RAYMOND JAMES FINANCIAL INC

Previous wording

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, anticipated results of litigation, regulatory developments, and general economic conditions. In addition, words such as “believes,” “expects,” “anticipates,” “estimates,” “projects,” and future or conditional verbs such as “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.

Current wording

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, anticipated results of litigation, regulatory developments, and general economic conditions. In addition, words such as “believes,” “expects,” “anticipates,” “intends,” “estimates,” “projects,” and future or conditional verbs such as “will,” “may,” “could,” “should,” and “would,” as well as any other statement that necessarily depends on future events, are intended to identify forward-looking statements. Forward-looking statements are not guarantees, and they involve risks, uncertainties and assumptions. Although we make such statements based on assumptions that we believe to be reasonable, there can be no assurance that actual results will not differ materially from those expressed in the forward-looking statements. We caution investors not to rely unduly on any forward-looking statements and urge you to carefully consider the risks described in our filings with the 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.

Previous wording

For our fiscal first quarter of 2024, we generated net revenues of $3.01 billion, an increase of 8% compared with the prior-year quarter, while pre-tax income of $630 million decreased $22 million, or 3%. Our net income available to common shareholders of $497 million decreased 2%, and our earnings per diluted share were $2.32, reflecting an increase of 1%. Our annualized return on common equity (“ROCE”) for the quarter was 19.1%, compared with 21.3% for the prior-year quarter, and our annualized return on tangible common equity (“ROTCE”) was 23.0%(1), compared with 26.2%(1) for the prior-year quarter. Excluding the 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 $514 million(1)for the three months ended December 31, 2023, an increase of $9 million, or 2%, compared with adjusted net income available to common shareholders for the prior-year quarter which, 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 $2.40(1), an increase of 5% compared with the prior-year quarter. Adjusted annualized ROCE for the quarter was 19.7%(1) and adjusted annualized ROTCE was 23.8%(1)compared with adjusted annualized ROCE of 21.2%(1) and adjusted annualized ROTCE of 26.1%(1) for the prior-year quarter.

Current wording

For our fiscal second quarter of 2024, we generated net revenues of $3.12 billion and pre-tax income of $609 million, each 9% higher than the prior-year quarter. Our net income available to common shareholders of $474 million increased 12%, and our earnings per diluted share were $2.22, reflecting an increase of 15%. Our annualized return on common equity (“ROCE”) for the quarter was 17.5%, compared with 17.3% for the prior-year quarter, and our annualized return on tangible common equity (“ROTCE”) was 21.0%(1), compared with 21.3%(1) for the prior-year quarter. Excluding the impact of $26 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 $494 million(1)for the three months ended March 31, 2024, an increase of 11% compared with adjusted net income available to common shareholders for the prior-year quarter. Our adjusted earnings per diluted share were $2.31(1), an increase of 14% compared with the prior-year quarter. Adjusted annualized ROCE for the quarter was 18.3%(1) and adjusted annualized ROTCE was 21.8%(1)compared with adjusted annualized ROCE of 18.2%(1) and adjusted annualized ROTCE of 22.3%(1) for the prior-year quarter.

Previous wording

The increase in net revenues compared with the prior-year quarter was primarily due to higher asset management and related administrative fees, largely the result of higher 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 but 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 decrease in combined net interest income and RJBDP fees of $25 million, or 3%, as the benefits 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, while balances in the higher-cost ESP, which was launched to PCG clients in March 2023, continued to increase.

Current wording

The increase in net revenues compared with the prior-year quarter was primarily due to higher asset management and related administrative fees, largely the result of higher PCG client assets in fee-based accounts at the beginning of the current quarter compared with the prior-year quarter. Brokerage revenues also increased compared with the prior-year quarter largely due to an increase in client activity in the PCG segment, partially offset by lower fixed income brokerage revenues due to lower market volatility compared with the prior-year quarter. Investment banking revenues increased compared with the prior-year quarter due to higher merger & acquisition and advisory and debt underwriting revenues. Combined net interest income and RJBDP fees declined compared with the prior-year quarter, as the benefits of higher short-term interest rates and higher average interest-earning assets and RJBDP balances swept to third-party banks were more than offset by a significant increase in interest expense. The increase in interest expense was primarily due to a shift in the mix of deposit balances at our Bank segment, as lower-cost RJBDP balances declined, while balances in the higher-cost ESP, which was introduced to PCG clients in March 2023, and certificates of deposit increased.

Previous wording

Compensation, commissions and benefits expense increased 11%, primarily due to an increase in compensable revenues, as well as an increase in compensation costs both to support our growth and annual cost increases, including salaries. Our compensation ratio, or the ratio of compensation, commissions and benefits expense to net revenues, was 63.8%, compared with 62.3% for the prior-year quarter. Excluding acquisition-related compensation expenses, our adjusted compensation ratio was 63.4%(1), compared with 61.7%(1) for the prior-year quarter. The increase in the compensation ratio primarily resulted from changes in our revenue mix due to increases 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.

Current wording

Compensation, commissions and benefits expense increased 12%, primarily due to an increase in compensable revenues, as well as an increase in compensation costs to support our growth and annual salary increases. Our compensation ratio, or the ratio of compensation, commissions and benefits expense to net revenues, was 65.5%, compared with 63.3% for the prior-year quarter. Excluding acquisition-related compensation expenses, our adjusted compensation ratio was 65.2%(1), compared with 62.8%(1) for the prior-year quarter. The increase in the compensation ratio primarily resulted from changes in our revenue mix due to increases 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.

Previous wording

Our effective income tax rate was 21.0% for our fiscal first quarter of 2024, a slight decrease compared with the 21.9% effective income tax rate for the prior-year quarter.

Current wording

Our effective income tax rate was 21.8% for our fiscal second quarter of 2024, a decrease compared with the 23.3% effective income tax rate for the prior-year quarter, primarily due to a larger tax benefit recognized during the current quarter related to nontaxable valuation gains associated with our company-owned life insurance policies, compared to that for the prior-year quarter, as well as a favorable impact on our effective tax rate from lower nondeductible fines and penalties in the current quarter.

Previous wording

As of December 31, 2023, our Tier 1 leverage ratio of 12.1% and Total capital ratio of 23.0% were both significantly higher than the regulatory requirement to be considered well-capitalized. We also continue to have substantial liquidity with $2.1 billion(2) of cash at the parent as of December 31, 2023. We believe our capital and funding position provides us the opportunity to manage our balance sheet prudently and to continue to be opportunistic and invest in growth. During the three months ended December 31, 2023, we repurchased 1.41 million shares of our common stock for $150 million at an average price of $106.51 per share under the Board of Directors’ common stock repurchase authorization. After the effect of those repurchases, $1.39 billion remained under such authorization. We currently expect to continue to repurchase our common stock in our fiscal second quarter of 2024 to offset the remaining impact of shares issued with the acquisition of TriState Capital in fiscal 2022 and to offset dilution from share-based compensation; however, we will continue to monitor market conditions and other capital needs as we consider these repurchases.

Current wording

As of March 31, 2024, our Tier 1 leverage ratio of 12.3% and Total capital ratio of 23.3% were both significantly higher than the regulatory requirement to be considered well-capitalized. We also continue to have substantial liquidity with $2.03 billion(2) of cash at the parent as of March 31, 2024. We believe our capital and funding position provides us the opportunity to manage our balance sheet prudently and to continue to be opportunistic and invest in growth. During the three months ended March 31, 2024, we repurchased 1.70 million shares of our common stock for $207 million at an average price of $122 per share under the Board of Directors’ common stock repurchase authorization. In April 2024, we repurchased an additional 336 thousand shares of our common stock totaling $43 million, for a total of $400 million repurchased for the fiscal year, leaving $1.14 billion available under the Board of Directors’ common stock repurchase authorization as of the date of this Form 10-Q. With the April repurchases, we have offset the dilution from shares issued as part of the TriState Capital acquisition. We expect to continue to repurchase our common stock to offset dilution from share-based compensation and be opportunistic with incremental repurchases; however, we will continue to monitor market conditions and other capital needs as we consider these repurchases.

Previous wording

As we look ahead to our fiscal second quarter of 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 second quarter of 2024 results to be favorably impacted by higher asset management and related administrative fees, which will benefit from the 9% sequential increase in both PCG fee-based assets and financial assets under management as of December 31, 2023. In addition, our financial advisor recruiting activity remains robust, including a strong recruiting pipeline. However, absent a change to 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 second quarter compared with our fiscal first quarter of 2024 due to lower net interest income in our Bank segment reflecting the impact from higher-cost diversified funding sources, including our ESP which was launched to PCG clients in March 2023. While 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 be negatively impacted by market uncertainty during our fiscal second quarter of 2024 but start to improve later in our fiscal 2024. We expect to continue to experience headwinds for brokerage revenues due to flat or declining cash balances at many of our depository institution clients. In addition, although we have proactively taken steps to manage our credit risk in our loan portfolio, future economic deterioration or changes in our macroeconomic outlook could result in increased bank loan provisions for credit losses in future periods.

Current wording

As we look ahead to our fiscal third quarter of 2024, we believe we are well-positioned for long-term growth, with our strong capital position and total client assets under administration of $1.45 trillion. We expect our fiscal third quarter of 2024 results to be favorably impacted by higher asset management and related administrative fees, which will benefit from the 7% sequential increase in PCG fee-based assets and 5% sequential increase in financial assets under management as of March 31, 2024. In addition, our financial advisor recruiting activity remains robust, including a strong recruiting pipeline. While the timing of closings remains difficult to predict, we have a healthy investment banking pipeline and we expect investment banking revenues to improve along with the industry-wide gradual recovery. We expect our combined net interest income and RJBDP fees from third-party banks for the remainder of the fiscal year to be largely dependent on the level of short-term interest rates, the stability of client cash balances and the trajectory of loan growth, which has been subdued in the current interest rate environment. We have continued to experience headwinds for fixed income brokerage revenues due to flat or declining cash balances at many of our depository institution clients and we expect such headwinds to persist until short-term interest rates and cash balances at our depository institution clients stabilize. In addition, although our current loan portfolio credit metrics are solid and we continue to proactively manage our credit risk in our loan portfolio, future economic deterioration or changes in the macroeconomic outlook could result in increased bank loan provisions for credit losses in future periods.

Previous wording

Non-compensation expenses increased $64 million, or 16%, largely due to the favorable impact of a $32 million insurance settlement received in the prior-year quarter related to a previously settled litigation matter, the impact of a FDIC special assessment of $9 million, as well as higher communications and information processing expenses, primarily resulting from continued investments in technology to support our growth.

Current wording

Non-compensation expenses increased $34 million, or 4%, largely due to a $32 million insurance settlement received in the prior-year period related to a previously-settled litigation matter, the impact of an FDIC special assessment of $11 million, as well as higher communications and information processing expenses resulting from continued investments in technology to benefit our clients and advisors, and higher investment sub-advisory fees resulting from growth in assets under management in sub-advised programs. Partially offsetting these increases in expenses, expenses related to legal and regulatory matters declined significantly as the current-year period reflected net legal and regulatory matter reserve releases while the prior-year period included elevated provisions for legal and regulatory matters including an unfavorable arbitration award.

Previous wording

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. 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.

Current wording

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.

Previous wording

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 throughout our fiscal 2023. Since the beginning of our fiscal 2023, the Fed has increased the Fed funds target rate from a September 30, 2022 range of 2.25% to 2.50% to a December 31, 2023 range of 5.25% to 5.50%. While the Fed has left its benchmark rate unchanged in its most recent meetings, it has indicated that it intends to closely monitor market conditions to determine whether it will continue to hold rates steady or initiate rate cuts in our fiscal 2024. The following table details the Fed’s short-term interest rate activity since the beginning of our fiscal 2023.

Current wording

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 throughout our fiscal year 2023. Since the beginning of our fiscal year 2023, the Fed increased the Fed funds target rate 225 basis points from a September 30, 2022 range of 3.00% to 3.25% to a March 31, 2024 range of 5.25% to 5.50%. While the Fed has left its benchmark rate unchanged in our fiscal year 2024 to-date, in its most recent meetings, it has indicated that it intends to closely monitor market conditions to determine whether it will continue to hold rates steady or initiate interest rate cuts later in our fiscal year 2024. The following table details the Fed’s short-term interest rate activity since the beginning of our fiscal year 2023.

Previous wording

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), our financial results are sensitive to changes in interest rates. Increases in short-term interest rates generally result in an increase in our net earnings, although the magnitude of the impact to our net interest margin depends on the yields on interest-earning assets relative to the cost of interest-bearing liabilities, including deposit rates paid to clients on their cash balances. Our domestic client cash sweep balances continue to represent a relatively low-cost funding source, while other deposit products utilized as part of our 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.

Current wording

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), our financial results are sensitive to changes in interest rates. Increases in short-term interest rates generally result in an increase in our net earnings, although the magnitude of the impact to our net interest margin depends on the yields on interest-earning assets relative to the cost of interest-bearing liabilities, including deposit rates paid to clients on their cash balances. Our domestic client cash sweep balances continue to represent a relatively low-cost funding source, while other deposit products utilized as part of our strategy to diversify our funding sources, such as our ESP introduced to our clients in our fiscal year 2023, have a higher relative cost than other alternatives.

Previous wording

Combined net interest income and RJBDP fees from third-party banks of $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 2023 and higher interest-earning asset balances compared with the prior-year quarter were more than offset by a significant increase in interest expense, primarily resulting from a shift in the mix of deposit balances in our Bank segment, as 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 deploy 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 prior-year quarter.

Current wording

Combined net interest income and RJBDP fees from third-party banks for the three and six months ended March 31, 2024, declined compared with the comparable prior-year periods driven by a decline in net interest income, as the benefits from higher short-term interest rates to-date in fiscal year 2024 over fiscal year 2023 levels, and higher average interest-earning asset balances were more than offset by a significant increase in interest expense. The increase in interest expense primarily resulted from a shift in the mix of deposit balances in our Bank segment, as lower-cost RJBDP balances declined and a significant portion was replaced with higher-cost ESP balances, which was introduced to clients in March 2023, as well as an increase in certificates of deposit. However, growth in the ESP balances since its introduction has allowed us to deploy a higher portion of RJBDP balances to third-party banks instead of our Bank segment which, coupled with higher yields earned on such balances, resulted in an increase in RJBDP fees from such banks compared with the prior-year periods.

Previous wording

PCG AUA and PCG assets in fee-based accounts as of December 31, 2023 each increased 9% compared with September 30, 2023, due to market appreciation and strong net inflows of client assets during the quarter, primarily due to the favorable impact 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.

Current wording

PCG AUA and PCG assets in fee-based accounts as of March 31, 2024 increased 6% and 7%, respectively, compared with December 31, 2023, and increased 19% and 20%, respectively, compared with March 31, 2023, due to equity market appreciation and net new assets, due to the favorable impact of our advisor retention and 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.

Previous wording

The number of financial advisors as of December 31, 2023 decreased slightly compared with September 30, 2023, as planned retirements drove a small net decrease in advisor count, net of new recruits and trainees that were moved into production roles. Planned retirements, where assets are generally retained at the firm pursuant to advisor succession plans, are seasonally higher in the fiscal first quarter. We have and may continue to experience transfers to our RCS division in fiscal 2024; however, consistent with our experience in fiscal 2023, we would 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.

Current wording

The number of financial advisors as of March 31, 2024 increased compared with December 31, 2023 and March 31, 2023, as new recruits and trainees that were moved into production roles exceeded departures and planned retirements. Planned retirements, where assets are generally retained at the firm pursuant to advisor succession plans, are seasonally higher in the fiscal first quarter. We have and may continue to experience transfers to our RCS division in fiscal 2024; however, consistent with our experience in fiscal 2023, we would 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.

Previous wording

(1)In March 2023, we launched our 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.

Current wording

(1)In March 2023, we introduced our ESP, in which Private Client Group clients may deposit cash in a high-yield Raymond James Bank account. ESP balances held at Raymond James Bank as of the respective period end are included in “Bank deposits” on our Condensed Consolidated Statement of Financial Condition. As of March 31, 2024, we had placed $324 million of ESP deposits with third-party banks, and accordingly such deposits held at third-party banks were not included in our bank deposit liability balance on our Condensed Consolidated Statement of Financial Condition.

Previous wording

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 accounts are swept into interest-bearing deposit accounts at either 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 interest-rate environment, the PCG segment revenues 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.

Current wording

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 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 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 from our Bank segment 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 interest-rate environment, the PCG segment RJBDP fee revenues are 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.

Previous wording

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.

Current wording

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 balances at third-party banks. The average yield on RJBDP - third-party banks for the three and six months ended March 31, 2024 increased from the prior year largely as a result of the increases in the Fed’s short-term benchmark interest rate.

Previous wording

Total clients’ domestic cash sweep and ESP balances increased 3% compared with September 30, 2023, due to growth in both the ESP as well as client cash 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 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.

Current wording

Total clients’ domestic cash sweep and ESP balances increased slightly compared with December 31, 2023, but increased 11% compared with March 31, 2023 as growth in the ESP, which was introduced to clients in March 2023, more than offset a decline in client cash 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 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 since its introduction has provided us the flexibility to sweep more RJBDP balances to third-party banks and reduce the amount of RJBDP balances held in our Bank segment.

Previous wording

Asset management and related administrative fees increased $138 million, or 13%, primarily due to higher assets in fee-based accounts at the beginning of the current quarter compared with the prior-year quarter resulting from growth as a result of advisor recruiting as well as market appreciation.

Current wording

Asset management and related administrative fees increased $181 million, or 16%, primarily due to higher assets in fee-based accounts at the beginning of the current quarter compared with the prior-year quarter resulting from market appreciation, as well as growth from advisor recruiting.

Previous wording

Account and service fees decreased $17 million, or 3%, primarily due to a decrease in RJBDP fees resulting from lower client cash sweep balances. RJBDP fees paid to PCG from our Bank segment decreased due to a decline in balances allocated to our Bank segment partially offset by an increase in short-term interest rates, while RJBDP fees from third-party banks increased slightly resulting from the aforementioned increase in short-term interest rates, partially offset by a decrease in RJBDP balances. Partially offsetting the decline in total RJBDP fees, mutual fund service fees increased, primarily from higher average mutual fund assets.

Current wording

Account and service fees decreased $27 million, or 5%, primarily due to a decrease in RJBDP fees resulting from lower client cash sweep balances. RJBDP fees paid to PCG from our Bank segment decreased due to a decline in balances allocated to our Bank segment which more than offset the impact of an increase in short-term interest rates, while RJBDP fees from third-party banks increased due to higher average balances swept to third-party banks, as well as the aforementioned increase in short-term interest rates. Partially offsetting the decline in total RJBDP fees was an increase in mutual fund service fees, primarily resulting from higher average mutual fund assets.

Previous wording

Compensation-related expenses increased $152 million, or 11%, primarily due to higher commission expense resulting from higher compensable revenues, including asset management and related administrative fees and brokerage revenues, as well as an increase in compensation costs both to support our growth and annual cost increases, including salaries.

Current wording

Compensation-related expenses increased $201 million, or 14%, primarily due to higher commission expense resulting from higher compensable revenues, including asset management and related administrative fees and brokerage revenues, as well as an increase in compensation costs to support our growth and annual salary increases.

Previous wording

Non-compensation expenses increased $6 million, or 3%, due to higher communications and information processing expenses, occupancy expenses, and business development expenses, partially offset by the impact of lower provisions for legal and regulatory matters.

Current wording

Non-compensation expenses decreased $7 million, or 3%, due to lower provisions for legal and regulatory matters as the prior-year quarter included the impact of an unfavorable arbitration award, partially offset by higher communications and information processing expenses and occupancy expenses as a result of our growth, and higher business development expenses.

Previous wording

Brokerage revenues increased $37 million, or 11%, primarily due to higher client activity in the current quarter, particularly in fixed annuities.

Current wording

Brokerage revenues increased $80 million, or 11%, primarily due to higher client activity in the current-year period, particularly in fixed annuities, as well as higher trailing revenues, largely due to higher asset values.

Previous wording

Compensation-related expenses increased $25 million, or 12%, primarily due to the increase in revenues, as well as an increase in compensation costs both to support our growth and annual cost increases, including salaries.

Current wording

Compensation-related expenses increased $9 million, or 4%, primarily due to the increase in revenues, as well as an increase in compensation costs to support our growth and annual salary increases.

Previous wording

Compensation expenses increased $3 million, or 8%, primarily due to increased compensation costs both to support growth and annual cost increases, including salaries.

Current wording

Compensation-related expenses increased $34 million, or 8%, primarily due to the increase in revenues, as well as an increase in compensation costs to support our growth and annual salary increases.

Previous wording

(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.”

Current wording

(2)Represents the portion of the AMS AUM that is managed by RJIM and, as a result, is included in both AMS and RJIM in the preceding table. This amount is removed in the calculation of “Total financial assets under management.”

Previous wording

Assets managed by RJIM 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”). The following table presents RJIM’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.

Current wording

Assets managed by RJIM 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. The following table presents RJIM’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.

Previous wording

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.

Current wording

The increase in these assets as of March 31, 2024 compared with December 31, 2023 and March 31, 2023 was primarily due to market appreciation, successful financial advisor retention and recruiting, 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.

Previous wording

Asset management and related administrative fees increased $27 million, or 14%, driven by higher beginning balances of assets in non-discretionary asset-based programs and financial assets under management at AMS, as well as higher average financial assets under management at RJIM, in each case primarily due to market-driven appreciation in asset values.

Current wording

Asset management and related administrative fees increased $36 million, or 17%, driven by higher beginning balances of financial assets under management and assets in non-discretionary asset-based programs at AMS, as well as higher average financial assets under management at RJIM, in each case primarily due to market-driven appreciation in asset values.

Previous wording

Compensation expenses increased $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%, largely due to higher investment sub-advisory fees, resulting from the increase in the beginning balance of assets under management in sub-advised programs.

Current wording

Compensation expenses increased $12 million, or 12%, primarily due to higher revenues, as well as an increase in compensation costs to support our growth and annual cost increases, including salaries. Non-compensation expenses increased $21 million, or 13%, largely due to higher investment sub-advisory fees, resulting from the increase in assets under management in sub-advised programs.

Previous wording

Net interest income decreased $65 million, or 13%, primarily due to increased interest expense resulting from a higher-cost mix of deposits, as balances from the ESP, 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 asset balances during the current quarter. The net interest margin decreased to 2.74% from 3.36% for the prior-year quarter.

Current wording

Net interest income decreased $117 million, or 22%, primarily due to increased interest expense resulting from a higher-cost mix of deposits, as balances from the ESP, which was introduced to clients in March 2023, replaced a portion of lower-cost RJBDP client 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 cash balances during the current quarter. The Bank segment net interest margin decreased to 2.66% from 3.63% for the prior-year quarter.

Previous wording

Non-compensation expenses, excluding the bank loan provision for credit losses, decreased $24 million, or 8%, primarily due to a decrease in RJBDP fees paid to PCG resulting from the aforementioned decline in RJBDP balances swept to the Bank segment, partially offset by an increase in rates for such balances. These Bank segment fees and the related revenues earned by the PCG segment are eliminated in 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.

Current wording

Non-compensation expenses, excluding the bank loan provision for credit losses, decreased $93 million, or 25%, primarily due to a decrease in RJBDP fees paid to PCG resulting from the aforementioned decline in RJBDP balances swept to the Bank segment, partially offset by an increase in rates applicable to such balances. These Bank segment fees and the related revenues earned by the PCG segment are eliminated in 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 expenses related to the ESP and incremental FDIC expense related to a special assessment enacted during fiscal 2024 by the FDIC to its member institutions to recover losses it experienced in its Deposit Insurance Fund over the past twelve months.

Previous wording

The bank loan provision for credit losses was $12 million for the current quarter, compared with $14 million for the prior-year quarter. The bank loan provision for credit losses for the current quarter primarily reflected the 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 provision for credit losses for the prior-year quarter primarily reflected the impact of a weaker macroeconomic outlook at that time, primarily on the residential mortgage portfolio, and the impact of loan growth during the quarter.

Current wording

The bank loan provision for credit losses was $33 million for the current-year period, compared with $42 million for the prior-year period. The bank loan provision for credit losses for the current-year period primarily reflected the impacts of specific reserves, loan downgrades and charge-offs in our C&I and CRE loan portfolios, partially offset by the favorable impacts of an improved economic forecast and net loan payments. The bank loan provision for credit losses for the prior-year period primarily reflected a weaker macroeconomic outlook at that time, net charge-offs, and the impact of loan growth during the period.

Previous wording

Net interest income increased $5 million, or 6%, primarily due to the significant increase in short-term interest rates applicable to our cash, segregated cash, and client margin account balances.

Current wording

Net revenues increased $7 million due to an increase in interest income earned as a result of higher short-term interest rates applicable to our corporate cash balances.

Previous wording

Net revenues increased $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.

Current wording

Net revenues increased $24 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.

Previous wording

Non-interest expenses increased $32 million, primarily due to a $32 million insurance settlement received during the prior-year quarter related to a previously settled legal matter, which did not recur in the current-year quarter.

Current wording

Non-interest expenses increased $9 million, or 38%, due to a $32 million insurance settlement received during the prior-year period related to a previously-settled legal matter and, to a lesser extent, higher compensation expenses, partially offset by the positive impact of the net legal and regulatory reserve release in the current-year period.

Previous wording

Total assets of $80.13 billion as of December 31, 2023 were $1.77 billion, or 2%, greater than our total assets as of September 30, 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 increased $496 million, primarily due to an increase in client cash balances in our broker-dealer subsidiaries, which resulted in an increase in brokerage client payables and a corresponding increase in segregated assets. Bank loans, net increased $407 million primarily related to increases in corporate and residential mortgage loans.

Current wording

Total assets of $81.23 billion as of March 31, 2024 were $2.87 billion, or 4%, greater than our total assets as of September 30, 2023. Cash and cash equivalents increased $688 million primarily driven by an increase in cash held in our Bank segment, largely resulting from an increase in bank deposits during the period. Assets segregated for regulatory purposes and restricted cash increased $470 million, primarily due to an increase in client cash balances in our broker-dealer subsidiaries, which resulted in an increase in brokerage client payables and a corresponding increase in segregated assets. Other assets increased $409 million, partially due to valuation increases on our company-owned life insurance policies. Other receivables, bank loans, net, and collateralized agreements also increased by $391 million, $324 million, and $309 million, respectively. The increase in bank loans, net was primarily related to an increase in residential mortgage loans.

Previous wording

As of December 31, 2023, our total liabilities of $69.35 billion were $1.18 billion, or 2%, greater than our total liabilities as of September 30, 2023. Bank deposits increased $1.19 billion, primarily driven by an increase in ESP balances. Brokerage client payables increased $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 accrued compensation, commissions, and benefits of $418 million due to the payment of prior-year bonuses during the quarter.

Current wording

As of March 31, 2024, our total liabilities of $70.25 billion were $2.08 billion, or 3%, greater than our total liabilities as of September 30, 2023. Bank deposits increased $644 million, primarily driven by growth in ESP balances and other interest-bearing demand deposits, partially offset by a decrease in RJBDP client cash sweep balances swept to our Bank segment. Collateralized financings increased $618 million due to an increase in securities lending activity. Brokerage client payables increased $591 million primarily due to the aforementioned increase in client cash balances in our broker-dealer subsidiaries.

Previous wording

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 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.

Current wording

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 liquidity, including increased cash levels in our Bank segment, to ensure we have adequate funding to support our business and meet our clients’ needs. We seek to manage capital levels to support execution of our business strategy, provide financial strength to our subsidiaries, and maintain sustained access to the capital markets, while at the same time meeting our regulatory capital requirements and conservative internal management targets.

Previous wording

Liquidity and capital resources are provided primarily through our business operations and financing activities. Our 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.

Current wording

Liquidity and capital resources are provided primarily through our business operations and financing activities. Our 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 instances accessing certain lending programs available 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 which was introduced 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.