TriState Capital Bank and Chartwell have been integrated into our Bank and Asset Management segments, respectively, and their results of operations have been included in our results prospectively from the closing date of June 1, 2022.
Under the terms of the acquisition agreement, TriState Capital common stockholders received $6.00 cash and 0.25 shares of RJF common stock for each share of TriState Capital common stock. Additionally, the TriState Capital Series C Perpetual Non-Cumulative Convertible Non-Voting Preferred Stock (“Series C Convertible Preferred Stock”) was converted to common shares at the prescribed exchange ratio and cashed out at $30 per share and each share of TriState Capital’s 6.75% Fixed-to-Floating Rate Series A Non-Cumulative Perpetual Preferred Stock and TriState Capital’s 6.375% Fixed-to-Floating Rate Series B Non-Cumulative Perpetual Preferred Stock was converted, respectively, into the right to receive one share of a newly created series A and series B preferred stock of RJF. The fair values of these newly created RJF series A and series B preferred stock were estimated based on quoted market prices for the instruments. See Note 19 for further details on these new classes of preferred stock.
Furthermore, as a component of our total purchase consideration for TriState Capital on June 1, 2022, in accordance with the terms of the acquisition agreement, 551 thousand RJF restricted stock awards were issued at terms that mirrored restricted stock awards of TriState Capital which were outstanding as of the acquisition date. The fair value of the restricted stock awards was calculated as of the June 1, 2022 acquisition date and was allocated between the pre-acquisition service period ($28 million treated as purchase consideration) and the post-acquisition requisite service period, over which we will recognize share-based compensation amortization. In accordance with the terms of the acquisition agreement, the TriState Capital restricted stock awards were converted to RJF restricted stock awards using an exchange ratio that considered the RJF volume weighted average price for 10 trading days ending on the third business day prior to the closing of the acquisition. Upon completion of the acquisition, the fair value of the restricted stock awards was determined based on the June 1, 2022 closing share price of our common stock. See Note 22 for further details on these restricted stock awards.
On December 15, 2021, during the period between announcement of the intent to acquire TriState Capital and the acquisition closing date, we had loaned TriState Capital $125 million under an unsecured fixed-to-floating rate note (the “Note”). The Note was set to mature on December 15, 2024 and bore interest at a fixed annual rate of 2.25%. Upon acquisition, the Note reverted to an intercompany instrument and subsequent to the closing date, the Note was forgiven. In accordance with GAAP, as of the acquisition date the Note is considered to have been effectively settled and the acquisition-date fair value of $123 million is treated as purchase consideration and included in the purchase price. The fair value of the Note was determined using a discounted cash flow analysis based on current incremental borrowing rates for similar types of instruments.
We accounted for our completed acquisition of TriState Capital as a business combination in accordance with GAAP. Accordingly, the purchase price attributable to this acquisition was allocated to the assets acquired and liabilities assumed based on their estimated fair values. The estimated fair values of assets acquired and liabilities assumed related to the TriState Capital acquisition are considered provisional and are based on currently available information. We believe that the information available as of June 30, 2022 provides a reasonable basis for estimating the fair values of assets acquired and liabilities assumed. However, these provisional estimates may be adjusted upon the availability of new information regarding facts and circumstances which existed at the acquisition date. We expect to finalize the valuation of assets and liabilities in our fiscal
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
fourth quarter of 2022. Any adjustments to the initial estimates of the fair values of the assets acquired and liabilities assumed will be recorded as adjustments to the respective assets and liabilities, with the residual amounts allocated to goodwill. The following table summarizes the purchase consideration, fair value estimates of the assets acquired and liabilities assumed, and resulting goodwill as of the June 1, 2022 acquisition date.
| | | | | | | | |
| | TriState Capital |
$ in millions, except share and per share amounts | | June 1, 2022 |
Fair value of consideration transferred: | | |
Fair value of common stock issued: | | |
Shares of RJF common stock issued | | 7,861,189 |
RJF share price as of June 1, 2022 | | $ | 97.74 | |
Fair value of RJF common stock issued for TriState Capital common stock | | $ | 768 | |
Other common stock consideration | | 10 | |
Total fair value of common stock issued | | 778 | |
Cash consideration (1)
| | 359 | |
Effective settlement of the Note | | 123 | |
Preferred stock issued | | 120 | |
Restricted stock awards issued | | 28 | |
Total purchase price | | $ | 1,408 | |
Fair value of assets acquired: | | |
Cash and cash equivalents | | $ | 457 | |
| | |
| | |
Financial instruments: | | |
| | |
Available-for-sale securities | | 1,524 | |
Derivative assets | | 51 | |
Other investments | | 14 | |
| | |
Bank loans, net | | 11,549 | |
Deferred income taxes, net | | 26 | |
Identifiable intangible assets | | 197 | |
Other assets | | 226 | |
All other assets acquired | | 45 | |
Total assets acquired | | $ | 14,089 | |
Fair value of liabilities assumed: | | |
Bank deposits | | $ | 12,593 | |
| | |
| | |
| | |
Financial instrument liabilities — Derivative liabilities | | 125 | |
| | |
Accrued compensation, commissions and benefits | | 18 | |
Other payables | | 99 | |
Other borrowings | | 375 | |
| | |
Total liabilities assumed | | $ | 13,210 | |
Fair value of net identifiable assets acquired | | $ | 879 | |
Goodwill (2)
| | $ | 529 | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
(1) Cash consideration includes $6 per TriState Capital common share outstanding (for a total of $189 million) and $30 per TriState Capital Series C Convertible Preferred Stock outstanding (for a total of $154 million), as well as other cash amounts paid to settle outstanding TriState Capital warrants and options outstanding as of the closing and cash paid in lieu of fractional shares. We utilized our cash on hand to fund the cash component of the purchase consideration.
(2) The goodwill associated with this acquisition, which has been allocated to our Bank segment and primarily represents synergies from combining TriState Capital with our existing businesses, is not deductible for tax purposes.
Our Condensed Consolidated Statements of Income and Comprehensive Income included net revenues and a pre-tax loss attributable to TriState Capital of $29 million and $16 million, respectively, for the period June 1, 2022 through June 30, 2022. The pre-tax loss included an initial provision for credit losses on loans and lending commitments acquired as part of the acquisition of $26 million (included in “Bank loan provision/(benefit) for credit losses”) and $5 million (included in “Other” expense), respectively. These provisions were required under GAAP to be recorded in earnings in the reporting period following the acquisition date.
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
Charles Stanley
On January 21, 2022, we completed our acquisition of all of the outstanding share capital of United Kingdom (“U.K.”)-based Charles Stanley Group PLC (“Charles Stanley”) at a price of £5.15 per Charles Stanley share outstanding, or £277 million ($376 million as of January 21, 2022). The acquisition enables us to accelerate our financial planning, investment advisory and securities transaction services growth in the U.K. and, through Charles Stanley’s multiple affiliation options, gives us the ability to offer wealth management affiliation choices to financial advisors in the U.K. consistent with our Private Client Group (“PCG”) model in the U.S. and Canada. Charles Stanley has been integrated into our PCG segment and its results of operations have been included in our results prospectively from the closing date of January 21, 2022.
We accounted for our completed acquisition of Charles Stanley as a business combination in accordance with GAAP. Accordingly, the purchase price attributable to this acquisition was allocated to the assets acquired and liabilities assumed based on their estimated fair values. The following table summarizes the purchase consideration, fair value estimates of the assets acquired and liabilities assumed, and resulting goodwill as of the January 21, 2022 acquisition date.
| | | | | | | | |
| | Charles Stanley (1)
|
$ in millions | | January 21, 2022 |
Purchase price | | $ | 376 | |
Fair value of assets acquired: | | |
Cash and cash equivalents | | $ | 154 | |
Assets segregated for regulatory purposes | | 1,890 | |
| | |
| | |
| | |
| | |
| | |
| | |
Brokerage client receivables | | 270 | |
| | |
| | |
| | |
Identifiable intangible assets | | 85 | |
All other assets acquired | | 36 | |
Total assets acquired | | $ | 2,435 | |
Fair value of liabilities assumed: | | |
| | |
| | |
| | |
| | |
| | |
Brokerage client payables | | $ | 2,131 | |
Accrued compensation, commissions and benefits | | 42 | |
Other payables | | 50 | |
| | |
| | |
Total liabilities assumed | | $ | 2,223 | |
Fair value of net identifiable assets acquired | | $ | 212 | |
Goodwill (2)
| | $ | 164 | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
(1) The fair value of assets acquired and liabilities assumed associated with the Charles Stanley acquisition were denominated in British pounds sterling (“GBP”) and converted to U.S. dollars using the spot rate of 1.3554 as of January 21, 2022.
(2) The goodwill associated with this acquisition, which has been allocated to our PCG segment, primarily represents synergies from combining Charles Stanley with our existing businesses and is not deductible for tax purposes.
Our Condensed Consolidated Statements of Income and Comprehensive Income included net revenues of $57 million and $105 million, respectively, for the three months ended June 30, 2022 and for the period January 21, 2022 through June 30, 2022, as well as an insignificant net loss for both of the aforementioned periods.
Determination of fair value
The following is a description of the methods used to determine the fair values of significant assets and liabilities acquired:
Cash and cash equivalents; Assets segregated for regulatory purposes; Brokerage client receivables; Brokerage client payables: The pre-close historical carrying amount of these assets and liabilities was a reasonable estimate of fair value based on the short-term nature of these assets and liabilities.
Available-for-sale securities: The fair values of available-for-sale securities were based on quoted market prices for the same or similar securities, recently executed transactions or third-party pricing models.
Derivatives assets and liabilities: The pre-close historical carrying values of derivative assets and liabilities were used as reasonable estimates of fair value.
Bank loans: Fair values for bank loans were determined using the loss adjusted cash flow model approach, which utilized a discounted cash flow methodology that considered credit loss expectations, market interest rates and other market factors such as liquidity from the perspective of a market participant. Loans were segregated into specific pools according to similar
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
characteristics, including risk, interest rate type (i.e., fixed or floating), underlying benchmark rate, and payment type, and were treated in the aggregate when determining the fair value of each pool. The interest and liquidity components of the estimate were determined by discounting interest and principal cash flows through the expected life of each loan. The discount rates were determined using the weighted-average funding costs method, which considered cost of debt, cost of equity, and funding mix, as well as adjustments for servicing expense and liquidity, and then compared to current market rates on originations.
Purchased loans were evaluated and classified as either purchased credit deteriorated (“PCD”), which indicates that the loan has experienced more than insignificant credit deterioration since origination, or non-PCD loans. For PCD loans, the sum of the loan’s purchase price and allowance for credit losses, which was determined as of the acquisition date using the same allowance methodology applied to the TriState loan portfolio as of June 30, 2022, became its initial amortized cost basis. The initial allowance for credit losses on PCD loans is established in purchase accounting, with a corresponding offset to goodwill (i.e., is not recorded in earnings). As required under GAAP, an initial allowance for credit losses on non-PCD loans is required to be established through a provision for credit losses (i.e., recorded in earnings) in the first reporting period following the acquisition. Subsequent changes in the allowance for credit losses for PCD and non-PCD loans will be recognized in the bank loan provision/(benefit) for credit losses. For non-PCD loans, the difference between the fair value and the unpaid principal balance was considered the fair value mark. The non-credit discount or premium related to PCD loans and the fair value mark on non-PCD loans will be accreted or amortized into interest income over the contractual life of the loan using the effective interest method.
Of the total bank loans acquired in the TriState Capital acquisition with an unpaid principal balance of $11.70 billion, $11.36 billion were considered non-PCD loans and $337 million were considered PCD loans. The following table reconciles the difference between the unpaid principal balance and purchase price of PCD loans at acquisition.
| | | | | | | | |
$ in millions | | June 1, 2022 |
Unpaid principal balance of PCD loans | | $ | 337 | |
Allowance for credit losses on PCD loans | | (3) | |
Non-credit discount on PCD loans | | (10) | |
Purchase price of PCD loans | | $ | 324 | |
Identifiable intangible assets: The fair values of the significant identifiable intangible assets were estimated using the following income approaches.
•Customer relationships — The fair values of customer relationships were estimated using a multi-period excess earnings approach which was based on a forecast of all of the expected future net cash flows associated with the assets.
•Trade names — The fair values of trade names were estimated using a relief from royalty approach which was based on a forecast of the royalties we would save because we own the assets.
•Core deposit intangible (“CDI”) — The fair value of the CDI asset was estimated using a discounted cash flow approach, specifically the favorable source of funds method, that considered the cost of the acquired deposit base, an estimate of the cost associated with alternative funding sources, and expected client attrition rates.
These cash flow forecasts were then adjusted to present value by applying appropriate discount rates based on current market rates that reflect the risks associated with the cash flow streams.
The following table summarizes the fair value and weighted average estimated useful life of identifiable intangibles assets acquired as of the respective acquisition dates.
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | June 1, 2022 | | January 21, 2022 |
| | TriState Capital | | Charles Stanley |
$ in millions | | Estimated fair value | | Weighted average estimated useful life | | Estimated fair value | | Weighted average estimated useful life |
Fair value of identifiable intangible assets acquired: | | | | | | | | |
Core deposit intangible | | $ | 89 | | | 10 years | | $ | — | | | — | |
Customer relationships | | 54 | | | 17 years | | 65 | | | 13 years |
Trade name | | 33 | | | 20 years | | 15 | | | 10 years |
Other | | 16 | | | 10 years | | 5 | | | 6 years |
Non-amortizing customer relationships | | 5 | | | N/A | | — | | | — | |
Total identifiable intangibles assets acquired | | $ | 197 | | | | | $ | 85 | | | |
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
Other assets: Other assets primarily include company-owned life insurance policies, right-of-use (“ROU”) lease assets, investments in Federal Home Loan Bank (“FHLB”) stock, and investments in low-income housing tax credit (“LIHTC”) funds. The pre-close historical carrying values of company-owned life insurance policies, investments in FHLB stock and investments in LIHTC funds were used as a reasonable estimate of fair value. ROU lease assets were measured at the same amount as the lease liability, as adjusted to reflect favorable or unfavorable terms of the lease when compared with market terms (see “Other payables” section below for additional details regarding acquired lease liabilities).
Bank deposits: The fair values used for demand and savings deposits equaled the amounts payable on demand at the acquisition date. The fair values for time deposits were estimated by applying a discounted cash flow method to discount the principal and interest payments from maturity at the yields offered by similar banks as of the valuation date.
Other payables: Other payables primarily include lease liabilities and the fair value of unfunded lending commitments. Lease liabilities were measured at the present value of the remaining lease payments determined using a discounted cash flow method based on our cost of borrowing, as if the acquired lease were a new lease at the acquisition date. The fair value of unfunded lending commitments was estimated using a discounted cash flow approach.
Other borrowings: Other borrowings was comprised of 5.75% fixed-to-floating subordinated notes due 2030 and short-term FHLB advances (see Note 15 for further details on these borrowings). The fair value of the subordinated note was estimated based on quoted market prices as of the valuation date. The carrying amount of the FHLB advances was a reasonable estimate of fair value based on the short-term nature of these instruments and that the vast majority are floating-rate advances.
Pro forma financial information
The following table presents unaudited pro forma financial information as if the TriState Capital and Charles Stanley acquisitions had occurred on October 1, 2020. The unaudited pro forma results reflect adjustments for amortization of acquired identifiable intangible assets, the initial provision for credit losses on non-PCD loans and lending commitments acquired from TriState Capital, acquisition-related retention expense, and accretion of fair value adjustments to loans, available-for-sale securities, lending commitments, deposits, and other borrowings, with accretion calculated over the contractual life of the underlying asset or liability. Legal and other professional fees and other costs incurred to effect these acquisitions are treated as if they were incurred on October 1, 2020 in the pro forma amounts. The pro forma amounts do not reflect potential revenue growth or cost savings that may be realized as a result of these acquisitions. The unaudited pro forma financial information is presented for informational purposes only, and is not necessarily indicative of future operations or results had these acquisitions been completed as of October 1, 2020.
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three months ended June 30, | | Nine Months Ended June 30, |
$ in millions | | 2022 | | 2021 | | 2022 | | 2021 |
Net revenues | | $ | 2,782 | | | $ | 2,613 | | | $ | 8,486 | | | $ | 7,470 | |
Pre-tax income | | $ | 483 | | | $ | 424 | | | $ | 1,575 | | | $ | 1,252 | |
Acquisitions completed subsequent to June 30, 2022
SumRidge Partners
On July 1, 2022, we completed our acquisition of SumRidge Partners, LLC (“SumRidge Partners”). SumRidge Partners is a technology-driven fixed income market maker specializing in investment-grade and high-yield corporate bonds, municipal bonds, and institutional preferred securities. The acquisition of SumRidge Partners adds an institutional market-making operation, as well as additional trading technologies and risk management tools to our existing fixed income operations. The acquisition was funded using cash on hand as of the acquisition date. SumRidge Partners will be integrated into our Capital Markets segment and its results of operations will be included in our results prospectively from the closing date of July 1, 2022.
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
|
NOTE 43 – FAIR VALUE
Our “Financial instruments” and “Financial instrument liabilities” on our Condensed Consolidated Statements of Financial Condition are recorded at fair value. For further information about such instruments and our significant accounting policies related to fair value, see Notes 2 and 4 of our 20212022 Form 10-K. The following tables present assets and liabilities measured at fair value on a recurring basis. Netting adjustments represent the impact of counterparty and collateral netting on our derivative balances included on our Condensed Consolidated Statements of Financial Condition. See Note 65 for additional information.
| $ in millions | $ in millions | | Level 1 | | Level 2 | | Level 3 | | Netting adjustments | | Balance as of June 30, 2022 | $ in millions | | Level 1 | | Level 2 | | Level 3 | | Netting adjustments | | Balance as of June 30, 2023 |
Assets at fair value on a recurring basis: | Assets at fair value on a recurring basis: | | | | | | | | | | | Assets at fair value on a recurring basis: | | | | | | | | | | |
Assets segregated for regulatory purposes (1) | | $ | 2,000 | | | $ | — | | | $ | — | | | $ | — | | | $ | 2,000 | | |
| Trading assets: | Trading assets: | | | | | | | | | | | Trading assets: | | | | | | | | | | |
Municipal and provincial obligations | Municipal and provincial obligations | | 1 | | | 104 | | | — | | | — | | | 105 | | Municipal and provincial obligations | | $ | — | | | $ | 257 | | | $ | — | | | $ | — | | | $ | 257 | |
Corporate obligations | Corporate obligations | | 10 | | | 56 | | | — | | | — | | | 66 | | Corporate obligations | | 24 | | | 598 | | | — | | | — | | | 622 | |
Government and agency obligations | Government and agency obligations | | 24 | | | 33 | | | — | | | — | | | 57 | | Government and agency obligations | | 44 | | | 105 | | | — | | | — | | | 149 | |
Agency mortgage-backed securities (“MBS”), collateralized mortgage obligations (“CMOs”) and asset-backed securities (“ABS”) | Agency mortgage-backed securities (“MBS”), collateralized mortgage obligations (“CMOs”) and asset-backed securities (“ABS”) | | — | | | 96 | | | — | | | — | | | 96 | | Agency mortgage-backed securities (“MBS”), collateralized mortgage obligations (“CMOs”) and asset-backed securities (“ABS”) | | — | | | 19 | | | — | | | — | | | 19 | |
Non-agency CMOs and ABS | Non-agency CMOs and ABS | | — | | | 107 | | | — | | | — | | | 107 | | Non-agency CMOs and ABS | | — | | | 60 | | | — | | | — | | | 60 | |
Total debt securities | Total debt securities | | 35 | | | 396 | | | — | | | — | | | 431 | | Total debt securities | | 68 | | | 1,039 | | | — | | | — | | | 1,107 | |
Equity securities | Equity securities | | 7 | | | — | | | — | | | — | | | 7 | | Equity securities | | 10 | | | 2 | | | — | | | — | | | 12 | |
Brokered certificates of deposit | Brokered certificates of deposit | | — | | | 20 | | | — | | | — | | | 20 | | Brokered certificates of deposit | | — | | | 28 | | | — | | | — | | | 28 | |
| Other | | Other | | — | | | — | | | 9 | | | — | | | 9 | |
Total trading assets | Total trading assets | | 42 | | | 416 | | | — | | | — | | | 458 | | Total trading assets | | 78 | | | 1,069 | | | 9 | | | — | | | 1,156 | |
Available-for-sale securities (2)(1) | Available-for-sale securities (2)(1) | | 912 | | | 9,552 | | | — | | | — | | | 10,464 | | Available-for-sale securities (2)(1) | | 1,238 | | | 8,328 | | | — | | | — | | | 9,566 | |
Derivative assets: | Derivative assets: | | Derivative assets: | |
Interest rate - matched book | | — | | | 84 | | | — | | | — | | | 84 | | |
Interest rate - other | | 8 | | | 289 | | | — | | | (235) | | | 62 | | |
Interest rate | | Interest rate | | 9 | | | 414 | | | — | | | (199) | | | 224 | |
| Foreign exchange | Foreign exchange | | — | | | 4 | | | — | | | — | | | 4 | | Foreign exchange | | — | | | 5 | | | — | | | — | | | 5 | |
Other | | — | | | — | | | 2 | | | — | | | 2 | | |
| Total derivative assets | Total derivative assets | | 8 | | | 377 | | | 2 | | | (235) | | | 152 | | Total derivative assets | | 9 | | | 419 | | | — | | | (199) | | | 229 | |
Other investments - private equity - not measured at net asset value (“NAV”) | | — | | | — | | | 27 | | | — | | | 27 | | |
| All other investments: | All other investments: | | All other investments: | | | | | | | | | | |
Government and agency obligations (3) | | 120 | | | — | | | — | | | — | | | 120 | | |
Government and agency obligations (2) | | Government and agency obligations (2) | | 82 | | | — | | | — | | | — | | | 82 | |
Other | Other | | 97 | | | 2 | | | 24 | | | — | | | 123 | | Other | | 93 | | | 2 | | | 29 | | | — | | | 124 | |
Total all other investments | Total all other investments | | 217 | | | 2 | | | 24 | | | — | | | 243 | | Total all other investments | | 175 | | | 2 | | | 29 | | | — | | | 206 | |
Other assets - client-owned fractional shares | | Other assets - client-owned fractional shares | | 100 | | | — | | | — | | | — | | | 100 | |
Subtotal | Subtotal | | 3,179 | | | 10,347 | | | 53 | | | (235) | | | 13,344 | | Subtotal | | 1,600 | | | 9,818 | | | 38 | | | (199) | | | 11,257 | |
Other investments - private equity - measured at NAV | | | | | | | | | | 95 | | |
Other investments - private equity - measured at net asset value (“NAV”) | | Other investments - private equity - measured at net asset value (“NAV”) | | | | | | | | | | 100 | |
Total assets at fair value on a recurring basis | Total assets at fair value on a recurring basis | | $ | 3,179 | | | $ | 10,347 | | | $ | 53 | | | $ | (235) | | | $ | 13,439 | | Total assets at fair value on a recurring basis | | $ | 1,600 | | | $ | 9,818 | | | $ | 38 | | | $ | (199) | | | $ | 11,357 | |
| Liabilities at fair value on a recurring basis: | Liabilities at fair value on a recurring basis: | | Liabilities at fair value on a recurring basis: | |
Trading liabilities: | Trading liabilities: | | Trading liabilities: | |
Municipal and provincial obligations | Municipal and provincial obligations | | $ | 2 | | | $ | 6 | | | $ | — | | | $ | — | | | $ | 8 | | Municipal and provincial obligations | | $ | 10 | | | $ | 2 | | | $ | — | | | $ | — | | | $ | 12 | |
Corporate obligations | Corporate obligations | | — | | | 3 | | | — | | | — | | | 3 | | Corporate obligations | | — | | | 561 | | | — | | | — | | | 561 | |
Government and agency obligations | Government and agency obligations | | 101 | | | — | | | — | | | — | | | 101 | | Government and agency obligations | | 129 | | | — | | | — | | | — | | | 129 | |
| Total debt securities | Total debt securities | | 103 | | | 9 | | | — | | | — | | | 112 | | Total debt securities | | 139 | | | 563 | | | — | | | — | | | 702 | |
Equity securities | Equity securities | | 46 | | | — | | | — | | | — | | | 46 | | Equity securities | | 66 | | | — | | | — | | | — | | | 66 | |
| Total trading liabilities | Total trading liabilities | | 149 | | | 9 | | | — | | | — | | | 158 | | Total trading liabilities | | 205 | | | 563 | | | — | | | — | | | 768 | |
Derivative liabilities: | Derivative liabilities: | | | | | | | | | | | Derivative liabilities: | | | | | | | | | | |
Interest rate - matched book | | — | | | 84 | | | — | | | — | | | 84 | | |
Interest rate - other | | 7 | | | 345 | | | — | | | (58) | | | 294 | | |
Interest rate | | Interest rate | | 8 | | | 461 | | | — | | | (80) | | | 389 | |
| | Other | Other | | — | | | — | | | 1 | | | — | | | 1 | | Other | | — | | | — | | | 4 | | | — | | | 4 | |
Total derivative liabilities | Total derivative liabilities | | 7 | | | 429 | | | 1 | | | (58) | | | 379 | | Total derivative liabilities | | 8 | | | 461 | | | 4 | | | (80) | | | 393 | |
Other payables - repurchase liabilities related to client-owned fractional shares | | Other payables - repurchase liabilities related to client-owned fractional shares | | 100 | | | — | | | — | | | — | | | 100 | |
Total liabilities at fair value on a recurring basis | Total liabilities at fair value on a recurring basis | | $ | 156 | | | $ | 438 | | | $ | 1 | | | $ | (58) | | | $ | 537 | | Total liabilities at fair value on a recurring basis | | $ | 313 | | | $ | 1,024 | | | $ | 4 | | | $ | (80) | | | $ | 1,261 | |
| | | | | | | | |
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements (Unaudited) | |
| $ in millions | $ in millions | | Level 1 | | Level 2 | | Level 3 | | Netting adjustments | | Balance as of September 30, 2021 | $ in millions | | Level 1 | | Level 2 | | Level 3 | | Netting adjustments | | Balance as of September 30, 2022 |
Assets at fair value on a recurring basis: | Assets at fair value on a recurring basis: | | | | | | | | | | | Assets at fair value on a recurring basis: | | | | | | | | | | |
Assets segregated for regulatory purposes (1) | | $ | 2,100 | | | $ | — | | | $ | — | | | $ | — | | | $ | 2,100 | | |
| Trading assets: | Trading assets: | | | | | | | | | | Trading assets: | | | | | | | | | |
Municipal and provincial obligations | Municipal and provincial obligations | | — | | | 155 | | | — | | | — | | | 155 | | Municipal and provincial obligations | | $ | — | | | $ | 269 | | | $ | — | | | $ | — | | | $ | 269 | |
Corporate obligations | Corporate obligations | | 16 | | | 63 | | | — | | | — | | | 79 | | Corporate obligations | | 16 | | | 579 | | | — | | | — | | | 595 | |
Government and agency obligations | Government and agency obligations | | 15 | | | 94 | | | — | | | — | | | 109 | | Government and agency obligations | | 86 | | | 85 | | | — | | | — | | | 171 | |
Agency MBS, CMOs and ABS | | — | | | 211 | | | — | | | — | | | 211 | | |
Agency MBS, CMOs, and ABS | | Agency MBS, CMOs, and ABS | | — | | | 123 | | | — | | | — | | | 123 | |
Non-agency CMOs and ABS | Non-agency CMOs and ABS | | — | | | 14 | | | — | | | — | | | 14 | | Non-agency CMOs and ABS | | — | | | 61 | | | — | | | — | | | 61 | |
Total debt securities | Total debt securities | | 31 | | | 537 | | | — | | | — | | | 568 | | Total debt securities | | 102 | | | 1,117 | | | — | | | — | | | 1,219 | |
Equity securities | Equity securities | | 8 | | | 4 | | | — | | | — | | | 12 | | Equity securities | | 20 | | | — | | | — | | | — | | | 20 | |
Brokered certificates of deposit | Brokered certificates of deposit | | — | | | 16 | | | — | | | — | | | 16 | | Brokered certificates of deposit | | — | | | 30 | | | — | | | — | | | 30 | |
Other | Other | | — | | | — | | | 14 | | | — | | | 14 | | Other | | — | | | — | | | 1 | | | — | | | 1 | |
Total trading assets | Total trading assets | | 39 | | | 557 | | | 14 | | | — | | | 610 | | Total trading assets | | 122 | | | 1,147 | | | 1 | | | — | | | 1,270 | |
Available-for-sale securities (2)(1) | Available-for-sale securities (2)(1) | | 15 | | | 8,300 | | | — | | | — | | | 8,315 | | Available-for-sale securities (2)(1) | | 986 | | | 8,899 | | | — | | | — | | | 9,885 | |
Derivative assets: | Derivative assets: | | Derivative assets: | |
Interest rate - matched book | | — | | | 193 | | | — | |
| — | | | 193 | | |
Interest rate - other | | 16 | | | 128 | | | — | | | (87) | | | 57 | | |
Interest rate | | Interest rate | | 42 | | | 484 | | | — | | | (348) | | | 178 | |
| Foreign exchange | Foreign exchange | | — | | | 5 | | | — | | | — | | | 5 | | Foreign exchange | | — | | | 10 | | | — | | | — | | | 10 | |
Total derivative assets | Total derivative assets | | 16 | | | 326 | | | — | | | (87) | | | 255 | | Total derivative assets | | 42 | | | 494 | | | — | | | (348) | | | 188 | |
Other investments - private equity - not measured at NAV | | — | | | — | | | 75 | | | — | | | 75 | | |
| All other investments: | All other investments: | | All other investments: | | | | | | | | | | |
Government and agency obligations (3) | | 86 | | | — | | | — | | | — | | | 86 | | |
Government and agency obligations (2) | | Government and agency obligations (2) | | 79 | | | — | | | — | | | — | | | 79 | |
Other | Other | | 77 | | | 2 | | | 23 | | | — | | | 102 | | Other | | 92 | | | 2 | | | 29 | | | — | | | 123 | |
Total all other investments | Total all other investments | | 163 | | | 2 | | | 23 | | | — | | | 188 | | Total all other investments | | 171 | | | 2 | | | 29 | | | — | | | 202 | |
Other assets - client-owned fractional shares | | Other assets - client-owned fractional shares | | 78 | | | — | | | — | | | — | | | 78 | |
Subtotal | Subtotal | | 2,333 | | | 9,185 | | | 112 | | | (87) | | | 11,543 | | Subtotal | | 1,399 | | | 10,542 | | | 30 | | | (348) | | | 11,623 | |
Other investments - private equity - measured at NAV | Other investments - private equity - measured at NAV | | | | | | | | | | 94 | | Other investments - private equity - measured at NAV | | | | | | | | | | 90 | |
Total assets at fair value on a recurring basis | Total assets at fair value on a recurring basis | | $ | 2,333 | | | $ | 9,185 | | | $ | 112 | | | $ | (87) | | | $ | 11,637 | | Total assets at fair value on a recurring basis | | $ | 1,399 | | | $ | 10,542 | | | $ | 30 | | | $ | (348) | | | $ | 11,713 | |
| Liabilities at fair value on a recurring basis: | Liabilities at fair value on a recurring basis: | | Liabilities at fair value on a recurring basis: | |
Trading liabilities: | Trading liabilities: | | Trading liabilities: | |
Municipal and provincial obligations | Municipal and provincial obligations | | $ | 2 | | | $ | — | | | $ | — | | | $ | — | | | $ | 2 | | Municipal and provincial obligations | | $ | 5 | | | $ | — | | | $ | — | | | $ | — | | | $ | 5 | |
Corporate obligations | Corporate obligations | | — | | | 6 | | | — | | | — | | | 6 | | Corporate obligations | | — | | | 555 | | | — | | | — | | | 555 | |
Government and agency obligations | Government and agency obligations | | 137 | | | — | | | — | | | — | | | 137 | | Government and agency obligations | | 249 | | | — | | | — | | | — | | | 249 | |
| Total debt securities | Total debt securities | | 139 | | | 6 | | | — | | | — | | | 145 | | Total debt securities | | 254 | | | 555 | | | — | | | — | | | 809 | |
Equity securities | Equity securities | | 28 | | | 3 | | | — | | | — | | | 31 | | Equity securities | | 27 | | | — | | | — | | | — | | | 27 | |
| Total trading liabilities | Total trading liabilities | | 167 | | | 9 | | | — | | | — | | | 176 | | Total trading liabilities | | 281 | | | 555 | | | — | | | — | | | 836 | |
Derivative liabilities: | Derivative liabilities: | | | | | | | | | | | Derivative liabilities: | | | | | | | | | | |
Interest rate - matched book | | — | | | 193 | | | — | | | — | | | 193 | | |
Interest rate - other | | 16 | | | 106 | | | — | | | (88) | | | 34 | | |
Interest rate | | Interest rate | | 40 | | | 547 | | | — | | | (65) | | | 522 | |
| | Foreign exchange | | Foreign exchange | | — | | | 5 | | | — | | | — | | | 5 | |
Other | Other | | — | | | — | | | 1 | | | — | | | 1 | | Other | | — | | | — | | | 3 | | | — | | | 3 | |
Total derivative liabilities | Total derivative liabilities | | 16 | | | 299 | | | 1 | | | (88) | | | 228 | | Total derivative liabilities | | 40 | | | 552 | | | 3 | | | (65) | | | 530 | |
Other payables - repurchase liabilities related to client-owned fractional shares | | Other payables - repurchase liabilities related to client-owned fractional shares | | 78 | | | — | | | — | | | — | | | 78 | |
Total liabilities at fair value on a recurring basis | Total liabilities at fair value on a recurring basis | | $ | 183 | | | $ | 308 | | | $ | 1 | | | $ | (88) | | | $ | 404 | | Total liabilities at fair value on a recurring basis | | $ | 399 | | | $ | 1,107 | | | $ | 3 | | | $ | (65) | | | $ | 1,444 | |
(1) These assets consist of U.S. Treasury securities (“U.S. Treasuries”) with maturities greater than 3 months as of our date of purchase. These assets do not include U.S. Treasuries with maturities of less than 3 months as of our date of purchase with a fair value of $6.19 billion at June 30, 2022 and $3.55 billion at September 30, 2021 which were considered cash and cash equivalents segregated for regulatory purposes. These assets are classified as Level 1.
(2) Our available-for-sale securities primarily consist of agency MBS, agency CMOs and agency CMOs.U.S. Treasury securities (“U.S. Treasuries”). See Note 54 for further information.
(3)(2) These assets are primarily comprised of U.S. Treasuries primarily purchased to meet certain deposit requirements with clearing organizations.
| | | | | | | | |
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements (Unaudited) | |
Level 3 recurring fair value measurements
The following tables present the changes in fair value for Level 3 assets and liabilities measured at fair value on a recurring basis. The realized and unrealized gains and losses in the tables may include changes in fair value that were attributable to both observable and unobservable inputs. In the following tables, gains/(losses) on trading and derivative instruments are reported in “Principal transactions” and gains/(losses) on other investments are reported in “Other” revenues on our Condensed Consolidated Statements of Income and Comprehensive Income.
| Three months ended June 30, 2022 Level 3 instruments at fair value | |
Three months ended June 30, 2023 Level 3 instruments at fair value | | Three months ended June 30, 2023 Level 3 instruments at fair value |
| | Financial assets | | Financial liabilities | | Financial assets | | | | Financial liabilities |
| | Trading assets | | Derivative assets | | Other investments | | Trading liabilities | | Derivative liabilities | | Trading assets | | | | | Other investments | | | | Derivative liabilities |
$ in millions | $ in millions | | Other | | Other | | Private equity investments | | All other | | Other | | Other | $ in millions | | Other | | | | | All other | | | | Other |
Fair value beginning of period | Fair value beginning of period | | $ | 13 | | | $ | — | | | $ | 23 | | | $ | 30 | | | $ | (1) | | | $ | — | | Fair value beginning of period | | $ | 3 | | | | | | $ | 28 | | | | | $ | (4) | |
Total gains/(losses) included in earnings | Total gains/(losses) included in earnings | | (1) | | | 2 | | | 4 | | | (4) | | | 1 | | | (1) | | Total gains/(losses) included in earnings | | (1) | | | | | | 1 | | | | | — | |
Purchases and contributions | Purchases and contributions | | 37 | | | — | | | — | | | — | | | — | | | — | | Purchases and contributions | | 19 | | | | | | — | | | | | — | |
Sales, distributions, and deconsolidations | | (49) | | | — | | | — | | | (2) | | | — | | | — | | |
Sales and distributions | | Sales and distributions | | (12) | | | | | | — | | | | | — | |
Transfers: | Transfers: | | | | | | | | | | | | | Transfers: | | | | | | | | | | | |
Into Level 3 | Into Level 3 | | — | | | — | | | — | | | — | | | — | | | — | | Into Level 3 | | — | | | | | | — | | | | | — | |
Out of Level 3 | Out of Level 3 | | — | | | — | | | — | | | — | | | — | | | — | | Out of Level 3 | | — | | | | | | — | | | | | — | |
Fair value end of period | Fair value end of period | | $ | — | | | $ | 2 | | | $ | 27 | | | $ | 24 | | | $ | — | | | $ | (1) | | Fair value end of period | | $ | 9 | | | | | | $ | 29 | | | | | $ | (4) | |
Unrealized gains/(losses) for the period included in earnings for instruments held at the end of the reporting period | Unrealized gains/(losses) for the period included in earnings for instruments held at the end of the reporting period | | $ | — | | | $ | 2 | | | $ | 4 | | | $ | 1 | | | $ | — | | | $ | (1) | | Unrealized gains/(losses) for the period included in earnings for instruments held at the end of the reporting period | | $ | 1 | | | | | | $ | 1 | | | | | $ | — | |
| Nine Months Ended June 30, 2022 Level 3 instruments at fair value | |
Nine Months Ended June 30, 2023 Level 3 instruments at fair value | | Nine Months Ended June 30, 2023 Level 3 instruments at fair value |
| | Financial assets | | Financial liabilities | | Financial assets | | | | Financial liabilities |
| | Trading assets | | Derivative assets | | Other investments | | Trading liabilities | | Derivative liabilities | | Trading assets | | | | Other investments | | | | Derivative liabilities |
$ in millions | $ in millions | | Other | | Other | | Private equity investments | | All other | | Other | | Other | $ in millions | | Other | | | | All other | | | | Other |
Fair value beginning of period | Fair value beginning of period | | $ | 14 | | | $ | — | | | $ | 75 | | | $ | 23 | | | $ | — | | | $ | (1) | | Fair value beginning of period | | $ | 1 | | | | | $ | 29 | | | | | $ | (3) | |
Total gains/(losses) included in earnings | Total gains/(losses) included in earnings | | 1 | | | 2 | | | 4 | | | (4) | | | — | | | — | | Total gains/(losses) included in earnings | | (1) | | | | | — | | | | | (1) | |
Purchases and contributions | Purchases and contributions | | 91 | | | — | | | — | | | 7 | | | — | | | — | | Purchases and contributions | | 55 | | | | | — | | | | | — | |
Sales, distributions, and deconsolidations | | (106) | | | — | | | (40) | | | (2) | | | — | | | — | | |
Sales and distributions | | Sales and distributions | | (46) | | | | | — | | | | | — | |
Transfers: | Transfers: | | | | | | | | | | Transfers: | | | | | | | |
Into Level 3 | Into Level 3 | | — | | | — | | | — | | | — | | | — | | | — | | Into Level 3 | | — | | | | | — | | | | | — | |
Out of Level 3 | Out of Level 3 | | — | | | — | | | (12) | | | — | | | — | | | — | | Out of Level 3 | | — | | | | | — | | | | | — | |
Fair value end of period | Fair value end of period | | $ | — | | | $ | 2 | | | $ | 27 | | | $ | 24 | | | $ | — | | | $ | (1) | | Fair value end of period | | $ | 9 | | | | | $ | 29 | | | | | $ | (4) | |
Unrealized gains/(losses) for the period included in earnings for instruments held at the end of the reporting period | Unrealized gains/(losses) for the period included in earnings for instruments held at the end of the reporting period | | $ | — | | | $ | 2 | | | $ | 4 | | | $ | 1 | | | $ | — | | | $ | (1) | | Unrealized gains/(losses) for the period included in earnings for instruments held at the end of the reporting period | | $ | 1 | | | | | $ | — | | | | | $ | (1) | |
|
| | | | | | | | |
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements (Unaudited) | |
| Three months ended June 30, 2021 Level 3 instruments at fair value | |
Three months ended June 30, 2022 Level 3 instruments at fair value | | Three months ended June 30, 2022 Level 3 instruments at fair value |
| | Financial assets | | Financial liabilities | | Financial assets | | | | Financial liabilities |
| | | Trading assets | | Derivative assets | | Other investments | | Trading liabilities | | Derivative liabilities | | | Trading assets | | | Derivative assets | | | | Other investments | | | | Trading liabilities | | | Derivative liabilities |
$ in millions | $ in millions | | Other | | Other | | Private equity investments | | All other | | Other | | Other | $ in millions | | Other | | | Other | | | | All other | | | | Other | | | Other |
Fair value beginning of period | Fair value beginning of period | | $ | 5 | | | $ | — | | | $ | 52 | | | $ | 23 | | | $ | (1) | | | $ | (4) | | Fair value beginning of period | | $ | 13 | | | | $ | — | | | | | $ | 53 | | | | | $ | (1) | | | | $ | — | |
Total gains/(losses) included in earnings | Total gains/(losses) included in earnings | | — | | | 1 | | | 14 | | | — | | | 1 | | | — | | Total gains/(losses) included in earnings | | (1) | | | | 2 | | | | | — | | | | | 1 | | | | (1) | |
Purchases and contributions | Purchases and contributions | | 10 | | | — | | | — | | | — | | | — | | | — | | Purchases and contributions | | 37 | | | | — | | | | | — | | | | | — | | | | — | |
Sales and distributions | | (5) | | | — | | | — | | | — | | | — | | | — | | |
Sales, distributions, and deconsolidations | | Sales, distributions, and deconsolidations | | (49) | | | | — | | | | | (2) | | | | | — | | | | — | |
Transfers: | Transfers: | | | | | | | | | | Transfers: | | | | | | | | | | | | | |
Into Level 3 | Into Level 3 | | — | | | — | | | — | | | — | | | — | | | — | | Into Level 3 | | — | | | | — | | | | | — | | | | | — | | | | — | |
Out of Level 3 | Out of Level 3 | | — | | | — | | | — | | | — | | | — | | | — | | Out of Level 3 | | — | | | | — | | | | | — | | | | | — | | | | — | |
Fair value end of period | Fair value end of period | | $ | 10 | | | $ | 1 | | | $ | 66 | | | $ | 23 | | | $ | — | | | $ | (4) | | Fair value end of period | | $ | — | | | | $ | 2 | | | | | $ | 51 | | | | | $ | — | | | | $ | (1) | |
Unrealized gains/(losses) for the period included in earnings for instruments held at the end of the reporting period | Unrealized gains/(losses) for the period included in earnings for instruments held at the end of the reporting period | | $ | — | | | $ | 1 | | | $ | 14 | | | $ | — | | | $ | — | | | $ | — | | Unrealized gains/(losses) for the period included in earnings for instruments held at the end of the reporting period | | $ | — | | | | $ | 2 | | | | | $ | 5 | | | | | $ | — | | | | $ | (1) | |
| Nine Months Ended June 30, 2021 Level 3 instruments at fair value | |
Nine Months Ended June 30, 2022 Level 3 instruments at fair value | | Nine Months Ended June 30, 2022 Level 3 instruments at fair value |
| | Financial assets | | Financial liabilities | | Financial assets | | | | Financial liabilities |
| | Trading assets | | Derivative assets | | Other investments | | Trading liabilities | | Derivative liabilities | | Trading assets | | | Derivative assets | | | | Other investments | | | | Derivative liabilities |
$ in millions | $ in millions | | Other | | Other | | Private equity investments | | All other | | Other | | Other | $ in millions | | Other | | | Other | | | | All other | | | | Other |
Fair value beginning of period | Fair value beginning of period | | $ | 12 | | | $ | — | | | $ | 37 | | | $ | 22 | | | $ | — | | | $ | (5) | | Fair value beginning of period | | $ | 14 | | | | $ | — | | | | | $ | 98 | | | | | $ | (1) | |
Total gains/(losses) included in earnings | Total gains/(losses) included in earnings | | — | | | 1 | | | 29 | | | 1 | | | — | | | 1 | | Total gains/(losses) included in earnings | | 1 | | | | 2 | | | | | — | | | | | — | |
Purchases and contributions | Purchases and contributions | | 26 | | | — | | | — | | | — | | | — | | | — | | Purchases and contributions | | 91 | | | | — | | | | | 7 | | | | | — | |
Sales and distributions | | (28) | | | — | | | — | | | — | | | — | | | — | | |
Sales, distributions, and deconsolidations | | Sales, distributions, and deconsolidations | | (106) | | | | — | | | | | (42) | | | | | — | |
Transfers: | Transfers: | | | | | | | | | | Transfers: | | | | | | | | | |
Into Level 3 | Into Level 3 | | — | | | — | | | — | | | — | | | — | | | — | | Into Level 3 | | — | | | | — | | | | | — | | | | | — | |
Out of Level 3 | Out of Level 3 | | — | | | — | | | — | | | — | | | — | | | — | | Out of Level 3 | | — | | | | — | | | | | (12) | | | | | — | |
Fair value end of period | Fair value end of period | | $ | 10 | | | $ | 1 | | | $ | 66 | | | $ | 23 | | | $ | — | | | $ | (4) | | Fair value end of period | | $ | — | | | | $ | 2 | | | | | $ | 51 | | | | | $ | (1) | |
Unrealized gains/(losses) for the period included in earnings for instruments held at the end of the reporting period | Unrealized gains/(losses) for the period included in earnings for instruments held at the end of the reporting period | | $ | — | | | $ | 1 | | | $ | 29 | | | $ | — | | | $ | — | | | $ | 1 | | Unrealized gains/(losses) for the period included in earnings for instruments held at the end of the reporting period | | $ | — | | | | $ | 2 | | | | | $ | 5 | | | | | $ | (1) | |
|
As of June 30, 2022, 16%2023, 15% of our assets and less than 1%2% of our liabilities were measured at fair value on a recurring basis. In comparison, as of September 30, 2021, 19%2022, 14% of our assets and less than 1%2% of our liabilities were measured at fair value on a recurring basis. As of both June 30, 20222023 and September 30, 2021,2022, Level 3 assets represented less than 1% of our assets measured at fair value on a recurring basis.
Investments in private equity measured at net asset value per share
As more fully described in Note 2 of our 20212022 Form 10-K, as a practical expedient, we utilize NAV or its equivalent to determine the recorded value of a portion of our private equity investments portfolio. We utilize NAV when the fund investment does not have a readily determinable fair value and the NAV of the fund is calculated in a manner consistent with the measurement principles of investment company accounting, including measurement of the investments at fair value.
Our private equity portfolio as of June 30, 20222023 primarily included investments in third-party funds, and direct investments. Our private equity portfolio includesincluding growth equity, venture capital, and mezzanine lending fund investments. Our investments cannot be redeemed directly with the funds. Our investments are monetized through the liquidation of underlying assets of fund investments, the timing of which is uncertain.
| | | | | | | | |
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements (Unaudited) | |
The following table presents the recorded value and unfunded commitments related to our private equity investments portfolio.
| | | | | | | | | | | | | | |
$ in millions | | Recorded value | | Unfunded commitment |
June 30, 2022 | | | | |
Private equity investments measured at NAV | | $ | 95 | | | $ | 29 | |
Private equity investments not measured at NAV | | 27 | | | |
Total private equity investments | | $ | 122 | | | |
| | | | |
September 30, 2021 | | | | |
Private equity investments measured at NAV | | $ | 94 | | | $ | 8 | |
Private equity investments not measured at NAV | | 75 | | | |
Total private equity investments (1) | | $ | 169 | | | |
(1) Of the total private equity investments, the portion we owned was $120 million, while the portion that we did not own was $49 million and was included as a component of noncontrolling interests on our Condensed Consolidated Statements of Financial Condition.
As a financial holding company, we are subject to holding period limitations for our merchant banking activities. As a result of such holding limitations, we exited or restructured certain of our private equity investments during the first half of our fiscal 2022, which resulted in a decline in private equity investments not measured at NAV compared to September 30, 2021 and a decline in noncontrolling interests on our Condensed Consolidated Statements of Financial Condition related to the portion of such investments we did not own. Additionally, many of our private equity fund investments met the definition of prohibited covered funds as defined by the Volcker Rule enacted pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”). We received approval from the Board of Governors of the Federal Reserve System (“the Fed”) to continue to hold the majority of our covered fund investments until July 2022. As a result, we have exited or restructured our covered fund investments to conform to such regulatory deadlines. | | | | | | | | | | | | | | |
$ in millions | | Recorded value | | Unfunded commitment |
June 30, 2023 | | | | |
Private equity investments measured at NAV | | $ | 100 | | | $ | 36 | |
Private equity investments not measured at NAV | | 7 | | | |
Total private equity investments | | $ | 107 | | | |
| | | | |
September 30, 2022 | | | | |
Private equity investments measured at NAV | | $ | 90 | | | $ | 39 | |
Private equity investments not measured at NAV | | 5 | | | |
Total private equity investments | | $ | 95 | | | |
Financial instruments measured at fair value on a nonrecurring basis
The following table presents assets measured at fair value on a nonrecurring basis along with the valuation techniques and significant unobservable inputs used in the valuation of the assets classified as level 3. These inputs represent those that a market participant would take into account when pricing these instruments. Weighted averages are calculated by weighting each input by the relative fair value of the related financial instrument.
| $ in millions | $ in millions | | | Level 2 | | Level 3 | | Total fair value | | Valuation technique(s) | | Unobservable input | | Range (weighted-average) | $ in millions | | | Level 2 | | Level 3 | | Total fair value | | Valuation technique(s) | | Unobservable input | | Range (weighted-average) |
June 30, 2022 | | | | | | | | | | | | | | |
June 30, 2023 | | June 30, 2023 | | | | | | | | | | | | | |
Bank loans: | Bank loans: | | | | Bank loans: | | | |
Residential mortgage loans | Residential mortgage loans | | | $ | 3 | | | $ | 9 | | | $ | 12 | | | Collateral or discounted cash flow (1) | | Prepayment rate | | 7 yrs. - 12 yrs. (10.4 yrs.) | Residential mortgage loans | | | $ | 2 | | | $ | 8 | | | $ | 10 | | | Collateral or discounted cash flow (1) | | Prepayment rate | | 7 yrs. - 12 yrs. (10.3 yrs.) |
Corporate loans | Corporate loans | | | $ | — | | | $ | 64 | | | $ | 64 | | | Collateral or discounted cash flow (1) | | Recovery rate | | 37% - 70% (48%) | Corporate loans | | | $ | — | | | $ | 95 | | | $ | 95 | | | Collateral or discounted cash flow (1) | | Recovery rate | | 41% - 70% (64%) |
Loans held for sale | Loans held for sale | | | $ | 69 | | | $ | — | | | $ | 69 | | | N/A | | N/A | | N/A | Loans held for sale | | | $ | 28 | | | $ | — | | | $ | 28 | | | N/A | | N/A | | N/A |
| | September 30, 2021 | | | | |
September 30, 2022 | | September 30, 2022 | | | |
Bank loans: | Bank loans: | | | | Bank loans: | | | |
Residential mortgage loans | Residential mortgage loans | | | $ | 3 | | | $ | 11 | | | $ | 14 | | | Collateral or discounted cash flow (1) | | Prepayment rate | | 7 yrs. - 12 yrs. (10.5 yrs.) | Residential mortgage loans | | | $ | 2 | | | $ | 10 | | | $ | 12 | | | Collateral or discounted cash flow (1) | | Prepayment rate | | 7 yrs. - 12 yrs. (10.4 yrs.) |
Corporate loans | Corporate loans | | | $ | — | | | $ | 49 | | | $ | 49 | | | Collateral or discounted cash flow (1) | | Recovery rate | | 74% | Corporate loans | | | $ | — | | | $ | 57 | | | $ | 57 | | | Collateral or discounted cash flow (1) | | Recovery rate | | 24% - 66% (47%) |
Loans held for sale | Loans held for sale | | | $ | 29 | | | $ | — | | | $ | 29 | | | N/A | | N/A | | N/A | Loans held for sale | | | $ | 3 | | | $ | — | | | $ | 3 | | | N/A | | N/A | | N/A |
|
(1) The valuation techniques used to estimate the fair values are based on collateral value less selling costs for the collateral-dependent loans and discounted cash flows for loans that are not collateral-dependent. Unobservable inputs used in the collateral valuation technique are not meaningful and unobservable inputs used in the discounted cash flow valuation technique are presented in the table.
| | | | | | | | |
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements (Unaudited) | |
Financial instruments not recorded at fair value
Many, but not all, of the financial instruments we hold were recorded at fair value on the Condensed Consolidated Statements of Financial Condition. The following table presents the estimated fair value and fair value hierarchy of financial assets and liabilities that are not recorded at fair value on the Condensed Consolidated Statements of Financial Condition at June 30, 20222023 and September 30, 2021.2022. This table excludes financial instruments that are carried at amounts which approximate fair value. Refer to Note 4 of our 20212022 Form 10-K for a discussion of the fair value hierarchy classifications of our financial instruments that are not recorded at fair value.
| $ in millions | $ in millions | | | Level 2 | | Level 3 | | Total estimated fair value | | Carrying amount | $ in millions | | | Level 2 | | Level 3 | | Total estimated fair value | | Carrying amount |
June 30, 2022 | | | | | | | | | | |
June 30, 2023 | | June 30, 2023 | | | | | | | | | |
Financial assets: | Financial assets: | | | | | | | | | | Financial assets: | | | | | | | | | |
Bank loans, net | Bank loans, net | | | $ | 96 | | | $ | 41,105 | | | $ | 41,201 | | | $ | 41,698 | | Bank loans, net | | | $ | 106 | | | $ | 42,410 | | | $ | 42,516 | | | $ | 43,212 | |
Financial liabilities: | Financial liabilities: | | | | | | Financial liabilities: | | | | | |
Bank deposits - certificates of deposit | Bank deposits - certificates of deposit | | | $ | 490 | | | $ | 619 | | | $ | 1,109 | | | $ | 1,121 | | Bank deposits - certificates of deposit | | | $ | 2,732 | | | $ | — | | | $ | 2,732 | | | $ | 2,739 | |
Other borrowings - Subordinated notes payable | | | $ | 98 | | | $ | — | | | $ | 98 | | | $ | 100 | | |
Other borrowings - subordinated notes payable | | Other borrowings - subordinated notes payable | | | $ | 92 | | | $ | — | | | $ | 92 | | | $ | 100 | |
Senior notes payable | Senior notes payable | | | $ | 1,881 | | | $ | — | | | $ | 1,881 | | | $ | 2,038 | | Senior notes payable | | | $ | 1,776 | | | $ | — | | | $ | 1,776 | | | $ | 2,039 | |
| September 30, 2021 | | | | |
September 30, 2022 | | September 30, 2022 | | | |
Financial assets: | Financial assets: | | | | Financial assets: | | | |
Bank loans, net | Bank loans, net | | | $ | 116 | | | $ | 24,839 | | | $ | 24,955 | | | $ | 24,902 | | Bank loans, net | | | $ | 134 | | | $ | 42,336 | | | $ | 42,470 | | | $ | 43,167 | |
Financial liabilities: | Financial liabilities: | | | | | | Financial liabilities: | | | | | |
Bank deposits - certificates of deposit | Bank deposits - certificates of deposit | | | $ | — | | | $ | 898 | | | $ | 898 | | | $ | 878 | | Bank deposits - certificates of deposit | | | $ | 400 | | | $ | 579 | | | $ | 979 | | | $ | 999 | |
Other borrowings - subordinated notes payable | | Other borrowings - subordinated notes payable | | | $ | 95 | | | $ | — | | | $ | 95 | | | $ | 100 | |
Senior notes payable | Senior notes payable | | | $ | 2,459 | | | $ | — | | | $ | 2,459 | | | $ | 2,037 | | Senior notes payable | | | $ | 1,706 | | | $ | — | | | $ | 1,706 | | | $ | 2,038 | |
| | | | | | | | |
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements (Unaudited) | |
NOTE 54 – AVAILABLE-FOR-SALE SECURITIES
We own available-for-sale securities at Raymond James Bank and TriState Capital Bank. Refer to Note 2 of our 20212022 Form 10-K for a discussion of our accounting policies applicable to our available-for-sale securities.
The following table details the amortized costs and fair values of our available-for-sale securities. See Note 3 for additional information regarding the fair value of available-for-sale securities.
| $ in millions | $ in millions | | Cost basis | | Gross unrealized gains | | Gross unrealized losses | | Fair value | $ in millions | | Cost basis | | Gross unrealized gains | | Gross unrealized losses | | Fair value |
June 30, 2022 | | | | | | | | | |
June 30, 2023 | | June 30, 2023 | | | | | | | | |
Agency residential MBS | Agency residential MBS | | $ | 5,903 | | | $ | — | | | $ | (390) | | | $ | 5,513 | | Agency residential MBS | | $ | 5,064 | | | $ | 1 | | | $ | (560) | | | $ | 4,505 | |
Agency commercial MBS | Agency commercial MBS | | 1,428 | | | — | | | (144) | | | 1,284 | | Agency commercial MBS | | 1,469 | | | — | | | (197) | | | 1,272 | |
Agency CMOs | Agency CMOs | | 1,706 | | | 1 | | | (161) | | | 1,546 | | Agency CMOs | | 1,497 | | | — | | | (245) | | | 1,252 | |
Other agency obligations | Other agency obligations | | 578 | | | — | | | (11) | | | 567 | | Other agency obligations | | 710 | | | — | | | (28) | | | 682 | |
Non-agency residential MBS | Non-agency residential MBS | | 496 | | | — | | | (11) | | | 485 | | Non-agency residential MBS | | 509 | | | — | | | (44) | | | 465 | |
U.S. Treasuries | U.S. Treasuries | | 919 | | | — | | | (7) | | | 912 | | U.S. Treasuries | | 1,265 | | | — | | | (27) | | | 1,238 | |
Corporate bonds | Corporate bonds | | 140 | | | 1 | | | (1) | | | 140 | | Corporate bonds | | 140 | | | — | | | (6) | | | 134 | |
Other | Other | | 19 | | | — | | | (2) | | | 17 | | Other | | 18 | | | — | | | — | | | 18 | |
Total available-for-sale securities | Total available-for-sale securities | | $ | 11,189 | | | $ | 2 | | | $ | (727) | | | $ | 10,464 | | Total available-for-sale securities | | $ | 10,672 | | | $ | 1 | | | $ | (1,107) | | | $ | 9,566 | |
| September 30, 2021 | | | | | | | | | |
September 30, 2022 | | September 30, 2022 | | | | | | | | |
Agency residential MBS | Agency residential MBS | | $ | 5,168 | | | $ | 46 | | | $ | (25) | | | $ | 5,189 | | Agency residential MBS | | $ | 5,662 | | | $ | — | | | $ | (668) | | | $ | 4,994 | |
Agency commercial MBS | Agency commercial MBS | | 1,285 | | | 7 | | | (28) | | | 1,264 | | Agency commercial MBS | | 1,518 | | | — | | | (208) | | | 1,310 | |
Agency CMOs | Agency CMOs | | 1,854 | | | 9 | | | (16) | | | 1,847 | | Agency CMOs | | 1,637 | | | — | | | (233) | | | 1,404 | |
Other agency obligations | | Other agency obligations | | 613 | | | — | | | (31) | | | 582 | |
Non-agency residential MBS | | Non-agency residential MBS | | 492 | | | — | | | (41) | | | 451 | |
U.S. Treasuries | U.S. Treasuries | | 15 | | | — | | | — | | | 15 | | U.S. Treasuries | | 1,014 | | | — | | | (28) | | | 986 | |
| Corporate bonds | | Corporate bonds | | 146 | | | — | | | (5) | | | 141 | |
Other | | Other | | 18 | | | — | | | (1) | | | 17 | |
Total available-for-sale securities | Total available-for-sale securities | | $ | 8,322 | | | $ | 62 | | | $ | (69) | | | $ | 8,315 | | Total available-for-sale securities | | $ | 11,100 | | | $ | — | | | $ | (1,215) | | | $ | 9,885 | |
The amortized costs and fair values in the preceding table exclude $22$28 million and $14$24 million of accrued interest on available-for-sale securities as of June 30, 20222023 and September 30, 2021,2022, respectively, which was included in “Other receivables, net” on our Condensed Consolidated Statements of Financial Condition.
See Note 46 for additionalmore information regarding available-for-sale securities pledged with the fair valueFederal Home Loan Bank (“FHLB”) and Federal Reserve Bank of available-for-sale securities.Atlanta (“FRB”).
| | | | | | | | |
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements (Unaudited) | |
The following table details the contractual maturities, amortized costs, carrying values and current yields for our available-for-sale securities. Weighted-average yields are calculated on a taxable-equivalent basis based on estimated annual income divided by the average amortized cost of these securities. Since our MBS and CMO available-for-sale securities are backed by mortgages, actual maturities may differ from contractual maturities because borrowers may have the right to prepay obligations without prepayment penalties. As a result, as of June 30, 2022, theThe weighted-average life of our available-for-sale securities portfolio, after factoring in estimated prepayments, was approximately 4.75 years.4.30 years as of June 30, 2023.
| | | | June 30, 2022 | | | June 30, 2023 |
$ in millions | $ in millions | | Within one year | | After one but within five years | | After five but within ten years | | After ten years | | Total | $ in millions | | Within one year | | After one but within five years | | After five but within ten years | | After ten years | | Total |
Agency residential MBS | Agency residential MBS | | | | | | | | | | | Agency residential MBS | | | | | | | | | | |
Amortized cost | Amortized cost | | $ | — | | | $ | 135 | | | $ | 2,621 | | | $ | 3,147 | | | $ | 5,903 | | Amortized cost | | $ | — | | | $ | 127 | | | $ | 2,240 | | | $ | 2,697 | | | $ | 5,064 | |
Carrying value | Carrying value | | $ | — | | | $ | 133 | | | $ | 2,468 | | | $ | 2,912 | | | $ | 5,513 | | Carrying value | | $ | — | | | $ | 122 | | | $ | 2,011 | | | $ | 2,372 | | | $ | 4,505 | |
Weighted-average yield | | Weighted-average yield | | — | % | | 2.46 | % | | 1.29 | % | | 1.90 | % | | 1.65 | % |
Agency commercial MBS | Agency commercial MBS | | Agency commercial MBS | |
Amortized cost | Amortized cost | | $ | 19 | | | $ | 481 | | | $ | 853 | | | $ | 75 | | | $ | 1,428 | | Amortized cost | | $ | — | | | $ | 919 | | | $ | 499 | | | $ | 51 | | | $ | 1,469 | |
Carrying value | Carrying value | | $ | 19 | | | $ | 452 | | | $ | 746 | | | $ | 67 | | | $ | 1,284 | | Carrying value | | $ | — | | | $ | 824 | | | $ | 406 | | | $ | 42 | | | $ | 1,272 | |
Weighted-average yield | | Weighted-average yield | | — | % | | 1.61 | % | | 1.21 | % | | 1.87 | % | | 1.48 | % |
Agency CMOs | Agency CMOs | | | Agency CMOs | | |
Amortized cost | Amortized cost | | $ | — | | | $ | 8 | | | $ | 34 | | | $ | 1,664 | | | $ | 1,706 | | Amortized cost | | $ | — | | | $ | 10 | | | $ | 45 | | | $ | 1,442 | | | $ | 1,497 | |
Carrying value | Carrying value | | $ | — | | | $ | 8 | | | $ | 32 | | | $ | 1,506 | | | $ | 1,546 | | Carrying value | | $ | — | | | $ | 8 | | | $ | 40 | | | $ | 1,204 | | | $ | 1,252 | |
Weighted-average yield | | Weighted-average yield | | — | % | | 2.27 | % | | 1.54 | % | | 1.57 | % | | 1.58 | % |
Other agency obligations | Other agency obligations | | Other agency obligations | |
Amortized cost | Amortized cost | | $ | — | | | $ | 467 | | | $ | 99 | | | $ | 12 | | | $ | 578 | | Amortized cost | | $ | 60 | | | $ | 560 | | | $ | 80 | | | $ | 10 | | | $ | 710 | |
Carrying value | Carrying value | | $ | — | | | $ | 456 | | | $ | 98 | | | $ | 13 | | | $ | 567 | | Carrying value | | $ | 59 | | | $ | 539 | | | $ | 74 | | | $ | 10 | | | $ | 682 | |
Weighted-average yield | | Weighted-average yield | | 2.54 | % | | 3.24 | % | | 3.44 | % | | 3.07 | % | | 3.20 | % |
Non-agency residential MBS | Non-agency residential MBS | | Non-agency residential MBS | |
Amortized cost | Amortized cost | | $ | — | | | $ | — | | | $ | — | | | $ | 496 | | | $ | 496 | | Amortized cost | | $ | — | | | $ | — | | | $ | — | | | $ | 509 | | | $ | 509 | |
Carrying value | Carrying value | | $ | — | | | $ | — | | | $ | — | | | $ | 485 | | | $ | 485 | | Carrying value | | $ | — | | | $ | — | | | $ | — | | | $ | 465 | | | $ | 465 | |
Weighted-average yield | | Weighted-average yield | | — | % | | — | % | | — | % | | 4.10 | % | | 4.10 | % |
U.S. Treasuries | U.S. Treasuries | | U.S. Treasuries | |
Amortized cost | Amortized cost | | $ | — | | | $ | 915 | | | $ | 4 | | | $ | — | | | $ | 919 | | Amortized cost | | $ | 417 | | | $ | 848 | | | $ | — | | | $ | — | | | $ | 1,265 | |
Carrying value | Carrying value | | $ | — | | | $ | 909 | | | $ | 3 | | | $ | — | | | $ | 912 | | Carrying value | | $ | 408 | | | $ | 830 | | | $ | — | | | $ | — | | | $ | 1,238 | |
Weighted-average yield | | Weighted-average yield | | 2.40 | % | | 3.51 | % | | — | % | | — | % | | 3.14 | % |
Corporate bonds | Corporate bonds | | Corporate bonds | |
Amortized cost | Amortized cost | | $ | — | | | $ | 78 | | | $ | 62 | | | $ | — | | | $ | 140 | | Amortized cost | | $ | 25 | | | $ | 87 | | | $ | 28 | | | $ | — | | | $ | 140 | |
Carrying value | Carrying value | | $ | — | | | $ | 77 | | | $ | 63 | | | $ | — | | | $ | 140 | | Carrying value | | $ | 25 | | | $ | 84 | | | $ | 25 | | | $ | — | | | $ | 134 | |
Weighted-average yield | | Weighted-average yield | | 4.79 | % | | 6.32 | % | | 4.90 | % | | — | % | | 5.76 | % |
Other | Other | | Other | |
Amortized cost | Amortized cost | | $ | 1 | | | $ | 5 | | | $ | — | | | $ | 13 | | | $ | 19 | | Amortized cost | | $ | — | | | $ | 5 | | | $ | 5 | | | $ | 8 | | | $ | 18 | |
Carrying value | Carrying value | | $ | 1 | | | $ | 4 | | | $ | — | | | $ | 12 | | | $ | 17 | | Carrying value | | $ | — | | | $ | 5 | | | $ | 5 | | | $ | 8 | | | $ | 18 | |
Weighted-average yield | | Weighted-average yield | | — | % | | 7.05 | % | | 5.23 | % | | 8.05 | % | | 7.06 | % |
Total available-for-sale securities | Total available-for-sale securities | | Total available-for-sale securities | |
Amortized cost | Amortized cost | | $ | 20 | | | $ | 2,089 | | | $ | 3,673 | | | $ | 5,407 | | | $ | 11,189 | | Amortized cost | | $ | 502 | | | $ | 2,556 | | | $ | 2,897 | | | $ | 4,717 | | | $ | 10,672 | |
Carrying value | Carrying value | | $ | 20 | | | $ | 2,039 | | | $ | 3,410 | | | $ | 4,995 | | | $ | 10,464 | | Carrying value | | $ | 492 | | | $ | 2,412 | | | $ | 2,561 | | | $ | 4,101 | | | $ | 9,566 | |
Weighted-average yield | Weighted-average yield | | 2.15 | % | | 2.23 | % | | 1.33 | % | | 1.89 | % | | 1.76 | % | Weighted-average yield | | 2.54 | % | | 2.81 | % | | 1.38 | % | | 2.05 | % | | 2.07 | % |
| | | | | | | | |
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements (Unaudited) | |
The following table details the gross unrealized losses and fair values of securities that were in a loss position at the reporting period end, aggregated by investment category and length of time the individual securities have been in a continuous unrealized loss position.
| | | | Less than 12 months | | 12 months or more | | Total | | | Less than 12 months | | 12 months or more | | Total |
$ in millions | $ in millions | | Estimated fair value | | Unrealized losses | | Estimated fair value | | Unrealized losses | | Estimated fair value | | Unrealized losses | $ in millions | | Estimated fair value | | Unrealized losses | | Estimated fair value | | Unrealized losses | | Estimated fair value | | Unrealized losses |
June 30, 2022 | | | | | | | | | | | | | |
June 30, 2023 | | June 30, 2023 | | | | | | | | | | | | |
Agency residential MBS | Agency residential MBS | | $ | 4,288 | | | $ | (267) | | | $ | 1,149 | | | $ | (123) | | | $ | 5,437 | | | $ | (390) | | Agency residential MBS | | $ | 190 | | | $ | (8) | | | $ | 4,274 | | | $ | (552) | | | $ | 4,464 | | | $ | (560) | |
Agency commercial MBS | Agency commercial MBS | | 607 | | | (44) | | | 649 | | | (100) | | | 1,256 | | | (144) | | Agency commercial MBS | | 136 | | | (5) | | | 1,136 | | | (192) | | | 1,272 | | | (197) | |
Agency CMOs | Agency CMOs | | 961 | | | (85) | | | 547 | | | (76) | | | 1,508 | | | (161) | | Agency CMOs | | 26 | | | (1) | | | 1,226 | | | (244) | | | 1,252 | | | (245) | |
Other agency obligations | Other agency obligations | | 487 | | | (11) | | | — | | | — | | | 487 | | | (11) | | Other agency obligations | | 208 | | | (3) | | | 474 | | | (25) | | | 682 | | | (28) | |
Non-agency residential MBS | Non-agency residential MBS | | 471 | | | (11) | | | — | | | — | | | 471 | | | (11) | | Non-agency residential MBS | | 53 | | | (2) | | | 412 | | | (42) | | | 465 | | | (44) | |
U.S. Treasuries | U.S. Treasuries | | 776 | | | (7) | | | — | | | — | | | 776 | | | (7) | | U.S. Treasuries | | 325 | | | (6) | | | 763 | | | (21) | | | 1,088 | | | (27) | |
Corporate bonds | Corporate bonds | | 120 | | | (1) | | | — | | | — | | | 120 | | | (1) | | Corporate bonds | | 26 | | | (1) | | | 65 | | | (5) | | | 91 | | | (6) | |
Other | Other | | 18 | | | (1) | | | — | | | (1) | | | 18 | | | (2) | | Other | | 5 | | | — | | | 13 | | | — | | | 18 | | | — | |
Total | Total | | $ | 7,728 | | | $ | (427) | | | $ | 2,345 | | | $ | (300) | | | $ | 10,073 | | | $ | (727) | | Total | | $ | 969 | | | $ | (26) | | | $ | 8,363 | | | $ | (1,081) | | | $ | 9,332 | | | $ | (1,107) | |
September 30, 2021 | | | | | | | | | | | | | |
September 30, 2022 | | September 30, 2022 | | | | | | | | | | | | |
Agency residential MBS | Agency residential MBS | | $ | 3,155 | | | $ | (25) | | | $ | 18 | | | $ | — | | | $ | 3,173 | | | $ | (25) | | Agency residential MBS | | $ | 2,165 | | | $ | (226) | | | $ | 2,829 | | | $ | (442) | | | $ | 4,994 | | | $ | (668) | |
Agency commercial MBS | Agency commercial MBS | | 645 | | | (13) | | | 353 | | | (15) | | | 998 | | | (28) | | Agency commercial MBS | | 494 | | | (41) | | | 816 | | | (167) | | | 1,310 | | | (208) | |
Agency CMOs | Agency CMOs | | 918 | | | (12) | | | 231 | | | (4) | | | 1,149 | | | (16) | | Agency CMOs | | 337 | | | (32) | | | 1,067 | | | (201) | | | 1,404 | | | (233) | |
Other agency obligations | | Other agency obligations | | 582 | | | (31) | | | — | | | — | | | 582 | | | (31) | |
Non-agency residential MBS | | Non-agency residential MBS | | 451 | | | (41) | | | — | | | — | | | 451 | | | (41) | |
U.S. Treasuries | U.S. Treasuries | | 3 | | | — | | | — | | | — | | | 3 | | | — | | U.S. Treasuries | | 982 | | | (28) | | | 4 | | | — | | | 986 | | | (28) | |
| Corporate bonds | | Corporate bonds | | 128 | | | (5) | | | — | | | — | | | 128 | | | (5) | |
Other | | Other | | 17 | | | (1) | | | — | | | — | | | 17 | | | (1) | |
Total | Total | | $ | 4,721 | | | $ | (50) | | | $ | 602 | | | $ | (19) | | | $ | 5,323 | | | $ | (69) | | Total | | $ | 5,156 | | | $ | (405) | | | $ | 4,716 | | | $ | (810) | | | $ | 9,872 | | | $ | (1,215) | |
At June 30, 2022,2023, of the 9921,079 available-for-sale securities in an unrealized loss position, 842144 were in a continuous unrealized loss position for less than 12 months and 150935 securities were in a continuous unrealized loss position for greater than 12 months. The contractual cash flows for certain securities within our available-for-sale portfolio are guaranteed by the U.S. government or its agencies. For those securities, we do not consider any associated unrealized losses to be credit losses due to the guarantee of the full payment of principal and interest, and the fact that we have the ability and intent to hold these securities. In addition, unrealized losses related to these available-for-sale securities are generally due to changes in market interest rates. At June 30, 2022, based on our assessment of those securities not guaranteed by the U.S. government or its agencies, we recognized an insignificant allowance for credit losses.
At June 30, 2022,2023, debt securities we held in excess of ten percent of our equity included those issued by the Federal National Home Mortgage Association and Federal Home Loan Mortgage Corporation with amortized costs of $5.60$4.91 billion and $3.23$2.95 billion, respectively, and fair values of $5.18$4.31 billion and $2.97$2.57 billion, respectively.
During the three and nine months ended June 30, 2023, there were no sales of available-for-sale securities. During the three and nine months ended June 30, 2022, sales of available-for-sale securities were insignificant. During the three and nine months ended June 30, 2021, we received proceeds of $450 million and $969 million, respectively, from the sales of agency MBS and agency CMO available-for-sale securities, resulting in insignificant gains.
| | | | | | | | |
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements (Unaudited) | |
NOTE 65 – DERIVATIVE ASSETS AND DERIVATIVE LIABILITIES
Our derivative assets and derivative liabilities are recorded at fair value and are included in “Derivative assets” and “Derivative liabilities” on our Condensed Consolidated Statements of Financial Condition. Cash flows related to our derivatives are included within operating activities on the Condensed Consolidated Statements of Cash Flows. The significant accounting policies governing our derivatives, including our methodologies for determining fair value, are described in Note 2 of our 20212022 Form 10-K.
Derivative balances included on our financial statements
The following table presents the gross fair values and notional amounts of derivatives by product type, the amounts of counterparty and cash collateral netting on our Condensed Consolidated Statements of Financial Condition, as well as collateral posted and received under credit support agreements that do not meet the criteria for netting under GAAP.
| | | June 30, 2022 | | September 30, 2021 | | June 30, 2023 | | September 30, 2022 |
$ in millions | $ in millions | | Derivative assets | | Derivative liabilities | | Notional amount | | Derivative assets | | Derivative liabilities | | Notional amount | $ in millions | | Derivative assets | | Derivative liabilities | | Notional amount | | Derivative assets | | Derivative liabilities | | Notional amount |
Derivatives not designated as hedging instruments | Derivatives not designated as hedging instruments | | | | | | | | | | | | | Derivatives not designated as hedging instruments | | | | | | | | | | | | |
Interest rate - matched book | | $ | 84 | | | $ | 84 | | | $ | 1,340 | | | $ | 193 | | | $ | 193 | | | $ | 1,736 | | |
Interest rate - other (1) | Interest rate - other (1) | | 288 | | | 352 | | | 16,551 | | | 144 | | | 122 | | | 15,087 | | Interest rate - other (1) | | $ | 414 | | | $ | 469 | | | $ | 17,811 | | | $ | 462 | | | $ | 535 | | | $ | 14,647 | |
Interest rate - matched book (2) | | Interest rate - matched book (2) | | — | | | — | | | — | | | 52 | | | 52 | | | 1,340 | |
Foreign exchange | Foreign exchange | | 2 | | | — | | | 1,037 | | | 3 | | | — | | | 826 | | Foreign exchange | | 2 | | | — | | | 1,167 | | | 4 | | | 5 | | | 958 | |
Other | Other | | 2 | | | 1 | | | 601 | | | — | | | 1 | | | 551 | | Other | | — | | | 4 | | | 661 | | | — | | | 3 | | | 531 | |
Subtotal | Subtotal | | 376 | | | 437 | | | 19,529 | | | 340 | | | 316 | | | 18,200 | | Subtotal | | 416 | | | 473 | | | 19,639 | | | 518 | | | 595 | | | 17,476 | |
Derivatives designated as hedging instruments | Derivatives designated as hedging instruments | | | | | | | | | | | | | Derivatives designated as hedging instruments | | | | | | | | | | | | |
Interest rate - other(3) | Interest rate - other(3) | | 9 | | | — | | | 1,050 | | | — | | | — | | | 850 | | Interest rate - other(3) | | 9 | | | — | | | 1,250 | | | 12 | | | — | | | 1,050 | |
Foreign exchange | Foreign exchange | | 2 | | | — | | | 1,160 | | | 2 | | | — | | | 939 | | Foreign exchange | | 3 | | | — | | | 1,188 | | | 6 | | | — | | | 1,092 | |
Subtotal | Subtotal | | 11 | | | — | | | 2,210 | | | 2 | | | — | | | 1,789 | | Subtotal | | 12 | | | — | | | 2,438 | | | 18 | | | — | | | 2,142 | |
Total gross fair value/notional amount | Total gross fair value/notional amount | | 387 | | | 437 | | | $ | 21,739 | | | 342 | | | 316 | | | $ | 19,989 | | Total gross fair value/notional amount | | 428 | | | 473 | | | $ | 22,077 | | | 536 | | | 595 | | | $ | 19,618 | |
Offset on the Condensed Consolidated Statements of Financial Condition | Offset on the Condensed Consolidated Statements of Financial Condition | | | | | | | | | | | | | Offset on the Condensed Consolidated Statements of Financial Condition | | | | | | | | | | | | |
Counterparty netting | Counterparty netting | | (31) | | | (31) | | | (46) | | | (46) | | | Counterparty netting | | (24) | | | (24) | | | (35) | | | (35) | | |
Cash collateral netting | Cash collateral netting | | (204) | | | (27) | | | (41) | | | (42) | | | Cash collateral netting | | (175) | | | (56) | | | (313) | | | (30) | | |
Total amounts offset | Total amounts offset | | (235) | | | (58) | | | (87) | | | (88) | | | Total amounts offset | | (199) | | | (80) | | | (348) | | | (65) | | |
Net amounts presented on the Condensed Consolidated Statements of Financial Condition | Net amounts presented on the Condensed Consolidated Statements of Financial Condition | | 152 | | | 379 | | | 255 | | | 228 | | | Net amounts presented on the Condensed Consolidated Statements of Financial Condition | | $ | 229 | | | $ | 393 | | | $ | 188 | | | $ | 530 | | |
Gross amounts not offset on the Condensed Consolidated Statements of Financial Condition | Gross amounts not offset on the Condensed Consolidated Statements of Financial Condition | | | | | | | | | | Gross amounts not offset on the Condensed Consolidated Statements of Financial Condition | | | | | | | | | |
Financial instruments (2) | Financial instruments (2) | | (85) | | | (84) | | | (205) | | | (193) | | | Financial instruments (2) | | (108) | | | — | | | (60) | | | (52) | | |
Total | Total | | $ | 67 | | | $ | 295 | | | $ | 50 | | | $ | 35 | | | Total | | $ | 121 | | | $ | 393 | | | $ | 128 | | | $ | 478 | | |
(1) Relates to interest rate derivatives entered into as part of our fixed income business operations, including to-be-announced security contracts (“TBAs”) that are accounted for as derivatives, as well as our banking operations, including those acquired with TriState Capital on June 1, 2022.operations.
(2) Although the matched book derivative arrangements dodid not meet the definition of a master netting arrangement as specified by GAAP, the agreement with the third-party intermediary includesincluded terms that arewere similar to a master netting agreement. As a result, we presentpresented the matched book amounts as of September 30, 2022 net in the preceding table. As of June 30, 2023, we had exited such matched book derivative agreements.
(3) During the nine months ended June 30, 2023, we entered into an interest rate swap to manage our risk of increases in interest rates associated with certain money market and savings accounts by converting the balances subject to variable interest rates to a fixed interest rate. Such interest rate swap has been designated and accounted for as a cash flow hedge. Refer to Note 13 of this Form 10-Q for information regarding these bank deposits.
| | | | | | | | |
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements (Unaudited) | |
The following table details the gains/(losses) included in accumulated other comprehensive income/(loss) (“AOCI”), net of income taxes, on derivatives designated as hedging instruments. These gains/(losses) included any amounts reclassified from AOCI to net income during the period. See Note 1917 for additional information.
| | | | Three months ended June 30, | | Nine months ended June 30, | | | Three months ended June 30, | | Nine months ended June 30, |
$ in millions | $ in millions | | 2022 | | 2021 | | 2022 | | 2021 | $ in millions | | 2023 | | 2022 | | 2023 | | 2022 |
Interest rate (cash flow hedges) | Interest rate (cash flow hedges) | | $ | 10 | | | $ | (2) | | | $ | 48 | | | $ | 22 | | Interest rate (cash flow hedges) | | $ | 12 | | | $ | 10 | | | $ | (1) | | | $ | 48 | |
Foreign exchange (net investment hedges) | Foreign exchange (net investment hedges) | | 24 | | | (9) | | | 14 | | | (48) | | Foreign exchange (net investment hedges) | | (16) | | | 24 | | | (33) | | | 14 | |
Total gains/(losses) in AOCI, net of taxes | | $ | 34 | | | $ | (11) | | | $ | 62 | | | $ | (26) | | |
Total gains/(losses) included in AOCI, net of taxes | | Total gains/(losses) included in AOCI, net of taxes | | $ | (4) | | | $ | 34 | | | $ | (34) | | | $ | 62 | |
There were 0no components of derivative gains or losses excluded from the assessment of hedge effectiveness for each of the three and nine months ended June 30, 20222023 and 2021.2022. We expect to reclassify $13$36 million of interest expense out of AOCI and into earnings within the next 12 months. The maximum length of time over which forecasted transactions are or will be hedged is fivefour years.
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
The following table details the gains/(losses) on derivatives not designated as hedging instruments recognized on the Condensed Consolidated Statements of Income and Comprehensive Income. These amounts do not include any offsetting gains/(losses) on the related hedged item.
| $ in millions | $ in millions | | Three months ended June 30, | | Nine months ended June 30, | $ in millions | | Three months ended June 30, | | Nine months ended June 30, |
| Location of gain/(loss) | | 2022 | | 2021 | | 2022 | | 2021 | | Location of gain/(loss) | | 2023 | | 2022 | | 2023 | | 2022 |
Interest rate | Interest rate | | Principal transactions/other revenues | | $ | 4 | | | $ | 2 | | | $ | 14 | | | $ | 12 | | Interest rate | | Principal transactions/other revenues | | $ | 6 | | | $ | 4 | | | $ | 17 | | | $ | 14 | |
Foreign exchange | Foreign exchange | | Other revenues | | $ | 33 | | | $ | (9) | | | $ | 30 | | | $ | (39) | | Foreign exchange | | Other revenues | | $ | (20) | | | $ | 33 | | | $ | (56) | | | $ | 30 | |
Other | Other | | Principal transactions | | $ | 1 | | | $ | 1 | | | $ | 2 | | | $ | 3 | | Other | | Principal transactions | | $ | 1 | | | $ | 1 | | | $ | — | | | $ | 2 | |
|
Risks associated with our derivatives and related risk mitigation
Credit risk
We are exposed to credit losses primarily in the event of nonperformance by the counterparties to derivatives that are not cleared through a clearing organization. Where we are subject to credit exposure, we perform a credit evaluation of counterparties prior to entering into derivative transactions and we continue to monitor their credit standings on an ongoing basis. We may require initial margin or collateral from counterparties, generally in the form of cash or other marketable securities to support certain of these obligations as established by the credit threshold specified by the agreement and/or as a result of monitoring the credit standing of the counterparties. We also enter into derivatives with clients to which Raymond James Bank and TriState Capital Bank have provided loans. Such derivatives are generally collateralized by marketable securities or other assets of the client.
Our only exposure to credit risk on matched book derivatives is related to our uncollected derivative transaction fee revenues, which were insignificant as of both June 30, 2022 and September 30, 2021. We are not exposed to market risk on these derivatives due to the pass-through transaction structure described in Note 2 of our 2021 Form 10-K.
Interest rate and foreign exchange risk
We are exposed to interest rate risk related to certain of our interest rate derivatives. We are also exposed to foreign exchange risk related to our forward foreign exchange derivatives. On a daily basis, we monitor our risk exposure on our derivatives based on established limits with respect to a number of factors, including interest rate,sensitivity-based and foreign exchange spot and forward rates, spread, ratio, basis and volatility risks, both for the total portfolio and by maturity period.limits.
Derivatives with credit-risk-related contingent features
Certain of our derivative contracts contain provisions that require our debt to maintain an investment-grade rating from one or more of the major credit rating agencies or contain provisions related to default on certain of our outstanding debt. If our debt were to fall below investment-grade or we were to default on certain of our outstanding debt, the counterparties to the derivative instruments could terminate the derivative and request immediate payment, or demand immediate and ongoing overnight collateralization on our derivative instruments in liability positions. The aggregate fair value of all derivative instruments with such credit-risk-related contingent features that were in a liability position was insignificant$3 million as of June 30, 20222023 and $8 million as of September 30, 2021.2022.
| | | | | | | | |
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements (Unaudited) | |
NOTE 76 – COLLATERALIZED AGREEMENTS AND FINANCINGS
Collateralized agreements are comprised of securities purchased under agreements to resell (“reverse repurchase agreements”) and securities borrowed. Collateralized financings are comprised of securities sold under agreements to repurchase (“repurchase agreements”) and securities loaned. We enter into these transactions in order to facilitate client activities, acquire securities to cover short positions and finance certain firm activities. The significant accounting policies governing our collateralized agreements and financings are described in Note 2 of our 20212022 Form 10-K.
Our reverse repurchase agreements, repurchase agreements, securities borrowing, and securities lending transactions are governed by master agreements that are widely used by counterparties and that may allow for net settlements of payments in the normal course, as well as offsetting of all contracts with a given counterparty in the event of bankruptcy or default of one of the parties to the transaction. For financial statement purposes, we do not offset our reverse repurchase agreements, repurchase agreements, securities borrowed, and securities loaned because the conditions for netting as specified by GAAP are not met. Although not offset on the Condensed Consolidated Statements of Financial Condition, these transactions are included in the following table.
| | | Collateralized agreements | | Collateralized financings | | Collateralized agreements | | Collateralized financings |
$ in millions | $ in millions | | Reverse repurchase agreements | | Securities borrowed | | Total | | Repurchase agreements | | Securities loaned | | Total | $ in millions | | Reverse repurchase agreements | | Securities borrowed | | Total | | Repurchase agreements | | Securities loaned | | Total |
June 30, 2022 | | | | | | | | | | | | | |
June 30, 2023 | | June 30, 2023 | | | | | | | | | | | | |
Gross amounts of recognized assets/liabilities | Gross amounts of recognized assets/liabilities | | $ | 168 | | | $ | 463 | | | $ | 631 | | | $ | 100 | | | $ | 337 | | | $ | 437 | | Gross amounts of recognized assets/liabilities | | $ | 181 | | | $ | 229 | | | $ | 410 | | | $ | 110 | | | $ | 71 | | | $ | 181 | |
Gross amounts offset on the Condensed Consolidated Statements of Financial Condition | Gross amounts offset on the Condensed Consolidated Statements of Financial Condition | | — | | | — | | | — | | | — | | | — | | | — | | Gross amounts offset on the Condensed Consolidated Statements of Financial Condition | | — | | | — | | | — | | | — | | | — | | | — | |
Net amounts presented on the Condensed Consolidated Statements of Financial Condition | | 168 | | | 463 | | | 631 | | | 100 | | | 337 | | | 437 | | |
Net amounts included in the Condensed Consolidated Statements of Financial Condition | | Net amounts included in the Condensed Consolidated Statements of Financial Condition | | 181 | | | 229 | | | 410 | | | 110 | | | 71 | | | 181 | |
Gross amounts not offset on the Condensed Consolidated Statements of Financial Condition | Gross amounts not offset on the Condensed Consolidated Statements of Financial Condition | | (168) | | | (452) | | | (620) | | | (100) | | | (320) | | | (420) | | Gross amounts not offset on the Condensed Consolidated Statements of Financial Condition | | (181) | | | (223) | | | (404) | | | (110) | | | (68) | | | (178) | |
Net amounts | Net amounts | | $ | — | | | $ | 11 | | | $ | 11 | | | $ | — | | | $ | 17 | | | $ | 17 | | Net amounts | | $ | — | | | $ | 6 | | | $ | 6 | | | $ | — | | | $ | 3 | | | $ | 3 | |
September 30, 2021 | | | | | | | | | | | | | |
September 30, 2022 | | September 30, 2022 | | | | | | | | | | | | |
Gross amounts of recognized assets/liabilities | Gross amounts of recognized assets/liabilities | | $ | 279 | | | $ | 201 | | | $ | 480 | | | $ | 205 | | | $ | 72 | | | $ | 277 | | Gross amounts of recognized assets/liabilities | | $ | 367 | | | $ | 337 | | | $ | 704 | | | $ | 294 | | | $ | 172 | | | $ | 466 | |
Gross amounts offset on the Condensed Consolidated Statements of Financial Condition | Gross amounts offset on the Condensed Consolidated Statements of Financial Condition | | — | | | — | | | — | | | — | | | — | | | — | | Gross amounts offset on the Condensed Consolidated Statements of Financial Condition | | — | | | — | | | — | | | — | | | — | | | — | |
Net amounts presented on the Condensed Consolidated Statements of Financial Condition | | 279 | | | 201 | | | 480 | | | 205 | | | 72 | | | 277 | | |
Net amounts included in the Condensed Consolidated Statements of Financial Condition | | Net amounts included in the Condensed Consolidated Statements of Financial Condition | | 367 | | | 337 | | | 704 | | | 294 | | | 172 | | | 466 | |
Gross amounts not offset on the Condensed Consolidated Statements of Financial Condition | Gross amounts not offset on the Condensed Consolidated Statements of Financial Condition | | (279) | | | (195) | | | (474) | | | (205) | | | (68) | | | (273) | | Gross amounts not offset on the Condensed Consolidated Statements of Financial Condition | | (367) | | | (327) | | | (694) | | | (294) | | | (162) | | | (456) | |
Net amounts | Net amounts | | $ | — | | | $ | 6 | | | $ | 6 | | | $ | — | | | $ | 4 | | | $ | 4 | | Net amounts | | $ | — | | | $ | 10 | | | $ | 10 | | | $ | — | | | $ | 10 | | | $ | 10 | |
The total amount of collateral received under reverse repurchase agreements and the total amount of collateral posted under repurchase agreements exceeds the carrying value of these agreements on our Condensed Consolidated Statements of Financial Condition.
| | | | | | | | |
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements (Unaudited) | |
Repurchase agreements and securities loaned accounted for as secured borrowings
The following table presents the remaining contractual maturity of repurchase agreements and securities lending transactions accounted for as secured borrowings.
| $ in millions | $ in millions | | Overnight and continuous | | Up to 30 days | | 30-90 days | | Greater than 90 days | | Total | $ in millions | | Overnight and continuous | | Up to 30 days | | 30-90 days | | Greater than 90 days | | Total |
June 30, 2022 | | | | | | | | | | | |
June 30, 2023 | | June 30, 2023 | | | | | | | | | | |
Repurchase agreements: | Repurchase agreements: | | Repurchase agreements: | |
Government and agency obligations | Government and agency obligations | | $ | 57 | | | $ | — | | | $ | — | | | $ | — | | | $ | 57 | | Government and agency obligations | | $ | 107 | | | $ | — | | | $ | — | | | $ | — | | | $ | 107 | |
Agency MBS and agency CMOs | Agency MBS and agency CMOs | | 43 | | | — | | | — | | | — | | | 43 | | Agency MBS and agency CMOs | | 3 | | | — | | | — | | | — | | | 3 | |
Total repurchase agreements | Total repurchase agreements | | 100 | | | — | | | — | | | — | | | 100 | | Total repurchase agreements | | 110 | | | — | | | — | | | — | | | 110 | |
Securities loaned: | Securities loaned: | | | | | | | | | | | Securities loaned: | | | | | | | | | | |
Equity securities | Equity securities | | 337 | | | — | | | — | | | — | | | 337 | | Equity securities | | 71 | | | — | | | — | | | — | | | 71 | |
Total collateralized financings | Total collateralized financings | | $ | 437 | |
| $ | — | |
| $ | — | |
| $ | — | |
| $ | 437 | | Total collateralized financings | | $ | 181 | |
| $ | — | |
| $ | — | |
| $ | — | |
| $ | 181 | |
September 30, 2021 | | | | | | | | | | | |
September 30, 2022 | | September 30, 2022 | | | | | | | | | | |
Repurchase agreements: | Repurchase agreements: | | Repurchase agreements: | |
Government and agency obligations | Government and agency obligations | | $ | 122 | | | $ | — | | | $ | — | | | $ | — | | | $ | 122 | | Government and agency obligations | | $ | 183 | | | $ | — | | | $ | — | | | $ | — | | | $ | 183 | |
Agency MBS and agency CMOs | Agency MBS and agency CMOs | | 83 | | | — | | | — | | | — | | | 83 | | Agency MBS and agency CMOs | | 111 | | | — | | | — | | | — | | | 111 | |
Total repurchase agreements | Total repurchase agreements | | 205 | | | — | | | — | | | — | | | 205 | | Total repurchase agreements | | 294 | | | — | | | — | | | — | | | 294 | |
Securities loaned: | Securities loaned: | | | | | | | | | | | Securities loaned: | | | | | | | | | | |
Equity securities | Equity securities | | 72 | | | — | | | — | | | — | | | 72 | | Equity securities | | 172 | | | — | | | — | | | — | | | 172 | |
Total collateralized financings | Total collateralized financings | | $ | 277 | | | $ | — | | | $ | — | | | $ | — | | | $ | 277 | | Total collateralized financings | | $ | 466 | | | $ | — | | | $ | — | | | $ | — | | | $ | 466 | |
Collateral received and pledged
We receive cash and securities as collateral, primarily in connection with reverse repurchase agreements, securities borrowing agreements, derivative transactions, and client margin loans. The collateral we receive reduces our credit exposure to individual counterparties.
In many cases, we are permitted to deliver or repledge financial instruments we have received as collateral to satisfy our collateral requirements under our repurchase agreements, securities lending agreements or other secured borrowings, to satisfy deposit requirements with clearing organizations, or to otherwise meet either our or our clients’ settlement requirements.
The following table presents financial instruments at fair value that we received as collateral, were not included on our Condensed Consolidated Statements of Financial Condition, and that were available to be delivered or repledged, along with the balances of such instruments that were delivered or repledged, to satisfy one of our purposes previously described.
| $ in millions | $ in millions | | June 30, 2022 | | September 30, 2021 | $ in millions | | June 30, 2023 | | September 30, 2022 |
Collateral we received that was available to be delivered or repledged | Collateral we received that was available to be delivered or repledged | | $ | 3,830 | | | $ | 3,429 | | Collateral we received that was available to be delivered or repledged | | $ | 3,099 | | | $ | 3,812 | |
Collateral that we delivered or repledged | Collateral that we delivered or repledged | | $ | 995 | | | $ | 830 | | Collateral that we delivered or repledged | | $ | 776 | | | $ | 947 | |
| | | | | | | | |
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements (Unaudited) | |
Encumbered assets
We pledge certain of our assets to collateralize either repurchase agreements or other secured borrowings, maintain lines of credit, or to satisfy our collateral or settlement requirements with counterparties or clearing organizations who may or may not have the right to deliver or repledge such instruments. We pledge certain of our bank loans and available-for-sale securities with the FHLB as security for both the repayment of certain borrowings and to secure capacity for additional borrowings as needed. We also pledge certain loans and available-for-sale securities with the FRB to be eligible to participate in the Federal Reserve’s discount window program and to participate in certain deposit programs. During the nine months ended June 30, 2023, Raymond James Bank increased its borrowing capacity with the FHLB through the pledge of additional available-for-sale securities. The FHLB does not have the ability to sell or repledge such securities until they are borrowed against. For additional information regarding our outstanding FHLB advances see Note 14.
The following table presents information about our assets that have been pledged for one of the purposes previously described.
| $ in millions | $ in millions | | June 30, 2022 | | September 30, 2021 | $ in millions | | June 30, 2023 | | September 30, 2022 |
Had the right to deliver or repledge | Had the right to deliver or repledge | | $ | 422 | | | $ | 368 | | Had the right to deliver or repledge | | $ | 1,009 | | | $ | 1,276 | |
Did not have the right to deliver or repledge | Did not have the right to deliver or repledge | | $ | 63 | | | $ | 65 | | Did not have the right to deliver or repledge | | $ | 4,051 | | | $ | 63 | |
Bank loans, net pledged at the FHLB and the Federal Reserve Bank of Atlanta (“FRB”) | | $ | 8,138 | | | $ | 5,716 | | |
Bank loans, net pledged with the: | | Bank loans, net pledged with the: | |
FHLB | | FHLB | | $ | 9,267 | | | $ | 8,009 | |
FRB | | FRB | | 720 | | | 791 | |
Total bank loans, net pledged with the FHLB and FRB | | Total bank loans, net pledged with the FHLB and FRB | | $ | 9,987 | | | $ | 8,800 | |
| | | | | | | | |
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements (Unaudited) | |
NOTE 87 – BANK LOANS, NET
Bank client receivables are comprised of loans originated or purchased by our Bank segment and include commercialsecurities-based loans (“SBL”), corporate loans (commercial and industrial (“C&I”) loans, commercial real estate (“CRE”) loans, and real estate investment trust (“REIT”) loans, tax-exempt loans, commercial andloans), residential real estatemortgage loans, and securities-based loans (“SBL”) and othertax-exempt loans. These receivables are collateralized by first and, to a lesser extent, second mortgages on residential or other real property, other assets of the borrower, a pledge of revenue, securities or are unsecured. We segregate our loan portfolio into six loan portfolio segments: SBL, C&I, commercial real estate (“CRE”),CRE, REIT, tax-exempt, residential mortgage, and SBL and other. Substantially all of the SBL and other segment portfolio is comprised of securities-based loans.tax-exempt. See Note 2 of our 20212022 Form 10-K for a discussion of our October 1, 2020 adoption of new accounting guidance related to the measurement of credit losses on financial instruments and our accounting policies related to bank loans and the allowance for credit losses.
Loan balances in the following tables are presented at amortized cost (outstanding principal balance net of unearned income and deferred expenses, which include purchase premiums,unamortized purchase discounts and netor premiums, unearned income, deferred origination fees and costs)costs, and charge-offs), except for certain held for sale loans recorded at fair value. Bank loans are presented on our Condensed Consolidated Statements of Financial Condition at amortized cost (or fair value where applicable) less the allowance for credit losses.losses (“ACL”). As it pertains to TriState Capital Bank’s loans acquired as of June 1, 2022, the amortized cost of such purchased loans reflects the fair value of the loans on the originationacquisition date, and as described further in Note 3 of our 2022 Form 10-K, the purchase discount on such loans is accreted to interest income over the contractualweighted-average life of the loan.underlying loans, which may vary based on prepayments.
The following table presents the balances for both theheld for investment loans by portfolio segment and held for sale and held for investment loan portfolios, as well as the associated percentage of each portfolio segment in our bank loan portfolio.loans.
| | | | June 30, 2022 | | September 30, 2021 | | | | | | | | | | | | |
$ in millions | $ in millions | | Balance | | % | | Balance | | % | $ in millions | | June 30, 2023 | | September 30, 2022 |
SBL | | SBL | | $ | 14,227 | | | $ | 15,297 | |
C&I loans | C&I loans | | $ | 10,897 | | | 26 | % | | $ | 8,440 | | | 33 | % | C&I loans | | 10,663 | | | 11,173 | |
CRE loans | CRE loans | | 6,354 | | | 15 | % | | 2,872 | | | 11 | % | CRE loans | | 7,091 | | | 6,549 | |
REIT loans | REIT loans | | 1,416 | | | 3 | % | | 1,112 | | | 5 | % | REIT loans | | 1,715 | | | 1,592 | |
Residential mortgage loans | | Residential mortgage loans | | 8,422 | | | 7,386 | |
Tax-exempt loans | Tax-exempt loans | | 1,347 | | | 3 | % | | 1,321 | | | 5 | % | Tax-exempt loans | | 1,548 | | | 1,501 | |
Residential mortgage loans | | 6,728 | | | 16 | % | | 5,318 | | | 21 | % | |
SBL and other | | 15,312 | | | 36 | % | | 6,106 | | | 24 | % | |
Total loans held for investment | Total loans held for investment | | 42,054 | | | 99 | % | | 25,169 | | | 99 | % | Total loans held for investment | | 43,666 | | | 43,498 | |
Held for sale loans | Held for sale loans | | 166 | | | 1 | % | | 145 | | | 1 | % | Held for sale loans | | 135 | | | 137 | |
Total loans held for sale and investment | Total loans held for sale and investment | | 42,220 | | | 100 | % | | 25,314 | | | 100 | % | Total loans held for sale and investment | | 43,801 | | | 43,635 | |
Allowance for credit losses | Allowance for credit losses | | (377) | | | | | (320) | | | | Allowance for credit losses | | (456) | | | (396) | |
Bank loans, net (1) | Bank loans, net (1) | | $ | 41,843 | | | | | $ | 24,994 | | | | Bank loans, net (1) | | $ | 43,345 | | | $ | 43,239 | |
Accrued interest receivable on bank loans | | $ | 99 | | | $ | 48 | | | |
| ACL as a % of total loans held for investment | | ACL as a % of total loans held for investment | | 1.04 | % | | 0.91 | % |
Accrued interest receivable on bank loans (included in “Other receivables, net”) | | Accrued interest receivable on bank loans (included in “Other receivables, net”) | | $ | 197 | | | $ | 137 | |
(1) Bank loans, net as of June 30, 2023 and September 30, 2022 are presented net of $131$68 million and $112 million, respectively, of net unamortized discounts,discount, unearned income, and deferred loan fees and costs. This amountThe net unamortized discount primarily arose from the acquisition date fair value purchase discountsdiscount on bank loans acquired in the TriState Capital acquisition. See Note 3 of our 2022 Form 10-K for further information. Bank loans as of September 30, 2021 are presented net of $1 million of unearned income and deferred loan fees and costs.
The allowanceSee Note 6 for credit losses was 0.90% and 1.27% of the held for investment loan portfolio as of June 30, 2022 and September 30, 2021, respectively. Accrued interest receivables presented in the preceding table are reported in “Other receivables, net” on our Condensed Consolidated Statements of Financial Condition.
At June 30, 2022, we hadmore information regarding bank loans, net pledged $5.8 billion of residential mortgage loans and $1.5 billion of CRE loans with the FHLB as security for the repayment of certain borrowings. Additionally, as of June 30, 2022, we had pledged $797 million of C&I loans with theand FRB to be eligible to participate in the Federal Reserve’s discount window program. See Notes 7 and 15Note 14 for more information regarding borrowings from the FHLB and bank loans pledged with the FHLB and FRB.FHLB.
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
Held for sale loans
ExclusiveWe originated or purchased $699 million and $2.13 billion of loans held for sale during the three and nine months ended June 30, 2023, respectively, and, exclusive of the loans acquired on June 1, 2022 in our acquisition of TriState Capital, Bank, we originated or purchased $683 million and $2.65 billion of loans held for sale during the three and nine months ended June 30, 2022, respectively, and $385 million and $1.50 billion during the three and nine months ended June 30, 2021, respectively. The majority of these loans were purchases of the guaranteed portions of Small Business Administration (“SBA”) loans intendedthat were initially classified as loans held for resale in the secondary market as individual SBA loans or assale upon purchase and subsequently transferred to trading instruments once they had been securitized pools of SBA loans.into pools. Proceeds from the sales of these loans held for sale loansand not securitized amounted to $221 million and $574 million during the three and nine months ended June 30, 2023, respectively, and $345 million and $1.02 billion during the three and nine months ended June 30, 2022, respectively, and $230 million and $625 million during the three and nine months ended June 30, 2021, respectively. Net gains resulting from such sales were insignificant in all periods duringfor each of the three and nine months ended June 30, 20222023 and 2021.2022.
| | | | | | | | |
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements (Unaudited) | |
Purchases and sales of loans held for investment
The following table presents purchases and sales of loans held for investment by portfolio segment. Purchases do not include loans obtained from the acquisition of TriState Capital Bank.
| $ in millions | $ in millions | | C&I loans | | | Residential mortgage loans | | | Total | $ in millions | | | C&I loans | | CRE loans | | REIT loans | | | Residential mortgage loans | | Total |
Three months ended June 30, 2023 | | Three months ended June 30, 2023 | | | | | | | | | | | | |
Purchases | | Purchases | | | $ | 3 | | | $ | — | | | $ | — | | | | $ | 94 | | | $ | 97 | |
Sales | | Sales | | | $ | 441 | | | $ | — | | | $ | — | | | | $ | — | | | $ | 441 | |
Nine months ended June 30, 2023 | | Nine months ended June 30, 2023 | | | | | |
Purchases | | Purchases | | | $ | 360 | | | $ | 39 | | | $ | 24 | | | | $ | 394 | | | $ | 817 | |
Sales | | Sales | | | $ | 588 | | | $ | — | | | $ | — | | | | $ | — | | | $ | 588 | |
Three months ended June 30, 2022 | Three months ended June 30, 2022 | | | | | | | | | Three months ended June 30, 2022 | | | | | |
Purchases | Purchases | | $ | 439 | | | | $ | 383 | | | | $ | 822 | | Purchases | | | $ | 439 | | | $ | — | | | $ | — | | | | $ | 383 | | | $ | 822 | |
Sales | Sales | | $ | 33 | | | | $ | — | | | | $ | 33 | | Sales | | | $ | 33 | | | $ | — | | | $ | — | | | | $ | — | | | $ | 33 | |
Nine months ended June 30, 2022 | Nine months ended June 30, 2022 | | | | | | Nine months ended June 30, 2022 | | | | | |
Purchases | Purchases | | $ | 1,219 | | | | $ | 790 | | | | $ | 2,009 | | Purchases | | | $ | 1,219 | | | $ | — | | | $ | — | | | | $ | 790 | | | $ | 2,009 | |
Sales | Sales | | $ | 145 | | | | $ | — | | | | $ | 145 | | Sales | | | $ | 145 | | | $ | — | | | $ | — | | | | $ | — | | | $ | 145 | |
Three months ended June 30, 2021 | | | | | | |
Purchases | | $ | 381 | | | | $ | 190 | | | | $ | 571 | | |
Sales | | $ | 116 | | | | $ | — | | | | $ | 116 | | |
Nine months ended June 30, 2021 | | | | | | |
Purchases | | $ | 1,041 | | | | $ | 350 | | | | $ | 1,391 | | |
Sales | | $ | 216 | | | | $ | — | | | | $ | 216 | | |
Sales in the preceding table represent the recorded investment (i.e., net of charge-offs and discounts or premiums) of loans held for investment that were transferred to loans held for sale and subsequently sold to a third party during the respective period. As more fully described in Note 2 of our 20212022 Form 10-K, corporate loan sales generally occur as part of our credit management activities. Corporate loans include C&I, CRE, and REIT loans.
Aging analysis of loans held for investment
The following table presents information on delinquency status of our loans held for investment.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
$ in millions | | 30-89 days and accruing | | 90 days or more and accruing | | Total past due and accruing | | Nonaccrual with allowance | | Nonaccrual with no allowance | | Current and accruing | | Total loans held for investment |
June 30, 2022 | | | | | | | | | | | | | | |
C&I loans | | $ | 16 | | | $ | — | | | $ | 16 | | | $ | 46 | | | $ | — | | | $ | 10,835 | | | $ | 10,897 | |
CRE loans | | — | | | — | | | — | | | 12 | | | 17 | | | 6,325 | | | 6,354 | |
REIT loans | | — | | | — | | | — | | | — | | | — | | | 1,416 | | | 1,416 | |
Tax-exempt loans | | — | | | — | | | — | | | — | | | — | | | 1,347 | | | 1,347 | |
Residential mortgage loans | | 1 | | | — | | | 1 | | | 1 | | | 14 | | | 6,712 | | | 6,728 | |
SBL and other | | 1 | | | — | | | 1 | | | — | | | — | | | 15,311 | | | 15,312 | |
Total loans held for investment | | $ | 18 | | | $ | — | | | $ | 18 | | | $ | 59 | | | $ | 31 | | | $ | 41,946 | | | $ | 42,054 | |
| | | | | | | | | | | | | | |
September 30, 2021 | | | | | | | | | | | | | | |
C&I loans | | $ | — | | | $ | — | | | $ | — | | | $ | 39 | | | $ | — | | | $ | 8,401 | | | $ | 8,440 | |
CRE loans | | — | | | — | | | — | | | — | | | 20 | | | 2,852 | | | 2,872 | |
REIT loans | | — | | | — | | | — | | | — | | | — | | | 1,112 | | | 1,112 | |
Tax-exempt loans | | — | | | — | | | — | | | — | | | — | | | 1,321 | | | 1,321 | |
Residential mortgage loans | | 2 | | | — | | | 2 | | | 2 | | | 13 | | | 5,301 | | | 5,318 | |
SBL and other | | — | | | — | | | — | | | — | | | — | | | 6,106 | | | 6,106 | |
Total loans held for investment | | $ | 2 | | | $ | — | | | $ | 2 | | | $ | 41 | | | $ | 33 | | | $ | 25,093 | | | $ | 25,169 | |
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
$ in millions | | 30-89 days and accruing | | 90 days or more and accruing | | Total past due and accruing | | Nonaccrual with allowance | | Nonaccrual with no allowance | | Current and accruing | | Total loans held for investment |
June 30, 2023 | | | | | | | | | | | | | | |
SBL | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 14,227 | | | $ | 14,227 | |
C&I loans | | — | | | — | | | — | | | 75 | | | — | | | 10,588 | | | 10,663 | |
CRE loans | | — | | | — | | | — | | | 29 | | | 14 | | | 7,048 | | | 7,091 | |
REIT loans | | — | | | — | | | — | | | — | | | — | | | 1,715 | | | 1,715 | |
Residential mortgage loans | | 2 | | | — | | | 2 | | | — | | | 9 | | | 8,411 | | | 8,422 | |
Tax-exempt loans | | — | | | — | | | — | | | — | | | — | | | 1,548 | | | 1,548 | |
Total loans held for investment | | $ | 2 | | | $ | — | | | $ | 2 | | | $ | 104 | | | $ | 23 | | | $ | 43,537 | | | $ | 43,666 | |
| | | | | | | | | | | | | | |
September 30, 2022 | | | | | | | | | | | | | | |
SBL | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 15,297 | | | $ | 15,297 | |
C&I loans | | — | | | — | | | — | | | 32 | | | — | | | 11,141 | | | 11,173 | |
CRE loans | | — | | | — | | | — | | | 12 | | | 16 | | | 6,521 | | | 6,549 | |
REIT loans | | — | | | — | | | — | | | — | | | — | | | 1,592 | | | 1,592 | |
Residential mortgage loans | | 4 | | | — | | | 4 | | | — | | | 14 | | | 7,368 | | | 7,386 | |
Tax-exempt loans | | — | | | — | | | — | | | — | | | — | | | 1,501 | | | 1,501 | |
Total loans held for investment | | $ | 4 | | | $ | — | | | $ | 4 | | | $ | 44 | | | $ | 30 | | | $ | 43,420 | | | $ | 43,498 | |
The preceding table includes $78$118 million and $61$63 million at June 30, 20222023 and September 30, 2021,2022, respectively, of nonaccrual loans which were current pursuant to their contractual terms. The table also includes troubled debt restructurings (“TDRs”) of $13$30 million, $9$7 million, and $11$10 million for C&I loans, CRE loans, and residential first mortgage loans, respectively, at June 30, 2022,2023, and $12$11 million, $9 million, and $13$10 million for C&I loans, CRE loans and residential first mortgage loans, respectively, at September 30, 2021.2022.
Other real estate owned, included in “Other assets” on our Condensed Consolidated Statements of Financial Condition, was insignificant at both June 30, 20222023 and September 30, 2021.2022.
| | | | | | | | |
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements (Unaudited) | |
Collateral-dependent loans
A loan is considered collateral-dependent when the borrower is experiencing financial difficulty and repayment is expected to be provided substantially through the sale of the underlying collateral. Collateral-dependent loans are recorded based upon the fair value of the collateral less the estimated selling costs. At June 30, 2022, we had $13 million of collateral-dependent C&I loans which were fully collateralized by commercial real estate and other business assets and $28 million of collateral-dependent CRE loans which were fully collateralized by retail, industrial, and health care real estate. As September 30, 2021, we had $20 million of collateral-dependent CRE loans which were fully collateralized by retail and industrial real estate. We had $7 million and $5 million of collateral-dependent residential loans at June 30, 2022 and September 30, 2021, respectively, which were fully collateralized by single family homes.
| | | | | | | | | | | | | | | | | | | | |
Loan type ($ in millions) | | Nature of collateral | | June 30, 2023 | | September 30, 2022 |
| | | | | | |
C&I loans | | Commercial real estate and other business assets | | $ | 9 | | | $ | 11 | |
CRE loans | | Office, healthcare, industrial, and retail real estate | | $ | 42 | | | $ | 21 | |
| | | | | | |
Residential mortgage loans | | Single family homes | | $ | 4 | | | $ | 6 | |
| | | | | | |
| | | | | | |
The recorded investmentinvestments in residential mortgage loans secured by one-to-four family residential properties for which formal foreclosure proceedings were in process waswere $4 million and $5 million and $4 million atas of June 30, 20222023 and September 30, 2021,2022, respectively.
Credit quality indicators
The credit quality of our bank loan portfolio is summarized monthly by management using internal risk ratings, which align with the standard asset classification system utilized by bank regulators. These classifications are divided into three groups: Not Classified (Pass), Special Mention, and Classified or Adverse Rating (Substandard, Doubtful and Loss). These terms are defined as follows:
Pass – Loans which are currently performing in accordance with the contractual terms and are well protected by the current net worth and paying capacity of the obligor (or guarantors, if any) or by the fair value, less costs to acquire and sell, of any underlying collateral and generally are performing in a timely manner.accordance with the contractual terms.
Special Mention – Loans which have potential weaknesses that deserve management’s close attention. These loans are not adversely classified and do not expose us to sufficient risk to warrant an adverse classification.
Substandard – Loans which are inadequately protected by the current sound worth and paying capacity of the obligor or by the collateral pledged, if any. Loans with this classification are characterized by the distinct possibility that we will sustain some loss if the deficiencies are not corrected.
Doubtful – Loans which have all the weaknesses inherent in loans classified as substandard with the added characteristic that the weaknesses make collection or liquidation in full highly questionable and improbable on the basis of currently-known facts, conditions and values.
Loss – Loans which are considered by management to be uncollectible and of such little value that their continuance on our books as an asset, without establishment of a specific valuation allowance or charge-off, is not warranted. We do not have any loan balances within this classification because, in accordance with our accounting policy, loans, or a portion thereof considered to be uncollectible are charged-off prior to the assignment of this classification.
| | | | | | | | |
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements (Unaudited) | |
The following tables present our held for investment bank loan portfolio by credit quality indicator. Loans classified as special mention, substandard or doubtful are all considered to be “criticized” loans.
| | | June 30, 2022 | | June 30, 2023 |
| | Loans by origination fiscal year | | | | | Loans by origination fiscal year | | | |
$ in millions | $ in millions | | 2022 | | 2021 | | 2020 | | 2019 | | 2018 | | Prior | | Revolving loans | | | Total | $ in millions | | 2023 | | 2022 | | 2021 | | 2020 | | 2019 | | Prior | | Revolving loans | | | Total |
C&I loans | | | | | | | | | | | | | | | | | | |
SBL | | SBL | | | | | | | | | | | | | | | | | |
Risk rating: | Risk rating: | | | | Risk rating: | | | |
Pass | Pass | | $ | 693 | | $ | 1,514 | | $ | 1,341 | | $ | 1,244 | | $ | 1,370 | | $ | 2,217 | | $ | 2,231 | | | $ | 10,610 | Pass | | $ | 20 | | $ | 18 | | $ | 83 | | $ | 44 | | $ | 16 | | $ | 38 | | $ | 13,999 | | | $ | 14,218 |
Special mention(1) | Special mention(1) | | — | | — | | 62 | | 38 | | — | | 82 | | 4 | | | 186 | Special mention(1) | | — | | — | | — | | — | | — | | — | | 4 | | | 4 |
Substandard(1) | Substandard(1) | | 1 | | — | | 3 | | 25 | | 40 | | — | | 19 | | | 88 | Substandard(1) | | — | | — | | — | | — | | — | | — | | 5 | | | 5 |
Doubtful | Doubtful | | — | | — | | — | | 4 | | 9 | | — | | — | | | 13 | Doubtful | | — | | — | | — | | — | | — | | — | | — | | | — |
Total C&I loans | | $ | 694 | | $ | 1,514 | | $ | 1,406 | | $ | 1,311 | | $ | 1,419 | | $ | 2,299 | | $ | 2,254 | | | $ | 10,897 | |
Total SBL | | Total SBL | | $ | 20 | | $ | 18 | | $ | 83 | | $ | 44 | | $ | 16 | | $ | 38 | | $ | 14,008 | | | $ | 14,227 |
| | CRE loans | | | | |
C&I loans | | C&I loans | | | |
Risk rating: | Risk rating: | | | | Risk rating: | | | |
Pass | Pass | | $ | 1,420 | | $ | 1,329 | | $ | 878 | | $ | 749 | | $ | 855 | | $ | 687 | | $ | 189 | | | $ | 6,107 | Pass | | $ | 551 | | $ | 1,142 | | $ | 1,115 | | $ | 1,109 | | $ | 974 | | $ | 2,904 | | $ | 2,646 | | | $ | 10,441 |
Special mention | Special mention | | — | | 2 | | 30 | | 27 | | 36 | | — | | — | | | 95 | Special mention | | — | | 10 | | 29 | | — | | — | | 19 | | 7 | | | 65 |
Substandard | Substandard | | — | | — | | 15 | | 20 | | 80 | | 37 | | — | | | 152 | Substandard | | — | | — | | — | | 61 | | 18 | | 63 | | 15 | | | 157 |
Doubtful | Doubtful | | — | | — | | — | | — | | — | | — | | — | | | — | Doubtful | | — | | — | | — | | — | | — | | — | | — | | | — |
Total CRE loans | | $ | 1,420 | | $ | 1,331 | | $ | 923 | | $ | 796 | | $ | 971 | | $ | 724 | | $ | 189 | | | $ | 6,354 | |
Total C&I loans | | Total C&I loans | | $ | 551 | | $ | 1,152 | | $ | 1,144 | | $ | 1,170 | | $ | 992 | | $ | 2,986 | | $ | 2,668 | | | $ | 10,663 |
| | REIT loans | | | | |
CRE loans | | CRE loans | | | |
Risk rating: | Risk rating: | | | | Risk rating: | | | |
Pass | Pass | | $ | 87 | | $ | 234 | | $ | 99 | | $ | 57 | | $ | 40 | | $ | 185 | | $ | 591 | | | $ | 1,293 | Pass | | $ | 776 | | $ | 2,356 | | $ | 1,151 | | $ | 787 | | $ | 618 | | $ | 1,040 | | $ | 209 | | | $ | 6,937 |
Special mention | Special mention | | — | | — | | — | | 13 | | 11 | | 64 | | 8 | | | 96 | Special mention | | 7 | | — | | 5 | | 34 | | — | | 22 | | — | | | 68 |
Substandard | Substandard | | — | | — | | — | | 21 | | — | | 4 | | 2 | | | 27 | Substandard | | — | | — | | — | | 2 | | 12 | | 72 | | — | | | 86 |
Doubtful | Doubtful | | — | | — | | — | | — | | — | | — | | — | | | — | Doubtful | | — | | — | | — | | — | | — | | — | | — | | | — |
Total REIT loans | | $ | 87 | | $ | 234 | | $ | 99 | | $ | 91 | | $ | 51 | | $ | 253 | | $ | 601 | | | $ | 1,416 | |
Total CRE loans | | Total CRE loans | | $ | 783 | | $ | 2,356 | | $ | 1,156 | | $ | 823 | | $ | 630 | | $ | 1,134 | | $ | 209 | | | $ | 7,091 |
| | Tax-exempt loans | | | | |
REIT loans | | REIT loans | | | |
Risk rating: | Risk rating: | | | | Risk rating: | | | |
Pass | Pass | | $ | 71 | | $ | 170 | | $ | 58 | | $ | 115 | | $ | 197 | | $ | 736 | | $ | — | | | $ | 1,347 | Pass | | $ | 279 | | $ | 201 | | $ | 211 | | $ | 103 | | $ | 55 | | $ | 175 | | $ | 691 | | | $ | 1,715 |
Special mention | Special mention | | — | | — | | — | | — | | — | | — | | — | | | — | Special mention | | — | | — | | — | | — | | — | | — | | — | | | — |
Substandard | Substandard | | — | | — | | — | | — | | — | | — | | — | | | — | Substandard | | — | | — | | — | | — | | — | | — | | — | | | — |
Doubtful | Doubtful | | — | | — | | — | | — | | — | | — | | — | | | — | Doubtful | | — | | — | | — | | — | | — | | — | | — | | | — |
Total tax-exempt loans | | $ | 71 | | $ | 170 | | $ | 58 | | $ | 115 | | $ | 197 | | $ | 736 | | $ | — | | | $ | 1,347 | |
Total REIT loans | | Total REIT loans | | $ | 279 | | $ | 201 | | $ | 211 | | $ | 103 | | $ | 55 | | $ | 175 | | $ | 691 | | | $ | 1,715 |
| | Residential mortgage loans | Residential mortgage loans | | | | Residential mortgage loans | | | |
Risk rating: | Risk rating: | | | | Risk rating: | | | |
Pass | Pass | | $ | 2,195 | | $ | 1,727 | | $ | 1,059 | | $ | 493 | | $ | 300 | | $ | 887 | | $ | 37 | | | $ | 6,698 | Pass | | $ | 1,407 | | $ | 2,921 | | $ | 1,630 | | $ | 939 | | $ | 446 | | $ | 1,020 | | $ | 33 | | | $ | 8,396 |
Special mention | Special mention | | 1 | | 1 | | — | | 2 | | — | | 4 | | — | | | 8 | Special mention | | — | | — | | 2 | | — | | 2 | | 4 | | — | | | 8 |
Substandard | Substandard | | — | | — | | — | | — | | 1 | | 21 | | — | | | 22 | Substandard | | — | | 2 | | — | | — | | — | | 16 | | — | | | 18 |
Doubtful | Doubtful | | — | | — | | — | | — | | — | | — | | — | | | — | Doubtful | | — | | — | | — | | — | | — | | — | | — | | | — |
Total residential mortgage loans | Total residential mortgage loans | | $ | 2,196 | | $ | 1,728 | | $ | 1,059 | | $ | 495 | | $ | 301 | | $ | 912 | | $ | 37 | | | $ | 6,728 | Total residential mortgage loans | | $ | 1,407 | | $ | 2,923 | | $ | 1,632 | | $ | 939 | | $ | 448 | | $ | 1,040 | | $ | 33 | | | $ | 8,422 |
| | SBL and other | | | | |
Tax-exempt loans | | Tax-exempt loans | | | |
Risk rating: | Risk rating: | | | | Risk rating: | | | |
Pass | Pass | | $ | 10 | | $ | 41 | | $ | 75 | | $ | 44 | | $ | 36 | | $ | 43 | | $ | 15,063 | | | $ | 15,312 | Pass | | $ | 90 | | $ | 297 | | $ | 162 | | $ | 56 | | $ | 100 | | $ | 843 | | $ | — | | | $ | 1,548 |
Special mention | Special mention | | — | | — | | — | | — | | — | | — | | — | | | — | Special mention | | — | | — | | — | | — | | — | | — | | — | | | — |
Substandard | Substandard | | — | | — | | — | | — | | — | | — | | — | | | — | Substandard | | — | | — | | — | | — | | — | | — | | — | | | — |
Doubtful | Doubtful | | — | | — | | — | | — | | — | | — | | — | | | — | Doubtful | | — | | — | | — | | — | | — | | — | | — | | | — |
Total SBL and other | | $ | 10 | | $ | 41 | | $ | 75 | | $ | 44 | | $ | 36 | | $ | 43 | | $ | 15,063 | | | $ | 15,312 | |
Total tax-exempt loans | | Total tax-exempt loans | | $ | 90 | | $ | 297 | | $ | 162 | | $ | 56 | | $ | 100 | | $ | 843 | | $ | — | | | $ | 1,548 |
(1) These balances relate to loans which were collateralized by private securities or securities with a limited trading market as of June 30, 2023.
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | September 30, 2021 |
| | Loans by origination fiscal year | | | | | | |
$ in millions | | 2021 | | 2020 | | 2019 | | 2018 | | 2017 | | Prior | | Revolving loans | | | | Total |
C&I loans | | | | | | | | | | | | | | | | | | |
Risk rating: | | | | | | | | | | | | | | | | | | |
Pass | | $ | 999 | | $ | 1,273 | | $ | 1,180 | | $ | 1,408 | | $ | 935 | | $ | 1,633 | | $ | 739 | | | | $ | 8,167 |
Special mention | | — | | — | | 41 | | — | | 26 | | 54 | | 1 | | | | 122 |
Substandard | | — | | — | | 24 | | 84 | | — | | 28 | | — | | | | 136 |
Doubtful | | — | | — | | 15 | | — | | — | | — | | — | | | | 15 |
Total C&I loans | | $ | 999 | | $ | 1,273 | | $ | 1,260 | | $ | 1,492 | | $ | 961 | | $ | 1,715 | | $ | 740 | | | | $ | 8,440 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
CRE loans | | | | | | | | | | | | | | | | | | |
Risk rating: | | | | | | | | | | | | | | | | | | |
Pass | | $ | 533 | | $ | 459 | | $ | 442 | | $ | 652 | | $ | 223 | | $ | 174 | | $ | 62 | | | | $ | 2,545 |
Special mention | | — | | 45 | | 58 | | 36 | | — | | — | | — | | | | 139 |
Substandard | | — | | — | | 32 | | 98 | | 8 | | 50 | | — | | | | 188 |
Doubtful | | — | | — | | — | | — | | — | | — | | — | | | | — |
Total CRE loans | | $ | 533 | | $ | 504 | | $ | 532 | | $ | 786 | | $ | 231 | | $ | 224 | | $ | 62 | | | | $ | 2,872 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
REIT loans | | | | | | | | | | | | | | | | | | |
Risk rating: | | | | | | | | | | | | | | | | | | |
Pass | | $ | 235 | | $ | 95 | | $ | 75 | | $ | 60 | | $ | 46 | | $ | 167 | | $ | 237 | | | | $ | 915 |
Special mention | | — | | — | | 13 | | 11 | | 33 | | 106 | | 6 | | | | 169 |
Substandard | | — | | — | | 21 | | — | | 4 | | — | | 3 | | | | 28 |
Doubtful | | — | | — | | — | | — | | — | | — | | — | | | | — |
Total REIT loans | | $ | 235 | | $ | 95 | | $ | 109 | | $ | 71 | | $ | 83 | | $ | 273 | | $ | 246 | | | | $ | 1,112 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
Tax-exempt loans | | | | | | | | | | | | | | | | | | |
Risk rating: | | | | | | | | | | | | | | | | | | |
Pass | | $ | 158 | | $ | 57 | | $ | 124 | | $ | 204 | | $ | 272 | | $ | 506 | | $ | — | | | | $ | 1,321 |
Special mention | | — | | — | | — | | — | | — | | — | | — | | | | — |
Substandard | | — | | — | | — | | — | | — | | — | | — | | | | — |
Doubtful | | — | | — | | — | | — | | — | | — | | — | | | | — |
Total tax-exempt loans | | $ | 158 | | $ | 57 | | $ | 124 | | $ | 204 | | $ | 272 | | $ | 506 | | $ | — | | | | $ | 1,321 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
Residential mortgage loans | | | | | | | | | | | | | | | | | | |
Risk rating: | | | | | | | | | | | | | | | | | | |
Pass | | $ | 1,861 | | $ | 1,266 | | $ | 640 | | $ | 386 | | $ | 451 | | $ | 666 | | $ | 20 | | | | $ | 5,290 |
Special mention | | — | | — | | — | | — | | — | | 5 | | — | | | | 5 |
Substandard | | — | | — | | — | | 1 | | 2 | | 20 | | — | | | | 23 |
Doubtful | | — | | — | | — | | — | | — | | — | | — | | | | — |
Total residential mortgage loans | | $ | 1,861 | | $ | 1,266 | | $ | 640 | | $ | 387 | | $ | 453 | | $ | 691 | | $ | 20 | | | | $ | 5,318 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
SBL and other | | | | | | | | | | | | | | | | | | |
Risk rating: | | | | | | | | | | | | | | | | | | |
Pass | | $ | 3 | | $ | 45 | | $ | 12 | | $ | — | | $ | — | | $ | — | | $ | 6,046 | | | | $ | 6,106 |
Special mention | | — | | — | | — | | — | | — | | — | | — | | | | — |
Substandard | | — | | — | | — | | — | | — | | — | | — | | | | — |
Doubtful | | — | | — | | — | | — | | — | | — | | — | | | | — |
Total SBL and other | | $ | 3 | | $ | 45 | | $ | 12 | | $ | — | | $ | — | | $ | — | | $ | 6,046 | | | | $ | 6,106 |
| | | | | | | | |
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements (Unaudited) | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | September 30, 2022 |
| | Loans by origination fiscal year | | | | | | |
$ in millions | | 2022 | | 2021 | | 2020 | | 2019 | | 2018 | | Prior | | Revolving loans | | | | Total |
SBL | | | | | | | | | | | | | | | | | | |
Risk rating: | | | | | | | | | | | | | | | | | | |
Pass | | $ | 14 | | $ | 27 | | $ | 72 | | $ | 44 | | $ | 36 | | $ | 41 | | $ | 15,063 | | | | $ | 15,297 |
Special mention | | — | | — | | — | | — | | — | | — | | — | | | | — |
Substandard | | — | | — | | — | | — | | — | | — | | — | | | | — |
Doubtful | | — | | — | | — | | — | | — | | — | | — | | | | — |
Total SBL | | $ | 14 | | $ | 27 | | $ | 72 | | $ | 44 | | $ | 36 | | $ | 41 | | $ | 15,063 | | | | $ | 15,297 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
C&I loans | | | | | | | | | | | | | | | | | | |
Risk rating: | | | | | | | | | | | | | | | | | | |
Pass | | $ | 1,011 | | $ | 1,448 | | $ | 1,301 | | $ | 1,124 | | $ | 1,389 | | $ | 2,200 | | $ | 2,380 | | | | $ | 10,853 |
Special mention | | 10 | | 28 | | 3 | | 37 | | — | | 82 | | 6 | | | | 166 |
Substandard | | 1 | | — | | 60 | | 28 | | 40 | | 6 | | 14 | | | | 149 |
Doubtful | | — | | — | | — | | — | | 5 | | — | | — | | | | 5 |
Total C&I loans | | $ | 1,022 | | $ | 1,476 | | $ | 1,364 | | $ | 1,189 | | $ | 1,434 | | $ | 2,288 | | $ | 2,400 | | | | $ | 11,173 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
CRE loans | | | | | | | | | | | | | | | | | | |
Risk rating: | | | | | | | | | | | | | | | | | | |
Pass | | $ | 1,916 | | $ | 1,345 | | $ | 892 | | $ | 707 | | $ | 816 | | $ | 551 | | $ | 176 | | | | $ | 6,403 |
Special mention | | — | | 1 | | — | | — | | 36 | | 2 | | — | | | | 39 |
Substandard | | — | | — | | 14 | | 17 | | 46 | | 30 | | — | | | | 107 |
Doubtful | | — | | — | | — | | — | | — | | — | | — | | | | — |
Total CRE loans | | $ | 1,916 | | $ | 1,346 | | $ | 906 | | $ | 724 | | $ | 898 | | $ | 583 | | $ | 176 | | | | $ | 6,549 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
REIT loans | | | | | | | | | | | | | | | | | | |
Risk rating: | | | | | | | | | | | | | | | | | | |
Pass | | $ | 169 | | $ | 230 | | $ | 96 | | $ | 53 | | $ | 40 | | $ | 222 | | $ | 782 | | | | $ | 1,592 |
Special mention | | — | | — | | — | | — | | — | | — | | — | | | | — |
Substandard | | — | | — | | — | | — | | — | | — | | — | | | | — |
Doubtful | | — | | — | | — | | — | | — | | — | | — | | | | — |
Total REIT loans | | $ | 169 | | $ | 230 | | $ | 96 | | $ | 53 | | $ | 40 | | $ | 222 | | $ | 782 | | | | $ | 1,592 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
Residential mortgage loans | | | | | | | | | | | | | | | | | | |
Risk rating: | | | | | | | | | | | | | | | | | | |
Pass | | $ | 2,984 | | $ | 1,704 | | $ | 1,023 | | $ | 477 | | $ | 290 | | $ | 843 | | $ | 35 | | | | $ | 7,356 |
Special mention | | 1 | | 1 | | — | | 2 | | — | | 4 | | — | | | | 8 |
Substandard | | 1 | | — | | — | | — | | 1 | | 20 | | — | | | | 22 |
Doubtful | | — | | — | | — | | — | | — | | — | | — | | | | — |
Total residential mortgage loans | | $ | 2,986 | | $ | 1,705 | | $ | 1,023 | | $ | 479 | | $ | 291 | | $ | 867 | | $ | 35 | | | | $ | 7,386 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
Tax-exempt loans | | | | | | | | | | | | | | | | | | |
Risk rating: | | | | | | | | | | | | | | | | | | |
Pass | | $ | 264 | | $ | 169 | | $ | 56 | | $ | 115 | | $ | 192 | | $ | 705 | | $ | — | | | | $ | 1,501 |
Special mention | | — | | — | | — | | — | | — | | — | | — | | | | — |
Substandard | | — | | — | | — | | — | | — | | — | | — | | | | — |
Doubtful | | — | | — | | — | | — | | — | | — | | — | | | | — |
Total tax-exempt loans | | $ | 264 | | $ | 169 | | $ | 56 | | $ | 115 | | $ | 192 | | $ | 705 | | $ | — | | | | $ | 1,501 |
| | | | | | | | |
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements (Unaudited) | |
We also monitor the credit quality of the residential mortgage loan portfolio utilizing Fair Isaac Corporation (“FICO”)FICO scores and loan-to-value (“LTV”) ratios. A FICO score measures a borrower’s creditworthiness by considering factors such as payment and credit history. LTV measures the carrying value of the loan as a percentage of the value of the property securing the loan.
The following table presents the held for investment residential mortgage loan portfolio by FICO score and by LTV ratio at origination.
| | | | June 30, 2023 | |
| | | | | | | | | | | | | | Loans by origination fiscal year | | | | |
$ in millions | $ in millions | | June 30, 2022 | | September 30, 2021 | $ in millions | | 2023 | | 2022 | | 2021 | | 2020 | | 2019 | | Prior | | Revolving loans | | | Total | |
FICO score: | FICO score: | | | | | FICO score: | | | | | | | | | | | | | | | | | | |
Below 600 | Below 600 | | $ | 65 | | | $ | 67 | | Below 600 | | $ | 7 | | $ | 1 | | $ | 3 | | $ | 2 | | $ | 3 | | $ | 55 | | $ | — | | | $ | 71 | |
600 - 699 | 600 - 699 | | 463 | | | 416 | | 600 - 699 | | 79 | | 155 | | 106 | | 85 | | 30 | | 80 | | 3 | | | 538 | |
700 - 799 | 700 - 799 | | 4,943 | | | 3,772 | | 700 - 799 | | 1,110 | | 2,353 | | 1,239 | | 681 | | 327 | | 624 | | 23 | | | 6,357 | |
800 + | 800 + | | 1,231 | | | 1,058 | | 800 + | | 209 | | 412 | | 280 | | 170 | | 83 | | 277 | | 6 | | | 1,437 | |
FICO score not available | FICO score not available | | 26 | | | 5 | | FICO score not available | | 2 | | 2 | | 4 | | 1 | | 5 | | 4 | | 1 | | | 19 | |
Total | Total | | $ | 6,728 | | | $ | 5,318 | | Total | | $ | 1,407 | | $ | 2,923 | | $ | 1,632 | | $ | 939 | | $ | 448 | | $ | 1,040 | | $ | 33 | | | $ | 8,422 | |
| LTV ratio: | LTV ratio: | | LTV ratio: | | | | |
Below 80% | Below 80% | | $ | 5,258 | | | $ | 4,123 | | Below 80% | | $ | 974 | | $ | 2,243 | | $ | 1,276 | | $ | 732 | | $ | 334 | | $ | 801 | | $ | 31 | | | $ | 6,391 | |
80%+ | 80%+ | | 1,470 | | | 1,195 | | 80%+ | | 433 | | 680 | | 356 | | 207 | | 114 | | 239 | | 2 | | | 2,031 | |
Total | Total | | $ | 6,728 | | | $ | 5,318 | | Total | | $ | 1,407 | | $ | 2,923 | | $ | 1,632 | | $ | 939 | | $ | 448 | | $ | 1,040 | | $ | 33 | | | $ | 8,422 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | September 30, 2022 |
| | Loans by origination fiscal year | | | | | | |
$ in millions | | 2022 | | 2021 | | 2020 | | 2019 | | 2018 | | Prior | | Revolving loans | | | | Total |
FICO score: | | | | | | | | | | | | | | | | | | |
Below 600 | | $ | 1 | | $ | 3 | | $ | 2 | | $ | 3 | | $ | 1 | | $ | 54 | | $ | — | | | | $ | 64 |
600 - 699 | | 155 | | 112 | | 90 | | 32 | | 20 | | 68 | | 4 | | | | 481 |
700 - 799 | | 2,403 | | 1,301 | | 744 | | 353 | | 219 | | 470 | | 22 | | | | 5,512 |
800 + | | 424 | | 284 | | 184 | | 87 | | 48 | | 273 | | 6 | | | | 1,306 |
FICO score not available | | 3 | | 5 | | 3 | | 4 | | 3 | | 2 | | 3 | | | | 23 |
Total | | $ | 2,986 | | $ | 1,705 | | $ | 1,023 | | $ | 479 | | $ | 291 | | $ | 867 | | $ | 35 | | | | $ | 7,386 |
| | | | | | | | | | | | | | | | | | |
LTV ratio: | | | | | | | | | | | | | | | | | | |
Below 80% | | $ | 2,287 | | $ | 1,333 | | $ | 797 | | $ | 358 | | $ | 226 | | $ | 661 | | $ | 31 | | | | $ | 5,693 |
80%+ | | 699 | | 372 | | 226 | | 121 | | 65 | | 206 | | 4 | | | | 1,693 |
Total | | $ | 2,986 | | $ | 1,705 | | $ | 1,023 | | $ | 479 | | $ | 291 | | $ | 867 | | $ | 35 | | | | $ | 7,386 |
| | | | | | | | |
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements (Unaudited) | |
Allowance for credit losses
The following table presents changes in the allowance for credit losses on held for investment bank loans by portfolio segment.
| $ in millions | $ in millions | | C&I loans | | CRE loans | | REIT loans | | Tax-exempt loans | | Residential mortgage loans | | SBL and other | | Total | $ in millions | | SBL | | C&I loans | | CRE loans | | REIT loans | | Residential mortgage loans | | Tax-exempt loans | | Total |
Three months ended June 30, 2023 | | Three months ended June 30, 2023 | | | | | | | | | | | | | | |
Balance at beginning of period | | Balance at beginning of period | | $ | 5 | | | $ | 219 | | | $ | 100 | | | $ | 15 | | | $ | 74 | | | $ | 2 | | | $ | 415 | |
| Provision/(benefit) for credit losses | | Provision/(benefit) for credit losses | | — | | | (8) | | | 55 | | | 1 | | | 6 | | | — | | | 54 | |
| Net (charge-offs)/recoveries: | | Net (charge-offs)/recoveries: | | | | | | | | | | | | |
Charge-offs | | Charge-offs | | — | | | (6) | | | (9) | | | — | | | — | | | — | | | (15) | |
Recoveries | | Recoveries | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
Net (charge-offs)/recoveries | | Net (charge-offs)/recoveries | | — | | | (6) | | | (9) | | | — | | | — | | | — | | | (15) | |
Foreign exchange translation adjustment | | Foreign exchange translation adjustment | | — | | | 1 | | | 1 | | | — | | | — | | | — | | | 2 | |
Balance at end of period | | Balance at end of period | | $ | 5 | | | $ | 206 | | | $ | 147 | | | $ | 16 | | | $ | 80 | | | $ | 2 | | | $ | 456 | |
ACL by loan portfolio segment as a % of total ACL | | ACL by loan portfolio segment as a % of total ACL | | 1.1 | % | | 45.3 | % | | 32.2 | % | | 3.5 | % | | 17.5 | % | | 0.4 | % | | 100.0 | % |
| Nine months ended June 30, 2023 | | Nine months ended June 30, 2023 | |
Balance at beginning of period | | Balance at beginning of period | | $ | 3 | | | $ | 226 | | | $ | 87 | | | $ | 21 | | | $ | 57 | | | $ | 2 | | | $ | 396 | |
| Provision/(benefit) for credit losses | | Provision/(benefit) for credit losses | | 2 | | | 10 | | | 66 | | | (5) | | | 23 | | | — | | | 96 | |
| Net (charge-offs)/recoveries: | | Net (charge-offs)/recoveries: | | | | | | | | | | | |
Charge-offs | | Charge-offs | | — | | | (30) | | | (10) | | | — | | | — | | | — | | | (40) | |
Recoveries | | Recoveries | | — | | | — | | | 3 | | | — | | | — | | | — | | | 3 | |
Net (charge-offs)/recoveries | | Net (charge-offs)/recoveries | | — | | | (30) | | | (7) | | | — | | | — | | | — | | | (37) | |
Foreign exchange translation adjustment | | Foreign exchange translation adjustment | | — | | | — | | | 1 | | | — | | | — | | | — | | | 1 | |
Balance at end of period | | Balance at end of period | | $ | 5 | | | $ | 206 | | | $ | 147 | | | $ | 16 | | | $ | 80 | | | $ | 2 | | | $ | 456 | |
ACL by loan portfolio segment as a % of total ACL | | ACL by loan portfolio segment as a % of total ACL | | 1.1 | % | | 45.3 | % | | 32.2 | % | | 3.5 | % | | 17.5 | % | | 0.4 | % | | 100.0 | % |
| Three months ended June 30, 2022 | Three months ended June 30, 2022 | | | | | | | | | | | | | | | Three months ended June 30, 2022 | |
Balance at beginning of period | Balance at beginning of period | | $ | 195 | | | $ | 71 | | | $ | 25 | | | $ | 2 | | | $ | 32 | | | $ | 3 | | | $ | 328 | | Balance at beginning of period | | $ | 3 | | | $ | 195 | | | $ | 71 | | | $ | 25 | | | $ | 32 | | | $ | 2 | | | $ | 328 | |
Initial allowance on acquired PCD loans | | 1 | | | 2 | | | — | | | — | | | — | | | — | | | 3 | | |
Initial allowance on acquired purchased credit deteriorated (“PCD”) loans | | Initial allowance on acquired purchased credit deteriorated (“PCD”) loans | | — | | | 1 | | | 2 | | | — | | | — | | | — | | | 3 | |
Provision/(benefit) for credit losses: | Provision/(benefit) for credit losses: | | Provision/(benefit) for credit losses: | |
Initial provision for credit losses on non-PCD loans acquired with TriState Capital Bank | Initial provision for credit losses on non-PCD loans acquired with TriState Capital Bank | | 5 | | | 19 | | | — | | | — | | | — | | | 2 | | | 26 | | Initial provision for credit losses on non-PCD loans acquired with TriState Capital Bank | | 2 | | | 5 | | | 19 | | | — | | | — | | | — | | | 26 | |
Provision/(benefit) for credit losses | Provision/(benefit) for credit losses | | 17 | | | — | | | (2) | | | — | | | 16 | | | (1) | | | 30 | | Provision/(benefit) for credit losses | | (1) | | | 17 | | | — | | | (2) | | | 16 | | | — | | | 30 | |
Total provision/(benefit) for credit losses | Total provision/(benefit) for credit losses | | 22 | | | 19 | | | (2) | | | — | | | 16 | | | 1 | | | 56 | | Total provision/(benefit) for credit losses | | 1 | | | 22 | | | 19 | | | (2) | | | 16 | | | — | | | 56 | |
Net (charge-offs)/recoveries: | Net (charge-offs)/recoveries: | | | | | | | | | | | | | Net (charge-offs)/recoveries: | | | | | | | | | | | |
Charge-offs | Charge-offs | | (11) | | | (4) | | | — | | | — | | | — | | | — | | | (15) | | Charge-offs | | — | | | (11) | | | (4) | | | — | | | — | | | — | | | (15) | |
Recoveries | Recoveries | | — | | | 5 | | | — | | | — | | | — | | | — | | | 5 | | Recoveries | | — | | | — | | | 5 | | | — | | | — | | | — | | | 5 | |
Net (charge-offs)/recoveries | Net (charge-offs)/recoveries | | (11) | | | 1 | | | — | | | — | | | — | | | — | | | (10) | | Net (charge-offs)/recoveries | | — | | | (11) | | | 1 | | | — | | | — | | | — | | | (10) | |
Foreign exchange translation adjustment | Foreign exchange translation adjustment | | — | | | — | | | — | | | — | | | — | | | — | | | — | | Foreign exchange translation adjustment | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
Balance at end of period | Balance at end of period | | $ | 207 | | | $ | 93 | | | $ | 23 | | | $ | 2 | | | $ | 48 | | | $ | 4 | | | $ | 377 | | Balance at end of period | | $ | 4 | | | $ | 207 | | | $ | 93 | | | $ | 23 | | | $ | 48 | | | $ | 2 | | | $ | 377 | |
ACL by loan portfolio segment as a % of total ACL | | ACL by loan portfolio segment as a % of total ACL | | 1.1 | % | | 54.9 | % | | 24.7 | % | | 6.1 | % | | 12.7 | % | | 0.5 | % | | 100.0 | % |
| Nine months ended June 30, 2022 | Nine months ended June 30, 2022 | | Nine months ended June 30, 2022 | |
Balance at beginning of period | Balance at beginning of period | | $ | 191 | | | $ | 66 | | | $ | 22 | | | $ | 2 | | | $ | 35 | | | $ | 4 | | | $ | 320 | | Balance at beginning of period | | $ | 4 | | | $ | 191 | | | $ | 66 | | | $ | 22 | | | $ | 35 | | | $ | 2 | | | $ | 320 | |
Initial allowance on acquired PCD loans | Initial allowance on acquired PCD loans | | 1 | | | 2 | | | — | | | — | | | — | | | — | | | 3 | | Initial allowance on acquired PCD loans | | — | | | 1 | | | 2 | | | — | | | — | | | — | | | 3 | |
Provision/(benefit) for credit losses: | Provision/(benefit) for credit losses: | | Provision/(benefit) for credit losses: | |
Initial provision for credit losses on non-PCD loans acquired with TriState Capital Bank | Initial provision for credit losses on non-PCD loans acquired with TriState Capital Bank | | 5 | | | 19 | | | — | | | — | | | — | | | 2 | | | 26 | | Initial provision for credit losses on non-PCD loans acquired with TriState Capital Bank | | 2 | | | 5 | | | 19 | | | — | | | — | | | — | | | 26 | |
Provision/(benefit) for credit losses | Provision/(benefit) for credit losses | | 24 | | | 5 | | | 1 | | | — | | | 12 | | | (2) | | | 40 | | Provision/(benefit) for credit losses | | (2) | | | 24 | | | 5 | | | 1 | | | 12 | | | — | | | 40 | |
Total provision/(benefit) for credit losses | Total provision/(benefit) for credit losses | | 29 | | | 24 | | | 1 | | | — | | | 12 | | | — | | | 66 | | Total provision/(benefit) for credit losses | | — | | | 29 | | | 24 | | | 1 | | | 12 | | | — | | | 66 | |
Net (charge-offs)/recoveries: | Net (charge-offs)/recoveries: | | | | | | | | | | | | Net (charge-offs)/recoveries: | | | | | | | | | |
Charge-offs | Charge-offs | | (14) | | | (4) | | | — | | | — | | | — | | | — | | | (18) | | Charge-offs | | — | | | (14) | | | (4) | | | — | | | — | | | — | | | (18) | |
Recoveries | Recoveries | | — | | | 5 | | | — | | | — | | | 1 | | | — | | | 6 | | Recoveries | | — | | | — | | | 5 | | | — | | | 1 | | | — | | | 6 | |
Net (charge-offs)/recoveries | Net (charge-offs)/recoveries | | (14) | | | 1 | | | — | | | — | | | 1 | | | — | | | (12) | | Net (charge-offs)/recoveries | | — | | | (14) | | | 1 | | | — | | | 1 | | | — | | | (12) | |
Foreign exchange translation adjustment | Foreign exchange translation adjustment | | — | | | — | | | — | | | — | | | — | | | — | | | — | | Foreign exchange translation adjustment | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
Balance at end of period | Balance at end of period | | $ | 207 | | | $ | 93 | | | $ | 23 | | | $ | 2 | | | $ | 48 | | | $ | 4 | | | $ | 377 | | Balance at end of period | | $ | 4 | | | $ | 207 | | | $ | 93 | | | $ | 23 | | | $ | 48 | | | $ | 2 | | | $ | 377 | |
| Three months ended June 30, 2021 | | |
Balance at beginning of period | | $ | 203 | | | $ | 74 | | | $ | 36 | | | $ | 2 | | | $ | 26 | | | $ | 4 | | | $ | 345 | | |
| Provision/(benefit) for credit losses | | (14) | | | 2 | | | (10) | | | — | | | 3 | | | — | | | (19) | | |
Net (charge-offs)/recoveries: | | | | | | | | | | | | |
Charge-offs | | (1) | | | (3) | | | — | | | — | | | — | | | — | | | (4) | | |
Recoveries | | — | | | — | | | — | | | — | | | — | | | — | | | — | | |
Net (charge-offs)/recoveries | | (1) | | | (3) | | | — | | | — | | | — | | | — | | | (4) | | |
Foreign exchange translation adjustment | | — | | | — | | | — | | | — | | | — | | | — | | | — | | |
Balance at end of period | | $ | 188 | | | $ | 73 | | | $ | 26 | | | $ | 2 | | | $ | 29 | | | $ | 4 | | | $ | 322 | | |
| Nine months ended June 30, 2021 | | |
Balance at beginning of period | | $ | 200 | | | $ | 81 | | | $ | 36 | | | $ | 14 | | | $ | 18 | | | $ | 5 | | | $ | 354 | | |
Impact of CECL adoption | | 19 | | | (11) | | | (9) | | | (12) | | | 24 | | | (2) | | | 9 | | |
Provision/(benefit) for credit losses | | (29) | | | 5 | | | (1) | | | — | | | (13) | | | 1 | | | (37) | | |
Net (charge-offs)/recoveries: | | | | | | | | | | |
Charge-offs | | (3) | | | (3) | | | — | | | — | | | — | | | — | | | (6) | | |
Recoveries | | — | | | — | | | — | | | — | | | — | | | — | | | — | | |
Net (charge-offs)/recoveries | | (3) | | | (3) | | | — | | | — | | | — | | | — | | | (6) | | |
Foreign exchange translation adjustment | | 1 | | | 1 | | | — | | | — | | | — | | | — | | | 2 | | |
Balance at end of period | | $ | 188 | | | $ | 73 | | | $ | 26 | | | $ | 2 | | | $ | 29 | | | $ | 4 | | | $ | 322 | | |
ACL by loan portfolio segment as a % of total ACL | | ACL by loan portfolio segment as a % of total ACL | | 1.1 | % | | 54.9 | % | | 24.7 | % | | 6.1 | % | | 12.7 | % | | 0.5 | % | | 100.0 | % |
| | | | | | | | |
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements (Unaudited) | |
The allowance for credit losses on held for investment bank loans increased $49$41 million and $57$60 million during the three and nine months ended June 30, 2022,2023, respectively, primarily due toresulting from provisions for credit losses of $54 million and $96 million, respectively, partially offset by net charge-offs of certain loans during the initialperiod. The provision for credit losses for the three months ended June 30, 2023 largely reflected the impacts of $26 million recorded on non-PCD loans acquireda weaker economic outlook for the CRE portfolio as partreflected in Moody’s CRE Price Index utilized in our Current Expected Credit Losses (“CECL”) model and to a lesser extent loan downgrades. The provision for credit losses for the nine months ended June 30, 2023 primarily reflected the impacts of a weakened macroeconomic outlook for certain loan portfolios, including the TriState Capital acquisition,aforementioned impact of a weaker economic outlook for the CRE portfolio as reflected in Moody’s CRE Price Index utilized in our CECL model as well as loan downgrades during the period. These increases were partially offset by the impact of both loan growth at Raymond James Bankrepayments and sales, which had a weaker macroeconomic outlook.larger impact than provisions on new loans during the period.
The allowance for credit losses on unfunded lending commitments, which is included in “Other payables” on our Condensed Consolidated Statements of Financial Condition, was $19$28 million, $12$21 million, and $13$19 million at June 30, 2022,2023, March 31, 20222023 and September 30, 2021,2022, respectively. The increase in the allowance for credit losses on unfunded lending commitments for the three and nine months ended June 30, 2022 included $5 million related2023 was primarily due to the initial provision for credit losses on lending commitments assumed as a result of the acquisition of TriState Capital which was included “Other” expenses on our Condensed Consolidated Statements of Income and Comprehensive Income.
TriState Capital Bank allowance for credit losses policy
TriState Capital Bank’s accounting policies for its loan portfolio are substantially consistent with the accounting policies presented in Note 2 of our 2021 Form 10-K.
TriState Capital Bank estimates expected credit losses over the life of each loan in its portfolio utilizing lifetime or cumulative loss rate methodology, which identifies macroeconomic factors and asset-specific characteristics that are correlated with credit loss experience including loan age, loan type, and leverage. The lifetime loss rate is applied to the amortized cost of the loan. This methodology builds on default and recovery probabilities by utilizing pool-specific historical loss rates to calculate expected credit losses. These pool-specific historical loss rates may be adjusted for a forecast of certain macroeconomic variables, as further discussed below, and other factors such as differences in underwriting standards, portfolio mix, or when historical asset terms do not reflect the contractual terms of the financial assets being evaluated as of the measurement date. Each time expected credit losses are measured, the relevancy of historical loss information is assessed and management considers any necessary adjustments to address any differences in asset-specific characteristics. The lifetime loss rates are estimated by analyzing a combination of internal and external data related to historical performance of each loan pool over a complete economic cycle. Loss rates are based on historical averages for each loan pool, adjusted to reflect theaforementioned impact of a single, forward-looking forecast of certain macroeconomic variables suchweaker economic outlook for the CRE portfolio as gross domestic product (“GDP”), unemployment rates, corporate bond credit spreads and commercial property values, which management considers to be both reasonable and supportable. The single, forward-looking forecast of these macroeconomic variables is applied over the remaining life of the loan pools. The development of the reasonable and supportable forecast incorporates an assumption that each macroeconomic variable will revert to a long-term expectation startingreflected in years two to four of the forecast and largely completing within the first five years of the forecast.
TriState Capital Bank generally uses one of two methods to measure the allowance for credit losses on individually evaluated loans. A discounted cash flow approach is used to estimate the allowance for credit losses on certain nonaccrual corporate loans and all TDRs that are not collateral-dependent. For collateral-dependent loans and for instances where foreclosure is probable, management uses an approach that considers the fair value of the collateral less selling costs when measuring the allowance for credit losses. A loan is collateral-dependent when the borrower is experiencing financial difficulty and repayment is expected to be provided substantially through the sale of the collateral.
The allowance represents management’s current estimate of expected credit lossesMoody’s CRE Price Index utilized in the loan portfolio. Expected credit losses are estimated over the contractual term of the loans, which includes extension or renewal options that are not unconditionally cancellable and are adjusted for expected prepayments when appropriate. Management’s judgment takes into consideration past events, current conditions and reasonable and supportable economic forecasts including general economic conditions, diversification and seasoning of the loan portfolio, historic loss experience, identified credit problems, delinquency levels and adequacy of collateral.our CECL model.
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
NOTE 98 – LOANS TO FINANCIAL ADVISORS, NET
Loans to financial advisors are primarily comprised of loans originated as a part of our recruiting activities. See Note 2 of our 20212022 Form 10-K for a discussion of our accounting policies related to loans to financial advisors and the related allowance for credit losses. The following table presents the balances for our loans to financial advisors and the related accrued interest receivable.
| $ in millions | $ in millions | | June 30, 2022 | | September 30, 2021 | $ in millions | | June 30, 2023 | | September 30, 2022 |
Currently affiliated with the firm (1) | | $ | 1,147 | | | $ | 1,074 | | |
No longer affiliated with the firm (2) | | 7 | | | 10 | | |
Affiliated with the firm as of period-end (1) | | Affiliated with the firm as of period-end (1) | | $ | 1,142 | | | $ | 1,173 | |
No longer affiliated with the firm as of period-end (2) | | No longer affiliated with the firm as of period-end (2) | | 11 | | | 8 | |
Total loans to financial advisors | Total loans to financial advisors | | 1,154 | | | 1,084 | | Total loans to financial advisors | | 1,153 | | | 1,181 | |
Allowance for credit losses | Allowance for credit losses | | (29) | | | (27) | | Allowance for credit losses | | (31) | | | (29) | |
Loans to financial advisors, net | Loans to financial advisors, net | | $ | 1,125 | | | $ | 1,057 | | Loans to financial advisors, net | | $ | 1,122 | | | $ | 1,152 | |
Accrued interest receivable on loans to financial advisors | | $ | 5 | | | $ | 4 | | |
Allowance for credit losses as a percent of the loan portfolio | | 2.51 | % | | 2.49 | % | |
Accrued interest receivable on loans to financial advisors (included in “Other receivables, net”) | | Accrued interest receivable on loans to financial advisors (included in “Other receivables, net”) | | $ | 5 | | | $ | 5 | |
Allowance for credit losses as a percent of total loans to financial advisors | | Allowance for credit losses as a percent of total loans to financial advisors | | 2.69 | % | | 2.46 | % |
(1) These loans were predominantly current.
(2) These loans were predominantly past due for a period of 180 days or more.
Accrued interest receivables presented in the preceding table are reported in “Other receivables, net” on the Condensed Consolidated Statements of Financial Condition.
| | | | | | | | |
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements (Unaudited) | |
NOTE 109 – VARIABLE INTEREST ENTITIES
A VIE requires consolidation by the entity’s primary beneficiary. We evaluate all of the entities in which we are involved to determine if the entity is a VIE and if so, whether we hold a variable interest and are the primary beneficiary. Refer to Note 2 of our 20212022 Form 10-K for a discussion of our principal involvement with VIEs and the accounting policies regarding determination of whether we are deemed to be the primary beneficiary of VIEs.
VIEs where we are the primary beneficiary
Of the VIEs in which we hold an interest, we have determined that certain limited partnerships which are part of our private equity portfolioinvestments in low-income housing tax credit (“Private Equity Interests”LIHTC”), certain LIHTC funds and the trust we utilize in connection with restricted stock unit (“RSU”) awards granted to certain employees of one of our Canadian subsidiaries (the “Restricted Stock Trust Fund”) require consolidation in our financial statements, as we are deemed the primary beneficiary of such VIEs. The aggregate assets and liabilities of the VIEs we consolidate are provided in the following table. Aggregate assets and aggregate liabilities may differ from the consolidated carrying value of assets and liabilities due to the elimination of intercompany assets and liabilities held by the consolidated VIE.
| $ in millions | $ in millions | | Aggregate assets | | Aggregate liabilities | $ in millions | | Aggregate assets | | Aggregate liabilities |
June 30, 2022 | | | | | |
June 30, 2023 | | June 30, 2023 | | | | |
| LIHTC funds | LIHTC funds | | $ | 67 | | | $ | 10 | | LIHTC funds | | $ | 53 | | | $ | 6 | |
Restricted Stock Trust Fund | Restricted Stock Trust Fund | | 24 | | | 24 | | Restricted Stock Trust Fund | | 27 | | | 27 | |
Total | Total | | $ | 91 | | | $ | 34 | | Total | | $ | 80 | | | $ | 33 | |
| September 30, 2021 | | | | | |
Private Equity Interests | | $ | 66 | | | $ | 4 | | |
September 30, 2022 | | September 30, 2022 | | | | |
| LIHTC funds | LIHTC funds | | 111 | | | 52 | | LIHTC funds | | $ | 59 | | | $ | 6 | |
Restricted Stock Trust Fund | Restricted Stock Trust Fund | | 15 | | | 15 | | Restricted Stock Trust Fund | | 17 | | | 17 | |
Total | Total | | $ | 192 | | | $ | 71 | | Total | | $ | 76 | | | $ | 23 | |
During the nine months ended June 30, 2022, due to regulatory holding period limitations we exited or restructured our Private Equity Interests which were previously consolidated. See Note 4 for further information.
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
The following table presents information about the carrying value of the assets and liabilities of the VIEs which we consolidate and which are included on our Condensed Consolidated Statements of Financial Condition. Intercompany balances are eliminated in consolidation and are not reflected in the following table.
| $ in millions | $ in millions | | June 30, 2022 | | September 30, 2021 | $ in millions | | June 30, 2023 | | September 30, 2022 |
Assets: | Assets: | | | | | Assets: | | | | |
Cash and cash equivalents and assets segregated for regulatory purposes and restricted cash | Cash and cash equivalents and assets segregated for regulatory purposes and restricted cash | | $ | 5 | | | $ | 10 | | Cash and cash equivalents and assets segregated for regulatory purposes and restricted cash | | $ | 5 | | | $ | 5 | |
Other investments | | — | | | 63 | | |
| | Other assets | Other assets | | 62 | | | 105 | | Other assets | | 48 | | | 54 | |
Total assets | Total assets | | $ | 67 | | | $ | 178 | | Total assets | | $ | 53 | | | $ | 59 | |
Liabilities: | Liabilities: | | | | | Liabilities: | | | | |
Other payables | Other payables | | $ | — | | | $ | 45 | | Other payables | | $ | — | | | $ | — | |
| Total liabilities | Total liabilities | | $ | — | | | $ | 45 | | Total liabilities | | $ | — | | | $ | — | |
Noncontrolling interests | Noncontrolling interests | | $ | (24) | | | $ | 58 | | Noncontrolling interests | | $ | (27) | | | $ | (26) | |
VIEs where we hold a variable interest but are not the primary beneficiary
As discussed in Note 2 of our 20212022 Form 10-K, we have concluded that for certain VIEs we are not the primary beneficiary and therefore do not consolidate these VIEs. Such VIEs include certain LIHTC funds, our interests in certain limited partnerships which are part of our private equity portfolio (“Private Equity Interests, certain LIHTC funds,Interests”), and other limited partnerships. Our risk of loss for these VIEs is limited to our investments in, advances to, and/or receivables due from these VIEs.
| | | | | | | | |
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements (Unaudited) | |
Aggregate assets, liabilities, and risk of loss
The aggregate assets, liabilities, and our exposure to loss from those VIEs in which we hold a variable interest, but as to which we have concluded we are not the primary beneficiary, are provided in the following table.
| | | | June 30, 2022 | | September 30, 2021 | | | June 30, 2023 | | September 30, 2022 |
$ in millions | $ in millions | | Aggregate assets | | Aggregate liabilities | | Our risk of loss | | Aggregate assets | | Aggregate liabilities | | Our risk of loss | $ in millions | | Aggregate assets | | Aggregate liabilities | | Our risk of loss | | Aggregate assets | | Aggregate liabilities | | Our risk of loss |
LIHTC funds | | LIHTC funds | | $ | 8,187 | | | $ | 2,846 | | | $ | 79 | | | $ | 7,752 | | | $ | 2,584 | | | $ | 136 | |
Private Equity Interests | Private Equity Interests | | $ | 2,108 | | | $ | 418 | | | $ | 100 | | | $ | 7,318 | | | $ | 47 | | | $ | 82 | | Private Equity Interests | | 2,416 | | | 640 | | | 100 | | | 2,177 | | | 448 | | | 90 | |
LIHTC funds | | 7,315 | | | 2,431 | | | 71 | | | 7,032 | | | 2,280 | | | 71 | | |
Other | Other | | 172 | | | 122 | | | 9 | | | 519 | | | 155 | | | 10 | | Other | | 114 | | | 75 | | | 3 | | | 159 | | | 101 | | | 8 | |
Total | Total | | $ | 9,595 | | | $ | 2,971 | | | $ | 180 | | | $ | 14,869 | | | $ | 2,482 | | | $ | 163 | | Total | | $ | 10,717 | | | $ | 3,561 | | | $ | 182 | | | $ | 10,088 | | | $ | 3,133 | | | $ | 234 | |
NOTE 1110 - GOODWILL AND IDENTIFIABLE INTANGIBLE ASSETS, NET
Our goodwill and identifiable intangible assets result from various acquisitions. During the nine months ended June 30, 2022, we acquired TriState Capital and Charles Stanley, both of which resulted in goodwill and identifiable intangible assets. See Note 3 for additional information on these acquisitions and the related goodwill and identifiable intangible assets. See Notes 2 and 11 of our 20212022 Form 10-K for additional information about our goodwill and intangible assets, including the related accounting policies.
We perform goodwill and indefinite-lived intangible asset impairment testing on an annual basis or when an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying value or indicate that the asset is impaired. We performed our latest annual impairment testing for our goodwill and indefinite-lived intangible assets as of our January 1, 20222023 evaluation date, evaluating balances as of December 31, 2021.2022. In that testing, we performed a qualitative impairment assessment for each of our reporting units that had goodwill, as well as for our indefinite-lived intangible assets.
Our qualitative assessments considerconsidered macroeconomic indicators and industry and market considerations, such as trends in equity and fixed income markets, gross domestic product, labor markets, interest rates, and housing markets. We also considerconsidered regulatory changes, as well as company-specific factors such as market capitalization, reporting unit specific results, and changes in key personnel and strategy. Changes in these indicators, and our ability to respond to such changes, may trigger the need for impairment testing at a point other than our annual assessment date. Based upon the outcome of our qualitative assessments, no impairment was identified. No events have occurred since such assessments that would cause us to update this impairment testing.
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
NOTE 1211 - OTHER ASSETS
The following table details the components of other assets. See Note 2 of our 20212022 Form 10-K for a discussion of the accounting polices related to certain of these components.
| | $ in millions | $ in millions | | June 30, 2022 | | September 30, 2021 | $ in millions | | June 30, 2023 | | September 30, 2022 |
Investments in company-owned life insurance policies | Investments in company-owned life insurance policies | | $ | 964 | | | $ | 952 | | Investments in company-owned life insurance policies | | $ | 1,133 | | | $ | 944 | |
Property and equipment, net | Property and equipment, net | | 507 | | | 499 | | Property and equipment, net | | 542 | | | 503 | |
Lease ROU asset | | 476 | | | 446 | | |
Lease right of use (“ROU”) assets | | Lease right of use (“ROU”) assets | | 519 | | | 480 | |
Prepaid expenses | Prepaid expenses | | 171 | | | 127 | | Prepaid expenses | | 223 | | | 173 | |
| Investments in FHLB and FRB stock | Investments in FHLB and FRB stock | | 94 | | | 72 | | Investments in FHLB and FRB stock | | 85 | | | 88 | |
| Client-owned fractional shares | | Client-owned fractional shares | | 100 | | | 78 | |
All other | All other | | 179 | | | 161 | | All other | | 167 | | | 186 | |
Total other assets | Total other assets | | $ | 2,391 | | | $ | 2,257 | | Total other assets | | $ | 2,769 | | | $ | 2,452 | |
See Note 13 of our 20212022 Form 10-K for further information regarding our property and equipment and Note 1312 of this Form 10-Q and Note 14 of our 20212022 Form 10-K for further information regarding our leases.
| | | | | | | | |
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements (Unaudited) | |
NOTE 1312 – LEASES
The following table presents the balances related to our leases on our Condensed Consolidated Statements of Financial Condition. See NoteNotes 2 and 14 of our 20212022 Form 10-K for additional information related to our leases, including a discussion of our accounting policies.
| $ in millions | $ in millions | | June 30, 2022 | | September 30, 2021 | $ in millions | | June 30, 2023 | | September 30, 2022 |
ROU assets (included in Other assets) | ROU assets (included in Other assets) | | $ | 476 | | | $ | 446 | | ROU assets (included in Other assets) | | $ | 519 | | | $ | 480 | |
Lease liabilities (included in Other payables) | Lease liabilities (included in Other payables) | | $ | 486 | | | $ | 450 | | Lease liabilities (included in Other payables) | | $ | 521 | | | $ | 482 | |
Lease liabilities as of June 30, 20222023 excluded $53$46 million of minimum lease payments related to lease arrangements that were signedlegally binding but had not yet commenced. These leases are estimated to commence between dates later in fiscal year 2022 and2023 through fiscal year 2025 with lease terms ranging from onefour to 1310 years.
Lease expense
The following table details the components of lease expense, which is included in “Occupancy and equipment” expense on our Condensed Consolidated Statements of Income and Comprehensive Income.
| | | Three months ended June 30, | | Nine months ended June 30, | | Three months ended June 30, | | Nine months ended June 30, |
$ in millions | $ in millions | | 2022 | | 2021 | | 2022 | | 2021 | $ in millions | | 2023 | | 2022 | | 2023 | | 2022 |
Lease costs | Lease costs | | $ | 30 | | | $ | 27 | | | $ | 87 | | | $ | 81 | | Lease costs | | $ | 35 | | | $ | 30 | | | $ | 98 | | | $ | 87 | |
Variable lease costs | Variable lease costs | | $ | 7 | | | $ | 7 | | | $ | 22 | | | $ | 20 | | Variable lease costs | | $ | 9 | | | $ | 7 | | | $ | 24 | | | $ | 22 | |
Variable lease costs in the preceding table include payments required under lease arrangements for common area maintenance charges and other variable costs that are not reflected in the measurement of ROU assets and lease liabilities.
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
NOTE 1413 – BANK DEPOSITS
Bank deposits include savings and money market and savings accounts, certificates of deposit, interest-bearing checking accounts,demand deposits, which include Negotiable Order of Withdrawal accounts, certificates of deposit, and non-interest-bearing checking accounts.demand deposits. The following table presents a summary of bank deposits, excluding affiliated deposits, as well as the weighted-average interest rates on such deposits. The calculation of the weighted-average rates was based on the actual deposit balances and rates at each respective period end.
| | | June 30, 2022 | | September 30, 2021 | | June 30, 2023 | | September 30, 2022 |
$ in millions | $ in millions | | Balance | | Weighted-average rate | | Balance | | Weighted-average rate | $ in millions | | Balance | | Weighted-average rate | | Balance | | Weighted-average rate |
Savings and money market accounts | | $ | 42,372 | | | 0.45 | % | | $ | 31,415 | | | 0.01 | % | |
Money market and savings accounts | | Money market and savings accounts | | $ | 33,636 | | | 1.54 | % | | $ | 44,446 | | | 1.01 | % |
Interest-bearing demand deposits | | Interest-bearing demand deposits | | 16,661 | | | 4.86 | % | | 5,286 | | | 2.77 | % |
Certificates of deposit | Certificates of deposit | | 1,121 | | | 1.41 | % | | 878 | | | 1.87 | % | Certificates of deposit | | 2,739 | | | 4.23 | % | | 999 | | | 1.85 | % |
Interest-bearing checking accounts | | 5,448 | | | 1.59 | % | | 164 | | | 1.84 | % | |
Non-interest-bearing checking accounts | | 946 | | | — | | | 38 | | | — | | |
Non-interest-bearing demand deposits | | Non-interest-bearing demand deposits | | 732 | | | — | | | 626 | | | — | |
Total bank deposits | Total bank deposits | | $ | 49,887 | | | 0.60 | % | | $ | 32,495 | | | 0.07 | % | Total bank deposits | | $ | 53,768 | | | 2.72 | % | | $ | 51,357 | | | 1.21 | % |
SavingsMoney market and money marketsavings accounts in the preceding table consist primarilyincluded $27.92 billion and $38.71 billion as of deposits that areJune 30, 2023 and September 30, 2022, respectively, of cash balances which were swept to either bank in our Bank segment from the client investment accounts maintained at Raymond James & Associates, Inc. (“RJ&A”). These balancesSuch deposits are held in Federal Deposit Insurance Corporation (“FDIC”)-insured bank accounts through the Raymond James Bank Deposit Program (“RJBDP”). Money market and savings accounts also included direct accounts held by TriState Capital Bank on behalf of third-party clients. Interest-bearing demand deposits in the preceding table included $11.23 billion of deposits as of June 30, 2023 associated with our Enhanced Savings Program, in which Private Client Group clients deposit cash in a high-yield Raymond James Bank account.
The aggregatefollowing table details the estimated amount of individual time deposit account balancestotal bank deposits, excluding affiliated deposits, that are FDIC-insured, as well as the estimated amount that exceeded the FDIC insurance limit was $151 million and $42 million at June 30, 2022 and September 30, 2021, respectively.each respective period.
| | | | | | | | | | | | | | |
$ in millions | | June 30, 2023 | | September 30, 2022 |
FDIC-insured bank deposits | | $ | 46,884 | | | $ | 43,520 | |
Bank deposits exceeding FDIC insurance limit | | 6,884 | | | 7,837 | |
Total bank deposits | | $ | 53,768 | | | $ | 51,357 | |
FDIC-insured bank deposits as a % of total bank deposits | | 87 | % | | 85 | % |
Total bank deposits increased from September 30, 2021 as a result of our acquisition of TriState Capital Bank. TriState Capital Bank’s deposits are generally comprised of savings and money market accounts and interest-bearing checking accounts, which generally incur interest at variable rates. The interest rates on many of these accounts are linked to an index such as the effective federal funds rate, whereas the rates on other accounts are determined at TriState Capital Bank’s discretion. See Note 3 for further information about the acquisition.
| | | | | | | | |
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements (Unaudited) | |
The following table sets forth the scheduled maturitiesestimated amount of certificates of deposit.deposit, excluding affiliated deposits, that exceeded the FDIC insurance limit by time remaining until maturity as of June 30, 2023.
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | June 30, 2022 | | September 30, 2021 |
$ in millions | | Denominations greater than or equal to $100,000 | | Denominations less than $100,000 | | Denominations greater than or equal to $100,000 | | Denominations less than $100,000 |
Three months or less | | $ | 225 | | | $ | 31 | | | $ | 22 | | | $ | 87 | |
Over three through six months | | 145 | | | 88 | | | 21 | | | 76 | |
Over six through twelve months | | 131 | | | 43 | | | 32 | | | 54 | |
Over one through two years | | 103 | | | 159 | | | 93 | | | 170 | |
Over two through three years | | 25 | | | 149 | | | 37 | | | 166 | |
Over three through four years | | 7 | | | 5 | | | 6 | | | 99 | |
Over four through five years | | 6 | | | 4 | | | 9 | | | 6 | |
Total certificates of deposit | | $ | 642 | | | $ | 479 | | | $ | 220 | | | $ | 658 | |
| | | | | | | | |
$ in millions | | June 30, 2023 |
Three months or less | | $ | 40 | |
Over three through six months | | 25 | |
Over six through twelve months | | 31 | |
Over twelve months | | 12 | |
Total estimated certificates of deposit that exceeded the FDIC insurance limit | | $ | 108 | |
Interest expense on deposits, excluding interest expense related to affiliated deposits, is summarized in the following table.
| | | Three months ended June 30, | | Nine months ended June 30, | | Three months ended June 30, | | Nine months ended June 30, |
$ in millions | $ in millions | | 2022 | | 2021 | | 2022 | | 2021 | $ in millions | | 2023 | | 2022 | | 2023 | | 2022 |
Savings and money market accounts | | $ | 11 | | | $ | — | | | $ | 13 | | | $ | 2 | | |
Interest-bearing checking accounts | | 6 | | | 1 | | | 8 | | | 2 | | |
Money market and savings accounts | | Money market and savings accounts | | $ | 125 | | | $ | 11 | | | $ | 370 | | | $ | 13 | |
Interest-bearing demand deposits | | Interest-bearing demand deposits | | 157 | | | 6 | | | 266 | | | 8 | |
Certificates of deposit | Certificates of deposit | | 3 | | | 4 | | | 10 | | | 13 | | Certificates of deposit | | 30 | | | 3 | | | 54 | | | 10 | |
Total interest expense on deposits | Total interest expense on deposits | | $ | 20 | | | $ | 5 | | | $ | 31 | | | $ | 17 | | Total interest expense on deposits | | $ | 312 | | | $ | 20 | | | $ | 690 | | | $ | 31 | |
We use an interest rate swap to manage the risk of increases in interest rates associated with certain money market and savings accounts by converting the balances subject to variable interest rates to a fixed interest rate. Refer to Note 5 of this Form 10-Q for information regarding this interest rate swap, which has been designated and accounted for as a cash flow hedge.
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
NOTE 1514 – OTHER BORROWINGS
The following table details the components of our other borrowings, which are primarily comprised of short-term and long-term FHLB advances and subordinated notes.
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | June 30, 2023 | | September 30, 2022 |
$ in millions | | Weighted average interest rate | Maturity date | Balance | | Weighted average interest rate | Maturity date | Balance |
FHLB advances: | | | | | | | | |
Floating rate - term (1) | | 5.36 | % | December 2023 - March 2025 | $ | 850 | | | 3.32 | % | December 2023 | $ | 850 | |
Floating rate - overnight (1) | | — | % | Overnight | — | | | 3.11 | % | Overnight | 140 | |
Fixed rate | | 5.59 | % | September 2023 | 150 | | | 3.45 | % | December 2022 | 200 | |
Total FHLB advances | | | | 1,000 | | | | | 1,190 | |
Subordinated notes - fixed-to-floating (including an unaccreted premium of $2 and $2, respectively) | | 5.75 | % | May 2030 | 100 | | | 5.75 | % | May 2030 | 100 | |
Other | | | | — | | | | | 1 | |
Total other borrowings | | | | $ | 1,100 | | | | | $ | 1,291 | |
| | | | | | | | | | | | | | |
$ in millions | | June 30, 2022 | | September 30, 2021 |
FHLB advances | | $ | 1,250 | | | $ | 850 | |
5.75% fixed-to-floating subordinated notes, due 2030 (including premium of $2 and $0, respectively) | | 100 | | | — | |
Other | | 3 | | | 8 | |
Total other borrowings | | $ | 1,353 | | | $ | 858 | |
(1) Interest rates on these advances reset daily.
FHLB advances
We have entered into advances from the FHLB at Raymond James Bank and TriState Capital Bank, which are secured by certain residential mortgage and CRE loans. As of June 30, 2022, our FHLB borrowings consisted of $850 million of floating-rate advances at interest rates which reset daily and mature in December 2023, $200 million of overnight floating-rate advances, which are available for borrowing through May 2023 at interest rates which reset daily, and $200 million of fixed-rate advances which incur a weighted-average interest rate of 1.73% and mature in September 2022. As of September 30, 2021 all of the FHLB borrowings were floating-rate advances. The interest rates on our floating-rate advances are generally based on a Secured Overnight Financing Rate (“SOFR”). The weighted-average interest rate on our floating-rate FHLB advances as of June 30, 2022 and September 30, 2021 was 1.79% and 0.26%, respectively. We use interest rate swaps to manage the risk of increases in interest rates associated with the majority of theseour floating-rate FHLB advances by converting the balances subject to variable interest rates to a fixed interest rate. Refer to Note 2 of our 20212022 Form 10-K and Note 5 of this Form 10-Q for information regarding these interest rate swaps, which arehave been designated and accounted for as hedging instruments.cash flow hedges. Refer to Note 6 for more information regarding bank loans, net and available-for-sale securities pledged with the FHLB as security for our FHLB borrowings.
Subordinated notes
As part of the assets acquired and liabilities assumed in the TriState Capital acquisition, we assumed, as of the closing date, TriState Capital’s subordinated notes due 2030, with an aggregate principal amount of $98 million. TheOur subordinated notes incur interest at a fixed rate of 5.75% until May 2025 and thereafter at a variable interest rate based on London Interbank Offered Rate (“LIBOR”), or an appropriate alternative reference rate. We may redeem up to $60 million of these subordinated notes beginning in May 2025 and $38 million beginning in August 2025 at a redemption price equal to 100%3-month CME Term SOFR plus a spread adjustment of the principal amount5.62% per annum. Refer to Note 16 of the notes to be redeemed plus accrued and unpaid interest thereon to the redemption date.our 2022 Form 10-K for additional information regarding these borrowings.
| | | | | | | | |
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements (Unaudited) | |
OtherCredit Facility
In February 2019, RJFApril 2023, we amended and RJ&A entered into an unsecuredextended our revolving credit facility agreement (the “Credit Facility”) with, a syndicatecommitted unsecured line of lenders. In April 2021, we amended our Credit Facility, extendingcredit under which either RJ&A or RJF have the term from February 2024ability to April 2026 and incorporatingborrow. As a lower costresult of borrowing underthe extension, the Credit Facility reflects a term through April 2028 and certain favorable covenant modifications. This committed unsecured borrowing facility provides for maximum borrowings of up to $500 million, with a sublimit of $300 million for RJF. RJ&A may borrow up to $500 million under the Credit Facility, depending on the amount of outstanding borrowings of RJF.$750 million. The interest rates on borrowings under the Credit Facility are variable and were based on LIBOR as of June 30, 2022,the Secured Overnight Financing Rate (“SOFR”), as adjusted for RJF’s credit rating; however, the administrative agent has the right to select a commercially available alternative reference rate to LIBOR if adequate and reasonable means do not exist for ascertaining LIBOR.rating. There were no borrowings outstanding on the Credit Facility as of June 30, 2023 or September 30, 2022. There is a facility fee associated with the Credit Facility, which also varies with RJF’s credit rating. Based upon RJF’s credit rating as of June 30, 2022,2023, the variable rate facility fee, which is applied to the committed amount, was 0.150%0.125% per annum.
In addition to the Credit Facility, we maintain various secured and unsecured lines of credit, which are generally utilized to finance certain fixed income securities or for cash management purposes. Borrowings during the year were generally day-to-day and there were 0 borrowings outstanding on these arrangements as of June 30, 2022. The interest rates for these arrangements are variable and are based on a daily bank quoted rate, which may reference LIBOR, the Fed Funds rate, a lender’s prime rate, the Canadian prime rate, or another commercially available rate, as applicable.
We also have other collateralized financings included in “Collateralized financings”For further information on our Condensed Consolidated Statements of Financial Condition. Seeother borrowing arrangements refer to Note 7 for information regarding our other collateralized financing arrangements.
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
NOTE 16 – SENIOR NOTES PAYABLE
The following table summarizes our senior notes payable.
| | | | | | | | | | | | | | |
$ in millions | | June 30, 2022 | | September 30, 2021 |
4.65% senior notes, due 2030 | | $ | 500 | | | $ | 500 | |
4.95% senior notes, due 2046 | | 800 | | | 800 | |
3.75% senior notes, due 2051 | | 750 | | | 750 | |
| | | | |
| | | | |
Total principal amount | | 2,050 | | | 2,050 | |
Unaccreted premiums/(discounts) | | 6 | | | 5 | |
Unamortized debt issuance costs | | (18) | | | (18) | |
Total senior notes payable | | $ | 2,038 | | | $ | 2,037 | |
In April 2021, we sold in a registered underwritten public offering $750 million in aggregate principal amount of 3.75% senior notes due April 2051. We utilized the proceeds from the offering and cash on hand to early-redeem our $250 million of 5.625% senior notes due 2024 and our $500 million of 3.625% senior notes due 2026. We recognized losses on the extinguishment of such notes of $98 million which was presented in “Losses on extinguishment of debt” in our Condensed Consolidated Statements of Income and Comprehensive Income for the three and nine months ended June 30, 2021. See Note 17 of our 20212022 Form 10-K for further discussion on our senior notes payable.10-K.
NOTE 1715 – INCOME TAXES
The income tax provision for interim periods is comprised of tax on ordinary income provided at the most recent estimated annual effective tax rate, adjusted for the tax effect of discrete items. We estimate the annual effective tax rate quarterly based on the forecasted pre-tax results of our U.S. and non-U.S. operations. Items unrelated to current year ordinary income are recognized entirely in the period identified as a discrete item of tax. These discrete items generally relate to changes in tax laws, adjustments to the actual liability determined upon filing tax returns, excess tax benefits related to share-based compensation and adjustments to previously recorded reserves for uncertain tax positions. For discussion of income tax accounting policies and other income tax related information, see Notes 2 and 18 of our 20212022 Form 10-K.
Effective tax rate
Our effective income tax rate of 23.9%23.0% for the nine months ended June 30, 20222023 was higherlower than the 21.7%25.4% effective tax rate for our fiscal year 2021.2022. The higherdecrease in the effective income tax rate for the nine months ended June 30, 2022was primarily resulted from the negative impact of nondeductibledue to nontaxable valuation lossesgains associated with our company-owned life insurance policies that were recognized during the current year-to-date period compared to fiscal year 20212022 which had non-taxable gains. The increase in tax expense was partially offset by the favorable impact of larger tax deductions in the current year related to share-based compensation awards that vested during the year.nondeductible losses.
Uncertain tax positions
Although management cannot predict with any degree of certainty the timing of ultimate resolution of matters under review by various taxing jurisdictions, it is reasonably possible that our uncertain tax position liability balance may decrease within the next 12 months by up to $13$10 million as a result of the expirationdue to expirations of statutes of limitations and the completion of tax authorities’ examinations.
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
NOTE 1816 – COMMITMENTS, CONTINGENCIES AND GUARANTEES
Commitments and contingencies
Underwriting commitments
In the normal course of business, we enter into commitments for debt and equity underwritings. As of June 30, 2022,2023, we had 2one such open underwriting commitments,commitment, which werewas subsequently settled in an open market transactions and did not result in significant losses.transaction that had an insignificant impact on our results of operations.
Lending commitments and other credit-related financial instruments
We have outstanding, at any time, a significant number of commitments to extend credit and other credit-related off-balance-sheet financial instruments, such as standby letters of credit and loan purchases, which then extend over varying periods of time. These arrangements are subject to strict underwriting assessments and each customer’sclient’s credit worthiness is evaluated on a case-by-case basis. Fixed-rate commitments are subject to market risk resulting from fluctuations in interest rates and our exposure is limited to the replacement value of those commitments.
| | | | | | | | |
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements (Unaudited) | |
The following table presents our commitments to extend credit and other credit-related off-balance sheet financial instruments outstanding at Raymond Jamesour Bank and TriState Capital Bank.segment.
| $ in millions | $ in millions | | June 30, 2022 | | September 30, 2021 | $ in millions | | June 30, 2023 | | September 30, 2022 |
SBL and other consumer lines of credit | SBL and other consumer lines of credit | | $ | 31,928 | | | $ | 17,515 | | SBL and other consumer lines of credit | | $ | 37,868 | | | $ | 33,641 | |
Commercial lines of credit | Commercial lines of credit | | $ | 3,565 | | | $ | 2,075 | | Commercial lines of credit | | $ | 4,036 | | | $ | 3,792 | |
Unfunded lending commitments | Unfunded lending commitments | | $ | 1,342 | | | $ | 548 | | Unfunded lending commitments | | $ | 1,087 | | | $ | 1,255 | |
Standby letters of credit | Standby letters of credit | | $ | 101 | | | $ | 22 | | Standby letters of credit | | $ | 132 | | | $ | 94 | |
SBL and other consumer lines of credit primarily represent the unfunded amounts of bank loans to consumers that are primarily secured by marketable securities or other liquid collateral at advance rates consistent with industry standards. The proceeds from repayment or, if necessary, the liquidation of collateral, which is monitored daily, are expected to satisfy the amounts drawn against these existing lines of credit. These lines of credit are primarily uncommitted, as we reserve the right to not make any advances or may terminate these lines at any time.
Because many of our lending commitments expire without being funded in whole or in part, the contractual amounts are not estimates of our actual future credit exposure or future liquidity requirements. The allowance for credit losses calculated under the CECL model provides for potential losses related to the unfunded lending commitments. See Note 2 of our 20212022 Form 10-K and Notes 3 and 8Note 7 of this Form 10-Q for further discussion ofinformation on this allowance for credit losses related to unfunded lending commitments, including a discussion of the initial provision for credit losses on loans and lending commitments acquired as part of the TriState Capital acquisition.commitments.
RJ&A enters into margin lending arrangements which allow customers to borrow against the value of qualifying securities. Margin loans are collateralized by the securities held in the customer’s account at RJ&A. Collateral levels and established credit terms are monitored daily and we require customers to deposit additional collateral or reduce balances as necessary.
We offer loans to prospective financial advisors for recruiting and retention purposes (see Note 2 of our 20212022 Form 10-K and Note 98 of this Form 10-Q for further discussion of our loans to financial advisors). These offers are contingent upon certain events occurring, including the individuals joining us and meeting certain other conditions outlined in their offer.
Investment commitments
We had unfunded commitments to various investments, primarily those held by Raymond James Bank and TriState Capital Bank, of $43$74 million as of June 30, 2022.2023.
Other commitments
Raymond James Affordable Housing Investments, Inc. (“RJAHI”), formerly known as Raymond James Tax Credit Funds, Inc., sells investments in project partnerships to various LIHTC funds, which have third-party investors, and for which RJAHI serves as the managing member or general partner. RJAHI typically sells investments in project partnerships to LIHTC funds within
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
90 days of their acquisition. Until such investments are sold to LIHTC funds, RJAHI is responsible for funding investment commitments to such partnerships. As of June 30, 2022,2023, RJAHI had committed approximately $151$265 million to project partnerships that had not yet been sold to LIHTC funds. Because we expect to sell these project partnerships to LIHTC funds and the equity funding events arise over future periods, the contractual commitments are not expected to materially impact our future liquidity requirements. RJAHI may also make short-term loans or advances to project partnerships and LIHTC funds.
For information regarding our acquisition commitments associated with our recent acquisition of SumRidge Partners see Note 3. For information regarding our lease commitments see Note 1312 of this Form 10-Q and for information on the maturities of our lease liabilities see Note 14 of our 20212022 Form 10-K.
Guarantees
Our U.S. broker-dealer subsidiaries are required by federal law to be members of the Securities Investors Protection Corporation (“SIPC”). The SIPC fund provides protection up to $500 thousand per client for securities and cash held in client accounts, including a limitation of $250 thousand on claims for cash balances. We have purchased excess SIPC coverage through various syndicates of Lloyd’s of London. For RJ&A, our clearing broker-dealer, the additional protection currently provided has an aggregate firm limit of $750 million for cash and securities, including a sub-limit of $1.9 million per client for cash above basic SIPC. Account protection applies when a SIPC member fails financially and is unable to meet its obligations to clients. This coverage does not protect against market fluctuations. RJF has provided an indemnity to Lloyd’s of London against any and all losses they may incur associated with the excess SIPC policies.
| | | | | | | | |
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements (Unaudited) | |
Legal and regulatory mattermatters contingencies
In the normal course of our business, we have been named, from time to time, as a defendant in various legal actions, including arbitrations, class actions and other litigation, arising in connection with our activities as a diversified financial services institution.
RJF and certain of its subsidiaries are subject to regular reviews and inspections by regulatory authorities and self-regulatory organizations. Reviews can result in the imposition of sanctions for regulatory violations, ranging from non-monetary censures to fines and, in serious cases, temporary or permanent suspension from conducting business, or limitations on certain business activities. In addition, regulatory agencies and self-regulatory organizations institute investigations from time to time, among other things, into industry practices, which can also result in the imposition of such sanctions. For example, the firm is continuing its cooperation with the SEC in connection with an investigation of the firm’s investment advisory business’ compliance with records preservation requirements relating to business communications sent over electronic messaging channels that have not been approved by the firm. The SEC is reportedly conducting similar investigations of record preservation practices at other financial institutions.
We may contest liability and/or the amount of damages, as appropriate, in each pending matter. The level of litigation and investigatory activity (both formal and informal) by government and self-regulatory agencies in the financial services industry continues to be significant. There can be no assurance that material losses will not be incurred from claims that have not yet been asserted or are not yet determined to be material.
For many legal and regulatory matters, we are unable to estimate a range of reasonably possible loss as we cannot predict if, how or when such proceedings or investigations will be resolved or what the eventual settlement, fine, penalty or other relief, if any, may be. A large number of factors may contribute to this inherent unpredictability: the proceeding is in its early stages; the damages sought are unspecified, unsupported or uncertain; it is unclear whether a case brought as a class action will be allowed to proceed on that basis; the other party is seeking relief other than or in addition to compensatory damages (including, in the case of regulatory and governmental proceedings, potential fines and penalties); the matters present significant legal uncertainties; we have not engaged in settlement discussions; discovery is not complete; there are significant facts in dispute; and numerous parties are named as defendants (including where it is uncertain how liability might be shared among defendants). Subject to the foregoing, after consultation with counsel, we believe that the outcome of such litigation and regulatory proceedings will not have a material adverse effect on our consolidated financial condition. However, the outcome of such litigation and regulatory proceedings could be material to our operating results and cash flows for a particular future period, depending on, among other things, our revenues or income for such period.
There are certain matters for which we are unable to estimate the upper end of the range of reasonably possible loss. With respect to legal and regulatory matters for which management has been able to estimate a range of reasonably possible loss as of June 30, 2022,2023, we estimated the upper end of the range of reasonably possible aggregate loss to be approximately $80$100 million in excess of the aggregate accruals for such matters. Refer to Note 2 of our 20212022 Form 10-K for a discussion of our criteria for recognizing liabilities for contingencies.
| | | | | | | | |
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements (Unaudited) | |
NOTE 1917 – SHAREHOLDERS’ EQUITY
Preferred stock
On June 1, 2022, we completed our acquisition of TriState Capital. As a component of our total purchase consideration for TriState Capital on June 1, 2022, we issued two new series of preferred stock to replace previously issued andThe following table details the shares outstanding, preferred stock of TriState Capital. See Note 3 for further information about the acquisition.
On June 1, 2022, we issued 1.61 million depositary shares, each representing a 1/40th interest in a share of 6.75% Fixed-to-Floating Rate Series A Non-Cumulative Perpetual Preferred Stock, par value of $0.10 per share (“Series A Preferred Stock”), with a liquidation preference of $1,000 per share (equivalent of $25 per depositary share). Dividends on the Series A Preferred Stock are non-cumulative and, if declared, payable quarterly at a rate of 6.75% per annum from original issue date up to, but excluding, April 1, 2023, and thereafter at a floating rate equal to 3-month LIBOR, or industry-accepted alternative reference rate, plus a spread of 3.985% per annum. Subject to requisite regulatory approvals, we may redeem the Series A Preferred Stock on or after April 1, 2023, in whole or in part, at our option, at the liquidation preference plus declared and unpaid dividends. As of June 30, 2022, there were 40,250 shares of Series A Preferred Stock issued and outstanding with a carrying value, and aggregate liquidation preference of $41 million and $40 million, respectively.our preferred stock. For further details regarding our preferred stock see Note 20 of our 2022 Form 10-K.
| | | | | | | | | | | | | | |
$ in millions, except share count | | June 30, 2023 | | September 30, 2022 |
6.75% Fixed-to-Floating Rate Series A Non-Cumulative Perpetual Preferred Stock (“Series A Preferred Stock”): | | | | |
Shares outstanding | | — | | 40,250 |
Carrying value | | $ | — | | | $ | 41 | |
Aggregate liquidation preference | | $ | — | | | $ | 40 | |
6.375% Fixed-to-Floating Rate Series B Non-Cumulative Perpetual Preferred Stock (“Series B Preferred Stock”): | | | | |
Shares outstanding | | 80,500 | | 80,500 |
Carrying value | | $ | 79 | | | $ | 79 | |
Aggregate liquidation preference | | $ | 81 | | | $ | 81 | |
We also issued 3.22On April 3, 2023, we redeemed all 40,250 outstanding shares of our Series A Preferred Stock with a carrying value of $41 million, which triggered the redemption of the related depositary shares on June 1, 2022,(“Series A Depositary Shares”), each representing a 1/40th interest inof a share of 6.375% Fixed-to-Floating RateSeries A Preferred Stock, for an aggregate redemption value of $40 million.
The following table details dividends declared and dividends paid on our Series A and Series B Non-Cumulative Perpetualpreferred stock for the three and nine months ended June 30, 2023.
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Dividends declared | | Dividends paid |
$ in millions, except per share amounts | | Total dividends | | Per preferred share amount | | Total dividends | | Per preferred share amount |
Three months ended June 30, 2023 | | | | | | | | |
Series A Preferred Stock (1) | | $ | — | | | $ | — | | | $ | 1 | | | $ | 16.88 | |
Series B Preferred Stock | | 1 | | | $ | 15.94 | | | 1 | | | $ | 15.94 | |
Total preferred stock dividends (1) | | $ | 1 | | | | | $ | 2 | | | |
Nine Months Ended June 30, 2023 | | | | | | | | |
Series A Preferred Stock (1) | | $ | 2 | | | $ | 33.76 | | | $ | 3 | | | $ | 50.64 | |
Series B Preferred Stock | | 3 | | | $ | 47.82 | | | 3 | | | $ | 47.82 | |
Total preferred stock dividends (1) | | $ | 5 | | | | | $ | 6 | | | |
Three months ended June 30, 2022 | | | | | | | | |
Series A Preferred Stock | | $ | 1 | | | $ | 16.88 | | | $ | — | | | $ | — | |
Series B Preferred Stock | | 1 | | | $ | 15.94 | | | — | | | $ | — | |
Total preferred stock dividends | | $ | 2 | | | | | $ | — | | | |
Nine months ended June 30, 2022 | | | | | | | | |
Series A Preferred Stock | | $ | 1 | | | $ | 16.88 | | | | | $ | — | |
Series B Preferred Stock | | 1 | | | $ | 15.94 | | | — | | | $ | — | |
Total preferred stock dividends | | $ | 2 | | | | | $ | — | | | |
(1) Preferred stock dividends on our Condensed Consolidated Statements of Income and Comprehensive Income for the three and nine months ended June 30, 2023 included dividends declared during the periods, as well as the $1 million excess of the carrying value of our Series A Preferred Stock parover the redemption value, of $0.10 per share (“Series B Preferred Stock”), with a liquidation preference of $1,000 per share (equivalent of $25 per depositary share). which was reported as an offset to preferred dividends and increased net income available to common shareholders.
Dividends on the Series B Preferred Stock are non-cumulative and, if declared, payable quarterly at a rate of 6.375% per annum from original issue date up to, but excluding, July 1, 2026, and thereafter at a floating rate equal to 3-month LIBOR, or industry-accepted alternative reference rate,CME Term SOFR plus a spread adjustment of 4.088%4.35% per annum. Under certain circumstances, the aforementioned fixed rate may apply in lieuRefer to Note 20 of the floating rate. Subject to requisite regulatory approvals, we may redeem theour 2022 Form 10-K for additional information regarding our Series B Preferred Stock on or after July 1, 2024, in whole or in part, at our option, at the liquidation preference plus declared and unpaid dividends. As of June 30, 2022, there were 80,500 shares of Series B Preferred Stock issued and outstanding with a carrying value and aggregate liquidation preference of $79 million and $81 million, respectively.Stock.
The following table details dividends declared on our preferred stock for each respective period. | | | | | | | | | | | | | | | |
| Three and nine months ended June 30, 2022 | |
| Total declared ($ in millions) | | Per preferred share amount | | | | |
Series A Preferred Stock | $ | 1 | | | $ | 16.88 | | | | | |
Series B Preferred Stock | 1 | | | $ | 15.94 | | | | | |
Total preferred stock dividends declared | $ | 2 | | | | | | | |
| | | | | | | | |
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements (Unaudited) | |
Common equity
Common stock issuance
DuringWe issue shares from time to time during the year to satisfy obligations under certain of our fiscal third quarter of 2022 we issued 7.97 million shares of common stock, primarily in the form of per share consideration in the settlement of TriState Capital common stock, and 551 thousand restricted stock awards in conjunction with our acquisition of TriState Capital on June 1, 2022.share-based compensation programs. See Note 320 of this Form 10-Q and Note 23 of our 2022 Form 10-K for furtheradditional information on the TriState Capital acquisition and Note 22these programs. We may also reissue treasury shares for further information on the restricted stock awards.such purposes.
Share repurchases
We repurchase shares of our common stock from time to time for a number of reasons, including to offset dilution from share-based compensation. In December 2021,2022, our Board of Directors authorized sharecommon stock repurchases of up to $1$1.5 billion, which replaced the previous authorization. Our share repurchases are effected primarily through regular open-market purchases, typically under a SEC Rule 10b-18 plan, the amounts and timing of which are determined primarily by our current and projected capital position, applicable law and regulatory constraints, general market conditions, and the price and trading volumes of our common stock. FollowingDuring the acquisitionthree months ended June 30, 2023, under the Board of TriState Capital on June 1, 2022,Directors’ common stock repurchase authorization, we repurchased 1.143.31 million shares of our common stock for $100$300 million at an average price of approximately $88$90.51 per share. During the nine months ended June 30, 2023, we repurchased 8.35 million shares of our common stock for $788 million at an average price of $94.30 per share. As of June 30, 2022, approximately $9002023, $750 million remained available under the Board of Directors’ sharecommon stock repurchase authorization. We incurred $5 million of excise tax on share repurchases during the nine months ended June 30, 2023 which is included in “Treasury stock” on the Condensed Consolidated Statements of Changes in Shareholders’ Equity.
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
Common stock dividends
Dividends per common share declared and paid are detailed in the following table for each respective period.
| | | Three months ended June 30, | | Nine months ended June 30, | | | Three months ended June 30, | | Nine months ended June 30, |
| | 2022 | | 2021 | | 2022 | | 2021 | | | 2023 | | 2022 | | 2023 | | 2022 |
Dividends per common share - declared | Dividends per common share - declared | $ | 0.34 | | | $ | 0.26 | | | $ | 1.02 | | | $ | 0.78 | | Dividends per common share - declared | | $ | 0.42 | | | $ | 0.34 | | | $ | 1.26 | | | $ | 1.02 | |
Dividends per common share - paid | Dividends per common share - paid | $ | 0.34 | | | $ | 0.26 | | | $ | 0.94 | | | $ | 0.77 | | Dividends per common share - paid | | $ | 0.42 | | | $ | 0.34 | | | $ | 1.18 | | | $ | 0.94 | |
OtherOur dividend payout ratio is detailed in the following table for each respective period and is computed by dividing dividends declared per common share by earnings per diluted common share.
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three months ended June 30, | | Nine months ended June 30, |
| | 2023 | | 2022 | | 2023 | | 2022 |
Dividend payout ratio | | 24.6 | % | | 24.6 | % | | 21.2 | % | | 20.4 | % |
DuringRJF expects to continue paying cash dividends. However, the payment and rate of dividends on our fiscal fourth quarter of 2021, our Board of Directors approved a three-for-two stock split, effected in the form of a 50% stock dividend and paid on September 21, 2021. All share and per share information has been retroactively adjusted to reflect this stock split.
During our fiscal second quarter of 2022, we amended our Restated Articles of Incorporation, as filed with the Secretary of State of Florida on November 25, 2008, to increase the number of authorized shares of capital stock from 360 million shares to 660 million shares, consisting of 650 million shares of common stock par valueare subject to several factors including our operating results, financial and regulatory requirements or restrictions, and the availability of $0.01 per share,funds from our subsidiaries, including our broker-dealer and 10 million sharesbank subsidiaries, which may also be subject to restrictions under regulatory capital rules. The availability of preferred stock, par valuefunds from subsidiaries may also be subject to restrictions contained in loan covenants of $0.10 per share. The Amendedcertain broker-dealer loan agreements and Restated Articlesrestrictions by bank regulators on dividends to the parent from Raymond James Bank and TriState Capital Bank. See Note 21 of Incorporation, which were filed with the Secretary of State of Floridathis Form 10-Q for additional information on February 28, 2022, were approved by our Board of Directors and our shareholders on December 1, 2021 and February 24, 2022, respectively.regulatory capital requirements.
| | | | | | | | |
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements (Unaudited) | |
Accumulated other comprehensive income/(loss)
All of the components of other comprehensive income/(loss) (“OCI”), net of tax, were attributable to RJF. The following table presents the net change in AOCI as well as the changes, and the related tax effects, of each component of AOCI.
| $ in millions | $ in millions | | Net investment hedges | | Currency translations | | Subtotal: net investment hedges and currency translations | | Available- for-sale securities | | Cash flow hedges | | Total | $ in millions | | Net investment hedges | | Currency translations | | Subtotal: net investment hedges and currency translations | | Available- for-sale securities | | Cash flow hedges | | Total |
Three months ended June 30, 2023 | | Three months ended June 30, 2023 | | | | | | | | | | | | |
AOCI as of beginning of period | | AOCI as of beginning of period | | $ | 136 | | | $ | (206) | | | $ | (70) | | | $ | (758) | | | $ | 30 | | | $ | (798) | |
OCI: | | OCI: | |
OCI before reclassifications and taxes | | OCI before reclassifications and taxes | | (22) | | | 36 | | | 14 | | | (102) | | | 26 | | | (62) | |
Amounts reclassified from AOCI, before tax | | Amounts reclassified from AOCI, before tax | | — | | | — | | | — | | | — | | | (9) | | | (9) | |
Pre-tax net OCI | | Pre-tax net OCI | | (22) | | | 36 | | | 14 | | | (102) | | | 17 | | | (71) | |
Income tax effect | | Income tax effect | | 6 | | | — | | | 6 | | | 26 | | | (5) | | | 27 | |
OCI for the period, net of tax | | OCI for the period, net of tax | | (16) | | | 36 | | | 20 | | | (76) | | | 12 | | | (44) | |
AOCI as of end of period | | AOCI as of end of period | | $ | 120 | | | $ | (170) | | | $ | (50) | | | $ | (834) | | | $ | 42 | | | $ | (842) | |
| Nine months ended June 30, 2023 | | Nine months ended June 30, 2023 | |
AOCI as of beginning of period | | AOCI as of beginning of period | | $ | 153 | | | $ | (276) | | | $ | (123) | | | $ | (902) | | | $ | 43 | | | $ | (982) | |
OCI: | | OCI: | |
OCI before reclassifications and taxes | | OCI before reclassifications and taxes | | (45) | | | 107 | | | 62 | | | 109 | | | 21 | | | 192 | |
Amounts reclassified from AOCI, before tax | | Amounts reclassified from AOCI, before tax | | — | | | — | | | — | | | — | | | (22) | | | (22) | |
Pre-tax net OCI | | Pre-tax net OCI | | (45) | | | 107 | | | 62 | | | 109 | | | (1) | | | 170 | |
Income tax effect | | Income tax effect | | 12 | | | (1) | | | 11 | | | (41) | | | — | | | (30) | |
OCI for the period, net of tax | | OCI for the period, net of tax | | (33) | | | 106 | | | 73 | | | 68 | | | (1) | | | 140 | |
AOCI as of end of period | | AOCI as of end of period | | $ | 120 | | | $ | (170) | | | $ | (50) | | | $ | (834) | | | $ | 42 | | | $ | (842) | |
| Three months ended June 30, 2022 | Three months ended June 30, 2022 | | | | | | | | | | | | | Three months ended June 30, 2022 | |
AOCI as of beginning of period | AOCI as of beginning of period | | $ | 71 | | | $ | (91) | | | $ | (20) | | | $ | (380) | | | $ | 11 | | | $ | (389) | | AOCI as of beginning of period | | $ | 71 | | | $ | (91) | | | $ | (20) | | | $ | (380) | | | $ | 11 | | | $ | (389) | |
OCI: | OCI: | | OCI: | |
OCI before reclassifications and taxes | OCI before reclassifications and taxes | | 32 | | | (64) | | | (32) | | | (206) | | | 12 | | | (226) | | OCI before reclassifications and taxes | | 32 | | | (64) | | | (32) | | | (206) | | | 12 | | | (226) | |
Amounts reclassified from AOCI, before tax | Amounts reclassified from AOCI, before tax | | — | | | — | | | — | | | — | | | 2 | | | 2 | | Amounts reclassified from AOCI, before tax | | — | | | — | | | — | | | — | | | 2 | | | 2 | |
Pre-tax net OCI | Pre-tax net OCI | | 32 | | | (64) | | | (32) | | | (206) | | | 14 | | | (224) | | Pre-tax net OCI | | 32 | | | (64) | | | (32) | | | (206) | | | 14 | | | (224) | |
Income tax effect | Income tax effect | | (8) | | | — | | | (8) | | | 49 | | | (4) | | | 37 | | Income tax effect | | (8) | | | — | | | (8) | | | 49 | | | (4) | | | 37 | |
OCI for the period, net of tax | OCI for the period, net of tax | | 24 | | | (64) | | | (40) | | | (157) | | | 10 | | | (187) | | OCI for the period, net of tax | | 24 | | | (64) | | | (40) | | | (157) | | | 10 | | | (187) | |
AOCI as of end of period | AOCI as of end of period | | $ | 95 | | | $ | (155) | | | $ | (60) | | | $ | (537) | | | $ | 21 | | | $ | (576) | | AOCI as of end of period | | $ | 95 | | | $ | (155) | | | $ | (60) | | | $ | (537) | | | $ | 21 | | | $ | (576) | |
| Nine months ended June 30, 2022 | Nine months ended June 30, 2022 | | Nine months ended June 30, 2022 | |
AOCI as of beginning of period | AOCI as of beginning of period | | $ | 81 | | | $ | (90) | | | $ | (9) | | | $ | (5) | | | $ | (27) | | | $ | (41) | | AOCI as of beginning of period | | $ | 81 | | | $ | (90) | | | $ | (9) | | | $ | (5) | | | $ | (27) | | | $ | (41) | |
OCI: | OCI: | | OCI: | |
OCI before reclassifications and taxes | OCI before reclassifications and taxes | | 18 | | | (65) | | | (47) | | | (711) | | | 55 | | | (703) | | OCI before reclassifications and taxes | | 18 | | | (65) | | | (47) | | | (711) | | | 55 | | | (703) | |
Amounts reclassified from AOCI, before tax | Amounts reclassified from AOCI, before tax | | — | | | — | | | — | | | — | | | 10 | | | 10 | | Amounts reclassified from AOCI, before tax | | — | | | — | | | — | | | — | | | 10 | | | 10 | |
Pre-tax net OCI | Pre-tax net OCI | | 18 | | | (65) | | | (47) | | | (711) | | | 65 | | | (693) | | Pre-tax net OCI | | 18 | | | (65) | | | (47) | | | (711) | | | 65 | | | (693) | |
Income tax effect | Income tax effect | | (4) | | | — | | | (4) | | | 179 | | | (17) | | | 158 | | Income tax effect | | (4) | | | — | | | (4) | | | 179 | | | (17) | | | 158 | |
OCI for the period, net of tax | OCI for the period, net of tax | | 14 | | | (65) | | | (51) | | | (532) | | | 48 | | | (535) | | OCI for the period, net of tax | | 14 | | | (65) | | | (51) | | | (532) | | | 48 | | | (535) | |
AOCI as of end of period | AOCI as of end of period | | $ | 95 | | | $ | (155) | | | $ | (60) | | | $ | (537) | | | $ | 21 | | | $ | (576) | | AOCI as of end of period | | $ | 95 | | | $ | (155) | | | $ | (60) | | | $ | (537) | | | $ | 21 | | | $ | (576) | |
| Three months ended June 30, 2021 | | |
AOCI as of beginning of period | | $ | 76 | | | $ | (81) | | | $ | (5) | | | $ | (4) | | | $ | (29) | | | $ | (38) | | |
OCI: | | |
OCI before reclassifications and taxes | | (12) | | | 14 | | | 2 | | | 36 | | | (7) | | | 31 | | |
Amounts reclassified from AOCI, before tax | | — | | | — | | | — | | | (2) | | | 3 | | | 1 | | |
Pre-tax net OCI | | (12) | | | 14 | | | 2 | | | 34 | | | (4) | | | 32 | | |
Income tax effect | | 3 | | | — | | | 3 | | | (9) | | | 2 | | | (4) | | |
OCI for the period, net of tax | | (9) | | | 14 | | | 5 | | | 25 | | | (2) | | | 28 | | |
AOCI as of end of period | | $ | 67 | | | $ | (67) | | | $ | — | | | $ | 21 | | | $ | (31) | | | $ | (10) | | |
| Nine months ended June 30, 2021 | | |
AOCI as of beginning of period | | $ | 115 | | | $ | (140) | | | $ | (25) | | | $ | 89 | | | $ | (53) | | | $ | 11 | | |
OCI: | | |
OCI before reclassifications and taxes | | (63) | | | 71 | | | 8 | | | (84) | | | 18 | | | (58) | | |
Amounts reclassified from AOCI, before tax | | — | | | 2 | | | 2 | | | (7) | | | 11 | | | 6 | | |
Pre-tax net OCI | | (63) | | | 73 | | | 10 | | | (91) | | | 29 | | | (52) | | |
Income tax effect | | 15 | | | — | | | 15 | | | 23 | | | (7) | | | 31 | | |
OCI for the period, net of tax | | (48) | | | 73 | | | 25 | | | (68) | | | 22 | | | (21) | | |
AOCI as of end of period | | $ | 67 | | | $ | (67) | | | $ | — | | | $ | 21 | | | $ | (31) | | | $ | (10) | | |
Reclassifications from AOCI to net income, excluding taxes, for the three and nine months ended June 30, 2023 and 2022 were recorded in “Interest expense” on the Condensed Consolidated Statements of Income and Comprehensive Income. Reclassifications from AOCI to net income, excluding taxes, for the three and nine months ended June 30, 2021 were primarily recorded in “Other” revenues and “Interest expense” on the Condensed Consolidated Statements of Income and Comprehensive Income.
Our net investment hedges and cash flow hedges relate to derivatives associated with our Bank segment. For further information about our significant accounting policies related to derivatives, see Note 2 of our 20212022 Form 10-K. In addition, see Note 65 of this Form 10-Q for additional information on these derivatives.
| | | | | | | | |
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements (Unaudited) | |
NOTE 2018 – REVENUES
The following tables present our sources of revenues by segment. For further information about our significant accounting policies related to revenue recognition see Note 2 of our 20212022 Form 10-K. See Note 126 of our 2022 Form 10-K and Note 2523 of this Form 10-Q for additional information on our segment determinations and results.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three months ended June 30, 2022 |
$ in millions | | Private Client Group | | Capital Markets | | Asset Management | | Bank | | Other and intersegment eliminations | | Total |
Revenues: | | | | | | | | | | | | |
Asset management and related administrative fees | | $ | 1,214 | | | $ | — | | | $ | 220 | | | $ | — | | | $ | (7) | | | $ | 1,427 | |
Brokerage revenues: | | | | | | | | | | | | |
Securities commissions: | | | | | | | | | | | | |
Mutual and other fund products | | 149 | | | 1 | | | 2 | | | — | | | (1) | | | 151 | |
Insurance and annuity products | | 109 | | | — | | | — | | | — | | | — | | | 109 | |
Equities, exchange-traded funds (“ETFs”) and fixed income products | | 90 | | | 35 | | | — | | | — | | | — | | | 125 | |
Subtotal securities commissions | | 348 | | | 36 | | | 2 | | | — | | | (1) | | | 385 | |
Principal transactions (1) | | 25 | | | 103 | | | — | | | — | | | — | | | 128 | |
Total brokerage revenues | | 373 | | | 139 | | | 2 | | | — | | | (1) | | | 513 | |
Account and service fees: | | | | | | | | | | | | |
Mutual fund and annuity service fees | | 102 | | | — | | | — | | | — | | | — | | | 102 | |
RJBDP fees | | 135 | | | 1 | | | — | | | — | | | (80) | | | 56 | |
Client account and other fees | | 59 | | | 1 | | | 5 | | | — | | | (12) | | | 53 | |
Total account and service fees | | 296 | | | 2 | | | 5 | | | — | | | (92) | | | 211 | |
Investment banking: | | | | | | | | | | | | |
Merger & acquisition and advisory | | — | | | 147 | | | — | | | — | | | — | | | 147 | |
Equity underwriting | | 6 | | | 36 | | | — | | | — | | | — | | | 42 | |
Debt underwriting | | — | | | 34 | | | — | | | — | | | — | | | 34 | |
Total investment banking | | 6 | | | 217 | | | — | | | — | | | — | | | 223 | |
Other: | | | | | | | | | | | | |
Tax credit fund revenues | | — | | | 21 | | | — | | | — | | | — | | | 21 | |
All other (1) | | 11 | | | 1 | | | — | | | 6 | | | (9) | | | 9 | |
Total other | | 11 | | | 22 | | | — | | | 6 | | | (9) | | | 30 | |
Total non-interest revenues | | 1,900 | | | 380 | | | 227 | | | 6 | | | (109) | | | 2,404 | |
Interest income (1) | | 68 | | | 6 | | | 1 | | | 296 | | | 3 | | | 374 | |
Total revenues | | 1,968 | | | 386 | | | 228 | | | 302 | | | (106) | | | 2,778 | |
Interest expense | | (10) | | | (3) | | | — | | | (26) | | | (21) | | | (60) | |
Net revenues | | $ | 1,958 | | | $ | 383 | | | $ | 228 | | | $ | 276 | | | $ | (127) | | | $ | 2,718 | |
(1) These revenues are generally not in scope of the accounting guidance for revenue from contracts with customers.
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
| | | Three months ended June 30, 2021 | | Three months ended June 30, 2023 |
$ in millions | $ in millions | | Private Client Group | | Capital Markets | | Asset Management | | Bank | | Other and intersegment eliminations | | Total | $ in millions | | Private Client Group | | Capital Markets | | Asset Management | | Bank | | Other and intersegment eliminations | | Total |
Revenues: | Revenues: | | | | | | | | | | | | | Revenues: | | | | | | | | | | | | |
Asset management and related administrative fees | Asset management and related administrative fees | | $ | 1,050 | | | $ | 1 | | | $ | 218 | | | $ | — | | | $ | (7) | | | $ | 1,262 | | Asset management and related administrative fees | | $ | 1,164 | | | $ | 1 | | | $ | 217 | | | $ | — | | | $ | (9) | | | $ | 1,373 | |
Brokerage revenues: | Brokerage revenues: | | Brokerage revenues: | |
Securities commissions: | Securities commissions: | | Securities commissions: | |
Mutual and other fund products | Mutual and other fund products | | 167 | | | 2 | | | 2 | | | — | | | — | | | 171 | | Mutual and other fund products | | 135 | | | 1 | | | 2 | | | — | | | (1) | | | 137 | |
Insurance and annuity products | Insurance and annuity products | | 113 | | | — | | | — | | | — | | | — | | | 113 | | Insurance and annuity products | | 103 | | | — | | | — | | | — | | | — | | | 103 | |
Equities, ETFs and fixed income products | | 97 | | | 33 | | | — | | | — | | | 1 | | | 131 | | |
Equities, exchange traded funds (“ETFs”) and fixed income products | | Equities, exchange traded funds (“ETFs”) and fixed income products | | 86 | | | 31 | | | — | | | — | | | (1) | | | 116 | |
Subtotal securities commissions | Subtotal securities commissions | | 377 | | | 35 | | | 2 | | | — | | | 1 | | | 415 | | Subtotal securities commissions | | 324 | | | 32 | | | 2 | | | — | | | (2) | | | 356 | |
Principal transactions (1) | Principal transactions (1) | | 13 | | | 125 | | | — | | | — | | | (1) | | | 137 | | Principal transactions (1) | | 25 | | | 78 | | | — | | | 3 | | | (1) | | | 105 | |
Total brokerage revenues | Total brokerage revenues | | 390 | | | 160 | | | 2 | | | — | | | — | | | 552 | | Total brokerage revenues | | 349 | | | 110 | | | 2 | | | 3 | | | (3) | | | 461 | |
Account and service fees: | Account and service fees: | | Account and service fees: | |
Mutual fund and annuity service fees | Mutual fund and annuity service fees | | 105 | | | — | | | — | | | — | | | (1) | | | 104 | | Mutual fund and annuity service fees | | 103 | | | — | | | — | | | — | | | — | | | 103 | |
RJBDP fees | RJBDP fees | | 65 | | | — | | | — | | | — | | | (47) | | | 18 | | RJBDP fees | | 384 | | | 1 | | | — | | | — | | | (278) | | | 107 | |
Client account and other fees | Client account and other fees | | 39 | | | 1 | | | 4 | | | — | | | (5) | | | 39 | | Client account and other fees | | 59 | | | 2 | | | 5 | | | — | | | (12) | | | 54 | |
Total account and service fees | Total account and service fees | | 209 | | | 1 | | | 4 | | | — | | | (53) | | | 161 | | Total account and service fees | | 546 | | | 3 | | | 5 | | | — | | | (290) | | | 264 | |
Investment banking: | Investment banking: | | Investment banking: | |
Merger & acquisition and advisory | Merger & acquisition and advisory | | — | | | 153 | | | — | | | — | | | — | | | 153 | | Merger & acquisition and advisory | | — | | | 88 | | | — | | | — | | | — | | | 88 | |
Equity underwriting | Equity underwriting | | 11 | | | 69 | | | — | | | — | | | — | | | 80 | | Equity underwriting | | 9 | | | 25 | | | — | | | — | | | 1 | | | 35 | |
Debt underwriting | Debt underwriting | | — | | | 43 | | | — | | | — | | | — | | | 43 | | Debt underwriting | | — | | | 28 | | | — | | | — | | | — | | | 28 | |
Total investment banking | Total investment banking | | 11 | | | 265 | | | — | | | — | | | — | | | 276 | | Total investment banking | | 9 | | | 141 | | | — | | | — | | | 1 | | | 151 | |
Other: | Other: | | Other: | |
Tax credit fund revenues | | — | | | 17 | | | — | | | — | | | — | | | 17 | | |
Affordable housing investments business revenues | | Affordable housing investments business revenues | | — | | | 21 | | | — | | | — | | | — | | | 21 | |
All other (1) | All other (1) | | 7 | | | 1 | | | 1 | | | 8 | | | 21 | | | 38 | | All other (1) | | 25 | | | — | | | — | | | 14 | | | (3) | | | 36 | |
Total other | Total other | | 7 | | | 18 | | | 1 | | | 8 | | | 21 | | | 55 | | Total other | | 25 | | | 21 | | | — | | | 14 | | | (3) | | | 57 | |
Total non-interest revenues | Total non-interest revenues | | 1,667 | | | 445 | | | 225 | | | 8 | | | (39) | | | 2,306 | | Total non-interest revenues | | 2,093 | | | 276 | | | 224 | | | 17 | | | (304) | | | 2,306 | |
Interest income (1) | Interest income (1) | | 31 | | | 4 | | | — | | | 172 | | | (2) | | | 205 | | Interest income (1) | | 114 | | | 21 | | | 2 | | | 826 | | | 24 | | | 987 | |
Total revenues | Total revenues | | 1,698 | | | 449 | | | 225 | | | 180 | | | (41) | | | 2,511 | | Total revenues | | 2,207 | | | 297 | | | 226 | | | 843 | | | (280) | | | 3,293 | |
Interest expense | Interest expense | | (2) | | | (3) | | | — | | | (11) | | | (24) | | | (40) | | Interest expense | | (25) | | | (21) | | | — | | | (329) | | | (11) | | | (386) | |
Net revenues | Net revenues | | $ | 1,696 | | | $ | 446 | | | $ | 225 | | | $ | 169 | | | $ | (65) | | | $ | 2,471 | | Net revenues | | $ | 2,182 | | | $ | 276 | | | $ | 226 | | | $ | 514 | | | $ | (291) | | | $ | 2,907 | |
(1) These revenues are generally not in scope of the accounting guidance for revenue from contracts with customers.
| | | | | | | | |
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements (Unaudited) | |
| | | Nine Months Ended June 30, 2022 | | Three months ended June 30, 2022 |
$ in millions | $ in millions | | Private Client Group | | Capital Markets | | Asset Management | | Bank | | Other and intersegment eliminations | | Total | $ in millions | | Private Client Group | | Capital Markets | | Asset Management | | Bank | | Other and intersegment eliminations | | Total |
Revenues: | Revenues: | | | | | | | | | | | | | Revenues: | | | | | | | | | | | | |
Asset management and related administrative fees | Asset management and related administrative fees | | $ | 3,621 | | | $ | 2 | | | $ | 673 | | | $ | — | | | $ | (23) | | | $ | 4,273 | | Asset management and related administrative fees | | $ | 1,214 | | | $ | — | | | $ | 220 | | | $ | — | | | $ | (7) | | | $ | 1,427 | |
Brokerage revenues: | Brokerage revenues: | | Brokerage revenues: | |
Securities commissions: | Securities commissions: | | Securities commissions: | |
Mutual and other fund products | Mutual and other fund products | | 486 | | | 5 | | | 6 | | | — | | | (2) | | | 495 | | Mutual and other fund products | | 149 | | | 1 | | | 2 | | | — | | | (1) | | | 151 | |
Insurance and annuity products | Insurance and annuity products | | 330 | | | — | | | — | | | — | | | — | | | 330 | | Insurance and annuity products | | 109 | | | — | | | — | | | — | | | — | | | 109 | |
Equities, ETFs and fixed income products | Equities, ETFs and fixed income products | | 299 | | | 108 | | | — | | | — | | | — | | | 407 | | Equities, ETFs and fixed income products | | 90 | | | 35 | | | — | | | — | | | — | | | 125 | |
Subtotal securities commissions | Subtotal securities commissions | | 1,115 | | | 113 | | | 6 | | | — | | | (2) | | | 1,232 | | Subtotal securities commissions | | 348 | | | 36 | | | 2 | | | — | | | (1) | | | 385 | |
Principal transactions (1) | Principal transactions (1) | | 52 | | | 351 | | | — | | | — | | | — | | | 403 | | Principal transactions (1) | | 25 | | | 103 | | | — | | | — | | | — | | | 128 | |
Total brokerage revenues | Total brokerage revenues | | 1,167 | | | 464 | | | 6 | | | — | | | (2) | | | 1,635 | | Total brokerage revenues | | 373 | | | 139 | | | 2 | | | — | | | (1) | | | 513 | |
Account and service fees: | Account and service fees: | | Account and service fees: | |
Mutual fund and annuity service fees | Mutual fund and annuity service fees | | 325 | | | — | | | — | | | — | | | (1) | | | 324 | | Mutual fund and annuity service fees | | 102 | | | — | | | — | | | — | | | — | | | 102 | |
RJBDP fees | RJBDP fees | | 271 | | | 1 | | | — | | | — | | | (179) | | | 93 | | RJBDP fees | | 135 | | | 1 | | | — | | | — | | | (80) | | | 56 | |
Client account and other fees | Client account and other fees | | 161 | | | 5 | | | 17 | | | — | | | (33) | | | 150 | | Client account and other fees | | 59 | | | 1 | | | 5 | | | — | | | (12) | | | 53 | |
Total account and service fees | Total account and service fees | | 757 | | | 6 | | | 17 | | | — | | | (213) | | | 567 | | Total account and service fees | | 296 | | | 2 | | | 5 | | | — | | | (92) | | | 211 | |
Investment banking: | Investment banking: | | Investment banking: | |
Merger & acquisition and advisory | Merger & acquisition and advisory | | — | | | 557 | | | — | | | — | | | — | | | 557 | | Merger & acquisition and advisory | | — | | | 147 | | | — | | | — | | | — | | | 147 | |
Equity underwriting | Equity underwriting | | 28 | | | 185 | | | — | | | — | | | — | | | 213 | | Equity underwriting | | 6 | | | 36 | | | — | | | — | | | — | | | 42 | |
Debt underwriting | Debt underwriting | | — | | | 113 | | | — | | | — | | | — | | | 113 | | Debt underwriting | | — | | | 34 | | | — | | | — | | | — | | | 34 | |
Total investment banking | Total investment banking | | 28 | | | 855 | | | — | | | — | | | — | | | 883 | | Total investment banking | | 6 | | | 217 | | | — | | | — | | | — | | | 223 | |
Other: | Other: | | Other: | |
Tax credit fund revenues | | — | | | 71 | | | — | | | — | | | — | | | 71 | | |
Affordable housing investments business revenues | | Affordable housing investments business revenues | | — | | | 21 | | | — | | | — | | | — | | | 21 | |
All other (1) | All other (1) | | 24 | | | 4 | | | 1 | | | 20 | | | (12) | | | 37 | | All other (1) | | 11 | | | 1 | | | — | | | 6 | | | (9) | | | 9 | |
Total other | Total other | | 24 | | | 75 | | | 1 | | | 20 | | | (12) | | | 108 | | Total other | | 11 | | | 22 | | | — | | | 6 | | | (9) | | | 30 | |
Total non-interest revenues | Total non-interest revenues | | 5,597 | | | 1,402 | | | 697 | | | 20 | | | (250) | | | 7,466 | | Total non-interest revenues | | 1,900 | | | 380 | | | 227 | | | 6 | | | (109) | | | 2,404 | |
Interest income (1) | Interest income (1) | | 138 | | | 16 | | | 1 | | | 682 | | | 4 | | | 841 | | Interest income (1) | | 68 | | | 6 | | | 1 | | | 296 | | | 3 | | | 374 | |
Total revenues | Total revenues | | 5,735 | | | 1,418 | | | 698 | | | 702 | | | (246) | | | 8,307 | | Total revenues | | 1,968 | | | 386 | | | 228 | | | 302 | | | (106) | | | 2,778 | |
Interest expense | Interest expense | | (16) | | | (8) | | | — | | | (46) | | | (65) | | | (135) | | Interest expense | | (10) | | | (3) | | | — | | | (26) | | | (21) | | | (60) | |
Net revenues | Net revenues | | $ | 5,719 | | | $ | 1,410 | | | $ | 698 | | | $ | 656 | | | $ | (311) | | | $ | 8,172 | | Net revenues | | $ | 1,958 | | | $ | 383 | | | $ | 228 | | | $ | 276 | | | $ | (127) | | | $ | 2,718 | |
(1) These revenues are generally not in scope of the accounting guidance for revenue from contracts with customers.
| | | | | | | | |
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements (Unaudited) | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Nine Months Ended June 30, 2023 |
$ in millions | | Private Client Group | | Capital Markets | | Asset Management | | Bank | | Other and intersegment eliminations | | Total |
Revenues: | | | | | | | | | | | | |
Asset management and related administrative fees | | $ | 3,319 | | | $ | 2 | | | $ | 620 | | | $ | — | | | $ | (24) | | | $ | 3,917 | |
Brokerage revenues: | | | | | | | | | | | | |
Securities commissions: | | | | | | | | | | | | |
Mutual and other fund products | | 398 | | | 4 | | | 4 | | | — | | | (2) | | | 404 | |
Insurance and annuity products | | 320 | | | — | | | — | | | — | | | — | | | 320 | |
Equities, ETFs and fixed income products | | 259 | | | 96 | | | — | | | — | | | (2) | | | 353 | |
Subtotal securities commissions | | 977 | | | 100 | | | 4 | | | — | | | (4) | | | 1,077 | |
Principal transactions (1) | | 81 | | | 274 | | | — | | | 11 | | | (2) | | | 364 | |
Total brokerage revenues | | 1,058 | | | 374 | | | 4 | | | 11 | | | (6) | | | 1,441 | |
Account and service fees: | | | | | | | | | | | | |
Mutual fund and annuity service fees | | 306 | | | — | | | 1 | | | — | | | (1) | | | 306 | |
RJBDP fees | | 1,200 | | | 3 | | | — | | | — | | | (859) | | | 344 | |
Client account and other fees | | 175 | | | 5 | | | 15 | | | — | | | (34) | | | 161 | |
Total account and service fees | | 1,681 | | | 8 | | | 16 | | | — | | | (894) | | | 811 | |
Investment banking: | | | | | | | | | | | | |
Merger & acquisition and advisory | | — | | | 277 | | | — | | | — | | | — | | | 277 | |
Equity underwriting | | 27 | | | 69 | | | — | | | — | | | — | | | 96 | |
Debt underwriting | | — | | | 73 | | | — | | | — | | | — | | | 73 | |
Total investment banking | | 27 | | | 419 | | | — | | | — | | | — | | | 446 | |
Other: | | | | | | | | | | | | |
Affordable housing investments business revenues | | — | | | 68 | | | — | | | — | | | — | | | 68 | |
All other (1) | | 40 | | | 1 | | | 2 | | | 33 | | | (11) | | | 65 | |
Total other | | 40 | | | 69 | | | 2 | | | 33 | | | (11) | | | 133 | |
Total non-interest revenues | | 6,125 | | | 872 | | | 642 | | | 44 | | | (935) | | | 6,748 | |
Interest income (1) | | 340 | | | 65 | | | 7 | | | 2,251 | | | 66 | | | 2,729 | |
Total revenues | | 6,465 | | | 937 | | | 649 | | | 2,295 | | | (869) | | | 9,477 | |
Interest expense | | (76) | | | (64) | | | — | | | (733) | | | (38) | | | (911) | |
Net revenues | | $ | 6,389 | | | $ | 873 | | | $ | 649 | | | $ | 1,562 | | | $ | (907) | | | $ | 8,566 | |
(1) These revenues are generally not in scope of the accounting guidance for revenue from contracts with customers.
| | | | | | | | |
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements (Unaudited) | |
| | | Nine Months Ended June 30, 2021 | | Nine Months Ended June 30, 2022 |
$ in millions | $ in millions | | Private Client Group | | Capital Markets | | Asset Management | | Bank | | Other and intersegment eliminations | | Total | $ in millions | | Private Client Group | | Capital Markets | | Asset Management | | Bank | | Other and intersegment eliminations | | Total |
Revenues: | Revenues: | | | | | | | | | | | | | Revenues: | | | | | | | | | | | | |
Asset management and related administrative fees | Asset management and related administrative fees | | $ | 2,914 | | | $ | 3 | | | $ | 607 | | | $ | — | | | $ | (22) | | | $ | 3,502 | | Asset management and related administrative fees | | $ | 3,621 | | | $ | 2 | | | $ | 673 | | | $ | — | | | $ | (23) | | | $ | 4,273 | |
Brokerage revenues: | Brokerage revenues: | | Brokerage revenues: | |
Securities commissions: | Securities commissions: | | Securities commissions: | |
Mutual and other fund products | Mutual and other fund products | | 498 | | | 5 | | | 7 | | | — | | | (2) | | | 508 | | Mutual and other fund products | | 486 | | | 5 | | | 6 | | | — | | | (2) | | | 495 | |
Insurance and annuity products | Insurance and annuity products | | 320 | | | — | | | — | | | — | | | — | | | 320 | | Insurance and annuity products | | 330 | | | — | | | — | | | — | | | — | | | 330 | |
Equities, ETFs and fixed income products | Equities, ETFs and fixed income products | | 300 | | | 110 | | | — | | | — | | | 1 | | | 411 | | Equities, ETFs and fixed income products | | 299 | | | 108 | | | — | | | — | | | — | | | 407 | |
Subtotal securities commissions | Subtotal securities commissions | | 1,118 | | | 115 | | | 7 | | | — | | | (1) | | | 1,239 | | Subtotal securities commissions | | 1,115 | | | 113 | | | 6 | | | — | | | (2) | | | 1,232 | |
Principal transactions (1) | Principal transactions (1) | | 38 | | | 394 | | | — | | | 1 | | | (1) | | | 432 | | Principal transactions (1) | | 52 | | | 351 | | | — | | | — | | | — | | | 403 | |
Total brokerage revenues | Total brokerage revenues | | 1,156 | | | 509 | | | 7 | | | 1 | | | (2) | | | 1,671 | | Total brokerage revenues | | 1,167 | | | 464 | | | 6 | | | — | | | (2) | | | 1,635 | |
Account and service fees: | Account and service fees: | | Account and service fees: | |
Mutual fund and annuity service fees | Mutual fund and annuity service fees | | 298 | | | — | | | — | | | — | | | (1) | | | 297 | | Mutual fund and annuity service fees | | 325 | | | — | | | — | | | — | | | (1) | | | 324 | |
RJBDP fees | RJBDP fees | | 192 | | | 1 | | | — | | | — | | | (135) | | | 58 | | RJBDP fees | | 271 | | | 1 | | | — | | | — | | | (179) | | | 93 | |
Client account and other fees | Client account and other fees | | 113 | | | 5 | | | 13 | | | — | | | (21) | | | 110 | | Client account and other fees | | 161 | | | 5 | | | 17 | | | — | | | (33) | | | 150 | |
Total account and service fees | Total account and service fees | | 603 | | | 6 | | | 13 | | | — | | | (157) | | | 465 | | Total account and service fees | | 757 | | | 6 | | | 17 | | | — | | | (213) | | | 567 | |
Investment banking: | Investment banking: | | Investment banking: | |
Merger & acquisition and advisory | Merger & acquisition and advisory | | — | | | 424 | | | — | | | — | | | — | | | 424 | | Merger & acquisition and advisory | | — | | | 557 | | | — | | | — | | | — | | | 557 | |
Equity underwriting | Equity underwriting | | 33 | | | 196 | | | — | | | — | | | — | | | 229 | | Equity underwriting | | 28 | | | 185 | | | — | | | — | | | — | | | 213 | |
Debt underwriting | Debt underwriting | | — | | | 126 | | | — | | | — | | | — | | | 126 | | Debt underwriting | | — | | | 113 | | | — | | | — | | | — | | | 113 | |
Total investment banking | Total investment banking | | 33 | | | 746 | | | — | | | — | | | — | | | 779 | | Total investment banking | | 28 | | | 855 | | | — | | | — | | | — | | | 883 | |
Other: | Other: | | Other: | |
Tax credit fund revenues | | — | | | 57 | | | — | | | — | | | — | | | 57 | | |
Affordable housing investments business revenues | | Affordable housing investments business revenues | | — | | | 71 | | | — | | | — | | | — | | | 71 | |
All other (1) | All other (1) | | 20 | | | 5 | | | 2 | | | 22 | | | 49 | | | 98 | | All other (1) | | 24 | | | 4 | | | 1 | | | 20 | | | (12) | | | 37 | |
Total other | Total other | | 20 | | | 62 | | | 2 | | | 22 | | | 49 | | | 155 | | Total other | | 24 | | | 75 | | | 1 | | | 20 | | | (12) | | | 108 | |
Total non-interest revenues | Total non-interest revenues | | 4,726 | | | 1,326 | | | 629 | | | 23 | | | (132) | | | 6,572 | | Total non-interest revenues | | 5,597 | | | 1,402 | | | 697 | | | 20 | | | (250) | | | 7,466 | |
Interest income (1) | Interest income (1) | | 91 | | | 12 | | | — | | | 505 | | | — | | | 608 | | Interest income (1) | | 138 | | | 16 | | | 1 | | | 682 | | | 4 | | | 841 | |
Total revenues | Total revenues | | 4,817 | | | 1,338 | | | 629 | | | 528 | | | (132) | | | 7,180 | | Total revenues | | 5,735 | | | 1,418 | | | 698 | | | 702 | | | (246) | | | 8,307 | |
Interest expense | Interest expense | | (7) | | | (7) | | | — | | | (32) | | | (69) | | | (115) | | Interest expense | | (16) | | | (8) | | | — | | | (46) | | | (65) | | | (135) | |
Net revenues | Net revenues | | $ | 4,810 | | | $ | 1,331 | | | $ | 629 | | | $ | 496 | | | $ | (201) | | | $ | 7,065 | | Net revenues | | $ | 5,719 | | | $ | 1,410 | | | $ | 698 | | | $ | 656 | | | $ | (311) | | | $ | 8,172 | |
(1) These revenues are generally not in scope of the accounting guidance for revenue from contracts with customers.
At June 30, 20222023 and September 30, 2021,2022, net receivables related to contracts with customers were $427$543 million and $416$511 million, respectively.
| | | | | | | | |
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements (Unaudited) | |
NOTE 2119 – INTEREST INCOME AND INTEREST EXPENSE
The following table details the components of interest income and interest expense.
| | | | Three months ended June 30, | | Nine months ended June 30, | | | Three months ended June 30, | | Nine months ended June 30, |
$ in millions | $ in millions | | 2022 | | 2021 | | 2022 | | 2021 | $ in millions | | 2023 | | 2022 | | 2023 | | 2022 |
Interest income: | Interest income: | | | | | | | | | Interest income: | | | | | | | | |
Cash and cash equivalents | Cash and cash equivalents | | $ | 10 | | | $ | 3 | | | $ | 16 | | | $ | 9 | | Cash and cash equivalents | | $ | 109 | | | $ | 10 | | | $ | 239 | | | $ | 16 | |
Assets segregated for regulatory purposes and restricted cash | Assets segregated for regulatory purposes and restricted cash | | 28 | | | 3 | | | 39 | | | 11 | | Assets segregated for regulatory purposes and restricted cash | | 47 | | | 28 | | | 152 | | | 39 | |
Trading assets — debt securities | | Trading assets — debt securities | | 13 | | | 4 | | | 40 | | | 13 | |
Available-for-sale securities | Available-for-sale securities | | 37 | | | 20 | | | 84 | | | 64 | | Available-for-sale securities | | 56 | | | 37 | | | 163 | | | 84 | |
Brokerage client receivables | Brokerage client receivables | | 24 | | | 19 | | | 66 | | | 56 | | Brokerage client receivables | | 42 | | | 24 | | | 124 | | | 66 | |
Bank loans, net | Bank loans, net | | 255 | | | 150 | | | 590 | | | 437 | | Bank loans, net | | 698 | | | 255 | | | 1,954 | | | 590 | |
All other | All other | | 20 | | | 10 | | | 46 | | | 31 | | All other | | 22 | | | 16 | | | 57 | | | 33 | |
Total interest income | Total interest income | | $ | 374 | | | $ | 205 | | | $ | 841 | | | $ | 608 | | Total interest income | | $ | 987 | | | $ | 374 | | | $ | 2,729 | | | $ | 841 | |
Interest expense: | Interest expense: | | | | | | | | | Interest expense: | | | | | | | | |
Bank deposits | Bank deposits | | $ | 20 | | | $ | 5 | | | $ | 31 | | | $ | 17 | | Bank deposits | | $ | 312 | | | $ | 20 | | | 690 | | | $ | 31 | |
Trading liabilities — debt securities | | Trading liabilities — debt securities | | 9 | | | 1 | | | 26 | | | 3 | |
Brokerage client payables | Brokerage client payables | | 3 | | | 1 | | | 4 | | | 3 | | Brokerage client payables | | 17 | | | 3 | | | 57 | | | 4 | |
Other borrowings | Other borrowings | | 6 | | | 4 | | | 15 | | | 14 | | Other borrowings | | 12 | | | 6 | | | 30 | | | 15 | |
Senior notes payable | Senior notes payable | | 23 | | | 25 | | | 69 | | | 73 | | Senior notes payable | | 23 | | | 23 | | | 69 | | | 69 | |
All other | All other | | 8 | | | 5 | | | 16 | | | 8 | | All other | | 13 | | | 7 | | | 39 | | | 13 | |
Total interest expense | Total interest expense | | $ | 60 | | | $ | 40 | | | $ | 135 | | | $ | 115 | | Total interest expense | | $ | 386 | | | $ | 60 | | | $ | 911 | | | $ | 135 | |
Net interest income | Net interest income | | $ | 314 | | | $ | 165 | | | $ | 706 | | | $ | 493 | | Net interest income | | $ | 601 | | | $ | 314 | | | $ | 1,818 | | | $ | 706 | |
Bank loan (provision)/benefit for credit losses | | (56) | | | 19 | | | (66) | | | 37 | | |
Net interest income after bank loan (provision)/benefit for credit losses | | $ | 258 | | | $ | 184 | | | $ | 640 | | | $ | 530 | | |
Bank loan provision for credit losses | | Bank loan provision for credit losses | | (54) | | | (56) | | | (96) | | | (66) | |
Net interest income after bank loan provision for credit losses | | Net interest income after bank loan provision for credit losses | | $ | 547 | | | $ | 258 | | | $ | 1,722 | | | $ | 640 | |
Interest expense related to bank deposits in the preceding table excludes interest expense associated with affiliate deposits, which has been eliminated in consolidation.
NOTE 2220 – SHARE-BASED COMPENSATION
We have 1one share-based compensation plan, Thethe Amended and Restated 2012 Stock Incentive Plan (“the Plan”), for our employees, Board of Directorsdirectors, and independent contractor financial advisors. Generally, we reissueOn February 23, 2023, our shareholders approved an amendment to the Plan to increase the number of shares available for grant by 18 million. Following this amendment, the Plan authorizes us to grant 96.4 million shares (including the shares available for grant under six predecessor plans). As of June 30, 2023, 20.9 million shares remained available for grant under the Plan. We may utilize treasury shares for grants under the Plan; however,though we are also permitted to issue new shares. The majority of ourOur share-based compensation awards are primarily issued during the fiscal first quarter of each fiscal year. Our share-based compensation accounting policies are described in Note 2 of our 20212022 Form 10-K. Other information related to our share-based awards is presented in Note 23 of our 20212022 Form 10-K.
Restricted stock units
During the three and nine months ended June 30, 2022,2023, we granted approximately 22247 thousand and 3.12.1 million RSUs, respectively, with a weighted-average grant-date fair value of $97.64$90.86 and $98.77,$116.18, respectively, compared with approximately 75222 thousand and 2.33.1 million RSUs granted during the three and nine months ended June 30, 2021,2022, respectively, with a weighted-average grant-date fair value of $87.87$97.64 and $63.17, respectively (as adjusted for the September 21, 2021 three-for-two stock split described in Note 19).$98.77, respectively. For the three and nine months ended June 30, 2022,2023, total share-based compensation amortization related to RSUs was $36$50 million and $141$180 million, respectively, compared with $27$36 million and $98$141 million for the three and nine months ended June 30, 2021,2022, respectively.
As of June 30, 2022,2023, there were $332$385 million of total pre-tax compensation costs not yet recognized (net of estimated forfeitures) related to RSUs, including those granted during the nine months ended June 30, 2022.2023. These costs are expected to be recognized over a weighted-average period of three2.7 years.
| | | | | | | | |
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements (Unaudited) | |
Restricted stock awards
AsRestricted stock awards (“RSAs”) were issued as a component of our total purchase consideration for TriState Capital on June 1, 2022, in accordance with the terms of the acquisition, 551 thousand RJF restricted stock awards were issued at terms that mirrored restricted stock awardsacquisition. See Note 23 of TriState Capital which were outstanding asour 2022 Form 10-K for further discussion of these awards. For the acquisition date. The fair value of the RJF restricted stock awards was calculated as of thethree and nine months ended June 1, 2022 acquisition date and was allocated between the pre-acquisition service period ($28 million treated as purchase consideration) and the post-acquisition requisite service period, over which we will recognize30, 2023 total share-based compensation amortization.amortization related to these RSAs was $2 million and $7 million, respectively. As of June 30, 2022,2023, there were $24$14 million of total pre-tax compensation costs not yet recognized for these RJF restricted shares.RSAs. These costs are expected to be recognized over a weighted-average period of three2.3 years. See Note 3 for further discussion of our acquisition of TriState Capital.
NOTE 2321 – REGULATORY CAPITAL REQUIREMENTS
RJF, as a bank holding company and financial holding company, as well as Raymond James Bank, TriState Capital Bank, our broker-dealer subsidiaries and our trust subsidiaries are subject to capital requirements by various regulatory authorities. Capital levels of each entity are monitored to ensure compliance with our various regulatory capital requirements. Failure to meet minimum capital requirements can initiate certain mandatory, and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on our financial results.
As a bank holding company under the Bank Holding Company Act of 1956, as amended (the “BHC Act”) that has made an election to be a financial holding company, RJF is subject to supervision, examination, and regulation by the Fed.Board of Governors of the Federal Reserve System (“the Fed”). We are subject to the Fed’s capital rules which establish an integrated regulatory capital framework and implement, in the U.S., the Basel III regulatory capital reforms from the Basel Committee on Banking Supervision and certain changes required by the Dodd-Frank Wall Street Reform and Consumer Protection Act. The FDIC’s capital rules, which are substantially similar to the Fed’s rules, applied to TriState Capital Bank as of June 30, 2023 and September 30, 2022. We apply the standardized approach for calculating risk-weighted assets and are also subject to the market risk provisions of the Fed’s capital rules (“market risk rule”).
Under these rules, minimum requirements are established for both the quantity and quality of capital held by banking organizations. RJF, Raymond James Bank, and TriState Capital Bank are required to maintain minimum leverage ratios (defined as tier 1 capital divided by adjusted average assets), as well as minimum ratios of tier 1 capital, common equity tier 1 (“CET1”), and total capital to risk-weighted assets.These capital ratios incorporate quantitative measures of our assets, liabilities, and certain off-balance sheet items as calculated under the regulatory capital rules and are subject to qualitative judgments by the regulators about components, risk-weightings, and other factors. We calculate these ratios in order to assess compliance with both regulatory requirements and internal capital policies. In order to maintain our ability to take certain capital actions, including dividends and common equity repurchases, and to make bonus payments, we must hold a capital conservation buffer above our minimum risk-based capital requirements.As of June 30, 2022,2023, capital levels at RJF, Raymond James Bank, and TriState Capital Bank exceeded the capital conservation buffer requirement and each entity was categorized as “well-capitalized.”
For further discussion of regulatory capital requirements applicable to certain of our businesses and subsidiaries, see Note 24 of our 20212022 Form 10-K.
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
To meet requirements for capital adequacy or to be categorized as “well-capitalized,” RJF must maintain minimum Tier 1 leverage, CET1, Tier 1 capital, CET1, and Total capital amounts and ratios as set forth in the following table.
| | | | Actual | | Requirement for capital adequacy purposes | | To be well-capitalized under regulatory provisions | | | Actual | | Requirement for capital adequacy purposes | | To be well-capitalized under regulatory provisions |
$ in millions | $ in millions | | Amount | | Ratio | | Amount | | Ratio | | Amount | | Ratio | $ in millions | | Amount | | Ratio | | Amount | | Ratio | | Amount | | Ratio |
RJF as of June 30, 2022: | | | | | | | | | | | | | |
RJF as of June 30, 2023: | | RJF as of June 30, 2023: | | | | | | | | | | | | |
Tier 1 leverage | Tier 1 leverage | | $ | 8,228 | | | 10.8 | % | | $ | 3,042 | | | 4.0 | % | | $ | 3,803 | | | 5.0 | % | Tier 1 leverage | | $ | 8,928 | | | 11.4 | % | | $ | 3,135 | | | 4.0 | % | | $ | 3,919 | | | 5.0 | % |
Tier 1 capital | Tier 1 capital | | $ | 8,228 | | | 20.0 | % | | $ | 2,473 | | | 6.0 | % | | $ | 3,297 | | | 8.0 | % | Tier 1 capital | | $ | 8,928 | | | 20.6 | % | | $ | 2,607 | | | 6.0 | % | | $ | 3,476 | | | 8.0 | % |
CET1 | CET1 | | $ | 8,228 | | | 20.0 | % | | $ | 1,855 | | | 4.5 | % | | $ | 2,679 | | | 6.5 | % | CET1 | | $ | 8,852 | | | 20.4 | % | | $ | 1,955 | | | 4.5 | % | | $ | 2,824 | | | 6.5 | % |
Total capital | Total capital | | $ | 8,868 | | | 21.5 | % | | $ | 3,297 | | | 8.0 | % | | $ | 4,121 | | | 10.0 | % | Total capital | | $ | 9,540 | | | 22.0 | % | | $ | 3,476 | | | 8.0 | % | | $ | 4,345 | | | 10.0 | % |
| RJF as of September 30, 2021: | | |
RJF as of September 30, 2022: | | RJF as of September 30, 2022: | |
Tier 1 leverage | Tier 1 leverage | | $ | 7,428 | | | 12.6 | % | | $ | 2,363 | | | 4.0 | % | | $ | 2,954 | | | 5.0 | % | Tier 1 leverage | | $ | 8,480 | | | 10.3 | % | | $ | 3,304 | | | 4.0 | % | | $ | 4,130 | | | 5.0 | % |
Tier 1 capital | Tier 1 capital | | $ | 7,428 | | | 25.0 | % | | $ | 1,783 | | | 6.0 | % | | $ | 2,377 | | | 8.0 | % | Tier 1 capital | | $ | 8,480 | | | 19.2 | % | | $ | 2,651 | | | 6.0 | % | | $ | 3,534 | | | 8.0 | % |
CET1 | CET1 | | $ | 7,428 | | | 25.0 | % | | $ | 1,337 | | | 4.5 | % | | $ | 1,932 | | | 6.5 | % | CET1 | | $ | 8,380 | | | 19.0 | % | | $ | 1,988 | | | 4.5 | % | | $ | 2,871 | | | 6.5 | % |
Total capital | Total capital | | $ | 7,780 | | | 26.2 | % | | $ | 2,377 | | | 8.0 | % | | $ | 2,972 | | | 10.0 | % | Total capital | | $ | 9,031 | | | 20.4 | % | | $ | 3,534 | | | 8.0 | % | | $ | 4,418 | | | 10.0 | % |
| | | | | | | | |
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements (Unaudited) | |
As of June 30, 2022,2023, RJF’s regulatory capital increase compared towith September 30, 20212022 was driven by an increase in equity primarily due to common and preferred stock issued in connection with the TriState Capital acquisition and positive earnings, partially offset by an increase in goodwillshare repurchases and intangible assets arising from the TriState Capital and Charles Stanley acquisitions (see Note 3 for further information) as well as dividends. RJF’s Tier 1 capital and Total capital ratios decreasedincreased compared towith September 30, 2021,2022 resulting from an increase in risk-weighted assets, partially offset by the increase in regulatory capital.capital and a decrease in risk-weighted assets. The increasedecrease in risk-weighted assets was primarily driven by increases in our bank loan and available-for-sale securities portfolios and unfunded lending commitments resulting from the TriState Capital acquisition and growth at Raymond James Bank, as well as an increasea decrease in assets segregated for regulatory purposes, and restricted cash due to higher client cash balances and the acquisition of Charles Stanley.partially offset by an increase in our bank loan portfolio.
RJF’s Tier 1 leverage ratio at June 30, 2022 decreased2023 increased compared to September 30, 20212022 due to higherthe increase in regulatory capital and lower average assets, primarily driven by increasesa decrease in bank loans, available-for-sale securities, as well as assets segregated for regulatory purposes and restricted cash. The higher average assets also reflect one month’s impact of the TriState Capital acquisition. The increase in average assets was partially offset by the increase in regulatory capital.purposes.
To meet the requirements for capital adequacy or to be categorized as “well-capitalized,” Raymond James Bank and TriState Capital Bank must maintain CET1,Tier 1 leverage, Tier 1 capital, CET1, and Total capital and Tier 1 leverage amounts and ratios as set forth in the following tables. Our intention is to maintain Raymond James Bank’s and TriState Capital Bank’s “well-capitalized” status. In the unlikely event that Raymond James Bank or TriState Capital Bank failed to maintain their “well-capitalized” status, the consequences could include a requirement to obtain a waiver from the FDIC prior to acceptance, renewal, or rollover of brokered deposits and result in higher FDIC premiums, but would not significantly impact our operations.
| | | | Actual | | Requirement for capital adequacy purposes | | To be well-capitalized under regulatory provisions | | | Actual | | Requirement for capital adequacy purposes | | To be well-capitalized under regulatory provisions |
$ in millions | $ in millions | | Amount | | Ratio | | Amount | | Ratio | | Amount | | Ratio | $ in millions | | Amount | | Ratio | | Amount | | Ratio | | Amount | | Ratio |
Raymond James Bank as of June 30, 2022: | | | | | | | | | | | | | |
Raymond James Bank as of June 30, 2023: | | Raymond James Bank as of June 30, 2023: | | | | | | | | | | | | |
Tier 1 leverage | Tier 1 leverage | | $ | 2,853 | | | 7.1 | % | | $ | 1,617 | | | 4.0 | % | | $ | 2,022 | | | 5.0 | % | Tier 1 leverage | | $ | 3,349 | | | 7.6 | % | | $ | 1,768 | | | 4.0 | % | | $ | 2,210 | | | 5.0 | % |
Tier 1 capital | Tier 1 capital | | $ | 2,853 | | | 12.2 | % | | $ | 1,408 | | | 6.0 | % | | $ | 1,877 | | | 8.0 | % | Tier 1 capital | | $ | 3,349 | | | 13.6 | % | | $ | 1,476 | | | 6.0 | % | | $ | 1,967 | | | 8.0 | % |
CET1 | CET1 | | $ | 2,853 | | | 12.2 | % | | $ | 1,056 | | | 4.5 | % | | $ | 1,525 | | | 6.5 | % | CET1 | | $ | 3,349 | | | 13.6 | % | | $ | 1,107 | | | 4.5 | % | | $ | 1,599 | | | 6.5 | % |
Total capital | Total capital | | $ | 3,147 | | | 13.4 | % | | $ | 1,877 | | | 8.0 | % | | $ | 2,346 | | | 10.0 | % | Total capital | | $ | 3,658 | | | 14.9 | % | | $ | 1,967 | | | 8.0 | % | | $ | 2,459 | | | 10.0 | % |
| Raymond James Bank as of September 30, 2021: | | | | | | | | | | | | | |
Raymond James Bank as of September 30, 2022: | | Raymond James Bank as of September 30, 2022: | | | | | | | | | | | | |
Tier 1 leverage | Tier 1 leverage | | $ | 2,626 | | | 7.4 | % | | $ | 1,411 | | | 4.0 | % | | $ | 1,763 | | | 5.0 | % | Tier 1 leverage | | $ | 2,998 | | | 7.1 | % | | $ | 1,695 | | | 4.0 | % | | $ | 2,119 | | | 5.0 | % |
Tier 1 capital | Tier 1 capital | | $ | 2,626 | | | 13.4 | % | | $ | 1,177 | | | 6.0 | % | | $ | 1,569 | | | 8.0 | % | Tier 1 capital | | $ | 2,998 | | | 12.1 | % | | $ | 1,485 | | | 6.0 | % | | $ | 1,979 | | | 8.0 | % |
CET1 | CET1 | | $ | 2,626 | | | 13.4 | % | | $ | 883 | | | 4.5 | % | | $ | 1,275 | | | 6.5 | % | CET1 | | $ | 2,998 | | | 12.1 | % | | $ | 1,113 | | | 4.5 | % | | $ | 1,608 | | | 6.5 | % |
Total capital | Total capital | | $ | 2,873 | | | 14.6 | % | | $ | 1,569 | | | 8.0 | % | | $ | 1,962 | | | 10.0 | % | Total capital | | $ | 3,308 | | | 13.4 | % | | $ | 1,979 | | | 8.0 | % | | $ | 2,474 | | | 10.0 | % |
Raymond James Bank’s regulatory capital increased compared towith September 30, 2021,2022, driven by an increase in equity due to positive earnings, partially offset by dividends paid to RJF. Raymond James Bank’s Tier 1 capital and Total capital ratios decreasedincreased compared towith September 30, 2021,2022 resulting from the increase in regulatory capital and a decrease in risk-weighted assets largely due to a decrease in the bank loan and available-for-sale securities portfolios. Raymond James Bank’s Tier 1 leverage ratio at June 30, 2023 increased compared with September 30, 2022 due to the increase in regulatory capital, partially offset by an increase in average assets, primarily driven by higher cash balances.
| | | | | | | | |
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements (Unaudited) | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Actual | | Requirement for capital adequacy purposes | | To be well-capitalized under regulatory provisions |
$ in millions | | Amount | | Ratio | | Amount | | Ratio | | Amount | | Ratio |
TriState Capital Bank as of June 30, 2023: | | | | | | | | | | | | |
Tier 1 leverage | | $ | 1,243 | | | 7.2 | % | | $ | 695 | | | 4.0 | % | | $ | 868 | | | 5.0 | % |
Tier 1 capital | | $ | 1,243 | | | 14.7 | % | | $ | 507 | | | 6.0 | % | | $ | 676 | | | 8.0 | % |
CET1 | | $ | 1,243 | | | 14.7 | % | | $ | 380 | | | 4.5 | % | | $ | 549 | | | 6.5 | % |
Total capital | | $ | 1,283 | | | 15.2 | % | | $ | 676 | | | 8.0 | % | | $ | 845 | | | 10.0 | % |
| | | | | | | | | | | | |
TriState Capital Bank as of September 30, 2022: | | | | | | | | | | | | |
Tier 1 leverage | | $ | 1,093 | | | 7.3 | % | | $ | 601 | | | 4.0 | % | | $ | 752 | | | 5.0 | % |
Tier 1 capital | | $ | 1,093 | | | 14.1 | % | | $ | 463 | | | 6.0 | % | | $ | 618 | | | 8.0 | % |
CET1 | | $ | 1,093 | | | 14.1 | % | | $ | 348 | | | 4.5 | % | | $ | 502 | | | 6.5 | % |
Total capital | | $ | 1,122 | | | 14.5 | % | | $ | 618 | | | 8.0 | % | | $ | 772 | | | 10.0 | % |
TriState Capital Bank’s regulatory capital increased compared with September 30, 2022, driven by positive earnings. TriState Capital Bank’s Tier 1 capital and Total capital ratios increased compared with September 30, 2022, due to the increase in regulatory capital, partially offset by an increase in risk-weighted assets primarily resulting from increases in bank loans and available-for-sale securities, partially offset by the increase in regulatory capital. Raymond Jamessecurities. TriState Capital Bank’s Tier 1 leverage ratio at June 30, 20222023 decreased slightly compared towith September 30, 2021 due to2022 as the increase in regulatory capital was offset by an increase in average assets, primarily driven primarily by higher cash balances, as well as the increases in bank loans and available-for-sale securities.
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
NotesOur banking subsidiaries may pay dividends to Condensed Consolidated Financial Statements (Unaudited)
On June 1, 2022, we completedRJF without prior approval of their respective regulators subject to certain restrictions including retained net income and targeted regulatory capital ratios. Dividends paid to RJF from our acquisition of TriState Capital, including TriState Capital Bank. See Note 3 for additional information on this acquisition.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Actual | | Requirement for capital adequacy purposes | | To be well-capitalized under regulatory provisions |
$ in millions | | Amount | | Ratio | | Amount | | Ratio | | Amount | | Ratio |
TriState Capital Bank as of June 30, 2022: | | | | | | | | | | | | |
Tier 1 leverage | | $ | 1,019 | | | 7.3 | % | | $ | 562 | | | 4.0 | % | | $ | 703 | | | 5.0 | % |
Tier 1 capital | | $ | 1,019 | | | 13.7 | % | | $ | 446 | | | 6.0 | % | | $ | 594 | | | 8.0 | % |
CET1 | | $ | 1,019 | | | 13.7 | % | | $ | 334 | | | 4.5 | % | | $ | 483 | | | 6.5 | % |
Total capital | | $ | 1,047 | | | 14.1 | % | | $ | 594 | | | 8.0 | % | | $ | 743 | | | 10.0 | % |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
banking subsidiaries may be limited to the extent that capital is needed to support their balance sheet growth.
Certain of our broker-dealer subsidiaries are subject to the requirements of the Uniform Net Capital Rule (Rule 15c3-1) under the Securities Exchange Act of 1934. The following table presents the net capital position of RJ&A.
| | | | | | | | | | | | | | |
$ in millions | | June 30, 2022 | | September 30, 2021 |
Raymond James & Associates, Inc.: | | | | |
(Alternative Method elected) | | | | |
Net capital as a percent of aggregate debit items | | 42.7 | % | | 72.1 | % |
Net capital | | $ | 1,213 | | | $ | 2,035 | |
Less: required net capital | | (57) | | | (56) | |
Excess net capital | | $ | 1,156 | | | $ | 1,979 | |
The decrease in RJ&A’s net capital and excess net capital as of June 30, 2022 as compared to September 30, 2021 reflected the impact of significant dividends from RJ&A to RJF during the nine months ended June 30, 2022. | | | | | | | | | | | | | | |
$ in millions | | June 30, 2023 | | September 30, 2022 |
Raymond James & Associates, Inc.: | | | | |
(Alternative Method elected) | | | | |
Net capital as a percent of aggregate debit items | | 43.4 | % | | 40.9 | % |
Net capital | | $ | 1,065 | | | $ | 1,152 | |
Less: required net capital | | (49) | | | (56) | |
Excess net capital | | $ | 1,016 | | | $ | 1,096 | |
As of June 30, 2022,2023, all of our other active regulated domestic and international subsidiaries were in compliance with and exceeded all applicable capital requirements.
| | | | | | | | |
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements (Unaudited) | |
NOTE 2422 – EARNINGS PER SHARE
All share and earnings per share information has been retroactively adjusted to reflect the September 21, 2021 three-for-two stock split described in Note 19.
The following table presents the computation of basic and diluted earnings per common share.
| | | | Three months ended June 30, | | Nine months ended June 30, | | | Three months ended June 30, | | Nine months ended June 30, |
in millions, except per share amounts | in millions, except per share amounts | | 2022 | | 2021 | | 2022 | | 2021 | in millions, except per share amounts | | 2023 | | 2022 | | 2023 | | 2022 |
Income for basic earnings per common share: | Income for basic earnings per common share: | | | | | | | | | Income for basic earnings per common share: | | | | | | | | |
Net income available to common shareholders | Net income available to common shareholders | | $ | 299 | | | $ | 307 | | | $ | 1,068 | | | $ | 974 | | Net income available to common shareholders | | $ | 369 | | | $ | 299 | | | $ | 1,301 | | | $ | 1,068 | |
Less allocation of earnings and dividends to participating securities | Less allocation of earnings and dividends to participating securities | | (1) | | | — | | | (2) | | | (1) | | Less allocation of earnings and dividends to participating securities | | (1) | | | (1) | | | (4) | | | (2) | |
Net income available to common shareholders after participating securities | Net income available to common shareholders after participating securities | | $ | 298 | | | $ | 307 | | | $ | 1,066 | | | $ | 973 | | Net income available to common shareholders after participating securities | | $ | 368 | | | $ | 298 | | | $ | 1,297 | | | $ | 1,066 | |
Income for diluted earnings per common share: | Income for diluted earnings per common share: | | | | | | | | | Income for diluted earnings per common share: | | | | | | | | |
Net income available to common shareholders | Net income available to common shareholders | | $ | 299 | | | $ | 307 | | | $ | 1,068 | | | $ | 974 | | Net income available to common shareholders | | $ | 369 | | | $ | 299 | | | $ | 1,301 | | | $ | 1,068 | |
Less allocation of earnings and dividends to participating securities | Less allocation of earnings and dividends to participating securities | | (1) | | | — | | | (2) | | | (1) | | Less allocation of earnings and dividends to participating securities | | (1) | | | (1) | | | (4) | | | (2) | |
Net income available to common shareholders after participating securities | Net income available to common shareholders after participating securities | | $ | 298 | | | $ | 307 | | | $ | 1,066 | | | $ | 973 | | Net income available to common shareholders after participating securities | | $ | 368 | | | $ | 298 | | | $ | 1,297 | | | $ | 1,066 | |
Common shares: | Common shares: | | | | | | | | | Common shares: | | | | | | | | |
Average common shares in basic computation | Average common shares in basic computation | | 210.7 | | | 205.8 | | | 208.1 | | | 205.8 | | Average common shares in basic computation | | 210.1 | | | 210.7 | | | 213.0 | | | 208.1 | |
Dilutive effect of outstanding stock options and certain RSUs | Dilutive effect of outstanding stock options and certain RSUs | | 5.0 | | | 5.9 | | | 5.4 | | | 5.1 | | Dilutive effect of outstanding stock options and certain RSUs | | 4.7 | | | 5.0 | | | 5.0 | | | 5.4 | |
Average common and common equivalent shares used in diluted computation | Average common and common equivalent shares used in diluted computation | | 215.7 | | | 211.7 | | | 213.5 | | | 210.9 | | Average common and common equivalent shares used in diluted computation | | 214.8 | | | 215.7 | | | 218.0 | | | 213.5 | |
Earnings per common share: | Earnings per common share: | | | | | | | | | Earnings per common share: | | | | | | | | |
Basic | Basic | | $ | 1.41 | | | $ | 1.49 | | | $ | 5.12 | | | $ | 4.73 | | Basic | | $ | 1.75 | | | $ | 1.41 | | | $ | 6.09 | | | $ | 5.12 | |
Diluted | Diluted | | $ | 1.38 | | | $ | 1.45 | | | $ | 4.99 | | | $ | 4.61 | | Diluted | | $ | 1.71 | | | $ | 1.38 | | | $ | 5.95 | | | $ | 4.99 | |
Stock options and certain RSUs excluded from weighted-average diluted common shares because their effect would be antidilutive | Stock options and certain RSUs excluded from weighted-average diluted common shares because their effect would be antidilutive | | 0.5 | | | — | | | 0.4 | | | 0.2 | | Stock options and certain RSUs excluded from weighted-average diluted common shares because their effect would be antidilutive | | 1.8 | | | 0.5 | | | 1.4 | | | 0.4 | |
The allocation of earnings and dividends to participating securities in the preceding table represents dividends paid during the period to participating securities, consisting of certain RSUs, as well as the restricted stock awardsRSAs granted as part of our acquisition of TriState Capital, plus an allocation of undistributed earnings to such participating securities. Participating securities and related dividends paid on these participating securities were insignificant for each of the three and nine months ended June 30, 20222023 and 2021.2022. Undistributed earnings are allocated to participating securities based upon their right to share in earnings if all earnings for the period had been distributed.
| | | | | | | | |
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements (Unaudited) | |
NOTE 2523 – SEGMENT INFORMATION
We currently operate through the following 5five segments: PCG; Capital Markets; Asset Management; Bank; and Other. As described in Note 1, our Bank segment has been renamed from Raymond James Bank as a result of our acquisition of TriState Capital on June 1, 2022.
The segments are determined based upon factors such as the services provided and the distribution channels served and are consistent with how we assess performance and determine how to allocate our resources. For a further discussion of our segments, see Note 26 of our 20212022 Form 10-K.
The following table presents information concerning operations in these segments.
| | | | Three months ended June 30, | | Nine months ended June 30, | | | Three months ended June 30, | | Nine months ended June 30, |
$ in millions | $ in millions | | 2022 | | 2021 | | 2022 | | 2021 | $ in millions | | 2023 | | 2022 | | 2023 | | 2022 |
Net revenues: | Net revenues: | | | | | | | | | Net revenues: | | | | | | | | |
Private Client Group | Private Client Group | | $ | 1,958 | | | $ | 1,696 | | | $ | 5,719 | | | $ | 4,810 | | Private Client Group | | $ | 2,182 | | | $ | 1,958 | | | $ | 6,389 | | | $ | 5,719 | |
Capital Markets | Capital Markets | | 383 | | | 446 | | | 1,410 | | | 1,331 | | Capital Markets | | 276 | | | 383 | | | 873 | | | 1,410 | |
Asset Management | Asset Management | | 228 | | | 225 | | | 698 | | | 629 | | Asset Management | | 226 | | | 228 | | | 649 | | | 698 | |
Bank | Bank | | 276 | | | 169 | | | 656 | | | 496 | | Bank | | 514 | | | 276 | | | 1,562 | | | 656 | |
Other | Other | | (21) | | | 2 | | | (54) | | | (6) | | Other | | 15 | | | (21) | | | 34 | | | (54) | |
Intersegment eliminations | Intersegment eliminations | | (106) | | | (67) | | | (257) | | | (195) | | Intersegment eliminations | | (306) | | | (106) | | | (941) | | | (257) | |
Total net revenues | Total net revenues | | $ | 2,718 | | | $ | 2,471 | | | $ | 8,172 | | | $ | 7,065 | | Total net revenues | | $ | 2,907 | | | $ | 2,718 | | | $ | 8,566 | | | $ | 8,172 | |
Pre-tax income/(loss): | Pre-tax income/(loss): | | | | | | | | | Pre-tax income/(loss): | | | | | | | | |
Private Client Group | Private Client Group | | $ | 251 | | | $ | 195 | | | $ | 659 | | | $ | 527 | | Private Client Group | | $ | 411 | | | $ | 251 | | | $ | 1,286 | | | $ | 659 | |
Capital Markets | Capital Markets | | 61 | | | 115 | | | 349 | | | 349 | | Capital Markets | | (34) | | | 61 | | | (84) | | | 349 | |
Asset Management | Asset Management | | 93 | | | 105 | | | 303 | | | 275 | | Asset Management | | 89 | | | 93 | | | 251 | | | 303 | |
Bank | Bank | | 74 | | | 104 | | | 259 | | | 286 | | Bank | | 66 | | | 74 | | | 293 | | | 259 | |
Other | | (64) | | | (134) | | | (164) | | | (206) | | |
Other (1) | | Other (1) | | (46) | | | (64) | | | (51) | | | (164) | |
Total pre-tax income | Total pre-tax income | | $ | 415 | | | $ | 385 | | | $ | 1,406 | | | $ | 1,231 | | Total pre-tax income | | $ | 486 | | | $ | 415 | | | $ | 1,695 | | | $ | 1,406 | |
(1) The nine months ended June 30, 2023 included the favorable impact of a $32 million insurance settlement received during the period related to a previously settled litigation matter. This item has been reflected as an offset to “Other” expenses on our Condensed Consolidated Statements of Income and Comprehensive Income.
No individual client accounted for more than ten percent of revenues in any of the periods presented.
The following table presents our net interest income on a segment basis.
| | | Three months ended June 30, | | Nine months ended June 30, | | Three months ended June 30, | | Nine months ended June 30, |
$ in millions | $ in millions | | 2022 | | 2021 | | 2022 | | 2021 | $ in millions | | 2023 | | 2022 | | 2023 | | 2022 |
Net interest income/(expense): | Net interest income/(expense): | | | | | | | | | Net interest income/(expense): | | | | | | | | |
Private Client Group | Private Client Group | | $ | 58 | | | $ | 29 | | | $ | 122 | | | $ | 84 | | Private Client Group | | $ | 89 | | | $ | 58 | | | $ | 264 | | | $ | 122 | |
Capital Markets | Capital Markets | | 3 | | | 1 | | | 8 | | | 5 | | Capital Markets | | — | | | 3 | | | 1 | | | 8 | |
Asset Management | Asset Management | | 1 | | | — | | | 1 | | | — | | Asset Management | | 2 | | | 1 | | | 7 | | | 1 | |
Bank | Bank | | 270 | | | 161 | | | 636 | | | 473 | | Bank | | 497 | | | 270 | | | 1,518 | | | 636 | |
Other | Other | | (18) | | | (26) | | | (61) | | | (69) | | Other | | 13 | | | (18) | | | 28 | | | (61) | |
Net interest income | Net interest income | | $ | 314 | | | $ | 165 | | | $ | 706 | | | $ | 493 | | Net interest income | | $ | 601 | | | $ | 314 | | | $ | 1,818 | | | $ | 706 | |
The following table presents our total assets on a segment basis.
| $ in millions | $ in millions | | June 30, 2022 | | September 30, 2021 | $ in millions | | June 30, 2023 | | September 30, 2022 |
Total assets: | Total assets: | | | | | Total assets: | | | | |
Private Client Group (1) | Private Client Group (1) | | $ | 25,729 | | | $ | 20,270 | | Private Client Group (1) | | $ | 12,287 | | | $ | 17,770 | |
Capital Markets | Capital Markets | | 2,169 | | | 2,457 | | Capital Markets | | 2,926 | | | 3,951 | |
Asset Management (2) | Asset Management (2) | | 546 | | | 476 | | Asset Management (2) | | 545 | | | 556 | |
Bank (2) | Bank (2) | | 55,562 | | | 36,154 | | Bank (2) | | 59,506 | | | 56,737 | |
Other | Other | | 2,105 | | | 2,534 | | Other | | 2,369 | | | 1,937 | |
Total | Total | | $ | 86,111 | | | $ | 61,891 | | Total | | $ | 77,633 | | | $ | 80,951 | |
(1) The June 30, 2022 balance reflected the assets of Charles Stanley which was acquired on January 21, 2022. See Note 3 for further discussion.
(2) The June 30, 2022 balance reflected the assets of TriState Capital which was acquired on June 1, 2022. See Note 3 for further discussion.
| | | | | | | | |
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements (Unaudited) | |
The following table presents goodwill, which was included in our total assets, on a segment basis.
| | | | | | | | | | | | | | |
$ in millions | | June 30, 2022 | | September 30, 2021 |
Goodwill: | | | | |
Private Client Group (1) | | $ | 564 | | | $ | 417 | |
Capital Markets | | 173 | | | 174 | |
Asset Management | | 69 | | | 69 | |
Bank (2) | | 529 | | | — | |
Total | | $ | 1,335 | | | $ | 660 | |
(1) As of June 30, 2022, this balance included £121 million, or $147 million, of goodwill arising from our acquisition of Charles Stanley on January 21, 2022. See Note 3 for further discussion.
(2) Represents goodwill arising from our acquisition of TriState Capital on June 1, 2022. See Note 3 for further discussion. | | | | | | | | | | | | | | |
$ in millions | | June 30, 2023 | | September 30, 2022 |
Goodwill: | | | | |
Private Client Group | | $ | 570 | | | $ | 550 | |
Capital Markets | | 275 | | | 274 | |
Asset Management | | 69 | | | 69 | |
Bank | | 529 | | | 529 | |
Total | | $ | 1,443 | | | $ | 1,422 | |
We have operations in the U.S., Canada, and Europe. Substantially all long-lived assets are located in the U.S. The following table presents our net revenues and pre-tax income classified by major geographic area in which they were earned.
| | | | Three months ended June 30, | | Nine months ended June 30, | | | Three months ended June 30, | | Nine months ended June 30, |
$ in millions | $ in millions | | 2022 | | 2021 | | 2022 | | 2021 | $ in millions | | 2023 | | 2022 | | 2023 | | 2022 |
Net revenues: | Net revenues: | | | | | | | | | Net revenues: | | | | | | | | |
U.S. | U.S. | | $ | 2,472 | | | $ | 2,275 | | | $ | 7,491 | | | $ | 6,548 | | U.S. | | $ | 2,652 | | | $ | 2,472 | | | $ | 7,819 | | | $ | 7,491 | |
Canada | Canada | | 138 | | | 128 | | | 404 | | | 363 | | Canada | | 140 | | | 138 | | | 418 | | | 404 | |
Europe | Europe | | 108 | | | 68 | | | 277 | | | 154 | | Europe | | 115 | | | 108 | | | 329 | | | 277 | |
Total | Total | | $ | 2,718 | | | $ | 2,471 | | | $ | 8,172 | | | $ | 7,065 | | Total | | $ | 2,907 | | | $ | 2,718 | | | $ | 8,566 | | | $ | 8,172 | |
Pre-tax income: | | | | | | | | | |
Pre-tax income/(loss): | | Pre-tax income/(loss): | | | | | | | | |
U.S. | U.S. | | $ | 393 | | | $ | 353 | | | $ | 1,330 | | | $ | 1,165 | | U.S. | | $ | 492 | | | $ | 393 | | | $ | 1,625 | | | $ | 1,330 | |
Canada | Canada | | 20 | | | 15 | | | 52 | | | 41 | | Canada | | 17 | | | 20 | | | 84 | | | 52 | |
Europe | Europe | | 2 | | | 17 | | | 24 | | | 25 | | Europe | | (23) | | | 2 | | | (14) | | | 24 | |
Total | Total | | $ | 415 | | | $ | 385 | | | $ | 1,406 | | | $ | 1,231 | | Total | | $ | 486 | | | $ | 415 | | | $ | 1,695 | | | $ | 1,406 | |
The following table presents our total assets by major geographic area in which they were held.
| | | | | | | | | | | | | | |
$ in millions | | June 30, 2022 | | September 30, 2021 |
Total assets: | | | | |
U.S. (1) | | $ | 78,911 | | | $ | 57,952 | |
Canada | | 4,153 | | | 3,724 | |
Europe (2) | | 3,047 | | | 215 | |
Total | | $ | 86,111 | | | $ | 61,891 | |
(1) The June 30, 2022 balance reflected the assets of TriState Capital which was acquired on June 1, 2022. See Note 3 or further discussion.
(2) The June 30, 2022 balance reflected the assets of Charles Stanley which was acquired on January 21, 2022. See Note 3 for further discussion. | | | | | | | | | | | | | | |
$ in millions | | June 30, 2023 | | September 30, 2022 |
Total assets: | | | | |
U.S. | | $ | 71,653 | | | $ | 74,428 | |
Canada | | 3,397 | | | 3,631 | |
Europe | | 2,583 | | | 2,892 | |
Total | | $ | 77,633 | | | $ | 80,951 | |
The following table presents goodwill, which was included in our total assets, classified by major geographic area in which it was held.
| | | | | | | | | | | | | | |
$ in millions | | June 30, 2022 | | September 30, 2021 |
Goodwill: | | | | |
U.S. (1) | | $ | 1,148 | | | $ | 619 | |
Canada | | 25 | | | 25 | |
Europe (2) | | 162 | | | 16 | |
Total | | $ | 1,335 | | | $ | 660 | |
(1) As of June 30, 2022, this balance included $529 million of goodwill arising from our acquisition of TriState Capital on June 1, 2022. See Note 3 for further discussion.
(2) As of June 30, 2022, this balance included £121 million, or $147 million, of goodwill arising from our acquisition of Charles Stanley on January 21, 2022. See Note 3 for further discussion. | | | | | | | | | | | | | | |
$ in millions | | June 30, 2023 | | September 30, 2022 |
Goodwill: | | | | |
U.S. | | $ | 1,250 | | | $ | 1,250 | |
Canada | | 24 | | | 23 | |
Europe | | 169 | | | 149 | |
Total | | $ | 1,443 | | | $ | 1,422 | |
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
| | | | | | | | |
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES | |
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
| | | | | |
INDEX | |
| PAGE |
Factors affecting “forward-looking statements” | |
Introduction | |
Executive overview | |
Reconciliation of non-GAAP financial measures to GAAP financial measures | |
Segments | |
Net interest analysis | |
Results of Operationsoperations | |
Private Client Group | |
Capital Markets | |
Asset Management | |
Bank | |
Other | |
Certain statistical disclosures by bank holding companies | |
Statement of financial condition analysis | |
Liquidity and capital resources | |
Regulatory | |
Critical accounting estimates | |
Recent accounting developments | |
Risk management | |
| | | | | | | | |
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Management’s Discussion and Analysis
Management’s Discussion and Analysis | |
FACTORS AFFECTING “FORWARD-LOOKING STATEMENTS”
Certain statements made in this Quarterly Report on Form 10-Q may constitute “forward-looking statements” under the Private Securities Litigation Reform Act of 1995. Forward-looking statements include information concerning future strategic objectives, business prospects, anticipated savings, financial results (including expenses, earnings, liquidity, cash flow and capital expenditures), industry or market conditions, demand for and pricing of our products, acquisitions, (including our announced acquisition of SumRidge Partners), divestitures, anticipated results of litigation, regulatory developments, and general economic conditions. In addition, words such as “believes,” “expects,” “anticipates,” “estimates,” “projects,” and future or conditional verbs such as “will,” “may,” “could,” “should,” and “would,” as well as any other statement that necessarily depends on future events, are intended to identify forward-looking statements. Forward-looking statements are not guarantees, and they involve risks, uncertainties and assumptions. Although we make such statements based on assumptions that we believe to be reasonable, there can be no assurance that actual results will not differ materially from those expressed in the forward-looking statements. We caution investors not to rely unduly on any forward-looking statements and urge you to carefully consider the risks described in our filings with the SECSecurities and Exchange Commission (the “SEC”) from time to time, including our most recent Annual Report on Form 10-K, and subsequent Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, which are available at www.raymondjames.com and the SEC’s website at www.sec.gov. We expressly disclaim any obligation to update any forward-looking statement in the event it later turns out to be inaccurate, whether as a result of new information, future events, or otherwise.
INTRODUCTION
The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to help the reader understand the results of our operations and financial condition. This MD&A is provided as a supplement to, and should be read in conjunction with, our condensed consolidated financial statements and accompanying notes to condensed consolidated financial statements. Where “NM” is used in various percentage change computations, the computed percentage change has been determined to be not meaningful.
We operate as a financial holding company and bank holding company. Results in the businesses in which we operate are highly correlated to general economic conditions and, more specifically, to the direction of the U.S. equity and fixed income markets, changes in interest rates, market volatility, corporate and mortgage lending markets and commercial and residential credit trends. Overall market conditions, economic, political and regulatory trends, and industry competition are among the factors which could affect us and which are unpredictable and beyond our control. These factors affect the financial decisions made by market participants, including investors, depositors, borrowers, and competitors, impacting their level of participation in the financial markets. These factors also impact the level of investment banking activity and asset valuations, which ultimately affect our business results.
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
Management’s Discussion and Analysis
EXECUTIVE OVERVIEW
Quarter ended June 30, 20222023 compared with the quarter ended June 30, 20212022
For our fiscal third quarter of 2022,2023, we generated net revenues of $2.72$2.91 billion, an increase of 10%7% compared with the prior-year quarter, and pre-tax income of $415$486 million increased 8%17%. Our net income available to common shareholders of $299$369 million decreased 3%increased 23%, and our earnings per diluted share were $1.38,$1.71, reflecting a 5% decrease.24% increase. Our annualized return on common equity (“ROCE”) for the quarter was 13.3%14.9%, compared with 15.9%13.3% for the prior-year quarter, and our annualized return on tangible common equity (“ROTCE”) was 15.6%18.3%(1), compared with 17.7%15.6%(1) for the prior-year quarter.
On June 1, 2022, we completed our acquisition of all the outstanding shares of TriState Capital, and its results of operations have been included in our results prospectively from the closing date of June 1, 2022. During the quarter, we incurred $65 Excluding $40 million of expenses related to our TriState Capital acquisition and other current and prior-year acquisitions comprised of acquisition-relatedcompleted in prior years, such as compensation expenses largely related to retention awards initial provisions for credit losses on acquired loans and unfunded lending commitments of $26 million and $5 million, respectively, amortization of identifiable intangible assets, arising from acquisitions, and other costs incurred to effect our acquisitions, including legal expenses and other professional fees. Excluding these acquisition-related expenses, our adjusted net income available to common shareholders was $348$399 million(1), 13% lower than adjusted net income for the prior-year quarter,three months ended June 30, 2023 and our adjusted earnings per diluted share were $1.61$1.85(1), 14% lower than adjusted earnings per diluted share foreach 15% higher compared with the prior-year quarter. Adjusted annualized ROCE for the quarter was 15.4%16.1%(1) and adjusted annualized ROTCE was 18.1%19.7%(1), compared with adjusted annualized ROCE of 20.5%15.4%(1) and adjusted annualized ROTCE of 22.9%18.1%(1) for the prior-year quarter.
The increase in net revenues compared with the prior-year quarter was driven by the benefit of higher short-term interest rates on both RJBDP fees from third-party banks and net interest income and higher asset management and related administrative fees, largely attributable to strong growth in PCG assets in fee-based accounts compared with the prior-year quarter. In addition, the current-year quarter includes incremental revenues from our acquisitions of TriState Capital, which was completed on June 1, 2022, and Charles Stanley, which was completed on January 21, 2022. These increases more than offset the declines in investment banking and brokerage revenues resulting from the challenging market environment during the current quarter.
Compensation, commissions and benefits expense increased 10%, primarily resulting from higher revenues compared with the prior-year quarter and, to a lesser extent, incremental compensation expense due to the Charles Stanley and TriState Capital acquisitions, a special bonus payable to certain eligible associates to assist them with inflationary cost pressures, which aggregated to $13 million, as well as other increases in compensation costs to support our growth. Our compensation ratio, or the ratio of compensation, commissions and benefits expense to net revenues, was 67.5%, compared with 67.2% for the prior-year quarter. Excluding acquisition-related compensation expenses, our adjusted compensation ratio was 66.8%(1), compared with 66.7%(1) for the prior-year quarter.
Non-compensation expenses increased 10%, primarily due to a $75 million increase in the bank loan provision for credit losses, resulting from a provision of $56 million for the current-year quarter compared with a benefit of $19 million for the prior-year quarter. The higher provision for credit losses in the current-year quarter was due to the aforementioned initial provision for credit losses on loans associated with our acquisition of TriState Capital Bank, as well as growth in bank loans at Raymond James Bank and a weaker macroeconomic outlook. Business development expenses also increased from the very low prior-year quarter level, primarily due to advisor recognition events and conferences, as well as an increase in business travel during the current period as travel restrictions have eased. Communications and information processing expenses increased as a result of incremental expenses of TriState Capital and Charles Stanley, as well as continued investments in technology to support our growth. Offsetting these increases, during the prior-year quarter we completed a $750 million, 30-year senior notes offering at 3.75%, and incurred $98 million of losses on extinguishment of debt from the early-redemption of certain of our senior notes which did not recur in the current period.
Our effective income tax rate was 27.5% for our fiscal third quarter of 2022, an increase compared with a 20.3% effective income tax rate for the prior-year quarter, primarily due to the unfavorable impact of nondeductible valuation losses associated with our company-owned life insurance portfolio during the current quarter compared with nontaxable valuation gains in the prior-year quarter.
(1) ROTCE, adjusted net income available to common shareholders, adjusted earnings per diluted share, adjusted annualized ROCE, and adjusted annualized ROTCE and adjusted compensation ratio are non-GAAP financial measures. Beginning with our fiscal third quarter of 2022, certain non-GAAP financial measures have been adjusted for additional expenses directly related to our acquisitions that we believe are not indicative of our core operating results, such as those related to amortization of identifiable intangible assets arising from acquisitions and acquisition-related retention. Prior periods have been conformed to the current presentation. Please see the “Reconciliation of non-GAAP financial measures to GAAP financial measures” in this MD&A for a reconciliation of these non-GAAP financial measures to the most directly comparable GAAP measures, and for other important disclosures.
| | | | | | | | |
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Management’s Discussion and Analysis | |
Quarterly net revenues increased compared with the prior-year quarter primarily due to the benefit of higher short-term interest rates on net interest income and RJBDP fees from third-party banks, as well as incremental revenues from our prior-year acquisitions of TriState Capital in June 2022 and SumRidge Partners, LLC (“SumRidge Partners”) in July 2022. These increases were offset by lower investment banking revenues due to a challenging market environment during the current quarter, which continued to dampen capital markets activity not only in our business but across the industry, as well as lower asset management and related administrative fees, primarily as a result of lower PCG client assets in fee-based accounts at the beginning of the current quarter compared with the prior-year quarter. Brokerage revenues also declined compared with the prior-year quarter primarily due to lower asset-based trailing revenues in the PCG segment, as well as decreased activity from depository institution clients in the Capital Markets segment.
Compensation, commissions and benefits expense increased 1%, primarily due to incremental compensation expenses arising from the aforementioned acquisitions, as well as an increase in compensation costs to support our growth and annual salary increases, partially offset by a decrease in compensable revenues compared with the prior-year quarter. Our compensation ratio, or the ratio of compensation, commissions and benefits expense to net revenues, was 63.7%, compared with 67.5% for the prior-year quarter. Excluding acquisition-related compensation expenses, our adjusted compensation ratio was 62.7%(1), compared with 66.8%(1) for the prior-year quarter. The decline in the compensation ratio primarily resulted from changes in our revenue mix due to higher net interest income and RJBDP fees from third-party banks, which have little associated direct compensation.
Non-compensation expenses increased $101 million or 22%. Elevated provisions for legal and regulatory matters during the current quarter accounted for approximately $65 million of the increase, with the remainder primarily resulting from incremental expenses arising from the aforementioned acquisitions, as well as higher communications and information processing expenses, arising both from acquisitions and continued investments in technology to support our growth, and higher business development expenses. The bank loan provision for credit losses was $54 million for the current-year quarter compared with a provision of $56 million for the prior-year quarter, which included an initial provision for credit losses of $26 million on loans acquired as part of the TriState Capital acquisition. The bank loan provision for credit losses in the current-year quarter largely reflected the impacts of a weaker economic outlook for the CRE portfolio as reflected in the Moody’s CRE Price Index in our CECL model and, to a lesser extent, loan downgrades during the quarter.
Our effective income tax rate was 24.1% for our fiscal third quarter of 2023, a decrease compared with the 27.5% effective income tax rate for the prior-year quarter, primarily due to the impact on our provision for income taxes from nontaxable valuation gains associated with our company-owned life insurance policies in the current-year quarter compared with nondeductible valuation losses in the prior-year quarter.
As of June 30, 2022,2023, our Tier 1 leverage ratio of 10.8%11.4% and Total capital ratio of 21.5%22.0% were both more than double the regulatory requirement to be considered well-capitalized. We also continue to have substantial liquidity with $2.0$1.7 billion(1)(2) of cash at the parent as of June 30, 2022,2023, which includes cash the parent loaned to RJ&A.&A to invest on its behalf. We believe our capital and funding and capital position provideprovides us the opportunity to continue to growmanage our balance sheet prudently and we expect to continue to be opportunistic and invest in deployinggrowth. We also have access to significant sources of funding for our capital. Subsequent tobusiness activities should the closingneed arise, including borrowings against the $750 million balance available on our revolving credit facility, which was recently renewed and increased from $500 million in April 2023, as well as nearly $10 billion of TriState CapitalFHLB borrowing capacity in our fiscal third quarter of 2022,the Bank segment. During the three months ended June 30, 2023, we repurchased 1.143.31 million shares of our common stock for $100$300 million at an average price of $88.$91 per share under the Board of Directors’ common stock repurchase authorization. After the effect of those repurchases, $900$750 million remained under such authorization. We currently expect to continue to repurchase our Board of Directors’ share repurchase authorization.
We remain well-positioned entering our fiscal fourth quarter. We expectcommon stock in our fiscal fourth quarter resultsof 2023 to be further positively impacted byoffset the full quarter’s impactshares issued with the acquisition of the 50-basis point and 75-basis point increasesTriState Capital in the Fed’s short-term benchmark interest rate enacted in May and Junefiscal 2022, respectively, as well as two months’ impact of the 75-basis point increase enacted at the end of July 2022. With clients’ domestic cash sweep balances of $75.8 billion as of June 30, 2022 and our high concentration of floating-rate assets,to offset dilution from share-based compensation; however, we also believe we are well-positioned for any further increases in short-term interest rates, which we expect to positively impact our net interest income and our RJBDP fees from third-party banks. In addition, we expect our fiscal fourth quarter results to be positively impacted by two incremental months of TriState Capital’s results as well as the results of SumRidge Partners, which was acquired on July 1, 2022. However, we also expect to continue to face macroeconomic uncertainties which may continue to have a negative impact on equity and fixed income markets. As a result, we may experience volatility in asset management fees and brokerage revenues, as well as investment banking revenues, despite our robust investment banking pipelines. In addition, asset management and related administrative fees will be negatively impacted by the 11% decrease in PCG fee-based assets as of June 30, 2022 and lower financial assets under management; however, our recruiting pipelines remain strong and we continue to see solid retention of existing advisors. Net loan growth should result in additional provisions for credit losses and future market deterioration could result in increased bank loan provisions in future periods. In addition, although we remain focused on the management of expenses, we expect that expenses will continue to increase in part as a result of inflationary pressures on our costs, as businessmonitor market conditions and event-related travel restrictions have eased, andother capital needs as we continue to make investments in our peopleconsider the magnitude and technology to support our growth.
Nine months ended June 30, 2022 compared with the nine months ended June 30, 2021
For the nine months ended June 30, 2022, we generated net revenuestiming of $8.17 billion, an increase of 16% compared with the prior-year period, and pre-tax income of $1.41 billion, an increase of 14%. Our net income available to common shareholders of $1.07 billion was 10% higher than the prior-year period and our earnings per diluted share were $4.99, reflecting an 8% increase. Our annualized ROCE was 16.3%, compared with 17.4% for the prior-year period, and our annualized ROTCE was 18.7%(2), compared with 19.3%(2) for the prior-year period.these repurchases.
Excluding $117 million of expenses related to acquisitions, our adjusted net income available to common shareholders was $1.16 billion(2), an increase of 6% compared with the prior-year period, and our adjusted earnings per diluted share were $5.41(2), an increase of 5%.Adjusted annualized ROCE for the year-to-date period was 17.6%(2), compared with 19.3%(2) in the prior-year period, and adjusted annualized ROTCEwas 20.1%(2), compared with 21.4%(2) in the prior-year period.
The significant increase in net revenues compared with the prior-year period was primarily driven by higher asset management and related administrative fees, primarily attributable to higher PCG client assets in fee-based accounts and incremental revenues from our Charles Stanley acquisition, the benefit of higher short-term interest rates on both RJBDP fees from third-party banks and net interest income, strong investment banking revenues, particularly in our fiscal first quarter, and one month of incremental revenues from our acquisition of TriState Capital.
Compensation, commissions and benefits expense increased 16%, primarily attributable to the growth in revenues and pre-tax income compared with the prior-year period, as well as our current-year acquisitions of Charles Stanley and TriState Capital. Our compensation ratio was 68.2%, compared with 68.1% for the prior-year period. Excluding $43 million of acquisition-related compensation expenses, our adjusted compensation ratio was 67.6%
(2), flat compared with the adjusted compensation ratio for the prior-year period.
(1) Adjusted compensation ratio is a non-GAAP financial measure. Please see the “Reconciliation of non-GAAP financial measures to GAAP financial measures” in this MD&A for a reconciliation of these non-GAAP financial measures to the most directly comparable GAAP measures, and for other important disclosures.
(2) For additional information, please see the “Liquidity and capital resources - Sources of liquidity” section in this MD&A.
| | | | | | | | |
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Management’s Discussion and Analysis | |
As we look ahead to our fiscal fourth quarter of 2023, we expect our results to be favorably impacted by higher asset management and related administrative fees, which will benefit from the 5% sequential increase in PCG fee-based assets and 3% sequential increase in financial assets under management as of June 30, 2023. However, we expect our combined net interest income and RJBDP fees from third-party banks to decline an estimated 5% in total in our fiscal fourth quarter compared with our fiscal third quarter of 2023 due to lower net interest income in our Bank segment reflecting the impact from higher-cost diversified funding sources, including our Enhanced Savings Program which was launched to PCG clients in March 2023, as well as elevated cash balances we plan to maintain in our Bank segment due to market conditions, partially offset by an increase in RJBDP fees from third-party banks due to the combination of higher average balances swept to such banks as well as recent increases in short-term interest rates. While we have a healthy investment banking pipeline, market uncertainty continues to impact the pace and timing of transactions, and we expect such uncertainty to continue in our fiscal fourth quarter, which may continue to have a negative impact on investment banking revenues compared to prior year levels. We expect to continue to experience headwinds for brokerage revenues due to a decline in cash balances at many of our depository institution clients. In addition, although we have proactively taken steps to manage our credit risk in our loan portfolio, including selling approximately $450 million of corporate loans during the fiscal third quarter of 2023, future economic deterioration or changes in our macroeconomic outlook could result in increased bank loan provisions for credit losses in future periods.
Nine months ended June 30, 2023 compared with the nine months ended June 30, 2022
For the nine months ended June 30, 2023, we generated net revenues of $8.57 billion, an increase of 5% compared with the prior-year period, and pre-tax income of $1.70 billion, an increase of 21%. Our net income available to common shareholders of $1.30 billion was 22% higher than the prior-year period and our earnings per diluted share were $5.95, reflecting a 19% increase. Our annualized ROCE was 17.9%, compared with 16.3% for the prior-year period, and our annualized ROTCE was 22.0%(1), compared with 18.7%(1) for the prior-year period.
The nine months ended June 30, 2023 included $97 million of expenses related to acquisitions completed in prior years, such as compensation related to retention awards and amortization of identifiable intangible assets. The nine months ended June 30, 2023 also included the favorable impact of a $32 million insurance settlement received during our fiscal first quarter related to a previously-settled legal matter. Excluding these items, our adjusted net income available to common shareholders was $1.35 billion(1), an increase of 17% compared with the prior-year period, and our adjusted earnings per diluted share were $6.17(1), an increase of 14%.Adjusted annualized ROCE was 18.5%(1), compared with 17.6%(1) in the prior-year period, and adjusted annualized ROTCEwas 22.7%(1), compared with 20.1%(1) in the prior-year period.
The increase in net revenues compared with the prior-year period was primarily driven by the benefit of significantly higher short-term interest rates in the current-year period on both net interest income and RJBDP fees from third-party banks, as well as incremental revenues arising from our prior-year acquisitions of Charles Stanley, TriState Capital and SumRidge. These increases were offset by lower investment banking and brokerage revenues, primarily due to a more challenging market environment during the current-year period, and a decline in asset management and related administrative fees, primarily attributable to lower PCG client assets in fee-based accounts at the beginning of each of the current-year quarterly billing periods.
Compensation, commissions and benefits expense decreased 3%, primarily attributable to the decrease in compensable revenues compared with the prior-year period, partially offset by incremental expenses arising from our prior-year acquisitions of Charles Stanley, TriState Capital, and SumRidge, as well as an increase in compensation costs to support our growth and annual salary increases. Our compensation ratio was 63.1%, compared with 68.2% for the prior-year period. Excluding acquisition-related compensation expenses, our adjusted compensation ratio was 62.4%(1), compared with an adjusted compensation ratio of 67.6%(1) for the prior-year period.
Non-compensation expenses increased $268 million, or 22%, due most significantly to incremental expenses arising from our prior-year acquisitions of Charles Stanley, TriState Capital, and SumRidge, elevated provisions for legal and regulatory matters during the current period of approximately $100 million, as well as increases in business development expenses, communications and information processing expenses, and the bank loan provision for credit losses. Partially offsetting these increases was the aforementioned favorable insurance settlement received.
(1) ROTCE, adjusted net income available to common shareholders, adjusted earnings per diluted share, adjusted annualized ROCE, adjusted annualized ROTCE, and adjusted compensation ratio are non-GAAP financial measures. Beginning with our fiscal third quarter of 2022, certain non-GAAP financial measures have been adjusted for additional expenses directly related to our acquisitions that we believe are not indicative of our core operating results, such as those related to amortization of identifiable intangible assets arising from acquisitions and acquisition-related retention. Prior periods have been conformed to the current presentation. Please see the “Reconciliation of non-GAAP financial measures to GAAP financial measures” in this MD&A for a reconciliation of these non-GAAP financial measures to the most directly comparable GAAP measures, and for other important disclosures.
| | | | | | | | |
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Management’s Discussion and Analysis
Management’s Discussion and Analysis | |
Non-compensation expenses increased 17%, primarily due to increases in the bank loan provision for credit losses, business development and communications and information processing expenses, as well as higher investment sub-advisory fees. In addition, the current-year period included incremental expenses from our acquisitions of Charles Stanley and TriState Capital. The bank loan provision for credit losses increased $103 million to a provision of $66 million for the current-year period, compared with a benefit of $37 million for the prior-year period. Offsetting these increases was the aforementioned $98 million decrease in losses on extinguishment of debt.
Our effective income tax rate was 23.9%23.0% for the nine months ended June 30, 2022, an increase2023, a decrease from 20.9%23.9% for the prior-year period. The increase in the effective tax rate from the prior-year period, was primarily due to the negative impact on our provision for income taxes of nondeductiblenontaxable valuation lossesgains associated with our company-owned life insurance portfolio duringpolicies in the current-year periodcurrent year compared with nontaxablenondeductible valuation gains forlosses in the prior-year period, partially offset by a larger tax benefit recognized during the current-year period related to share-based compensation that vested during the period.
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
Management’s DiscussionIn December 2022, the Board of Directors increased the quarterly cash dividend on common shares to $0.42 per share and Analysis
authorized common stock repurchases of up to $1.5 billion. During the nine months ended June 30, 2023, we repurchased 8.35 million shares of our common stock under the Board of Directors’ common stock repurchase authorization for $788 million at an average price of $94 per share.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES TO GAAP FINANCIAL MEASURES
We utilize certain non-GAAP financial measures as additional measures to aid in, and enhance, the understanding of our financial results and related measures. These non-GAAP financial measures have been separately identified in this document. We believe certain of these non-GAAP financial measures provide useful information to management and investors by excluding certain material items that may not be indicative of our core operating results. We utilize these non-GAAP financial measures in assessing the financial performance of the business, as they facilitate a meaningful comparison of current- and prior-period results. Certain of our non-GAAP financial measures have been adjusted for additional expenses directly related to our acquisitions that we believe are not indicative of our core operating results, such as those related to amortization of identifiable intangible assets arising from acquisitions and acquisition-related retention. Prior periods have been conformed to the current period presentation. We believe that ROTCEreturn on tangible common equity is meaningful to investors as this measureit facilitates comparisoncomparisons of our results to the results of other companies.In the following tables, the tax effect of non-GAAP adjustments reflects the statutory rate associated with each non-GAAP item. These non-GAAP financial measures should be considered in addition to, and not as a substitute for, measures of financial performance prepared in accordance with GAAP. In addition, our non-GAAP financial measures may not be comparable to similarly titled non-GAAP financial measures of other companies. The following tables provide a reconciliation of non-GAAP financial measures to the most directly comparable GAAP financial measures for the periods indicated.
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three months ended | Nine months ended |
$ in millions | | June 30, 2022 | | June 30, 2021 | | June 30, 2022 | | June 30, 2021 |
Net income available to common shareholders | | $ | 299 | | | $ | 307 | | | $ | 1,068 | | | $ | 974 | |
Non-GAAP adjustments: | | | | | | | | |
Expenses directly related to acquisitions included in the following financial statement line items: | | | | | | | | |
Compensation, commissions and benefits: | | | | | | | | |
Acquisition-related retention | | 16 | | | 13 | | | 41 | | | 35 | |
Other acquisition-related compensation | | 2 | | | — | | | 2 | | | — | |
Total “Compensation, commissions and benefits” expense | | 18 | | | 13 | | | 43 | | | 35 | |
Professional fees | | 4 | | | 4 | | | 11 | | | 5 | |
Bank loan provision/(benefit) for credit losses — Initial provision for credit losses on acquired loans | | 26 | | | — | | | 26 | | | — | |
Other: | | | | | | | | |
Amortization of identifiable intangible assets | | 8 | | | 7 | | | 22 | | | 14 | |
Initial provision for credit losses on acquired lending commitments | | 5 | | | — | | | 5 | | | — | |
All other acquisition-related expenses | | 4 | | | — | | | 10 | | | 1 | |
Total “Other” expense | | 17 | | | 7 | | | 37 | | | 15 | |
Total expenses related to acquisitions | | 65 | | | 24 | | | 117 | | | 55 | |
Losses on extinguishment of debt | | — | | | 98 | | | — | | | 98 | |
Pre-tax impact of non-GAAP adjustments | | 65 | | | 122 | | | 117 | | | 153 | |
Tax effect of non-GAAP adjustments | | (16) | | | (30) | | | (29) | | | (37) | |
Total non-GAAP adjustments, net of tax | | 49 | | | 92 | | | 88 | | | 116 | |
Adjusted net income available to common shareholders | | $ | 348 | | | $ | 399 | | | $ | 1,156 | | | $ | 1,090 | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
Compensation, commissions and benefits expense | | $ | 1,834 | | | $ | 1,661 | | | $ | 5,570 | | | $ | 4,809 | |
Less: Total compensation-related acquisition expenses (as detailed above) | | 18 | | | 13 | | | 43 | | | 35 | |
Adjusted “Compensation, commissions and benefits” expense | | $ | 1,816 | | | $ | 1,648 | | | $ | 5,527 | | | $ | 4,774 | |
measures.
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three months ended | Nine months ended |
$ in millions | | June 30, 2023 | | June 30, 2022 | | June 30, 2023 | | June 30, 2022 |
Net income available to common shareholders | | $ | 369 | | | $ | 299 | | | $ | 1,301 | | | $ | 1,068 | |
Non-GAAP adjustments: | | | | | | | | |
Expenses directly related to acquisitions included in the following financial statement line items: | | | | | | | | |
Compensation, commissions and benefits: | | | | | | | | |
Acquisition-related retention | | 18 | | | 16 | | | 53 | | | 41 | |
Other acquisition-related compensation | | 10 | | | 2 | | | 10 | | | 2 | |
Total “Compensation, commissions and benefits” expense | | 28 | | | 18 | | | 63 | | | 43 | |
Professional fees | | 1 | | | 4 | | | 1 | | | 11 | |
Bank loan provision for credit losses — Initial provision for credit losses on acquired loans | | — | | | 26 | | | — | | | 26 | |
Other: | | | | | | | | |
Amortization of identifiable intangible assets | | 11 | | | 8 | | | 33 | | | 22 | |
Initial provision for credit losses on acquired lending commitments | | — | | | 5 | | | — | | | 5 | |
All other acquisition-related expenses | | — | | | 4 | | | — | | | 10 | |
Total “Other” expense | | 11 | | | 17 | | | 33 | | | 37 | |
Total expenses related to acquisitions | | 40 | | | 65 | | | 97 | | | 117 | |
Other — Insurance settlement received | | — | | | — | | | (32) | | | — | |
Pre-tax impact of non-GAAP adjustments | | 40 | | | 65 | | | 65 | | | 117 | |
Tax effect of non-GAAP adjustments | | (10) | | | (16) | | | (16) | | | (29) | |
Total non-GAAP adjustments, net of tax | | 30 | | | 49 | | | 49 | | | 88 | |
Adjusted net income available to common shareholders | | $ | 399 | | | $ | 348 | | | $ | 1,350 | | | $ | 1,156 | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
Compensation, commissions and benefits expense | | $ | 1,851 | | | $ | 1,834 | | | $ | 5,407 | | | $ | 5,570 | |
Less: Total compensation-related acquisition expenses (as detailed above) | | 28 | | | 18 | | | 63 | | | 43 | |
Adjusted “Compensation, commissions and benefits” expense | | $ | 1,823 | | | $ | 1,816 | | | $ | 5,344 | | | $ | 5,527 | |
| | | | | | | | |
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Management’s Discussion and Analysis | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three months ended | | Nine months ended |
| | June 30, 2023 | | June 30, 2022 | | June 30, 2023 | | June 30, 2022 |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
Total compensation ratio | | 63.7 | % | | 67.5 | % | | 63.1 | % | | 68.2 | % |
Less the impact of non-GAAP adjustments on compensation ratio: | | | | | | | | |
Acquisition-related retention | | 0.7 | % | | 0.6 | % | | 0.6 | % | | 0.5 | % |
Other acquisition-related compensation | | 0.3 | % | | 0.1 | % | | 0.1 | % | | 0.1 | % |
Total “Compensation, commissions and benefits” expenses related to acquisitions | | 1.0 | % | | 0.7 | % | | 0.7 | % | | 0.6 | % |
Adjusted total compensation ratio | | 62.7 | % | | 66.8 | % | | 62.4 | % | | 67.6 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three months ended | Nine months ended |
| | June 30, 2023 | | June 30, 2022 | | June 30, 2023 | | June 30, 2022 |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
Diluted earnings per common share | | $ | 1.71 | | | $ | 1.38 | | | $ | 5.95 | | | $ | 4.99 | |
Impact of non-GAAP adjustments on diluted earnings per common share: | | | | | | | | |
| | | | | | | | |
Compensation, commissions and benefits: | | | | | | | | |
Acquisition-related retention | | 0.09 | | | 0.07 | | | 0.24 | | | 0.19 | |
Other acquisition-related compensation | | 0.05 | | | 0.01 | | | 0.05 | | | 0.01 | |
Total “Compensation, commissions and benefits” expense | | 0.14 | | | 0.08 | | | 0.29 | | | 0.20 | |
Professional fees | | — | | | 0.02 | | | — | | | 0.05 | |
Bank loan provision for credit losses — Initial provision for credit losses on acquired loans | | — | | | 0.12 | | | — | | | 0.12 | |
Other: | | | | | | | | |
Amortization of identifiable intangible assets | | 0.05 | | | 0.04 | | | 0.15 | | | 0.11 | |
Initial provision for credit losses on acquired lending commitments | | — | | | 0.02 | | | — | | | 0.02 | |
All other acquisition-related expenses | | — | | | 0.02 | | | — | | | 0.05 | |
Total “Other” expense | | 0.05 | | | 0.08 | | | 0.15 | | | 0.18 | |
Total expenses related to acquisitions | | 0.19 | | | 0.30 | | | 0.44 | | | 0.55 | |
Other — Insurance settlement received | | — | | | — | | | (0.15) | | | — | |
Tax effect of non-GAAP adjustments | | (0.05) | | | (0.07) | | | (0.07) | | | (0.13) | |
Total non-GAAP adjustments, net of tax | | 0.14 | | | 0.23 | | | 0.22 | | | 0.42 | |
Adjusted diluted earnings per common share | | $ | 1.85 | | | $ | 1.61 | | | $ | 6.17 | | | $ | 5.41 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | |
| | | | | | | | |
Return on common equity | | Three months ended | | Nine months ended |
$ in millions | | June 30, 2023 | | June 30, 2022 | | June 30, 2023 | | June 30, 2022 |
Average common equity | | $ | 9,873 | | | $ | 8,999 | | | $ | 9,705 | | | $ | 8,711 | |
Impact of non-GAAP adjustments on average common equity: | | | | | | | | |
| | | | | | | | |
Compensation, commissions and benefits: | | | | | | | | |
Acquisition-related retention | | 9 | | | 8 | | | 27 | | | 19 | |
Other acquisition-related compensation | | 4 | | | 1 | | | 2 | | | 1 | |
Total “Compensation, commissions and benefits” expense | | 13 | | | 9 | | | 29 | | | 20 | |
Professional fees | | 1 | | | 2 | | | — | | | 5 | |
Bank loan provision for credit losses — Initial provision for credit losses on acquired loans | | — | | | 13 | | | — | | | 7 | |
Other: | | | | | | | | |
Amortization of identifiable intangible assets | | 6 | | | 4 | | | 17 | | | 11 | |
Initial provision for credit losses on acquired lending commitments | | — | | | 3 | | | — | | | 1 | |
All other acquisition-related expenses | | — | | | 2 | | | — | | | 4 | |
Total “Other” expense | | 6 | | | 9 | | | 17 | | | 16 | |
Total expenses related to acquisitions | | 20 | | | 33 | | | 46 | | | 48 | |
Other — Insurance settlement received | | — | | | — | | | (24) | | | — | |
Tax effect of non-GAAP adjustments | | (5) | | | (8) | | | (5) | | | (12) | |
Total non-GAAP adjustments, net of tax | | 15 | | | 25 | | | 17 | | | 36 | |
Adjusted average common equity | | $ | 9,888 | | | $ | 9,024 | | | $ | 9,722 | | | $ | 8,747 | |
| | | | | | | | |
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Management’s Discussion and Analysis | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three months ended | | Nine months ended |
| | June 30, 2022 | | June 30, 2021 | | June 30, 2022 | | June 30, 2021 |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
Total compensation ratio | | 67.5 | % | | 67.2 | % | | 68.2 | % | | 68.1 | % |
Less the impact of non-GAAP adjustments on compensation ratio: | | | | | | | | |
Acquisition-related retention | | 0.6 | % | | 0.5 | % | | 0.5 | % | | 0.5 | % |
Other acquisition-related compensation | | 0.1 | % | | — | % | | 0.1 | % | | — | % |
Total “Compensation, commissions and benefits” expenses related to acquisitions | | 0.7 | % | | 0.5 | % | | 0.6 | % | | 0.5 | % |
Adjusted total compensation ratio | | 66.8 | % | | 66.7 | % | | 67.6 | % | | 67.6 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
Diluted earnings per common share | | $ | 1.38 | | | $ | 1.45 | | | $ | 4.99 | | | $ | 4.61 | |
Impact of non-GAAP adjustments on diluted earnings per common share: | | | | | | | | |
Compensation, commissions and benefits: | | | | | | | | |
Acquisition-related retention | | 0.07 | | | 0.06 | | | 0.19 | | | 0.17 | |
Other acquisition-related compensation | | 0.01 | | | — | | | 0.01 | | | — | |
Total “Compensation, commissions and benefits” expense | | 0.08 | | | 0.06 | | | 0.20 | | | 0.17 | |
Professional fees | | 0.02 | | | 0.02 | | | 0.05 | | | 0.02 | |
Bank loan provision/(benefit) for credit losses — Initial provision for credit losses on acquired loans | | 0.12 | | | — | | | 0.12 | | | — | |
Other: | | | | | | | | |
Amortization of identifiable intangible assets | | 0.04 | | | 0.03 | | | 0.11 | | | 0.07 | |
Initial provision for credit losses on acquired lending commitments | | 0.02 | | | — | | | 0.02 | | | — | |
All other acquisition-related expenses | | 0.02 | | | — | | | 0.05 | | | 0.01 | |
Total “Other” expense | | 0.08 | | | 0.03 | | | 0.18 | | | 0.08 | |
Total expenses related to acquisitions | | 0.30 | | | 0.11 | | | 0.55 | | | 0.27 | |
Losses on extinguishment of debt | | — | | | 0.46 | | | — | | | 0.46 | |
Tax effect of non-GAAP adjustments | | (0.07) | | | (0.14) | | | (0.13) | | | (0.18) | |
Total non-GAAP adjustments, net of tax | | 0.23 | | | 0.43 | | | 0.42 | | | 0.55 | |
Adjusted diluted earnings per common share | | $ | 1.61 | | | $ | 1.88 | | | $ | 5.41 | | | $ | 5.16 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | |
| | | | | | | | |
Return on common equity | | Three months ended | | Nine months ended |
$ in millions | | June 30, 2022 | | June 30, 2021 | | June 30, 2022 | | June 30, 2021 |
Average common equity | | $ | 8,999 | | | $ | 7,728 | | | $ | 8,711 | | | $ | 7,483 | |
Impact of non-GAAP adjustments on average common equity: | | | | | | | | |
Compensation, commissions and benefits: | | | | | | | | |
Acquisition-related retention | | 8 | | | 6 | | | 19 | | | 16 | |
Other acquisition-related compensation | | 1 | | | — | | | 1 | | | — | |
Total “Compensation, commissions and benefits” expense | | 9 | | | 6 | | | 20 | | | 16 | |
Professional fees | | 2 | | | 2 | | | 5 | | | 2 | |
Bank loan provision/(benefit) for credit losses — Initial provision for credit losses on acquired loans | | 13 | | | — | | | 7 | | | — | |
Other: | | | | | | | | |
Amortization of identifiable intangible assets | | 4 | | | 4 | | | 11 | | | 6 | |
Initial provision for credit losses on acquired lending commitments | | 3 | | | — | | | 1 | | | — | |
All other acquisition-related expenses | | 2 | | | — | | | 4 | | | 1 | |
Total “Other” expense | | 9 | | | 4 | | | 16 | | | 7 | |
Total expenses related to acquisitions | | 33 | | | 12 | | | 48 | | | 25 | |
Losses on extinguishment of debt | | — | | | 49 | | | — | | | 25 | |
Tax effect of non-GAAP adjustments | | (8) | | | (15) | | | (12) | | | (12) | |
Total non-GAAP adjustments, net of tax | | 25 | | | 46 | | | 36 | | | 38 | |
Adjusted average common equity | | $ | 9,024 | | | $ | 7,774 | | | $ | 8,747 | | | $ | 7,521 | |
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
Management’s Discussion and Analysis
| | | Three months ended | | Nine months ended | | Three months ended | | Nine months ended |
$ in millions | $ in millions | | June 30, 2022 | | June 30, 2021 | | June 30, 2022 | | June 30, 2021 | $ in millions | | June 30, 2023 | | June 30, 2022 | | June 30, 2023 | | June 30, 2022 |
Average common equity | Average common equity | | $ | 8,999 | | | $ | 7,728 | | | $ | 8,711 | | | $ | 7,483 | | Average common equity | | $ | 9,873 | | | $ | 8,999 | | | $ | 9,705 | | | $ | 8,711 | |
Less: | Less: | | Less: | |
Average goodwill and identifiable intangible assets, net | Average goodwill and identifiable intangible assets, net | | 1,460 | | | 865 | | | 1,169 | | | 791 | | Average goodwill and identifiable intangible assets, net | | 1,930 | | | 1,460 | | | 1,932 | | | 1,169 | |
Deferred tax liabilities related to goodwill and identifiable intangible assets, net | | (108) | | | (56) | | | (86) | | | (51) | | |
Average deferred tax liabilities related to goodwill and identifiable intangible assets, net | | Average deferred tax liabilities related to goodwill and identifiable intangible assets, net | | (128) | | | (108) | | | (128) | | | (86) | |
Average tangible common equity | Average tangible common equity | | $ | 7,647 | | | $ | 6,919 | | | $ | 7,628 | | | $ | 6,743 | | Average tangible common equity | | $ | 8,071 | | | $ | 7,647 | | | $ | 7,901 | | | $ | 7,628 | |
Impact of non-GAAP adjustments on average tangible common equity: | Impact of non-GAAP adjustments on average tangible common equity: | | Impact of non-GAAP adjustments on average tangible common equity: | |
Compensation, commissions and benefits: | Compensation, commissions and benefits: | | Compensation, commissions and benefits: | |
| Acquisition-related retention | Acquisition-related retention | | 8 | | | 6 | | | 19 | | | 16 | | Acquisition-related retention | | 9 | | | 8 | | | 27 | | | 19 | |
Other acquisition-related compensation | Other acquisition-related compensation | | 1 | | | — | | | 1 | | | — | | Other acquisition-related compensation | | 4 | | | 1 | | | 2 | | | 1 | |
Total “Compensation, commissions and benefits” expense | Total “Compensation, commissions and benefits” expense | | 9 | | | 6 | | | 20 | | | 16 | | Total “Compensation, commissions and benefits” expense | | 13 | | | 9 | | | 29 | | | 20 | |
Professional fees | Professional fees | | 2 | | | 2 | | | 5 | | | 2 | | Professional fees | | 1 | | | 2 | | | — | | | 5 | |
Bank loan provision/(benefit) for credit losses — Initial provision for credit losses on acquired loans | | 13 | | | — | | | 7 | | | — | | |
Bank loan provision for credit losses — Initial provision for credit losses on acquired loans | | Bank loan provision for credit losses — Initial provision for credit losses on acquired loans | | — | | | 13 | | | — | | | 7 | |
Other: | Other: | | Other: | |
Amortization of identifiable intangible assets | Amortization of identifiable intangible assets | | 4 | | | 4 | | | 11 | | | 6 | | Amortization of identifiable intangible assets | | 6 | | | 4 | | | 17 | | | 11 | |
Initial provision for credit losses on acquired lending commitments | Initial provision for credit losses on acquired lending commitments | | 3 | | | — | | | 1 | | | — | | Initial provision for credit losses on acquired lending commitments | | — | | | 3 | | | — | | | 1 | |
All other acquisition-related expenses | All other acquisition-related expenses | | 2 | | | — | | | 4 | | | 1 | | All other acquisition-related expenses | | — | | | 2 | | | — | | | 4 | |
Total “Other” expense | Total “Other” expense | | 9 | | | 4 | | | 16 | | | 7 | | Total “Other” expense | | 6 | | | 9 | | | 17 | | | 16 | |
Total expenses related to acquisitions | Total expenses related to acquisitions | | 33 | | | 12 | | | 48 | | | 25 | | Total expenses related to acquisitions | | 20 | | | 33 | | | 46 | | | 48 | |
Losses on extinguishment of debt | | — | | | 49 | | | — | | | 25 | | |
Other — Insurance settlement received | | Other — Insurance settlement received | | — | | | — | | | (24) | | | — | |
Tax effect of non-GAAP adjustments | Tax effect of non-GAAP adjustments | | (8) | | | (15) | | | (12) | | | (12) | | Tax effect of non-GAAP adjustments | | (5) | | | (8) | | | (5) | | | (12) | |
Total non-GAAP adjustments, net of tax | Total non-GAAP adjustments, net of tax | | 25 | | | 46 | | | 36 | | | 38 | | Total non-GAAP adjustments, net of tax | | 15 | | | 25 | | | 17 | | | 36 | |
Adjusted average tangible common equity | Adjusted average tangible common equity | | $ | 7,672 | | | $ | 6,965 | | | $ | 7,664 | | | $ | 6,781 | | Adjusted average tangible common equity | | $ | 8,086 | | | $ | 7,672 | | | $ | 7,918 | | | $ | 7,664 | |
| Return on common equity | Return on common equity | | 13.3 | % | | 15.9 | % | | 16.3 | % | | 17.4 | % | Return on common equity | | 14.9 | % | | 13.3 | % | | 17.9 | % | | 16.3 | % |
Adjusted return on common equity | Adjusted return on common equity | | 15.4 | % | | 20.5 | % | | 17.6 | % | | 19.3 | % | Adjusted return on common equity | | 16.1 | % | | 15.4 | % | | 18.5 | % | | 17.6 | % |
Return on tangible common equity | Return on tangible common equity | | 15.6 | % | | 17.7 | % | | 18.7 | % | | 19.3 | % | Return on tangible common equity | | 18.3 | % | | 15.6 | % | | 22.0 | % | | 18.7 | % |
Adjusted return on tangible common equity | Adjusted return on tangible common equity | | 18.1 | % | | 22.9 | % | | 20.1 | % | | 21.4 | % | Adjusted return on tangible common equity | | 19.7 | % | | 18.1 | % | | 22.7 | % | | 20.1 | % |
Total compensation ratio is computed by dividing compensation, commissions and benefits expense by net revenues for each respective period. Adjusted total compensation ratio is computed by dividing adjusted compensation, commissions and benefits expense by net revenues for each respective period.
Tangible common equity is computed by subtracting goodwill and identifiable intangible assets, net, along with the associated deferred tax liabilities, from total common equity attributable to RJF. Average common equity for the quarter-to-date period is computed by adding the total common equity attributable to RJF as of the date indicated to the prior quarter-end total, and dividing by two, or in the case of average tangible common equity, computed by adding tangible common equity as of the date indicated to the prior quarter-end total, and dividing by two. Average common equity for the year-to-date period is computed by adding the total common equity attributable to RJF as of each quarter-end date during the indicated year-to-date period to the beginning of the year total, and dividing by four, or in the case of average tangible common equity, computed by adding tangible common equity as of each quarter-end date during the indicated year-to-date period to the beginning of the year total, and dividing by four. Adjusted average common equity is computed by adjusting for the impact on average common equity of the non-GAAP adjustments, as applicable for each respective period. Adjusted average tangible common equity is computed by adjusting for the impact on average tangible common equity of the non-GAAP adjustments, as applicable for each respective period.
ROCE is computed by dividing annualized net income available to common shareholders for the period indicated by average common equity for each respective period or, in the case of ROTCE, computed by dividing annualized net income available to common shareholders by average tangible common equity for each respective period. Adjusted return on common equityROCE is computed by dividing annualized adjusted net income available to common shareholders by adjusted average common equity for each respective period, or in the case of adjusted return on tangible common equity,ROTCE, computed by dividing annualized adjusted net income available to common shareholders by adjusted average tangible common equity for each respective period.
| | | | | | | | |
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Management’s Discussion and Analysis
Management’s Discussion and Analysis | |
SEGMENTS
We currently operate through the following five segments: PCG; Capital Markets; Asset Management; Bank; and Other.
The following table presents our consolidated and segment net revenues and pre-tax income/(loss) for the periods indicated.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three months ended June 30, | | Nine months ended June 30, |
$ in millions | | 2022 | | 2021 | | % change | | 2022 | | 2021 | | % change |
Total company | | | | | | | | | | | | |
Net revenues | | $ | 2,718 | | | $ | 2,471 | | | 10 | % | | $ | 8,172 | | | $ | 7,065 | | | 16 | % |
Pre-tax income | | $ | 415 | | | $ | 385 | | | 8 | % | | $ | 1,406 | | | $ | 1,231 | | | 14 | % |
| | | | | | | | | | | | |
Private Client Group | | | | | | | | | | | | |
Net revenues | | $ | 1,958 | | | $ | 1,696 | | | 15 | % | | $ | 5,719 | | | $ | 4,810 | | | 19 | % |
Pre-tax income | | $ | 251 | | | $ | 195 | | | 29 | % | | $ | 659 | | | $ | 527 | | | 25 | % |
| | | | | | | | | | | | |
Capital Markets | | | | | | | | | | | | |
Net revenues | | $ | 383 | | | $ | 446 | | | (14) | % | | $ | 1,410 | | | $ | 1,331 | | | 6 | % |
Pre-tax income | | $ | 61 | | | $ | 115 | | | (47) | % | | $ | 349 | | | $ | 349 | | | — | % |
| | | | | | | | | | | | |
Asset Management | | | | | | | | | | | | |
Net revenues | | $ | 228 | | | $ | 225 | | | 1 | % | | $ | 698 | | | $ | 629 | | | 11 | % |
Pre-tax income | | $ | 93 | | | $ | 105 | | | (11) | % | | $ | 303 | | | $ | 275 | | | 10 | % |
| | | | | | | | | | | | |
Bank | | | | | | | | | | | | |
Net revenues | | $ | 276 | | | $ | 169 | | | 63 | % | | $ | 656 | | | $ | 496 | | | 32 | % |
Pre-tax income | | $ | 74 | | | $ | 104 | | | (29) | % | | $ | 259 | | | $ | 286 | | | (9) | % |
| | | | | | | | | | | | |
Other | | | | | | | | | | | | |
Net revenues | | $ | (21) | | | $ | 2 | | | NM | | $ | (54) | | | $ | (6) | | | (800) | % |
Pre-tax loss | | $ | (64) | | | $ | (134) | | | 52 | % | | $ | (164) | | | $ | (206) | | | 20 | % |
| | | | | | | | | | | | |
Intersegment eliminations | | | | | | | | | | | | |
Net revenues | | $ | (106) | | | $ | (67) | | | (58) | % | | $ | (257) | | | $ | (195) | | | (32) | % |
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
Management’s Discussion and Analysis
NET INTEREST ANALYSIS
Largely in response to inflationary pressures and, to a lesser extent, given the improved economic and employment conditions since the beginning of the COVID-19 pandemic,fiscal year 2022, the Fed has rapidly and consistently increased its benchmark short-term interest rates from the near-zero interest rates at the beginning ofcommencing in March 2022 and continuing into our fiscal third quarter of 2023. Over this period, the Fed has increased the Fed funds target rate from a March 31, 2022 range of 0.25% to 0.50% to a June 30, 2023 range of 2.25%5.00% to 2.50%5.25%. The Fed has further increased the Fed funds target rate by 25 basis points in late July 2022. The Fed2023 and indicated that it intends to closely monitor short-term interest rates throughthroughout the remainder of our fiscal 2022 and into our fiscal 2023. The following table details the Fed’s recent short-term interest rate activity.
| | | | | | | | | | | | | | | | | | | | |
|
| | | | | | Fed Funds Target Rate Schedule |
FiscalRJF fiscal quarter ended | | DateEffective date of interest rate action | | IncreaseIncrease/(decrease) in interest rates (in basis points) | | Fed funds target rate |
March 31 2020 | | March 16, 2020 | | (100) | | 0.00% - 0.25% |
March 31, 2022 | | March 17, 2022 | | 25 | | 0.25% - 0.50% |
June 30, 2022 | | May 5, 2022 | | 50 | | 0.75% - 1.00% |
June 30, 2022 | | June 16, 2022 | | 75 | | 1.50% - 1.75% |
Rate changes subsequent to June 30, 2022 | | | | |
September 30, 2022 | | July 28, 2022 | | 75 | | 2.25% - 2.50% |
September 30, 2022 | | September 22, 2022 | | 75 | | 3.00% - 3.25% |
December 31, 2022 | | November 3, 2022 | | 75 | | 3.75% - 4.00% |
December 31, 2022 | | December 15, 2022 | | 50 | | 4.25% - 4.50% |
March 31, 2023 | | February 2, 2023 | | 25 | | 4.50% - 4.75% |
March 31, 2023 | | March 23, 2023 | | 25 | | 4.75% - 5.00% |
June 30, 2023 | | May 4, 2023 | | 25 | | 5.00% - 5.25% |
Rate changes subsequent to June 30, 2023 |
September 30, 2023 | | July 27, 2023 | | 25 | | 5.25% - 5.50% |
These increases in short-term interest rates in March, May and June of 2022 positively impacted our net interest income during our fiscal third quarter of 2022, as well as the fee income we earn from third-party banks on client cash balances swept to such banks as part of the RJBDP (included in account and service fees), which are also sensitive to changes in interest rates. We expect our fiscal fourth quarter of 2022 results to further benefit from a full quarter’s impact of the May and June 2022 interest rate increases, as well as two months of the 75-basis point increase in July 2022.
Given the relationship between our interest-sensitive assets and liabilities (primarily held in our PCG, Bank, and Other segments) and the nature of fees we earn from third-party banks on client cash balances swept to such banks as part of the RJBDP increases(included in account and service fees), our financial results are sensitive to changes in interest rates. Increases in short-term interest rates generally result in an increase in our net earnings, although the magnitude of the impact to our net interest margin depends on the yields on interest-earning assets relative to the cost of interest-bearing liabilities, including deposit rates paid to clients on their cash balances. Our domestic client cash sweep balances continue to represent a relatively low-cost funding source. In fiscal 2023, we introduced the Enhanced Savings Program to our clients as part of our strategy to diversify our funding sources, albeit at a higher relative cost than other alternatives. Changes to the regulatory landscape governing the fees the firm earns on client assets, including cash sweep balances, as well as other market driven factors, could negatively impact our earnings.
As a result of our diverse funding sources and high concentration of floating-rate assets, we believe we are well-positioned forbenefited from the increases in short-term interest rates during the second half of fiscal 2022 and continuing into the three and nine months ended June 30, 2023. However, despite recent increases in short-term interest rates, our net interest earningsincome and net interest margin decreased during our fiscal third quarter of 2023 compared with the preceding quarter due to a more rapid increase in deposit costs than in recent periods due to growth in the Enhanced Savings Program. Despite an additional 25-basis point increase in the Fed funds target rate in July 2023 and higher RJBDP balances swept to third-party banks, we expect our combined net interest income and RJBDP fees from third-party banks to further decline an estimated 5% in our fiscal fourth quarter compared to the fiscal third quarter of 2023, due to lower net interest income in our Bank segment largely resulting from higher interest expense associated with the continued success of our Enhanced Savings Program. Further, we expect to continue to carry a relatively higher level of cash balances in our Bank segment due to market conditions. In addition, our pace of loan growth may continue to be favorably impactedmuted, or otherwise fluctuate over time in response to a number of factors which include changes in interest rates, credit spreads, and other market factors, which may moderate growth in interest income generated by loans in the recent, as well as any additional, increasesBank segment in short-term rates.the near-term.
Refer to the discussion of our net interest income within the “Management’s Discussion and Analysis - Results of Operations” of our PCG, Bank, and Other segments, where applicable. Also refer to “Management’s Discussion and Analysis - Results of Operations - Private Client Group - Clients’ domestic cash sweep balances” for further information on the RJBDP.
| | | | | | | | |
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Management’s Discussion and Analysis
Management’s Discussion and Analysis | |
The following table presents our consolidated average interest-earning asset and interest-bearing liability balances, interest income and expense and the related yields and rates.
Quarter ended June 30, 20222023 compared with the quarter ended June 30, 20212022
| | | | Three months ended June 30, | | | Three months ended June 30, |
| | | 2022 | | 2021 | | | 2023 | | | 2022 |
$ in millions | $ in millions | | Average daily balance | | Interest | | Annualized average rate | | Average daily balance | | Interest | | Annualized average rate | $ in millions | | Average daily balance | | Interest | | Annualized average rate | | | Average daily balance | | Interest | | Annualized average rate |
Interest-earning assets: | Interest-earning assets: | | | | | | | | | | | | | Interest-earning assets: | | | | | | | | | | | | | |
Bank segment: | | Bank segment: | | | |
Cash and cash equivalents | Cash and cash equivalents | | $ | 5,548 | | $ | 10 | | | 0.76 | % | | $ | 5,644 | | | $ | 3 | | | 0.20 | % | Cash and cash equivalents | | $ | 5,502 | | $ | 70 | | 5.08 | % | | | $ | 1,603 | | $ | 3 | | 0.94 | % |
Assets segregated for regulatory purposes and restricted cash | | 17,337 | | 28 | | | 0.63 | % | | 9,016 | | | 3 | | | 0.16 | % | |
Available-for-sale securities | Available-for-sale securities | | 9,972 | | 37 | | | 1.47 | % | | 8,041 | | | 20 | | | 0.96 | % | Available-for-sale securities | | 10,737 | | 56 | | 2.07 | % | | | 9,972 | | 37 | | 1.47 | % |
Brokerage client receivables | | 2,555 | | 24 | | | 3.87 | % | | 2,363 | | | 19 | | | 3.33 | % | |
Loans held for sale and investment: (1) | | | | |
Loans held for sale and investment: (1) (2) | | Loans held for sale and investment: (1) (2) | | | |
Loans held for investment: | Loans held for investment: | | | | Loans held for investment: | | | |
SBL | | SBL | | 14,200 | | | 251 | | | 7.02 | % | | | 9,854 | | | 78 | | | 3.09 | % |
C&I loans | C&I loans | | 9,606 | | | 76 | | | 3.14 | % | | 7,936 | | | 50 | | | 2.51 | % | C&I loans | | 10,916 | | | 198 | | | 7.19 | % | | | 9,606 | | | 76 | | | 3.14 | % |
CRE loans | CRE loans | | 4,338 | | | 36 | | | 3.30 | % | | 2,748 | | | 18 | | | 2.59 | % | CRE loans | | 7,097 | | | 136 | | | 7.53 | % | | | 4,338 | | | 36 | | | 3.30 | % |
REIT loans | REIT loans | | 1,379 | | | 11 | | | 3.20 | % | | 1,327 | | | 9 | | | 2.53 | % | REIT loans | | 1,716 | | | 31 | | | 7.30 | % | | | 1,379 | | | 11 | | | 3.20 | % |
Tax-exempt loans | | 1,329 | | | 8 | | | 3.16 | % | | 1,294 | | | 9 | | | 3.33 | % | |
Residential mortgage loans | Residential mortgage loans | | 6,334 | | | 44 | | | 2.77 | % | | 5,126 | | | 34 | | | 2.70 | % | Residential mortgage loans | | 8,279 | | | 67 | | | 3.22 | % | | | 6,334 | | | 44 | | | 2.77 | % |
SBL and other | | 9,854 | | | 78 | | | 3.09 | % | | 5,208 | | | 29 | | | 2.22 | % | |
Tax-exempt loans (3) | | Tax-exempt loans (3) | | 1,629 | | | 11 | | | 3.17 | % | | | 1,329 | | | 8 | | | 3.16 | % |
| Loans held for sale | Loans held for sale | | 222 | | | 2 | | | 3.08 | % | | 142 | | | 1 | | | 2.92 | % | Loans held for sale | | 195 | | | 4 | | | 9.63 | % | | | 222 | | | 2 | | | 3.08 | % |
Total loans held for sale and investment | Total loans held for sale and investment | | 33,062 | | | 255 | | | 3.08 | % | | 23,781 | | | 150 | | | 2.54 | % | Total loans held for sale and investment | | 44,032 | | | 698 | | | 6.31 | % | | | 33,062 | | | 255 | | | 3.08 | % |
All other interest-earning assets | All other interest-earning assets | | 2,617 | | | 20 | | | 3.19 | % | | 2,288 | | | 10 | | | 1.51 | % | All other interest-earning assets | | 126 | | | 2 | | | 5.56 | % | | | 123 | | | 1 | | | 3.13 | % |
Interest-earning assets — Bank segment | | Interest-earning assets — Bank segment | | $ | 60,397 | | | $ | 826 | | | 5.44 | % | | | $ | 44,760 | | | $ | 296 | | | 2.64 | % |
All other segments: | | All other segments: | | | | | | | | | | | | | |
Cash and cash equivalents | | Cash and cash equivalents | | $ | 2,820 | | | $ | 39 | | | 5.51 | % | | | $ | 3,945 | | | $ | 7 | | | 0.63 | % |
Assets segregated for regulatory purposes and restricted cash | | Assets segregated for regulatory purposes and restricted cash | | 4,236 | | | 47 | | | 4.69 | % | | | 17,337 | | | 28 | | | 0.63 | % |
Trading assets — debt securities | | Trading assets — debt securities | | 1,025 | | | 13 | | | 5.00 | % | | | 377 | | | 4 | | | 4.87 | % |
Brokerage client receivables | | Brokerage client receivables | | 2,105 | | | 42 | | | 8.14 | % | | | 2,555 | | | 24 | | | 3.87 | % |
All other interest-earning assets | | All other interest-earning assets | | 1,830 | | | 20 | | | 3.52 | % | | | 2,117 | | | 15 | | | 2.90 | % |
Interest-earning assets — all other segments | | Interest-earning assets — all other segments | | $ | 12,016 | | | $ | 161 | | | 5.34 | % | | | $ | 26,331 | | | $ | 78 | | | 1.17 | % |
Total interest-earning assets | Total interest-earning assets | | $ | 71,091 | | | $ | 374 | | | 2.11 | % | | $ | 51,133 | | | $ | 205 | | | 1.60 | % | Total interest-earning assets | | $ | 72,413 | | | $ | 987 | | | 5.42 | % | | | $ | 71,091 | | | $ | 374 | | | 2.11 | % |
Interest-bearing liabilities: | Interest-bearing liabilities: | | | | | | | | | | | | | Interest-bearing liabilities: | | | | | | | | | | | | | |
Bank segment: | | Bank segment: | | | |
Bank deposits: | Bank deposits: | | | | Bank deposits: | | | |
Savings and money market accounts | | $ | 36,875 | | | $ | 11 | | | 0.12 | % | | $ | 28,744 | | | $ | — | | | 0.01 | % | |
Interest-bearing checking accounts | | 2,126 | | | 6 | | | 1.15 | % | | 164 | | | 1 | | | 1.83 | % | |
Money market and savings accounts | | Money market and savings accounts | | $ | 38,757 | | | $ | 130 | | | 1.35 | % | | | $ | 37,214 | | | $ | 11 | | | 0.12 | % |
Interest-bearing demand deposits | | Interest-bearing demand deposits | | 12,877 | | | 157 | | | 4.86 | % | | | 2,216 | | | 7 | | | 1.25 | % |
Certificates of deposit | Certificates of deposit | | 842 | | | 3 | | | 1.58 | % | | 883 | | | 4 | | | 1.91 | % | Certificates of deposit | | 2,806 | | | 30 | | | 4.24 | % | | | 842 | | | 3 | | | 1.58 | % |
Total bank deposits | | 39,843 | | | 20 | | | 0.21 | % | | 29,791 | | | 5 | | | 0.08 | % | |
Total bank deposits (4) | | Total bank deposits (4) | | 54,440 | | | 317 | | | 2.33 | % | | | 40,272 | | | 21 | | | 0.21 | % |
FHLB advances and all other interest-bearing liabilities | | FHLB advances and all other interest-bearing liabilities | | 1,478 | | | 12 | | | 3.18 | % | | | 1,114 | | | 5 | | | 1.73 | % |
Interest-bearing liabilities — Bank segment | | Interest-bearing liabilities — Bank segment | | $ | 55,918 | | | $ | 329 | | | 2.35 | % | | | $ | 41,386 | | | $ | 26 | | | 0.25 | % |
All other segments: | | All other segments: | | | | | | | | | | | | | |
Trading liabilities — debt securities | | Trading liabilities — debt securities | | $ | 703 | | | $ | 9 | | | 5.18 | % | | | $ | 164 | | | $ | 1 | | | 2.76 | % |
Brokerage client payables | Brokerage client payables | | 16,892 | | | 3 | | | 0.08 | % | | 10,486 | | | 1 | | | 0.03 | % | Brokerage client payables | | 5,184 | | | 17 | | | 1.48 | % | | | 16,892 | | | 3 | | | 0.08 | % |
Other borrowings | | 1,045 | | | 6 | | | 2.06 | % | | 860 | | | 4 | | | 2.19 | % | |
Senior notes payable | Senior notes payable | | 2,037 | | | 23 | | | 4.44 | % | | 2,211 | | | 25 | | | 4.49 | % | Senior notes payable | | 2,038 | | | 23 | | | 4.44 | % | | | 2,037 | | | 23 | | | 4.44 | % |
All other interest-bearing liabilities | | 1,025 | | | 8 | | | 2.39 | % | | 602 | | | 5 | | | 1.12 | % | |
All other interest-bearing liabilities (4) | | All other interest-bearing liabilities (4) | | 579 | | | 8 | | | 3.88 | % | | | 363 | | | 7 | | | 2.73 | % |
Interest-bearing liabilities — all other segments | | Interest-bearing liabilities — all other segments | | $ | 8,504 | | | $ | 57 | | | 2.66 | % | | | $ | 19,456 | | | $ | 34 | | | 0.70 | % |
Total interest-bearing liabilities | Total interest-bearing liabilities | | $ | 60,842 | | | $ | 60 | | | 0.40 | % | | $ | 43,950 | | | $ | 40 | | | 0.34 | % | Total interest-bearing liabilities | | $ | 64,422 | | | $ | 386 | | | 2.39 | % | | | $ | 60,842 | | | $ | 60 | | | 0.40 | % |
Net interest income | | | | $ | 314 | | | | | | | $ | 165 | | | | |
Firmwide net interest margin (net yield on interest-earning assets) | | | | 1.77 | % | | | | | 1.31 | % | |
Bank segment net interest margin | | 2.41 | % | | | 1.92 | % | |
Firmwide net interest income | | Firmwide net interest income | | | | $ | 601 | | | | | | | | $ | 314 | | | |
Net interest margin (net yield on interest-earning assets) | | Net interest margin (net yield on interest-earning assets) | | | | | | | |
Bank segment | | Bank segment | | 3.26 | % | | | | 2.41 | % |
Firmwide | | Firmwide | | 3.33 | % | | | | 1.77 | % |
(1) Loans are presented net of unamortized purchase discounts or premiums, unearned income, and deferred loanorigination fees and costs.costs, and charge-offs.
(2) Nonaccrual loans are included in the average loan balances in the preceding table.balances. Any payments received for corporate nonaccrual loans are applied entirely to principal. Interest income on residential mortgage nonaccrual loans is recognized on a cash basis.
(3) The yield on tax-exempt loans in the preceding table is presented on a taxable-equivalent basis utilizing the applicable federal statutory rates for each of the threeyears presented.
(4) The average balance, interest expense, and average rate for “Total bank deposits” included amounts associated with affiliate deposits. Such amounts are eliminated in consolidation and are offset in “All other interest-bearing liabilities” under “All other segments”.
| | | | | | | | |
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Management’s Discussion and Analysis | |
Increases and decreases in interest income and interest expense result from changes in average balances (volume) of interest-earning assets and interest-bearing liabilities, as well as changes in average interest rates. The following table shows the effect that these factors had on the interest earned on our interest-earning assets and the interest incurred on our interest-bearing liabilities. The effect of changes in volume is determined by multiplying the change in volume by the previous period’s average rate. Similarly, the effect of rate changes is calculated by multiplying the change in average rate by the previous period’s volume. Changes attributable to both volume and rate have been allocated proportionately.
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three months ended June 30, | | | | | | | |
| | 2023 compared to 2022 | | | |
| | Increase/(decrease) due to | | | |
$ in millions | | Volume | | Rate | | Total | | | | | | | |
Interest-earning assets: | | Interest income |
Bank segment: | | | | | | | | | | | | | |
Cash and cash equivalents | | $ | 10 | | | $ | 57 | | | $ | 67 | | | | | | | | |
Available-for-sale securities | | 4 | | | 15 | | | 19 | | | | | | | | |
Loans held for sale and investment: | | | | | | | | | | | | | |
Loans held for investment: | | | | | | | | | | | | | |
SBL | | 52 | | | 121 | | | 173 | | | | | | | | |
C&I loans | | 13 | | | 109 | | | 122 | | | | | | | | |
CRE loans | | 37 | | | 63 | | | 100 | | | | | | | | |
REIT loans | | 3 | | | 17 | | | 20 | | | | | | | | |
Residential mortgage loans | | 14 | | | 9 | | | 23 | | | | | | | | |
Tax-exempt loans | | 3 | | | — | | | 3 | | | | | | | | |
| | | | | | | | | | | | | |
Loans held for sale | | — | | | 2 | | | 2 | | | | | | | | |
Total loans held for sale and investment | | 122 | | | 321 | | | 443 | | | | | | | | |
All other interest-earning assets | | — | | | 1 | | | 1 | | | | | | | | |
Interest-earning assets — Bank segment | | $ | 136 | | | $ | 394 | | | $ | 530 | | | | | | | | |
All other segments: | | | | | | | | | | | | | |
Cash and cash equivalents | | $ | (2) | | | $ | 34 | | | $ | 32 | | | | | | | | |
Assets segregated for regulatory purposes and restricted cash | | (35) | | | 54 | | | 19 | | | | | | | | |
Trading assets — debt securities | | 10 | | | (1) | | | 9 | | | | | | | | |
Brokerage client receivables | | (3) | | | 21 | | | 18 | | | | | | | | |
All other interest-earning assets | | (6) | | | 11 | | | 5 | | | | | | | | |
Interest-earning assets — all other segments | | $ | (36) | | | $ | 119 | | | $ | 83 | | | | | | | | |
Total interest-earning assets | | $ | 100 | | | $ | 513 | | | $ | 613 | | | | | | | | |
| | | | | | | | | | | | | |
Interest-bearing liabilities: | | Interest expense |
Bank segment: | | | | | | | | | | | | | |
Bank deposits: | | | | | | | | | | | | | |
Money market and savings accounts | | $ | 3 | | | $ | 116 | | | $ | 119 | | | | | | | | |
Interest-bearing demand deposits | | 88 | | | 62 | | | 150 | | | | | | | | |
Certificates of deposit | | 15 | | | 12 | | | 27 | | | | | | | | |
Total bank deposits | | 106 | | | 190 | | | 296 | | | | | | | | |
FHLB advances and all other interest-bearing liabilities | | 2 | | | 5 | | | 7 | | | | | | | | |
Interest-bearing liabilities — Bank segment | | $ | 108 | | | $ | 195 | | | $ | 303 | | | | | | | | |
All other segments: | | | | | | | | | | | | | |
Trading liabilities — debt securities | | $ | 7 | | | $ | 1 | | | $ | 8 | | | | | | | | |
Brokerage client payables | | (3) | | | 17 | | | 14 | | | | | | | | |
| | | | | | | | | | | | | |
All other interest-bearing liabilities | | 17 | | | (16) | | | 1 | | | | | | | | |
Interest-bearing liabilities — all other segments | | $ | 21 | | | $ | 2 | | | $ | 23 | | | | | | | | |
Total interest-bearing liabilities | | $ | 129 | | | $ | 197 | | | $ | 326 | | | | | | | | |
Change in firmwide net interest income | | $ | (29) | | | $ | 316 | | | $ | 287 | | | | | | | | |
| | | | | | | | |
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Management’s Discussion and Analysis | |
Nine months ended June 30, 2023 compared with the nine months ended June 30, 2022
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Nine months ended June 30, |
| | 2023 | | | 2022 |
$ in millions | | Average daily balance | | Interest | | Annualized average rate | | | Average daily balance | | Interest | | Annualized average rate |
Interest-earning assets: | | | | | | | | | | | | | |
Bank segment: | | | | | | | | | | | | | |
Cash and cash equivalents | | $ | 3,637 | | $ | 128 | | 4.66 | % | | | $ | 1,785 | | $ | 5 | | 0.42 | % |
Available-for-sale securities | | 10,886 | | 163 | | 1.99 | % | | | 9,116 | | 84 | | 1.23 | % |
Loans held for sale and investment: (1) (2) | | | | | | | | | | | | | |
Loans held for investment: | | | | | | | | | | | | | |
SBL | | 14,580 | | | 717 | | | 6.49 | % | | | 7,630 | | | 152 | | | 2.62 | % |
C&I loans | | 11,109 | | | 555 | | | 6.59 | % | | | 8,989 | | | 185 | | | 2.72 | % |
CRE loans | | 6,951 | | | 369 | | | 6.99 | % | | | 3,476 | | | 76 | | | 2.90 | % |
REIT loans | | 1,671 | | | 86 | | | 6.80 | % | | | 1,278 | | | 27 | | | 2.76 | % |
Residential mortgage loans | | 7,960 | | | 186 | | | 3.12 | % | | | 5,851 | | | 119 | | | 2.69 | % |
Tax-exempt loans (3) | | 1,625 | | | 31 | | | 3.13 | % | | | 1,305 | | | 25 | | | 3.18 | % |
| | | | | | | | | | | | | |
Loans held for sale | | 184 | | | 10 | | | 7.46 | % | | | 243 | | | 6 | | | 2.98 | % |
Total loans held for sale and investment | | 44,080 | | | 1,954 | | | 5.88 | % | | | 28,772 | | | 590 | | | 2.73 | % |
All other interest-earning assets | | 141 | | | 6 | | | 5.54 | % | | | 127 | | | 3 | | | 2.66 | % |
Interest-earning assets — Bank segment | | $ | 58,744 | | | $ | 2,251 | | | 5.08 | % | | | $ | 39,800 | | | $ | 682 | | | 2.28 | % |
All other segments: | | | | | | | | | | | | | |
Cash and cash equivalents | | $ | 3,084 | | | $ | 111 | | | 4.81 | % | | | $ | 4,034 | | | $ | 11 | | | 0.35 | % |
Assets segregated for regulatory purposes and restricted cash | | 5,125 | | | 152 | | | 3.96 | % | | | 15,879 | | | 39 | | | 0.32 | % |
Trading assets — debt securities | | 1,055 | | | 40 | | | 5.05 | % | | | 452 | | | 13 | | | 3.90 | % |
Brokerage client receivables | | 2,236 | | | 124 | | | 7.46 | % | | | 2,533 | | | 66 | | | 3.50 | % |
All other interest-earning assets | | 1,829 | | | 51 | | | 3.25 | % | | | 1,892 | | | 30 | | | 2.20 | % |
Interest-earning assets — all other segments | | $ | 13,329 | | | $ | 478 | | | 4.73 | % | | | $ | 24,790 | | | $ | 159 | | | 0.86 | % |
Total interest-earning assets | | $ | 72,073 | | | $ | 2,729 | | | 5.02 | % | | | $ | 64,590 | | | $ | 841 | | | 1.74 | % |
Interest-bearing liabilities: | | | | | | | | | | | | | |
Bank segment: | | | | | | | | | | | | | |
Bank deposits: | | | | | | | | | | | | | |
Money market and savings accounts | | $ | 42,828 | | | $ | 383 | | | 1.20 | % | | | $ | 34,099 | | | $ | 12 | | | 0.05 | % |
Interest-bearing demand deposits | | 7,881 | | | 266 | | | 4.49 | % | | | 909 | | | 10 | | | 1.26 | % |
Certificates of deposit | | 1,960 | | | 54 | | | 3.66 | % | | | 806 | | | 10 | | | 1.76 | % |
Total bank deposits (4) | | 52,669 | | | 703 | | | 1.78 | % | | | 35,814 | | | 32 | | | 0.12 | % |
FHLB advances and all other interest-bearing liabilities | | 1,408 | | | 30 | | | 2.82 | % | | | 928 | | | 14 | | | 2.06 | % |
Interest-bearing liabilities — Bank segment | | $ | 54,077 | | | $ | 733 | | | 1.81 | % | | | $ | 36,742 | | | $ | 46 | | | 0.17 | % |
All other segments: | | | | | | | | | | | | | |
Trading liabilities — debt securities | | $ | 736 | | | $ | 26 | | | 4.80 | % | | | $ | 179 | | | $ | 3 | | | 1.97 | % |
Brokerage client payables | | 6,291 | | | 57 | | | 1.25 | % | | | 16,741 | | | 4 | | | 0.03 | % |
Senior notes payable | | 2,038 | | | 69 | | | 4.44 | % | | | 2,037 | | | 69 | | | 4.44 | % |
All other interest-bearing liabilities (4) | | 655 | | | 26 | | | 4.06 | % | | | 231 | | | 13 | | | 7.45 | % |
Interest-bearing liabilities — all other segments | | $ | 9,720 | | | $ | 178 | | | 2.38 | % | | | $ | 19,188 | | | $ | 89 | | | 0.61 | % |
Total interest-bearing liabilities | | $ | 63,797 | | | $ | 911 | | | 1.90 | % | | | $ | 55,930 | | | $ | 135 | | | 0.32 | % |
Firmwide net interest income | | | | $ | 1,818 | | | | | | | | $ | 706 | | | |
Net interest margin (net yield on interest-earning assets) | | | | | | | | | | | | | |
Bank segment | | | | | | 3.41 | % | | | | | | | 2.14 | % |
Firmwide | | | | | | 3.37 | % | | | | | | | 1.46 | % |
(1) Loans are presented net of unamortized discounts, unearned income, deferred loan fees and 2021.costs, and charge-offs.
(2) Nonaccrual loans are included in the average loan balances. Any payments received for corporate nonaccrual loans are applied entirely to principal. Interest income on residential mortgage nonaccrual loans is recognized on a cash basis.
(3) The yield on tax-exempt loans in the preceding table is presented on a taxable-equivalent basis utilizing the applicable federal statutory rates for each of the years presented.
(4) The average balance, interest expense, and average rate for “Total bank deposits” included amounts associated with affiliate deposits. Such amounts are eliminated in consolidation and are offset in “All other interest-bearing liabilities” under “All other segments”.
| | | | | | | | |
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Management’s Discussion and Analysis
Management’s Discussion and Analysis | |
Increases and decreases in interest income and interest expense result from changes in average balances (volume) of interest-earning assets and interest-bearing liabilities, as well as changes in average interest rates. The following table shows the effect that these factors had on the interest earned on our interest-earning assets and the interest incurred on our interest-bearing liabilities. The effect of changes in volume is determined by multiplying the change in volume by the previous period’s average yield/cost. Similarly, the effect of rate changes is calculated by multiplying the change in average yield/cost by the previous period’s volume. Changes attributable to both volume and rate have been allocated proportionately.
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three months ended June 30, | | | | | | | |
| | 2022 compared to 2021 | | | |
| | Increase/(decrease) due to | | | |
$ in millions | | Volume | | Rate | | Total | | | | | | | |
Interest income: | | | | | | | | | | | | | |
Interest-earning assets: | | | | | | | | | | | | | |
Cash and cash equivalents | | $ | — | | | $ | 7 | | | $ | 7 | | | | | | | | |
Assets segregated for regulatory purposes and restricted cash | | 4 | | | 21 | | | 25 | | | | | | | | |
Available-for-sale securities | | 5 | | | 12 | | | 17 | | | | | | | | |
Brokerage client receivables | | 2 | | | 3 | | | 5 | | | | | | | | |
Loans held for sale and investment: (1) | | | | | | | | | | | | | |
Loans held for investment: | | | | | | | | | | | | | |
C&I loans | | 11 | | | 15 | | | 26 | | | | | | | | |
CRE loans | | 11 | | | 7 | | | 18 | | | | | | | | |
REIT loans | | — | | | 2 | | | 2 | | | | | | | | |
Tax-exempt loans | | — | | | (1) | | | (1) | | | | | | | | |
Residential mortgage loans | | 9 | | | 1 | | | 10 | | | | | | | | |
SBL and other | | 27 | | | 22 | | | 49 | | | | | | | | |
Loans held for sale | | 1 | | | — | | | 1 | | | | | | | | |
Total loans held for sale and investment | | 59 | | | 46 | | | 105 | | | | | | | | |
All other interest-earning assets | | 2 | | | 8 | | | 10 | | | | | | | | |
Total interest-earning assets | | $ | 72 | | | $ | 97 | | | $ | 169 | | | | | | | | |
Interest expense: | | | | | | | | | | | | | |
Interest-bearing liabilities: | | | | | | | | | | | | | |
Bank deposits: | | | | | | | | | | | | | |
Savings and money market accounts | | $ | 2 | | | $ | 9 | | | $ | 11 | | | | | | | | |
Interest-bearing checking accounts | | 10 | | | (5) | | | 5 | | | | | | | | |
Certificates of deposit | | — | | | (1) | | | (1) | | | | | | | | |
Total bank deposits | | 12 | | | 3 | | | 15 | | | | | | | | |
Brokerage client payables | | — | | | 2 | | | 2 | | | | | | | | |
Other borrowings | | 2 | | | — | | | 2 | | | | | | | | |
Senior notes payable | | (2) | | | — | | | (2) | | | | | | | | |
All other interest-bearing liabilities | | 1 | | | 2 | | | 3 | | | | | | | | |
Total interest-bearing liabilities | | $ | 13 | | | $ | 7 | | | $ | 20 | | | | | | | | |
Change in net interest income | | $ | 59 | | | $ | 90 | | | $ | 149 | | | | | | | | |
(1) Loans are presented net of unamortized discounts, unearned income, and deferred loan fees and costs.
| | | | | | | | | | | | | | | | | | | | |
| | Nine months ended June 30, |
| | 2023 compared to 2022 |
| | Increase/(decrease) due to |
$ in millions | | Volume | | Rate | | Total |
Interest-earning assets: | | Interest income |
Bank segment: | | | | | | |
Cash and cash equivalents | | $ | 12 | | | $ | 111 | | | $ | 123 | |
Available-for-sale securities | | 19 | | | 60 | | | 79 | |
Loans held for sale and investment: | | | | | | |
Loans held for investment: | | | | | | |
SBL | | 215 | | | 350 | | | 565 | |
C&I loans | | 53 | | | 317 | | | 370 | |
CRE loans | | 122 | | | 171 | | | 293 | |
REIT loans | | 10 | | | 49 | | | 59 | |
Residential mortgage loans | | 47 | | | 20 | | | 67 | |
Tax-exempt loans | | 7 | | | (1) | | | 6 | |
| | | | | | |
Loans held for sale | | (3) | | | 7 | | | 4 | |
Total loans held for sale and investment | | 451 | | | 913 | | | 1,364 | |
All other interest-earning assets | | — | | | 3 | | | 3 | |
Interest-earning assets — Bank segment | | $ | 482 | | | $ | 1,087 | | | $ | 1,569 | |
All other segments: | | | | | | |
Cash and cash equivalents | | $ | (4) | | | $ | 104 | | | $ | 100 | |
Assets segregated for regulatory purposes and restricted cash | | (61) | | | 174 | | | 113 | |
Trading assets — debt securities | | 22 | | | 5 | | | 27 | |
Brokerage client receivables | | (14) | | | 72 | | | 58 | |
All other interest-earning assets | | (1) | | | 22 | | | 21 | |
Interest-earning assets — all other segments | | $ | (58) | | | $ | 377 | | | $ | 319 | |
Total interest-earning assets | | $ | 424 | | | $ | 1,464 | | | $ | 1,888 | |
| | | | | | |
Interest-bearing liabilities: | | Interest expense |
Bank segment: | | | | | | |
Bank deposits: | | | | | | |
Money market and savings accounts | | $ | 4 | | | $ | 367 | | | $ | 371 | |
Interest-bearing demand deposits | | 192 | | | 64 | | | 256 | |
Certificates of deposit | | 25 | | | 19 | | | 44 | |
Total bank deposits | | 221 | | | 450 | | | 671 | |
FHLB advances and all other interest-bearing liabilities | | 9 | | | 7 | | | 16 | |
Interest-bearing liabilities — Bank segment | | $ | 230 | | | $ | 457 | | | $ | 687 | |
All other segments: | | | | | | |
Trading liabilities — debt securities | | $ | 16 | | | $ | 7 | | | $ | 23 | |
Brokerage client payables | | (5) | | | 58 | | | 53 | |
| | | | | | |
All other interest-bearing liabilities | | 21 | | | (8) | | | 13 | |
Interest-bearing liabilities — all other segments | | $ | 32 | | | $ | 57 | | | $ | 89 | |
Total interest-bearing liabilities | | $ | 262 | | | $ | 514 | | | $ | 776 | |
Change in firmwide net interest income | | $ | 162 | | | $ | 950 | | | $ | 1,112 | |
| | | | | | | | |
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Management’s Discussion and Analysis
Management’s Discussion and Analysis | |
Nine months ended June 30, 2022 compared with the nine months ended June 30, 2021
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Nine months ended June 30, |
| | 2022 | | 2021 |
$ in millions | | Average daily balance | | Interest | | Annualized average rate | | Average daily balance | | Interest | | Annualized average rate |
Interest-earning assets: | | | | | | | | | | | | |
Cash and cash equivalents | | $ | 5,819 | | | $ | 16 | | | 0.37 | % | | $ | 5,548 | | | $ | 9 | | | 0.22 | % |
Assets segregated for regulatory purposes and restricted cash | | 15,879 | | | 39 | | | 0.32 | % | | 8,307 | | | 11 | | | 0.18 | % |
Available-for-sale securities | | 9,116 | | | 84 | | | 1.23 | % | | 7,837 | | | 64 | | | 1.08 | % |
Brokerage client receivables | | 2,533 | | | 66 | | | 3.50 | % | | 2,222 | | | 56 | | | 3.38 | % |
Loans held for sale and investment: (1) | | | | | | | | | | | | |
Loans held for investment: | | | | | | | | | | | | |
C&I loans | | 8,989 | | | 185 | | | 2.72 | % | | 7,670 | | | 149 | | | 2.57 | % |
CRE loans | | 3,476 | | | 76 | | | 2.90 | % | | 2,665 | | | 52 | | | 2.57 | % |
REIT loans | | 1,278 | | | 27 | | | 2.76 | % | | 1,290 | | | 25 | | | 2.49 | % |
Tax-exempt loans | | 1,305 | | | 25 | | | 3.18 | % | | 1,253 | | | 25 | | | 3.34 | % |
Residential mortgage loans | | 5,850 | | | 119 | | | 2.72 | % | | 5,044 | | | 103 | | | 2.73 | % |
SBL and other | | 7,630 | | | 152 | | | 2.62 | % | | 4,709 | | | 80 | | | 2.24 | % |
Loans held for sale | | 243 | | | 6 | | | 2.98 | % | | 153 | | | 3 | | | 2.54 | % |
Total loans held for sale and investment | | 28,771 | | | 590 | | | 2.74 | % | | 22,784 | | | 437 | | | 2.57 | % |
All other interest-earning assets | | 2,472 | | | 46 | | | 2.52 | % | | 2,264 | | | 31 | | | 1.79 | % |
Total interest-earning assets | | $ | 64,590 | | | $ | 841 | | | 1.74 | % | | $ | 48,962 | | | $ | 608 | | | 1.66 | % |
Interest-bearing liabilities: | | | | | | | | | | | | |
Bank deposits: | | | | | | | | | | | | |
Savings and money market accounts | | $ | 33,807 | | | $ | 13 | | | 0.05 | % | | $ | 27,573 | | | $ | 2 | | | 0.01 | % |
Interest-bearing checking accounts | | 833 | | | 8 | | | 1.21 | % | | 159 | | | 2 | | | 1.88 | % |
Certificates of deposit | | 806 | | | 10 | | | 1.76 | % | | 911 | | | 13 | | | 1.90 | % |
Total bank deposits | | 35,446 | | | 31 | | | 0.12 | % | | 28,643 | | | 17 | | | 0.08 | % |
Brokerage client payables | | 16,741 | | | 4 | | | 0.03 | % | | 9,765 | | | 3 | | | 0.03 | % |
Other borrowings | | 919 | | | 15 | | | 2.13 | % | | 863 | | | 14 | | | 2.20 | % |
Senior notes payable | | 2,037 | | | 69 | | | 4.44 | % | | 2,115 | | | 73 | | | 4.62 | % |
All other interest-bearing liabilities | | 787 | | | 16 | | | 2.08 | % | | 591 | | | 8 | | | 1.05 | % |
Total interest-bearing liabilities | | $ | 55,930 | | | $ | 135 | | | 0.32 | % | | $ | 41,977 | | | $ | 115 | | | 0.36 | % |
Net interest income | | | | $ | 706 | | | | | | | $ | 493 | | | |
Firmwide net interest margin (net yield on interest-earning assets) | | | | | | 1.46 | % | | | | | | 1.35 | % |
Bank segment net interest margin | | | | | | 2.14 | % | | | | | | 1.96 | % |
(1) Loans are presented net of unamortized discounts, unearned income, and deferred loan fees and costs.
Nonaccrual loans are included in the average loan balances in the preceding table. Any payments received for corporate nonaccrual loans are applied entirely to principal. Interest income on residential mortgage nonaccrual loans is recognized on a cash basis.
The yield on tax-exempt loans in the preceding table is presented on a tax-equivalent basis utilizing the applicable federal statutory rates for each of the nine months ended June 30, 2022 and 2021.
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
Management’s Discussion and Analysis
Increases and decreases in interest income and interest expense result from changes in average balances (volume) of interest-earning assets and interest-bearing liabilities, as well as changes in average interest rates. The following table shows the effect that these factors had on the interest earned on our interest-earning assets and the interest incurred on our interest-bearing liabilities. The effect of changes in volume is determined by multiplying the change in volume by the previous period’s average yield/cost. Similarly, the effect of rate changes is calculated by multiplying the change in average yield/cost by the previous period’s volume. Changes attributable to both volume and rate have been allocated proportionately.
| | | | | | | | | | | | | | | | | | | | |
| | Nine months ended June 30, |
| | 2022 compared to 2021 |
| | Increase/(decrease) due to |
$ in millions | | Volume | | Rate | | Total |
Interest income: | | | | | | |
Interest-earning assets: | | | | | | |
Cash and cash equivalents | | $ | 1 | | | $ | 6 | | | $ | 7 | |
Assets segregated for regulatory purposes and restricted cash | | 11 | | | 17 | | | 28 | |
Available-for-sale securities | | 10 | | | 10 | | | 20 | |
Brokerage client receivables | | 8 | | | 2 | | | 10 | |
Loans held for sale and investment: (1) | | | | | | |
Loans held for investment: | | | | | | |
C&I loans | | 26 | | | 10 | | | 36 | |
CRE loans | | 16 | | | 8 | | | 24 | |
REIT loans | | — | | | 2 | | | 2 | |
Tax-exempt loans | | 2 | | | (2) | | | — | |
Residential mortgage loans | | 17 | | | (1) | | | 16 | |
SBL and other | | 50 | | | 22 | | | 72 | |
Loans held for sale | | 2 | | | 1 | | | 3 | |
Total loans held for sale and investment | | 113 | | | 40 | | | 153 | |
All other interest-earning assets | | 3 | | | 12 | | | 15 | |
Total interest-earning assets | | $ | 146 | | | $ | 87 | | | $ | 233 | |
Interest expense: | | | | | | |
Interest-bearing liabilities: | | | | | | |
Bank deposits: | | | | | | |
Savings and money market accounts | | $ | 1 | | | $ | 10 | | | $ | 11 | |
Interest-bearing checking accounts | | 12 | | | (6) | | | 6 | |
Certificates of deposit | | (2) | | | (1) | | | (3) | |
Total bank deposits | | 11 | | | 3 | | | 14 | |
Brokerage client payables | | 1 | | | — | | | 1 | |
Other borrowings | | 2 | | | (1) | | | 1 | |
Senior notes payable | | (2) | | | (2) | | | (4) | |
All other interest-bearing liabilities | | 2 | | | 6 | | | 8 | |
Total interest-bearing liabilities | | $ | 14 | | | $ | 6 | | | $ | 20 | |
Change in net interest income | | $ | 132 | | | $ | 81 | | | $ | 213 | |
(1) Loans are presented net of unamortized discounts, unearned income, and deferred loan fees and costs.
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
Management’s Discussion and Analysis
RESULTS OF OPERATIONS – PRIVATE CLIENT GROUP
For an overview of our PCG segment operations, as well as a description of the key factors impacting our PCG results of operations, refer to the information presented in “Item 1 - Business” and “Item 7 - Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our 20212022 Form 10-K.
Operating results
| | | | Three months ended June 30, | | Nine months ended June 30, | | | Three months ended June 30, | | Nine months ended June 30, |
$ in millions | $ in millions | | 2022 | | 2021 | | % change | | 2022 | | 2021 | | % change | $ in millions | | 2023 | | 2022 | | % change | | 2023 | | 2022 | | % change |
Revenues: | Revenues: | | | | | | | | | | | | | Revenues: | | | | | | | | | | | | |
Asset management and related administrative fees | Asset management and related administrative fees | | $ | 1,214 | | | $ | 1,050 | | | 16 | % | | $ | 3,621 | | | $ | 2,914 | | | 24 | % | Asset management and related administrative fees | | $ | 1,164 | | | $ | 1,214 | | | (4) | % | | $ | 3,319 | | | $ | 3,621 | | | (8) | % |
Brokerage revenues: | Brokerage revenues: | | Brokerage revenues: | |
Mutual and other fund products | Mutual and other fund products | | 149 | | | 167 | | | (11) | % | | 486 | | | 498 | | | (2) | % | Mutual and other fund products | | 135 | | | 149 | | | (9) | % | | 398 | | | 486 | | | (18) | % |
Insurance and annuity products | Insurance and annuity products | | 109 | | | 113 | | | (4) | % | | 330 | | | 320 | | | 3 | % | Insurance and annuity products | | 103 | | | 109 | | | (6) | % | | 320 | | | 330 | | | (3) | % |
Equities, ETFs and fixed income products | Equities, ETFs and fixed income products | | 115 | | | 110 | | | 5 | % | | 351 | | | 338 | | | 4 | % | Equities, ETFs and fixed income products | | 111 | | | 115 | | | (3) | % | | 340 | | | 351 | | | (3) | % |
Total brokerage revenues | Total brokerage revenues | | 373 | | | 390 | | | (4) | % | | 1,167 | | | 1,156 | | | 1 | % | Total brokerage revenues | | 349 | | | 373 | | | (6) | % | | 1,058 | | | 1,167 | | | (9) | % |
Account and service fees: | Account and service fees: | | Account and service fees: | |
Mutual fund and annuity service fees | Mutual fund and annuity service fees | | 102 | | | 105 | | | (3) | % | | 325 | | | 298 | | | 9 | % | Mutual fund and annuity service fees | | 103 | | | 102 | | | 1 | % | | 306 | | | 325 | | | (6) | % |
RJBDP fees: | RJBDP fees: | | RJBDP fees: | |
Bank segment | Bank segment | | 79 | | | 47 | | | 68 | % | | 178 | | | 134 | | | 33 | % | Bank segment | | 277 | | | 79 | | | 251 | % | | 856 | | | 178 | | | 381 | % |
Third-party banks | Third-party banks | | 56 | | | 18 | | | 211 | % | | 93 | | | 58 | | | 60 | % | Third-party banks | | 107 | | | 56 | | | 91 | % | | 344 | | | 93 | | | 270 | % |
Client account and other fees | Client account and other fees | | 59 | | | 39 | | | 51 | % | | 161 | | | 113 | | | 42 | % | Client account and other fees | | 59 | | | 59 | | | — | % | | 175 | | | 161 | | | 9 | % |
Total account and service fees | Total account and service fees | | 296 | | | 209 | | | 42 | % | | 757 | | | 603 | | | 26 | % | Total account and service fees | | 546 | | | 296 | | | 84 | % | | 1,681 | | | 757 | | | 122 | % |
Investment banking | Investment banking | | 6 | | | 11 | | | (45) | % | | 28 | | | 33 | | | (15) | % | Investment banking | | 9 | | | 6 | | | 50 | % | | 27 | | | 28 | | | (4) | % |
Interest income | Interest income | | 68 | | | 31 | | | 119 | % | | 138 | | | 91 | | | 52 | % | Interest income | | 114 | | | 68 | | | 68 | % | | 340 | | | 138 | | | 146 | % |
All other | All other | | 11 | | | 7 | | | 57 | % | | 24 | | | 20 | | | 20 | % | All other | | 25 | | | 11 | | | 127 | % | | 40 | | | 24 | | | 67 | % |
Total revenues | Total revenues | | 1,968 | | | 1,698 | | | 16 | % | | 5,735 | | | 4,817 | | | 19 | % | Total revenues | | 2,207 | | | 1,968 | | | 12 | % | | 6,465 | | | 5,735 | | | 13 | % |
Interest expense | Interest expense | | (10) | | | (2) | | | 400 | % | | (16) | | | (7) | | | 129 | % | Interest expense | | (25) | | | (10) | | | 150 | % | | (76) | | | (16) | | | 375 | % |
Net revenues | Net revenues | | 1,958 | | | 1,696 | | | 15 | % | | 5,719 | | | 4,810 | | | 19 | % | Net revenues | | 2,182 | | | 1,958 | | | 11 | % | | 6,389 | | | 5,719 | | | 12 | % |
Non-interest expenses: | Non-interest expenses: | | | | | | | | | | Non-interest expenses: | | | | | | | | | |
Financial advisor compensation and benefits | Financial advisor compensation and benefits | | 1,187 | | | 1,082 | | | 10 | % | | 3,605 | | | 3,053 | | | 18 | % | Financial advisor compensation and benefits | | 1,151 | | | 1,187 | | | (3) | % | | 3,344 | | | 3,605 | | | (7) | % |
Administrative compensation and benefits | Administrative compensation and benefits | | 306 | | | 251 | | | 22 | % | | 878 | | | 760 | | | 16 | % | Administrative compensation and benefits | | 355 | | | 306 | | | 16 | % | | 1,042 | | | 878 | | | 19 | % |
Total compensation, commissions and benefits | Total compensation, commissions and benefits | | 1,493 | | | 1,333 | | | 12 | % | | 4,483 | | | 3,813 | | | 18 | % | Total compensation, commissions and benefits | | 1,506 | | | 1,493 | | | 1 | % | | 4,386 | | | 4,483 | | | (2) | % |
Non-compensation expenses: | Non-compensation expenses: | | Non-compensation expenses: | |
Communications and information processing | Communications and information processing | | 86 | | | 70 | | | 23 | % | | 241 | | | 201 | | | 20 | % | Communications and information processing | | 94 | | | 86 | | | 9 | % | | 283 | | | 241 | | | 17 | % |
Occupancy and equipment | Occupancy and equipment | | 50 | | | 45 | | | 11 | % | | 146 | | | 133 | | | 10 | % | Occupancy and equipment | | 53 | | | 50 | | | 6 | % | | 157 | | | 146 | | | 8 | % |
Business development | Business development | | 39 | | | 19 | | | 105 | % | | 91 | | | 50 | | | 82 | % | Business development | | 43 | | | 39 | | | 10 | % | | 113 | | | 91 | | | 24 | % |
Professional fees | Professional fees | | 19 | | | 10 | | | 90 | % | | 41 | | | 33 | | | 24 | % | Professional fees | | 17 | | | 19 | | | (11) | % | | 47 | | | 41 | | | 15 | % |
All other | All other | | 20 | | | 24 | | | (17) | % | | 58 | | | 53 | | | 9 | % | All other | | 58 | | | 20 | | | 190 | % | | 117 | | | 58 | | | 102 | % |
Total non-compensation expenses | Total non-compensation expenses | | 214 | | | 168 | | | 27 | % | | 577 | | | 470 | | | 23 | % | Total non-compensation expenses | | 265 | | | 214 | | | 24 | % | | 717 | | | 577 | | | 24 | % |
Total non-interest expenses | Total non-interest expenses | | 1,707 | | | 1,501 | | | 14 | % | | 5,060 | | | 4,283 | | | 18 | % | Total non-interest expenses | | 1,771 | | | 1,707 | | | 4 | % | | 5,103 | | | 5,060 | | | 1 | % |
Pre-tax income | Pre-tax income | | $ | 251 | | | $ | 195 | | | 29 | % | | $ | 659 | | | $ | 527 | | | 25 | % | Pre-tax income | | $ | 411 | | | $ | 251 | | | 64 | % | | $ | 1,286 | | | $ | 659 | | | 95 | % |
| | | | | | | | |
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Management’s Discussion and Analysis
Management’s Discussion and Analysis | |
Selected key metrics
PCG client asset balances
| | | As of | | As of |
$ in billions | $ in billions | | June 30, 2022 | | March 31, 2022 | | September 30, 2021 | | | June 30, 2021 | | March 31, 2021 | | September 30, 2020 | $ in billions | | June 30, 2023 | | March 31, 2023 | | September 30, 2022 | | | June 30, 2022 | | March 31, 2022 | | September 30, 2021 |
Assets under administration (“AUA”) (1) | Assets under administration (“AUA”) (1) | | $ | 1,068.8 | | | $ | 1,198.3 | | | $ | 1,115.4 | | | | $ | 1,102.9 | | | $ | 1,028.1 | | | $ | 883.3 | | Assets under administration (“AUA”) (1) | | $ | 1,227.0 | | | $ | 1,171.1 | | | $ | 1,039.0 | | | | $ | 1,068.8 | | | $ | 1,198.3 | | | $ | 1,115.4 | |
Assets in fee-based accounts (1) (2) | Assets in fee-based accounts (1) (2) | | $ | 606.7 | | | $ | 678.0 | | | $ | 627.1 | | | | $ | 616.7 | | | $ | 567.6 | | | $ | 475.3 | | Assets in fee-based accounts (1) (2) | | $ | 697.0 | | | $ | 666.3 | | | $ | 586.0 | | | | $ | 606.7 | | | $ | 678.0 | | | $ | 627.1 | |
Percent of AUA in fee-based accounts | Percent of AUA in fee-based accounts | | 56.8 | % | | 56.6 | % | | 56.2 | % | | | 55.9 | % | | 55.2 | % | | 53.8 | % | Percent of AUA in fee-based accounts | | 56.8 | % | | 56.9 | % | | 56.4 | % | | | 56.8 | % | | 56.6 | % | | 56.2 | % |
(1)These metrics includeIncludes assets associated with firms affiliated with us through our Registered Investment Advisor & Custody Services (“RCS”) division of $130.5 billion as of June 30, 2023, $123.5 billion as of March 31, 2023, $108.5 billion as of September 30, 2022, $109.7 billion as of June 30, 2022, $99.2 billion as of March 31, 2022, and $92.7 billion as of September 30, 2021. Of these amounts, $109.9 billion as of June 30, 2023, $103.6 billion as of March 31, 2023, $89.9 billion as of September 30, 2022, $90.3 billion as of June 30, 2022, $84.0 billion as of March 31, 2022, and $77.2 billion as of September 30, 2021 were fee-based assets. Based on the impact fromnature of the acquisition of Charles Stanley, which was completed on January 21, 2022.services provided to such firms, revenues related to these assets are included in “Account and service fees.”
(2)A portion of our “Assets in fee-based accounts” is invested in “managed programs” overseen by our Asset Management segment, specifically our Asset Management Services division of RJ&A (“AMS”). These assets are included in our financial assets under management as disclosed in the “Selected key metrics” section of our “Management’s Discussion and Analysis - Results of Operations - Asset Management.”
PCG net new assets
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three months ended June 30, | | Nine months ended June 30, |
$ in millions | | 2023 | | 2022 | | 2023 | | 2022 |
Domestic Private Client Group net new assets (1) (2) | | $ | 14,386 | | | $ | 14,663 | | | $ | 59,085 | | | $ | 74,857 | |
Domestic Private Client Group net new assets growth - annualized (3) | | 5.4 | % | | 5.4 | % | | 8.3 | % | | 9.5 | % |
(1) Domestic Private Client Group net new assets represents domestic Private Client Group client inflows, including dividends and interest, less domestic Private Client Group client outflows, including commissions, advisory fees and other fees.
(2) This metric includes the impact of the departure of approximately $4.6 billion of assets under administration related to the portion of advisors previously associated through a single relationship in our independent contractors division whose affiliation with the firm ended in the fiscal third quarter of 2023.
(3) The Domestic Private Client Group net new asset growth - annualized percentage is based on the beginning Domestic Private Client Group AUA balance for the indicated period.
PCG AUA and PCG assets in fee-based accounts as of June 30, 2023 each increased 5% compared with March 31, 2023, increased 18% and 19%, respectively, compared with September 30, 2022, and each increased 15% compared with June 30, 2022 due to net equity market appreciation and strong net inflows of client assets during the period, primarily due to the favorable impact of our recruiting. We expect that the 5% increase in PCG fee-based assets as of June 30, 2023 compared with March 31, 2023 will positively impact our asset management and related administrative fees for our fiscal fourth quarter of 2023. PCG assets in fee-based accounts continued to be a significant percentage of overall PCG AUA due to many clients’ preference for fee-based alternatives versus transaction-based accounts and, as a result, a significant portion of our PCG revenues is more directly impacted by market movements.
Fee-based accounts within our PCG segment are comprised of a wide array of products and programs that we offer our clients. The majority of assets in fee-based accounts within our PCG segment are invested in programs for which our financial advisors provide investment advisory services, either on a discretionary or non-discretionary basis. Administrative services for such accounts (e.g., record-keeping) are generally performed by our Asset Management segment and, as a result, a portion of the related revenue is shared with the Asset Management segment.
We also offer our clients fee-based accounts that are invested in “managed programs” overseen by AMS, which is part of our Asset Management segment. Fee-billable assets invested in managed programs are included in both “Assets in fee-based accounts” in the preceding table and “Financial assets under management” in the Asset Management segment. Revenues related to managed programs are shared by our PCG and Asset Management segments. The Asset Management segment receives a higher portion of the revenues related to accounts invested in managed programs, as compared to the portion received for non-managed programs for which our financial advisors provide investment advisory services, as it is performing portfolio management services in addition to administrative services.
| | | | | | | | |
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Management’s Discussion and Analysis | |
The vast majority of the revenues we earn from fee-based accounts isare recorded in “Asset management and related administrative fees” on our Condensed Consolidated Statements of Income and Comprehensive Income. Fees received from such accounts are based on the value of client assets in fee-based accounts and vary based on the specific account types in which the client invests and the level of assets in the client relationship. As fees for the majority of such accounts are billed based on balances as of the beginning of the quarter, revenues from fee-based accounts may not be immediately affected by changes in asset values, but rather the impacts are seen in the following quarter.
PCG AUA decreased compared with March 31, 2022 and September 30, 2021, as the positive impacts of strong net inflows of client assets and, when compared to September 2021, the Charles Stanley acquisition, were offset by a decline in equity markets. PCG AUA and assets in fee-based accounts each declined 11% compared with March 31, 2022, which will negatively impact our asset management and related administrative fees for our fiscal fourth quarter of 2022. PCG assets in fee-based accounts continued to be a significant percentage of overall PCG AUA due to many clients’ preference for fee-based alternatives versus transaction-based accounts and, as a result, a significant portion of our PCG revenues is more directly impacted by market movements.Financial advisors
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | June 30, 2023 | | March 31, 2023 | | September 30, 2022 | | | | June 30, 2022 | | March 31, 2022 | | September 30, 2021 |
Employees | | 3,654 | | | 3,628 | | | 3,638 | | | | | 3,615 | | | 3,601 | | | 3,461 | |
Independent contractors (1) | | 5,050 | | | 5,098 | | | 5,043 | | | | | 5,001 | | | 5,129 | | | 5,021 | |
Total advisors | | 8,704 | | | 8,726 | | | 8,681 | | | | | 8,616 | | | 8,730 | | | 8,482 | |
Financial(1) Includes the impact of the transfer of one firm with 166 financial advisors
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | June 30, 2022 | | March 31, 2022 | | December 31, 2021 | | September 30, 2021 | | | | June 30, 2021 | | |
Employees | | 3,615 | | | 3,601 | | | 3,447 | | | 3,461 | | | | | 3,423 | | | |
Independent contractors | | 5,001 | | | 5,129 | | | 5,017 | | | 5,021 | | | | | 4,990 | | | |
Total advisors | | 8,616 | | | 8,730 | | | 8,464 | | | 8,482 | | | | | 8,413 | | | |
previously affiliated as independent contractors to our RCS division during our fiscal third quarter of 2022 and the impact of the departure of 60 financial advisors, representing the portion of advisors previously associated through a single relationship in our independent contractors division whose affiliation with the firm ended in the fiscal third quarter of 2023.
The number of financial advisors as of June 30, 20222023 decreased compared towith March 31, 2023, primarily due to the impact of an independent contractor relationship whose affiliation with the firm ended in our fiscal third quarter. The number of financial advisors as of June 30, 2023 increased compared with September 30, 2022, as the impactsnumber of strongnew recruits and trainees that were moved into production roles exceeded the number of financial advisors who left the firm, including planned retirements where assets are generally retained at the firm pursuant to advisor succession plans. The recruiting and strong retentionpipeline remains solid across our affiliation options; however, the timing of existingfinancial advisors were offsetjoining the firm may be impacted by the transfer of 188 advisors previously affiliated as independent contractorsmarket uncertainty. We expect to continue to experience transfers to our Registered Investment Advisor & Custody Services (“RCS”)RCS division (including one firmin fiscal 2023; however, consistent with 166 financial advisors). Weour experience in fiscal 2022, we do not expect these financial advisor transfers to significantly impact our results of operations. Advisors in our RCS division are not included in our financial advisor metric although their client assets which were $109.7 billion as of June 30, 2022, $99.2 billion as of March 31, 2022 and $92.7 billion as of September 30, 2021, are included in PCG AUA. The recruiting pipeline remains robust across our affiliation options; however the timing of financial advisors joining the firm may be impacted by market uncertainty.
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
Management’s Discussion and Analysis
Clients’ domestic cash sweep balances and Enhanced Savings Program balances
| | | As of | | As of |
$ in millions | $ in millions | | June 30, 2022 | | March 31, 2022 | | December 31, 2021 | | | September 30, 2021 | | June 30, 2021 | | $ in millions | | June 30, 2023 | | March 31, 2023 | | September 30, 2022 | | | June 30, 2022 | | March 31, 2022 | | September 30, 2021 |
RJBDP: | RJBDP: | | | | | | | | | | | | | RJBDP: | | | | | | | | | | | | | |
Bank segment | Bank segment | | $ | 36,646 | | | $ | 33,570 | | | $ | 33,097 | | | | $ | 31,410 | | | $ | 29,253 | | | Bank segment | | $ | 27,915 | | | $ | 37,682 | | | $ | 38,705 | | | | $ | 36,646 | | | $ | 33,570 | | | $ | 31,410 | |
Third-party banks | Third-party banks | | 25,478 | | | 25,887 | | | 24,316 | | | | 24,496 | | | 25,080 | | | Third-party banks | | 16,923 | | | 9,408 | | | 21,964 | | | | 25,478 | | | 25,887 | | | 24,496 | |
Subtotal RJBDP | Subtotal RJBDP | | 62,124 | | | 59,457 | | | 57,413 | | | | 55,906�� | | | 54,333 | | | Subtotal RJBDP | | 44,838 | | | 47,090 | | | 60,669 | | | | 62,124 | | | 59,457 | | | 55,906 | |
Client Interest Program (“CIP”) | Client Interest Program (“CIP”) | | 13,717 | | | 17,013 | | | 16,065 | | | | 10,762 | | | 8,610 | | | Client Interest Program (“CIP”) | | 1,915 | | | 2,385 | | | 6,445 | | | | 13,717 | | | 17,013 | | | 10,762 | |
Total clients’ domestic cash sweep balances | Total clients’ domestic cash sweep balances | | $ | 75,841 | | | $ | 76,470 | | | $ | 73,478 | | | | $ | 66,668 | | | $ | 62,943 | | | Total clients’ domestic cash sweep balances | | 46,753 | | | 49,475 | | | 67,114 | | | | 75,841 | | | 76,470 | | | 66,668 | |
Enhanced Savings Program (1) | | Enhanced Savings Program (1) | | 11,225 | | | 2,746 | | | — | | | | — | | | — | | | — | |
Total clients’ domestic cash sweep and Enhanced Savings Program balances | | Total clients’ domestic cash sweep and Enhanced Savings Program balances | | $ | 57,978 | | | $ | 52,221 | | | $ | 67,114 | | | | $ | 75,841 | | | $ | 76,470 | | | $ | 66,668 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three months ended June 30, | | Nine months ended June 30, |
| | 2022 | | 2021 | | 2022 | | 2021 |
Average yield on RJBDP - third-party banks | | 0.88 | % | | 0.29 | % | | 0.50 | % | | 0.30 | % |
(1) In March 2023, we launched our Enhanced Savings Program, in which Private Client Group clients may deposit cash in a high-yield Raymond James Bank account. These balances are reflected in Bank deposits on our Condensed Consolidated Statements of Financial Condition.
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three months ended June 30, | | Nine months ended June 30, |
| | 2023 | | 2022 | | 2023 | | 2022 |
Average yield on RJBDP - third-party banks | | 3.37 | % | | 0.88 | % | | 3.05 | % | | 0.50 | % |
A significant portion of our domestic clients’ cash is included in the RJBDP, a multi-bank sweep program in which clients’ cash deposits in their brokerage accounts are swept into interest-bearing deposit accounts at either Raymond James Bank or TriState Capital Bank, which are included in our Bank segment, or various third-party banks. Such balances swept to third-party balances are not reflected on our Condensed Consolidated Statements of Financial Condition. Our PCG segment earns servicing fees for the administrative services we provide related to our clients’ deposits that are swept to such banks as part of the RJBDP. These servicing fees are variable in nature and fluctuate based on client cash balances in the program, as well as the level of short-term interest rates and the interest paid to clients on balances in the RJBDP. Under our current intersegment policies, the PCG segment receives the greater of a base servicing fee or a net yield equivalent to the average yield that the firm would otherwise receive from third-party banks in the RJBDP. This is a different intersegment policy than that which was in place in prior years, duringIn the last interest rate cycle. The result of this change is thatcurrent interest-rate environment the PCG segment revenues will
| | | | | | | | |
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Management’s Discussion and Analysis | |
throughout fiscal 2023 reflect increasedRJBDP fee revenues asderived from the yield from third-party banks in the program continues to rise, and the Bank segment RJBDP servicing costs reflect such market rate for the market rate.deposits. In fiscal 2022, the PCG segment revenues reflected the base servicing fee until May 2022, when the yield from third-party banks first exceeded such level. The fees that the PCG segment earns from the Bank segment, as well as the servicing costs incurred on the deposits in the Bank segment, are eliminated in the computation of our consolidated results. consolidation.
The “Average yield on RJBDP - third partythird-party banks” in the preceding table is computed by dividing annualized RJBDP fees from third-party banks, which are net of the interest expense paid to clients by the third-party banks, by the average daily RJBDP balance at third-party banks. The average yield on RJBDP - third-party banks increased from the prior-year quarterperiods as a result of the 25-basis point increasesignificant increases in the Federal Reserve’sFed’s short-term benchmark interest rate, which began in March 2022, the 50-basis point2022. We expect an increase in May 2022 and, to a lesser extent, the 75-basis point increase toward the end of our fiscal third quarter in June 2022. Based on these interest rate increases, as well as the additional 75-basis point increase announced by the Fed in late July 2022, we expect our average yield on RJBDP fees from third-party banks to approximate 1.7% forin our fiscal fourth quarter of 2022. However, actual yields may be impacted by other factors, including2023 compared with our fiscal third quarter of 2023 due to higher average balances held at third-party banks in the program resulting in part from additional funding flexibility the Enhanced Savings Program provides us, as well as the recent increases in short-term interest rates paid to clients andincluding the demand for our deposit sweep balances from third-party banks that participate25-basis point increase in the RJBDP.July 2023.
AlthoughTotal client domestic cash sweep and Enhanced Savings Program balances increased 11% compared with March 31, 2023 due to growth of Enhanced Savings Program balances at Raymond James Bank which more than offset a decline in domestic cash sweep balances largely due to quarterly fee billings and client tax payments in April 2023. Total client domestic cash sweep and Enhanced Savings Program balances decreased 14% compared with September 30, 2022, as a result of cash sorting activity given the higher short-term interest rate environment, partially offset by the launch of the Enhanced Savings Program in March 2023, which resulted in $11.2 billion of client cash balances remained elevated as of June 30, 2022, balances declined compared with March 31, 2022 and have continued to decline modestly after the quarter-end during the month of July 2022. In addition, more client cash was allocated to Raymond James Bank through the RJBDP, resulting in a reduction in cash allocated to our CIP and a corresponding decrease in our assets segregated for regulatory purposes balance presented on our Condensed Consolidated Statements of Financial Condition.2023. PCG segment results can be impacted by not only changes in the level of client cash balances, but also by the allocation of client cash balances between RJBDP, CIP, and our CIP,the Enhanced Savings Program, as the PCG segment may earn different amounts from each of these client cash destinations, depending on multiple factors.
Quarter ended June 30, 20222023 compared with the quarter ended June 30, 20212022
Net revenues of $1.96$2.18 billion increased 15%11% and pre-tax income of $251$411 million increased 29%64%.
Asset management and related administrative fees increased $164decreased $50 million, or 16%4%, primarily due to higherlower assets in fee-based accounts at the beginning of the current quarter as well as incremental revenues relatedcompared with the prior-year quarter primarily due to declines in the Charles Stanley acquisition.equity market.
Brokerage revenues decreased $17$24 million, or 4%6%, primarily due to a decline inlower trailing placement feesrevenues from mutual and other fund products and variable annuity products, primarily resulting from lowermarket-driven declines in asset values.values for products for which we receive trails.
Account and service fees increased $87$250 million, or 42%84%, primarily due to higher RJBDP fees from both third-party banks and our Bank segment and third-party banks resulting from significantly higher short-term interest rates compared with the prior-year quarter, and higher
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
Management’s Discussion and Analysis
client cash balances in the RJBDP. Client account and other fees also increased primarily as a result of incremental revenues arising from our acquisition of Charles Stanley.partially offset by lower average balances.
Net interest income increased $29$31 million, or 100%53%, primarily due to the increase in short-term interest rates.rates applicable to our cash, segregated cash, and client margin account balances, partially offset by lower average balances.
Other revenues increased $14 million, or 127%, primarily due to a favorable arbitration award during the fiscal third quarter of 2023. The benefit of this award was largely offset by associated compensation expenses and external legal fees incurred over the duration of the claim period, a portion of which was incurred during the fiscal third quarter of 2023.
Compensation-related expenses increased $160$13 million, or 12%1%, primarily due to higher revenues, incremental expenses arising from our acquisition of Charles Stanley, the majority of the aforementioned special bonus payable to certain eligible associates to assist with inflationary cost pressures, and other increasesan increase in compensation costs to support our growth.growth and annual salary increases, partially offset by lower commission expense resulting from lower compensable revenues, including asset management and related administrative fees and brokerage revenues.
Non-compensation expenses increased $46$51 million, or 27%. Business development expenses increased significantly from the low levels incurred in the prior-year quarter as24%, primarily driven by higher provisions for legal and regulatory matters and, to a result of advisor recognition events and conferences, as well as an increase in business travel as travel restrictions have eased. Communicationslesser extent, higher communications and information processing expenses also increased, primarily due to ongoing enhancements of our technology platforms and incremental expenses resulting from the acquisition of Charles Stanley.expenses.
| | | | | | | | |
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Management’s Discussion and Analysis | |
Nine months ended June 30, 20222023 compared with the nine months ended June 30, 20212022
Net revenues of $5.72$6.39 billion increased 19%12% and pre-tax income of $659 million$1.29 billion increased 25%95%.
Asset management and related administrative fees increased $707decreased $302 million, or 24%8%, primarily due to higherlower assets in fee-based accounts at the beginning of each of the current-year quarterly billing periods compared with the prior-year quarterly billing periods, and, to a lesser extent,partially offset by incremental revenues arising from the acquisition of Charles Stanley.
Brokerage revenues decreased $109 million, or 9%, primarily due to lower trailing revenues from mutual fund and annuity products primarily resulting from market-driven declines in asset values for products for which we receive trails, as well as lower sales of equity products, mutual and other fund products, variable annuities, and insurance products. These decreases were partially offset by higher fixed annuity and fixed income product sales.
Account and service fees increased $154$924 million, or 26%122%, primarily due to an increase in RJBDP fees from both third-party banks and our Bank segment due to the increase in short-term rates during the current-year period, as well as higher client cash balances in the RJBDP. Client account and other fees also increased,third-party banks resulting from incremental revenues from our acquisitions of NWPS Holdings, Inc. atsignificantly higher short-term interest rates compared with the end of our fiscal first quarter of 2021 and Charles Stanley in our fiscal second quarter of 2022, as well as higher account maintenance fees resulting from an increase in the fee per account effective during the current fiscal-yearprior-year period. Mutual fund service fees increaseddecreased primarily due to higher averagemarket-driven declines in mutual fund assets.
Net interest income increased $38$142 million, or 45%116%, primarily due to the significant increase in short-term interest rates applicable to our cash, segregated cash, and client margin account balances.
Other revenues increased $16 million, or 67%, primarily due to the aforementioned favorable arbitration award during the current-year period.fiscal third quarter of 2023. The benefit of this award was largely offset by associated compensation expenses and external legal fees incurred over the duration of the claim period, a portion of which was incurred during fiscal 2023.
Compensation-related expenses increased $670decreased $97 million, or 18%2%, primarily due to lower commission expense resulting from lower compensable revenues, including asset management and related administrative fees and brokerage revenues, partially offset by an increase in compensation costs to support our growth, annual salary increases, and incremental expenses resulting from our acquisition of Charles Stanley.
Non-compensation expenses increased $140 million, or 24%, due to higher revenues,provisions for legal and regulatory matters, incremental expenses resulting from our acquisition of Charles Stanley, higher communications and an increase in compensation costs to support our growth.
Non-compensationinformation processing expenses increased $107 million, or 23%,primarily due to ongoing enhancements of our technology platforms, and increases in travel and event-related expenses compared with the low levels incurred in the prior-year period, higher communications and information processing expenses primarily due to ongoing enhancements of our technology platforms, increasing occupancy rates, and incremental expenses resulting from our acquisition of Charles Stanley.period.
| | | | | | | | |
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Management’s Discussion and Analysis
Management’s Discussion and Analysis | |
RESULTS OF OPERATIONS – CAPITAL MARKETS
For an overview of our Capital Markets segment operations, as well as a description of the key factors impacting our Capital Markets results of operations, refer to the information presented in “Item 1 - Business” and “Item 7 - Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our 20212022 Form 10-K.
Operating results
| | | | Three months ended June 30, | | Nine months ended June 30, | | | Three months ended June 30, | | Nine months ended June 30, |
$ in millions | $ in millions | | 2022 | | 2021 | | % change | | 2022 | | 2021 | | % change | $ in millions | | 2023 | | 2022 | | % change | | 2023 | | 2022 | | % change |
Revenues: | Revenues: | | | | | | | | | | | | | Revenues: | | | | | | | | | | | | |
Brokerage revenues: | Brokerage revenues: | | | | | | Brokerage revenues: | | | | | |
Fixed income | Fixed income | | $ | 107 | | | $ | 124 | | | (14) | % | | $ | 352 | | | $ | 397 | | | (11) | % | Fixed income | | $ | 78 | | | $ | 107 | | | (27) | % | | $ | 274 | | | $ | 352 | | | (22) | % |
Equity | Equity | | 32 | | | 36 | | | (11) | % | | 112 | | | 112 | | | — | % | Equity | | 32 | | | 32 | | | — | % | | 100 | | | 112 | | | (11) | % |
Total brokerage revenues | Total brokerage revenues | | 139 | | | 160 | | | (13) | % | | 464 | | | 509 | | | (9) | % | Total brokerage revenues | | 110 | | | 139 | | | (21) | % | | 374 | | | 464 | | | (19) | % |
Investment banking: | Investment banking: | | Investment banking: | |
Merger & acquisition and advisory | Merger & acquisition and advisory | | 147 | | | 153 | | | (4) | % | | 557 | | | 424 | | | 31 | % | Merger & acquisition and advisory | | 88 | | | 147 | | | (40) | % | | 277 | | | 557 | | | (50) | % |
Equity underwriting | Equity underwriting | | 36 | | | 69 | | | (48) | % | | 185 | | | 196 | | | (6) | % | Equity underwriting | | 25 | | | 36 | | | (31) | % | | 69 | | | 185 | | | (63) | % |
Debt underwriting | Debt underwriting | | 34 | | | 43 | | | (21) | % | | 113 | | | 126 | | | (10) | % | Debt underwriting | | 28 | | | 34 | | | (18) | % | | 73 | | | 113 | | | (35) | % |
Total investment banking | Total investment banking | | 217 | | | 265 | | | (18) | % | | 855 | | | 746 | | | 15 | % | Total investment banking | | 141 | | | 217 | | | (35) | % | | 419 | | | 855 | | | (51) | % |
Interest income | Interest income | | 6 | | | 4 | | | 50 | % | | 16 | | | 12 | | | 33 | % | Interest income | | 21 | | | 6 | | | 250 | % | | 65 | | | 16 | | | 306 | % |
Tax credit fund revenues | | 21 | | | 17 | | | 24 | % | | 71 | | | 57 | | | 25 | % | |
Affordable housing investments business revenues | | Affordable housing investments business revenues | | 21 | | | 21 | | | — | % | | 68 | | | 71 | | | (4) | % |
All other | All other | | 3 | | | 3 | | | — | % | | 12 | | | 14 | | | (14) | % | All other | | 4 | | | 3 | | | 33 | % | | 11 | | | 12 | | | (8) | % |
Total revenues | Total revenues | | 386 | | | 449 | | | (14) | % | | 1,418 | | | 1,338 | | | 6 | % | Total revenues | | 297 | | | 386 | | | (23) | % | | 937 | | | 1,418 | | | (34) | % |
Interest expense | Interest expense | | (3) | | | (3) | | | — | % | | (8) | | | (7) | | | 14 | % | Interest expense | | (21) | | | (3) | | | 600 | % | | (64) | | | (8) | | | 700 | % |
Net revenues | Net revenues | | 383 | | | 446 | | | (14) | % | | 1,410 | | | 1,331 | | | 6 | % | Net revenues | | 276 | | | 383 | | | (28) | % | | 873 | | | 1,410 | | | (38) | % |
Non-interest expenses: | Non-interest expenses: | | | | | | | | | | Non-interest expenses: | | | | | | | | | |
Compensation, commissions and benefits | Compensation, commissions and benefits | | 243 | | | 256 | | | (5) | % | | 827 | | | 767 | | | 8 | % | Compensation, commissions and benefits | | 220 | | | 243 | | | (9) | % | | 664 | | | 827 | | | (20) | % |
Non-compensation expenses: | Non-compensation expenses: | | Non-compensation expenses: | |
Communications and information processing | Communications and information processing | | 22 | | | 22 | | | — | % | | 66 | | | 61 | | | 8 | % | Communications and information processing | | 27 | | | 22 | | | 23 | % | | 77 | | | 66 | | | 17 | % |
Occupancy and equipment | Occupancy and equipment | | 10 | | | 9 | | | 11 | % | | 29 | | | 27 | | | 7 | % | Occupancy and equipment | | 10 | | | 10 | | | — | % | | 31 | | | 29 | | | 7 | % |
Business development | Business development | | 12 | | | 8 | | | 50 | % | | 29 | | | 23 | | | 26 | % | Business development | | 14 | | | 12 | | | 17 | % | | 46 | | | 29 | | | 59 | % |
Professional fees | Professional fees | | 10 | | | 12 | | | (17) | % | | 31 | | | 38 | | | (18) | % | Professional fees | | 12 | | | 10 | | | 20 | % | | 39 | | | 31 | | | 26 | % |
| All other | All other | | 25 | | | 24 | | | 4 | % | | 79 | | | 66 | | | 20 | % | All other | | 27 | | | 25 | | | 8 | % | | 100 | | | 79 | | | 27 | % |
Total non-compensation expenses | Total non-compensation expenses | | 79 | | | 75 | | | 5 | % | | 234 | | | 215 | | | 9 | % | Total non-compensation expenses | | 90 | | | 79 | | | 14 | % | | 293 | | | 234 | | | 25 | % |
Total non-interest expenses | Total non-interest expenses | | 322 | | | 331 | | | (3) | % | | 1,061 | | | 982 | | | 8 | % | Total non-interest expenses | | 310 | | | 322 | | | (4) | % | | 957 | | | 1,061 | | | (10) | % |
Pre-tax income | | $ | 61 | | | $ | 115 | | | (47) | % | | $ | 349 | | | $ | 349 | | | — | % | |
Pre-tax income/(loss) | | Pre-tax income/(loss) | | $ | (34) | | | $ | 61 | | | NM | | $ | (84) | | | $ | 349 | | | NM |
Quarter ended June 30, 20222023 compared with the quarter ended June 30, 20212022
Net revenues of $383$276 million decreased 14%28% and the pre-tax loss was $34 million compared with pre-tax income of $61 million for the prior-year quarter.
Investment banking revenues decreased 47%.$76 million, or 35%, as activity levels in the current quarter were negatively impacted by macroeconomic uncertainties which continue to dampen capital markets activity across the industry. Our investment banking pipeline remains healthy and reflects the investments we have made over the past several years; however, market uncertainty continues to impact the pace and timing of transactions, and we expect such uncertainty to continue to negatively impact our investment banking activity in our fiscal fourth quarter of 2023.
Brokerage revenues decreased $21$29 million, or 13%21%, due to a decrease in fixed income brokerage revenues resulting from decreased activity from depository institution clients due to challenging market conditions, partially offset by incremental revenues from SumRidge Partners, which was acquired on July 1, 2022. We expect our fixed income brokerage revenues to continue to be negatively impacted by a decline in cash balances at many of our depository institution clients, decreasing their immediate demand for our products and services.
| | | | | | | | |
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Management’s Discussion and Analysis | |
Compensation-related expenses decreased $23 million, or 9%, due to lower revenues, partially offset by incremental compensation expenses arising from growth investments, including our acquisition of SumRidge Partners in July 2022, as well as higher share-based compensation amortization resulting from production-related awards granted in prior periods which are amortized over the vesting period.
Non-compensation expenses increased $11 million, or 14%, primarily attributable to incremental expenses associated with SumRidge Partners.
Nine months ended June 30, 2023 compared with the nine months ended June 30, 2022
Net revenues of $873 million decreased 38% and the pre-tax loss was $84 million compared with pre-tax income of $349 million for the prior-year period.
Investment banking revenues decreased $436 million, or 51%, compared with a strong prior-year period, as activity levels were negatively impacted in the current-year period by very different market conditions compared with the prior-year period, resulting from the aforementioned macroeconomic uncertainties impacting the industry.
Brokerage revenues decreased $90 million, or 19%, primarily due to a decrease in fixed income brokerage revenues resulting fromas a moreresult of the aforementioned challenging market environment compared with a strong prior-year quarter. We expect our fixed income brokerageconditions, partially offset by incremental revenues for our fiscal fourth quarter of 2022 to benefit from our acquisition of SumRidge Partners, which closed on July 1, 2022.
Investment banking revenues decreased $48 million, or 18%, primarily due to a decline in merger & acquisition and advisory revenues compared with a strong prior-year quarter. Merger & acquisition activity and underwriting activity during the current quarter continued to be negatively impacted by a challenging market environment resulting from macroeconomic uncertainty and geopolitical concerns. Our investment banking pipeline remains strong and, in part, reflects the investments we have made over the past several years, including our fiscal 2021 acquisitions of Financo and Cebile; however, continued market uncertainty could delay, or ultimately prevent, the closing of transactions, which could negatively impact our results for the remainder of fiscal 2022.Partners.
Compensation-related expenses decreased $13$163 million, or 5%20%, primarily due to the impactdecrease in revenues, partially offset by incremental expenses associated with growth investments, including our acquisition of lower revenues.
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
Management’s DiscussionSumRidge Partners, higher salaries, in part due to inflationary and Analysis
market compensation pressures, and higher share-based compensation amortization resulting from production-related awards granted in prior periods which are amortized over the vesting period.
Non-compensation expenses increased $4$59 million, or 5%25%, primarily attributabledue to an increase in business developmentincremental expenses resulting fromassociated with SumRidge Partners, increased travel and conference-relatedevent-related expenses, as travel restrictions have eased.
Nine months ended June 30, 2022 compared with the nine months ended June 30, 2021
Net revenues of $1.41 billion increased 6% and pre-tax income of $349 million was flathigher professional fees and provisions for legal and regulatory matters compared with the prior-year period.
Investment banking revenues increased $109 million, or 15%, due to a significant increase in merger & acquisition and advisory revenues, which reflected high levels of client activity in the fiscal first quarter of 2022. Debt and equity underwritings decreased compared with the prior-year period and were negatively impacted by market uncertainty during our fiscal second and third quarters of 2022.
| | | | | | | | |
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Management’s Discussion and Analysis | |
Brokerage revenues decreased $45 million, or 9%, due to a decrease in fixed income brokerage revenues, which remained solid but were lower than the prior-year period as a result of challenging trading conditions compared with a strong prior-year period.
Compensation-related expenses increased $60 million, or 8%, primarily due to the increase in revenues, as well as higher compensation costs to support our growth.
Non-compensation expenses increased $19 million, or 9%, primarily due to increased travel and event-related expenses, as well as an increase in expenses to support our growth, partially offset by lower investment banking deal expenses due to lower underwriting revenues compared with the prior-year period.
RESULTS OF OPERATIONS – ASSET MANAGEMENT
For an overview of our Asset Management segment operations as well as a description of the key factors impacting our Asset Management results of operations, refer to the information presented in “Item 1 - Business” and “Item 7 - Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our 20212022 Form 10-K.
Operating results
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three months ended June 30, | | Nine months ended June 30, |
$ in millions | | 2022 | | 2021 | | % change | | 2022 | | 2021 | | % change |
Revenues: | | | | | | | | | | | | |
Asset management and related administrative fees: | | | | | | | | | | | | |
Managed programs | | $ | 145 | | | $ | 148 | | | (2) | % | | $ | 445 | | | $ | 414 | | | 7 | % |
Administration and other | | 75 | | | 70 | | | 7 | % | | 228 | | | 193 | | | 18 | % |
Total asset management and related administrative fees | | 220 | | | 218 | | | 1 | % | | 673 | | | 607 | | | 11 | % |
Account and service fees | | 5 | | | 4 | | | 25 | % | | 17 | | | 13 | | | 31 | % |
All other | | 3 | | | 3 | | | — | % | | 8 | | | 9 | | | (11) | % |
Net revenues | | 228 | | | 225 | | | 1 | % | | 698 | | | 629 | | | 11 | % |
Non-interest expenses: | | | | | | | | | | | | |
Compensation, commissions and benefits | | 49 | | | 43 | | | 14 | % | | 142 | | | 138 | | | 3 | % |
Non-compensation expenses: | | | | | | | | | | | | |
Communications and information processing | | 13 | | | 12 | | | 8 | % | | 39 | | | 35 | | | 11 | % |
Investment sub-advisory fees | | 38 | | | 33 | | | 15 | % | | 114 | | | 91 | | | 25 | % |
| | | | | | | | | | | | |
All other | | 35 | | | 32 | | | 9 | % | | 100 | | | 90 | | | 11 | % |
Total non-compensation expenses | | 86 | | | 77 | | | 12 | % | | 253 | | | 216 | | | 17 | % |
Total non-interest expenses | | 135 | | | 120 | | | 13 | % | | 395 | | | 354 | | | 12 | % |
Pre-tax income | | $ | 93 | | | $ | 105 | | | (11) | % | | $ | 303 | | | $ | 275 | | | 10 | % |
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
Management’s Discussion and Analysis
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three months ended June 30, | | Nine months ended June 30, |
$ in millions | | 2023 | | 2022 | | % change | | 2023 | | 2022 | | % change |
Revenues: | | | | | | | | | | | | |
Asset management and related administrative fees: | | | | | | | | | | | | |
Managed programs | | $ | 146 | | | $ | 145 | | | 1 | % | | $ | 420 | | | $ | 445 | | | (6) | % |
Administration and other | | 71 | | | 75 | | | (5) | % | | 200 | | | 228 | | | (12) | % |
Total asset management and related administrative fees | | 217 | | | 220 | | | (1) | % | | 620 | | | 673 | | | (8) | % |
Account and service fees | | 5 | | | 5 | | | — | % | | 16 | | | 17 | | | (6) | % |
All other | | 4 | | | 3 | | | 33 | % | | 13 | | | 8 | | | 63 | % |
Net revenues | | 226 | | | 228 | | | (1) | % | | 649 | | | 698 | | | (7) | % |
Non-interest expenses: | | | | | | | | | | | | |
Compensation, commissions and benefits | | 51 | | | 49 | | | 4 | % | | 150 | | | 142 | | | 6 | % |
Non-compensation expenses: | | | | | | | | | | | | |
Communications and information processing | | 15 | | | 13 | | | 15 | % | | 43 | | | 39 | | | 10 | % |
Investment sub-advisory fees | | 39 | | | 38 | | | 3 | % | | 107 | | | 114 | | | (6) | % |
| | | | | | | | | | | | |
All other | | 32 | | | 35 | | | (9) | % | | 98 | | | 100 | | | (2) | % |
Total non-compensation expenses | | 86 | | | 86 | | | — | % | | 248 | | | 253 | | | (2) | % |
Total non-interest expenses | | 137 | | | 135 | | | 1 | % | | 398 | | | 395 | | | 1 | % |
Pre-tax income | | $ | 89 | | | $ | 93 | | | (4) | % | | $ | 251 | | | $ | 303 | | | (17) | % |
Selected key metrics
Managed programs
Management fees recorded in our Asset Management segment are generally calculated as a percentage of the value of our fee-billable financial assets under management (“AUM”). These AUM include the portion of fee-based AUA in our PCG segment that is invested in programs overseen by our Asset Management segment (included in the “AMS” line of the following table), as well as retail accounts managed on behalf of third-party institutions, institutional accounts and proprietary mutual funds that we manage (collectively included in the “Carillon Tower Advisers”“Raymond James Investment Management” line of the following table).
Revenues related to fee-based AUA in our PCG segment are shared by the PCG and Asset Management segments, the amount of which depends on whether or not clients are invested in assets that are in managed programs overseen by our Asset Management segment and the administrative services provided (see our “Management’s Discussion and Analysis - Results of Operations - Private Client Group” for more information). Our AUM in AMS are impacted by market fluctuations and net inflows or outflows of assets, including transfers between fee-based accounts and transaction-based accounts within our PCG segment.
Revenues earned by Carillon Tower AdvisersRaymond James Investment Management for retail accounts managed on behalf of third-party institutions, institutional accounts and our proprietary mutual funds are recorded entirely in the Asset Management segment. Our AUM in Carillon Tower AdvisersRaymond James Investment Management are impacted by market and investment performance and net inflows or outflows of assets, including the impact of acquisitions.assets.
Fees for our managed programs are generally collected quarterly. Approximately 70%65% of these fees are based on balances as of the beginning of the quarter (primarily in AMS), approximately 10%15% are based on balances as of the end of the quarter, and approximately 20% are based on average daily balances throughout the quarter.
| | | | | | | | |
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Management’s Discussion and Analysis | |
Financial assets under management
| $ in billions | $ in billions | | June 30, 2022 | | March 31, 2022 | | September 30, 2021 | | June 30, 2021 | | March 31, 2021 | | September 30, 2020 | $ in billions | | June 30, 2023 | | March 31, 2023 | | September 30, 2022 | | June 30, 2022 | | March 31, 2022 | | September 30, 2021 |
AMS (1) | AMS (1) | | $ | 125.4 | | | $ | 140.1 | | | $ | 134.4 | | | $ | 131.8 | | | $ | 121.2 | | | $ | 102.2 | | AMS (1) | | $ | 142.3 | | | $ | 136.5 | | | $ | 119.8 | | | $ | 125.4 | | | $ | 140.1 | | | $ | 134.4 | |
Carillon Tower Advisers | | 67.2 | | | 64.0 | | | 67.8 | | | 69.2 | | | 66.6 | | | 59.5 | | |
Raymond James Investment Management | | Raymond James Investment Management | | 70.2 | | | 69.4 | | | 64.2 | | | 67.2 | | | 64.0 | | | 67.8 | |
Subtotal financial assets under management | Subtotal financial assets under management | | 192.6 | | | 204.1 | | | 202.2 | | | 201.0 | | | 187.8 | | | 161.7 | | Subtotal financial assets under management | | 212.5 | | | 205.9 | | | 184.0 | | | 192.6 | | | 204.1 | | | 202.2 | |
Less: Assets managed for affiliated entities | Less: Assets managed for affiliated entities | | (10.2) | | | (10.4) | | | (10.3) | | | (10.0) | | | (9.6) | | | (8.6) | | Less: Assets managed for affiliated entities | | (11.8) | | | (11.5) | | | (10.2) | | | (10.2) | | | (10.4) | | | (10.3) | |
Total financial assets under management | Total financial assets under management | | $ | 182.4 | | | $ | 193.7 | | | $ | 191.9 | | | $ | 191.0 | | | $ | 178.2 | | | $ | 153.1 | | Total financial assets under management | | $ | 200.7 | | | $ | 194.4 | | | $ | 173.8 | | | $ | 182.4 | | | $ | 193.7 | | | $ | 191.9 | |
(1)Represents the portion of our PCG segment fee-based AUA (as disclosed in “Assets in fee-based accounts” in the “Selected key metrics - PCG client asset balances” section of our “Management’s Discussion and Analysis - Results of Operations - Private Client Group”) that is invested in managed programs overseen by the Asset Management segment.
Activity (including activity in assets managed for affiliated entities)
| | | Three months ended June 30, | | Nine months ended June 30, | | Three months ended June 30, | | Nine months ended June 30, |
$ in billions | $ in billions | | 2022 | | 2021 | | 2022 | | 2021 | $ in billions | | 2023 | | 2022 | | 2023 | | 2022 |
Financial assets under management at beginning of period | Financial assets under management at beginning of period | | $ | 204.1 | | | $ | 187.8 | | | $ | 202.2 | | | $ | 161.7 | | Financial assets under management at beginning of period | | $ | 205.9 | | | $ | 204.1 | | | $ | 184.0 | | | $ | 202.2 | |
Carillon Tower Advisers: | | |
| Acquisition of Chartwell Investment Partners (1) | Acquisition of Chartwell Investment Partners (1) | | 9.8 | | | — | | | 9.8 | | | — | | Acquisition of Chartwell Investment Partners (1) | | — | | | 9.8 | | | — | | | 9.8 | |
Other - net inflows/(outflows) | | 0.3 | | | (0.3) | | | (0.9) | | | 0.8 | | |
Raymond James Investment Management - net inflows/(outflows) | | Raymond James Investment Management - net inflows/(outflows) | | (0.4) | | | 0.3 | | | 1.3 | | | (0.9) | |
AMS - net inflows | AMS - net inflows | | 1.4 | | | 4.5 | | | 8.4 | | | 9.8 | | AMS - net inflows | | 0.8 | | | 1.4 | | | 3.5 | | | 8.4 | |
Net market appreciation/(depreciation) in asset values | Net market appreciation/(depreciation) in asset values | | (23.0) | | | 9.0 | | | (26.9) | | | 28.7 | | Net market appreciation/(depreciation) in asset values | | 6.2 | | | (23.0) | | | 23.7 | | | (26.9) | |
Financial assets under management at end of period | Financial assets under management at end of period | | $ | 192.6 | | | $ | 201.0 | | | $ | 192.6 | | | $ | 201.0 | | Financial assets under management at end of period | | $ | 212.5 | | | $ | 192.6 | | | $ | 212.5 | | | $ | 192.6 | |
(1)Represents June 1, 2022 assets under management of Chartwell Investment Partners, a registered investment advisor acquired as part of the TriState Capital acquisition. See Note 3 of the Notes to Condensed Consolidated Financial Statements of thisour 2022 Form 10-Q10-K for further information about this acquisition.
AMS
See “Management’s Discussion and Analysis - Results of Operations - Private Client Group” for further information about our retail client assets, including those fee-based assets invested in programs managed by AMS.
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
Management’s Discussion and Analysis
Carillon Tower AdvisersRaymond James Investment Management
Assets managed by Carillon Tower AdvisersRaymond James Investment Management include assets managed by its subsidiaries and affiliates:our subsidiaries: Eagle Asset Management, Scout Investments, Reams Asset Management (a division of Scout Investments), ClariVest Asset Management, Cougar Global Investments, and Chartwell Investment Partners (“Chartwell”), which was acquired on June 1, 2022 in connection with our acquisition of TriState Capital. The following table presents Carillon Tower Advisers’Raymond James Investment Management’s AUM by objective, excluding assets for which it does not exercise discretion, as well as the approximate average client fee rate earned on such assets.
| | | | | | | | | | | | | | | | As of June 30, 2023 | |
$ in billions | $ in billions | | June 30, 2022 | | Average fee rate | | $ in billions | | AUM | | Average fee rate | |
Equity | Equity | | $ | 24.4 | | | 0.56 | % | | Equity | | $ | 24.9 | | | 0.56 | % | |
Fixed income | Fixed income | | 35.0 | | | 0.20 | % | | Fixed income | | 37.0 | | | 0.20 | % | |
Balanced | Balanced | | 7.8 | | | 0.33 | % | | Balanced | | 8.3 | | | 0.33 | % | |
Total financial assets under management | Total financial assets under management | | $ | 67.2 | | | 0.35 | % | | Total financial assets under management | | $ | 70.2 | | | 0.34 | % | |
Non-discretionary asset-based programs
The following table includes assets held in certain non-discretionary asset-based programs for which the Asset Management segment does not exercise discretion but provides administrative support (including for affiliated entities). The vast majority of these assets are also included in our PCG segment fee-based AUA (as disclosed in “Assets in fee-based accounts” in the “Selected key metrics - PCG client asset balances” section of our “Management’s Discussion and Analysis - Results of Operations - Private Client Group”).
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
$ in billions | | June 30, 2022 | | March 31, 2022 | | September 30, 2021 | | | | June 30, 2021 | | March 31, 2021 | | September 30, 2020 |
Total assets | | $ | 339.7 | | | $ | 379.7 | | | $ | 365.3 | | | | | $ | 361.5 | | | $ | 334.2 | | | $ | 280.6 | |
The decrease in assets as of June 30, 2022 compared to March 31, 2022 was largely due to a decline in equity markets during the quarter. Administrative fees associated with these programs are predominantly based on balances at the beginning of the quarter.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
$ in billions | | June 30, 2023 | | March 31, 2023 | | September 30, 2022 | | June 30, 2022 | | March 31, 2022 | | | | September 30, 2021 |
Total assets | | $ | 399.2 | | | $ | 378.7 | | | $ | 329.2 | | | $ | 339.7 | | | $ | 379.7 | | | | | $ | 365.3 | |
| | | | | | | | |
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Management’s Discussion and Analysis | |
The increase in assets as of June 30, 2023 compared with March 31, 2023, September 30, 2022, and June 30, 2022 was largely due to equity market appreciation and continued growth in the PCG segment.
Raymond James Trust
The following table includes assets held in asset-based programs in RJRaymond James Trust, N.A. (including those managed for affiliated entities).
| $ in billions | $ in billions | | June 30, 2022 | | March 31, 2022 | | September 30, 2021 | | | June 30, 2021 | | March 31, 2021 | | September 30, 2020 | $ in billions | | June 30, 2023 | | March 31, 2023 | | September 30, 2022 | | | June 30, 2022 | | March 31, 2022 | | September 30, 2021 |
Total assets | Total assets | | $ | 7.6 | | | $ | 8.4 | | | $ | 8.1 | | | | $ | 8.1 | | | $ | 7.8 | | | $ | 7.1 | | Total assets | | $ | 8.6 | | | $ | 8.2 | | | $ | 7.3 | | | | $ | 7.6 | | | $ | 8.4 | | | $ | 8.1 | |
Quarter ended June 30, 20222023 compared with the quarter ended June 30, 20212022
Net revenues of $228$226 million increaseddecreased 1% whileand pre-tax income of $93$89 million decreased 11%4%.
Asset management and related administrative fees increased $2decreased $3 million, or 1%, driven by a higherlower beginning balance of assets in non-discretionary asset-based programs and financial assets under management at AMS, partially offset byas well as lower average financial assets under management at Carillon Tower Advisers.Raymond James Investment Management (excluding Chartwell, which was acquired on June 1, 2022), in each case primarily due to market-driven depreciation in asset values. These declines were partially offset by incremental revenues arising from the acquisition of Chartwell. We expect the declinesincrease in financial assets under management and assets in non-discretionary asset-based programs during the quarter,as of June 30, 2023 compared with March 31, 2023, which occurred due to equity market appreciation and net inflows during the decline in equity markets,quarter, to negativelypositively affect our fiscal fourth quarter revenues,of 2023, as the majority of our asset management and related administrative fees are billed based on balances as of the beginning of the quarter. Despite positive net inflows at Carillon Tower Advisers during the quarter and the positive impact of acquiring Chartwell (as of June 1, 2022), Carillon Tower Advisers continues to be challenged by the industry shift from actively managed investment strategies to passive investment strategies.
Compensation expenses increased $6$2 million, or 14%4%, resulting from increased costsdue to support our growth, as well as one month of incremental compensation expenses related to Chartwell. Non-compensationof Chartwell, and non-compensation expenses increased $9 million, or 12%, primarily due to higher investment sub-advisory fees, resulting fromwere flat compared with the increase in assets under management in sub-advised programs.
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
Management’s Discussion and Analysis
prior-year quarter.
Nine months ended June 30, 20222023 compared with the nine months ended June 30, 20212022
Net revenues of $698$649 million increased 11%decreased 7% and pre-tax income of $303$251 million increased 10%decreased 17%.
Asset management and related administrative fees increased $66decreased $53 million, or 11%8%, driven by higherlower assets in non-discretionary asset-based programs and financial assets under management and higher assets in non-discretionary asset-based programsat AMS at the beginning of each of the current-year quarterly billing periods compared with the prior-year quarterly billing periods.periods, as well as lower average financial assets under management at Raymond James Investment Management (excluding Chartwell), in each case primarily due to market-driven depreciation in asset values. These declines were partially offset by incremental revenues of Chartwell.
Compensation expenses increased $4$8 million, or 3%6%, due to incremental expenses resulting from the acquisition of Chartwell and non-compensationhigher salary expenses increased $37in part due to annual salary increases. Non-compensation expenses decreased $5 million, or 17%. The increase in non-compensation expenses was largely2% due to higherlower investment sub-advisory fees, resulting from the increasedecrease in assets under management in sub-advised programs.programs, and lower platform fees, partially offset by incremental expenses resulting from the Chartwell acquisition.
| | | | | | | | |
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Management’s Discussion and Analysis | |
RESULTS OF OPERATIONS – BANK
For an overview of our Bank segment operations, as well as a description of the key factors impacting our Bank segment results of operations, refer to the information presented in “Item 1 - Business” and “Item 7 - Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our 20212022 Form 10-K. Our Bank segment results include the results of TriState Capital Bank since the acquisition date of June 1, 2022. See Note 3 of the Notes to Condensed Consolidated Financial Statements of this Form 10-Q for information regarding this acquisition.
Operating results
| | | Three months ended June 30, | | Nine months ended June 30, | | Three months ended June 30, | | Nine months ended June 30, |
$ in millions | $ in millions | | 2022 | | 2021 | | % change | | 2022 | | 2021 | | % change | $ in millions | | 2023 | | 2022 | | % change | | 2023 | | 2022 | | % change |
Revenues: | Revenues: | | | | | | | | | | | | | Revenues: | | | | | | | | | | | | |
Interest income | Interest income | | $ | 296 | | | $ | 172 | | | 72 | % | | $ | 682 | | | $ | 505 | | | 35 | % | Interest income | | $ | 826 | | | $ | 296 | | | 179 | % | | $ | 2,251 | | | $ | 682 | | | 230 | % |
Interest expense | Interest expense | | (26) | | | (11) | | | 136 | % | | (46) | | | (32) | | | 44 | % | Interest expense | | (329) | | | (26) | | | 1,165 | % | | (733) | | | (46) | | | 1,493 | % |
Net interest income | Net interest income | | 270 | | | 161 | | | 68 | % | | 636 | | | 473 | | | 34 | % | Net interest income | | 497 | | | 270 | | | 84 | % | | 1,518 | | | 636 | | | 139 | % |
All other | All other | | 6 | | | 8 | | | (25) | % | | 20 | | | 23 | | | (13) | % | All other | | 17 | | | 6 | | | 183 | % | | 44 | | | 20 | | | 120 | % |
Net revenues | Net revenues | | 276 | | | 169 | | | 63 | % | | 656 | | | 496 | | | 32 | % | Net revenues | | 514 | | | 276 | | | 86 | % | | 1,562 | | | 656 | | | 138 | % |
Non-interest expenses: | Non-interest expenses: | | | | | | | | | | Non-interest expenses: | | | | | | | | | |
Compensation and benefits | Compensation and benefits | | 21 | | | 13 | | | 62 | % | | 48 | | | 38 | | | 26 | % | Compensation and benefits | | 48 | | | 21 | | | 129 | % | | 136 | | | 48 | | | 183 | % |
Non-compensation expenses: | Non-compensation expenses: | | Non-compensation expenses: | |
Bank loan provision/(benefit) for credit losses | | 56 | | | (19) | | | NM | | 66 | | | (37) | | | NM | |
Bank loan provision for credit losses | | Bank loan provision for credit losses | | 54 | | | 56 | | | (4) | % | | 96 | | | 66 | | | 45 | % |
RJBDP fees to PCG | RJBDP fees to PCG | | 79 | | | 47 | | | 68 | % | | 178 | | | 134 | | | 33 | % | RJBDP fees to PCG | | 277 | | | 79 | | | 251 | % | | 856 | | | 178 | | | 381 | % |
| All other | All other | | 46 | | | 24 | | | 92 | % | | 105 | | | 75 | | | 40 | % | All other | | 69 | | | 46 | | | 50 | % | | 181 | | | 105 | | | 72 | % |
Total non-compensation expenses | Total non-compensation expenses | | 181 | | | 52 | | | 248 | % | | 349 | | | 172 | | | 103 | % | Total non-compensation expenses | | 400 | | | 181 | | | 121 | % | | 1,133 | | | 349 | | | 225 | % |
Total non-interest expenses | Total non-interest expenses | | 202 | | | 65 | | | 211 | % | | 397 | | | 210 | | | 89 | % | Total non-interest expenses | | 448 | | | 202 | | | 122 | % | | 1,269 | | | 397 | | | 220 | % |
Pre-tax income | Pre-tax income | | $ | 74 | | | $ | 104 | | | (29) | % | | $ | 259 | | | $ | 286 | | | (9) | % | Pre-tax income | | $ | 66 | | | $ | 74 | | | (11) | % | | $ | 293 | | | $ | 259 | | | 13 | % |
Quarter ended June 30, 20222023 compared with the quarter ended June 30, 20212022
Net revenues of $276$514 million increased 63%86%, while pre-tax income of $74$66 million decreased 29%11%.
Net interest income increased $109$227 million, or 68%84%, primarily due to the significant increase in short-term interest rates and higher average interest-earning assets at Raymond James Bank, as well as one month of incremental net interest income from the June 1, 2022 acquisition of TriState Capital Bank. The increase in average interest-earning assets at Raymond James Bank was primarily driven by growth in securities-based loansthe bank loan portfolio and residential mortgage loanshigher average cash balances. These increases were partially offset by increased interest expense at Raymond James Bank as we pursue more diversified funding sources which have a higher relative cost, such as an increased emphasis on certificates of deposit and the Enhanced Savings Program launched to PCG clients as well as increases in average corporate loans and available-for-sale securities.our fiscal second quarter of 2023. The net interest margin increased to 2.41%3.26% from 1.92%2.41% for the prior-year quarter. We anticipate that the Bank segment net interest income and net interest margin forwill decline during our fiscal fourth quarter of 2022 will approximate 2.7% and will be positively impacted by2023 due to the Fed’s short-term interest rate increases enacted during our fiscal third quarter and in late July 2022. We anticipateimpact from the Bank segment’s net interest income to benefit from a full quarter’s impact of TriState Capital Bank results. In addition, given that a significant portion of our interest-earning assets are sensitive to changes in market interest rates, we expect our net interest earnings to also be favorably impacted by any additional increases in short-term interest rates that may occur.aforementioned higher-cost diversified funding sources.
The bank loan provision for credit losses was $56$54 million for the current quarter, compared with a benefit for credit losses of $19$56 million for the prior-year quarter. The current quarter provision includesfor credit losses largely reflected the impacts of a weaker economic outlook for the CRE portfolio as reflected in Moody’s CRE Price Index utilized in our CECL model and, to a lesser extent, loan downgrades. The prior-year quarter provision for credit losses was primarily due to an initial provision for credit losses of $26
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
Management’s Discussion million on loans acquired as part of the TriState Capital acquisition, as well as additional provisions for credit losses at Raymond James Bank due to loan growth and Analysisa weaker macroeconomic outlook at that time.
Compensation expenses increased $27 million, or 129%, primarily due to incremental expenses of TriState Capital Bank.
Non-compensation expenses, excluding the bank loan provision for credit losses, increased $221 million, or 177%, primarily due to an increase in RJBDP fees paid to PCG and incremental expenses of TriState Capital Bank. RJBDP fees to PCG increased $198 million, or 251%, due to a significant increase in short-term interest rates, partially offset by a decrease in balances swept to our Bank segment as part of the RJBDP, as deposit balances raised in the Enhanced Savings Program during our fiscal third quarter of 2023 resulted in a decrease in balances swept to the Bank segment from the RJBDP. These Bank segment fees and the related revenues earned by the PCG segment are eliminated in consolidation (see “Management’s Discussion and Analysis - Results of Operations - Private Client Group” for further information on these servicing fees).
| | | | | | | | |
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Management’s Discussion and Analysis | |
Nine months ended June 30, 2023 compared with the nine months ended June 30, 2022
Net revenues of $1.56 billion increased 138%, while pre-tax income of $293 million recordedincreased 13%.
Net interest income increased $882 million, or 139%, due to the significant increase in short-term interest rates and higher average interest-earning assets at Raymond James Bank, primarily bank loans, as well as incremental net interest income from the acquisition of TriState Capital Bank. These increases were partially offset by the aforementioned increased deposit costs at Raymond James Bank. The net interest margin increased to 3.41% from 2.14% for the prior-year period.
All other revenues increased $24 million, or 120%, primarily due to incremental revenues from the TriState Capital acquisition largely related to derivatives, valuation gains on non-PCDcertain company-owned life insurance policies compared with losses in the prior-year period, and higher foreign currency gains compared with the prior-year period.
The bank loan provision for credit losses was $96 million for the current-year period, compared with $66 million for the prior-year period. The current year provision for credit losses primarily reflected the impacts of a weakened macroeconomic outlook for certain loan portfolios, including the impact of a weaker economic outlook for the CRE portfolio as reflected in Moody’s CRE Price Index utilized in our CECL model, as well as loan downgrades during the period. These increases were partially offset by the impact of loan repayments and sales, which had a larger impact than provisions on new loans during the period. The provision for credit losses in the prior-year period primarily reflected the aforementioned initial provision for credit losses on loans acquired as part of the TriState Capital acquisition, as well as the impact of both loan growth at Raymond James Bank and a weaker macroeconomic outlook. The prior-year quarter benefit primarily reflected an improved economic forecast, as well as improved credit ratings within our corporate loan portfolio.outlook at that time.
Compensation expenses increased $8$88 million, or 62%183%, primarily due to incremental expenses from the acquisition of TriState Capital.Capital Bank and, to a lesser extent, increased headcount and annual salary increases.
Non-compensation expenses, excluding the bank loan provision/(benefit)provision for credit losses, increased $54$754 million, or 76%266%, primarily due to an increase in RJBDP fees paid to PCG and incremental expenses associated with TriState Capital (including a $5 million initial provision for credit losses on TriState Capital’s unfunded lending commitments), and a provision for credit losses on unfunded lending commitments unrelated to the acquisition compared with a benefit for the prior-year quarter.Bank. RJBDP fees to PCG increased $32$678 million, or 68%381%, primarily due to ana significant increase in short-term interest rates as well asand, to a lesser extent, an increase in client cash swept to Raymond Jamesour Bank segment as part of the RJBDP. Under our current intersegment policies, theThese Bank segment incursfees and the higher of a base servicing fee to PCG on RJBDP deposits it receives in this program, or a net yield equivalent to the yield that the firm would otherwise receive from third-party banks in the RJBDP. This is a different intersegment policy than that which was in place in prior years, during the last interest rate cycle. The result of this intersegment change is that the Bank segment expense to PCG for servicing these cash deposits will increase as rates rise, reflecting a market rate, with the PCG segment receiving increased fee revenues. The servicing fee that the Bank segment incurs on these RJBDP cash sweep deposits, as well as the fee revenues inearned by the PCG segment are eliminated in the computation of our consolidated results.
Nine months ended June 30, 2022 compared with the nine months ended June 30, 2021
Net revenues of $656 million increased 32%, while pre-tax income of $259 million decreased 9%.
Net interest income increased $163 million, or 34%, due to the increase in short-term interest rates, higher average interest-earning assets, as well as one month of incremental net interest income from the acquisition of TriState Capital Bank. The increase in average interest-earning assets was primarily driven by significant growth in securities-based loans and residential mortgage loans to PCG clients, as well as higher average corporate loans and available-for-sale securities. The net interest margin increased to 2.14% from 1.96% for the prior-year period.
The bank loan provision for credit losses was $66 million for the current-year period, compared with a benefit for credit losses of $37 million for the prior-year period. The current-year period provision includes the aforementioned initial provision for credit losses of $26 million recorded on non-PCD loans acquired as part of the TriState Capital acquisition, as well as the impact of both loan growth at Raymond James Bank and a weaker macroeconomic outlook. The prior year benefit was largely attributable to improved economic forecasts utilized in our model at that time, including improved outlooks on unemployment and gross domestic product, which favorably impacted most of our loan portfolios at that time, as well as improved credit ratings within our corporate loan portfolio.
Non-compensation expenses, excluding the bank loan provision/(benefit) for credit losses, increased $74 million, or 35%, primarily due to an increase in RJBDP fees paid to PCG, one month of incremental expenses associated with TriState Capital (including a $5 million initial provision for credit losses on TriState Capital’s unfunded lending commitments), and a provision for credit losses on unfunded lending commitments unrelated to the acquisition compared with a benefit for the prior-year period. RJBDP fees to PCG increased $44 million, or 33%, due to an increase in short-term interest rates as well as an increase in client cash swept to Raymond James Bank as part of the RJBDP. These fees are eliminated in the computation of our consolidated results.consolidation.
| | | | | | | | |
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Management’s Discussion and Analysis
Management’s Discussion and Analysis | |
RESULTS OF OPERATIONS – OTHER
This segment includes our private equity investments, interest income on certain corporate cash balances, certain costs incurred in acquisition activities, and certain corporate overhead costs of RJF that are not allocated to other segments, including the interest costs on our public debt.debt as well as certain provisions for legal and regulatory matters. For an overview of our Other segment operations, refer to the information presented in “Item 1 - Business” and “Item 7 - Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our 20212022 Form 10-K.
Operating results
| | | Three months ended June 30, | | Nine months ended June 30, | | Three months ended June 30, | | Nine months ended June 30, |
$ in millions | $ in millions | | 2022 | | 2021 | | % change | | 2022 | | 2021 | | % change | $ in millions | | 2023 | | 2022 | | % change | | 2023 | | 2022 | | % change |
Revenues: | Revenues: | | | | | | | | | | | | | Revenues: | | | | | | | | | | | | |
Interest income | Interest income | | $ | 6 | | | $ | — | | | NM | | $ | 10 | | | $ | 6 | | | 67 | % | Interest income | | $ | 37 | | | $ | 6 | | | 517 | % | | $ | 103 | | | $ | 10 | | | 930 | % |
Gains/(losses) on private equity investments | | (3) | | | 24 | | | NM | | — | | | 56 | | | (100) | % | |
Net gains/(losses) on private equity investments | | Net gains/(losses) on private equity investments | | 2 | | | (3) | | | NM | | 5 | | | — | | | NM |
All other | All other | | — | | | 4 | | | (100) | % | | 7 | | | 7 | | | — | % | All other | | — | | | — | | | — | % | | 1 | | | 7 | | | (86) | % |
Total revenues | Total revenues | | 3 | | | 28 | | | (89) | % | | 17 | | | 69 | | | (75) | % | Total revenues | | 39 | | | 3 | | | 1,200 | % | | 109 | | | 17 | | | 541 | % |
Interest expense | Interest expense | | (24) | | | (26) | | | (8) | % | | (71) | | | (75) | | | (5) | % | Interest expense | | (24) | | | (24) | | | — | % | | (75) | | | (71) | | | 6 | % |
Net revenues | Net revenues | | (21) | | | 2 | | | NM | | (54) | | | (6) | | | (800) | % | Net revenues | | 15 | | | (21) | | | NM | | 34 | | | (54) | | | NM |
Non-interest expenses: | Non-interest expenses: | | | | | | | | | | Non-interest expenses: | | | | | | | | | |
Compensation and all other | | 43 | | | 38 | | | 13 | % | | 110 | | | 102 | | | 8 | % | |
Losses on extinguishment of debt | | — | | | 98 | | | (100) | % | | — | | | 98 | | | (100) | % | |
Compensation and benefits | | Compensation and benefits | | 27 | | | 28 | | | (4) | % | | 71 | | | 70 | | | 1 | % |
Insurance settlement received | | Insurance settlement received | | — | | | — | | | — | % | | (32) | | | — | | | NM |
| All other | | All other | | 34 | | | 15 | | | 127 | % | | 46 | | | 40 | | | 15 | % |
Total non-interest expenses | Total non-interest expenses | | 43 | | | 136 | | | (68) | % | | 110 | | | 200 | | | (45) | % | Total non-interest expenses | | 61 | | | 43 | | | 42 | % | | 85 | | | 110 | | | (23) | % |
Pre-tax loss | Pre-tax loss | | $ | (64) | | | $ | (134) | | | 52 | % | | $ | (164) | | | $ | (206) | | | 20 | % | Pre-tax loss | | $ | (46) | | | $ | (64) | | | 28 | % | | $ | (51) | | | $ | (164) | | | 69 | % |
Quarter ended June 30, 20222023 compared with the quarter ended June 30, 20212022
ThePre-tax loss was $46 million compared with a pre-tax loss of $64 million was $70 million lower than the loss infor the prior-year quarter.
Net revenues decreased $23increased $36 million primarily due to a net loss of $3 million related to our private equity investments compared with $24 million of gainsan increase in the prior-year quarter, partially offset by the impact of higher interest income largely due toearned as a result of higher short-term interest rates.rates applicable to our corporate cash balances.
Non-interest expenses decreased $93increased $18 million, primarily due to $98 million of losses on extinguishment of debt in the prior-year quarter related to the early-redemption our $250 million of 5.625% senior notes due 2024 and our $500 million of 3.625% senior notes due 2026. Offsetting this decrease was an increase in costs incurred in acquisition activities in the current quarter, which primarily includedprovisions for legal and other professionalregulatory matters and an increase in advertising expenses, and other costs incurred to effect our acquisition of TriState Capital, which was completed on June 1, 2022, and topartially offset by a lesser extent expenses associated with our acquisitions of Charles Stanley and SumRidge Partners, which were completeddecrease in January 2022 and July 2022, respectively.acquisition-related expenses.
Nine months ended June 30, 20222023 compared with the nine months ended June 30, 20212022
The pre-tax loss was $51 million compared with a pre-tax loss of $164 million was $42 million lower than the loss in the prior-year period.
Net revenues decreased $48increased $88 million, primarily due to lower private equity gains compared with the prior-year period. The prior-year period included $56 million of private equity valuation gains, of which $20 million were attributable to noncontrolling interests and were offset within other expenses, whereas the current year private equity results net to an insignificant amount. Offsetting the negative impact of the lower private equity valuation gains,increase in interest income increased compared with the prior-year period, largelyearned as a result of higher short-term interest rates applicable to our corporate cash balances, partially offset by an increase in interest expense due to the increasesubordinated notes assumed as part of our acquisition of TriState Capital in short-term interest rates, and interest expense decreased due to lower interest expense on senior notes payable compared with the prior-year period.June 2022.
Non-interest expenses decreased $90$25 million, or 45%23%, primarily due to a $32 million insurance settlement received during the aforementioned losses on extinguishment of debt recorded in the prior-yearcurrent-year period related to a previously settled legal matter, which was reflected as an offset to Other expenses, as well as thea decrease in amounts attributable to noncontrolling interests.acquisition-related expenses. These decreases were partially offset by an increase in costs incurred in acquisition activities, primarily associated with our current-year acquisitions of Charles Stanleyprovisions for legal and TriState Capital, as well as our July 1, 2022 acquisition of SumRidge Partners.regulatory matters.
| | | | | | | | |
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Management’s Discussion and Analysis
Management’s Discussion and Analysis | |
CERTAIN STATISTICAL DISCLOSURES BY BANK HOLDING COMPANIES
We are required to provide certain statistical disclosures as a bank holding company under the SEC’s Industry Guide 3. The following table provides certain of those disclosures.
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three months ended June 30, | | Nine months ended June 30, |
| | 2022 | | 2021 | | 2022 | | 2021 |
Return on assets | | 1.5% | | 2.2% | | 2.0% | | 2.4% |
Return on equity | | 13.3% | | 15.9% | | 16.3% | | 17.4% |
Average equity to average assets | | 11.3% | | 13.6% | | 12.0% | | 14.0% |
Dividend payout ratio | | 24.6% | | 17.9% | | 20.4% | | 16.9% |
Return on assets is computed by dividing annualized net income available to common shareholders for the period indicated by average assets for each respective period. Average assets for the quarter is computed by adding total assets as of the date indicated to the prior quarter-end total and dividing by two. Average assets for the year-to-date period is computed by adding total assets as of each quarter-end date during the year-to-date period to the beginning of the year total and dividing by four.
Return on equity is computed by dividing annualized net income available to common shareholders for the period indicated by average common equity for each respective period. Average equity for the quarter is computed by adding total equity attributable to RJF as of the date indicated to the prior quarter-end total and dividing by two. Average equity for the year-to-date period is computed by adding total equity attributable to RJF as of each quarter-end date during the year-to-date period to the beginning of the year total and dividing by four.
Average equity to average assets is computed by dividing average common equity by average assets, as calculated in accordance with the previous explanations.
Dividend payout ratio is computed by dividing dividends declared per common share during the period by earnings per diluted common share for the period.
Refer to the “Net interest analysis” and “Risk management - Credit risk” sections of this MD&A and to the Notes to Condensed Consolidated Financial Statements of this Form 10-Q for the other required disclosures.
STATEMENT OF FINANCIAL CONDITION ANALYSIS
The assets on our Condensed Consolidated Statements of Financial Condition consisted primarily of cash and cash equivalents, assets segregated for regulatory purposes and restricted cash (primarily segregated for the benefit of clients), receivables including bank loans, financial instruments held either for trading purposes or as investments, goodwill and identifiable intangible assets, and other assets. A significant portion of our assets were liquid in nature, providing us with flexibility in financing our business.
Total assets of $86.11$77.63 billion as of June 30, 20222023 were $24.22$3.32 billion, or 39%4%, greaterless than our total assets as of September 30, 2021. Our acquisition of TriState Capital during fiscal year 2022 brought a significant amount of assets and liabilities onto our balance sheet. The significant impacts on our June 30, 2022 assets which are directly attributable to this acquisition include an $11.79 billion increase in bank loans, net, a $1.56 billion increase in available-for-sale securities, and a $725 million increase in goodwill and intangible assets resulting from the acquisition.2022. Assets segregated for regulatory purposes and restricted cash increased $4.90decreased $4.64 billion, primarily due to an increasea decrease in client cash sweep balances, which resulted in a decline in client cash held in our CIP and the addition of $2.30 billion ofa corresponding decline in segregated cash balances resulting from the Charles Stanley acquisition. The acquisition of Charles Stanleyassets. Brokerage client receivables, collateralized agreements, and trading assets also contributed $221decreased $570 million, to the increase in goodwill$294 million, and identifiable intangible assets as of June 30, 2022$114 million, respectively, compared with September 30, 2021. Bank loans, net also increased due2022. The available-for-sale securities portfolio balances declined $319 million as a result of our intention to $5.06 billionutilize the cash generated from maturities in loan growth exclusivethis portfolio as a source of the loans acquired on the closing date of TriState Capital, consisting of increases in corporate, residential, and securities-based loans. Available-for-sale securities also increased $589 million exclusive of the portfolio acquired from TriState Capital on the closing date.funding for our business activities. Partially offsetting these increasesdecreases was a decrease$2.20 billion increase in cash and cash equivalents of $1.24 billion, partiallyas we have increased the cash held in our Bank segment since September 30, 2022 as a result of market factors that have impacted the banking industry during fiscal 2023, providing us flexibility to meet the needs of our acquisitions, as well as $100 million of RJF share repurchases. See Note 3 of the Notes to Condensed Consolidated Financial Statements of this Form 10-Q for additional information on our acquisitions.clients.
As of June 30, 2022,2023, our total liabilities of $76.62$67.71 billion were $23.03$3.81 billion, or 43%5%, greaterless than our total liabilities as of September 30, 2021. The increase2022. Brokerage client payables decreased $5.41 billion, primarily related to the aforementioned decrease in totalCIP balances as of June 30, 2023. Collateralized financings and derivative liabilities was primarily due toalso decreased $285 million and $137 million, respectively. These decreases were partially offset by an increase in bank deposits of $17.39$2.41 billion, which
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
Management’s Discussion and Analysis
includes $12.79 billion as a result of our acquisition of TriState Capital, as well as an increase in bank deposits unrelated to the acquisition of $4.56 billion. Brokerage client payables increased $5.06 billion, related to the increase in client cash balances as of June 30, 2022, primarily due to anthe launch of the Enhanced Savings Program to PCG clients in March 2023, which raised $11.23 billion of deposits during the period ended June 30, 2023, enabling us to shift a portion of our client cash sweep balances in the RJBDP from being held as bank deposits in our Bank segment to third-party banks in our RJBDP, which do not impact our Condensed Consolidated Statements of Financial Condition. The increase in client cash held indeposits also allowed us to reduce our CIPalready modest level of $2.96 billion, as well asborrowings from the acquisition of Charles Stanley, which resulted in an increase of $2.41 billion. Other borrowings increased $495FHLB by $190 million primarily reflectingcompared to September 30, 2022, despite the additional FHLB borrowings and subordinated note of TriState Capital. Partially offsetting these increases was a decrease in accrued compensation, commissions, and benefits.
banking market conditions that arose during fiscal 2023.
LIQUIDITY AND CAPITAL RESOURCES
Liquidity and capital are essential to our business. The primary goal of our liquidity management activities is to ensure adequate funding and liquidity to conduct our business over a range of economic and market environments.environments, including times of broader industry or market liquidity stress events, such as those which occurred in the banking industry during fiscal 2023. In times of market stress or uncertainty, we generally maintain higher levels of capital and liquidity, including increased cash levels in our Bank segment, to ensure we have adequate funding to support our business and meet our clients’ needs. We seek to manage capital levels to support execution of our business strategy, provide financial strength to our subsidiaries, and maintain sustained access to the capital markets, while at the same time meeting our regulatory capital requirements and conservative internal management targets.
Liquidity and capital resources are provided primarily through our business operations and financing activities. Financing activities could include bank borrowings, collateralized financing arrangements, new or enhanced deposit product offerings such as the Enhanced Savings Program, or additional capital raising activities under our “universal” shelf registration statement. We believe our existing assets, most of which are liquid in nature, together with funds generated from operations and available from committed and uncommitted financing facilities, provide adequate funds for continuing operations at current levels of activity in the short-term. We also believe that we will be able to continue to meet our long-term cash requirements due to our strong financial position and ability to access capital from financial markets.
| | | | | | | | |
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Management’s Discussion and Analysis | |
Liquidity and capital management
Senior management establishes our liquidity and capital management frameworks. Our liquidity and capital management frameworks are overseen by the RJF Asset and Liability Committee, a senior management committee that develops and executes strategies and policies to manage our liquidity risk and interest rate risk, as well as provides oversight over the firm’s investments. Our liquidity management framework is designed to ensure we have a sufficient amount of funding, even when funding markets experience stress. We manage the maturities and diversity of our funding across products and seek to maintain a diversified funding profile with an appropriate tenor, taking into consideration the characteristics and liquidity profile of our assets. The liquidity management framework includes senior management’s review of short- and long-term cash flow forecasts, review of capitalnecessary expenditures, monitoring of the availability of alternative sources of financing, and daily monitoring of liquidity in our significant subsidiaries. Our decisions on the allocation of resources to our business units consider, among other factors, projected profitability, cash flow, risk, and future liquidity needs.needs, and required capital levels. Our treasury department assists in evaluating, monitoring and controlling the impact that our business activities have on our financial condition and liquidity, and also maintains our relationships with various lenders. The objective of our liquidity management framework is to support the successful execution of our business strategies while ensuring ongoing and sufficient funding and liquidity.
Our capital planning and capital risk management processes are governed by the Capital Planning Committee (“CPC”), a senior management committee that provides oversight on our capital planning and ensures that our strategic planning and risk management processes are integrated into the capital planning process. The CPC meets at least quarterly to review key metrics related to the firm’s capital, such as debt structure and capital ratios; to analyze potential and emerging risks to capital; to oversee our annual firmwide capital stress test; and to propose capital actions to the Board of Directors, such as declaring dividends, repurchasing securities, and raising capital. To ensure that we have sufficient capital to absorb unanticipated losses, the firm adheres to capital risk appetite statements and tolerances set in excess of regulatory minimums, which are established by the CPC and approved by the Board of Directors. We conduct enterprise-wide capital stress testing to ensure that we maintain adequate capital to adhere to our established tolerances under multiple scenarios, including a stressed scenario.
Capital structure
Common equity (i.e., common stock, additional paid-in capital, and retained earnings) is the primary component of our capital structure. Common equity allows for the absorption of losses on an ongoing basis and for the conservation of resources during stress periods, as it provides us with discretion on the amount and timing of dividends and other capital actions. Information about our common equity is included in the Condensed Consolidated Statements of Financial Condition, the Condensed Consolidated Statements of Changes in Shareholders’ Equity, and Note 17 of this Form 10-Q.
Under regulatory capital rules applicable to us as a bank holding company, we are required to maintain minimum leverage ratios (defined as tier 1 capital divided by adjusted average assets), as well as minimum ratios of tier 1 capital, CET1, and total capital to risk-weighted assets. These capital ratios incorporate quantitative measures of our assets, liabilities, and certain off-balance sheet items as calculated under the regulatory capital rules and are subject to qualitative judgments by the regulators about components, risk-weightings, and other factors. We calculate these ratios in order to assess compliance with both regulatory requirements and internal capital policies. In order to maintain our ability to take certain capital actions, including dividends and common equity repurchases, and to make bonus payments, we must hold a capital conservation buffer above our minimum risk-based capital requirements. See Note 21 for further information about our regulatory capital and related capital ratios.
We have classified all of our investments in debt securities as available-for-sale and have not classified any of our investments in debt securities as held-to-maturity. Accordingly, we account for our available-for-sale securities at fair value at each reporting date, with unrealized gains and losses, net of tax, included in AOCI. Current Basel III rules permit us to make an election to exclude most components of AOCI when calculating CET1, tier 1 capital, and total capital. We have elected the AOCI opt-out for regulatory capital purposes and therefore exclude certain elements of AOCI, including gains/losses on our available-for-sale portfolio, from our capital calculations.
On July 27, 2023, U.S. banking regulators issued proposed rules that, if enacted, would result in changes to regulations applicable to bank holding companies, including higher capital requirements and eliminating the AOCI opt-out election, which could negatively impact our regulatory capital ratios in the future. We are evaluating these proposals, most of which would apply to us if our average total consolidated assets for four consecutive calendar quarters exceeded $100 billion, to assess their potential impact to our current businesses and strategies.
| | | | | | | | |
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Management’s Discussion and Analysis | |
The following table presents the components of RJF’s regulatory capital used to calculate the aforementioned regulatory capital ratios.
| | | | | | | | | | | | | | |
$ in millions | | June 30, 2023 | | September 30, 2022 |
Common equity tier 1 capital/Tier 1 capital | | | | |
Common stock and related additional paid-in capital | | $ | 3,101 | | | $ | 2,989 | |
Retained earnings | | 9,870 | | | 8,843 | |
Treasury stock | | (2,259) | | | (1,512) | |
Accumulated other comprehensive loss | | (842) | | | (982) | |
Less: Goodwill and identifiable intangible assets, net of related deferred tax liabilities | | (1,799) | | | (1,805) | |
Other adjustments | | 781 | | | 847 | |
Common equity tier 1 capital | | 8,852 | | | 8,380 | |
Preferred stock | | 79 | | | 120 | |
Less: Tier 1 capital deductions | | (3) | | | (20) | |
Tier 1 capital | | 8,928 | | | 8,480 | |
Tier 2 capital | | | | |
Qualifying subordinated debt | | 100 | | | 100 | |
Qualifying allowances for credit losses | | 512 | | | 451 | |
Tier 2 capital | | 612 | | | 551 | |
Total capital | | $ | 9,540 | | | $ | 9,031 | |
The following table presents RJF’s risk-weighted assets by exposure type used to calculate the aforementioned regulatory capital ratios.
| | | | | | | | | | | | | | |
$ in millions | | June 30, 2023 | | September 30, 2022 |
On-balance sheet assets: | | | | |
Corporate exposures | | $ | 19,822 | | | $ | 20,147 | |
Exposures to sovereign and government-sponsored entities (1) | | 1,896 | | | 2,002 | |
Exposures to depository institutions, foreign banks, and credit unions | | 1,910 | | | 3,003 | |
Exposures to public-sector entities | | 749 | | | 696 | |
Residential mortgage exposures | | 4,257 | | | 3,732 | |
Statutory multifamily mortgage exposures | | 108 | | | 71 | |
High volatility commercial real estate exposures | | 122 | | | 128 | |
Past due loans | | 200 | | | 110 | |
Equity exposures | | 533 | | | 445 | |
Securitization exposures | | 132 | | | 129 | |
Other assets | | 7,952 | | | 7,325 | |
Off-balance sheet: | | | | |
Standby letters of credit | | 79 | | | 62 | |
Commitments with original maturity of one year or less | | 111 | | | 98 | |
Commitments with original maturity greater than one year | | 2,561 | | | 2,437 | |
Over-the-counter derivatives | | 305 | | | 305 | |
| | | | |
Other off-balance sheet items | | 271 | | | 423 | |
Market risk-weighted assets | | 2,437 | | | 3,063 | |
Total standardized risk-weighted assets | | $ | 43,445 | | | $ | 44,176 | |
(1)RJF’s exposure is predominantly to the U.S. government and its agencies.
Cash flows
Cash and cash equivalents (excluding amounts segregated for regulatory purposes and restricted cash) decreased $1.24of $8.38 billion to $5.96 billion during the nine months endedat June 30, 2022, primarily due to the purchase of U.S. Treasuries, which were largely segregated for regulatory purposes as of June 30, 2022, as well as investments in bank loans and available-for-sale securities. In addition, we completed our acquisitions of Charles Stanley for cash consideration of £277 million ($376 million as of January 21, 2022) and TriState Capital, which included cash consideration of $484 million (including a $125 million note issued to TriState Capital prior to the acquisition) during the nine months ended June2023 increased $2.20 billion compared with September 30, 2022. Offsetting theseThe increase in cash outflows was the impact of positiveand cash equivalents primarily resulted from net income earned during the period as well as a significantand an increase in client cashbank deposits, as additional deposits from the launch of our Enhanced Savings Program to PCG clients in March 2023 and certificate of deposit issuances during the period more than offset a decline in RJBDP balances which increasedswept to our brokerage client payablesBank segment. These increases were partially offset by common stock repurchases during the fiscal year of $788 million and bank deposits.dividends.
| | | | | | | | |
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Management’s Discussion and Analysis
Management’s Discussion and Analysis | |
Sources of liquidity
Approximately $2.03$1.72 billion of our total June 30, 20222023 cash and cash equivalents included cash held at the parent company, which included cash loaned to RJ&A. These amounts include the impact of significant dividends from RJ&A during the nine months ended June 30, 2022, as well as dividends from RJF’s other subsidiaries. As of June 30, 2022,2023, RJF had loaned $1.47$1.00 billion to RJ&A (such amount is included in the RJ&A cash balance in the following table), which RJ&A has invested on behalf of RJF in cash and cash equivalents or otherwise deployed in its normal business activities.
The following table presents our holdings of cash and cash equivalents.
| | | | | | | | |
$ in millions | | June 30, 20222023 |
RJF | | $ | 578 | |
RJ&A | | 1,988743 | |
Raymond James Bank | | 1,1182,299 | |
TriState Capital Bank | | 4612,246 | |
RJ&A | | 1,760 | |
Raymond James Ltd. (“RJ Ltd.”) | | 947 | |
Charles Stanley Group Limited | | 115492 | |
Raymond James Financial Services, Inc. | | 148154 | |
Carillon Tower AdvisersCharles Stanley Group Limited | | 77129 | |
Raymond James Trust Company of New Hampshire | | 96 | |
Raymond James Capital Services, LLC | | 94 | |
Raymond James Investment Management | | 84 | |
Other subsidiaries | | 526278 | |
Total cash and cash equivalents | | $ | 5,9588,375 | |
Due to market volatility in the banking industry during fiscal 2023, we maintained a higher level of cash balances at Raymond James Bank and TriState Capital Bank as of June 30, 2023 compared with September 30, 2022 as part of our liquidity management practices.
RJF maintained depository accounts at Raymond James Bank with a balance of $256and TriState Capital Bank totaling $279 million as of June 30, 2022.2023. The portion of this total that was available on demand without restrictions, which amounted to $178$237 million as of June 30, 2022,2023, is reflected in the RJF cash balance and excluded from Raymond James Bank’s cash balance in the preceding table.
A large portion of the RJ Ltd. cash and cash equivalents balancebalances at our non-U.S. subsidiaries, including RJ Ltd. and Charles Stanley Group Limited, as of June 30, 20222023 was held to meet regulatory requirements and was not available for use by the parent.
In addition to the cash balances described, we have various other potential sources of cash available to the parent company from subsidiaries, as described in the following section.
Liquidity available from subsidiaries
Liquidity is principally available to RJF the parent company, from RJ&A and Raymond James Bank.
Certain of our broker-dealer subsidiaries are subject to the requirements of the Uniform Net Capital Rule (Rule 15c3-1) under the Securities and Exchange Act of 1934. As a member firm of the Financial Industry Regulatory Authority (“FINRA”), RJ&A is subject to FINRA’s capital requirements, which are substantially the same as Rule 15c3-1. Rule 15c3-1 provides for an “alternative net capital requirement,” which RJ&A has elected. Regulations require that minimum net capital, as defined, be equal to the greater of $1.5 million or 2% of aggregate debit items arising from client balances. In addition, covenants in RJ&A’s committed financing facilities require its net capital to be a minimum of 10% of aggregate debit items. At June 30, 2022,2023, RJ&A significantly exceeded the minimum regulatory requirements, the covenants in its financing arrangements pertaining to net capital, as well as its internally-targeted net capital tolerances despite significant dividends to RJF during the nine months ended June 30, 2022.tolerances. FINRA may impose certain restrictions, such as restricting withdrawals of equity capital, if a member firm were to fall below a certain threshold or fail to meet minimum net capital requirements which may result in RJ&A limiting dividends it would otherwise remit to RJF. We evaluate regulatory requirements, loan covenants and certain internal tolerances when determining the amount of liquidity available to RJF from RJ&A.
| | | | | | | | |
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Management’s Discussion and Analysis | |
Raymond James Bank may pay dividends to RJF without prior approval of its regulator as long as the dividends do not exceed the sum of its current calendar year and the previous two calendar years’ retained net income, and it maintains its targeted regulatory capital ratios. Dividends may be limited to the extent that capital is needed to support balance sheet growth.growth or as part of our liquidity and capital management activities.
Although we have liquidity available to us from our other subsidiaries, the available amounts aremay not be as significant as those previously described and, in certain instances, may be subject to regulatory requirements.
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
Management’s Discussion and Analysis
Borrowings and financing arrangements
Committed financingFinancing arrangements
We have various financing arrangements in place with third-party lenders that allow us the flexibility to borrow funds on a secured or unsecured basis to meet our liquidity needs. We generally utilize these financing arrangements to finance a portion of our fixed income trading instruments held by RJ&A or for cash management purposes. Our ability to borrow under these arrangements is dependent upon compliance with the conditions in our various loan agreements and, in the case of secured borrowings, collateral eligibility requirements. Our
As of June 30, 2023, RJF and RJ&A had the ability to borrow under our $750 million Credit Facility, a committed financing arrangements primarily consist of a tri-party repurchase agreement (i.e., securities sold under agreements to repurchase) and, in the case of our $500 million revolving credit facility agreement (the “Credit Facility”), an unsecured line of credit. The required market value of the collateral associated with the tri-party repurchase agreement ranges from 105% to 125% of the amount financed.
The following table presents our most significant committed financing arrangements with third-party lenders, whichcredit; however, we generally utilize to finance a portion of our fixed income trading instruments, and thehad no such borrowings outstanding balances related thereto.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | June 30, 2022 |
$ in millions | | RJ&A | | | | RJF | | Total | | Total number of arrangements |
Financing arrangement: | | | | | | | | | | |
Committed secured | | $ | 100 | | | | | $ | — | | | $ | 100 | | | 1 | |
Committed unsecured | | 200 | | | | | 300 | | | 500 | | | 1 | |
Total committed financing arrangements | | $ | 300 | | | | | $ | 300 | | | $ | 600 | | | 2 | |
| | | | | | | | | | |
Outstanding borrowing amount: | | | | | | | | | | |
Committed secured | | $ | — | | | | | $ | — | | | $ | — | | | |
Committed unsecured | | — | | | | | — | | | — | | | |
Total outstanding borrowing amount | | $ | — | | | | | $ | — | | | $ | — | | | |
Our committed unsecured financing arrangement in the preceding table represents our Credit Facility, which provides for maximum borrowings of up to $500 million, with a sublimit of $300 million for RJF. RJ&A may borrow up to $500 million under the Credit Facility, depending on the amount of outstanding borrowings by RJF. The variable ratethis facility fee on our Credit Facility, which is applied to the committed amount, decreased to 0.150% per annum as of June 30, 2022 from 0.175% per annum as of September 30, 2021, as a result of Moody’s Investor Services (“Moody’s”) upgrade of our credit ratings in February 2022. For additional details on our issuer and senior long-term debt ratings see our credit ratings table within this section below. For additional details on our committed unsecured financing arrangement, see2023. See our discussion of the Credit Facility in Note 1514 of the Notes to Condensed Consolidated Financial Statements of this Form 10-Q and Note 16 of the Notes to Consolidated Financial Statements of our 2021 Form 10-K.10-Q.
Uncommitted financing arrangements
OurIn addition to our Credit Facility, we have various uncommitted financing arrangements with third-party lenders, which are in the form of secured lines of credit, secured bilateral or tri-party repurchase agreements, or unsecured lines of credit. Our arrangements with third-party lenders are generally utilized to finance a portion of our fixed income securities or for cash management purposes. Our uncommitted secured financing arrangements generally require us to post collateral in excess of the amount borrowed and are generally collateralized by RJ&A-owned securities or by securities that we have received as collateral under reverse repurchase agreements (i.e., securities purchased under agreements to resell). As of June 30, 2022,2023, we had outstanding borrowings under one uncommitted secured borrowing arrangement out of a total of 1213 uncommitted financing arrangements (eight(nine uncommitted secured and four uncommitted unsecured). However, lenders are under no contractual obligation to lend to us under uncommitted credit facilities.
The following table presents ourOur borrowings on uncommitted financing arrangements, all of which were in the form of repurchase agreements in RJ&A, and were included in “Collateralized financings” on our Condensed Consolidated Statements of Financial Condition.
| | | | | | | | | | | | | | |
$ in millions | | | | | | | | June 30, 2022 |
Outstanding borrowing amount: | | | | | | | | |
Uncommitted secured | | | | | | | | $ | 100 | |
Uncommitted unsecured | | | | | | | | — | |
Total outstanding borrowing amount | | | | | | | | $ | 100 | |
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
Management’s Discussion and Analysis
The average daily balance outstanding during the five most recent quarters, the maximum month-end balance outstanding during the quarter and the period-end balances for repurchase agreements and reverse repurchase agreements are detailed in the following table.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Repurchase transactions | | Reverse repurchase transactions |
For the quarter ended: ($ in millions) | | Average daily balance outstanding | | Maximum month-end balance outstanding during the quarter | | End of period balance outstanding | | Average daily balance outstanding | | Maximum month-end balance outstanding during the quarter | | End of period balance outstanding |
June 30, 2022 | | $ | 203 | | | $ | 276 | | | $ | 100 | | | $ | 238 | | | $ | 300 | | | $ | 168 | |
March 31, 2022 | | $ | 271 | | | $ | 334 | | | $ | 140 | | | $ | 211 | | | $ | 304 | | | $ | 221 | |
December 31, 2021 | | $ | 247 | | | $ | 258 | | | $ | 203 | | | $ | 306 | | | $ | 305 | | | $ | 204 | |
September 30, 2021 | | $ | 220 | | | $ | 234 | | | $ | 205 | | | $ | 269 | | | $ | 286 | | | $ | 279 | |
June 30, 2021 | | $ | 194 | | | $ | 185 | | | $ | 185 | | | $ | 283 | | | $ | 339 | | | $ | 289 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Repurchase transactions | | Reverse repurchase transactions |
For the quarter ended: ($ in millions) | | Average daily balance outstanding | | Maximum month-end balance outstanding during the quarter | | End of period balance outstanding | | Average daily balance outstanding | | Maximum month-end balance outstanding during the quarter | | End of period balance outstanding |
June 30, 2023 | | $ | 123 | | | $ | 128 | | | $ | 110 | | | $ | 179 | | | $ | 181 | | | $ | 181 | |
March 31, 2023 | | $ | 174 | | | $ | 223 | | | $ | 150 | | | $ | 236 | | | $ | 310 | | | $ | 167 | |
December 31, 2022 | | $ | 245 | | | $ | 257 | | | $ | 150 | | | $ | 288 | | | $ | 306 | | | $ | 156 | |
September 30, 2022 | | $ | 196 | | | $ | 294 | | | $ | 294 | | | $ | 249 | | | $ | 367 | | | $ | 367 | |
June 30, 2022 | | $ | 203 | | | $ | 276 | | | $ | 100 | | | $ | 238 | | | $ | 300 | | | $ | 168 | |
| | | | | | | | |
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Management’s Discussion and Analysis | |
Other borrowings and collateralized financings
We had $1.25$1.00 billion in FHLB borrowings outstanding at June 30, 2022,2023, comprised of floating-rate and fixed-rate advances. As of June 30, 2022, our FHLB borrowings consisted of $850 million of floating-rate advances at interest rates which reset daily and mature in December 2023, $200 million of overnight floating-rate advances, which are available for borrowing through May 2023 at interest rates which reset daily, and $200reflects a decrease of $550 million from the balance outstanding as of fixed-rate advances which mature in September 2022. As of September 30, 2021 all of the FHLB borrowings were floating-rate advances.March 31, 2023. The interest rates on our floating-rate advances are generally based on SOFR. We use interest rate swaps to manage the risk of increases in interest rates associated with the majority of theseour floating-rate FHLB advances by converting the balances subject to variable interest rates to a fixed interest rate. At June 30, 2022, we had pledged $7.34 billion
We pledge certain of residential mortgagesour bank loans and CRE loansavailable-for-sale securities with the FHLB as security for both the repayment of thesecertain borrowings and to secure capacity for additional borrowings as needed. During the nine months ended June 30, 2023, we increased our borrowing capacity with the FHLB through the pledge of additional available-for-sale securities. At June 30, 2023, we had pledged with the FHLB bank loans and available-for-sale securities of $9.27 billion and $3.86 billion, respectively, as both security for the repayment of outstanding FHLB borrowings and also to secure capacity for additional borrowings as needed. As of June 30, 2023, we had an additional $4.57$9.67 billion in immediate credit available from the FHLB based on the collateral pledged. As of June 30, 2022,Further, with the pledge of additional collateral, we hadhave additional credit availabilityavailable to us from certain FHLB member banks. See Notes 4, 6, 7, and 14 of the Notes to Condensed Consolidated Financial Statements of this Form 10-Q for additional information regarding bank loans, net and available-for-sale securities pledged with the FHLB and for further information on our FHLB borrowings, including the related maturities and interest rates.
A portion of our fixed income transactions are cleared through a third-party clearing organization, which provides financing for the purchase of trading instruments to support such transactions. The amount of financing is based on the amount of trading inventory financed, as well as any deposits held at the clearing organization. Amounts outstanding under this financing arrangement are collateralized by a portion of our trading inventory and accrue interest based on market rates. While we had borrowings outstanding as of June 30, 2023, the clearing organization is under no contractual obligation to lend to us under this arrangement.
Raymond James Bank and TriState Capital Bank have access to the Federal Reserve’s discount window and may have access to other lending programs that may be established by the Federal Reserve in unusual and exigent circumstances, including the Bank Term Funding Program that was created by the Federal Reserve on March 12, 2023; however, we do not view borrowings from the Federal Reserve as one of our primary sources of funding. See Note 156 of the Notes to Condensed Consolidated Financial Statements of this Form 10-Q for additional information regarding bank loans, net pledged with the FRB.
At June 30, 2023, TriState Capital had subordinated notes due 2030, with an aggregate principal amount of $98 million. See Note 14 of the Notes to Condensed Consolidated Financial Statements of this Form 10-Q and Note 16 of the Notes to Consolidated Financial Statements of our 20212022 Form 10-K for additional information regarding these borrowings.
We are eligible to participate in the Federal Reserve’s discount window program; however, we do not view borrowings from the Federal Reserve as a primary source of funding. The credit available in this program is subject to periodic review, may be terminated or reduced at the discretion of the Federal Reserve, and is secured by certain pledged C&I loans.
As part of the acquisition of TriState Capital, we assumed, as of the closing date, TriState Capital’s subordinated notes due 2030, with an aggregate principal amount of $98 million. The subordinated notes incur interest at a fixed rate of 5.75% until May 2025 and thereafter at a variable interest rate based on LIBOR, or an appropriate alternative reference rate. We may redeem up to $60 million of these subordinated notes beginning in May 2025 and $38 million beginning in August 2025 at a redemption price equal to 100% of the principal amount of the notes to be redeemed plus accrued and unpaid interest thereon to the redemption date. See Note 15 of the Notes to Condensed Consolidated Financial Statements of this Form 10-Q for additional information regarding these borrowings.
We may act as an intermediary between broker-dealers and other financial institutions whereby we borrow securities from one broker-dealer and then lend them to another. Where permitted, we have also loaned, to broker-dealers and other financial institutions, securities owned by clients or the firm. We account for each of these types of transactions as collateralized agreements and financings, with the outstanding balance of $337$71 million as of June 30, 20222023 related to the securities loaned included in “Collateralized financings” on our Condensed Consolidated Statements of Financial Condition of this Form 10-Q. See Note 76 of the Notes to Condensed Consolidated Financial Statements of this Form 10-Q and Note 2 of our 2022 Form 10-K for more information on our collateralized agreements and financings.
Senior notes payable
At June 30, 2022,2023, we had aggregate outstanding senior notes payable of $2.04 billion which, exclusive of any unaccreted premiums or discounts and debt issuance costs, was comprised of $500 million par 4.65% senior notes due 2030, $800 million par 4.95% senior notes due 2046, and $750 million par 3.75% senior notes due 2051. See Note 16 of the Notes to Condensed Consolidated Financial Statements of this Form 10-Q and Note 17 of the Notes to the Consolidated Financial Statements of our 20212022 Form 10-K for additional information on senior notes payable.
| | | | | | | | |
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Management’s Discussion and Analysis
Management’s Discussion and Analysis | |
Credit ratings
Our issuer, and senior long-term debt, and preferred stock credit ratings as of the most current report are detailed in the following table.
| | | | | | | | | | | | | | | | | | | | |
| | Credit Rating |
Rating Agency | | Rating | | Outlook |
Fitch Ratings, Inc.(1) | | Moody’s | | Standard & Poor’s Ratings Services (2) |
Issuer and senior long-term debt | | A- | | StableA3 | | A- |
Moody’sPreferred stock | | A3BB+ | | Baa3 (hyb) | | Not rated |
Outlook | | Stable |
| Standard & Poor’s Ratings ServicesStable | | BBB+ | | PositiveStable |
(1)On March 17, 2023, Fitch Ratings, Inc. affirmed RJF’s issuer and senior long term debt A- rating, preferred stock BB+ rating, and stable rating outlook.
(2)On February 13, 2023, Standard & Poor’s Rating Services upgraded RJF’s issuer and senior long-term debt from BBB+ to A- and changed the rating outlook to stable.
Our current long-term debtcredit ratings depend upon a number of factors, including industry dynamics, operating and economic environment, operating results, operating margins, earnings trends and volatility, balance sheet composition, liquidity and liquidity management, capital structure, overall risk management, business diversification and market share, and competitive position in the markets in which we operate. Deterioration in any of these factors could impact our credit ratings. Any rating downgrades could increase our costs in the event we were to obtain additional financing.
Should our credit rating be downgraded prior to a public debt offering, it is probable that we would have to offer a higher rate of interest to bond holders. A downgrade to below investment grade may make a public debt offering difficult to execute on terms we would consider to be favorable. A downgrade below investment grade could result in the termination of certain derivative contracts and the counterparties to the derivative instruments could request immediate payment or demand immediate and ongoing overnight collateralization on our derivative instruments in liability positions. A credit downgrade could damage our reputation and result in certain counterparties limiting their business with us, result in negative comments by analysts, potentially negatively impact investors’ and/or clients’ perception of us and cause a decline in our stock price. None of our borrowing arrangements contains a condition or event of default related to our credit ratings. However, a credit downgrade would result in the firm incurring a higher facility fee on the Credit Facility, in addition to triggering a higher interest rate applicable to any borrowings outstanding on that line as of and subsequent to such downgrade. Conversely, an improvement in RJF’s current credit rating could have a favorable impact on the facility fee, as well as the interest rate applicable to any borrowings on such line.
Other sources and uses of liquidity
We have company-owned life insurance policies which are utilized to fund certain non-qualified deferred compensation plans and other employee benefit plans. Certain of our non-qualified deferred compensation plans and other employee benefit plans are employee-directed while others are company-directed. Of the company-owned life insurance policies which fund these plans, certain policies could be used as a source of liquidity for the firm. Those policies against which we could readily borrow had a cash surrender value of $751$917 million as of June 30, 2022,2023, comprised of $472$598 million related to employee-directed plans and $279$319 million related to company-directed plans, and we were able to borrow up to 90%, or $676$825 million, of the June 30, 20222023 total without restriction. To effect any such borrowing, the underlying investments would be converted to money market investments, therefore requiring us to take market risk related to the employee-directed plans. There were no borrowings outstanding against any of these policies as of June 30, 2022.2023.
On May 12, 2021, we filed a “universal” shelf registration statement with the SEC pursuant to which we can issue debt, equity and other capital instruments if and when necessary or perceived by us to be opportune. Subject to certain conditions, this registration statement will be effective through May 12, 2024.
As of the date of this report, we have utilized approximately $300 million of cash at the parent company to fund acquisitions during our fiscal fourth quarter of 2022.
As part of our ongoing operations, we also enter into contractual arrangements that may require future cash payments, including certificates of deposit, lease obligations and other contractual arrangements, such as for software and various services. See Notes 1312 and 1413 of the Notes to Condensed Consolidated Financial Statements of this Form 10-Q for information regarding our lease obligations and certificates of deposit, respectively. We have entered into investment commitments, lending commitments and other commitments to extend credit for which we are unable to reasonably predict the timing of future payments. See Note 1816 of the Notes to Condensed Consolidated Financial Statements of this Form 10-Q for further information.
| | | | | | | | |
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Management’s Discussion and Analysis
Management’s Discussion and Analysis | |
REGULATORY
Refer to the discussion of the regulatory environment in which we operate and the impact on our operations of certain rules and regulations in “Item 1 - Business - Regulation” and “Item 7 - Management’s Discussion and Analysis of Financial Condition and Results of Operations - Regulatory” of our 20212022 Form 10-K.
RJF and many of its subsidiaries are each subject to various regulatory capital requirements. As of June 30, 2022,2023, all of our active regulated domestic and international subsidiaries had net capital in excess of minimum requirements. In addition, RJF, Raymond James Bank, and TriState Capital Bank were categorized as “well-capitalized” as of June 30, 2022.2023. The maintenance of certain risk-based and other regulatory capital levels could influence various capital allocation decisions impacting one or more of our businesses. However, due to the current capital position of RJF and its regulated subsidiaries, we do not anticipate these capital requirements will have a negative impact on our future business activities.
Effective August 1, 2023, TriState Capital Bank completed its conversion from a state non-member bank, which was primarily supervised by the Pennsylvania Department of Banking and Securities (“PDBS”) and the FDIC, to a state member bank, which is primarily supervised by the PDBS and the Fed. As a state member bank, TriState Capital Bank will continue to be supervised by the FDIC and the Consumer Financial Protection Bureau. We do not anticipate any material changes to TriState Capital Bank’s existing business or operations as a result of the conversion.
The Financial Conduct Authority, which regulated the widely-referenced benchmark London Interbank Offered Rate (“LIBOR”), ceased publication of the most commonly used U.S. dollar LIBOR tenors (“USD LIBOR”) on June, 30, 2023. On September 30, 2022, the Adjustable Interest (LIBOR) Rate Act (“LIBOR Act”) was enacted into U.S. federal law to provide a statutory framework to replace LIBOR with a benchmark rate based on the SOFR in contracts that do not have fallback provisions or that have fallback provisions resulting in a replacement rate based on LIBOR. As of June 30, 2023, we no longer offer new contracts referencing LIBOR and legacy contracts indexed to USD LIBOR have transitioned to SOFR-based or other alternative reference rates in accordance with existing fallback provisions or the LIBOR Act.
See Note 2321 of the Notes to Condensed Consolidated Financial Statements and “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and capital resources - Capital structure” of this Form 10-Q for further information on regulatory capital requirements.
Banking supervision and regulation
As part of the acquisition of TriState Capital on June 1, 2022, we acquired a new, separately chartered depository institution, TriState Capital Bank. TriState Capital Bank is a FDIC-insured non-member bank that is primarily supervised by both the FDIC and the Pennsylvania Department of Banking and Securities. TriState Capital Bank is also subject to supervision by Consumer Financial Protection Bureau.
Alternative reference rate transition
Central banks and regulators in the U.S. and other jurisdictions are working to implement the transition to suitable replacements for the LIBOR. In December 2021, our FHLB borrowings and SBL converted from LIBOR-based interest rates to SOFR-based interest rates, resulting in an insignificant impact on interest income, interest expense, and cash flows. We continue to evaluate the effect of the alternative reference rate transition and at this time, given current economic conditions, we expect minimal financial impact. Refer to “Item 1 - Business - Regulation” of our 2021 Form 10-K for additional information regarding the alternative reference rate transition and our planned response.
CRITICAL ACCOUNTING ESTIMATES
The condensed consolidated financial statements are prepared in accordance with GAAP, which require us to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and the reported amounts of revenues and expenses during anyfor the reporting period in our condensed consolidated financial statements.period. Management has established detailed policies and control procedures intended to ensure the appropriateness of such estimates and assumptions and their consistent application from period to period. For a description of our significant accounting policies, see Note 2 of the Notes to Consolidated Financial Statements of our 20212022 Form 10-K.
Due to their nature, estimates involve judgment based upon available information. Actual results or amounts could differ from estimates and the difference could have a material impact on the condensed consolidated financial statements. Therefore, understanding these critical accounting estimates is important in understanding our reported results of operations and financial position. We believe that of our accounting estimates and assumptions, those described in the following sections involve a high degree of judgment and complexity.
Valuation of financial instruments
The use of fair value to measure financial instruments, with related gains or losses recognized on our Condensed Consolidated Statements of Income and Comprehensive Income, is fundamental to our financial statements and our risk management processes. See Note 2 of the Notes to Consolidated Financial Statements of our 2021 Form 10-K for a discussion of our fair value accounting policies regarding financial instruments and financial instrument liabilities. See Note 4 of the Notes to Condensed Consolidated Financial Statements of this Form 10-Q for additional information on our financial instruments at fair value.
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
Management’s Discussion and Analysis
Loss provisions
Loss provisions for legal and regulatory matters
The recorded amount of liabilities related to legal and regulatory matters is subject to significant management judgment. For a description of the significant estimates and judgments associated with establishing such accruals, see the “Contingent liabilities” section of Note 2 of the Notes to Consolidated Financial Statements of our 20212022 Form 10-K. In addition, refer to Note 1816 of the Notes to Condensed Consolidated Financial Statements of this Form 10-Q for information regarding legal and regulatory mattermatters contingencies as of June 30, 2022.2023.
Allowance for credit losses
We evaluate certain of our financial assets, including bank loans, to estimate an allowance for credit losses based on expected credit losses over a financial asset’s lifetime. The remaining life of our financial assets is determined by considering contractual terms and expected prepayments, among other factors. We use multiple methodologies in estimating an allowance
| | | | | | | | |
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Management’s Discussion and Analysis | |
for credit losses and our approaches differ by type of financial asset and the risk characteristics within each financial asset type. Our estimates are based on ongoing evaluations of our financial assets, the related credit risk characteristics, and the overall economic and environmental conditions affecting the financial assets. Our process for determining the allowance for credit losses includes a complex analysis of several quantitative and qualitative factors requiring significant management judgment due to matters that are inherently uncertain. This uncertainty can produce volatility in our allowance for credit losses. In addition, the allowance for credit losses could be insufficient to cover actual losses. In such an event, any losses in excess of our allowance would result in a decrease in our net income, as well as a decrease in the level of regulatory capital.
We generally estimate the allowance for credit losses on bank loans using credit risk models which incorporate relevant available information from internal and external sources relating to past events, current conditions, and reasonable and supportable economic forecasts. After testing the reasonableness of a variety of economic forecast scenarios, each model is run using a single forecast scenario selected for each model. Our forecasts incorporate assumptions related to macroeconomic indicators including, but not limited to, U.S. gross domestic product, equity market indices, unemployment rates, and commercial real estate and residential home price indices.
To demonstrate the sensitivity of credit loss estimates on our bank loan portfolio to macroeconomic forecasts, we compared our modeled estimates under the base case economic scenario used to estimate the allowance for credit losses as of June 30, 2023, to what our estimate would have been under a downside case scenario and an upside scenario, without considering any offsetting effects in the qualitative component of our allowance for credit losses as of June 30, 2023. As of June 30, 2023, use of the downside case scenario would have resulted in an increase of approximately $230 million in the quantitative portion of our allowance for credit losses on bank loans, while the use of the upside case would have resulted in a reduction of approximately $50 million in the quantitative portion of our allowance for credit losses on bank loans at June 30, 2023. These hypothetical outcomes reflect the relative sensitivity of the modeled portion of our allowance estimate to macroeconomic forecasted scenarios but do not consider any potential impact qualitative adjustments could have on the allowance for credit losses in such environments. Qualitative adjustments could either increase or decrease modeled loss estimates calculated using an alternative economic scenario assumption. Further, such sensitivity calculations do not necessarily reflect the nature and extent of future changes in the related allowance for a number of reasons including: (1) management’s predictions of future economic trends and relationships among the scenarios may differ from actual events; and (2) management’s application of subjective measures to modeled results through the qualitative portion of the allowance for credit losses when appropriate. The downside case scenario utilized in this hypothetical sensitivity analysis assumes a moderate recession. To the extent macroeconomic conditions worsen beyond those assumed in this downside case scenario, we could incur provisions for credit losses significantly in excess of those estimated in this analysis.
See Note 2 of the Notes to Consolidated Financial Statements of our 20212022 Form 10-K for information regarding our methodologies and assumptions used in estimating the allowance for credit losses. See Note 87 of the Notes to Condensed Consolidated Financial Statements of this Form 10-Q for information regarding our allowance for credit losses related to bank loans as of June 30, 2022, including the impact to our allowance for credit losses resulting from our acquisition of TriState Capital, as well as further information regarding the methodologies and assumptions used in estimated the allowance for credit losses for loans at TriState Capital Bank.
Business combinations
We generally account for our acquisitions as business combinations under GAAP, using the acquisition method of accounting, whereby the assets acquired, including separately identifiable intangible assets, and liabilities assumed are recorded at their acquisition-date estimated fair values. Any excess purchase consideration over the acquisition-date fair values of the net assets acquired is recorded as goodwill. The acquisition method requires us to make significant estimates and assumptions in determining the fair value of assets acquired and liabilities assumed. Significant judgment is required in estimating the fair value of identifiable intangible assets and in assigning the useful lives of the definite-lived identifiable intangible assets, which impact the periods over which amortization of those assets are recognized. Accordingly, we typically obtain the assistance of third-party valuation specialists. The fair value estimates are based on available historical information and on future expectations and assumptions deemed reasonable by management, but are inherently uncertain as they pertain to forward-looking views of our businesses, client behavior, and market conditions. We consider the income, market and cost approaches and place reliance on the approach or approaches deemed most appropriate to estimate the fair value of intangible assets. Significant estimates and assumptions inherent in the valuations reflect a consideration of other marketplace participants and include the amount and timing of future cash flows (including expected growth rates and profitability), technology life cycles, the economic barriers to entry and the discount rate applied to the cash flows. Unanticipated market or macroeconomic events and circumstances may occur that could affect the accuracy or validity of the estimates and assumptions.
Refer to Note 3 of the Notes to Condensed Consolidated Financial Statements of this Form 10-Q for more information on our valuation methods and the results of applying the acquisition method of accounting, including the estimated fair values of the assets acquired and liabilities assumed and, where relevant, the estimated remaining useful lives.
Our ongoing accounting for goodwill and intangible assets acquired requires us to make significant estimates and assumptions as we exercise judgement to evaluate these assets for impairment. Our processes and accounting policies for evaluating impairments are further described in Note 2 of the Notes to Consolidated Financial Statements of our 2021 Form 10‑K.
2023.
| | | | | | | | |
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Management’s Discussion and Analysis
Management’s Discussion and Analysis | |
RECENT ACCOUNTING DEVELOPMENTS
In March 2022, the Financial Accounting Standards Board (“FASB”) issued new guidance related to troubled debt restructurings and disclosures regarding write-offs of financing receivables (ASU 2022-02), amending guidance related to the measurement of credit losses on financial instruments (ASU 2016-13). The amendment eliminates the accounting guidance for troubled debt restructurings for creditors, but requires enhanced disclosures for certain loan refinancings and restructurings by creditors when a borrower is experiencing financial difficulty, and requires disclosure of current-period gross write-offs by year of origination for financing receivables. This new guidance is effective for our fiscal year beginning on October 1, 2023 and will be applied on a prospective basis. Although permitted, we do not currently plan to early adopt. We do not expect the adoption of this new guidance to have a material impact on our financial position and results of operations.
In March 2023, the FASB issued amended guidance related to accounting for investments in tax credit structures using the proportional amortization method (ASU 2023-02). The amendment permits reporting entities to elect to account for their tax equity investments using the proportional amortization method if certain conditions are met and makes the delayed equity contributions guidance applicable only when the proportional amortization method is applied to a tax equity investment. This amendment also requires entities to make disclosures about all investments in a tax credit program for which they have elected to account for using the proportional amortization method, including those investments in an elected tax credit program that do not meet the conditions to use the proportional amortization method. This new guidance is effective for our fiscal year beginning on October 1, 2024. This guidance may be applied on a retrospective basis or modified retrospective basis to all qualifying tax equity investments; however, the transition method must be applied consistently to all affected investments. Early adoption is permitted on a program-by-program basis. We are still evaluating the impact, including from any potential early adoption, that this new guidance will have on our financial position, results of operations, and disclosures.
RISK MANAGEMENT
Risks are an inherent part of our business and activities. Management of risk is critical to our fiscal soundness and profitability. Our risk management processes are multi-faceted and require communication, judgment, and knowledge of financial products and markets. We have a formal Enterprise Risk Management (“ERM”) program to assess and review aggregate risks across the firm. Our management takes an active role in the ERM process, which requires specific administrative and business functions to participate in the identification, assessment, monitoring, and control of various risks.
The principal risks related to our business activities are market, credit, liquidity, operational, model, and compliance.
Governance
Our Board of Directors, including its AuditRisk Committee and RiskAudit Committee, oversees the firm’s management and mitigation of risk, reinforcing a culture that encourages ethical conduct and risk management throughout the firm. Senior management communicates and reinforces this culture through three lines of risk management and a number of senior-level management committees. Our first line of risk management, which includes all of our businesses, owns its risks and is responsible for identifying, mitigating, and escalating risks arising from its day-to-day activities. The second line of risk management, which includes Compliance and Risk Management, advises our client-facing businesses and other first-line functions in identifying, assessing, and mitigating risk. The second line of risk management tests and monitors the effectiveness of controls, as deemed necessary, and escalates risks when appropriate to senior management and the Board of Directors. The third line of risk management, Internal Audit, independently reviews activities conducted by the previous lines of risk management to assess their management and mitigation of risk, providing additional assurance to the Board of Directors and senior management, with a view toward enhancing our oversight, management, and mitigation of risk. Our legal department provides legal advice and guidance to each of these three lines of risk management.
Market risk
Market risk is our risk of loss resulting from the impact of changes in market prices on our trading inventory, derivatives, and investment positions. We have exposure to market risk primarily through our broker-dealer trading operations and our banking operations. OurThrough our broker-dealer subsidiaries, primarily RJ&A,we trade debt obligations and equity securities and maintain trading inventories to ensure availability of securities and to facilitate client transactions. Inventory levels may fluctuate daily as a result of client demand. We also hold investments within our available-for-sale securities portfolio, and from time-to-timetime to time may hold SBA loan securitizations not yet transferred. Our primary market risks relate to interest rates, equity prices, and foreign exchange rates. Interest rate risk results from changes in levels of interest rates, the volatility of interest rates, mortgage prepayment speeds, and credit spreads. Equity risk results from changes in prices of equity securities. Foreign exchange risk results from changes in spot prices, forward prices, and volatility of foreign exchange rates.
See Note 2 of the Notes to
| | | | | | | | |
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Management’s Discussion and Analysis | |
Consolidated Financial Statements of our 20212022 Form 10-K and Notes 3, 4, 5 and 65 of the Notes to Condensed Consolidated Financial Statements of this Form 10-Q for fair value and other information regarding our trading inventories, available-for-sale securities, and derivative instruments.
We regularly enter into underwriting commitments and, as a result, we may be subject to market risk on any unsold shares issued in the offerings to which we are committed. Risk exposure is controlled by limiting our participation, the transaction size, or through the syndication process.
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
Management’s Discussion and Analysis
The Market Risk Management department is responsible for measuring, monitoring, and reporting market risks associated with the firm’s trading and derivative portfolios. While Market Risk Management maintains ongoing communication with the revenue-generating business units, it is independent of such units.
Interest rate risk
Trading activities
We are exposed to interest rate risk as a result of our trading inventory (primarily comprised of fixed income instruments) in our Capital Markets segment. Changes in value of our trading inventory may result from fluctuations in interest rates, credit spreads, equity prices, macroeconomic factors, investor expectations or risk appetites, liquidity, as well as dynamic relationships among these factors. Other market factors, such as the recent downgrade of the U.S. government’s credit rating by Fitch, could also impact the market value of our trading inventory and other financial instruments on our Condensed Consolidated Statements of Financial Condition. We actively manage interest rate risk arising from our fixed income trading inventory through the use of hedging strategies utilizing U.S. Treasuries, exchange traded funds, futures contracts, liquid spread products, and derivatives.
Our primary method for controlling risks within trading inventories is through the use of dollar-based and exposure-based limits. A hierarchy of limits exists at multiple levels, including firm, business unit, desk (e.g., for equities, corporate bonds, municipal bonds), product sub-type (e.g., below-investment-grade positions) and, at times, at the individual position. For derivative positions, which are primarily comprised of interest rate swaps, we have established limits based on a number of factors, including interest rate,sensitivity-based and foreign exchange spot and forward rates, spread, ratio, basis, and volatility risk. Derivative exposures are also monitored both for the total portfolio and by maturity periods.limits. Trading positions and derivatives are monitored against these limits through daily reports that are distributed to senior management.During volatile markets, we may temporarily reduce limits and/or choose to pare our trading inventories to reduce risk.
We monitor Value-at-Risk (“VaR”) for all of our trading portfolios on a daily basis for risk management purposes and as a result of applying the Fed’s Market Risk Rule (“MRR”) for the purpose of calculating our capital ratios. The MRR, also known as the “Risk-Based Capital Guidelines: Market Risk” rule released by the Fed, the Office of the Comptroller of the Currency and the FDIC, requires us to calculate VaR for all of our trading portfolios, including fixed income, equity, derivatives, and foreign exchange instruments. VaR is an appropriate statistical technique for estimating potential losses in trading portfolios due to typical adverse market movements over a specified time horizon with a suitable confidence level. However, there are inherent limitations of utilizing VaR including: historical movements in markets may not accurately predict future market movements; VaR does not take into account the liquidity of individual positions; VaR does not estimate losses over longer time horizons; and extended periods of one-directional markets potentially distort risks within the portfolio. In addition, should markets become more volatile, actual trading losses may exceed VaR results presented on a single day and might accumulate over a longer time horizon. As a result, management complements VaR with sensitivity analysis and stress testing and employs additional controls such as a daily review of trading results, review of aged inventory, independent review of pricing, monitoring of concentrations, and review of issuer ratings.
To calculate VaR, we use models which incorporate historical simulation. This approach assumes that historical changes in market conditions, such as in interest rates and equity prices, are representative of future changes. Simulation is based on daily market data for the previous twelve months. VaR is reported at a 99% confidence level for a one-day time horizon. Assuming that future market conditions change as they have in the past twelve months, we would expect to incur losses greater than those predicted by our one-day VaR estimates about once every 100 trading days, or about three times per year on average. For regulatory capital calculation purposes, we also report VaR and Stressed VaR numbers for a ten-day time horizon. The VaR model is independently reviewed by our Model Risk Management function. See “Item 7 - Management’s Discussion and Analysis of Financial Condition and Results of Operations - Risk management - Model risk” of our 20212022 Form 10-K for further information.
The modeling of the risk characteristics of trading positions involves a number of assumptions and approximations that management believes to be reasonable. However, there is no uniform industry methodology for estimating VaR, and different
| | | | | | | | |
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Management’s Discussion and Analysis | |
assumptions or approximations could produce materially different VaR estimates. As a result, VaR results are more reliable when used as indicators of risk levels and trends within a firm than as a basis for inferring differences in risk-taking across firms.
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
Management’s Discussion and Analysis
The following table sets forth the high, low, period-end and average daily one-day VaR for all of our trading portfolios, including fixed income and equity instruments, and for our derivatives for the periods and dates indicated.
| | | | Nine months ended June 30, 2022 | | Period-end VaR | | Three months ended June 30, | | Nine months ended June 30, | | | Nine months ended June 30, 2023 | | Period-end VaR | | Three months ended June 30, | | Nine months ended June 30, |
$ in millions | $ in millions | | High | | Low | | June 30, 2022 | | September 30, 2021 | | $ in millions | | 2022 | | 2021 | | 2022 | | 2021 | $ in millions | | High | | Low | | June 30, 2023 | | September 30, 2022 | | $ in millions | | 2023 | | 2022 | | 2023 | | 2022 |
Daily VaR | Daily VaR | | $ | 2 | | | $ | 1 | | | $ | 2 | | | $ | 1 | | | Average daily VaR | | $ | 1 | | | $ | 2 | | | $ | 1 | | | $ | 5 | | Daily VaR | | $ | 3 | | | $ | 1 | | | $ | 2 | | | $ | 3 | | | Average daily VaR | | $ | 2 | | | $ | 1 | | | $ | 2 | | | $ | 1 | |
Average daily VaR was lowerhigher during the three and nine months ended June 30, 2023 compared with the three and nine months ended June 30, 2022 compared with the nine months ended June 30, 2021 due to the impact of scenarios of elevatedincreased market volatility during the period, as a resultwell as the addition of the COVID-19 pandemic (which commencedSumRidge Partners trading inventory beginning in March 2020) on ourJuly 2022. Period-end VaR model during the prior-year period.was lower at June 30, 2023 compared to September 30, 2022, due to a decline in trading inventory.
The Fed’s MRR requires us to perform daily back-testing procedures for our VaR model, whereby we compare each day’s projected VaR to its regulatory-defined daily trading losses, which exclude fees, commissions, reserves, net interest income, and intraday trading. Regulatory-defined daily trading losses are used to evaluate the performance of our VaR model and are not comparable to our actual daily net revenues. Based on these daily “ex ante” versus “ex post” comparisons, we determine whether the number of times that regulatory-defined daily trading losses exceed VaR is consistent with our expectations at a 99% confidence level. During the three andmonths ended June 30, 2023, our regulatory-defined daily losses in our trading portfolios did not exceed our predicted VaR. During the nine months ended June 30, 2022,2023, our regulatory-defined daily losses in our trading portfolios exceeded our predicted VaR on four and nine occasions, respectively, due to the volatility and market uncertainty related to the Fed’s short-term interest rate increases.one occasion.
Separately, RJF provides additional market risk disclosures to comply with the MRR, including 10-day VaR and 10-day Stressed VaR, which are available on our website at https://www.raymondjames.com/investor-relations/financial-information/filings-and-reports within “Other Reports and Information.”
Banking operations
Our Bank segment maintains an interest-earning asset portfolio that is comprised of cash, SBL, C&I loans, commercial and residential real estateCRE loans, REIT loans, tax-exempt loans, and SBLtax-exempt loans, as well as securities held in the available-for-sale securities portfolio, and SBA loan securitizations.portfolio. These interest-earning assets are primarily funded by client deposits. Based on the current asset portfolio, our banking operations are subject to interest rate risk. We analyze interest rate risk based on forecasted net interest income, which is the net amount of interest received and interest paid, and the net portfolio valuation, both across a range of interest rate scenarios.
One of the objectives of the Asset and Liability Committee is to manage the sensitivity of net interest income to changes in market interest rates. This committee uses several measures to monitor and limit interest rate risk in our banking operations, including scenario analysis and economic value of equity. The methods used to measure this sensitivity are described in “Item 7 - Management’s Discussion and Analysis of Financial Condition and Results of Operations - Risk management - Market risk” of our 2021 Form 10-K.equity (“EVE”). We utilize a hedging strategystrategies using interest rate swaps in our banking operations as a resultcomponent of our asset and liability management process. For further information regarding this hedging strategy, see Note 2 of the Notes to Consolidated Financial Statements of our 20212022 Form 10-K and Note 15Notes 13 and 14 of the Notes to Condensed Consolidated Financial Statements of this Form 10-Q.
To ensure that we remain within the tolerances established for net interest income, a sensitivity analysis of net interest income to interest rate conditions is estimated under a variety of scenarios. We use simulation models and estimation techniques to assess the sensitivity of net interest income to movements in interest rates. The model estimates the sensitivity by calculating interest income and interest expense in a dynamic balance sheet environment using current repricing, prepayment, and reinvestment of cash flow assumptions over a 12-month time horizon. Assumptions used in the model include interest rate movement, the slope of the yield curve, and balance sheet composition and growth.The model also considers interest rate-related risks such as pricing spreads, pricing of client cash accounts, including deposit betas, and prepayments. Various interest rate scenarios are modeled in order to determine the effect those scenarios may have on net interest income.
| | | | | | | | |
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Management’s Discussion and Analysis | |
The following table is an analysis of our banking operations’ estimated net interest income over a 12-month period based on instantaneous shifts in interest rates (expressed in basis points) using our previously described asset/liability model, which assumes a dynamic balance sheet, that the interest rates on substantially all of our deposits change by an amount equal to the change in market interest rates (i.e., deposit beta of 100%), and that interest rates do not decline below zero. While not presented, additional rate scenarios are performed, including interest rate ramps and yield curve shifts that may more realistically mimic the speed of potential interest rate movements. We also perform simulations on time horizons of up to five years to assess longer-term impacts to various interest rate scenarios. On a quarterly basis, we test expected model results to actual performance.
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
Management’s Discussion and Analysis
Additionally, any changes made to key assumptions in the model are documented and approved by the Asset and Liability Committee.
| Instantaneous changes in rate (1) | Instantaneous changes in rate (1) | | Net interest income ($ in millions) | | Projected change in net interest income | Instantaneous changes in rate (1) | | Net interest income ($ in millions) | | Projected change in net interest income |
+200 | +200 | | $1,757 | | 4% | +200 | | $1,779 | | 5% |
+100 | +100 | | $1,726 | | 2% | +100 | | $1,736 | | 2% |
0 | 0 | | $1,695 | | —% | 0 | | $1,698 | | —% |
-100 | -100 | | $1,519 | | (10)% | -100 | | $1,643 | | (3)% |
-200 | | -200 | | $1,599 | | (6)% |
(1) Our 0-basis point scenario was based on interest rates as of June 30, 20222023 and did not include the impact of the Fed’s July 202227, 2023 increase in its benchmark short-term interest rates.rate.
The preceding table does not include the impacts of an instantaneous change in interest rates on net interest income on assets and liabilities outside of our banking operations or on our RJBDP fees from third-party banks, which are also sensitive to changes in interest rates and are included in “Account and service fees” on our Condensed Consolidated Statements of Income and Comprehensive Income. Refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Net interest analysis” of this Form 10-Q for a discussion of the impact changes in short-term interest rates could have on the consolidated firm’s operations.
The Asset and Liability Committee also reviews EVE, which is a point in time analysis of current interest-earning assets and interest-bearing liabilities that incorporates all cash flows over their estimated remaining lives, discounted at current rates. The EVE approach is based on a static balance sheet and provides an indicator of future earnings and capital levels as the changes in EVE indicate the anticipated change in the value of future cash flows. We monitor sensitivity to changes in EVE utilizing Board of Directors-approved limits. These limits set a risk tolerance to changing interest rates and assist in determining strategies for mitigating this risk as EVE approaches these limits. As of June 30, 2023, our EVE analyses were within approved limits.
The following table shows the contractual maturities of our bank loan portfolio at June 30, 2022,2023, including contractual principal repayments. Maturities are generally determined based upon contractual terms; however, rollovers or extensions that are included for the purposes of measuring the allowance for credit losses are reflected in maturities in the following table. This table does not include any estimates of prepayments, which could shorten the average loan lives and cause the actual timing of the loan repayments to differ significantly from those shown in the table.
| | | | Due in | | | Due in |
$ in millions | $ in millions | | One year or less | | > One year – five years | | > Five years | | Total | $ in millions | | One year or less | | > One year – five years | | > Five years - fifteen years | | > Fifteen years | | Total |
SBL | | SBL | | $ | 13,804 | | | $ | 383 | | | $ | 39 | | | $ | 1 | | | $ | 14,227 | |
C&I loans | C&I loans | | $ | 907 | | | $ | 7,104 | | | $ | 2,886 | | | $ | 10,897 | | C&I loans | | 1,033 | | | 7,489 | | | 2,102 | | | 39 | | | 10,663 | |
CRE loans | CRE loans | | 931 | | | 5,162 | | | 261 | | | 6,354 | | CRE loans | | 1,045 | | | 4,119 | | | 1,910 | | | 17 | | | 7,091 | |
REIT loans | REIT loans | | 177 | | | 1,202 | | | 37 | | | 1,416 | | REIT loans | | 239 | | | 1,416 | | | 60 | | | — | | | 1,715 | |
Residential mortgage loans | | Residential mortgage loans | | 5 | | | 42 | | | 186 | | | 8,189 | | | 8,422 | |
Tax-exempt loans | Tax-exempt loans | | 4 | | | 136 | | | 1,207 | | | 1,347 | | Tax-exempt loans | | 94 | | | 269 | | | 1,185 | | | — | | | 1,548 | |
Residential mortgage loans | | 15 | | | 34 | | | 6,679 | | | 6,728 | | |
SBL and other | | 15,044 | | | 258 | | | 10 | | | 15,312 | | |
Total loans held for investment | Total loans held for investment | | 17,078 | | | 13,896 | | | 11,080 | | | 42,054 | | Total loans held for investment | | 16,220 | | | 13,718 | | | 5,482 | | | 8,246 | | | 43,666 | |
Held for sale loans | Held for sale loans | | — | | | — | | | 166 | | | 166 | | Held for sale loans | | — | | | — | | | 67 | | | 68 | | | 135 | |
Total loans held for sale and investment | Total loans held for sale and investment | | $ | 17,078 | | | $ | 13,896 | | | $ | 11,246 | | | $ | 42,220 | | Total loans held for sale and investment | | $ | 16,220 | | | $ | 13,718 | | | $ | 5,549 | | | $ | 8,314 | | | $ | 43,801 | |
| | | | | | | | |
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Management’s Discussion and Analysis | |
The following table shows the distribution of the recorded investment of those bank loans that mature in more than one year between fixed and adjustable interest rate loans at June 30, 2022.2023.
| | | | Interest rate type | | | Interest rate type |
$ in millions | $ in millions | | Fixed | | Adjustable | | Total | $ in millions | | Fixed | | Adjustable | | Total |
SBL | | SBL | | $ | 11 | | | $ | 412 | | | $ | 423 | |
C&I loans | C&I loans | | $ | 695 | | | $ | 9,295 | | | $ | 9,990 | | C&I loans | | 858 | | | 8,772 | | | 9,630 | |
CRE loans | CRE loans | | 318 | | | 5,105 | | | 5,423 | | CRE loans | | 467 | | | 5,579 | | | 6,046 | |
REIT loans | REIT loans | | — | | | 1,239 | | | 1,239 | | REIT loans | | — | | | 1,476 | | | 1,476 | |
Residential mortgage loans | | Residential mortgage loans | | 229 | | | 8,188 | |
| 8,417 | |
Tax-exempt loans | Tax-exempt loans | | 1,343 | | | — | | | 1,343 | | Tax-exempt loans | | 1,454 | | | — | | | 1,454 | |
Residential mortgage loans | | 230 | | | 6,483 | |
| 6,713 | | |
SBL and other | | 1 | | | 267 | | | 268 | | |
Total loans held for investment | Total loans held for investment | | 2,587 | | | 22,389 | | | 24,976 | | Total loans held for investment | | 3,019 | | | 24,427 | | | 27,446 | |
Held for sale loans | Held for sale loans | | 1 | | | 165 | | | 166 | | Held for sale loans | | 7 | | | 128 | | | 135 | |
Total loans held for sale and investment | Total loans held for sale and investment | | $ | 2,588 | | | $ | 22,554 | | | $ | 25,142 | | Total loans held for sale and investment | | $ | 3,026 | | | $ | 24,555 | | | $ | 27,581 | |
Contractual loan terms for SBL, C&I loans, CRE loans, REIT loans, and residential mortgage and SBL loans may include an interest rate floor, cap and/or fixed interest rates for a certain period of time, which would impact the timing of the interest rate reset for the respective loan. See the discussion within the “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Risk management - Credit risk - Risk monitoring process” section of this Form 10-Q for additional information regarding our interest-only residential mortgage loan portfolio.
In our available-for-sale securities portfolio, we hold primarily fixed-rate agency-backed MBS, and agency-backed CMOs, and U.S. Treasuries, which are carried at fair value on our Condensed Consolidated Statements of Financial Condition, with changes in the fair value of the portfolio recorded through OCI on our Condensed Consolidated Statements of Income and Comprehensive Income. At June 30, 2022,2023, our available-for-sale securities portfolio had a fair value of $10.46$9.57 billion with a weighted-average yield of 1.76%.2.07% and a weighted-average life, after factoring in estimated prepayments, of 4.30 years. The effective duration of our available-for-sale securities portfolio as of June 30, 20222023 was approximately 3.98,3.54, where duration is defined as the approximate percentage change in price for a 100-basis point change in rates. See Note 54 of the Notes to Condensed Consolidated Financial Statements of this Form 10-Q for additional information.
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
Management’s Discussion and Analysis
information on our available-for-sale securities portfolio.
Equity price risk
We are exposed to equity price risk as a result of our capital markets activities. Our broker-dealer activities are generally client-driven, and we carry equity securities as part of our trading inventory to facilitate such activities, although the amounts are not as significant as our fixed income trading inventory. We attempt to reduce the risk of loss inherent in our inventory of equity securities by monitoring those security positions each day and establishing position limits. Equity securities held in our trading inventory are generally included in VaR.
In addition, we have a private equity portfolio, included in “Other investments” on our Condensed Consolidated Statements of Financial Condition, which is primarily comprised of investments in third-party funds. See Note 43 of the Notes to Condensed Consolidated Financial Statements of this Form 10-Q for additional information on this portfolio.
Foreign exchange risk
We are subject to foreign exchange risk due to our investments in foreign subsidiaries as well as transactions and resulting balances denominated in a currency other than the U.S. dollar. For example, our bank loan portfolio includes loans which are denominated in Canadian dollars, totaling $1.53$1.49 billion and $1.29$1.51 billion at June 30, 20222023 and September 30, 2021,2022, respectively, when converted to the U.S. dollar. A majority of such loans are held in a Canadian subsidiary of Raymond James Bank, which is discussed in the following sections.
Investments in foreign subsidiaries
Raymond James Bank has an investment in a Canadian subsidiary, resulting in foreign exchange risk. To mitigate its foreign exchange risk, Raymond James Bank utilizes short-term, forward foreign exchange contracts. These derivatives are primarily accounted for as net investment hedges in the condensed consolidated financial statements. See Note 2 of the Notes to Consolidated Financial Statements of our 20212022 Form 10-K and Note 65 of the Notes to Condensed Consolidated Financial Statements of this Form 10-Q for further information regarding these derivatives.
| | | | | | | | |
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Management’s Discussion and Analysis | |
At June 30, 2022,2023, we had foreign exchange risk in our investment in RJ Ltd. of CAD $366426 million and in our investment in Charles Stanley of £277£278 million, which were not hedged. All of our other investments, inconsisting primarily of subsidiaries located in Europe, are not hedged, and we do not believe we had material foreign exchange risk either individually, or in the aggregate, pertaining to these subsidiaries as of June 30, 2022.2023. Foreign exchange gains/losses related to our foreign investments are primarily reflected in OCI on our Condensed Consolidated Statements of Income and Comprehensive Income. See Note 1917 of the Notes to Condensed Consolidated Financial Statements of this Form 10-Q for further information regarding our components of OCI.
Transactions and resulting balances denominated in a currency other than the U.S. dollar
We are subject to foreign exchange risk due to our holdings of cash and certain other assets and liabilities resulting from transactions denominated in a currency other than the U.S. dollar. Any currency-related gains/losses arising from these foreign currency denominated balances are reflected in “Other” revenues in our Condensed Consolidated Statements of Income and Comprehensive Income. The foreign exchange risk associated with a portion of such transactions and balances denominated in foreign currency are mitigated utilizing short-term, forward foreign exchange contracts. Such derivatives are not designated hedges and therefore, the related gains/losses are included in “Other” revenues in our Condensed Consolidated Statements of Income and Comprehensive Income. See Note 65 of the Notes to Condensed Consolidated Financial Statements of this Form 10-Q for information regarding our derivatives.
Credit risk
Credit risk is the risk of loss due to adverse changes in a borrower’s, issuer’s, or counterparty’s ability to meet its financial obligations under contractual or agreed-upon terms. 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 is an integral component of the profit assessment of lending and other financing activities. See further discussion of our credit risk, including how we manage such risk, in “Item 7 - Management’s Discussion and Analysis of Financial Condition and Results of Operations - Risk management - Credit risk” of our 20212022 Form 10-K.
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
Management’s Discussion and AnalysisCorporate activities
We maintain cash balances with the Fed and with various financial institutions, primarily global systemically important banks, in our normal course of business. A large portion of such balances are in excess of FDIC insurance limits. As a result, we may be exposed to the risk that these financial institutions may not return our cash to us in the event that the institution experiences financial distress or ceases its operations. In order to mitigate our credit risk to such financial institutions, we monitor our exposure with each institution on a daily basis and subject each institution to limits based on various factors including but not limited to financial strength, capitalization levels, liquidity, credit ratings, and market factors to the extent applicable.
Brokerage activities
We are engaged in various trading and brokerage activities in which our counterparties primarily include broker-dealers, banks, exchanges, clearing organizations, and other financial institutions. We are exposed to risk that these counterparties may not fulfill their obligations. In addition, certain commitments, including underwritings, may create exposure to individual issuers and businesses. The risk of default depends on the creditworthiness of the counterparty and/or the issuer of the instrument. In addition, we may be subject to concentration risk if we hold large positions in or have large commitments to a single counterparty, borrower, or group of similar counterparties or borrowers (e.g., in the same industry). We seek to mitigate these risks by imposing and monitoring individual and aggregate position limits within each business segment for each counterparty, conducting regular credit reviews of financial counterparties, reviewing security, derivative and loan concentrations, holding and calculating the fair value of collateral on certain transactions and conducting business through clearing organizations, which may guarantee performance. See Note 2 of the Notes to Consolidated Financial Statements of our 20212022 Form 10-K and Notes 65 and 76 of the Notes to Condensed Consolidated Financial Statements of this Form 10-Q for further information about our credit risk mitigation related to derivatives and collateralized agreements.
Our client activities involve the execution, settlement, and financing of various transactions on behalf of our clients. Client activities are transacted on either a cash or margin basis. Credit exposure results from client margin loans, which are monitored daily and are collateralized by the securities in the clients’ accounts. We monitor exposure to industry sectors and individual securities and perform analysis on a daily basis in connection with our margin lending activities. We adjust our margin requirements if we believe our risk exposure is not appropriate based on market conditions. In addition, when clients execute a purchase, we are at some risk that the client will default on their financial obligation associated with the trade. If this occurs, we may have to liquidate the position at a loss. FurtherSee Note 2 of the Notes to the Consolidated Financial Statements of our 2022
| | | | | | | | |
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Management’s Discussion and Analysis | |
Form 10-K for further information about our determination of the allowance for credit losses associated with certain of our brokerage lending activities is described in Note 2 of the Notes to the Consolidated Financial Statements of our 2021 Form 10-K.activities.
We offer loans to financial advisors for recruiting and retention purposes. We have credit risk and may incur a loss primarily in the event that such borrower is no longer affiliated with us. See Note 2 of the Notes to the Consolidated Financial Statements of our 20212022 Form 10-K and Note 98 of the Notes to Condensed Consolidated Financial Statements of this Form 10-Q for further information about our loans to financial advisors.
Banking activities
Our Bank segment has a substantial loan portfolio. Our strategy for credit risk management related to bank loans includes well-defined credit policies, uniform underwriting criteria, and ongoing risk monitoring and review processes for all credit exposures. The strategy also includes diversification on aacross loan types, geographic location, industry and client level, regular credit examinations and management reviews of all corporate and tax-exempt loans as well as individual delinquent residential loans. The credit risk management process also includes an annual independent reviewreviews of the credit risk monitoring process that performs assessments of compliance with credit policies, risk ratings, and other critical credit information. We seek to identify potential problem loans early, record any necessary risk rating changes and charge-offs promptly, and maintain appropriate reserve levels for expected losses. We utilize a comprehensivethorough credit risk rating system to measure the credit quality of individual corporate and tax-exempt loans and related unfunded lending commitments, including the probability of default and/or loss given default of each corporate and tax-exempt loan and commitment outstanding.commitments. For our SBL and residential mortgage loans and substantially all of our SBL, we utilize the credit risk rating system used by bank regulators in measuring the credit quality of each homogeneous class of loans. In evaluating credit risk, we consider trends in loan performance, the level of allowance coverage relative to similar banking institutions,historical experience through various economic cycles, industry or client concentrations, the loan portfolio composition and macroeconomic factors (both current and forecasted). These factors have a potentially negative impact on loan performance and net charge-offs.
While our bank loan portfolio is diversified, a significant downturn in the overall economy, deterioration in real estate values or a significant issue within any sector or sectors where we have a concentration will generally result in large provisions for credit losses and/or charge-offs. We determine the allowance required for specific loan gradespools based on relative risk characteristics of the loan portfolio. On an ongoing basis, we evaluate our methods for determining the allowance for each class of loans and make enhancements we consider appropriate. Our allowance for credit losses methodology is described in Note 8 of the Notes to Condensed Consolidated Financial Statements of this Form 10-Q and Note 2 of the Notes to the Consolidated Financial Statements of our 20212022 Form 10-K. As our bank loan portfolio is segregated into six portfolio segments, likewise, the allowance for credit losses is segregated by these same segments. See “Item 7 - Management’s Discussion and Analysis of Financial Condition and Results of Operations - Risk management - Credit risk” of our 20212022 Form 10-K for further information about the risk characteristics relevant to each portfolio segment.
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
Management’s Discussion and Analysis
Our allowance for credit losses as a percentage of total bank loans held for investment was 0.90% and 1.27% at June 30, 2022 and September 30, 2021, respectively. The bank loan provision for credit losses for the three and nine months ended June 30, 2022 was $56 million and $66 million, respectively, compared to a benefit for credit losses of $19 million and $37 million for the three and nine months ended June 30, 2021, respectively. See further explanation of the credit loss provision in “Management’s Discussion and Analysis - Results of Operations - Bank” of this Form 10-Q and Note 8 of the Notes to Condensed Consolidated Financial Statements of this Form 10-Q for further information about our allowance for credit losses.
The level of charge-off activity is a factor that is considered in evaluating the potential severity of future credit losses. The following table presents net loan (charge-offs)/recoveries and the annualized percentage of net loan (charge-offs)/recoveries to the average outstanding loan balances on an annualized basis by loan portfolio segment.
| | | | Three months ended June 30, | | Nine Months Ended June 30, | | | Three months ended June 30, | | Nine Months Ended June 30, |
| | | 2022 | | 2021 | | 2022 | | 2021 | | | 2023 | | 2022 | | 2023 | | 2022 |
$ in millions | $ in millions | | Net loan (charge-off)/recovery amount | | % of avg. outstanding loans | | Net loan (charge-off)/recovery amount | | % of avg. outstanding loans | | Net loan (charge-off)/recovery amount | | % of avg. outstanding loans | | Net loan (charge-off)/recovery amount | | % of avg. outstanding loans | $ in millions | | Net loan (charge-off)/recovery amount | | Annualized % of avg. outstanding loans | | Net loan (charge-off)/recovery amount | | Annualized % of avg. outstanding loans | | Net loan (charge-off)/recovery amount | | Annualized % of avg. outstanding loans | | Net loan (charge-off)/recovery amount | | Annualized % of avg. outstanding loans |
| C&I loans | C&I loans | | $ | (11) | | | 0.46 | % | | $ | (1) | | | 0.05 | % | | $ | (14) | | | 0.21 | % | | $ | (3) | | | 0.05 | % | C&I loans | | $ | (6) | | | 0.22 | % | | $ | (11) | | | 0.46 | % | | $ | (30) | | | 0.36 | % | | $ | (14) | | | 0.21 | % |
CRE loans | CRE loans | | 1 | | | 0.09 | % | | (3) | | | 0.44 | % | | 1 | | | 0.04 | % | | (3) | | | 0.15 | % | CRE loans | | (9) | | | 0.51 | % | | 1 | | | 0.09 | % | | (7) | | | 0.13 | % | | 1 | | | 0.04 | % |
| Residential mortgage loans | Residential mortgage loans | | — | | | — | % | | — | | | — | % | | 1 | | | 0.02 | % | | — | | | — | % | Residential mortgage loans | | — | | | — | % | | — | | | — | % | | — | | | — | % | | 1 | | | 0.02 | % |
| Total loans held for sale and investment | Total loans held for sale and investment | | $ | (10) | | | 0.12 | % | | $ | (4) | | | 0.07 | % | | $ | (12) | | | 0.06 | % | | $ | (6) | | | 0.04 | % | Total loans held for sale and investment | | $ | (15) | | | 0.14 | % | | $ | (10) | | | 0.12 | % | | $ | (37) | | | 0.11 | % | | $ | (12) | | | 0.06 | % |
| | | | | | | | |
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Management’s Discussion and Analysis | |
The level of nonperforming loansassets is another indicator of potential future credit losses. Nonperforming assets are comprised of both nonperforming loans and other real estate owned. Nonperforming loans include those loans which have been placed on nonaccrual status and certain accruing loans which are 90 days or more past due and in the process of collection. The following table presents the balance of nonperforming loans, balancenonperforming assets, and total allowance forrelated key credit losses for the periods presented.ratios.
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | June 30, 2022 | | September 30, 2021 |
$ in millions | | Nonperforming loan balance | | Allowance for credit losses balance | | Nonperforming loan balance | | Allowance for credit losses balance |
C&I loans | | $ | 46 | | | $ | 207 | | | $ | 39 | | | $ | 191 | |
CRE loans | | 29 | | | 93 | | | 20 | | | 66 | |
REIT loans | | — | | | 23 | | | — | | | 22 | |
Tax-exempt loans | | — | | | 2 | | | — | | | 2 | |
Residential mortgage loans | | 15 | | | 48 | | | 15 | | | 35 | |
SBL and other | | — | | | 4 | | | — | | | 4 | |
Total nonperforming loans held for investment (1) | | $ | 90 | | | $ | 377 | | | $ | 74 | | | $ | 320 | |
Total nonperforming loans as a % of total loans held for sale and investment | | 0.21 | % | | | | 0.29 | % | | |
| | | | | | | | | | | | | | |
$ in millions | | June 30, 2023 | | September 30, 2022 |
| | | | |
Nonperforming loans (1) | | $ | 127 | | | $ | 74 | |
Nonperforming assets | | $ | 127 | | | $ | 74 | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
Nonperforming loans as a % of total loans held for sale and investment | | 0.29 | % | | 0.17 | % |
Allowance for credit losses as a % of nonperforming loans | | 359 | % | | 535 | % |
Nonperforming assets as a % of Bank segment total assets | | 0.21 | % | | 0.13 | % |
(1) Total nonperformingNonperforming loans held for investment at June 30, 20222023 and September 30, 20212022 included $78$118 million and $61$63 million of nonperforming loans, respectively, which were current pursuant to their contractual terms.
The nonperforming loan balances in the preceding table exclude $7excluded $8 million and $8$7 million as of June 30, 20222023 and September 30, 2021,2022, respectively, of residential TDRstroubled debt restructurings which were returned to accrual status in accordance with our policy.
The following table presents total nonperforming assets, including the nonperforming loans in the preceding table and, when applicable, other real estate acquired in the settlement of residential mortgages, as a percentage of our Bank segment’s total assets.
| | | | | | | | | | | | | | | | | | | | |
$ in millions | | June 30, 2022 | | September 30, 2021 | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
Total nonperforming assets | | $ | 92 | | | $ | 74 | | | | | | | |
Total nonperforming assets as a % of the Bank Segment’s total assets | | 0.17 | % | | 0.20 | % | | | | | | |
Although our nonperforming assets as a percentage of theour Bank segment’s assets remained low as of June 30, 2022,2023, any prolonged period of market deterioration could result in an increase in our nonperforming assets, an increase in our allowance for credit losses and/or an increase in net charge-offs in future periods, although the extent willwould depend on future developments that are highly uncertain.
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
Management’sSee further explanation of our bank loan portfolio segments, allowance for credit losses, and the credit loss provision in Note 7 of the Notes to Condensed Consolidated Financial Statements of this Form 10-Q and “Management’s Discussion and Analysis - Results of Operations - Bank” of this Form 10-Q and Note 2 of the Notes to the Consolidated Financial Statements of our 2022 Form 10-K.
Loan underwriting policies
Our underwriting policies for the major types of bank loans are described in “Item 7 - Management’s Discussion and Analysis of Financial Condition and Results of Operations - Risk management - Credit risk” of our 20212022 Form 10-K.
Risk monitoring process
Another component of credit risk strategy for our bank loan portfolio is the ongoing risk monitoring and review processes, including our internal loan review process, as well as our rigorous processes to manage and limit credit losses arising from loan delinquencies. There are various other factors included in these processes, depending on the loan portfolio. There were no significant changes to those processes during the three months ended June 30, 2023.
Residential mortgage and SBL and otherresidential mortgage loan portfolios
TheSubstantially all collateral securing our SBL and other portfolio is monitored on a recurring basis, with marketable collateral monitored on a daily basis. Collateral adjustments, as triggered by our monitoring procedures, are made by the borrower as necessary to ensure our loans are adequately secured, resulting in minimizing our credit risk. Collateral calls have been minimal relative to our SBL and other portfolio with noinsignificant losses incurred to date.
We track and review many factors to monitor credit risk in our residential mortgage loan portfolio. The factors include, but are not limited to: loan performance trends, loan product parameters and qualification requirements, borrower credit scores, level of documentation, loan purpose, geographic concentrations, average loan size, risk rating, and LTV ratios. See Note 87 of the Notes to the Condensed Consolidated Financial Statements of this Form 10-Q for additional information about our residential mortgage loan portfolio.
| | | | | | | | |
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Management’s Discussion and Analysis | |
The following table presents a summary of delinquent residential mortgage loans, the vast majority of which are first mortgage loans, which are comprised of loans which are two or more payments past due as well as loans in the process of foreclosure.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Amount of delinquent residential loans | | Delinquent residential loans as a percentage of outstanding residential mortgage loan balances |
$ in millions | | 30-89 days | | 90 days or more | | Total | | 30-89 days | | 90 days or more | | Total |
June 30, 2022 | | $ | 2 | | | $ | 6 | | | $ | 8 | | | 0.03 | % | | 0.09 | % | | 0.12 | % |
September 30, 2021 | | $ | 4 | | | $ | 6 | | | $ | 10 | | | 0.08 | % | | 0.11 | % | | 0.19 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Amount of delinquent residential mortgage loans | | Delinquent residential mortgage loans as a percentage of outstanding residential mortgage loan balances |
$ in millions | | 30-89 days | | 90 days or more | | Total | | 30-89 days | | 90 days or more | | Total |
June 30, 2023 | | $ | 3 | | | $ | 4 | | | $ | 7 | | | 0.03 | % | | 0.05 | % | | 0.08 | % |
September 30, 2022 | | $ | 6 | | | $ | 6 | | | $ | 12 | | | 0.08 | % | | 0.08 | % | | 0.16 | % |
Our June 30, 20222023 percentage compares favorably to the national average for over 30 day delinquencies of 2.33%1.91%, as most recently reported by the Fed.
Credit risk is also managed by diversifying the residential mortgage portfolio. Most of the loans in our residential loan portfolio are to PCG clients across the U.S. The following table details the geographic concentrations (top five states) of our one-to-four family residential mortgage loans.
| | | June 30, 2022 | | June 30, 2023 |
| | Loans outstanding as a % of total residential mortgage loans held for sale and investment | | Loans outstanding as a % of total loans held for sale and investment | | Loans outstanding as a % of total residential mortgage loans held for sale and investment | | Loans outstanding as a % of total loans held for sale and investment |
CA | CA | | 27% | | 4% | CA | | 25% | | 5% |
FL | FL | | 17% | | 3% | FL | | 17% | | 3% |
TX | TX | | 8% | | 1% | TX | | 8% | | 2% |
NY | NY | | 8% | | 1% | NY | | 8% | | 1% |
CO | CO | | 4% | | 1% | CO | | 4% | | 1% |
The occurrence of a natural disaster or severe weather event in any of these states, for example wildfires in California and hurricanes in Florida, could result in additional credit loss provisions and/or charge-offs on our loans in such states and therefore negatively impact our net income and regulatory capital in any given period.
Loans where borrowers may be subject to payment increases include adjustable-rateadjustable rate mortgage loans with terms that initially require payment of interest only. Payments may increase significantly when the interest-only period ends and the loan principal begins to amortize. At June 30, 20222023 and September 30, 2021,2022, these loans totaled $2.43$2.78 billion and $1.97$2.55 billion, respectively, or approximately 36%33% and 37%35% of the residential mortgage portfolio, respectively. The weighted-average number of years before the remainder of the loans, which were still in their interest-only period at June 30, 2022,2023, begins amortizing is sevensix years.
| | | | | | | | |
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Management’s Discussion and Analysis
Management’s Discussion and Analysis | |
Corporate and tax-exempt loans
Credit risk in our corporate and tax-exempt bank loan portfolios is monitored on an individual loan basis. The majority of our tax-exempt bank loan portfolio is comprised of loans to investment-grade borrowers. Credit risk is managed by diversifying the corporate bank loan portfolio. Our corporate bank loan portfolio does not contain a significant concentration in any single industry. The following table details the industry concentrations (top five categories) of our corporate bank loans.
| | | June 30, 2022 | | June 30, 2023 |
| | Loans outstanding as a % of total corporate bank loans held for sale and investment | | Loans outstanding as a % of total loans held for sale and investment | | Loans outstanding as a % of total corporate bank loans held for sale and investment | | Loans outstanding as a % of total loans held for sale and investment |
Multi-family | Multi-family | | 9% | | 4% | Multi-family | | 11% | | 5% |
Industrial warehouse | Industrial warehouse | | 8% | | 4% | Industrial warehouse | | 9% | | 4% |
Loan fund | | Loan fund | | 7% | | 3% |
Office real estate | Office real estate | | 6% | | 3% | Office real estate | | 6% | | 3% |
Loan fund | | 6% | | 3% | |
Consumer products and services | Consumer products and services | | 5% | | 2% | Consumer products and services | | 5% | | 2% |
WhileThe Fed’s measures to control inflation, including through increases in short-term interest rates, have had a dampening effect on the impacts of the COVID-19 pandemic appeareconomy and are likely to be waning, certain sectors continue to be impacted by supply chain disruptions and changesdo so in consumer behavior. In addition, recent macroeconomic developments and the Ukraine conflict have further exacerbated supply chain stresses and inflation concerns.near-term. These and related factors could negatively impact our borrowers, particularly those in consumer-facing or supply-dependentrate-sensitive industries. In addition,response to changing trends, and industry-wide challenges following the COVID-19 pandemic, we continue to monitorhave closely monitored each loan in our exposure tocommercial real estate portfolio, particularly office real estate, where trendsutilizing LTV ratios and other metrics. We have changedalso focused on reducing our corporate loan exposure in certain sectors with increasing credit concerns, and have sold approximately $450 million, before charge-offs and discounts or premiums, of corporate loans during the three months ended June 30, 2023. Additional sales of corporate loans may be made during the remainder of fiscal 2023 as a resultpart of our credit risk mitigation strategies. However, to the COVID-19 pandemic.extent credit spreads widen and present what we consider to be an attractive risk-adjusted return, we may increase our pace of corporate loan growth over the year-to-date levels during our fiscal fourth quarter of 2023.
Liquidity risk
See the section “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and capital resources” of this Form 10-Q for information regarding our liquidity and how we manage liquidity risk.
Operational risk
Operational risk generally refers to the risk of loss resulting from our operations, including, but not limited to, business disruptions, improper or unauthorized execution and processing of transactions, deficiencies in our technology or financial operating systems and inadequacies or breaches in our control processes, including cybersecurity incidents. See “Item 7 - Management’s Discussion and Analysis of Financial Condition and Results of Operations - Risk management - Operational risk” of our 20212022 Form 10-K for a discussion of our operational risk and certain of our risk mitigation processes.
Periods of severe market volatility can result in a significantly higher level of transactions on specific days, which may present operational challenges from time to time that may result in losses. These losses can result from, but are not limited to, trade errors, failed transaction settlements, late collateral calls to borrowers and counterparties, or interruptions to our system processing. We did not incur any significant losses related to such operational challenges during the nine months ended June 30, 2022.2023.
As more fully described in the discussion of our business technology risks included in various risk factors presented in “Item 1A - Risk Factors” of our 20212022 Form 10-K, despite our implementation of protective measures and endeavoring to modify them as circumstances warrant, our computer systems, software and networks may be vulnerable to human error, natural disasters, power loss, cyber-attacks and other information security breaches, and other events that could have an impact on the security and stability of our operations.
Model risk
Model risk refers to the possibility of unintended business outcomes arising from the design, implementation or use of models. See “Item 7 - Management’s Discussion and Analysis of Financial Condition and Results of Operations - Risk management - Model risk” of our 20212022 Form 10-K for information regarding how we utilize models throughout the firm and how we manage model risk.
| | | | | | | | |
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Management’s Discussion and Analysis
Management’s Discussion and Analysis | |
Compliance risk
Compliance risk is the risk of legal or regulatory sanctions, financial loss, or reputational damage that the firm may suffer from a failure to comply with applicable laws, external standards, or internal requirements. See “Item 7 - Management’s Discussion and Analysis of Financial Condition and Results of Operations - Risk management - Compliance risk” of our 20212022 Form 10-K for information on our compliance risks, including how we manage such risks.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
See “Item 2 - Management’s Discussion and Analysis of Financial Condition and Results of Operations - Risk management” of this Form 10-Q for our quantitative and qualitative disclosures about market risk.
ITEM 4. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
Disclosure controls are procedures designed to ensure that information required to be disclosed in our reports filed under the Securities Exchange Act of 1934, such as this report, are recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls are also designed to ensure that such information is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable, not absolute, assurance of achieving the desired control objectives, as ours are designed to do, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.
Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we have evaluated the effectiveness of our disclosure controls and procedures pursuant to Securities Exchange Act of 1934 Rule 13a-15(b) as of the end of the period covered by this report. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that these disclosure controls and procedures are effective.
Changes in Internal Control over Financial Reporting
Effective June 1, 2022, we completed our acquisition of TriState Capital. Management has elected to exclude TriState Capital from our assessment of the effectiveness of our internal control over financial reporting as of June 30, 2022, as permitted by the SEC Staff guidance. TriState Capital’s assets represented approximately 17% of our consolidated total assets as of June 30, 2022, and its net revenues and net loss for the period from the acquisition date through June 30, 2022 represented approximately 1% and 5%, respectively, of our consolidated net revenues and net income for the three months ended June 30, 2022. As of June 30, 2022, management was in the process of integrating TriState Capital into our internal control over financial reporting.
Other than as discussed above, thereThere were no changes during the three months ended June 30, 20222023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 1A. RISK FACTORS
Our operations and financial results are subject to various risks and uncertainties which could adversely affect our business, financial condition, results of operations, liquidity and the trading price of our common stock. For information regarding these risks and uncertainties, see “Item 1A - Risk Factors” of our 2021 Form 10-K. The following represents significant changes to our risk factors disclosed in our 2021 Form 10-K.
The rights of holders of our common stock are generally subordinate to the rights of holders of our outstanding and any future issuances of debt securities and preferred stock.
Our Board of Directors has the authority to issue debt securities as well as an aggregate of up to 10 million shares of preferred stock on the terms it determines without shareholder approval. In connection with our acquisition of TriState Capital Holdings on June 1, 2022, we issued 40,250 shares of 6.75% Fixed-to-Floating Rate Series A Non-Cumulative Perpetual Preferred Stock, par value $0.10 per share (“Series A Preferred Stock”), in the form of 1.61 million depositary shares, each representing a 1/40th interest in a share of Series A Preferred Stock, and 80,500 shares of 6.375% Fixed-to-Floating Rate Series B Non-Cumulative Perpetual Preferred Stock, par value $0.10 per share (“Series B Preferred Stock” in the form of 3.22 million depositary shares, each representing a 1/40th interest in a share of Series B Preferred Stock. Any debt or shares of preferred stock that we may issue in the future will also be senior to our common stock. Because our decision to issue debt or equity securities or incur other borrowings in the future will depend on market conditions and other factors beyond our control, the amount, timing, nature or success of our future capital raising efforts is uncertain. Thus, holders of our common stock bear the risk that our future issuances of debt or equity securities or our incurrence of other borrowings may negatively affect the market price of our common stock.
The depositary shares representing our preferred stock are thinly traded and have limited voting rights.
The depositary shares representing interests in our preferred stock are listed on the New York Stock Exchange, but an active, liquid trading market for such securities may not be sustained. A public trading market having depth, liquidity and orderliness depends upon the presence in the marketplace and independent decisions of willing buyers and sellers of our preferred stock, over which we have no control. Without an active, liquid trading market, holders of our depositary shares may not be able to sell their shares at the volume, prices and times desired. In addition, holders of our preferred stock (and, accordingly, holders of the depositary shares representing such stock), will have no voting rights with respect to matters that generally require the approval of our voting common shareholders. Holders of preferred stock have voting rights that are generally limited to, with respect to the particular series of preferred stock held, (i) authorizing, creating or issuing any capital stock ranking senior to such preferred stock as to dividends or the distribution of assets upon liquidation, and (ii) amending, altering or repealing any provision of our Articles of Incorporation so as to adversely affect the powers, preferences or special rights of such series of preferred stock.Not applicable.
| | | | | | | | |
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Management’s Discussion and Analysis | |
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
We did not have any sales of unregistered securities for the nine months ended June 30, 2022.2023.
We purchase our own stock from time to time in conjunction with a number of activities, each of which is described in the following paragraphs. The following table presents information on our purchases of our own stock, on a monthly basis, for the nine months ended June 30, 2022.2023.
| | | | | | | | | | | | | | | | | | | | | | | |
| Total number of shares purchased | | Average price per share | | Number of shares purchased as part of publicly announced plans or programs | | Approximate dollar value (in millions) at each month-end of securities that may yet be purchased under the plans or programs |
October 1, 2021 – October 31, 2021 | 1,305 | | | $ | 94.47 | | | — | | | $632 |
November 1, 2021 – November 30, 2021 | 94,824 | | | $ | 98.82 | | | — | | | $632 |
December 1, 2021 – December 31, 2021 | 145 | | | $ | 98.90 | | | — | | | $1,000 |
First quarter | 96,274 | | | $ | 98.76 | | | — | | | |
| | | | | | | |
January 1, 2022 – January 31, 2022 | 787 | | | $ | 109.57 | | | — | | | $1,000 |
February 1, 2022 – February 28, 2022 | 3,391 | | | $ | 109.67 | | | — | | | $1,000 |
March 1, 2022 – March 31, 2022 | — | | | $ | — | | | — | | | $1,000 |
Second quarter | 4,178 | | | $ | 109.65 | | | — | | | |
| | | | | | | |
April 1, 2022 – April 30, 2022 | — | | | $ | — | | | — | | | $1,000 |
May 1, 2022 – May 31, 2022 | — | | | $ | — | | | — | | | $1,000 |
June 1, 2022 – June 30, 2022 | 1,137,660 | | | $ | 88.01 | | | 1,136,347 | | | $900 |
Third quarter | 1,137,660 | | | $ | 88.01 | | | 1,136,347 | | | |
| | | | | | | |
Fiscal year-to-date total | 1,238,112 | | | $ | 88.92 | | | 1,136,347 | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Total number of shares purchased | | Average price per share | | Number of shares purchased as part of publicly announced plans or programs | | Approximate dollar value (in millions) at each month-end of securities that may yet be purchased under the plans or programs |
October 1, 2022 – October 31, 2022 | 358,103 | | | $ | 105.94 | | | 354,313 | | | $800 |
November 1, 2022 – November 30, 2022 | 78,798 | | | $ | 120.60 | | | — | | | $800 |
December 1, 2022 – December 31, 2022 | 937,747 | | | $ | 106.64 | | | 937,737 | | | $1,400 |
First quarter | 1,374,648 | | | $ | 107.26 | | | 1,292,050 | | | |
| | | | | | | |
January 1, 2023 – January 31, 2023 | 53,430 | | | $ | 114.90 | | | — | | | $1,400 |
February 1, 2023 – February 28, 2023 | 13,586 | | | $ | 113.49 | | | — | | | $1,400 |
March 1, 2023 – March 31, 2023 | 3,745,485 | | | $ | 93.45 | | | 3,745,388 | | | $1,050 |
Second quarter | 3,812,501 | | | $ | 93.82 | | | 3,745,388 | | | |
| | | | | | | |
April 1, 2023 – April 30, 2023 | 111,500 | | | $ | 89.67 | | | 111,500 | | | $1,040 |
May 1, 2023 – May 31, 2023 | 2,069,035 | | | $ | 87.79 | | | 2,069,035 | | | $858 |
June 1, 2023 – June 30, 2023 | 1,135,079 | | | $ | 95.55 | | | 1,133,895 | | | $750 |
Third quarter | 3,315,614 | | | $ | 90.51 | | | 3,314,430 | | | |
| | | | | | | |
Fiscal year-to-date total | 8,502,763 | | | $ | 94.70 | | | 8,351,868 | | | |
In December 2021,2022, the Board of Directors authorized repurchase of our common stock in an aggregate amount of up to $1$1.5 billion, which replaced the previous authorization.
In the preceding table, the total number of shares purchased includes shares purchased pursuant to the Restricted Stock Trust Fund, which was established to acquire our common stock in the open market and used to settle RSUs granted as a retention vehicle for certain employees of our wholly-owned Canadian subsidiaries. For more information on this trust fund, see Note 2 of the Notes to Consolidated Financial Statements of our 20212022 Form 10-K and Note 109 of the Notes to Condensed Consolidated Financial Statements of this Form 10-Q. These activities do not utilize the repurchase authorization presented in the preceding table.
The total number of shares purchased also includes shares repurchased as a result of employees surrendering shares as payment for option exercises or withholding taxes. These activities do not utilize the repurchase authorization presented in the preceding table.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5. OTHER INFORMATION
None.None of our directors or officers adopted or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement during the three months ended June 30, 2023.
| | | | | | | | |
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Management’s Discussion and Analysis | |
ITEM 6. EXHIBITS
| | | | | |
Exhibit Number | Description |
2.1 | Agreement and Plan of Merger, dated October 20, 2021, among Raymond James Financial, Inc., Macaroon One LLC, Macaroon Two LLC and TriState Capital Holdings, Inc., incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on October 26, 2021. |
3.1.1 | |
3.1.2 | |
3.1.3 | |
3.2 | |
4.110.1 | DepositAmended and Restated Credit Agreement, dated as of April 6, 2023, among TriState Capital Holdings,Raymond James Financial, Inc., ComputershareRaymond James & Associates, Inc., Computershare Trust Company, N.A.the Lenders party thereto and the holders from time to timeBank of the depositary receipts described therein relating to 6.75% Fixed-to-Floating Rate Series A Non-Cumulative Perpetual Preferred Stock,America, N.A, incorporated by reference to Exhibit 4.110.1 to the Company’s Registration StatementCurrent Report on Form 8-A,8-K, filed with the Securities and Exchange Commission on May 31, 2022. |
4.2 | |
4.3 | |
4.4 | |
4.5 | |
4.6 | |
31.1 | |
31.2 | |
32 | |
101.INS | XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. |
101.SCH | Inline XBRL Taxonomy Extension Schema Document. |
101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document. |
101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document. |
101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document. |
101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document. |
104 | Cover Page Interactive Data File - the cover page interactive data file does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. |
| | | | | | | | |
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Management’s Discussion and Analysis | |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| | | | | | | | | | | |
| | | RAYMOND JAMES FINANCIAL, INC. |
| | | (Registrant) |
| | | |
Date: | August 8, 20224, 2023 | | /s/ Paul C. Reilly |
| | | Paul C. Reilly |
| | | Chair and Chief Executive Officer |
| | | |
Date: | August 8, 20224, 2023 | | /s/ Paul M. Shoukry |
| | | Paul M. Shoukry |
| | | Chief Financial Officer and Treasurer |