NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
June 30, 2022
NOTE 1 – ORGANIZATION AND BASIS OF PRESENTATION
Organization
Raymond James Financial, Inc. (“RJF” or the “firm”) is a financial holding company which, together with its subsidiaries, is engaged in various financial services activities, including providing investment management services to retail and institutional clients, merger & acquisition and advisory services, the underwriting, distribution, trading and brokerage of equity and debt securities, and the sale of mutual funds and other investment products. The firm also provides corporate and retail banking services, and trust services.
As a result of our acquisition of TriState Capital Holdings, Inc. (“TriState Capital”) on June 1, 2022, which included TriState Capital Bank, a Pennsylvania-chartered state bank, we renamed our Raymond James Bank segment to “Bank” segment. The Bank segment reflects the results of our banking operations and includes the results of Raymond James Bank and, since June 1, 2022, TriState Capital Bank. There were no changes to the prior period presentation of the Bank segment. For further information about the acquisition of TriState Capital and our business segments, see Note 3 and Note 25, respectively. As used herein, the terms “our,” “we,” or “us” refer to RJF and/or one or more of its subsidiaries.
Basis of presentation
The accompanying unaudited condensed consolidated financial statements include the accounts of RJF and its consolidated subsidiaries that are generally controlled through a majority voting interest. We consolidate all of our 100%-owned subsidiaries. In addition, we consolidate any variable interest entity (“VIE”) in which we are the primary beneficiary. Additional information on these VIEs is provided in Note 2 of our Annual Report on Form 10-K (“2021 Form 10-K”) for the year ended September 30, 2021, as filed with the United States (“U.S.”) Securities and Exchange Commission (“SEC”) and in Note 10 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 2021 Form 10-K. To prepare condensed consolidated financial statements in accordance with GAAP, we must make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements, and the reported amounts of revenues and expenses for the reporting period. Actual results could differ from those estimates and could have a material impact on the condensed consolidated financial statements.
Reclassifications
Beginning with our fiscal third quarter of 2022, we reclassified acquisition-related expenses which were previously reported in “Acquisition-related expenses” on our Condensed Consolidated Statements of Income and Comprehensive Income to the respective income statement line items that align with the nature of the expenses, including reclassifications to “Compensation, commissions, and benefits,” “Professional fees,” or “Other” expenses, as appropriate. Prior periods have been conformed to the current presentation.
In addition to the reclassifications discussed above, certain other 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 2021 Form 10-K. Refer to Note 8 for a description of our allowance for credit losses policy related to TriState Capital Bank. Except as discussed in Note 8, there have been no significant changes in our significant accounting policies since September 30, 2021.
NOTE 3 – ACQUISITIONS
Acquisitions completed during the nine months ended June 30, 2022
TriState Capital
On June 1, 2022, we completed our acquisition of all the outstanding shares of TriState Capital, including its wholly owned subsidiaries, TriState Capital Bank and Chartwell Investment Partners, LLC (“Chartwell”), in a cash and stock transaction valued at $1.4 billion. TriState Capital Bank serves the commercial banking needs of middle-market businesses and financial services providers and focused private banking needs of high-net-worth individuals nation-wide. Chartwell, a registered investment adviser, provides investment management services primarily to institutional investors, mutual funds, and individual investors. TriState Capital Bank will continue to operate as a separately branded firm and as an independently-chartered bank. TriState Capital Bank and Chartwell have been integrated into our Bank and Asset Management segments, respectively, and their results of operations have been included in our results prospectively from the closing date of June 1, 2022.
Under the terms of the acquisition agreement, TriState Capital common stockholders received $6.00 cash and 0.25 shares of RJF common stock for each share of TriState Capital common stock. Additionally, the TriState Capital Series C Perpetual Non-Cumulative Convertible Non-Voting Preferred Stock (“Series C Convertible Preferred Stock”) was converted to common shares at the prescribed exchange ratio and cashed out at $30 per share and each share of TriState Capital’s 6.75% Fixed-to-Floating Rate Series A Non-Cumulative Perpetual Preferred Stock and TriState Capital’s 6.375% Fixed-to-Floating Rate Series B Non-Cumulative Perpetual Preferred Stock was converted, respectively, into the right to receive one share of a newly created series A and series B preferred stock of RJF. The fair values of these newly created RJF series A and series B preferred stock were estimated based on quoted market prices for the instruments. See Note 19 for further details on these new classes of preferred stock.
Furthermore, as a component of our total purchase consideration for TriState Capital on June 1, 2022, in accordance with the terms of the acquisition agreement, 551 thousand RJF restricted stock awards were issued at terms that mirrored restricted stock awards of TriState Capital which were outstanding as of the acquisition date. The fair value of the restricted stock awards was calculated as of the June 1, 2022 acquisition date and was allocated between the pre-acquisition service period ($28 million treated as purchase consideration) and the post-acquisition requisite service period, over which we will recognize share-based compensation amortization. In accordance with the terms of the acquisition agreement, the TriState Capital restricted stock awards were converted to RJF restricted stock awards using an exchange ratio that considered the RJF volume weighted average price for 10 trading days ending on the third business day prior to the closing of the acquisition. Upon completion of the acquisition, the fair value of the restricted stock awards was determined based on the June 1, 2022 closing share price of our common stock. See Note 22 for further details on these restricted stock awards.
On December 15, 2021, during the period between announcement of the intent to acquire TriState Capital and the acquisition closing date, we had loaned TriState Capital $125 million under an unsecured fixed-to-floating rate note (the “Note”). The Note was set to mature on December 15, 2024 and bore interest at a fixed annual rate of 2.25%. Upon acquisition, the Note reverted to an intercompany instrument and subsequent to the closing date, the Note was forgiven. In accordance with GAAP, as of the acquisition date the Note is considered to have been effectively settled and the acquisition-date fair value of $123 million is treated as purchase consideration and included in the purchase price. The fair value of the Note was determined using a discounted cash flow analysis based on current incremental borrowing rates for similar types of instruments.
We accounted for our completed acquisition of TriState Capital as a business combination in accordance with GAAP. Accordingly, the purchase price attributable to this acquisition was allocated to the assets acquired and liabilities assumed based on their estimated fair values. The estimated fair values of assets acquired and liabilities assumed related to the TriState Capital acquisition are considered provisional and are based on currently available information. We believe that the information available as of June 30, 2022 provides a reasonable basis for estimating the fair values of assets acquired and liabilities assumed. However, these provisional estimates may be adjusted upon the availability of new information regarding facts and circumstances which existed at the acquisition date. We expect to finalize the valuation of assets and liabilities in our fiscal
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
fourth quarter of 2022. Any adjustments to the initial estimates of the fair values of the assets acquired and liabilities assumed will be recorded as adjustments to the respective assets and liabilities, with the residual amounts allocated to goodwill. The following table summarizes the purchase consideration, fair value estimates of the assets acquired and liabilities assumed, and resulting goodwill as of the June 1, 2022 acquisition date.
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| | TriState Capital |
$ in millions, except share and per share amounts | | June 1, 2022 |
Fair value of consideration transferred: | | |
Fair value of common stock issued: | | |
Shares of RJF common stock issued | | 7,861,189 |
RJF share price as of June 1, 2022 | | $ | 97.74 | |
Fair value of RJF common stock issued for TriState Capital common stock | | $ | 768 | |
Other common stock consideration | | 10 | |
Total fair value of common stock issued | | 778 | |
Cash consideration (1) | | 359 | |
Effective settlement of the Note | | 123 | |
Preferred stock issued | | 120 | |
Restricted stock awards issued | | 28 | |
Total purchase price | | $ | 1,408 | |
Fair value of assets acquired: | | |
Cash and cash equivalents | | $ | 457 | |
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Financial instruments: | | |
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Available-for-sale securities | | 1,524 | |
Derivative assets | | 51 | |
Other investments | | 14 | |
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Bank loans, net | | 11,549 | |
Deferred income taxes, net | | 26 | |
Identifiable intangible assets | | 197 | |
Other assets | | 226 | |
All other assets acquired | | 45 | |
Total assets acquired | | $ | 14,089 | |
Fair value of liabilities assumed: | | |
Bank deposits | | $ | 12,593 | |
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Financial instrument liabilities — Derivative liabilities | | 125 | |
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Accrued compensation, commissions and benefits | | 18 | |
Other payables | | 99 | |
Other borrowings | | 375 | |
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Total liabilities assumed | | $ | 13,210 | |
Fair value of net identifiable assets acquired | | $ | 879 | |
Goodwill (2) | | $ | 529 | |
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(1) Cash consideration includes $6 per TriState Capital common share outstanding (for a total of $189 million) and $30 per TriState Capital Series C Convertible Preferred Stock outstanding (for a total of $154 million), as well as other cash amounts paid to settle outstanding TriState Capital warrants and options outstanding as of the closing and cash paid in lieu of fractional shares. We utilized our cash on hand to fund the cash component of the purchase consideration.
(2) The goodwill associated with this acquisition, which has been allocated to our Bank segment and primarily represents synergies from combining TriState Capital with our existing businesses, is not deductible for tax purposes.
Our Condensed Consolidated Statements of Income and Comprehensive Income included net revenues and a pre-tax loss attributable to TriState Capital of $29 million and $16 million, respectively, for the period June 1, 2022 through June 30, 2022. The pre-tax loss included an initial provision for credit losses on loans and lending commitments acquired as part of the acquisition of $26 million (included in “Bank loan provision/(benefit) for credit losses”) and $5 million (included in “Other” expense), respectively. These provisions were required under GAAP to be recorded in earnings in the reporting period following the acquisition date.
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
Charles Stanley
On January 21, 2022, we completed our acquisition of all of the outstanding share capital of United Kingdom (“U.K.”)-based Charles Stanley Group PLC (“Charles Stanley”) at a price of £5.15 per Charles Stanley share outstanding, or £277 million ($376 million as of January 21, 2022). The acquisition enables us to accelerate our financial planning, investment advisory and securities transaction services growth in the U.K. and, through Charles Stanley’s multiple affiliation options, gives us the ability to offer wealth management affiliation choices to financial advisors in the U.K. consistent with our Private Client Group (“PCG”) model in the U.S. and Canada. Charles Stanley has been integrated into our PCG segment and its results of operations have been included in our results prospectively from the closing date of January 21, 2022.
We accounted for our completed acquisition of Charles Stanley as a business combination in accordance with GAAP. Accordingly, the purchase price attributable to this acquisition was allocated to the assets acquired and liabilities assumed based on their estimated fair values. The following table summarizes the purchase consideration, fair value estimates of the assets acquired and liabilities assumed, and resulting goodwill as of the January 21, 2022 acquisition date.
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| | Charles Stanley (1) |
$ in millions | | January 21, 2022 |
Purchase price | | $ | 376 | |
Fair value of assets acquired: | | |
Cash and cash equivalents | | $ | 154 | |
Assets segregated for regulatory purposes | | 1,890 | |
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Brokerage client receivables | | 270 | |
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Identifiable intangible assets | | 85 | |
All other assets acquired | | 36 | |
Total assets acquired | | $ | 2,435 | |
Fair value of liabilities assumed: | | |
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Brokerage client payables | | $ | 2,131 | |
Accrued compensation, commissions and benefits | | 42 | |
Other payables | | 50 | |
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Total liabilities assumed | | $ | 2,223 | |
Fair value of net identifiable assets acquired | | $ | 212 | |
Goodwill (2) | | $ | 164 | |
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(1) The fair value of assets acquired and liabilities assumed associated with the Charles Stanley acquisition were denominated in British pounds sterling (“GBP”) and converted to U.S. dollars using the spot rate of 1.3554 as of January 21, 2022.
(2) The goodwill associated with this acquisition, which has been allocated to our PCG segment, primarily represents synergies from combining Charles Stanley with our existing businesses and is not deductible for tax purposes.
Our Condensed Consolidated Statements of Income and Comprehensive Income included net revenues of $57 million and $105 million, respectively, for the three months ended June 30, 2022 and for the period January 21, 2022 through June 30, 2022, as well as an insignificant net loss for both of the aforementioned periods.
Determination of fair value
The following is a description of the methods used to determine the fair values of significant assets and liabilities acquired:
Cash and cash equivalents; Assets segregated for regulatory purposes; Brokerage client receivables; Brokerage client payables: The pre-close historical carrying amount of these assets and liabilities was a reasonable estimate of fair value based on the short-term nature of these assets and liabilities.
Available-for-sale securities: The fair values of available-for-sale securities were based on quoted market prices for the same or similar securities, recently executed transactions or third-party pricing models.
Derivatives assets and liabilities: The pre-close historical carrying values of derivative assets and liabilities were used as reasonable estimates of fair value.
Bank loans: Fair values for bank loans were determined using the loss adjusted cash flow model approach, which utilized a discounted cash flow methodology that considered credit loss expectations, market interest rates and other market factors such as liquidity from the perspective of a market participant. Loans were segregated into specific pools according to similar
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
characteristics, including risk, interest rate type (i.e., fixed or floating), underlying benchmark rate, and payment type, and were treated in the aggregate when determining the fair value of each pool. The interest and liquidity components of the estimate were determined by discounting interest and principal cash flows through the expected life of each loan. The discount rates were determined using the weighted-average funding costs method, which considered cost of debt, cost of equity, and funding mix, as well as adjustments for servicing expense and liquidity, and then compared to current market rates on originations.
Purchased loans were evaluated and classified as either purchased credit deteriorated (“PCD”), which indicates that the loan has experienced more than insignificant credit deterioration since origination, or non-PCD loans. For PCD loans, the sum of the loan’s purchase price and allowance for credit losses, which was determined as of the acquisition date using the same allowance methodology applied to the TriState loan portfolio as of June 30, 2022, became its initial amortized cost basis. The initial allowance for credit losses on PCD loans is established in purchase accounting, with a corresponding offset to goodwill (i.e., is not recorded in earnings). As required under GAAP, an initial allowance for credit losses on non-PCD loans is required to be established through a provision for credit losses (i.e., recorded in earnings) in the first reporting period following the acquisition. Subsequent changes in the allowance for credit losses for PCD and non-PCD loans will be recognized in the bank loan provision/(benefit) for credit losses. For non-PCD loans, the difference between the fair value and the unpaid principal balance was considered the fair value mark. The non-credit discount or premium related to PCD loans and the fair value mark on non-PCD loans will be accreted or amortized into interest income over the contractual life of the loan using the effective interest method.
Of the total bank loans acquired in the TriState Capital acquisition with an unpaid principal balance of $11.70 billion, $11.36 billion were considered non-PCD loans and $337 million were considered PCD loans. The following table reconciles the difference between the unpaid principal balance and purchase price of PCD loans at acquisition.
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$ in millions | | June 1, 2022 |
Unpaid principal balance of PCD loans | | $ | 337 | |
Allowance for credit losses on PCD loans | | (3) | |
Non-credit discount on PCD loans | | (10) | |
Purchase price of PCD loans | | $ | 324 | |
Identifiable intangible assets: The fair values of the significant identifiable intangible assets were estimated using the following income approaches.
•Customer relationships — The fair values of customer relationships were estimated using a multi-period excess earnings approach which was based on a forecast of all of the expected future net cash flows associated with the assets.
•Trade names — The fair values of trade names were estimated using a relief from royalty approach which was based on a forecast of the royalties we would save because we own the assets.
•Core deposit intangible (“CDI”) — The fair value of the CDI asset was estimated using a discounted cash flow approach, specifically the favorable source of funds method, that considered the cost of the acquired deposit base, an estimate of the cost associated with alternative funding sources, and expected client attrition rates.
These cash flow forecasts were then adjusted to present value by applying appropriate discount rates based on current market rates that reflect the risks associated with the cash flow streams.
The following table summarizes the fair value and weighted average estimated useful life of identifiable intangibles assets acquired as of the respective acquisition dates.
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| | June 1, 2022 | | January 21, 2022 |
| | TriState Capital | | Charles Stanley |
$ in millions | | Estimated fair value | | Weighted average estimated useful life | | Estimated fair value | | Weighted average estimated useful life |
Fair value of identifiable intangible assets acquired: | | | | | | | | |
Core deposit intangible | | $ | 89 | | | 10 years | | $ | — | | | — | |
Customer relationships | | 54 | | | 17 years | | 65 | | | 13 years |
Trade name | | 33 | | | 20 years | | 15 | | | 10 years |
Other | | 16 | | | 10 years | | 5 | | | 6 years |
Non-amortizing customer relationships | | 5 | | | N/A | | — | | | — | |
Total identifiable intangibles assets acquired | | $ | 197 | | | | | $ | 85 | | | |
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
Other assets: Other assets primarily include company-owned life insurance policies, right-of-use (“ROU”) lease assets, investments in Federal Home Loan Bank (“FHLB”) stock, and investments in low-income housing tax credit (“LIHTC”) funds. The pre-close historical carrying values of company-owned life insurance policies, investments in FHLB stock and investments in LIHTC funds were used as a reasonable estimate of fair value. ROU lease assets were measured at the same amount as the lease liability, as adjusted to reflect favorable or unfavorable terms of the lease when compared with market terms (see “Other payables” section below for additional details regarding acquired lease liabilities).
Bank deposits: The fair values used for demand and savings deposits equaled the amounts payable on demand at the acquisition date. The fair values for time deposits were estimated by applying a discounted cash flow method to discount the principal and interest payments from maturity at the yields offered by similar banks as of the valuation date.
Other payables: Other payables primarily include lease liabilities and the fair value of unfunded lending commitments. Lease liabilities were measured at the present value of the remaining lease payments determined using a discounted cash flow method based on our cost of borrowing, as if the acquired lease were a new lease at the acquisition date. The fair value of unfunded lending commitments was estimated using a discounted cash flow approach.
Other borrowings: Other borrowings was comprised of 5.75% fixed-to-floating subordinated notes due 2030 and short-term FHLB advances (see Note 15 for further details on these borrowings). The fair value of the subordinated note was estimated based on quoted market prices as of the valuation date. The carrying amount of the FHLB advances was a reasonable estimate of fair value based on the short-term nature of these instruments and that the vast majority are floating-rate advances.
Pro forma financial information
The following table presents unaudited pro forma financial information as if the TriState Capital and Charles Stanley acquisitions had occurred on October 1, 2020. The unaudited pro forma results reflect adjustments for amortization of acquired identifiable intangible assets, the initial provision for credit losses on non-PCD loans and lending commitments acquired from TriState Capital, acquisition-related retention expense, and accretion of fair value adjustments to loans, available-for-sale securities, lending commitments, deposits, and other borrowings, with accretion calculated over the contractual life of the underlying asset or liability. Legal and other professional fees and other costs incurred to effect these acquisitions are treated as if they were incurred on October 1, 2020 in the pro forma amounts. The pro forma amounts do not reflect potential revenue growth or cost savings that may be realized as a result of these acquisitions. The unaudited pro forma financial information is presented for informational purposes only, and is not necessarily indicative of future operations or results had these acquisitions been completed as of October 1, 2020.
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| | Three months ended June 30, | | Nine Months Ended June 30, |
$ in millions | | 2022 | | 2021 | | 2022 | | 2021 |
Net revenues | | $ | 2,782 | | | $ | 2,613 | | | $ | 8,486 | | | $ | 7,470 | |
Pre-tax income | | $ | 483 | | | $ | 424 | | | $ | 1,575 | | | $ | 1,252 | |
Acquisitions completed subsequent to June 30, 2022
SumRidge Partners
On July 1, 2022, we completed our acquisition of SumRidge Partners, LLC (“SumRidge Partners”). SumRidge Partners is a technology-driven fixed income market maker specializing in investment-grade and high-yield corporate bonds, municipal bonds, and institutional preferred securities. The acquisition of SumRidge Partners adds an institutional market-making operation, as well as additional trading technologies and risk management tools to our existing fixed income operations. The acquisition was funded using cash on hand as of the acquisition date. SumRidge Partners will be integrated into our Capital Markets segment and its results of operations will be included in our results prospectively from the closing date of July 1, 2022.
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
NOTE 4 – FAIR VALUE
Our “Financial instruments” and “Financial instrument liabilities” on our Condensed Consolidated Statements of Financial Condition are recorded at fair value. For further information about such instruments and our significant accounting policies related to fair value, see Notes 2 and 4 of our 2021 Form 10-K. The following tables present assets and liabilities measured at fair value on a recurring basis. Netting adjustments represent the impact of counterparty and collateral netting on our derivative balances included on our Condensed Consolidated Statements of Financial Condition. See Note 6 for additional information.
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$ in millions | | Level 1 | | Level 2 | | Level 3 | | Netting adjustments | | Balance as of June 30, 2022 |
Assets at fair value on a recurring basis: | | | | | | | | | | |
Assets segregated for regulatory purposes (1) | | $ | 2,000 | | | $ | — | | | $ | — | | | $ | — | | | $ | 2,000 | |
Trading assets: | | | | | | | | | | |
Municipal and provincial obligations | | 1 | | | 104 | | | — | | | — | | | 105 | |
Corporate obligations | | 10 | | | 56 | | | — | | | — | | | 66 | |
Government and agency obligations | | 24 | | | 33 | | | — | | | — | | | 57 | |
Agency mortgage-backed securities (“MBS”), collateralized mortgage obligations (“CMOs”) and asset-backed securities (“ABS”) | | — | | | 96 | | | — | | | — | | | 96 | |
Non-agency CMOs and ABS | | — | | | 107 | | | — | | | — | | | 107 | |
Total debt securities | | 35 | | | 396 | | | — | | | — | | | 431 | |
Equity securities | | 7 | | | — | | | — | | | — | | | 7 | |
Brokered certificates of deposit | | — | | | 20 | | | — | | | — | | | 20 | |
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Total trading assets | | 42 | | | 416 | | | — | | | — | | | 458 | |
Available-for-sale securities (2) | | 912 | | | 9,552 | | | — | | | — | | | 10,464 | |
Derivative assets: | | | | | | | | | | |
Interest rate - matched book | | — | | | 84 | | | — | | | — | | | 84 | |
Interest rate - other | | 8 | | | 289 | | | — | | | (235) | | | 62 | |
Foreign exchange | | — | | | 4 | | | — | | | — | | | 4 | |
Other | | — | | | — | | | 2 | | | — | | | 2 | |
Total derivative assets | | 8 | | | 377 | | | 2 | | | (235) | | | 152 | |
Other investments - private equity - not measured at net asset value (“NAV”) | | — | | | — | | | 27 | | | — | | | 27 | |
All other investments: | | | | | | | | | | |
Government and agency obligations (3) | | 120 | | | — | | | — | | | — | | | 120 | |
Other | | 97 | | | 2 | | | 24 | | | — | | | 123 | |
Total all other investments | | 217 | | | 2 | | | 24 | | | — | | | 243 | |
Subtotal | | 3,179 | | | 10,347 | | | 53 | | | (235) | | | 13,344 | |
Other investments - private equity - measured at NAV | | | | | | | | | | 95 | |
Total assets at fair value on a recurring basis | | $ | 3,179 | | | $ | 10,347 | | | $ | 53 | | | $ | (235) | | | $ | 13,439 | |
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Liabilities at fair value on a recurring basis: | | | | | | | | | | |
Trading liabilities: | | | | | | | | | | |
Municipal and provincial obligations | | $ | 2 | | | $ | 6 | | | $ | — | | | $ | — | | | $ | 8 | |
Corporate obligations | | — | | | 3 | | | — | | | — | | | 3 | |
Government and agency obligations | | 101 | | | — | | | — | | | — | | | 101 | |
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Total debt securities | | 103 | | | 9 | | | — | | | — | | | 112 | |
Equity securities | | 46 | | | — | | | — | | | — | | | 46 | |
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Total trading liabilities | | 149 | | | 9 | | | — | | | — | | | 158 | |
Derivative liabilities: | | | | | | | | | | |
Interest rate - matched book | | — | | | 84 | | | — | | | — | | | 84 | |
Interest rate - other | | 7 | | | 345 | | | — | | | (58) | | | 294 | |
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Other | | — | | | — | | | 1 | | | — | | | 1 | |
Total derivative liabilities | | 7 | | | 429 | | | 1 | | | (58) | | | 379 | |
Total liabilities at fair value on a recurring basis | | $ | 156 | | | $ | 438 | | | $ | 1 | | | $ | (58) | | | $ | 537 | |
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
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$ in millions | | Level 1 | | Level 2 | | Level 3 | | Netting adjustments | | Balance as of September 30, 2021 |
Assets at fair value on a recurring basis: | | | | | | | | | | |
Assets segregated for regulatory purposes (1) | | $ | 2,100 | | | $ | — | | | $ | — | | | $ | — | | | $ | 2,100 | |
Trading assets: | | | | | | | | | | |
Municipal and provincial obligations | | — | | | 155 | | | — | | | — | | | 155 | |
Corporate obligations | | 16 | | | 63 | | | — | | | — | | | 79 | |
Government and agency obligations | | 15 | | | 94 | | | — | | | — | | | 109 | |
Agency MBS, CMOs and ABS | | — | | | 211 | | | — | | | — | | | 211 | |
Non-agency CMOs and ABS | | — | | | 14 | | | — | | | — | | | 14 | |
Total debt securities | | 31 | | | 537 | | | — | | | — | | | 568 | |
Equity securities | | 8 | | | 4 | | | — | | | — | | | 12 | |
Brokered certificates of deposit | | — | | | 16 | | | — | | | — | | | 16 | |
Other | | — | | | — | | | 14 | | | — | | | 14 | |
Total trading assets | | 39 | | | 557 | | | 14 | | | — | | | 610 | |
Available-for-sale securities (2) | | 15 | | | 8,300 | | | — | | | — | | | 8,315 | |
Derivative assets: | | | | | | | | | | |
Interest rate - matched book | | — | | | 193 | | | — | |
| — | | | 193 | |
Interest rate - other | | 16 | | | 128 | | | — | | | (87) | | | 57 | |
Foreign exchange | | — | | | 5 | | | — | | | — | | | 5 | |
Total derivative assets | | 16 | | | 326 | | | — | | | (87) | | | 255 | |
Other investments - private equity - not measured at NAV | | — | | | — | | | 75 | | | — | | | 75 | |
All other investments: | | | | | | | | | | |
Government and agency obligations (3) | | 86 | | | — | | | — | | | — | | | 86 | |
Other | | 77 | | | 2 | | | 23 | | | — | | | 102 | |
Total all other investments | | 163 | | | 2 | | | 23 | | | — | | | 188 | |
Subtotal | | 2,333 | | | 9,185 | | | 112 | | | (87) | | | 11,543 | |
Other investments - private equity - measured at NAV | | | | | | | | | | 94 | |
Total assets at fair value on a recurring basis | | $ | 2,333 | | | $ | 9,185 | | | $ | 112 | | | $ | (87) | | | $ | 11,637 | |
| | | | | | | | | | |
Liabilities at fair value on a recurring basis: | | | | | | | | | | |
Trading liabilities: | | | | | | | | | | |
Municipal and provincial obligations | | $ | 2 | | | $ | — | | | $ | — | | | $ | — | | | $ | 2 | |
Corporate obligations | | — | | | 6 | | | — | | | — | | | 6 | |
Government and agency obligations | | 137 | | | — | | | — | | | — | | | 137 | |
| | | | | | | | | | |
Total debt securities | | 139 | | | 6 | | | — | | | — | | | 145 | |
Equity securities | | 28 | | | 3 | | | — | | | — | | | 31 | |
| | | | | | | | | | |
Total trading liabilities | | 167 | | | 9 | | | — | | | — | | | 176 | |
Derivative liabilities: | | | | | | | | | | |
Interest rate - matched book | | — | | | 193 | | | — | | | — | | | 193 | |
Interest rate - other | | 16 | | | 106 | | | — | | | (88) | | | 34 | |
| | | | | | | | | | |
Other | | — | | | — | | | 1 | | | — | | | 1 | |
Total derivative liabilities | | 16 | | | 299 | | | 1 | | | (88) | | | 228 | |
Total liabilities at fair value on a recurring basis | | $ | 183 | | | $ | 308 | | | $ | 1 | | | $ | (88) | | | $ | 404 | |
(1) These assets consist of U.S. Treasury securities (“U.S. Treasuries”) with maturities greater than 3 months as of our date of purchase. These assets do not include U.S. Treasuries with maturities of less than 3 months as of our date of purchase with a fair value of $6.19 billion at June 30, 2022 and $3.55 billion at September 30, 2021 which were considered cash and cash equivalents segregated for regulatory purposes. These assets are classified as Level 1.
(2) Our available-for-sale securities primarily consist of agency MBS and agency CMOs. See Note 5 for further information.
(3) These assets are comprised of U.S. Treasuries primarily purchased to meet certain deposit requirements with clearing organizations.
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
Level 3 recurring fair value measurements
The following tables present the changes in fair value for Level 3 assets and liabilities measured at fair value on a recurring basis. The realized and unrealized gains and losses in the tables may include changes in fair value that were attributable to both observable and unobservable inputs. In the following tables, gains/(losses) on trading and derivative instruments are reported in “Principal transactions” and gains/(losses) on other investments are reported in “Other” revenues on our Condensed Consolidated Statements of Income and Comprehensive Income.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Three months ended June 30, 2022 Level 3 instruments at fair value |
| | Financial assets | | Financial liabilities |
| | Trading assets | | Derivative assets | | Other investments | | Trading liabilities | | Derivative liabilities |
$ in millions | | Other | | Other | | Private equity investments | | All other | | Other | | Other |
Fair value beginning of period | | $ | 13 | | | $ | — | | | $ | 23 | | | $ | 30 | | | $ | (1) | | | $ | — | |
Total gains/(losses) included in earnings | | (1) | | | 2 | | | 4 | | | (4) | | | 1 | | | (1) | |
Purchases and contributions | | 37 | | | — | | | — | | | — | | | — | | | — | |
Sales, distributions, and deconsolidations | | (49) | | | — | | | — | | | (2) | | | — | | | — | |
Transfers: | | | | | | | | | | | | |
Into Level 3 | | — | | | — | | | — | | | — | | | — | | | — | |
Out of Level 3 | | — | | | — | | | — | | | — | | | — | | | — | |
Fair value end of period | | $ | — | | | $ | 2 | | | $ | 27 | | | $ | 24 | | | $ | — | | | $ | (1) | |
Unrealized gains/(losses) for the period included in earnings for instruments held at the end of the reporting period | | $ | — | | | $ | 2 | | | $ | 4 | | | $ | 1 | | | $ | — | | | $ | (1) | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Nine Months Ended June 30, 2022 Level 3 instruments at fair value |
| | Financial assets | | Financial liabilities |
| | Trading assets | | Derivative assets | | Other investments | | Trading liabilities | | Derivative liabilities |
$ in millions | | Other | | Other | | Private equity investments | | All other | | Other | | Other |
Fair value beginning of period | | $ | 14 | | | $ | — | | | $ | 75 | | | $ | 23 | | | $ | — | | | $ | (1) | |
Total gains/(losses) included in earnings | | 1 | | | 2 | | | 4 | | | (4) | | | — | | | — | |
Purchases and contributions | | 91 | | | — | | | — | | | 7 | | | — | | | — | |
Sales, distributions, and deconsolidations | | (106) | | | — | | | (40) | | | (2) | | | — | | | — | |
Transfers: | | | | | | | | | | | | |
Into Level 3 | | — | | | — | | | — | | | — | | | — | | | — | |
Out of Level 3 | | — | | | — | | | (12) | | | — | | | — | | | — | |
Fair value end of period | | $ | — | | | $ | 2 | | | $ | 27 | | | $ | 24 | | | $ | — | | | $ | (1) | |
Unrealized gains/(losses) for the period included in earnings for instruments held at the end of the reporting period | | $ | — | | | $ | 2 | | | $ | 4 | | | $ | 1 | | | $ | — | | | $ | (1) | |
| | | | | | | | | | | | |
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Three months ended June 30, 2021 Level 3 instruments at fair value |
| | Financial assets | | Financial liabilities |
| | Trading assets | | Derivative assets | | Other investments | | Trading liabilities | | Derivative liabilities |
$ in millions | | Other | | Other | | Private equity investments | | All other | | Other | | Other |
Fair value beginning of period | | $ | 5 | | | $ | — | | | $ | 52 | | | $ | 23 | | | $ | (1) | | | $ | (4) | |
Total gains/(losses) included in earnings | | — | | | 1 | | | 14 | | | — | | | 1 | | | — | |
Purchases and contributions | | 10 | | | — | | | — | | | — | | | — | | | — | |
Sales and distributions | | (5) | | | — | | | — | | | — | | | — | | | — | |
Transfers: | | | | | | | | | | | | |
Into Level 3 | | — | | | — | | | — | | | — | | | — | | | — | |
Out of Level 3 | | — | | | — | | | — | | | — | | | — | | | — | |
Fair value end of period | | $ | 10 | | | $ | 1 | | | $ | 66 | | | $ | 23 | | | $ | — | | | $ | (4) | |
Unrealized gains/(losses) for the period included in earnings for instruments held at the end of the reporting period | | $ | — | | | $ | 1 | | | $ | 14 | | | $ | — | | | $ | — | | | $ | — | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Nine Months Ended June 30, 2021 Level 3 instruments at fair value |
| | Financial assets | | Financial liabilities |
| | Trading assets | | Derivative assets | | Other investments | | Trading liabilities | | Derivative liabilities |
$ in millions | | Other | | Other | | Private equity investments | | All other | | Other | | Other |
Fair value beginning of period | | $ | 12 | | | $ | — | | | $ | 37 | | | $ | 22 | | | $ | — | | | $ | (5) | |
Total gains/(losses) included in earnings | | — | | | 1 | | | 29 | | | 1 | | | — | | | 1 | |
Purchases and contributions | | 26 | | | — | | | — | | | — | | | — | | | — | |
Sales and distributions | | (28) | | | — | | | — | | | — | | | — | | | — | |
Transfers: | | | | | | | | | | | | |
Into Level 3 | | — | | | — | | | — | | | — | | | — | | | — | |
Out of Level 3 | | — | | | — | | | — | | | — | | | — | | | — | |
Fair value end of period | | $ | 10 | | | $ | 1 | | | $ | 66 | | | $ | 23 | | | $ | — | | | $ | (4) | |
Unrealized gains/(losses) for the period included in earnings for instruments held at the end of the reporting period | | $ | — | | | $ | 1 | | | $ | 29 | | | $ | — | | | $ | — | | | $ | 1 | |
| | | | | | | | | | | | |
As of June 30, 2022, 16% of our assets and less than 1% of our liabilities were measured at fair value on a recurring basis. In comparison, as of September 30, 2021, 19% of our assets and less than 1% of our liabilities were measured at fair value on a recurring basis. As of both June 30, 2022 and September 30, 2021, 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 2021 Form 10-K, as a practical expedient, we utilize NAV or its equivalent to determine the recorded value of a portion of our private equity investments portfolio. We utilize NAV when the fund investment does not have a readily determinable fair value and the NAV of the fund is calculated in a manner consistent with the measurement principles of investment company accounting, including measurement of the investments at fair value.
Our private equity portfolio as of June 30, 2022 included investments in third-party funds and direct investments. Our private equity portfolio includes growth equity, venture capital, and mezzanine lending investments. Our investments cannot be redeemed directly with the funds. Our investments are monetized through the liquidation of underlying assets of fund investments, the timing of which is uncertain.
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
The following table presents the recorded value and unfunded commitments related to our private equity investments portfolio.
| | | | | | | | | | | | | | |
$ in millions | | Recorded value | | Unfunded commitment |
June 30, 2022 | | | | |
Private equity investments measured at NAV | | $ | 95 | | | $ | 29 | |
Private equity investments not measured at NAV | | 27 | | | |
Total private equity investments | | $ | 122 | | | |
| | | | |
September 30, 2021 | | | | |
Private equity investments measured at NAV | | $ | 94 | | | $ | 8 | |
Private equity investments not measured at NAV | | 75 | | | |
Total private equity investments (1) | | $ | 169 | | | |
(1) Of the total private equity investments, the portion we owned was $120 million, while the portion that we did not own was $49 million and was included as a component of noncontrolling interests on our Condensed Consolidated Statements of Financial Condition.
As a financial holding company, we are subject to holding period limitations for our merchant banking activities. As a result of such holding limitations, we exited or restructured certain of our private equity investments during the first half of our fiscal 2022, which resulted in a decline in private equity investments not measured at NAV compared to September 30, 2021 and a decline in noncontrolling interests on our Condensed Consolidated Statements of Financial Condition related to the portion of such investments we did not own. Additionally, many of our private equity fund investments met the definition of prohibited covered funds as defined by the Volcker Rule enacted pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”). We received approval from the Board of Governors of the Federal Reserve System (“the Fed”) to continue to hold the majority of our covered fund investments until July 2022. As a result, we have exited or restructured our covered fund investments to conform to such regulatory deadlines.
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 | | | | Level 2 | | Level 3 | | Total fair value | | Valuation technique(s) | | Unobservable input | | Range (weighted-average) |
June 30, 2022 | | | | | | | | | | | | | | |
Bank loans: | | | | | | | | | | | | | | |
Residential mortgage loans | | | | $ | 3 | | | $ | 9 | | | $ | 12 | | | Collateral or discounted cash flow (1) | | Prepayment rate | | 7 yrs. - 12 yrs. (10.4 yrs.) |
Corporate loans | | | | $ | — | | | $ | 64 | | | $ | 64 | | | Collateral or discounted cash flow (1) | | Recovery rate | | 37% - 70% (48%) |
Loans held for sale | | | | $ | 69 | | | $ | — | | | $ | 69 | | | N/A | | N/A | | N/A |
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
September 30, 2021 | | | | | | | | | | | | | | |
Bank loans: | | | | | | | | | | | | | | |
Residential mortgage loans | | | | $ | 3 | | | $ | 11 | | | $ | 14 | | | Collateral or discounted cash flow (1) | | Prepayment rate | | 7 yrs. - 12 yrs. (10.5 yrs.) |
Corporate loans | | | | $ | — | | | $ | 49 | | | $ | 49 | | | Collateral or discounted cash flow (1) | | Recovery rate | | 74% |
Loans held for sale | | | | $ | 29 | | | $ | — | | | $ | 29 | | | N/A | | N/A | | N/A |
| | | | | | | | | | | | | | |
(1) The valuation techniques used to estimate the fair values are based on collateral value less selling costs for the collateral-dependent loans and discounted cash flows for loans that are not collateral-dependent. Unobservable inputs used in the discounted cash flow valuation technique are presented in the table.
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
Financial instruments not recorded at fair value
Many, but not all, of the financial instruments we hold were recorded at fair value on the Condensed Consolidated Statements of Financial Condition. The following table presents the estimated fair value and fair value hierarchy of financial assets and liabilities that are not recorded at fair value on the Condensed Consolidated Statements of Financial Condition at June 30, 2022 and September 30, 2021. This table excludes financial instruments that are carried at amounts which approximate fair value. Refer to Note 4 of our 2021 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 | | | | Level 2 | | Level 3 | | Total estimated fair value | | Carrying amount |
June 30, 2022 | | | | | | | | | | |
Financial assets: | | | | | | | | | | |
Bank loans, net | | | | $ | 96 | | | $ | 41,105 | | | $ | 41,201 | | | $ | 41,698 | |
Financial liabilities: | | | | | | | | | | |
Bank deposits - certificates of deposit | | | | $ | 490 | | | $ | 619 | | | $ | 1,109 | | | $ | 1,121 | |
Other borrowings - Subordinated notes payable | | | | $ | 98 | | | $ | — | | | $ | 98 | | | $ | 100 | |
Senior notes payable | | | | $ | 1,881 | | | $ | — | | | $ | 1,881 | | | $ | 2,038 | |
| | | | | | | | | | |
September 30, 2021 | | | | | | | | | | |
Financial assets: | | | | | | | | | | |
Bank loans, net | | | | $ | 116 | | | $ | 24,839 | | | $ | 24,955 | | | $ | 24,902 | |
Financial liabilities: | | | | | | | | | | |
Bank deposits - certificates of deposit | | | | $ | — | | | $ | 898 | | | $ | 898 | | | $ | 878 | |
Senior notes payable | | | | $ | 2,459 | | | $ | — | | | $ | 2,459 | | | $ | 2,037 | |
NOTE 5 – AVAILABLE-FOR-SALE SECURITIES
We own available-for-sale securities at Raymond James Bank and TriState Capital Bank. Refer to Note 2 of our 2021 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.
| | | | | | | | | | | | | | | | | | | | | | | | | | |
$ in millions | | Cost basis | | Gross unrealized gains | | Gross unrealized losses | | Fair value |
June 30, 2022 | | | | | | | | |
Agency residential MBS | | $ | 5,903 | | | $ | — | | | $ | (390) | | | $ | 5,513 | |
Agency commercial MBS | | 1,428 | | | — | | | (144) | | | 1,284 | |
Agency CMOs | | 1,706 | | | 1 | | | (161) | | | 1,546 | |
Other agency obligations | | 578 | | | — | | | (11) | | | 567 | |
Non-agency residential MBS | | 496 | | | — | | | (11) | | | 485 | |
U.S. Treasuries | | 919 | | | — | | | (7) | | | 912 | |
Corporate bonds | | 140 | | | 1 | | | (1) | | | 140 | |
Other | | 19 | | | — | | | (2) | | | 17 | |
Total available-for-sale securities | | $ | 11,189 | | | $ | 2 | | | $ | (727) | | | $ | 10,464 | |
| | | | | | | | |
September 30, 2021 | | | | | | | | |
Agency residential MBS | | $ | 5,168 | | | $ | 46 | | | $ | (25) | | | $ | 5,189 | |
Agency commercial MBS | | 1,285 | | | 7 | | | (28) | | | 1,264 | |
Agency CMOs | | 1,854 | | | 9 | | | (16) | | | 1,847 | |
U.S. Treasuries | | 15 | | | — | | | — | | | 15 | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
Total available-for-sale securities | | $ | 8,322 | | | $ | 62 | | | $ | (69) | | | $ | 8,315 | |
The amortized costs and fair values in the preceding table exclude $22 million and $14 million of accrued interest on available-for-sale securities as of June 30, 2022 and September 30, 2021, respectively, which was included in “Other receivables, net” on our Condensed Consolidated Statements of Financial Condition.
See Note 4 for additional information regarding the fair value of available-for-sale securities.
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
The following table details the contractual maturities, amortized costs, carrying values and current yields for our available-for-sale securities. Since our MBS and CMO available-for-sale securities are backed by mortgages, actual maturities may differ from contractual maturities because borrowers may have the right to prepay obligations without prepayment penalties. As a result, as of June 30, 2022, the weighted-average life of our available-for-sale securities portfolio was approximately 4.75 years.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | June 30, 2022 |
$ in millions | | Within one year | | After one but within five years | | After five but within ten years | | After ten years | | Total |
Agency residential MBS | | | | | | | | | | |
Amortized cost | | $ | — | | | $ | 135 | | | $ | 2,621 | | | $ | 3,147 | | | $ | 5,903 | |
Carrying value | | $ | — | | | $ | 133 | | | $ | 2,468 | | | $ | 2,912 | | | $ | 5,513 | |
Agency commercial MBS | | | | | | | | | | |
Amortized cost | | $ | 19 | | | $ | 481 | | | $ | 853 | | | $ | 75 | | | $ | 1,428 | |
Carrying value | | $ | 19 | | | $ | 452 | | | $ | 746 | | | $ | 67 | | | $ | 1,284 | |
Agency CMOs | | | | | | | | | | |
Amortized cost | | $ | — | | | $ | 8 | | | $ | 34 | | | $ | 1,664 | | | $ | 1,706 | |
Carrying value | | $ | — | | | $ | 8 | | | $ | 32 | | | $ | 1,506 | | | $ | 1,546 | |
Other agency obligations | | | | | | | | | | |
Amortized cost | | $ | — | | | $ | 467 | | | $ | 99 | | | $ | 12 | | | $ | 578 | |
Carrying value | | $ | — | | | $ | 456 | | | $ | 98 | | | $ | 13 | | | $ | 567 | |
Non-agency residential MBS | | | | | | | | | | |
Amortized cost | | $ | — | | | $ | — | | | $ | — | | | $ | 496 | | | $ | 496 | |
Carrying value | | $ | — | | | $ | — | | | $ | — | | | $ | 485 | | | $ | 485 | |
U.S. Treasuries | | | | | | | | | | |
Amortized cost | | $ | — | | | $ | 915 | | | $ | 4 | | | $ | — | | | $ | 919 | |
Carrying value | | $ | — | | | $ | 909 | | | $ | 3 | | | $ | — | | | $ | 912 | |
Corporate bonds | | | | | | | | | | |
Amortized cost | | $ | — | | | $ | 78 | | | $ | 62 | | | $ | — | | | $ | 140 | |
Carrying value | | $ | — | | | $ | 77 | | | $ | 63 | | | $ | — | | | $ | 140 | |
Other | | | | | | | | | | |
Amortized cost | | $ | 1 | | | $ | 5 | | | $ | — | | | $ | 13 | | | $ | 19 | |
Carrying value | | $ | 1 | | | $ | 4 | | | $ | — | | | $ | 12 | | | $ | 17 | |
Total available-for-sale securities | | | | | | | | | | |
Amortized cost | | $ | 20 | | | $ | 2,089 | | | $ | 3,673 | | | $ | 5,407 | | | $ | 11,189 | |
Carrying value | | $ | 20 | | | $ | 2,039 | | | $ | 3,410 | | | $ | 4,995 | | | $ | 10,464 | |
Weighted-average yield | | 2.15 | % | | 2.23 | % | | 1.33 | % | | 1.89 | % | | 1.76 | % |
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 |
$ in millions | | Estimated fair value | | Unrealized losses | | Estimated fair value | | Unrealized losses | | Estimated fair value | | Unrealized losses |
June 30, 2022 | | | | | | | | | | | | |
Agency residential MBS | | $ | 4,288 | | | $ | (267) | | | $ | 1,149 | | | $ | (123) | | | $ | 5,437 | | | $ | (390) | |
Agency commercial MBS | | 607 | | | (44) | | | 649 | | | (100) | | | 1,256 | | | (144) | |
Agency CMOs | | 961 | | | (85) | | | 547 | | | (76) | | | 1,508 | | | (161) | |
Other agency obligations | | 487 | | | (11) | | | — | | | — | | | 487 | | | (11) | |
Non-agency residential MBS | | 471 | | | (11) | | | — | | | — | | | 471 | | | (11) | |
U.S. Treasuries | | 776 | | | (7) | | | — | | | — | | | 776 | | | (7) | |
Corporate bonds | | 120 | | | (1) | | | — | | | — | | | 120 | | | (1) | |
Other | | 18 | | | (1) | | | — | | | (1) | | | 18 | | | (2) | |
Total | | $ | 7,728 | | | $ | (427) | | | $ | 2,345 | | | $ | (300) | | | $ | 10,073 | | | $ | (727) | |
September 30, 2021 | | | | | | | | | | | | |
Agency residential MBS | | $ | 3,155 | | | $ | (25) | | | $ | 18 | | | $ | — | | | $ | 3,173 | | | $ | (25) | |
Agency commercial MBS | | 645 | | | (13) | | | 353 | | | (15) | | | 998 | | | (28) | |
Agency CMOs | | 918 | | | (12) | | | 231 | | | (4) | | | 1,149 | | | (16) | |
U.S. Treasuries | | 3 | | | — | | | — | | | — | | | 3 | | | — | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
Total | | $ | 4,721 | | | $ | (50) | | | $ | 602 | | | $ | (19) | | | $ | 5,323 | | | $ | (69) | |
At June 30, 2022, of the 992 available-for-sale securities in an unrealized loss position, 842 were in a continuous unrealized loss position for less than 12 months and 150 securities were in a continuous unrealized loss position for greater than 12 months. The contractual cash flows for certain securities within our available-for-sale portfolio are guaranteed by the U.S. government or its agencies. For those securities, we do not consider any associated unrealized losses to be credit losses due to the guarantee of the full payment of principal and interest, and the fact that we have the ability and intent to hold these securities. In addition, unrealized losses related to these available-for-sale securities are generally due to changes in market interest rates. At June 30, 2022, based on our assessment of those securities not guaranteed by the U.S. government or its agencies, we recognized an insignificant allowance for credit losses.
At June 30, 2022, debt securities we held in excess of ten percent of our equity included those issued by the Federal National Home Mortgage Association and Federal Home Loan Mortgage Corporation with amortized costs of $5.60 billion and $3.23 billion, respectively, and fair values of $5.18 billion and $2.97 billion, respectively.
During the three and nine months ended June 30, 2022, sales of available-for-sale securities were insignificant. During the three and nine months ended June 30, 2021, we received proceeds of $450 million and $969 million, respectively, from the sales of agency MBS and agency CMO available-for-sale securities, resulting in insignificant gains.
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
NOTE 6 – 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 2021 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.
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| | June 30, 2022 | | September 30, 2021 |
$ in millions | | Derivative assets | | Derivative liabilities | | Notional amount | | Derivative assets | | Derivative liabilities | | Notional amount |
Derivatives not designated as hedging instruments | | | | | | | | | | | | |
Interest rate - matched book | | $ | 84 | | | $ | 84 | | | $ | 1,340 | | | $ | 193 | | | $ | 193 | | | $ | 1,736 | |
Interest rate - other (1) | | 288 | | | 352 | | | 16,551 | | | 144 | | | 122 | | | 15,087 | |
Foreign exchange | | 2 | | | — | | | 1,037 | | | 3 | | | — | | | 826 | |
Other | | 2 | | | 1 | | | 601 | | | — | | | 1 | | | 551 | |
Subtotal | | 376 | | | 437 | | | 19,529 | | | 340 | | | 316 | | | 18,200 | |
Derivatives designated as hedging instruments | | | | | | | | | | | | |
Interest rate - other | | 9 | | | — | | | 1,050 | | | — | | | — | | | 850 | |
Foreign exchange | | 2 | | | — | | | 1,160 | | | 2 | | | — | | | 939 | |
Subtotal | | 11 | | | — | | | 2,210 | | | 2 | | | — | | | 1,789 | |
Total gross fair value/notional amount | | 387 | | | 437 | | | $ | 21,739 | | | 342 | | | 316 | | | $ | 19,989 | |
Offset on the Condensed Consolidated Statements of Financial Condition | | | | | | | | | | | | |
Counterparty netting | | (31) | | | (31) | | | | | (46) | | | (46) | | | |
Cash collateral netting | | (204) | | | (27) | | | | | (41) | | | (42) | | | |
Total amounts offset | | (235) | | | (58) | | | | | (87) | | | (88) | | | |
Net amounts presented on the Condensed Consolidated Statements of Financial Condition | | 152 | | | 379 | | | | | 255 | | | 228 | | | |
Gross amounts not offset on the Condensed Consolidated Statements of Financial Condition | | | | | | | | | | | | |
Financial instruments (2) | | (85) | | | (84) | | | | | (205) | | | (193) | | | |
Total | | $ | 67 | | | $ | 295 | | | | | $ | 50 | | | $ | 35 | | | |
(1) Relates to interest rate derivatives entered into as part of our fixed income business operations, including to-be-announced security contracts (“TBAs”) that are accounted for as derivatives, as well as our banking operations, including those acquired with TriState Capital on June 1, 2022.
(2) 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.
The following table details the gains/(losses) included in accumulated other comprehensive income/(loss) (“AOCI”), net of income taxes, on derivatives designated as hedging instruments. These gains/(losses) included any amounts reclassified from AOCI to net income during the period. See Note 19 for additional information.
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| | Three months ended June 30, | | Nine months ended June 30, |
$ in millions | | 2022 | | 2021 | | 2022 | | 2021 |
Interest rate (cash flow hedges) | | $ | 10 | | | $ | (2) | | | $ | 48 | | | $ | 22 | |
Foreign exchange (net investment hedges) | | 24 | | | (9) | | | 14 | | | (48) | |
Total gains/(losses) in AOCI, net of taxes | | $ | 34 | | | $ | (11) | | | $ | 62 | | | $ | (26) | |
There were no components of derivative gains or losses excluded from the assessment of hedge effectiveness for each of the three and nine months ended June 30, 2022 and 2021. We expect to reclassify $13 million of interest expense out of AOCI and into earnings within the next 12 months. The maximum length of time over which forecasted transactions are or will be hedged is five years.
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
The following table details the gains/(losses) on derivatives not designated as hedging instruments recognized on the Condensed Consolidated Statements of Income and Comprehensive Income.
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$ in millions | | | | Three months ended June 30, | | Nine months ended June 30, |
| Location of gain/(loss) | | 2022 | | 2021 | | 2022 | | 2021 |
Interest rate | | Principal transactions/other revenues | | $ | 4 | | | $ | 2 | | | $ | 14 | | | $ | 12 | |
Foreign exchange | | Other revenues | | $ | 33 | | | $ | (9) | | | $ | 30 | | | $ | (39) | |
Other | | Principal transactions | | $ | 1 | | | $ | 1 | | | $ | 2 | | | $ | 3 | |
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Risks associated with our derivatives and related risk mitigation
Credit risk
We are exposed to credit losses primarily in the event of nonperformance by the counterparties to derivatives that are not cleared through a clearing organization. Where we are subject to credit exposure, we perform a credit evaluation of counterparties prior to entering into derivative transactions and we continue to monitor their credit standings on an ongoing basis. We may require initial margin or collateral from counterparties, generally in the form of cash or other marketable securities to support certain of these obligations as established by the credit threshold specified by the agreement and/or as a result of monitoring the credit standing of the counterparties. We also enter into derivatives with clients to which Raymond James Bank and TriState Capital Bank have provided loans. Such derivatives are generally collateralized by marketable securities or other assets of the client.
Our only exposure to credit risk on matched book derivatives is related to our uncollected derivative transaction fee revenues, which were insignificant as of both June 30, 2022 and September 30, 2021. We are not exposed to market risk on these derivatives due to the pass-through transaction structure described in Note 2 of our 2021 Form 10-K.
Interest rate and foreign exchange risk
We are exposed to interest rate risk related to certain of our interest rate derivatives. We are also exposed to foreign exchange risk related to our forward foreign exchange derivatives. On a daily basis, we monitor our risk exposure on our derivatives based on established limits with respect to a number of factors, including interest rate, foreign exchange spot and forward rates, spread, ratio, basis and volatility risks, both for the total portfolio and by maturity period.
Derivatives with credit-risk-related contingent features
Certain of our derivative contracts contain provisions that require our debt to maintain an investment-grade rating from one or more of the major credit rating agencies or contain provisions related to default on certain of our outstanding debt. If our debt were to fall below investment-grade or we were to default on certain of our outstanding debt, the counterparties to the derivative instruments could terminate the derivative and request immediate payment, or demand immediate and ongoing overnight collateralization on our derivative instruments in liability positions. The aggregate fair value of all derivative instruments with such credit-risk-related contingent features that were in a liability position was insignificant as of June 30, 2022 and September 30, 2021.
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
NOTE 7 – 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 2021 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.
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| | Collateralized agreements | | Collateralized financings |
$ in millions | | Reverse repurchase agreements | | Securities borrowed | | Total | | Repurchase agreements | | Securities loaned | | Total |
June 30, 2022 | | | | | | | | | | | | |
Gross amounts of recognized assets/liabilities | | $ | 168 | | | $ | 463 | | | $ | 631 | | | $ | 100 | | | $ | 337 | | | $ | 437 | |
Gross amounts offset on the Condensed Consolidated Statements of Financial Condition | | — | | | — | | | — | | | — | | | — | | | — | |
Net amounts presented on the Condensed Consolidated Statements of Financial Condition | | 168 | | | 463 | | | 631 | | | 100 | | | 337 | | | 437 | |
Gross amounts not offset on the Condensed Consolidated Statements of Financial Condition | | (168) | | | (452) | | | (620) | | | (100) | | | (320) | | | (420) | |
Net amounts | | $ | — | | | $ | 11 | | | $ | 11 | | | $ | — | | | $ | 17 | | | $ | 17 | |
September 30, 2021 | | | | | | | | | | | | |
Gross amounts of recognized assets/liabilities | | $ | 279 | | | $ | 201 | | | $ | 480 | | | $ | 205 | | | $ | 72 | | | $ | 277 | |
Gross amounts offset on the Condensed Consolidated Statements of Financial Condition | | — | | | — | | | — | | | — | | | — | | | — | |
Net amounts presented on the Condensed Consolidated Statements of Financial Condition | | 279 | | | 201 | | | 480 | | | 205 | | | 72 | | | 277 | |
Gross amounts not offset on the Condensed Consolidated Statements of Financial Condition | | (279) | | | (195) | | | (474) | | | (205) | | | (68) | | | (273) | |
Net amounts | | $ | — | | | $ | 6 | | | $ | 6 | | | $ | — | | | $ | 4 | | | $ | 4 | |
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.
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$ in millions | | Overnight and continuous | | Up to 30 days | | 30-90 days | | Greater than 90 days | | Total |
June 30, 2022 | | | | | | | | | | |
Repurchase agreements: | | | | | | | | | | |
Government and agency obligations | | $ | 57 | | | $ | — | | | $ | — | | | $ | — | | | $ | 57 | |
Agency MBS and agency CMOs | | 43 | | | — | | | — | | | — | | | 43 | |
Total repurchase agreements | | 100 | | | — | | | — | | | — | | | 100 | |
Securities loaned: | | | | | | | | | | |
Equity securities | | 337 | | | — | | | — | | | — | | | 337 | |
Total collateralized financings | | $ | 437 | |
| $ | — | |
| $ | — | |
| $ | — | |
| $ | 437 | |
September 30, 2021 | | | | | | | | | | |
Repurchase agreements: | | | | | | | | | | |
Government and agency obligations | | $ | 122 | | | $ | — | | | $ | — | | | $ | — | | | $ | 122 | |
Agency MBS and agency CMOs | | 83 | | | — | | | — | | | — | | | 83 | |
Total repurchase agreements | | 205 | | | — | | | — | | | — | | | 205 | |
Securities loaned: | | | | | | | | | | |
Equity securities | | 72 | | | — | | | — | | | — | | | 72 | |
Total collateralized financings | | $ | 277 | | | $ | — | | | $ | — | | | $ | — | | | $ | 277 | |
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.
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$ in millions | | June 30, 2022 | | September 30, 2021 |
Collateral we received that was available to be delivered or repledged | | $ | 3,830 | | | $ | 3,429 | |
Collateral that we delivered or repledged | | $ | 995 | | | $ | 830 | |
Encumbered assets
We pledge certain of our assets to collateralize either repurchase agreements or other secured borrowings, maintain lines of credit, or to satisfy our collateral or settlement requirements with counterparties or clearing organizations who may or may not have the right to deliver or repledge such instruments. The following table presents information about our assets that have been pledged for one of the purposes previously described.
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$ in millions | | June 30, 2022 | | September 30, 2021 |
Had the right to deliver or repledge | | $ | 422 | | | $ | 368 | |
Did not have the right to deliver or repledge | | $ | 63 | | | $ | 65 | |
Bank loans, net pledged at the FHLB and the Federal Reserve Bank of Atlanta (“FRB”) | | $ | 8,138 | | | $ | 5,716 | |
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
NOTE 8 – BANK LOANS, NET
Bank client receivables are comprised of loans originated or purchased by our Bank segment and include commercial and industrial (“C&I”) loans, real estate investment trust (“REIT”) loans, tax-exempt loans, commercial and residential real estate loans, and securities-based loans (“SBL”) and other 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: C&I, commercial real estate (“CRE”), REIT, tax-exempt, residential mortgage, and SBL and other. Substantially all of the SBL and other segment portfolio is comprised of securities-based loans. See Note 2 of our 2021 Form 10-K for a discussion of our October 1, 2020 adoption of new accounting guidance related to the measurement of credit losses on financial instruments and our accounting policies related to bank loans and the allowance for credit losses.
Loan balances in the following tables are presented at amortized cost (outstanding principal balance net of unearned income and deferred expenses, which include purchase premiums, purchase discounts and net deferred origination fees and costs), 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. 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 origination date, and as described further in Note 3, the purchase discount on such loans is accreted to interest income over the contractual life of the loan.
The following table presents the balances for both the held for sale and held for investment loan portfolios, as well as the associated percentage of each portfolio segment in our bank loan portfolio.
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| | June 30, 2022 | | September 30, 2021 |
$ in millions | | Balance | | % | | Balance | | % |
C&I loans | | $ | 10,897 | | | 26 | % | | $ | 8,440 | | | 33 | % |
CRE loans | | 6,354 | | | 15 | % | | 2,872 | | | 11 | % |
REIT loans | | 1,416 | | | 3 | % | | 1,112 | | | 5 | % |
Tax-exempt loans | | 1,347 | | | 3 | % | | 1,321 | | | 5 | % |
Residential mortgage loans | | 6,728 | | | 16 | % | | 5,318 | | | 21 | % |
SBL and other | | 15,312 | | | 36 | % | | 6,106 | | | 24 | % |
Total loans held for investment | | 42,054 | | | 99 | % | | 25,169 | | | 99 | % |
Held for sale loans | | 166 | | | 1 | % | | 145 | | | 1 | % |
Total loans held for sale and investment | | 42,220 | | | 100 | % | | 25,314 | | | 100 | % |
Allowance for credit losses | | (377) | | | | | (320) | | | |
Bank loans, net (1) | | $ | 41,843 | | | | | $ | 24,994 | | | |
Accrued interest receivable on bank loans | | $ | 99 | | | | | $ | 48 | | | |
(1) Bank loans as of June 30, 2022 are presented net of $131 million of net unamortized discounts, unearned income, and deferred loan fees and costs. This amount primarily arose from the purchase discounts on bank loans acquired in the TriState Capital acquisition. See Note 3 for further information. Bank loans as of September 30, 2021 are presented net of $1 million of unearned income and deferred loan fees and costs.
The allowance for credit losses was 0.90% and 1.27% of the held for investment loan portfolio as of June 30, 2022 and September 30, 2021, respectively. Accrued interest receivables presented in the preceding table are reported in “Other receivables, net” on our Condensed Consolidated Statements of Financial Condition.
At June 30, 2022, we had pledged $5.8 billion of residential mortgage loans and $1.5 billion of CRE loans with the FHLB as security for the repayment of certain borrowings. Additionally, as of June 30, 2022, we had pledged $797 million of C&I loans with the FRB to be eligible to participate in the Federal Reserve’s discount window program. See Notes 7 and 15 for more information regarding borrowings from the FHLB and bank loans pledged with the FHLB and FRB.
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
Held for sale loans
Exclusive of the loans acquired on June 1, 2022 in our acquisition of TriState Capital Bank, we originated or purchased $683 million and $2.65 billion of loans held for sale during the three and nine months ended June 30, 2022, respectively, and $385 million and $1.50 billion during the three and nine months ended June 30, 2021, respectively. The majority of these loans were purchases of the guaranteed portions of Small Business Administration (“SBA”) loans intended for resale in the secondary market as individual SBA loans or as securitized pools of SBA loans. Proceeds from the sales of these held for sale loans amounted to $345 million and $1.02 billion during the three and nine months ended June 30, 2022, respectively, and $230 million and $625 million during the three and nine months ended June 30, 2021, respectively. Net gains resulting from such sales were insignificant in all periods during the three and nine months ended June 30, 2022 and 2021.
Purchases and sales of loans held for investment
The following table presents purchases and sales of loans held for investment by portfolio segment. Purchases do not include loans obtained from the acquisition of TriState Capital Bank.
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$ in millions | | C&I loans | | | | | | | | Residential mortgage loans | | | | Total |
Three months ended June 30, 2022 | | | | | | | | | | | | | | |
Purchases | | $ | 439 | | | | | | | | | $ | 383 | | | | | $ | 822 | |
Sales | | $ | 33 | | | | | | | | | $ | — | | | | | $ | 33 | |
Nine months ended June 30, 2022 | | | | | | | | | | | | | | |
Purchases | | $ | 1,219 | | | | | | | | | $ | 790 | | | | | $ | 2,009 | |
Sales | | $ | 145 | | | | | | | | | $ | — | | | | | $ | 145 | |
Three months ended June 30, 2021 | | | | | | | | | | | | | | |
Purchases | | $ | 381 | | | | | | | | | $ | 190 | | | | | $ | 571 | |
Sales | | $ | 116 | | | | | | | | | $ | — | | | | | $ | 116 | |
Nine months ended June 30, 2021 | | | | | | | | | | | | | | |
Purchases | | $ | 1,041 | | | | | | | | | $ | 350 | | | | | $ | 1,391 | |
Sales | | $ | 216 | | | | | | | | | $ | — | | | | | $ | 216 | |
Sales in the preceding table represent the recorded investment (i.e., net of charge-offs and discounts or premiums) of loans held for investment that were transferred to loans held for sale and subsequently sold to a third party during the respective period. As more fully described in Note 2 of our 2021 Form 10-K, corporate loan sales generally occur as part of our credit management activities. Corporate loans include C&I, CRE, and REIT loans.
Aging analysis of loans held for investment
The following table presents information on delinquency status of our loans held for investment.
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$ in millions | | 30-89 days and accruing | | 90 days or more and accruing | | Total past due and accruing | | Nonaccrual with allowance | | Nonaccrual with no allowance | | Current and accruing | | Total loans held for investment |
June 30, 2022 | | | | | | | | | | | | | | |
C&I loans | | $ | 16 | | | $ | — | | | $ | 16 | | | $ | 46 | | | $ | — | | | $ | 10,835 | | | $ | 10,897 | |
CRE loans | | — | | | — | | | — | | | 12 | | | 17 | | | 6,325 | | | 6,354 | |
REIT loans | | — | | | — | | | — | | | — | | | — | | | 1,416 | | | 1,416 | |
Tax-exempt loans | | — | | | — | | | — | | | — | | | — | | | 1,347 | | | 1,347 | |
Residential mortgage loans | | 1 | | | — | | | 1 | | | 1 | | | 14 | | | 6,712 | | | 6,728 | |
SBL and other | | 1 | | | — | | | 1 | | | — | | | — | | | 15,311 | | | 15,312 | |
Total loans held for investment | | $ | 18 | | | $ | — | | | $ | 18 | | | $ | 59 | | | $ | 31 | | | $ | 41,946 | | | $ | 42,054 | |
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September 30, 2021 | | | | | | | | | | | | | | |
C&I loans | | $ | — | | | $ | — | | | $ | — | | | $ | 39 | | | $ | — | | | $ | 8,401 | | | $ | 8,440 | |
CRE loans | | — | | | — | | | — | | | — | | | 20 | | | 2,852 | | | 2,872 | |
REIT loans | | — | | | — | | | — | | | — | | | — | | | 1,112 | | | 1,112 | |
Tax-exempt loans | | — | | | — | | | — | | | — | | | — | | | 1,321 | | | 1,321 | |
Residential mortgage loans | | 2 | | | — | | | 2 | | | 2 | | | 13 | | | 5,301 | | | 5,318 | |
SBL and other | | — | | | — | | | — | | | — | | | — | | | 6,106 | | | 6,106 | |
Total loans held for investment | | $ | 2 | | | $ | — | | | $ | 2 | | | $ | 41 | | | $ | 33 | | | $ | 25,093 | | | $ | 25,169 | |
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
The preceding table includes $78 million and $61 million at June 30, 2022 and September 30, 2021, respectively, of nonaccrual loans which were current pursuant to their contractual terms. The table also includes troubled debt restructurings (“TDRs”) of $13 million, $9 million, and $11 million for C&I loans, CRE loans, and residential first mortgage loans, respectively, at June 30, 2022, and $12 million and $13 million for CRE loans and residential first mortgage loans, respectively, at September 30, 2021.
Other real estate owned, included in “Other assets” on our Condensed Consolidated Statements of Financial Condition, was insignificant at both June 30, 2022 and September 30, 2021.
Collateral-dependent loans
A loan is considered collateral-dependent when the borrower is experiencing financial difficulty and repayment is expected to be provided substantially through the sale of the underlying collateral. Collateral-dependent loans are recorded based upon the fair value of the collateral less the estimated selling costs. At June 30, 2022, we had $13 million of collateral-dependent C&I loans which were fully collateralized by commercial real estate and other business assets and $28 million of collateral-dependent CRE loans which were fully collateralized by retail, industrial, and health care real estate. As September 30, 2021, we had $20 million of collateral-dependent CRE loans which were fully collateralized by retail and industrial real estate. We had $7 million and $5 million of collateral-dependent residential loans at June 30, 2022 and September 30, 2021, respectively, which were fully collateralized by single family homes. The recorded investment in mortgage loans secured by one-to-four family residential properties for which formal foreclosure proceedings were in process was $5 million and $4 million at June 30, 2022 and September 30, 2021, respectively.
Credit quality indicators
The credit quality of our bank loan portfolio is summarized monthly by management using internal risk ratings, which align with the standard asset classification system utilized by bank regulators. These classifications are divided into three groups: Not Classified (Pass), Special Mention, and Classified or Adverse Rating (Substandard, Doubtful and Loss). These terms are defined as follows:
Pass – Loans which are currently performing in accordance with the contractual terms and are well protected by the current net worth and paying capacity of the obligor (or guarantors, if any) or by the fair value, less costs to acquire and sell, of any underlying collateral in a timely manner.
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.
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| | June 30, 2022 |
| | Loans by origination fiscal year | | | | | | |
$ in millions | | 2022 | | 2021 | | 2020 | | 2019 | | 2018 | | Prior | | Revolving loans | | | | Total |
C&I loans | | | | | | | | | | | | | | | | | | |
Risk rating: | | | | | | | | | | | | | | | | | | |
Pass | | $ | 693 | | $ | 1,514 | | $ | 1,341 | | $ | 1,244 | | $ | 1,370 | | $ | 2,217 | | $ | 2,231 | | | | $ | 10,610 |
Special mention | | — | | — | | 62 | | 38 | | — | | 82 | | 4 | | | | 186 |
Substandard | | 1 | | — | | 3 | | 25 | | 40 | | — | | 19 | | | | 88 |
Doubtful | | — | | — | | — | | 4 | | 9 | | — | | — | | | | 13 |
Total C&I loans | | $ | 694 | | $ | 1,514 | | $ | 1,406 | | $ | 1,311 | | $ | 1,419 | | $ | 2,299 | | $ | 2,254 | | | | $ | 10,897 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
CRE loans | | | | | | | | | | | | | | | | | | |
Risk rating: | | | | | | | | | | | | | | | | | | |
Pass | | $ | 1,420 | | $ | 1,329 | | $ | 878 | | $ | 749 | | $ | 855 | | $ | 687 | | $ | 189 | | | | $ | 6,107 |
Special mention | | — | | 2 | | 30 | | 27 | | 36 | | — | | — | | | | 95 |
Substandard | | — | | — | | 15 | | 20 | | 80 | | 37 | | — | | | | 152 |
Doubtful | | — | | — | | — | | — | | — | | — | | — | | | | — |
Total CRE loans | | $ | 1,420 | | $ | 1,331 | | $ | 923 | | $ | 796 | | $ | 971 | | $ | 724 | | $ | 189 | | | | $ | 6,354 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
REIT loans | | | | | | | | | | | | | | | | | | |
Risk rating: | | | | | | | | | | | | | | | | | | |
Pass | | $ | 87 | | $ | 234 | | $ | 99 | | $ | 57 | | $ | 40 | | $ | 185 | | $ | 591 | | | | $ | 1,293 |
Special mention | | — | | — | | — | | 13 | | 11 | | 64 | | 8 | | | | 96 |
Substandard | | — | | — | | — | | 21 | | — | | 4 | | 2 | | | | 27 |
Doubtful | | — | | — | | — | | — | | — | | — | | — | | | | — |
Total REIT loans | | $ | 87 | | $ | 234 | | $ | 99 | | $ | 91 | | $ | 51 | | $ | 253 | | $ | 601 | | | | $ | 1,416 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
Tax-exempt loans | | | | | | | | | | | | | | | | | | |
Risk rating: | | | | | | | | | | | | | | | | | | |
Pass | | $ | 71 | | $ | 170 | | $ | 58 | | $ | 115 | | $ | 197 | | $ | 736 | | $ | — | | | | $ | 1,347 |
Special mention | | — | | — | | — | | — | | — | | — | | — | | | | — |
Substandard | | — | | — | | — | | — | | — | | — | | — | | | | — |
Doubtful | | — | | — | | — | | — | | — | | — | | — | | | | — |
Total tax-exempt loans | | $ | 71 | | $ | 170 | | $ | 58 | | $ | 115 | | $ | 197 | | $ | 736 | | $ | — | | | | $ | 1,347 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
Residential mortgage loans | | | | | | | | | | | | | | | | | | |
Risk rating: | | | | | | | | | | | | | | | | | | |
Pass | | $ | 2,195 | | $ | 1,727 | | $ | 1,059 | | $ | 493 | | $ | 300 | | $ | 887 | | $ | 37 | | | | $ | 6,698 |
Special mention | | 1 | | 1 | | — | | 2 | | — | | 4 | | — | | | | 8 |
Substandard | | — | | — | | — | | — | | 1 | | 21 | | — | | | | 22 |
Doubtful | | — | | — | | — | | — | | — | | — | | — | | | | — |
Total residential mortgage loans | | $ | 2,196 | | $ | 1,728 | | $ | 1,059 | | $ | 495 | | $ | 301 | | $ | 912 | | $ | 37 | | | | $ | 6,728 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
SBL and other | | | | | | | | | | | | | | | | | | |
Risk rating: | | | | | | | | | | | | | | | | | | |
Pass | | $ | 10 | | $ | 41 | | $ | 75 | | $ | 44 | | $ | 36 | | $ | 43 | | $ | 15,063 | | | | $ | 15,312 |
Special mention | | — | | — | | — | | — | | — | | — | | — | | | | — |
Substandard | | — | | — | | — | | — | | — | | — | | — | | | | — |
Doubtful | | — | | — | | — | | — | | — | | — | | — | | | | — |
Total SBL and other | | $ | 10 | | $ | 41 | | $ | 75 | | $ | 44 | | $ | 36 | | $ | 43 | | $ | 15,063 | | | | $ | 15,312 |
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | September 30, 2021 |
| | Loans by origination fiscal year | | | | | | |
$ in millions | | 2021 | | 2020 | | 2019 | | 2018 | | 2017 | | Prior | | Revolving loans | | | | Total |
C&I loans | | | | | | | | | | | | | | | | | | |
Risk rating: | | | | | | | | | | | | | | | | | | |
Pass | | $ | 999 | | $ | 1,273 | | $ | 1,180 | | $ | 1,408 | | $ | 935 | | $ | 1,633 | | $ | 739 | | | | $ | 8,167 |
Special mention | | — | | — | | 41 | | — | | 26 | | 54 | | 1 | | | | 122 |
Substandard | | — | | — | | 24 | | 84 | | — | | 28 | | — | | | | 136 |
Doubtful | | — | | — | | 15 | | — | | — | | — | | — | | | | 15 |
Total C&I loans | | $ | 999 | | $ | 1,273 | | $ | 1,260 | | $ | 1,492 | | $ | 961 | | $ | 1,715 | | $ | 740 | | | | $ | 8,440 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
CRE loans | | | | | | | | | | | | | | | | | | |
Risk rating: | | | | | | | | | | | | | | | | | | |
Pass | | $ | 533 | | $ | 459 | | $ | 442 | | $ | 652 | | $ | 223 | | $ | 174 | | $ | 62 | | | | $ | 2,545 |
Special mention | | — | | 45 | | 58 | | 36 | | — | | — | | — | | | | 139 |
Substandard | | — | | — | | 32 | | 98 | | 8 | | 50 | | — | | | | 188 |
Doubtful | | — | | — | | — | | — | | — | | — | | — | | | | — |
Total CRE loans | | $ | 533 | | $ | 504 | | $ | 532 | | $ | 786 | | $ | 231 | | $ | 224 | | $ | 62 | | | | $ | 2,872 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
REIT loans | | | | | | | | | | | | | | | | | | |
Risk rating: | | | | | | | | | | | | | | | | | | |
Pass | | $ | 235 | | $ | 95 | | $ | 75 | | $ | 60 | | $ | 46 | | $ | 167 | | $ | 237 | | | | $ | 915 |
Special mention | | — | | — | | 13 | | 11 | | 33 | | 106 | | 6 | | | | 169 |
Substandard | | — | | — | | 21 | | — | | 4 | | — | | 3 | | | | 28 |
Doubtful | | — | | — | | — | | — | | — | | — | | — | | | | — |
Total REIT loans | | $ | 235 | | $ | 95 | | $ | 109 | | $ | 71 | | $ | 83 | | $ | 273 | | $ | 246 | | | | $ | 1,112 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
Tax-exempt loans | | | | | | | | | | | | | | | | | | |
Risk rating: | | | | | | | | | | | | | | | | | | |
Pass | | $ | 158 | | $ | 57 | | $ | 124 | | $ | 204 | | $ | 272 | | $ | 506 | | $ | — | | | | $ | 1,321 |
Special mention | | — | | — | | — | | — | | — | | — | | — | | | | — |
Substandard | | — | | — | | — | | — | | — | | — | | — | | | | — |
Doubtful | | — | | — | | — | | — | | — | | — | | — | | | | — |
Total tax-exempt loans | | $ | 158 | | $ | 57 | | $ | 124 | | $ | 204 | | $ | 272 | | $ | 506 | | $ | — | | | | $ | 1,321 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
Residential mortgage loans | | | | | | | | | | | | | | | | | | |
Risk rating: | | | | | | | | | | | | | | | | | | |
Pass | | $ | 1,861 | | $ | 1,266 | | $ | 640 | | $ | 386 | | $ | 451 | | $ | 666 | | $ | 20 | | | | $ | 5,290 |
Special mention | | — | | — | | — | | — | | — | | 5 | | — | | | | 5 |
Substandard | | — | | — | | — | | 1 | | 2 | | 20 | | — | | | | 23 |
Doubtful | | — | | — | | — | | — | | — | | — | | — | | | | — |
Total residential mortgage loans | | $ | 1,861 | | $ | 1,266 | | $ | 640 | | $ | 387 | | $ | 453 | | $ | 691 | | $ | 20 | | | | $ | 5,318 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
SBL and other | | | | | | | | | | | | | | | | | | |
Risk rating: | | | | | | | | | | | | | | | | | | |
Pass | | $ | 3 | | $ | 45 | | $ | 12 | | $ | — | | $ | — | | $ | — | | $ | 6,046 | | | | $ | 6,106 |
Special mention | | — | | — | | — | | — | | — | | — | | — | | | | — |
Substandard | | — | | — | | — | | — | | — | | — | | — | | | | — |
Doubtful | | — | | — | | — | | — | | — | | — | | — | | | | — |
Total SBL and other | | $ | 3 | | $ | 45 | | $ | 12 | | $ | — | | $ | — | | $ | — | | $ | 6,046 | | | | $ | 6,106 |
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
We also monitor the credit quality of the residential mortgage loan portfolio utilizing Fair Isaac Corporation (“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.
| | | | | | | | | | | | | | |
$ in millions | | June 30, 2022 | | September 30, 2021 |
FICO score: | | | | |
Below 600 | | $ | 65 | | | $ | 67 | |
600 - 699 | | 463 | | | 416 | |
700 - 799 | | 4,943 | | | 3,772 | |
800 + | | 1,231 | | | 1,058 | |
FICO score not available | | 26 | | | 5 | |
Total | | $ | 6,728 | | | $ | 5,318 | |
| | | | |
LTV ratio: | | | | |
Below 80% | | $ | 5,258 | | | $ | 4,123 | |
80%+ | | 1,470 | | | 1,195 | |
Total | | $ | 6,728 | | | $ | 5,318 | |
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 | | C&I loans | | CRE loans | | REIT loans | | Tax-exempt loans | | Residential mortgage loans | | SBL and other | | Total |
Three months ended June 30, 2022 | | | | | | | | | | | | | | |
Balance at beginning of period | | $ | 195 | | | $ | 71 | | | $ | 25 | | | $ | 2 | | | $ | 32 | | | $ | 3 | | | $ | 328 | |
Initial allowance on acquired PCD loans | | 1 | | | 2 | | | — | | | — | | | — | | | — | | | 3 | |
Provision/(benefit) for credit losses: | | | | | | | | | | | | | | |
Initial provision for credit losses on non-PCD loans acquired with TriState Capital Bank | | 5 | | | 19 | | | — | | | — | | | — | | | 2 | | | 26 | |
Provision/(benefit) for credit losses | | 17 | | | — | | | (2) | | | — | | | 16 | | | (1) | | | 30 | |
Total provision/(benefit) for credit losses | | 22 | | | 19 | | | (2) | | | — | | | 16 | | | 1 | | | 56 | |
Net (charge-offs)/recoveries: | | | | | | | | | | | | | | |
Charge-offs | | (11) | | | (4) | | | — | | | — | | | — | | | — | | | (15) | |
Recoveries | | — | | | 5 | | | — | | | — | | | — | | | — | | | 5 | |
Net (charge-offs)/recoveries | | (11) | | | 1 | | | — | | | — | | | — | | | — | | | (10) | |
Foreign exchange translation adjustment | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
Balance at end of period | | $ | 207 | | | $ | 93 | | | $ | 23 | | | $ | 2 | | | $ | 48 | | | $ | 4 | | | $ | 377 | |
| | | | | | | | | | | | | | |
Nine months ended June 30, 2022 | | | | | | | | | | | | | | |
Balance at beginning of period | | $ | 191 | | | $ | 66 | | | $ | 22 | | | $ | 2 | | | $ | 35 | | | $ | 4 | | | $ | 320 | |
Initial allowance on acquired PCD loans | | 1 | | | 2 | | | — | | | — | | | — | | | — | | | 3 | |
Provision/(benefit) for credit losses: | | | | | | | | | | | | | | |
Initial provision for credit losses on non-PCD loans acquired with TriState Capital Bank | | 5 | | | 19 | | | — | | | — | | | — | | | 2 | | | 26 | |
Provision/(benefit) for credit losses | | 24 | | | 5 | | | 1 | | | — | | | 12 | | | (2) | | | 40 | |
Total provision/(benefit) for credit losses | | 29 | | | 24 | | | 1 | | | — | | | 12 | | | — | | | 66 | |
Net (charge-offs)/recoveries: | | | | | | | | | | | | | | |
Charge-offs | | (14) | | | (4) | | | — | | | — | | | — | | | — | | | (18) | |
Recoveries | | — | | | 5 | | | — | | | — | | | 1 | | | — | | | 6 | |
Net (charge-offs)/recoveries | | (14) | | | 1 | | | — | | | — | | | 1 | | | — | | | (12) | |
Foreign exchange translation adjustment | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
Balance at end of period | | $ | 207 | | | $ | 93 | | | $ | 23 | | | $ | 2 | | | $ | 48 | | | $ | 4 | | | $ | 377 | |
| | | | | | | | | | | | | | |
Three months ended June 30, 2021 | | | | | | | | | | | | | | |
Balance at beginning of period | | $ | 203 | | | $ | 74 | | | $ | 36 | | | $ | 2 | | | $ | 26 | | | $ | 4 | | | $ | 345 | |
| | | | | | | | | | | | | | |
Provision/(benefit) for credit losses | | (14) | | | 2 | | | (10) | | | — | | | 3 | | | — | | | (19) | |
Net (charge-offs)/recoveries: | | | | | | | | | | | | | | |
Charge-offs | | (1) | | | (3) | | | — | | | — | | | — | | | — | | | (4) | |
Recoveries | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
Net (charge-offs)/recoveries | | (1) | | | (3) | | | — | | | — | | | — | | | — | | | (4) | |
Foreign exchange translation adjustment | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
Balance at end of period | | $ | 188 | | | $ | 73 | | | $ | 26 | | | $ | 2 | | | $ | 29 | | | $ | 4 | | | $ | 322 | |
| | | | | | | | | | | | | | |
Nine months ended June 30, 2021 | | | | | | | | | | | | | | |
Balance at beginning of period | | $ | 200 | | | $ | 81 | | | $ | 36 | | | $ | 14 | | | $ | 18 | | | $ | 5 | | | $ | 354 | |
Impact of CECL adoption | | 19 | | | (11) | | | (9) | | | (12) | | | 24 | | | (2) | | | 9 | |
Provision/(benefit) for credit losses | | (29) | | | 5 | | | (1) | | | — | | | (13) | | | 1 | | | (37) | |
Net (charge-offs)/recoveries: | | | | | | | | | | | | | | |
Charge-offs | | (3) | | | (3) | | | — | | | — | | | — | | | — | | | (6) | |
Recoveries | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
Net (charge-offs)/recoveries | | (3) | | | (3) | | | — | | | — | | | — | | | — | | | (6) | |
Foreign exchange translation adjustment | | 1 | | | 1 | | | — | | | — | | | — | | | — | | | 2 | |
Balance at end of period | | $ | 188 | | | $ | 73 | | | $ | 26 | | | $ | 2 | | | $ | 29 | | | $ | 4 | | | $ | 322 | |
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
The allowance for credit losses on held for investment bank loans increased $49 million and $57 million during the three and nine months ended June 30, 2022, respectively, primarily due to the initial provision for credit losses of $26 million recorded on non-PCD loans acquired as part of the TriState Capital acquisition, as well as the impact of both loan growth at Raymond James Bank and a weaker macroeconomic outlook.
The allowance for credit losses on unfunded lending commitments, which is included in “Other payables” on our Condensed Consolidated Statements of Financial Condition, was $19 million, $12 million, and $13 million at June 30, 2022, March 31, 2022 and September 30, 2021, respectively. The increase in the allowance for credit losses on unfunded lending commitments for the three and nine months ended June 30, 2022 included $5 million related to the initial provision for credit losses on lending commitments assumed as a result of the acquisition of TriState Capital which was included “Other” expenses on our Condensed Consolidated Statements of Income and Comprehensive Income.
TriState Capital Bank allowance for credit losses policy
TriState Capital Bank’s accounting policies for its loan portfolio are substantially consistent with the accounting policies presented in Note 2 of our 2021 Form 10-K.
TriState Capital Bank estimates expected credit losses over the life of each loan in its portfolio utilizing lifetime or cumulative loss rate methodology, which identifies macroeconomic factors and asset-specific characteristics that are correlated with credit loss experience including loan age, loan type, and leverage. The lifetime loss rate is applied to the amortized cost of the loan. This methodology builds on default and recovery probabilities by utilizing pool-specific historical loss rates to calculate expected credit losses. These pool-specific historical loss rates may be adjusted for a forecast of certain macroeconomic variables, as further discussed below, and other factors such as differences in underwriting standards, portfolio mix, or when historical asset terms do not reflect the contractual terms of the financial assets being evaluated as of the measurement date. Each time expected credit losses are measured, the relevancy of historical loss information is assessed and management considers any necessary adjustments to address any differences in asset-specific characteristics. The lifetime loss rates are estimated by analyzing a combination of internal and external data related to historical performance of each loan pool over a complete economic cycle. Loss rates are based on historical averages for each loan pool, adjusted to reflect the impact of a single, forward-looking forecast of certain macroeconomic variables such as gross domestic product (“GDP”), unemployment rates, corporate bond credit spreads and commercial property values, which management considers to be both reasonable and supportable. The single, forward-looking forecast of these macroeconomic variables is applied over the remaining life of the loan pools. The development of the reasonable and supportable forecast incorporates an assumption that each macroeconomic variable will revert to a long-term expectation starting in years two to four of the forecast and largely completing within the first five years of the forecast.
TriState Capital Bank generally uses one of two methods to measure the allowance for credit losses on individually evaluated loans. A discounted cash flow approach is used to estimate the allowance for credit losses on certain nonaccrual corporate loans and all TDRs that are not collateral-dependent. For collateral-dependent loans and for instances where foreclosure is probable, management uses an approach that considers the fair value of the collateral less selling costs when measuring the allowance for credit losses. A loan is collateral-dependent when the borrower is experiencing financial difficulty and repayment is expected to be provided substantially through the sale of the collateral.
The allowance represents management’s current estimate of expected credit losses in the loan portfolio. Expected credit losses are estimated over the contractual term of the loans, which includes extension or renewal options that are not unconditionally cancellable and are adjusted for expected prepayments when appropriate. Management’s judgment takes into consideration past events, current conditions and reasonable and supportable economic forecasts including general economic conditions, diversification and seasoning of the loan portfolio, historic loss experience, identified credit problems, delinquency levels and adequacy of collateral.
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
NOTE 9 – 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 2021 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 | | June 30, 2022 | | September 30, 2021 |
Currently affiliated with the firm (1) | | $ | 1,147 | | | $ | 1,074 | |
No longer affiliated with the firm (2) | | 7 | | | 10 | |
Total loans to financial advisors | | 1,154 | | | 1,084 | |
Allowance for credit losses | | (29) | | | (27) | |
Loans to financial advisors, net | | $ | 1,125 | | | $ | 1,057 | |
Accrued interest receivable on loans to financial advisors | | $ | 5 | | | $ | 4 | |
Allowance for credit losses as a percent of the loan portfolio | | 2.51 | % | | 2.49 | % |
(1) These loans were predominantly current.
(2) These loans were predominantly past due for a period of 180 days or more.
Accrued interest receivables presented in the preceding table are reported in “Other receivables, net” on the Condensed Consolidated Statements of Financial Condition.
NOTE 10 – 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 2021 Form 10-K for a discussion of our principal involvement with VIEs and the accounting policies regarding determination of whether we are deemed to be the primary beneficiary of VIEs.
VIEs where we are the primary beneficiary
Of the VIEs in which we hold an interest, we have determined that certain limited partnerships which are part of our private equity portfolio (“Private Equity Interests”), certain LIHTC funds, and the trust we utilize in connection with restricted stock unit (“RSU”) awards granted to certain employees of one of our Canadian subsidiaries (the “Restricted Stock Trust Fund”) require consolidation in our financial statements, as we are deemed the primary beneficiary of such VIEs. The aggregate assets and liabilities of the VIEs we consolidate are provided in the following table. Aggregate assets and aggregate liabilities may differ from the consolidated carrying value of assets and liabilities due to the elimination of intercompany assets and liabilities held by the consolidated VIE.
| | | | | | | | | | | | | | |
$ in millions | | Aggregate assets | | Aggregate liabilities |
June 30, 2022 | | | | |
| | | | |
LIHTC funds | | $ | 67 | | | $ | 10 | |
Restricted Stock Trust Fund | | 24 | | | 24 | |
Total | | $ | 91 | | | $ | 34 | |
| | | | |
September 30, 2021 | | | | |
Private Equity Interests | | $ | 66 | | | $ | 4 | |
LIHTC funds | | 111 | | | 52 | |
Restricted Stock Trust Fund | | 15 | | | 15 | |
Total | | $ | 192 | | | $ | 71 | |
During the nine months ended June 30, 2022, due to regulatory holding period limitations we exited or restructured our Private Equity Interests which were previously consolidated. See Note 4 for further information.
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
The following table presents information about the carrying value of the assets and liabilities of the VIEs which we consolidate and which are included on our Condensed Consolidated Statements of Financial Condition. Intercompany balances are eliminated in consolidation and not reflected in the following table.
| | | | | | | | | | | | | | |
$ in millions | | June 30, 2022 | | September 30, 2021 |
Assets: | | | | |
Cash and cash equivalents and assets segregated for regulatory purposes and restricted cash | | $ | 5 | | | $ | 10 | |
Other investments | | — | | | 63 | |
| | | | |
Other assets | | 62 | | | 105 | |
Total assets | | $ | 67 | | | $ | 178 | |
Liabilities: | | | | |
Other payables | | $ | — | | | $ | 45 | |
| | | | |
Total liabilities | | $ | — | | | $ | 45 | |
Noncontrolling interests | | $ | (24) | | | $ | 58 | |
VIEs where we hold a variable interest but are not the primary beneficiary
As discussed in Note 2 of our 2021 Form 10-K, we have concluded that for certain VIEs we are not the primary beneficiary and therefore do not consolidate these VIEs. Such VIEs include certain Private Equity Interests, certain LIHTC funds, 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.
Aggregate assets, liabilities and risk of loss
The aggregate assets, liabilities, and our exposure to loss from those VIEs in which we hold a variable interest, but as to which we have concluded we are not the primary beneficiary, are provided in the following table.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | June 30, 2022 | | September 30, 2021 |
$ in millions | | Aggregate assets | | Aggregate liabilities | | Our risk of loss | | Aggregate assets | | Aggregate liabilities | | Our risk of loss |
Private Equity Interests | | $ | 2,108 | | | $ | 418 | | | $ | 100 | | | $ | 7,318 | | | $ | 47 | | | $ | 82 | |
LIHTC funds | | 7,315 | | | 2,431 | | | 71 | | | 7,032 | | | 2,280 | | | 71 | |
Other | | 172 | | | 122 | | | 9 | | | 519 | | | 155 | | | 10 | |
Total | | $ | 9,595 | | | $ | 2,971 | | | $ | 180 | | | $ | 14,869 | | | $ | 2,482 | | | $ | 163 | |
NOTE 11 - GOODWILL AND IDENTIFIABLE INTANGIBLE ASSETS, NET
Our goodwill and identifiable intangible assets result from various acquisitions. During the nine months ended June 30, 2022, we acquired TriState Capital and Charles Stanley, both of which resulted in goodwill and identifiable intangible assets. See Note 3 for additional information on these acquisitions and the related goodwill and identifiable intangible assets. See Notes 2 and 11 of our 2021 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, 2022 evaluation date, evaluating balances as of December 31, 2021. 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, such as trends in equity and fixed income markets, gross domestic product, labor markets, interest rates, and housing markets. We also consider regulatory changes, 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 12 - OTHER ASSETS
The following table details the components of other assets. See Note 2 of our 2021 Form 10-K for a discussion of the accounting polices related to certain of these components.
| | | | | | | | | | | | | | |
| | |
$ in millions | | June 30, 2022 | | September 30, 2021 |
Investments in company-owned life insurance policies | | $ | 964 | | | $ | 952 | |
Property and equipment, net | | 507 | | | 499 | |
Lease ROU asset | | 476 | | | 446 | |
Prepaid expenses | | 171 | | | 127 | |
| | | | |
Investments in FHLB and FRB stock | | 94 | | | 72 | |
| | | | |
All other | | 179 | | | 161 | |
Total other assets | | $ | 2,391 | | | $ | 2,257 | |
See Note 13 of our 2021 Form 10-K for further information regarding our property and equipment and Note 13 of this Form 10-Q and Note 14 of our 2021 Form 10-K for further information regarding our leases.
NOTE 13 – LEASES
The following table presents the balances related to our leases on our Condensed Consolidated Statements of Financial Condition. See Note 2 and 14 of our 2021 Form 10-K for additional information related to our leases, including a discussion of our accounting policies.
| | | | | | | | | | | | | | |
$ in millions | | June 30, 2022 | | September 30, 2021 |
ROU assets (included in Other assets) | | $ | 476 | | | $ | 446 | |
Lease liabilities (included in Other payables) | | $ | 486 | | | $ | 450 | |
Lease liabilities as of June 30, 2022 excluded $53 million of minimum lease payments related to lease arrangements that were signed but not yet commenced. These leases are estimated to commence between dates later in fiscal year 2022 and fiscal year 2025 with lease terms ranging from one to 13 years.
Lease expense
The following table details the components of lease expense, which is included in “Occupancy and equipment” expense on our Condensed Consolidated Statements of Income and Comprehensive Income.
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three months ended June 30, | | Nine months ended June 30, |
$ in millions | | 2022 | | 2021 | | 2022 | | 2021 |
Lease costs | | $ | 30 | | | $ | 27 | | | $ | 87 | | | $ | 81 | |
Variable lease costs | | $ | 7 | | | $ | 7 | | | $ | 22 | | | $ | 20 | |
Variable lease costs in the preceding table include payments required under lease arrangements for common area maintenance charges and other variable costs that are not reflected in the measurement of ROU assets and lease liabilities.
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
NOTE 14 – BANK DEPOSITS
Bank deposits include savings and money market accounts, certificates of deposit, interest-bearing checking accounts, which include Negotiable Order of Withdrawal accounts, and non-interest-bearing checking accounts. The following table presents a summary of bank deposits, as well as the weighted-average interest rates on such deposits. The calculation of the weighted-average rates was based on the actual deposit balances and rates at each respective period end.
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | June 30, 2022 | | September 30, 2021 |
$ in millions | | Balance | | Weighted-average rate | | Balance | | Weighted-average rate |
Savings and money market accounts | | $ | 42,372 | | | 0.45 | % | | $ | 31,415 | | | 0.01 | % |
Certificates of deposit | | 1,121 | | | 1.41 | % | | 878 | | | 1.87 | % |
Interest-bearing checking accounts | | 5,448 | | | 1.59 | % | | 164 | | | 1.84 | % |
Non-interest-bearing checking accounts | | 946 | | | — | | | 38 | | | — | |
Total bank deposits | | $ | 49,887 | | | 0.60 | % | | $ | 32,495 | | | 0.07 | % |
Savings and money market accounts in the preceding table consist primarily of deposits that are cash balances swept to either bank in our Bank segment, from the client investment accounts maintained at Raymond James & Associates, Inc. (“RJ&A”). These balances are held in Federal Deposit Insurance Corporation (“FDIC”)-insured bank accounts through the Raymond James Bank Deposit Program (“RJBDP”). The aggregate amount of individual time deposit account balances that exceeded the FDIC insurance limit was $151 million and $42 million at June 30, 2022 and September 30, 2021, respectively.
Total bank deposits increased from September 30, 2021 as a result of our acquisition of TriState Capital Bank. TriState Capital Bank’s deposits are generally comprised of savings and money market accounts and interest-bearing checking accounts, which generally incur interest at variable rates. The interest rates on many of these accounts are linked to an index such as the effective federal funds rate, whereas the rates on other accounts are determined at TriState Capital Bank’s discretion. See Note 3 for further information about the acquisition.
The following table sets forth the scheduled maturities of certificates of deposit.
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | June 30, 2022 | | September 30, 2021 |
$ in millions | | Denominations greater than or equal to $100,000 | | Denominations less than $100,000 | | Denominations greater than or equal to $100,000 | | Denominations less than $100,000 |
Three months or less | | $ | 225 | | | $ | 31 | | | $ | 22 | | | $ | 87 | |
Over three through six months | | 145 | | | 88 | | | 21 | | | 76 | |
Over six through twelve months | | 131 | | | 43 | | | 32 | | | 54 | |
Over one through two years | | 103 | | | 159 | | | 93 | | | 170 | |
Over two through three years | | 25 | | | 149 | | | 37 | | | 166 | |
Over three through four years | | 7 | | | 5 | | | 6 | | | 99 | |
Over four through five years | | 6 | | | 4 | | | 9 | | | 6 | |
Total certificates of deposit | | $ | 642 | | | $ | 479 | | | $ | 220 | | | $ | 658 | |
Interest expense on deposits is summarized in the following table.
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three months ended June 30, | | Nine months ended June 30, |
$ in millions | | 2022 | | 2021 | | 2022 | | 2021 |
Savings and money market accounts | | $ | 11 | | | $ | — | | | $ | 13 | | | $ | 2 | |
Interest-bearing checking accounts | | 6 | | | 1 | | | 8 | | | 2 | |
Certificates of deposit | | 3 | | | 4 | | | 10 | | | 13 | |
Total interest expense on deposits | | $ | 20 | | | $ | 5 | | | $ | 31 | | | $ | 17 | |
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
NOTE 15 – 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.
| | | | | | | | | | | | | | |
$ in millions | | June 30, 2022 | | September 30, 2021 |
FHLB advances | | $ | 1,250 | | | $ | 850 | |
5.75% fixed-to-floating subordinated notes, due 2030 (including premium of $2 and $0, respectively) | | 100 | | | — | |
Other | | 3 | | | 8 | |
Total other borrowings | | $ | 1,353 | | | $ | 858 | |
FHLB advances
We have entered into advances from the FHLB at Raymond James Bank and TriState Capital Bank, which are secured by certain residential mortgage and CRE loans. As of June 30, 2022, our FHLB borrowings consisted of $850 million of floating-rate advances at interest rates which reset daily and mature in December 2023, $200 million of overnight floating-rate advances, which are available for borrowing through May 2023 at interest rates which reset daily, and $200 million of fixed-rate advances which incur a weighted-average interest rate of 1.73% and mature in September 2022. As of September 30, 2021 all of the FHLB borrowings were floating-rate advances. The interest rates on our floating-rate advances are generally based on a Secured Overnight Financing Rate (“SOFR”). The weighted-average interest rate on our floating-rate FHLB advances as of June 30, 2022 and September 30, 2021 was 1.79% and 0.26%, respectively. We use interest rate swaps to manage the risk of increases in interest rates associated with the majority of these floating-rate advances by converting the balances subject to variable interest rates to a fixed interest rate. Refer to Note 2 of our 2021 Form 10-K for information regarding these interest rate swaps, which are accounted for as hedging instruments.
Subordinated notes
As part of the assets acquired and liabilities assumed in the TriState Capital acquisition, we assumed, as of the closing date, TriState Capital’s subordinated notes due 2030, with an aggregate principal amount of $98 million. The subordinated notes incur interest at a fixed rate of 5.75% until May 2025 and thereafter at a variable interest rate based on London Interbank Offered Rate (“LIBOR”), or an appropriate alternative reference rate. We may redeem up to $60 million of these subordinated notes beginning in May 2025 and $38 million beginning in August 2025 at a redemption price equal to 100% of the principal amount of the notes to be redeemed plus accrued and unpaid interest thereon to the redemption date.
Other
In February 2019, RJF and RJ&A entered into an unsecured revolving credit facility agreement (the “Credit Facility”) with a syndicate of lenders. In April 2021, we amended our Credit Facility, extending the term from February 2024 to April 2026 and incorporating a lower cost of borrowing under the Credit Facility and certain favorable covenant modifications. This committed unsecured borrowing facility provides for maximum borrowings of up to $500 million, with a sublimit of $300 million for RJF. RJ&A may borrow up to $500 million under the Credit Facility, depending on the amount of outstanding borrowings of RJF. The interest rates on borrowings under the Credit Facility are variable and were based on LIBOR as of June 30, 2022, as adjusted for RJF’s credit rating; however, the administrative agent has the right to select a commercially available alternative reference rate to LIBOR if adequate and reasonable means do not exist for ascertaining LIBOR. There were no borrowings outstanding on the Credit Facility as of June 30, 2022. There is a facility fee associated with the Credit Facility, which also varies with RJF’s credit rating. Based upon RJF’s credit rating as of June 30, 2022, the variable rate facility fee, which is applied to the committed amount, was 0.150% per annum.
In addition to the Credit Facility, we maintain various secured and unsecured lines of credit, which are generally utilized to finance certain fixed income securities or for cash management purposes. Borrowings during the year were generally day-to-day and there were no borrowings outstanding on these arrangements as of June 30, 2022. The interest rates for these arrangements are variable and are based on a daily bank quoted rate, which may reference LIBOR, the Fed Funds rate, a lender’s prime rate, the Canadian prime rate, or another commercially available rate, as applicable.
We also have other collateralized financings included in “Collateralized financings” on our Condensed Consolidated Statements of Financial Condition. See Note 7 for information regarding our other collateralized financing arrangements.
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
NOTE 16 – SENIOR NOTES PAYABLE
The following table summarizes our senior notes payable.
| | | | | | | | | | | | | | |
$ in millions | | June 30, 2022 | | September 30, 2021 |
4.65% senior notes, due 2030 | | $ | 500 | | | $ | 500 | |
4.95% senior notes, due 2046 | | 800 | | | 800 | |
3.75% senior notes, due 2051 | | 750 | | | 750 | |
| | | | |
| | | | |
Total principal amount | | 2,050 | | | 2,050 | |
Unaccreted premiums/(discounts) | | 6 | | | 5 | |
Unamortized debt issuance costs | | (18) | | | (18) | |
Total senior notes payable | | $ | 2,038 | | | $ | 2,037 | |
In April 2021, we sold in a registered underwritten public offering $750 million in aggregate principal amount of 3.75% senior notes due April 2051. We utilized the proceeds from the offering and cash on hand to early-redeem our $250 million of 5.625% senior notes due 2024 and our $500 million of 3.625% senior notes due 2026. We recognized losses on the extinguishment of such notes of $98 million which was presented in “Losses on extinguishment of debt” in our Condensed Consolidated Statements of Income and Comprehensive Income for the three and nine months ended June 30, 2021. See Note 17 of our 2021 Form 10-K for further discussion on our senior notes payable.
NOTE 17 – 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 2021 Form 10-K.
Effective tax rate
Our effective income tax rate of 23.9% for the nine months ended June 30, 2022 was higher than the 21.7% effective tax rate for our fiscal year 2021. The higher effective income tax rate for the nine months ended June 30, 2022 primarily resulted from the negative impact of nondeductible valuation losses associated with our company-owned life insurance policies that were recognized during the current year-to-date period compared to fiscal year 2021 which had non-taxable gains. The increase in tax expense was partially offset by the favorable impact of larger tax deductions in the current year related to share-based compensation awards that vested during the year.
Uncertain tax positions
Although management cannot predict with any degree of certainty the timing of ultimate resolution of matters under review by various taxing jurisdictions, it is reasonably possible that our uncertain tax position liability balance may decrease within the next 12 months by up to $13 million as a result of the expiration of statutes of limitations and the completion of tax authorities’ examinations.
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
NOTE 18 – COMMITMENTS, CONTINGENCIES AND GUARANTEES
Commitments and contingencies
Underwriting commitments
In the normal course of business, we enter into commitments for debt and equity underwritings. As of June 30, 2022, we had two such open underwriting commitments, which were subsequently settled in open market transactions and did not result in significant losses.
Lending commitments and other credit-related financial instruments
We have outstanding, at any time, a significant number of commitments to extend credit and other credit-related off-balance-sheet financial instruments, such as standby letters of credit and loan purchases, which then extend over varying periods of time. These arrangements are subject to strict underwriting assessments and each customer’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 Raymond James Bank and TriState Capital Bank.
| | | | | | | | | | | | | | |
$ in millions | | June 30, 2022 | | September 30, 2021 |
SBL and other consumer lines of credit | | $ | 31,928 | | | $ | 17,515 | |
Commercial lines of credit | | $ | 3,565 | | | $ | 2,075 | |
Unfunded lending commitments | | $ | 1,342 | | | $ | 548 | |
Standby letters of credit | | $ | 101 | | | $ | 22 | |
SBL and other consumer lines of credit primarily represent the unfunded amounts of bank loans to consumers that are secured by marketable securities at advance rates consistent with industry standards. The proceeds from repayment or, if necessary, the liquidation of collateral, which is monitored daily, are expected to satisfy the amounts drawn against these existing lines of credit. These lines of credit are primarily uncommitted, as we reserve the right to not make any advances or may terminate these lines at any time.
Because many of our lending commitments expire without being funded in whole or in part, the contractual amounts are not estimates of our actual future credit exposure or future liquidity requirements. The allowance for credit losses calculated under CECL provides for potential losses related to the unfunded lending commitments. See Note 2 of our 2021 Form 10-K and Notes 3 and 8 of this Form 10-Q for further discussion of this allowance for credit losses related to unfunded lending commitments, including a discussion of the initial provision for credit losses on loans and lending commitments acquired as part of the TriState Capital acquisition.
RJ&A enters into margin lending arrangements which allow customers to borrow against the value of qualifying securities. Margin loans are collateralized by the securities held in the customer’s account at RJ&A. Collateral levels and established credit terms are monitored daily and we require customers to deposit additional collateral or reduce balances as necessary.
We offer loans to prospective financial advisors for recruiting and retention purposes (see Note 2 of our 2021 Form 10-K and Note 9 of this Form 10-Q for further discussion of our loans to financial advisors). These offers are contingent upon certain events occurring, including the individuals joining us and meeting certain other conditions outlined in their offer.
Investment commitments
We had unfunded commitments to various investments, primarily those held by Raymond James Bank and TriState Capital Bank, of $43 million as of June 30, 2022.
Other commitments
Raymond James Affordable Housing Investments, Inc. (“RJAHI”), formerly known as Raymond James Tax Credit Funds, Inc., sells investments in project partnerships to various LIHTC funds, which have third-party investors, and for which RJAHI serves as the managing member or general partner. RJAHI typically sells investments in project partnerships to LIHTC funds within
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
90 days of their acquisition. Until such investments are sold to LIHTC funds, RJAHI is responsible for funding investment commitments to such partnerships. As of June 30, 2022, RJAHI had committed approximately $151 million to project partnerships that had not yet been sold to LIHTC funds. Because we expect to sell these project partnerships to LIHTC funds and the equity funding events arise over future periods, the contractual commitments are not expected to materially impact our future liquidity requirements. RJAHI may also make short-term loans or advances to project partnerships and LIHTC funds.
For information regarding our acquisition commitments associated with our recent acquisition of SumRidge Partners see Note 3. For information regarding our lease commitments see Note 13 of this Form 10-Q and for information on the maturities of our lease liabilities see Note 14 of our 2021 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 matter 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.
We may contest liability and/or the amount of damages, as appropriate, in each pending matter. The level of litigation and investigatory activity (both formal and informal) by government and self-regulatory agencies in the financial services industry continues to be significant. There can be no assurance that material losses will not be incurred from claims that have not yet been asserted or are not yet determined to be material.
For many legal and regulatory matters, we are unable to estimate a range of reasonably possible loss as we cannot predict if, how or when such proceedings or investigations will be resolved or what the eventual settlement, fine, penalty or other relief, if any, may be. A large number of factors may contribute to this inherent unpredictability: the proceeding is in its early stages; the damages sought are unspecified, unsupported or uncertain; it is unclear whether a case brought as a class action will be allowed to proceed on that basis; the other party is seeking relief other than or in addition to compensatory damages (including, in the case of regulatory and governmental proceedings, potential fines and penalties); the matters present significant legal uncertainties; we have not engaged in settlement discussions; discovery is not complete; there are significant facts in dispute; and numerous parties are named as defendants (including where it is uncertain how liability might be shared among defendants). Subject to the foregoing, after consultation with counsel, we believe that the outcome of such litigation and regulatory proceedings will not have a material adverse effect on our consolidated financial condition. However, the outcome of such litigation and regulatory proceedings could be material to our operating results and cash flows for a particular future period, depending on, among other things, our revenues or income for such period.
There are certain matters for which we are unable to estimate the upper end of the range of reasonably possible loss. With respect to legal and regulatory matters for which management has been able to estimate a range of reasonably possible loss as of June 30, 2022, we estimated the upper end of the range of reasonably possible aggregate loss to be approximately $80 million in excess of the aggregate accruals for such matters. Refer to Note 2 of our 2021 Form 10-K for a discussion of our criteria for recognizing liabilities for contingencies.
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
NOTE 19 – SHAREHOLDERS’ EQUITY
Preferred stock
On June 1, 2022, we completed our acquisition of TriState Capital. As a component of our total purchase consideration for TriState Capital on June 1, 2022, we issued two new series of preferred stock to replace previously issued and outstanding preferred stock of TriState Capital. See Note 3 for further information about the acquisition.
On June 1, 2022, we issued 1.61 million depositary shares, each representing a 1/40th interest in a share of 6.75% Fixed-to-Floating Rate Series A Non-Cumulative Perpetual Preferred Stock, par value of $0.10 per share (“Series A Preferred Stock”), with a liquidation preference of $1,000 per share (equivalent of $25 per depositary share). Dividends on the Series A Preferred Stock are non-cumulative and, if declared, payable quarterly at a rate of 6.75% per annum from original issue date up to, but excluding, April 1, 2023, and thereafter at a floating rate equal to 3-month LIBOR, or industry-accepted alternative reference rate, plus a spread of 3.985% per annum. Subject to requisite regulatory approvals, we may redeem the Series A Preferred Stock on or after April 1, 2023, in whole or in part, at our option, at the liquidation preference plus declared and unpaid dividends. As of June 30, 2022, there were 40,250 shares of Series A Preferred Stock issued and outstanding with a carrying value and aggregate liquidation preference of $41 million and $40 million, respectively.
We also issued 3.22 million depositary shares on June 1, 2022, each representing a 1/40th interest in a share of 6.375% Fixed-to-Floating Rate Series B Non-Cumulative Perpetual Preferred Stock, par value of $0.10 per share (“Series B Preferred Stock”), with a liquidation preference of $1,000 per share (equivalent of $25 per depositary share). Dividends on the Series B Preferred Stock are non-cumulative and, if declared, payable quarterly at a rate of 6.375% per annum from original issue date up to, but excluding, July 1, 2026, and thereafter at a floating rate equal to 3-month LIBOR, or industry-accepted alternative reference rate, plus a spread of 4.088% per annum. Under certain circumstances, the aforementioned fixed rate may apply in lieu of the floating rate. Subject to requisite regulatory approvals, we may redeem the Series B Preferred Stock on or after July 1, 2024, in whole or in part, at our option, at the liquidation preference plus declared and unpaid dividends. As of June 30, 2022, there were 80,500 shares of Series B Preferred Stock issued and outstanding with a carrying value and aggregate liquidation preference of $79 million and $81 million, respectively.
The following table details dividends declared on our preferred stock for each respective period.
| | | | | | | | | | | | | | | |
| Three and nine months ended June 30, 2022 | |
| Total declared ($ in millions) | | Per preferred share amount | | | | |
Series A Preferred Stock | $ | 1 | | | $ | 16.88 | | | | | |
Series B Preferred Stock | 1 | | | $ | 15.94 | | | | | |
Total preferred stock dividends declared | $ | 2 | | | | | | | |
Common equity
Common stock issuance
During our fiscal third quarter of 2022 we issued 7.97 million shares of common stock, primarily in the form of per share consideration in the settlement of TriState Capital common stock, and 551 thousand restricted stock awards in conjunction with our acquisition of TriState Capital on June 1, 2022. See Note 3 for further information on the TriState Capital acquisition and Note 22 for further information on the restricted stock awards.
Share repurchases
We repurchase shares of our common stock from time to time for a number of reasons, including to offset dilution from share-based compensation. In December 2021, our Board of Directors authorized share repurchases of up to $1 billion, which replaced the previous authorization. Our share repurchases are effected primarily through regular open-market purchases, the amounts and timing of which are determined primarily by our current and projected capital position, applicable law and regulatory constraints, general market conditions and the price and trading volumes of our common stock. Following the acquisition of TriState Capital on June 1, 2022, we repurchased 1.14 million shares of our common stock for $100 million at an average price of approximately $88 per share. As of June 30, 2022, approximately $900 million remained available under the Board of Directors’ share repurchase authorization.
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
Common stock dividends
Dividends per common share declared and paid are detailed in the following table for each respective period.
| | | | | | | | | | | | | | | | | | | | | | | |
| Three months ended June 30, | | Nine months ended June 30, |
| 2022 | | 2021 | | 2022 | | 2021 |
Dividends per common share - declared | $ | 0.34 | | | $ | 0.26 | | | $ | 1.02 | | | $ | 0.78 | |
Dividends per common share - paid | $ | 0.34 | | | $ | 0.26 | | | $ | 0.94 | | | $ | 0.77 | |
Other
During our fiscal fourth quarter of 2021, our Board of Directors approved a three-for-two stock split, effected in the form of a 50% stock dividend and paid on September 21, 2021. All share and per share information has been retroactively adjusted to reflect this stock split.
During our fiscal second quarter of 2022, we amended our Restated Articles of Incorporation, as filed with the Secretary of State of Florida on November 25, 2008, to increase the number of authorized shares of capital stock from 360 million shares to 660 million shares, consisting of 650 million shares of common stock, par value of $0.01 per share, and 10 million shares of preferred stock, par value of $0.10 per share. The Amended and Restated Articles of Incorporation, which were filed with the Secretary of State of Florida on February 28, 2022, were approved by our Board of Directors and our shareholders on December 1, 2021 and February 24, 2022, respectively.
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 | | Net investment hedges | | Currency translations | | Subtotal: net investment hedges and currency translations | | Available- for-sale securities | | Cash flow hedges | | Total |
Three months ended June 30, 2022 | | | | | | | | | | | | |
AOCI as of beginning of period | | $ | 71 | | | $ | (91) | | | $ | (20) | | | $ | (380) | | | $ | 11 | | | $ | (389) | |
OCI: | | | | | | | | | | | | |
OCI before reclassifications and taxes | | 32 | | | (64) | | | (32) | | | (206) | | | 12 | | | (226) | |
Amounts reclassified from AOCI, before tax | | — | | | — | | | — | | | — | | | 2 | | | 2 | |
Pre-tax net OCI | | 32 | | | (64) | | | (32) | | | (206) | | | 14 | | | (224) | |
Income tax effect | | (8) | | | — | | | (8) | | | 49 | | | (4) | | | 37 | |
OCI for the period, net of tax | | 24 | | | (64) | | | (40) | | | (157) | | | 10 | | | (187) | |
AOCI as of end of period | | $ | 95 | | | $ | (155) | | | $ | (60) | | | $ | (537) | | | $ | 21 | | | $ | (576) | |
| | | | | | | | | | | | |
Nine months ended June 30, 2022 | | | | | | | | | | | | |
AOCI as of beginning of period | | $ | 81 | | | $ | (90) | | | $ | (9) | | | $ | (5) | | | $ | (27) | | | $ | (41) | |
OCI: | | | | | | | | | | | | |
OCI before reclassifications and taxes | | 18 | | | (65) | | | (47) | | | (711) | | | 55 | | | (703) | |
Amounts reclassified from AOCI, before tax | | — | | | — | | | — | | | — | | | 10 | | | 10 | |
Pre-tax net OCI | | 18 | | | (65) | | | (47) | | | (711) | | | 65 | | | (693) | |
Income tax effect | | (4) | | | — | | | (4) | | | 179 | | | (17) | | | 158 | |
OCI for the period, net of tax | | 14 | | | (65) | | | (51) | | | (532) | | | 48 | | | (535) | |
AOCI as of end of period | | $ | 95 | | | $ | (155) | | | $ | (60) | | | $ | (537) | | | $ | 21 | | | $ | (576) | |
| | | | | | | | | | | | |
Three months ended June 30, 2021 | | | | | | | | | | | | |
AOCI as of beginning of period | | $ | 76 | | | $ | (81) | | | $ | (5) | | | $ | (4) | | | $ | (29) | | | $ | (38) | |
OCI: | | | | | | | | | | | | |
OCI before reclassifications and taxes | | (12) | | | 14 | | | 2 | | | 36 | | | (7) | | | 31 | |
Amounts reclassified from AOCI, before tax | | — | | | — | | | — | | | (2) | | | 3 | | | 1 | |
Pre-tax net OCI | | (12) | | | 14 | | | 2 | | | 34 | | | (4) | | | 32 | |
Income tax effect | | 3 | | | — | | | 3 | | | (9) | | | 2 | | | (4) | |
OCI for the period, net of tax | | (9) | | | 14 | | | 5 | | | 25 | | | (2) | | | 28 | |
AOCI as of end of period | | $ | 67 | | | $ | (67) | | | $ | — | | | $ | 21 | | | $ | (31) | | | $ | (10) | |
| | | | | | | | | | | | |
Nine months ended June 30, 2021 | | | | | | | | | | | | |
AOCI as of beginning of period | | $ | 115 | | | $ | (140) | | | $ | (25) | | | $ | 89 | | | $ | (53) | | | $ | 11 | |
OCI: | | | | | | | | | | | | |
OCI before reclassifications and taxes | | (63) | | | 71 | | | 8 | | | (84) | | | 18 | | | (58) | |
Amounts reclassified from AOCI, before tax | | — | | | 2 | | | 2 | | | (7) | | | 11 | | | 6 | |
Pre-tax net OCI | | (63) | | | 73 | | | 10 | | | (91) | | | 29 | | | (52) | |
Income tax effect | | 15 | | | — | | | 15 | | | 23 | | | (7) | | | 31 | |
OCI for the period, net of tax | | (48) | | | 73 | | | 25 | | | (68) | | | 22 | | | (21) | |
AOCI as of end of period | | $ | 67 | | | $ | (67) | | | $ | — | | | $ | 21 | | | $ | (31) | | | $ | (10) | |
Reclassifications from AOCI to net income, excluding taxes, for the three and nine months ended June 30, 2022 were recorded in “Interest expense” on the Condensed Consolidated Statements of Income and Comprehensive Income. Reclassifications from AOCI to net income, excluding taxes, for the three and nine months ended June 30, 2021 were primarily recorded in “Other” revenues and “Interest expense” on the Condensed Consolidated Statements of Income and Comprehensive Income.
Our net investment hedges and cash flow hedges relate to derivatives associated with our Bank segment. For further information about our significant accounting policies related to derivatives, see Note 2 of our 2021 Form 10-K. In addition, see Note 6 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 20 – 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 2021 Form 10-K. See Note 1 and Note 25 of this Form 10-Q for additional information on our segment determinations and results.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three months ended June 30, 2022 |
$ in millions | | Private Client Group | | Capital Markets | | Asset Management | | Bank | | Other and intersegment eliminations | | Total |
Revenues: | | | | | | | | | | | | |
Asset management and related administrative fees | | $ | 1,214 | | | $ | — | | | $ | 220 | | | $ | — | | | $ | (7) | | | $ | 1,427 | |
Brokerage revenues: | | | | | | | | | | | | |
Securities commissions: | | | | | | | | | | | | |
Mutual and other fund products | | 149 | | | 1 | | | 2 | | | — | | | (1) | | | 151 | |
Insurance and annuity products | | 109 | | | — | | | — | | | — | | | — | | | 109 | |
Equities, exchange-traded funds (“ETFs”) and fixed income products | | 90 | | | 35 | | | — | | | — | | | — | | | 125 | |
Subtotal securities commissions | | 348 | | | 36 | | | 2 | | | — | | | (1) | | | 385 | |
Principal transactions (1) | | 25 | | | 103 | | | — | | | — | | | — | | | 128 | |
Total brokerage revenues | | 373 | | | 139 | | | 2 | | | — | | | (1) | | | 513 | |
Account and service fees: | | | | | | | | | | | | |
Mutual fund and annuity service fees | | 102 | | | — | | | — | | | — | | | — | | | 102 | |
RJBDP fees | | 135 | | | 1 | | | — | | | — | | | (80) | | | 56 | |
Client account and other fees | | 59 | | | 1 | | | 5 | | | — | | | (12) | | | 53 | |
Total account and service fees | | 296 | | | 2 | | | 5 | | | — | | | (92) | | | 211 | |
Investment banking: | | | | | | | | | | | | |
Merger & acquisition and advisory | | — | | | 147 | | | — | | | — | | | — | | | 147 | |
Equity underwriting | | 6 | | | 36 | | | — | | | — | | | — | | | 42 | |
Debt underwriting | | — | | | 34 | | | — | | | — | | | — | | | 34 | |
Total investment banking | | 6 | | | 217 | | | — | | | — | | | — | | | 223 | |
Other: | | | | | | | | | | | | |
Tax credit fund revenues | | — | | | 21 | | | — | | | — | | | — | | | 21 | |
All other (1) | | 11 | | | 1 | | | — | | | 6 | | | (9) | | | 9 | |
Total other | | 11 | | | 22 | | | — | | | 6 | | | (9) | | | 30 | |
Total non-interest revenues | | 1,900 | | | 380 | | | 227 | | | 6 | | | (109) | | | 2,404 | |
Interest income (1) | | 68 | | | 6 | | | 1 | | | 296 | | | 3 | | | 374 | |
Total revenues | | 1,968 | | | 386 | | | 228 | | | 302 | | | (106) | | | 2,778 | |
Interest expense | | (10) | | | (3) | | | — | | | (26) | | | (21) | | | (60) | |
Net revenues | | $ | 1,958 | | | $ | 383 | | | $ | 228 | | | $ | 276 | | | $ | (127) | | | $ | 2,718 | |
(1) These revenues are generally not in scope of the accounting guidance for revenue from contracts with customers.
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three months ended June 30, 2021 |
$ in millions | | Private Client Group | | Capital Markets | | Asset Management | | Bank | | Other and intersegment eliminations | | Total |
Revenues: | | | | | | | | | | | | |
Asset management and related administrative fees | | $ | 1,050 | | | $ | 1 | | | $ | 218 | | | $ | — | | | $ | (7) | | | $ | 1,262 | |
Brokerage revenues: | | | | | | | | | | | | |
Securities commissions: | | | | | | | | | | | | |
Mutual and other fund products | | 167 | | | 2 | | | 2 | | | — | | | — | | | 171 | |
Insurance and annuity products | | 113 | | | — | | | — | | | — | | | — | | | 113 | |
Equities, ETFs and fixed income products | | 97 | | | 33 | | | — | | | — | | | 1 | | | 131 | |
Subtotal securities commissions | | 377 | | | 35 | | | 2 | | | — | | | 1 | | | 415 | |
Principal transactions (1) | | 13 | | | 125 | | | — | | | — | | | (1) | | | 137 | |
Total brokerage revenues | | 390 | | | 160 | | | 2 | | | — | | | — | | | 552 | |
Account and service fees: | | | | | | | | | | | | |
Mutual fund and annuity service fees | | 105 | | | — | | | — | | | — | | | (1) | | | 104 | |
RJBDP fees | | 65 | | | — | | | — | | | — | | | (47) | | | 18 | |
Client account and other fees | | 39 | | | 1 | | | 4 | | | — | | | (5) | | | 39 | |
Total account and service fees | | 209 | | | 1 | | | 4 | | | — | | | (53) | | | 161 | |
Investment banking: | | | | | | | | | | | | |
Merger & acquisition and advisory | | — | | | 153 | | | — | | | — | | | — | | | 153 | |
Equity underwriting | | 11 | | | 69 | | | — | | | — | | | — | | | 80 | |
Debt underwriting | | — | | | 43 | | | — | | | — | | | — | | | 43 | |
Total investment banking | | 11 | | | 265 | | | — | | | — | | | — | | | 276 | |
Other: | | | | | | | | | | | | |
Tax credit fund revenues | | — | | | 17 | | | — | | | — | | | — | | | 17 | |
All other (1) | | 7 | | | 1 | | | 1 | | | 8 | | | 21 | | | 38 | |
Total other | | 7 | | | 18 | | | 1 | | | 8 | | | 21 | | | 55 | |
Total non-interest revenues | | 1,667 | | | 445 | | | 225 | | | 8 | | | (39) | | | 2,306 | |
Interest income (1) | | 31 | | | 4 | | | — | | | 172 | | | (2) | | | 205 | |
Total revenues | | 1,698 | | | 449 | | | 225 | | | 180 | | | (41) | | | 2,511 | |
Interest expense | | (2) | | | (3) | | | — | | | (11) | | | (24) | | | (40) | |
Net revenues | | $ | 1,696 | | | $ | 446 | | | $ | 225 | | | $ | 169 | | | $ | (65) | | | $ | 2,471 | |
(1) These revenues are generally not in scope of the accounting guidance for revenue from contracts with customers.
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Nine Months Ended June 30, 2022 |
$ in millions | | Private Client Group | | Capital Markets | | Asset Management | | Bank | | Other and intersegment eliminations | | Total |
Revenues: | | | | | | | | | | | | |
Asset management and related administrative fees | | $ | 3,621 | | | $ | 2 | | | $ | 673 | | | $ | — | | | $ | (23) | | | $ | 4,273 | |
Brokerage revenues: | | | | | | | | | | | | |
Securities commissions: | | | | | | | | | | | | |
Mutual and other fund products | | 486 | | | 5 | | | 6 | | | — | | | (2) | | | 495 | |
Insurance and annuity products | | 330 | | | — | | | — | | | — | | | — | | | 330 | |
Equities, ETFs and fixed income products | | 299 | | | 108 | | | — | | | — | | | — | | | 407 | |
Subtotal securities commissions | | 1,115 | | | 113 | | | 6 | | | — | | | (2) | | | 1,232 | |
Principal transactions (1) | | 52 | | | 351 | | | — | | | — | | | — | | | 403 | |
Total brokerage revenues | | 1,167 | | | 464 | | | 6 | | | — | | | (2) | | | 1,635 | |
Account and service fees: | | | | | | | | | | | | |
Mutual fund and annuity service fees | | 325 | | | — | | | — | | | — | | | (1) | | | 324 | |
RJBDP fees | | 271 | | | 1 | | | — | | | — | | | (179) | | | 93 | |
Client account and other fees | | 161 | | | 5 | | | 17 | | | — | | | (33) | | | 150 | |
Total account and service fees | | 757 | | | 6 | | | 17 | | | — | | | (213) | | | 567 | |
Investment banking: | | | | | | | | | | | | |
Merger & acquisition and advisory | | — | | | 557 | | | — | | | — | | | — | | | 557 | |
Equity underwriting | | 28 | | | 185 | | | — | | | — | | | — | | | 213 | |
Debt underwriting | | — | | | 113 | | | — | | | — | | | — | | | 113 | |
Total investment banking | | 28 | | | 855 | | | — | | | — | | | — | | | 883 | |
Other: | | | | | | | | | | | | |
Tax credit fund revenues | | — | | | 71 | | | — | | | — | | | — | | | 71 | |
All other (1) | | 24 | | | 4 | | | 1 | | | 20 | | | (12) | | | 37 | |
Total other | | 24 | | | 75 | | | 1 | | | 20 | | | (12) | | | 108 | |
Total non-interest revenues | | 5,597 | | | 1,402 | | | 697 | | | 20 | | | (250) | | | 7,466 | |
Interest income (1) | | 138 | | | 16 | | | 1 | | | 682 | | | 4 | | | 841 | |
Total revenues | | 5,735 | | | 1,418 | | | 698 | | | 702 | | | (246) | | | 8,307 | |
Interest expense | | (16) | | | (8) | | | — | | | (46) | | | (65) | | | (135) | |
Net revenues | | $ | 5,719 | | | $ | 1,410 | | | $ | 698 | | | $ | 656 | | | $ | (311) | | | $ | 8,172 | |
(1) These revenues are generally not in scope of the accounting guidance for revenue from contracts with customers.
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Nine Months Ended June 30, 2021 |
$ in millions | | Private Client Group | | Capital Markets | | Asset Management | | Bank | | Other and intersegment eliminations | | Total |
Revenues: | | | | | | | | | | | | |
Asset management and related administrative fees | | $ | 2,914 | | | $ | 3 | | | $ | 607 | | | $ | — | | | $ | (22) | | | $ | 3,502 | |
Brokerage revenues: | | | | | | | | | | | | |
Securities commissions: | | | | | | | | | | | | |
Mutual and other fund products | | 498 | | | 5 | | | 7 | | | — | | | (2) | | | 508 | |
Insurance and annuity products | | 320 | | | — | | | — | | | — | | | — | | | 320 | |
Equities, ETFs and fixed income products | | 300 | | | 110 | | | — | | | — | | | 1 | | | 411 | |
Subtotal securities commissions | | 1,118 | | | 115 | | | 7 | | | — | | | (1) | | | 1,239 | |
Principal transactions (1) | | 38 | | | 394 | | | — | | | 1 | | | (1) | | | 432 | |
Total brokerage revenues | | 1,156 | | | 509 | | | 7 | | | 1 | | | (2) | | | 1,671 | |
Account and service fees: | | | | | | | | | | | | |
Mutual fund and annuity service fees | | 298 | | | — | | | — | | | — | | | (1) | | | 297 | |
RJBDP fees | | 192 | | | 1 | | | — | | | — | | | (135) | | | 58 | |
Client account and other fees | | 113 | | | 5 | | | 13 | | | — | | | (21) | | | 110 | |
Total account and service fees | | 603 | | | 6 | | | 13 | | | — | | | (157) | | | 465 | |
Investment banking: | | | | | | | | | | | | |
Merger & acquisition and advisory | | — | | | 424 | | | — | | | — | | | — | | | 424 | |
Equity underwriting | | 33 | | | 196 | | | — | | | — | | | — | | | 229 | |
Debt underwriting | | — | | | 126 | | | — | | | — | | | — | | | 126 | |
Total investment banking | | 33 | | | 746 | | | — | | | — | | | — | | | 779 | |
Other: | | | | | | | | | | | | |
Tax credit fund revenues | | — | | | 57 | | | — | | | — | | | — | | | 57 | |
All other (1) | | 20 | | | 5 | | | 2 | | | 22 | | | 49 | | | 98 | |
Total other | | 20 | | | 62 | | | 2 | | | 22 | | | 49 | | | 155 | |
Total non-interest revenues | | 4,726 | | | 1,326 | | | 629 | | | 23 | | | (132) | | | 6,572 | |
Interest income (1) | | 91 | | | 12 | | | — | | | 505 | | | — | | | 608 | |
Total revenues | | 4,817 | | | 1,338 | | | 629 | | | 528 | | | (132) | | | 7,180 | |
Interest expense | | (7) | | | (7) | | | — | | | (32) | | | (69) | | | (115) | |
Net revenues | | $ | 4,810 | | | $ | 1,331 | | | $ | 629 | | | $ | 496 | | | $ | (201) | | | $ | 7,065 | |
(1) These revenues are generally not in scope of the accounting guidance for revenue from contracts with customers.
At June 30, 2022 and September 30, 2021, net receivables related to contracts with customers were $427 million and $416 million, respectively.
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
NOTE 21 – INTEREST INCOME AND INTEREST EXPENSE
The following table details the components of interest income and interest expense.
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three months ended June 30, | | Nine months ended June 30, |
$ in millions | | 2022 | | 2021 | | 2022 | | 2021 |
Interest income: | | | | | | | | |
Cash and cash equivalents | | $ | 10 | | | $ | 3 | | | $ | 16 | | | $ | 9 | |
Assets segregated for regulatory purposes and restricted cash | | 28 | | | 3 | | | 39 | | | 11 | |
Available-for-sale securities | | 37 | | | 20 | | | 84 | | | 64 | |
Brokerage client receivables | | 24 | | | 19 | | | 66 | | | 56 | |
Bank loans, net | | 255 | | | 150 | | | 590 | | | 437 | |
All other | | 20 | | | 10 | | | 46 | | | 31 | |
Total interest income | | $ | 374 | | | $ | 205 | | | $ | 841 | | | $ | 608 | |
Interest expense: | | | | | | | | |
Bank deposits | | $ | 20 | | | $ | 5 | | | $ | 31 | | | $ | 17 | |
Brokerage client payables | | 3 | | | 1 | | | 4 | | | 3 | |
Other borrowings | | 6 | | | 4 | | | 15 | | | 14 | |
Senior notes payable | | 23 | | | 25 | | | 69 | | | 73 | |
All other | | 8 | | | 5 | | | 16 | | | 8 | |
Total interest expense | | $ | 60 | | | $ | 40 | | | $ | 135 | | | $ | 115 | |
Net interest income | | $ | 314 | | | $ | 165 | | | $ | 706 | | | $ | 493 | |
Bank loan (provision)/benefit for credit losses | | (56) | | | 19 | | | (66) | | | 37 | |
Net interest income after bank loan (provision)/benefit for credit losses | | $ | 258 | | | $ | 184 | | | $ | 640 | | | $ | 530 | |
Interest expense related to bank deposits in the preceding table excludes interest expense associated with affiliate deposits, which has been eliminated in consolidation.
NOTE 22 – SHARE-BASED COMPENSATION
We have one share-based compensation plan, The Amended and Restated 2012 Stock Incentive Plan (“the Plan”), for our employees, Board of Directors and independent contractor financial advisors. Generally, we reissue our treasury shares under the Plan; however, we are also permitted to issue new shares. The majority of our share-based compensation awards are issued during the fiscal first quarter of each year. Our share-based compensation accounting policies are described in Note 2 of our 2021 Form 10-K. Other information related to our share-based awards is presented in Note 23 of our 2021 Form 10-K.
Restricted stock units
During the three and nine months ended June 30, 2022, we granted approximately 222 thousand and 3.1 million RSUs, respectively, with a weighted-average grant-date fair value of $97.64 and $98.77, respectively, compared with approximately 75 thousand and 2.3 million RSUs granted during the three and nine months ended June 30, 2021, with a weighted-average grant-date fair value of $87.87 and $63.17, respectively (as adjusted for the September 21, 2021 three-for-two stock split described in Note 19). For the three and nine months ended June 30, 2022, total share-based compensation amortization related to RSUs was $36 million and $141 million, respectively, compared with $27 million and $98 million for the three and nine months ended June 30, 2021, respectively.
As of June 30, 2022, there were $332 million of total pre-tax compensation costs not yet recognized (net of estimated forfeitures) related to RSUs, including those granted during the nine months ended June 30, 2022. These costs are expected to be recognized over a weighted-average period of three years.
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
Restricted stock awards
As a component of our total purchase consideration for TriState Capital on June 1, 2022, in accordance with the terms of the acquisition, 551 thousand RJF restricted stock awards were issued at terms that mirrored restricted stock awards of TriState Capital which were outstanding as of the acquisition date. The fair value of the RJF restricted stock awards was calculated as of the June 1, 2022 acquisition date and was allocated between the pre-acquisition service period ($28 million treated as purchase consideration) and the post-acquisition requisite service period, over which we will recognize share-based compensation amortization. As of June 30, 2022, there were $24 million of total pre-tax compensation costs not yet recognized for these RJF restricted shares. These costs are expected to be recognized over a weighted-average period of three years. See Note 3 for further discussion of our acquisition of TriState Capital.
NOTE 23 – REGULATORY CAPITAL REQUIREMENTS
RJF, as a bank holding company and financial holding company, as well as Raymond James Bank, TriState Capital Bank, our broker-dealer subsidiaries and our trust subsidiaries are subject to capital requirements by various regulatory authorities. Capital levels of each entity are monitored to ensure compliance with our various regulatory capital requirements. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on our financial results.
As a bank holding company under the Bank Holding Company Act of 1956, as amended (the “BHC Act”) that has made an election to be a financial holding company, RJF is subject to supervision, examination and regulation by the Fed. 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 Act. We apply the standardized approach for calculating risk-weighted assets and are also subject to the market risk provisions of the Fed’s capital rules (“market risk rule”).
Under these rules, minimum requirements are established for both the quantity and quality of capital held by banking organizations. RJF, Raymond James Bank, and TriState Capital Bank are required to maintain minimum leverage ratios (defined as tier 1 capital divided by adjusted average assets), as well as minimum ratios of tier 1 capital, common equity tier 1 (“CET1”) and total capital to risk-weighted assets. These capital ratios incorporate quantitative measures of our assets, liabilities, and certain off-balance sheet items as calculated under the regulatory capital rules and are subject to qualitative judgments by the regulators about components, risk-weightings, and other factors. We calculate these ratios in order to assess compliance with both regulatory requirements and internal capital policies. In order to maintain our ability to take certain capital actions, including dividends and common equity repurchases, and to make bonus payments, we must hold a capital conservation buffer above our minimum risk-based capital requirements. As of June 30, 2022, 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 2021 Form 10-K.
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
To meet requirements for capital adequacy or to be categorized as “well-capitalized,” RJF must maintain minimum Tier 1 leverage, CET1, Tier 1 capital, 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 |
$ in millions | | Amount | | Ratio | | Amount | | Ratio | | Amount | | Ratio |
RJF as of June 30, 2022: | | | | | | | | | | | | |
Tier 1 leverage | | $ | 8,228 | | | 10.8 | % | | $ | 3,042 | | | 4.0 | % | | $ | 3,803 | | | 5.0 | % |
Tier 1 capital | | $ | 8,228 | | | 20.0 | % | | $ | 2,473 | | | 6.0 | % | | $ | 3,297 | | | 8.0 | % |
CET1 | | $ | 8,228 | | | 20.0 | % | | $ | 1,855 | | | 4.5 | % | | $ | 2,679 | | | 6.5 | % |
Total capital | | $ | 8,868 | | | 21.5 | % | | $ | 3,297 | | | 8.0 | % | | $ | 4,121 | | | 10.0 | % |
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RJF as of September 30, 2021: | | | | | | | | | | | | |
Tier 1 leverage | | $ | 7,428 | | | 12.6 | % | | $ | 2,363 | | | 4.0 | % | | $ | 2,954 | | | 5.0 | % |
Tier 1 capital | | $ | 7,428 | | | 25.0 | % | | $ | 1,783 | | | 6.0 | % | | $ | 2,377 | | | 8.0 | % |
CET1 | | $ | 7,428 | | | 25.0 | % | | $ | 1,337 | | | 4.5 | % | | $ | 1,932 | | | 6.5 | % |
Total capital | | $ | 7,780 | | | 26.2 | % | | $ | 2,377 | | | 8.0 | % | | $ | 2,972 | | | 10.0 | % |
As of June 30, 2022, RJF’s regulatory capital increase compared to September 30, 2021 was driven by an increase in equity primarily due to common and preferred stock issued in connection with the TriState Capital acquisition and positive earnings, partially offset by an increase in goodwill and intangible assets arising from the TriState Capital and Charles Stanley acquisitions (see Note 3 for further information) as well as dividends. RJF’s Tier 1 and Total capital ratios decreased compared to September 30, 2021, resulting from an increase in risk-weighted assets, partially offset by the increase in regulatory capital. The increase in risk-weighted assets was primarily driven by increases in our bank loan and available-for-sale securities portfolios and unfunded lending commitments resulting from the TriState Capital acquisition and growth at Raymond James Bank, as well as an increase in assets segregated for regulatory purposes and restricted cash due to higher client cash balances and the acquisition of Charles Stanley.
RJF’s Tier 1 leverage ratio at June 30, 2022 decreased compared to September 30, 2021 due to higher average assets driven by increases in bank loans, available-for-sale securities, as well as assets segregated for regulatory purposes and restricted cash. The higher average assets also reflect one month’s impact of the TriState Capital acquisition. The increase in average assets was partially offset by the increase in regulatory capital.
To meet the requirements for capital adequacy or to be categorized as “well-capitalized,” Raymond James Bank and TriState Capital Bank must maintain CET1, Tier 1 capital, Total capital and Tier 1 leverage amounts and ratios as set forth in the following tables.
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| | 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 June 30, 2022: | | | | | | | | | | | | |
Tier 1 leverage | | $ | 2,853 | | | 7.1 | % | | $ | 1,617 | | | 4.0 | % | | $ | 2,022 | | | 5.0 | % |
Tier 1 capital | | $ | 2,853 | | | 12.2 | % | | $ | 1,408 | | | 6.0 | % | | $ | 1,877 | | | 8.0 | % |
CET1 | | $ | 2,853 | | | 12.2 | % | | $ | 1,056 | | | 4.5 | % | | $ | 1,525 | | | 6.5 | % |
Total capital | | $ | 3,147 | | | 13.4 | % | | $ | 1,877 | | | 8.0 | % | | $ | 2,346 | | | 10.0 | % |
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Raymond James Bank as of September 30, 2021: | | | | | | | | | | | | |
Tier 1 leverage | | $ | 2,626 | | | 7.4 | % | | $ | 1,411 | | | 4.0 | % | | $ | 1,763 | | | 5.0 | % |
Tier 1 capital | | $ | 2,626 | | | 13.4 | % | | $ | 1,177 | | | 6.0 | % | | $ | 1,569 | | | 8.0 | % |
CET1 | | $ | 2,626 | | | 13.4 | % | | $ | 883 | | | 4.5 | % | | $ | 1,275 | | | 6.5 | % |
Total capital | | $ | 2,873 | | | 14.6 | % | | $ | 1,569 | | | 8.0 | % | | $ | 1,962 | | | 10.0 | % |
Raymond James Bank’s regulatory capital increased compared to September 30, 2021, driven by an increase in equity due to positive earnings, offset by dividends paid to RJF. Raymond James Bank’s Tier 1 and Total capital ratios decreased compared to September 30, 2021, 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. Raymond James Bank’s Tier 1 leverage ratio at June 30, 2022 decreased compared to September 30, 2021 due to the increase in average assets, driven primarily by the increases in bank loans and available-for-sale securities.
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
On June 1, 2022, we completed our acquisition of TriState Capital, including TriState Capital Bank. See Note 3 for additional information on this acquisition.
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| | Actual | | Requirement for capital adequacy purposes | | To be well-capitalized under regulatory provisions |
$ in millions | | Amount | | Ratio | | Amount | | Ratio | | Amount | | Ratio |
TriState Capital Bank as of June 30, 2022: | | | | | | | | | | | | |
Tier 1 leverage | | $ | 1,019 | | | 7.3 | % | | $ | 562 | | | 4.0 | % | | $ | 703 | | | 5.0 | % |
Tier 1 capital | | $ | 1,019 | | | 13.7 | % | | $ | 446 | | | 6.0 | % | | $ | 594 | | | 8.0 | % |
CET1 | | $ | 1,019 | | | 13.7 | % | | $ | 334 | | | 4.5 | % | | $ | 483 | | | 6.5 | % |
Total capital | | $ | 1,047 | | | 14.1 | % | | $ | 594 | | | 8.0 | % | | $ | 743 | | | 10.0 | % |
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Certain of our broker-dealer subsidiaries are subject to the requirements of the Uniform Net Capital Rule (Rule 15c3-1) under the Securities Exchange Act of 1934. The following table presents the net capital position of RJ&A.
| | | | | | | | | | | | | | |
$ in millions | | June 30, 2022 | | September 30, 2021 |
Raymond James & Associates, Inc.: | | | | |
(Alternative Method elected) | | | | |
Net capital as a percent of aggregate debit items | | 42.7 | % | | 72.1 | % |
Net capital | | $ | 1,213 | | | $ | 2,035 | |
Less: required net capital | | (57) | | | (56) | |
Excess net capital | | $ | 1,156 | | | $ | 1,979 | |
The decrease in RJ&A’s net capital and excess net capital as of June 30, 2022 as compared to September 30, 2021 reflected the impact of significant dividends from RJ&A to RJF during the nine months ended June 30, 2022.
As of June 30, 2022, 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 24 – EARNINGS PER SHARE
All share and earnings per share information has been retroactively adjusted to reflect the September 21, 2021 three-for-two stock split described in Note 19.
The following table presents the computation of basic and diluted earnings per common share.
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three months ended June 30, | | Nine months ended June 30, |
in millions, except per share amounts | | 2022 | | 2021 | | 2022 | | 2021 |
Income for basic earnings per common share: | | | | | | | | |
Net income available to common shareholders | | $ | 299 | | | $ | 307 | | | $ | 1,068 | | | $ | 974 | |
Less allocation of earnings and dividends to participating securities | | (1) | | | — | | | (2) | | | (1) | |
Net income available to common shareholders after participating securities | | $ | 298 | | | $ | 307 | | | $ | 1,066 | | | $ | 973 | |
Income for diluted earnings per common share: | | | | | | | | |
Net income available to common shareholders | | $ | 299 | | | $ | 307 | | | $ | 1,068 | | | $ | 974 | |
Less allocation of earnings and dividends to participating securities | | (1) | | | — | | | (2) | | | (1) | |
Net income available to common shareholders after participating securities | | $ | 298 | | | $ | 307 | | | $ | 1,066 | | | $ | 973 | |
Common shares: | | | | | | | | |
Average common shares in basic computation | | 210.7 | | | 205.8 | | | 208.1 | | | 205.8 | |
Dilutive effect of outstanding stock options and certain RSUs | | 5.0 | | | 5.9 | | | 5.4 | | | 5.1 | |
Average common and common equivalent shares used in diluted computation | | 215.7 | | | 211.7 | | | 213.5 | | | 210.9 | |
Earnings per common share: | | | | | | | | |
Basic | | $ | 1.41 | | | $ | 1.49 | | | $ | 5.12 | | | $ | 4.73 | |
Diluted | | $ | 1.38 | | | $ | 1.45 | | | $ | 4.99 | | | $ | 4.61 | |
Stock options and certain RSUs excluded from weighted-average diluted common shares because their effect would be antidilutive | | 0.5 | | | — | | | 0.4 | | | 0.2 | |
The allocation of earnings and dividends to participating securities in the preceding table represents dividends paid during the period to participating securities, consisting of certain RSUs, as well as the restricted stock awards granted as part of our acquisition of TriState Capital, plus an allocation of undistributed earnings to such participating securities. Participating securities and related dividends paid on these participating securities were insignificant for each of the three and nine months ended June 30, 2022 and 2021. Undistributed earnings are allocated to participating securities based upon their right to share in earnings if all earnings for the period had been distributed.
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
NOTE 25 – SEGMENT INFORMATION
We currently operate through the following five segments: PCG; Capital Markets; Asset Management; Bank; and Other. As described in Note 1, our Bank segment has been renamed from Raymond James Bank as a result of our acquisition of TriState Capital on June 1, 2022.
The segments are determined based upon factors such as the services provided and the distribution channels served and are consistent with how we assess performance and determine how to allocate our resources. For a further discussion of our segments, see Note 26 of our 2021 Form 10-K.
The following table presents information concerning operations in these segments.
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| | Three months ended June 30, | | Nine months ended June 30, |
$ in millions | | 2022 | | 2021 | | 2022 | | 2021 |
Net revenues: | | | | | | | | |
Private Client Group | | $ | 1,958 | | | $ | 1,696 | | | $ | 5,719 | | | $ | 4,810 | |
Capital Markets | | 383 | | | 446 | | | 1,410 | | | 1,331 | |
Asset Management | | 228 | | | 225 | | | 698 | | | 629 | |
Bank | | 276 | | | 169 | | | 656 | | | 496 | |
Other | | (21) | | | 2 | | | (54) | | | (6) | |
Intersegment eliminations | | (106) | | | (67) | | | (257) | | | (195) | |
Total net revenues | | $ | 2,718 | | | $ | 2,471 | | | $ | 8,172 | | | $ | 7,065 | |
Pre-tax income/(loss): | | | | | | | | |
Private Client Group | | $ | 251 | | | $ | 195 | | | $ | 659 | | | $ | 527 | |
Capital Markets | | 61 | | | 115 | | | 349 | | | 349 | |
Asset Management | | 93 | | | 105 | | | 303 | | | 275 | |
Bank | | 74 | | | 104 | | | 259 | | | 286 | |
Other | | (64) | | | (134) | | | (164) | | | (206) | |
Total pre-tax income | | $ | 415 | | | $ | 385 | | | $ | 1,406 | | | $ | 1,231 | |
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.
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| | Three months ended June 30, | | Nine months ended June 30, |
$ in millions | | 2022 | | 2021 | | 2022 | | 2021 |
Net interest income/(expense): | | | | | | | | |
Private Client Group | | $ | 58 | | | $ | 29 | | | $ | 122 | | | $ | 84 | |
Capital Markets | | 3 | | | 1 | | | 8 | | | 5 | |
Asset Management | | 1 | | | — | | | 1 | | | — | |
Bank | | 270 | | | 161 | | | 636 | | | 473 | |
Other | | (18) | | | (26) | | | (61) | | | (69) | |
Net interest income | | $ | 314 | | | $ | 165 | | | $ | 706 | | | $ | 493 | |
The following table presents our total assets on a segment basis.
| | | | | | | | | | | | | | |
$ in millions | | June 30, 2022 | | September 30, 2021 |
Total assets: | | | | |
Private Client Group (1) | | $ | 25,729 | | | $ | 20,270 | |
Capital Markets | | 2,169 | | | 2,457 | |
Asset Management (2) | | 546 | | | 476 | |
Bank (2) | | 55,562 | | | 36,154 | |
Other | | 2,105 | | | 2,534 | |
Total | | $ | 86,111 | | | $ | 61,891 | |
(1) The June 30, 2022 balance reflected the assets of Charles Stanley which was acquired on January 21, 2022. See Note 3 for further discussion.
(2) The June 30, 2022 balance reflected the assets of TriState Capital which was acquired on June 1, 2022. See Note 3 for further discussion.
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
The following table presents goodwill, which was included in our total assets, on a segment basis.
| | | | | | | | | | | | | | |
$ in millions | | June 30, 2022 | | September 30, 2021 |
Goodwill: | | | | |
Private Client Group (1) | | $ | 564 | | | $ | 417 | |
Capital Markets | | 173 | | | 174 | |
Asset Management | | 69 | | | 69 | |
Bank (2) | | 529 | | | — | |
Total | | $ | 1,335 | | | $ | 660 | |
(1) As of June 30, 2022, this balance included £121 million, or $147 million, of goodwill arising from our acquisition of Charles Stanley on January 21, 2022. See Note 3 for further discussion.
(2) Represents goodwill arising from our acquisition of TriState Capital on June 1, 2022. See Note 3 for further discussion.
We have operations in the U.S., Canada and Europe. Substantially all long-lived assets are located in the U.S. The following table presents our net revenues and pre-tax income classified by major geographic area in which they were earned.
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| | Three months ended June 30, | | Nine months ended June 30, |
$ in millions | | 2022 | | 2021 | | 2022 | | 2021 |
Net revenues: | | | | | | | | |
U.S. | | $ | 2,472 | | | $ | 2,275 | | | $ | 7,491 | | | $ | 6,548 | |
Canada | | 138 | | | 128 | | | 404 | | | 363 | |
Europe | | 108 | | | 68 | | | 277 | | | 154 | |
Total | | $ | 2,718 | | | $ | 2,471 | | | $ | 8,172 | | | $ | 7,065 | |
Pre-tax income: | | | | | | | | |
U.S. | | $ | 393 | | | $ | 353 | | | $ | 1,330 | | | $ | 1,165 | |
Canada | | 20 | | | 15 | | | 52 | | | 41 | |
Europe | | 2 | | | 17 | | | 24 | | | 25 | |
Total | | $ | 415 | | | $ | 385 | | | $ | 1,406 | | | $ | 1,231 | |
The following table presents our total assets by major geographic area in which they were held.
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$ in millions | | June 30, 2022 | | September 30, 2021 |
Total assets: | | | | |
U.S. (1) | | $ | 78,911 | | | $ | 57,952 | |
Canada | | 4,153 | | | 3,724 | |
Europe (2) | | 3,047 | | | 215 | |
Total | | $ | 86,111 | | | $ | 61,891 | |
(1) The June 30, 2022 balance reflected the assets of TriState Capital which was acquired on June 1, 2022. See Note 3 or further discussion.
(2) The June 30, 2022 balance reflected the assets of Charles Stanley which was acquired on January 21, 2022. See Note 3 for further discussion.
The following table presents goodwill, which was included in our total assets, classified by major geographic area in which it was held.
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$ in millions | | June 30, 2022 | | September 30, 2021 |
Goodwill: | | | | |
U.S. (1) | | $ | 1,148 | | | $ | 619 | |
Canada | | 25 | | | 25 | |
Europe (2) | | 162 | | | 16 | |
Total | | $ | 1,335 | | | $ | 660 | |
(1) As of June 30, 2022, this balance included $529 million of goodwill arising from our acquisition of TriState Capital on June 1, 2022. See Note 3 for further discussion.
(2) As of June 30, 2022, this balance included £121 million, or $147 million, of goodwill arising from our acquisition of Charles Stanley on January 21, 2022. See Note 3 for further discussion.
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES