RAYMOND JAMES FINANCIAL INC 10-Q

ITEM 1. FINANCIAL STATEMENTS RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (Unaudited) $ in millions, except per share amounts December 31, 2022 September 30, 2022 Assets: Cash and cash equivalents $ 6,177 $ 6,178 Assets segregated for regulatory purposes and restricted cash 5,116 8,481 Collateralized agreements 335 704 Financial instruments, at fair value: Trading assets ( $ 969 and $ 1,188 pledged as collateral) 1,112 1,270 Available-for-sale securities ( $ 74 and $ 74 pledged as collateral) 9,793 9,885 Derivative assets 107 188 Other investments ( $ 15 and $ 14 pledged as collateral) 296 292 Brokerage client receivables, net 2,641 2,934 Other receivables, net 1,252 1,615 Bank loans, net 44,066 43,239 Loans to financial advisors, net 1,122 1,152 Deferred income taxes, net 572 630 Goodwill and identifiable intangible assets, net 1,938 1,931 Other assets 2,520 2,452 Total assets $ 77,047 $ 80,951 Liabilities and shareholders’ equity: Bank deposits $ 51,979 $ 51,357 Collateralized financings 194 466 Financial instrument liabilities, at fair value: Trading liabilities 692 836 Derivative liabilities 452 530 Brokerage client payables 7,728 11,446 Accrued compensation, commissions and benefits 1,281 1,787 Other payables 1,703 1,768 Other borrowings 1,150 1,291 Senior notes payable 2,038 2,038 Total liabilities 67,217 71,519 Commitments and contingencies (see Note 15) Shareholders’ equity Preferred stock 120 120 Common stock; $ .01 par value; 650,000,000 shares authorized; 248,081,414 shares issued and 214,984,869 shares outstanding as of December 31, 2022; 248,018,564 shares issued and 215,122,523 shares outstanding as of September 30, 2022 2 2 Additional paid-in capital 2,975 2,987 Retained earnings 9,254 8,843 Treasury stock, at cost; 33,096,545 and 32,896,041 common shares as of December 31, 2022 and September 30, 2022, respectively ( 1,604 ) ( 1,512 ) Accumulated other comprehensive loss ( 891 ) ( 982 ) Total equity attributable to Raymond James Financial, Inc. 9,856 9,458 Noncontrolling interests ( 26 ) ( 26 ) Total shareholders’ equity 9,830 9,432 Total liabilities and shareholders’ equity $ 77,047 $ 80,951 See accompanying Notes to Condensed Consolidated Financial Statements (Unaudited). 3 RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (Unaudited) Three months ended December 31, in millions, except per share amounts 2022 2021 Revenues: Asset management and related administrative fees $ 1,242 $ 1,382 Brokerage revenues: Securities commissions 352 425 Principal transactions 132 133 Total brokerage revenues 484 558 Account and service fees 289 177 Investment banking 141 425 Interest income 827 225 Other 44 51 Total revenues 3,027 2,818 Interest expense ( 241 ) ( 37 ) Net revenues 2,786 2,781 Non-interest expenses: Compensation, commissions and benefits 1,736 1,884 Non-compensation expenses: Communications and information processing 139 112 Occupancy and equipment 66 59 Business development 56 35 Investment sub-advisory fees 34 38 Professional fees 32 28 Bank loan provision/(benefit) for credit losses 14 ( 11 ) Other 57 78 Total non-compensation expenses 398 339 Total non-interest expenses 2,134 2,223 Pre-tax income 652 558 Provision for income taxes 143 112 Net income 509 446 Preferred stock dividends 2 — Net income available to common shareholders $ 507 $ 446 Earnings per common share – basic $ 2.36 $ 2.16 Earnings per common share – diluted $ 2.30 $ 2.10 Weighted-average common shares outstanding – basic 214.7 206.3 Weighted-average common and common equivalent shares outstanding – diluted 220.4 212.4 Net income $ 509 $ 446 Other comprehensive income/(loss), net of tax: Available-for-sale securities 47 ( 55 ) Currency translations, net of the impact of net investment hedges 46 — Cash flow hedges ( 2 ) 9 Total other comprehensive income/(loss), net of tax 91 ( 46 ) Total comprehensive income $ 600 $ 400 See accompanying Notes to Condensed Consolidated Financial Statements (Unaudited). 4 RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (Unaudited) Three months ended December 31, $ in millions, except per share amounts 2022 2021 Preferred stock: Balance beginning of period $ 120 $ — Shares issuances — — Balance end of period 120 — Common stock, par value $ .01 per share: Balance beginning of period 2 2 Share issuances — — Balance end of period 2 2 Additional paid-in capital: Balance beginning of period 2,987 2,088 Employee stock purchases 7 8 Distributions due to vesting of restricted stock units and exercise of stock options, net of forfeitures ( 99 ) ( 105 ) Share-based compensation amortization 80 64 Balance end of period 2,975 2,055 Retained earnings: Balance beginning of period 8,843 7,633 Net income 509 446 Common and preferred stock cash dividends declared (see Note 16) ( 98 ) ( 76 ) Balance end of period 9,254 8,003 Treasury stock: Balance beginning of period ( 1,512 ) ( 1,437 ) Purchases/surrenders ( 147 ) ( 10 ) Reissuances due to vesting of restricted stock units and exercise of stock options 55 74 Balance end of period ( 1,604 ) ( 1,373 ) Accumulated other comprehensive loss: Balance beginning of period ( 982 ) ( 41 ) Other comprehensive income/(loss), net of tax 91 ( 46 ) Balance end of period ( 891 ) ( 87 ) Total equity attributable to Raymond James Financial, Inc. $ 9,856 $ 8,600 Noncontrolling interests: Balance beginning of period $ ( 26 ) $ 58 Net income attributable to noncontrolling interests — 2 Deconsolidations and sales — ( 8 ) Balance end of period ( 26 ) 52 Total shareholders’ equity $ 9,830 $ 8,652 See accompanying Notes to Condensed Consolidated Financial Statements (Unaudited). 5 RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) Three months ended December 31, $ in millions 2022 2021 Cash flows from operating activities: Net income $ 509 $ 446 Adjustments to reconcile net income to net cash used in operating activities: Depreciation and amortization 40 35 Deferred income taxes, net 25 14 Premium and discount amortization on available-for-sale securities and bank loans and net unrealized gain/loss on other investments ( 11 ) 14 Provisions/(benefits) for credit losses and legal and regulatory proceedings 21 ( 8 ) Share-based compensation expense 81 65 Unrealized gain on company-owned life insurance policies, net of expenses ( 48 ) ( 38 ) Other ( 10 ) ( 1 ) Net change in: Assets segregated for regulatory purposes excluding cash and cash equivalents — ( 7,499 ) Collateralized agreements, net of collateralized financings 97 125 Loans (provided to) financial advisors, net of repayments 25 ( 56 ) Brokerage client receivables and other receivables, net 477 197 Trading instruments, net 127 209 Derivative instruments, net ( 18 ) 58 Other assets 8 ( 431 ) Brokerage client payables and other payables ( 3,882 ) 5,021 Accrued compensation, commissions and benefits ( 511 ) ( 395 ) Purchases and originations of loans held for sale, net of proceeds from sales of securitizations and loans held for sale ( 66 ) ( 43 ) Net cash used in operating activities ( 3,136 ) ( 2,287 ) Cash flows from investing activities: Increase in bank loans, net ( 826 ) ( 1,137 ) Proceeds from sales of loans held for investment 45 75 Purchases of available-for-sale securities ( 153 ) ( 824 ) Available-for-sale securities maturations, repayments and redemptions 326 501 Additions to property and equipment ( 27 ) ( 19 ) Investment in note receivable — ( 125 ) Other investing activities, net ( 31 ) ( 26 ) Net cash used in investing activities ( 666 ) ( 1,555 ) See accompanying Notes to Condensed Consolidated Financial Statements (Unaudited). 6 RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) Three months ended December 31, $ in millions 2022 2021 Cash flows from financing activities: Increase in bank deposits 622 1,597 Repurchases of common stock and share-based awards withheld for payment of withholding tax requirements ( 189 ) ( 51 ) Dividends on preferred and common stock ( 81 ) ( 60 ) Exercise of stock options and employee stock purchases 11 17 Proceeds from Federal Home Loan Bank advances 650 850 Repayments of Federal Home Loan Bank advances and other borrowed funds ( 791 ) ( 851 ) Other financing, net ( 1 ) ( 5 ) Net cash provided by financing activities 221 1,497 Currency adjustment: Effect of exchange rate changes on cash and cash equivalents, including those segregated for regulatory purposes 215 3 Net decrease in cash and cash equivalents, including those segregated for regulatory purposes and restricted cash ( 3,366 ) ( 2,342 ) Cash and cash equivalents, including those segregated for regulatory purposes and restricted cash at beginning of year 14,659 16,449 Cash and cash equivalents, including those segregated for regulatory purposes and restricted cash at end of period $ 11,293 $ 14,107 Cash and cash equivalents $ 6,177 $ 8,216 Cash and cash equivalents segregated for regulatory purposes and restricted cash 5,116 5,891 Total cash and cash equivalents, including those segregated for regulatory purposes and restricted cash at end of period $ 11,293 $ 14,107 Supplemental disclosures of cash flow information: Cash paid for interest $ 216 $ 41 Cash paid for income taxes, net $ 13 $ 12 Cash outflows for lease liabilities $ 31 $ 25 Non-cash right-of-use assets recorded for new and modified leases $ 13 $ 16 See accompanying Notes to Condensed Consolidated Financial Statements (Unaudited). 7 RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) December 31, 2022 NOTE 1 – ORGANIZATION AND BASIS OF PRESENTATION Organization Raymond James Financial, Inc. (“RJF” or the “firm”) is a financial holding company which, together with its subsidiaries, is engaged in various financial services activities, including providing investment management services to retail and institutional clients, merger & acquisition and advisory services, the underwriting, distribution, trading and brokerage of equity and debt securities, and the sale of mutual funds and other investment products. The firm also provides corporate and retail banking services, and trust services. As used herein, the terms “our,” “we,” or “us” refer to RJF and/or one or more of its subsidiaries. Basis of presentation The accompanying unaudited condensed consolidated financial statements include the accounts of RJF and its consolidated subsidiaries that are generally controlled through a majority voting interest. We consolidate all of our 100 %-owned subsidiaries. In addition, we consolidate any variable interest entity (“VIE”) in which we are the primary beneficiary. Additional information on these VIEs is provided in Note 2 of our Annual Report on Form 10-K (“2022 Form 10-K”) for the year ended September 30, 2022, as filed with the United States (“U.S.”) Securities and Exchange Commission (“SEC”) and in Note 9 of this Quarterly Report on Form 10-Q (“Form 10-Q”). When we do not have a controlling interest in an entity, but we exert significant influence over the entity, we apply the equity method of accounting. All material intercompany balances and transactions have been eliminated in consolidation. Accounting estimates and assumptions Certain financial information that is normally included in annual financial statements prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) but is not required for interim reporting purposes has been condensed or omitted. These unaudited condensed consolidated financial statements reflect, in the opinion of management, all adjustments necessary for a fair presentation of our consolidated financial position and results of operations for the periods presented. The nature of our business is such that the results of any interim period are not necessarily indicative of results for a full year. These unaudited condensed consolidated financial statements should be read in conjunction with Management’s Discussion and Analysis of Financial Condition and Results of Operations and the Consolidated Financial Statements and Notes thereto included in our 2022 Form 10-K. To prepare condensed consolidated financial statements in accordance with GAAP, we must make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of liabilities at the date of the condensed consolidated financial statements, and the reported amounts of revenues and expenses for the reporting period. Actual results could differ from those estimates and could have a material impact on the condensed consolidated financial statements. Reclassifications Certain prior period amounts have been reclassified to conform to the current period’s presentation. NOTE 2 – UPDATE OF SIGNIFICANT ACCOUNTING POLICIES A summary of our significant accounting policies is included in Note 2 of our 2022 Form 10-K. There have been no significant changes in our significant accounting policies since September 30, 2022. 8 RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements (Unaudited) NOTE 3 – FAIR VALUE Our “Financial instruments” and “Financial instrument liabilities” on our Condensed Consolidated Statements of Financial Condition are recorded at fair value. For further information about such instruments and our significant accounting policies related to fair value, see Notes 2 and 4 of our 2022 Form 10-K. The following tables present assets and liabilities measured at fair value on a recurring basis. Netting adjustments represent the impact of counterparty and collateral netting on our derivative balances included on our Condensed Consolidated Statements of Financial Condition. See Note 5 for additional information. $ in millions Level 1 Level 2 Level 3 Netting adjustments Balance as of December 31, 2022 Assets at fair value on a recurring basis: Trading assets: Municipal and provincial obligations $ — $ 163 $ — $ — $ 163 Corporate obligations 19 583 — — 602 Government and agency obligations 47 79 — — 126 Agency mortgage-backed securities (“MBS”), collateralized mortgage obligations (“CMOs”) and asset-backed securities (“ABS”) — 134 — — 134 Non-agency CMOs and ABS — 34 — — 34 Total debt securities 66 993 — — 1,059 Equity securities 17 1 — — 18 Brokered certificates of deposit — 29 — — 29 Other — — 6 — 6 Total trading assets 83 1,023 6 — 1,112 Available-for-sale securities (1) 987 8,806 — — 9,793 Derivative assets: Interest rate - matched book — 14 — — 14 Interest rate - other 2 418 — ( 327 ) 93 Total derivative assets 2 432 — ( 327 ) 107 All other investments: Government and agency obligations (2) 80 — — — 80 Other 90 2 30 — 122 Total all other investments 170 2 30 — 202 Other assets - fractional shares 86 — — — 86 Subtotal 1,328 10,263 36 ( 327 ) 11,300 Other investments - private equity - measured at net asset value (“NAV”) 94 Total assets at fair value on a recurring basis $ 1,328 $ 10,263 $ 36 $ ( 327 ) $ 11,394 Liabilities at fair value on a recurring basis: Trading liabilities: Municipal and provincial obligations $ 6 $ — $ — $ — $ 6 Corporate obligations — 525 — — 525 Government and agency obligations 137 — — — 137 Total debt securities 143 525 — — 668 Equity securities 24 — — — 24 Total trading liabilities 167 525 — — 692 Derivative liabilities: Interest rate - matched book — 14 — — 14 Interest rate - other 3 479 — ( 61 ) 421 Foreign exchange — 13 — — 13 Other — — 4 — 4 Total derivative liabilities 3 506 4 ( 61 ) 452 Other payables - fractional shares 86 — — — 86 Total liabilities at fair value on a recurring basis $ 256 $ 1,031 $ 4 $ ( 61 ) $ 1,230 9 RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements (Unaudited) $ in millions Level 1 Level 2 Level 3 Netting adjustments Balance as of September 30, 2022 Assets at fair value on a recurring basis: Trading assets: Municipal and provincial obligations $ — $ 269 $ — $ — $ 269 Corporate obligations 16 579 — — 595 Government and agency obligations 86 85 — — 171 Agency MBS, CMOs, and ABS — 123 — — 123 Non-agency CMOs and ABS — 61 — — 61 Total debt securities 102 1,117 — — 1,219 Equity securities 20 — — — 20 Brokered certificates of deposit — 30 — — 30 Other — — 1 — 1 Total trading assets 122 1,147 1 — 1,270 Available-for-sale securities (1) 986 8,899 — — 9,885 Derivative assets: Interest rate - matched book — 52 — — 52 Interest rate - other 42 432 — ( 348 ) 126 Foreign exchange — 10 — — 10 Total derivative assets 42 494 — ( 348 ) 188 All other investments: Government and agency obligations (2) 79 — — — 79 Other 92 2 29 — 123 Total all other investments 171 2 29 — 202 Other assets - fractional shares 78 — — — 78 Subtotal 1,399 10,542 30 ( 348 ) 11,623 Other investments - private equity - measured at NAV 90 Total assets at fair value on a recurring basis $ 1,399 $ 10,542 $ 30 $ ( 348 ) $ 11,713 Liabilities at fair value on a recurring basis: Trading liabilities: Municipal and provincial obligations $ 5 $ — $ — $ — $ 5 Corporate obligations — 555 — — 555 Government and agency obligations 249 — — — 249 Total debt securities 254 555 — — 809 Equity securities 27 — — — 27 Total trading liabilities 281 555 — — 836 Derivative liabilities: Interest rate - matched book — 52 — — 52 Interest rate - other 40 495 — ( 65 ) 470 Foreign exchange — 5 — — 5 Other — — 3 — 3 Total derivative liabilities 40 552 3 ( 65 ) 530 Other payables - fractional shares 78 — — — 78 Total liabilities at fair value on a recurring basis $ 399 $ 1,107 $ 3 $ ( 65 ) $ 1,444 (1) Our available-for-sale securities primarily consist of agency MBS, agency CMOs and U.S. Treasury securities (“U.S. Treasuries”). See Note 4 for further information. (2) These assets are comprised of U.S. Treasuries primarily purchased to meet certain deposit requirements with clearing organizations. 10 RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements (Unaudited) Level 3 recurring fair value measurements The following tables present the changes in fair value for Level 3 assets and liabilities measured at fair value on a recurring basis. The realized and unrealized gains and losses in the tables may include changes in fair value that were attributable to both observable and unobservable inputs. In the following tables, gains/(losses) on trading and derivative instruments are reported in “Principal transactions” and gains/(losses) on other investments are reported in “Other” revenues on our Condensed Consolidated Statements of Income and Comprehensive Income. Three months ended December 31, 2022 Level 3 instruments at fair value Financial assets Financial liabilities Trading assets Other investments Derivative liabilities $ in millions Other All other Other Fair value beginning of period $ 1 $ 29 $ ( 3 ) Total gains/(losses) included in earnings — 1 ( 1 ) Purchases and contributions 25 — — Sales, distributions, and deconsolidations ( 20 ) — — Transfers: Into Level 3 — — — Out of Level 3 — — — Fair value end of period $ 6 $ 30 $ ( 4 ) Unrealized gains/(losses) for the period included in earnings for instruments held at the end of the reporting period $ ( 1 ) $ 1 $ ( 1 ) Three months ended December 31, 2021 Level 3 instruments at fair value Financial assets Financial liabilities Trading assets Derivative assets Other investments Derivative liabilities $ in millions Other Other All other Other Fair value beginning of period $ 14 $ — $ 98 $ ( 1 ) Total gains included in earnings 2 1 — 1 Purchases and contributions 25 — — — Sales and distributions ( 39 ) — — — Transfers: Into Level 3 — — — — Out of Level 3 — — — — Fair value end of period $ 2 $ 1 $ 98 $ — Unrealized gains/(losses) for the period included in earnings for instruments held at the end of the reporting period $ ( 1 ) $ 2 $ — $ — As of December 31, 2022, 15 % of our assets and 2 % of our liabilities were measured at fair value on a recurring basis. In comparison, as of September 30, 2022, 14 % of our assets and 2 % of our liabilities were measured at fair value on a recurring basis. As of both December 31, 2022 and September 30, 2022, Level 3 assets represented less than 1 % of our assets measured at fair value on a recurring basis. Investments in private equity measured at net asset value per share As more fully described in Note 2 of our 2022 Form 10-K, as a practical expedient, we utilize NAV or its equivalent to determine the recorded value of a portion of our private equity investments portfolio. We utilize NAV when the fund investment does not have a readily determinable fair value and the NAV of the fund is calculated in a manner consistent with the measurement principles of investment company accounting, including measurement of the investments at fair value. 11 RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements (Unaudited) Our private equity portfolio as of December 31, 2022 primarily included investments in third-party funds, including growth equity, venture capital, and mezzanine lending fund investments. Our investments cannot be redeemed directly with the funds. Our investments are monetized through the liquidation of underlying assets of fund investments, the timing of which is uncertain. The following table presents the recorded value and unfunded commitments related to our private equity investments portfolio. $ in millions Recorded value Unfunded commitment December 31, 2022 Private equity investments measured at NAV $ 94 $ 38 Private equity investments not measured at NAV 5 Total private equity investments $ 99 September 30, 2022 Private equity investments measured at NAV $ 90 $ 39 Private equity investments not measured at NAV 5 Total private equity investments $ 95 Financial instruments measured at fair value on a nonrecurring basis The following table presents assets measured at fair value on a nonrecurring basis along with the valuation techniques and significant unobservable inputs used in the valuation of the assets classified as level 3. These inputs represent those that a market participant would take into account when pricing these instruments. Weighted averages are calculated by weighting each input by the relative fair value of the related financial instrument. $ in millions Level 2 Level 3 Total fair value Valuation technique(s) Unobservable input Range (weighted-average) December 31, 2022 Bank loans: Residential mortgage loans $ 2 $ 9 $ 11 Collateral or discounted cash flow (1) Prepayment rate 7 yrs. - 12 yrs. ( 10.4 yrs.) Corporate loans $ — $ 47 $ 47 Collateral or discounted cash flow (1) Recovery rate 17 % - 68 % ( 50 %) Loans held for sale $ 1 $ — $ 1 N/A N/A N/A September 30, 2022 Bank loans: Residential mortgage loans $ 2 $ 10 $ 12 Collateral or discounted cash flow (1) Prepayment rate 7 yrs. - 12 yrs. ( 10.4 yrs.) Corporate loans $ — $ 57 $ 57 Collateral or discounted cash flow (1) Recovery rate 24 % - 66 % ( 47 %) Loans held for sale $ 3 $ — $ 3 N/A N/A N/A (1) The valuation techniques used to estimate the fair values are based on collateral value less selling costs for the collateral-dependent loans and discounted cash flows for loans that are not collateral-dependent. Unobservable inputs used in the collateral valuation technique are not meaningful and unobservable inputs used in the discounted cash flow valuation technique are presented in the table. 12 RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements (Unaudited) Financial instruments not recorded at fair value Many, but not all, of the financial instruments we hold were recorded at fair value on the Condensed Consolidated Statements of Financial Condition. The following table presents the estimated fair value and fair value hierarchy of financial assets and liabilities that are not recorded at fair value on the Condensed Consolidated Statements of Financial Condition at December 31, 2022 and September 30, 2022. This table excludes financial instruments that are carried at amounts which approximate fair value. Refer to Note 4 of our 2022 Form 10-K for a discussion of the fair value hierarchy classifications of our financial instruments that are not recorded at fair value. $ in millions Level 2 Level 3 Total estimated fair value Carrying amount December 31, 2022 Financial assets: Bank loans, net $ 89 $ 43,251 $ 43,340 $ 44,007 Financial liabilities: Bank deposits - certificates of deposit $ 1,402 $ — $ 1,402 $ 1,415 Other borrowings - subordinated notes payable $ 94 $ — $ 94 $ 100 Senior notes payable $ 1,743 $ — $ 1,743 $ 2,038 September 30, 2022 Financial assets: Bank loans, net $ 134 $ 42,336 $ 42,470 $ 43,167 Financial liabilities: Bank deposits - certificates of deposit $ 400 $ 579 $ 979 $ 999 Other borrowings - subordinated notes payable $ 95 $ — $ 95 $ 100 Senior notes payable $ 1,706 $ — $ 1,706 $ 2,038 13 RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements (Unaudited) NOTE 4 – AVAILABLE-FOR-SALE SECURITIES Refer to Note 2 of our 2022 Form 10-K for a discussion of our accounting policies applicable to our available-for-sale securities. The following table details the amortized costs and fair values of our available-for-sale securities. See Note 3 for additional information regarding the fair value of available-for-sale securities. $ in millions Cost basis Gross unrealized gains Gross unrealized losses Fair value December 31, 2022 Agency residential MBS $ 5,486 $ 1 $ ( 588 ) $ 4,899 Agency commercial MBS 1,484 — ( 199 ) 1,285 Agency CMOs 1,585 — ( 240 ) 1,345 Other agency obligations 692 — ( 29 ) 663 Non-agency residential MBS 495 — ( 41 ) 454 U.S. Treasuries 1,016 — ( 29 ) 987 Corporate bonds 146 — ( 4 ) 142 Other 18 — — 18 Total available-for-sale securities $ 10,922 $ 1 $ ( 1,130 ) $ 9,793 September 30, 2022 Agency residential MBS $ 5,662 $ — $ ( 668 ) $ 4,994 Agency commercial MBS 1,518 — ( 208 ) 1,310 Agency CMOs 1,637 — ( 233 ) 1,404 Other agency obligations 613 — ( 31 ) 582 Non-agency residential MBS 492 — ( 41 ) 451 U.S. Treasuries 1,014 — ( 28 ) 986 Corporate bonds 146 — ( 5 ) 141 Other 18 — ( 1 ) 17 Total available-for-sale securities $ 11,100 $ — $ ( 1,215 ) $ 9,885 The amortized costs and fair values in the preceding table exclude $ 26 million and $ 24 million of accrued interest on available-for-sale securities as of December 31, 2022 and September 30, 2022, respectively, which was included in “Other receivables, net” on our Condensed Consolidated Statements of Financial Condition. 14 RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements (Unaudited) The following table details the contractual maturities, amortized costs, carrying values and current yields for our available-for-sale securities. Weighted-average yields are calculated on a taxable-equivalent basis based on estimated annual income divided by the average amortized cost of these securities. Since our MBS and CMO available-for-sale securities are backed by mortgages, actual maturities may differ from contractual maturities because borrowers may have the right to prepay obligations without prepayment penalties. As a result, as of December 31, 2022, the weighted-average life of our available-for-sale securities portfolio was approximately 4.49 years. December 31, 2022 $ in millions Within one year After one but within five years After five but within ten years After ten years Total Agency residential MBS Amortized cost $ — $ 142 $ 2,427 $ 2,917 $ 5,486 Carrying value $ — $ 137 $ 2,189 $ 2,573 $ 4,899 Weighted-average yield — % 2.47 % 1.28 % 1.88 % 1.63 % Agency commercial MBS Amortized cost $ 2 $ 803 $ 607 $ 72 $ 1,484 Carrying value $ 2 $ 725 $ 497 $ 61 $ 1,285 Weighted-average yield 1.90 % 1.67 % 1.23 % 1.55 % 1.48 % Agency CMOs Amortized cost $ — $ 11 $ 29 $ 1,545 $ 1,585 Carrying value $ — $ 11 $ 25 $ 1,309 $ 1,345 Weighted-average yield — % 2.22 % 1.56 % 1.57 % 1.57 % Other agency obligations Amortized cost $ — $ 567 $ 114 $ 11 $ 692 Carrying value $ — $ 544 $ 108 $ 11 $ 663 Weighted-average yield — % 2.64 % 3.55 % 2.94 % 2.80 % Non-agency residential MBS Amortized cost $ — $ — $ — $ 495 $ 495 Carrying value $ — $ — $ — $ 454 $ 454 Weighted-average yield — % — % — % 4.06 % 4.06 % U.S. Treasuries Amortized cost $ 107 $ 909 $ — $ — $ 1,016 Carrying value $ 104 $ 883 $ — $ — $ 987 Weighted-average yield 2.22 % 2.69 % — % — % 2.63 % Corporate bonds Amortized cost $ 1 $ 117 $ 28 $ — $ 146 Carrying value $ 1 $ 114 $ 27 $ — $ 142 Weighted-average yield 2.83 % 5.51 % 4.86 % — % 5.37 % Other Amortized cost $ — $ 5 $ 5 $ 8 $ 18 Carrying value $ — $ 5 $ 5 $ 8 $ 18 Weighted-average yield — % 5.79 % 5.23 % 7.17 % 6.30 % Total available-for-sale securities Amortized cost $ 110 $ 2,554 $ 3,210 $ 5,048 $ 10,922 Carrying value $ 107 $ 2,419 $ 2,851 $ 4,416 $ 9,793 Weighted-average yield 2.22 % 2.48 % 1.39 % 2.01 % 1.94 % 15 RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements (Unaudited) The following table details the gross unrealized losses and fair values of securities that were in a loss position at the reporting period end, aggregated by investment category and length of time the individual securities have been in a continuous unrealized loss position. Less than 12 months 12 months or more Total $ in millions Estimated fair value Unrealized losses Estimated fair value Unrealized losses Estimated fair value Unrealized losses December 31, 2022 Agency residential MBS $ 1,322 $ ( 99 ) $ 3,516 $ ( 489 ) $ 4,838 $ ( 588 ) Agency commercial MBS 322 ( 21 ) 963 ( 178 ) 1,285 ( 199 ) Agency CMOs 247 ( 24 ) 1,098 ( 216 ) 1,345 ( 240 ) Other agency obligations 615 ( 28 ) 19 ( 1 ) 634 ( 29 ) Non-agency residential MBS 454 ( 41 ) — — 454 ( 41 ) U.S. Treasuries 981 ( 28 ) 6 ( 1 ) 987 ( 29 ) Corporate bonds 107 ( 4 ) — — 107 ( 4 ) Other 18 — — — 18 — Total $ 4,066 $ ( 245 ) $ 5,602 $ ( 885 ) $ 9,668 $ ( 1,130 ) September 30, 2022 Agency residential MBS $ 2,165 $ ( 226 ) $ 2,829 $ ( 442 ) $ 4,994 $ ( 668 ) Agency commercial MBS 494 ( 41 ) 816 ( 167 ) 1,310 ( 208 ) Agency CMOs 337 ( 32 ) 1,067 ( 201 ) 1,404 ( 233 ) Other agency obligations 582 ( 31 ) — — 582 ( 31 ) Non-agency residential MBS 451 ( 41 ) — — 451 ( 41 ) U.S. Treasuries 982 ( 28 ) 4 — 986 ( 28 ) Corporate bonds 128 ( 5 ) — — 128 ( 5 ) Other 17 ( 1 ) — — 17 ( 1 ) Total $ 5,156 $ ( 405 ) $ 4,716 $ ( 810 ) $ 9,872 $ ( 1,215 ) At December 31, 2022, of the 1,066 available-for-sale securities in an unrealized loss position, 635 were in a continuous unrealized loss position for less than 12 months and 431 securities were in a continuous unrealized loss position for greater than 12 months. At December 31, 2022, debt securities we held in excess of ten percent of our equity included those issued by the Federal National Home Mortgage Association and Federal Home Loan Mortgage Corporation with amortized costs of $ 5.24 billion and $ 3.13 billion, respectively, and fair values of $ 4.62 billion and $ 2.75 billion, respectively. During the three months ended December 31, 2022 and December 31, 2021, there were no sales of available-for-sale securities. 16 RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements (Unaudited) NOTE 5 – DERIVATIVE ASSETS AND DERIVATIVE LIABILITIES Our derivative assets and derivative liabilities are recorded at fair value and are included in “Derivative assets” and “Derivative liabilities” on our Condensed Consolidated Statements of Financial Condition. Cash flows related to our derivatives are included within operating activities on the Condensed Consolidated Statements of Cash Flows. The significant accounting policies governing our derivatives, including our methodologies for determining fair value, are described in Note 2 of our 2022 Form 10-K. Derivative balances included on our financial statements The following table presents the gross fair values and notional amounts of derivatives by product type, the amounts of counterparty and cash collateral netting on our Condensed Consolidated Statements of Financial Condition, as well as collateral posted and received under credit support agreements that do not meet the criteria for netting under GAAP. December 31, 2022 September 30, 2022 $ in millions Derivative assets Derivative liabilities Notional amount Derivative assets Derivative liabilities Notional amount Derivatives not designated as hedging instruments Interest rate - matched book $ 14 $ 14 $ 414 $ 52 $ 52 $ 1,340 Interest rate - other (1) 408 482 14,066 462 535 14,647 Foreign exchange — 6 1,023 4 5 958 Other — 4 534 — 3 531 Subtotal 422 506 16,037 518 595 17,476 Derivatives designated as hedging instruments Interest rate - other (2) 12 — 1,400 12 — 1,050 Foreign exchange — 7 1,130 6 — 1,092 Subtotal 12 7 2,530 18 — 2,142 Total gross fair value/notional amount 434 513 $ 18,567 536 595 $ 19,618 Offset on the Condensed Consolidated Statements of Financial Condition Counterparty netting ( 22 ) ( 22 ) ( 35 ) ( 35 ) Cash collateral netting ( 305 ) ( 39 ) ( 313 ) ( 30 ) Total amounts offset ( 327 ) ( 61 ) ( 348 ) ( 65 ) Net amounts presented on the Condensed Consolidated Statements of Financial Condition 107 452 188 530 Gross amounts not offset on the Condensed Consolidated Statements of Financial Condition Financial instruments (3) ( 21 ) ( 14 ) ( 60 ) ( 52 ) Total $ 86 $ 438 $ 128 $ 478 (1) Relates to interest rate derivatives entered into as part of our fixed income business operations, including to-be-announced security contracts that are accounted for as derivatives, as well as our banking operations. (2) During the quarter ended December 31, 2022, we entered into an interest rate swap to manage our risk of increases in interest rates associated with certain bank deposits by converting the balances subject to variable interest rates to a fixed interest rate. Such interest rate swap has been designated and accounted for as a cash flow hedge. Refer to Note 12 of this Form 10-Q for information regarding these bank deposits. (3) Although the matched book derivative arrangements do not meet the definition of a master netting arrangement as specified by GAAP, the agreement with the third-party intermediary includes terms that are similar to a master netting agreement. As a result, we present the matched book amounts net in the preceding table. The following table details the gains/(losses) included in accumulated other comprehensive income/(loss) (“AOCI”), net of income taxes, on derivatives designated as hedging instruments. These gains/(losses) included any amounts reclassified from AOCI to net income during the period. See Note 16 for additional information. Three months ended December 31, $ in millions 2022 2021 Interest rate (cash flow hedges) $ ( 2 ) $ 9 Foreign exchange (net investment hedges) ( 14 ) ( 1 ) Total gains/(losses) included in AOCI, net of taxes $ ( 16 ) $ 8 17 RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements (Unaudited) There were no components of derivative gains or losses excluded from the assessment of hedge effectiveness for each of the three months ended December 31, 2022 and 2021. We expect to reclassify $ 32 million of interest expense out of AOCI and into earnings within the next 12 months. The maximum length of time over which forecasted transactions are or will be hedged is five years . The following table details the gains/(losses) on derivatives not designated as hedging instruments recognized on the Condensed Consolidated Statements of Income and Comprehensive Income. These amounts do not include any offsetting gains/(losses) on the related hedged item. $ in millions Three months ended December 31, Location of gain/(loss) 2022 2021 Interest rate Principal transactions/other revenues $ 6 $ 3 Foreign exchange Other revenues $ ( 30 ) $ ( 1 ) Other Principal transactions $ ( 1 ) $ 3 Risks associated with our derivatives and related risk mitigation Credit risk We are exposed to credit losses primarily in the event of nonperformance by the counterparties to derivatives that are not cleared through a clearing organization. Where we are subject to credit exposure, we perform a credit evaluation of counterparties prior to entering into derivative transactions and we continue to monitor their credit standings on an ongoing basis. We may require initial margin or collateral from counterparties, generally in the form of cash or marketable securities to support certain of these obligations as established by the credit threshold specified by the agreement and/or as a result of monitoring the credit standing of the counterparties. We also enter into derivatives with clients to which Raymond James Bank and TriState Capital Bank have provided loans. Such derivatives are generally collateralized by marketable securities or other assets of the client. Interest rate and foreign exchange risk We are exposed to interest rate risk related to certain of our interest rate derivatives. We are also exposed to foreign exchange risk related to our forward foreign exchange derivatives. On a daily basis, we monitor our risk exposure on our derivatives based on established limits with respect to a number of factors, including interest rate, foreign exchange spot and forward rates, spread, ratio, basis and volatility risks, both for the total portfolio and by maturity period. Derivatives with credit-risk-related contingent features Certain of our derivative contracts contain provisions that require our debt to maintain an investment-grade rating from one or more of the major credit rating agencies or contain provisions related to default on certain of our outstanding debt. If our debt were to fall below investment-grade or we were to default on certain of our outstanding debt, the counterparties to the derivative instruments could terminate the derivative and request immediate payment, or demand immediate and ongoing overnight collateralization on our derivative instruments in liability positions. The aggregate fair value of all derivative instruments with such credit-risk-related contingent features that were in a liability position was $ 7 million as of December 31, 2022 and $ 8 million as of September 30, 2022. 18 RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements (Unaudited) NOTE 6 – COLLATERALIZED AGREEMENTS AND FINANCINGS Collateralized agreements are comprised of securities purchased under agreements to resell (“reverse repurchase agreements”) and securities borrowed. Collateralized financings are comprised of securities sold under agreements to repurchase (“repurchase agreements”) and securities loaned. We enter into these transactions in order to facilitate client activities, acquire securities to cover short positions and finance certain firm activities. The significant accounting policies governing our collateralized agreements and financings are described in Note 2 of our 2022 Form 10-K. Our reverse repurchase agreements, repurchase agreements, securities borrowing, and securities lending transactions are governed by master agreements that are widely used by counterparties and that may allow for net settlements of payments in the normal course, as well as offsetting of all contracts with a given counterparty in the event of bankruptcy or default of one of the parties to the transaction. For financial statement purposes, we do not offset our reverse repurchase agreements, repurchase agreements, securities borrowed, and securities loaned because the conditions for netting as specified by GAAP are not met. Although not offset on the Condensed Consolidated Statements of Financial Condition, these transactions are included in the following table. Collateralized agreements Collateralized financings $ in millions Reverse repurchase agreements Securities borrowed Total Repurchase agreements Securities loaned Total December 31, 2022 Gross amounts of recognized assets/liabilities $ 156 $ 179 $ 335 $ 150 $ 44 $ 194 Gross amounts offset on the Condensed Consolidated Statements of Financial Condition — — — — — — Net amounts included in the Condensed Consolidated Statements of Financial Condition 156 179 335 150 44 194 Gross amounts not offset on the Condensed Consolidated Statements of Financial Condition ( 156 ) ( 174 ) ( 330 ) ( 150 ) ( 40 ) ( 190 ) Net amounts $ — $ 5 $ 5 $ — $ 4 $ 4 September 30, 2022 Gross amounts of recognized assets/liabilities $ 367 $ 337 $ 704 $ 294 $ 172 $ 466 Gross amounts offset on the Condensed Consolidated Statements of Financial Condition — — — — — — Net amounts included in the Condensed Consolidated Statements of Financial Condition 367 337 704 294 172 466 Gross amounts not offset on the Condensed Consolidated Statements of Financial Condition ( 367 ) ( 327 ) ( 694 ) ( 294 ) ( 162 ) ( 456 ) Net amounts $ — $ 10 $ 10 $ — $ 10 $ 10 The total amount of collateral received under reverse repurchase agreements and the total amount of collateral posted under repurchase agreements exceeds the carrying value of these agreements on our Condensed Consolidated Statements of Financial Condition. 19 RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements (Unaudited) Repurchase agreements and securities loaned accounted for as secured borrowings The following table presents the remaining contractual maturity of repurchase agreements and securities lending transactions accounted for as secured borrowings. $ in millions Overnight and continuous Up to 30 days 30-90 days Greater than 90 days Total December 31, 2022 Repurchase agreements: Government and agency obligations $ 139 $ — $ — $ — $ 139 Agency MBS and agency CMOs 11 — — — 11 Total repurchase agreements 150 — — — 150 Securities loaned: Equity securities 44 — — — 44 Total collateralized financings $ 194 $ — $ — $ — $ 194 September 30, 2022 Repurchase agreements: Government and agency obligations $ 183 $ — $ — $ — $ 183 Agency MBS and agency CMOs 111 — — — 111 Total repurchase agreements 294 — — — 294 Securities loaned: Equity securities 172 — — — 172 Total collateralized financings $ 466 $ — $ — $ — $ 466 Collateral received and pledged We receive cash and securities as collateral, primarily in connection with reverse repurchase agreements, securities borrowing agreements, derivative transactions, and client margin loans. The collateral we receive reduces our credit exposure to individual counterparties. In many cases, we are permitted to deliver or repledge financial instruments we have received as collateral to satisfy our collateral requirements under our repurchase agreements, securities lending agreements or other secured borrowings, to satisfy deposit requirements with clearing organizations, or to otherwise meet either our or our clients’ settlement requirements. The following table presents financial instruments at fair value that we received as collateral, were not included on our Condensed Consolidated Statements of Financial Condition, and that were available to be delivered or repledged, along with the balances of such instruments that were delivered or repledged, to satisfy one of our purposes previously described. $ in millions December 31, 2022 September 30, 2022 Collateral we received that was available to be delivered or repledged $ 3,256 $ 3,812 Collateral that we delivered or repledged $ 523 $ 947 20 RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements (Unaudited) Encumbered assets We pledge certain of our assets to collateralize repurchase agreements or other secured borrowings, maintain lines of credit, or to satisfy our collateral or settlement requirements with counterparties or clearing organizations who may or may not have the right to deliver or repledge such instruments. We pledge certain of our bank loans with the Federal Home Loan Bank (“FHLB”) as security for both the repayment of certain borrowings and to secure capacity for additional borrowings as needed as well as with the Federal Reserve Bank of Atlanta (“FRB”) to be eligible to participate in the Federal Reserve’s discount window program. For additional information regarding our outstanding FHLB advances see Note 13. The following table presents information about our assets that have been pledged for one of the purposes previously described. $ in millions December 31, 2022 September 30, 2022 Had the right to deliver or repledge $ 1,058 $ 1,276 Did not have the right to deliver or repledge $ 64 $ 63 Bank loans, net pledged with the: FHLB $ 8,360 $ 8,009 FRB 746 791 Total bank loans, net pledged with the FHLB and FRB $ 9,106 $ 8,800 NOTE 7 – BANK LOANS, NET Bank client receivables are comprised of loans originated or purchased by our Bank segment and include securities-based loans (“SBL”), corporate loans (commercial and industrial (“C&I”) loans, commercial real estate (“CRE”) loans, and real estate investment trust (“REIT”) loans), residential mortgage loans, and tax-exempt loans. These receivables are collateralized by first and, to a lesser extent, second mortgages on residential or other real property, other assets of the borrower, a pledge of revenue, securities or are unsecured. We segregate our loan portfolio into six loan portfolio segments: SBL, C&I, CRE, REIT, residential mortgage, and tax-exempt. See Note 2 of our 2022 Form 10-K for a discussion of accounting policies related to bank loans and the allowance for credit losses. Loan balances in the following tables are presented at amortized cost (outstanding principal balance net of unamortized purchase discounts or premiums, unearned income, and deferred origination fees and costs), except for certain held for sale loans recorded at fair value. Bank loans are presented on our Condensed Consolidated Statements of Financial Condition at amortized cost (or fair value where applicable) less the allowance for credit losses (“ACL”). As it pertains to TriState Capital Bank’s loans acquired as of June 1, 2022, the amortized cost of such purchased loans reflects the fair value of the loans on the acquisition date, and as described further in Note 3 of our 2022 Form 10-K, the purchase discount on such loans is accreted to interest income over the weighted-average life of the underlying loans, which may vary based on prepayments. The following table presents the balances for held for investment loans by portfolio segment and held for sale loans. $ in millions December 31, 2022 September 30, 2022 SBL $ 14,885 $ 15,297 C&I loans 11,405 11,173 CRE loans 6,929 6,549 REIT loans 1,680 1,592 Residential mortgage loans 7,818 7,386 Tax-exempt loans 1,667 1,501 Total loans held for investment 44,384 43,498 Held for sale loans 90 137 Total loans held for sale and investment 44,474 43,635 Allowance for credit losses ( 408 ) ( 396 ) Bank loans, net (1) $ 44,066 $ 43,239 ACL as a % of total loans held for investment 0.92 % 0.91 % Accrued interest receivable on bank loans (included in “Other receivables, net”) $ 182 $ 137 (1) Bank loans, net as of December 31, 2022 and September 30, 2022 are presented net of $ 108 million and $ 112 million, respectively, of net unamortized discount, unearned income, and deferred loan fees and costs. The net unamortized discount primarily arose from the acquisition date fair value purchased discount on bank loans acquired in the TriState Capital acquisition. See Note 3 of our 2022 Form 10-K for further information. 21 RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements (Unaudited) See Note 6 for more information regarding bank loans, net pledged with the FHLB and FRB and Note 13 for more information regarding borrowings from the FHLB. Held for sale loans We originated or purchased $ 802 million and $ 968 million of loans held for sale during the three months ended December 31, 2022 and 2021, respectively. The majority of these loans were purchases of the guaranteed portions of Small Business Administration (“SBA”) loans that were initially classified as loans held for sale upon purchase and subsequently transferred to trading instruments once they had been securitized into pools. Proceeds from the sales of all loans held for sale and not securitized amounted to $ 198 million and $ 338 million during the three months ended December 31, 2022 and 2021, respectively. Net gains resulting from such sales were insignificant for each of the three months ended December 31, 2022 and 2021. Purchases and sales of loans held for investment The following table presents purchases and sales of loans held for investment by portfolio segment. $ in millions C&I loans CRE loans REIT loans Residential mortgage loans Total Three months ended December 31, 2022 Purchases $ 163 $ 39 $ 24 $ 190 $ 416 Sales $ — $ — $ — $ — $ — Three months ended December 31, 2021 Purchases $ 339 $ — $ — $ 184 $ 523 Sales $ 51 $ — $ — $ — $ 51 Sales in the preceding table represent the recorded investment (i.e., net of charge-offs and discounts or premiums) of loans held for investment that were transferred to loans held for sale and subsequently sold to a third party during the respective period. As more fully described in Note 2 of our 2022 Form 10-K, corporate loan sales generally occur as part of our credit management activities. Aging analysis of loans held for investment The following table presents information on delinquency status of our loans held for investment. $ in millions 30-89 days and accruing 90 days or more and accruing Total past due and accruing Nonaccrual with allowance Nonaccrual with no allowance Current and accruing Total loans held for investment December 31, 2022 SBL $ — $ — $ — $ — $ — $ 14,885 $ 14,885 C&I loans 10 — 10 27 — 11,368 11,405 CRE loans 9 — 9 — 19 6,901 6,929 REIT loans — — — — — 1,680 1,680 Residential mortgage loans 4 — 4 — 15 7,799 7,818 Tax-exempt loans — — — — — 1,667 1,667 Total loans held for investment $ 23 $ — $ 23 $ 27 $ 34 $ 44,300 $ 44,384 September 30, 2022 SBL $ — $ — $ — $ — $ — $ 15,297 $ 15,297 C&I loans — — — 32 — 11,141 11,173 CRE loans — — — 12 16 6,521 6,549 REIT loans — — — — — 1,592 1,592 Residential mortgage loans 4 — 4 — 14 7,368 7,386 Tax-exempt loans — — — — — 1,501 1,501 Total loans held for investment $ 4 $ — $ 4 $ 44 $ 30 $ 43,420 $ 43,498 The preceding table includes $ 39 million and $ 63 million at December 31, 2022 and September 30, 2022, respectively, of nonaccrual loans which were current pursuant to their contractual terms. The table also includes troubled debt restructurings of $ 11 million, $ 8 million, and $ 10 million for C&I loans, CRE loans, and residential first mortgage loans, respectively, at 22 RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements (Unaudited) December 31, 2022, and $ 11 million, $ 9 million, and $ 10 million for C&I loans, CRE loans and residential first mortgage loans, respectively, at September 30, 2022. Other real estate owned, included in “Other assets” on our Condensed Consolidated Statements of Financial Condition, was insignificant at both December 31, 2022 and September 30, 2022. Collateral-dependent loans A loan is considered collateral-dependent when the borrower is experiencing financial difficulty and repayment is expected to be provided substantially through the sale of the underlying collateral. Collateral-dependent loans are recorded based upon the fair value of the collateral less the estimated selling costs. Loan type ($ in millions) Nature of collateral December 31, 2022 September 30, 2022 C&I loans Commercial real estate and other business assets $ 11 $ 11 CRE loans Retail, industrial, and health care real estate $ 19 $ 21 Residential mortgage loans Single family homes $ 8 $ 6 The recorded investment in residential mortgage loans secured by one-to-four family residential properties for which formal foreclosure proceedings were in process was $ 5 million at both December 31, 2022 and September 30, 2022. Credit quality indicators The credit quality of our bank loan portfolio is summarized monthly by management using internal risk ratings, which align with the standard asset classification system utilized by bank regulators. These classifications are divided into three groups: Not Classified (Pass), Special Mention, and Classified or Adverse Rating (Substandard, Doubtful and Loss). These terms are defined as follows: Pass – Loans which are well protected by the current net worth and paying capacity of the obligor (or guarantors, if any) or by the fair value, less costs to acquire and sell, of any underlying collateral and generally are performing in accordance with the contractual terms. Special Mention – Loans which have potential weaknesses that deserve management’s close attention. These loans are not adversely classified and do not expose us to sufficient risk to warrant an adverse classification. Substandard – Loans which are inadequately protected by the current sound worth and paying capacity of the obligor or by the collateral pledged, if any. Loans with this classification are characterized by the distinct possibility that we will sustain some loss if the deficiencies are not corrected. Doubtful – Loans which have all the weaknesses inherent in loans classified as substandard with the added characteristic that the weaknesses make collection or liquidation in full highly questionable and improbable on the basis of currently-known facts, conditions and values. Loss – Loans which are considered by management to be uncollectible and of such little value that their continuance on our books as an asset, without establishment of a specific valuation allowance or charge-off, is not warranted. We do not have any loan balances within this classification because, in accordance with our accounting policy, loans, or a portion thereof considered to be uncollectible are charged-off prior to the assignment of this classification. 23 RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements (Unaudited) The following tables present our held for investment bank loan portfolio by credit quality indicator. Loans classified as special mention, substandard or doubtful are all considered to be “criticized” loans. December 31, 2022 Loans by origination fiscal year $ in millions 2023 2022 2021 2020 2019 Prior Revolving loans Total SBL Risk rating: Pass $ 5 $ 14 $ 79 $ 54 $ 27 $ 93 $ 14,613 $ 14,885 Special mention — — — — — — — — Substandard — — — — — — — — Doubtful — — — — — — — — Total SBL $ 5 $ 14 $ 79 $ 54 $ 27 $ 93 $ 14,613 $ 14,885 C&I loans Risk rating: Pass $ 187 $ 1,129 $ 1,418 $ 1,295 $ 1,074 $ 3,372 $ 2,620 $ 11,095 Special mention — 10 29 38 9 75 5 166 Substandard — — — 59 23 45 13 140 Doubtful — — — — — 4 — 4 Total C&I loans $ 187 $ 1,139 $ 1,447 $ 1,392 $ 1,106 $ 3,496 $ 2,638 $ 11,405 CRE loans Risk rating: Pass $ 384 $ 2,362 $ 1,206 $ 812 $ 665 $ 1,232 $ 161 $ 6,822 Special mention 5 — 1 14 — 38 — 58 Substandard — — — 3 13 33 — 49 Doubtful — — — — — — — — Total CRE loans $ 389 $ 2,362 $ 1,207 $ 829 $ 678 $ 1,303 $ 161 $ 6,929 REIT loans Risk rating: Pass $ 213 $ 226 $ 217 $ 100 $ 54 $ 202 $ 668 $ 1,680 Special mention — — — — — — — — Substandard — — — — — — — — Doubtful — — — — — — — — Total REIT loans $ 213 $ 226 $ 217 $ 100 $ 54 $ 202 $ 668 $ 1,680 Residential mortgage loans Risk rating: Pass $ 538 $ 2,988 $ 1,672 $ 989 $ 466 $ 1,093 $ 42 $ 7,788 Special mention — — 1 — 2 5 — 8 Substandard — 2 — — — 20 — 22 Doubtful — — — — — — — — Total residential mortgage loans $ 538 $ 2,990 $ 1,673 $ 989 $ 468 $ 1,118 $ 42 $ 7,818 Tax-exempt loans Risk rating: Pass $ 165 $ 297 $ 169 $ 56 $ 109 $ 871 $ — $ 1,667 Special mention — — — — — — — — Substandard — — — — — — — — Doubtful — — — — — — — — Total tax-exempt loans $ 165 $ 297 $ 169 $ 56 $ 109 $ 871 $ — $ 1,667 24 RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements (Unaudited) September 30, 2022 Loans by origination fiscal year $ in millions 2022 2021 2020 2019 2018 Prior Revolving loans Total SBL Risk rating: Pass $ 14 $ 27 $ 72 $ 44 $ 36 $ 41 $ 15,063 $ 15,297 Special mention — — — — — — — — Substandard — — — — — — — — Doubtful — — — — — — — — Total SBL $ 14 $ 27 $ 72 $ 44 $ 36 $ 41 $ 15,063 $ 15,297 C&I loans Risk rating: Pass $ 1,011 $ 1,448 $ 1,301 $ 1,124 $ 1,389 $ 2,200 $ 2,380 $ 10,853 Special mention 10 28 3 37 — 82 6 166 Substandard 1 — 60 28 40 6 14 149 Doubtful — — — 5 — — 5 Total C&I loans $ 1,022 $ 1,476 $ 1,364 $ 1,189 $ 1,434 $ 2,288 $ 2,400 $ 11,173 CRE loans Risk rating: Pass $ 1,916 $ 1,345 $ 892 $ 707 $ 816 $ 551 $ 176 $ 6,403 Special mention — 1 — — 36 2 — 39 Substandard — — 14 17 46 30 — 107 Doubtful — — — — — — — — Total CRE loans $ 1,916 $ 1,346 $ 906 $ 724 $ 898 $ 583 $ 176 $ 6,549 REIT loans Risk rating: Pass $ 169 $ 230 $ 96 $ 53 $ 40 $ 222 $ 782 $ 1,592 Special mention — — — — — — — — Substandard — — — — — — — — Doubtful — — — — — — — — Total REIT loans $ 169 $ 230 $ 96 $ 53 $ 40 $ 222 $ 782 $ 1,592 Residential mortgage loans Risk rating: Pass $ 2,984 $ 1,704 $ 1,023 $ 477 $ 290 $ 843 $ 35 $ 7,356 Special mention 1 1 — 2 — 4 — 8 Substandard 1 — — — 1 20 — 22 Doubtful — — — — — — — — Total residential mortgage loans $ 2,986 $ 1,705 $ 1,023 $ 479 $ 291 $ 867 $ 35 $ 7,386 Tax-exempt loans Risk rating: Pass $ 264 $ 169 $ 56 $ 115 $ 192 $ 705 $ — $ 1,501 Special mention — — — — — — — — Substandard — — — — — — — — Doubtful — — — — — — — — Total tax-exempt loans $ 264 $ 169 $ 56 $ 115 $ 192 $ 705 $ — $ 1,501 25 RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements (Unaudited) We also monitor the credit quality of the residential mortgage loan portfolio utilizing FICO scores and loan-to-value (“LTV”) ratios. A FICO score measures a borrower’s creditworthiness by considering factors such as payment and credit history. LTV measures the carrying value of the loan as a percentage of the value of the property securing the loan. The following table presents the held for investment residential mortgage loan portfolio by FICO score and by LTV ratio at origination. December 31, 2022 Loans by origination fiscal year $ in millions 2023 2022 2021 2020 2019 Prior Revolving loans Total FICO score: Below 600 $ 1 $ 1 $ 3 $ 2 $ 3 $ 55 $ — $ 65 600 - 699 30 156 109 89 31 85 4 504 700 - 799 435 2,411 1,274 721 342 667 26 5,876 800 + 72 419 283 176 86 306 9 1,351 FICO score not available — 3 4 1 6 5 3 22 Total $ 538 $ 2,990 $ 1,673 $ 989 $ 468 $ 1,118 $ 42 $ 7,818 LTV ratio: Below 80% $ 387 $ 2,287 $ 1,308 $ 776 $ 350 $ 856 $ 37 $ 6,001 80%+ 151 703 365 213 118 262 5 1,817 Total $ 538 $ 2,990 $ 1,673 $ 989 $ 468 $ 1,118 $ 42 $ 7,818 September 30, 2022 Loans by origination fiscal year $ in millions 2022 2021 2020 2019 2018 Prior Revolving loans Total FICO score: Below 600 $ 1 $ 3 $ 2 $ 3 $ 1 $ 54 $ — $ 64 600 - 699 155 112 90 32 20 68 4 481 700 - 799 2,403 1,301 744 353 219 470 22 5,512 800 + 424 284 184 87 48 273 6 1,306 FICO score not available 3 5 3 4 3 2 3 23 Total $ 2,986 $ 1,705 $ 1,023 $ 479 $ 291 $ 867 $ 35 $ 7,386 LTV ratio: Below 80% $ 2,287 $ 1,333 $ 797 $ 358 $ 226 $ 661 $ 31 $ 5,693 80%+ 699 372 226 121 65 206 4 1,693 Total $ 2,986 $ 1,705 $ 1,023 $ 479 $ 291 $ 867 $ 35 $ 7,386 26 RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements (Unaudited) Allowance for credit losses The following table presents changes in the allowance for credit losses on held for investment bank loans by portfolio segment. $ in millions SBL C&I loans CRE loans REIT loans Residential mortgage loans Tax-exempt loans Total Three months ended December 31, 2022 Balance at beginning of period $ 3 $ 226 $ 87 $ 21 $ 57 $ 2 $ 396 Provision/(benefit) for credit losses 1 — 2 ( 6 ) 17 — 14 Net (charge-offs)/recoveries: Charge-offs — ( 4 ) ( 1 ) — — — ( 5 ) Recoveries — — 3 — — — 3 Net (charge-offs)/recoveries — ( 4 ) 2 — — — ( 2 ) Foreign exchange translation adjustment — — — — — — — Balance at end of period $ 4 $ 222 $ 91 $ 15 $ 74 $ 2 $ 408 ACL by loan portfolio segment as a % of total ACL 1.0 % 54.4 % 22.3 % 3.7 % 18.1 % 0.5 % 100.0 % Three months ended December 31, 2021 Balance at beginning of period $ 4 $ 191 $ 66 $ 22 $ 35 $ 2 $ 320 Provision/(benefit) for credit losses ( 1 ) ( 10 ) 6 — ( 6 ) — ( 11 ) Net (charge-offs)/recoveries: Charge-offs — ( 2 ) — — — — ( 2 ) Recoveries — — — — 1 — 1 Net (charge-offs)/recoveries — ( 2 ) — — 1 — ( 1 ) Foreign exchange translation adjustment — — — — — — — Balance at end of period $ 3 $ 179 $ 72 $ 22 $ 30 $ 2 $ 308 ACL by loan portfolio segment as a % of total ACL 1.0 % 58.2 % 23.4 % 7.1 % 9.7 % 0.6 % 100.0 % The allowance for credit losses on held for investment bank loans increased $ 12 million during the three months ended December 31, 2022 resulting from a $ 14 million provision for credit losses, primarily due to a weaker macroeconomic outlook, primarily on the residential mortgage portfolio, and the impact of loan growth during the quarter. The allowance for credit losses on unfunded lending commitments, which is included in “Other payables” on our Condensed Consolidated Statements of Financial Condition, was $ 19 million at both December 31, 2022 and September 30, 2022. 27 RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements (Unaudited) NOTE 8 – LOANS TO FINANCIAL ADVISORS, NET Loans to financial advisors are primarily comprised of loans originated as a part of our recruiting activities. See Note 2 of our 2022 Form 10-K for a discussion of our accounting policies related to loans to financial advisors and the related allowance for credit losses. The following table presents the balances for our loans to financial advisors and the related accrued interest receivable. $ in millions December 31, 2022 September 30, 2022 Affiliated with the firm as of period-end (1) $ 1,143 $ 1,173 No longer affiliated with the firm as of period-end (2) 9 8 Total loans to financial advisors 1,152 1,181 Allowance for credit losses ( 30 ) ( 29 ) Loans to financial advisors, net $ 1,122 $ 1,152 Accrued interest receivable on loans to financial advisors (included in “Other receivables, net”) $ 5 $ 5 Allowance for credit losses as a percent of total loans to financial advisors 2.60 % 2.46 % (1) These loans were predominantly current. (2) These loans were predominantly past due for a period of 180 days or more. NOTE 9 – VARIABLE INTEREST ENTITIES A VIE requires consolidation by the entity’s primary beneficiary. We evaluate all of the entities in which we are involved to determine if the entity is a VIE and if so, whether we hold a variable interest and are the primary beneficiary. Refer to Note 2 of our 2022 Form 10-K for a discussion of our principal involvement with VIEs and the accounting policies regarding determination of whether we are deemed to be the primary beneficiary of VIEs. VIEs where we are the primary beneficiary Of the VIEs in which we hold an interest, we have determined that certain investments in low-income housing tax credit (“LIHTC”) funds and the trust we utilize in connection with restricted stock unit (“RSU”) awards granted to certain employees of one of our Canadian subsidiaries (the “Restricted Stock Trust Fund”) require consolidation in our financial statements, as we are deemed the primary beneficiary of such VIEs. The aggregate assets and liabilities of the VIEs we consolidate are provided in the following table. Aggregate assets and aggregate liabilities may differ from the consolidated carrying value of assets and liabilities due to the elimination of intercompany assets and liabilities held by the consolidated VIE. $ in millions Aggregate assets Aggregate liabilities December 31, 2022 LIHTC funds $ 60 $ 6 Restricted Stock Trust Fund 27 27 Total $ 87 $ 33 September 30, 2022 LIHTC funds $ 59 $ 6 Restricted Stock Trust Fund 17 17 Total $ 76 $ 23 28 RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements (Unaudited) The following table presents information about the carrying value of the assets and liabilities of the VIEs which we consolidate and which are included on our Condensed Consolidated Statements of Financial Condition. Intercompany balances are eliminated in consolidation and are not reflected in the following table. $ in millions December 31, 2022 September 30, 2022 Assets: Cash and cash equivalents and assets segregated for regulatory purposes and restricted cash $ 5 $ 5 Other assets 55 54 Total assets $ 60 $ 59 Liabilities: Other payables $ — $ — Total liabilities $ — $ — Noncontrolling interests $ ( 26 ) $ ( 26 ) VIEs where we hold a variable interest but are not the primary beneficiary As discussed in Note 2 of our 2022 Form 10-K, we have concluded that for certain VIEs we are not the primary beneficiary and therefore do not consolidate these VIEs. Such VIEs include certain LIHTC funds, certain Private Equity Interests, and other limited partnerships. Our risk of loss for these VIEs is limited to our investments in, advances to, and/or receivables due from these VIEs. Aggregate assets, liabilities, and risk of loss The aggregate assets, liabilities, and our exposure to loss from those VIEs in which we hold a variable interest, but as to which we have concluded we are not the primary beneficiary, are provided in the following table. December 31, 2022 September 30, 2022 $ in millions Aggregate assets Aggregate liabilities Our risk of loss Aggregate assets Aggregate liabilities Our risk of loss LIHTC funds $ 8,101 $ 2,697 $ 76 $ 7,752 $ 2,584 $ 136 Private Equity Interests 2,207 531 94 2,177 448 90 Other 158 101 3 159 101 8 Total $ 10,466 $ 3,329 $ 173 $ 10,088 $ 3,133 $ 234 NOTE 10 - OTHER ASSETS The following table details the components of other assets. See Note 2 of our 2022 Form 10-K for a discussion of the accounting polices related to certain of these components. $ in millions December 31, 2022 September 30, 2022 Investments in company-owned life insurance policies $ 1,024 $ 944 Property and equipment, net 502 503 Lease right of use (“ROU”) assets 468 480 Prepaid expenses 186 173 Investments in FHLB and FRB stock 86 88 All other 254 264 Total other assets $ 2,520 $ 2,452 See Note 13 of our 2022 Form 10-K for further information regarding our property and equipment and Note 11 of this Form 10-Q and Note 14 of our 2022 Form 10-K for further information regarding our leases. 29 RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements (Unaudited) NOTE 11 – LEASES The following table presents the balances related to our leases on our Condensed Consolidated Statements of Financial Condition. See Notes 2 and 14 of our 2022 Form 10-K for additional information related to our leases, including a discussion of our accounting policies. $ in millions December 31, 2022 September 30, 2022 ROU assets (included in Other assets) $ 468 $ 480 Lease liabilities (included in Other payables) $ 471 $ 482 Lease liabilities as of December 31, 2022 excluded $ 63 million of minimum lease payments related to lease arrangements that were legally binding but had not yet commenced. These leases are estimated to commence between dates later in fiscal year 2023 and fiscal year 2025 with lease terms ranging from three to 13 years. Lease expense The following table details the components of lease expense, which is included in “Occupancy and equipment” expense on our Condensed Consolidated Statements of Income and Comprehensive Income. Three months ended December 31, $ in millions 2022 2021 Lease costs $ 31 $ 28 Variable lease costs $ 7 $ 7 Variable lease costs in the preceding table include payments required under lease arrangements for common area maintenance charges and other variable costs that are not reflected in the measurement of ROU assets and lease liabilities. NOTE 12 – BANK DEPOSITS Bank deposits include money market and savings accounts, interest-bearing checking accounts, which include Negotiable Order of Withdrawal accounts, certificates of deposit, and non-interest-bearing checking accounts. The following table presents a summary of bank deposits, as well as the weighted-average interest rates on such deposits. The calculation of the weighted-average rates was based on the actual deposit balances and rates at each respective period end. December 31, 2022 September 30, 2022 $ in millions Balance Weighted-average rate Balance Weighted-average rate Money market and savings accounts $ 44,767 1.20 % $ 44,446 1.01 % Interest-bearing checking accounts 5,309 4.10 % 5,286 2.77 % Certificates of deposit 1,415 3.09 % 999 1.85 % Non-interest-bearing checking accounts 488 — 626 — Total bank deposits $ 51,979 1.55 % $ 51,357 1.21 % At December 31, 2022 and September 30, 2022, money market and savings accounts in the preceding table included $ 39.10 billion and $ 38.71 billion, respectively, of deposits that are cash balances swept to our Bank segment from the client investment accounts maintained at Raymond James & Associates, Inc. (“RJ&A”), which are held in Federal Deposit Insurance Corporation (“FDIC”)-insured bank accounts through the Raymond James Bank Deposit Program (“RJBDP”). As of December 31, 2022 and September 30, 2022, money market and savings accounts also included direct accounts held by TriState Capital Bank on behalf of third-party clients. 30 RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements (Unaudited) As of December 31, 2022 and September 30, 2022, the estimated amount of total bank deposits that exceeded the FDIC insurance limit was $ 8.18 billion and $ 7.84 billion, respectively. The following table sets forth the estimated amount of certificates of deposit that exceeded the FDIC insurance limit by time remaining until maturity as of December 31, 2022. $ in millions December 31, 2022 Three months or less $ 37 Over three through six months 16 Over six through twelve months 15 Over twelve months 12 Total estimated certificates of deposit that exceeded the FDIC insurance limit $ 80 Interest expense on deposits, excluding interest expense related to affiliated deposits, is summarized in the following table. Three months ended December 31, $ in millions 2022 2021 Money market and savings accounts $ 117 $ 1 Interest-bearing checking accounts 47 1 Certificates of deposit 8 4 Total interest expense on deposits $ 172 $ 6 We use an interest rate swap to manage the risk of increases in interest rates associated with certain bank deposits by converting the balances subject to variable interest rates to a fixed interest rate. Refer to Note 5 of this Form 10-Q for information regarding this interest rate swap, which has been designated and accounted for as a cash flow hedge. NOTE 13 – OTHER BORROWINGS The following table details the components of our other borrowings, which are primarily comprised of short-term and long-term FHLB advances and subordinated notes. December 31, 2022 September 30, 2022 $ in millions Weighted average interest rate Maturity date Balance Weighted average interest rate Maturity date Balance FHLB advances: Floating rate - term (1) 4.58 % December 2023 $ 200 3.32 % December 2023 $ 850 Floating rate - term (1) 4.60 % June 2024 650 N/A N/A — Floating rate - overnight (1) N/A Overnight — 3.11 % Overnight 140 Fixed rate 4.82 % March 2023 200 3.45 % December 2022 200 Total FHLB advances 1,050 1,190 Subordinated notes - fixed-to-floating (including an unaccreted premium of $ 2 and $ 2 , respectively) (2) 5.75 % May 2030 100 5.75 % May 2030 100 Other — 1 Total other borrowings $ 1,150 $ 1,291 (1) Interest rates on these advances reset daily. (2) Incur interest at a fixed rate of 5.75 % until May 2025 and thereafter at a variable interest rate based on London Interbank Offered Rate, or an appropriate alternative reference rate. We may redeem these subordinated notes beginning in August 2025 at a redemption price equal to 100 % of the principal amount of the notes to be redeemed plus accrued and unpaid interest thereon to the redemption date. We use interest rate swaps to manage the risk of increases in interest rates associated with our floating-rate FHLB advances by converting the balances subject to variable interest rates to a fixed interest rate. Refer to Note 2 of our 2022 Form 10-K and Note 5 of this Form 10-Q for information regarding these interest rate swaps, which have been designated and accounted for as cash flow hedges. Refer to Note 6 for more information regarding bank loans, net pledged with the FHLB as security for our FHLB borrowings. For further information on our other borrowing arrangements refer to Note 16 of our 2022 Form 10-K. 31 RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements (Unaudited) NOTE 14 – INCOME TAXES The income tax provision for interim periods is comprised of tax on ordinary income provided at the most recent estimated annual effective tax rate, adjusted for the tax effect of discrete items. We estimate the annual effective tax rate quarterly based on the forecasted pre-tax results of our U.S. and non-U.S. operations. Items unrelated to current year ordinary income are recognized entirely in the period identified as a discrete item of tax. These discrete items generally relate to changes in tax laws, adjustments to the actual liability determined upon filing tax returns, excess tax benefits related to share-based compensation and adjustments to previously recorded reserves for uncertain tax positions. For discussion of income tax accounting policies and other income tax related information, see Notes 2 and 18 of our 2022 Form 10-K. Effective tax rate Our effective income tax rate of 21.9 % for the three months ended December 31, 2022 was lower than the 25.4 % effective tax rate for our fiscal year 2022. The decrease in the effective income tax rate was primarily due to non-taxable valuation gains associated with our company-owned life insurance policies that were recognized during the current period compared to fiscal year 2022 which had non-deductible losses. Uncertain tax positions Although management cannot predict with any degree of certainty the timing of ultimate resolution of matters under review by various taxing jurisdictions, it is reasonably possible that our uncertain tax position liability balance may decrease within the next 12 months by up to $ 10 million as a result of the expiration of statutes of limitations and the completion of tax authorities’ examinations. NOTE 15 – COMMITMENTS, CONTINGENCIES AND GUARANTEES Commitments and contingencies Underwriting commitments In the normal course of business, we enter into commitments for debt and equity underwritings. As of December 31, 2022, we had one such open underwriting commitment, which was subsequently settled in an open market transaction and did not result in a significant loss. Lending commitments and other credit-related financial instruments We have outstanding, at any time, a significant number of commitments to extend credit and other credit-related off-balance-sheet financial instruments, such as standby letters of credit and loan purchases, which then extend over varying periods of time. These arrangements are subject to strict underwriting assessments and each client’s credit worthiness is evaluated on a case-by-case basis. Fixed-rate commitments are subject to market risk resulting from fluctuations in interest rates and our exposure is limited to the replacement value of those commitments. The following table presents our commitments to extend credit and other credit-related off-balance sheet financial instruments outstanding at our Bank segment. $ in millions December 31, 2022 September 30, 2022 SBL and other consumer lines of credit $ 35,159 $ 33,641 Commercial lines of credit $ 3,809 $ 3,792 Unfunded lending commitments $ 1,227 $ 1,255 Standby letters of credit $ 99 $ 94 SBL and other consumer lines of credit primarily represent the unfunded amounts of bank loans to consumers that are secured by marketable securities or other liquid collateral at advance rates consistent with industry standards. The proceeds from repayment or, if necessary, the liquidation of collateral, which is monitored daily, are expected to satisfy the amounts drawn against these existing lines of credit. These lines of credit are primarily uncommitted, as we reserve the right to not make any advances or may terminate these lines at any time. 32 RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements (Unaudited) Because many of our lending commitments expire without being funded in whole or in part, the contractual amounts are not estimates of our actual future credit exposure or future liquidity requirements. The allowance for credit losses calculated under the current expected credit losses (“CECL”) model provides for potential losses related to the unfunded lending commitments. See Note 2 of our 2022 Form 10-K and Note 7 of this Form 10-Q for further information on this allowance for credit losses related to unfunded lending commitments. RJ&A enters into margin lending arrangements which allow customers to borrow against the value of qualifying securities. Margin loans are collateralized by the securities held in the customer’s account at RJ&A. Collateral levels and established credit terms are monitored daily and we require customers to deposit additional collateral or reduce balances as necessary. We offer loans to prospective financial advisors for recruiting and retention purposes (see Note 2 of our 2022 Form 10-K and Note 8 of this Form 10-Q for further discussion of our loans to financial advisors). These offers are contingent upon certain events occurring, including the individuals joining us and meeting certain other conditions outlined in their offer. Investment commitments We had unfunded commitments to various investments, primarily held by Raymond James Bank and TriState Capital Bank, of $ 48 million as of December 31, 2022. Other commitments Raymond James Affordable Housing Investments, Inc. (“RJAHI”) sells investments in project partnerships to various LIHTC funds, which have third-party investors, and for which RJAHI serves as the managing member or general partner. RJAHI typically sells investments in project partnerships to LIHTC funds within 90 days of their acquisition. Until such investments are sold to LIHTC funds, RJAHI is responsible for funding investment commitments to such partnerships. As of December 31, 2022, RJAHI had committed approximately $ 254 million to project partnerships that had not yet been sold to LIHTC funds. Because we expect to sell these project partnerships to LIHTC funds and the equity funding events arise over future periods, the contractual commitments are not expected to materially impact our future liquidity requirements. RJAHI may also make short-term loans or advances to project partnerships and LIHTC funds. For information regarding our lease commitments see Note 11 of this Form 10-Q and for information on the maturities of our lease liabilities see Note 14 of our 2022 Form 10-K. Guarantees Our U.S. broker-dealer subsidiaries are required by federal law to be members of the Securities Investors Protection Corporation (“SIPC”). The SIPC fund provides protection up to $ 500 thousand per client for securities and cash held in client accounts, including a limitation of $ 250 thousand on claims for cash balances. We have purchased excess SIPC coverage through various syndicates of Lloyd’s of London. For RJ&A, our clearing broker-dealer, the additional protection currently provided has an aggregate firm limit of $ 750 million for cash and securities, including a sub-limit of $ 1.9 million per client for cash above basic SIPC. Account protection applies when a SIPC member fails financially and is unable to meet its obligations to clients. This coverage does not protect against market fluctuations. RJF has provided an indemnity to Lloyd’s of London against any and all losses they may incur associated with the excess SIPC policies. Legal and regulatory matters contingencies In the normal course of our business, we have been named, from time to time, as a defendant in various legal actions, including arbitrations, class actions and other litigation, arising in connection with our activities as a diversified financial services institution. RJF and certain of its subsidiaries are subject to regular reviews and inspections by regulatory authorities and self-regulatory organizations. Reviews can result in the imposition of sanctions for regulatory violations, ranging from non-monetary censures to fines and, in serious cases, temporary or permanent suspension from conducting business, or limitations on certain business activities. In addition, regulatory agencies and self-regulatory organizations institute investigations from time to time, among other things, into industry practices, which can also result in the imposition of such sanctions. For example, the firm is continuing its cooperation with the SEC in connection with an investigation of the firm’s investment advisory business’ compliance with records preservation requirements relating to business communications sent over electronic messaging channels that have not been approved by the firm. The SEC is reportedly conducting similar investigations of record preservation practices at other financial institutions. 33 RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements (Unaudited) We may contest liability and/or the amount of damages, as appropriate, in each pending matter. The level of litigation and investigatory activity (both formal and informal) by government and self-regulatory agencies in the financial services industry continues to be significant. There can be no assurance that material losses will not be incurred from claims that have not yet been asserted or are not yet determined to be material. For many legal and regulatory matters, we are unable to estimate a range of reasonably possible loss as we cannot predict if, how or when such proceedings or investigations will be resolved or what the eventual settlement, fine, penalty or other relief, if any, may be. A large number of factors may contribute to this inherent unpredictability: the proceeding is in its early stages; the damages sought are unspecified, unsupported or uncertain; it is unclear whether a case brought as a class action will be allowed to proceed on that basis; the other party is seeking relief other than or in addition to compensatory damages (including, in the case of regulatory and governmental proceedings, potential fines and penalties); the matters present significant legal uncertainties; we have not engaged in settlement discussions; discovery is not complete; there are significant facts in dispute; and numerous parties are named as defendants (including where it is uncertain how liability might be shared among defendants). Subject to the foregoing, after consultation with counsel, we believe that the outcome of such litigation and regulatory proceedings will not have a material adverse effect on our consolidated financial condition. However, the outcome of such litigation and regulatory proceedings could be material to our operating results and cash flows for a particular future period, depending on, among other things, our revenues or income for such period. There are certain matters for which we are unable to estimate the upper end of the range of reasonably possible loss. With respect to legal and regulatory matters for which management has been able to estimate a range of reasonably possible loss as of December 31, 2022, we estimated the upper end of the range of reasonably possible aggregate loss to be approximately $ 100 million in excess of the aggregate accruals for such matters. Refer to Note 2 of our 2022 Form 10-K for a discussion of our criteria for recognizing liabilities for contingencies. NOTE 16 – SHAREHOLDERS’ EQUITY Preferred stock The following table details the shares outstanding, carrying value, and aggregate liquidation preference of our preferred stock. For further details regarding our preferred stock see Note 20 of our 2022 Form 10-K. $ in millions, except share count December 31, 2022 September 30, 2022 6.75 % Fixed-to-Floating Rate Series A Non-Cumulative Perpetual Preferred Stock (“Series A Preferred Stock”): Shares outstanding 40,250 40,250 Carrying value $ 41 $ 41 Aggregate liquidation preference $ 40 $ 40 6.375 % Fixed-to-Floating Rate Series B Non-Cumulative Perpetual Preferred Stock (“Series B Preferred Stock”): Shares outstanding 80,500 80,500 Carrying value $ 79 $ 79 Aggregate liquidation preference $ 81 $ 81 The following table details dividends declared and dividends paid on our Series A and Series B preferred stock for the three months ended December 31, 2022. $ in millions, except per share amounts Total dividends Per preferred share amount Dividends declared: Series A Preferred Stock $ 1 $ 16.88 Series B Preferred Stock 1 $ 15.94 Total preferred stock dividends declared $ 2 Dividends paid: Series A Preferred Stock $ 1 $ 16.88 Series B Preferred Stock 1 $ 15.94 Total preferred stock dividends paid $ 2 34 RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements (Unaudited) Common equity Common stock issuance We issue shares from time-to-time during the year to satisfy obligations under certain of our share-based compensation programs. See Note 19 of this Form 10-Q and Note 23 of our 2022 Form 10-K for additional information on these programs. We may also reissue treasury shares for such purposes. Share repurchases We repurchase shares of our common stock from time to time for a number of reasons, including to offset dilution from share-based compensation. In December 2022, our Board of Directors authorized common stock repurchases of up to $ 1.5 billion, which replaced the previous authorization. Our share repurchases are effected primarily through regular open-market purchases, typically under a SEC Rule 10b-18 plan, the amounts and timing of which are determined primarily by our current and projected capital position, applicable law and regulatory constraints, general market conditions, and the price and trading volumes of our common stock. During the three months ended December 31, 2022, we repurchased 1.29 million shares of our common stock for $ 138 million at an average price of $ 106 per share under the Board of Directors’ common stock repurchase authorization. As of December 31, 2022, approximately $ 1.4 billion remained available under such authorization. Common stock dividends Dividends per common share declared and paid are detailed in the following table for each respective period. Three months ended December 31, 2022 2021 Dividends per common share - declared $ 0.42 $ 0.34 Dividends per common share - paid $ 0.34 $ 0.26 Our dividend payout ratio is detailed in the following table for each respective period and is computed by dividing dividends declared per common share by earnings per diluted common share. Three months ended December 31, 2022 2021 Dividend payout ratio 18.3 % 16.2 % RJF expects to continue paying cash dividends. However, the payment and rate of dividends on our common stock are subject to several factors including our operating results, financial and regulatory requirements or restrictions, and the availability of funds from our subsidiaries, including our broker-dealer and bank subsidiaries, which may also be subject to restrictions under regulatory capital rules. The availability of funds from subsidiaries may also be subject to restrictions contained in loan covenants of certain broker-dealer loan agreements and restrictions by bank regulators on dividends to the parent from Raymond James Bank and TriState Capital Bank. See Note 20 of this Form 10-Q for additional information on our regulatory capital requirements. 35 RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements (Unaudited) Accumulated other comprehensive income/(loss) All of the components of other comprehensive income/(loss) (“OCI”), net of tax, were attributable to RJF. The following table presents the net change in AOCI as well as the changes, and the related tax effects, of each component of AOCI. $ in millions Net investment hedges Currency translations Subtotal: net investment hedges and currency translations Available- for-sale securities Cash flow hedges Total Three months ended December 31, 2022 AOCI as of beginning of period $ 153 $ ( 276 ) $ ( 123 ) $ ( 902 ) $ 43 $ ( 982 ) OCI: OCI before reclassifications and taxes ( 19 ) 60 41 85 2 128 Amounts reclassified from AOCI, before tax — — — — ( 5 ) ( 5 ) Pre-tax net OCI ( 19 ) 60 41 85 ( 3 ) 123 Income tax effect 5 — 5 ( 38 ) 1 ( 32 ) OCI for the period, net of tax ( 14 ) 60 46 47 ( 2 ) 91 AOCI as of end of period $ 139 $ ( 216 ) $ ( 77 ) $ ( 855 ) $ 41 $ ( 891 ) Three months ended December 31, 2021 AOCI as of beginning of period $ 81 $ ( 90 ) $ ( 9 ) $ ( 5 ) $ ( 27 ) $ ( 41 ) OCI: OCI before reclassifications and taxes ( 2 ) 1 ( 1 ) ( 72 ) 8 ( 65 ) Amounts reclassified from AOCI, before tax — — — — 4 4 Pre-tax net OCI ( 2 ) 1 ( 1 ) ( 72 ) 12 ( 61 ) Income tax effect 1 — 1 17 ( 3 ) 15 OCI for the period, net of tax ( 1 ) 1 — ( 55 ) 9 ( 46 ) AOCI as of end of period $ 80 $ ( 89 ) $ ( 9 ) $ ( 60 ) $ ( 18 ) $ ( 87 ) Reclassifications from AOCI to net income, excluding taxes, for the three months ended December 31, 2022 and 2021 were recorded in “Interest expense” on the Condensed Consolidated Statements of Income and Comprehensive Income. Our net investment hedges and cash flow hedges relate to derivatives associated with our Bank segment. For further information about our significant accounting policies related to derivatives, see Note 2 of our 2022 Form 10-K. In addition, see Note 5 of this Form 10-Q for additional information on these derivatives. 36 RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements (Unaudited) NOTE 17 – REVENUES The following tables present our sources of revenues by segment. For further information about our significant accounting policies related to revenue recognition see Note 2 of our 2022 Form 10-K. See and Note 22 of this Form 10-Q for additional information on our segment results. Three Months Ended December 31, 2022 $ in millions Private Client Group Capital Markets Asset Management Bank Other and intersegment eliminations Total Revenues: Asset management and related administrative fees $ 1,053 $ 1 $ 197 $ — $ ( 9 ) $ 1,242 Brokerage revenues: Securities commissions: Mutual and other fund products 128 1 1 — — 130 Insurance and annuity products 104 — — — — 104 Equities, exchange traded funds (“ETFs”) and fixed income products 85 33 — — — 118 Subtotal securities commissions 317 34 1 — — 352 Principal transactions (1) 28 100 — 4 — 132 Total brokerage revenues 345 134 1 4 — 484 Account and service fees: Mutual fund and annuity service fees 98 — — — — 98 RJBDP fees 405 1 — — ( 269 ) 137 Client account and other fees 60 2 5 — ( 13 ) 54 Total account and service fees 563 3 5 — ( 282 ) 289 Investment banking: Merger & acquisition and advisory — 102 — — — 102 Equity underwriting 9 15 — — ( 1 ) 23 Debt underwriting — 16 — — — 16 Total investment banking 9 133 — — ( 1 ) 141 Other: Affordable housing investments business revenues — 24 — — — 24 All other (1) 6 — 2 13 ( 1 ) 20 Total other 6 24 2 13 ( 1 ) 44 Total non-interest revenues 1,976 295 205 17 ( 293 ) 2,200 Interest income (1) 109 23 2 676 17 827 Total revenues 2,085 318 207 693 ( 276 ) 3,027 Interest expense ( 22 ) ( 23 ) — ( 185 ) ( 11 ) ( 241 ) Net revenues $ 2,063 $ 295 $ 207 $ 508 $ ( 287 ) $ 2,786 (1) These revenues are generally not in scope of the accounting guidance for revenue from contracts with customers. 37 RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements (Unaudited) Three Months Ended December 31, 2021 $ in millions Private Client Group Capital Markets Asset Management Bank Other and intersegment eliminations Total Revenues: Asset management and related administrative fees $ 1,162 $ 1 $ 227 $ — $ ( 8 ) $ 1,382 Brokerage revenues: Securities commissions: Mutual and other fund products 171 2 2 — — 175 Insurance and annuity products 111 — — — — 111 Equities, ETFs and fixed income products 104 35 — — — 139 Subtotal securities commissions 386 37 2 — — 425 Principal transactions (1) 11 122 — — — 133 Total brokerage revenues 397 159 2 — — 558 Account and service fees: Mutual fund and annuity service fees 114 — — — ( 1 ) 113 RJBDP fees 67 — — — ( 50 ) 17 Client account and other fees 49 2 6 — ( 10 ) 47 Total account and service fees 230 2 6 — ( 61 ) 177 Investment banking: Merger & acquisition and advisory — 271 — — — 271 Equity underwriting 13 97 — — — 110 Debt underwriting — 44 — — — 44 Total investment banking 13 412 — — — 425 Other: Affordable housing investments business revenues — 35 — — — 35 All other (1) 7 2 1 6 — 16 Total other 7 37 1 6 — 51 Total non-interest revenues 1,809 611 236 6 ( 69 ) 2,593 Interest income (1) 33 5 — 187 — 225 Total revenues 1,842 616 236 193 ( 69 ) 2,818 Interest expense ( 3 ) ( 2 ) — ( 10 ) ( 22 ) ( 37 ) Net revenues $ 1,839 $ 614 $ 236 $ 183 $ ( 91 ) $ 2,781 (1) These revenues are generally not in scope of the accounting guidance for revenue from contracts with customers. At December 31, 2022 and September 30, 2022, net receivables related to contracts with customers were $ 432 million and $ 511 million, respectively. 38 RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements (Unaudited) NOTE 18 – INTEREST INCOME AND INTEREST EXPENSE The following table details the components of interest income and interest expense. Three months ended December 31, $ in millions 2022 2021 Interest income: Cash and cash equivalents $ 55 $ 3 Assets segregated for regulatory purposes and restricted cash 50 4 Trading assets — debt securities 14 4 Available-for-sale securities 53 22 Brokerage client receivables 41 21 Bank loans, net 599 164 All other 15 7 Total interest income $ 827 $ 225 Interest expense: Bank deposits $ 172 $ 6 Trading liabilities — debt securities 10 1 Brokerage client payables 17 1 Other borrowings 9 5 Senior notes payable 23 23 All other 10 1 Total interest expense $ 241 $ 37 Net interest income $ 586 $ 188 Bank loan (provision)/benefit for credit losses ( 14 ) 11 Net interest income after bank loan (provision)/benefit for credit losses $ 572 $ 199 Interest expense related to bank deposits in the preceding table excludes interest expense associated with affiliate deposits which has been eliminated in consolidation. NOTE 19 – SHARE-BASED COMPENSATION We have one share-based compensation plan, The Amended and Restated 2012 Stock Incentive Plan (“the Plan”), for our employees, Board of Directors, and independent contractor financial advisors. Generally, we reissue our treasury shares under the Plan; however, we are also permitted to issue new shares. Our share-based compensation awards are primarily issued during the fiscal first quarter of each year. Our share-based compensation accounting policies are described in Note 2 of our 2022 Form 10-K. Other information related to our share-based awards is presented in Note 23 of our 2022 Form 10-K. Restricted stock units During the three months ended December 31, 2022, we granted approximately 1.9 million RSUs with a weighted-average grant-date fair value of $ 117.66 , compared with approximately 2.3 million RSUs granted during the three months ended December 31, 2021, with a weighted-average grant-date fair value of $ 96.99 . For the three months ended December 31, 2022, total share-based compensation amortization related to RSUs was $ 76 million, compared with $ 63 million for the three months ended December 31, 2021. As of December 31, 2022, there were $ 462 million of total pre-tax compensation costs not yet recognized (net of estimated forfeitures) related to RSUs, including those granted during the three months ended December 31, 2022. These costs are expected to be recognized over a weighted-average period of three years . 39 RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements (Unaudited) Restricted stock awards Restricted stock awards (“RSAs”) were issued as a component of our total purchase consideration for TriState Capital Holdings, Inc. (“TriState Capital”) on June 1, 2022, in accordance with the terms of the acquisition. See Note 23 of our 2022 Form 10-K for further discussion of these awards. For the three months ended December 31, 2022 total share-based compensation amortization related to RSAs was $ 3 million. As of December 31, 2022, there were $ 18 million of total pre-tax compensation costs not yet recognized for these RSAs. These costs are expected to be recognized over a weighted-average period of 2.5 years. NOTE 20 – REGULATORY CAPITAL REQUIREMENTS RJF, as a bank holding company and financial holding company, as well as Raymond James Bank, TriState Capital Bank, our broker-dealer subsidiaries and our trust subsidiaries are subject to capital requirements by various regulatory authorities. Capital levels of each entity are monitored to ensure compliance with our various regulatory capital requirements. Failure to meet minimum capital requirements can initiate certain mandatory, and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on our financial results. As a bank holding company under the Bank Holding Company Act of 1956, as amended (the “BHC Act”) that has made an election to be a financial holding company, RJF is subject to supervision, examination, and regulation by the Board of Governors of the Federal Reserve System (“the Fed”). We are subject to the Fed’s capital rules which establish an integrated regulatory capital framework and implement, in the U.S., the Basel III regulatory capital reforms from the Basel Committee on Banking Supervision and certain changes required by the Dodd-Frank Wall Street Reform and Consumer Protection Act. The FDIC’s capital rules, which are substantially similar to the Fed’s rules, apply to TriState Capital Bank. We apply the standardized approach for calculating risk-weighted assets and are also subject to the market risk provisions of the Fed’s capital rules (“market risk rule”). Under these rules, minimum requirements are established for both the quantity and quality of capital held by banking organizations. RJF, Raymond James Bank, and TriState Capital Bank are required to maintain minimum leverage ratios (defined as tier 1 capital divided by adjusted average assets), as well as minimum ratios of tier 1 capital, common equity tier 1 (“CET1”), and total capital to risk-weighted assets. These capital ratios incorporate quantitative measures of our assets, liabilities, and certain off-balance sheet items as calculated under the regulatory capital rules and are subject to qualitative judgments by the regulators about components, risk-weightings, and other factors. We calculate these ratios in order to assess compliance with both regulatory requirements and internal capital policies. In order to maintain our ability to take certain capital actions, including dividends and common equity repurchases, and to make bonus payments, we must hold a capital conservation buffer above our minimum risk-based capital requirements. As of December 31, 2022, capital levels at RJF, Raymond James Bank, and TriState Capital Bank exceeded the capital conservation buffer requirement and each entity was categorized as “well-capitalized.” For further discussion of regulatory capital requirements applicable to certain of our businesses and subsidiaries, see Note 24 of our 2022 Form 10-K. 40 RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements (Unaudited) To meet requirements for capital adequacy or to be categorized as “well-capitalized,” RJF must maintain minimum Tier 1 leverage, Tier 1 capital, CET1, and Total capital amounts and ratios as set forth in the following table. Actual Requirement for capital adequacy purposes To be well-capitalized under regulatory provisions $ in millions Amount Ratio Amount Ratio Amount Ratio RJF as of December 31, 2022: Tier 1 leverage $ 8,844 11.3 % $ 3,121 4.0 % $ 3,901 5.0 % Tier 1 capital $ 8,844 20.3 % $ 2,618 6.0 % $ 3,490 8.0 % CET1 $ 8,728 20.0 % $ 1,963 4.5 % $ 2,836 6.5 % Total capital $ 9,407 21.6 % $ 3,490 8.0 % $ 4,363 10.0 % RJF as of September 30, 2022: Tier 1 leverage $ 8,480 10.3 % $ 3,304 4.0 % $ 4,130 5.0 % Tier 1 capital $ 8,480 19.2 % $ 2,651 6.0 % $ 3,534 8.0 % CET1 $ 8,380 19.0 % $ 1,988 4.5 % $ 2,871 6.5 % Total capital $ 9,031 20.4 % $ 3,534 8.0 % $ 4,418 10.0 % As of December 31, 2022, RJF’s regulatory capital increase compared with September 30, 2022 was driven by positive earnings, net of share repurchases and dividends paid during our fiscal first quarter of 2023. RJF’s Tier 1 and Total capital ratios increased compared with September 30, 2022 resulting from the increase in regulatory capital, as well as a decrease in risk-weighted assets. The decrease in risk-weighted assets was primarily driven by a decrease in our assets segregated for regulatory purposes and restricted cash, as well as a decrease in receivables, partially offset by an increase in our bank loan portfolio. RJF’s Tier 1 leverage ratio at December 31, 2022 increased compared with September 30, 2022 due to the increase in regulatory capital, as well as lower average assets primarily driven by a decrease in assets segregated for regulatory purposes, partially offset by an increase in our bank loan portfolio. To meet the requirements for capital adequacy or to be categorized as “well-capitalized,” Raymond James Bank and TriState Capital Bank must maintain Tier 1 leverage, Tier 1 capital, CET1, and Total capital amounts and ratios as set forth in the following tables. Our intention is to maintain Raymond James Bank’s and TriState Capital Bank’s “well-capitalized” status. In the unlikely event that Raymond James Bank or TriState Capital Bank failed to maintain their “well-capitalized” status, the consequences could include a requirement to obtain a waiver from the FDIC prior to acceptance, renewal, or rollover of brokered deposits and result in higher FDIC premiums, but would not significantly impact our operations. Actual Requirement for capital adequacy purposes To be well-capitalized under regulatory provisions $ in millions Amount Ratio Amount Ratio Amount Ratio Raymond James Bank as of December 31, 2022: Tier 1 leverage $ 3,189 7.4 % $ 1,722 4.0 % $ 2,152 5.0 % Tier 1 capital $ 3,189 12.6 % $ 1,520 6.0 % $ 2,026 8.0 % CET1 $ 3,189 12.6 % $ 1,140 4.5 % $ 1,646 6.5 % Total capital $ 3,506 13.8 % $ 2,026 8.0 % $ 2,533 10.0 % Raymond James Bank as of September 30, 2022: Tier 1 leverage $ 2,998 7.1 % $ 1,695 4.0 % $ 2,119 5.0 % Tier 1 capital $ 2,998 12.1 % $ 1,485 6.0 % $ 1,979 8.0 % CET1 $ 2,998 12.1 % $ 1,113 4.5 % $ 1,608 6.5 % Total capital $ 3,308 13.4 % $ 1,979 8.0 % $ 2,474 10.0 % 41 RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements (Unaudited) Raymond James Bank’s regulatory capital increased compared with September 30, 2022, driven by positive earnings, partially offset by dividends paid to RJF. Raymond James Bank’s Tier 1 and Total capital ratios increased compared with September 30, 2022 resulting from the increase in regulatory capital, partially offset by an increase in risk-weighted assets due to growth in the bank loan portfolio. Raymond James Bank’s Tier 1 leverage ratio at December 31, 2022 increased compared with September 30, 2022 due to the increase in regulatory capital, partially offset by an increase in average assets, primarily driven by an increase in the bank loan portfolio. Actual Requirement for capital adequacy purposes To be well-capitalized under regulatory provisions $ in millions Amount Ratio Amount Ratio Amount Ratio TriState Capital Bank as of December 31, 2022: Tier 1 leverage $ 1,131 7.3 % $ 621 4.0 % $ 776 5.0 % Tier 1 capital $ 1,131 14.0 % $ 486 6.0 % $ 649 8.0 % CET1 $ 1,131 14.0 % $ 365 4.5 % $ 527 6.5 % Total capital $ 1,162 14.3 % $ 649 8.0 % $ 811 10.0 % TriState Capital Bank as of September 30, 2022: Tier 1 leverage $ 1,093 7.3 % $ 601 4.0 % $ 752 5.0 % Tier 1 capital $ 1,093 14.1 % $ 463 6.0 % $ 618 8.0 % CET1 $ 1,093 14.1 % $ 348 4.5 % $ 502 6.5 % Total capital $ 1,122 14.5 % $ 618 8.0 % $ 772 10.0 % TriState Capital Bank’s regulatory capital increased compared with September 30, 2022, driven by positive earnings. TriState Capital Bank’s Tier 1 and Total capital ratios decreased compared with September 30, 2022, due to an increase in risk-weighted assets, primarily resulting from increases in bank loans and available-for-sale securities, partially offset by the increase in regulatory capital. TriState Capital Bank’s Tier 1 leverage ratio at December 31, 2022 was flat compared with September 30, 2022 as the increase in regulatory capital was offset by an increase in average assets, primarily driven by the increases in bank loans and available-for-sale securities. Our banking subsidiaries may pay dividends to RJF without prior approval of their respective regulators subject to certain restrictions including retained net income and targeted regulatory capital ratios. Dividends paid to RJF from our banking subsidiaries may be limited to the extent that capital is needed to support their balance sheet growth. Certain of our broker-dealer subsidiaries are subject to the requirements of the Uniform Net Capital Rule (Rule 15c3-1) under the Securities Exchange Act of 1934. The following table presents the net capital position of RJ&A. $ in millions December 31, 2022 September 30, 2022 Raymond James & Associates, Inc. : (Alternative Method elected) Net capital as a percent of aggregate debit items 45.7 % 40.9 % Net capital $ 1,168 $ 1,152 Less: required net capital ( 51 ) ( 56 ) Excess net capital $ 1,117 $ 1,096 As of December 31, 2022, all of our other active regulated domestic and international subsidiaries were in compliance with and exceeded all applicable capital requirements. 42 RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements (Unaudited) NOTE 21 – EARNINGS PER SHARE The following table presents the computation of basic and diluted earnings per common share. Three months ended December 31, in millions, except per share amounts 2022 2021 Income for basic earnings per common share: Net income available to common shareholders $ 507 $ 446 Less allocation of earnings and dividends to participating securities ( 1 ) ( 1 ) Net income available to common shareholders after participating securities $ 506 $ 445 Income for diluted earnings per common share: Net income available to common shareholders $ 507 $ 446 Less allocation of earnings and dividends to participating securities ( 1 ) ( 1 ) Net income available to common shareholders after participating securities $ 506 $ 445 Common shares: Average common shares in basic computation 214.7 206.3 Dilutive effect of outstanding stock options and certain RSUs 5.7 6.1 Average common and common equivalent shares used in diluted computation 220.4 212.4 Earnings per common share: Basic $ 2.36 $ 2.16 Diluted $ 2.30 $ 2.10 Stock options and certain RSUs excluded from weighted-average diluted common shares because their effect would be antidilutive 1.2 — The allocation of earnings and dividends to participating securities in the preceding table represents dividends paid during the period to participating securities, consisting of certain RSUs, as well as the RSAs granted as part of our acquisition of TriState Capital, plus an allocation of undistributed earnings to such participating securities. Participating securities and related dividends paid on these participating securities were insignificant for each of the three months ended December 31, 2022 and 2021. Undistributed earnings are allocated to participating securities based upon their right to share in earnings if all earnings for the period had been distributed. 43 RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements (Unaudited) NOTE 22 – SEGMENT INFORMATION We currently operate through the following five segments: PCG; Capital Markets; Asset Management; Bank; and Other. The segments are determined based upon factors such as the services provided and the distribution channels served and are consistent with how we assess performance and determine how to allocate our resources. For a further discussion of our segments, see Note 26 of our 2022 Form 10-K. The following table presents information concerning operations in these segments. Three months ended December 31, $ in millions 2022 2021 Net revenues: Private Client Group $ 2,063 $ 1,839 Capital Markets 295 614 Asset Management 207 236 Bank 508 183 Other 9 ( 15 ) Intersegment eliminations ( 296 ) ( 76 ) Total net revenues $ 2,786 $ 2,781 Pre-tax income/(loss): Private Client Group $ 434 $ 195 Capital Markets ( 16 ) 201 Asset Management 80 107 Bank 136 102 Other (1) 18 ( 47 ) Total pre-tax income $ 652 $ 558 (1) The three months ended December 31, 2022 included the favorable impact of a $ 32 million insurance settlement received during the quarter related to a previously settled litigation matter. This item has been reflected as an offset to “Other” expenses on our Condensed Consolidated Statements of Income and Comprehensive income. No individual client accounted for more than ten percent of revenues in any of the periods presented. The following table presents our net interest income on a segment basis. Three months ended December 31, $ in millions 2022 2021 Net interest income/(expense): Private Client Group $ 87 $ 30 Capital Markets — 3 Asset Management 2 — Bank 491 177 Other 6 ( 22 ) Net interest income $ 586 $ 188 The following table presents our total assets on a segment basis. $ in millions December 31, 2022 September 30, 2022 Total assets: Private Client Group $ 13,920 $ 17,770 Capital Markets 2,898 3,951 Asset Management 558 556 Bank 57,623 56,737 Other 2,048 1,937 Total $ 77,047 $ 80,951 44 RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES The following table presents goodwill, which was included in our total assets, on a segment basis. $ in millions December 31, 2022 September 30, 2022 Goodwill: Private Client Group $ 562 $ 550 Capital Markets 275 274 Asset Management 69 69 Bank 529 529 Total $ 1,435 $ 1,422 We have operations in the U.S., Canada, and Europe. Substantially all long-lived assets are located in the U.S. The following table presents our net revenues and pre-tax income classified by major geographic area in which they were earned. Three months ended December 31, $ in millions 2022 2021 Net revenues: U.S. $ 2,540 $ 2,589 Canada 134 137 Europe 112 55 Total $ 2,786 $ 2,781 Pre-tax income: U.S. $ 609 $ 531 Canada 31 17 Europe 12 10 Total $ 652 $ 558 The following table presents our total assets by major geographic area in which they were held. $ in millions December 31, 2022 September 30, 2022 Total assets: U.S. $ 70,762 $ 74,428 Canada 3,594 3,631 Europe 2,691 2,892 Total $ 77,047 $ 80,951 The following table presents goodwill, which was included in our total assets, classified by major geographic area in which it was held. $ in millions December 31, 2022 September 30, 2022 Goodwill: U.S. $ 1,250 $ 1,250 Canada 23 23 Europe 162 149 Total $ 1,435 $ 1,422 45 RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES