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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 MarchDecember 31, 2023
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 6.375% 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.
211,910,694209,027,614 shares of common stock as of May 4, 2023February 5, 2024
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 - Fair value | |
| | Note 4 - Available-for-sale securities | |
| | Note 5 - Derivative assets and derivative liabilities | |
| | Note 6 - Collateralized agreements and financings | |
| | Note 7 - Bank loans, net | |
| | Note 8 - Loans to financial advisors, net | |
| | Note 9 - Variable interest entities | |
| | | |
| | Note 10 - Goodwill and identifiable intangibleOther assets net | |
| | Note 11 - Other assetsLeases | |
| | Note 12 - Bank deposits | |
| | Note 12 - Leases | |
| | Note 13 - Bank depositsOther borrowings | |
| | | |
| | | |
| | Note 14 - Other borrowings | |
| | | |
| | | |
| | Note 15 - Income taxes | |
| | Note 1615 - Commitments, contingencies and guarantees | |
| | Note 1716 - Shareholders’ equity | |
| | Note 1817 - Revenues | |
| | Note 1918 - Interest income and interest expense | |
| | Note 19 - Share-based compensation | |
| | Note 20 - Share-based compensationRegulatory capital requirements | |
| | Note 21 - Earnings per share | |
| | Note 21 - Regulatory capital requirements | |
| | Note 22 - Earnings per share | |
| | Note 23 - 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 | | March 31, 2023 | | September 30, 2022 | $ in millions, except per share amounts | | December 31, 2023 | | September 30, 2023 |
Assets: | Assets: | | | | |
Cash and cash equivalents | Cash and cash equivalents | | $ | 8,663 | | | $ | 6,178 | |
Cash and cash equivalents | |
Cash and cash equivalents | |
Assets segregated for regulatory purposes and restricted cash | Assets segregated for regulatory purposes and restricted cash | | 4,697 | | | 8,481 | |
Collateralized agreements | Collateralized agreements | | 379 | | | 704 | |
Financial instruments, at fair value: | Financial instruments, at fair value: | |
Trading assets ($935 and $1,188 pledged as collateral) | | 993 | | | 1,270 | |
Available-for-sale securities ($26 and $74 pledged as collateral) | | 9,773 | | | 9,885 | |
Trading assets ($1,019 and $1,062 pledged as collateral) | |
Trading assets ($1,019 and $1,062 pledged as collateral) | |
Trading assets ($1,019 and $1,062 pledged as collateral) | |
Available-for-sale securities ($20 and $22 pledged as collateral) | |
Derivative assets | Derivative assets | | 91 | | | 188 | |
Other investments ($21 and $14 pledged as collateral) | | 318 | | | 292 | |
Other investments ($7 and $7 pledged as collateral) | |
Brokerage client receivables, net | Brokerage client receivables, net | | 2,575 | | | 2,934 | |
Other receivables, net | Other receivables, net | | 1,711 | | | 1,615 | |
Bank loans, net | Bank loans, net | | 43,683 | | | 43,239 | |
Loans to financial advisors, net | Loans to financial advisors, net | | 1,108 | | | 1,152 | |
Deferred income taxes, net | Deferred income taxes, net | | 573 | | | 630 | |
Goodwill and identifiable intangible assets, net | Goodwill and identifiable intangible assets, net | | 1,932 | | | 1,931 | |
Other assets | Other assets | | 2,684 | | | 2,452 | |
Total assets | Total assets | | $ | 79,180 | | | $ | 80,951 | |
| Liabilities and shareholders’ equity: | Liabilities and shareholders’ equity: | |
Liabilities and shareholders’ equity: | |
Liabilities and shareholders’ equity: | |
Bank deposits | |
Bank deposits | |
Bank deposits | Bank deposits | | $ | 54,229 | | | $ | 51,357 | |
Collateralized financings | Collateralized financings | | 327 | | | 466 | |
Financial instrument liabilities, at fair value: | Financial instrument liabilities, at fair value: | |
Trading liabilities | |
Trading liabilities | |
Trading liabilities | Trading liabilities | | 710 | | | 836 | |
Derivative liabilities | Derivative liabilities | | 351 | | | 530 | |
Brokerage client payables | Brokerage client payables | | 6,848 | | | 11,446 | |
Accrued compensation, commissions and benefits | Accrued compensation, commissions and benefits | | 1,461 | | | 1,787 | |
Other payables | Other payables | | 1,597 | | | 1,768 | |
Other borrowings | Other borrowings | | 1,650 | | | 1,291 | |
Senior notes payable | Senior notes payable | | 2,038 | | | 2,038 | |
Total liabilities | Total liabilities | | 69,211 | | | 71,519 | |
Commitments and contingencies (see Note 16) | |
Commitments and contingencies (see Note 15) | | Commitments and contingencies (see Note 15) | | |
Shareholders’ equity | Shareholders’ equity | |
Preferred stock | Preferred stock | | 120 | | | 120 | |
Common stock; $.01 par value; 650,000,000 shares authorized; 248,323,901 shares issued and 211,581,156 shares outstanding as of March 31, 2023; 248,018,564 shares issued and 215,122,523 shares outstanding as of September 30, 2022 | | 2 | | | 2 | |
Preferred stock | |
Preferred stock | |
Common stock; $.01 par value; 650,000,000 shares authorized; 249,682,751 shares issued and 208,665,962 shares outstanding as of December 31, 2023; 248,728,805 shares issued and 208,769,095 shares outstanding as of September 30, 2023 | |
Additional paid-in capital | Additional paid-in capital | | 3,035 | | | 2,987 | |
Retained earnings | Retained earnings | | 9,590 | | | 8,843 | |
Treasury stock, at cost; 36,742,745 and 32,896,041 common shares as of March 31, 2023 and September 30, 2022, respectively | | (1,954) | | | (1,512) | |
Treasury stock, at cost; 41,016,789 and 39,959,710 common shares as of December 31, 2023 and September 30, 2023, respectively | |
Accumulated other comprehensive loss | Accumulated other comprehensive loss | | (798) | | | (982) | |
Total equity attributable to Raymond James Financial, Inc. | Total equity attributable to Raymond James Financial, Inc. | | 9,995 | | | 9,458 | |
Noncontrolling interests | Noncontrolling interests | | (26) | | | (26) | |
Total shareholders’ equity | Total shareholders’ equity | | 9,969 | | | 9,432 | |
Total liabilities and shareholders’ equity | Total liabilities and shareholders’ equity | | $ | 79,180 | | | $ | 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 March 31, | | Six months ended March 31, | | | | Three months ended December 31, |
in millions, except per share amounts | in millions, except per share amounts | | 2023 | | 2022 | | 2023 | | 2022 | in millions, except per share amounts | | | | | | 2023 | | 2022 |
Revenues: | Revenues: | | | | | | | | |
Asset management and related administrative fees | Asset management and related administrative fees | | $ | 1,302 | | | $ | 1,464 | | | $ | 2,544 | | | $ | 2,846 | |
Asset management and related administrative fees | |
Asset management and related administrative fees | |
Brokerage revenues: | Brokerage revenues: | |
Securities commissions | |
Securities commissions | |
Securities commissions | Securities commissions | | 369 | | | 422 | | | 721 | | | 847 | |
Principal transactions | Principal transactions | | 127 | | | 142 | | | 259 | | | 275 | |
Total brokerage revenues | Total brokerage revenues | | 496 | | | 564 | | | 980 | | | 1,122 | |
Account and service fees | Account and service fees | | 258 | | | 179 | | | 547 | | | 356 | |
Investment banking | Investment banking | | 154 | | | 235 | | | 295 | | | 660 | |
Interest income | Interest income | | 915 | | | 242 | | | 1,742 | | | 467 | |
Other | Other | | 32 | | | 27 | | | 76 | | | 78 | |
Total revenues | Total revenues | | 3,157 | | | 2,711 | | | 6,184 | | | 5,529 | |
Interest expense | Interest expense | | (284) | | | (38) | | | (525) | | | (75) | |
Net revenues | Net revenues | | 2,873 | | | 2,673 | | | 5,659 | | | 5,454 | |
Non-interest expenses: | Non-interest expenses: | | | | | | | | |
Compensation, commissions and benefits | Compensation, commissions and benefits | | 1,820 | | | 1,852 | | | 3,556 | | | 3,736 | |
Compensation, commissions and benefits | |
Compensation, commissions and benefits | |
Non-compensation expenses: | Non-compensation expenses: | |
Communications and information processing | |
Communications and information processing | |
Communications and information processing | Communications and information processing | | 153 | | | 127 | | | 292 | | | 239 | |
Occupancy and equipment | Occupancy and equipment | | 68 | | | 62 | | | 134 | | | 121 | |
Business development | Business development | | 54 | | | 34 | | | 110 | | | 69 | |
Investment sub-advisory fees | Investment sub-advisory fees | | 36 | | | 40 | | | 70 | | | 78 | |
Professional fees | Professional fees | | 38 | | | 27 | | | 70 | | | 55 | |
Bank loan provision for credit losses | Bank loan provision for credit losses | | 28 | | | 21 | | | 42 | | | 10 | |
| | Other | |
| Other | |
| Other | Other | | 119 | | | 77 | | | 176 | | | 155 | |
Total non-compensation expenses | Total non-compensation expenses | | 496 | | | 388 | | | 894 | | | 727 | |
Total non-interest expenses | Total non-interest expenses | | 2,316 | | | 2,240 | | | 4,450 | | | 4,463 | |
Pre-tax income | Pre-tax income | | 557 | | | 433 | | | 1,209 | | | 991 | |
Provision for income taxes | Provision for income taxes | | 130 | | | 110 | | | 273 | | | 222 | |
Net income | Net income | | 427 | | | 323 | | | 936 | | | 769 | |
Preferred stock dividends | Preferred stock dividends | | 2 | | | — | | | 4 | | | — | |
Net income available to common shareholders | Net income available to common shareholders | | $ | 425 | | | $ | 323 | | | $ | 932 | | | $ | 769 | |
| Earnings per common share – basic | Earnings per common share – basic | | $ | 1.97 | | | $ | 1.56 | | | $ | 4.33 | | | $ | 3.71 | |
Earnings per common share – basic | |
Earnings per common share – basic | |
Earnings per common share – diluted | Earnings per common share – diluted | | $ | 1.93 | | | $ | 1.52 | | | $ | 4.23 | | | $ | 3.61 | |
Weighted-average common shares outstanding – basic | Weighted-average common shares outstanding – basic | | 214.3 | | | 207.7 | | 214.5 | | 207.0 | Weighted-average common shares outstanding – basic | | | | | | 208.6 | | 214.7 |
Weighted-average common and common equivalent shares outstanding – diluted | Weighted-average common and common equivalent shares outstanding – diluted | | 219.2 | | 213.0 | | 219.7 | | 212.6 | Weighted-average common and common equivalent shares outstanding – diluted | | | | | | 213.8 | | 220.4 |
| Net income | Net income | | $ | 427 | | | $ | 323 | | | $ | 936 | | | $ | 769 | |
Net income | |
Net income | |
Other comprehensive income/(loss), net of tax: | Other comprehensive income/(loss), net of tax: | | | | | |
Available-for-sale securities | |
Available-for-sale securities | |
Available-for-sale securities | Available-for-sale securities | | 97 | | | (320) | | | 144 | | | (375) | |
Currency translations, net of the impact of net investment hedges | Currency translations, net of the impact of net investment hedges | | 7 | | | (11) | | | 53 | | | (11) | |
Cash flow hedges | Cash flow hedges | | (11) | | | 29 | | | (13) | | | 38 | |
Total other comprehensive income/(loss), net of tax | | 93 | | | (302) | | | 184 | | | (348) | |
Total other comprehensive income, net of tax | |
Total comprehensive income | Total comprehensive income | | $ | 520 | | | $ | 21 | | | $ | 1,120 | | | $ | 421 | |
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 March 31, | | Six months ended March 31, |
$ in millions, except per share amounts | $ in millions, except per share amounts | | 2023 | | 2022 | | 2023 | | 2022 |
$ in millions, except per share amounts | |
$ in millions, except per share amounts | |
Preferred stock: | |
Preferred stock: | |
Preferred stock: | Preferred stock: | | | | | | | | |
Balance beginning of period | Balance beginning of period | | $ | 120 | | | $ | — | | | $ | 120 | | | $ | — | |
Balance beginning of period | |
Balance beginning of period | |
| Shares issuances | | — | | | — | | | — | | | — | |
Share issuances | |
| Share issuances | |
| Share issuances | |
| Balance end of period | |
| Balance end of period | |
| Balance end of period | Balance end of period | | 120 | | | — | | | 120 | | | — | |
| Common stock, par value $.01 per share: | 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 | |
Balance beginning of period | Balance beginning of period | | 2 | | | 2 | | | 2 | | | 2 | |
Share issuances | Share issuances | | — | |
| — | | | — | | | — | |
Share issuances | |
Share issuances | |
Balance end of period | |
Balance end of period | |
Balance end of period | Balance end of period | | 2 | | | 2 | | | 2 | | | 2 | |
| Additional paid-in capital: | Additional paid-in capital: | | | | | |
| Additional paid-in capital: | |
| Additional paid-in capital: | |
Balance beginning of period | |
Balance beginning of period | |
Balance beginning of period | Balance beginning of period | | 2,975 | |
| 2,055 | | | 2,987 | | | 2,088 | |
| Employee stock purchases | Employee stock purchases | | 15 | |
| 14 | | | 22 | | | 22 | |
| Employee stock purchases | |
| Employee stock purchases | |
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 | |
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 | | (11) | |
| (17) | | | (110) | | | (122) | |
Share-based compensation amortization | Share-based compensation amortization | | 56 | |
| 41 | | | 136 | | | 105 | |
Share-based compensation amortization | |
Share-based compensation amortization | |
Balance end of period | |
Balance end of period | |
Balance end of period | |
| Retained earnings: | |
| Retained earnings: | |
| Retained earnings: | |
Balance beginning of period | |
Balance beginning of period | |
Balance beginning of period | |
Net income attributable to Raymond James Financial, Inc. | |
Net income attributable to Raymond James Financial, Inc. | |
Net income attributable to Raymond James Financial, Inc. | |
Common and preferred stock cash dividends declared (see Note 16) | |
Common and preferred stock cash dividends declared (see Note 16) | |
Common and preferred stock cash dividends declared (see Note 16) | |
| | Balance end of period | Balance end of period | | 3,035 | | | 2,093 | | | 3,035 | | | 2,093 | |
| Retained earnings: | | | | | |
Balance beginning of period | | 9,254 | |
| 8,003 | | | 8,843 | | | 7,633 | |
Net income | | 427 | |
| 323 | | | 936 | | | 769 | |
Common and preferred stock cash dividends declared (see Note 17) | | (91) | | | (70) | | | (189) | | | (146) | |
| Balance end of period | |
| | Balance end of period | Balance end of period | | 9,590 | | | 8,256 | | | 9,590 | | | 8,256 | |
| Treasury stock: | Treasury stock: | | | | | |
| Treasury stock: | |
| Treasury stock: | |
Balance beginning of period | |
Balance beginning of period | |
Balance beginning of period | Balance beginning of period | | (1,604) | | | (1,373) | | | (1,512) | | | (1,437) | |
Purchases/surrenders | Purchases/surrenders | | (358) | | | — | | | (505) | | | (10) | |
Purchases/surrenders | |
Purchases/surrenders | |
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 | | 8 | | | 13 | | | 63 | | | 87 | |
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 | |
Balance end of period | |
Balance end of period | |
Balance end of period | Balance end of period | | (1,954) | | | (1,360) | | | (1,954) | | | (1,360) | |
| Accumulated other comprehensive loss: | Accumulated other comprehensive loss: | | | | | |
| Accumulated other comprehensive loss: | |
| Accumulated other comprehensive loss: | |
Balance beginning of period | Balance beginning of period | | (891) | | | (87) | | | (982) | | | (41) | |
Other comprehensive income/(loss), net of tax | | 93 | | | (302) | | | 184 | | | (348) | |
Balance beginning of period | |
Balance beginning of period | |
Other comprehensive income, net of tax | |
Other comprehensive income, net of tax | |
Other comprehensive income, net of tax | |
| Balance end of period | |
| Balance end of period | |
| Balance end of period | Balance end of period | | (798) | | | (389) | | | (798) | | | (389) | |
Total equity attributable to Raymond James Financial, Inc. | Total equity attributable to Raymond James Financial, Inc. | | $ | 9,995 | | | $ | 8,602 | | | $ | 9,995 | | | $ | 8,602 | |
Total equity attributable to Raymond James Financial, Inc. | |
Total equity attributable to Raymond James Financial, Inc. | |
| Noncontrolling interests: | |
| Noncontrolling interests: | |
| Noncontrolling interests: | Noncontrolling interests: | |
Balance beginning of period | Balance beginning of period | | $ | (26) | | | $ | 52 | | | $ | (26) | | | $ | 58 | |
Net loss attributable to noncontrolling interests | | — | | | (2) | | | — | | | — | |
Balance beginning of period | |
Balance beginning of period | |
| Deconsolidations and sales | | — | | | (43) | | | — | | | (51) | |
Consolidations | |
| Consolidations | |
| Consolidations | |
| Balance end of period | |
| Balance end of period | |
| | Balance end of period | Balance end of period | | (26) | | | 7 | | | (26) | | | 7 | |
Total shareholders’ equity | Total shareholders’ equity | | $ | 9,969 | | | $ | 8,609 | | | $ | 9,969 | | | $ | 8,609 | |
Total shareholders’ equity | |
Total shareholders’ equity | |
See accompanying Notes to Condensed Consolidated Financial Statements (Unaudited).
5
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
| | Six months ended March 31, |
| | Three months ended December 31, | | | | Three months ended December 31, |
$ in millions | $ in millions | | 2023 | | 2022 | $ in millions | | 2023 | | 2022 |
Cash flows from operating activities: | Cash flows from operating activities: | | | | | Cash flows from operating activities: | | |
Net income | Net income | | $ | 936 | | | $ | 769 | |
Adjustments to reconcile net income to net cash used in operating activities: | | | | |
Adjustments to reconcile net income to net cash provided by/(used in) operating activities: | | Adjustments to reconcile net income to net cash provided by/(used in) operating activities: | | | | |
Depreciation and amortization | Depreciation and amortization | | 81 | | | 69 | |
Deferred income taxes, net | Deferred income taxes, net | | (4) | | | 12 | |
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 | | (23) | | | 24 | |
Provisions for credit losses and legal and regulatory proceedings | | 78 | | | 16 | |
Provisions for credit losses and legal and regulatory matters, net | |
Share-based compensation expense | Share-based compensation expense | | 138 | | | 109 | |
Unrealized (gain)/loss on company-owned life insurance policies, net of expenses | | (86) | | | 19 | |
Unrealized gain on company-owned life insurance policies, net of expenses | |
| Other | Other | | (3) | | | 10 | |
Other | |
Other | |
Net change in: | Net change in: | | | | | Net change in: | | | | |
Assets segregated for regulatory purposes excluding cash and cash equivalents | | — | | | (8,294) | |
| Collateralized agreements, net of collateralized financings | |
Collateralized agreements, net of collateralized financings | |
Collateralized agreements, net of collateralized financings | Collateralized agreements, net of collateralized financings | | 186 | | | 59 | |
Loans (provided to) financial advisors, net of repayments | Loans (provided to) financial advisors, net of repayments | | 34 | | | (76) | |
Brokerage client receivables and other receivables, net | Brokerage client receivables and other receivables, net | | 145 | | | (299) | |
Trading instruments, net | Trading instruments, net | | 163 | | | 160 | |
Derivative instruments, net | Derivative instruments, net | | (122) | | | 166 | |
Other assets | Other assets | | (65) | | | (39) | |
Brokerage client payables and other payables | Brokerage client payables and other payables | | (4,892) | | | 6,556 | |
Accrued compensation, commissions and benefits | Accrued compensation, commissions and benefits | | (332) | | | (278) | |
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 | | 6 | | | (153) | |
Net cash used in operating activities | | (3,760) | | | (1,170) | |
Net cash provided by/(used in) operating activities | |
| Cash flows from investing activities: | |
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 | | (621) | | | (2,850) | |
Proceeds from sales of loans held for investment | Proceeds from sales of loans held for investment | | 142 | | | 134 | |
Purchases of available-for-sale securities | Purchases of available-for-sale securities | | (325) | | | (1,992) | |
Available-for-sale securities maturations, repayments and redemptions | Available-for-sale securities maturations, repayments and redemptions | | 639 | | | 952 | |
| Cash and cash equivalents acquired in business acquisitions, including those segregated for regulatory purposes, net of cash paid for acquisitions | | — | | | 1,671 | |
| Additions to property and equipment | Additions to property and equipment | | (69) | | | (42) | |
Purchase of Federal Home Loan Bank stock, net | | (35) | | | — | |
| Investment in note receivable | | — | | | (125) | |
Purchases of other investments, net | | (6) | | | (80) | |
Additions to property and equipment | |
| Additions to property and equipment | |
| Investment in solar tax credit equity investment | |
| Investment in solar tax credit equity investment | |
| Investment in solar tax credit equity investment | |
| Other investing activities, net | |
Other investing activities, net | |
Other investing activities, net | Other investing activities, net | | (44) | | | (71) | |
Net cash used in investing activities | Net cash used in investing activities | | (319) | | | (2,403) | |
| |
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) |
| Six months ended March 31, |
| | Three months ended December 31, | | | | Three months ended December 31, |
$ in millions | $ in millions | | 2023 | | 2022 | $ in millions | | 2023 | | 2022 |
Cash flows from financing activities: | Cash flows from financing activities: | | | | |
| Increase in bank deposits | Increase in bank deposits | | 2,872 | | | 2,190 | |
| Increase in bank deposits | |
| Increase in bank deposits | |
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 | | (558) | | | (59) | |
Dividends on preferred and common stock | | (174) | | | (131) | |
Dividends on common and preferred stock | |
Exercise of stock options and employee stock purchases | Exercise of stock options and employee stock purchases | | 25 | | | 32 | |
| Proceeds from Federal Home Loan Bank advances | |
Proceeds from Federal Home Loan Bank advances | |
Proceeds from Federal Home Loan Bank advances | Proceeds from Federal Home Loan Bank advances | | 1,650 | | | 850 | |
Repayments of Federal Home Loan Bank advances and other borrowed funds | Repayments of Federal Home Loan Bank advances and other borrowed funds | | (1,291) | | | (852) | |
Other financing, net | Other financing, net | | (2) | | | (5) | |
Net cash provided by financing activities | Net cash provided by financing activities | | 2,522 | | | 2,025 | |
| Currency adjustment: | Currency adjustment: | | | | |
Currency adjustment: | |
Currency adjustment: | | | | | |
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 | | 258 | | | (49) | |
Net decrease in cash and cash equivalents, including those segregated for regulatory purposes and restricted cash | | (1,299) | | | (1,597) | |
Net increase/(decrease) in cash and cash equivalents, including those segregated for regulatory purposes and restricted cash | |
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 | | 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 | | $ | 13,360 | | | $ | 14,852 | |
| Cash and cash equivalents | Cash and cash equivalents | | $ | 8,663 | | | $ | 5,715 | |
Cash and cash equivalents | |
Cash and cash equivalents | |
Cash and cash equivalents segregated for regulatory purposes and restricted cash | Cash and cash equivalents segregated for regulatory purposes and restricted cash | | 4,697 | | | 9,137 | |
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 | | $ | 13,360 | | | $ | 14,852 | |
| Supplemental disclosures of cash flow information: | |
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 | | $ | 483 | | | $ | 76 | |
Cash paid for income taxes, net | Cash paid for income taxes, net | | $ | 389 | | | $ | 293 | |
Cash outflows for lease liabilities | Cash outflows for lease liabilities | | $ | 60 | | | $ | 52 | |
Non-cash right-of-use assets recorded for new and modified leases | Non-cash right-of-use assets recorded for new and modified leases | | $ | 42 | | | $ | 26 | |
|
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)
MarchDecember 31, 2023
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 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 (“20222023 Form 10-K”) for the year ended September 30, 2022,2023, as filed with the United States (“U.S.”) Securities and Exchange Commission (“SEC”) and in Note 9 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 20222023 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 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
Certain 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 20222023 Form 10-K. There have beenDuring the three months ended December 31, 2023, there were no significant changes into our significant accounting policies since September 30, 2022.other than the accounting policies adopted or modified as part of our implementation of new or amended accounting guidance, as noted in the following sections.
Accounting guidance adopted in fiscal 2024
In March 2022, the Financial Accounting Standards Board (“FASB”) issued new guidance related to troubled debt restructurings (“TDRs”) 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 update eliminates the requirement to use a discounted cash flow approach to measure the allowance for credit losses for TDRs and instead allows for the use of a current expected credit loss (“CECL”) approach for all loans. Under a CECL approach, the impact of loan modifications and the subsequent performance of modified loans, including defaults, is reflected in the historical loss data used to calculate expected lifetime credit losses. In addition, the update requires new disclosures about modifications granted to borrowers experiencing financial difficulty in the form of principal forgiveness, interest rate reductions, other-than-insignificant payment delays, term extensions, or a combination of these modifications. The update also requires new disclosures for the financial effects of these modifications and for loan performance in the twelve months following the modification, and also requires disclosure of current period gross charge-offs by year of origination. We adopted this guidance on a prospective basis as of October 1, 2023, which did not have a material impact on our financial position or results of operations. Refer to Note 7 for additional disclosures required by this guidance and changes to our accounting policies as a result of this adoption. See Note 2 of our 2023 Form 10-K for a discussion of our accounting policies related to our nonperforming assets and allowance for credit losses.
| | | | | | | | |
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements (Unaudited) | |
NOTE 3 – FAIR VALUE
Our “Financial instruments” and “Financial instrument liabilities” on our Condensed Consolidated Statements of Financial Condition are recorded at fair value. ForSee Notes 2 and 4 of our 2023 Form 10-K for further information about such instruments and our significant accounting policies related to fair value, see Notes 2 and 4 of our 2022 Form 10-K.value. 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 5 for additional information.
| $ in millions | $ in millions | | Level 1 | | Level 2 | | Level 3 | | Netting adjustments | | Balance as of March 31, 2023 | $ in millions | | Level 1 | | Level 2 | | Level 3 | | Netting adjustments | | Balance as of December 31, 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: | | | | | | |
| Trading assets: | |
Trading assets: | |
Trading assets: | Trading assets: | | | | | | | | | | | | |
Municipal and provincial obligations | Municipal and provincial obligations | | $ | — | | | $ | 177 | | | $ | — | | | $ | — | | | $ | 177 | |
Corporate obligations | Corporate obligations | | 17 | | | 520 | | | — | | | — | | | 537 | |
Government and agency obligations | Government and agency obligations | | 40 | | | 83 | | | — | | | — | | | 123 | |
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”) | | — | | | 27 | | | — | | | — | | | 27 | |
Non-agency CMOs and ABS | Non-agency CMOs and ABS | | — | | | 106 | | | — | | | — | | | 106 | |
Total debt securities | Total debt securities | | 57 | | | 913 | | | — | | | — | | | 970 | |
Equity securities | Equity securities | | 8 | | | 2 | | | — | | | — | | | 10 | |
Brokered certificates of deposit | Brokered certificates of deposit | | 1 | | | 9 | | | — | | | — | | | 10 | |
Other | Other | | — | | | — | | | 3 | | | — | | | 3 | |
Total trading assets | Total trading assets | | 66 | | | 924 | | | 3 | | | — | | | 993 | |
Available-for-sale securities (1) | Available-for-sale securities (1) | | 1,021 | | | 8,752 | | | — | | | — | | | 9,773 | |
Derivative assets: | |
Interest rate | | 9 | | | 361 | | | — | | | (279) | | | 91 | |
| Derivative assets - interest rate | |
Derivative assets - interest rate | |
Derivative assets - interest rate | |
| Total derivative assets | | 9 | | | 361 | | | — | | | (279) | | | 91 | |
| All other investments: | |
| All other investments: | |
| | All other investments: | All other investments: | | | | | | | | | | |
Government and agency obligations (2) | Government and agency obligations (2) | | 97 | | | — | | | — | | | — | | | 97 | |
Government and agency obligations (2) | |
Government and agency obligations (2) | |
Other | Other | | 93 | | | 1 | | | 28 | | | — | | | 122 | |
Total all other investments | Total all other investments | | 190 | | | 1 | | | 28 | | | — | | | 219 | |
Other assets - fractional shares | | 92 | | | — | | | — | | | — | | | 92 | |
Other assets - client-owned fractional shares | |
Subtotal | Subtotal | | 1,378 | | | 10,038 | | | 31 | | | (279) | | | 11,168 | |
Other investments - private equity - measured at net asset value (“NAV”) | Other investments - private equity - measured at net asset value (“NAV”) | | | | | | | | | | 99 | |
Total assets at fair value on a recurring basis | Total assets at fair value on a recurring basis | | $ | 1,378 | | | $ | 10,038 | | | $ | 31 | | | $ | (279) | | | $ | 11,267 | |
| Liabilities at fair value on a recurring basis: | 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: | |
Trading liabilities: | |
Municipal and provincial obligations | |
Municipal and provincial obligations | |
Municipal and provincial obligations | Municipal and provincial obligations | | $ | 1 | | | $ | — | | | $ | — | | | $ | — | | | $ | 1 | |
Corporate obligations | Corporate obligations | | — | | | 563 | | | — | | | — | | | 563 | |
Government and agency obligations | Government and agency obligations | | 99 | | | 2 | | | — | | | — | | | 101 | |
Non-agency CMOs and ABS | | — | | | 4 | | | — | | | — | | | 4 | |
| Total debt securities | |
Total debt securities | |
Total debt securities | Total debt securities | | 100 | | | 569 | | | — | | | — | | | 669 | |
Equity securities | Equity securities | | 41 | | | — | | | — | | | — | | | 41 | |
| Total trading liabilities | Total trading liabilities | | 141 | | | 569 | | | — | | | — | | | 710 | |
Total trading liabilities | |
Total trading liabilities | |
Derivative liabilities: | Derivative liabilities: | | | | | | | | | | |
Interest rate | |
Interest rate | |
Interest rate | Interest rate | | 8 | | | 408 | | | — | | | (78) | | | 338 | |
| Foreign exchange | Foreign exchange | | — | | | 9 | | | — | | | — | | | 9 | |
Other | | — | | | — | | | 4 | | | — | | | 4 | |
| Foreign exchange | |
| Foreign exchange | |
| Total derivative liabilities | Total derivative liabilities | | 8 | | | 417 | | | 4 | | | (78) | | | 351 | |
Other payables - fractional shares | | 92 | | | — | | | — | | | — | | | 92 | |
Total derivative liabilities | |
Total derivative liabilities | |
Other payables - repurchase liabilities related to client-owned fractional shares | |
Total liabilities at fair value on a recurring basis | Total liabilities at fair value on a recurring basis | | $ | 241 | | | $ | 986 | | | $ | 4 | | | $ | (78) | | | $ | 1,153 | |
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
$ in millions | | Level 1 | | Level 2 | | Level 3 | | Netting adjustments | | Balance as of September 30, 2022 |
Assets at fair value on a recurring basis: | | | | | | | | | | |
| | | | | | | | | | |
Trading assets: | | | | | | | | | | |
Municipal and provincial obligations | | $ | — | | | $ | 269 | | | $ | — | | | $ | — | | | $ | 269 | |
Corporate obligations | | 16 | | | 579 | | | — | | | — | | | 595 | |
Government and agency obligations | | 86 | | | 85 | | | — | | | — | | | 171 | |
Agency MBS, CMOs, and ABS | | — | | | 123 | | | — | | | — | | | 123 | |
Non-agency CMOs and ABS | | — | | | 61 | | | — | | | — | | | 61 | |
Total debt securities | | 102 | | | 1,117 | | | — | | | — | | | 1,219 | |
Equity securities | | 20 | | | — | | | — | | | — | | | 20 | |
Brokered certificates of deposit | | — | | | 30 | | | — | | | — | | | 30 | |
Other | | — | | | — | | | 1 | | | — | | | 1 | |
Total trading assets | | 122 | | | 1,147 | | | 1 | | | — | | | 1,270 | |
Available-for-sale securities (1) | | 986 | | | 8,899 | | | — | | | — | | | 9,885 | |
Derivative assets: | | | | | | | | | | |
Interest rate | | 42 | | | 484 | | | — | | | (348) | | | 178 | |
| | | | | | | | | | |
| | | | | | | | | | |
Foreign exchange | | — | | | 10 | | | — | | | — | | | 10 | |
Total derivative assets | | 42 | | | 494 | | | — | | | (348) | | | 188 | |
| | | | | | | | | | |
All other investments: | | | | | | | | | | |
Government and agency obligations (2) | | 79 | | | — | | | — | | | — | | | 79 | |
Other | | 92 | | | 2 | | | 29 | | | — | | | 123 | |
Total all other investments | | 171 | | | 2 | | | 29 | | | — | | | 202 | |
Other assets - fractional shares | | 78 | | | — | | | — | | | — | | | 78 | |
Subtotal | | 1,399 | | | 10,542 | | | 30 | | | (348) | | | 11,623 | |
Other investments - private equity - measured at NAV | | | | | | | | | | 90 | |
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: | | | | | | | | | | |
Trading liabilities: | | | | | | | | | | |
Municipal and provincial obligations | | $ | 5 | | | $ | — | | | $ | — | | | $ | — | | | $ | 5 | |
Corporate obligations | | — | | | 555 | | | — | | | — | | | 555 | |
Government and agency obligations | | 249 | | | — | | | — | | | — | | | 249 | |
| | | | | | | | | | |
Total debt securities | | 254 | | | 555 | | | — | | | — | | | 809 | |
Equity securities | | 27 | | | — | | | — | | | — | | | 27 | |
| | | | | | | | | | |
Total trading liabilities | | 281 | | | 555 | | | — | | | — | | | 836 | |
Derivative liabilities: | | | | | | | | | | |
Interest rate | | 40 | | | 547 | | | — | | | (65) | | | 522 | |
| | | | | | | | | | |
| | | | | | | | | | |
Foreign exchange | | — | | | 5 | | | — | | | — | | | 5 | |
Other | | — | | | — | | | 3 | | | — | | | 3 | |
Total derivative liabilities | | 40 | | | 552 | | | 3 | | | (65) | | | 530 | |
Other payables - fractional shares | | 78 | | | — | | | — | | | — | | | 78 | |
Total liabilities at fair value on a recurring basis | | $ | 399 | | | $ | 1,107 | | | $ | 3 | | | $ | (65) | | | $ | 1,444 | |
| | | | | | | | |
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements (Unaudited) | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
$ in millions | | Level 1 | | Level 2 | | Level 3 | | Netting adjustments | | Balance as of September 30, 2023 |
Assets at fair value on a recurring basis: | | | | | | | | | | |
| | | | | | | | | | |
Trading assets: | | | | | | | | | | |
Municipal and provincial obligations | | $ | — | | | $ | 239 | | | $ | — | | | $ | — | | | $ | 239 | |
Corporate obligations | | 22 | | | 620 | | | — | | | — | | | 642 | |
Government and agency obligations | | 24 | | | 117 | | | — | | | — | | | 141 | |
Agency MBS, CMOs, and ABS | | — | | | 35 | | | — | | | — | | | 35 | |
Non-agency CMOs and ABS | | — | | | 68 | | | — | | | — | | | 68 | |
Total debt securities | | 46 | | | 1,079 | | | — | | | — | | | 1,125 | |
Equity securities | | 20 | | | 2 | | | — | | | — | | | 22 | |
Brokered certificates of deposit | | — | | | 36 | | | — | | | — | | | 36 | |
Other | | — | | | — | | | 4 | | | — | | | 4 | |
Total trading assets | | 66 | | | 1,117 | | | 4 | | | — | | | 1,187 | |
Available-for-sale securities (1) | | 1,240 | | | 7,941 | | | — | | | — | | | 9,181 | |
Derivative assets: | | | | | | | | | | |
Interest rate | | 14 | | | 503 | | | — | | | (261) | | | 256 | |
| | | | | | | | | | |
| | | | | | | | | | |
Foreign exchange | | — | | | 9 | | | — | | | — | | | 9 | |
Total derivative assets | | 14 | | | 512 | | | — | | | (261) | | | 265 | |
| | | | | | | | | | |
All other investments: | | | | | | | | | | |
Government and agency obligations (2) | | 71 | | | — | | | — | | | — | | | 71 | |
Other | | 102 | | | 2 | | | 30 | | | — | | | 134 | |
Total all other investments | | 173 | | | 2 | | | 30 | | | — | | | 205 | |
Other assets - client-owned fractional shares | | 98 | | | — | | | — | | | — | | | 98 | |
Subtotal | | 1,591 | | | 9,572 | | | 34 | | | (261) | | | 10,936 | |
Other investments - private equity - measured at NAV | | | | | | | | | | 101 | |
Total assets at fair value on a recurring basis | | $ | 1,591 | | | $ | 9,572 | | | $ | 34 | | | $ | (261) | | | $ | 11,037 | |
| | | | | | | | | | |
Liabilities at fair value on a recurring basis: | | | | | | | | | | |
Trading liabilities: | | | | | | | | | | |
Municipal and provincial obligations | | $ | 10 | | | $ | — | | | $ | — | | | $ | — | | | $ | 10 | |
Corporate obligations | | — | | | 514 | | | — | | | — | | | 514 | |
Government and agency obligations | | 161 | | | 1 | | | — | | | — | | | 162 | |
| | | | | | | | | | |
Total debt securities | | 171 | | | 515 | | | — | | | — | | | 686 | |
Equity securities | | 30 | | | — | | | — | | | — | | | 30 | |
| | | | | | | | | | |
Total trading liabilities | | 201 | | | 515 | | | — | | | — | | | 716 | |
Derivative liabilities: | | | | | | | | | | |
Interest rate | | 13 | | | 563 | | | — | | | (88) | | | 488 | |
| | | | | | | | | | |
| | | | | | | | | | |
Foreign exchange | | — | | | 2 | | | — | | | — | | | 2 | |
| | | | | | | | | | |
Total derivative liabilities | | 13 | | | 565 | | | — | | | (88) | | | 490 | |
Other payables - repurchase liabilities related to client-owned fractional shares | | 98 | | | — | | | — | | | — | | | 98 | |
Total liabilities at fair value on a recurring basis | | $ | 312 | | | $ | 1,080 | | | $ | — | | | $ | (88) | | | $ | 1,304 | |
(1)Our available-for-sale securities primarily consist of agency MBS, agency CMOs, and U.S. Treasury securities (“U.S. Treasuries”). See Note 4 for further information.
(2)These assets are primarily comprised of U.S. Treasuries 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”“Principal transactions” and gains/(losses) on other investments are reported in “Other”“Other” revenues on our Condensed Consolidated Statements of Income and Comprehensive Income.
| Three months ended March 31, 2023 Level 3 instruments at fair value | | Financial assets | | | | Financial liabilities |
| Trading assets | | | | | Other investments | | | | Derivative liabilities |
Three months ended December 31, 2023 Level 3 instruments at fair value | |
Three months ended December 31, 2023 Level 3 instruments at fair value | |
Three months ended December 31, 2023 Level 3 instruments at fair value | |
| | Financial assets | | | | Financial assets | | | | | | Financial liabilities |
| | Trading assets | | | | Trading assets | | | | | | | | Other investments | | | | | | Derivative liabilities |
$ in millions | $ in millions | | Other | | | | | All other | | | | Other | $ in millions | | Other | | | | | | | | All other | | | | | | Other |
Fair value beginning of period | Fair value beginning of period | | $ | 6 | | | | | | $ | 30 | | | | | $ | (4) | |
Total gains/(losses) included in earnings | Total gains/(losses) included in earnings | | — | | | | | | (2) | | | | | — | |
Purchases and contributions | Purchases and contributions | | 11 | | | | | | — | | | | | — | |
Sales and distributions | Sales and distributions | | (14) | | | | | | — | | | | | — | |
Transfers: | Transfers: | | | | | | | | | | | |
Into Level 3 | Into Level 3 | | — | | | | | | — | | | | | — | |
Into Level 3 | |
Into Level 3 | |
Out of Level 3 | Out of Level 3 | | — | | | | | | — | | | | | — | |
Fair value end of period | Fair value end of period | | $ | 3 | | | | | | $ | 28 | | | | | $ | (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) | | | | | $ | — | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Six months ended March 31, 2023 Level 3 instruments at fair value |
| | Financial assets | | | | | | Financial liabilities |
| | Trading assets | | | | | | | | Other investments | | | | | | Derivative liabilities |
$ in millions | | Other | | | | | | | | All other | | | | | | Other |
Fair value beginning of period | | $ | 1 | | | | | | | | | $ | 29 | | | | | | | $ | (3) | |
Total gains/(losses) included in earnings | | — | | | | | | | | | (1) | | | | | | | (1) | |
Purchases and contributions | | 36 | | | | | | | | | — | | | | | | | — | |
Sales and distributions | | (34) | | | | | | | | | — | | | | | | | — | |
Transfers: | | | | | | | | | | | | | | | | |
Into Level 3 | | — | | | | | | | | | — | | | | | | | — | |
Out of Level 3 | | — | | | | | | | | | — | | | | | | | — | |
Fair value end of period | | $ | 3 | | | | | | | | | $ | 28 | | | | | | | $ | (4) | |
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 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Three months ended December 31, 2022 Level 3 instruments at fair value |
| | Financial assets | | | | | | | | | Financial liabilities |
| | Trading assets | | | | | | | | Other investments | | | | | | | | | Derivative liabilities |
$ in millions | | Other | | | | | | | | All other | | | | | | | | | Other |
Fair value beginning of period | | $ | 1 | | | | | | | | | $ | 29 | | | | | | | | | | $ | (3) | |
Total gains/(losses) included in earnings | | — | | | | | | | | | 1 | | | | | | | | | | (1) | |
Purchases and contributions | | 25 | | | | | | | | | — | | | | | | | | | | — | |
Sales and distributions | | (20) | | | | | | | | | — | | | | | | | | | | — | |
Transfers: | | | | | | | | | | | | | | | | | | | |
Into Level 3 | | — | | | | | | | | | — | | | | | | | | | | — | |
Out of Level 3 | | — | | | | | | | | | — | | | | | | | | | | — | |
Fair value end of period | | $ | 6 | | | | | | | | | $ | 30 | | | | | | | | | | $ | (4) | |
Unrealized gains/(losses) for the period included in earnings for instruments held at the end of the reporting period | | $ | (1) | | | | | | | | | $ | 1 | | | | | | | | | | $ | (1) | |
Notes to Condensed Consolidated Financial Statements (Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Three months ended March 31, 2022 Level 3 instruments at fair value | | |
| | Financial assets | | | | | | Financial liabilities | | |
| | Trading assets | | | Derivative assets | | | | | Other investments | | | | | | Trading liabilities | | |
$ in millions | | Other | | | Other | | | | | All other | | | | | | Other | | |
Fair value beginning of period | | $ | 2 | | | | $ | 1 | | | | | | $ | 98 | | | | | | | $ | — | | | |
Total gains/(losses) included in earnings | | — | | | | (1) | | | | | | — | | | | | | | (1) | | | |
Purchases and contributions | | 29 | | | | — | | | | | | 7 | | | | | | | — | | | |
Sales, distributions, and deconsolidations | | (18) | | | | — | | | | | | (40) | | | | | | | — | | | |
Transfers: | | | | | | | | | | | | | | | | | | |
Into Level 3 | | — | | | | — | | | | | | — | | | | | | | — | | | |
Out of Level 3 | | — | | | | — | | | | | | (12) | | | | | | | — | | | |
Fair value end of period | | $ | 13 | | | | $ | — | | | | | | $ | 53 | | | | | | | $ | (1) | | | |
Unrealized gains/(losses) for the period included in earnings for instruments held at the end of the reporting period | | $ | (1) | | | | $ | (1) | | | | | | $ | — | | | | | | | $ | (1) | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Six months ended March 31, 2022 Level 3 instruments at fair value |
| | Financial assets | | | Financial liabilities |
| | Trading assets | | | | | | | | Other investments | | | Trading liabilities | | | Derivative liabilities |
$ in millions | | Other | | | | | | | | All other | | | Other | | | Other |
Fair value beginning of period | | $ | 14 | | | | | | | | | $ | 98 | | | | $ | — | | | | $ | (1) | |
Total gains/(losses) included in earnings | | 2 | | | | | | | | | — | | | | (1) | | | | 1 | |
Purchases and contributions | | 54 | | | | | | | | | 7 | | | | — | | | | — | |
Sales, distributions, and deconsolidations | | (57) | | | | | | | | | (40) | | | | — | | | | — | |
Transfers: | | | | | | | | | | | | | | | | |
Into Level 3 | | — | | | | | | | | | — | | | | — | | | | — | |
Out of Level 3 | | — | | | | | | | | | (12) | | | | — | | | | — | |
Fair value end of period | | $ | 13 | | | | | | | | | $ | 53 | | | | $ | (1) | | | | $ | — | |
Unrealized gains/(losses) for the period included in earnings for instruments held at the end of the reporting period | | $ | (1) | | | | | | | | | $ | — | | | | $ | (1) | | | | $ | — | |
| | | | | | | | | | | | | | | | |
As of both MarchDecember 31, 2023 and September 30, 2022,2023, 14% of our assets and 2% of our liabilities were measured at fair value on a recurring basisbasis. As of both December 31, 2023 and September 30, 2023, 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 20222023 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 MarchDecember 31, 2023 primarily included investments in third-party funds, including 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 | $ in millions | | Recorded value | | Unfunded commitment | $ in millions | | Recorded value | | Unfunded commitment |
March 31, 2023 | | | | |
December 31, 2023 | |
Private equity investments measured at NAV | |
Private equity investments measured at NAV | |
Private equity investments measured at NAV | Private equity investments measured at NAV | | $ | 99 | | | $ | 35 | |
Private equity investments not measured at NAV | Private equity investments not measured at NAV | | 5 | | |
Total private equity investments | Total private equity investments | | $ | 104 | | |
Total private equity investments | |
Total private equity investments | |
| September 30, 2022 | |
September 30, 2023 | |
| September 30, 2023 | |
| September 30, 2023 | |
Private equity investments measured at NAV | |
Private equity investments measured at NAV | |
Private equity investments measured at NAV | Private equity investments measured at NAV | | $ | 90 | | | $ | 39 | |
Private equity investments not measured at NAV | Private equity investments not measured at NAV | | 5 | | |
Total private equity investments | Total private equity investments | | $ | 95 | | |
Total private equity investments | |
Total private equity investments | |
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) |
March 31, 2023 | | | | | | | | | | | | | |
$ in millions | |
$ in millions | | | | | Level 2 | | Level 3 | | Total fair value | | Valuation technique(s) | | Unobservable input | | Range (weighted-average) |
December 31, 2023 | |
Bank loans: | Bank loans: | | | |
Bank loans: | |
Bank loans: | |
Residential mortgage loans | |
Residential mortgage loans | |
Residential mortgage loans | Residential mortgage loans | | | $ | 2 | | | $ | 9 | | | $ | 11 | | | Collateral or discounted cash flow (1) | | Prepayment rate | | 7 yrs. - 12 yrs. (10.3 yrs.) | | | | $ | 2 | | | $ | | $ | 8 | | | $ | | $ | 10 | | | Collateral or discounted cash flow (1) | | Collateral or discounted cash flow (1) | | Prepayment rate | | 7 yrs. - 12 yrs. (10.3 yrs.) |
Corporate loans | Corporate loans | | | $ | — | | | $ | 76 | | | $ | 76 | | | Collateral or discounted cash flow (1) | | Recovery rate | | 44% - 80% (63%) | Corporate loans | | | | $ | — | | | $ | | $ | 104 | | | $ | | $ | 104 | | | Collateral or discounted cash flow (1) | | Collateral or discounted cash flow (1) | | Recovery rate | | 3% - 63% (49%) |
Loans held for sale | Loans held for sale | | | $ | 93 | | | $ | — | | | $ | 93 | | | N/A | | N/A | | N/A | Loans held for sale | | | | $ | 30 | | | $ | | $ | — | | | $ | | $ | 30 | | | N/A | | N/A |
| | September 30, 2022 | | | |
September 30, 2023 | |
| September 30, 2023 | |
| September 30, 2023 | |
Bank loans: | Bank loans: | | | |
Bank loans: | |
Bank loans: | |
Residential mortgage loans | |
Residential mortgage loans | |
Residential mortgage loans | Residential mortgage loans | | | $ | 2 | | | $ | 10 | | | $ | 12 | | | Collateral or discounted cash flow (1) | | Prepayment rate | | 7 yrs. - 12 yrs. (10.4 yrs.) | | | | $ | 2 | | | $ | | $ | 8 | | | $ | | $ | 10 | | | Collateral or discounted cash flow (1) | | Collateral or discounted cash flow (1) | | Prepayment rate | | 7 yrs. - 12 yrs. (10.3 yrs.) |
Corporate loans | Corporate loans | | | $ | — | | | $ | 57 | | | $ | 57 | | | Collateral or discounted cash flow (1) | | Recovery rate | | 24% - 66% (47%) | Corporate loans | | | | $ | — | | | $ | | $ | 84 | | | $ | | $ | 84 | | | Collateral or discounted cash flow (1) | | Collateral or discounted cash flow (1) | | Recovery rate | | 22% - 65% (53%) |
Loans held for sale | Loans held for sale | | | $ | 3 | | | $ | — | | | $ | 3 | | | N/A | | N/A | | N/A | Loans held for sale | | | | $ | 2 | | | $ | | $ | — | | | $ | | $ | 2 | | | 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 MarchDecember 31, 2023 and September 30, 2022.2023. This table excludes financial instruments that are carried at amounts which approximate fair value. Refer toSee Note 4 of our 20222023 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 |
March 31, 2023 | | | | | | | | | |
$ in millions | |
$ in millions | | | | | Level 2 | | Level 3 | | Total estimated fair value | | Carrying amount |
December 31, 2023 | |
Financial assets: | |
Financial assets: | |
Financial assets: | Financial assets: | | | | | | | | | | | | | | | |
Bank loans, net | Bank loans, net | | | $ | 26 | | | $ | 42,926 | | | $ | 42,952 | | | $ | 43,503 | |
Financial liabilities: | Financial liabilities: | | | | | |
Bank deposits - certificates of deposit | Bank deposits - certificates of deposit | | | $ | 2,643 | | | $ | — | | | $ | 2,643 | | | $ | 2,656 | |
Bank deposits - certificates of deposit | |
Bank deposits - certificates of deposit | |
Other borrowings - subordinated notes payable | Other borrowings - subordinated notes payable | | | $ | 92 | | | $ | — | | | $ | 92 | | | $ | 100 | |
Senior notes payable | Senior notes payable | | | $ | 1,779 | | | $ | — | | | $ | 1,779 | | | $ | 2,038 | |
| September 30, 2022 | | | |
September 30, 2023 | |
September 30, 2023 | |
September 30, 2023 | |
Financial assets: | Financial assets: | | | |
Financial assets: | |
Financial assets: | |
Bank loans, net | |
Bank loans, net | |
Bank loans, net | Bank loans, net | | | $ | 134 | | | $ | 42,336 | | | $ | 42,470 | | | $ | 43,167 | |
Financial liabilities: | Financial liabilities: | | | | | |
Bank deposits - certificates of deposit | Bank deposits - certificates of deposit | | | $ | 400 | | | $ | 579 | | | $ | 979 | | | $ | 999 | |
Bank deposits - certificates of deposit | |
Bank deposits - certificates of deposit | |
Other borrowings - subordinated notes payable | Other borrowings - subordinated notes payable | | | $ | 95 | | | $ | — | | | $ | 95 | | | $ | 100 | |
Senior notes payable | Senior notes payable | | | $ | 1,706 | | | $ | — | | | $ | 1,706 | | | $ | 2,038 | |
| | | | | | | | |
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements (Unaudited) | |
NOTE 4 – AVAILABLE-FOR-SALE SECURITIES
Refer toSee Note 2 of our 20222023 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 |
March 31, 2023 | | | | | | | | |
December 31, 2023 | | December 31, 2023 | | |
Agency residential MBS | Agency residential MBS | | $ | 5,272 | | | $ | 1 | | | $ | (520) | | | $ | 4,753 | |
Agency commercial MBS | Agency commercial MBS | | 1,477 | | | — | | | (178) | | | 1,299 | |
Agency CMOs | Agency CMOs | | 1,545 | | | — | | | (218) | | | 1,327 | |
Other agency obligations | Other agency obligations | | 760 | | | — | | | (23) | | | 737 | |
Non-agency residential MBS | Non-agency residential MBS | | 518 | | | — | | | (39) | | | 479 | |
U.S. Treasuries | U.S. Treasuries | | 1,043 | | | — | | | (22) | | | 1,021 | |
Corporate bonds | Corporate bonds | | 145 | | | — | | | (5) | | | 140 | |
Other | Other | | 17 | | | — | | | — | | | 17 | |
Total available-for-sale securities | Total available-for-sale securities | | $ | 10,777 | | | $ | 1 | | | $ | (1,005) | | | $ | 9,773 | |
| September 30, 2022 | | | | | | | | |
September 30, 2023 | |
September 30, 2023 | |
September 30, 2023 | | | |
Agency residential MBS | Agency residential MBS | | $ | 5,662 | | | $ | — | | | $ | (668) | | | $ | 4,994 | |
Agency commercial MBS | Agency commercial MBS | | 1,518 | | | — | | | (208) | | | 1,310 | |
Agency CMOs | 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 | | 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 | | $ | 11,100 | | | $ | — | | | $ | (1,215) | | | $ | 9,885 | |
The amortized costs and fair values in the preceding table exclude $25$29 million and $24$28 million of accrued interest on available-for-sale securities as of MarchDecember 31, 2023 and September 30, 2022,2023, respectively, which was included in “Other“Other receivables, net”net” on our Condensed Consolidated Statements of Financial Condition.
See Note 6 for more information regarding available-for-sale securities pledged with the Federal Home Loan Bank (“FHLB”) and Federal Reserve Bank of Atlanta (“FRB”).
| | | | | | | | |
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements (Unaudited) | |
The following table details the contractual maturities, amortized costs, carryingfair 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 March 31, 2023, the weighted-average life of our available-for-sale securities portfolio, after factoring in estimated prepayments, was approximately 4.38 years.4.0 years as of December 31, 2023.
| | | | March 31, 2023 | | | December 31, 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 | | $ | — | | | $ | 138 | | | $ | 2,332 | | | $ | 2,802 | | | $ | 5,272 | |
Carrying value | | $ | — | | | $ | 134 | | | $ | 2,120 | | | $ | 2,499 | | | $ | 4,753 | |
Fair value | |
Weighted-average yield | Weighted-average yield | | — | % | | 2.47 | % | | 1.30 | % | | 1.90 | % | | 1.65 | % | Weighted-average yield | | 2.11 | % | | 2.53 | % | | 1.31 | % | | 1.95 | % | | 1.68 | % |
Agency commercial MBS | Agency commercial MBS | |
Amortized cost | Amortized cost | | $ | — | | | $ | 876 | | | $ | 550 | | | $ | 51 | | | $ | 1,477 | |
Carrying value | | $ | — | | | $ | 797 | | | $ | 459 | | | $ | 43 | | | $ | 1,299 | |
Amortized cost | |
Amortized cost | |
Fair value | |
Weighted-average yield | Weighted-average yield | | — | % | | 1.63 | % | | 1.25 | % | | 1.87 | % | | 1.50 | % | Weighted-average yield | | 3.45 | % | | 1.60 | % | | 1.20 | % | | 1.87 | % | | 1.51 | % |
Agency CMOs | Agency CMOs | | | Agency CMOs | | | | | | | | | | |
Amortized cost | Amortized cost | | $ | — | | | $ | 11 | | | $ | 41 | | | $ | 1,493 | | | $ | 1,545 | |
Carrying value | | $ | — | | | $ | 10 | | | $ | 37 | | | $ | 1,280 | | | $ | 1,327 | |
Fair value | |
Weighted-average yield | Weighted-average yield | | — | % | | 2.28 | % | | 1.51 | % | | 1.61 | % | | 1.61 | % | Weighted-average yield | | — | % | | 2.39 | % | | 1.52 | % | | 1.58 | % | | 1.58 | % |
Other agency obligations | Other agency obligations | |
Amortized cost | Amortized cost | | $ | 35 | | | $ | 609 | | | $ | 105 | | | $ | 11 | | | $ | 760 | |
Carrying value | | $ | 34 | | | $ | 594 | | | $ | 99 | | | $ | 10 | | | $ | 737 | |
Amortized cost | |
Amortized cost | |
Fair value | |
Weighted-average yield | Weighted-average yield | | 2.16 | % | | 3.42 | % | | 3.58 | % | | 3.07 | % | | 3.38 | % | Weighted-average yield | | 2.08 | % | | 3.26 | % | | 3.43 | % | | 3.07 | % | | 3.15 | % |
Non-agency residential MBS | Non-agency residential MBS | |
Amortized cost | Amortized cost | | $ | — | | | $ | — | | | $ | — | | | $ | 518 | | | $ | 518 | |
Carrying value | | $ | — | | | $ | — | | | $ | — | | | $ | 479 | | | $ | 479 | |
Amortized cost | |
Amortized cost | |
Fair value | |
Weighted-average yield | Weighted-average yield | | — | % | | — | % | | — | % | | 4.13 | % | | 4.13 | % | Weighted-average yield | | — | % | | — | % | | — | % | | 4.33 | % | | 4.33 | % |
U.S. Treasuries | U.S. Treasuries | |
Amortized cost | Amortized cost | | $ | 191 | | | $ | 852 | | | $ | — | | | $ | — | | | $ | 1,043 | |
Carrying value | | $ | 188 | | | $ | 833 | | | $ | — | | | $ | — | | | $ | 1,021 | |
Amortized cost | |
Amortized cost | |
Fair value | |
Weighted-average yield | Weighted-average yield | | 2.28 | % | | 2.78 | % | | — | % | | — | % | | 2.69 | % | Weighted-average yield | | 2.67 | % | | 4.64 | % | | — | % | | — | % | | 3.25 | % |
Corporate bonds | Corporate bonds | |
Amortized cost | Amortized cost | | $ | 1 | | | $ | 116 | | | $ | 28 | | | $ | — | | | $ | 145 | |
Carrying value | | $ | 1 | | | $ | 112 | | | $ | 27 | | | $ | — | | | $ | 140 | |
Amortized cost | |
Amortized cost | |
Fair value | |
Weighted-average yield | Weighted-average yield | | 2.88 | % | | 5.80 | % | | 4.95 | % | | — | % | | 5.61 | % | Weighted-average yield | | 4.73 | % | | 5.58 | % | | 5.02 | % | | — | % | | 5.30 | % |
Other | Other | |
Amortized cost | Amortized cost | | $ | — | | | $ | 5 | | | $ | 5 | | | $ | 7 | | | $ | 17 | |
Carrying value | | $ | — | | | $ | 5 | | | $ | 4 | | | $ | 8 | | | $ | 17 | |
Amortized cost | |
Amortized cost | |
Fair value | |
Weighted-average yield | Weighted-average yield | | — | % | | 6.66 | % | | 5.23 | % | | 7.47 | % | | 6.67 | % | Weighted-average yield | | — | % | | 7.39 | % | | 5.22 | % | | 8.32 | % | | 7.26 | % |
Total available-for-sale securities | Total available-for-sale securities | |
Amortized cost | Amortized cost | | $ | 227 | | | $ | 2,607 | | | $ | 3,061 | | | $ | 4,882 | | | $ | 10,777 | |
Carrying value | | $ | 223 | | | $ | 2,485 | | | $ | 2,746 | | | $ | 4,319 | | | $ | 9,773 | |
Amortized cost | |
Amortized cost | |
Fair value | |
Weighted-average yield | Weighted-average yield | | 2.27 | % | | 2.66 | % | | 1.42 | % | | 2.06 | % | | 2.03 | % | Weighted-average yield | | 2.70 | % | | 2.79 | % | | 1.39 | % | | 2.14 | % | | 2.13 | % |
| | | | | | | | |
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 | | Fair value | | Unrealized losses | | Fair value | | Unrealized losses | | Fair value | | Unrealized losses |
March 31, 2023 | | | | | | | | | | | | |
December 31, 2023 | |
Agency residential MBS | |
Agency residential MBS | |
Agency residential MBS | Agency residential MBS | | $ | 673 | | | $ | (40) | | | $ | 4,018 | | | $ | (480) | | | $ | 4,691 | | | $ | (520) | |
Agency commercial MBS | Agency commercial MBS | | 145 | | | (4) | | | 1,154 | | | (174) | | | 1,299 | | | (178) | |
Agency CMOs | Agency CMOs | | 40 | | | (1) | | | 1,287 | | | (217) | | | 1,327 | | | (218) | |
Other agency obligations | Other agency obligations | | 386 | | | (11) | | | 301 | | | (12) | | | 687 | | | (23) | |
Non-agency residential MBS | Non-agency residential MBS | | 469 | | | (39) | | | — | | | — | | | 469 | | | (39) | |
U.S. Treasuries | U.S. Treasuries | | 749 | | | (16) | | | 247 | | | (6) | | | 996 | | | (22) | |
Corporate bonds | Corporate bonds | | 125 | | | (5) | | | — | | | — | | | 125 | | | (5) | |
Other | Other | | 13 | | | — | | | — | | | — | | | 13 | | | — | |
Total | Total | | $ | 2,600 | | | $ | (116) | | | $ | 7,007 | | | $ | (889) | | | $ | 9,607 | | | $ | (1,005) | |
September 30, 2022 | | | | | | | | | | | | |
| September 30, 2023 | |
September 30, 2023 | |
September 30, 2023 | |
Agency residential MBS | |
Agency residential MBS | |
Agency residential MBS | Agency residential MBS | | $ | 2,165 | | | $ | (226) | | | $ | 2,829 | | | $ | (442) | | | $ | 4,994 | | | $ | (668) | |
Agency commercial MBS | Agency commercial MBS | | 494 | | | (41) | | | 816 | | | (167) | | | 1,310 | | | (208) | |
Agency CMOs | 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 | | 982 | | | (28) | | | 4 | | | — | | | 986 | | | (28) | |
Corporate bonds | Corporate bonds | | 128 | | | (5) | | | — | | | — | | | 128 | | | (5) | |
Other | Other | | 17 | | | (1) | | | — | | | — | | | 17 | | | (1) | |
Total | Total | | $ | 5,156 | | | $ | (405) | | | $ | 4,716 | | | $ | (810) | | | $ | 9,872 | | | $ | (1,215) | |
At MarchDecember 31, 2023, of the 1,0721,066 available-for-sale securities in an unrealized loss position, 39536 were in a continuous unrealized loss position for less than 12 months and 6771,030 securities were in a continuous unrealized loss position for greater than 12 months.
At MarchDecember 31, 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 $5.07$4.60 billion and $3.05$2.77 billion, respectively, and fair values of $4.52$4.11 billion and $2.70$2.45 billion, respectively.
During the three and six months ended MarchDecember 31, 2023 and March 31, 2022, there were no sales of available-for-sale securities.
| | | | | | | | |
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements (Unaudited) | |
NOTE 5 – 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 20222023 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.
| | March 31, 2023 | | September 30, 2022 |
| | December 31, 2023 | | | | December 31, 2023 | | September 30, 2023 |
$ 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 | | | | | | | | | | | | |
Interest rate - other (1) | | $ | 353 | | | $ | 407 | | | $ | 16,404 | | | $ | 462 | | | $ | 535 | | | $ | 14,647 | |
Interest rate - matched book | | 8 | | | 8 | | | 170 | | | 52 | | | 52 | | | 1,340 | |
Interest rate (1) | |
Interest rate (1) | |
Interest rate (1) | |
| Foreign exchange | |
Foreign exchange | |
Foreign exchange | Foreign exchange | | — | | | 4 | | | 1,128 | | | 4 | | | 5 | | | 958 | |
Other | Other | | — | | | 4 | | | 582 | | | — | | | 3 | | | 531 | |
Subtotal | Subtotal | | 361 | | | 423 | | | 18,284 | | | 518 | | | 595 | | | 17,476 | |
Derivatives designated as hedging instruments | Derivatives designated as hedging instruments | | | | | | | | | | | | |
Interest rate - other (2) | | 9 | | | 1 | | | 1,300 | | | 12 | | | — | | | 1,050 | |
Interest rate | |
Interest rate | |
Interest rate | |
Foreign exchange | Foreign exchange | | — | | | 5 | | | 1,149 | | | 6 | | | — | | | 1,092 | |
Subtotal | Subtotal | | 9 | | | 6 | | | 2,449 | | | 18 | | | — | | | 2,142 | |
Total gross fair value/notional amount | Total gross fair value/notional amount | | 370 | | | 429 | | | $ | 20,733 | | | 536 | | | 595 | | | $ | 19,618 | |
Offset on the Condensed Consolidated Statements of Financial Condition | Offset on the Condensed Consolidated Statements of Financial Condition | | | | | | | | | | | | |
Counterparty netting | Counterparty netting | | (36) | | | (36) | | | (35) | | | (35) | | |
Counterparty netting | |
Counterparty netting | |
Cash collateral netting | |
Cash collateral netting | |
Cash collateral netting | Cash collateral netting | | (243) | | | (42) | | | (313) | | | (30) | | |
Total amounts offset | Total amounts offset | | (279) | | | (78) | | | (348) | | | (65) | | |
Total amounts offset | |
Total amounts offset | |
Net amounts presented on the Condensed Consolidated Statements of Financial Condition | |
Net amounts presented on the Condensed Consolidated Statements of Financial Condition | |
Net amounts presented on the Condensed Consolidated Statements of Financial Condition | Net amounts presented on the Condensed Consolidated Statements of Financial Condition | | $ | 91 | | | $ | 351 | | | $ | 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 | | | | | | | | | |
Financial instruments (3) | | (14) | | | (8) | | | (60) | | | (52) | | |
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 | |
Financial instruments | |
Financial instruments | |
Total | Total | | $ | 77 | | | $ | 343 | | | $ | 128 | | | $ | 478 | | |
Total | |
Total | |
(1) Relates to interest rate derivatives entered into as part of our fixed income business operations, includingIncluded to-be-announced security contracts that are accounted for as derivatives, as well as our banking operations.
(2) During the six months ended March 31, 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.
(3) Although the matched book derivative arrangements do not meet the definition of a master netting arrangement as specified by GAAP, the agreement with the third-party intermediary includes terms that are similar to a master netting agreement. As a result, we present the matched book amounts net in the preceding table.
derivatives.
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
The following table details the gains/(losses)losses included in accumulated other comprehensive income/(loss)loss (“AOCI”), net of income taxes, on derivatives designated as hedging instruments. These gains/(losses)losses included any amounts reclassified from AOCI to net income during the period. See Note 1716 for additional information.
| | |
| | | | Three months ended March 31, | | Six months ended March 31, |
$ in millions | $ in millions | | 2023 | | 2022 | | 2023 | | 2022 |
$ in millions | |
$ in millions | |
Interest rate (cash flow hedges) | |
Interest rate (cash flow hedges) | |
Interest rate (cash flow hedges) | Interest rate (cash flow hedges) | | $ | (11) | | | $ | 29 | | | $ | (13) | | | $ | 38 | |
Foreign exchange (net investment hedges) | Foreign exchange (net investment hedges) | | (3) | | | (9) | | | (17) | | | (10) | |
Total gains/(losses) included in AOCI, net of taxes | | $ | (14) | | | $ | 20 | | | $ | (30) | | | $ | 28 | |
Foreign exchange (net investment hedges) | |
Foreign exchange (net investment hedges) | |
Total losses included in AOCI, net of taxes | |
Total losses included in AOCI, net of taxes | |
Total losses included in AOCI, net of taxes | |
There were no components of derivative gains or losses excluded from the assessment of hedge effectiveness for each of the three and six months ended MarchDecember 31, 2023 and 2022. We expect to reclassify $29$27 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 March 31, | | Six months ended March 31, |
| Location of gain/(loss) | | 2023 | | 2022 | | 2023 | | 2022 |
$ in millions | |
| | Location of gain/(loss) | |
| Location of gain/(loss) | |
Interest rate | |
Interest rate | |
Interest rate | Interest rate | | Principal transactions/other revenues | | $ | 5 | | | $ | 7 | | | $ | 11 | | | $ | 10 | |
Foreign exchange | Foreign exchange | | Other revenues | | $ | (6) | | | $ | (2) | | | $ | (36) | | | $ | (3) | |
Foreign exchange | |
Foreign exchange | |
Other | |
Other | |
Other | Other | | Principal transactions | | $ | — | | | $ | (2) | | | $ | (1) | | | $ | 1 | |
|
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 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, typically interest rate derivatives, to which Raymond James Bank and TriState Capital Bankeither of our bank subsidiaries have provided loans. Such derivatives are generally collateralized by marketable securities or other assets of the client.
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 sensitivity-based and foreign exchange spot 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 $7$6 million as of MarchDecember 31, 2023 and $8$3 million as of September 30, 2022.2023.
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RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements (Unaudited) | |
NOTE 6 – 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 20222023 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 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 |
March 31, 2023 | | | | | | | | | | | | |
December 31, 2023 | |
Gross amounts of recognized assets/liabilities | |
Gross amounts of recognized assets/liabilities | |
Gross amounts of recognized assets/liabilities | Gross amounts of recognized assets/liabilities | | $ | 167 | | | $ | 212 | | | $ | 379 | | | $ | 150 | | | $ | 177 | | | $ | 327 | |
Gross amounts offset on the Condensed Consolidated Statements of Financial Condition | Gross amounts offset on the Condensed Consolidated Statements of Financial Condition | | — | | | — | | | — | | | — | | | — | | | — | |
Net amounts included in the Condensed Consolidated Statements of Financial Condition | Net amounts included in the Condensed Consolidated Statements of Financial Condition | | 167 | | | 212 | | | 379 | | | 150 | | | 177 | | | 327 | |
Gross amounts not offset on the Condensed Consolidated Statements of Financial Condition | Gross amounts not offset on the Condensed Consolidated Statements of Financial Condition | | (167) | | | (211) | | | (378) | | | (150) | | | (173) | | | (323) | |
Net amounts | Net amounts | | $ | — | | | $ | 1 | | | $ | 1 | | | $ | — | | | $ | 4 | | | $ | 4 | |
September 30, 2022 | | | | | | | | | | | | |
| September 30, 2023 | |
September 30, 2023 | |
September 30, 2023 | |
Gross amounts of recognized assets/liabilities | |
Gross amounts of recognized assets/liabilities | |
Gross amounts of recognized assets/liabilities | 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 | | — | | | — | | | — | | | — | | | — | | | — | |
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 | | (367) | | | (327) | | | (694) | | | (294) | | | (162) | | | (456) | |
Net amounts | 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 |
March 31, 2023 | | | | | | | | | | |
December 31, 2023 | |
Repurchase agreements: | Repurchase agreements: | |
Repurchase agreements: | |
Repurchase agreements: | |
Government and agency obligations | |
Government and agency obligations | |
Government and agency obligations | Government and agency obligations | | $ | 115 | | | $ | — | | | $ | — | | | $ | — | | | $ | 115 | |
Agency MBS and agency CMOs | Agency MBS and agency CMOs | | 35 | | | — | | | — | | | — | | | 35 | |
Total repurchase agreements | Total repurchase agreements | | 150 | | | — | | | — | | | — | | | 150 | |
Securities loaned: | Securities loaned: | | | | | | | | | | |
Equity securities | Equity securities | | 177 | | | — | | | — | | | — | | | 177 | |
Equity securities | |
Equity securities | |
Total collateralized financings | Total collateralized financings | | $ | 327 | |
| $ | — | |
| $ | — | |
| $ | — | |
| $ | 327 | |
September 30, 2022 | | | | | | | | | | |
| September 30, 2023 | |
September 30, 2023 | |
September 30, 2023 | |
Repurchase agreements: | Repurchase agreements: | |
Repurchase agreements: | |
Repurchase agreements: | |
Government and agency obligations | |
Government and agency obligations | |
Government and agency obligations | Government and agency obligations | | $ | 183 | | | $ | — | | | $ | — | | | $ | — | | | $ | 183 | |
Agency MBS and agency CMOs | Agency MBS and agency CMOs | | 111 | | | — | | | — | | | — | | | 111 | |
Total repurchase agreements | Total repurchase agreements | | 294 | | | — | | | — | | | — | | | 294 | |
Securities loaned: | Securities loaned: | | | | | | | | | | |
Equity securities | Equity securities | | 172 | | | — | | | — | | | — | | | 172 | |
Equity securities | |
Equity securities | |
Total collateralized financings | 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 | | March 31, 2023 | | September 30, 2022 | $ in millions | | December 31, 2023 | | September 30, 2023 |
Collateral we received that was available to be delivered or repledged | Collateral we received that was available to be delivered or repledged | | $ | 2,993 | | | $ | 3,812 | |
Collateral that we delivered or repledged | Collateral that we delivered or repledged | | $ | 766 | | | $ | 947 | |
| | | | | | | | |
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements (Unaudited) | |
Encumbered assets
We pledge certain of our assets, primarily trading assets, to collateralize repurchase agreements or other secured borrowings, maintain lines of credit, to maintain our ability to hold certain deposits, 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 quarter ended March 31, 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 14.13.
The following table presents information about our assets that have been pledged for one of the purposes previously described.
| | | | | | | | | | | | | | |
$ in millions | | March 31, 2023 | | September 30, 2022 |
Had the right to deliver or repledge | | $ | 982 | | | $ | 1,276 | |
Did not have the right to deliver or repledge | | $ | 4,753 | | | $ | 63 | |
Bank loans, net pledged with the: | | | | |
FHLB | | $ | 8,768 | | | $ | 8,009 | |
FRB | | 793 | | | 791 | |
Total bank loans, net pledged with the FHLB and FRB | | $ | 9,561 | | | $ | 8,800 | |
| | | | | | | | | | | | | | |
$ in millions | | December 31, 2023 | | September 30, 2023 |
Had the right to deliver or repledge | | $ | 1,046 | | | $ | 1,091 | |
Did not have the right to deliver or repledge | | $ | 64 | | | $ | 63 | |
| | | | |
Assets pledged with the FHLB and FRB: | | | | |
Available-for-sale securities | | $ | 3,947 | | | $ | 3,897 | |
Bank loans | | 10,396 | | | 10,166 | |
Total assets pledged with the FHLB and FRB | | $ | 14,343 | | | $ | 14,063 | |
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RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements (Unaudited) | |
NOTE 7 – BANK LOANS, NET
Bank client receivables are comprised of loans originated or purchased by our Bank segment and include securities-based loans (“SBL”), corporate loans (commercial and industrial (“C&I”) loans, commercial real estate (“CRE”) loans, and real estate investment trust (“REIT”) loans), residential mortgage loans, and tax-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, CRE, REIT, residential mortgage, and tax-exempt. See Note 2 of our 20222023 Form 10-K for a discussion of 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 unamortized purchase discounts or premiums, unearned income, and 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 (“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 acquisition date, and as described further in Note 3 of our 20222023 Form 10-K, the purchase discount on such loans is accreted to interest income over the weighted-average life of the underlying loans, which may vary based on prepayments.
The following table presents the balances for held for investment loans by portfolio segment and held for sale loans.
| $ in millions | $ in millions | | March 31, 2023 | | September 30, 2022 | $ in millions | | December 31, 2023 | | September 30, 2023 |
SBL | SBL | | $ | 14,227 | | | $ | 15,297 | |
C&I loans | C&I loans | | 11,259 | | | 11,173 | |
CRE loans | CRE loans | | 7,054 | | | 6,549 | |
REIT loans | REIT loans | | 1,717 | | | 1,592 | |
Residential mortgage loans | Residential mortgage loans | | 8,079 | | | 7,386 | |
Tax-exempt loans | Tax-exempt loans | | 1,643 | | | 1,501 | |
Total loans held for investment | Total loans held for investment | | 43,979 | | | 43,498 | |
Held for sale loans | Held for sale loans | | 119 | | | 137 | |
Total loans held for sale and investment | Total loans held for sale and investment | | 44,098 | | | 43,635 | |
Allowance for credit losses | Allowance for credit losses | | (415) | | | (396) | |
Bank loans, net (1) | Bank loans, net (1) | | $ | 43,683 | | | $ | 43,239 | |
| ACL as a % of total loans held for investment | ACL as a % of total loans held for investment | | 0.94 | % | | 0.91 | % |
ACL as a % of total loans held for investment | |
ACL as a % of total loans held for investment | | | 1.08 | % | | 1.07 | % |
Accrued interest receivable on bank loans (included in “Other receivables, net”) | Accrued interest receivable on bank loans (included in “Other receivables, net”) | | $ | 192 | | | $ | 137 | |
(1)Bank loans, net as of MarchDecember 31, 2023 and September 30, 20222023 are presented net of $89$37 million and $112$52 million, respectively, of net unamortized discount, unearned income, and deferred loan fees and costs. The net unamortized discount primarily arose from the acquisition date fair value purchase discount on bank loans acquired in the TriState Capital Holdings, Inc. acquisition. See Note 3 of our 20222023 Form 10-K for furtheradditional information.
See Note 6 for moreadditional information regarding bank loans net pledged with the FHLB and FRB and Note 1413 for moreadditional information regarding borrowings from the FHLB.
Held for sale loans
We originated or purchased $624$441 million and $1.43 billion$802 million of loans held for sale during the three and six months ended MarchDecember 31, 2023 respectively, and $999 million and $1.97 billion during the three and six months ended March 31, 2022, respectively. The majority of these loans were purchases of the guaranteed portions of Small Business Administration (“SBA”) loans that were initially classified as loans held for sale upon purchase and subsequently transferred to trading instruments once they had been securitized into pools. Proceeds from the sales of these loans held for sale and not securitized amounted to $155$102 million and $353$198 million during the three and six months ended MarchDecember 31, 2023 respectively, and $339 million and $677 million during the three and six months ended March 31, 2022, respectively. Net gains resulting from such sales were insignificant for each of the three and six months ended MarchDecember 31, 2023 and 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.
| $ in millions | $ in millions | | C&I loans | | CRE loans | | REIT loans | | | Residential mortgage loans | | | Total |
Three months ended March 31, 2023 | | | | | | | | | | | | |
$ in millions | |
$ in millions | | | | | C&I loans | | CRE loans | | REIT loans | | | | Residential mortgage loans | | Total |
Three months ended December 31, 2023 | |
Purchases | |
Purchases | |
Purchases | Purchases | | $ | 194 | | | $ | — | | | $ | — | | | | $ | 110 | | | | $ | 304 | |
Sales | Sales | | $ | 147 | | | $ | — | | | $ | — | | | | $ | — | | | | $ | 147 | |
Six months ended March 31, 2023 | | | | | |
| Three months ended December 31, 2022 | |
| Three months ended December 31, 2022 | |
| Three months ended December 31, 2022 | |
Purchases | |
Purchases | |
Purchases | Purchases | | $ | 357 | | | $ | 39 | | | $ | 24 | | | | $ | 300 | | | | $ | 720 | |
Sales | Sales | | $ | 147 | | | $ | — | | | $ | — | | | | $ | — | | | | $ | 147 | |
Three months ended March 31, 2022 | | | | | |
Purchases | | $ | 441 | | | $ | — | | | $ | — | | | | $ | 223 | | | | $ | 664 | |
Sales | | $ | 61 | | | $ | — | | | $ | — | | | | $ | — | | | | $ | 61 | |
Six months ended March 31, 2022 | | | | | |
Purchases | | $ | 780 | | | $ | — | | | $ | — | | | | $ | 407 | | | | $ | 1,187 | |
Sales | | $ | 112 | | | $ | — | | | $ | — | | | | $ | — | | | | $ | 112 | |
|
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 20222023 Form 10-K, corporate loan sales generally occur as part of our credit management activities.
Aging analysis ofPast due, nonaccrual, and modified loans held for investment
The following table presents information on delinquency status of our loans held for investment.
| $ in millions | $ 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 | $ 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 |
March 31, 2023 | | | | | | | | | | | | | | |
December 31, 2023 | | December 31, 2023 | | | | | | | | |
SBL | SBL | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 14,227 | | | $ | 14,227 | |
C&I loans | C&I loans | | — | | | — | | | — | | | 32 | | | — | | | 11,227 | | | 11,259 | |
CRE loans | CRE loans | | — | | | — | | | — | | | 34 | | | 18 | | | 7,002 | | | 7,054 | |
REIT loans | REIT loans | | — | | | — | | | — | | | — | | | — | | | 1,717 | | | 1,717 | |
Residential mortgage loans | Residential mortgage loans | | 4 | | | — | | | 4 | | | — | | | 15 | | | 8,060 | | | 8,079 | |
Tax-exempt loans | Tax-exempt loans | | — | | | — | | | — | | | — | | | — | | | 1,643 | | | 1,643 | |
Total loans held for investment | Total loans held for investment | | $ | 4 | | | $ | — | | | $ | 4 | | | $ | 66 | | | $ | 33 | | | $ | 43,876 | | | $ | 43,979 | |
| September 30, 2022 | | | | | | | | | | | | |
September 30, 2023 | |
September 30, 2023 | |
September 30, 2023 | | | | | | | | | |
SBL | SBL | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 15,297 | | | $ | 15,297 | |
C&I loans | C&I loans | | — | | | — | | | — | | | 32 | | | — | | | 11,141 | | | 11,173 | |
CRE loans | CRE loans | | — | | | — | | | — | | | 12 | | | 16 | | | 6,521 | | | 6,549 | |
REIT loans | REIT loans | | — | | | — | | | — | | | — | | | — | | | 1,592 | | | 1,592 | |
Residential mortgage loans | Residential mortgage loans | | 4 | | | — | | | 4 | | | — | | | 14 | | | 7,368 | | | 7,386 | |
Tax-exempt loans | Tax-exempt loans | | — | | | — | | | — | | | — | | | — | | | 1,501 | | | 1,501 | |
Total loans held for investment | Total loans held for investment | | $ | 4 | | | $ | — | | | $ | 4 | | | $ | 44 | | | $ | 30 | | | $ | 43,420 | | | $ | 43,498 | |
The preceding table includes $90$87 million and $63$96 million at MarchDecember 31, 2023 and September 30, 2022,2023, respectively, of nonaccrual loans which were current pursuant to their contractual terms. The table also includes troubled debt restructurings
In the normal course of $20business, we may modify the original terms of a loan agreement. In certain circumstances, we may agree to modify the original terms of a loan agreement to a borrower experiencing financial difficulty, which may include a borrower in default, financial distress, bankruptcy or other circumstances. Loan modifications to borrowers experiencing financial difficulty typically involve principal forgiveness, an interest rate reduction, an other-than-insignificant payment delay (i.e., payment deferral greater than six months), or a term extension, or any combination thereof. Modified loans to borrowers experiencing financial difficulty are subject to our nonaccrual policies. Loans to borrowers experiencing financial difficulty which were modified during the three months ended December 31, 2023 were not significant.
Prior to September 30, 2023, loan modifications to borrowers experiencing financial difficulty, to the extent significant, were considered TDRs. On October 1, 2023, we adopted ASU 2022-02, which eliminated the recognition and measurement guidance for TDRs. See Note 2 for additional information about this guidance. As of September 30, 2023, TDRs were $21 million, $8$3 million, and $10 million for C&I loans, CRE loans and residential first mortgage loans, respectively, at March 31, 2023, and $11 million, $9 million, and $10 million for C&I loans, CRE loans and residential first mortgage loans, respectively, at September 30, 2022.respectively.
| | | | | | | | |
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements (Unaudited) | |
Other real estate owned, included in “Other assets” on our Condensed Consolidated Statements of Financial Condition, was insignificant at both MarchDecember 31, 2023 and September 30, 2022.2023.
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
Collateral-dependent loans
A loan is considered collateral-dependent when the borrower is experiencing financial difficulty and repayment is expected to be provided substantially through the sale of the underlying collateral. Collateral-dependent loans are recorded based upon the fair value of the collateral less the estimated selling costs. The following table presents the amortized cost of our collateral-dependent loans and the nature of the collateral.
| Loan type ($ in millions) | Loan type ($ in millions) | | Nature of collateral | | March 31, 2023 | | | September 30, 2022 | | Loan type ($ in millions) | | Nature of collateral | | December 31, 2023 | | September 30, 2023 |
| C&I loans | C&I loans | | Commercial real estate and other business assets | | $ | 9 | | | | $ | 11 | | |
C&I loans | |
C&I loans | |
CRE loans | CRE loans | | Retail, industrial, office and health care real estate | | $ | 52 | | | | $ | 21 | | |
| Residential mortgage loans | Residential mortgage loans | | Single family homes | | $ | 6 | | | | $ | 6 | | |
Residential mortgage loans | |
Residential mortgage loans | |
| |
CRE collateral dependent loans as of December 31, 2023 included two loans that were placed on nonaccrual status with an associated allowance during the three months ended December 31, 2023. The recorded investmentinvestments in residential mortgage loans secured by one-to-four family residential properties for which formal foreclosure proceedings were in process was $5were $3 million at both Marchand $4 million as of December 31, 2023 and September 30, 2022.2023, 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 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 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.
| | March 31, 2023 |
| Loans by origination fiscal year | | | |
| | As of and for the three months ended December 31, 2023 | |
| | As of and for the three months ended December 31, 2023 | |
| | As of and for the three months ended December 31, 2023 | |
| | Loans by origination fiscal year | |
$ in millions | |
$ in millions | |
$ in millions | $ in millions | | 2023 | | 2022 | | 2021 | | 2020 | | 2019 | | Prior | | Revolving loans | | | Total | | 2024 | | 2023 | | 2022 | | 2021 | | 2020 | | Prior | | Revolving loans | | | | Total |
SBL | SBL | | | | | | | | | | | | | | | | | |
Risk rating: | Risk rating: | | | |
Risk rating: | |
Risk rating: | |
Pass | |
Pass | |
Pass | Pass | | $ | 20 | | $ | 18 | | $ | 92 | | $ | 41 | | $ | 26 | | $ | 82 | | $ | 13,948 | | | $ | 14,227 | | $ | 31 | | $ | 47 | | $ | 19 | | $ | 82 | | $ | 36 | | $ | 74 | | $ | 14,339 | | | | $ | 14,628 |
Special mention | Special mention | | — | | — | | — | | — | | — | | — | | — | | | — | Special mention | | — | | | | — |
Substandard | | — | | — | | — | | — | | — | | — | | — | | | — |
Substandard (1) | | Substandard (1) | | 19 | | — | | | | 19 |
Doubtful | Doubtful | | — | | — | | — | | — | | — | | — | | — | | | — | Doubtful | | — | | | | — |
Total SBL | Total SBL | | $ | 20 | | $ | 18 | | $ | 92 | | $ | 41 | | $ | 26 | | $ | 82 | | $ | 13,948 | | | $ | 14,227 | Total SBL | | $ | 50 | | $ | 47 | | $ | 19 | | $ | 82 | | $ | 36 | | $ | 74 | | $ | 14,339 | | | | $ | 14,647 |
Gross charge-offs | | Gross charge-offs | | $ | — | | $ | — | | $ | — | | $ | — | | $ | — | | $ | — | | $ | — | | | | $ | — |
| | C&I loans | C&I loans | | | |
| C&I loans | |
| C&I loans | |
Risk rating: | Risk rating: | | | |
Risk rating: | |
Risk rating: | |
Pass | |
Pass | |
Pass | Pass | | $ | 454 | | $ | 1,193 | | $ | 1,254 | | $ | 1,223 | | $ | 1,097 | | $ | 3,272 | | $ | 2,526 | | | $ | 11,019 | | $ | 138 | | $ | 732 | | $ | 1,206 | | $ | 1,067 | | $ | 877 | | $ | 3,457 | | $ | 2,784 | | | | $ | 10,261 |
Special mention | Special mention | | — | | 10 | | 29 | | 38 | | — | | 1 | | 7 | | | 85 | Special mention | | — | | 5 | | — | | 68 | | — | | 3 | | | | 76 |
Substandard | Substandard | | — | | — | | — | | 40 | | 18 | | 84 | | 13 | | | 155 | Substandard | | — | | 29 | | 62 | | 59 | | 16 | | | | 166 |
Doubtful | Doubtful | | — | | — | | — | | — | | — | | — | | — | | | — | Doubtful | | — | | | | — |
Total C&I loans | Total C&I loans | | $ | 454 | | $ | 1,203 | | $ | 1,283 | | $ | 1,301 | | $ | 1,115 | | $ | 3,357 | | $ | 2,546 | | | $ | 11,259 | Total C&I loans | | $ | 138 | | $ | 732 | | $ | 1,211 | | $ | 1,096 | | $ | 1,007 | | $ | 3,516 | | $ | 2,803 | | | | $ | 10,503 |
Gross charge-offs | | Gross charge-offs | | $ | — | | $ | — | | $ | — | | $ | 1 | | $ | — | | $ | 5 | | $ | — | | | | $ | 6 |
| | CRE loans | CRE loans | | | |
| CRE loans | |
| CRE loans | |
Risk rating: | Risk rating: | | | |
Risk rating: | |
Risk rating: | |
Pass | |
Pass | |
Pass | Pass | | $ | 613 | | $ | 2,346 | | $ | 1,195 | | $ | 784 | | $ | 654 | | $ | 1,180 | | $ | 149 | | | $ | 6,921 | | $ | 131 | | $ | 1,182 | | $ | 2,317 | | $ | 1,107 | | $ | 739 | | $ | 1,411 | | $ | 255 | | | | $ | 7,142 |
Special mention | Special mention | | 7 | | — | | — | | 36 | | — | | 22 | | — | | | 65 | Special mention | | — | | 6 | | — | | 14 | | 19 | | — | | | | 39 |
Substandard | Substandard | | — | | — | | — | | 2 | | 13 | | 53 | | — | | | 68 | Substandard | | — | | 5 | | 32 | | 113 | | — | | | | 150 |
Doubtful | Doubtful | | — | | — | | — | | — | | — | | — | | — | | | — | Doubtful | | — | | | | — |
Total CRE loans | Total CRE loans | | $ | 620 | | $ | 2,346 | | $ | 1,195 | | $ | 822 | | $ | 667 | | $ | 1,255 | | $ | 149 | | | $ | 7,054 | Total CRE loans | | $ | 131 | | $ | 1,188 | | $ | 2,317 | | $ | 1,112 | | $ | 785 | | $ | 1,543 | | $ | 255 | | | | $ | 7,331 |
Gross charge offs | | Gross charge offs | | $ | — | | $ | — | | $ | — | | $ | — | | $ | — | | $ | 2 | | $ | — | | | | $ | 2 |
| | REIT loans | REIT loans | | | |
| REIT loans | |
| REIT loans | |
Risk rating: | Risk rating: | | | |
Risk rating: | |
Risk rating: | |
Pass | |
Pass | |
Pass | Pass | | $ | 266 | | $ | 202 | | $ | 214 | | $ | 101 | | $ | 55 | | $ | 197 | | $ | 682 | | | $ | 1,717 | | $ | 51 | | $ | 236 | | $ | 184 | | $ | 232 | | $ | 103 | | $ | 311 | | $ | 580 | | | | $ | 1,697 |
Special mention | Special mention | | — | | — | | — | | — | | — | | — | | — | | | — | Special mention | | — | | | | — |
Substandard | Substandard | | — | | — | | — | | — | | — | | — | | — | | | — | Substandard | | — | | | | — |
Doubtful | Doubtful | | — | | — | | — | | — | | — | | — | | — | | | — | Doubtful | | — | | | | — |
Total REIT loans | Total REIT loans | | $ | 266 | | $ | 202 | | $ | 214 | | $ | 101 | | $ | 55 | | $ | 197 | | $ | 682 | | | $ | 1,717 | Total REIT loans | | $ | 51 | | $ | 236 | | $ | 184 | | $ | 232 | | $ | 103 | | $ | 311 | | $ | 580 | | | | $ | 1,697 |
Gross charge-offs | | Gross charge-offs | | $ | — | | $ | — | | $ | — | | $ | — | | $ | — | | $ | — | | $ | — | | | | $ | — |
| | Residential mortgage loans | Residential mortgage loans | | | |
| Residential mortgage loans | |
| Residential mortgage loans | |
Risk rating: | Risk rating: | | | |
Risk rating: | |
Risk rating: | |
Pass | |
Pass | |
Pass | Pass | | $ | 915 | | $ | 2,956 | | $ | 1,661 | | $ | 965 | | $ | 455 | | $ | 1,057 | | $ | 40 | | | $ | 8,049 | | $ | 323 | | $ | 1,747 | | $ | 2,857 | | $ | 1,588 | | $ | 903 | | $ | 1,388 | | $ | 33 | | | | $ | 8,839 |
Special mention | Special mention | | — | | — | | 1 | | — | | 2 | | 5 | | — | | | 8 | Special mention | | — | | 2 | | — | | 5 | | — | | | | 7 |
Substandard | Substandard | | — | | 2 | | — | | — | | — | | 20 | | — | | | 22 | Substandard | | — | | 2 | | — | | 13 | | — | | | | 15 |
Doubtful | Doubtful | | — | | — | | — | | — | | — | | — | | — | | | — | Doubtful | | — | | | | — |
Total residential mortgage loans | Total residential mortgage loans | | $ | 915 | | $ | 2,958 | | $ | 1,662 | | $ | 965 | | $ | 457 | | $ | 1,082 | | $ | 40 | | | $ | 8,079 | Total residential mortgage loans | | $ | 323 | | $ | 1,747 | | $ | 2,861 | | $ | 1,588 | | $ | 903 | | $ | 1,406 | | $ | 33 | | | | $ | 8,861 |
Gross charge-offs | | Gross charge-offs | | $ | — | | $ | — | | $ | — | | $ | — | | $ | — | | $ | — | | $ | — | | | | $ | — |
| | Tax-exempt loans | Tax-exempt loans | | | |
| Tax-exempt loans | |
| Tax-exempt loans | |
Risk rating: | Risk rating: | | | |
Risk rating: | |
Risk rating: | |
Pass | |
Pass | |
Pass | Pass | | $ | 165 | | $ | 298 | | $ | 165 | | $ | 56 | | $ | 108 | | $ | 851 | | $ | — | | | $ | 1,643 | | $ | — | | $ | 57 | | $ | 270 | | $ | 160 | | $ | 54 | | $ | 870 | | $ | — | | | | $ | 1,411 |
Special mention | Special mention | | — | | — | | — | | — | | — | | — | | — | | | — | Special mention | | — | | | | — |
Substandard | Substandard | | — | | — | | — | | — | | — | | — | | — | | | — | Substandard | | — | | | | — |
Doubtful | Doubtful | | — | | — | | — | | — | | — | | — | | — | | | — | Doubtful | | — | | | | — |
Total tax-exempt loans | Total tax-exempt loans | | $ | 165 | | $ | 298 | | $ | 165 | | $ | 56 | | $ | 108 | | $ | 851 | | $ | — | | | $ | 1,643 | Total tax-exempt loans | | $ | — | | $ | 57 | | $ | 270 | | $ | 160 | | $ | 54 | | $ | 870 | | $ | — | | | | $ | 1,411 |
Gross charge-offs | | Gross charge-offs | | $ | — | | $ | — | | $ | — | | $ | — | | $ | — | | $ | — | | $ | — | | | | $ | — |
(1)
As of December 31, 2023, these balances relate to loans which were collateralized by private securities or other financial instruments with a limited trading market.
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) | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | September 30, 2023 |
| | Loans by origination fiscal year | | | | | | |
$ in millions | | 2023 | | 2022 | | 2021 | | 2020 | | 2019 | | Prior | | Revolving loans | | | | Total |
SBL | | | | | | | | | | | | | | | | | | |
Risk rating: | | | | | | | | | | | | | | | | | | |
Pass | | $ | 74 | | $ | 18 | | $ | 83 | | $ | 40 | | $ | 15 | | $ | 59 | | $ | 14,293 | | | | $ | 14,582 |
Special mention | | — | | — | | — | | — | | — | | — | | — | | | | — |
Substandard (1) | | — | | — | | — | | — | | — | | — | | 24 | | | | 24 |
Doubtful | | — | | — | | — | | — | | — | | — | | — | | | | — |
Total SBL | | $ | 74 | | $ | 18 | | $ | 83 | | $ | 40 | | $ | 15 | | $ | 59 | | $ | 14,317 | | | | $ | 14,606 |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
C&I loans | | | | | | | | | | | | | | | | | | |
Risk rating: | | | | | | | | | | | | | | | | | | |
Pass | | $ | 672 | | $ | 1,148 | | $ | 1,091 | | $ | 965 | | $ | 1,020 | | $ | 2,675 | | $ | 2,564 | | | | $ | 10,135 |
Special mention | | — | | 5 | | 29 | | 69 | | — | | — | | 4 | | | | 107 |
Substandard | | — | | — | | — | | 62 | | 17 | | 65 | | 17 | | | | 161 |
Doubtful | | — | | — | | — | | — | | — | | 3 | | — | | | | 3 |
Total C&I loans | | $ | 672 | | $ | 1,153 | | $ | 1,120 | | $ | 1,096 | | $ | 1,037 | | $ | 2,743 | | $ | 2,585 | | | | $ | 10,406 |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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| | | | | | | | | | | | | | | | | | |
CRE loans | | | | | | | | | | | | | | | | | | |
Risk rating: | | | | | | | | | | | | | | | | | | |
Pass | | $ | 1,130 | | $ | 2,344 | | $ | 1,115 | | $ | 766 | | $ | 604 | | $ | 845 | | $ | 220 | | | | $ | 7,024 |
Special mention | | 7 | | — | | — | | 14 | | 5 | | 55 | | — | | | | 81 |
Substandard | | — | | — | | 5 | | 32 | | 12 | | 67 | | — | | | | 116 |
Doubtful | | — | | — | | — | | — | | — | | — | | — | | | | — |
Total CRE loans | | $ | 1,137 | | $ | 2,344 | | $ | 1,120 | | $ | 812 | | $ | 621 | | $ | 967 | | $ | 220 | | | | $ | 7,221 |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
REIT loans | | | | | | | | | | | | | | | | | | |
Risk rating: | | | | | | | | | | | | | | | | | | |
Pass | | $ | 258 | | $ | 200 | | $ | 214 | | $ | 101 | | $ | 172 | | $ | 176 | | $ | 547 | | | | $ | 1,668 |
Special mention | | — | | — | | — | | — | | — | | — | | — | | | | — |
Substandard | | — | | — | | — | | — | | — | | — | | — | | | | — |
Doubtful | | — | | — | | — | | — | | — | | — | | — | | | | — |
Total REIT loans | | $ | 258 | | $ | 200 | | $ | 214 | | $ | 101 | | $ | 172 | | $ | 176 | | $ | 547 | | | | $ | 1,668 |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
Residential mortgage loans | | | | | | | | | | | | | | | | | | |
Risk rating: | | | | | | | | | | | | | | | | | | |
Pass | | $ | 1,765 | | $ | 2,889 | | $ | 1,607 | | $ | 919 | | $ | 433 | | $ | 992 | | $ | 31 | | | | $ | 8,636 |
Special mention | | — | | — | | 2 | | — | | 2 | | 5 | | — | | | | 9 |
Substandard | | — | | 2 | | — | | 1 | | — | | 14 | | — | | | | 17 |
Doubtful | | — | | — | | — | | — | | — | | — | | — | | | | — |
Total residential mortgage loans | | $ | 1,765 | | $ | 2,891 | | $ | 1,609 | | $ | 920 | | $ | 435 | | $ | 1,011 | | $ | 31 | | | | $ | 8,662 |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
Tax-exempt loans | | | | | | | | | | | | | | | | | | |
Risk rating: | | | | | | | | | | | | | | | | | | |
Pass | | $ | 147 | | $ | 279 | | $ | 161 | | $ | 54 | | $ | 97 | | $ | 803 | | $ | — | | | | $ | 1,541 |
Special mention | | — | | — | | — | | — | | — | | — | | — | | | | — |
Substandard | | — | | — | | — | | — | | — | | — | | — | | | | — |
Doubtful | | — | | — | | — | | — | | — | | — | | — | | | | — |
Total tax-exempt loans | | $ | 147 | | $ | 279 | | $ | 161 | | $ | 54 | | $ | 97 | | $ | 803 | | $ | — | | | | $ | 1,541 |
| | | | | | | | | | | | | | | | | | |
(1)As of September 30, 2023, these balances relate to loans which were collateralized by private securities or other financial instruments with a limited trading market.
| | | | | | | | |
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 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.origination and by FICO score.
| | March 31, 2023 | |
| Loans by origination fiscal year | | | | |
| | December 31, 2023 | |
| | December 31, 2023 | |
| | December 31, 2023 | |
| | Loans by origination fiscal year | |
| | Loans by origination fiscal year | |
| | Loans by origination fiscal year | |
$ in millions | |
$ in millions | |
$ in millions | $ in millions | | 2023 | | 2022 | | 2021 | | 2020 | | 2019 | | Prior | | Revolving loans | | | Total | |
FICO score: | FICO score: | | | | | | | | | | | | | | | | | | |
FICO score: | |
FICO score: | |
Below 600 | |
Below 600 | |
Below 600 | Below 600 | | $ | 6 | | $ | 1 | | $ | 3 | | $ | 2 | | $ | 3 | | $ | 55 | | $ | — | | | $ | 70 | |
600 - 699 | 600 - 699 | | 51 | | 155 | | 107 | | 88 | | 31 | | 83 | | 4 | | | 519 | |
600 - 699 | |
600 - 699 | |
700 - 799 | |
700 - 799 | |
700 - 799 | 700 - 799 | | 718 | | 2,383 | | 1,265 | | 700 | | 334 | | 647 | | 25 | | | 6,072 | |
800 + | 800 + | | 139 | | 416 | | 283 | | 174 | | 84 | | 293 | | 8 | | | 1,397 | |
800 + | |
800 + | |
FICO score not available | FICO score not available | | 1 | | 3 | | 4 | | 1 | | 5 | | 4 | | 3 | | | 21 | |
FICO score not available | |
FICO score not available | |
Total | |
Total | |
Total | Total | | $ | 915 | | $ | 2,958 | | $ | 1,662 | | $ | 965 | | $ | 457 | | $ | 1,082 | | $ | 40 | | | $ | 8,079 | |
| LTV ratio: | LTV ratio: | | | | |
| LTV ratio: | |
| LTV ratio: | |
Below 80% | |
Below 80% | |
Below 80% | Below 80% | | $ | 639 | | $ | 2,262 | | $ | 1,300 | | $ | 755 | | $ | 341 | | $ | 832 | | $ | 36 | | | $ | 6,165 | |
80%+ | 80%+ | | 276 | | 696 | | 362 | | 210 | | 116 | | 250 | | 4 | | | 1,914 | |
80%+ | |
80%+ | |
Total | Total | | $ | 915 | | $ | 2,958 | | $ | 1,662 | | $ | 965 | | $ | 457 | | $ | 1,082 | | $ | 40 | | | $ | 8,079 | |
Total | |
Total | |
| | September 30, 2022 |
| Loans by origination fiscal year | | | |
| | September 30, 2023 | |
| | September 30, 2023 | |
| | September 30, 2023 | |
| | Loans by origination fiscal year | |
$ in millions | |
$ in millions | |
$ in millions | $ in millions | | 2022 | | 2021 | | 2020 | | 2019 | | 2018 | | Prior | | Revolving loans | | | Total | | 2022 | | 2021 | | 2020 | | 2019 | | 2018 | | Prior | | Revolving loans | | | | Total |
FICO score: | FICO score: | | | | | | | | | | | | | | | | | |
Below 600 | |
Below 600 | |
Below 600 | Below 600 | | $ | 1 | | $ | 3 | | $ | 2 | | $ | 3 | | $ | 1 | | $ | 54 | | $ | — | | | $ | 64 | | $ | 7 | | $ | 1 | | $ | 3 | | $ | 2 | | $ | 3 | | $ | 55 | | $ | — | | | | $ | 71 |
600 - 699 | 600 - 699 | | 155 | | 112 | | 90 | | 32 | | 20 | | 68 | | 4 | | | 481 | 600 - 699 | | 99 | | 154 | | 106 | | 83 | | 30 | | 79 | | 4 | | | | 555 |
700 - 799 | 700 - 799 | | 2,403 | | 1,301 | | 744 | | 353 | | 219 | | 470 | | 22 | | | 5,512 | 700 - 799 | | 1,381 | | 2,327 | | 1,218 | | 666 | | 320 | | 609 | | 20 | | | | 6,541 |
800 + | 800 + | | 424 | | 284 | | 184 | | 87 | | 48 | | 273 | | 6 | | | 1,306 | 800 + | | 274 | | 407 | | 279 | | 168 | | 77 | | 265 | | 6 | | | | 1,476 |
FICO score not available | FICO score not available | | 3 | | 5 | | 3 | | 4 | | 3 | | 2 | | 3 | | | 23 | FICO score not available | | 4 | | 2 | | 3 | | 1 | | 5 | | 3 | | 1 | | | | 19 |
Total | Total | | $ | 2,986 | | $ | 1,705 | | $ | 1,023 | | $ | 479 | | $ | 291 | | $ | 867 | | $ | 35 | | | $ | 7,386 | Total | | $ | 1,765 | | $ | 2,891 | | $ | 1,609 | | $ | 920 | | $ | 435 | | $ | 1,011 | | $ | 31 | | | | $ | 8,662 |
| LTV ratio: | LTV ratio: | | | |
LTV ratio: | |
LTV ratio: | |
Below 80% | |
Below 80% | |
Below 80% | Below 80% | | $ | 2,287 | | $ | 1,333 | | $ | 797 | | $ | 358 | | $ | 226 | | $ | 661 | | $ | 31 | | | $ | 5,693 | | $ | 1,244 | | $ | 2,218 | | $ | 1,257 | | $ | 716 | | $ | 323 | | $ | 780 | | $ | 29 | | | | $ | 6,567 |
80%+ | 80%+ | | 699 | | 372 | | 226 | | 121 | | 65 | | 206 | | 4 | | | 1,693 | 80%+ | | 521 | | 673 | | 352 | | 204 | | 112 | | 231 | | 2 | | | | 2,095 |
Total | Total | | $ | 2,986 | | $ | 1,705 | | $ | 1,023 | | $ | 479 | | $ | 291 | | $ | 867 | | $ | 35 | | | $ | 7,386 | Total | | $ | 1,765 | | $ | 2,891 | | $ | 1,609 | | $ | 920 | | $ | 435 | | $ | 1,011 | | $ | 31 | | | | $ | 8,662 |
| | | | | | | | |
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 | | SBL | | C&I loans | | CRE loans | | REIT loans | | Residential mortgage loans | | Tax-exempt loans | | Total | $ in millions | | SBL | | C&I loans | | CRE loans | | REIT loans | | Residential mortgage loans | | Tax-exempt loans | | Total |
Three months ended March 31, 2023 | | | | | | | | | | | | | | |
Three months ended December 31, 2023 | | Three months ended December 31, 2023 | | | | | | | | | | | | |
| Balance at beginning of period | Balance at beginning of period | | $ | 4 | | | $ | 222 | | | $ | 91 | | | $ | 15 | | | $ | 74 | | | $ | 2 | | | $ | 408 | |
| Provision for credit losses | | 1 | | | 18 | | | 9 | | | — | | | — | | | — | | | 28 | |
| Balance at beginning of period | |
| Balance at beginning of period | |
| Provision/(benefit) for credit losses | |
| Provision/(benefit) for credit losses | |
| Provision/(benefit) for credit losses | |
| Net (charge-offs)/recoveries: | Net (charge-offs)/recoveries: | | | | | | | | | | | | |
Net (charge-offs)/recoveries: | |
Net (charge-offs)/recoveries: | |
Charge-offs | |
Charge-offs | |
Charge-offs | Charge-offs | | — | | | (20) | | | — | | | — | | | — | | | — | | | (20) | |
Recoveries | Recoveries | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
Net (charge-offs)/recoveries | Net (charge-offs)/recoveries | | — | | | (20) | | | — | | | — | | | — | | | — | | | (20) | |
Foreign exchange translation adjustment | Foreign exchange translation adjustment | | — | | | (1) | | | — | | | — | | | — | | | — | | | (1) | |
Balance at end of period | Balance at end of period | | $ | 5 | | | $ | 219 | | | $ | 100 | | | $ | 15 | | | $ | 74 | | | $ | 2 | | | $ | 415 | |
ACL by loan portfolio segment as a % of total ACL | ACL by loan portfolio segment as a % of total ACL | | 1.2 | % | | 52.8 | % | | 24.1 | % | | 3.6 | % | | 17.8 | % | | 0.5 | % | | 100.0 | % | ACL by loan portfolio segment as a % of total ACL | | 1.5 | % | | 44.1 | % | | 36.3 | % | | 3.5 | % | | 14.2 | % | | 0.4 | % | | 100.0 | % |
| Six months ended March 31, 2023 | |
Three months ended December 31, 2022 | |
Three months ended December 31, 2022 | |
Three months ended December 31, 2022 | |
Balance at beginning of period | |
Balance at beginning of period | |
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 | | | 18 | | | 11 | | | (6) | | | 17 | | | — | | | 42 | |
| | Provision/(benefit) for credit losses | |
| Provision/(benefit) for credit losses | |
| Net (charge-offs)/recoveries: | Net (charge-offs)/recoveries: | | | | | | | | | | | |
Net (charge-offs)/recoveries: | |
Net (charge-offs)/recoveries: | |
Charge-offs | |
Charge-offs | |
Charge-offs | Charge-offs | | — | | | (24) | | | (1) | | | — | | | — | | | — | | | (25) | |
Recoveries | Recoveries | | — | | | — | | | 3 | | | — | | | — | | | — | | | 3 | |
Net (charge-offs)/recoveries | Net (charge-offs)/recoveries | | — | | | (24) | | | 2 | | | — | | | — | | | — | | | (22) | |
Foreign exchange translation adjustment | Foreign exchange translation adjustment | | — | | | (1) | | | — | | | — | | | — | | | — | | | (1) | |
Balance at end of period | Balance at end of period | | $ | 5 | | | $ | 219 | | | $ | 100 | | | $ | 15 | | | $ | 74 | | | $ | 2 | | | $ | 415 | |
ACL by loan portfolio segment as a % of total ACL | ACL by loan portfolio segment as a % of total ACL | | 1.2 | % | | 52.8 | % | | 24.1 | % | | 3.6 | % | | 17.8 | % | | 0.5 | % | | 100.0 | % | ACL by loan portfolio segment as a % of total ACL | | 1.0 | % | | 54.4 | % | | 22.3 | % | | 3.7 | % | | 18.1 | % | | 0.5 | % | | 100.0 | % |
| Three months ended March 31, 2022 | |
Balance at beginning of period | | $ | 3 | | | $ | 179 | | | $ | 72 | | | $ | 22 | | | $ | 30 | | | $ | 2 | | | $ | 308 | |
| Provision/(benefit) for credit losses | | — | | | 17 | | | (1) | | | 3 | | | 2 | | | — | | | 21 | |
Net (charge-offs)/recoveries: | | | | | | | | | | | |
Charge-offs | | — | | | (1) | | | — | | | — | | | — | | | — | | | (1) | |
Recoveries | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
Net (charge-offs)/recoveries | | — | | | (1) | | | — | | | — | | | — | | | — | | | (1) | |
Foreign exchange translation adjustment | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
Balance at end of period | | $ | 3 | | | $ | 195 | | | $ | 71 | | | $ | 25 | | | $ | 32 | | | $ | 2 | | | $ | 328 | |
ACL by loan portfolio segment as a % of total ACL | | 0.9 | % | | 59.5 | % | | 21.6 | % | | 7.6 | % | | 9.8 | % | | 0.6 | % | | 100.0 | % |
| Six months ended March 31, 2022 | |
Balance at beginning of period | | $ | 4 | | | $ | 191 | | | $ | 66 | | | $ | 22 | | | $ | 35 | | | $ | 2 | | | $ | 320 | |
| Provision/(benefit) for credit losses | | (1) | | | 7 | | | 5 | | | 3 | | | (4) | | | �� | | | 10 | |
Net (charge-offs)/recoveries: | | | | | | | | | |
Charge-offs | | — | | | (3) | | | — | | | — | | | — | | | — | | | (3) | |
Recoveries | | — | | | — | | | — | | | — | | | 1 | | | — | | | 1 | |
Net (charge-offs)/recoveries | | — | | | (3) | | | — | | | — | | | 1 | | | — | | | (2) | |
Foreign exchange translation adjustment | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
Balance at end of period | | $ | 3 | | | $ | 195 | | | $ | 71 | | | $ | 25 | | | $ | 32 | | | $ | 2 | | | $ | 328 | |
ACL by loan portfolio segment as a % of total ACL | | 0.9 | % | | 59.5 | % | | 21.6 | % | | 7.6 | % | | 9.8 | % | | 0.6 | % | | 100.0 | % |
|
The allowance for credit losses on held for investment bank loans increased $7 million and $19$5 million during the three and six months ended MarchDecember 31, 2023 respectively,primarily resulting from a $28 million and $42 million provisionprovisions for credit losses respectively,of $12 million, partially offset by net charge-offs which were primarily related to two C&I loans.of certain loans during the period. The provision for credit losses for the three months ended MarchDecember 31, 2023 primarily reflected the impacts of charge-offs of certain loans during the quarter,specific reserves in our C&I and CRE loan portfolios, loan downgrades, inand charge-offs, partially offset by the CRE and C&I loan portfolios, and additional volatility in the macroeconomic outlook. The provision for credit losses for the six months ended March 31, 2023 was primarily due to a weaker macroeconomic outlook, net charge-offs, and thefavorable impact of loan growth duringrepayments and sales, which had a larger impact on the period.current quarter expense than provisions on new loans.
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
The allowance for credit losses on unfunded lending commitments, which is included in “Other payables” on our Condensed Consolidated Statements of Financial Condition, was $21$20 million and $22 million at MarchDecember 31, 2023 and $19 million at both December 31, 2022 and September 30, 2022.2023, respectively.
NOTE 8 – 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 20222023 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 | | March 31, 2023 | | September 30, 2022 | $ in millions | | December 31, 2023 | | September 30, 2023 |
Affiliated with the firm as of period-end (1) | Affiliated with the firm as of period-end (1) | | $ | 1,130 | | | $ | 1,173 | |
No longer affiliated with the firm as of period-end (2) | No longer affiliated with the firm as of period-end (2) | | 8 | | | 8 | |
Total loans to financial advisors | Total loans to financial advisors | | 1,138 | | | 1,181 | |
Allowance for credit losses | Allowance for credit losses | | (30) | | | (29) | |
Loans to financial advisors, net | Loans to financial advisors, net | | $ | 1,108 | | | $ | 1,152 | |
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 | | 2.64 | % | | 2.46 | % | Allowance for credit losses as a percent of total loans to financial advisors | | 2.87 | % | | 2.74 | % |
(1)These loans were predominantly current.
(2)These loans were predominantly past due for a period of 180 days or more.
| | | | | | | | |
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements (Unaudited) | |
NOTE 9 – 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 20222023 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 investments in low-income housing tax credit (“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 |
March 31, 2023 | | | | |
December 31, 2023 | | December 31, 2023 | | |
| LIHTC funds | |
LIHTC funds | |
LIHTC funds | LIHTC funds | | $ | 55 | | | $ | 6 | |
Restricted Stock Trust Fund | Restricted Stock Trust Fund | | 26 | | | 26 | |
Total | Total | | $ | 81 | | | $ | 32 | |
| September 30, 2022 | | | | |
September 30, 2023 | |
September 30, 2023 | |
September 30, 2023 | | | |
| LIHTC funds | |
LIHTC funds | |
LIHTC funds | LIHTC funds | | $ | 59 | | | $ | 6 | |
Restricted Stock Trust Fund | Restricted Stock Trust Fund | | 17 | | | 17 | |
Total | Total | | $ | 76 | | | $ | 23 | |
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 | | March 31, 2023 | | September 30, 2022 | $ in millions | | December 31, 2023 | | September 30, 2023 |
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 | | | $ | 5 | |
| Other assets | Other assets | | 50 | | | 54 | |
| Other assets | |
| Other assets | |
Total assets | Total assets | | $ | 55 | | | $ | 59 | |
Liabilities: | Liabilities: | | | | | Liabilities: | | | | |
Other payables | Other payables | | $ | — | | | $ | — | |
| Total liabilities | Total liabilities | | $ | — | | | $ | — | |
Total liabilities | |
Total liabilities | |
Noncontrolling interests | Noncontrolling interests | | $ | (26) | | | $ | (26) | |
VIEs where we hold a variable interest but are not the primary beneficiary
As discussed in Note 2 of our 20222023 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 primarily include certain LIHTC funds, our interests in certain limited partnerships which are part of our private equity portfolio (“Private Equity 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.
| | | | March 31, 2023 | | September 30, 2022 | | | December 31, 2023 | | September 30, 2023 |
$ 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 | | $ | 8,518 | | | $ | 2,759 | | | $ | 73 | | | $ | 7,752 | | | $ | 2,584 | | | $ | 136 | |
Private Equity Interests | Private Equity Interests | | 2,317 | | | 553 | | | 99 | | | 2,177 | | | 448 | | | 90 | |
Other | Other | | 109 | | | 70 | | | 3 | | | 159 | | | 101 | | | 8 | |
Total | Total | | $ | 10,944 | | | $ | 3,382 | | | $ | 175 | | | $ | 10,088 | | | $ | 3,133 | | | $ | 234 | |
NOTE 10 - GOODWILL AND IDENTIFIABLE INTANGIBLE ASSETS, NET
Our goodwill and identifiable intangible assets result from various acquisitions. See Notes 2 and 11 of our 2022 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, 2023 evaluation date, evaluating balances as of December 31, 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 consider 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 consider regulatory changes, as well as company-specific factors such as 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 11 - OTHER ASSETS
The following table details the components of other assets.assets as of the dates indicated. See Note 2 of our 20222023 Form 10-K for a discussion of theour accounting polices related to certain of these components.
| | $ in millions | $ in millions | | March 31, 2023 | | September 30, 2022 |
$ in millions | |
$ in millions | | | December 31, 2023 | | September 30, 2023 |
Investments in company-owned life insurance policies | Investments in company-owned life insurance policies | | $ | 1,077 | | | $ | 944 | |
Property and equipment, net | Property and equipment, net | | 515 | | | 503 | |
Lease right of use (“ROU”) assets | | 476 | | | 480 | |
Lease right-of-use (“ROU”) assets | |
Prepaid expenses | Prepaid expenses | | 249 | | | 173 | |
| Investments in FHLB and FRB stock | Investments in FHLB and FRB stock | | 123 | | | 88 | |
| Investments in FHLB and FRB stock | |
Investments in FHLB and FRB stock | |
Client-owned fractional shares | |
All other | All other | | 244 | | | 264 | |
Total other assets | Total other assets | | $ | 2,684 | | | $ | 2,452 | |
See Note 13 of our 20222023 Form 10-K for furtheradditional information regarding our property and equipment and Note 1211 of this Form 10-Q and Note 14 of our 20222023 Form 10-K for furtheradditional information regarding our leases.
NOTE 1211 – LEASES
The following table presents the balances related to our leases on our Condensed Consolidated Statements of Financial Condition. See Notes 2 and 14 of our 20222023 Form 10-K for additional information related to our leases, including a discussion of our accounting policies.
| | | | | | | | | | | | | | |
$ in millions | | March 31, 2023 | | September 30, 2022 |
ROU assets (included in Other assets) | | $ | 476 | | | $ | 480 | |
Lease liabilities (included in Other payables) | | $ | 478 | | | $ | 482 | |
| | | | | | | | | | | | | | |
$ in millions | | December 31, 2023 | | September 30, 2023 |
ROU assets (included in “Other assets”) | | $ | 552 | | | $ | 560 | |
Lease liabilities (included in “Other payables”) | | $ | 537 | | | $ | 539 | |
Lease liabilities as of MarchDecember 31, 2023 excluded $53$42 million of minimum lease payments related to lease arrangements that were legally binding but had not yet commenced. These leases are estimated to commence between dates later in fiscal year 2023 and2024 through fiscal year 2025 with lease terms ranging from twofour to 13ten 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 March 31, | | Six months ended March 31, |
| | Three months ended December 31, | |
| | Three months ended December 31, | |
| | Three months ended December 31, | |
$ in millions | |
$ in millions | |
$ in millions | $ in millions | | 2023 | | 2022 | | 2023 | | 2022 |
Lease costs | Lease costs | | $ | 32 | | | $ | 29 | | | $ | 63 | | | $ | 57 | |
Lease costs | |
Lease costs | |
Variable lease costs | Variable lease costs | | $ | 8 | | | $ | 8 | | | $ | 15 | | | $ | 15 | |
Variable lease costs | |
Variable lease costs | |
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.
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RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements (Unaudited) | |
NOTE 1312 – BANK DEPOSITS
Bank deposits include money market and savings accounts, interest-bearing demand deposits, which include Negotiable Order of Withdrawal accounts, certificates of deposit, and non-interest-bearing demand deposits.deposits held by either of our bank subsidiaries. The following table presents a summary of bank deposits, excluding affiliate 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.
| | March 31, 2023 | | September 30, 2022 |
| | December 31, 2023 | | | | December 31, 2023 | | September 30, 2023 |
$ in millions | $ in millions | | Balance | | Weighted-average rate | | Balance | | Weighted-average rate | $ in millions | | Balance | | Weighted-average rate | | Balance | | Weighted-average rate |
Money market and savings accounts | Money market and savings accounts | | $ | 43,136 | | | 1.24 | % | | $ | 44,446 | | | 1.01 | % | Money market and savings accounts | | $ | 31,315 | | | 1.96 | | 1.96 | % | | $ | 32,268 | | | 1.85 | | 1.85 | % |
Interest-bearing demand deposits | Interest-bearing demand deposits | | 7,809 | | | 4.45 | % | | 5,286 | | | 2.77 | % | Interest-bearing demand deposits | | 20,423 | | | 5.02 | | 5.02 | % | | 18,376 | | | 4.98 | | 4.98 | % |
Certificates of deposit | Certificates of deposit | | 2,656 | | | 4.15 | % | | 999 | | | 1.85 | % | Certificates of deposit | | 2,885 | | | 4.63 | | 4.63 | % | | 2,831 | | | 4.41 | | 4.41 | % |
Non-interest-bearing demand deposits | Non-interest-bearing demand deposits | | 628 | | | — | | | 626 | | | — | |
Total bank deposits | Total bank deposits | | $ | 54,229 | | | 1.86 | % | | $ | 51,357 | | | 1.21 | % | Total bank deposits | | $ | 55,393 | | | 3.25 | | 3.25 | % | | $ | 54,199 | | | 3.06 | | 3.06 | % |
Money market and savings accounts in the preceding table included $37.68$23.91 billion and $38.71$25.36 billion as of MarchDecember 31, 2023 and September 30, 2022,2023, respectively, of cash balances which were swept to our Bank segment from the client investment accounts maintained at Raymond James & Associates, Inc. (“RJ&A”). Such 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 demandTotal bank deposits in the preceding table included $2.75$14.48 billion and $13.59 billion of deposits as of MarchDecember 31, 2023 and September 30, 2023, respectively, associated with our Enhanced Savings Program (“ESP”), in which Private Client GroupPCG clients may deposit cash in a high-yield Raymond James Bank account. Substantially all of the ESP balances are reflected in interest-bearing demand deposits in the preceding table.
The following table details the estimated amount of total bank deposits (which excludes affiliate deposits) that are FDIC-insured, as well as the estimated amount of total bank deposits that exceeded the FDIC insurance limit at each respective period.
| $ in millions | $ in millions | | March 31, 2023 | | September 30, 2022 | $ in millions | | December 31, 2023 | | September 30, 2023 |
FDIC-insured bank deposits | FDIC-insured bank deposits | | $ | 47,475 | | | $ | 43,520 | |
Bank deposits exceeding FDIC insurance limit | | 6,754 | | | 7,837 | |
Bank deposits exceeding FDIC insurance limit (1) (2) | |
Total bank deposits | Total bank deposits | | $ | 54,229 | | | $ | 51,357 | |
FDIC-insured bank deposits as a % of total bank deposits | FDIC-insured bank deposits as a % of total bank deposits | | 88 | % | | 85 | % | FDIC-insured bank deposits as a % of total bank deposits | | 89 | % | | 89 | % |
(1)Bank deposits that exceeded the FDIC insurance limit were calculated in accordance with applicable regulatory reporting requirements.
(2)Excluded affiliate deposits exceeding the FDIC insurance limit of $924 million and $764 million as of December 31, 2023 and September 30, 2023, respectively.
The following table sets forth the estimated amount of certificates of deposit that exceeded the FDIC insurance limit, categorized by the time remaining until maturity, as of MarchDecember 31, 2023.
| | | | | | | | |
$ in millions | | MarchDecember 31, 2023 |
Three months or less | | $ | 3874 | |
Over three through six months | | 2337 | |
Over six through twelve months | | 2928 | |
Over twelve months | | 1312 | |
Total estimated certificates of deposit that exceeded the FDIC insurance limit(1) | | $ | 103151 | |
(1)Total certificates of deposit that exceeded the FDIC insurance limit were calculated in accordance with applicable regulatory reporting requirements.
| | | | | | | | |
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements (Unaudited) | |
Interest expense on deposits, excluding interest expense related to affiliatedaffiliate deposits, is summarized in the following table.
| | Three months ended March 31, | | Six months ended March 31, |
| | Three months ended December 31, | |
| | Three months ended December 31, | |
| | Three months ended December 31, | |
$ in millions | |
$ in millions | |
$ in millions | $ in millions | | 2023 | | 2022 | | 2023 | | 2022 |
Money market and savings accounts | Money market and savings accounts | | $ | 128 | | | $ | 1 | | | $ | 245 | | | $ | 2 | |
Money market and savings accounts | |
Money market and savings accounts | |
Interest-bearing demand deposits | |
Interest-bearing demand deposits | |
Interest-bearing demand deposits | Interest-bearing demand deposits | | 62 | | | 1 | | | 109 | | | 2 | |
Certificates of deposit | Certificates of deposit | | 16 | | | 3 | | | 24 | | | 7 | |
Certificates of deposit | |
Certificates of deposit | |
Total interest expense on deposits | Total interest expense on deposits | | $ | 206 | | | $ | 5 | | | $ | 378 | | | $ | 11 | |
Total interest expense on deposits | |
Total interest expense on deposits | |
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 toSee Note 52 of thisour 2023 Form 10-Q10-K 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 1413 – 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.
| | March 31, 2023 | | September 30, 2022 |
| | December 31, 2023 | | | | December 31, 2023 | | September 30, 2023 |
$ in millions | $ in millions | | Weighted average interest rate | Maturity date | Balance | | Weighted average interest rate | Maturity date | Balance | $ in millions | | Weighted-average interest rate | Maturity date | Balance | | Weighted-average interest rate | Maturity date | Balance |
FHLB advances: | FHLB advances: | | | | |
Floating rate - term (1) | | 5.09 | % | December 2023 - June 2024 | $ | 850 | | | 3.32 | % | December 2023 | $ | 850 | |
Floating rate - overnight (1) | | N/A | Overnight | — | | | 3.11 | % | Overnight | 140 | |
Floating rate - term | |
Floating rate - term | |
Floating rate - term | |
| Fixed rate | |
Fixed rate | |
Fixed rate | Fixed rate | | 5.13 | % | April 2023 - June 2023 | 700 | | | 3.45 | % | December 2022 | 200 | |
Total FHLB advances | Total FHLB advances | | 1,550 | | | 1,190 | |
Subordinated notes - fixed-to-floating (including an unaccreted premium of $2 and $2, respectively) (2) | | 5.75 | % | May 2030 | 100 | | | 5.75 | % | May 2030 | 100 | |
Other | | — | | | 1 | |
Subordinated notes - fixed-to-floating (including an unaccreted premium of $1 and $2, respectively) | |
| Total other borrowings | Total other borrowings | | $ | 1,650 | | | $ | 1,291 | |
Total other borrowings | |
Total other borrowings | |
(1) Interest
We use interest rate swaps to manage the risk of increases in interest rates onassociated with the majority our floating-rate FHLB advances by converting the balances subject to variable interest rates to a fixed interest rate. See Note 2 of our 2023 Form 10-K and Note 5 of this Form 10-Q for information regarding these advances reset daily.interest rate swaps, which have been designated and accounted for as cash flow hedges. See Note 6 for additional information regarding bank loans and available-for-sale securities pledged with the FHLB as security for our FHLB borrowings.
(2) Incur
Subordinated notes
As of December 31, 2023, we had subordinated notes due May 2030 outstanding, with an aggregate principal amount of $98 million. Our 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 Offeredequal to 3-month CME Term Secured Overnight Financing Rate or an appropriate alternative reference rate.(“SOFR”) plus a spread adjustment of 5.62% per annum. We may redeem these subordinated notes 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.
We useCredit Facility
RJF and RJ&A are parties to a revolving credit facility agreement (the “Credit Facility”), a committed unsecured line of credit under which either RJ&A or RJF have the ability to borrow. The Credit Facility has a term through April 2028 and provides for maximum borrowings of up to $750 million. The interest rate swaps to managerates on borrowings under the riskCredit Facility are variable and based on SOFR, as adjusted for RJF’s credit rating. There were no borrowings outstanding on the Credit Facility as of increases in interest ratesDecember 31, 2023 or September 30, 2023. There is a facility fee associated with the majority our floating-rate FHLB advances by convertingCredit Facility, which also varies with RJF’s credit rating (the “Variable Rate Facility Fee”). Based upon RJF’s credit rating as of December 31, 2023, the balances subjectVariable Rate Facility Fee, which is applied to variable interest rates to a fixed interest rate. Refer to Note 2 of our 2022 Form 10-K and Note 5 of this Form 10-Q for information regarding these interest rate swaps, which have been designated and accounted for as 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.committed amount, was 0.125% per annum.
For further information on our other borrowing arrangements refer to Note 16 of our 20222023 Form 10-K.
| | | | | | | | |
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements (Unaudited) | |
NOTE 1514 – 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 20222023 Form 10-K.
Effective tax rate
Our effective income tax rate of 22.6%21.0% for the sixthree months ended MarchDecember 31, 2023 was lower than the 25.4%23.7% effective tax rate for our fiscal year 2022.2023. The decrease in the effective income tax rate was primarily due to nontaxable valuation gains associated with our company-owned life insurance policies that werea larger tax benefit recognized during the current quarter related to share-based compensation that vested during the period, compared to that for the fiscal year 2022 which had2023. Additionally, our effective income tax rate for the fiscal year 2023 reflected the adverse impact of nondeductible losses.fines and penalties that did not recur during the current quarter.
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 $10$6 million due to expirationsexpiration of statutes of limitations of federal and the completion ofstate tax examinations.returns.
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
NOTE 1615 – 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 MarchDecember 31, 2023, we had oneno such open underwriting commitment, which was subsequently settled in an open market transaction and did not result in a significant loss.commitments.
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 client’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.
The following table presents our commitments to extend credit and other credit-related off-balance sheet financial instruments outstanding at our Bank segment.
| $ in millions | $ in millions | | March 31, 2023 | | September 30, 2022 | $ in millions | | December 31, 2023 | | September 30, 2023 |
SBL and other consumer lines of credit | SBL and other consumer lines of credit | | $ | 36,998 | | | $ | 33,641 | |
Commercial lines of credit | Commercial lines of credit | | $ | 4,137 | | | $ | 3,792 | |
Unfunded lending commitments | Unfunded lending commitments | | $ | 1,153 | | | $ | 1,255 | |
Standby letters of credit | Standby letters of credit | | $ | 107 | | | $ | 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.
| | | | | | | | |
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements (Unaudited) | |
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 current expected credit losses (“CECL”)CECL model provides for potential losses related to the unfunded lending commitments. See Note 2 of our 20222023 Form 10-K and Note 7 of this Form 10-Q for furtheradditional information onregarding this allowance for credit losses related to unfunded lending commitments.
RJ&A enters into margin lending arrangements which allow customersclients to borrow against the value of qualifying securities. Margin loans are collateralized by the securities held in the customer’sclient’s account at RJ&A. Collateral levels and established credit terms are monitored daily and we require customersclients 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 20222023 Form 10-K and Note 8 of this Form 10-Q for further discussion ofadditional information regarding 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. We had no such unfunded commitments for loans to financial advisors who have met such conditions as of December 31, 2023.
Investment commitments
We had unfunded commitments to various investments, primarily held by Raymond James Bank and TriState Capital Bank, of $63 million as of MarchDecember 31, 2023.
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
Other commitments
Raymond James Affordable Housing Investments, Inc. (“RJAHI”) 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 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 MarchDecember 31, 2023, RJAHI had committed approximately $149$248 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 lease commitments see Note 1211 of this Form 10-Q and for information on the maturities of our lease liabilities see Note 14 of our 20222023 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.
Legal and regulatory matters 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 cooperationhas cooperated 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
| | | | | | | | |
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements (Unaudited) | |
financial institutions. As of December 31, 2023, we continue to maintain an accrual related to this SEC investigation in our condensed consolidated financial statements in accordance with our contingent liabilities accounting policy. Refer to Note 2 of our 2023 Form 10-K for a discussion of our criteria for recognizing liabilities for contingencies.
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.
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
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 MarchDecember 31, 2023, we estimated the upper end of the range of reasonably possible aggregate loss to be approximately $100$35 million in excess of the aggregate accruals for such matters. Refer to Note 2 of our 20222023 Form 10-K for a discussion of our criteria for recognizing liabilities for contingencies.
NOTE 1716 – SHAREHOLDERS’ EQUITY
Preferred stock
The following table details the shares outstanding, carrying value, and aggregate liquidation preference of our preferred stock. For further details regarding our preferred stock see Note 20 of our 20222023 Form 10-K.
| | | | | | | | | | | | | | |
$ in millions, except share count | | March 31, 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 | | 40,250 |
Carrying value | | $ | 41 | | | $ | 41 | |
Aggregate liquidation preference | | $ | 40 | | | $ | 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 | |
On April 3, 2023, we redeemed all 40,250 outstanding shares of our Series A Preferred Stock, which triggered the redemption of the related depositary shares (“Series A Depositary Shares”), each representing a 1/40th interest of a share of Series A Preferred Stock, for an aggregate redemption value of $40 million. The redemption of the Series A Preferred Stock will be reflected in our condensed consolidated financial statements in our fiscal third quarter of 2023. | | | | | | | | | | | | | | |
$ in millions | | December 31, 2023 | | September 30, 2023 |
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 | |
The following table details dividends declared and dividends paid on our 6.75% Fixed-to-Floating Rate Series A Non-Cumulative Perpetual Preferred Stock (“Series A Preferred Stock”) and Series B preferred stockPreferred Stock for the three and six months ended MarchDecember 31, 2023 and 2022. We redeemed all outstanding shares of our Series A Preferred Stock on April 3, 2023.
| | | | Three months ended March 31, 2023 | | Six months ended March 31, 2023 | | | Dividends declared | | Dividends paid |
$ in millions, except per share amounts | $ in millions, except per share amounts | | Total dividends | | Per preferred share amount | | Total dividends | | Per preferred share amount | $ in millions, except per share amounts | | Total dividends | | Per preferred share amount | | Total dividends | | Per preferred share amount |
Dividends declared: | | | | | | | | |
Three months ended December 31, 2023 | |
| Series B Preferred Stock | |
| Series B Preferred Stock | |
| Series B Preferred Stock | |
| Three months ended December 31, 2022 | |
| Three months ended December 31, 2022 | |
| Three months ended December 31, 2022 | |
Series A Preferred Stock | |
Series A Preferred Stock | |
Series A Preferred Stock | Series A Preferred Stock | | $ | 1 | | | $ | 16.88 | | | $ | 2 | | | $ | 33.76 | |
Series B Preferred Stock | Series B Preferred Stock | | 1 | | | $ | 15.94 | | | 2 | | | $ | 31.88 | |
Total preferred stock dividends declared | | $ | 2 | | | $ | 4 | | |
Dividends paid: | | | | | |
Series A Preferred Stock | | $ | 1 | | | $ | 16.88 | | | $ | 2 | | | $ | 33.76 | |
Series B Preferred Stock | | 1 | | | $ | 15.94 | | | 2 | | | $ | 31.88 | |
Total preferred stock dividends paid | | $ | 2 | | | $ | 4 | | |
Total | |
|
| | | | | | | | |
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements (Unaudited) | |
Common equity
Common stock issuanceThe following table presents the changes in our common shares outstanding for the three months ended December 31, 2023 and 2022.
| | | | | | | | | | | | | | | | | | |
| | Three months ended December 31, | | |
Shares in millions | | 2023 | | 2022 | | | | |
Balance beginning of period | | 208.8 | | | 215.1 | | | | | |
Repurchases of common stock | | (1.4) | | | (1.3) | | | | | |
Issuances due to vesting of RSUs and exercise of stock options, net of forfeitures | | 1.3 | | | 1.2 | | | | | |
| | | | | | | | |
| | | | | | | | |
Balance end of period | | 208.7 | | | 215.0 | | | | | |
We issue shares from time to time during the year to satisfy obligations under certain of our share-based compensation programs.programs, some of which may be reissued out of treasury shares. See Note 2019 of this Form 10-Q and Note 23 of our 20222023 Form 10-K for additional information on these programs. We may also reissue treasury shares for such purposes.
Share repurchases
We repurchase shares of our common stock from time to time for a number of reasons, including to offset dilution, which could arise from share issuances resulting from share-based compensation.compensation programs or acquisitions. In December 2022,November 2023, our Board of Directors authorized common stock repurchases of up to $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 lawlegal and regulatory constraints, general market conditions and the price and trading volumes of our common stock. During the three months ended MarchDecember 31, 2023, we repurchased 3.751.41 million shares of our common stock for $350$150 million at an average price of $93$106.51 per shareshare. As of December 31, 2023, $1.39 billion remained available under the Board of Directors’ common stock repurchase authorization. During the six months ended March 31, 2023, we repurchased 5.04 million shares of our common stock for $488 million at an average price of $97 per share under the Board of Directors’ common stock repurchase authorization. As of March 31, 2023, approximately $1.1 billion remained available under such authorization.
Common stock dividends
Dividends per common share declared and paid are detailed in the following table for each respective period.
| | |
| |
| |
| | | Three months ended March 31, | | Six months ended March 31, |
| | 2023 | | 2022 | | 2023 | | 2022 |
Dividends per common share - declared | Dividends per common share - declared | $ | 0.42 | | | $ | 0.34 | | | $ | 0.84 | | | $ | 0.68 | |
Dividends per common share - declared | |
Dividends per common share - declared | |
Dividends per common share - paid | Dividends per common share - paid | $ | 0.42 | | | $ | 0.34 | | | $ | 0.76 | | | $ | 0.60 | |
Dividends per common share - paid | |
Dividends per common share - paid | |
Our 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 March 31, | | Six months ended March 31, 2023 |
| | 2023 | | 2022 | | 2023 | | 2022 |
Dividend payout ratio | | 21.8 | % | | 22.4 | % | | 19.9 | % | | 18.8 | % |
| | | | | | | | | | | | | | | | | | |
| | Three months ended December 31, | | |
| | 2023 | | 2022 | | | | |
Dividend payout ratio | | 19.4 | % | | 18.3 | % | | | | |
RJF expectsWe expect to continue paying cash dividends. However,dividends; however, the payment and rate of dividends on our common stock are subject to several factors including our operating results, financial and regulatory requirements or restrictions, and the availability of funds from our subsidiaries, including our broker-dealer and bank subsidiaries, which may also be subject to restrictions under regulatory capital rules. The availability of funds from subsidiaries may also be subject to restrictions contained in loan covenants of certain broker-dealer loan agreements and restrictions by bank regulators on dividends to the parent from Raymond James Bank and TriState Capital Bank.our bank subsidiaries. See Note 2120 of this Form 10-Q for additional information on our 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 March 31, 2023 | | | | | | | | | | | | |
Three months ended December 31, 2023 | |
| AOCI as of beginning of period | |
| AOCI as of beginning of period | |
| AOCI as of beginning of period | AOCI as of beginning of period | | $ | 139 | | | $ | (216) | | | $ | (77) | | | $ | (855) | | | $ | 41 | | | $ | (891) | |
OCI: | OCI: | |
OCI before reclassifications and taxes | |
OCI before reclassifications and taxes | |
OCI before reclassifications and taxes | OCI before reclassifications and taxes | | (4) | | | 11 | | | 7 | | | 126 | | | (7) | | | 126 | |
Amounts reclassified from AOCI, before tax | Amounts reclassified from AOCI, before tax | | — | | | — | | | — | | | — | | | (8) | | | (8) | |
Pre-tax net OCI | Pre-tax net OCI | | (4) | | | 11 | | | 7 | | | 126 | | | (15) | | | 118 | |
Income tax effect | Income tax effect | | 1 | | | (1) | | | — | | | (29) | | | 4 | | | (25) | |
OCI for the period, net of tax | OCI for the period, net of tax | | (3) | | | 10 | | | 7 | | | 97 | | | (11) | | | 93 | |
AOCI as of end of period | AOCI as of end of period | | $ | 136 | | | $ | (206) | | | $ | (70) | | | $ | (758) | | | $ | 30 | | | $ | (798) | |
| Six months ended March 31, 2023 | |
Three months ended December 31, 2022 | |
Three months ended December 31, 2022 | |
Three months ended December 31, 2022 | |
AOCI as of beginning of period | |
AOCI as of beginning of period | |
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 | |
OCI before reclassifications and taxes | OCI before reclassifications and taxes | | (23) | | | 71 | | | 48 | | | 211 | | | (5) | | | 254 | |
Amounts reclassified from AOCI, before tax | Amounts reclassified from AOCI, before tax | | — | | | — | | | — | | | — | | | (13) | | | (13) | |
Pre-tax net OCI | Pre-tax net OCI | | (23) | | | 71 | | | 48 | | | 211 | | | (18) | | | 241 | |
Income tax effect | Income tax effect | | 6 | | | (1) | | | 5 | | | (67) | | | 5 | | | (57) | |
OCI for the period, net of tax | OCI for the period, net of tax | | (17) | | | 70 | | | 53 | | | 144 | | | (13) | | | 184 | |
AOCI as of end of period | AOCI as of end of period | | $ | 136 | | | $ | (206) | | | $ | (70) | | | $ | (758) | | | $ | 30 | | | $ | (798) | |
| Three months ended March 31, 2022 | |
AOCI as of beginning of period | | $ | 80 | | | $ | (89) | | | $ | (9) | | | $ | (60) | | | $ | (18) | | | $ | (87) | |
OCI: | |
OCI before reclassifications and taxes | | (12) | | | (2) | | | (14) | | | (433) | | | 35 | | | (412) | |
Amounts reclassified from AOCI, before tax | | — | | | — | | | — | | | — | | | 4 | | | 4 | |
Pre-tax net OCI | | (12) | | | (2) | | | (14) | | | (433) | | | 39 | | | (408) | |
Income tax effect | | 3 | | | — | | | 3 | | | 113 | | | (10) | | | 106 | |
OCI for the period, net of tax | | (9) | | | (2) | | | (11) | | | (320) | | | 29 | | | (302) | |
AOCI as of end of period | | $ | 71 | | | $ | (91) | | | $ | (20) | | | $ | (380) | | | $ | 11 | | | $ | (389) | |
| Six months ended March 31, 2022 | |
AOCI as of beginning of period | | $ | 81 | | | $ | (90) | | | $ | (9) | | | $ | (5) | | | $ | (27) | | | $ | (41) | |
OCI: | |
OCI before reclassifications and taxes | | (14) | | | (1) | | | (15) | | | (505) | | | 43 | | | (477) | |
Amounts reclassified from AOCI, before tax | | — | | | — | | | — | | | — | | | 8 | | | 8 | |
Pre-tax net OCI | | (14) | | | (1) | | | (15) | | | (505) | | | 51 | | | (469) | |
Income tax effect | | 4 | | | — | | | 4 | | | 130 | | | (13) | | | 121 | |
OCI for the period, net of tax | | (10) | | | (1) | | | (11) | | | (375) | | | 38 | | | (348) | |
AOCI as of end of period | | $ | 71 | | | $ | (91) | | | $ | (20) | | | $ | (380) | | | $ | 11 | | | $ | (389) | |
|
Reclassifications from AOCI to net income, excluding taxes, for the three and six months ended MarchDecember 31, 2023 and 2022 were recorded in “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 20222023 Form 10-K. In addition, see Note 5 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 1817 – 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 20222023 Form 10-K. See Note 26 of our 20222023 Form 10-K and Note 2322 of this Form 10-Q for additional information on our segment results.segments.
| | Three months ended March 31, 2023 |
| | Three months ended December 31, 2023 | | | | Three months ended December 31, 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: | | | | | | | | | | | | |
Asset management and related administrative fees | Asset management and related administrative fees | | $ | 1,102 | | | $ | — | | | $ | 206 | | | $ | — | | | $ | (6) | | | $ | 1,302 | |
Asset management and related administrative fees | |
Asset management and related administrative fees | |
Brokerage revenues: | Brokerage revenues: | |
Securities commissions: | Securities commissions: | |
Securities commissions: | |
Securities commissions: | |
Mutual and other fund products | |
Mutual and other fund products | |
Mutual and other fund products | Mutual and other fund products | | 135 | | | 2 | | | 1 | | | — | | | (1) | | | 137 | |
Insurance and annuity products | Insurance and annuity products | | 113 | | | — | | | — | | | — | | | — | | | 113 | |
Equities, exchange traded funds (“ETFs”) and fixed income products | | 88 | | | 32 | | | — | | | — | | | (1) | | | 119 | |
Equities, exchange-traded funds (“ETFs”) and fixed income products | |
Subtotal securities commissions | Subtotal securities commissions | | 336 | | | 34 | | | 1 | | | — | | | (2) | | | 369 | |
Principal transactions (1) | Principal transactions (1) | | 28 | | | 96 | | | — | | | 4 | | | (1) | | | 127 | |
Total brokerage revenues | Total brokerage revenues | | 364 | | | 130 | | | 1 | | | 4 | | | (3) | | | 496 | |
Account and service fees: | Account and service fees: | |
Mutual fund and annuity service fees | |
Mutual fund and annuity service fees | |
Mutual fund and annuity service fees | Mutual fund and annuity service fees | | 105 | | | — | | | 1 | | | — | | | (1) | | | 105 | |
RJBDP fees | RJBDP fees | | 411 | | | 1 | | | — | | | — | | | (312) | | | 100 | |
Client account and other fees | Client account and other fees | | 56 | | | 1 | | | 5 | | | — | | | (9) | | | 53 | |
Total account and service fees | Total account and service fees | | 572 | | | 2 | | | 6 | | | — | | | (322) | | | 258 | |
Investment banking: | Investment banking: | |
Merger & acquisition and advisory | Merger & acquisition and advisory | | — | | | 87 | | | — | | | — | | | — | | | 87 | |
Merger & acquisition and advisory | |
Merger & acquisition and advisory | |
Equity underwriting | Equity underwriting | | 9 | | | 29 | | | — | | | — | | | — | | | 38 | |
Debt underwriting | Debt underwriting | | — | | | 29 | | | — | | | — | | | — | | | 29 | |
Total investment banking | Total investment banking | | 9 | | | 145 | | | — | | | — | | | — | | | 154 | |
Other: | Other: | |
Affordable housing investments business revenues | |
Affordable housing investments business revenues | |
Affordable housing investments business revenues | Affordable housing investments business revenues | | — | | | 23 | | | — | | | — | | | — | | | 23 | |
All other (1) | All other (1) | | 9 | | | 1 | | | — | | | 6 | | | (7) | | | 9 | |
Total other | Total other | | 9 | | | 24 | | | — | | | 6 | | | (7) | | | 32 | |
Total non-interest revenues | Total non-interest revenues | | 2,056 | | | 301 | | | 213 | | | 10 | | | (338) | | | 2,242 | |
Interest income (1) | Interest income (1) | | 117 | | | 21 | | | 3 | | | 749 | | | 25 | | | 915 | |
Total revenues | Total revenues | | 2,173 | | | 322 | | | 216 | | | 759 | | | (313) | | | 3,157 | |
Interest expense | Interest expense | | (29) | | | (20) | | | — | | | (219) | | | (16) | | | (284) | |
Net revenues | Net revenues | | $ | 2,144 | | | $ | 302 | | | $ | 216 | | | $ | 540 | | | $ | (329) | | | $ | 2,873 | |
(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 March 31, 2022 |
$ in millions | | Private Client Group | | Capital Markets | | Asset Management | | Bank | | Other and intersegment eliminations | | Total |
Revenues: | | | | | | | | | | | | |
Asset management and related administrative fees | | $ | 1,245 | | | $ | 1 | | | $ | 226 | | | $ | — | | | $ | (8) | | | $ | 1,464 | |
Brokerage revenues: | | | | | | | | | | | | |
Securities commissions: | | | | | | | | | | | | |
Mutual and other fund products | | 166 | | | 2 | | | 2 | | | — | | | (1) | | | 169 | |
Insurance and annuity products | | 110 | | | — | | | — | | | — | | | — | | | 110 | |
Equities, ETFs and fixed income products | | 105 | | | 38 | | | — | | | — | | | — | | | 143 | |
Subtotal securities commissions | | 381 | | | 40 | | | 2 | | | — | | | (1) | | | 422 | |
Principal transactions (1) | | 16 | | | 126 | | | — | | | — | | | — | | | 142 | |
Total brokerage revenues | | 397 | | | 166 | | | 2 | | | — | | | (1) | | | 564 | |
Account and service fees: | | | | | | | | | | | | |
Mutual fund and annuity service fees | | 109 | | | — | | | — | | | — | | | — | | | 109 | |
RJBDP fees | | 69 | | | — | | | — | | | — | | | (49) | | | 20 | |
Client account and other fees | | 53 | | | 2 | | | 6 | | | — | | | (11) | | | 50 | |
Total account and service fees | | 231 | | | 2 | | | 6 | | | — | | | (60) | | | 179 | |
Investment banking: | | | | | | | | | | | | |
Merger & acquisition and advisory | | — | | | 139 | | | — | | | — | | | — | | | 139 | |
Equity underwriting | | 9 | | | 52 | | | — | | | — | | | — | | | 61 | |
Debt underwriting | | — | | | 35 | | | — | | | — | | | — | | | 35 | |
Total investment banking | | 9 | | | 226 | | | — | | | — | | | — | | | 235 | |
Other: | | | | | | | | | | | | |
Affordable housing investments business revenues | | — | | | 15 | | | — | | | — | | | — | | | 15 | |
All other (1) | | 6 | | | 1 | | | — | | | 8 | | | (3) | | | 12 | |
Total other | | 6 | | | 16 | | | — | | | 8 | | | (3) | | | 27 | |
Total non-interest revenues | | 1,888 | | | 411 | | | 234 | | | 8 | | | (72) | | | 2,469 | |
Interest income (1) | | 37 | | | 5 | | | — | | | 199 | | | 1 | | | 242 | |
Total revenues | | 1,925 | | | 416 | | | 234 | | | 207 | | | (71) | | | 2,711 | |
Interest expense | | (3) | | | (3) | | | — | | | (10) | | | (22) | | | (38) | |
Net revenues | | $ | 1,922 | | | $ | 413 | | | $ | 234 | | | $ | 197 | | | $ | (93) | | | $ | 2,673 | |
| | | | | | | | |
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements (Unaudited) | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three months ended December 31, 2022 |
$ in millions | | Private Client Group | | Capital Markets | | Asset Management | | Bank | | Other and intersegment eliminations | | Total |
Revenues: | | | | | | | | | | | | |
Asset management and related administrative fees | | $ | 1,053 | | | $ | 1 | | | $ | 197 | | | $ | — | | | $ | (9) | | | $ | 1,242 | |
Brokerage revenues: | | | | | | | | | | | | |
Securities commissions: | | | | | | | | | | | | |
Mutual and other fund products | | 128 | | | 1 | | | 1 | | | — | | | — | | | 130 | |
Insurance and annuity products | | 104 | | | — | | | — | | | — | | | — | | | 104 | |
Equities, ETFs and fixed income products | | 85 | | | 33 | | | — | | | — | | | — | | | 118 | |
Subtotal securities commissions | | 317 | | | 34 | | | 1 | | | — | | | — | | | 352 | |
Principal transactions (1) | | 28 | | | 100 | | | — | | | 4 | | | — | | | 132 | |
Total brokerage revenues | | 345 | | | 134 | | | 1 | | | 4 | | | — | | | 484 | |
Account and service fees: | | | | | | | | | | | | |
Mutual fund and annuity service fees | | 98 | | | — | | | — | | | — | | | — | | | 98 | |
RJBDP fees | | 405 | | | 1 | | | — | | | — | | | (269) | | | 137 | |
Client account and other fees | | 60 | | | 2 | | | 5 | | | — | | | (13) | | | 54 | |
Total account and service fees | | 563 | | | 3 | | | 5 | | | — | | | (282) | | | 289 | |
Investment banking: | | | | | | | | | | | | |
Merger & acquisition and advisory | | — | | | 102 | | | — | | | — | | | — | | | 102 | |
Equity underwriting | | 9 | | | 15 | | | — | | | — | | | (1) | | | 23 | |
Debt underwriting | | — | | | 16 | | | — | | | — | | | — | | | 16 | |
Total investment banking | | 9 | | | 133 | | | — | | | — | | | (1) | | | 141 | |
Other: | | | | | | | | | | | | |
Affordable housing investments business revenues | | — | | | 24 | | | — | | | — | | | — | | | 24 | |
All other (1) | | 6 | | | — | | | 2 | | | 13 | | | (1) | | | 20 | |
Total other | | 6 | | | 24 | | | 2 | | | 13 | | | (1) | | | 44 | |
Total non-interest revenues | | 1,976 | | | 295 | | | 205 | | | 17 | | | (293) | | | 2,200 | |
Interest income (1) | | 109 | | | 23 | | | 2 | | | 676 | | | 17 | | | 827 | |
Total revenues | | 2,085 | | | 318 | | | 207 | | | 693 | | | (276) | | | 3,027 | |
Interest expense | | (22) | | | (23) | | | — | | | (185) | | | (11) | | | (241) | |
Net revenues | | $ | 2,063 | | | $ | 295 | | | $ | 207 | | | $ | 508 | | | $ | (287) | | | $ | 2,786 | |
(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)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Six months ended March 31, 2023 |
$ in millions | | Private Client Group | | Capital Markets | | Asset Management | | Bank | | Other and intersegment eliminations | | Total |
Revenues: | | | | | | | | | | | | |
Asset management and related administrative fees | | $ | 2,155 | | | $ | 1 | | | $ | 403 | | | $ | — | | | $ | (15) | | | $ | 2,544 | |
Brokerage revenues: | | | | | | | | | | | | |
Securities commissions: | | | | | | | | | | | | |
Mutual and other fund products | | 263 | | | 3 | | | 2 | | | — | | | (1) | | | 267 | |
Insurance and annuity products | | 217 | | | — | | | — | | | — | | | — | | | 217 | |
Equities, ETFs and fixed income products | | 173 | | | 65 | | | — | | | — | | | (1) | | | 237 | |
Subtotal securities commissions | | 653 | | | 68 | | | 2 | | | — | | | (2) | | | 721 | |
Principal transactions (1) | | 56 | | | 196 | | | — | | | 8 | | | (1) | | | 259 | |
Total brokerage revenues | | 709 | | | 264 | | | 2 | | | 8 | | | (3) | | | 980 | |
Account and service fees: | | | | | | | | | | | | |
Mutual fund and annuity service fees | | 203 | | | — | | | 1 | | | — | | | (1) | | | 203 | |
RJBDP fees | | 816 | | | 2 | | | — | | | — | | | (581) | | | 237 | |
Client account and other fees | | 116 | | | 3 | | | 10 | | | — | | | (22) | | | 107 | |
Total account and service fees | | 1,135 | | | 5 | | | 11 | | | — | | | (604) | | | 547 | |
Investment banking: | | | | | | | | | | | | |
Merger & acquisition and advisory | | — | | | 189 | | | — | | | — | | | — | | | 189 | |
Equity underwriting | | 18 | | | 44 | | | — | | | — | | | (1) | | | 61 | |
Debt underwriting | | — | | | 45 | | | — | | | — | | | — | | | 45 | |
Total investment banking | | 18 | | | 278 | | | — | | | — | | | (1) | | | 295 | |
Other: | | | | | | | | | | | | |
Affordable housing investments business revenues | | — | | | 47 | | | — | | | — | | | — | | | 47 | |
All other (1) | | 15 | | | 1 | | | 2 | | | 19 | | | (8) | | | 29 | |
Total other | | 15 | | | 48 | | | 2 | | | 19 | | | (8) | | | 76 | |
Total non-interest revenues | | 4,032 | | | 596 | | | 418 | | | 27 | | | (631) | | | 4,442 | |
Interest income (1) | | 226 | | | 44 | | | 5 | | | 1,425 | | | 42 | | | 1,742 | |
Total revenues | | 4,258 | | | 640 | | | 423 | | | 1,452 | | | (589) | | | 6,184 | |
Interest expense | | (51) | | | (43) | | | — | | | (404) | | | (27) | | | (525) | |
Net revenues | | $ | 4,207 | | | $ | 597 | | | $ | 423 | | | $ | 1,048 | | | $ | (616) | | | $ | 5,659 | |
(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)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Six months ended March 31, 2022 |
$ in millions | | Private Client Group | | Capital Markets | | Asset Management | | Bank | | Other and intersegment eliminations | | Total |
Revenues: | | | | | | | | | | | | |
Asset management and related administrative fees | | $ | 2,407 | | | $ | 2 | | | $ | 453 | | | $ | — | | | $ | (16) | | | $ | 2,846 | |
Brokerage revenues: | | | | | | | | | | | | |
Securities commissions: | | | | | | | | | | | | |
Mutual and other fund products | | 337 | | | 4 | | | 4 | | | — | | | (1) | | | 344 | |
Insurance and annuity products | | 221 | | | — | | | — | | | — | | | — | | | 221 | |
Equities, ETFs and fixed income products | | 209 | | | 73 | | | — | | | — | | | — | | | 282 | |
Subtotal securities commissions | | 767 | | | 77 | | | 4 | | | — | | | (1) | | | 847 | |
Principal transactions (1) | | 27 | | | 248 | | | — | | | — | | | — | | | 275 | |
Total brokerage revenues | | 794 | | | 325 | | | 4 | | | — | | | (1) | | | 1,122 | |
Account and service fees: | | | | | | | | | | | | |
Mutual fund and annuity service fees | | 223 | | | — | | | — | | | — | | | (1) | | | 222 | |
RJBDP fees | | 136 | | | — | | | — | | | — | | | (99) | | | 37 | |
Client account and other fees | | 102 | | | 4 | | | 12 | | | — | | | (21) | | | 97 | |
Total account and service fees | | 461 | | | 4 | | | 12 | | | — | | | (121) | | | 356 | |
Investment banking: | | | | | | | | | | | | |
Merger & acquisition and advisory | | — | | | 410 | | | — | | | — | | | — | | | 410 | |
Equity underwriting | | 22 | | | 149 | | | — | | | — | | | — | | | 171 | |
Debt underwriting | | — | | | 79 | | | — | | | — | | | — | | | 79 | |
Total investment banking | | 22 | | | 638 | | | — | | | — | | | — | | | 660 | |
Other: | | | | | | | | | | | | |
Affordable housing investments business revenues | | — | | | 50 | | | — | | | — | | | — | | | 50 | |
All other (1) | | 13 | | | 3 | | | 1 | | | 14 | | | (3) | | | 28 | |
Total other | | 13 | | | 53 | | | 1 | | | 14 | | | (3) | | | 78 | |
Total non-interest revenues | | 3,697 | | | 1,022 | | | 470 | | | 14 | | | (141) | | | 5,062 | |
Interest income (1) | | 70 | | | 10 | | | — | | | 386 | | | 1 | | | 467 | |
Total revenues | | 3,767 | | | 1,032 | | | 470 | | | 400 | | | (140) | | | 5,529 | |
Interest expense | | (6) | | | (5) | | | — | | | (20) | | | (44) | | | (75) | |
Net revenues | | $ | 3,761 | | | $ | 1,027 | | | $ | 470 | | | $ | 380 | | | $ | (184) | | | $ | 5,454 | |
(1) These revenues are generally not in scope of the accounting guidance for revenue from contracts with customers.
At MarchDecember 31, 2023 and September 30, 2022,2023, net receivables related to contracts with customers were $540$481 million and $511$519 million, respectively.
| | | | | | | | |
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements (Unaudited) | |
NOTE 1918 – INTEREST INCOME AND INTEREST EXPENSE
The following table details the components of interest income and interest expense.
| | |
| | | | Three months ended March 31, | | Six months ended March 31, |
$ in millions | $ in millions | | 2023 | | 2022 | | 2023 | | 2022 |
$ in millions | |
$ in millions | |
Interest income: | |
Interest income: | |
Interest income: | Interest income: | | | | | | | | |
Cash and cash equivalents | Cash and cash equivalents | | $ | 75 | | | $ | 3 | | | $ | 130 | | | $ | 6 | |
Cash and cash equivalents | |
Cash and cash equivalents | |
Assets segregated for regulatory purposes and restricted cash | |
Assets segregated for regulatory purposes and restricted cash | |
Assets segregated for regulatory purposes and restricted cash | Assets segregated for regulatory purposes and restricted cash | | 55 | | | 7 | | | 105 | | | 11 | |
Trading assets — debt securities | Trading assets — debt securities | | 13 | | | 4 | | | 27 | | | 9 | |
Trading assets — debt securities | |
Trading assets — debt securities | |
Available-for-sale securities | |
Available-for-sale securities | |
Available-for-sale securities | Available-for-sale securities | | 54 | | | 25 | | | 107 | | | 47 | |
Brokerage client receivables | Brokerage client receivables | | 41 | | | 21 | | | 82 | | | 42 | |
Brokerage client receivables | |
Brokerage client receivables | |
Bank loans, net | |
Bank loans, net | |
Bank loans, net | Bank loans, net | | 657 | | | 171 | | | 1,256 | | | 335 | |
All other | All other | | 20 | | | 11 | | | 35 | | | 17 | |
All other | |
All other | |
Total interest income | |
Total interest income | |
Total interest income | Total interest income | | $ | 915 | | | $ | 242 | | | $ | 1,742 | | | $ | 467 | |
Interest expense: | Interest expense: | | | | | | | | |
Interest expense: | |
Interest expense: | |
Bank deposits | |
Bank deposits | |
Bank deposits | Bank deposits | | $ | 206 | | | $ | 5 | | | 378 | | | $ | 11 | |
Trading liabilities — debt securities | Trading liabilities — debt securities | | 7 | | | 1 | | | 17 | | | 2 | |
Trading liabilities — debt securities | |
Trading liabilities — debt securities | |
Brokerage client payables | |
Brokerage client payables | |
Brokerage client payables | Brokerage client payables | | 23 | | | — | | | 40 | | | 1 | |
Other borrowings | Other borrowings | | 9 | | | 4 | | | 18 | | | 9 | |
Other borrowings | |
Other borrowings | |
Senior notes payable | |
Senior notes payable | |
Senior notes payable | Senior notes payable | | 23 | | | 23 | | | 46 | | | 46 | |
All other | All other | | 16 | | | 5 | | | 26 | | | 6 | |
All other | |
All other | |
Total interest expense | |
Total interest expense | |
Total interest expense | Total interest expense | | $ | 284 | | | $ | 38 | | | $ | 525 | | | $ | 75 | |
Net interest income | Net interest income | | $ | 631 | | | $ | 204 | | | $ | 1,217 | | | $ | 392 | |
Net interest income | |
Net interest income | |
Bank loan provision for credit losses | |
Bank loan provision for credit losses | |
Bank loan provision for credit losses | Bank loan provision for credit losses | | (28) | | | (21) | | | (42) | | | (10) | |
Net interest income after bank loan provision for credit losses | Net interest income after bank loan provision for credit losses | | $ | 603 | | | $ | 183 | | | $ | 1,175 | | | $ | 382 | |
Net interest income after bank loan provision for credit losses | |
Net interest income after bank loan provision for credit losses | |
Interest expense related to bank deposits in the preceding table excludes interest expense associated with affiliate deposits, which has been eliminated in consolidation.
NOTE 2019 – SHARE-BASED COMPENSATION
We have one share-based compensation plan, the Raymond James Financial, Inc. Amended and Restated 2012 Stock Incentive Plan (“the Plan”), for our employees, directors,Board of Directors, and independent contractor financial advisors. On 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 March 31, 2023, 21.0 million shares remained available for grant under the Plan. We may utilize treasury shares for grants under the Plan;Plan, though we are also permitted to issue new shares. Our share-based compensation awards are primarily issued during the first quarter of each fiscal year. Our share-based compensation accounting policies are described in Note 2 of our 20222023 Form 10-K. Other information related to our share-based awards is presented in Note 23 of our 20222023 Form 10-K.
Restricted stock units
During the three and six months ended MarchDecember 31, 2023, we granted approximately 203 thousand and 2.11.7 million RSUs respectively, with a weighted-average grant-date fair value of $108.39 and $116.75, respectively,$106.68, compared with approximately 550 thousand and 2.91.9 million RSUs granted during the three and six months ended MarchDecember 31, 2022, respectively, with a weighted-average grant-date fair value of $107.06 and $98.86, respectively.$117.66. For the three and six months ended MarchDecember 31, 2023, total share-based compensation amortization related to RSUs was $54$87 million, and $130 million, respectively, compared with $41 million and $105$76 million for the three and six months ended MarchDecember 31, 2022, respectively.2022.
As of MarchDecember 31, 2023, there were $430$425 million of total pre-tax compensation costs not yet recognized (net of estimated forfeitures) related to RSUs, including those granted during the sixthree months ended MarchDecember 31, 2023. These costs are expected to be recognized over a weighted-average period of 2.8three years.
| | | | | | | | |
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements (Unaudited) | |
Restricted stock awards
Restricted stock awards (“RSAs”) were issued as a component of our total purchase consideration for TriState Capital Holdings, Inc. (“TriState Capital”) on June 1, 2022, in accordance with the terms of the acquisition. See Note 23 of our 20222023 Form 10-K for further discussion of these awards. For the three and six months ended MarchDecember 31, 2023 total share-based compensation amortization related to these RSAs was $2 million, and $5compared with $3 million respectively.for the three months ended December 31, 2022. As of MarchDecember 31, 2023, there were $16$10 million of total pre-tax compensation costs not yet recognized for these RSAs. These costs are expected to be recognized over a weighted-average period of 2.5two years.
NOTE 2120 – 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 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, apply to TriState Capital Bank. 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 MarchDecember 31, 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 20222023 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, 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 March 31, 2023: | | | | | | | | | | | | |
RJF as of December 31, 2023: | | RJF as of December 31, 2023: | | |
Tier 1 leverage | Tier 1 leverage | | $ | 8,903 | | | 11.5 | % | | $ | 3,104 | | | 4.0 | % | | $ | 3,879 | | | 5.0 | % | Tier 1 leverage | | $ | 9,646 | | | 12.1 | | 12.1 | % | | $ | 3,185 | | | 4.0 | | 4.0 | % | | $ | 3,981 | | | 5.0 | | 5.0 | % |
Tier 1 capital | Tier 1 capital | | $ | 8,903 | | | 20.1 | % | | $ | 2,653 | | | 6.0 | % | | $ | 3,538 | | | 8.0 | % | Tier 1 capital | | $ | 9,646 | | | 21.6 | | 21.6 | % | | $ | 2,676 | | | 6.0 | | 6.0 | % | | $ | 3,568 | | | 8.0 | | 8.0 | % |
CET1 | CET1 | | $ | 8,788 | | | 19.9 | % | | $ | 1,990 | | | 4.5 | % | | $ | 2,874 | | | 6.5 | % | CET1 | | $ | 9,570 | | | 21.5 | | 21.5 | % | | $ | 2,007 | | | 4.5 | | 4.5 | % | | $ | 2,899 | | | 6.5 | | 6.5 | % |
Total capital | Total capital | | $ | 9,474 | | | 21.4 | % | | $ | 3,538 | | | 8.0 | % | | $ | 4,422 | | | 10.0 | % | Total capital | | $ | 10,271 | | | 23.0 | | 23.0 | % | | $ | 3,568 | | | 8.0 | | 8.0 | % | | $ | 4,461 | | | 10.0 | | 10.0 | % |
| RJF as of September 30, 2022: | |
RJF as of September 30, 2023: | |
RJF as of September 30, 2023: | |
RJF as of September 30, 2023: | |
Tier 1 leverage | |
Tier 1 leverage | |
Tier 1 leverage | Tier 1 leverage | | $ | 8,480 | | | 10.3 | % | | $ | 3,304 | | | 4.0 | % | | $ | 4,130 | | | 5.0 | % | | $ | 9,321 | | | 11.9 | | 11.9 | % | | $ | 3,123 | | | 4.0 | | 4.0 | % | | $ | 3,904 | | | 5.0 | | 5.0 | % |
Tier 1 capital | Tier 1 capital | | $ | 8,480 | | | 19.2 | % | | $ | 2,651 | | | 6.0 | % | | $ | 3,534 | | | 8.0 | % | Tier 1 capital | | $ | 9,321 | | | 21.4 | | 21.4 | % | | $ | 2,613 | | | 6.0 | | 6.0 | % | | $ | 3,484 | | | 8.0 | | 8.0 | % |
CET1 | CET1 | | $ | 8,380 | | | 19.0 | % | | $ | 1,988 | | | 4.5 | % | | $ | 2,871 | | | 6.5 | % | CET1 | | $ | 9,245 | | | 21.2 | | 21.2 | % | | $ | 1,960 | | | 4.5 | | 4.5 | % | | $ | 2,831 | | | 6.5 | | 6.5 | % |
Total capital | Total capital | | $ | 9,031 | | | 20.4 | % | | $ | 3,534 | | | 8.0 | % | | $ | 4,418 | | | 10.0 | % | Total capital | | $ | 9,934 | | | 22.8 | | 22.8 | % | | $ | 3,484 | | | 8.0 | | 8.0 | % | | $ | 4,355 | | | 10.0 | | 10.0 | % |
As of MarchDecember 31, 2023, RJF’s regulatory capital increase compared with September 30, 20222023 was driven by an increase in equity due to positive earnings, partially offset by dividendsshare repurchases and share repurchases.dividends. RJF’s Tier 1 capital and Total capital ratios increased compared with September 30, 20222023 resulting from the increase in regulatory capital, partially offset by a smallan increase in risk-weighted assets. The increase in risk-weighted assets was primarily driven by increasesan increase in our bank loan portfolio partially offset by a decrease in assets segregated for regulatory purposes.
and company-owned life insurance policies. RJF’s Tier 1 leverage ratio at MarchDecember 31, 2023 increased compared withto September 30, 20222023 due to the increase in regulatory capital, and lowerwhich was partially offset by higher average assets, primarily driven by a decreasean increase in assets segregated for regulatory purposes.cash and our bank loan portfolio.
To meet the requirements for capital adequacy or to be categorized as “well-capitalized,” Raymond James Bank and TriState Capital Bank must maintain Tier 1 leverage, Tier 1 capital, CET1, and Total capital 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 |
$ in millions | | Amount | | Ratio | | Amount | | Ratio | | Amount | | Ratio |
Raymond James Bank as of March 31, 2023: | | | | | | | | | | | | |
Tier 1 leverage | | $ | 3,303 | | | 7.7 | % | | $ | 1,725 | | | 4.0 | % | | $ | 2,156 | | | 5.0 | % |
Tier 1 capital | | $ | 3,303 | | | 13.1 | % | | $ | 1,512 | | | 6.0 | % | | $ | 2,016 | | | 8.0 | % |
CET1 | | $ | 3,303 | | | 13.1 | % | | $ | 1,134 | | | 4.5 | % | | $ | 1,638 | | | 6.5 | % |
Total capital | | $ | 3,619 | | | 14.4 | % | | $ | 2,016 | | | 8.0 | % | | $ | 2,520 | | | 10.0 | % |
| | | | | | | | | | | | |
Raymond James Bank as of September 30, 2022: | | | | | | | | | | | | |
Tier 1 leverage | | $ | 2,998 | | | 7.1 | % | | $ | 1,695 | | | 4.0 | % | | $ | 2,119 | | | 5.0 | % |
Tier 1 capital | | $ | 2,998 | | | 12.1 | % | | $ | 1,485 | | | 6.0 | % | | $ | 1,979 | | | 8.0 | % |
CET1 | | $ | 2,998 | | | 12.1 | % | | $ | 1,113 | | | 4.5 | % | | $ | 1,608 | | | 6.5 | % |
Total capital | | $ | 3,308 | | | 13.4 | % | | $ | 1,979 | | | 8.0 | % | | $ | 2,474 | | | 10.0 | % |
Raymond James Bank’s regulatory capital increased compared with September 30, 2022, driven by positive earnings, partially offset by dividends paid to RJF. Raymond James Bank’s Tier 1 and Total capital ratios increased compared with September 30, 2022 resulting from the increase in regulatory capital, partially offset by an increase in risk-weighted assets due to growth in the bank loan portfolio and higher cash balances. Raymond James Bank’s Tier 1 leverage ratio at March 31, 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 an increase in the bank loan portfolio and higher cash balances. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Actual | | Requirement for capital adequacy purposes | | To be well-capitalized under regulatory provisions |
$ in millions | | Amount | | Ratio | | Amount | | Ratio | | Amount | | Ratio |
Raymond James Bank as of December 31, 2023: | | | | | | | | | | | | |
Tier 1 leverage | | $ | 3,375 | | | 7.9 | % | | $ | 1,702 | | | 4.0 | % | | $ | 2,127 | | | 5.0 | % |
Tier 1 capital | | $ | 3,375 | | | 13.9 | % | | $ | 1,457 | | | 6.0 | % | | $ | 1,942 | | | 8.0 | % |
CET1 | | $ | 3,375 | | | 13.9 | % | | $ | 1,093 | | | 4.5 | % | | $ | 1,578 | | | 6.5 | % |
Total capital | | $ | 3,681 | | | 15.2 | % | | $ | 1,942 | | | 8.0 | % | | $ | 2,428 | | | 10.0 | % |
| | | | | | | | | | | | |
Raymond James Bank as of September 30, 2023: | | | | | | | | | | | | |
Tier 1 leverage | | $ | 3,355 | | | 7.8 | % | | $ | 1,710 | | | 4.0 | % | | $ | 2,137 | | | 5.0 | % |
Tier 1 capital | | $ | 3,355 | | | 13.7 | % | | $ | 1,465 | | | 6.0 | % | | $ | 1,954 | | | 8.0 | % |
CET1 | | $ | 3,355 | | | 13.7 | % | | $ | 1,099 | | | 4.5 | % | | $ | 1,587 | | | 6.5 | % |
Total capital | | $ | 3,662 | | | 15.0 | % | | $ | 1,954 | | | 8.0 | % | | $ | 2,442 | | | 10.0 | % |
| | | | | | | | | | | | |
TriState Capital Bank as of December 31, 2023: | | | | | | | | | | | | |
Tier 1 leverage | | $ | 1,358 | | | 7.1 | % | | $ | 764 | | | 4.0 | % | | $ | 956 | | | 5.0 | % |
Tier 1 capital | | $ | 1,358 | | | 15.2 | % | | $ | 536 | | | 6.0 | % | | $ | 715 | | | 8.0 | % |
CET1 | | $ | 1,358 | | | 15.2 | % | | $ | 402 | | | 4.5 | % | | $ | 581 | | | 6.5 | % |
Total capital | | $ | 1,403 | | | 15.7 | % | | $ | 715 | | | 8.0 | % | | $ | 894 | | | 10.0 | % |
| | | | | | | | | | | | |
TriState Capital Bank as of September 30, 2023: | | | | | | | | | | | | |
Tier 1 leverage | | $ | 1,290 | | | 7.2 | % | | $ | 721 | | | 4.0 | % | | $ | 902 | | | 5.0 | % |
Tier 1 capital | | $ | 1,290 | | | 14.8 | % | | $ | 524 | | | 6.0 | % | | $ | 699 | | | 8.0 | % |
CET1 | | $ | 1,290 | | | 14.8 | % | | $ | 393 | | | 4.5 | % | | $ | 568 | | | 6.5 | % |
Total capital | | $ | 1,333 | | | 15.3 | % | | $ | 699 | | | 8.0 | % | | $ | 874 | | | 10.0 | % |
| | | | | | | | |
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 March 31, 2023: | | | | | | | | | | | | |
Tier 1 leverage | | $ | 1,159 | | | 7.2 | % | | $ | 646 | | | 4.0 | % | | $ | 808 | | | 5.0 | % |
Tier 1 capital | | $ | 1,159 | | | 13.9 | % | | $ | 499 | | | 6.0 | % | | $ | 666 | | | 8.0 | % |
CET1 | | $ | 1,159 | | | 13.9 | % | | $ | 374 | | | 4.5 | % | | $ | 541 | | | 6.5 | % |
Total capital | | $ | 1,195 | | | 14.4 | % | | $ | 666 | | | 8.0 | % | | $ | 832 | | | 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 and Total capital ratios decreased compared with September 30, 2022, due to 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. TriState Capital Bank’s Tier 1 leverage ratio at March 31, 2023 decreased slightly compared with September 30, 2022 as the increase in regulatory capital was offset by an increase in average assets, primarily driven by the increases in bank loans and available-for-sale securities.
Our bankingbank subsidiaries may pay dividends to RJF 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 bankingbank 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 | $ in millions | | March 31, 2023 | | September 30, 2022 | $ in millions | | December 31, 2023 | | September 30, 2023 |
Raymond James & Associates, Inc.: | Raymond James & Associates, Inc.: | | | | | Raymond James & Associates, Inc.: | | |
(Alternative Method elected) | (Alternative Method elected) | | | | | (Alternative Method elected) | | |
Net capital as a percent of aggregate debit items | Net capital as a percent of aggregate debit items | | 44.3 | % | | 40.9 | % | Net capital as a percent of aggregate debit items | | 38.5 | % | | 43.3 | % |
Net capital | Net capital | | $ | 1,086 | | | $ | 1,152 | |
Less: required net capital | Less: required net capital | | (49) | | | (56) | |
Excess net capital | Excess net capital | | $ | 1,037 | | | $ | 1,096 | |
As of MarchDecember 31, 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 2221 – EARNINGS PER SHARE
The following table presents the computation of basic and diluted earnings per common share.
| | |
| | | | Three months ended March 31, | | Six months ended March 31, |
in millions, except per share amounts | in millions, except per share amounts | | 2023 | | 2022 | | 2023 | | 2022 |
in millions, except per share amounts | |
in millions, except per share amounts | |
Income for basic earnings per common share: | |
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 | | $ | 425 | | | $ | 323 | | | $ | 932 | | | $ | 769 | |
Net income available to common shareholders | |
Net income available to common shareholders | |
Less allocation of earnings and dividends to participating securities | |
Less allocation of earnings and dividends to participating securities | |
Less allocation of earnings and dividends to participating securities | Less allocation of earnings and dividends to participating securities | | (2) | | | — | | | (3) | | | (1) | |
Net income available to common shareholders after participating securities | Net income available to common shareholders after participating securities | | $ | 423 | | | $ | 323 | | | $ | 929 | | | $ | 768 | |
Net income available to common shareholders after participating securities | |
Net income available to common shareholders after participating securities | |
Income for diluted earnings per common share: | |
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 | | $ | 425 | | | $ | 323 | | | $ | 932 | | | $ | 769 | |
Net income available to common shareholders | |
Net income available to common shareholders | |
Less allocation of earnings and dividends to participating securities | |
Less allocation of earnings and dividends to participating securities | |
Less allocation of earnings and dividends to participating securities | Less allocation of earnings and dividends to participating securities | | (2) | | | — | | | (3) | | | (1) | |
Net income available to common shareholders after participating securities | Net income available to common shareholders after participating securities | | $ | 423 | | | $ | 323 | | | $ | 929 | | | $ | 768 | |
Net income available to common shareholders after participating securities | |
Net income available to common shareholders after participating securities | |
Common shares: | |
Common shares: | |
Common shares: | Common shares: | | | | | | | | |
Average common shares in basic computation | Average common shares in basic computation | | 214.3 | | | 207.7 | | | 214.5 | | | 207.0 | |
Average common shares in basic computation | |
Average common shares in basic computation | |
Dilutive effect of outstanding stock options and certain RSUs | |
Dilutive effect of outstanding stock options and certain RSUs | |
Dilutive effect of outstanding stock options and certain RSUs | Dilutive effect of outstanding stock options and certain RSUs | | 4.9 | | | 5.3 | | | 5.2 | | | 5.6 | |
Average common and common equivalent shares used in diluted computation | Average common and common equivalent shares used in diluted computation | | 219.2 | | | 213.0 | | | 219.7 | | | 212.6 | |
Average common and common equivalent shares used in diluted computation | |
Average common and common equivalent shares used in diluted computation | |
Earnings per common share: | |
Earnings per common share: | |
Earnings per common share: | Earnings per common share: | | | | | | | | |
Basic | Basic | | $ | 1.97 | | | $ | 1.56 | | | $ | 4.33 | | | $ | 3.71 | |
Basic | |
Basic | |
Diluted | |
Diluted | |
Diluted | Diluted | | $ | 1.93 | | | $ | 1.52 | | | $ | 4.23 | | | $ | 3.61 | |
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 | | 1.6 | | | — | | | 1.3 | | | 0.5 | |
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 | |
The allocation of earnings and dividends to participating securities in the preceding table represents dividends paid during the period to participating securities, consisting of RSAs and certain RSUs, as well as the RSAs 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 six months ended MarchDecember 31, 2023 and 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.
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RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements (Unaudited) | |
NOTE 2322 – SEGMENT INFORMATION
We currently operate through the following five segments: PCG; Capital Markets; Asset Management; Bank; and Other.
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 20222023 Form 10-K.
The following table presents information concerning operations in these segments.
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three months ended March 31, | | Six months ended March 31, |
$ in millions | | 2023 | | 2022 | | 2023 | | 2022 |
Net revenues: | | | | | | | | |
Private Client Group | | $ | 2,144 | | | $ | 1,922 | | | $ | 4,207 | | | $ | 3,761 | |
Capital Markets | | 302 | | | 413 | | | 597 | | | 1,027 | |
Asset Management | | 216 | | | 234 | | | 423 | | | 470 | |
Bank | | 540 | | | 197 | | | 1,048 | | | 380 | |
Other | | 10 | | | (18) | | | 19 | | | (33) | |
Intersegment eliminations | | (339) | | | (75) | | | (635) | | | (151) | |
Total net revenues | | $ | 2,873 | | | $ | 2,673 | | | $ | 5,659 | | | $ | 5,454 | |
Pre-tax income/(loss): | | | | | | | | |
Private Client Group | | $ | 441 | | | $ | 213 | | | $ | 875 | | | $ | 408 | |
Capital Markets | | (34) | | | 87 | | | (50) | | | 288 | |
Asset Management | | 82 | | | 103 | | | 162 | | | 210 | |
Bank | | 91 | | | 83 | | | 227 | | | 185 | |
Other (1) | | (23) | | | (53) | | | (5) | | | (100) | |
Total pre-tax income | | $ | 557 | | | $ | 433 | | | $ | 1,209 | | | $ | 991 | |
(1) The six months ended March 31, 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. | | | | | | | | | | | | | | | | | | |
| | Three months ended December 31, | | |
$ in millions | | 2023 | | 2022 | | | | |
Net revenues: | | | | | | | | |
Private Client Group | | $ | 2,226 | | | $ | 2,063 | | | | | |
Capital Markets | | 338 | | | 295 | | | | | |
Asset Management | | 235 | | | 207 | | | | | |
Bank | | 441 | | | 508 | | | | | |
Other | | 26 | | | 9 | | | | | |
Intersegment eliminations | | (253) | | | (296) | | | | | |
Total net revenues | | $ | 3,013 | | | $ | 2,786 | | | | | |
Pre-tax income/(loss): | | | | | | | | |
Private Client Group | | $ | 439 | | | $ | 434 | | | | | |
Capital Markets | | 3 | | | (16) | | | | | |
Asset Management | | 93 | | | 80 | | | | | |
Bank | | 92 | | | 136 | | | | | |
Other | | 3 | | | 18 | | | | | |
Total pre-tax income | | $ | 630 | | | $ | 652 | | | | | |
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 March 31, | | Six months ended March 31, |
| | Three months ended December 31, | |
| | Three months ended December 31, | |
| | Three months ended December 31, | |
$ in millions | $ in millions | | 2023 | | 2022 | | 2023 | | 2022 |
Net interest income/(expense): | | | | | | | | |
$ in millions | |
$ in millions | |
Net interest income: | |
Net interest income: | |
Net interest income: | |
Private Client Group | |
Private Client Group | |
Private Client Group | Private Client Group | | $ | 88 | | | $ | 34 | | | $ | 175 | | | $ | 64 | |
Capital Markets | Capital Markets | | 1 | | | 2 | | | 1 | | | 5 | |
Capital Markets | |
Capital Markets | |
Asset Management | |
Asset Management | |
Asset Management | Asset Management | | 3 | | | — | | | 5 | | | — | |
Bank | Bank | | 530 | | | 189 | | | 1,021 | | | 366 | |
Bank | |
Bank | |
Other | |
Other | |
Other | Other | | 9 | | | (21) | | | 15 | | | (43) | |
Net interest income | Net interest income | | $ | 631 | | | $ | 204 | | | $ | 1,217 | | | $ | 392 | |
Net interest income | |
Net interest income | |
The following table presents our total assets on a segment basis.
| $ in millions | $ in millions | | March 31, 2023 | | September 30, 2022 | $ in millions | | December 31, 2023 | | September 30, 2023 |
Total assets: | Total assets: | | | | |
Private Client Group | |
Private Client Group | |
Private Client Group | Private Client Group | | $ | 13,035 | | | $ | 17,770 | |
Capital Markets | Capital Markets | | 2,920 | | | 3,951 | |
Asset Management | Asset Management | | 521 | | | 556 | |
Bank | Bank | | 60,400 | | | 56,737 | |
Other | Other | | 2,304 | | | 1,937 | |
Total | Total | | $ | 79,180 | | | $ | 80,951 | |
| | | | | | | | |
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 | $ in millions | | March 31, 2023 | | September 30, 2022 | $ in millions | | December 31, 2023 | | September 30, 2023 |
Goodwill: | Goodwill: | | | | |
Private Client Group | |
Private Client Group | |
Private Client Group | Private Client Group | | $ | 565 | | | $ | 550 | |
Capital Markets | Capital Markets | | 275 | | | 274 | |
Asset Management | Asset Management | | 69 | | | 69 | |
Bank | Bank | | 529 | | | 529 | |
Total | Total | | $ | 1,438 | | | $ | 1,422 | |
We have operations in the U.S., Canada, and Europe. Substantially allThe vast majority of our long-lived assets are located in the U.S. The following table presents our net revenues and pre-tax incomeincome/(loss) classified by major geographic area in which they were earned.
| | |
| | | | Three months ended March 31, | | Six months ended March 31, |
$ in millions | $ in millions | | 2023 | | 2022 | | 2023 | | 2022 |
$ in millions | |
$ in millions | |
Net revenues: | |
Net revenues: | |
Net revenues: | Net revenues: | | | | | | | | |
U.S. | U.S. | | $ | 2,627 | | | $ | 2,430 | | | $ | 5,167 | | | $ | 5,019 | |
U.S. | |
U.S. | |
Canada | |
Canada | |
Canada | Canada | | 144 | | | 129 | | | 278 | | | 266 | |
Europe | Europe | | 102 | | | 114 | | | 214 | | | 169 | |
Europe | |
Europe | |
Total | |
Total | |
Total | Total | | $ | 2,873 | | | $ | 2,673 | | | $ | 5,659 | | | $ | 5,454 | |
Pre-tax income/(loss): | Pre-tax income/(loss): | | | | | | | | |
Pre-tax income/(loss): | |
Pre-tax income/(loss): | |
U.S. | |
U.S. | |
U.S. | U.S. | | $ | 524 | | | $ | 406 | | | $ | 1,133 | | | $ | 937 | |
Canada | Canada | | 36 | | | 14 | | | 67 | | | 32 | |
Canada | |
Canada | |
Europe | |
Europe | |
Europe | Europe | | (3) | | | 13 | | | 9 | | | 22 | |
Total | Total | | $ | 557 | | | $ | 433 | | | $ | 1,209 | | | $ | 991 | |
Total | |
Total | |
The following table presents our total assets by major geographic area in which they were held.
| $ in millions | $ in millions | | March 31, 2023 | | September 30, 2022 | $ in millions | | December 31, 2023 | | September 30, 2023 |
Total assets: | Total assets: | | | | |
U.S. | U.S. | | $ | 72,960 | | | $ | 74,428 | |
U.S. | |
U.S. | |
Canada | Canada | | 3,460 | | | 3,631 | |
Europe | Europe | | 2,760 | | | 2,892 | |
Total | Total | | $ | 79,180 | | | $ | 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 | $ in millions | | March 31, 2023 | | September 30, 2022 | $ in millions | | December 31, 2023 | | September 30, 2023 |
Goodwill: | Goodwill: | | | | |
U.S. | U.S. | | $ | 1,250 | | | $ | 1,250 | |
U.S. | |
U.S. | |
Canada | Canada | | 24 | | | 23 | |
Europe | Europe | | 164 | | | 149 | |
Total | Total | | $ | 1,438 | | | $ | 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 | |
Net interest analysis | |
Results of operations | |
Private Client Group | |
Capital Markets | |
Asset Management | |
Bank | |
Other | |
Statement of financial condition analysis | |
Liquidity and capital resources | |
Regulatory | |
Critical accounting estimates | |
Recent accounting developmentsAccounting standards update | |
Risk management | |
| | | | | | | | |
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES 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 (including changes in interest rates and inflation), demand for and pricing of our products (including cash sweep and deposit offerings), acquisitions, divestitures, anticipated results of litigation, regulatory developments, and general economic conditions. In addition, words such as “believes,” “expects,” “anticipates,” “plans,” “estimates,” “projects,” and future or conditional verbs such as “will,“may,” “may,“will,” “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 Securities 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.
EXECUTIVE OVERVIEW
Quarter ended MarchDecember 31, 2023 compared with the quarter ended MarchDecember 31, 2022
For our fiscal secondfirst quarter of 2023,2024, we generated net revenues of $2.87$3.01 billion, an increase of 7%8% compared with the prior-year quarter, while pre-tax income of $557$630 million increased 29%decreased $22 million, or 3%. Our net income available to common shareholders of $425$497 million increased 32%decreased 2%, and our earnings per diluted share were $1.93,$2.32, reflecting a 27% increase.an increase of 1%. Our annualized return on common equity (“ROCE”) for the quarter was 17.3%19.1%, compared with 15.0%21.3% for the prior-year quarter, and our annualized return on tangible common equity (“ROTCE”) was 21.3%23.0%(1), compared with 16.8%26.2%(1) for the prior-year quarter. Excluding $28the impact of $23 million of expenses related to acquisitions completed in prior years, such as compensation related to retention awards and amortization of identifiable intangible assets, our adjusted net income available to common shareholders was $446$514 million(1) for the three months ended MarchDecember 31, 2023, 29% higher thanan increase of $9 million, or 2%, compared with adjusted net income available to common shareholders for the prior-year quarter and ourwhich, in addition to acquisition-related expenses, excluded the impact of a $32 million favorable insurance settlement received in the prior-year quarter related to a previously-settled legal matter, which did not recur. Our adjusted earnings per diluted share were $2.03$2.40(1), 25% higher than adjusted earnings per diluted share foran increase of 5% compared with the prior-year quarter. Adjusted annualized ROCE for the quarter was 18.2%19.7%(1) and adjusted annualized ROTCE was 22.3%23.8%(1), compared with adjusted annualized ROCE of 16.1%21.2%(1) and adjusted annualized ROTCE of 18.0%26.1%(1) for the prior-year quarter.
(1)
(1) ROTCE, adjusted net income available to common shareholders, adjusted earnings per diluted share, adjusted annualized ROCE, and adjusted annualized ROTCE are non-GAAP financial measures. 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 | |
QuarterlyThe increase in net revenues increased compared with the prior-year quarter was 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, SumRidge Partners, LLC (“SumRidge Partners”) in July 2022 and, to a lesser extent Charles Stanley Group PLC (“Charles Stanley”) in late January 2022. These increases were offset by lower asset management and related administrative fees, primarily as alargely the result of lowerhigher PCG client assets in fee-based accounts at the beginning of the current quarter compared with the prior-year quarter. Investment banking revenues increased compared with the prior-year quarter as well as lowerbut continued to be impacted by market uncertainty, which negatively impacted industry-wide investment banking activity. Brokerage revenues also increased compared with the prior-year quarter largely due to an increase in client activity in the PCG segment. Offsetting these increases was a challenging market environment duringdecrease in combined net interest income and RJBDP fees of $25 million, or 3%, as the current quarter. Brokerage revenues alsobenefits of higher short-term interest rates on net interest income and RJBDP fees from third-party banks and of higher average interest-earning assets were more than offset by a significant increase in interest expense, primarily resulting from a shift in the mix of deposit balances at our Bank segment, as lower-cost RJBDP balances declined compared with the prior-year quarter, primarily due to lower asset-based trailing revenueswhile balances in the higher-cost ESP, which was launched to PCG segment, as well as decreased activity from depository clients in the Capital Markets segment.March 2023, continued to increase.
Compensation, commissions and benefits expense decreased 2%increased 11%, primarily attributabledue to the decreasean increase in compensable revenues, compared with the prior-year quarter, partially offset by incremental compensation expenses arising from the aforementioned acquisitions,as well as an increase in compensation costs both to support our growth and annual salary increases.cost increases, including salaries. Our compensation ratio, or the ratio of compensation, commissions and benefits expense to net revenues, was 63.3%63.8%, compared with 69.3%62.3% for the prior-year quarter. Excluding acquisition-related compensation expenses, our adjusted compensation ratio was 62.8%63.4%(1), compared with 68.8%61.7%(1) for the prior-year quarter. The declineincrease in the compensation ratio primarily resulted from changes in our revenue mix due to higherincreases in compensable revenues compared with the prior-year quarter, as well as a decrease in combined net interest income and RJBDP fees from third-party banks, which have little associated direct compensation.
Non-compensation expenses increased 28%$64 million, or 16%, largely due to incremental expenses arising from the aforementioned acquisitions, higher legal and regulatory costs, includingfavorable impact of a $32 million insurance settlement received in the prior-year quarter related to a previously settled litigation matter, the impact of an unfavorable arbitration award during the current quarter,a FDIC special assessment of $9 million, as well as higher communications and information processing expenses, reflectingprimarily resulting from continued investments in technology investments and higher business development expenses compared to the relatively low prior-year level. The bank loan provision for credit losses was $28 million for the current-year quarter compared with a provision of $21 million for the prior-year quarter.support our growth.
Our effective income tax rate was 23.3%21.0% for our fiscal secondfirst quarter of 2023,2024, a slight decrease compared with the 25.4%21.9% effective income tax rate for the prior-year quarter, primarily due to the favorable impact of nontaxable valuation gains associated with our company-owned life insurance policies in the current quarter compared with nondeductible valuation losses in the prior-year quarter.
As of MarchDecember 31, 2023, our Tier 1 leverage ratio of 11.5%12.1% and Total capital ratio of 21.4%23.0% were both moresignificantly higher than double the regulatory requirement to be considered well-capitalized. We also continue to have substantial liquidity with $1.8$2.1 billion(2) of cash at the parent as of March 31, 2023, which includes cash the parent loaned to RJ&A to invest on its behalf. Despite a challenging operating environment, we renewed our revolving credit facility in April 2023, expanding our borrowing capacity under the facility from $500 million to $750 million. In addition, we increased our FHLB borrowings in the Bank segment by $500 million as of March 31, 2023 compared to December 31, 2022, and subsequently repaid $200 million of these borrowings in April 2023, leaving us with more than $9 billion of FHLB borrowing capacity in the Bank segment. In addition, although recent turmoil in the banking industry has heightened awareness around bank deposits in excess of FDIC insurance limits, as of March 31, 2023, 88% of our Bank segment deposits were FDIC-insured, including nearly 95% at Raymond James Bank.2023. We believe our fundingcapital and capitalfunding position provides us the opportunity to manage our balance sheet prudently in the current operating environment and to continue beingto be opportunistic and invest in growth. During the three months ended MarchDecember 31, 2023, we repurchased 3.751.41 million shares of our common stock for $350$150 million at an average price of $93$106.51 per share under the Board of Directors’ common stock repurchase authorization. After the effect of those repurchases, $1.1$1.39 billion remained under such authorization. We currently expect to continue to repurchase our common stock in our fiscal 2023second quarter of 2024 to offset the remaining impact of shares issued with the acquisition of TriState Capital in fiscal 2022 as well asand to offset dilution from share-based compensation; however, we will continue to monitor market conditions and other capital needs as we consider these repurchases.
(1) Adjusted compensation ratio is a non-GAAP financial measure. Please see the “Reconciliation of non-GAAP financial measuresAs we look ahead 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
We remain well-positioned entering our fiscal thirdsecond quarter of 2023.2024, we believe we are well-positioned for long-term growth, with our strong capital position and total client assets under administration of $1.37 trillion. We expect our fiscal thirdsecond quarter of 2024 results to be favorably impacted by higher asset management and related administrative fees, which will benefit from the 5%9% sequential increase in both PCG fee-based assets and financial assets under management as of MarchDecember 31, 2023. In addition, our financial advisor recruiting pipelines remain solid across our affiliation options and we continueactivity remains robust, including a strong recruiting pipeline. However, absent a change to see solid retention of existing advisors. However,interest rates from December 31, 2023 levels, we expect our combined net interest income and RJBDP fees from third-party banks to further decline an estimated 5% in total in our fiscal thirdsecond quarter compared with our fiscal first quarter of 2024 due to a decrease in average balances swept to third-party banks and a contraction in the Bank segment’slower net interest margin given the higher level of cash balances we plan to maintainincome in our Bank segment due to market conditions, as well asreflecting the impact from higher-cost diversified funding sources, including our Enhanced Savings Program,ESP which was launched to PCG clients in March 2023. WeWhile we have a healthy investment banking pipeline and we believe the environment for M&A and advisory activity is improving, the pace and timing of transactions are heavily influenced by market conditions, and we expect investment banking activity to continue to face macroeconomic uncertainties which may continuebe negatively impacted by market uncertainty during our fiscal second quarter of 2024 but start to have a negative impact on equity and fixed income markets. As a result, we mayimprove later in our fiscal 2024. We expect to continue to experience headwinds for brokerage revenues and investment banking revenues, despitedue to flat or declining cash balances at many of our healthy investment banking pipelines.depository institution clients. In addition, although we have proactively taken steps to manage our credit risk in our loan portfolio, future economic deterioration or changes in our macroeconomic outlook could result in increased bank loan provisions for credit losses in future periods.
Six months ended March 31, 2023 compared with the six months ended March 31, 2022
For the six months ended March 31, 2023, we generated net revenues of $5.66 billion, an increase of 4% compared with the prior-year period, and pre-tax income of $1.21 billion, an increase of 22%. Our net income available to common shareholders of $932 million was 21% higher than the prior-year period and our earnings per diluted share were $4.23, reflecting a 17% increase. Our annualized ROCE was 19.3%, compared with 18.1% for the prior-year period, and our annualized ROTCE was 23.8%(1), compared with 20.2%(1) for the prior-year period.
The six months ended March 31, 2023 included $57 million of expenses related to acquisitions completed in prior years, such as compensation related to retention awards and amortization of identifiable intangible assets, as well as the favorable impact of a $32 million insurance settlement received during our fiscal first quarter related to a previously-settled litigation matter. Excluding these items, our adjusted net income available to common shareholders was $951 million(1), an increase of 18% compared with the prior-year period, and our adjusted earnings per diluted share were $4.31(1), an increase of 13%.Adjusted annualized ROCE was 19.7%(1), compared with 19.0%(1) in the prior-year period, and adjusted annualized ROTCEwas 24.2%(1), compared with 21.2%(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 asset management and related administrative fees, primarily attributable to lower PCG client assets in fee-based accounts, and declines in investment banking and brokerage revenues primarily due to a more challenging market environment during the current-year period.
Compensation, commissions and benefits expense decreased 5%, 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 62.8%, compared with 68.5% for the prior-year period. Excluding acquisition-related compensation expenses, our adjusted compensation ratio was 62.2%(1), compared with an adjusted compensation ratio of 68.0%(1) for the prior-year period.
Non-compensation expenses increased 23%, primarily due to incremental expenses arising from our acquisitions of Charles Stanley, TriState Capital, and SumRidge, as well as increases in business development expenses, the bank loan provision for credit losses, and communications and information processing expenses. The current-year period also included the aforementioned increase in legal and regulatory costs. Partially offsetting these increases was the aforementioned favorable insurance settlement received.
Our effective income tax rate was 22.6% for the six months ended March 31, 2023, a slight increase from 22.4% for the prior-year period.
(1)
(1) ROTCE, adjusted net income available to common shareholders, adjusted earnings per diluted share, adjusted annualized ROCE, adjusted annualized ROTCE, and adjustedAdjusted compensation ratio areis a non-GAAP financial measures.measure. Please see the “Reconciliation of non-GAAP financial measures to GAAP financial measures” in this MD&A for a reconciliation of thesethis non-GAAP financial measuresmeasure to the most directly comparable GAAP measures,measure, and for other important disclosures.
(2)For additional information, please see the “Liquidity and capital resources - Sources of liquidity” section in this MD&A.
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RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Management’s Discussion and Analysis
In December 2022, the Board of Directors increased the quarterly cash dividend on common shares to $0.42 per share and authorized common stock repurchases of up to $1.5 billion. During the six months ended March 31, 2023, we repurchased 5.04 million shares of our common stock for $488 million at an average price of $97 per share under the Board of Directors’ common stock repurchase authorization.
Management’s Discussion and Analysis | |
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 comparison of current- and prior-period results. Beginning with our fiscal third quarter of 2022, 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 return on tangible common equityROTCE is meaningful to investors as it facilitates comparisons 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 measures.
| | | Three months ended December 31, | |
| | Three months ended December 31, | |
| | Three months ended December 31, | |
$ in millions, except per share amounts | |
$ in millions, except per share amounts | |
$ in millions, except per share amounts | |
Net income available to common shareholders | |
Net income available to common shareholders | |
Net income available to common shareholders | |
Non-GAAP adjustments: | |
Non-GAAP adjustments: | |
Non-GAAP adjustments: | |
Expenses related to acquisitions: | |
Expenses related to acquisitions: | |
Expenses related to acquisitions: | |
| Compensation, commissions and benefits — Acquisition-related retention | |
| Compensation, commissions and benefits — Acquisition-related retention | |
| Compensation, commissions and benefits — Acquisition-related retention | |
| | | Three months ended | Six months ended |
$ in millions | | March 31, 2023 | | March 31, 2022 | | March 31, 2023 | | March 31, 2022 |
Net income available to common shareholders | | $ | 425 | | | $ | 323 | | | $ | 932 | | | $ | 769 | |
Non-GAAP adjustments: | |
Expenses directly related to acquisitions included in the following financial statement line items: | |
| Compensation, commissions and benefits — Acquisition-related retention | | 17 | | | 14 | | | 35 | | | 25 | |
Professional fees | |
| Professional fees | |
| | Professional fees | Professional fees | | — | | | 5 | | | — | | | 7 | |
| Other — Amortization of identifiable intangible assets | Other — Amortization of identifiable intangible assets | | 11 | | | 6 | | | 22 | | | 14 | |
| All other acquisition-related expenses | | — | | | 6 | | | — | | | 6 | |
Total “Other” expense | | 11 | | | 12 | | | 22 | | | 20 | |
Total expenses related to acquisitions | | 28 | | | 31 | | | 57 | | | 52 | |
Other — Insurance settlement received | | — | | | — | | | (32) | | | — | |
Pre-tax impact of non-GAAP adjustments | | 28 | | | 31 | | | 25 | | | 52 | |
Tax effect of non-GAAP adjustments | | (7) | | | (8) | | | (6) | | | (13) | |
Total non-GAAP adjustments, net of tax | | 21 | | | 23 | | | 19 | | | 39 | |
Adjusted net income available to common shareholders | | $ | 446 | | | $ | 346 | | | $ | 951 | | | $ | 808 | |
| Other — Amortization of identifiable intangible assets | |
| Other — Amortization of identifiable intangible assets | |
| Total expenses related to acquisitions | |
| | Total expenses related to acquisitions | |
| Total expenses related to acquisitions | |
Other — Insurance settlement received | |
Other — Insurance settlement received | |
Other — Insurance settlement received | |
Pre-tax impact of non-GAAP adjustments | |
Pre-tax impact of non-GAAP adjustments | |
Pre-tax impact of non-GAAP adjustments | |
Tax effect of non-GAAP adjustments | |
Tax effect of non-GAAP adjustments | |
Tax effect of non-GAAP adjustments | |
Total non-GAAP adjustments, net of tax | |
Total non-GAAP adjustments, net of tax | |
Total non-GAAP adjustments, net of tax | |
Adjusted net income available to common shareholders | |
Adjusted net income available to common shareholders | |
Adjusted net income available to common shareholders | |
| Pre-tax income | |
| Pre-tax income | |
| Pre-tax income | |
Pre-tax impact of non-GAAP adjustments (as detailed above) | |
Pre-tax impact of non-GAAP adjustments (as detailed above) | |
Pre-tax impact of non-GAAP adjustments (as detailed above) | |
Adjusted pre-tax income | |
Adjusted pre-tax income | |
Adjusted pre-tax income | |
| Compensation, commissions and benefits expense | |
| Compensation, commissions and benefits expense | |
| Compensation, commissions and benefits expense | Compensation, commissions and benefits expense | | $ | 1,820 | | | $ | 1,852 | | | $ | 3,556 | | | $ | 3,736 | |
Less: Acquisition-related retention (as detailed above) | Less: Acquisition-related retention (as detailed above) | | 17 | | | 14 | | | 35 | | | 25 | |
Less: Acquisition-related retention (as detailed above) | |
Less: Acquisition-related retention (as detailed above) | |
Adjusted “Compensation, commissions and benefits” expense | Adjusted “Compensation, commissions and benefits” expense | | $ | 1,803 | | | $ | 1,838 | | | $ | 3,521 | | | $ | 3,711 | |
Adjusted “Compensation, commissions and benefits” expense | |
Adjusted “Compensation, commissions and benefits” expense | |
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Total compensation ratio | | 63.3 | % | | 69.3 | % | | 62.8 | % | | 68.5 | % |
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Acquisition-related retention | | 0.5 | % | | 0.5 | % | | 0.6 | % | | 0.5 | % |
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Adjusted total compensation ratio | | 62.8 | % | | 68.8 | % | | 62.2 | % | | 68.0 | % |
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
Management’s Discussion and Analysis
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| | Three months ended | Six months ended |
Earnings per common share | | March 31, 2023 | | March 31, 2022 | | March 31, 2023 | | March 31, 2022 |
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Diluted earnings per common share | | $ | 1.93 | | | $ | 1.52 | | | $ | 4.23 | | | $ | 3.61 | |
Impact of non-GAAP adjustments on diluted earnings per common share: | | | | | | | | |
Expenses directly related to acquisitions included in the following financial statement line items: | | | | | | | | |
Compensation, commissions and benefits — Acquisition-related retention | | 0.08 | | | 0.06 | | | 0.16 | | | 0.12 | |
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Professional fees | | — | | | 0.02 | | | — | | | 0.03 | |
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Other — Amortization of identifiable intangible assets | | 0.05 | | | 0.03 | | | 0.10 | | | 0.07 | |
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All other acquisition-related expenses | | — | | | 0.03 | | | — | | | 0.03 | |
Total “Other” expense | | 0.05 | | | 0.06 | | | 0.10 | | | 0.10 | |
Total expenses related to acquisitions | | 0.13 | | | 0.14 | | | 0.26 | | | 0.25 | |
Other — Insurance settlement received | | — | | | — | | | (0.15) | | | — | |
Tax effect of non-GAAP adjustments | | (0.03) | | | (0.04) | | | (0.03) | | | (0.06) | |
Total non-GAAP adjustments, net of tax | | 0.10 | | | 0.10 | | | 0.08 | | | 0.19 | |
Adjusted diluted earnings per common share | | $ | 2.03 | | | $ | 1.62 | | | $ | 4.31 | | | $ | 3.80 | |
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Return on common equity | | Three months ended | | Six months ended |
$ in millions | | March 31, 2023 | | March 31, 2022 | | March 31, 2023 | | March 31, 2022 |
Average common equity | | $ | 9,806 | | | $ | 8,601 | | | $ | 9,650 | | | $ | 8,482 | |
Impact of non-GAAP adjustments on average common equity: | | | | | | | | |
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Expenses directly related to acquisitions included in the following financial statement line items: | | | | | | | | |
Compensation, commissions and benefits — Acquisition-related retention | | 9 | | | 7 | | | 18 | | | 12 | |
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Professional fees | | — | | | 3 | | | — | | | 3 | |
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Other — Amortization of identifiable intangible assets | | 6 | | | 3 | | | 11 | | | 7 | |
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All other acquisition-related expenses | | — | | | 3 | | | — | | | 2 | |
Total “Other” expense | | 6 | | | 6 | | | 11 | | | 9 | |
Total expenses related to acquisitions | | 15 | | | 16 | | | 29 | | | 24 | |
Other — Insurance settlement received | | — | | | — | | | (21) | | | — | |
Tax effect of non-GAAP adjustments | | (4) | | | (4) | | | (2) | | | (6) | |
Total non-GAAP adjustments, net of tax | | 11 | | | 12 | | | 6 | | | 18 | |
Adjusted average common equity | | $ | 9,817 | | | $ | 8,613 | | | $ | 9,656 | | | $ | 8,500 | |
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Total compensation ratio | | | 63.8 | % | | 62.3 | % | | | | |
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Acquisition-related retention | | | 0.4 | % | | 0.6 | % | | | | |
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Adjusted total compensation ratio | | | 63.4 | % | | 61.7 | % | | | | |
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Diluted earnings per common share | | $ | 2.32 | | | $ | 2.30 | | | | | |
Impact of non-GAAP adjustments on diluted earnings per common share: | | | | | | | | |
Expenses related to acquisitions: | | | | | | | | |
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Compensation, commissions and benefits — Acquisition-related retention | | 0.05 | | | 0.08 | | | | | |
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Professional fees | | 0.01 | | | — | | | | | |
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Other — Amortization of identifiable intangible assets | | 0.05 | | | 0.06 | | | | | |
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Total expenses related to acquisitions | | 0.11 | | | 0.14 | | | | | |
Other — Insurance settlement received | | — | | | (0.15) | | | | | |
Tax effect of non-GAAP adjustments | | (0.03) | | | — | | | | | |
Total non-GAAP adjustments, net of tax | | 0.08 | | | (0.01) | | | | | |
Adjusted diluted earnings per common share | | $ | 2.40 | | | $ | 2.29 | | | | | |
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RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Management’s Discussion and Analysis | |
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| | Three months ended | | Six months ended |
$ in millions | | March 31, 2023 | | March 31, 2022 | | March 31, 2023 | | March 31, 2022 |
Average common equity | | $ | 9,806 | | | $ | 8,601 | | | $ | 9,650 | | | $ | 8,482 | |
Less: | | | | | | | | |
Average goodwill and identifiable intangible assets, net | | 1,936 | | | 992 | | | 1,934 | | | 955 | |
Average deferred tax liabilities related to goodwill and identifiable intangible assets, net | | (129) | | | (77) | | | (128) | | | (72) | |
Average tangible common equity | | $ | 7,999 | | | $ | 7,686 | | | $ | 7,844 | | | $ | 7,599 | |
Impact of non-GAAP adjustments on average tangible common equity: | | | | | | | | |
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Expenses directly related to acquisitions included in the following financial statement line items: | | | | | | | | |
Compensation, commissions and benefits — Acquisition-related retention | | 9 | | | 7 | | | 18 | | | 12 | |
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Other — Amortization of identifiable intangible assets | | 6 | | | 3 | | | 11 | | | 7 | |
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All other acquisition-related expenses | | — | | | 3 | | | — | | | 2 | |
Total “Other” expense | | 6 | | | 6 | | | 11 | | | 9 | |
Total expenses related to acquisitions | | 15 | | | 16 | | | 29 | | | 24 | |
Other — Insurance settlement received | | — | | | — | | | (21) | | | — | |
Tax effect of non-GAAP adjustments | | (4) | | | (4) | | | (2) | | | (6) | |
Total non-GAAP adjustments, net of tax | | 11 | | | 12 | | | 6 | | | 18 | |
Adjusted average tangible common equity | | $ | 8,010 | | | $ | 7,698 | | | $ | 7,850 | | | $ | 7,617 | |
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Return on common equity | | 17.3 | % | | 15.0 | % | | 19.3 | % | | 18.1 | % |
Adjusted return on common equity | | 18.2 | % | | 16.1 | % | | 19.7 | % | | 19.0 | % |
Return on tangible common equity | | 21.3 | % | | 16.8 | % | | 23.8 | % | | 20.2 | % |
Adjusted return on tangible common equity | | 22.3 | % | | 18.0 | % | | 24.2 | % | | 21.2 | % |
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Return on common equity | | Three months ended December 31, | | |
$ in millions | | 2023 | | 2022 | | | | |
Average common equity | | $ | 10,423 | | | $ | 9,537 | | | | | |
Impact of non-GAAP adjustments on average common equity: | | | | | | | | |
Expenses related to acquisitions: | | | | | | | | |
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Compensation, commissions and benefits — Acquisition-related retention | | 6 | | | 9 | | | | | |
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Other — Amortization of identifiable intangible assets | | 6 | | | 5 | | | | | |
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Total expenses related to acquisitions | | 12 | | | 14 | | | | | |
Other — Insurance settlement received | | — | | | (16) | | | | | |
Tax effect of non-GAAP adjustments | | (3) | | | 1 | | | | | |
Total non-GAAP adjustments, net of tax | | 9 | | | (1) | | | | | |
Adjusted average common equity | | $ | 10,432 | | | $ | 9,536 | | | | | |
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Average common equity | | $ | 10,423 | | | $ | 9,537 | | | | | |
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Average goodwill and identifiable intangible assets, net | | 1,908 | | | 1,935 | | | | | |
Average deferred tax liabilities related to goodwill and identifiable intangible assets, net | | (132) | | | (128) | | | | | |
Average tangible common equity | | $ | 8,647 | | | $ | 7,730 | | | | | |
Impact of non-GAAP adjustments on average tangible common equity: | | | | | | | | |
Expenses related to acquisitions: | | | | | | | | |
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Compensation, commissions and benefits — Acquisition-related retention | | 6 | | | 9 | | | | | |
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Other — Amortization of identifiable intangible assets | | 6 | | | 5 | | | | | |
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Total expenses related to acquisitions | | 12 | | | 14 | | | | | |
Other — Insurance settlement received | | — | | | (16) | | | | | |
Tax effect of non-GAAP adjustments | | (3) | | | 1 | | | | | |
Total non-GAAP adjustments, net of tax | | 9 | | | (1) | | | | | |
Adjusted average tangible common equity | | $ | 8,656 | | | $ | 7,729 | | | | | |
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Return on common equity | | 19.1 | % | | 21.3 | % | | | | |
Adjusted return on common equity | | 19.7 | % | | 21.2 | % | | | | |
Return on tangible common equity | | 23.0 | % | | 26.2 | % | | | | |
Adjusted return on tangible common equity | | 23.8 | % | | 26.1 | % | | | | |
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 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 year total, and dividing by three, 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 year total, and dividing by three. 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 ROCE 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 ROTCE, computed by dividing annualized adjusted net income available to common shareholders by adjusted average tangible common equity for each respective period.
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RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Management’s Discussion and Analysis | |
NET INTEREST ANALYSIS
Largely in response to inflationary pressures since the beginning of fiscal year 2022, the Fed rapidly and consistently increased its benchmark short-term interest rates commencing in March 2022 and continuing intothroughout our fiscal second quarter2023. Since the beginning of 2023. Over this period,our fiscal 2023, the Fed has increased the Fed funds target rate from a March 31,September 30, 2022 range of 0.25%2.25% to 0.50%2.50% to a MarchDecember 31, 2023 range of 4.75%5.25% to 5%5.50%. The Fed further increasedWhile the Fed funds targethas left its benchmark rate by 25 basis pointsunchanged in May 2023 andits most recent meetings, it has indicated that it intends to closely monitor short-term interestmarket conditions to determine whether it will continue to hold rates throughout the remainder ofsteady or initiate rate cuts in our fiscal 2023.2024. The following table details the Fed’s recent short-term interest rate activity.activity since the beginning of our fiscal 2023.
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| Fed Funds Target Rate Schedule
RJF Fiscalfiscal quarter ended | | Effective date of interest rate action | | Increase/(decrease)Increase 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%
| 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% |
Rate changes subsequent to March 31, 2023 |
June 30, 2023 | | May 4, 2023 | | 25 | | 5.00% - 5.25% |
September 30, 2023 | | July 27, 2023 | | 25 | | 5.25% - 5.50% |
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| | | | | | |
Increases in short-term interest rates have positively impacted our net interest income and 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 is also sensitive to changes in interest rates.
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 (included in account and service fees), whichour financial results are also sensitive to changes in interest rates, increasesrates. 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. Changes to the regulatory landscape governing the fees the firm earns onOur domestic client assets, including cash sweep balances could negatively impactcontinue to represent a relatively low-cost funding source, while other deposit products utilized as part of our earnings.strategy to diversify our funding sources, such as our ESP introduced to our clients in fiscal 2023, have a higher relative cost than other alternatives.
As a result of our diverse funding sources, strong loan growth and high concentration of floating-rate assets, we benefited from the increases in short-term interest rates during the three and six months ended March 31, 2023. However, despite the recent increases in short-term interest rates, we expect our combinedCombined net interest income and RJBDP fees from third-party banks to declineof $698 million for three months ended December 31, 2023 was $25 million, or 3%, lower compared with the prior-year quarter. The benefits from increases in short-term interest rates throughout our fiscal third2023 and higher interest-earning asset balances compared with the prior-year quarter due towere more than offset by a decreasesignificant increase in averageinterest expense, primarily resulting from a shift in the mix of deposit balances swept to third-party banks as well as a lower net interest margin in our Bank Segment, given the higher level of cash balances we plan to maintain in our Bank segment, dueas lower-cost RJBDP balances declined compared with the prior-year quarter and a significant portion was replaced with higher-cost ESP balances. However, growth in the ESP allowed us to market conditions, as well asdeploy remaining RJBDP balances to third-party banks, which coupled with higher rates earned on such balances resulted in an increase in RJBDP fees from such banks compared with the impact from higher-cost diversified funding sources, including our Enhanced Savings Program, which was launched to PCG clients in March 2023. Our domestic client cash sweep balances represent a relatively low-cost funding source. As we pursue further diversified funding sources other than our domestic client cash sweep balances, such as the Enhanced Savings Program, our costs may increase as those funding sources typically reflect higher costs than our domestic client cash sweep balances. In addition, our pace of loan growth may continue to fluctuate over time in response to changes in interest rates and other market factors.prior-year quarter.
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 | |
The following table presents our consolidated average interest-earning asset and interest-bearing liability balances, interest income and expense and the related rates.
Quarter ended MarchDecember 31, 2023 compared with the quarter ended MarchDecember 31, 2022
| | | | Three months ended March 31, | | | Three months ended December 31, |
| | | 2023 | | | 2022 | | | 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 | | $ | 3,093 | | $ | 36 | | 4.64 | % | | | $ | 1,601 | | $ | 1 | | 0.22 | % |
Cash and cash equivalents | |
Cash and cash equivalents | | | $ | 5,760 | | $ | 79 | | 5.41 | % | | | $ | 2,325 | | $ | 22 | | 3.72 | % |
Available-for-sale securities | Available-for-sale securities | | 10,869 | | 54 | | 2.00 | % | | | 8,869 | | 25 | | 1.16 | % | Available-for-sale securities | | 10,333 | | 56 | | 2.16 | % | | | 11,050 | | 53 | | 1.92 | % |
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: | |
Loans held for investment: | |
SBL | |
SBL | |
SBL | SBL | | 14,493 | | | 240 | | | 6.63 | % | | | 6,753 | | | 39 | | | 2.31 | % | | 14,587 | | | 266 | | 266 | | | 7.16 | | 7.16 | % | | | 15,038 | | | 226 | | 226 | | | 5.87 | | 5.87 | % |
C&I loans | C&I loans | | 11,236 | | | 188 | | | 6.69 | % | | | 8,783 | | | 54 | | | 2.49 | % | C&I loans | | 10,472 | | | 203 | | 203 | | | 7.60 | | 7.60 | % | | | 11,176 | | | 172 | | 172 | | | 6.01 | | 6.01 | % |
CRE loans | CRE loans | | 6,961 | | | 123 | | | 7.07 | % | | | 3,150 | | | 20 | | | 2.56 | % | CRE loans | | 7,245 | | | 141 | | 141 | | | 7.61 | | 7.61 | % | | | 6,798 | | | 107 | | 107 | | | 6.18 | | 6.18 | % |
REIT loans | REIT loans | | 1,671 | | | 31 | | | 7.11 | % | | | 1,324 | | | 9 | | | 2.48 | % | REIT loans | | 1,694 | | | 34 | | 34 | | | 7.76 | | 7.76 | % | | | 1,628 | | | 24 | | 24 | | | 5.87 | | 5.87 | % |
Residential mortgage loans | Residential mortgage loans | | 7,979 | | | 62 | | | 3.13 | % | | | 5,770 | | | 38 | | | 2.69 | % | Residential mortgage loans | | 8,799 | | | 77 | | 77 | | | 3.48 | | 3.48 | % | | | 7,626 | | | 57 | | 57 | | | 2.99 | | 2.99 | % |
Tax-exempt loans (3) | Tax-exempt loans (3) | | 1,652 | | | 10 | | | 3.16 | % | | | 1,289 | | | 9 | | | 3.18 | % | Tax-exempt loans (3) | | 1,481 | | | 10 | | 10 | | | 3.27 | | 3.27 | % | | | 1,594 | | | 10 | | 10 | | | 3.06 | | 3.06 | % |
| Loans held for sale | Loans held for sale | | 170 | | | 3 | | | 7.23 | % | | | 268 | | | 2 | | | 2.94 | % |
Loans held for sale | |
Loans held for sale | | | 140 | | | 3 | | | 8.86 | % | | | 189 | | | 3 | | | 5.39 | % |
Total loans held for sale and investment | Total loans held for sale and investment | | 44,162 | | | 657 | | | 5.97 | % | | | 27,337 | | | 171 | | | 2.53 | % | Total loans held for sale and investment | | 44,418 | | | 734 | | 734 | | | 6.51 | | 6.51 | % | | | 44,049 | | | 599 | | 599 | | | 5.35 | | 5.35 | % |
All other interest-earning assets | All other interest-earning assets | | 153 | | | 2 | | | 5.80 | % | | | 114 | | | 2 | | | 2.75 | % | All other interest-earning assets | | 237 | | | 3 | | 3 | | | 5.98 | | 5.98 | % | | | 143 | | | 2 | | 2 | | | 5.29 | | 5.29 | % |
Interest-earning assets — Bank segment | Interest-earning assets — Bank segment | | $ | 58,277 | | | $ | 749 | | | 5.16 | % | | | $ | 37,921 | | | $ | 199 | | | 2.11 | % | Interest-earning assets — Bank segment | | $ | 60,748 | | | $ | | $ | 872 | | | 5.66 | | 5.66 | % | | | $ | 57,567 | | | $ | | $ | 676 | | | 4.63 | | 4.63 | % |
All other segments: | All other segments: | | | | | | | | | | | | | |
Cash and cash equivalents | |
Cash and cash equivalents | |
Cash and cash equivalents | Cash and cash equivalents | | $ | 3,130 | | | $ | 39 | | | 5.10 | % | | | $ | 4,318 | | | $ | 2 | | | 0.19 | % | | $ | 3,469 | | | $ | | $ | 53 | | | 6.07 | | 6.07 | % | | | $ | 3,436 | | | $ | | $ | 33 | | | 3.78 | | 3.78 | % |
Assets segregated for regulatory purposes and restricted cash | Assets segregated for regulatory purposes and restricted cash | | 4,856 | | | 55 | | | 4.36 | % | | | 19,522 | | | 7 | | | 0.15 | % | Assets segregated for regulatory purposes and restricted cash | | 3,623 | | | 47 | | 47 | | | 5.13 | | 5.13 | % | | | 6,237 | | | 50 | | 50 | | | 3.17 | | 3.17 | % |
Trading assets — debt securities | Trading assets — debt securities | | 1,057 | | | 13 | | | 5.05 | % | | | 464 | | | 4 | | | 3.86 | % | Trading assets — debt securities | | 1,100 | | | 15 | | 15 | | | 5.57 | | 5.57 | % | | | 1,080 | | | 14 | | 14 | | | 5.10 | | 5.10 | % |
Brokerage client receivables | Brokerage client receivables | | 2,205 | | | 41 | | | 7.66 | % | | | 2,558 | | | 21 | | | 3.29 | % | Brokerage client receivables | | 2,138 | | | 45 | | 45 | | | 8.39 | | 8.39 | % | | | 2,398 | | | 41 | | 41 | | | 6.70 | | 6.70 | % |
All other interest-earning assets | All other interest-earning assets | | 1,817 | | | 18 | | | 3.12 | % | | | 1,614 | | | 9 | | | 2.47 | % | All other interest-earning assets | | 1,936 | | | 21 | | 21 | | | 3.92 | | 3.92 | % | | | 2,001 | | | 13 | | 13 | | | 2.58 | | 2.58 | % |
Interest-earning assets — all other segments | Interest-earning assets — all other segments | | $ | 13,065 | | | $ | 166 | | | 4.98 | % | | | $ | 28,476 | | | $ | 43 | | | 0.63 | % | Interest-earning assets — all other segments | | $ | 12,266 | | | $ | | $ | 181 | | | 5.81 | | 5.81 | % | | | $ | 15,152 | | | $ | | $ | 151 | | | 3.93 | | 3.93 | % |
Total interest-earning assets | Total interest-earning assets | | $ | 71,342 | | | $ | 915 | | | 5.13 | % | | | $ | 66,397 | | | $ | 242 | | | 1.48 | % | Total interest-earning assets | | $ | 73,014 | | | $ | | $ | 1,053 | | | 5.69 | | 5.69 | % | | | $ | 72,719 | | | $ | | $ | 827 | | | 4.48 | | 4.48 | % |
Interest-bearing liabilities: | Interest-bearing liabilities: | | | | | | | | | | | | | |
Bank segment: | Bank segment: | | | |
Bank segment: | |
Bank segment: | |
Bank deposits: | Bank deposits: | | | |
Bank deposits: | |
Bank deposits: | |
Money market and savings accounts | |
Money market and savings accounts | |
Money market and savings accounts | Money market and savings accounts | | $ | 44,554 | | | $ | 132 | | | 1.20 | % | | | $ | 33,136 | | | $ | 1 | | | 0.01 | % | | $ | 32,001 | | | $ | | $ | 160 | | | 1.99 | | 1.99 | % | | | $ | 45,165 | | | $ | | $ | 123 | | | 1.08 | | 1.08 | % |
Interest-bearing demand deposits | Interest-bearing demand deposits | | 5,620 | | | 62 | | | 4.47 | % | | | 293 | | | 1 | | | 1.10 | % | Interest-bearing demand deposits | | 19,565 | | | 244 | | 244 | | | 4.97 | | 4.97 | % | | | 5,149 | | | 45 | | 45 | | | 3.42 | | 3.42 | % |
Certificates of deposit | Certificates of deposit | | 1,859 | | | 16 | | | 3.57 | % | | | 733 | | | 3 | | | 1.83 | % | Certificates of deposit | | 2,757 | | | 32 | | 32 | | | 4.56 | | 4.56 | % | | | 1,225 | | | 8 | | 8 | | | 2.48 | | 2.48 | % |
Total bank deposits (4) | Total bank deposits (4) | | 52,033 | | | 210 | | | 1.64 | % | | | 34,162 | | | 5 | | | 0.06 | % | Total bank deposits (4) | | 54,323 | | | 436 | | 436 | | | 3.19 | | 3.19 | % | | | 51,539 | | | 176 | | 176 | | | 1.35 | | 1.35 | % |
FHLB advances and all other interest-bearing liabilities | FHLB advances and all other interest-bearing liabilities | | 1,452 | | | 9 | | | 2.80 | % | | | 864 | | | 4 | | | 2.17 | % | FHLB advances and all other interest-bearing liabilities | | 1,231 | | | 10 | | 10 | | | 3.03 | | 3.03 | % | | | 1,397 | | | 9 | | 9 | | | 2.61 | | 2.61 | % |
Interest-bearing liabilities — Bank segment | Interest-bearing liabilities — Bank segment | | $ | 53,485 | | | $ | 219 | | | 1.67 | % | | | $ | 35,026 | | | $ | 9 | | | 0.11 | % | Interest-bearing liabilities — Bank segment | | $ | 55,554 | | | $ | | $ | 446 | | | 3.19 | | 3.19 | % | | | $ | 52,936 | | | $ | | $ | 185 | | | 1.38 | | 1.38 | % |
All other segments: | All other segments: | | | | | | | | | | | | | |
Trading liabilities — debt securities | Trading liabilities — debt securities | | $ | 725 | | | $ | 7 | | | 4.14 | % | | | $ | 168 | | | $ | 1 | | | 1.89 | % |
Trading liabilities — debt securities | |
Trading liabilities — debt securities | | | $ | 756 | | | $ | 11 | | | 5.66 | % | | | $ | 778 | | | $ | 10 | | | 5.07 | % |
Brokerage client payables | Brokerage client payables | | 6,044 | | | 23 | | | 1.52 | % | | | 21,405 | | | — | | | 0.01 | % | Brokerage client payables | | 4,668 | | | 20 | | 20 | | | 1.72 | | 1.72 | % | | | 7,749 | | | 17 | | 17 | | | 0.87 | | 0.87 | % |
Senior notes payable | Senior notes payable | | 2,038 | | | 23 | | | 4.44 | % | | | 2,037 | | | 23 | | | 4.44 | % | Senior notes payable | | 2,039 | | | 23 | | 23 | | | 4.51 | | 4.51 | % | | | 2,038 | | | 23 | | 23 | | | 4.52 | | 4.52 | % |
All other interest-bearing liabilities (4) | All other interest-bearing liabilities (4) | | 113 | | | 12 | | | 3.72 | % | | | 199 | | | 5 | | | 5.77 | % | All other interest-bearing liabilities (4) | | 980 | | | 7 | | 7 | | | 2.96 | | 2.96 | % | | | 585 | | | 6 | | 6 | | | 2.61 | | 2.61 | % |
Interest-bearing liabilities — all other segments | Interest-bearing liabilities — all other segments | | $ | 8,920 | | | $ | 65 | | | 2.43 | % | | | $ | 23,809 | | | $ | 29 | | | 0.47 | % | Interest-bearing liabilities — all other segments | | $ | 8,443 | | | $ | | $ | 61 | | | 2.89 | | 2.89 | % | | | $ | 11,150 | | | $ | | $ | 56 | | | 1.92 | | 1.92 | % |
Total interest-bearing liabilities | Total interest-bearing liabilities | | $ | 62,405 | | | $ | 284 | | | 1.78 | % | | | $ | 58,835 | | | $ | 38 | | | 0.26 | % | Total interest-bearing liabilities | | $ | 63,997 | | | $ | | $ | 507 | | | 3.15 | | 3.15 | % | | | $ | 64,086 | | | $ | | $ | 241 | | | 1.47 | | 1.47 | % |
Firmwide net interest income | Firmwide net interest income | | | | $ | 631 | | | | | | | | $ | 204 | | | |
Net interest margin (net yield on interest-earning assets) | Net interest margin (net yield on interest-earning assets) | | | | | | | |
Net interest margin (net yield on interest-earning assets) | |
Net interest margin (net yield on interest-earning assets) | |
Bank segment | |
Bank segment | |
Bank segment | Bank segment | | 3.63 | % | | | | 2.01 | % | | | | | | 2.74 | % | | | | | | | 3.36 | % |
Firmwide | Firmwide | | 3.59 | % | | | | 1.25 | % | Firmwide | | | | | | 2.97 | % | | | | | | | 3.19 | % |
(1)
(1) Loans are presented net of unamortized purchase discounts or premiums, unearned income, and deferred origination fees and costs.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 yieldaverage rate 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 yearsperiods 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”.
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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 December 31, | |
| | Three months ended December 31, | |
| | Three months ended December 31, | |
| | 2023 compared to 2022 | |
| | 2023 compared to 2022 | |
| | 2023 compared to 2022 | |
| | Three months ended March 31, | |
| | 2023 compared to 2022 | |
| | | Increase/(decrease) due to | |
$ in millions | $ in millions | | Volume | | Rate | | Total | |
$ in millions | |
$ in millions | |
Interest-earning assets: | |
Interest-earning assets: | |
Interest-earning assets: | Interest-earning assets: | | Interest income | | Interest income |
Bank segment: | Bank segment: | | | | | | | |
Cash and cash equivalents | Cash and cash equivalents | | $ | 2 | | | $ | 33 | | | $ | 35 | | |
Cash and cash equivalents | |
Cash and cash equivalents | |
Available-for-sale securities | |
Available-for-sale securities | |
Available-for-sale securities | Available-for-sale securities | | 7 | | | 22 | | | 29 | | |
Loans held for sale and investment: | Loans held for sale and investment: | | |
Loans held for sale and investment: | |
Loans held for sale and investment: | |
Loans held for investment: | |
Loans held for investment: | |
Loans held for investment: | Loans held for investment: | | |
SBL | SBL | | 76 | | | 125 | | | 201 | | |
SBL | |
SBL | |
C&I loans | |
C&I loans | |
C&I loans | C&I loans | | 19 | | | 115 | | | 134 | | |
CRE loans | CRE loans | | 41 | | | 62 | | | 103 | | |
CRE loans | |
CRE loans | |
REIT loans | |
REIT loans | |
REIT loans | REIT loans | | 3 | | | 19 | | | 22 | | |
Residential mortgage loans | Residential mortgage loans | | 17 | | | 7 | | | 24 | | |
Residential mortgage loans | |
Residential mortgage loans | |
Tax-exempt loans | Tax-exempt loans | | — | | | 1 | | | 1 | | |
| Tax-exempt loans | |
Tax-exempt loans | |
Loans held for sale | |
Loans held for sale | |
Loans held for sale | Loans held for sale | | — | | | 1 | | | 1 | | |
Total loans held for sale and investment | Total loans held for sale and investment | | 156 | | | 330 | | | 486 | | |
Total loans held for sale and investment | |
Total loans held for sale and investment | |
All other interest-earning assets | |
All other interest-earning assets | |
All other interest-earning assets | All other interest-earning assets | | 1 | | | (1) | | | — | | |
Interest-earning assets — Bank segment | Interest-earning assets — Bank segment | | $ | 166 | | | $ | 384 | | | $ | 550 | | |
Interest-earning assets — Bank segment | |
Interest-earning assets — Bank segment | |
All other segments: | |
All other segments: | |
All other segments: | All other segments: | | | | | | | |
Cash and cash equivalents | Cash and cash equivalents | | $ | — | | | $ | 37 | | | $ | 37 | | |
Cash and cash equivalents | |
Cash and cash equivalents | |
Assets segregated for regulatory purposes and restricted cash | |
Assets segregated for regulatory purposes and restricted cash | |
Assets segregated for regulatory purposes and restricted cash | Assets segregated for regulatory purposes and restricted cash | | (11) | | | 59 | | | 48 | | |
Trading assets — debt securities | Trading assets — debt securities | | 6 | | | 3 | | | 9 | | |
Trading assets — debt securities | |
Trading assets — debt securities | |
Brokerage client receivables | |
Brokerage client receivables | |
Brokerage client receivables | Brokerage client receivables | | (6) | | | 26 | | | 20 | | |
All other interest-earning assets | All other interest-earning assets | | 4 | | | 5 | | | 9 | | |
All other interest-earning assets | |
All other interest-earning assets | |
Interest-earning assets — all other segments | |
Interest-earning assets — all other segments | |
Interest-earning assets — all other segments | Interest-earning assets — all other segments | | $ | (7) | | | $ | 130 | | | $ | 123 | | |
Total interest-earning assets | Total interest-earning assets | | $ | 159 | | | $ | 514 | | | $ | 673 | | |
Total interest-earning assets | |
Total interest-earning assets | |
| | | | | | | |
| | | |
| | | |
Interest-bearing liabilities: | |
Interest-bearing liabilities: | |
Interest-bearing liabilities: | Interest-bearing liabilities: | | Interest expense | | Interest expense |
Bank segment: | Bank segment: | | | |
Bank deposits: | Bank deposits: | | |
Bank deposits: | |
Bank deposits: | |
Money market and savings accounts | |
Money market and savings accounts | |
Money market and savings accounts | Money market and savings accounts | | $ | 1 | | | $ | 130 | | | $ | 131 | | |
Interest-bearing demand deposits | Interest-bearing demand deposits | | 60 | | | 1 | | | 61 | | |
Interest-bearing demand deposits | |
Interest-bearing demand deposits | |
Certificates of deposit | |
Certificates of deposit | |
Certificates of deposit | Certificates of deposit | | 8 | | | 5 | | | 13 | | |
Total bank deposits | Total bank deposits | | 69 | | | 136 | | | 205 | | |
Total bank deposits | |
Total bank deposits | |
FHLB advances and all other interest-bearing liabilities | |
FHLB advances and all other interest-bearing liabilities | |
FHLB advances and all other interest-bearing liabilities | FHLB advances and all other interest-bearing liabilities | | 4 | | | 1 | | | 5 | | |
Interest-bearing liabilities — Bank segment | Interest-bearing liabilities — Bank segment | | $ | 73 | | | $ | 137 | | | $ | 210 | | |
Interest-bearing liabilities — Bank segment | |
Interest-bearing liabilities — Bank segment | |
All other segments: | |
All other segments: | |
All other segments: | All other segments: | | | | | | | |
Trading liabilities — debt securities | Trading liabilities — debt securities | | $ | 4 | | | $ | 2 | | | $ | 6 | | |
Trading liabilities — debt securities | |
Trading liabilities — debt securities | |
Brokerage client payables | Brokerage client payables | | 3 | | | 20 | | | 23 | | |
| Brokerage client payables | |
Brokerage client payables | |
Senior notes payable | |
Senior notes payable | |
Senior notes payable | |
All other interest-bearing liabilities | |
All other interest-bearing liabilities | |
All other interest-bearing liabilities | All other interest-bearing liabilities | | 4 | | | 3 | | | 7 | | |
Interest-bearing liabilities — all other segments | Interest-bearing liabilities — all other segments | | $ | 11 | | | $ | 25 | | | $ | 36 | | |
Interest-bearing liabilities — all other segments | |
Interest-bearing liabilities — all other segments | |
Total interest-bearing liabilities | |
Total interest-bearing liabilities | |
Total interest-bearing liabilities | Total interest-bearing liabilities | | $ | 84 | | | $ | 162 | | | $ | 246 | | |
Change in firmwide net interest income | Change in firmwide net interest income | | $ | 75 | | | $ | 352 | | | $ | 427 | | |
Change in firmwide net interest income | |
Change in firmwide net interest income | |
| | | | | | | | |
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Management’s Discussion and Analysis | |
Six months ended March 31, 2023 compared with the six months ended March 31, 2022
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Six months ended March 31, |
| | 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 | | $ | 2,705 | | $ | 58 | | 4.24 | % | | | $ | 1,876 | | $ | 2 | | 0.19 | % |
Available-for-sale securities | | 10,961 | | 107 | | 1.95 | % | | | 8,688 | | 47 | | 1.09 | % |
Loans held for sale and investment: (1) (2) | | | | | | | | | | | | | |
Loans held for investment: | | | | | | | | | | | | | |
SBL | | 14,768 | | | 466 | | | 6.27 | % | | | 6,519 | | | 74 | | | 2.26 | % |
C&I loans | | 11,206 | | | 357 | | | 6.31 | % | | | 8,681 | | | 109 | | | 2.49 | % |
CRE loans | | 6,879 | | | 233 | | | 6.75 | % | | | 3,044 | | | 40 | | | 2.61 | % |
REIT loans | | 1,649 | | | 55 | | | 6.64 | % | | | 1,227 | | | 16 | | | 2.51 | % |
Residential mortgage loans | | 7,801 | | | 119 | | | 3.06 | % | | | 5,609 | | | 75 | | | 2.68 | % |
Tax-exempt loans (3) | | 1,623 | | | 20 | | | 3.11 | % | | | 1,293 | | | 17 | | | 3.19 | % |
| | | | | | | | | | | | | |
Loans held for sale | | 179 | | | 6 | | | 6.27 | % | | | 254 | | | 4 | | | 2.94 | % |
Total loans held for sale and investment | | 44,105 | | | 1,256 | | | 5.68 | % | | | 26,627 | | | 335 | | | 2.53 | % |
All other interest-earning assets | | 148 | | | 4 | | | 5.55 | % | | | 141 | | | 2 | | | 2.21 | % |
Interest-earning assets — Bank segment | | $ | 57,919 | | | $ | 1,425 | | | 4.91 | % | | | $ | 37,332 | | | $ | 386 | | | 2.07 | % |
All other segments: | | | | | | | | | | | | | |
Cash and cash equivalents | | $ | 3,401 | | | $ | 72 | | | 4.25 | % | | | $ | 4,078 | | | $ | 4 | | | 0.19 | % |
Assets segregated for regulatory purposes and restricted cash | | 5,554 | | | 105 | | | 3.81 | % | | | 15,844 | | | 11 | | | 0.14 | % |
Trading assets — debt securities | | 1,069 | | | 27 | | | 5.08 | % | | | 516 | | | 9 | | | 3.35 | % |
Brokerage client receivables | | 2,301 | | | 82 | | | 7.16 | % | | | 2,521 | | | 42 | | | 3.32 | % |
All other interest-earning assets | | 1,909 | | | 31 | | | 2.79 | % | | | 1,622 | | | 15 | | | 1.92 | % |
Interest-earning assets — all other segments | | $ | 14,234 | | | $ | 317 | | | 4.42 | % | | | $ | 24,581 | | | $ | 81 | | | 0.66 | % |
Total interest-earning assets | | $ | 72,153 | | | $ | 1,742 | | | 4.81 | % | | | $ | 61,913 | | | $ | 467 | | | 1.51 | % |
Interest-bearing liabilities: | | | | | | | | | | | | | |
Bank segment: | | | | | | | | | | | | | |
Bank deposits: | | | | | | | | | | | | | |
Money market and savings accounts | | $ | 44,864 | | | $ | 253 | | | 1.13 | % | | | $ | 32,542 | | | $ | 1 | | | 0.01 | % |
Interest-bearing demand deposits | | 5,382 | | | 109 | | | 4.05 | % | | | 239 | | | 3 | | | 2.78 | % |
Certificates of deposit | | 1,538 | | | 24 | | | 3.13 | % | | | 789 | | | 7 | | | 1.85 | % |
Total bank deposits (4) | | 51,784 | | | 386 | | | 1.49 | % | | | 33,570 | | | 11 | | | 0.06 | % |
FHLB advances and all other interest-bearing liabilities | | 1,374 | | | 18 | | | 2.63 | % | | | 863 | | | 9 | | | 2.19 | % |
Interest-bearing liabilities — Bank segment | | $ | 53,158 | | | $ | 404 | | | 1.52 | % | | | $ | 34,433 | | | $ | 20 | | | 0.12 | % |
All other segments: | | | | | | | | | | | | | |
Trading liabilities — debt securities | | $ | 752 | | | $ | 17 | | | 4.63 | % | | | $ | 187 | | | $ | 2 | | | 1.63 | % |
Brokerage client payables | | 6,842 | | | 40 | | | 1.16 | % | | | 17,275 | | | 1 | | | 0.01 | % |
Senior notes payable | | 2,038 | | | 46 | | | 4.44 | % | | | 2,037 | | | 46 | | | 4.44 | % |
All other interest-bearing liabilities (4) | | 133 | | | 18 | | | 2.45 | % | | | 194 | | | 6 | | | 6.28 | % |
Interest-bearing liabilities — all other segments | | $ | 9,765 | | | $ | 121 | | | 2.13 | % | | | $ | 19,693 | | | $ | 55 | | | 0.55 | % |
Total interest-bearing liabilities | | $ | 62,923 | | | $ | 525 | | | 1.61 | % | | | $ | 54,126 | | | $ | 75 | | | 0.28 | % |
Firmwide net interest income | | | | $ | 1,217 | | | | | | | | $ | 392 | | | |
Net interest margin (net yield on interest-earning assets) | | | | | | | | | | | | | |
Bank segment | | | | | | 3.51 | % | | | | | | | 1.97 | % |
Firmwide | | | | | | 3.38 | % | | | | | | | 1.27 | % |
(1) Loans are presented net of unamortized discounts, unearned income, and deferred loan fees and costs.
(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
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.
| | | | | | | | | | | | | | | | | | | | |
| | Six months ended March 31, |
| | 2023 compared to 2022 |
| | Increase/(decrease) due to |
$ in millions | | Volume | | Rate | | Total |
Interest-earning assets: | | Interest income |
Bank segment: | | | | | | |
Cash and cash equivalents | | $ | 2 | | | $ | 54 | | | $ | 56 | |
Available-for-sale securities | | 15 | | | 45 | | | 60 | |
Loans held for sale and investment: | | | | | | |
Loans held for investment: | | | | | | |
SBL | | 163 | | | 229 | | | 392 | |
C&I loans | | 40 | | | 208 | | | 248 | |
CRE loans | | 85 | | | 108 | | | 193 | |
REIT loans | | 7 | | | 32 | | | 39 | |
Residential mortgage loans | | 33 | | | 11 | | | 44 | |
Tax-exempt loans | | 4 | | | (1) | | | 3 | |
| | | | | | |
Loans held for sale | | (3) | | | 5 | | | 2 | |
Total loans held for sale and investment | | 329 | | | 592 | | | 921 | |
All other interest-earning assets | | — | | | 2 | | | 2 | |
Interest-earning assets — Bank segment | | $ | 346 | | | $ | 693 | | | $ | 1,039 | |
All other segments: | | | | | | |
Cash and cash equivalents | | $ | (2) | | | $ | 70 | | | $ | 68 | |
Assets segregated for regulatory purposes and restricted cash | | (26) | | | 120 | | | 94 | |
Trading assets — debt securities | | 12 | | | 6 | | | 18 | |
Brokerage client receivables | | (11) | | | 51 | | | 40 | |
All other interest-earning assets | | 5 | | | 11 | | | 16 | |
Interest-earning assets — all other segments | | $ | (22) | | | $ | 258 | | | $ | 236 | |
Total interest-earning assets | | $ | 324 | | | $ | 951 | | | $ | 1,275 | |
| | | | | | |
Interest-bearing liabilities: | | Interest expense |
Bank segment: | | | | | | |
Bank deposits: | | | | | | |
Money market and savings accounts | | $ | 1 | | | $ | 251 | | | $ | 252 | |
Interest-bearing demand deposits | | 104 | | | 2 | | | 106 | |
Certificates of deposit | | 10 | | | 7 | | | 17 | |
Total bank deposits | | 115 | | | 260 | | | 375 | |
FHLB advances and all other interest-bearing liabilities | | 7 | | | 2 | | | 9 | |
Interest-bearing liabilities — Bank segment | | $ | 122 | | | $ | 262 | | | $ | 384 | |
All other segments: | | | | | | |
Trading liabilities — debt securities | | $ | 9 | | | $ | 6 | | | $ | 15 | |
Brokerage client payables | | (2) | | | 41 | | | 39 | |
| | | | | | |
All other interest-bearing liabilities | | 4 | | | 8 | | | 12 | |
Interest-bearing liabilities — all other segments | | $ | 11 | | | $ | 55 | | | $ | 66 | |
Total interest-bearing liabilities | | $ | 133 | | | $ | 317 | | | $ | 450 | |
Change in firmwide net interest income | | $ | 191 | | | $ | 634 | | | $ | 825 | |
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 20222023 Form 10-K.
Operating results
| | |
| | | | Three months ended March 31, | | Six months ended March 31, |
$ in millions | $ in millions | | 2023 | | 2022 | | % change | | 2023 | | 2022 | | % change |
$ in millions | |
$ in millions | |
Revenues: | |
Revenues: | |
Revenues: | Revenues: | | | | | | | | | | | | |
Asset management and related administrative fees | Asset management and related administrative fees | | $ | 1,102 | | | $ | 1,245 | | | (11) | % | | $ | 2,155 | | | $ | 2,407 | | | (10) | % |
Asset management and related administrative fees | |
Asset management and related administrative fees | |
Brokerage revenues: | |
Brokerage revenues: | |
Brokerage revenues: | Brokerage revenues: | |
Mutual and other fund products | Mutual and other fund products | | 135 | | | 166 | | | (19) | % | | 263 | | | 337 | | | (22) | % |
Mutual and other fund products | |
Mutual and other fund products | |
Insurance and annuity products | |
Insurance and annuity products | |
Insurance and annuity products | Insurance and annuity products | | 113 | | | 110 | | | 3 | % | | 217 | | | 221 | | | (2) | % |
Equities, ETFs and fixed income products | Equities, ETFs and fixed income products | | 116 | | | 121 | | | (4) | % | | 229 | | | 236 | | | (3) | % |
Equities, ETFs and fixed income products | |
Equities, ETFs and fixed income products | |
Total brokerage revenues | |
Total brokerage revenues | |
Total brokerage revenues | Total brokerage revenues | | 364 | | | 397 | | | (8) | % | | 709 | | | 794 | | | (11) | % |
Account and service fees: | Account and service fees: | |
Account and service fees: | |
Account and service fees: | |
Mutual fund and annuity service fees | |
Mutual fund and annuity service fees | |
Mutual fund and annuity service fees | Mutual fund and annuity service fees | | 105 | | | 109 | | | (4) | % | | 203 | | | 223 | | | (9) | % |
RJBDP fees: | RJBDP fees: | |
RJBDP fees: | |
RJBDP fees: | |
Bank segment | |
Bank segment | |
Bank segment | Bank segment | | 311 | | | 49 | | | 535 | % | | 579 | | | 99 | | | 485 | % |
Third-party banks | Third-party banks | | 100 | | | 20 | | | 400 | % | | 237 | | | 37 | | | 541 | % |
Third-party banks | |
Third-party banks | |
Client account and other fees | |
Client account and other fees | |
Client account and other fees | Client account and other fees | | 56 | | | 53 | | | 6 | % | | 116 | | | 102 | | | 14 | % |
Total account and service fees | Total account and service fees | | 572 | | | 231 | | | 148 | % | | 1,135 | | | 461 | | | 146 | % |
Total account and service fees | |
Total account and service fees | |
Investment banking | |
Investment banking | |
Investment banking | Investment banking | | 9 | | | 9 | | | — | % | | 18 | | | 22 | | | (18) | % |
Interest income | Interest income | | 117 | | | 37 | | | 216 | % | | 226 | | | 70 | | | 223 | % |
Interest income | |
Interest income | |
All other | |
All other | |
All other | All other | | 9 | | | 6 | | | 50 | % | | 15 | | | 13 | | | 15 | % |
Total revenues | Total revenues | | 2,173 | | | 1,925 | | | 13 | % | | 4,258 | | | 3,767 | | | 13 | % |
Total revenues | |
Total revenues | |
Interest expense | |
Interest expense | |
Interest expense | Interest expense | | (29) | | | (3) | | | 867 | % | | (51) | | | (6) | | | 750 | % |
Net revenues | Net revenues | | 2,144 | | | 1,922 | | | 12 | % | | 4,207 | | | 3,761 | | | 12 | % |
Net revenues | |
Net revenues | |
Non-interest expenses: | |
Non-interest expenses: | |
Non-interest expenses: | Non-interest expenses: | | | | | | | | | |
Financial advisor compensation and benefits | Financial advisor compensation and benefits | | 1,118 | | | 1,231 | | | (9) | % | | 2,193 | | | 2,418 | | | (9) | % |
Financial advisor compensation and benefits | |
Financial advisor compensation and benefits | |
Administrative compensation and benefits | |
Administrative compensation and benefits | |
Administrative compensation and benefits | Administrative compensation and benefits | | 345 | | | 289 | | | 19 | % | | 687 | | | 572 | | | 20 | % |
Total compensation, commissions and benefits | Total compensation, commissions and benefits | | 1,463 | | | 1,520 | | | (4) | % | | 2,880 | | | 2,990 | | | (4) | % |
Total compensation, commissions and benefits | |
Total compensation, commissions and benefits | |
Non-compensation expenses: | |
Non-compensation expenses: | |
Non-compensation expenses: | Non-compensation expenses: | |
Communications and information processing | Communications and information processing | | 100 | | | 84 | | | 19 | % | | 189 | | | 155 | | | 22 | % |
Communications and information processing | |
Communications and information processing | |
Occupancy and equipment | |
Occupancy and equipment | |
Occupancy and equipment | Occupancy and equipment | | 53 | | | 50 | | | 6 | % | | 104 | | | 96 | | | 8 | % |
Business development | Business development | | 33 | | | 25 | | | 32 | % | | 70 | | | 52 | | | 35 | % |
Business development | |
Business development | |
Professional fees | |
Professional fees | |
Professional fees | Professional fees | | 17 | | | 13 | | | 31 | % | | 30 | | | 22 | | | 36 | % |
All other | All other | | 37 | | | 17 | | | 118 | % | | 59 | | | 38 | | | 55 | % |
All other | |
All other | |
Total non-compensation expenses | |
Total non-compensation expenses | |
Total non-compensation expenses | Total non-compensation expenses | | 240 | | | 189 | | | 27 | % | | 452 | | | 363 | | | 25 | % |
Total non-interest expenses | Total non-interest expenses | | 1,703 | | | 1,709 | | | — | % | | 3,332 | | | 3,353 | | | (1) | % |
Total non-interest expenses | |
Total non-interest expenses | |
Pre-tax income | Pre-tax income | | $ | 441 | | | $ | 213 | | | 107 | % | | $ | 875 | | | $ | 408 | | | 114 | % |
Pre-tax income | |
Pre-tax income | |
| | | | | | | | |
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Management’s Discussion and Analysis | |
Selected key metrics
PCG client asset balances
| | As of |
| | As of | |
| | As of | |
| | As of | |
$ in billions | $ in billions | | March 31, 2023 | | December 31, 2022 | | September 30, 2022 | | | March 31, 2022 | | December 31, 2021 | | September 30, 2021 |
Assets under administration (“AUA”) (1) | | $ | 1,171.1 | | | $ | 1,114.3 | | | $ | 1,039.0 | | | | $ | 1,198.3 | | | $ | 1,199.8 | | | $ | 1,115.4 | |
Assets in fee-based accounts (1) (2) | | $ | 666.3 | | | $ | 633.1 | | | $ | 586.0 | | | | $ | 678.0 | | | $ | 677.8 | | | $ | 627.1 | |
Assets under administration (“AUA”) | |
Assets under administration (“AUA”) | |
Assets under administration (“AUA”) | |
Registered Investment Advisor (“RIA”) & Custody Services (“RCS”) AUA (1) | |
Registered Investment Advisor (“RIA”) & Custody Services (“RCS”) AUA (1) | |
Registered Investment Advisor (“RIA”) & Custody Services (“RCS”) AUA (1) | |
Assets in fee-based accounts (2) | |
Assets in fee-based accounts (2) | |
Assets in fee-based accounts (2) | |
RCS assets in fee-based accounts (1) | |
RCS assets in fee-based accounts (1) | |
RCS assets in fee-based accounts (1) | |
Percent of AUA in fee-based accounts | Percent of AUA in fee-based accounts | | 56.9 | % | | 56.8 | % | | 56.4 | % | | | 56.6 | % | | 56.5 | % | | 56.2 | % |
Percent of AUA in fee-based accounts | |
Percent of AUA in fee-based accounts | |
(1)IncludesRepresents assets associated with firms affiliated with us through our Registered Investment Advisor & Custody Services (“RCS”)RCS division, of $123.5 billion as of March 31, 2023, $115.6 billion as of December 31, 2022, $108.5 billion as of September 30, 2022, $99.2 billion as of March 31, 2022, $101.6 billion as of December 31, 2021,which are included in AUA and $92.7 billion as of September 30, 2021. Of these amounts, $103.6 billion as of March 31, 2023, $96.6 billion as of December 31, 2022, $89.9 billion as of September 30, 2022, $84.0 billion as of March 31, 2022, $85.5 billion as of December 31, 2021, and $77.2 billion as of September 30, 2021 wereassets in fee-based assets.accounts. Based on the nature of the 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 March 31, | | Six months ended March 31, |
| | Three months ended December 31, | |
| | Three months ended December 31, | |
| | Three months ended December 31, | |
$ in millions | |
$ in millions | |
$ in millions | $ in millions | | 2023 | | 2022 | | 2023 | | 2022 |
Domestic Private Client Group net new assets (1) | Domestic Private Client Group net new assets (1) | | $ | 21,473 | | | $ | 24,093 | | | $ | 44,699 | | | $ | 60,194 | |
Domestic Private Client Group net new assets (1) | |
Domestic Private Client Group net new assets (1) | |
Domestic Private Client Group net new assets growth - annualized (2) | Domestic Private Client Group net new assets growth - annualized (2) | | 8.4 | % | | 8.6 | % | | 9.4 | % | | 11.4 | % |
Domestic Private Client Group net new assets growth - annualized (2) | |
Domestic Private Client Group net new assets growth - annualized (2) | |
(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)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 MarchDecember 31, 2023 each increased 5% compared with December 31, 2022, and increased 13% and 14%, respectively,9% compared with September 30, 20222023, due to equity market appreciation and strong net inflows of client assets during the period. We expect that the 5% increase in fee-based accounts compared with December 31, 2022 will positively impact our asset management and related administrative fees for our fiscal third quarter, of 2023. Compared with March 31, 2022, PCG AUA declined 2%, primarily due to a net decline in equity markets since March 31, 2022, offset by the favorable impactsimpact of our recruiting. 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.
The vast majority of the revenues we earn from fee-based accounts are 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.
| | | | | | | | |
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Management’s Discussion and Analysis | |
Management’s Discussion and Analysis
Financial advisors
| | March 31, 2023 | | December 31, 2022 | | September 30, 2022 | | | March 31, 2022 | | December 31, 2021 | | September 30, 2021 |
| | December 31, 2023 | | | | December 31, 2023 | | September 30, 2023 | | June 30, 2023 | | March 31, 2023 | | December 31, 2022 |
Employees | Employees | | 3,628 | | | 3,631 | | | 3,638 | | | | 3,601 | | | 3,447 | | | 3,461 | |
Independent contractors (1) | | 5,098 | | | 5,068 | | | 5,043 | | | | 5,129 | | | 5,017 | | | 5,021 | |
Independent contractors | |
Total advisors | Total advisors | | 8,726 | | | 8,699 | | | 8,681 | | | | 8,730 | | | 8,464 | | | 8,482 | |
(1) Includes the impact of the transfer of one firm with 166 financial advisors previously affiliated as independent contractors to our RCS division during our fiscal third quarter of 2022.
The number of financial advisors as of MarchDecember 31, 2023 increaseddecreased slightly compared with December 31, 2022 and September 30, 2022,2023, as the impactsplanned retirements drove a small net decrease in advisor count, net of new recruits and trainees that were moved into production roles were partially offset by financial advisors who left the firm, including plannedroles. Planned retirements, where assets are generally retained at the firm pursuant to advisor succession plans. The recruiting pipeline remains solid across our affiliation options; however,plans, are seasonally higher in the timing of financial advisors joining the firmfiscal first quarter. We have and may be impacted by market uncertainty. We expect to continue to experience transfers to our RCS division in fiscal 2023;2024; however, consistent with our experience in fiscal 2022,2023, we dowould 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 are included in PCG AUA.
Clients’ domestic cash sweep balances and Enhanced Savings ProgramESP balances
| | As of |
| | As of | | | | As of |
$ in millions | $ in millions | | March 31, 2023 | | December 31, 2022 | | September 30, 2022 | | | March 31, 2022 | | December 31, 2021 | | September 30, 2021 | $ in millions | | December 31, 2023 | | September 30, 2023 | | June 30, 2023 | | March 31, 2023 | | December 31, 2022 |
RJBDP: | RJBDP: | | | | | | | | | | | | | |
Bank segment | |
Bank segment | |
Bank segment | Bank segment | | $ | 37,682 | | | $ | 39,098 | | | $ | 38,705 | | | | $ | 33,570 | | | $ | 33,097 | | | $ | 31,410 | |
Third-party banks | Third-party banks | | 9,408 | | | 18,231 | | | 21,964 | | | | 25,887 | | | 24,316 | | | 24,496 | |
Subtotal RJBDP | Subtotal RJBDP | | 47,090 | | | 57,329 | | | 60,669 | | | | 59,457 | | | 57,413 | | | 55,906 | |
Client Interest Program (“CIP”) | Client Interest Program (“CIP”) | | 2,385 | | | 3,053 | | | 6,445 | | | | 17,013 | | | 16,065 | | | 10,762 | |
Total clients’ domestic cash sweep balances | Total clients’ domestic cash sweep balances | | 49,475 | | | 60,382 | | | 67,114 | | | | 76,470 | | | 73,478 | | | 66,668 | |
Enhanced Savings Program (1) | | 2,746 | | | — | | | — | | | | — | | | — | | | — | |
Total clients’ domestic cash sweep and Enhanced Savings Program balances | | $ | 52,221 | | | $ | 60,382 | | | $ | 67,114 | | | | $ | 76,470 | | | $ | 73,478 | | | $ | 66,668 | |
ESP (1) | |
Total clients’ domestic cash sweep and ESP balances | |
(1)In March 2023, we launched our Enhanced Savings Program,ESP, 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 March 31, | | Six months ended March 31, |
| | 2023 | | 2022 | | 2023 | | 2022 |
Average yield on RJBDP - third-party banks | | 3.25 | % | | 0.32 | % | | 2.93 | % | | 0.30 | % |
| | | | | | | | | | | | | | | | | | |
| | Three months ended December 31, | | |
| | 2023 | | 2022 | | | | |
Average yield on RJBDP - third-party banks | | 3.66 | % | | 2.72 | % | | | | |
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,of our bank subsidiaries, which are included in our Bank segment, or various third-party banks. Balances swept to third-party banks 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 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. In the current marketinterest-rate environment, the PCG segment revenues will reflect RJBDP fee revenues derived from the yield from third-party banks in the program and the Bank segment RJBDP servicing costs reflect such market rate for the deposits. 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 consolidation.
The “Average yield on RJBDP - third-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 quarter, largely as a result of the significant increases in the Fed’s short-term benchmark interest rate, which began in March 2022. We expect a decline in our RJBDP fees in our fiscal third quarter of 2023 due to lower average balances in the program.
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
Management’s Discussion and Analysis
rate.
| | | | | | | | |
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Management’s Discussion and Analysis | |
Total clientclients’ domestic cash sweep and Enhanced Savings ProgramESP balances declined 14% compared with December 31, 2022 and 22%increased 3% compared with September 30, 2022,2023, due to growth in both the ESP as a result of continued 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 $2.75 billion ofwell as client cash balances as of March 31, 2023.sweep balances. 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 the RJBDP, the CIP, and the Enhanced Savings Program,ESP, as the PCG segment may earn different amounts from each of these client cash destinations, depending on multiple factors. For example, continued growth in the ESP, which was launched to PCG clients in March 2023, has allowed us to sweep more RJBDP balances to third-party banks and reduce the amount of RJBDP balances held in our Bank segment.
Quarter ended MarchDecember 31, 2023 compared with the quarter ended MarchDecember 31, 2022
Net revenues of $2.14$2.23 billion increased 12%8% and pre-tax income of $441$439 million increased 107%1%.
Asset management and related administrative fees decreased $143increased $138 million, or 11%13%, primarily due to lowerhigher assets in fee-based accounts at the beginning of the current quarter compared with the prior-year quarter due to declines in the equity market.resulting from growth as a result of advisor recruiting as well as market appreciation.
Brokerage revenues decreased $33increased $37 million, or 8%11%, primarily due to lower trailing revenues from mutual fund and annuity products primarily resulting from market-driven declineshigher client activity in asset values for products for which we receive trails.the current quarter, particularly in fixed annuities.
Account and service fees increased $341decreased $17 million, or 148%3%, primarily due to highera decrease in RJBDP fees resulting from bothlower client cash sweep balances. RJBDP fees paid to PCG from our Bank segment and third-party banks resulting from significantly higher short-term interest rates compared with the prior-year quarter.
Net interest income increased $54 million, or 159%,decreased due to the increasea decline in short-term interest rates applicablebalances allocated to our cash, segregated cash, and client margin account balances.
Compensation-related expenses decreased $57 million, or 4%, primarily due to lower commission expense resulting from lower compensable revenues, including asset management and related administrative fees and brokerage revenues,Bank segment partially offset by an increase in compensation costs to support our growth, annual salary increases, and, to a lesser extent, incremental expenses arisingshort-term interest rates, while RJBDP fees from our January 2022 acquisition of Charles Stanley.
Non-compensation expensesthird-party banks increased $51 million, or 27%, driven by higher legal and regulatory costs, includingslightly resulting from the impact of an unfavorable arbitration award during the current quarter, as well as higher communications and information processing expenses primarily due to ongoing enhancements of our technology platforms, anaforementioned increase in travel and event-related expenses compared with the relatively low levels in the prior-year quarter, and incremental expenses resulting from our acquisition of Charles Stanley.
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
Management’s Discussion and Analysis
Six months ended March 31, 2023 compared with the six months ended March 31, 2022
Net revenues of $4.21 billion increased 12% and pre-tax income of $875 million increased 114%.
Asset management and related administrative fees decreased $252 million, or 10%, primarily due to lower 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,short-term interest rates, partially offset by incremental revenues arising froma decrease in RJBDP balances. Partially offsetting the acquisition of Charles Stanley.
Brokerage revenues decreased $85 million, or 11%, primarily due to lower trailing revenues fromdecline in total RJBDP fees, mutual fund and annuity products primarily resulting from market-driven declines in asset values for products for which we receive trails.
Account and service fees increased, $674 million, or 146%, primarily due to an increase in RJBDP fees from both our Bank segment and third-party banks resulting from significantly higher short-term interest rates compared with the prior-year period, partially offset by lower client cash balances in the RJBDP. Mutual fund service fees decreased primarily due to market-driven declines inaverage mutual fund assets.
Net interest income increased $111$5 million, or 173%6%, primarily due to the significant increase in short-term interest rates applicable to our cash, segregated cash, and client margin account balances.
Compensation-related expenses decreased $110increased $152 million, or 4%11%, primarily due to lowerhigher commission expense resulting from lowerhigher compensable revenues, including asset management and related administrative fees and brokerage revenues, partially offset byas well as an increase in compensation costs both to support our growth and annual salarycost increases, and incremental expenses resulting from our acquisition of Charles Stanley.including salaries.
Non-compensation expenses increased $89$6 million, or 25%3%, due to incremental expenses resulting from our acquisition of Charles Stanley, higher communications and information processing expenses, primarily due to ongoing enhancementsoccupancy expenses, and business development expenses, partially offset by the impact of our technology platforms, increases in travel and event-related expenses compared with the low levels incurred in the prior-year period, and the aforementioned increases inlower provisions for legal and regulatory costs.
matters.
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RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES 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 20222023 Form 10-K.
Operating results
| | |
| | | | Three months ended March 31, | | Six months ended March 31, |
$ in millions | $ in millions | | 2023 | | 2022 | | % change | | 2023 | | 2022 | | % change |
$ in millions | |
$ in millions | |
Revenues: | |
Revenues: | |
Revenues: | Revenues: | | | | | | | | | | | | |
Brokerage revenues: | Brokerage revenues: | | | | | |
Brokerage revenues: | |
Brokerage revenues: | |
Fixed income | |
Fixed income | |
Fixed income | Fixed income | | $ | 96 | | | $ | 125 | | | (23) | % | | $ | 196 | | | $ | 245 | | | (20) | % |
Equity | Equity | | 34 | | | 41 | | | (17) | % | | 68 | | | 80 | | | (15) | % |
Equity | |
Equity | |
Total brokerage revenues | |
Total brokerage revenues | |
Total brokerage revenues | Total brokerage revenues | | 130 | | | 166 | | | (22) | % | | 264 | | | 325 | | | (19) | % |
Investment banking: | Investment banking: | |
Investment banking: | |
Investment banking: | |
Merger & acquisition and advisory | |
Merger & acquisition and advisory | |
Merger & acquisition and advisory | Merger & acquisition and advisory | | 87 | | | 139 | | | (37) | % | | 189 | | | 410 | | | (54) | % |
Equity underwriting | Equity underwriting | | 29 | | | 52 | | | (44) | % | | 44 | | | 149 | | | (70) | % |
Equity underwriting | |
Equity underwriting | |
Debt underwriting | |
Debt underwriting | |
Debt underwriting | Debt underwriting | | 29 | | | 35 | | | (17) | % | | 45 | | | 79 | | | (43) | % |
Total investment banking | Total investment banking | | 145 | | | 226 | | | (36) | % | | 278 | | | 638 | | | (56) | % |
Total investment banking | |
Total investment banking | |
Interest income | |
Interest income | |
Interest income | Interest income | | 21 | | | 5 | | | 320 | % | | 44 | | | 10 | | | 340 | % |
Affordable housing investments business revenues | Affordable housing investments business revenues | | 23 | | | 15 | | | 53 | % | | 47 | | | 50 | | | (6) | % |
Affordable housing investments business revenues | |
Affordable housing investments business revenues | |
All other | |
All other | |
All other | All other | | 3 | | | 4 | | | (25) | % | | 7 | | | 9 | | | (22) | % |
Total revenues | Total revenues | | 322 | | | 416 | | | (23) | % | | 640 | | | 1,032 | | | (38) | % |
Total revenues | |
Total revenues | |
Interest expense | |
Interest expense | |
Interest expense | Interest expense | | (20) | | | (3) | | | 567 | % | | (43) | | | (5) | | | 760 | % |
Net revenues | Net revenues | | 302 | | | 413 | | | (27) | % | | 597 | | | 1,027 | | | (42) | % |
Net revenues | |
Net revenues | |
Non-interest expenses: | |
Non-interest expenses: | |
Non-interest expenses: | Non-interest expenses: | | | | | | | | | |
Compensation, commissions and benefits | Compensation, commissions and benefits | | 231 | | | 253 | | | (9) | % | | 444 | | | 584 | | | (24) | % |
Compensation, commissions and benefits | |
Compensation, commissions and benefits | |
Non-compensation expenses: | |
Non-compensation expenses: | |
Non-compensation expenses: | Non-compensation expenses: | |
Communications and information processing | Communications and information processing | | 26 | | | 22 | | | 18 | % | | 50 | | | 44 | | | 14 | % |
Communications and information processing | |
Communications and information processing | |
Occupancy and equipment | |
Occupancy and equipment | |
Occupancy and equipment | Occupancy and equipment | | 11 | | | 10 | | | 10 | % | | 21 | | | 19 | | | 11 | % |
Business development | Business development | | 17 | | | 9 | | | 89 | % | | 32 | | | 17 | | | 88 | % |
Business development | |
Business development | |
Professional fees | |
Professional fees | |
Professional fees | Professional fees | | 14 | | | 7 | | | 100 | % | | 27 | | | 21 | | | 29 | % |
All other | All other | | 37 | | | 25 | | | 48 | % | | 73 | | | 54 | | | 35 | % |
All other | |
All other | |
Total non-compensation expenses | |
Total non-compensation expenses | |
Total non-compensation expenses | Total non-compensation expenses | | 105 | | | 73 | | | 44 | % | | 203 | | | 155 | | | 31 | % |
Total non-interest expenses | Total non-interest expenses | | 336 | | | 326 | | | 3 | % | | 647 | | | 739 | | | (12) | % |
Total non-interest expenses | |
Total non-interest expenses | |
Pre-tax income/(loss) | Pre-tax income/(loss) | | $ | (34) | | | $ | 87 | | | NM | | $ | (50) | | | $ | 288 | | | NM |
Pre-tax income/(loss) | |
Pre-tax income/(loss) | |
Quarter ended MarchDecember 31, 2023 compared with the quarter ended MarchDecember 31, 2022
Net revenues of $302$338 million decreased 27%increased 15% and the pre-tax income was $3 million, a $19 million increase over the pre-tax loss was $34of $16 million compared with pre-tax income of $87 million forin the prior-year quarter.
Investment banking revenues decreased $81increased $37 million, or 36%28%, as activity levels incompared with the current quarter wereprior-year quarter. Market conditions improved compared with the prior-year quarter; however, market uncertainty continued to negatively impacted by heightened market volatility and macroeconomic uncertainties which continue to dampen capital markets activity across the industry. Ourimpact industry-wide investment banking pipeline remains healthy and, in part, reflects the investments we have made over the past several years; however, continued market uncertainty could delay, or ultimately prevent, the closing of transactions, which could negatively impact our results.activity.
Brokerage revenues decreased $36Compensation-related expenses increased $25 million, or 22%12%, primarily due to a decreasethe increase in fixed income brokerage revenues, resulting from decreased activity from depository institution clients dueas well as an increase in compensation costs both to challenging market conditions, partially offset by incremental revenues from SumRidge Partners, which was acquired on July 1, 2022. We expectsupport our fixed income brokerage revenues to continue to be negatively impacted by the challenging market conditions which have resulted in a decline in cash balances at many of our depository institution clients, decreasing their immediate demand for our productsgrowth and services.
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
Management’s Discussion and Analysis
Compensation-related expenses decreased $22 million, or 9%, due to lower revenues, partially offset by incremental compensation expenses arising from our acquisition of SumRidge Partners, higher salaries, in part due to inflationary and 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.annual cost increases, including salaries.
Non-compensation expenses increased $32decreased $1 million, or 44%, primarily attributable to incremental expenses associated with SumRidge Partners, an increase in travel and event-related expenses from the relatively low prior-year levels, and higher professional fees.1%.
Six months ended March 31, 2023 compared with the six months ended March 31, 2022
Net revenues of $597 million decreased 42% and the pre-tax loss was $50 million compared with pre-tax income of $288 million for the prior-year period.
Investment banking revenues decreased $360 million, or 56%, 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 $61 million, or 19%, primarily due to a decrease in fixed income brokerage revenues as a result of the aforementioned challenging market conditions, partially offset by incremental revenues from SumRidge Partners.
Compensation-related expenses decreased $140 million, or 24%, primarily due to the decrease in revenues, partially offset by incremental expenses associated with SumRidge Partners, higher salaries, in part due to inflationary and 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 $48 million, or 31%, primarily due to incremental expenses associated with SumRidge Partners, increased travel and event-related expenses and higher professional fees compared with the prior-year period.
| | | | | | | | |
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Management’s Discussion and Analysis | |
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 20222023 Form 10-K.
Operating results
| | |
| | | | Three months ended March 31, | | Six months ended March 31, |
$ in millions | $ in millions | | 2023 | | 2022 | | % change | | 2023 | | 2022 | | % change |
$ in millions | |
$ in millions | |
Revenues: | |
Revenues: | |
Revenues: | Revenues: | | | | | | | | | | | | |
Asset management and related administrative fees: | Asset management and related administrative fees: | |
Asset management and related administrative fees: | |
Asset management and related administrative fees: | |
Managed programs | |
Managed programs | |
Managed programs | Managed programs | | $ | 140 | | | $ | 149 | | | (6) | % | | $ | 274 | | | $ | 300 | | | (9) | % |
Administration and other | Administration and other | | 66 | | | 77 | | | (14) | % | | 129 | | | 153 | | | (16) | % |
Administration and other | |
Administration and other | |
Total asset management and related administrative fees | |
Total asset management and related administrative fees | |
Total asset management and related administrative fees | Total asset management and related administrative fees | | 206 | | | 226 | | | (9) | % | | 403 | | | 453 | | | (11) | % |
Account and service fees | Account and service fees | | 6 | | | 6 | | | — | % | | 11 | | | 12 | | | (8) | % |
Account and service fees | |
Account and service fees | |
All other | |
All other | |
All other | All other | | 4 | | | 2 | | | 100 | % | | 9 | | | 5 | | | 80 | % |
Net revenues | Net revenues | | 216 | | | 234 | | | (8) | % | | 423 | | | 470 | | | (10) | % |
Net revenues | |
Net revenues | |
Non-interest expenses: | |
Non-interest expenses: | |
Non-interest expenses: | Non-interest expenses: | | | | | | | | | |
Compensation, commissions and benefits | Compensation, commissions and benefits | | 52 | | | 47 | | | 11 | % | | 99 | | | 93 | | | 6 | % |
Compensation, commissions and benefits | |
Compensation, commissions and benefits | |
Non-compensation expenses: | |
Non-compensation expenses: | |
Non-compensation expenses: | Non-compensation expenses: | |
Communications and information processing | Communications and information processing | | 14 | | | 14 | | | — | % | | 28 | | | 26 | | | 8 | % |
Communications and information processing | |
Communications and information processing | |
Investment sub-advisory fees | |
Investment sub-advisory fees | |
Investment sub-advisory fees | Investment sub-advisory fees | | 34 | | | 39 | | | (13) | % | | 68 | | | 76 | | | (11) | % |
| All other | All other | | 34 | | | 31 | | | 10 | % | | 66 | | | 65 | | | 2 | % |
| All other | |
| All other | |
Total non-compensation expenses | |
Total non-compensation expenses | |
Total non-compensation expenses | Total non-compensation expenses | | 82 | | | 84 | | | (2) | % | | 162 | | | 167 | | | (3) | % |
Total non-interest expenses | Total non-interest expenses | | 134 | | | 131 | | | 2 | % | | 261 | | | 260 | | | — | % |
Total non-interest expenses | |
Total non-interest expenses | |
Pre-tax income | Pre-tax income | | $ | 82 | | | $ | 103 | | | (20) | % | | $ | 162 | | | $ | 210 | | | (23) | % |
Pre-tax income | |
Pre-tax income | |
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 “RaymondRaymond James Investment Management”Management (“RJIM”) 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 Raymond James Investment ManagementRJIM 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 Raymond James Investment ManagementRJIM are impacted by market and investment performance and net inflows or outflows of assets.
Fees for our managed programs are generally collected quarterly. Approximately 65%70% of these fees are based on balances as of the beginning of the quarter (primarily in AMS), approximately 15% are based on balances as of the end of the quarter, and approximately 20%15% 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 | | March 31, 2023 | | December 31, 2022 | | September 30, 2022 | | March 31, 2022 | | December 31, 2021 | | September 30, 2021 |
$ in billions | |
$ in billions | |
AMS (1) | AMS (1) | | $ | 136.5 | | | $ | 129.5 | | | $ | 119.8 | | | $ | 140.1 | | | $ | 145.0 | | | $ | 134.4 | |
Raymond James Investment Management | | 69.4 | | | 67.4 | | | 64.2 | | | 64.0 | | | 68.9 | | | 67.8 | |
AMS (1) | |
AMS (1) | |
RJIM | |
RJIM | |
RJIM | |
Subtotal financial assets under management | Subtotal financial assets under management | | 205.9 | | | 196.9 | | | 184.0 | | | 204.1 | | | 213.9 | | | 202.2 | |
Less: Assets managed for affiliated entities | | (11.5) | | | (10.9) | | | (10.2) | | | (10.4) | | | (10.7) | | | (10.3) | |
Subtotal financial assets under management | |
Subtotal financial assets under management | |
Less: Assets managed for affiliated entities (2) | |
Less: Assets managed for affiliated entities (2) | |
Less: Assets managed for affiliated entities (2) | |
Total financial assets under management | Total financial assets under management | | $ | 194.4 | | | $ | 186.0 | | | $ | 173.8 | | | $ | 193.7 | | | $ | 203.2 | | | $ | 191.9 | |
Total financial assets under management | |
Total financial assets under management | |
(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.
(2)Represents the portion of the AMS AUM that is managed by RJIM and, as a result, are included in both AMS and RJIM in the preceding table. This amount is removed in the calculation of “Total financial assets under management.”
Activity (including activity in assets managed for affiliated entities)
| | Three months ended March 31, | | Six months ended March 31, |
| | | | Three months ended December 31, | |
| | | | Three months ended December 31, | |
| | | | Three months ended December 31, | |
$ in billions | $ in billions | | 2023 | | 2022 | | 2023 | | 2022 | $ in billions | | | | | | 2023 | | 2022 |
Financial assets under management at beginning of period | Financial assets under management at beginning of period | | $ | 196.9 | | | $ | 213.9 | | | $ | 184.0 | | | $ | 202.2 | |
| Raymond James Investment Management - net inflows/(outflows) | | 1.1 | | | (0.8) | | | 1.7 | | | (1.2) | |
RJIM - net inflows/(outflows) | |
RJIM - net inflows/(outflows) | |
RJIM - net inflows/(outflows) | |
AMS - net inflows | AMS - net inflows | | 1.7 | | | 3.5 | | | 2.7 | | | 7.0 | |
Net market appreciation/(depreciation) in asset values | | 6.2 | | | (12.5) | | | 17.5 | | | (3.9) | |
Net market appreciation in asset values | |
Financial assets under management at end of period | Financial assets under management at end of period | | $ | 205.9 | | | $ | 204.1 | | | $ | 205.9 | | | $ | 204.1 | |
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 Investment ManagementRJIM
Assets managed by Raymond James Investment ManagementRJIM include assets managed by 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 Raymond James Investment Management’sRJIM’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 March 31, 2023 | |
| | As of December 31, 2023 | |
| | As of December 31, 2023 | |
| | As of December 31, 2023 | |
$ in billions | |
$ in billions | |
$ in billions | $ in billions | | AUM | | Average fee rate | |
Equity | Equity | | $ | 24.6 | | | 0.56 | % | |
Equity | |
Equity | |
Fixed income | |
Fixed income | |
Fixed income | Fixed income | | 36.7 | | | 0.20 | % | |
Balanced | Balanced | | 8.1 | | | 0.33 | % | |
Balanced | |
Balanced | |
Total financial assets under management | Total financial assets under management | | $ | 69.4 | | | 0.34 | % | |
Total financial assets under management | |
Total financial assets under management | |
| | | | | | | | |
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Management’s Discussion and Analysis | |
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 other services such as administrative support (including for affiliated entities). and investment advice. 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 | | December 31, 2023 | | September 30, 2023 | | | | December 31, 2022 | | | | | | September 30, 2022 |
Total assets | | $ | 431.4 | | | $ | 391.1 | | | | | $ | 355.6 | | | | | | | $ | 329.2 | |
The increase in these assets as of December 31, 2023 compared with September 30, 2023 was primarily due to market appreciation, successful financial advisor recruiting and retention, and the continued trend of clients moving to fee-based accounts from transaction-based accounts. Administrative fees associated with these programs are predominantly based on balances at the beginning of the quarter.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
$ in billions | | March 31, 2023 | | December 31, 2022 | | September 30, 2022 | | March 31, 2022 | | December 31, 2021 | | | | September 30, 2021 |
Total assets | | $ | 378.7 | | | $ | 355.6 | | | $ | 329.2 | | | $ | 379.7 | | | $ | 392.4 | | | | | $ | 365.3 | |
The increase in assets as of March 31, 2023 compared with December 31, 2022 and September 30, 2022 was largely due to equity market appreciation and continued growth in the PCG segment. The slight decrease in assets compared to March 31, 2022 was due to declines in the equity market since such time, offset by continued growth in the PCG segment and the favorable impact of our June 1, 2022 acquisition of Chartwell.
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
Management’s Discussion and Analysis
Raymond James Trust
The following table includes assets held in asset-based programs in Raymond James Trust, N.A. (including those managed for affiliated entities).
| $ in billions | $ in billions | | March 31, 2023 | | December 31, 2022 | | September 30, 2022 | | | March 31, 2022 | | December 31, 2021 | | September 30, 2021 |
$ in billions | |
$ in billions | | | December 31, 2023 | | September 30, 2023 | | | | | | December 31, 2022 | | | | September 30, 2022 |
Total assets | Total assets | | $ | 8.2 | | | $ | 7.8 | | | $ | 7.3 | | | | $ | 8.4 | | | $ | 8.8 | | | $ | 8.1 | |
Fees earned on trust services are primarily reported within “Asset management and related administrative fees” on the Condensed Consolidated Statements of Income and Comprehensive Income.
Quarter ended MarchDecember 31, 2023 compared with the quarter ended MarchDecember 31, 2022
Net revenues of $216$235 million decreased 8%increased 14% and pre-tax income of $82$93 million decreased 20%increased 16%.
Asset management and related administrative fees decreased $20increased $27 million, or 9%14%, driven by a lowerhigher beginning balancebalances of assets in non-discretionary asset-based programs and financial assets under management at AMS, as well as lowerhigher average financial assets under management at Raymond James Investment Management (excluding Chartwell),RJIM, in each case primarily due to market-driven depreciationappreciation in asset values. These declines were partially offset by incremental revenues arising from the acquisition of Chartwell. We expect the increase in financial assets under management and assets in non-discretionary asset-based programs as of March 31, 2023 compared with December 31, 2022, which occurred due to equity market appreciation and net inflows during the quarter, to positively affect our fiscal third quarter 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.
Compensation expenses increased $5$6 million, or 13%, including an increase in compensation costs both to support our growth and annual cost increases, including salaries. Non-compensation expenses increased $9 million, or 11%, primarilylargely due to the acquisition of Chartwell. Non-compensation expenses decreased $2 million, or 2%, primarily due to lowerhigher investment sub-advisory fees, resulting from the decreaseincrease in the beginning balance of assets under management in sub-advised programs, partially offset by incremental expenses resulting from the Chartwell acquisition.
Six months ended March 31, 2023 compared with the six months ended March 31, 2022
Net revenues of $423 million decreased 10% and pre-tax income of $162 million decreased 23%.
Asset management and related administrative fees decreased $50 million, or 11%, driven by lower assets in non-discretionary asset-based programs and financial assets under management at AMS at the beginning of each of the current-year quarterly billing periods compared with the prior-year quarterly billing 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 arising from the acquisition of Chartwell.
Compensation expenses increased $6 million, or 6%, primarily due to the acquisition of Chartwell. Non-compensation expenses decreased $5 million, or 3% due to lower investment sub-advisory fees, resulting from the decrease in assets under management in sub-advised programs, partially offset by incremental expenses resulting from the Chartwell acquisition.
programs.
| | | | | | | | |
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 20222023 Form 10-K. Our Bank segment results include the results of TriState Capital Bank since the acquisition date of June 1, 2022.
Operating results
| | Three months ended March 31, | | Six months ended March 31, |
| | Three months ended December 31, | |
| | Three months ended December 31, | |
| | Three months ended December 31, | |
$ in millions | |
$ in millions | |
$ in millions | $ in millions | | 2023 | | 2022 | | % change | | 2023 | | 2022 | | % change |
Revenues: | Revenues: | | | | | | | | | | | | |
Revenues: | |
Revenues: | |
Interest income | |
Interest income | |
Interest income | Interest income | | $ | 749 | | | $ | 199 | | | 276 | % | | $ | 1,425 | | | $ | 386 | | | 269 | % |
Interest expense | Interest expense | | (219) | | | (10) | | | 2,090 | % | | (404) | | | (20) | | | 1,920 | % |
Interest expense | |
Interest expense | |
Net interest income | |
Net interest income | |
Net interest income | Net interest income | | 530 | | | 189 | | | 180 | % | | 1,021 | | | 366 | | | 179 | % |
All other | All other | | 10 | | | 8 | | | 25 | % | | 27 | | | 14 | | | 93 | % |
All other | |
All other | |
Net revenues | |
Net revenues | |
Net revenues | Net revenues | | 540 | | | 197 | | | 174 | % | | 1,048 | | | 380 | | | 176 | % |
Non-interest expenses: | Non-interest expenses: | | | | | | | | | |
Non-interest expenses: | |
Non-interest expenses: | |
Compensation and benefits | |
Compensation and benefits | |
Compensation and benefits | Compensation and benefits | | 48 | | | 14 | | | 243 | % | | 88 | | | 27 | | | 226 | % |
Non-compensation expenses: | Non-compensation expenses: | |
Non-compensation expenses: | |
Non-compensation expenses: | |
Bank loan provision for credit losses | Bank loan provision for credit losses | | 28 | | | 21 | | | 33 | % | | 42 | | | 10 | | | 320 | % |
Bank loan provision for credit losses | |
Bank loan provision for credit losses | |
RJBDP fees to PCG | |
RJBDP fees to PCG | |
RJBDP fees to PCG | RJBDP fees to PCG | | 311 | | | 49 | | | 535 | % | | 579 | | | 99 | | | 485 | % |
| All other | All other | | 62 | | | 30 | | | 107 | % | | 112 | | | 59 | | | 90 | % |
| All other | |
| All other | |
Total non-compensation expenses | |
Total non-compensation expenses | |
Total non-compensation expenses | Total non-compensation expenses | | 401 | | | 100 | | | 301 | % | | 733 | | | 168 | | | 336 | % |
Total non-interest expenses | Total non-interest expenses | | 449 | | | 114 | | | 294 | % | | 821 | | | 195 | | | 321 | % |
Total non-interest expenses | |
Total non-interest expenses | |
Pre-tax income | Pre-tax income | | $ | 91 | | | $ | 83 | | | 10 | % | | $ | 227 | | | $ | 185 | | | 23 | % |
Pre-tax income | |
Pre-tax income | |
Quarter ended MarchDecember 31, 2023 compared with the quarter ended MarchDecember 31, 2022
Net revenues of $540$441 million increased 174% anddecreased 13%, while pre-tax income of $91$92 million increased 10%decreased 32%.
Net interest income increased $341decreased $65 million, or 180%13%, primarily due to increased interest expense resulting from a higher-cost mix of deposits, as balances from the significantESP, which launched in March 2023, replaced a portion of lower-cost RJBDP cash sweep balances. The increase in interest expense was partially offset by an increase in interest income due to higher short-term interest rates and higher average interest-earning assets at Raymond James Bank, as well as incremental net interest income fromasset balances during 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 the bank loan portfolio and, to a lesser extent, higher average cash balances and available-for-sale securities.current quarter. The net interest margin increaseddecreased to 3.63%2.74% from 2.01%3.36% for the prior-year quarter. We anticipate that the Bank segment net interest income and net interest margin will decline during our fiscal third quarter of 2023 due to the higher level of cash balances held by the Bank segment as a result of recent market volatility, as well as the impact from higher-cost diversified funding sources, including the Enhanced Savings Program launched to PCG clients in March 2023.
The bank loan provision for credit losses was $28$12 million for the current quarter, compared with $21$14 million for the prior-year quarter. The current quarter provision primarily reflected the impacts of charge-offs of certain loans during the quarter, loan downgrades in the CRE and C&I loan portfolios, and additional volatility in the macroeconomic outlook. The prior-year quarter provision for credit losses was primarily due to loan growth.
Compensation expenses increased $34 million, or 243%, primarily due to incremental expenses of TriState Capital Bank.
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
Management’s Discussion and Analysis
Non-compensation expenses, excluding the bank loan provision for credit losses, increased $294 million, or 372%, primarily due to an increase in RJBDP fees paid to PCG and incremental expenses of TriState Capital Bank. RJBDP fees to PCG increased $262 million, or 535%, due to an increase in the market-based servicing fee incurred by the Bank segment for the administrative services provided by the PCG segment for such deposit balances, as well as an increase in client cash balances swept to our Bank segment as part of the RJBDP. As described in “Management’s Discussion and Analysis - Results of Operations - Private Client Group”, our Bank segment incurs servicing fee expense, reflected as revenues in our PCG segment, for the administrative services provided related to our clients’ deposits that are swept to our Bank segment 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. As the yield from third-party banks in the RJBDP program continues to rise, the rate the Bank segment incurs on RJBDP deposits will also increase as it reflects a market rate for such deposits. These Bank segment fees and the revenues earned by the PCG segment are eliminated in consolidation.
Six months ended March 31, 2023 compared with the six months ended March 31, 2022
Net revenues of $1.05 billion increased 176%, while pre-tax income of $227 million increased 23%.
Net interest income increased $655 million, or 179%, due to the significant increase in short-term interest rates and higher average interest-earning assets at Raymond James Bank, as well as incremental net interest income from the acquisition of TriState Capital Bank. The increase in average interest-earning assets at Raymond James Bank was primarily driven by higher average bank loans and an increase in average available-for-sale securities. The net interest margin increased to 3.51% from 1.97% for the prior-year period.
The bank loan provision for credit losses was $42 million for the current-year period, compared with $10 million forcurrent quarter primarily reflected the prior-year period.impacts of specific reserves in our C&I and CRE portfolios, loan downgrades, and charge-offs, partially offset by the favorable impact of loan repayments and sales, which had a larger impact on the current quarter expense than provisions on new loans. The current year provision for credit losses for the prior-year quarter primarily reflected the impact of a weaker macroeconomic outlook net charge-offs,at that time, primarily on the residential mortgage portfolio, and the impact of loan growth during the period. The prior-year period provisionquarter.
Compensation expenses increased $3 million, or 8%, primarily reflected the impact of loan growth.due to increased compensation costs both to support growth and annual cost increases, including salaries.
Non-compensation expenses, excluding the bank loan provision for credit losses, increased $533decreased $24 million, or 337%8%, primarily due to an increasea decrease in RJBDP fees paid to PCG and incremental expenses associated with TriState Capital Bank.resulting from the aforementioned decline in RJBDP feesbalances swept to PCG increased $480 million, or 485%, due to a significant increase in short-term interest rates as well asthe Bank segment, partially offset by an increase in client cash swept to our Bank segment as part of the RJBDP.rates for such balances. These Bank segment fees and the related revenues earned by the PCG segment are eliminated in consolidation.
consolidation (see “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Private Client Group” for further information about these servicing fees). Offsetting this decline was an increase in expenses related to deposits, including a special assessment enacted during the quarter by the FDIC to recover losses to its Deposit Insurance Fund, as well as expenses related to the ESP and certificates of deposit issuances during the quarter. The impact of the special assessment was $9 million of incremental expense for the three months ended December 31, 2023.
| | | | | | | | |
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, our private equity investments, which predominantly consist of investments in third-party funds, certain costs incurred in acquisition activities,other corporate investing activity, and certain corporate overhead costs of RJF that are not allocated to other segments, including the interest costs on our public debt.debt, certain provisions for legal and regulatory matters, and certain acquisition-related expenses. 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 20222023 Form 10-K.
Operating results
| | Three months ended March 31, | | Six months ended March 31, |
| | Three months ended December 31, | |
| | Three months ended December 31, | |
| | Three months ended December 31, | |
$ in millions | |
$ in millions | |
$ in millions | $ in millions | | 2023 | | 2022 | | % change | | 2023 | | 2022 | | % change |
Revenues: | Revenues: | | | | | | | | | | | | |
Revenues: | |
Revenues: | |
Interest income | Interest income | | $ | 36 | | | $ | 3 | | | 1,100 | % | | $ | 66 | | | $ | 4 | | | 1,550 | % |
Net gains/(losses) on private equity investments | | 1 | | | (2) | | | NM | | 3 | | | 3 | | | — | % |
Interest income | |
Interest income | |
All other | |
All other | |
All other | All other | | — | | | 5 | | | (100) | % | | 1 | | | 7 | | | (86) | % |
Total revenues | Total revenues | | 37 | | | 6 | | | 517 | % | | 70 | | | 14 | | | 400 | % |
Total revenues | |
Total revenues | |
Interest expense | |
Interest expense | |
Interest expense | Interest expense | | (27) | | | (24) | | | 13 | % | | (51) | | | (47) | | | 9 | % |
Net revenues | Net revenues | | 10 | | | (18) | | | NM | | 19 | | | (33) | | | NM |
Net revenues | |
Net revenues | |
Non-interest expenses: | Non-interest expenses: | | | | | | | | | |
Compensation and other | | 33 | | | 35 | | | (6) | % | | 56 | | | 67 | | | (16) | % |
Non-interest expenses: | |
Non-interest expenses: | |
Compensation and benefits | |
Compensation and benefits | |
Compensation and benefits | |
Insurance settlement received | |
Insurance settlement received | |
Insurance settlement received | Insurance settlement received | | — | | | — | | | — | % | | (32) | | | — | | | NM |
| All other | |
| All other | |
| All other | |
Total non-interest expenses | Total non-interest expenses | | 33 | | | 35 | | | (6) | % | | 24 | | | 67 | | | (64) | % |
Pre-tax income/(loss) | | $ | (23) | | | $ | (53) | | | 57 | % | | $ | (5) | | | $ | (100) | | | 95 | % |
Total non-interest expenses | |
Total non-interest expenses | |
Pre-tax income | |
Pre-tax income | |
Pre-tax income | |
Quarter ended MarchDecember 31, 2023 compared with the quarter ended MarchDecember 31, 2022
Pre-tax lossincome was $23$3 million, a decrease of 83% compared with a pre-tax lossincome of $53$18 million for the prior-year quarter.
Net revenues increased $28$17 million primarily due to an increase in interest income earned as a result of higher short-term interest rates applicable to our corporate cash balances.
Non-interest expenses decreased $2increased $32 million, primarily due to a decrease in acquisition-related expenses, partially offset by an increase in compensation expenses.
Six months ended March 31, 2023 compared with the six months ended March 31, 2022
The pre-tax loss was $5 million compared with a pre-tax loss of $100 million in the prior-year period.
Net revenues increased $52 million, primarily due to an increase in interest income earned 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 subordinated notes assumed as part of our acquisition of TriState Capital in June 2022.
Non-interest expenses decreased $43 million, or 64%, primarily due to a $32 million insurance settlement received during the current-year periodprior-year quarter related to a previously settled litigationlegal matter, which was reflected as an offset to Other expenses, as well as a decreasedid not recur in acquisition-related expenses. These decreases were partially offset by an increase in compensation expenses.
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
Management’s Discussion and Analysis
the current-year quarter.
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 $79.18$80.13 billion as of MarchDecember 31, 2023 were $1.77 billion, or 2%, lessgreater than our total assets as of September 30, 2022.2023. Cash and cash equivalents increased $893 million primarily driven by an increase in cash held at our bank subsidiaries, largely resulting from an increase in bank deposits during the period. Assets segregated for regulatory purposes and restricted cash decreased $3.78 billion,increased $496 million, primarily due to a decreasean increase in client cash sweep balances in our broker-dealer subsidiaries, which resulted in a declinean increase in brokerage client cash held in our CIPpayables and a corresponding declineincrease in segregated assets. Brokerage client receivables, collateralized agreements, and trading assets also decreased $359 million, $325 million, and $277 million, respectively, compared with September 30, 2022. Partially offsetting these decreases was a $2.49 billion increase in cash and cash equivalents, driven by an increase in bank deposits, as well as an increase in bankBank loans, net of $444increased $407 million primarily related to increases in corporate and residential mortgage loans, partially offset by a decline in securities-based loans.
As of MarchDecember 31, 2023, our total liabilities of $69.21$69.35 billion were $2.31$1.18 billion, or 3%2%, lessgreater than our total liabilities as of September 30, 2022.2023. Bank deposits increased $1.19 billion, primarily driven by an increase in ESP balances. Brokerage client payables decreased $4.60 billionincreased $346 million, primarily related to the aforementioned increase in client cash balances in our broker-dealer subsidiaries as of December 31, 2023. These increases were partially offset by a decrease in CIP balances as of March 31, 2023. Accruedaccrued compensation, commissions, and benefits decreased $326of $418 million primarily due to the payment of prior-year bonuses. These decreases were partially offset by an increase in bank deposits of $2.87 billion, primarily due to the launch of the Enhanced Savings Program to PCG clients in March 2023, which raised $2.75 billion of depositsbonuses during the period ended March 31, 2023, and an increase in other borrowings of $359 million as a result of a net increase in FHLB borrowings in the Bank segment during our fiscal second quarter of 2023.quarter.
| | | | | | | | |
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Management’s Discussion and Analysis | |
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, including times of broader industry or market liquidity stress events. 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.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. FinancingOur business operations generate substantially all of their own liquidity and funding needs. We have a contingency funding plan which would guide our actions if one or more of our businesses were to experience disruptions from normal funding and liquidity sources. These actions include reallocating client cash balances in the RJBDP from third-party banks to our bank subsidiaries thereby bringing those deposits onto our Consolidated Statements of Financial Condition, increasing our FHLB borrowings at our bank subsidiaries, accessing committed and uncommitted lines of credit at the parent or certain operating subsidiaries, accessing capital markets or, in certain circumstances, accessing certain borrowings from the Federal Reserve. We also have the ability to create additional sources of funding by developing new products to meet the financial needs of our clients, such as the ESP deposit offering launched to PCG clients in fiscal 2023. With each of our deposit offerings, we work to obtain sufficient liquidity to support our business operations while also maintaining a high level of FDIC insurance coverage for our clients.
Our financing activities could also include bank borrowings, collateralized financing arrangements, 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 cashfunding and liquidity requirements due to our strong financial position and ability to access capital from financial markets.
Liquidity and capital management
Senior management establishes our liquidity and capital management frameworks. Our liquidity and capital management frameworks are overseen by the RJFour 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 financing,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.assets (e.g., the maturities of our available-for-sale securities portfolio). 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 liquidity.
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
Management’s Discussionfunding and Analysis
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.
| | | | | | | | |
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Management’s Discussion and Analysis | |
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 1716 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 2120 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.
Recent events impacting the financial services industry, including the failure of certain banks in the industry, mayOn July 27, 2023, U.S. banking regulators issued proposed rules that, if enacted, would result in a changechanges to regulations applicable to bank holding companies, including higher capital requirements and eliminating the AOCI opt-out election, which could negatively impactreduce our regulatory capital ratios in the future. In addition, potential changes toUnder the proposed rule, if enacted, there would be a three-year transition period for the elimination of the AOCI opt-out electionelection. 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 future regulatory capital calculations.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 | $ in millions | | March 31, 2023 | | September 30, 2022 | $ in millions | | December 31, 2023 | | September 30, 2023 |
Common equity tier 1 capital/Tier 1 capital | Common equity tier 1 capital/Tier 1 capital | | | | |
Common stock and related additional paid-in capital | |
Common stock and related additional paid-in capital | |
Common stock and related additional paid-in capital | Common stock and related additional paid-in capital | | $ | 3,037 | | | $ | 2,989 | |
Retained earnings | Retained earnings | | 9,590 | | | 8,843 | |
Treasury stock | Treasury stock | | (1,954) | | | (1,512) | |
Accumulated other comprehensive loss | Accumulated other comprehensive loss | | (798) | | | (982) | |
Less: Goodwill and identifiable intangible assets, net of related deferred tax liabilities | Less: Goodwill and identifiable intangible assets, net of related deferred tax liabilities | | (1,804) | | | (1,805) | |
Other adjustments | Other adjustments | | 717 | | | 847 | |
Common equity tier 1 capital | Common equity tier 1 capital | | 8,788 | | | 8,380 | |
Additional tier 1 capital (preferred equity of $120, net of $5 of other items) | | 115 | | | 100 | |
Preferred stock | |
Less: Tier 1 capital deductions | |
Tier 1 capital | Tier 1 capital | | 8,903 | | | 8,480 | |
Tier 2 capital | Tier 2 capital | |
Tier 2 capital instruments plus related surplus | | 100 | | | 100 | |
Qualifying subordinated debt | |
Qualifying subordinated debt | |
Qualifying subordinated debt | |
Qualifying allowances for credit losses | Qualifying allowances for credit losses | | 471 | | | 451 | |
Tier 2 capital | Tier 2 capital | | 571 | | | 551 | |
Total capital | Total capital | | $ | 9,474 | | | $ | 9,031 | |
| | | | | | | | |
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Management’s Discussion and Analysis | |
The following table presents RJF’s risk-weighted assets by exposure type used to calculate the aforementioned regulatory capital ratios.
| $ in millions | $ in millions | | March 31, 2023 | | September 30, 2022 | $ in millions | | December 31, 2023 | | September 30, 2023 |
On-balance sheet assets: | On-balance sheet assets: | | | | |
Corporate exposures | |
Corporate exposures | |
Corporate exposures | Corporate exposures | | $ | 20,597 | | | $ | 20,147 | |
Exposures to sovereign and government-sponsored entities (1) | Exposures to sovereign and government-sponsored entities (1) | | 1,952 | | | 2,002 | |
Exposures to depository institutions, foreign banks, and credit unions | Exposures to depository institutions, foreign banks, and credit unions | | 2,062 | | | 3,003 | |
Exposures to public-sector entities | Exposures to public-sector entities | | 774 | | | 696 | |
Residential mortgage exposures | Residential mortgage exposures | | 4,087 | | | 3,732 | |
Statutory multifamily mortgage exposures | | 92 | | | 71 | |
Statutory multi-family mortgage exposures | |
High volatility commercial real estate exposures | High volatility commercial real estate exposures | | 126 | | | 128 | |
Past due loans | Past due loans | | 149 | | | 110 | |
Equity exposures | Equity exposures | | 525 | | | 445 | |
Securitization exposures | Securitization exposures | | 133 | | | 129 | |
Other assets | Other assets | | 7,868 | | | 7,325 | |
Off-balance sheet: | Off-balance sheet: | |
Standby letters of credit | Standby letters of credit | | 79 | | | 62 | |
Standby letters of credit | |
Standby letters of credit | |
Commitments with original maturity of one year or less | Commitments with original maturity of one year or less | | 121 | | | 98 | |
Commitments with original maturity greater than one year | Commitments with original maturity greater than one year | | 2,549 | | | 2,437 | |
Over-the-counter derivatives | Over-the-counter derivatives | | 235 | | | 305 | |
| Other off-balance sheet items | Other off-balance sheet items | | 250 | | | 423 | |
Other off-balance sheet items | |
Other off-balance sheet items | |
Market risk-weighted assets | Market risk-weighted assets | | 2,624 | | | 3,063 | |
Total standardized risk-weighted assets | Total standardized risk-weighted assets | | $ | 44,223 | | | $ | 44,176 | |
(1)RJF’s exposureExposure 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) of $8.66$10.21 billion at MarchDecember 31, 2023 increased $2.49 billion$893 million compared with September 30, 2022.2023. The increase in cash and cash equivalents primarily resulted from an increase in bank deposits including $2.75 billion of deposits from the launch of our Enhanced Savings Program to PCG clients in March 2023, as well asand net proceeds from additional FHLB advancesincome earned during the period,period. These increases were partially offset by payments of prior-year bonuses, purchases of bank loans, common stock repurchases and dividends investments in bank loanspaid on our common and available-for-sale securities, andpreferred stock during the payment of prior-year bonuses.three months ended December 31, 2023.
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
Management’s Discussion and Analysis
Sources of liquidity
Approximately $1.83$2.08 billion of our total MarchDecember 31, 2023 cash and cash equivalents was RJF corporate cash, which included the cash held at the parent company, which includedas well as cash it loaned to RJ&A. As of MarchDecember 31, 2023, RJF had loaned $1.16$1.38 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 | | MarchDecember 31, 2023 |
RJF | | $ | 692732 | |
TriState Capital Bank | | 3,765 | |
Raymond James Bank | | 2,5812,295 | |
TriState Capital Bank | | 2,401 | |
RJ&A | | 1,6391,961 | |
Raymond James Ltd. (“RJ Ltd.”) | | 502548 | |
Raymond James Capital Services, LLC | | 179 | |
Charles Stanley Group Limited | | 131 | |
Raymond James Financial Services, Inc. | | 121186 | |
Charles Stanley Group Limited (“Charles Stanley”) | | 149 | |
Raymond James Trust Company of New Hampshire | | 94100 | |
Raymond James Investment Management | | 5795 | |
Raymond James Capital Services, LLC | | 65 | |
Other subsidiaries | | 266310 | |
Total cash and cash equivalents | | $ | 8,66310,206 | |
Due to recent market volatility, we maintained a higher level of cash balances at Raymond James Bank and TriState Capital Bank as of March 31, 2023 compared with more recent periods as part of our liquidity management practices.
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RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Management’s Discussion and Analysis | |
RJF maintained depository accounts at Raymond James Bank and TriState Capital Bank totaling $275$286 million as of MarchDecember 31, 2023. The portion of this total that was available on demand without restrictions, which amounted to $234$244 million as of MarchDecember 31, 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 cash and cash equivalents balances at our non-U.S. subsidiaries, including RJ Ltd., and Charles Stanley, as of MarchDecember 31, 2023 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 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 MarchDecember 31, 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. 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 or as part of our liquidity and capital management activities.
Although we have liquidity available to us from our other subsidiaries, the available amounts may not be as significant as those previously described and, in certain instances, may be subject to regulatory requirements.
Borrowings and financing arrangements
Financing 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.
As of MarchDecember 31, 2023, RJF and RJ&A had the ability to borrow under our $500$750 million revolving credit facility agreement (the “Credit Facility”),Credit Facility, a committed unsecured line of credit; however, we had no such borrowings outstanding under this facility as of MarchDecember 31, 2023. See our discussion of the Credit Facility in Note 1613 of the Notes to theCondensed Consolidated Financial Statements of our 2022this Form 10-K10-Q for additional details on theinformation regarding our Credit Facility. In April 2023, we amended our Credit Facility, increasing the borrowing capacity to $750 million, extending the term through April 2028, adding the secured overnight financing rate (“SOFR”) as an alternative reference rate, decreasing our variable rate facility fee, and removing the previous $300 million sublimit for RJF.
In addition to our Credit Facility, we have various uncommitted financing arrangements with third-party lenders, which are in the form of secured lines of credit, secured bilateral or tri-party repurchase agreements, or unsecured lines of credit. Our uncommitted secured financing arrangements generally require us to post collateral in excess of the amount borrowed and are generally collateralized by RJ&A-owned securities or by securities that we have received as collateral under reverse repurchase agreements (i.e., securities purchased under agreements to resell). As of MarchDecember 31, 2023, we had outstanding borrowings under onetwo uncommitted secured borrowing arrangementarrangements out of a total of 1312 uncommitted financing arrangements (nine(eight uncommitted secured and four uncommitted unsecured). However, lenders are under no contractual obligation to lend to us under uncommitted credit facilities.
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RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Management’s Discussion and Analysis | |
Our borrowings on uncommitted financing arrangements, which were in the form of repurchase agreements in RJ&A, were included in “Collateralized financings” on our Condensed Consolidated Statements of Financial Condition. The average daily balance outstanding during the five most recent quarters, the maximum month-end balance outstanding during the quarter and the period-end balances for repurchase agreements and reverse repurchase agreements are detailed in the following table.
| | | | Repurchase transactions | | Reverse repurchase transactions | | | Repurchase transactions | | Reverse repurchase transactions |
For the quarter ended: ($ in millions) | 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 | 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 |
December 31, 2023 | |
September 30, 2023 | |
June 30, 2023 | |
March 31, 2023 | March 31, 2023 | | $ | 174 | | | $ | 223 | | | $ | 150 | | | $ | 236 | | | $ | 310 | | | $ | 167 | |
December 31, 2022 | 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 | |
March 31, 2022 | | $ | 271 | | | $ | 334 | | | $ | 140 | | | $ | 211 | | | $ | 304 | | | $ | 221 | |
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
Management’s Discussion and Analysis
Other borrowings and collateralized financings
We had $1.55$1 billion in FHLB borrowings outstanding at MarchDecember 31, 2023, comprised of floating-rate and fixed-rate advances. The interest rates on our floating-rate advances are generally based on a SOFR. We use interest rate swaps to manage the risk of increases in interest rates associated with the majority of our floating-rate FHLB advances by converting the balances subject to variable interest rates to a fixed interest rate. In March 2023, we increased our fixed-rate FHLB borrowings by $1 billion. We repaid $500 million of such borrowings by March 31, 2023, with the remaining $500 million maturing on April 20, 2023. We subsequently repaid $200 million of the borrowings maturing in April 2023, while extending the remaining $300 million until May 26, 2023 at a rate of 5.23%.
During the quarter ended March 31, 2023, we increasedWe pledge certain of our borrowing capacity with the FHLB through the pledge of additional available-for-sale securities. At March 31, 2023, we had pledged $8.77 billion of bank loans net and $4.64 billion of available-for-sale securities with the FHLB as security for both the repayment of outstanding FHLBcertain borrowings and to secure capacity for additional borrowings as needed. As of MarchDecember 31, 2023, we had an additional $9.07$9.37 billion in immediate credit available from the FHLB based on the collateral pledged, which does include additional capacity created by the $200 million repayment of FHLB borrowings subsequent to quarter end, and withpledged. With the pledge of additionalincremental collateral, we had additionalcould further increase credit availabilityavailable to us from certain FHLB member banks.the FHLB. See Notes 4, 6, 7, and 1413 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 MarchDecember 31, 2023, the clearing organization is under no contractual obligation to lend to us under this arrangement.
Raymond James Bank and TriState Capital BankAs member banks, our bank subsidiaries 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 onin March 12, 2023;2023 and is expected to expire in March 2024; however, we do not view borrowings from the Federal Reserve as aone of our primary sourcesources of funding. See Note 6 of the Notes to Condensed Consolidated Financial Statements of this Form 10-Q for additional information regarding available-for-sale securities and bank loans net pledged with the FRB.
As part of the acquisition of TriState Capital,At December 31, 2023, we assumed, as of the closing date, TriState Capital’shad subordinated notes due 2030 outstanding, with an aggregate principal amount of $98 million. See Note 1413 of the Notes to Condensed Consolidated Financial Statements of this Form 10-Q and Note 16 of our 20222023 Form 10-K 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-dealercounterparty and then lend them to another.another counterparty. Where permitted, we have also loaned to broker-dealers and other financial institutions, securities owned by clients or the firm.firm to broker-dealers and other financial institutions. We account for each of these types of transactions as collateralized agreements and financings, with the outstanding balance of $177$347 million as of MarchDecember 31, 2023 related to the securities loaned included in “Collateralized financings” on our Condensed Consolidated Statements of Financial Condition of this Form 10-Q. See Note 6 of the Notes to Condensed Consolidated Financial Statements of this Form 10-Q and Note 2 of our 20222023 Form 10-K for more information on our collateralized agreements and financings.
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RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Management’s Discussion and Analysis | |
Senior notes payable
At MarchDecember 31, 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 17 of the Notes to the Consolidated Financial Statements of our 20222023 Form 10-K for additional information on senior notes payable.
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
Management’s Discussion and Analysis
Credit ratings
Our issuer, 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
| | Fitch Ratings, Inc.(1) | | Moody’s | | Standard & Poor’s Ratings Services(2) |
Issuer and senior long-term debtdebt: | | | | | | |
Rating | | A- | | A3 | | A- |
Preferred stockOutlook | | Stable | | Stable | | Stable |
Last rating action | | Affirmed | | Upgrade | | Upgrade |
Date of last rating action | | March 2023 | | February 2022 | | February 2023 |
Preferred stock: | | | | | | |
Rating | | BB+ | | Baa3 (hyb) | | Not rated |
OutlookLast rating action | | Affirmed | | StableAssigned | | N/A |
Date of last rating action | | StableMarch 2023 | | August 2022 | | StableN/A |
(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 credit 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, cause clients to withdraw bank deposits that exceed FDIC insurance limits from our bank subsidiaries, 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 (i.e., the participant chooses investment portfolio benchmarks) 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 $863 million$1.01 billion as of MarchDecember 31, 2023, comprised of $554$667 million related to employee-directed plans and $309$343 million related to company-directed plans, and we were able to borrow up to 90%, or $777$909 million, of the MarchDecember 31, 2023 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 MarchDecember 31, 2023.
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RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Management’s Discussion and Analysis | |
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 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 1211 and 1312 of the Notes to Condensed Consolidated Financial Statements of this Form 10-Q and Notes 14 and 15 of our 2023 Form 10-K 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 1615 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
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” of our 20222023 Form 10-K.
RJF and many of its subsidiaries are each subject to various regulatory capital requirements. As of MarchDecember 31, 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 MarchDecember 31, 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. See Note 2120 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.
The Department of Labor (“DOL”) recently proposed the “Retirement Security Rule.” This proposed regulation amends the definition of a “fiduciary” in connection with investment advice regarding employee benefit plans and individual retirement accounts (“the Proposed Fiduciary Rule”). Along with the Proposed Fiduciary Rule, the DOL issued proposed amendments to several prohibited transaction exemptions. If finalized, the Proposed Fiduciary Rule, along with the amended prohibited transaction exemptions, could have a material adverse effect on our business and results of operations.
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 for the reporting 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 20222023 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.
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 20222023 Form 10-K. In addition, refer to Note 1615 of the Notes to Condensed Consolidated Financial Statements of this Form 10-Q for information regarding legal and regulatory matters contingencies as of MarchDecember 31, 2023.
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RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Management’s Discussion and Analysis | |
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 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.
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
Management’s Discussion and Analysis
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 MarchDecember 31, 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 MarchDecember 31, 2023. As of MarchDecember 31, 2023, use of the downside case scenario would have resulted in an increase of approximately $200$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 $40$45 million in the quantitative portion of our allowance for credit losses on bank loans at MarchDecember 31, 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 20222023 Form 10-K for information regarding our methodologies and assumptions used in estimating the allowance for credit losses. See Note 7 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 MarchDecember 31, 2023.
RECENT ACCOUNTING DEVELOPMENTSSTANDARDS UPDATE
In March 2022, the Financial Accounting Standards Board 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 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 MarchNovember 2023, the FASB issued amended guidance related to accountingdisclosures for investments in tax credit structures using the proportional amortization methodsegment reporting (ASU 2023-02)2023-07). The amendment permits reporting entitiesrequires a public entity to electdisclose on an annual and interim basis, for each reportable segment, the significant segment expenses that are regularly provided to account for their tax equity investments using the proportional amortization method if certain conditions are metchief operating decision maker and makes the delayed equity contributionsincluded within each reported measure of segment profit or loss. The guidance applicable only when the proportional amortization method is applied to a tax equity investment. This amendment also requires entitiesa public entity to make disclosures about all investments indisclose, for each reportable segment, an amount for other segment items (those not captured as a tax credit program for which they have elected to account for usingsignificant expense) and 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.reported measure of a segment’s profit or loss. This new guidance is effective for annual periods beginning in our fiscal year2025 and interim periods beginning on October 1, 2024.in our fiscal first quarter of 2026 with early adoption permitted. This guidance maywill 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. Although permitted, we do not currently plan to early adopt.basis. We are still evaluating the impact the adoption ofthat this new guidance will have on our financial position, results of operations, and disclosures.
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RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Management’s Discussion and Analysis | |
In December 2023, the FASB issued amended guidance related to disclosures for income taxes (ASU 2023-09). The amendment requires a public entity to enhance its existing annual tabular reconciliation of its statutory income tax rate to its effective tax rate, with certain reconciling items at or above 5% of the applicable statutory income tax rate broken out by nature and/or jurisdiction. The guidance also requires an entity to disclose income taxes paid (net of refunds received), disaggregated by federal, state, and foreign taxes, and net amounts paid to an individual jurisdiction when they represent 5% or more of the total income taxes paid. This new guidance is effective for annual periods beginning in our fiscal 2026 with early adoption permitted. This guidance will be applied on a prospective basis with retrospective application permitted. We are evaluating the impact that this new guidance will have on our disclosures.
See Note 2 of the Notes to the Condensed Consolidated Financial Statements of this Form 10-Q for information regarding new accounting guidance we adopted during the three months ended December 31, 2023.
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.
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
Management’s Discussion and Analysis
Governance
Our Board of Directors, including its Risk Committee and Audit 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. Through our broker-dealer subsidiaries, we trade debt obligations and equity securities and maintain trading inventories to ensure availability of securities 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 time may hold SBASmall Business Administration loan securitizations not yet transferred.sold. 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 Consolidated Financial Statements of our 20222023 Form 10-K and Notes 3, 4, and 5 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 sharessecurities 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.
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.
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RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Management’s Discussion and Analysis | |
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 the 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 amongbetween these factors. 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.issuer concentration. For derivative positions, which are primarily comprised of interest rate swaps, we have established sensitivity-based and foreign exchange spot 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.
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
Management’s Discussion and Analysis
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 ofto 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 whichthat 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 20222023 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 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.
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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.
| | |
| | | | Six months ended March 31, 2023 | | Period-end VaR | | Three months ended March 31, | | Six months ended March 31, |
$ in millions | $ in millions | | High | | Low | | March 31, 2023 | | September 30, 2022 | | $ in millions | | 2023 | | 2022 | | 2023 | | 2022 |
$ in millions | |
$ in millions | |
Daily VaR | Daily VaR | | $ | 3 | | | $ | 1 | | | $ | 1 | | | $ | 3 | | | Average daily VaR | | $ | 2 | | | $ | 1 | | | $ | 2 | | | $ | 1 | |
Daily VaR | |
Daily VaR | |
Average daily VaR was higher during the three and six months ended March 31, 2023 compared with the three and six months ended March 31, 2022 due to the impact of increased market volatility during the period, as well as the addition of the SumRidge Partners trading inventory beginning in July 2022. Period-end VaR was lower at MarchDecember 31, 2023 compared towith September 30, 2022,2023, due to lower net exposure as a declineresult of a change in the mix of our 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 and six months ended MarchDecember 31, 2023, our regulatory-defined daily losses in our trading portfolios exceededdid not exceed our predicted VaR on one occasion.VaR.
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.”
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
Management’s Discussion and Analysis
Banking operations
Our Bank segment maintains an interest-earning asset portfolio that is comprised of cash, SBL, C&I loans, commercial andCRE loans, REIT loans, residential real estate loans, REITmortgage loans, and tax-exempt loans, as well as securities held in the available-for-sale securities 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 theour 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 (“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 20222023 Form 10-K and Notes 1312 and 1413 of the Notes to Condensed Consolidated Financial Statements of this Form 10-Q. See “Item 7 - Management’s Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and capital resources” of our 2023 Form 10-K for further information.
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.
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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, a weighted-average deposit beta on our interest-bearing deposit accounts without stated maturities of approximately 40% as both interest rates rise and fall, 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. 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 | | $2,120 | | 14% | +200 | | $1,971 | | 13% |
+100 | +100 | | $1,989 | | 7% | +100 | | $1,892 | | 8% |
0 | 0 | | $1,860 | | —% | 0 | | $1,745 | | —% |
-100 | -100 | | $1,733 | | (7)% | -100 | | $1,642 | | (6)% |
-200 | -200 | | $1,599 | | (14)% | -200 | | $1,548 | | (11)% |
|
(1)Our 0-basis point scenario was based on interest rates as of MarchDecember 31, 2023 and did2023.
The preceding table does not include the impactimpacts of the Fed’s May 4, 2023 increasean instantaneous change in its benchmark short-term rate.
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 discussionadditional information on our net interest income.
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. In our available-for-sale securities portfolio, we hold primarily fixed-rate agency-backed MBS, 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 impactportfolio recorded through OCI on our Condensed Consolidated Statements of Income and Comprehensive Income. As the majority of our available-for-sale securities portfolio is comprised of U.S. government and government agency-backed securities, changes in short-termfair value are primarily driven by changes in interest rates. At December 31, 2023, our available-for-sale securities portfolio had a fair value of $9.20 billion with a weighted-average yield of 2.13% and a weighted-average life, after factoring in estimated prepayments, of 4.0 years. To evaluate the interest rate sensitivity of our available-for-sale securities portfolio we also monitor, among other things, effective duration, defined as the approximate percentage change in price for a 100-basis point change in rates. As of December 31, 2023, the effective duration of our available-for-sale securities portfolio was approximately 3.37, which means that we would expect the market value of our available-for-sale securities portfolio to decline approximately 3.37% for every 100-basis point increase in interest rates could haveand increase approximately 3.37% for every 100-basis point decline in interest rates. See Note 2 of the Notes to Consolidated Financial Statements of our 2023 Form 10-K and Note 4 of the Notes to Condensed Consolidated Financial Statements of this Form 10-Q for additional information on the consolidated firm’s operations.our available-for-sale securities portfolio.
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 MarchDecember 31, 2023, our EVE analyses were within approved limits.
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RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Management’s Discussion and Analysis | |
The following table shows the maturities of our bank loan portfolio at MarchDecember 31, 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 - fifteen years | | > Fifteen years | | Total | $ in millions | | One year or less | | > One year - five years | | > Five years - fifteen years | | > Fifteen years | | Total |
SBL | SBL | | $ | 13,747 | | | $ | 400 | | | $ | 79 | | | $ | 1 | | | $ | 14,227 | |
C&I loans | C&I loans | | 891 | | | 7,519 | | | 2,811 | | | 38 | | | 11,259 | |
CRE loans | CRE loans | | 923 | | | 4,172 | | | 1,937 | | | 22 | | | 7,054 | |
REIT loans | REIT loans | | 256 | | | 1,401 | | | 60 | | | — | | | 1,717 | |
Residential mortgage loans | Residential mortgage loans | | 13 | | | 36 | | | 201 | | | 7,829 | | | 8,079 | |
Tax-exempt loans | Tax-exempt loans | | 169 | | | 253 | | | 1,221 | | | — | | | 1,643 | |
Total loans held for investment | Total loans held for investment | | 15,999 | | | 13,781 | | | 6,309 | | | 7,890 | | | 43,979 | |
Held for sale loans | Held for sale loans | | — | | | — | | | 47 | | | 72 | | | 119 | |
Total loans held for sale and investment | Total loans held for sale and investment | | $ | 15,999 | | | $ | 13,781 | | | $ | 6,356 | | | $ | 7,962 | | | $ | 44,098 | |
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 MarchDecember 31, 2023.
| | | | Interest rate type | | | Interest rate type |
$ in millions | $ in millions | | Fixed | | Adjustable | | Total | $ in millions | | Fixed | | Adjustable | | Total |
SBL | SBL | | $ | 12 | | | $ | 468 | | | $ | 480 | |
C&I loans | C&I loans | | 899 | | | 9,469 | | | 10,368 | |
CRE loans | CRE loans | | 419 | | | 5,712 | | | 6,131 | |
REIT loans | REIT loans | | — | | | 1,461 | | | 1,461 | |
Residential mortgage loans | Residential mortgage loans | | 230 | | | 7,836 | |
| 8,066 | |
Tax-exempt loans | Tax-exempt loans | | 1,474 | | | — | | | 1,474 | |
Total loans held for investment | Total loans held for investment | | 3,034 | | | 24,946 | | | 27,980 | |
Held for sale loans | Held for sale loans | | 2 | | | 117 | | | 119 | |
Total loans held for sale and investment | Total loans held for sale and investment | | $ | 3,036 | | | $ | 25,063 | | | $ | 28,099 | |
Contractual loan terms for SBL, C&I loans, CRE loans, REIT loans, and residential mortgage 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, 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 March 31, 2023, our available-for-sale securities portfolio had a fair value of $9.77 billion with a weighted-average yield of 2.03% and a weighted-average life of 4.38 years. The effective duration of our available-for-sale securities portfolio as of March 31, 2023 was approximately 3.65, where duration is defined as the approximate percentage change in price for a 100-basis point change in rates. See Note 4 of the Notes to Condensed Consolidated Financial Statements of this Form 10-Q for additional information on our available-for-sale securities portfolio.
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
Management’s Discussion and Analysis
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 3 of the Notes to Condensed Consolidated Financial Statements of this Form 10-Q for additional information on this portfolio.
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RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Management’s Discussion and Analysis | |
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.dollar (“USD”). For example, our bank loan portfolio includes loans which are denominated in Canadian dollars (“CAD”), totaling $1.54$1.40 billion and $1.51 billion at Marchas of both December 31, 2023 and September 30, 2022, respectively,2023, when converted to the U.S. dollar.USD. 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 20222023 Form 10-K and Note 5 of the Notes to Condensed Consolidated Financial Statements of this Form 10-Q for further information regarding these derivatives.
At MarchDecember 31, 2023, we had foreign exchange risk in our investment in RJ Ltd. of CAD 413429 million and in our investment in Charles Stanley of £274£289 million, which were not hedged. All of ourWe had other, less significant investments consistingin foreign domiciled subsidiaries, primarily of subsidiaries located in Europe, arewhich were not hedged, andhedged; however, we do not believe we had material foreign exchange risk either individually, or in the aggregate, pertaining to these subsidiaries as of MarchDecember 31, 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 1716 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. dollarUSD
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.USD. 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 5 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 20222023 Form 10-K.
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
Management’s Discussion and Analysis
Corporate activities
We maintain cash balances with the Fed and with various financial institutions, primarily global systemically important banks,financial institutions, 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.
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RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Management’s Discussion and Analysis | |
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 onas security for certain transactions and conducting business through clearing organizations, which may guarantee performance. See Note 2 of the Notes to Consolidated Financial Statements of our 20222023 Form 10-K and Notes 5 and 6 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. See Note 2 of the Notes to the Consolidated Financial Statements of our 20222023 Form 10-K for furtheradditional information about our determination of the allowance for credit losses associated with certain of our brokerage lending 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 20222023 Form 10-K and Note 8 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 across loan types, geographic location, industrylocations, industries and client level,clients, 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 annual independent reviews at least annually 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 thorough credit risk rating system to measure the credit quality of individual corporate and tax-exempt loans and related unfunded lending commitments. For our 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, 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 pools 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
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
Management’s Discussion and Analysis
make enhancements we consider appropriate. Our allowance for credit losses methodology is described in Note 2 of the Notes to the Consolidated Financial Statements of our 20222023 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 20222023 Form 10-K for further information about the risk characteristics relevant to each portfolio segment.
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RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Management’s Discussion and Analysis | |
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 by loan portfolio segment.
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| | Three months ended March 31, | | Six months ended March 31, |
| | 2023 | | 2022 | | 2023 | | 2022 |
$ in millions | | Net loan (charge-off)/recovery amount (1) | | Annualized % of avg. outstanding loans | | Net loan (charge-off)/recovery amount | | Annualized % of avg. outstanding loans | | Net loan (charge-off)/recovery amount (1) | | Annualized % of avg. outstanding loans | | Net loan (charge-off)/recovery amount | | Annualized % of avg. outstanding loans |
| | | | | | | | | | | | | | | | |
C&I loans | | $ | (20) | | | 0.71 | % | | $ | (1) | | | 0.05 | % | | $ | (24) | | | 0.43 | % | | $ | (3) | | | 0.07 | % |
CRE loans | | — | | | — | % | | — | | | — | % | | 2 | | | 0.06 | % | | — | | | — | % |
| | | | | | | | | | | | | | | | |
Residential mortgage loans | | — | | | — | % | | — | | | — | % | | — | | | — | % | | 1 | | | 0.04 | % |
| | | | | | | | | | | | | | | | |
Total loans held for sale and investment | | $ | (20) | | | 0.18 | % | | $ | (1) | | | 0.01 | % | | $ | (22) | | | 0.10 | % | | $ | (2) | | | 0.02 | % |
(1) Net charge-offs during the three and six months ended March 31, 2023 were primarily related to two C&I loans. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Three months ended December 31, |
| | | | | | 2023 | | 2022 |
$ in millions | | | | | | | | | | 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 | | | | | | | | | | $ | (6) | | | 0.23 | % | | $ | (4) | | | 0.14 | % |
CRE loans | | | | | | | | | | (2) | | | 0.11 | % | | 2 | | | 0.12 | % |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
Total loans held for sale and investment | | | | | | | | | | $ | (8) | | | 0.07 | % | | $ | (2) | | | 0.02 | % |
The level of nonperforming assets 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, nonperforming assets, and related key credit ratios.
| $ in millions | $ in millions | | March 31, 2023 | | September 30, 2022 | $ in millions | | December 31, 2023 | | September 30, 2023 |
| Nonperforming loans (1) | |
Nonperforming loans (1) | |
Nonperforming loans (1) | Nonperforming loans (1) | | $ | 99 | | | $ | 74 | |
Nonperforming assets | Nonperforming assets | | $ | 99 | | | $ | 74 | |
| | | Nonperforming loans as a % of total loans held for sale and investment | Nonperforming loans as a % of total loans held for sale and investment | | 0.22 | % | | 0.17 | % |
| Nonperforming loans as a % of total loans held for sale and investment | |
| Nonperforming loans as a % of total loans held for sale and investment | | | 0.37 | % | | 0.29 | % |
Allowance for credit losses as a % of nonperforming loans | Allowance for credit losses as a % of nonperforming loans | | 419 | % | | 535 | % | Allowance for credit losses as a % of nonperforming loans | | 292 | % | | 370 | % |
Nonperforming assets as a % of Bank segment total assets | Nonperforming assets as a % of Bank segment total assets | | 0.16 | % | | 0.13 | % | Nonperforming assets as a % of Bank segment total assets | | 0.27 | % | | 0.21 | % |
(1)Nonperforming loans at MarchDecember 31, 2023 and September 30, 20222023 included $90$87 million and $63$96 million of loans, respectively, which were current pursuant to their contractual terms.
The increase in nonperforming loan balances in the preceding table excluded $6 millionloans and $7 millionassets as of MarchDecember 31, 2023 andas compared with September 30, 2022, respectively,2023 was primarily due to two loans that were placed on nonaccrual status with an associated allowance during the three months ended December 31, 2023. See table summarizing nonaccrual loans by category in Note 7 of residential troubled debt restructurings which were returnedthe Notes to accrual status in accordance with our policy.
Condensed Consolidated Financial Statements of this Form 10-Q. Although our nonperforming assets as a percentage of our Bank segment’s assets remained low as of MarchDecember 31, 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 would depend on future developments that are highly uncertain.
See 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 20222023 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 20222023 Form 10-K.
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
Management’s Discussion and Analysis
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 MarchDecember 31, 2023. See further discussion of our risk monitoring process in “Item 7 - Management’s Discussion and Analysis of Financial Condition and Results of Operations - Risk management - Credit risk - Banking activities” of our 2023 Form 10-K.
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RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Management’s Discussion and Analysis | |
SBL and residential mortgage loan portfolios
Substantially all collateral securing our SBL portfolio is 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 portfolio with insignificantno losses incurred to date.during the three months ended December 31, 2023.
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 7 of the Notes to the Condensed Consolidated Financial Statements of this Form 10-Q for additional information about our residential mortgage loan portfolio.
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.
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| | 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 |
March 31, 2023 | | $ | 4 | | | $ | 5 | | | $ | 9 | | | 0.05 | % | | 0.06 | % | | 0.11 | % |
September 30, 2022 | | $ | 6 | | | $ | 6 | | | $ | 12 | | | 0.08 | % | | 0.08 | % | | 0.16 | % |
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| | 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 |
December 31, 2023 | | $ | 5 | | | $ | 3 | | | $ | 8 | | | 0.06 | % | | 0.03 | % | | 0.09 | % |
September 30, 2023 | | $ | 3 | | | $ | 4 | | | $ | 7 | | | 0.03 | % | | 0.05 | % | | 0.08 | % |
Our MarchDecember 31, 2023 percentage compares favorably to the national average for over 30 day delinquencies of 2.03%1.88%, 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.
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| | March 31, 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 |
CA | | 25% | | 5% |
FL | | 17% | | 3% |
TX | | 8% | | 2% |
NY | | 8% | | 1% |
CO | | 4% | | 1% |
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| | December 31, 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 |
California | | 24% | | 5% |
Florida | | 18% | | 4% |
Texas | | 8% | | 2% |
New York | | 8% | | 1% |
Colorado | | 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 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 MarchDecember 31, 2023 and September 30, 2022,2023, these loans totaled $2.71$2.87 billion and $2.55$2.85 billion, respectively, or approximately 34%32% and 35%33% 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 MarchDecember 31, 2023, begins amortizing is six years.
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RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Management’s Discussion and Analysis | |
Corporate and tax-exempt loans
Credit risk in our corporate and tax-exempt loan portfolios is monitored on an individual loan basis. The majority of our tax-exempt 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.
| | March 31, 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 |
| | December 31, 2023 | | | | December 31, 2023 |
| | Loans outstanding as a % of total corporate bank 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 | | 10% | | 5% | Multi-family | | 12% | | 5% |
Industrial warehouse | Industrial warehouse | | 8% | | 4% | Industrial warehouse | | 9% | | 4% |
Office real estate | | Office real estate | | 7% | | 3% |
Loan fund | Loan fund | | 7% | | 3% | Loan fund | | 6% | | 3% |
Office real estate | | 7% | | 3% |
Consumer products and services | | 5% | | 2% |
Subscription lines of credit | | Subscription lines of credit | | 5% | | 2% |
The Fed’s measures to control inflation, including through increases in short-term interest rates in prior fiscal years, have had an impacta dampening effect on consumer behaviorthe economy. Coupled with the present uncertainty regarding future Fed interest rate cuts, both in terms of timing and are likelymagnitude, all lead to our expectation that such dampening will continue to do so in the near-term.during our fiscal 2024. These and related factors could continue to negatively impact our borrowers, particularly thoseborrowers. We continue to closely monitor economic factors, including inflation, interest rates, and a potential recession, that may impact our corporate loan portfolio, including our CRE portfolio. We continue to maintain conservative underwriting standards for our CRE portfolio, including LTV limits that generally range between 65% to 80% at origination depending upon property type. LTV ratios are subject to change over the life of the loan as property values change. Our underwriting standards for our CRE portfolio, including LTV at origination, may be tightened in consumer-facing industries. In response to changing trends, and industry-wide challenges followingtimes of uncertainty. Further, within the COVID-19 pandemic,CRE portfolio, we have closely monitored each loan inlimited our commercial real estate portfolio, particularlyexposure to office real estate utilizing LTV ratiosloans to 3% of total loans held for sale and other metrics. We have also focused on reducing our corporate loan exposure in certain sectors with increasing credit concerns, including selling approximately $430 million of loans subsequent to March 31, 2023 through May 5, 2023 at an average sales price of 99% of par value. Additional sales of corporate loans may be made during the remainder of fiscal 2023 to further reduce credit risk in certain sectors.investment. In addition, we planhave sold and may continue to be prudent in issuing newsell corporate loans for the remainderas part of fiscal 2023 as a result of the recent market volatility.our credit risk mitigation strategies.
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 20222023 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 sixthree months ended MarchDecember 31, 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 20222023 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 20222023 Form 10-K for information regarding how we utilize models throughout the firm and how we manage model risk.
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RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES 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 20222023 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
There were no changes during the three months ended MarchDecember 31, 2023 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
Not applicable.
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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 sixthree months ended MarchDecember 31, 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 sixthree months ended MarchDecember 31, 2023.
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| 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 | | | |
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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 | | | |
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Fiscal year-to-date total | 5,187,149 | | | $ | 97.38 | | | 5,037,438 | | | |
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| 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, 2023 – October 31, 2023 | 2,602 | | | $ | 100.13 | | | — | | | $750 |
November 1, 2023 – November 30, 2023 | 516,466 | | | $ | 99.63 | | | 439,678 | | | $1,500 |
December 1, 2023 – December 31, 2023 | 970,735 | | | $ | 110.03 | | | 968,566 | | | $1,393 |
First quarter | 1,489,803 | | | $ | 106.40 | | | 1,408,244 | | | |
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In December 2022,November 2023, the Board of Directors authorized repurchase of our common stock in an aggregate amount of up to $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 20222023 Form 10-K and Note 9 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.
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
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 December 31, 2023.
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RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Management’s Discussion and Analysis | |
ITEM 6. EXHIBITS
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Exhibit Number | Description |
3.1.1 | |
3.1.2 | |
3.1.3 | |
3.2 | |
10.1 | |
10.2 | Amended and Restated Credit Agreement, dated as of April 6, 2023, among Raymond James Financial, Inc., Raymond James & Associates, Inc., the Lenders party thereto and Bank of America, N.A, incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on April 12, 2023.. |
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. |
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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.
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| | | RAYMOND JAMES FINANCIAL, INC. |
| | | (Registrant) |
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Date: | May 8, 2023February 7, 2024 | | /s/ Paul C. Reilly |
| | | Paul C. Reilly |
| | | Chair and Chief Executive Officer |
| | | |
Date: | May 8, 2023February 7, 2024 | | /s/ Paul M. Shoukry |
| | | Paul M. Shoukry |
| | | Chief Financial Officer |