RAYMOND JAMES FINANCIAL INC 10-Q

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS INDEX PAGE Factors affecting “forward-looking statements” 57 Introduction 57 Executive overview 58 Reconciliation of non-GAAP financial measures to GAAP financial measures 61 Segments 64 Net interest analysis 65 Results of Operations Private Client Group 70 Capital Markets 74 Asset Management 75 Bank 78 Other 80 Certain statistical disclosures by bank holding companies 81 Statement of financial condition analysis 81 Liquidity and capital resources 82 Regulatory 87 Critical accounting estimates 87 Recent accounting developments 89 Risk management 89 56 RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Management’s Discussion and Analysis FACTORS AFFECTING “FORWARD-LOOKING STATEMENTS” Certain statements made in this Quarterly Report on Form 10-Q may constitute “forward-looking statements” under the Private Securities Litigation Reform Act of 1995. Forward-looking statements include information concerning future strategic objectives, business prospects, anticipated savings, financial results (including expenses, earnings, liquidity, cash flow and capital expenditures), industry or market conditions, demand for and pricing of our products, acquisitions (including our announced acquisition of SumRidge Partners), divestitures, anticipated results of litigation, regulatory developments, and general economic conditions. In addition, words such as “expects,” “anticipates,” and future or conditional verbs such as “will,” “may,” “could,” “should,” and “would,” as well as any other statement that necessarily depends on future events, are intended to identify forward-looking statements. Forward-looking statements are not guarantees, and they involve risks, uncertainties and assumptions. Although we make such statements based on assumptions that we believe to be reasonable, there can be no assurance that actual results will not differ materially from those expressed in the forward-looking statements. We caution investors not to rely unduly on any forward-looking statements and urge you to carefully consider the risks described in our filings with the SEC from time to time, including our most recent Annual Report on Form 10-K, subsequent Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, which are available at www.raymondjames.com and the SEC’s website at www.sec.gov. We expressly disclaim any obligation to update any forward-looking statement in the event it later turns out to be inaccurate, whether as a result of new information, future events or otherwise. INTRODUCTION The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to help the reader understand the results of our operations and financial condition. This MD&A is provided as a supplement to, and should be read in conjunction with, our condensed consolidated financial statements and accompanying notes to condensed consolidated financial statements. Where “NM” is used in various percentage change computations, the computed percentage change has been determined to be not meaningful. We operate as a financial holding company and bank holding company. Results in the businesses in which we operate are highly correlated to general economic conditions and, more specifically, to the direction of the U.S. equity and fixed income markets, changes in interest rates, market volatility, corporate and mortgage lending markets and commercial and residential credit trends. Overall market conditions, economic, political and regulatory trends, and industry competition are among the factors which could affect us and which are unpredictable and beyond our control. These factors affect the financial decisions made by market participants, including investors, borrowers, and competitors, impacting their level of participation in the financial markets. These factors also impact the level of investment banking activity and asset valuations, which ultimately affect our business results. 57 RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Management’s Discussion and Analysis EXECUTIVE OVERVIEW Quarter ended June 30, 2022 compared with the quarter ended June 30, 2021 For our fiscal third quarter of 2022, we generated net revenues of $2.72 billion, an increase of 10% compared with the prior-year quarter, and pre-tax income of $415 million increased 8%. Our net income available to common shareholders of $299 million decreased 3%, and our earnings per diluted share were $1.38, reflecting a 5% decrease. Our annualized return on common equity (“ROCE”) for the quarter was 13.3%, compared with 15.9% for the prior-year quarter, and our annualized return on tangible common equity (“ROTCE”) was 15.6% (1) , compared with 17.7% (1) for the prior-year quarter. On June 1, 2022, we completed our acquisition of all the outstanding shares of TriState Capital, and its results of operations have been included in our results prospectively from the closing date of June 1, 2022. During the quarter, we incurred $65 million of expenses related to our TriState Capital acquisition and other current and prior-year acquisitions, comprised of acquisition-related compensation expenses largely related to retention awards, initial provisions for credit losses on acquired loans and unfunded lending commitments of $26 million and $5 million, respectively, amortization of identifiable intangible assets arising from acquisitions, and other costs incurred to effect our acquisitions, including legal expenses and other professional fees. Excluding these acquisition-related expenses, our adjusted net income available to common shareholders was $348 million (1) , 13% lower than adjusted net income for the prior-year quarter, and our adjusted earnings per diluted share were $1.61 (1) , 14% lower than adjusted earnings per diluted share for the prior-year quarter. Adjusted annualized ROCE for the quarter was 15.4% (1) and adjusted annualized ROTCE was 18.1% (1) , compared with adjusted annualized ROCE of 20.5% (1) and adjusted annualized ROTCE of 22.9% (1) for the prior-year quarter. The increase in net revenues compared with the prior-year quarter was driven by the benefit of higher short-term interest rates on both RJBDP fees from third-party banks and net interest income and higher asset management and related administrative fees, largely attributable to strong growth in PCG assets in fee-based accounts compared with the prior-year quarter. In addition, the current-year quarter includes incremental revenues from our acquisitions of TriState Capital, which was completed on June 1, 2022, and Charles Stanley, which was completed on January 21, 2022. These increases more than offset the declines in investment banking and brokerage revenues resulting from the challenging market environment during the current quarter. Compensation, commissions and benefits expense increased 10%, primarily resulting from higher revenues compared with the prior-year quarter and, to a lesser extent, incremental compensation expense due to the Charles Stanley and TriState Capital acquisitions, a special bonus payable to certain eligible associates to assist them with inflationary cost pressures, which aggregated to $13 million, as well as other increases in compensation costs to support our growth. Our compensation ratio, or the ratio of compensation, commissions and benefits expense to net revenues, was 67.5%, compared with 67.2% for the prior-year quarter. Excluding acquisition-related compensation expenses, our adjusted compensation ratio was 66.8% (1) , compared with 66.7% (1) for the prior-year quarter. Non-compensation expenses increased 10%, primarily due to a $75 million increase in the bank loan provision for credit losses, resulting from a provision of $56 million for the current-year quarter compared with a benefit of $19 million for the prior-year quarter. The higher provision for credit losses in the current-year quarter was due to the aforementioned initial provision for credit losses on loans associated with our acquisition of TriState Capital Bank, as well as growth in bank loans at Raymond James Bank and a weaker macroeconomic outlook. Business development expenses also increased from the very low prior-year quarter level, primarily due to advisor recognition events and conferences, as well as an increase in business travel during the current period as travel restrictions have eased. Communications and information processing expenses increased as a result of incremental expenses of TriState Capital and Charles Stanley, as well as continued investments in technology to support our growth. Offsetting these increases, during the prior-year quarter we completed a $750 million, 30-year senior notes offering at 3.75%, and incurred $98 million of losses on extinguishment of debt from the early-redemption of certain of our senior notes which did not recur in the current period. Our effective income tax rate was 27.5% for our fiscal third quarter of 2022, an increase compared with a 20.3% effective income tax rate for the prior-year quarter, primarily due to the unfavorable impact of nondeductible valuation losses associated with our company-owned life insurance portfolio during the current quarter compared with nontaxable valuation gains in the prior-year quarter. (1) ROTCE, adjusted net income available to common shareholders, adjusted earnings per diluted share, adjusted annualized ROCE, adjusted annualized ROTCE, and adjusted compensation ratio are non-GAAP financial measures. Beginning with our fiscal third quarter of 2022, certain non-GAAP financial measures have been adjusted for additional expenses directly related to our acquisitions that we believe are not indicative of our core operating results, such as those related to amortization of identifiable intangible assets arising from acquisitions and acquisition-related retention. Prior periods have been conformed to the current presentation. Please see the “Reconciliation of non-GAAP financial measures to GAAP financial measures” in this MD&A for a reconciliation of these non-GAAP financial measures to the most directly comparable GAAP measures, and for other important disclosures. 58 RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Management’s Discussion and Analysis As of June 30, 2022, our Tier 1 leverage ratio of 10.8% and Total capital ratio of 21.5% were both more than double the regulatory requirement to be considered well-capitalized. We also continue to have substantial liquidity with $2.0 billion (1) of cash at the parent as of June 30, 2022, which includes cash loaned to RJ&A. We believe our funding and capital position provide us the opportunity to continue to grow our balance sheet prudently and we expect to continue to be opportunistic in deploying our capital. Subsequent to the closing of TriState Capital in our fiscal third quarter of 2022, we repurchased 1.14 million shares of our common stock for $100 million at an average price of $88. After the effect of those repurchases, $900 million remained under our Board of Directors’ share repurchase authorization. We remain well-positioned entering our fiscal fourth quarter. We expect our fiscal fourth quarter results to be further positively impacted by the full quarter’s impact of the 50-basis point and 75-basis point increases in the Fed’s short-term benchmark interest rate enacted in May and June 2022, respectively, as well as two months’ impact of the 75-basis point increase enacted at the end of July 2022. With clients’ domestic cash sweep balances of $75.8 billion as of June 30, 2022 and our high concentration of floating-rate assets, we also believe we are well-positioned for any further increases in short-term interest rates, which we expect to positively impact our net interest income and our RJBDP fees from third-party banks. In addition, we expect our fiscal fourth quarter results to be positively impacted by two incremental months of TriState Capital’s results as well as the results of SumRidge Partners, which was acquired on July 1, 2022. However, we also expect to continue to face macroeconomic uncertainties which may continue to have a negative impact on equity and fixed income markets. As a result, we may experience volatility in asset management fees and brokerage revenues, as well as investment banking revenues, despite our robust investment banking pipelines. In addition, asset management and related administrative fees will be negatively impacted by the 11% decrease in PCG fee-based assets as of June 30, 2022 and lower financial assets under management; however, our recruiting pipelines remain strong and we continue to see solid retention of existing advisors. Net loan growth should result in additional provisions for credit losses and future market deterioration could result in increased bank loan provisions in future periods. In addition, although we remain focused on the management of expenses, we expect that expenses will continue to increase in part as a result of inflationary pressures on our costs, as business and event-related travel restrictions have eased, and as we continue to make investments in our people and technology to support our growth. Nine months ended June 30, 2022 compared with the nine months ended June 30, 2021 For the nine months ended June 30, 2022, we generated net revenues of $8.17 billion, an increase of 16% compared with the prior-year period, and pre-tax income of $1.41 billion, an increase of 14%. Our net income available to common shareholders of $1.07 billion was 10% higher than the prior-year period and our earnings per diluted share were $4.99, reflecting an 8% increase. Our annualized ROCE was 16.3%, compared with 17.4% for the prior-year period, and our annualized ROTCE was 18.7% (2) , compared with 19.3% (2) for the prior-year period. Excluding $117 million of expenses related to acquisitions, our adjusted net income available to common shareholders was $1.16 billion (2) , an increase of 6% compared with the prior-year period, and our adjusted earnings per diluted share were $5.41 (2) , an increase of 5%. Adjusted annualized ROCE for the year-to-date period was 17.6% (2) , compared with 19.3% (2) in the prior-year period, and adjusted annualized ROTCE was 20.1% (2) , compared with 21.4% (2) in the prior-year period. The significant increase in net revenues compared with the prior-year period was primarily driven by higher asset management and related administrative fees, primarily attributable to higher PCG client assets in fee-based accounts and incremental revenues from our Charles Stanley acquisition, the benefit of higher short-term interest rates on both RJBDP fees from third-party banks and net interest income, strong investment banking revenues, particularly in our fiscal first quarter, and one month of incremental revenues from our acquisition of TriState Capital. Compensation, commissions and benefits expense increased 16%, primarily attributable to the growth in revenues and pre-tax income compared with the prior-year period, as well as our current-year acquisitions of Charles Stanley and TriState Capital. Our compensation ratio was 68.2%, compared with 68.1% for the prior-year period. Excluding $43 million of acquisition-related compensation expenses, our adjusted compensation ratio was 67.6% (2) , flat compared with the adjusted compensation ratio for the prior-year period. (1) For additional information, please see the “Liquidity and capital resources - Sources of liquidity” section in this MD&A. (2) ROTCE, adjusted net income available to common shareholders, adjusted earnings per diluted share, adjusted annualized ROCE, adjusted annualized ROTCE, and adjusted compensation ratio are non-GAAP financial measures. Beginning with our fiscal third quarter of 2022, certain non-GAAP financial measures have been adjusted for additional expenses directly related to our acquisitions that we believe are not indicative of our core operating results, such as those related to amortization of identifiable intangible assets arising from acquisitions and acquisition-related retention. Prior periods have been conformed to the current presentation. Please see the “Reconciliation of non-GAAP financial measures to GAAP financial measures” in this MD&A for a reconciliation of these non-GAAP financial measures to the most directly comparable GAAP measures, and for other important disclosures. 59 RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Management’s Discussion and Analysis Non-compensation expenses increased 17%, primarily due to increases in the bank loan provision for credit losses, business development and communications and information processing expenses, as well as higher investment sub-advisory fees. In addition, the current-year period included incremental expenses from our acquisitions of Charles Stanley and TriState Capital. The bank loan provision for credit losses increased $103 million to a provision of $66 million for the current-year period, compared with a benefit of $37 million for the prior-year period. Offsetting these increases was the aforementioned $98 million decrease in losses on extinguishment of debt. Our effective income tax rate was 23.9% for the nine months ended June 30, 2022, an increase from 20.9% for the prior-year period. The increase in the effective tax rate from the prior-year period was primarily due to the negative impact of nondeductible valuation losses associated with our company-owned life insurance portfolio during the current-year period compared with nontaxable valuation gains for the prior-year period, partially offset by a larger tax benefit recognized during the current-year period related to share-based compensation that vested during the period. 60 RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Management’s Discussion and Analysis RECONCILIATION OF NON-GAAP FINANCIAL MEASURES TO GAAP FINANCIAL MEASURES We utilize certain non-GAAP financial measures as additional measures to aid in, and enhance, the understanding of our financial results and related measures. We believe certain of these non-GAAP financial measures provide useful information to management and investors by excluding certain material items that may not be indicative of our core operating results. We utilize these non-GAAP financial measures in assessing the financial performance of the business, as they facilitate a meaningful comparison of current- and prior-period results. Certain of our non-GAAP financial measures have been adjusted for additional expenses directly related to our acquisitions that we believe are not indicative of our core operating results, such as those related to amortization of identifiable intangible assets arising from acquisitions and acquisition-related retention. Prior periods have been conformed to the current period presentation. We believe that ROTCE is meaningful to investors as this measure facilitates comparison of our results to the results of other companies. In the following tables, the tax effect of non-GAAP adjustments reflects the statutory rate associated with each non-GAAP item. These non-GAAP financial measures should be considered in addition to, and not as a substitute for, measures of financial performance prepared in accordance with GAAP. In addition, our non-GAAP financial measures may not be comparable to similarly titled non-GAAP financial measures of other companies. The following tables provide a reconciliation of non-GAAP financial measures to the most directly comparable GAAP financial measures for the periods indicated. Three months ended Nine months ended $ in millions June 30, 2022 June 30, 2021 June 30, 2022 June 30, 2021 Net income available to common shareholders $ 299 $ 307 $ 1,068 $ 974 Non-GAAP adjustments : Expenses directly related to acquisitions included in the following financial statement line items: Compensation, commissions and benefits: Acquisition-related retention 16 13 41 35 Other acquisition-related compensation 2 — 2 — Total “Compensation, commissions and benefits” expense 18 13 43 35 Professional fees 4 4 11 5 Bank loan provision/(benefit) for credit losses — Initial provision for credit losses on acquired loans 26 — 26 — Other: Amortization of identifiable intangible assets 8 7 22 14 Initial provision for credit losses on acquired lending commitments 5 — 5 — All other acquisition-related expenses 4 — 10 1 Total “Other” expense 17 7 37 15 Total expenses related to acquisitions 65 24 117 55 Losses on extinguishment of debt — 98 — 98 Pre-tax impact of non-GAAP adjustments 65 122 117 153 Tax effect of non-GAAP adjustments (16) (30) (29) (37) Total non-GAAP adjustments, net of tax 49 92 88 116 Adjusted net income available to common shareholders $ 348 $ 399 $ 1,156 $ 1,090 Compensation, commissions and benefits expense $ 1,834 $ 1,661 $ 5,570 $ 4,809 Less: Total compensation-related acquisition expenses (as detailed above) 18 13 43 35 Adjusted “Compensation, commissions and benefits” expense $ 1,816 $ 1,648 $ 5,527 $ 4,774 61 RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Management’s Discussion and Analysis Three months ended Nine months ended June 30, 2022 June 30, 2021 June 30, 2022 June 30, 2021 Total compensation ratio 67.5 % 67.2 % 68.2 % 68.1 % Less the impact of non-GAAP adjustments on compensation ratio : Acquisition-related retention 0.6 % 0.5 % 0.5 % 0.5 % Other acquisition-related compensation 0.1 % — % 0.1 % — % Total “Compensation, commissions and benefits” expenses related to acquisitions 0.7 % 0.5 % 0.6 % 0.5 % Adjusted total compensation ratio 66.8 % 66.7 % 67.6 % 67.6 % Diluted earnings per common share $ 1.38 $ 1.45 $ 4.99 $ 4.61 Impact of non-GAAP adjustments on diluted earnings per common share: Compensation, commissions and benefits: Acquisition-related retention 0.07 0.06 0.19 0.17 Other acquisition-related compensation 0.01 — 0.01 — Total “Compensation, commissions and benefits” expense 0.08 0.06 0.20 0.17 Professional fees 0.02 0.02 0.05 0.02 Bank loan provision/(benefit) for credit losses — Initial provision for credit losses on acquired loans 0.12 — 0.12 — Other: Amortization of identifiable intangible assets 0.04 0.03 0.11 0.07 Initial provision for credit losses on acquired lending commitments 0.02 — 0.02 — All other acquisition-related expenses 0.02 — 0.05 0.01 Total “Other” expense 0.08 0.03 0.18 0.08 Total expenses related to acquisitions 0.30 0.11 0.55 0.27 Losses on extinguishment of debt — 0.46 — 0.46 Tax effect of non-GAAP adjustments (0.07) (0.14) (0.13) (0.18) Total non-GAAP adjustments, net of tax 0.23 0.43 0.42 0.55 Adjusted diluted earnings per common share $ 1.61 $ 1.88 $ 5.41 $ 5.16 Return on common equity Three months ended Nine months ended $ in millions June 30, 2022 June 30, 2021 June 30, 2022 June 30, 2021 Average common equity $ 8,999 $ 7,728 $ 8,711 $ 7,483 Impact of non-GAAP adjustments on average common equity : Compensation, commissions and benefits: Acquisition-related retention 8 6 19 16 Other acquisition-related compensation 1 — 1 — Total “Compensation, commissions and benefits” expense 9 6 20 16 Professional fees 2 2 5 2 Bank loan provision/(benefit) for credit losses — Initial provision for credit losses on acquired loans 13 — 7 — Other: Amortization of identifiable intangible assets 4 4 11 6 Initial provision for credit losses on acquired lending commitments 3 — 1 — All other acquisition-related expenses 2 — 4 1 Total “Other” expense 9 4 16 7 Total expenses related to acquisitions 33 12 48 25 Losses on extinguishment of debt — 49 — 25 Tax effect of non-GAAP adjustments (8) (15) (12) (12) Total non-GAAP adjustments, net of tax 25 46 36 38 Adjusted average common equity $ 9,024 $ 7,774 $ 8,747 $ 7,521 62 RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Management’s Discussion and Analysis Three months ended Nine months ended $ in millions June 30, 2022 June 30, 2021 June 30, 2022 June 30, 2021 Average common equity $ 8,999 $ 7,728 $ 8,711 $ 7,483 Less : Average goodwill and identifiable intangible assets, net 1,460 865 1,169 791 Deferred tax liabilities related to goodwill and identifiable intangible assets, net (108) (56) (86) (51) Average tangible common equity $ 7,647 $ 6,919 $ 7,628 $ 6,743 Impact of non-GAAP adjustments on average tangible common equity: Compensation, commissions and benefits: Acquisition-related retention 8 6 19 16 Other acquisition-related compensation 1 — 1 — Total “Compensation, commissions and benefits” expense 9 6 20 16 Professional fees 2 2 5 2 Bank loan provision/(benefit) for credit losses — Initial provision for credit losses on acquired loans 13 — 7 — Other: Amortization of identifiable intangible assets 4 4 11 6 Initial provision for credit losses on acquired lending commitments 3 — 1 — All other acquisition-related expenses 2 — 4 1 Total “Other” expense 9 4 16 7 Total expenses related to acquisitions 33 12 48 25 Losses on extinguishment of debt — 49 — 25 Tax effect of non-GAAP adjustments (8) (15) (12) (12) Total non-GAAP adjustments, net of tax 25 46 36 38 Adjusted average tangible common equity $ 7,672 $ 6,965 $ 7,664 $ 6,781 Return on common equity 13.3 % 15.9 % 16.3 % 17.4 % Adjusted return on common equity 15.4 % 20.5 % 17.6 % 19.3 % Return on tangible common equity 15.6 % 17.7 % 18.7 % 19.3 % Adjusted return on tangible common equity 18.1 % 22.9 % 20.1 % 21.4 % Total compensation ratio is computed by dividing compensation, commissions and benefits expense by net revenues for each respective period. Adjusted total compensation ratio is computed by dividing adjusted compensation, commissions and benefits expense by net revenues for each respective period. Average common equity for the quarter-to-date period is computed by adding the total common equity attributable to RJF as of the date indicated to the prior quarter-end total, and dividing by two, or in the case of average tangible common equity, computed by adding tangible common equity as of the date indicated to the prior quarter-end total, and dividing by two. Average common equity for the year-to-date period is computed by adding the total common equity attributable to RJF as of each quarter-end date during the indicated year-to-date period to the beginning of the year total, and dividing by four, or in the case of average tangible common equity, computed by adding tangible common equity as of each quarter-end date during the indicated year-to-date period to the beginning of the year total, and dividing by four. Adjusted average common equity is computed by adjusting for the impact on average common equity of the non-GAAP adjustments, as applicable for each respective period. Adjusted average tangible common equity is computed by adjusting for the impact on average tangible common equity of the non-GAAP adjustments, as applicable for each respective period. ROCE is computed by dividing annualized net income available to common shareholders for the period indicated by average common equity for each respective period or, in the case of ROTCE, computed by dividing annualized net income available to common shareholders by average tangible common equity for each respective period. Adjusted return on common equity is computed by dividing annualized adjusted net income available to common shareholders by adjusted average common equity for each respective period, or in the case of adjusted return on tangible common equity, computed by dividing annualized adjusted net income available to common shareholders by adjusted average tangible common equity for each respective period. 63 RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Management’s Discussion and Analysis SEGMENTS We currently operate through the following five segments: PCG; Capital Markets; Asset Management; Bank; and Other. The following table presents our consolidated and segment net revenues and pre-tax income/(loss) for the periods indicated. Three months ended June 30, Nine months ended June 30, $ in millions 2022 2021 % change 2022 2021 % change Total company Net revenues $ 2,718 $ 2,471 10 % $ 8,172 $ 7,065 16 % Pre-tax income $ 415 $ 385 8 % $ 1,406 $ 1,231 14 % Private Client Group Net revenues $ 1,958 $ 1,696 15 % $ 5,719 $ 4,810 19 % Pre-tax income $ 251 $ 195 29 % $ 659 $ 527 25 % Capital Markets Net revenues $ 383 $ 446 (14) % $ 1,410 $ 1,331 6 % Pre-tax income $ 61 $ 115 (47) % $ 349 $ 349 — % Asset Management Net revenues $ 228 $ 225 1 % $ 698 $ 629 11 % Pre-tax income $ 93 $ 105 (11) % $ 303 $ 275 10 % Bank Net revenues $ 276 $ 169 63 % $ 656 $ 496 32 % Pre-tax income $ 74 $ 104 (29) % $ 259 $ 286 (9) % Other Net revenues $ (21) $ 2 NM $ (54) $ (6) (800) % Pre-tax loss $ (64) $ (134) 52 % $ (164) $ (206) 20 % Intersegment eliminations Net revenues $ (106) $ (67) (58) % $ (257) $ (195) (32) % 64 RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Management’s Discussion and Analysis NET INTEREST ANALYSIS Largely in response to inflationary pressures and, to a lesser extent, given the improved economic and employment conditions since the beginning of the COVID-19 pandemic, the Fed has rapidly increased its benchmark short-term interest rates, from the near-zero interest rates at the beginning of March 2022 to a range of 2.25% to 2.50% in late July 2022. The Fed indicated that it intends to closely monitor short-term interest rates through the remainder of our fiscal 2022 and into our fiscal 2023. The following table details the Fed’s recent short-term interest rate activity. Fiscal quarter ended Date of interest rate action Increase in interest rates (in basis points) Fed funds target rate March 31, 2022 March 17, 2022 25 0.25% - 0.50% June 30, 2022 May 5, 2022 50 0.75% - 1.00% June 30, 2022 June 16, 2022 75 1.50% - 1.75% Rate changes subsequent to June 30, 2022 September 30, 2022 July 28, 2022 75 2.25% - 2.50% These increases in short-term interest rates in March, May and June of 2022 positively impacted our net interest income during our fiscal third quarter of 2022, as well as the fee income we earn from third-party banks on client cash balances swept to such banks as part of the RJBDP (included in account and service fees), which are also sensitive to changes in interest rates. We expect our fiscal fourth quarter of 2022 results to further benefit from a full quarter’s impact of the May and June 2022 interest rate increases, as well as two months of the 75-basis point increase in July 2022. Given the relationship between our interest-sensitive assets and liabilities (primarily held in our PCG, Bank and Other segments) and the nature of fees we earn from third-party banks on the RJBDP, increases in short-term interest rates generally result in an increase in our net earnings, although the magnitude of the impact to our net interest margin depends on the yields on interest-earning assets relative to the cost of interest-bearing liabilities, including deposit rates paid to clients on their cash balances. As a result, we believe we are well-positioned for our net interest earnings to be favorably impacted by the recent, as well as any additional, increases in short-term rates. Refer to the discussion of our net interest income within the “Management’s Discussion and Analysis - Results of Operations” of our PCG, Bank, and Other segments, where applicable. Also refer to “Management’s Discussion and Analysis - Results of Operations - Private Client Group - Clients’ domestic cash sweep balances” for further information on the RJBDP. 65 RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Management’s Discussion and Analysis The following table presents our consolidated average interest-earning asset and interest-bearing liability balances, interest income and expense and the related yields and rates. Quarter ended June 30, 2022 compared with the quarter ended June 30, 2021 Three months ended June 30, 2022 2021 $ in millions Average daily balance Interest Annualized average rate Average daily balance Interest Annualized average rate Interest-earning assets: Cash and cash equivalents $ 5,548 $ 10 0.76 % $ 5,644 $ 3 0.20 % Assets segregated for regulatory purposes and restricted cash 17,337 28 0.63 % 9,016 3 0.16 % Available-for-sale securities 9,972 37 1.47 % 8,041 20 0.96 % Brokerage client receivables 2,555 24 3.87 % 2,363 19 3.33 % Loans held for sale and investment: (1) Loans held for investment: C&I loans 9,606 76 3.14 % 7,936 50 2.51 % CRE loans 4,338 36 3.30 % 2,748 18 2.59 % REIT loans 1,379 11 3.20 % 1,327 9 2.53 % Tax-exempt loans 1,329 8 3.16 % 1,294 9 3.33 % Residential mortgage loans 6,334 44 2.77 % 5,126 34 2.70 % SBL and other 9,854 78 3.09 % 5,208 29 2.22 % Loans held for sale 222 2 3.08 % 142 1 2.92 % Total loans held for sale and investment 33,062 255 3.08 % 23,781 150 2.54 % All other interest-earning assets 2,617 20 3.19 % 2,288 10 1.51 % Total interest-earning assets $ 71,091 $ 374 2.11 % $ 51,133 $ 205 1.60 % Interest-bearing liabilities: Bank deposits: Savings and money market accounts $ 36,875 $ 11 0.12 % $ 28,744 $ — 0.01 % Interest-bearing checking accounts 2,126 6 1.15 % 164 1 1.83 % Certificates of deposit 842 3 1.58 % 883 4 1.91 % Total bank deposits 39,843 20 0.21 % 29,791 5 0.08 % Brokerage client payables 16,892 3 0.08 % 10,486 1 0.03 % Other borrowings 1,045 6 2.06 % 860 4 2.19 % Senior notes payable 2,037 23 4.44 % 2,211 25 4.49 % All other interest-bearing liabilities 1,025 8 2.39 % 602 5 1.12 % Total interest-bearing liabilities $ 60,842 $ 60 0.40 % $ 43,950 $ 40 0.34 % Net interest income $ 314 $ 165 Firmwide net interest margin (net yield on interest-earning assets) 1.77 % 1.31 % Bank segment net interest margin 2.41 % 1.92 % (1) Loans are presented net of unamortized discounts, unearned income, and deferred loan fees and costs. Nonaccrual loans are included in the average loan balances in the preceding table. Any payments received for corporate nonaccrual loans are applied entirely to principal. Interest income on residential mortgage nonaccrual loans is recognized on a cash basis. The yield on tax-exempt loans in the preceding table is presented on a taxable-equivalent basis utilizing the applicable federal statutory rates for each of the three months ended June 30, 2022 and 2021. 66 RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Management’s Discussion and Analysis Increases and decreases in interest income and interest expense result from changes in average balances (volume) of interest-earning assets and interest-bearing liabilities, as well as changes in average interest rates. The following table shows the effect that these factors had on the interest earned on our interest-earning assets and the interest incurred on our interest-bearing liabilities. The effect of changes in volume is determined by multiplying the change in volume by the previous period’s average yield/cost. Similarly, the effect of rate changes is calculated by multiplying the change in average yield/cost by the previous period’s volume. Changes attributable to both volume and rate have been allocated proportionately. Three months ended June 30, 2022 compared to 2021 Increase/(decrease) due to $ in millions Volume Rate Total Interest income: Interest-earning assets: Cash and cash equivalents $ — $ 7 $ 7 Assets segregated for regulatory purposes and restricted cash 4 21 25 Available-for-sale securities 5 12 17 Brokerage client receivables 2 3 5 Loans held for sale and investment: (1) Loans held for investment: C&I loans 11 15 26 CRE loans 11 7 18 REIT loans — 2 2 Tax-exempt loans — (1) (1) Residential mortgage loans 9 1 10 SBL and other 27 22 49 Loans held for sale 1 — 1 Total loans held for sale and investment 59 46 105 All other interest-earning assets 2 8 10 Total interest-earning assets $ 72 $ 97 $ 169 Interest expense: Interest-bearing liabilities: Bank deposits: Savings and money market accounts $ 2 $ 9 $ 11 Interest-bearing checking accounts 10 (5) 5 Certificates of deposit — (1) (1) Total bank deposits 12 3 15 Brokerage client payables — 2 2 Other borrowings 2 — 2 Senior notes payable (2) — (2) All other interest-bearing liabilities 1 2 3 Total interest-bearing liabilities $ 13 $ 7 $ 20 Change in net interest income $ 59 $ 90 $ 149 (1) Loans are presented net of unamortized discounts, unearned income, and deferred loan fees and costs. 67 RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Management’s Discussion and Analysis Nine months ended June 30, 2022 compared with the nine months ended June 30, 2021 Nine months ended June 30, 2022 2021 $ in millions Average daily balance Interest Annualized average rate Average daily balance Interest Annualized average rate Interest-earning assets: Cash and cash equivalents $ 5,819 $ 16 0.37 % $ 5,548 $ 9 0.22 % Assets segregated for regulatory purposes and restricted cash 15,879 39 0.32 % 8,307 11 0.18 % Available-for-sale securities 9,116 84 1.23 % 7,837 64 1.08 % Brokerage client receivables 2,533 66 3.50 % 2,222 56 3.38 % Loans held for sale and investment: (1) Loans held for investment: C&I loans 8,989 185 2.72 % 7,670 149 2.57 % CRE loans 3,476 76 2.90 % 2,665 52 2.57 % REIT loans 1,278 27 2.76 % 1,290 25 2.49 % Tax-exempt loans 1,305 25 3.18 % 1,253 25 3.34 % Residential mortgage loans 5,850 119 2.72 % 5,044 103 2.73 % SBL and other 7,630 152 2.62 % 4,709 80 2.24 % Loans held for sale 243 6 2.98 % 153 3 2.54 % Total loans held for sale and investment 28,771 590 2.74 % 22,784 437 2.57 % All other interest-earning assets 2,472 46 2.52 % 2,264 31 1.79 % Total interest-earning assets $ 64,590 $ 841 1.74 % $ 48,962 $ 608 1.66 % Interest-bearing liabilities: Bank deposits: Savings and money market accounts $ 33,807 $ 13 0.05 % $ 27,573 $ 2 0.01 % Interest-bearing checking accounts 833 8 1.21 % 159 2 1.88 % Certificates of deposit 806 10 1.76 % 911 13 1.90 % Total bank deposits 35,446 31 0.12 % 28,643 17 0.08 % Brokerage client payables 16,741 4 0.03 % 9,765 3 0.03 % Other borrowings 919 15 2.13 % 863 14 2.20 % Senior notes payable 2,037 69 4.44 % 2,115 73 4.62 % All other interest-bearing liabilities 787 16 2.08 % 591 8 1.05 % Total interest-bearing liabilities $ 55,930 $ 135 0.32 % $ 41,977 $ 115 0.36 % Net interest income $ 706 $ 493 Firmwide net interest margin (net yield on interest-earning assets) 1.46 % 1.35 % Bank segment net interest margin 2.14 % 1.96 % (1) Loans are presented net of unamortized discounts, unearned income, and deferred loan fees and costs. Nonaccrual loans are included in the average loan balances in the preceding table. Any payments received for corporate nonaccrual loans are applied entirely to principal. Interest income on residential mortgage nonaccrual loans is recognized on a cash basis. The yield on tax-exempt loans in the preceding table is presented on a tax-equivalent basis utilizing the applicable federal statutory rates for each of the nine months ended June 30, 2022 and 2021. 68 RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Management’s Discussion and Analysis Increases and decreases in interest income and interest expense result from changes in average balances (volume) of interest-earning assets and interest-bearing liabilities, as well as changes in average interest rates. The following table shows the effect that these factors had on the interest earned on our interest-earning assets and the interest incurred on our interest-bearing liabilities. The effect of changes in volume is determined by multiplying the change in volume by the previous period’s average yield/cost. Similarly, the effect of rate changes is calculated by multiplying the change in average yield/cost by the previous period’s volume. Changes attributable to both volume and rate have been allocated proportionately. Nine months ended June 30, 2022 compared to 2021 Increase/(decrease) due to $ in millions Volume Rate Total Interest income: Interest-earning assets: Cash and cash equivalents $ 1 $ 6 $ 7 Assets segregated for regulatory purposes and restricted cash 11 17 28 Available-for-sale securities 10 10 20 Brokerage client receivables 8 2 10 Loans held for sale and investment: (1) Loans held for investment: C&I loans 26 10 36 CRE loans 16 8 24 REIT loans — 2 2 Tax-exempt loans 2 (2) — Residential mortgage loans 17 (1) 16 SBL and other 50 22 72 Loans held for sale 2 1 3 Total loans held for sale and investment 113 40 153 All other interest-earning assets 3 12 15 Total interest-earning assets $ 146 $ 87 $ 233 Interest expense: Interest-bearing liabilities: Bank deposits: Savings and money market accounts $ 1 $ 10 $ 11 Interest-bearing checking accounts 12 (6) 6 Certificates of deposit (2) (1) (3) Total bank deposits 11 3 14 Brokerage client payables 1 — 1 Other borrowings 2 (1) 1 Senior notes payable (2) (2) (4) All other interest-bearing liabilities 2 6 8 Total interest-bearing liabilities $ 14 $ 6 $ 20 Change in net interest income $ 132 $ 81 $ 213 (1) Loans are presented net of unamortized discounts, unearned income, and deferred loan fees and costs. 69 RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Management’s Discussion and Analysis RESULTS OF OPERATIONS – PRIVATE CLIENT GROUP For an overview of our PCG segment operations, as well as a description of the key factors impacting our PCG results of operations, refer to the information presented in “Item 1 - Business” and “Item 7 - Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our 2021 Form 10-K. Operating results Three months ended June 30, Nine months ended June 30, $ in millions 2022 2021 % change 2022 2021 % change Revenues: Asset management and related administrative fees $ 1,214 $ 1,050 16 % $ 3,621 $ 2,914 24 % Brokerage revenues: Mutual and other fund products 149 167 (11) % 486 498 (2) % Insurance and annuity products 109 113 (4) % 330 320 3 % Equities, ETFs and fixed income products 115 110 5 % 351 338 4 % Total brokerage revenues 373 390 (4) % 1,167 1,156 1 % Account and service fees: Mutual fund and annuity service fees 102 105 (3) % 325 298 9 % RJBDP fees: Bank segment 79 47 68 % 178 134 33 % Third-party banks 56 18 211 % 93 58 60 % Client account and other fees 59 39 51 % 161 113 42 % Total account and service fees 296 209 42 % 757 603 26 % Investment banking 6 11 (45) % 28 33 (15) % Interest income 68 31 119 % 138 91 52 % All other 11 7 57 % 24 20 20 % Total revenues 1,968 1,698 16 % 5,735 4,817 19 % Interest expense (10) (2) 400 % (16) (7) 129 % Net revenues 1,958 1,696 15 % 5,719 4,810 19 % Non-interest expenses: Financial advisor compensation and benefits 1,187 1,082 10 % 3,605 3,053 18 % Administrative compensation and benefits 306 251 22 % 878 760 16 % Total compensation, commissions and benefits 1,493 1,333 12 % 4,483 3,813 18 % Non-compensation expenses: Communications and information processing 86 70 23 % 241 201 20 % Occupancy and equipment 50 45 11 % 146 133 10 % Business development 39 19 105 % 91 50 82 % Professional fees 19 10 90 % 41 33 24 % All other 20 24 (17) % 58 53 9 % Total non-compensation expenses 214 168 27 % 577 470 23 % Total non-interest expenses 1,707 1,501 14 % 5,060 4,283 18 % Pre-tax income $ 251 $ 195 29 % $ 659 $ 527 25 % 70 RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Management’s Discussion and Analysis Selected key metrics PCG client asset balances As of $ in billions June 30, 2022 March 31, 2022 September 30, 2021 June 30, 2021 March 31, 2021 September 30, 2020 Assets under administration (“AUA”) (1) $ 1,068.8 $ 1,198.3 $ 1,115.4 $ 1,102.9 $ 1,028.1 $ 883.3 Assets in fee-based accounts (1) (2) $ 606.7 $ 678.0 $ 627.1 $ 616.7 $ 567.6 $ 475.3 Percent of AUA in fee-based accounts 56.8 % 56.6 % 56.2 % 55.9 % 55.2 % 53.8 % (1) These metrics include the impact from the acquisition of Charles Stanley, which was completed on January 21, 2022. (2) A portion of our “Assets in fee-based accounts” is invested in “managed programs” overseen by our Asset Management segment, specifically our Asset Management Services division of RJ&A (“AMS”). These assets are included in our financial assets under management as disclosed in the “Selected key metrics” section of our “Management’s Discussion and Analysis - Results of Operations - Asset Management.” Fee-based accounts within our PCG segment are comprised of a wide array of products and programs that we offer our clients. The majority of assets in fee-based accounts within our PCG segment are invested in programs for which our financial advisors provide investment advisory services, either on a discretionary or non-discretionary basis. Administrative services for such accounts (e.g., record-keeping) are generally performed by our Asset Management segment and, as a result, a portion of the related revenue is shared with the Asset Management segment. We also offer our clients fee-based accounts that are invested in “managed programs” overseen by AMS, which is part of our Asset Management segment. Fee-billable assets invested in managed programs are included in both “Assets in fee-based accounts” in the preceding table and “Financial assets under management” in the Asset Management segment. Revenues related to managed programs are shared by our PCG and Asset Management segments. The Asset Management segment receives a higher portion of the revenues related to accounts invested in managed programs, as compared to the portion received for non-managed programs, as it is performing portfolio management services in addition to administrative services. The vast majority of the revenues we earn from fee-based accounts is recorded in “Asset management and related administrative fees” on our Condensed Consolidated Statements of Income and Comprehensive Income. Fees received from such accounts are based on the value of client assets in fee-based accounts and vary based on the specific account types in which the client invests and the level of assets in the client relationship. As fees for the majority of such accounts are billed based on balances as of the beginning of the quarter, revenues from fee-based accounts may not be immediately affected by changes in asset values, but rather the impacts are seen in the following quarter. PCG AUA decreased compared with March 31, 2022 and September 30, 2021, as the positive impacts of strong net inflows of client assets and, when compared to September 2021, the Charles Stanley acquisition, were offset by a decline in equity markets. PCG AUA and assets in fee-based accounts each declined 11% compared with March 31, 2022, which will negatively impact our asset management and related administrative fees for our fiscal fourth quarter of 2022. PCG assets in fee-based accounts continued to be a significant percentage of overall PCG AUA due to many clients’ preference for fee-based alternatives versus transaction-based accounts and, as a result, a significant portion of our PCG revenues is more directly impacted by market movements. Financial advisors June 30, 2022 March 31, 2022 December 31, 2021 September 30, 2021 June 30, 2021 Employees 3,615 3,601 3,447 3,461 3,423 Independent contractors 5,001 5,129 5,017 5,021 4,990 Total advisors 8,616 8,730 8,464 8,482 8,413 The number of financial advisors as of June 30, 2022 decreased compared to March 31, 2022, as the impacts of strong recruiting and strong retention of existing advisors were offset by the transfer of 188 advisors previously affiliated as independent contractors to our Registered Investment Advisor & Custody Services (“RCS”) division (including one firm with 166 financial advisors). We do not expect these transfers to significantly impact our results of operations. Advisors in our RCS division are not included in our financial advisor metric although their client assets, which were $109.7 billion as of June 30, 2022, $99.2 billion as of March 31, 2022 and $92.7 billion as of September 30, 2021, are included in PCG AUA. The recruiting pipeline remains robust across our affiliation options; however the timing of financial advisors joining the firm may be impacted by market uncertainty. 71 RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Management’s Discussion and Analysis Clients’ domestic cash sweep balances As of $ in millions June 30, 2022 March 31, 2022 December 31, 2021 September 30, 2021 June 30, 2021 RJBDP: Bank segment $ 36,646 $ 33,570 $ 33,097 $ 31,410 $ 29,253 Third-party banks 25,478 25,887 24,316 24,496 25,080 Subtotal RJBDP 62,124 59,457 57,413 55,906 54,333 Client Interest Program (“CIP”) 13,717 17,013 16,065 10,762 8,610 Total clients’ domestic cash sweep balances $ 75,841 $ 76,470 $ 73,478 $ 66,668 $ 62,943 Three months ended June 30, Nine months ended June 30, 2022 2021 2022 2021 Average yield on RJBDP - third-party banks 0.88 % 0.29 % 0.50 % 0.30 % A significant portion of our domestic clients’ cash is included in the RJBDP, a multi-bank sweep program in which clients’ cash deposits in their accounts are swept into interest-bearing deposit accounts at either Raymond James Bank or TriState Capital Bank, which are included in our Bank segment, or various third-party banks. Our PCG segment earns servicing fees for the administrative services we provide related to our clients’ deposits that are swept to such banks as part of the RJBDP. These servicing fees are variable in nature and fluctuate based on client cash balances in the program, as well as the level of short-term interest rates and the interest paid to clients on balances in the RJBDP. Under our current intersegment policies, the PCG segment receives the greater of a base servicing fee or a net yield equivalent to the yield that the firm would otherwise receive from third-party banks in the RJBDP. This is a different intersegment policy than that which was in place in prior years, during the last interest rate cycle. The result of this change is that the PCG segment revenues will reflect increased fee revenues as the yield from third-party banks in the program continues to rise, and the Bank segment RJBDP servicing costs reflect the market rate. The fees that the PCG segment earns from the Bank segment, as well as the servicing costs incurred on the deposits in the Bank segment, are eliminated in the computation of our consolidated results. The “Average yield on RJBDP - third party banks” in the preceding table is computed by dividing annualized RJBDP fees from third-party banks, which are net of the interest expense paid to clients by the third-party banks, by the average daily RJBDP balance at third-party banks. The average yield on RJBDP - third-party banks increased from the prior-year quarter as a result of the 25-basis point increase in the Federal Reserve’s short-term benchmark interest rate in March 2022, the 50-basis point increase in May 2022 and, to a lesser extent, the 75-basis point increase toward the end of our fiscal third quarter in June 2022. Based on these interest rate increases, as well as the additional 75-basis point increase announced by the Fed in late July 2022, we expect our average yield on RJBDP from third-party banks to approximate 1.7% for our fiscal fourth quarter of 2022. However, actual yields may be impacted by other factors, including interest rates paid to clients and the demand for our deposit sweep balances from third-party banks that participate in the RJBDP. Although client cash balances remained elevated as of June 30, 2022, balances declined compared with March 31, 2022 and have continued to decline modestly after the quarter-end during the month of July 2022. In addition, more client cash was allocated to Raymond James Bank through the RJBDP, resulting in a reduction in cash allocated to our CIP and a corresponding decrease in our assets segregated for regulatory purposes balance presented on our Condensed Consolidated Statements of Financial Condition. PCG segment results can be impacted by not only changes in the level of client cash balances, but also by the allocation of client cash balances between RJBDP and our CIP, as the PCG segment may earn different amounts from each of these client cash destinations, depending on multiple factors. Quarter ended June 30, 2022 compared with the quarter ended June 30, 2021 Net revenues of $1.96 billion increased 15% and pre-tax income of $251 million increased 29%. Asset management and related administrative fees increased $164 million, or 16%, primarily due to higher assets in fee-based accounts at the beginning of the current quarter, as well as incremental revenues related to the Charles Stanley acquisition. Brokerage revenues decreased $17 million, or 4%, primarily due to a decline in trailing placement fees from mutual and other fund products and annuity products resulting from lower asset values. Account and service fees increased $87 million, or 42%, primarily due to higher RJBDP fees from both third-party banks and our Bank segment resulting from significantly higher short-term interest rates compared with the prior-year quarter and higher 72 RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Management’s Discussion and Analysis client cash balances in the RJBDP. Client account and other fees also increased primarily as a result of incremental revenues arising from our acquisition of Charles Stanley. Net interest income increased $29 million, or 100%, primarily due to the increase in short-term interest rates. Compensation-related expenses increased $160 million, or 12%, primarily due to higher revenues, incremental expenses arising from our acquisition of Charles Stanley, the majority of the aforementioned special bonus payable to certain eligible associates to assist with inflationary cost pressures, and other increases in compensation costs to support our growth. Non-compensation expenses increased $46 million, or 27%. Business development expenses increased significantly from the low levels incurred in the prior-year quarter as a result of advisor recognition events and conferences, as well as an increase in business travel as travel restrictions have eased. Communications and information processing expenses also increased, primarily due to ongoing enhancements of our technology platforms and incremental expenses resulting from the acquisition of Charles Stanley. Nine months ended June 30, 2022 compared with the nine months ended June 30, 2021 Net revenues of $5.72 billion increased 19% and pre-tax income of $659 million increased 25%. Asset management and related administrative fees increased $707 million, or 24%, primarily due to higher assets in fee-based accounts at the beginning of each of the current-year quarterly billing periods compared with the prior-year quarterly billing periods and, to a lesser extent, incremental revenues arising from the acquisition of Charles Stanley. Account and service fees increased $154 million, or 26%, primarily due to an increase in RJBDP fees from both third-party banks and our Bank segment due to the increase in short-term rates during the current-year period, as well as higher client cash balances in the RJBDP. Client account and other fees also increased, resulting from incremental revenues from our acquisitions of NWPS Holdings, Inc. at the end of our fiscal first quarter of 2021 and Charles Stanley in our fiscal second quarter of 2022, as well as higher account maintenance fees resulting from an increase in the fee per account effective during the current fiscal-year period. Mutual fund service fees increased due to higher average mutual fund assets. Net interest income increased $38 million, or 45%, primarily due to the increase in short-term interest rates during the current-year period. Compensation-related expenses increased $670 million, or 18%, primarily due to higher revenues, incremental expenses resulting from our acquisition of Charles Stanley, and an increase in compensation costs to support our growth. Non-compensation expenses increased $107 million, or 23%, due to increases in travel and event-related expenses compared with the low levels incurred in the prior-year period, higher communications and information processing expenses primarily due to ongoing enhancements of our technology platforms, increasing occupancy rates, and incremental expenses resulting from our acquisition of Charles Stanley. 73 RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Management’s Discussion and Analysis RESULTS OF OPERATIONS – CAPITAL MARKETS For an overview of our Capital Markets segment operations, as well as a description of the key factors impacting our Capital Markets results of operations, refer to the information presented in “Item 1 - Business” and “Item 7 - Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our 2021 Form 10-K. Operating results Three months ended June 30, Nine months ended June 30, $ in millions 2022 2021 % change 2022 2021 % change Revenues: Brokerage revenues: Fixed income $ 107 $ 124 (14) % $ 352 $ 397 (11) % Equity 32 36 (11) % 112 112 — % Total brokerage revenues 139 160 (13) % 464 509 (9) % Investment banking: Merger & acquisition and advisory 147 153 (4) % 557 424 31 % Equity underwriting 36 69 (48) % 185 196 (6) % Debt underwriting 34 43 (21) % 113 126 (10) % Total investment banking 217 265 (18) % 855 746 15 % Interest income 6 4 50 % 16 12 33 % Tax credit fund revenues 21 17 24 % 71 57 25 % All other 3 3 — % 12 14 (14) % Total revenues 386 449 (14) % 1,418 1,338 6 % Interest expense (3) (3) — % (8) (7) 14 % Net revenues 383 446 (14) % 1,410 1,331 6 % Non-interest expenses: Compensation, commissions and benefits 243 256 (5) % 827 767 8 % Non-compensation expenses: Communications and information processing 22 22 — % 66 61 8 % Occupancy and equipment 10 9 11 % 29 27 7 % Business development 12 8 50 % 29 23 26 % Professional fees 10 12 (17) % 31 38 (18) % All other 25 24 4 % 79 66 20 % Total non-compensation expenses 79 75 5 % 234 215 9 % Total non-interest expenses 322 331 (3) % 1,061 982 8 % Pre-tax income $ 61 $ 115 (47) % $ 349 $ 349 — % Quarter ended June 30, 2022 compared with the quarter ended June 30, 2021 Net revenues of $383 million decreased 14% and pre-tax income of $61 million decreased 47%. Brokerage revenues decreased $21 million, or 13%, primarily due to a decrease in fixed income brokerage revenues resulting from a more challenging market environment compared with a strong prior-year quarter. We expect our fixed income brokerage revenues for our fiscal fourth quarter of 2022 to benefit from our acquisition of SumRidge Partners, which closed on July 1, 2022. Investment banking revenues decreased $48 million, or 18%, primarily due to a decline in merger & acquisition and advisory revenues compared with a strong prior-year quarter. Merger & acquisition activity and underwriting activity during the current quarter continued to be negatively impacted by a challenging market environment resulting from macroeconomic uncertainty and geopolitical concerns. Our investment banking pipeline remains strong and, in part, reflects the investments we have made over the past several years, including our fiscal 2021 acquisitions of Financo and Cebile; however, continued market uncertainty could delay, or ultimately prevent, the closing of transactions, which could negatively impact our results for the remainder of fiscal 2022. Compensation-related expenses decreased $13 million, or 5%, due to the impact of lower revenues. 74 RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Management’s Discussion and Analysis Non-compensation expenses increased $4 million, or 5%, primarily attributable to an increase in business development expenses resulting from increased travel and conference-related expenses as travel restrictions have eased. Nine months ended June 30, 2022 compared with the nine months ended June 30, 2021 Net revenues of $1.41 billion increased 6% and pre-tax income of $349 million was flat compared with the prior-year period. Investment banking revenues increased $109 million, or 15%, due to a significant increase in merger & acquisition and advisory revenues, which reflected high levels of client activity in the fiscal first quarter of 2022. Debt and equity underwritings decreased compared with the prior-year period and were negatively impacted by market uncertainty during our fiscal second and third quarters of 2022. Brokerage revenues decreased $45 million, or 9%, due to a decrease in fixed income brokerage revenues, which remained solid but were lower than the prior-year period as a result of challenging trading conditions compared with a strong prior-year period. Compensation-related expenses increased $60 million, or 8%, primarily due to the increase in revenues, as well as higher compensation costs to support our growth. Non-compensation expenses increased $19 million, or 9%, primarily due to increased travel and event-related expenses, as well as an increase in expenses to support our growth, partially offset by lower investment banking deal expenses due to lower underwriting revenues compared with the prior-year period. RESULTS OF OPERATIONS – ASSET MANAGEMENT For an overview of our Asset Management segment operations as well as a description of the key factors impacting our Asset Management results of operations, refer to the information presented in “Item 1 - Business” and “Item 7 - Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our 2021 Form 10-K. Operating results Three months ended June 30, Nine months ended June 30, $ in millions 2022 2021 % change 2022 2021 % change Revenues: Asset management and related administrative fees: Managed programs $ 145 $ 148 (2) % $ 445 $ 414 7 % Administration and other 75 70 7 % 228 193 18 % Total asset management and related administrative fees 220 218 1 % 673 607 11 % Account and service fees 5 4 25 % 17 13 31 % All other 3 3 — % 8 9 (11) % Net revenues 228 225 1 % 698 629 11 % Non-interest expenses: Compensation, commissions and benefits 49 43 14 % 142 138 3 % Non-compensation expenses: Communications and information processing 13 12 8 % 39 35 11 % Investment sub-advisory fees 38 33 15 % 114 91 25 % All other 35 32 9 % 100 90 11 % Total non-compensation expenses 86 77 12 % 253 216 17 % Total non-interest expenses 135 120 13 % 395 354 12 % Pre-tax income $ 93 $ 105 (11) % $ 303 $ 275 10 % 75 RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Management’s Discussion and Analysis Selected key metrics Managed programs Management fees recorded in our Asset Management segment are generally calculated as a percentage of the value of our fee-billable financial assets under management (“AUM”). These AUM include the portion of fee-based AUA in our PCG segment that is invested in programs overseen by our Asset Management segment (included in the “AMS” line of the following table), as well as retail accounts managed on behalf of third-party institutions, institutional accounts and proprietary mutual funds that we manage (collectively included in the “Carillon Tower Advisers” line of the following table). Revenues related to fee-based AUA in our PCG segment are shared by the PCG and Asset Management segments, the amount of which depends on whether or not clients are invested in assets that are in managed programs overseen by our Asset Management segment and the administrative services provided (see our “Management’s Discussion and Analysis - Results of Operations - Private Client Group” for more information). Our AUM in AMS are impacted by market fluctuations and net inflows or outflows of assets, including transfers between fee-based accounts and transaction-based accounts within our PCG segment. Revenues earned by Carillon Tower Advisers for retail accounts managed on behalf of third-party institutions, institutional accounts and our proprietary mutual funds are recorded entirely in the Asset Management segment. Our AUM in Carillon Tower Advisers are impacted by market and investment performance and net inflows or outflows of assets, including the impact of acquisitions. Fees for our managed programs are generally collected quarterly. Approximately 70% of these fees are based on balances as of the beginning of the quarter, approximately 10% are based on balances as of the end of the quarter, and approximately 20% are based on average daily balances throughout the quarter. Financial assets under management $ in billions June 30, 2022 March 31, 2022 September 30, 2021 June 30, 2021 March 31, 2021 September 30, 2020 AMS (1) $ 125.4 $ 140.1 $ 134.4 $ 131.8 $ 121.2 $ 102.2 Carillon Tower Advisers 67.2 64.0 67.8 69.2 66.6 59.5 Subtotal financial assets under management 192.6 204.1 202.2 201.0 187.8 161.7 Less: Assets managed for affiliated entities (10.2) (10.4) (10.3) (10.0) (9.6) (8.6) Total financial assets under management $ 182.4 $ 193.7 $ 191.9 $ 191.0 $ 178.2 $ 153.1 (1) Represents the portion of our PCG segment fee-based AUA (as disclosed in “Assets in fee-based accounts” in the “Selected key metrics - PCG client asset balances” section of our “Management’s Discussion and Analysis - Results of Operations - Private Client Group”) that is invested in managed programs overseen by the Asset Management segment. Activity (including activity in assets managed for affiliated entities) Three months ended June 30, Nine months ended June 30, $ in billions 2022 2021 2022 2021 Financial assets under management at beginning of period $ 204.1 $ 187.8 $ 202.2 $ 161.7 Carillon Tower Advisers: Acquisition of Chartwell Investment Partners (1) 9.8 — 9.8 — Other - net inflows/(outflows) 0.3 (0.3) (0.9) 0.8 AMS - net inflows 1.4 4.5 8.4 9.8 Net market appreciation/(depreciation) in asset values (23.0) 9.0 (26.9) 28.7 Financial assets under management at end of period $ 192.6 $ 201.0 $ 192.6 $ 201.0 (1) Represents June 1, 2022 assets under management of Chartwell Investment Partners, a registered investment advisor acquired as part of the TriState Capital acquisition. See Note 3 of the Notes to Condensed Consolidated Financial Statements of this Form 10-Q for further information about this acquisition. AMS See “Management’s Discussion and Analysis - Results of Operations - Private Client Group” for further information about our retail client assets, including those fee-based assets invested in programs managed by AMS. 76 RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Management’s Discussion and Analysis Carillon Tower Advisers Assets managed by Carillon Tower Advisers include assets managed by its subsidiaries and affiliates: Eagle Asset Management, Scout Investments, Reams Asset Management (a division of Scout Investments), ClariVest Asset Management, Cougar Global Investments, and Chartwell Investment Partners, which was acquired on June 1, 2022 in connection with our acquisition of TriState Capital. The following table presents Carillon Tower Advisers’ AUM by objective, excluding assets for which it does not exercise discretion, as well as the approximate average client fee rate earned on such assets. $ in billions June 30, 2022 Average fee rate Equity $ 24.4 0.56 % Fixed income 35.0 0.20 % Balanced 7.8 0.33 % Total financial assets under management $ 67.2 0.35 % Non-discretionary asset-based programs The following table includes assets held in certain non-discretionary asset-based programs for which the Asset Management segment does not exercise discretion but provides administrative support (including for affiliated entities). The vast majority of these assets are also included in our PCG segment fee-based AUA (as disclosed in “Assets in fee-based accounts” in the “Selected key metrics - PCG client asset balances” section of our “Management’s Discussion and Analysis - Results of Operations - Private Client Group”). $ in billions June 30, 2022 March 31, 2022 September 30, 2021 June 30, 2021 March 31, 2021 September 30, 2020 Total assets $ 339.7 $ 379.7 $ 365.3 $ 361.5 $ 334.2 $ 280.6 The decrease in assets as of June 30, 2022 compared to March 31, 2022 was largely due to a decline in equity markets during the quarter. Administrative fees associated with these programs are predominantly based on balances at the beginning of the quarter. RJ Trust The following table includes assets held in asset-based programs in RJ Trust (including those managed for affiliated entities). $ in billions June 30, 2022 March 31, 2022 September 30, 2021 June 30, 2021 March 31, 2021 September 30, 2020 Total assets $ 7.6 $ 8.4 $ 8.1 $ 8.1 $ 7.8 $ 7.1 Quarter ended June 30, 2022 compared with the quarter ended June 30, 2021 Net revenues of $228 million increased 1% while pre-tax income of $93 million decreased 11%. Asset management and related administrative fees increased $2 million, or 1%, driven by a higher beginning balance of assets in non-discretionary asset-based programs and financial assets under management at AMS, partially offset by lower average financial assets under management at Carillon Tower Advisers. We expect the declines in financial assets under management and assets in non-discretionary asset-based programs during the quarter, which occurred due to the decline in equity markets, to negatively affect our fiscal fourth quarter revenues, as the majority of our asset management and related administrative fees are billed based on balances as of the beginning of the quarter. Despite positive net inflows at Carillon Tower Advisers during the quarter and the positive impact of acquiring Chartwell (as of June 1, 2022), Carillon Tower Advisers continues to be challenged by the industry shift from actively managed investment strategies to passive investment strategies. Compensation expenses increased $6 million, or 14%, resulting from increased costs to support our growth, as well as one month of incremental compensation expenses related to Chartwell. Non-compensation expenses increased $9 million, or 12%, primarily due to higher investment sub-advisory fees, resulting from the increase in assets under management in sub-advised programs. 77 RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Management’s Discussion and Analysis Nine months ended June 30, 2022 compared with the nine months ended June 30, 2021 Net revenues of $698 million increased 11% and pre-tax income of $303 million increased 10%. Asset management and related administrative fees increased $66 million, or 11%, driven by higher financial assets under management and higher assets in non-discretionary asset-based programs at the beginning of each of the current-year quarterly billing periods compared with the prior-year quarterly billing periods. Compensation expenses increased $4 million, or 3%, and non-compensation expenses increased $37 million, or 17%. The increase in non-compensation expenses was largely due to higher investment sub-advisory fees, resulting from the increase in assets under management in sub-advised programs. RESULTS OF OPERATIONS – BANK For an overview of our Bank segment operations, as well as a description of the key factors impacting our Bank segment results of operations, refer to the information presented in “Item 1 - Business” and “Item 7 - Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our 2021 Form 10-K. Our Bank segment results include the results of TriState Capital Bank since the acquisition date of June 1, 2022. See Note 3 of the Notes to Condensed Consolidated Financial Statements of this Form 10-Q for information regarding this acquisition. Operating results Three months ended June 30, Nine months ended June 30, $ in millions 2022 2021 % change 2022 2021 % change Revenues: Interest income $ 296 $ 172 72 % $ 682 $ 505 35 % Interest expense (26) (11) 136 % (46) (32) 44 % Net interest income 270 161 68 % 636 473 34 % All other 6 8 (25) % 20 23 (13) % Net revenues 276 169 63 % 656 496 32 % Non-interest expenses: Compensation and benefits 21 13 62 % 48 38 26 % Non-compensation expenses: Bank loan provision/(benefit) for credit losses 56 (19) NM 66 (37) NM RJBDP fees to PCG 79 47 68 % 178 134 33 % All other 46 24 92 % 105 75 40 % Total non-compensation expenses 181 52 248 % 349 172 103 % Total non-interest expenses 202 65 211 % 397 210 89 % Pre-tax income $ 74 $ 104 (29) % $ 259 $ 286 (9) % Quarter ended June 30, 2022 compared with the quarter ended June 30, 2021 Net revenues of $276 million increased 63%, while pre-tax income of $74 million decreased 29%. Net interest income increased $109 million, or 68%, due to the increase in short-term interest rates, higher average interest-earning assets, as well as one month of incremental net interest income from the acquisition of TriState Capital Bank. The increase in average interest-earning assets was primarily driven by growth in securities-based loans and residential mortgage loans to PCG clients, as well as increases in average corporate loans and available-for-sale securities. The net interest margin increased to 2.41% from 1.92% for the prior-year quarter. We anticipate that the Bank segment net interest margin for our fiscal fourth quarter of 2022 will approximate 2.7% and will be positively impacted by the Fed’s short-term interest rate increases enacted during our fiscal third quarter and in late July 2022. We anticipate the Bank segment’s net interest income to benefit from a full quarter’s impact of TriState Capital Bank results. In addition, given that a significant portion of our interest-earning assets are sensitive to changes in market interest rates, we expect our net interest earnings to also be favorably impacted by any additional increases in short-term interest rates that may occur. The bank loan provision for credit losses was $56 million for the current quarter, compared with a benefit for credit losses of $19 million for the prior-year quarter. The current quarter provision includes the initial provision for credit losses of $26 78 RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Management’s Discussion and Analysis million recorded on non-PCD loans acquired as part of the TriState Capital acquisition, as well as the impact of both loan growth at Raymond James Bank and a weaker macroeconomic outlook. The prior-year quarter benefit primarily reflected an improved economic forecast, as well as improved credit ratings within our corporate loan portfolio. Compensation expenses increased $8 million, or 62%, primarily due to incremental expenses from the acquisition of TriState Capital. Non-compensation expenses, excluding the bank loan provision/(benefit) for credit losses, increased $54 million, or 76%, primarily due to an increase in RJBDP fees paid to PCG, incremental expenses associated with TriState Capital (including a $5 million initial provision for credit losses on TriState Capital’s unfunded lending commitments), and a provision for credit losses on unfunded lending commitments unrelated to the acquisition compared with a benefit for the prior-year quarter. RJBDP fees to PCG increased $32 million, or 68%, primarily due to an increase in short-term interest rates as well as an increase in client cash swept to Raymond James Bank as part of the RJBDP. Under our current intersegment policies, the Bank segment incurs the higher of a base servicing fee to PCG on RJBDP deposits it receives in this program, or a net yield equivalent to the yield that the firm would otherwise receive from third-party banks in the RJBDP. This is a different intersegment policy than that which was in place in prior years, during the last interest rate cycle. The result of this intersegment change is that the Bank segment expense to PCG for servicing these cash deposits will increase as rates rise, reflecting a market rate, with the PCG segment receiving increased fee revenues. The servicing fee that the Bank segment incurs on these RJBDP cash sweep deposits, as well as the fee revenues in the PCG segment, are eliminated in the computation of our consolidated results. Nine months ended June 30, 2022 compared with the nine months ended June 30, 2021 Net revenues of $656 million increased 32%, while pre-tax income of $259 million decreased 9%. Net interest income increased $163 million, or 34%, due to the increase in short-term interest rates, higher average interest-earning assets, as well as one month of incremental net interest income from the acquisition of TriState Capital Bank. The increase in average interest-earning assets was primarily driven by significant growth in securities-based loans and residential mortgage loans to PCG clients, as well as higher average corporate loans and available-for-sale securities. The net interest margin increased to 2.14% from 1.96% for the prior-year period. The bank loan provision for credit losses was $66 million for the current-year period, compared with a benefit for credit losses of $37 million for the prior-year period. The current-year period provision includes the aforementioned initial provision for credit losses of $26 million recorded on non-PCD loans acquired as part of the TriState Capital acquisition, as well as the impact of both loan growth at Raymond James Bank and a weaker macroeconomic outlook. The prior year benefit was largely attributable to improved economic forecasts utilized in our model at that time, including improved outlooks on unemployment and gross domestic product, which favorably impacted most of our loan portfolios at that time, as well as improved credit ratings within our corporate loan portfolio. Non-compensation expenses, excluding the bank loan provision/(benefit) for credit losses, increased $74 million, or 35%, primarily due to an increase in RJBDP fees paid to PCG, one month of incremental expenses associated with TriState Capital (including a $5 million initial provision for credit losses on TriState Capital’s unfunded lending commitments), and a provision for credit losses on unfunded lending commitments unrelated to the acquisition compared with a benefit for the prior-year period. RJBDP fees to PCG increased $44 million, or 33%, due to an increase in short-term interest rates as well as an increase in client cash swept to Raymond James Bank as part of the RJBDP. These fees are eliminated in the computation of our consolidated results. 79 RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Management’s Discussion and Analysis RESULTS OF OPERATIONS – OTHER This segment includes our private equity investments, interest income on certain corporate cash balances, certain costs incurred in acquisition activities, and certain corporate overhead costs of RJF that are not allocated to other segments, including the interest costs on our public debt. For an overview of our Other segment operations, refer to the information presented in “Item 1 - Business” and “Item 7 - Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our 2021 Form 10-K. Operating results Three months ended June 30, Nine months ended June 30, $ in millions 2022 2021 % change 2022 2021 % change Revenues: Interest income $ 6 $ — NM $ 10 $ 6 67 % Gains/(losses) on private equity investments (3) 24 NM — 56 (100) % All other — 4 (100) % 7 7 — % Total revenues 3 28 (89) % 17 69 (75) % Interest expense (24) (26) (8) % (71) (75) (5) % Net revenues (21) 2 NM (54) (6) (800) % Non-interest expenses: Compensation and all other 43 38 13 % 110 102 8 % Losses on extinguishment of debt — 98 (100) % — 98 (100) % Total non-interest expenses 43 136 (68) % 110 200 (45) % Pre-tax loss $ (64) $ (134) 52 % $ (164) $ (206) 20 % Quarter ended June 30, 2022 compared with the quarter ended June 30, 2021 The pre-tax loss of $64 million was $70 million lower than the loss in the prior-year quarter. Net revenues decreased $23 million due to a net loss of $3 million related to our private equity investments compared with $24 million of gains in the prior-year quarter, partially offset by the impact of higher interest income largely due to higher short-term interest rates. Non-interest expenses decreased $93 million, primarily due to $98 million of losses on extinguishment of debt in the prior-year quarter related to the early-redemption our $250 million of 5.625% senior notes due 2024 and our $500 million of 3.625% senior notes due 2026. Offsetting this decrease was an increase in costs incurred in acquisition activities in the current quarter, which primarily included legal and other professional expenses and other costs incurred to effect our acquisition of TriState Capital, which was completed on June 1, 2022, and to a lesser extent expenses associated with our acquisitions of Charles Stanley and SumRidge Partners, which were completed in January 2022 and July 2022, respectively. Nine months ended June 30, 2022 compared with the nine months ended June 30, 2021 The pre-tax loss of $164 million was $42 million lower than the loss in the prior-year period. Net revenues decreased $48 million, primarily due to lower private equity gains compared with the prior-year period. The prior-year period included $56 million of private equity valuation gains, of which $20 million were attributable to noncontrolling interests and were offset within other expenses, whereas the current year private equity results net to an insignificant amount. Offsetting the negative impact of the lower private equity valuation gains, interest income increased compared with the prior-year period, largely due to the increase in short-term interest rates, and interest expense decreased due to lower interest expense on senior notes payable compared with the prior-year period. Non-interest expenses decreased $90 million, or 45%, primarily due to the aforementioned losses on extinguishment of debt recorded in the prior-year period, as well as the decrease in amounts attributable to noncontrolling interests. These decreases were partially offset by an increase in costs incurred in acquisition activities, primarily associated with our current-year acquisitions of Charles Stanley and TriState Capital, as well as our July 1, 2022 acquisition of SumRidge Partners. 80 RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Management’s Discussion and Analysis CERTAIN STATISTICAL DISCLOSURES BY BANK HOLDING COMPANIES We are required to provide certain statistical disclosures as a bank holding company under the SEC’s Industry Guide 3. The following table provides certain of those disclosures. Three months ended June 30, Nine months ended June 30, 2022 2021 2022 2021 Return on assets 1.5% 2.2% 2.0% 2.4% Return on equity 13.3% 15.9% 16.3% 17.4% Average equity to average assets 11.3% 13.6% 12.0% 14.0% Dividend payout ratio 24.6% 17.9% 20.4% 16.9% Return on assets is computed by dividing annualized net income available to common shareholders for the period indicated by average assets for each respective period. Average assets for the quarter is computed by adding total assets as of the date indicated to the prior quarter-end total and dividing by two. Average assets for the year-to-date period is computed by adding total assets as of each quarter-end date during the year-to-date period to the beginning of the year total and dividing by four. Return on equity is computed by dividing annualized net income available to common shareholders for the period indicated by average common equity for each respective period. Average equity for the quarter is computed by adding total equity attributable to RJF as of the date indicated to the prior quarter-end total and dividing by two. Average equity for the year-to-date period is computed by adding total equity attributable to RJF as of each quarter-end date during the year-to-date period to the beginning of the year total and dividing by four. Average equity to average assets is computed by dividing average common equity by average assets, as calculated in accordance with the previous explanations. Dividend payout ratio is computed by dividing dividends declared per common share during the period by earnings per diluted common share for the period. Refer to the “Net interest analysis” and “Risk management - Credit risk” sections of this MD&A and to the Notes to Condensed Consolidated Financial Statements of this Form 10-Q for the other required disclosures. STATEMENT OF FINANCIAL CONDITION ANALYSIS The assets on our Condensed Consolidated Statements of Financial Condition consisted primarily of cash and cash equivalents, assets segregated for regulatory purposes and restricted cash (primarily segregated for the benefit of clients), receivables including bank loans, financial instruments held either for trading purposes or as investments, goodwill and identifiable intangible assets, and other assets. A significant portion of our assets were liquid in nature, providing us with flexibility in financing our business. Total assets of $86.11 billion as of June 30, 2022 were $24.22 billion, or 39%, greater than our total assets as of September 30, 2021. Our acquisition of TriState Capital during fiscal year 2022 brought a significant amount of assets and liabilities onto our balance sheet. The significant impacts on our June 30, 2022 assets which are directly attributable to this acquisition include an $11.79 billion increase in bank loans, net, a $1.56 billion increase in available-for-sale securities, and a $725 million increase in goodwill and intangible assets resulting from the acquisition. Assets segregated for regulatory purposes and restricted cash increased $4.90 billion, primarily due to an increase in client cash balances and the addition of $2.30 billion of segregated cash balances resulting from the Charles Stanley acquisition. The acquisition of Charles Stanley also contributed $221 million to the increase in goodwill and identifiable intangible assets as of June 30, 2022 compared with September 30, 2021. Bank loans, net also increased due to $5.06 billion in loan growth exclusive of the loans acquired on the closing date of TriState Capital, consisting of increases in corporate, residential, and securities-based loans. Available-for-sale securities also increased $589 million exclusive of the portfolio acquired from TriState Capital on the closing date. Partially offsetting these increases was a decrease in cash and cash equivalents of $1.24 billion, partially a result of our acquisitions, as well as $100 million of RJF share repurchases. See Note 3 of the Notes to Condensed Consolidated Financial Statements of this Form 10-Q for additional information on our acquisitions. As of June 30, 2022, our total liabilities of $76.62 billion were $23.03 billion, or 43%, greater than our total liabilities as of September 30, 2021. The increase in total liabilities was primarily due to an increase in bank deposits of $17.39 billion, which 81 RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Management’s Discussion and Analysis includes $12.79 billion as a result of our acquisition of TriState Capital, as well as an increase in bank deposits unrelated to the acquisition of $4.56 billion. Brokerage client payables increased $5.06 billion, related to the increase in client cash balances as of June 30, 2022, primarily due to an increase in client cash held in our CIP of $2.96 billion, as well as the acquisition of Charles Stanley, which resulted in an increase of $2.41 billion. Other borrowings increased $495 million, primarily reflecting the additional FHLB borrowings and subordinated note of TriState Capital. Partially offsetting these increases was a decrease in accrued compensation, commissions, and benefits. LIQUIDITY AND CAPITAL RESOURCES Liquidity and capital are essential to our business. The primary goal of our liquidity management activities is to ensure adequate funding to conduct our business over a range of economic and market environments. We seek to manage capital levels to support execution of our business strategy, provide financial strength to our subsidiaries, and maintain sustained access to the capital markets, while at the same time meeting our regulatory capital requirements and conservative internal management targets. Liquidity and capital resources are provided primarily through our business operations and financing activities. Financing activities could include bank borrowings, collateralized financing arrangements or additional capital raising activities under our “universal” shelf registration statement. We believe our existing assets, most of which are liquid in nature, together with funds generated from operations and available from committed and uncommitted financing facilities, provide adequate funds for continuing operations at current levels of activity in the short-term. We also believe that we will be able to continue to meet our long-term cash requirements due to our strong financial position and ability to access capital from financial markets. Liquidity and capital management Senior management establishes our liquidity and capital management frameworks. Our liquidity and capital management frameworks are overseen by the RJF Asset and Liability Committee, a senior management committee that develops and executes strategies and policies to manage our liquidity risk and interest rate risk, as well as provides oversight over the firm’s investments. The liquidity management framework includes senior management’s review of short- and long-term cash flow forecasts, review of capital expenditures, monitoring of the availability of alternative sources of financing, and daily monitoring of liquidity in our significant subsidiaries. Our decisions on the allocation of resources to our business units consider, among other factors, projected profitability, cash flow, risk, and future liquidity needs. Our treasury department assists in evaluating, monitoring and controlling the impact that our business activities have on our financial condition and liquidity, and also maintains our relationships with various lenders. The objective of our liquidity management framework is to support the successful execution of our business strategies while ensuring ongoing and sufficient liquidity. Our capital planning and capital risk management processes are governed by the Capital Planning Committee (“CPC”), a senior management committee that provides oversight on our capital planning and ensures that our strategic planning and risk management processes are integrated into the capital planning process. The CPC meets at least quarterly to review key metrics related to the firm’s capital, such as debt structure and capital ratios; to analyze potential and emerging risks to capital; to oversee our annual firmwide capital stress test; and to propose capital actions to the Board of Directors, such as declaring dividends, repurchasing securities, and raising capital. To ensure that we have sufficient capital to absorb unanticipated losses, the firm adheres to capital risk appetite statements and tolerances set in excess of regulatory minimums, which are established by the CPC and approved by the Board of Directors. We conduct enterprise-wide capital stress testing to ensure that we maintain adequate capital to adhere to our established tolerances under multiple scenarios, including a stressed scenario. Cash flows Cash and cash equivalents (excluding amounts segregated for regulatory purposes and restricted cash) decreased $1.24 billion to $5.96 billion during the nine months ended June 30, 2022, primarily due to the purchase of U.S. Treasuries, which were largely segregated for regulatory purposes as of June 30, 2022, as well as investments in bank loans and available-for-sale securities. In addition, we completed our acquisitions of Charles Stanley for cash consideration of £277 million ($376 million as of January 21, 2022) and TriState Capital, which included cash consideration of $484 million (including a $125 million note issued to TriState Capital prior to the acquisition) during the nine months ended June 30, 2022. Offsetting these cash outflows was the impact of positive net income during the period, as well as a significant increase in client cash balances which increased our brokerage client payables and bank deposits. 82 RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Management’s Discussion and Analysis Sources of liquidity Approximately $2.03 billion of our total June 30, 2022 cash and cash equivalents included cash held at the parent company, which included cash loaned to RJ&A. These amounts include the impact of significant dividends from RJ&A during the nine months ended June 30, 2022, as well as dividends from RJF’s other subsidiaries. As of June 30, 2022, RJF had loaned $1.47 billion to RJ&A (such amount is included in the RJ&A cash balance in the following table), which RJ&A has invested on behalf of RJF in cash and cash equivalents or otherwise deployed in its normal business activities. The following table presents our holdings of cash and cash equivalents. $ in millions June 30, 2022 RJF $ 578 RJ&A 1,988 Raymond James Bank 1,118 TriState Capital Bank 461 Raymond James Ltd. (“RJ Ltd.”) 947 Charles Stanley Group Limited 115 Raymond James Financial Services, Inc. 148 Carillon Tower Advisers 77 Other subsidiaries 526 Total cash and cash equivalents $ 5,958 RJF maintained depository accounts at Raymond James Bank with a balance of $256 million as of June 30, 2022. The portion of this total that was available on demand without restrictions, which amounted to $178 million as of June 30, 2022, is reflected in the RJF cash balance and excluded from Raymond James Bank’s cash balance in the preceding table. A large portion of the RJ Ltd. cash and cash equivalents balance as of June 30, 2022 was held to meet regulatory requirements and was not available for use by the parent. In addition to the cash balances described, we have various other potential sources of cash available to the parent from subsidiaries, as described in the following section. Liquidity available from subsidiaries Liquidity is principally available to RJF, the parent company, from RJ&A and Raymond James Bank. Certain of our broker-dealer subsidiaries are subject to the requirements of the Uniform Net Capital Rule (Rule 15c3-1) under the Securities and Exchange Act of 1934. As a member firm of the Financial Industry Regulatory Authority (“FINRA”), RJ&A is subject to FINRA’s capital requirements, which are substantially the same as Rule 15c3-1. Rule 15c3-1 provides for an “alternative net capital requirement,” which RJ&A has elected. Regulations require that minimum net capital, as defined, be equal to the greater of $1.5 million or 2% of aggregate debit items arising from client balances. In addition, covenants in RJ&A’s committed financing facilities require its net capital to be a minimum of 10% of aggregate debit items. At June 30, 2022, RJ&A significantly exceeded the minimum regulatory requirements, the covenants in its financing arrangements pertaining to net capital, as well as its internally-targeted net capital tolerances despite significant dividends to RJF during the nine months ended June 30, 2022. FINRA may impose certain restrictions, such as restricting withdrawals of equity capital, if a member firm were to fall below a certain threshold or fail to meet minimum net capital requirements which may result in RJ&A limiting dividends it would otherwise remit to RJF. We evaluate regulatory requirements, loan covenants and certain internal tolerances when determining the amount of liquidity available to RJF from RJ&A. Raymond James Bank may pay dividends to RJF without prior approval of its regulator as long as the dividends do not exceed the sum of its current calendar year and the previous two calendar years’ retained net income, and it maintains its targeted regulatory capital ratios. Dividends may be limited to the extent that capital is needed to support balance sheet growth. Although we have liquidity available to us from our other subsidiaries, the available amounts are not as significant as those previously described and, in certain instances, may be subject to regulatory requirements. 83 RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Management’s Discussion and Analysis Borrowings and financing arrangements Committed financing arrangements Our ability to borrow is dependent upon compliance with the conditions in our various loan agreements and, in the case of secured borrowings, collateral eligibility requirements. Our committed financing arrangements primarily consist of a tri-party repurchase agreement (i.e., securities sold under agreements to repurchase) and, in the case of our $500 million revolving credit facility agreement (the “Credit Facility”), an unsecured line of credit. The required market value of the collateral associated with the tri-party repurchase agreement ranges from 105% to 125% of the amount financed. The following table presents our most significant committed financing arrangements with third-party lenders, which we generally utilize to finance a portion of our fixed income trading instruments, and the outstanding balances related thereto. June 30, 2022 $ in millions RJ&A RJF Total Total number of arrangements Financing arrangement: Committed secured $ 100 $ — $ 100 1 Committed unsecured 200 300 500 1 Total committed financing arrangements $ 300 $ 300 $ 600 2 Outstanding borrowing amount: Committed secured $ — $ — $ — Committed unsecured — — — Total outstanding borrowing amount $ — $ — $ — Our committed unsecured financing arrangement in the preceding table represents our Credit Facility, which provides for maximum borrowings of up to $500 million, with a sublimit of $300 million for RJF. RJ&A may borrow up to $500 million under the Credit Facility, depending on the amount of outstanding borrowings by RJF. The variable rate facility fee on our Credit Facility, which is applied to the committed amount, decreased to 0.150% per annum as of June 30, 2022 from 0.175% per annum as of September 30, 2021, as a result of Moody’s Investor Services (“Moody’s”) upgrade of our credit ratings in February 2022. For additional details on our issuer and senior long-term debt ratings see our credit ratings table within this section below. For additional details on our committed unsecured financing arrangement, see our discussion of the Credit Facility in Note 15 of the Notes to Condensed Consolidated Financial Statements of this Form 10-Q and Note 16 of the Notes to Consolidated Financial Statements of our 2021 Form 10-K. Uncommitted financing arrangements Our uncommitted financing arrangements are in the form of secured lines of credit, secured bilateral or tri-party repurchase agreements, or unsecured lines of credit. Our arrangements with third-party lenders are generally utilized to finance a portion of our fixed income securities or for cash management purposes. Our uncommitted secured financing arrangements generally require us to post collateral in excess of the amount borrowed and are generally collateralized by RJ&A-owned securities or by securities that we have received as collateral under reverse repurchase agreements (i.e., securities purchased under agreements to resell). As of June 30, 2022, we had outstanding borrowings under one uncommitted secured borrowing arrangement out of a total of 12 uncommitted financing arrangements (eight uncommitted secured and four uncommitted unsecured). However, lenders are under no contractual obligation to lend to us under uncommitted credit facilities. The following table presents our borrowings on uncommitted financing arrangements, all of which were in the form of repurchase agreements in RJ&A and were included in “Collateralized financings” on our Condensed Consolidated Statements of Financial Condition. $ in millions June 30, 2022 Outstanding borrowing amount: Uncommitted secured $ 100 Uncommitted unsecured — Total outstanding borrowing amount $ 100 84 RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Management’s Discussion and Analysis The average daily balance outstanding during the five most recent quarters, the maximum month-end balance outstanding during the quarter and the period-end balances for repurchase agreements and reverse repurchase agreements are detailed in the following table. Repurchase transactions Reverse repurchase transactions For the quarter ended: ($ in millions) Average daily balance outstanding Maximum month-end balance outstanding during the quarter End of period balance outstanding Average daily balance outstanding Maximum month-end balance outstanding during the quarter End of period balance outstanding June 30, 2022 $ 203 $ 276 $ 100 $ 238 $ 300 $ 168 March 31, 2022 $ 271 $ 334 $ 140 $ 211 $ 304 $ 221 December 31, 2021 $ 247 $ 258 $ 203 $ 306 $ 305 $ 204 September 30, 2021 $ 220 $ 234 $ 205 $ 269 $ 286 $ 279 June 30, 2021 $ 194 $ 185 $ 185 $ 283 $ 339 $ 289 Other borrowings and collateralized financings We had $1.25 billion in FHLB borrowings outstanding at June 30, 2022, comprised of floating-rate and fixed-rate advances. As of June 30, 2022, our FHLB borrowings consisted of $850 million of floating-rate advances at interest rates which reset daily and mature in December 2023, $200 million of overnight floating-rate advances, which are available for borrowing through May 2023 at interest rates which reset daily, and $200 million of fixed-rate advances which 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 SOFR. 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. At June 30, 2022, we had pledged $7.34 billion of residential mortgages and CRE loans with the FHLB as security for the repayment of these borrowings and had an additional $4.57 billion in immediate credit available based on collateral pledged. As of June 30, 2022, with the pledge of additional collateral, we had additional credit availability from certain FHLB member banks. See Note 15 of the Notes to Condensed Consolidated Financial Statements of this Form 10-Q and Note 16 of the Notes to Consolidated Financial Statements of our 2021 Form 10-K for additional information regarding these borrowings. We are eligible to participate in the Federal Reserve’s discount window program; however, we do not view borrowings from the Federal Reserve as a primary source of funding. The credit available in this program is subject to periodic review, may be terminated or reduced at the discretion of the Federal Reserve, and is secured by certain pledged C&I loans. As part of the acquisition of TriState Capital, we assumed, as of the closing date, TriState Capital’s subordinated notes due 2030, with an aggregate principal amount of $98 million. The subordinated notes incur interest at a fixed rate of 5.75% until May 2025 and thereafter at a variable interest rate based on LIBOR, or an appropriate alternative reference rate. We may redeem up to $60 million of these subordinated notes beginning in May 2025 and $38 million beginning in August 2025 at a redemption price equal to 100% of the principal amount of the notes to be redeemed plus accrued and unpaid interest thereon to the redemption date. See Note 15 of the Notes to Condensed Consolidated Financial Statements of this Form 10-Q for additional information regarding these borrowings. We may act as an intermediary between broker-dealers and other financial institutions whereby we borrow securities from one broker-dealer and then lend them to another. Where permitted, we have also loaned, to broker-dealers and other financial institutions, securities owned by clients or the firm. We account for each of these types of transactions as collateralized agreements and financings, with the outstanding balance of $337 million as of June 30, 2022 related to the securities loaned included in “Collateralized financings” on our Condensed Consolidated Statements of Financial Condition of this Form 10-Q. See Note 7 of the Notes to Condensed Consolidated Financial Statements of this Form 10-Q for more information on our collateralized agreements and financings. Senior notes payable At June 30, 2022, we had aggregate outstanding senior notes payable of $2.04 billion which, exclusive of any unaccreted premiums or discounts and debt issuance costs, was comprised of $500 million par 4.65% senior notes due 2030, $800 million par 4.95% senior notes due 2046, and $750 million par 3.75% senior notes due 2051. See Note 16 of the Notes to Condensed Consolidated Financial Statements of this Form 10-Q and Note 17 of the Notes to the Consolidated Financial Statements of our 2021 Form 10-K for additional information on senior notes payable. 85 RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Management’s Discussion and Analysis Credit ratings Our issuer and senior long-term debt ratings as of the most current report are detailed in the following table. Rating Agency Rating Outlook Fitch Ratings, Inc. A- Stable Moody’s A3 Stable Standard & Poor’s Ratings Services BBB+ Positive Our current long-term debt ratings depend upon a number of factors, including industry dynamics, operating and economic environment, operating results, operating margins, earnings trends and volatility, balance sheet composition, liquidity and liquidity management, capital structure, overall risk management, business diversification and market share, and competitive position in the markets in which we operate. Deterioration in any of these factors could impact our credit ratings. Any rating downgrades could increase our costs in the event we were to obtain additional financing. Should our credit rating be downgraded prior to a public debt offering, it is probable that we would have to offer a higher rate of interest to bond holders. A downgrade to below investment grade may make a public debt offering difficult to execute on terms we would consider to be favorable. A downgrade below investment grade could result in the termination of certain derivative contracts and the counterparties to the derivative instruments could request immediate payment or demand immediate and ongoing overnight collateralization on our derivative instruments in liability positions. A credit downgrade could damage our reputation and result in certain counterparties limiting their business with us, result in negative comments by analysts, potentially negatively impact investors’ and/or clients’ perception of us, and cause a decline in our stock price. None of our borrowing arrangements contains a condition or event of default related to our credit ratings. However, a credit downgrade would result in the firm incurring a higher facility fee on the Credit Facility, in addition to triggering a higher interest rate applicable to any borrowings outstanding on that line as of and subsequent to such downgrade. Conversely, an improvement in RJF’s current credit rating could have a favorable impact on the facility fee, as well as the interest rate applicable to any borrowings on such line. Other sources and uses of liquidity We have company-owned life insurance policies which are utilized to fund certain non-qualified deferred compensation plans and other employee benefit plans. Certain of our non-qualified deferred compensation plans and other employee benefit plans are employee-directed while others are company-directed. Of the company-owned life insurance policies which fund these plans, certain policies could be used as a source of liquidity for the firm. Those policies against which we could readily borrow had a cash surrender value of $751 million as of June 30, 2022, comprised of $472 million related to employee-directed plans and $279 million related to company-directed plans, and we were able to borrow up to 90%, or $676 million, of the June 30, 2022 total without restriction. To effect any such borrowing, the underlying investments would be converted to money market investments, therefore requiring us to take market risk related to the employee-directed plans. There were no borrowings outstanding against any of these policies as of June 30, 2022. On May 12, 2021, we filed a “universal” shelf registration statement with the SEC pursuant to which we can issue debt, equity and other capital instruments if and when necessary or perceived by us to be opportune. Subject to certain conditions, this registration statement will be effective through May 12, 2024. As of the date of this report, we have utilized approximately $300 million of cash at the parent company to fund acquisitions during our fiscal fourth quarter of 2022. As part of our ongoing operations, we also enter into contractual arrangements that may require future cash payments, including certificates of deposit, lease obligations and other contractual arrangements, such as for software and various services. See Notes 13 and 14 of the Notes to Condensed Consolidated Financial Statements of this Form 10-Q for information regarding our lease obligations and certificates of deposit, respectively. We have entered into investment commitments, lending commitments and other commitments to extend credit for which we are unable to reasonably predict the timing of future payments. See Note 18 of the Notes to Condensed Consolidated Financial Statements of this Form 10-Q for further information. 86 RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Management’s Discussion and Analysis REGULATORY Refer to the discussion of the regulatory environment in which we operate and the impact on our operations of certain rules and regulations in “Item 1 - Business - Regulation” and “Item 7 - Management’s Discussion and Analysis of Financial Condition and Results of Operations - Regulatory” of our 2021 Form 10-K. RJF and many of its subsidiaries are each subject to various regulatory capital requirements. As of June 30, 2022, all of our active regulated domestic and international subsidiaries had net capital in excess of minimum requirements. In addition, RJF, Raymond James Bank, and TriState Capital Bank were categorized as “well-capitalized” as of June 30, 2022. The maintenance of certain risk-based and other regulatory capital levels could influence various capital allocation decisions impacting one or more of our businesses. However, due to the current capital position of RJF and its regulated subsidiaries, we do not anticipate these capital requirements will have a negative impact on our future business activities. See Note 23 of the Notes to Condensed Consolidated Financial Statements of this Form 10-Q for further information on regulatory capital requirements. Banking supervision and regulation As part of the acquisition of TriState Capital on June 1, 2022, we acquired a new, separately chartered depository institution, TriState Capital Bank. TriState Capital Bank is a FDIC-insured non-member bank that is primarily supervised by both the FDIC and the Pennsylvania Department of Banking and Securities. TriState Capital Bank is also subject to supervision by Consumer Financial Protection Bureau. Alternative reference rate transition Central banks and regulators in the U.S. and other jurisdictions are working to implement the transition to suitable replacements for the LIBOR . In December 2021, our FHLB borrowings and SBL converted from LIBOR-based interest rates to SOFR-based interest rates, resulting in an insignificant impact on interest income, interest expense, and cash flows. We continue to evaluate the effect of the alternative reference rate transition and at this time, given current economic conditions, we expect minimal financial impact. Refer to “Item 1 - Business - Regulation” of our 2021 Form 10-K f or additional information regarding the alternative reference rate transition and our planned response. CRITICAL ACCOUNTING ESTIMATES The condensed consolidated financial statements are prepared in accordance with GAAP, which require us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the reported amounts of revenues and expenses during any reporting period in our condensed consolidated financial statements. Management has established detailed policies and control procedures intended to ensure the appropriateness of such estimates and assumptions and their consistent application from period to period. For a description of our significant accounting policies, see Note 2 of the Notes to Consolidated Financial Statements of our 2021 Form 10-K. Due to their nature, estimates involve judgment based upon available information. Actual results or amounts could differ from estimates and the difference could have a material impact on the consolidated financial statements. Therefore, understanding these critical accounting estimates is important in understanding our reported results of operations and financial position. We believe that of our accounting estimates and assumptions, those described in the following sections involve a high degree of judgment and complexity. Valuation of financial instruments The use of fair value to measure financial instruments, with related gains or losses recognized on our Condensed Consolidated Statements of Income and Comprehensive Income, is fundamental to our financial statements and our risk management processes. See Note 2 of the Notes to Consolidated Financial Statements of our 2021 Form 10-K for a discussion of our fair value accounting policies regarding financial instruments and financial instrument liabilities. See Note 4 of the Notes to Condensed Consolidated Financial Statements of this Form 10-Q for additional information on our financial instruments at fair value. 87 RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Management’s Discussion and Analysis Loss provisions Loss provisions for legal and regulatory matters The recorded amount of liabilities related to legal and regulatory matters is subject to significant management judgment. For a description of the significant estimates and judgments associated with establishing such accruals, see the “Contingent liabilities” section of Note 2 of the Notes to Consolidated Financial Statements of our 2021 Form 10-K. In addition, refer to Note 18 of the Notes to Condensed Consolidated Financial Statements of this Form 10-Q for information regarding legal and regulatory matter contingencies as of June 30, 2022. Allowance for credit losses We evaluate certain of our financial assets, including bank loans, to estimate an allowance for credit losses based on expected credit losses over a financial asset’s lifetime. Our estimates are based on ongoing evaluations of our financial assets, the related credit risk characteristics, and the overall economic and environmental conditions affecting the financial assets. Our process for determining the allowance for credit losses includes a complex analysis of several quantitative and qualitative factors requiring significant management judgment due to matters that are inherently uncertain. This uncertainty can produce volatility in our allowance for credit losses. In addition, the allowance for credit losses could be insufficient to cover actual losses. In such an event, any losses in excess of our allowance would result in a decrease in our net income, as well as a decrease in the level of regulatory capital. See Note 2 of the Notes to Consolidated Financial Statements of our 2021 Form 10-K for information regarding our methodologies and assumptions used in estimating the allowance for credit losses. See Note 8 of the Notes to Condensed Consolidated Financial Statements of this Form 10-Q for information regarding our allowance for credit losses related to bank loans as of June 30, 2022, including the impact to our allowance for credit losses resulting from our acquisition of TriState Capital, as well as further information regarding the methodologies and assumptions used in estimated the allowance for credit losses for loans at TriState Capital Bank. Business combinations We generally account for our acquisitions as business combinations under GAAP, using the acquisition method of accounting, whereby the assets acquired, including separately identifiable intangible assets, and liabilities assumed are recorded at their acquisition-date estimated fair values. Any excess purchase consideration over the acquisition-date fair values of the net assets acquired is recorded as goodwill. The acquisition method requires us to make significant estimates and assumptions in determining the fair value of assets acquired and liabilities assumed. Significant judgment is required in estimating the fair value of identifiable intangible assets and in assigning the useful lives of the definite-lived identifiable intangible assets, which impact the periods over which amortization of those assets are recognized. Accordingly, we typically obtain the assistance of third-party valuation specialists. The fair value estimates are based on available historical information and on future expectations and assumptions deemed reasonable by management, but are inherently uncertain as they pertain to forward-looking views of our businesses, client behavior, and market conditions. We consider the income, market and cost approaches and place reliance on the approach or approaches deemed most appropriate to estimate the fair value of intangible assets. Significant estimates and assumptions inherent in the valuations reflect a consideration of other marketplace participants and include the amount and timing of future cash flows (including expected growth rates and profitability), technology life cycles, the economic barriers to entry and the discount rate applied to the cash flows. Unanticipated market or macroeconomic events and circumstances may occur that could affect the accuracy or validity of the estimates and assumptions. Refer to Note 3 of the Notes to Condensed Consolidated Financial Statements of this Form 10-Q for more information on our valuation methods and the results of applying the acquisition method of accounting, including the estimated fair values of the assets acquired and liabilities assumed and, where relevant, the estimated remaining useful lives. Our ongoing accounting for goodwill and intangible assets acquired requires us to make significant estimates and assumptions as we exercise judgement to evaluate these assets for impairment. Our processes and accounting policies for evaluating impairments are further described in Note 2 of the Notes to Consolidated Financial Statements of our 2021 Form 10‑K. 88 RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Management’s Discussion and Analysis RECENT ACCOUNTING DEVELOPMENTS In March 2022, the Financial Accounting Standards Board issued new guidance related to troubled debt restructurings and disclosures regarding write-offs of financing receivables (ASU 2022-02), amending guidance related to the measurement of credit losses on financial instruments (ASU 2016-13). The amendment eliminates the accounting guidance for troubled debt restructurings for creditors, but requires enhanced disclosures for certain loan refinancings and restructurings by creditors when a borrower is experiencing financial difficulty, and requires disclosure of current-period gross write-offs by year of origination for financing receivables. This new guidance is effective for our fiscal year beginning on October 1, 2023 and will be applied on a prospective basis. Although permitted, we do not currently plan to early adopt. We do not expect the adoption of this new guidance to have a material impact on our financial position and results of operations. RISK MANAGEMENT Risks are an inherent part of our business and activities. Management of risk is critical to our fiscal soundness and profitability. Our risk management processes are multi-faceted and require communication, judgment and knowledge of financial products and markets. We have a formal Enterprise Risk Management (“ERM”) program to assess and review aggregate risks across the firm. Our management takes an active role in the ERM process, which requires specific administrative and business functions to participate in the identification, assessment, monitoring and control of various risks. The principal risks related to our business activities are market, credit, liquidity, operational, model, and compliance. Governance Our Board of Directors, including its Audit and Risk Committee, oversees the firm’s management and mitigation of risk, reinforcing a culture that encourages ethical conduct and risk management throughout the firm. Senior management communicates and reinforces this culture through three lines of risk management and a number of senior-level management committees. Our first line of risk management, which includes all of our businesses, owns its risks and is responsible for identifying, mitigating, and escalating risks arising from its day-to-day activities. The second line of risk management, which includes Compliance and Risk Management, advises our client-facing businesses and other first-line functions in identifying, assessing and mitigating risk. The second line of risk management tests and monitors the effectiveness of controls, as deemed necessary, and escalates risks when appropriate to senior management and the Board of Directors. The third line of risk management, Internal Audit, independently reviews activities conducted by the previous lines of risk management to assess their management and mitigation of risk, providing additional assurance to the Board of Directors and senior management, with a view toward enhancing our oversight, management, and mitigation of risk. Market risk Market risk is our risk of loss resulting from the impact of changes in market prices on our trading inventory, derivatives and investment positions. We have exposure to market risk primarily through our broker-dealer trading operations and our banking operations. Our broker-dealer subsidiaries, primarily RJ&A, trade debt obligations and equity securities and maintain trading inventories to ensure availability of securities and to facilitate client transactions. Inventory levels may fluctuate daily as a result of client demand. We also hold investments within our available-for-sale securities portfolio, and from time-to-time may hold SBA loan securitizations not yet transferred. Our primary market risks relate to interest rates, equity prices, and foreign exchange rates. Interest rate risk results from changes in levels of interest rates, the volatility of interest rates, mortgage prepayment speeds and credit spreads. Equity risk results from changes in prices of equity securities. Foreign exchange risk results from changes in spot prices, forward prices and volatility of foreign exchange rates. See Note 2 of the Notes to Consolidated Financial Statements of our 2021 Form 10-K and Notes 4, 5 and 6 of the Notes to Condensed Consolidated Financial Statements of this Form 10-Q for fair value and other information regarding our trading inventories, available-for-sale securities and derivative instruments. We regularly enter into underwriting commitments and, as a result, we may be subject to market risk on any unsold shares issued in the offerings to which we are committed. Risk exposure is controlled by limiting our participation, the transaction size or through the syndication process. 89 RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Management’s Discussion and Analysis The Market Risk Management department is responsible for measuring, monitoring, and reporting market risks associated with the firm’s trading and derivative portfolios. While Market Risk Management maintains ongoing communication with the revenue-generating business units, it is independent of such units. Interest rate risk Trading activities We are exposed to interest rate risk as a result of our trading inventory (primarily comprised of fixed income instruments) in our Capital Markets segment. Changes in value of our trading inventory may result from fluctuations in interest rates, credit spreads, equity prices, macroeconomic factors, investor expectations or risk appetites, liquidity, as well as dynamic relationships among these factors. We actively manage interest rate risk arising from our fixed income trading inventory through the use of hedging strategies utilizing U.S. Treasuries, futures contracts, liquid spread products and derivatives. Our primary method for controlling risks within trading inventories is through the use of dollar-based and exposure-based limits. A hierarchy of limits exists at multiple levels, including firm, business unit, desk (e.g., for equities, corporate bonds, municipal bonds), product sub-type (e.g., below-investment-grade positions) and, at times, at the individual position. For derivative positions, which are primarily comprised of interest rate swaps, we have established limits based on a number of factors, including interest rate, foreign exchange spot and forward rates, spread, ratio, basis, and volatility risk. Derivative exposures are also monitored both for the total portfolio and by maturity periods. Trading positions and derivatives are monitored against these limits through daily reports that are distributed to senior management. During volatile markets, we may temporarily reduce limits and/or choose to pare our trading inventories to reduce risk. We monitor Value-at-Risk (“VaR”) for all of our trading portfolios on a daily basis for risk management purposes and as a result of applying the Fed’s Market Risk Rule (“MRR”) for the purpose of calculating our capital ratios. The MRR, also known as the “Risk-Based Capital Guidelines: Market Risk” rule released by the Fed, the Office of the Comptroller of the Currency and the FDIC, requires us to calculate VaR for all of our trading portfolios, including fixed income, equity, derivatives, and foreign exchange instruments. VaR is an appropriate statistical technique for estimating potential losses in trading portfolios due to typical adverse market movements over a specified time horizon with a suitable confidence level. However, there are inherent limitations of utilizing VaR including: historical movements in markets may not accurately predict future market movements; VaR does not take into account the liquidity of individual positions; VaR does not estimate losses over longer time horizons; and extended periods of one-directional markets potentially distort risks within the portfolio. In addition, should markets become more volatile, actual trading losses may exceed VaR results presented on a single day and might accumulate over a longer time horizon. As a result, management complements VaR with sensitivity analysis and stress testing and employs additional controls such as a daily review of trading results, review of aged inventory, independent review of pricing, monitoring of concentrations and review of issuer ratings. To calculate VaR, we use models which incorporate historical simulation. This approach assumes that historical changes in market conditions, such as in interest rates and equity prices, are representative of future changes. Simulation is based on daily market data for the previous twelve months. VaR is reported at a 99% confidence level for a one-day time horizon. Assuming that future market conditions change as they have in the past twelve months, we would expect to incur losses greater than those predicted by our one-day VaR estimates about once every 100 trading days, or about three times per year on average. For regulatory capital calculation purposes, we also report VaR and Stressed VaR numbers for a ten-day time horizon. The VaR model is independently reviewed by our Model Risk Management function. See “Item 7 - Management’s Discussion and Analysis of Financial Condition and Results of Operations - Risk management - Model risk” of our 2021 Form 10-K for further information. The modeling of the risk characteristics of trading positions involves a number of assumptions and approximations that management believes to be reasonable. However, there is no uniform industry methodology for estimating VaR, and different assumptions or approximations could produce materially different VaR estimates. As a result, VaR results are more reliable when used as indicators of risk levels and trends within a firm than as a basis for inferring differences in risk-taking across firms. 90 RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Management’s Discussion and Analysis The following table sets forth the high, low, period-end and average daily one-day VaR for all of our trading portfolios, including fixed income and equity instruments, and for our derivatives for the periods and dates indicated. Nine months ended June 30, 2022 Period-end VaR Three months ended June 30, Nine months ended June 30, $ in millions High Low June 30, 2022 September 30, 2021 $ in millions 2022 2021 2022 2021 Daily VaR $ 2 $ 1 $ 2 $ 1 Average daily VaR $ 1 $ 2 $ 1 $ 5 Average daily VaR was lower during the nine months ended June 30, 2022 compared with the nine months ended June 30, 2021 due to the impact of scenarios of elevated volatility as a result of the COVID-19 pandemic (which commenced in March 2020) on our VaR model during the prior-year period. The Fed’s MRR requires us to perform daily back-testing procedures for our VaR model, whereby we compare each day’s projected VaR to its regulatory-defined daily trading losses, which exclude fees, commissions, reserves, net interest income and intraday trading. Regulatory-defined daily trading losses are used to evaluate the performance of our VaR model and are not comparable to our actual daily net revenues. Based on these daily “ex ante” versus “ex post” comparisons, we determine whether the number of times that regulatory-defined daily trading losses exceed VaR is consistent with our expectations at a 99% confidence level. During the three and nine months ended June 30, 2022, our regulatory-defined daily losses in our trading portfolios exceeded our predicted VaR on four and nine occasions, respectively, due to the volatility and market uncertainty related to the Fed’s short-term interest rate increases. Separately, RJF provides additional market risk disclosures to comply with the MRR, including 10-day VaR and 10-day Stressed VaR, which are available on our website at https://www.raymondjames.com/investor-relations/financial-information/filings-and-reports within “Other Reports and Information.” Banking operations Our Bank segment maintains an interest-earning asset portfolio that is comprised of cash, C&I loans, commercial and residential real estate loans, REIT loans, tax-exempt loans, and SBL loans, as well as securities held in the available-for-sale securities portfolio, and SBA loan securitizations. These interest-earning assets are primarily funded by client deposits. Based on the current asset portfolio, our banking operations are subject to interest rate risk. We analyze interest rate risk based on forecasted net interest income, which is the net amount of interest received and interest paid, and the net portfolio valuation, both across a range of interest rate scenarios. One of the objectives of the Asset and Liability Committee is to manage the sensitivity of net interest income to changes in market interest rates. This committee uses several measures to monitor and limit interest rate risk in our banking operations, including scenario analysis and economic value of equity. The methods used to measure this sensitivity are described in “Item 7 - Management’s Discussion and Analysis of Financial Condition and Results of Operations - Risk management - Market risk” of our 2021 Form 10-K. We utilize a hedging strategy using interest rate swaps in our banking operations as a result of our asset and liability management process. For further information regarding this hedging strategy, see Note 2 of the Notes to Consolidated Financial Statements of our 2021 Form 10-K and Note 15 of the Notes to Condensed Consolidated Financial Statements of this Form 10-Q. To ensure that we remain within the tolerances established for net interest income, a sensitivity analysis of net interest income to interest rate conditions is estimated under a variety of scenarios. We use simulation models and estimation techniques to assess the sensitivity of net interest income to movements in interest rates. The model estimates the sensitivity by calculating interest income and interest expense in a dynamic balance sheet environment using current repricing, prepayment, and reinvestment of cash flow assumptions over a 12-month time horizon. Assumptions used in the model include interest rate movement, the slope of the yield curve, and balance sheet composition and growth. The model also considers interest rate-related risks such as pricing spreads, pricing of client cash accounts, and prepayments. Various interest rate scenarios are modeled in order to determine the effect those scenarios may have on net interest income. The following table is an analysis of our banking operations’ estimated net interest income over a 12-month period based on instantaneous shifts in interest rates (expressed in basis points) using our previously described asset/liability model, which assumes a dynamic balance sheet and that interest rates do not decline below zero. While not presented, additional rate scenarios are performed, including interest rate ramps and yield curve shifts that may more realistically mimic the speed of potential interest rate movements. We also perform simulations on time horizons of up to five years to assess longer-term impacts to various interest rate scenarios. On a quarterly basis, we test expected model results to actual performance. 91 RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Management’s Discussion and Analysis Additionally, any changes made to key assumptions in the model are documented and approved by the Asset and Liability Committee. Instantaneous changes in rate (1) Net interest income ($ in millions) Projected change in net interest income +200 $1,757 4% +100 $1,726 2% 0 $1,695 —% -100 $1,519 (10)% (1) Our 0-basis point scenario was based on interest rates as of June 30, 2022 and did not include the impact of the Fed’s July 2022 increase in short-term interest rates. Refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Net interest analysis” of this Form 10-Q for a discussion of the impact changes in short-term interest rates could have on the consolidated firm’s operations. The following table shows the contractual maturities of our bank loan portfolio at June 30, 2022, including contractual principal repayments. This table does not include any estimates of prepayments, which could shorten the average loan lives and cause the actual timing of the loan repayments to differ significantly from those shown in the table. Due in $ in millions One year or less > One year – five years > Five years Total C&I loans $ 907 $ 7,104 $ 2,886 $ 10,897 CRE loans 931 5,162 261 6,354 REIT loans 177 1,202 37 1,416 Tax-exempt loans 4 136 1,207 1,347 Residential mortgage loans 15 34 6,679 6,728 SBL and other 15,044 258 10 15,312 Total loans held for investment 17,078 13,896 11,080 42,054 Held for sale loans — — 166 166 Total loans held for sale and investment $ 17,078 $ 13,896 $ 11,246 $ 42,220 The following table shows the distribution of the recorded investment of those bank loans that mature in more than one year between fixed and adjustable interest rate loans at June 30, 2022. Interest rate type $ in millions Fixed Adjustable Total C&I loans $ 695 $ 9,295 $ 9,990 CRE loans 318 5,105 5,423 REIT loans — 1,239 1,239 Tax-exempt loans 1,343 — 1,343 Residential mortgage loans 230 6,483 6,713 SBL and other 1 267 268 Total loans held for investment 2,587 22,389 24,976 Held for sale loans 1 165 166 Total loans held for sale and investment $ 2,588 $ 22,554 $ 25,142 Contractual loan terms for C&I, CRE, REIT, residential mortgage, and SBL loans may include an interest rate floor, cap and/or fixed interest rates for a certain period of time, which would impact the timing of the interest rate reset for the respective loan. See the discussion within the “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Risk management - Credit risk - Risk monitoring process” section of this Form 10-Q for additional information regarding our interest-only residential mortgage loan portfolio. In our available-for-sale securities portfolio, we hold primarily fixed-rate agency-backed MBS and agency-backed CMOs which are carried at fair value on our Condensed Consolidated Statements of Financial Condition, with changes in the fair value of the portfolio recorded through OCI on our Condensed Consolidated Statements of Income and Comprehensive Income. At June 30, 2022, our available-for-sale securities portfolio had a fair value of $10.46 billion with a weighted-average yield of 1.76%. The effective duration of our available-for-sale securities portfolio as of June 30, 2022 was approximately 3.98, where duration is defined as the approximate percentage change in price for a 100-basis point change in rates. See Note 5 of the Notes to Condensed Consolidated Financial Statements of this Form 10-Q for additional information. 92 RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Management’s Discussion and Analysis Equity price risk We are exposed to equity price risk as a result of our capital markets activities. Our broker-dealer activities are generally client-driven, and we carry equity securities as part of our trading inventory to facilitate such activities, although the amounts are not as significant as our fixed income trading inventory. We attempt to reduce the risk of loss inherent in our inventory of equity securities by monitoring those security positions each day and establishing position limits. Equity securities held in our trading inventory are generally included in VaR. In addition, we have a private equity portfolio, included in “Other investments” on our Condensed Consolidated Statements of Financial Condition, which is primarily comprised of investments in third-party funds. See Note 4 of the Notes to Condensed Consolidated Financial Statements of this Form 10-Q for additional information on this portfolio. Foreign exchange risk We are subject to foreign exchange risk due to our investments in foreign subsidiaries as well as transactions and resulting balances denominated in a currency other than the U.S. dollar. For example, our bank loan portfolio includes loans which are denominated in Canadian dollars, totaling $1.53 billion and $1.29 billion at June 30, 2022 and September 30, 2021, respectively, when converted to the U.S. dollar. A majority of such loans are held in a Canadian subsidiary of Raymond James Bank, which is discussed in the following sections. Investments in foreign subsidiaries Raymond James Bank has an investment in a Canadian subsidiary, resulting in foreign exchange risk. To mitigate its foreign exchange risk, Raymond James Bank utilizes short-term, forward foreign exchange contracts. These derivatives are primarily accounted for as net investment hedges in the condensed consolidated financial statements. See Note 2 of the Notes to Consolidated Financial Statements of our 2021 Form 10-K and Note 6 of the Notes to Condensed Consolidated Financial Statements of this Form 10-Q for further information regarding these derivatives. At June 30, 2022, we had foreign exchange risk in our investment in RJ Ltd. of CAD $366 million and in our investment in Charles Stanley of £277 million, which were not hedged. All of our other investments in subsidiaries located in Europe are not hedged and we do not believe we had material foreign exchange risk either individually, or in the aggregate, pertaining to these subsidiaries as of June 30, 2022. Foreign exchange gains/losses related to our foreign investments are primarily reflected in OCI on our Condensed Consolidated Statements of Income and Comprehensive Income. See Note 19 of the Notes to Condensed Consolidated Financial Statements of this Form 10-Q for further information regarding our components of OCI. Transactions and resulting balances denominated in a currency other than the U.S. dollar We are subject to foreign exchange risk due to our holdings of cash and certain other assets and liabilities resulting from transactions denominated in a currency other than the U.S. dollar. Any currency-related gains/losses arising from these foreign currency denominated balances are reflected in “Other” revenues in our Condensed Consolidated Statements of Income and Comprehensive Income. The foreign exchange risk associated with a portion of such transactions and balances denominated in foreign currency are mitigated utilizing short-term, forward foreign exchange contracts. Such derivatives are not designated hedges and therefore, the related gains/losses are included in “Other” revenues in our Condensed Consolidated Statements of Income and Comprehensive Income. See Note 6 of the Notes to Condensed Consolidated Financial Statements of this Form 10-Q for information regarding our derivatives. Credit risk Credit risk is the risk of loss due to adverse changes in a borrower’s, issuer’s or counterparty’s ability to meet its financial obligations under contractual or agreed-upon terms. The nature and amount of credit risk depends on the type of transaction, the structure and duration of that transaction, and the parties involved. Credit risk is an integral component of the profit assessment of lending and other financing activities. See further discussion of our credit risk, including how we manage such risk, in “Item 7 - Management’s Discussion and Analysis of Financial Condition and Results of Operations - Risk management - Credit risk” of our 2021 Form 10-K. 93 RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Management’s Discussion and Analysis Brokerage activities We are engaged in various trading and brokerage activities in which our counterparties primarily include broker-dealers, banks and other financial institutions. We are exposed to risk that these counterparties may not fulfill their obligations. In addition, certain commitments, including underwritings, may create exposure to individual issuers and businesses. The risk of default depends on the creditworthiness of the counterparty and/or the issuer of the instrument. In addition, we may be subject to concentration risk if we hold large positions in or have large commitments to a single counterparty, borrower, or group of similar counterparties or borrowers (e.g., in the same industry). We seek to mitigate these risks by imposing and monitoring individual and aggregate position limits within each business segment for each counterparty, conducting regular credit reviews of financial counterparties, reviewing security, derivative and loan concentrations, holding and calculating the fair value of collateral on certain transactions and conducting business through clearing organizations, which may guarantee performance. See Note 2 of the Notes to Consolidated Financial Statements of our 2021 Form 10-K and Notes 6 and 7 of the Notes to Condensed Consolidated Financial Statements of this Form 10-Q for further information about our credit risk mitigation related to derivatives and collateralized agreements. Our client activities involve the execution, settlement, and financing of various transactions on behalf of our clients. Client activities are transacted on either a cash or margin basis. Credit exposure results from client margin loans, which are monitored daily and are collateralized by the securities in the clients’ accounts. We monitor exposure to industry sectors and individual securities and perform analysis on a daily basis in connection with our margin lending activities. We adjust our margin requirements if we believe our risk exposure is not appropriate based on market conditions. In addition, when clients execute a purchase, we are at some risk that the client will default on their financial obligation associated with the trade. If this occurs, we may have to liquidate the position at a loss. Further information about our determination of the allowance for credit losses associated with certain of our brokerage lending activities is described in Note 2 of the Notes to the Consolidated Financial Statements of our 2021 Form 10-K. We offer loans to financial advisors for recruiting and retention purposes. We have credit risk and may incur a loss primarily in the event that such borrower is no longer affiliated with us. See Note 2 of the Notes to the Consolidated Financial Statements of our 2021 Form 10-K and Note 9 of the Notes to Condensed Consolidated Financial Statements of this Form 10-Q for further information about our loans to financial advisors. Banking activities Our Bank segment has a substantial loan portfolio. Our strategy for credit risk management related to bank loans includes well-defined credit policies, uniform underwriting criteria, and ongoing risk monitoring and review processes for all credit exposures. The strategy also includes diversification on a geographic, industry and client level, regular credit examinations and management reviews of all corporate and tax-exempt loans as well as individual delinquent residential loans. The credit risk management process also includes an annual independent review of the credit risk monitoring process that performs assessments of compliance with credit policies, risk ratings, and other critical credit information. We seek to identify potential problem loans early, record any necessary risk rating changes and charge-offs promptly, and maintain appropriate reserve levels for expected losses. We utilize a comprehensive credit risk rating system to measure the credit quality of individual corporate and tax-exempt loans and related unfunded lending commitments, including the probability of default and/or loss given default of each corporate and tax-exempt loan and commitment outstanding. For our SBL and residential mortgage loans, we utilize the credit risk rating system used by bank regulators in measuring the credit quality of each homogeneous class of loans. In evaluating credit risk, we consider trends in loan performance, the level of allowance coverage relative to similar banking institutions, industry or client concentrations, the loan portfolio composition and macroeconomic factors (both current and forecasted). These factors have a potentially negative impact on loan performance and net charge-offs. While our bank loan portfolio is diversified, a significant downturn in the overall economy, deterioration in real estate values or a significant issue within any sector or sectors where we have a concentration will generally result in large provisions for credit losses and/or charge-offs. We determine the allowance required for specific loan grades based on relative risk characteristics of the loan portfolio. On an ongoing basis, we evaluate our methods for determining the allowance for each class of loans and make enhancements we consider appropriate. Our allowance for credit losses methodology is described in Note 8 of the Notes to Condensed Consolidated Financial Statements of this Form 10-Q and Note 2 of the Notes to the Consolidated Financial Statements of our 2021 Form 10-K. As our bank loan portfolio is segregated into six portfolio segments, likewise, the allowance for credit losses is segregated by these same segments. See “Item 7 - Management’s Discussion and Analysis of Financial Condition and Results of Operations - Risk management - Credit risk” of our 2021 Form 10-K for further information about the risk characteristics relevant to each portfolio segment. 94 RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Management’s Discussion and Analysis Our allowance for credit losses as a percentage of total bank loans held for investment was 0.90% and 1.27% at June 30, 2022 and September 30, 2021, respectively. The bank loan provision for credit losses for the three and nine months ended June 30, 2022 was $56 million and $66 million, respectively, compared to a benefit for credit losses of $19 million and $37 million for the three and nine months ended June 30, 2021, respectively. See further explanation of the credit loss provision in “Management’s Discussion and Analysis - Results of Operations - Bank” of this Form 10-Q and Note 8 of the Notes to Condensed Consolidated Financial Statements of this Form 10-Q for further information about our allowance for credit losses. The level of charge-off activity is a factor that is considered in evaluating the potential severity of future credit losses. The following table presents net loan (charge-offs)/recoveries and the percentage of net loan (charge-offs)/recoveries to the average outstanding loan balances on an annualized basis by loan portfolio segment. Three months ended June 30, Nine Months Ended June 30, 2022 2021 2022 2021 $ in millions Net loan (charge-off)/recovery amount % of avg. outstanding loans Net loan (charge-off)/recovery amount % of avg. outstanding loans Net loan (charge-off)/recovery amount % of avg. outstanding loans Net loan (charge-off)/recovery amount % of avg. outstanding loans C&I loans $ (11) 0.46 % $ (1) 0.05 % $ (14) 0.21 % $ (3) 0.05 % CRE loans 1 0.09 % (3) 0.44 % 1 0.04 % (3) 0.15 % Residential mortgage loans — — % — — % 1 0.02 % — — % Total loans held for sale and investment $ (10) 0.12 % $ (4) 0.07 % $ (12) 0.06 % $ (6) 0.04 % The level of nonperforming loans is another indicator of potential future credit losses. The following table presents the nonperforming loans balance and total allowance for credit losses for the periods presented. June 30, 2022 September 30, 2021 $ in millions Nonperforming loan balance Allowance for credit losses balance Nonperforming loan balance Allowance for credit losses balance C&I loans $ 46 $ 207 $ 39 $ 191 CRE loans 29 93 20 66 REIT loans — 23 — 22 Tax-exempt loans — 2 — 2 Residential mortgage loans 15 48 15 35 SBL and other — 4 — 4 Total nonperforming loans held for investment (1) $ 90 $ 377 $ 74 $ 320 Total nonperforming loans as a % of total loans held for sale and investment 0.21 % 0.29 % (1) Total nonperforming loans held for investment at June 30, 2022 and September 30, 2021 included $78 million and $61 million of nonperforming loans, respectively, which were current pursuant to their contractual terms. The nonperforming loan balances in the preceding table exclude $7 million and $8 million as of June 30, 2022 and September 30, 2021, respectively, of residential TDRs which were returned to accrual status in accordance with our policy. The following table presents total nonperforming assets, including the nonperforming loans in the preceding table and, when applicable, other real estate acquired in the settlement of residential mortgages, as a percentage of our Bank segment’s total assets. $ in millions June 30, 2022 September 30, 2021 Total nonperforming assets $ 92 $ 74 Total nonperforming assets as a % of the Bank Segment’s total assets 0.17 % 0.20 % Although our nonperforming assets as a percentage of the Bank segment’s assets remained low as of June 30, 2022, any prolonged period of market deterioration could result in an increase in our nonperforming assets, an increase in our allowance for credit losses and/or an increase in net charge-offs in future periods, although the extent will depend on future developments that are highly uncertain. 95 RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Management’s Discussion and Analysis Loan underwriting policies Our underwriting policies for the major types of bank loans are described in “Item 7 - Management’s Discussion and Analysis of Financial Condition and Results of Operations - Risk management - Credit risk” of our 2021 Form 10-K. Risk monitoring process Another component of credit risk strategy for our bank loan portfolio is the ongoing risk monitoring and review processes, including our internal loan review process, as well as our rigorous processes to manage and limit credit losses arising from loan delinquencies. There are various other factors included in these processes, depending on the loan portfolio. Residential mortgage and SBL and other loan portfolios The collateral securing our SBL and other portfolio is monitored on a recurring basis, with marketable collateral monitored on a daily basis. Collateral adjustments, as triggered by our monitoring procedures, are made by the borrower as necessary to ensure our loans are adequately secured, resulting in minimizing our credit risk. Collateral calls have been minimal relative to our SBL and other portfolio with no losses incurred to date. We track and review many factors to monitor credit risk in our residential mortgage loan portfolio. The factors include, but are not limited to: loan performance trends, loan product parameters and qualification requirements, borrower credit scores, level of documentation, loan purpose, geographic concentrations, average loan size, risk rating and LTV ratios. See Note 8 of the Notes to the Condensed Consolidated Financial Statements of this Form 10-Q for additional information about our residential mortgage loan portfolio. The following table presents a summary of delinquent residential mortgage loans, the vast majority of which are first mortgage loans, which are comprised of loans which are two or more payments past due as well as loans in the process of foreclosure. Amount of delinquent residential loans Delinquent residential loans as a percentage of outstanding residential mortgage loan balances $ in millions 30-89 days 90 days or more Total 30-89 days 90 days or more Total June 30, 2022 $ 2 $ 6 $ 8 0.03 % 0.09 % 0.12 % September 30, 2021 $ 4 $ 6 $ 10 0.08 % 0.11 % 0.19 % Our June 30, 2022 percentage compares favorably to the national average for over 30 day delinquencies of 2.33%, as most recently reported by the Fed. Credit risk is also managed by diversifying the residential mortgage portfolio. Most of the loans in our residential loan portfolio are to PCG clients across the U.S. The following table details the geographic concentrations (top five states) of our one-to-four family residential mortgage loans. June 30, 2022 Loans outstanding as a % of total residential mortgage loans held for sale and investment Loans outstanding as a % of total loans held for sale and investment CA 27% 4% FL 17% 3% TX 8% 1% NY 8% 1% CO 4% 1% Loans where borrowers may be subject to payment increases include adjustable-rate mortgage loans with terms that initially require payment of interest only. Payments may increase significantly when the interest-only period ends and the loan principal begins to amortize. At June 30, 2022 and September 30, 2021, these loans totaled $2.43 billion and $1.97 billion, respectively, or approximately 36% and 37% of the residential mortgage portfolio, respectively. The weighted-average number of years before the remainder of the loans, which were still in their interest-only period at June 30, 2022, begins amortizing is seven years. 96 RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Management’s Discussion and Analysis Corporate and tax-exempt loans Credit risk in our corporate and tax-exempt bank loan portfolios is monitored on an individual loan basis. The majority of our tax-exempt bank loan portfolio is comprised of loans to investment-grade borrowers. Credit risk is managed by diversifying the corporate bank loan portfolio. Our corporate bank loan portfolio does not contain a significant concentration in any single industry. The following table details the industry concentrations (top five categories) of our corporate bank loans. June 30, 2022 Loans outstanding as a % of total corporate bank loans held for sale and investment Loans outstanding as a % of total loans held for sale and investment Multi-family 9% 4% Industrial warehouse 8% 4% Office real estate 6% 3% Loan fund 6% 3% Consumer products and services 5% 2% While the impacts of the COVID-19 pandemic appear to be waning, certain sectors continue to be impacted by supply chain disruptions and changes in consumer behavior. In addition, recent macroeconomic developments and the Ukraine conflict have further exacerbated supply chain stresses and inflation concerns. These and related factors could negatively impact our borrowers, particularly those in consumer-facing or supply-dependent industries. In addition, we continue to monitor our exposure to office real estate where trends have changed as a result of the COVID-19 pandemic. Liquidity risk See the section “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and capital resources” of this Form 10-Q for information regarding our liquidity and how we manage liquidity risk. Operational risk Operational risk generally refers to the risk of loss resulting from our operations, including, but not limited to, business disruptions, improper or unauthorized execution and processing of transactions, deficiencies in our technology or financial operating systems and inadequacies or breaches in our control processes, including cybersecurity incidents. See “Item 7 - Management’s Discussion and Analysis of Financial Condition and Results of Operations - Risk management - Operational risk” of our 2021 Form 10-K for a discussion of our operational risk and certain of our risk mitigation processes. Periods of severe market volatility can result in a significantly higher level of transactions on specific days, which may present operational challenges from time to time that may result in losses. These losses can result from, but are not limited to, trade errors, failed transaction settlements, late collateral calls to borrowers and counterparties, or interruptions to our system processing. We did not incur any significant losses related to such operational challenges during the nine months ended June 30, 2022. As more fully described in the discussion of our business technology risks included in various risk factors presented in “Item 1A - Risk Factors” of our 2021 Form 10-K, despite our implementation of protective measures and endeavoring to modify them as circumstances warrant, our computer systems, software and networks may be vulnerable to human error, natural disasters, power loss, cyber-attacks and other information security breaches, and other events that could have an impact on the security and stability of our operations. Model risk Model risk refers to the possibility of unintended business outcomes arising from the design, implementation or use of models. See “Item 7 - Management’s Discussion and Analysis of Financial Condition and Results of Operations - Risk management - Model risk” of our 2021 Form 10-K for information regarding how we utilize models throughout the firm and how we manage model risk. 97 RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Management’s Discussion and Analysis Compliance risk Compliance risk is the risk of legal or regulatory sanctions, financial loss, or reputational damage that the firm may suffer from a failure to comply with applicable laws, external standards, or internal requirements. See “Item 7 - Management’s Discussion and Analysis of Financial Condition and Results of Operations - Risk management - Compliance risk” of our 2021 Form 10-K for information on our compliance risks, including how we manage such risks. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK See “Item 2 - Management’s Discussion and Analysis of Financial Condition and Results of Operations - Risk management” of this Form 10-Q for our quantitative and qualitative disclosures about market risk.