RAYMOND JAMES FINANCIAL INC 10-Q

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS INDEX PAGE Factors affecting “forward-looking statements” 52 Introduction 52 Executive overview 52 Reconciliation of non-GAAP financial measures to GAAP financial measures 55 Net interest analysis 58 Results of operations Private Client Group 63 Capital Markets 67 Asset Management 68 Bank 71 Other 72 Statement of financial condition analysis 73 Liquidity and capital resources 74 Regulatory 80 Critical accounting estimates 81 Accounting standards update 82 Risk management 82 51 RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Management’s Discussion and Analysis Index FACTORS AFFECTING “FORWARD-LOOKING STATEMENTS” Certain statements made in this Quarterly Report on Form 10-Q may constitute “forward-looking statements” under the Private Securities Litigation Reform Act of 1995. Forward-looking statements include information concerning future strategic objectives, business prospects, anticipated savings, financial results (including expenses, earnings, liquidity, cash flow and capital expenditures), industry or market conditions (including changes in interest rates and inflation), demand for and pricing of our products (including cash sweep and deposit offerings), acquisitions, anticipated results of litigation, regulatory developments, and general economic conditions. In addition, words such as “believes,” “expects,” “anticipates,” “intends,” “estimates,” “projects,” and future or conditional verbs such as “will,” “may,” “could,” “should,” and “would,” as well as any other statement that necessarily depends on future events, are intended to identify forward-looking statements. Forward-looking statements are not guarantees, and they involve risks, uncertainties and assumptions. Although we make such statements based on assumptions that we believe to be reasonable, there can be no assurance that actual results will not differ materially from those expressed in the forward-looking statements. We caution investors not to rely unduly on any forward-looking statements and urge you to carefully consider the risks described in our filings with the Securities and Exchange Commission (the “SEC”) from time to time, including our most recent Annual Report on Form 10-K, and subsequent Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, which are available at www.raymondjames.com and the SEC’s website at www.sec.gov. We expressly disclaim any obligation to update any forward-looking statement in the event it later turns out to be inaccurate, whether as a result of new information, future events, or otherwise. INTRODUCTION The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to help the reader understand the results of our operations and financial condition. This MD&A is provided as a supplement to, and should be read in conjunction with, our condensed consolidated financial statements and accompanying notes to condensed consolidated financial statements. Where “NM” is used in various percentage change computations, the computed percentage change has been determined to be not meaningful. We operate as a financial holding company and bank holding company. Results in the businesses in which we operate are highly correlated to general economic conditions and, more specifically, to the direction of the U.S. equity and fixed income markets, changes in interest rates, market volatility, corporate and mortgage lending markets and commercial and residential credit trends. Overall market conditions, economic, political and regulatory trends, and industry competition are among the factors which could affect us and which are unpredictable and beyond our control. These factors affect the financial decisions made by market participants, including investors, borrowers, and competitors, impacting their level of participation in the financial markets. These factors also impact the level of investment banking activity and asset valuations, which ultimately affect our business results. EXECUTIVE OVERVIEW Quarter ended March 31, 2024 compared with the quarter ended March 31, 2023 For our fiscal second quarter of 2024, we generated net revenues of $3.12 billion and pre-tax income of $609 million, each 9% higher than the prior-year quarter. Our net income available to common shareholders of $474 million increased 12%, and our earnings per diluted share were $2.22, reflecting an increase of 15%. Our annualized return on common equity (“ROCE”) for the quarter was 17.5%, compared with 17.3% for the prior-year quarter, and our annualized return on tangible common equity (“ROTCE”) was 21.0% (1) , compared with 21.3% (1) for the prior-year quarter. Excluding the impact of $26 million of expenses related to acquisitions completed in prior years, such as compensation related to retention awards and amortization of identifiable intangible assets, our adjusted net income available to common shareholders was $494 million (1) for the three months ended March 31, 2024, an increase of 11% compared with adjusted net income available to common shareholders for the prior-year quarter. Our adjusted earnings per diluted share were $2.31 (1) , an increase of 14% compared with the prior-year quarter. Adjusted annualized ROCE for the quarter was 18.3% (1) and adjusted annualized ROTCE was 21.8% (1) compared with adjusted annualized ROCE of 18.2% (1) and adjusted annualized ROTCE of 22.3% (1) for the prior-year quarter. (1) ROTCE, adjusted net income available to common shareholders, adjusted earnings per diluted share, adjusted annualized ROCE, and adjusted annualized ROTCE are non-GAAP financial measures. Please see the “Reconciliation of non-GAAP financial measures to GAAP financial measures” in this MD&A for a reconciliation of these non-GAAP financial measures to the most directly comparable GAAP measures, and for other important disclosures. 52 RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Management’s Discussion and Analysis Index The increase in net revenues compared with the prior-year quarter was primarily due to higher asset management and related administrative fees, largely the result of higher PCG client assets in fee-based accounts at the beginning of the current quarter compared with the prior-year quarter. Brokerage revenues also increased compared with the prior-year quarter largely due to an increase in client activity in the PCG segment, partially offset by lower fixed income brokerage revenues due to lower market volatility compared with the prior-year quarter. Investment banking revenues increased compared with the prior-year quarter due to higher merger & acquisition and advisory and debt underwriting revenues. Combined net interest income and RJBDP fees declined compared with the prior-year quarter, as the benefits of higher short-term interest rates and higher average interest-earning assets and RJBDP balances swept to third-party banks were more than offset by a significant increase in interest expense. The increase in interest expense was primarily due to a shift in the mix of deposit balances at our Bank segment, as lower-cost RJBDP balances declined, while balances in the higher-cost ESP, which was introduced to PCG clients in March 2023, and certificates of deposit increased. Compensation, commissions and benefits expense increased 12%, primarily due to an increase in compensable revenues, as well as an increase in compensation costs to support our growth and annual salary increases. Our compensation ratio, or the ratio of compensation, commissions and benefits expense to net revenues, was 65.5%, compared with 63.3% for the prior-year quarter. Excluding acquisition-related compensation expenses, our adjusted compensation ratio was 65.2% (1) , compared with 62.8% (1) for the prior-year quarter. The increase in the compensation ratio primarily resulted from changes in our revenue mix due to increases in compensable revenues compared with the prior-year quarter, as well as a decrease in combined net interest income and RJBDP fees from third-party banks, which have little associated direct compensation. Non-compensation expenses decreased 6%, largely due to the favorable impact of a net legal and regulatory reserve release in the quarter of $32 million, while the prior-year quarter reflected incremental net expense including the impact of an unfavorable arbitration award. The bank loan provision for credit losses also declined compared with the prior-year quarter, reflecting an improved economic outlook year over year. Partially offsetting these decreases were higher communications and information processing expenses as we continue to invest in our technology for the benefit of our clients and advisors, and higher investment sub-advisory fees which are highly correlated with the increase in asset management fee revenues. Our effective income tax rate was 21.8% for our fiscal second quarter of 2024, a decrease compared with the 23.3% effective income tax rate for the prior-year quarter, primarily due to a larger tax benefit recognized during the current quarter related to nontaxable valuation gains associated with our company-owned life insurance policies, compared to that for the prior-year quarter, as well as a favorable impact on our effective tax rate from lower nondeductible fines and penalties in the current quarter. As of March 31, 2024, our Tier 1 leverage ratio of 12.3% and Total capital ratio of 23.3% were both significantly higher than the regulatory requirement to be considered well-capitalized. We also continue to have substantial liquidity with $2.03 billion (2) of cash at the parent as of March 31, 2024. We believe our capital and funding position provides us the opportunity to manage our balance sheet prudently and to continue to be opportunistic and invest in growth. During the three months ended March 31, 2024, we repurchased 1.70 million shares of our common stock for $207 million at an average price of $122 per share under the Board of Directors’ common stock repurchase authorization. In April 2024, we repurchased an additional 336 thousand shares of our common stock totaling $43 million, for a total of $400 million repurchased for the fiscal year, leaving $1.14 billion available under the Board of Directors’ common stock repurchase authorization as of the date of this Form 10-Q. With the April repurchases, we have offset the dilution from shares issued as part of the TriState Capital acquisition. We expect to continue to repurchase our common stock to offset dilution from share-based compensation and be opportunistic with incremental repurchases; however, we will continue to monitor market conditions and other capital needs as we consider these repurchases. (1) Adjusted compensation ratio is a non-GAAP financial measure. Please see the “Reconciliation of non-GAAP financial measures to GAAP financial measures” in this MD&A for a reconciliation of this non-GAAP financial measure to the most directly comparable GAAP measure, and for other important disclosures. (2) For additional information, please see the “Liquidity and capital resources - Sources of liquidity” section in this MD&A. 53 RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Management’s Discussion and Analysis Index As we look ahead to our fiscal third quarter of 2024, we believe we are well-positioned for long-term growth, with our strong capital position and total client assets under administration of $1.45 trillion. We expect our fiscal third quarter of 2024 results to be favorably impacted by higher asset management and related administrative fees, which will benefit from the 7% sequential increase in PCG fee-based assets and 5% sequential increase in financial assets under management as of March 31, 2024. In addition, our financial advisor recruiting activity remains robust, including a strong recruiting pipeline. While the timing of closings remains difficult to predict, we have a healthy investment banking pipeline and we expect investment banking revenues to improve along with the industry-wide gradual recovery. We expect our combined net interest income and RJBDP fees from third-party banks for the remainder of the fiscal year to be largely dependent on the level of short-term interest rates, the stability of client cash balances and the trajectory of loan growth, which has been subdued in the current interest rate environment. We have continued to experience headwinds for fixed income brokerage revenues due to flat or declining cash balances at many of our depository institution clients and we expect such headwinds to persist until short-term interest rates and cash balances at our depository institution clients stabilize. In addition, although our current loan portfolio credit metrics are solid and we continue to proactively manage our credit risk in our loan portfolio, future economic deterioration or changes in the macroeconomic outlook could result in increased bank loan provisions for credit losses in future periods. Six months ended March 31, 2024 compared with the six months ended March 31, 2023 For the six months ended March 31, 2024, we generated net revenues of $6.13 billion, an increase of 8% compared with the prior-year period, and pre-tax income of $1.24 billion, an increase of 2%. Our net income available to common shareholders of $971 million was 4% higher than the prior-year period and our earnings per diluted share were $4.54, reflecting a 7% increase. Our annualized ROCE was 18.3%, compared with 19.3% for the prior-year period, and our annualized ROTCE was 22.0% (1) , compared with 23.8% (1) for the prior-year period. Excluding the impact of $49 million of expenses related to acquisitions completed in prior years, adjusted net income available to common shareholders for the six months ended March 31, 2024 was $1.01 billion (1) , an increase of 6% compared with adjusted net income available to common shareholders for the prior-year period which, in addition to acquisition-related expenses, excluded the impact of a $32 million favorable insurance settlement related to a previously-settled legal matter. Our adjusted earnings per diluted share were $4.71 (1) , an increase of 9% compared with the prior-year period. Adjusted annualized ROCE was 19.0% (1) , compared with 19.7% (1) for the prior-year period, and adjusted annualized ROTCE was 22.8% (1) , compared with 24.2% (1) for the prior-year period. The increase in net revenues compared with the prior-year period was primarily due to higher asset management and related administrative fees, largely the result of higher PCG client assets in fee-based accounts at the beginning of each of the current-year billing periods compared with the prior-year billing periods. Brokerage revenues also increased compared with the prior-year period largely due to an increase in client activity in the PCG segment. Investment banking revenues increased primarily due to more favorable market conditions in the current-year period. Offsetting these increases was a decrease in combined net interest income and RJBDP fees from third-party banks, as the benefits of higher short-term interest rates and higher average interest-earning assets and RJBDP balances swept to third-party banks were more than offset by a significant increase in interest expense. The increase in interest expense was primarily due to a shift in the mix of deposit balances at our Bank segment, as lower-cost RJBDP balances declined compared with the prior-year period, while balances in the higher-cost ESP and certificates of deposit increased. Compensation, commissions and benefits expense increased 11%, primarily due to an increase in compensable revenues, as well as an increase in compensation costs to support our growth and annual salary increases. Our compensation ratio was 64.7%, compared with 62.8% for the prior-year period. Excluding acquisition-related compensation expenses, our adjusted compensation ratio was 64.3% (1) , compared with an adjusted compensation ratio of 62.2% (1) for the prior-year period. The increase in the compensation ratio primarily resulted from changes in our revenue mix due to increases in compensable revenues compared with the prior-year period, as well as a decrease in combined net interest income and RJBDP fees from third-party banks, which have little associated direct compensation. (1) ROTCE, adjusted net income available to common shareholders, adjusted earnings per diluted share, adjusted annualized ROCE, adjusted annualized ROTCE, and adjusted compensation ratio are non-GAAP financial measures. Please see the “Reconciliation of non-GAAP financial measures to GAAP financial measures” in this MD&A for a reconciliation of these non-GAAP financial measures to the most directly comparable GAAP measures, and for other important disclosures. 54 RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Management’s Discussion and Analysis Index Non-compensation expenses increased $34 million, or 4%, largely due to a $32 million insurance settlement received in the prior-year period related to a previously-settled litigation matter, the impact of an FDIC special assessment of $11 million, as well as higher communications and information processing expenses resulting from continued investments in technology to benefit our clients and advisors, and higher investment sub-advisory fees resulting from growth in assets under management in sub-advised programs. Partially offsetting these increases in expenses, expenses related to legal and regulatory matters declined significantly as the current-year period reflected net legal and regulatory matter reserve releases while the prior-year period included elevated provisions for legal and regulatory matters including an unfavorable arbitration award. Our effective income tax rate was 21.4% for the six months ended March 31, 2024, a decrease from 22.6% for the prior-year period, primarily due to a larger tax benefit recognized during the current-year period related to nontaxable valuation gains associated with our company-owned life insurance policies compared to the prior-year period, as well as a lower amount of nondeductible fines and penalties compared to the prior-year period. RECONCILIATION OF NON-GAAP FINANCIAL MEASURES TO GAAP FINANCIAL MEASURES We utilize certain non-GAAP financial measures as additional measures to aid in, and enhance, the understanding of our financial results and related measures. These non-GAAP financial measures have been separately identified in this document. We believe certain of these non-GAAP financial measures provide useful information to management and investors by excluding certain material items that may not be indicative of our core operating results. We utilize these non-GAAP financial measures in assessing the financial performance of the business, as they facilitate a comparison of current- and prior-period results. We believe that ROTCE is meaningful to investors as it facilitates comparisons of our results to the results of other companies. In the following tables, the tax effect of non-GAAP adjustments reflects the statutory rate associated with each non-GAAP item. These non-GAAP financial measures should be considered in addition to, and not as a substitute for, measures of financial performance prepared in accordance with GAAP. In addition, our non-GAAP financial measures may not be comparable to similarly titled non-GAAP financial measures of other companies. The following tables provide a reconciliation of non-GAAP financial measures to the most directly comparable GAAP measures. Three months ended March 31, Six months ended March 31, $ in millions 2024 2023 2024 2023 Net income available to common shareholders $ 474 $ 425 $ 971 $ 932 Non-GAAP adjustments : Expenses related to acquisitions: Compensation, commissions and benefits — Acquisition-related retention 11 17 22 35 Communications and information processing 1 — 1 — Professional fees 1 — 2 — Other: Amortization of identifiable intangible assets 11 11 22 22 All other acquisition-related expenses 2 — 2 — Total “Other” expense 13 11 24 22 Total expenses related to acquisitions 26 28 49 57 Other — Insurance settlement received — — — (32) Pre-tax impact of non-GAAP adjustments 26 28 49 25 Tax effect of non-GAAP adjustments (6) (7) (12) (6) Total non-GAAP adjustments, net of tax 20 21 37 19 Adjusted net income available to common shareholders $ 494 $ 446 $ 1,008 $ 951 Pre-tax income $ 609 $ 557 $ 1,239 $ 1,209 Pre-tax impact of non-GAAP adjustments (as detailed above) 26 28 49 25 Adjusted pre-tax income $ 635 $ 585 $ 1,288 $ 1,234 Compensation, commissions and benefits expense $ 2,043 $ 1,820 $ 3,964 $ 3,556 Less: Acquisition-related retention (as detailed above) 11 17 22 35 Adjusted “Compensation, commissions and benefits” expense $ 2,032 $ 1,803 $ 3,942 $ 3,521 55 RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Management’s Discussion and Analysis Index Three months ended March 31, Six months ended March 31, $ in millions, except per share amounts 2024 2023 2024 2023 Total compensation ratio 65.5 % 63.3 % 64.7 % 62.8 % Less the impact of non-GAAP adjustments on compensation ratio : Acquisition-related retention 0.3 % 0.5 % 0.4 % 0.6 % Adjusted total compensation ratio 65.2 % 62.8 % 64.3 % 62.2 % Diluted earnings per common share $ 2.22 $ 1.93 $ 4.54 $ 4.23 Impact of non-GAAP adjustments on diluted earnings per common share: Expenses related to acquisitions: Compensation, commissions and benefits — Acquisition-related retention 0.05 0.08 0.10 0.16 Communications and information processing — — — — Professional fees 0.01 — 0.01 — Other: Amortization of identifiable intangible assets 0.05 0.05 0.11 0.10 All other acquisition-related expenses 0.01 — 0.01 — Total “Other” expense 0.06 0.05 0.12 0.10 Total expenses related to acquisitions 0.12 0.13 0.23 0.26 Other — Insurance settlement received — — — (0.15) Tax effect of non-GAAP adjustments (0.03) (0.03) (0.06) (0.03) Total non-GAAP adjustments, net of tax 0.09 0.10 0.17 0.08 Adjusted diluted earnings per common share $ 2.31 $ 2.03 $ 4.71 $ 4.31 Average common equity $ 10,808 $ 9,806 $ 10,584 $ 9,650 Impact of non-GAAP adjustments on average common equity : Expenses related to acquisitions: Compensation, commissions and benefits — Acquisition-related retention 6 9 11 18 Communications and information processing — — — — Professional fees — — 1 — Other: Amortization of identifiable intangible assets 6 6 11 11 All other acquisition-related expenses 1 — 1 — Total “Other” expense 7 6 12 11 Total expenses related to acquisitions 13 15 24 29 Other — Insurance settlement received — — — (21) Tax effect of non-GAAP adjustments (3) (4) (6) (2) Total non-GAAP adjustments, net of tax 10 11 18 6 Adjusted average common equity $ 10,818 $ 9,817 $ 10,602 $ 9,656 56 RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Management’s Discussion and Analysis Index Three months ended March 31, Six months ended March 31, $ in millions 2024 2023 2024 2023 Average common equity $ 10,808 $ 9,806 $ 10,584 $ 9,650 Less : Average goodwill and identifiable intangible assets, net 1,901 1,936 1,903 1,934 Average deferred tax liabilities related to goodwill and identifiable intangible assets, net (133) (129) (132) (128) Average tangible common equity $ 9,040 $ 7,999 $ 8,813 $ 7,844 Impact of non-GAAP adjustments on average tangible common equity: Expenses related to acquisitions: Compensation, commissions and benefits — Acquisition-related retention 6 9 11 18 Communications and information processing — — — — Professional fees — — 1 — Other: Amortization of identifiable intangible assets 6 6 11 11 All other acquisition-related expenses 1 — 1 — Total “Other” expense 7 6 12 11 Total expenses related to acquisitions 13 15 24 29 Other — Insurance settlement received — — — (21) Tax effect of non-GAAP adjustments (3) (4) (6) (2) Total non-GAAP adjustments, net of tax 10 11 18 6 Adjusted average tangible common equity $ 9,050 $ 8,010 $ 8,831 $ 7,850 Return on common equity 17.5 % 17.3 % 18.3 % 19.3 % Adjusted return on common equity 18.3 % 18.2 % 19.0 % 19.7 % Return on tangible common equity 21.0 % 21.3 % 22.0 % 23.8 % Adjusted return on tangible common equity 21.8 % 22.3 % 22.8 % 24.2 % Total compensation ratio is computed by dividing compensation, commissions and benefits expense by net revenues for each respective period. Adjusted total compensation ratio is computed by dividing adjusted compensation, commissions and benefits expense by net revenues for each respective period. Tangible common equity is computed by subtracting goodwill and identifiable intangible assets, net, along with the associated deferred tax liabilities, from total common equity attributable to RJF. Average common equity is computed by adding the total common equity attributable to RJF as of the date indicated to the prior quarter-end total, and dividing by two, or in the case of average tangible common equity, computed by adding tangible common equity as of the date indicated to the prior quarter-end total, and dividing by two. Average common equity for the year-to-date period is computed by adding the total common equity attributable to RJF as of each quarter-end date during the indicated year-to-date period to the beginning of year total, and dividing by three, or in the case of average tangible common equity, computed by adding tangible common equity as of each quarter-end date during the indicated year-to-date period to the beginning of year total, and dividing by three. Adjusted average common equity is computed by adjusting for the impact on average common equity of the non-GAAP adjustments, as applicable for each respective period. Adjusted average tangible common equity is computed by adjusting for the impact on average tangible common equity of the non-GAAP adjustments, as applicable for each respective period. ROCE is computed by dividing annualized net income available to common shareholders for the period indicated by average common equity for each respective period or, in the case of ROTCE, computed by dividing annualized net income available to common shareholders by average tangible common equity for each respective period. Adjusted ROCE is computed by dividing annualized adjusted net income available to common shareholders by adjusted average common equity for each respective period, or in the case of adjusted ROTCE, computed by dividing annualized adjusted net income available to common shareholders by adjusted average tangible common equity for each respective period. 57 RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Management’s Discussion and Analysis Index NET INTEREST ANALYSIS Largely in response to inflationary pressures since the beginning of fiscal year 2022, the Fed rapidly and consistently increased its benchmark short-term interest rates commencing in March 2022 and continuing throughout our fiscal year 2023. Since the beginning of our fiscal year 2023, the Fed increased the Fed funds target rate 225 basis points from a September 30, 2022 range of 3.00% to 3.25% to a March 31, 2024 range of 5.25% to 5.50%. While the Fed has left its benchmark rate unchanged in our fiscal year 2024 to-date, in its most recent meetings, it has indicated that it intends to closely monitor market conditions to determine whether it will continue to hold rates steady or initiate interest rate cuts later in our fiscal year 2024. The following table details the Fed’s short-term interest rate activity since the beginning of our fiscal year 2023. RJF fiscal quarter ended Effective date of interest rate action Increase in interest rates (in basis points) Fed funds target rate September 30, 2022 September 22, 2022 75 3.00% - 3.25% December 31, 2022 November 3, 2022 75 3.75% - 4.00% December 31, 2022 December 15, 2022 50 4.25% - 4.50% March 31, 2023 February 2, 2023 25 4.50% - 4.75% March 31, 2023 March 23, 2023 25 4.75% - 5.00% June 30, 2023 May 4, 2023 25 5.00% - 5.25% September 30, 2023 July 27, 2023 25 5.25% - 5.50% Given the relationship between our interest-sensitive assets and liabilities (primarily held in our PCG, Bank, and Other segments) and the nature of fees we earn from third-party banks on client cash balances swept to such banks as part of the RJBDP (included in account and service fees), our financial results are sensitive to changes in interest rates. Increases in short-term interest rates generally result in an increase in our net earnings, although the magnitude of the impact to our net interest margin depends on the yields on interest-earning assets relative to the cost of interest-bearing liabilities, including deposit rates paid to clients on their cash balances. Our domestic client cash sweep balances continue to represent a relatively low-cost funding source, while other deposit products utilized as part of our strategy to diversify our funding sources, such as our ESP introduced to our clients in our fiscal year 2023, have a higher relative cost than other alternatives. Combined net interest income and RJBDP fees from third-party banks for the three and six months ended March 31, 2024, declined compared with the comparable prior-year periods driven by a decline in net interest income, as the benefits from higher short-term interest rates to-date in fiscal year 2024 over fiscal year 2023 levels, and higher average interest-earning asset balances were more than offset by a significant increase in interest expense. The increase in interest expense primarily resulted from a shift in the mix of deposit balances in our Bank segment, as lower-cost RJBDP balances declined and a significant portion was replaced with higher-cost ESP balances, which was introduced to clients in March 2023, as well as an increase in certificates of deposit. However, growth in the ESP balances since its introduction has allowed us to deploy a higher portion of RJBDP balances to third-party banks instead of our Bank segment which, coupled with higher yields earned on such balances, resulted in an increase in RJBDP fees from such banks compared with the prior-year periods. Refer to the discussion of our net interest income within the “Management’s Discussion and Analysis - Results of Operations” of our PCG, Bank, and Other segments, where applicable. Also refer to “Management’s Discussion and Analysis - Results of Operations - Private Client Group - Clients’ domestic cash sweep balances” for further information on the RJBDP. 58 RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Management’s Discussion and Analysis Index The following table presents our consolidated average interest-earning asset and interest-bearing liability balances, interest income and expense and the related rates. Quarter ended March 31, 2024 compared with the quarter ended March 31, 2023 Three months ended March 31, 2024 2023 $ in millions Average daily balance Interest Annualized average rate Average daily balance Interest Annualized average rate Interest-earning assets: Bank segment: Cash and cash equivalents $ 6,020 $ 81 5.40 % $ 3,093 $ 36 4.64 % Available-for-sale securities 10,080 56 2.21 % 10,869 54 2.00 % Loans held for sale and investment: (1) (2) Loans held for investment: SBL 14,548 263 7.13 % 14,493 240 6.63 % C&I loans 10,385 200 7.60 % 11,236 192 6.83 % CRE loans 7,385 140 7.52 % 6,961 119 6.85 % REIT loans 1,687 32 7.67 % 1,671 31 7.11 % Residential mortgage loans 8,947 80 3.58 % 7,979 62 3.13 % Tax-exempt loans (3) 1,410 9 3.23 % 1,652 10 3.16 % Loans held for sale 170 3 7.90 % 170 3 7.23 % Total loans held for sale and investment 44,532 727 6.49 % 44,162 657 5.97 % All other interest-earning assets 240 4 6.35 % 153 2 5.80 % Interest-earning assets — Bank segment $ 60,872 $ 868 5.67 % $ 58,277 $ 749 5.16 % All other segments: Cash and cash equivalents $ 3,038 $ 47 6.18 % $ 3,130 $ 39 5.10 % Assets segregated for regulatory purposes and restricted cash 3,654 47 5.23 % 4,856 55 4.36 % Trading assets — debt securities 1,231 19 5.95 % 1,057 13 5.05 % Brokerage client receivables 2,290 47 8.17 % 2,205 41 7.66 % All other interest-earning assets 2,020 21 4.17 % 1,817 18 3.12 % Interest-earning assets — all other segments $ 12,233 $ 181 5.91 % $ 13,065 $ 166 4.98 % Total interest-earning assets $ 73,105 $ 1,049 5.71 % $ 71,342 $ 915 5.13 % Interest-bearing liabilities: Bank segment: Bank deposits: Money market and savings accounts $ 31,138 $ 164 2.11 % $ 44,554 $ 135 1.23 % Interest-bearing demand deposits 20,638 253 4.94 % 5,620 59 4.28 % Certificates of deposit 2,677 30 4.69 % 1,859 16 3.57 % Total bank deposits (4) 54,453 447 3.31 % 52,033 210 1.64 % FHLB advances and all other interest-bearing liabilities 1,183 8 2.84 % 1,452 9 2.80 % Interest-bearing liabilities — Bank segment $ 55,636 $ 455 3.30 % $ 53,485 $ 219 1.67 % All other segments: Trading liabilities — debt securities $ 799 $ 11 5.55 % $ 725 $ 7 4.14 % Brokerage client payables 4,815 21 1.71 % 6,044 23 1.52 % Senior notes payable 2,039 23 4.50 % 2,038 23 4.52 % All other interest-bearing liabilities (4) 1,036 10 3.88 % 603 12 3.72 % Interest-bearing liabilities — all other segments $ 8,689 $ 65 2.98 % $ 9,410 $ 65 2.51 % Total interest-bearing liabilities $ 64,325 $ 520 3.26 % $ 62,895 $ 284 1.80 % Firmwide net interest income $ 529 $ 631 Net interest margin (net yield on interest-earning assets) Bank segment 2.66 % 3.63 % Firmwide 2.91 % 3.59 % (1) Loans are presented net of unamortized purchase discounts or premiums, unearned income, deferred origination fees and costs, and charge-offs. (2) Nonaccrual loans are included in the average loan balances. Any payments received for corporate nonaccrual loans are applied entirely to principal. Interest income on residential mortgage nonaccrual loans is recognized on a cash basis. (3) The average rate on tax-exempt loans in the preceding table is presented on a taxable-equivalent basis utilizing the applicable federal statutory rates for each of the periods presented. (4) The average balance, interest expense, and average rate for “Total bank deposits” included amounts associated with affiliate deposits. Such amounts are eliminated in consolidation and are offset in “All other interest-bearing liabilities” under “All other segments”. 59 RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Management’s Discussion and Analysis Index Increases and decreases in interest income and interest expense result from changes in average balances (volume) of interest-earning assets and interest-bearing liabilities, as well as changes in average interest rates. The following table shows the effect that these factors had on the interest earned on our interest-earning assets and the interest incurred on our interest-bearing liabilities. The effect of changes in volume is determined by multiplying the change in volume by the previous period’s average rate. Similarly, the effect of rate changes is calculated by multiplying the change in average rate by the previous period’s volume. Changes attributable to both volume and rate have been allocated proportionately. Three months ended March 31, 2024 compared to 2023 Increase/(decrease) due to $ in millions Volume Rate Total Interest-earning assets: Interest income Bank segment: Cash and cash equivalents $ 38 $ 7 $ 45 Available-for-sale securities (4) 6 2 Loans held for sale and investment: Loans held for investment: SBL 1 22 23 C&I loans (14) 22 8 CRE loans 8 13 21 REIT loans — 1 1 Residential mortgage loans 8 10 18 Tax-exempt loans (1) — (1) Loans held for sale — — — Total loans held for sale and investment 2 68 70 All other interest-earning assets 2 — 2 Interest-earning assets — Bank segment $ 38 $ 81 $ 119 All other segments: Cash and cash equivalents $ (1) $ 9 $ 8 Assets segregated for regulatory purposes and restricted cash (19) 11 (8) Trading assets — debt securities 3 3 6 Brokerage client receivables 2 4 6 All other interest-earning assets 1 2 3 Interest-earning assets — all other segments $ (14) $ 29 $ 15 Total interest-earning assets $ 24 $ 110 $ 134 Interest-bearing liabilities: Interest expense Bank segment: Bank deposits: Money market and savings accounts $ (61) $ 90 $ 29 Interest-bearing demand deposits 184 10 194 Certificates of deposit 8 6 14 Total bank deposits 131 106 237 FHLB advances and all other interest-bearing liabilities (1) — (1) Interest-bearing liabilities — Bank segment $ 130 $ 106 $ 236 All other segments: Trading liabilities — debt securities $ 1 $ 3 $ 4 Brokerage client payables (5) 3 (2) Senior notes payable — — — All other interest-bearing liabilities — (2) (2) Interest-bearing liabilities — all other segments $ (4) $ 4 $ — Total interest-bearing liabilities $ 126 $ 110 $ 236 Change in firmwide net interest income $ (102) $ — $ (102) 60 RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Management’s Discussion and Analysis Index Six months ended March 31, 2024 compared with the six months ended March 31, 2023 Six months ended March 31, 2024 2023 $ in millions Average daily balance Interest Annualized average rate Average daily balance Interest Annualized average rate Interest-earning assets: Bank segment: Cash and cash equivalents $ 5,889 $ 160 5.41 % $ 2,705 $ 58 4.24 % Available-for-sale securities 10,207 112 2.18 % 10,961 107 1.95 % Loans held for sale and investment: (1) (2) Loans held for investment: SBL 14,567 529 7.14 % 14,768 466 6.27 % C&I loans 10,428 403 7.60 % 11,206 364 6.42 % CRE loans 7,314 281 7.56 % 6,879 226 6.52 % REIT loans 1,691 66 7.71 % 1,649 55 6.64 % Residential mortgage loans 8,873 157 3.53 % 7,801 119 3.06 % Tax-exempt loans (3) 1,446 19 3.25 % 1,623 20 3.11 % Loans held for sale 155 6 8.36 % 179 6 6.27 % Total loans held for sale and investment 44,474 1,461 6.50 % 44,105 1,256 5.68 % All other interest-earning assets 239 7 6.17 % 148 4 5.55 % Interest-earning assets — Bank segment $ 60,809 $ 1,740 5.67 % $ 57,919 $ 1,425 4.91 % All other segments: Cash and cash equivalents $ 3,248 $ 100 6.13 % $ 3,401 $ 72 4.25 % Assets segregated for regulatory purposes and restricted cash 3,639 94 5.18 % 5,554 105 3.81 % Trading assets — debt securities 1,162 34 5.78 % 1,069 27 5.08 % Brokerage client receivables 2,214 92 8.28 % 2,301 82 7.16 % All other interest-earning assets 1,996 42 4.00 % 1,909 31 2.79 % Interest-earning assets — all other segments $ 12,259 $ 362 5.86 % $ 14,234 $ 317 4.42 % Total interest-earning assets $ 73,068 $ 2,102 5.70 % $ 72,153 $ 1,742 4.81 % Interest-bearing liabilities: Bank segment: Bank deposits: Money market and savings accounts $ 31,572 $ 324 2.05 % $ 44,864 $ 258 1.16 % Interest-bearing demand deposits 20,134 497 4.94 % 5,382 104 3.87 % Certificates of deposit 2,717 62 4.62 % 1,538 24 3.13 % Total bank deposits (4) 54,423 883 3.25 % 51,784 386 1.49 % FHLB advances and all other interest-bearing liabilities 1,207 18 2.94 % 1,374 18 2.63 % Interest-bearing liabilities — Bank segment $ 55,630 $ 901 3.24 % $ 53,158 $ 404 1.52 % All other segments: Trading liabilities — debt securities $ 777 $ 22 5.60 % $ 752 $ 17 4.63 % Brokerage client payables 4,752 41 1.71 % 6,842 40 1.16 % Senior notes payable 2,039 46 4.50 % 2,038 46 4.52 % All other interest-bearing liabilities (4) 935 17 3.69 % 646 18 2.91 % Interest-bearing liabilities — all other segments $ 8,503 $ 126 2.95 % $ 10,278 $ 121 2.19 % Total interest-bearing liabilities $ 64,133 $ 1,027 3.20 % $ 63,436 $ 525 1.64 % Firmwide net interest income $ 1,075 $ 1,217 Net interest margin (net yield on interest-earning assets) Bank segment 2.70 % 3.51 % Firmwide 2.94 % 3.38 % (1) Loans are presented net of unamortized discounts, unearned income, deferred loan fees and costs, and charge-offs. (2) Nonaccrual loans are included in the average loan balances. Any payments received for corporate nonaccrual loans are applied entirely to principal. Interest income on residential mortgage nonaccrual loans is recognized on a cash basis. (3) The average rate on tax-exempt loans in the preceding table is presented on a taxable-equivalent basis utilizing the applicable federal statutory rates for each of the years presented. (4) The average balance, interest expense, and average rate for “Total bank deposits” included amounts associated with affiliate deposits. Such amounts are eliminated in consolidation and are offset in “All other interest-bearing liabilities” under “All other segments”. 61 RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Management’s Discussion and Analysis Index Increases and decreases in interest income and interest expense result from changes in average balances (volume) of interest-earning assets and interest-bearing liabilities, as well as changes in average interest rates. The following table shows the effect that these factors had on the interest earned on our interest-earning assets and the interest incurred on our interest-bearing liabilities. The effect of changes in volume is determined by multiplying the change in volume by the previous period’s average yield/cost. Similarly, the effect of rate changes is calculated by multiplying the change in average yield/cost by the previous period’s volume. Changes attributable to both volume and rate have been allocated proportionately. Six months ended March 31, 2024 compared to 2023 Increase/(decrease) due to $ in millions Volume Rate Total Interest-earning assets: Interest income Bank segment: Cash and cash equivalents $ 83 $ 19 $ 102 Available-for-sale securities (8) 13 5 Loans held for sale and investment: Loans held for investment: SBL (5) 68 63 C&I loans (25) 64 39 CRE loans 15 40 55 REIT loans 1 10 11 Residential mortgage loans 18 20 38 Tax-exempt loans (2) 1 (1) Loans held for sale (2) 2 — Total loans held for sale and investment — 205 205 All other interest-earning assets 3 — 3 Interest-earning assets — Bank segment $ 78 $ 237 $ 315 All other segments: Cash and cash equivalents $ (3) $ 31 $ 28 Assets segregated for regulatory purposes and restricted cash (49) 38 (11) Trading assets — debt securities 2 5 7 Brokerage client receivables (3) 13 10 All other interest-earning assets 1 10 11 Interest-earning assets — all other segments $ (52) $ 97 $ 45 Total interest-earning assets $ 26 $ 334 $ 360 Interest-bearing liabilities: Interest expense Bank segment: Bank deposits: Money market and savings accounts $ (113) $ 179 $ 66 Interest-bearing demand deposits 357 36 393 Certificates of deposit 24 14 38 Total bank deposits 268 229 497 FHLB advances and all other interest-bearing liabilities (2) 2 — Interest-bearing liabilities — Bank segment $ 266 $ 231 $ 497 All other segments: Trading liabilities — debt securities $ 1 $ 4 $ 5 Brokerage client payables (18) 19 1 Senior notes payable — — — All other interest-bearing liabilities — (1) (1) Interest-bearing liabilities — all other segments $ (17) $ 22 $ 5 Total interest-bearing liabilities $ 249 $ 253 $ 502 Change in firmwide net interest income $ (223) $ 81 $ (142) 62 RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Management’s Discussion and Analysis Index RESULTS OF OPERATIONS – PRIVATE CLIENT GROUP For an overview of our PCG segment operations, as well as a description of the key factors impacting our PCG results of operations, refer to the information presented in “Item 1 - Business” and “Item 7 - Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our 2023 Form 10-K. Operating results Three months ended March 31, Six months ended March 31, $ in millions 2024 2023 % change 2024 2023 % change Revenues: Asset management and related administrative fees $ 1,283 $ 1,102 16 % $ 2,474 $ 2,155 15 % Brokerage revenues: Mutual and other fund products 141 135 4 % 277 263 5 % Insurance and annuity products 127 113 12 % 252 217 16 % Equities, ETFs and fixed income products 139 116 20 % 260 229 14 % Total brokerage revenues 407 364 12 % 789 709 11 % Account and service fees: Mutual fund and annuity service fees 115 105 10 % 221 203 9 % RJBDP fees: Bank segment 206 311 (34) % 429 579 (26) % Third-party banks 160 100 60 % 312 237 32 % Client account and other fees 64 56 14 % 129 116 11 % Total account and service fees 545 572 (5) % 1,091 1,135 (4) % Investment banking 8 9 (11) % 19 18 6 % Interest income 122 117 4 % 240 226 6 % All other 6 9 (33) % 10 15 (33) % Total revenues 2,371 2,173 9 % 4,623 4,258 9 % Interest expense (30) (29) 3 % (56) (51) 10 % Net revenues 2,341 2,144 9 % 4,567 4,207 9 % Non-interest expenses: Financial advisor compensation and benefits 1,273 1,118 14 % 2,463 2,193 12 % Administrative compensation and benefits 391 345 13 % 770 687 12 % Total compensation, commissions and benefits 1,664 1,463 14 % 3,233 2,880 12 % Non-compensation expenses: Communications and information processing 104 100 4 % 197 189 4 % Occupancy and equipment 56 53 6 % 111 104 7 % Business development 37 33 12 % 77 70 10 % Professional fees 17 17 — % 31 30 3 % All other 19 37 (49) % 35 59 (41) % Total non-compensation expenses 233 240 (3) % 451 452 — % Total non-interest expenses 1,897 1,703 11 % 3,684 3,332 11 % Pre-tax income $ 444 $ 441 1 % $ 883 $ 875 1 % 63 RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Management’s Discussion and Analysis Index Selected key metrics PCG client asset balances As of $ in billions March 31, 2024 December 31, 2023 September 30, 2023 March 31, 2023 December 31, 2022 September 30, 2022 Assets under administration (“AUA”) $ 1,388.8 $ 1,310.5 $ 1,201.2 $ 1,171.1 $ 1,114.3 $ 1,039.0 Registered Investment Advisor (“RIA”) & Custody Services (“RCS”) AUA (1) $ 160.8 $ 146.9 $ 133.3 $ 123.5 $ 115.6 $ 108.5 Assets in fee-based accounts (2) $ 798.8 $ 746.6 $ 683.2 $ 666.3 $ 633.1 $ 586.0 RCS assets in fee-based accounts (1) $ 134.5 $ 122.8 $ 111.7 $ 103.6 $ 96.6 $ 89.9 Percent of AUA in fee-based accounts 57.5 % 57.0 % 56.9 % 56.9 % 56.8 % 56.4 % (1) Represents assets associated with firms affiliated with us through our RCS division, which are included in AUA and assets in fee-based accounts. Based on the nature of the services provided to such firms, revenues related to these assets are included in “Account and service fees.” (2) A portion of our “Assets in fee-based accounts” is invested in “managed programs” overseen by our Asset Management segment, specifically our Asset Management Services division of RJ&A (“AMS”). These assets are included in our financial assets under management as disclosed in the “Selected key metrics” section of our “Management’s Discussion and Analysis - Results of Operations - Asset Management.” PCG net new assets Three months ended March 31, Six months ended March 31, $ in millions 2024 2023 2024 2023 Domestic Private Client Group net new assets (1) $ 9,648 $ 21,473 $ 31,223 $ 44,699 Domestic Private Client Group net new assets growth - annualized (2) 3.2 % 8.4 % 5.7 % 9.4 % (1) Domestic Private Client Group net new assets represents domestic Private Client Group client inflows, including dividends and interest, less domestic Private Client Group client outflows, including commissions, advisory fees and other fees. (2) The Domestic Private Client Group net new asset growth - annualized percentage is based on the beginning Domestic Private Client Group AUA balance for the indicated period. PCG AUA and PCG assets in fee-based accounts as of March 31, 2024 increased 6% and 7%, respectively, compared with December 31, 2023, and increased 19% and 20%, respectively, compared with March 31, 2023, due to equity market appreciation and net new assets, due to the favorable impact of our advisor retention and recruiting. PCG assets in fee-based accounts continued to be a significant percentage of overall PCG AUA due to many clients’ preference for fee-based alternatives versus transaction-based accounts and, as a result, a significant portion of our PCG revenues is more directly impacted by market movements. Fee-based accounts within our PCG segment are comprised of a wide array of products and programs that we offer our clients. The majority of assets in fee-based accounts within our PCG segment are invested in programs for which our financial advisors provide investment advisory services, either on a discretionary or non-discretionary basis. Administrative services for such accounts (e.g., record-keeping) are generally performed by our Asset Management segment and, as a result, a portion of the related revenue is shared with the Asset Management segment. We also offer our clients fee-based accounts that are invested in “managed programs” overseen by AMS, which is part of our Asset Management segment. Fee-billable assets invested in managed programs are included in both “Assets in fee-based accounts” in the preceding table and “Financial assets under management” in the Asset Management segment. Revenues related to managed programs are shared by our PCG and Asset Management segments. The Asset Management segment receives a higher portion of the revenues related to accounts invested in managed programs, as compared to the portion received for non-managed programs, as it is performing portfolio management services in addition to administrative services. The vast majority of the revenues we earn from fee-based accounts are recorded in “Asset management and related administrative fees” on our Condensed Consolidated Statements of Income and Comprehensive Income. Fees received from such accounts are based on the value of client assets in fee-based accounts and vary based on the specific account types in which the client invests and the level of assets in the client relationship. As fees for the majority of such accounts are billed based on balances as of the beginning of the quarter, revenues from fee-based accounts may not be immediately affected by changes in asset values, but rather the impacts are seen in the following quarter. 64 RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Management’s Discussion and Analysis Index Financial advisors March 31, 2024 December 31, 2023 September 30, 2023 June 30, 2023 March 31, 2023 Employees 3,747 3,718 3,693 3,654 3,628 Independent contractors 5,014 4,992 5,019 5,050 5,098 Total advisors 8,761 8,710 8,712 8,704 8,726 The number of financial advisors as of March 31, 2024 increased compared with December 31, 2023 and March 31, 2023, as new recruits and trainees that were moved into production roles exceeded departures and planned retirements. Planned retirements, where assets are generally retained at the firm pursuant to advisor succession plans, are seasonally higher in the fiscal first quarter. We have and may continue to experience transfers to our RCS division in fiscal 2024; however, consistent with our experience in fiscal 2023, we would not expect these financial advisor transfers to significantly impact our results of operations. Advisors in our RCS division are not included in our financial advisor metric although their client assets are included in PCG AUA. Clients’ domestic cash sweep balances and ESP balances As of $ in millions March 31, 2024 December 31, 2023 September 30, 2023 June 30, 2023 March 31, 2023 RJBDP: Bank segment $ 23,405 $ 23,912 $ 25,355 $ 27,915 $ 37,682 Third-party banks 18,234 17,820 15,858 16,923 9,408 Subtotal RJBDP 41,639 41,732 41,213 44,838 47,090 Client Interest Program (“CIP”) 1,715 1,765 1,620 1,915 2,385 Total clients’ domestic cash sweep balances 43,354 43,497 42,833 46,753 49,475 ESP (1) 14,863 14,476 13,592 11,225 2,746 Total clients’ domestic cash sweep and ESP balances $ 58,217 $ 57,973 $ 56,425 $ 57,978 $ 52,221 (1) In March 2023, we introduced our ESP, in which Private Client Group clients may deposit cash in a high-yield Raymond James Bank account. ESP balances held at Raymond James Bank as of the respective period end are included in “Bank deposits” on our Condensed Consolidated Statement of Financial Condition. As of March 31, 2024, we had placed $324 million of ESP deposits with third-party banks, and accordingly such deposits held at third-party banks were not included in our bank deposit liability balance on our Condensed Consolidated Statement of Financial Condition. Three months ended March 31, Six months ended March 31, 2024 2023 2024 2023 Average yield on RJBDP - third-party banks 3.59 % 3.25 % 3.62 % 2.93 % A significant portion of our domestic clients’ cash is included in the RJBDP, a multi-bank sweep program in which clients’ cash deposits in their brokerage accounts are swept into interest-bearing deposit accounts at either of our bank subsidiaries, which are included in our Bank segment, or various third-party banks. Balances swept to third-party banks are not reflected on our Condensed Consolidated Statements of Financial Condition. Our PCG segment earns servicing fees for the administrative services we provide related to our clients’ deposits that are swept to banks as part of the RJBDP. These servicing fees are variable in nature and fluctuate based on client cash balances in the program, as well as the level of short-term interest rates and the interest paid to clients on balances in the RJBDP. Under our intersegment policies, the PCG segment receives from our Bank segment the greater of a base servicing fee or a net yield equivalent to the average yield that the firm would otherwise receive from third-party banks in the RJBDP. In the current interest-rate environment, the PCG segment RJBDP fee revenues are derived from the yield from third-party banks in the program and the Bank segment RJBDP servicing costs reflect such market rate for the deposits. The fees that the PCG segment earns from the Bank segment, as well as the servicing costs incurred on the deposits in the Bank segment, are eliminated in consolidation. The “Average yield on RJBDP - third-party banks” in the preceding table is computed by dividing annualized RJBDP fees from third-party banks, which are net of the interest expense paid to clients by the third-party banks, by the average daily RJBDP balances at third-party banks. The average yield on RJBDP - third-party banks for the three and six months ended March 31, 2024 increased from the prior year largely as a result of the increases in the Fed’s short-term benchmark interest rate. 65 RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Management’s Discussion and Analysis Index Total clients’ domestic cash sweep and ESP balances increased slightly compared with December 31, 2023, but increased 11% compared with March 31, 2023 as growth in the ESP, which was introduced to clients in March 2023, more than offset a decline in client cash sweep balances. PCG segment results can be impacted by not only changes in the level of client cash balances, but also by the allocation of client cash balances between the RJBDP, the CIP, and the ESP, as the PCG segment may earn different amounts from each of these client cash destinations, depending on multiple factors. For example, continued growth in the ESP since its introduction has provided us the flexibility to sweep more RJBDP balances to third-party banks and reduce the amount of RJBDP balances held in our Bank segment. Quarter ended March 31, 2024 compared with the quarter ended March 31, 2023 Net revenues of $2.34 billion increased 9% and pre-tax income of $444 million increased 1%. Asset management and related administrative fees increased $181 million, or 16%, primarily due to higher assets in fee-based accounts at the beginning of the current quarter compared with the prior-year quarter resulting from market appreciation, as well as growth from advisor recruiting. Brokerage revenues increased $43 million, or 12%, primarily due to higher client activity in the current quarter, as well as higher trailing revenues, largely due to higher asset values. Account and service fees decreased $27 million, or 5%, primarily due to a decrease in RJBDP fees resulting from lower client cash sweep balances. RJBDP fees paid to PCG from our Bank segment decreased due to a decline in balances allocated to our Bank segment which more than offset the impact of an increase in short-term interest rates, while RJBDP fees from third-party banks increased due to higher average balances swept to third-party banks, as well as the aforementioned increase in short-term interest rates. Partially offsetting the decline in total RJBDP fees was an increase in mutual fund service fees, primarily resulting from higher average mutual fund assets. Net interest income increased $4 million, or 5%, primarily due to an increase in short-term interest rates. Compensation-related expenses increased $201 million, or 14%, primarily due to higher commission expense resulting from higher compensable revenues, including asset management and related administrative fees and brokerage revenues, as well as an increase in compensation costs to support our growth and annual salary increases. Non-compensation expenses decreased $7 million, or 3%, due to lower provisions for legal and regulatory matters as the prior-year quarter included the impact of an unfavorable arbitration award, partially offset by higher communications and information processing expenses and occupancy expenses as a result of our growth, and higher business development expenses. Six months ended March 31, 2024 compared with the six months ended March 31, 2023 Net revenues of $4.57 billion increased 9% and pre-tax income of $883 million increased 1%. Asset management and related administrative fees increased $319 million, or 15%, primarily due to higher assets in fee-based accounts at the beginning of each of the current-year quarterly billing periods compared with the prior-year periods resulting from market appreciation and advisor recruiting. Brokerage revenues increased $80 million, or 11%, primarily due to higher client activity in the current-year period, particularly in fixed annuities, as well as higher trailing revenues, largely due to higher asset values. Account and service fees decreased $44 million, or 4%, primarily due to a decrease in RJBDP fees resulting from lower client cash sweep balances. RJBDP fees paid to PCG from our Bank segment decreased due to a decline in balances allocated to our Bank segment which more than offset the impact of higher short-term interest rates, while RJBDP fees from third-party banks increased due to the aforementioned increase in short-term interest rates, as well as higher average balances swept to third-party banks. Partially offsetting the decline in total RJBDP fees, mutual fund service fees increased, primarily from higher average mutual fund assets, and client account and other fees increased reflecting higher custody and account maintenance fees. Net interest income increased $9 million, or 5%, primarily due to the increase in short-term interest rates. Compensation-related expenses increased $353 million, or 12%, primarily due to higher commission expense resulting from higher compensable revenues, including asset management and related administrative fees and brokerage revenues, as well as an increase in compensation costs to support our growth and annual salary increases. 66 RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Management’s Discussion and Analysis Index Non-compensation expenses were flat compared with the prior-year period as higher communications and information processing expenses, occupancy expenses, and business development expenses were offset by the impact of lower provisions for legal and regulatory matters. RESULTS OF OPERATIONS – CAPITAL MARKETS For an overview of our Capital Markets segment operations, as well as a description of the key factors impacting our Capital Markets results of operations, refer to the information presented in “Item 1 - Business” and “Item 7 - Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our 2023 Form 10-K. Operating results Three months ended March 31, Six months ended March 31, $ in millions 2024 2023 % change 2024 2023 % change Revenues: Brokerage revenues: Fixed income $ 88 $ 96 (8) % $ 190 $ 196 (3) % Equity 34 34 — % 72 68 6 % Total brokerage revenues 122 130 (6) % 262 264 (1) % Investment banking: Merger & acquisition and advisory 107 87 23 % 225 189 19 % Equity underwriting 23 29 (21) % 49 44 11 % Debt underwriting 41 29 41 % 67 45 49 % Total investment banking 171 145 18 % 341 278 23 % Interest income 26 21 24 % 49 44 11 % Affordable housing investments business revenues 22 23 (4) % 45 47 (4) % All other 4 3 33 % 8 7 14 % Total revenues 345 322 7 % 705 640 10 % Interest expense (24) (20) 20 % (46) (43) 7 % Net revenues 321 302 6 % 659 597 10 % Non-interest expenses: Compensation, commissions and benefits 240 231 4 % 478 444 8 % Non-compensation expenses: Communications and information processing 30 26 15 % 57 50 14 % Occupancy and equipment 12 11 9 % 23 21 10 % Business development 15 17 (12) % 31 32 (3) % Professional fees 11 14 (21) % 25 27 (7) % All other 30 37 (19) % 59 73 (19) % Total non-compensation expenses 98 105 (7) % 195 203 (4) % Total non-interest expenses 338 336 1 % 673 647 4 % Pre-tax loss $ (17) $ (34) 50 % $ (14) $ (50) 72 % Quarter ended March 31, 2024 compared with the quarter ended March 31, 2023 Net revenues of $321 million increased 6% and the pre-tax loss was $17 million, compared with a pre-tax loss of $34 million for the prior-year quarter. Investment banking revenues increased $26 million, or 18%, compared with the prior-year quarter, primarily due to improvement in merger & acquisition and advisory revenues, which continued to be subdued although improved compared with the prior-year quarter, as well as higher debt underwriting revenues in both our fixed income and public finance businesses. Brokerage revenues decreased $8 million, or 6%, due to lower fixed income brokerage revenues, primarily due to lower interest rate volatility in the current quarter compared with the prior-year quarter. Compensation-related expenses increased $9 million, or 4%, primarily due to the increase in revenues, as well as an increase in compensation costs to support our growth and annual salary increases. 67 RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Management’s Discussion and Analysis Index Non-compensation expenses decreased $7 million, or 7%, primarily due to lower provisions for legal and regulatory matters and lower legal fee expense. Six months ended March 31, 2024 compared with the six months ended March 31, 2023 Net revenues of $659 million increased 10% and the pre-tax loss was $14 million, compared with a pre-tax loss of $50 million for the prior-year period. Investment banking revenues increased $63 million, or 23%, primarily due to a higher volume of transactions closed as a result of more favorable investment banking market conditions in the current-year period compared to the prior-year period. Compensation-related expenses increased $34 million, or 8%, primarily due to the increase in revenues, as well as an increase in compensation costs to support our growth and annual salary increases. Non-compensation expenses decreased $8 million, or 4%, largely due to lower provisions for legal and regulatory matters and legal fee expenses, partially offset by higher communications and information processing expenses. RESULTS OF OPERATIONS – ASSET MANAGEMENT For an overview of our Asset Management segment operations as well as a description of the key factors impacting our Asset Management results of operations, refer to the information presented in “Item 1 - Business” and “Item 7 - Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our 2023 Form 10-K. Operating results Three months ended March 31, Six months ended March 31, $ in millions 2024 2023 % change 2024 2023 % change Revenues: Asset management and related administrative fees: Managed programs $ 163 $ 140 16 % $ 313 $ 274 14 % Administration and other 79 66 20 % 153 129 19 % Total asset management and related administrative fees 242 206 17 % 466 403 16 % Account and service fees 5 6 (17) % 11 11 — % All other 5 4 25 % 10 9 11 % Net revenues 252 216 17 % 487 423 15 % Non-interest expenses: Compensation, commissions and benefits 58 52 12 % 111 99 12 % Non-compensation expenses: Communications and information processing 16 14 14 % 31 28 11 % Investment sub-advisory fees 43 34 26 % 82 68 21 % All other 35 34 3 % 70 66 6 % Total non-compensation expenses 94 82 15 % 183 162 13 % Total non-interest expenses 152 134 13 % 294 261 13 % Pre-tax income $ 100 $ 82 22 % $ 193 $ 162 19 % Selected key metrics Managed programs Management fees recorded in our Asset Management segment are generally calculated as a percentage of the value of our fee-billable financial assets under management (“AUM”). These AUM include the portion of fee-based AUA in our PCG segment that is invested in programs overseen by our Asset Management segment (included in the “AMS” line of the following table), as well as retail accounts managed on behalf of third-party institutions, institutional accounts and proprietary mutual funds that we manage (collectively included in the Raymond James Investment Management (“RJIM”) line of the following table). 68 RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Management’s Discussion and Analysis Index Revenues related to fee-based AUA in our PCG segment are shared by the PCG and Asset Management segments, the amount of which depends on whether or not clients are invested in assets that are in managed programs overseen by our Asset Management segment and the administrative services provided (see our “Management’s Discussion and Analysis - Results of Operations - Private Client Group” for more information). Our AUM in AMS are impacted by market fluctuations and net inflows or outflows of assets, including transfers between fee-based accounts and transaction-based accounts within our PCG segment. Revenues earned by RJIM for retail accounts managed on behalf of third-party institutions, institutional accounts and our proprietary mutual funds are recorded entirely in the Asset Management segment. Our AUM in RJIM are impacted by market and investment performance and net inflows or outflows of assets. Fees for our managed programs are generally collected quarterly. Approximately 70% of these fees are based on balances as of the beginning of the quarter (primarily in AMS), approximately 15% are based on balances as of the end of the quarter, and approximately 15% are based on average daily balances throughout the quarter. Financial assets under management $ in billions March 31, 2024 December 31, 2023 September 30, 2023 March 31, 2023 December 31, 2022 September 30, 2022 AMS (1) $ 165.7 $ 154.2 $ 139.2 $ 136.5 $ 129.5 $ 119.8 RJIM 74.4 73.3 68.7 69.4 67.4 64.2 Subtotal financial assets under management 240.1 227.5 207.9 205.9 196.9 184.0 Less: Assets managed for affiliated entities (2) (13.3) (12.5) (11.5) (11.5) (11.0) (10.2) Total financial assets under management $ 226.8 $ 215.0 $ 196.4 $ 194.4 $ 185.9 $ 173.8 (1) Represents the portion of our PCG segment fee-based AUA (as disclosed in “Assets in fee-based accounts” in the “Selected key metrics - PCG client asset balances” section of our “Management’s Discussion and Analysis - Results of Operations - Private Client Group”) that is invested in managed programs overseen by the Asset Management segment. (2) Represents the portion of the AMS AUM that is managed by RJIM and, as a result, is included in both AMS and RJIM in the preceding table. This amount is removed in the calculation of “Total financial assets under management.” Activity (including activity in assets managed for affiliated entities) Three months ended March 31, Six months ended March 31, $ in billions 2024 2023 2024 2023 Financial assets under management at beginning of period $ 227.5 $ 196.9 $ 207.9 $ 184.0 RJIM - net inflows/(outflows) (1.3) 1.1 (2.2) 1.7 AMS - net inflows 2.5 1.7 4.2 2.7 Net market appreciation in asset values 11.4 6.2 30.2 17.5 Financial assets under management at end of period $ 240.1 $ 205.9 $ 240.1 $ 205.9 AMS See “Management’s Discussion and Analysis - Results of Operations - Private Client Group” for further information about our retail client assets, including those fee-based assets invested in programs managed by AMS. RJIM Assets managed by RJIM include assets managed by our subsidiaries: Eagle Asset Management, Scout Investments, Reams Asset Management (a division of Scout Investments), ClariVest Asset Management, Cougar Global Investments, and Chartwell Investment Partners. The following table presents RJIM’s AUM by objective, excluding assets for which it does not exercise discretion, as well as the approximate average client fee rate earned on such assets. As of March 31, 2024 $ in billions AUM Average fee rate Equity $ 24.1 0.56 % Fixed income 41.2 0.20 % Balanced 9.1 0.33 % Total financial assets under management $ 74.4 0.33 % 69 RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Management’s Discussion and Analysis Index Non-discretionary asset-based programs The following table includes assets held in certain non-discretionary asset-based programs for which the Asset Management segment does not exercise discretion but provides other services such as administrative support (including for affiliated entities) and investment advice. The vast majority of these assets are also included in our PCG segment fee-based AUA (as disclosed in “Assets in fee-based accounts” in the “Selected key metrics - PCG client asset balances” section of our “Management’s Discussion and Analysis - Results of Operations - Private Client Group”). $ in billions March 31, 2024 December 31, 2023 September 30, 2023 March 31, 2023 December 31, 2022 September 30, 2022 Total assets $ 462.9 $ 431.4 $ 391.1 $ 378.7 $ 355.6 $ 329.2 The increase in these assets as of March 31, 2024 compared with December 31, 2023 and March 31, 2023 was primarily due to market appreciation, successful financial advisor retention and recruiting, and the continued trend of clients moving to fee-based accounts from transaction-based accounts. Administrative fees associated with these programs are predominantly based on balances at the beginning of the quarter. Raymond James Trust The following table includes assets held in asset-based programs in Raymond James Trust, N.A. (including those managed for affiliated entities). $ in billions March 31, 2024 December 31, 2023 September 30, 2023 March 31, 2023 December 31, 2022 September 30, 2022 Total assets $ 9.8 $ 9.4 $ 8.5 $ 8.2 $ 7.8 $ 7.3 Fees earned on trust services are primarily reported within “Asset management and related administrative fees” on the Condensed Consolidated Statements of Income and Comprehensive Income. Quarter ended March 31, 2024 compared with the quarter ended March 31, 2023 Net revenues of $252 million increased 17% and pre-tax income of $100 million increased 22%. Asset management and related administrative fees increased $36 million, or 17%, driven by higher beginning balances of financial assets under management and assets in non-discretionary asset-based programs at AMS, as well as higher average financial assets under management at RJIM, in each case primarily due to market-driven appreciation in asset values. Compensation expenses increased $6 million, or 12%, primarily due to higher revenues and annual salary increases. Non-compensation expenses increased $12 million, or 15%, largely due to higher investment sub-advisory fees, resulting from the increase in the beginning balance of assets under management in sub-advised programs. Six months ended March 31, 2024 compared with the six months ended March 31, 2023 Net revenues of $487 million increased 15% and pre-tax income of $193 million increased 19%. Asset management and related administrative fees increased $63 million, or 16%, driven by higher beginning balances of financial assets under management and assets in non-discretionary asset-based programs at AMS, as well as higher average financial assets under management at RJIM, in each case primarily due to market-driven appreciation in asset values. Compensation expenses increased $12 million, or 12%, primarily due to higher revenues, as well as an increase in compensation costs to support our growth and annual cost increases, including salaries. Non-compensation expenses increased $21 million, or 13%, largely due to higher investment sub-advisory fees, resulting from the increase in assets under management in sub-advised programs. 70 RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Management’s Discussion and Analysis Index RESULTS OF OPERATIONS – BANK For an overview of our Bank segment operations, as well as a description of the key factors impacting our Bank segment results of operations, refer to the information presented in “Item 1 - Business” and “Item 7 - Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our 2023 Form 10-K. Operating results Three months ended March 31, Six months ended March 31, $ in millions 2024 2023 % change 2024 2023 % change Revenues: Interest income $ 868 $ 749 16 % $ 1,740 $ 1,425 22 % Interest expense (455) (219) 108 % (901) (404) 123 % Net interest income 413 530 (22) % 839 1,021 (18) % All other 11 10 10 % 26 27 (4) % Net revenues 424 540 (21) % 865 1,048 (17) % Non-interest expenses: Compensation and benefits 48 48 — % 91 88 3 % Non-compensation expenses: Bank loan provision for credit losses 21 28 (25) % 33 42 (21) % RJBDP fees to PCG 206 311 (34) % 429 579 (26) % All other 74 62 19 % 145 112 29 % Total non-compensation expenses 301 401 (25) % 607 733 (17) % Total non-interest expenses 349 449 (22) % 698 821 (15) % Pre-tax income $ 75 $ 91 (18) % $ 167 $ 227 (26) % Quarter ended March 31, 2024 compared with the quarter ended March 31, 2023 Net revenues of $424 million decreased 21%, while pre-tax income of $75 million decreased 18%. Net interest income decreased $117 million, or 22%, primarily due to increased interest expense resulting from a higher-cost mix of deposits, as balances from the ESP, which was introduced to clients in March 2023, replaced a portion of lower-cost RJBDP client cash sweep balances. The increase in interest expense was partially offset by an increase in interest income due to higher short-term interest rates and higher average cash balances during the current quarter. The Bank segment net interest margin decreased to 2.66% from 3.63% for the prior-year quarter. The bank loan provision for credit losses was $21 million for the current quarter, compared with $28 million for the prior-year quarter. The bank loan provision for credit losses for the current quarter primarily reflected the impacts of specific reserves, loan downgrades and charge-offs in our C&I and CRE loan portfolios, partially offset by the favorable impacts of an improved economic forecast and net loan payments. The bank loan provision for credit losses for the prior-year quarter primarily reflected the impacts of charge-offs of certain loans during the quarter, loan downgrades in the CRE and C&I loan portfolios, and additional volatility in the macroeconomic outlook. Non-compensation expenses, excluding the bank loan provision for credit losses, decreased $93 million, or 25%, primarily due to a decrease in RJBDP fees paid to PCG resulting from the aforementioned decline in RJBDP balances swept to the Bank segment, partially offset by an increase in rates applicable to such balances. These Bank segment fees and the related revenues earned by the PCG segment are eliminated in consolidation (see “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Private Client Group” for further information about these servicing fees). Offsetting this decline was an increase in expenses related to deposits, including expenses related to the ESP and incremental FDIC expense related to a special assessment enacted during fiscal 2024 by the FDIC to its member institutions to recover losses it experienced in its Deposit Insurance Fund over the past twelve months. 71 RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Management’s Discussion and Analysis Index Six months ended March 31, 2024 compared with the six months ended March 31, 2023 Net revenues of $865 million decreased 17% and pre-tax income of $167 million decreased 26%. Net interest income decreased $182 million, or 18%, primarily due to increased interest expense resulting from a higher-cost mix of deposits, as balances from the ESP, which was introduced to clients in March 2023, replaced a portion of lower-cost RJBDP client cash sweep balances. The increase in interest expense was partially offset by an increase in interest income due to higher short-term interest rates and higher average cash balances during the current-year period. The Bank segment net interest margin decreased to 2.70% from 3.51% for the prior-year period. The bank loan provision for credit losses was $33 million for the current-year period, compared with $42 million for the prior-year period. The bank loan provision for credit losses for the current-year period primarily reflected the impacts of specific reserves, loan downgrades and charge-offs in our C&I and CRE loan portfolios, partially offset by the favorable impacts of an improved economic forecast and net loan payments. The bank loan provision for credit losses for the prior-year period primarily reflected a weaker macroeconomic outlook at that time, net charge-offs, and the impact of loan growth during the period. Non-compensation expenses, excluding the bank loan provision for credit losses, decreased $117 million, or 17%, primarily due to a decrease in RJBDP fees paid to PCG. RJBDP fees to PCG decreased $150 million, or 26%, primarily due to the aforementioned decline in RJBDP balances swept to the Bank segment, partially offset by an increase in rates applicable to such balances. These Bank segment fees and the revenues earned by the PCG segment are eliminated in consolidation. Offsetting this decline were the aforementioned increases in expenses related to deposits, including the incremental FDIC special assessment enacted during the current-year period described above and expenses related to the ESP and certificates of deposit issuances during the current-year period, as well as higher communications and information processing expenses. The FDIC special assessment resulted in $11 million of incremental expense for the six months ended March 31, 2024. RESULTS OF OPERATIONS – OTHER This segment includes interest income on certain corporate cash balances, our private equity investments, which predominantly consist of investments in third-party funds, certain other corporate investing activity, and certain corporate overhead costs of RJF that are not allocated to other segments, including the interest costs on our public debt, certain provisions for legal and regulatory matters, and certain acquisition-related expenses. For an overview of our Other segment operations, refer to the information presented in “Item 1 - Business” and “Item 7 - Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our 2023 Form 10-K. Operating results Three months ended March 31, Six months ended March 31, $ in millions 2024 2023 % change 2024 2023 % change Revenues: Interest income $ 44 $ 36 22 % $ 93 $ 66 41 % All other (2) 1 NM — 4 (100) % Total revenues 42 37 14 % 93 70 33 % Interest expense (25) (27) (7) % (50) (51) (2) % Net revenues 17 10 70 % 43 19 126 % Non-interest expenses: Compensation and benefits 32 26 23 % 49 44 11 % Insurance settlement received — — — % — (32) 100 % All other (22) 7 NM (16) 12 NM Total non-interest expenses 10 33 (70) % 33 24 38 % Pre-tax income/(loss) $ 7 $ (23) NM $ 10 $ (5) NM 72 RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Management’s Discussion and Analysis Index Quarter ended March 31, 2024 compared with the quarter ended March 31, 2023 Pre-tax income was $7 million, compared with a pre-tax loss of $23 million for the prior-year quarter. Net revenues increased $7 million due to an increase in interest income earned as a result of higher short-term interest rates applicable to our corporate cash balances. Non-interest expenses decreased $23 million, primarily due to a net legal and regulatory reserve release, partially offset by higher compensation and advertising expenses. Six months ended March 31, 2024 compared with the six months ended March 31, 2023 Pre-tax income was $10 million compared with a pre-tax loss of $5 million for the prior-year period. Net revenues increased $24 million, primarily due to an increase in interest income earned as a result of higher short-term interest rates applicable to our corporate cash balances. Non-interest expenses increased $9 million, or 38%, due to a $32 million insurance settlement received during the prior-year period related to a previously-settled legal matter and, to a lesser extent, higher compensation expenses, partially offset by the positive impact of the net legal and regulatory reserve release in the current-year period. STATEMENT OF FINANCIAL CONDITION ANALYSIS The assets on our Condensed Consolidated Statements of Financial Condition consisted primarily of cash and cash equivalents, assets segregated for regulatory purposes and restricted cash (primarily segregated for the benefit of clients), receivables including bank loans, financial instruments held either for trading purposes or as investments, goodwill and identifiable intangible assets, and other assets. A significant portion of our assets were liquid in nature, providing us with flexibility in financing our business. Total assets of $81.23 billion as of March 31, 2024 were $2.87 billion, or 4%, greater than our total assets as of September 30, 2023. Cash and cash equivalents increased $688 million primarily driven by an increase in cash held in our Bank segment, largely resulting from an increase in bank deposits during the period. Assets segregated for regulatory purposes and restricted cash increased $470 million, primarily due to an increase in client cash balances in our broker-dealer subsidiaries, which resulted in an increase in brokerage client payables and a corresponding increase in segregated assets. Other assets increased $409 million, partially due to valuation increases on our company-owned life insurance policies. Other receivables, bank loans, net, and collateralized agreements also increased by $391 million, $324 million, and $309 million, respectively. The increase in bank loans, net was primarily related to an increase in residential mortgage loans. As of March 31, 2024, our total liabilities of $70.25 billion were $2.08 billion, or 3%, greater than our total liabilities as of September 30, 2023. Bank deposits increased $644 million, primarily driven by growth in ESP balances and other interest-bearing demand deposits, partially offset by a decrease in RJBDP client cash sweep balances swept to our Bank segment. Collateralized financings increased $618 million due to an increase in securities lending activity. Brokerage client payables increased $591 million primarily due to the aforementioned increase in client cash balances in our broker-dealer subsidiaries. 73 RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Management’s Discussion and Analysis Index LIQUIDITY AND CAPITAL RESOURCES Liquidity and capital are essential to our business. The primary goal of our liquidity management activities is to ensure adequate funding and liquidity to conduct our business over a range of economic and market environments, including times of broader industry or market liquidity stress events. In times of market stress or uncertainty, we generally maintain higher levels of liquidity, including increased cash levels in our Bank segment, to ensure we have adequate funding to support our business and meet our clients’ needs. We seek to manage capital levels to support execution of our business strategy, provide financial strength to our subsidiaries, and maintain sustained access to the capital markets, while at the same time meeting our regulatory capital requirements and conservative internal management targets. Liquidity and capital resources are provided primarily through our business operations and financing activities. Our business operations generate substantially all of their own liquidity and funding needs. We have a contingency funding plan which would guide our actions if one or more of our businesses were to experience disruptions from normal funding and liquidity sources. These actions include reallocating client cash balances in the RJBDP from third-party banks to our bank subsidiaries thereby bringing those deposits onto our Consolidated Statements of Financial Condition, increasing our FHLB borrowings at our bank subsidiaries, accessing committed and uncommitted lines of credit at the parent or certain operating subsidiaries, accessing capital markets, or in certain instances accessing certain lending programs available from the Federal Reserve. We also have the ability to create additional sources of funding by developing new products to meet the financial needs of our clients, such as the ESP deposit offering which was introduced to PCG clients in fiscal 2023. With each of our deposit offerings, we work to obtain sufficient liquidity to support our business operations while also maintaining a high level of FDIC insurance coverage for our clients. Our financing activities could also include bank borrowings, collateralized financing arrangements, or additional capital raising activities under our “universal” shelf registration statement. We believe our existing assets, most of which are liquid in nature, together with funds generated from operations and available from committed and uncommitted financing facilities, provide adequate funds for continuing operations at current levels of activity in the short-term. We also believe that we will be able to continue to meet our long-term funding and liquidity requirements due to our strong financial position and ability to access capital from financial markets. Liquidity and capital management Senior management establishes our liquidity and capital management frameworks. Our liquidity and capital management frameworks are overseen by our Asset and Liability Committee, a senior management committee that develops and executes strategies and policies to manage our liquidity risk and interest rate risk, as well as provides oversight over the firm’s investments. Our liquidity management framework is designed to ensure we have a sufficient amount of funding, even when funding markets experience stress. We manage the maturities and diversity of our funding across products and seek to maintain a diversified funding profile with an appropriate tenor, taking into consideration the characteristics and liquidity profile of our assets (e.g., the maturities of our available-for-sale securities portfolio). The liquidity management framework includes senior management’s review of short- and long-term cash flow forecasts, review of necessary expenditures, monitoring of the availability of alternative sources of financing, and daily monitoring of liquidity in our significant subsidiaries. Our decisions on the allocation of resources to our business units consider, among other factors, projected profitability, cash flow, risk, future liquidity needs, and required capital levels. Our treasury department assists in evaluating, monitoring and controlling the impact that our business activities have on our financial condition and liquidity, and also maintains our relationships with various lenders. The objective of our liquidity management framework is to support the successful execution of our business strategies while ensuring ongoing and sufficient funding and liquidity. Our capital planning and capital risk management processes are governed by the Capital Planning Committee (“CPC”), a senior management committee that provides oversight on our capital planning and ensures that our strategic planning and risk management processes are integrated into the capital planning process. The CPC meets at least quarterly to review key metrics related to the firm’s capital, such as debt structure and capital ratios; to analyze potential and emerging risks to capital; to oversee our annual firmwide capital stress test; and to propose capital actions to the Board of Directors, such as declaring dividends, repurchasing securities, and raising capital. To ensure that we have sufficient capital to absorb unanticipated losses, the firm adheres to capital risk appetite statements and tolerances set in excess of regulatory minimums, which are established by the CPC and approved by the Board of Directors. We conduct enterprise-wide capital stress testing to ensure that we maintain adequate capital to adhere to our established tolerances under multiple scenarios, including a stressed scenario. 74 RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Management’s Discussion and Analysis Index Capital structure Common equity (i.e., common stock, additional paid-in capital, and retained earnings) is the primary component of our capital structure. Common equity allows for the absorption of losses on an ongoing basis and for the conservation of resources during stress periods, as it provides us with discretion on the amount and timing of dividends and other capital actions. Information about our common equity is included in the Condensed Consolidated Statements of Financial Condition, the Condensed Consolidated Statements of Changes in Shareholders’ Equity, and Note 17 of this Form 10-Q. Under regulatory capital rules applicable to us as a bank holding company, we are required to maintain minimum leverage ratios (defined as tier 1 capital divided by adjusted average assets), as well as minimum ratios of tier 1 capital, CET1, and total capital to risk-weighted assets. These capital ratios incorporate quantitative measures of our assets, liabilities, and certain off-balance sheet items as calculated under the regulatory capital rules and are subject to qualitative judgments by the regulators about components, risk-weightings, and other factors. We calculate these ratios in order to assess compliance with both regulatory requirements and internal capital policies. In order to maintain our ability to take certain capital actions, including dividends and common equity repurchases, and to make bonus payments, we must hold a capital conservation buffer above our minimum risk-based capital requirements. See Note 21 for further information about our regulatory capital and related capital ratios. We have classified all of our investments in debt securities as available-for-sale and have not classified any of our investments in debt securities as held-to-maturity. Accordingly, we account for our available-for-sale securities at fair value at each reporting date, with unrealized gains and losses, net of tax, included in AOCI. Current Basel III rules permit us to make an election to exclude most components of AOCI when calculating CET1, tier 1 capital, and total capital. We have elected the AOCI opt-out for regulatory capital purposes and therefore exclude certain elements of AOCI, including gains/losses on our available-for-sale portfolio, from our capital calculations. On July 27, 2023, U.S. banking regulators issued proposed rules that, if enacted, would result in changes to regulations applicable to bank holding companies, including higher capital requirements and eliminating the AOCI opt-out election, which could reduce our regulatory capital ratios in the future. Under the proposed rule, if enacted, there would be a three-year transition period for the elimination of the AOCI opt-out election. We are continuing to evaluate these proposals, most of which would apply to us if our average total consolidated assets for four consecutive calendar quarters exceeded $100 billion, to assess their potential impact to our current businesses and strategies. The following table presents the components of RJF’s regulatory capital used to calculate the aforementioned regulatory capital ratios. $ in millions March 31, 2024 September 30, 2023 Common equity tier 1 capital/Tier 1 capital Common stock and related additional paid-in capital $ 3,188 $ 3,145 Retained earnings 10,988 10,213 Treasury stock (2,547) (2,252) Accumulated other comprehensive loss (724) (971) Less: Goodwill and identifiable intangible assets, net of related deferred tax liabilities (1,760) (1,776) Other adjustments 654 886 Common equity tier 1 capital 9,799 9,245 Preferred stock 79 79 Less: Tier 1 capital deductions (3) (3) Tier 1 capital 9,875 9,321 Tier 2 capital Qualifying subordinated debt 99 100 Qualifying allowances for credit losses 525 513 Tier 2 capital 624 613 Total capital $ 10,499 $ 9,934 75 RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Management’s Discussion and Analysis Index The following table presents RJF’s risk-weighted assets by exposure type used to calculate the aforementioned regulatory capital ratios. $ in millions March 31, 2024 September 30, 2023 On-balance sheet assets: Corporate exposures $ 19,396 $ 19,262 Exposures to sovereign and government-sponsored entities (1) 1,760 1,844 Exposures to depository institutions, foreign banks, and credit unions 1,933 1,878 Exposures to public-sector entities 697 698 Residential mortgage exposures 4,557 4,377 Statutory multi-family mortgage exposures 181 118 High volatility commercial real estate exposures 144 141 Past due loans 288 203 Equity exposures 528 538 Securitization exposures 142 134 Other assets 9,488 8,665 Off-balance sheet: Standby letters of credit 91 91 Commitments with original maturity of one year or less 190 131 Commitments with original maturity greater than one year 2,430 2,396 Over-the-counter derivatives 307 311 Other off-balance sheet items 375 275 Market risk-weighted assets 2,544 2,485 Total standardized risk-weighted assets $ 45,051 $ 43,547 (1) Exposure is predominantly to the U.S. government and its agencies. Cash flows Cash and cash equivalents (excluding amounts segregated for regulatory purposes and restricted cash) of $10.00 billion at March 31, 2024 increased $688 million compared with September 30, 2023. The increase in cash and cash equivalents primarily resulted from net income during the period, as well as an increase in bank deposits, net maturities of available-for-sale securities and short-term borrowings during the period. These increases were partially offset by investments in bank loans, common stock repurchases, dividends paid on our common and preferred stock, and the payment of prior-year bonuses during the six months ended March 31, 2024. Sources of liquidity Approximately $2.03 billion of our total March 31, 2024 cash and cash equivalents was RJF corporate cash, which included the cash held at the parent company, as well as cash it loaned to RJ&A. As of March 31, 2024, RJF had loaned $1.31 billion to RJ&A (such amount is included in the RJ&A cash balance in the following table), which RJ&A has invested on behalf of RJF in cash and cash equivalents or otherwise deployed in its normal business activities. The following table presents our holdings of cash and cash equivalents. $ in millions March 31, 2024 RJF $ 752 TriState Capital Bank 3,810 Raymond James Bank 2,064 RJ&A 2,062 Raymond James Ltd. (“RJ Ltd.”) 491 Raymond James Financial Services, Inc. 154 Charles Stanley Group Limited (“Charles Stanley”) 121 Raymond James Trust Company of New Hampshire 102 Raymond James Capital Services, LLC 83 RJIM 77 Other subsidiaries 285 Total cash and cash equivalents $ 10,001 76 RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Management’s Discussion and Analysis Index RJF maintained depository accounts at Raymond James Bank and TriState Capital Bank totaling $290 million as of March 31, 2024. The portion of this total that was available on demand without restrictions, which amounted to $247 million as of March 31, 2024, is reflected in the RJF cash balance and excluded from Raymond James Bank’s cash balance in the preceding table. A large portion of the cash and cash equivalents balances at our non-U.S. subsidiaries, including RJ Ltd. and Charles Stanley, as of March 31, 2024 was held to meet regulatory requirements and was not available for use by the parent. In addition to the cash balances described, we have various other potential sources of cash available to the parent company from subsidiaries, as described in the following section. Liquidity available from subsidiaries Liquidity is principally available to RJF from RJ&A and Raymond James Bank. Certain of our broker-dealer subsidiaries are subject to the requirements of the Uniform Net Capital Rule (Rule 15c3-1) under the Securities and Exchange Act of 1934. As a member firm of the Financial Industry Regulatory Authority (“FINRA”), RJ&A is subject to FINRA’s capital requirements, which are substantially the same as Rule 15c3-1. Rule 15c3-1 provides for an “alternative net capital requirement,” which RJ&A has elected. Regulations require that minimum net capital, as defined, be equal to the greater of $1.5 million or 2% of aggregate debit items arising from client balances. In addition, covenants in RJ&A’s committed financing facilities require its net capital to be a minimum of 10% of aggregate debit items. At March 31, 2024, RJ&A significantly exceeded the minimum regulatory requirements, the covenants in its financing arrangements pertaining to net capital, as well as its internally-targeted net capital tolerances. FINRA may impose certain restrictions, such as restricting withdrawals of equity capital, if a member firm were to fall below a certain threshold or fail to meet minimum net capital requirements which may result in RJ&A limiting dividends it would otherwise remit to RJF. We evaluate regulatory requirements, loan covenants and certain internal tolerances when determining the amount of liquidity available to RJF from RJ&A. Our bank subsidiaries may pay dividends to RJF without prior approval of their regulators as long as the dividends do not exceed the sum of their current calendar year and the previous two calendar years’ retained net income, and they maintain their targeted regulatory capital ratios, among other restrictions. Dividends paid to RJF from our bank subsidiaries may be limited to the extent that capital is needed to support balance sheet growth or as part of our liquidity and capital management activities. Although we have liquidity available to us from our other subsidiaries, the available amounts may not be as significant as those previously described and, in certain instances, may be subject to regulatory requirements. Borrowings and financing arrangements Financing arrangements We have various financing arrangements in place with third-party lenders that allow us the flexibility to borrow funds on a secured or unsecured basis to meet our liquidity needs. We generally utilize these financing arrangements to finance a portion of our fixed income trading instruments held by RJ&A or for cash management purposes. Our ability to borrow under these arrangements is dependent upon compliance with the conditions in our various loan agreements and, in the case of secured borrowings, collateral eligibility requirements. As of March 31, 2024, RJF and RJ&A had the ability to borrow under our $750 million Credit Facility, a committed unsecured line of credit. We had no such borrowings outstanding under this facility as of March 31, 2024. See Note 14 of the Notes to Condensed Consolidated Financial Statements of this Form 10-Q for additional information regarding our Credit Facility. In addition to our Credit Facility, we have various uncommitted financing arrangements with third-party lenders, which are in the form of secured lines of credit, secured bilateral repurchase agreements, or unsecured lines of credit. Our uncommitted secured financing arrangements generally require us to post collateral in excess of the amount borrowed and are generally collateralized by RJ&A-owned securities or by securities that we have received as collateral under reverse repurchase agreements (i.e., securities purchased under agreements to resell). As of March 31, 2024, we had outstanding borrowings of $200 million under one uncommitted unsecured agreement, which was included in “Other borrowings” on our Condensed Consolidated Statements of Financial Condition, and $371 million under three uncommitted secured borrowing arrangements, which were included in “Collateralized Financings” on our Condensed Consolidated Statements of Financial Condition. We 77 RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Management’s Discussion and Analysis Index have a total of 12 uncommitted financing arrangements with third-party lenders (eight uncommitted secured and four uncommitted unsecured); however, lenders are generally under no contractual obligation to lend to us under uncommitted credit facilities. See Notes 6 and 14 of the Notes to Condensed Consolidated Financial Statements of this Form 10-Q for additional information regarding these borrowings. Our borrowings on uncommitted secured financing arrangements, which were in the form of repurchase agreements in RJ&A, were included in “Collateralized financings” on our Condensed Consolidated Statements of Financial Condition. The average daily balance outstanding during the five most recent quarters, the maximum month-end balance outstanding during the quarter and the period-end balances for repurchase agreements and reverse repurchase agreements are detailed in the following table. Repurchase transactions Reverse repurchase transactions For the quarter ended: ($ in millions) Average daily balance outstanding Maximum month-end balance outstanding during the quarter End of period balance outstanding Average daily balance outstanding Maximum month-end balance outstanding during the quarter End of period balance outstanding March 31, 2024 $ 256 $ 371 $ 371 $ 244 $ 449 $ 449 December 31, 2023 $ 171 $ 193 $ 169 $ 225 $ 252 $ 194 September 30, 2023 $ 153 $ 232 $ 157 $ 215 $ 279 $ 187 June 30, 2023 $ 123 $ 128 $ 110 $ 179 $ 181 $ 181 March 31, 2023 $ 174 $ 223 $ 150 $ 236 $ 310 $ 167 Other borrowings and collateralized financings We had $1 billion in FHLB borrowings outstanding at March 31, 2024, comprised of floating-rate and fixed-rate advances. The interest rates on our floating-rate advances are based on SOFR. We use interest rate swaps to manage the risk of increases in interest rates associated with the majority of our floating-rate FHLB advances by converting the balances subject to variable interest rates to a fixed interest rate. We pledge certain of our bank loans and available-for-sale securities with the FHLB as security for both the repayment of certain borrowings and to secure capacity for additional borrowings as needed. As of March 31, 2024, we had $9.52 billion in immediate credit available from the FHLB based on the collateral pledged. With the pledge of incremental collateral, we could further increase credit available to us from the FHLB. See Notes 4, 6, 7, and 14 of the Notes to Condensed Consolidated Financial Statements of this Form 10-Q for additional information regarding bank loans and available-for-sale securities pledged with the FHLB and for further information on our FHLB borrowings, including the related maturities and interest rates. As member banks, our bank subsidiaries have access to the Federal Reserve’s discount window and may have access to other lending programs that may be established by the Federal Reserve in unusual and exigent circumstances; however, we do not view borrowings from the Federal Reserve as one of our primary sources of funding. See Note 6 of the Notes to Condensed Consolidated Financial Statements of this Form 10-Q for additional information regarding available-for-sale securities and bank loans pledged with the FRB. A portion of our fixed income transactions are cleared through a third-party clearing organization, which provides financing for the purchase of trading instruments to support such transactions. The amount of financing is based on the amount of trading inventory financed, as well as any deposits held at the clearing organization. Amounts outstanding under this financing arrangement are collateralized by a portion of our trading inventory and accrue interest based on market rates. While we had borrowings outstanding as of March 31, 2024, the clearing organization is under no contractual obligation to lend to us under this arrangement. At March 31, 2024, we had subordinated notes due 2030 outstanding, with an aggregate principal amount of $98 million. See Note 14 of the Notes to Condensed Consolidated Financial Statements of this Form 10-Q and Note 16 of our 2023 Form 10-K for additional information regarding these borrowings. We may act as an intermediary between broker-dealers and other financial institutions whereby we borrow securities from one counterparty and then lend them to another counterparty. Where permitted, we have also loaned securities owned by clients or the firm to broker-dealers and other financial institutions. We account for each of these types of transactions as collateralized agreements and financings, with the outstanding balance of $584 million as of March 31, 2024 related to the securities loaned included in “Collateralized financings” on our Condensed Consolidated Statements of Financial Condition of this Form 10-Q. See Note 6 of the Notes to Condensed Consolidated Financial Statements of this Form 10-Q and Note 2 of our 2023 Form 10-K for more information on our collateralized agreements and financings. 78 RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Management’s Discussion and Analysis Index Senior notes payable At March 31, 2024, we had aggregate outstanding senior notes payable of $2.04 billion, which, exclusive of any unaccreted premiums or discounts and debt issuance costs, was comprised of $500 million par 4.65% senior notes due 2030, $800 million par 4.95% senior notes due 2046, and $750 million par 3.75% senior notes due 2051. See Note 17 of the Notes to the Consolidated Financial Statements of our 2023 Form 10-K for additional information on our senior notes payable. Credit ratings Our issuer, senior long-term debt, and preferred stock credit ratings as of the most current report are detailed in the following table. Credit Rating Fitch Ratings, Inc. Moody’s Standard & Poor’s Ratings Services Issuer and senior long-term debt: Rating A- A3 A- Outlook Stable Stable Stable Last rating action Affirmed Affirmed Affirmed Date of last rating action March 2024 March 2024 February 2024 Preferred stock: Rating BB+ Baa3 (hyb) Not rated Last rating action Affirmed Affirmed N/A Date of last rating action March 2024 March 2024 N/A Our current credit ratings depend upon a number of factors, including industry dynamics, operating and economic environment, operating results, operating margins, earnings trends and volatility, balance sheet composition, liquidity and liquidity management, capital structure, overall risk management, business diversification and market share, and competitive position in the markets in which we operate. Deterioration in any of these factors could impact our credit ratings. Any rating downgrades could increase our costs in the event we were to obtain additional financing. Should our credit rating be downgraded prior to a public debt offering, it is probable that we would have to offer a higher rate of interest to bond holders. A downgrade to below investment grade may make a public debt offering difficult to execute on terms we would consider to be favorable. A downgrade below investment grade could result in the termination of certain derivative contracts and the counterparties to the derivative instruments could request immediate payment or demand immediate and ongoing overnight collateralization on our derivative instruments in liability positions. A credit downgrade could damage our reputation and result in certain counterparties limiting their business with us, result in negative comments by analysts, potentially negatively impact investors’ and/or clients’ perception of us, cause clients to withdraw bank deposits that exceed FDIC insurance limits from our bank subsidiaries, and cause a decline in our stock price. None of our borrowing arrangements contains a condition or event of default related to our credit ratings. However, a credit downgrade would result in the firm incurring a higher facility fee on the Credit Facility, in addition to triggering a higher interest rate applicable to any borrowings outstanding on that line as of and subsequent to such downgrade. Conversely, an improvement in RJF’s current credit rating could have a favorable impact on the facility fee, as well as the interest rate applicable to any borrowings on such line. Other sources and uses of liquidity We have company-owned life insurance policies which are utilized to fund certain non-qualified deferred compensation plans and other employee benefit plans. Certain of our non-qualified deferred compensation plans and other employee benefit plans are employee-directed (i.e., the participant chooses investment portfolio benchmarks) while others are company-directed. Of the company-owned life insurance policies which fund these plans, certain policies could be used as a source of liquidity for the firm. Those policies against which we could readily borrow had a cash surrender value of $1.09 billion as of March 31, 2024, comprised of $730 million related to employee-directed plans and $363 million related to company-directed plans, and we were able to borrow up to 90%, or $984 million, of the March 31, 2024 total without restriction. To effect any such borrowing, the underlying investments would be converted to money market investments, therefore requiring us to take market risk related to the employee-directed plans. There were no borrowings outstanding against any of these policies as of March 31, 2024. 79 RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Management’s Discussion and Analysis Index On May 12, 2021, we filed a “universal” shelf registration statement with the SEC pursuant to which we can issue debt, equity and other capital instruments if and when necessary or perceived by us to be opportune. Subject to certain conditions, this registration statement will be effective through May 12, 2024. Prior to its expiration, we intend to renew the shelf registration statement. As part of our ongoing operations, we also enter into contractual arrangements that may require future cash payments, including certificates of deposit, lease obligations and other contractual arrangements, such as for software licenses and various services. See Notes 12 and 13 of the Notes to Condensed Consolidated Financial Statements of this Form 10-Q and Notes 14 and 15 of our 2023 Form 10-K for information regarding our lease obligations and certificates of deposit, respectively. We have entered into investment commitments, lending commitments and other commitments to extend credit for which we are unable to reasonably predict the timing of future payments. See Note 16 of the Notes to Condensed Consolidated Financial Statements of this Form 10-Q for further information. REGULATORY Refer to the discussion of the regulatory environment in which we operate and the impact on our operations of certain rules and regulations in “Item 1 - Business - Regulation” of our 2023 Form 10-K. RJF and many of its subsidiaries are each subject to various regulatory capital requirements. As of March 31, 2024, all of our active regulated domestic and international subsidiaries had net capital in excess of minimum requirements. In addition, RJF, Raymond James Bank, and TriState Capital Bank were categorized as “well-capitalized” as of March 31, 2024. The maintenance of certain risk-based and other regulatory capital levels could influence various capital allocation decisions impacting one or more of our businesses. However, due to the current capital position of RJF and its regulated subsidiaries, we do not anticipate these capital requirements will have a negative impact on our future business activities. See Note 21 of the Notes to Condensed Consolidated Financial Statements and “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and capital resources - Capital structure” of this Form 10-Q for further information on regulatory capital requirements. In March 2024, the SEC issued a final rule that requires registrants to provide climate-related disclosures in their annual reports which is intended to enhance and standardize climate-related disclosures. The rule requires, among other things, disclosures about the financial statement impacts of severe weather events and other natural conditions, as well as our climate-related oversight and risk management activities and material Scope 1 and Scope 2 greenhouse gas emissions. These new disclosures are effective for annual periods beginning in our fiscal 2026, except for disclosures of Scope 1 and 2 greenhouse gas emissions and certain other disclosure which are effective for annual periods beginning in our fiscal 2027. Several legal challenges were filed following the final rule issuance, and the rule is currently in review by the Eighth Circuit Court of Appeals (“Eighth Circuit”). The SEC has exercised its discretion to stay the final rule pending completion of judicial review of the consolidated Eighth Circuit petitions. We are monitoring the legal activity closely while continuing to evaluate the impact that this new guidance will have on our disclosures. Compliance with these additional disclosures could result in additional costs. On April 23, 2024, the Department of Labor (“DOL”) issued a final rule significantly expanding the definition of “investment advice fiduciary” under the Employee Retirement Income Security Act of 1974. In related rulemakings, the DOL also finalized amendments to several Prohibited Transaction Exemptions (“PTEs”), which exempt certain compensation arrangements that would otherwise be prohibited. The final rules generally become effective September 23, 2024, with a one-year transition period for certain conditions in the PTEs. We are currently evaluating the impact of these new rules and the extent to which they are consistent with the SEC’s Regulation Best Interest. We expect compliance with the rules will require us to alter our business practices and may impose additional costs. On April 23, 2024, the Federal Trade Commission (“FTC”) issued a final rule which will prohibit companies from entering into any new post-employment non-competition agreements with employees and independent contractors and make existing non-competition clauses for the vast majority of U.S. workers unenforceable. The rule will permit companies to enforce existing non-competition clauses only with a narrowly defined group of “senior executives,” but provides an exception for non-competition agreements entered into as part of the sale of a business. The rule will become effective 120 days after its publication in the Federal Register. We are currently evaluating the impact of this new rule, including the status of legal challenges. Compliance with the rule could require us to alter our business practices where such non-competition agreements are present and could accelerate the timing of compensation expense recognition in certain of our deferred compensation plans. 80 RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Management’s Discussion and Analysis Index CRITICAL ACCOUNTING ESTIMATES The condensed consolidated financial statements are prepared in accordance with GAAP, which require us to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and the reported amounts of revenues and expenses for the reporting period. Management has established detailed policies and control procedures intended to ensure the appropriateness of such estimates and assumptions and their consistent application from period to period. For a description of our significant accounting policies, see Note 2 of the Notes to Consolidated Financial Statements of our 2023 Form 10-K. Due to their nature, estimates involve judgment based upon available information. Actual results or amounts could differ from estimates and the difference could have a material impact on the condensed consolidated financial statements. Therefore, understanding these critical accounting estimates is important in understanding our reported results of operations and financial position. We believe that of our accounting estimates and assumptions, those described in the following sections involve a high degree of judgment and complexity. Loss provisions Loss provisions for legal and regulatory matters The recorded amount of liabilities related to legal and regulatory matters is subject to significant management judgment. For a description of the significant estimates and judgments associated with establishing such accruals, see the “Contingent liabilities” section of Note 2 of the Notes to Consolidated Financial Statements of our 2023 Form 10-K. In addition, refer to Note 16 of the Notes to Condensed Consolidated Financial Statements of this Form 10-Q for information regarding legal and regulatory matters contingencies as of March 31, 2024. Allowance for credit losses We evaluate certain of our financial assets, including bank loans, to estimate an allowance for credit losses based on expected credit losses over a financial asset’s lifetime. The remaining life of our financial assets is determined by considering contractual terms and expected prepayments, among other factors. We use multiple methodologies in estimating an allowance for credit losses and our approaches differ by type of financial asset and the risk characteristics within each financial asset type. Our estimates are based on ongoing evaluations of our financial assets, the related credit risk characteristics, and the overall economic and environmental conditions affecting the financial assets. Our process for determining the allowance for credit losses includes a complex analysis of several quantitative and qualitative factors requiring significant management judgment due to matters that are inherently uncertain. This uncertainty can produce volatility in our allowance for credit losses. In addition, the allowance for credit losses could be insufficient to cover actual losses. In such an event, any losses in excess of our allowance would result in a decrease in our net income, as well as a decrease in the level of regulatory capital. We generally estimate the allowance for credit losses on bank loans using credit risk models which incorporate relevant available information from internal and external sources relating to past events, current conditions, and reasonable and supportable economic forecasts. After testing the reasonableness of a variety of economic forecast scenarios, each model is run using a single forecast scenario selected for each model. Our forecasts incorporate assumptions related to macroeconomic indicators including, but not limited to, U.S. gross domestic product, equity market indices, unemployment rates, and commercial real estate and residential home price indices. To demonstrate the sensitivity of credit loss estimates on our bank loan portfolio to macroeconomic forecasts, we compared our modeled estimates under the base case economic scenario used to estimate the allowance for credit losses as of March 31, 2024, to what our estimate would have been under a downside case scenario and an upside scenario, without considering any offsetting effects in the qualitative component of our allowance for credit losses as of March 31, 2024. As of March 31, 2024, use of the downside case scenario would have resulted in an increase of approximately $210 million in the quantitative portion of our allowance for credit losses on bank loans, while the use of the upside case would have resulted in a reduction of approximately $40 million in the quantitative portion of our allowance for credit losses on bank loans at March 31, 2024. These hypothetical outcomes reflect the relative sensitivity of the modeled portion of our allowance estimate to macroeconomic forecasted scenarios but do not consider any potential impact qualitative adjustments could have on the allowance for credit losses in such environments. Qualitative adjustments could either increase or decrease modeled loss estimates calculated using an alternative economic scenario assumption. Further, such sensitivity calculations do not necessarily reflect the nature and extent of future changes in the related allowance for a number of reasons including: (1) management’s predictions of future economic trends and relationships among the scenarios may differ from actual events; and (2) management’s application of subjective measures to modeled results through the qualitative portion of the allowance for credit losses when appropriate. The downside case scenario utilized in this hypothetical sensitivity analysis assumes a moderate recession. To the extent 81 RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Management’s Discussion and Analysis Index macroeconomic conditions worsen beyond those assumed in this downside case scenario, we could incur provisions for credit losses significantly in excess of those estimated in this analysis. See Note 2 of the Notes to Consolidated Financial Statements of our 2023 Form 10-K for information regarding our methodologies and assumptions used in estimating the allowance for credit losses. See Note 7 of the Notes to Condensed Consolidated Financial Statements of this Form 10-Q for information regarding our allowance for credit losses related to bank loans as of March 31, 2024. ACCOUNTING STANDARDS UPDATE In November 2023, the FASB issued amended guidance related to disclosures for segment reporting (ASU 2023-07). The amendment requires a public entity to disclose on an annual and interim basis, for each reportable segment, the significant segment expenses that are regularly provided to the chief operating decision maker and included within each reported measure of segment profit or loss. The guidance also requires a public entity to disclose, for each reportable segment, an amount for other segment items (those not captured as a significant expense) and the reported measure of a segment’s profit or loss. This new guidance is effective for annual periods beginning in our fiscal 2025 and interim periods beginning in our fiscal first quarter of 2026 with early adoption permitted. This guidance will be applied on a retrospective basis. We are evaluating the impact that this new guidance will have on our disclosures. In December 2023, the FASB issued amended guidance related to disclosures for income taxes (ASU 2023-09). The amendment requires a public entity to enhance its existing annual tabular reconciliation of its statutory income tax rate to its effective tax rate, with certain reconciling items at or above 5% of the applicable statutory income tax rate broken out by nature and/or jurisdiction. The guidance also requires an entity to disclose income taxes paid (net of refunds received), disaggregated by federal, state, and foreign taxes, and net amounts paid to an individual jurisdiction when they represent 5% or more of the total income taxes paid. This new guidance is effective for annual periods beginning in our fiscal 2026 with early adoption permitted. This guidance will be applied on a prospective basis with retrospective application permitted. We are evaluating the impact that this new guidance will have on our disclosures. See Note 2 of the Notes to the Condensed Consolidated Financial Statements of this Form 10-Q for information regarding new accounting guidance we adopted during the three and six months ended March 31, 2024. RISK MANAGEMENT Risks are an inherent part of our business and activities. Management of risk is critical to our fiscal soundness and profitability. Our risk management processes are multi-faceted and require communication, judgment, and knowledge of financial products and markets. We have a formal Enterprise Risk Management (“ERM”) program to assess and review aggregate risks across the firm. Our management takes an active role in the ERM process, which requires specific administrative and business functions to participate in the identification, assessment, monitoring and control of various risks. The principal risks related to our business activities are market, credit, liquidity, operational, model, and compliance. Governance Our Board of Directors, including its Risk Committee and Audit Committee, oversees the firm’s management and mitigation of risk, reinforcing a culture that encourages ethical conduct and risk management throughout the firm. Senior management communicates and reinforces this culture through three lines of risk management and a number of senior-level management committees. Our first line of risk management, which includes all of our businesses, owns its risks and is responsible for identifying, mitigating, and escalating risks arising from its day-to-day activities. The second line of risk management, which includes Compliance and Risk Management, advises our client-facing businesses and other first-line functions in identifying, assessing, and mitigating risk. The second line of risk management tests and monitors the effectiveness of controls, as deemed necessary, and escalates risks when appropriate to senior management and the Board of Directors. The third line of risk management, Internal Audit, independently reviews activities conducted by the previous lines of risk management to assess their management and mitigation of risk, providing additional assurance to the Board of Directors and senior management, with a view toward enhancing our oversight, management, and mitigation of risk. Our legal department provides legal advice and guidance to each of these three lines of risk management. 82 RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Management’s Discussion and Analysis Index Market risk Market risk is our risk of loss resulting from the impact of changes in market prices on our trading inventory, derivatives, and investment positions. We have exposure to market risk primarily through our broker-dealer trading operations and our banking operations. Through our broker-dealer subsidiaries, we trade debt obligations and equity securities and maintain trading inventories to ensure availability of securities to facilitate client transactions. Inventory levels may fluctuate daily as a result of client demand. We also hold investments within our available-for-sale securities portfolio, and from time to time may hold Small Business Administration loan securitizations not yet sold. Our primary market risks relate to interest rates, equity prices, and foreign exchange rates. Interest rate risk results from changes in levels of interest rates, the volatility of interest rates, mortgage prepayment speeds, and credit spreads. Equity risk results from changes in prices of equity securities. Foreign exchange risk results from changes in spot prices, forward prices, and volatility of foreign exchange rates. See Note 2 of the Notes to Consolidated Financial Statements of our 2023 Form 10-K and Notes 3, 4, and 5 of the Notes to Condensed Consolidated Financial Statements of this Form 10-Q for fair value and other information regarding our trading inventories, available-for-sale securities, and derivative instruments. We regularly enter into underwriting commitments and, as a result, we may be subject to market risk on any unsold securities issued in the offerings to which we are committed. Risk exposure is controlled by limiting our participation, the transaction size, or through the syndication process. The Market Risk Management department is responsible for measuring, monitoring, and reporting market risks associated with the firm’s trading and derivative portfolios. While Market Risk Management maintains ongoing communication with the revenue-generating business units, it is independent of such units. Interest rate risk Trading activities We are exposed to interest rate risk as a result of our trading inventory (primarily comprised of fixed income instruments) in our Capital Markets segment. Changes in the value of our trading inventory may result from fluctuations in interest rates, credit spreads, equity prices, macroeconomic factors, investor expectations or risk appetites, liquidity, as well as dynamic relationships between these factors. We actively manage interest rate risk arising from our fixed income trading inventory through the use of hedging strategies utilizing U.S. Treasuries, exchange traded funds, futures contracts, liquid spread products, and derivatives. Our primary method for controlling risks within trading inventories is through the use of dollar-based and exposure-based limits. A hierarchy of limits exists at multiple levels, including firm, business unit, desk (e.g., for equities, corporate bonds, municipal bonds), product sub-type (e.g., below-investment-grade positions) and issuer concentration. For derivative positions, which are primarily comprised of interest rate swaps, we have established sensitivity-based and foreign exchange spot limits. Trading positions and derivatives are monitored against these limits through daily reports that are distributed to senior management. During volatile markets, we may temporarily reduce limits and/or choose to pare our trading inventories to reduce risk. We monitor Value-at-Risk (“VaR”) for all of our trading portfolios on a daily basis for risk management purposes and as a result of applying the Fed’s Market Risk Rule (“MRR”) for the purpose of calculating our capital ratios. The MRR, also known as the “Risk-Based Capital Guidelines: Market Risk” rule released by the Fed, the Office of the Comptroller of the Currency and the FDIC, requires us to calculate VaR for all of our trading portfolios, including fixed income, equity, derivatives, and foreign exchange instruments. VaR is an appropriate statistical technique for estimating potential losses in trading portfolios due to typical adverse market movements over a specified time horizon with a suitable confidence level. However, there are inherent limitations to utilizing VaR including: historical movements in markets may not accurately predict future market movements; VaR does not take into account the liquidity of individual positions; VaR does not estimate losses over longer time horizons; and extended periods of one-directional markets potentially distort risks within the portfolio. In addition, should markets become more volatile, actual trading losses may exceed VaR results presented on a single day and might accumulate over a longer time horizon. As a result, management complements VaR with sensitivity analysis and stress testing and employs additional controls such as a daily review of trading results, review of aged inventory, independent review of pricing, monitoring of concentrations, and review of issuer ratings. To calculate VaR, we use models that incorporate historical simulation. This approach assumes that historical changes in market conditions, such as in interest rates and equity prices, are representative of future changes. Simulation is based on daily market data for the previous twelve months. VaR is reported at a 99% confidence level for a one-day time horizon. Assuming 83 RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Management’s Discussion and Analysis Index that future market conditions change as they have in the past twelve months, we would expect to incur losses greater than those predicted by our one-day VaR estimates about once every 100 trading days, or about three times per year on average. For regulatory capital calculation purposes, we also report VaR and Stressed VaR numbers for a ten-day time horizon. The VaR model is independently reviewed by our Model Risk Management function. See “Item 7 - Management’s Discussion and Analysis of Financial Condition and Results of Operations - Risk management - Model risk” of our 2023 Form 10-K for further information. The modeling of the risk characteristics of trading positions involves a number of assumptions and approximations that management believes to be reasonable. However, there is no uniform industry methodology for estimating VaR, and different assumptions or approximations could produce materially different VaR estimates. As a result, VaR results are more reliable when used as indicators of risk levels and trends within a firm than as a basis for inferring differences in risk-taking across firms. The following table sets forth the high, low, period-end and average daily one-day VaR for all of our trading portfolios, including fixed income and equity instruments, and for our derivatives for the periods and dates indicated. Six months ended March 31, 2024 Period-end VaR Three months ended March 31, Six months ended March 31, $ in millions High Low March 31, 2024 September 30, 2023 $ in millions 2024 2023 2024 2023 Daily VaR $ 3 $ 1 $ 2 $ 2 Average daily VaR $ 2 $ 2 $ 2 $ 2 The Fed’s MRR requires us to perform daily back-testing procedures for our VaR model, whereby we compare each day’s projected VaR to its regulatory-defined daily trading losses, which exclude fees, commissions, reserves, net interest income, and intraday trading. Regulatory-defined daily trading losses are used to evaluate the performance of our VaR model and are not comparable to our actual daily net revenues. Based on these daily “ex ante” versus “ex post” comparisons, we determine whether the number of times that regulatory-defined daily trading losses exceed VaR is consistent with our expectations at a 99% confidence level. During both the three and six months ended March 31, 2024, our regulatory-defined daily losses in our trading portfolios exceeded our predicted VaR on one occasion. Separately, RJF provides additional market risk disclosures to comply with the MRR, including 10-day VaR and 10-day Stressed VaR, which are available on our website at https://www.raymondjames.com/investor-relations/financial-information/filings-and-reports within “Other Reports and Information.” Banking operations Our Bank segment maintains an interest-earning asset portfolio that is comprised of cash, SBL, C&I loans, CRE loans, REIT loans, residential mortgage loans, and tax-exempt loans, as well as securities held in the available-for-sale securities portfolio. These interest-earning assets are primarily funded by client deposits. Based on the current asset portfolio, our banking operations are subject to interest rate risk. We analyze interest rate risk based on forecasted net interest income, which is the net amount of interest received and interest paid, and the net portfolio valuation, both across a range of interest rate scenarios. One of the objectives of our Asset and Liability Committee is to manage the sensitivity of net interest income to changes in market interest rates. This committee uses several measures to monitor and limit interest rate risk in our banking operations, including scenario analysis and economic value of equity (“EVE”). We utilize hedging strategies using interest rate swaps in our banking operations as a component of our asset and liability management process. For further information regarding this hedging strategy, see Note 2 of the Notes to Consolidated Financial Statements of our 2023 Form 10-K and Notes 13 and 14 of the Notes to Condensed Consolidated Financial Statements of this Form 10-Q. See “Item 7 - Management’s Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and capital resources” of our 2023 Form 10-K for further information. To ensure that we remain within the tolerances established for net interest income, a sensitivity analysis of net interest income to interest rate conditions is estimated under a variety of scenarios. We use simulation models and estimation techniques to assess the sensitivity of net interest income to movements in interest rates. The model estimates the sensitivity by calculating interest income and interest expense in a dynamic balance sheet environment using current repricing, prepayment, and reinvestment of cash flow assumptions over a 12-month time horizon. Assumptions used in the model include interest rate movement, the slope of the yield curve, and balance sheet composition and growth. The model also considers interest rate- 84 RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Management’s Discussion and Analysis Index related risks such as pricing spreads, pricing of client cash accounts, including deposit betas, and prepayments. Various interest rate scenarios are modeled in order to determine the effect those scenarios may have on net interest income. The following table is an analysis of our banking operations’ estimated net interest income over a 12-month period based on instantaneous shifts in interest rates (expressed in basis points) using our previously described asset/liability model, which assumes a dynamic balance sheet, a weighted-average deposit beta on our interest-bearing deposit accounts without stated maturities of approximately 45% as interest rates both rise and fall, and that interest rates do not decline below zero. While not presented, additional rate scenarios are performed, including interest rate ramps and yield curve shifts that may more realistically mimic the speed of potential interest rate movements. We also perform simulations on time horizons of up to five years to assess longer-term impacts to various interest rate scenarios. On a quarterly basis, we test expected model results to actual performance. Additionally, any changes made to key assumptions in the model are documented and approved by the Asset and Liability Committee. Instantaneous changes in rate (1) Net interest income ($ in millions) Projected change in net interest income +200 $1,932 13% +100 $1,853 8% 0 $1,711 —% -100 $1,596 (7)% -200 $1,580 (8)% (1) Our 0-basis point scenario was based on interest rates as of March 31, 2024. The preceding table does not include the impacts of an instantaneous change in interest rates on net interest income on assets and liabilities outside of our banking operations or on our RJBDP fees from third-party banks, which are also sensitive to changes in interest rates and are included in “Account and service fees” on our Condensed Consolidated Statements of Income and Comprehensive Income. Refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Net interest analysis” of this Form 10-Q for additional information on our net interest income. We have classified all of our investments in debt securities as available-for-sale and have not classified any of our investments in debt securities as held-to-maturity. In our available-for-sale securities portfolio, we hold primarily fixed-rate agency-backed MBS, agency-backed CMOs, and U.S. Treasuries, which are carried at fair value on our Condensed Consolidated Statements of Financial Condition, with changes in the fair value of the portfolio recorded through OCI on our Condensed Consolidated Statements of Income and Comprehensive Income. As the majority of our available-for-sale securities portfolio is comprised of U.S. government and government agency-backed securities, changes in fair value are primarily driven by changes in interest rates. At March 31, 2024, our available-for-sale securities portfolio had a fair value of $9.03 billion with a weighted-average yield of 2.25% and a weighted-average life, after factoring in estimated prepayments, of 3.9 years. To evaluate the interest rate sensitivity of our available-for-sale securities portfolio we also monitor, among other things, effective duration, defined as the approximate percentage change in price for a 100-basis point change in rates. As of March 31, 2024, the effective duration of our available-for-sale securities portfolio was approximately 3.30, which means that we would expect the market value of our available-for-sale securities portfolio to decline approximately 3.30% for every 100-basis point increase in interest rates and increase approximately 3.30% for every 100-basis point decline in interest rates. See Note 2 of the Notes to Consolidated Financial Statements of our 2023 Form 10-K and Note 4 of the Notes to Condensed Consolidated Financial Statements of this Form 10-Q for additional information on our available-for-sale securities portfolio. The Asset and Liability Committee also reviews EVE, which is a point in time analysis of current interest-earning assets and interest-bearing liabilities that incorporates all cash flows over their estimated remaining lives, discounted at current rates. The EVE approach is based on a static balance sheet and provides an indicator of future earnings and capital levels as the changes in EVE indicate the anticipated change in the value of future cash flows. We monitor sensitivity to changes in EVE utilizing Board of Directors-approved limits. These limits set a risk tolerance to changing interest rates and assist in determining strategies for mitigating this risk as EVE approaches these limits. As of March 31, 2024, our EVE analyses were within approved limits. 85 RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Management’s Discussion and Analysis Index The following table shows the maturities of our bank loan portfolio at March 31, 2024, including contractual principal repayments. Maturities are generally determined based upon contractual terms; however, rollovers or extensions that are included for the purposes of measuring the allowance for credit losses are reflected in maturities in the following table. This table does not include any estimates of prepayments, which could shorten the average loan lives and cause the actual timing of the loan repayments to differ significantly from those shown in the table. Due in $ in millions One year or less > One year - five years > Five years - fifteen years > Fifteen years Total SBL $ 14,015 $ 575 $ 19 $ 1 $ 14,610 C&I loans 1,174 6,198 2,780 38 10,190 CRE loans 866 4,786 1,796 14 7,462 REIT loans 460 1,181 60 — 1,701 Residential mortgage loans 8 33 170 8,805 9,016 Tax-exempt loans 10 376 1,059 — 1,445 Total loans held for investment 16,533 13,149 5,884 8,858 44,424 Held for sale loans — — 65 81 146 Total loans held for sale and investment $ 16,533 $ 13,149 $ 5,949 $ 8,939 $ 44,570 The following table shows the distribution of the recorded investment of those bank loans that mature in more than one year between fixed and adjustable interest rate loans at March 31, 2024. Interest rate type $ in millions Fixed Adjustable Total SBL $ 57 $ 538 $ 595 C&I loans 848 8,168 9,016 CRE loans 467 6,129 6,596 REIT loans — 1,241 1,241 Residential mortgage loans 217 8,791 9,008 Tax-exempt loans 1,435 — 1,435 Total loans held for investment 3,024 24,867 27,891 Held for sale loans 3 143 146 Total loans held for sale and investment $ 3,027 $ 25,010 $ 28,037 Contractual loan terms for SBL, C&I loans, CRE loans, REIT loans, and residential mortgage loans may include an interest rate floor, cap and/or fixed interest rates for a certain period of time, which would impact the timing of the interest rate reset for the respective loan. See the discussion within the “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Risk management - Credit risk - Risk monitoring process” section of this Form 10-Q for additional information regarding our interest-only residential mortgage loan portfolio. Equity price risk We are exposed to equity price risk as a result of our capital markets activities. Our broker-dealer activities are generally client-driven, and we carry equity securities as part of our trading inventory to facilitate such activities, although the amounts are not as significant as our fixed income trading inventory. We attempt to reduce the risk of loss inherent in our inventory of equity securities by monitoring those security positions each day and establishing position limits. Equity securities held in our trading inventory are generally included in VaR. In addition, we have a private equity portfolio, included in “Other investments” on our Condensed Consolidated Statements of Financial Condition, which is primarily comprised of investments in third-party funds. See Note 3 of the Notes to Condensed Consolidated Financial Statements of this Form 10-Q for additional information on this portfolio. Foreign exchange risk We are subject to foreign exchange risk due to our investments in foreign subsidiaries as well as transactions and resulting balances denominated in a currency other than the U.S. dollar (“USD”). For example, our bank loan portfolio includes loans which are denominated in Canadian dollars (“CAD”), totaling $1.35 billion and $1.40 billion at March 31, 2024 and September 30, 2023, respectively, when converted to the USD. A majority of such loans are held in a Canadian subsidiary of Raymond James Bank, which is discussed in the following sections. 86 RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Management’s Discussion and Analysis Index Investments in foreign subsidiaries Raymond James Bank has an investment in a Canadian subsidiary, resulting in foreign exchange risk. To mitigate its foreign exchange risk, Raymond James Bank utilizes short-term, forward foreign exchange contracts. These derivatives are primarily accounted for as net investment hedges in the condensed consolidated financial statements. See Note 2 of the Notes to Consolidated Financial Statements of our 2023 Form 10-K and Note 5 of the Notes to Condensed Consolidated Financial Statements of this Form 10-Q for further information regarding these derivatives. At March 31, 2024, we had foreign exchange risk in our investment in RJ Ltd. of CAD 446 million and in our investment in Charles Stanley of £287 million, which were not hedged. We had other, less significant investments in foreign domiciled subsidiaries, primarily in Europe, which were not hedged; however, we do not believe we had material foreign exchange risk either individually, or in the aggregate, pertaining to these subsidiaries as of March 31, 2024. Foreign exchange gains/losses related to our foreign investments are primarily reflected in OCI on our Condensed Consolidated Statements of Income and Comprehensive Income. See Note 17 of the Notes to Condensed Consolidated Financial Statements of this Form 10-Q for further information regarding our components of OCI. Transactions and resulting balances denominated in a currency other than the USD We are subject to foreign exchange risk due to our holdings of cash and certain other assets and liabilities resulting from transactions denominated in a currency other than the USD. Any currency-related gains/losses arising from these foreign currency denominated balances are reflected in “Other” revenues in our Condensed Consolidated Statements of Income and Comprehensive Income. The foreign exchange risk associated with a portion of such transactions and balances denominated in foreign currency are mitigated utilizing short-term, forward foreign exchange contracts. Such derivatives are not designated hedges and therefore, the related gains/losses are included in “Other” revenues in our Condensed Consolidated Statements of Income and Comprehensive Income. See Note 5 of the Notes to Condensed Consolidated Financial Statements of this Form 10-Q for information regarding our derivatives. Credit risk Credit risk is the risk of loss due to adverse changes in a borrower’s, issuer’s, or counterparty’s ability to meet its financial obligations under contractual or agreed-upon terms. The nature and amount of credit risk depends on the type of transaction, the structure and duration of that transaction, and the parties involved. Credit risk is an integral component of the profit assessment of lending and other financing activities. See further discussion of our credit risk, including how we manage such risk, in “Item 7 - Management’s Discussion and Analysis of Financial Condition and Results of Operations - Risk management - Credit risk” of our 2023 Form 10-K. Corporate activities We maintain cash balances with the Fed and with various financial institutions, primarily global systemically important financial institutions, in our normal course of business. A large portion of such balances are in excess of FDIC insurance limits. As a result, we may be exposed to the risk that these financial institutions may not return our cash to us in the event that the institution experiences financial distress or ceases its operations. In order to mitigate our credit risk to such financial institutions, we monitor our exposure with each institution on a daily basis and subject each institution to limits based on various factors including but not limited to financial strength, capitalization levels, liquidity, credit ratings, and market factors to the extent applicable. Brokerage activities We are engaged in various trading and brokerage activities in which our counterparties primarily include broker-dealers, banks, exchanges, clearing organizations, and other financial institutions. We are exposed to risk that these counterparties may not fulfill their obligations. In addition, certain commitments, including underwritings, may create exposure to individual issuers and businesses. The risk of default depends on the creditworthiness of the counterparty and/or the issuer of the instrument. In addition, we may be subject to concentration risk if we hold large positions in or have large commitments to a single counterparty, borrower, or group of similar counterparties or borrowers (e.g., in the same industry). We seek to mitigate these risks by imposing and monitoring individual and aggregate position limits within each business segment for each counterparty, conducting regular credit reviews of financial counterparties, reviewing security, derivative and loan concentrations, holding collateral as security for certain transactions and conducting business through clearing organizations, which may guarantee performance. See Note 2 of the Notes to Consolidated Financial Statements of our 2023 Form 10-K and Notes 5 and 6 of the 87 RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Management’s Discussion and Analysis Index Notes to Condensed Consolidated Financial Statements of this Form 10-Q for further information about our credit risk mitigation related to derivatives and collateralized agreements. Our client activities involve the execution, settlement, and financing of various transactions on behalf of our clients. Client activities are transacted on either a cash or margin basis. Credit exposure results from client margin loans, which are monitored daily and are collateralized by the securities in the clients’ accounts. We monitor exposure to industry sectors and individual securities on a daily basis in connection with our margin lending activities. We adjust our margin requirements if we believe our risk exposure is not appropriate based on market conditions. In addition, when clients execute a purchase, we are at some risk that the client will default on their financial obligation associated with the trade. If this occurs, we may have to liquidate the position at a loss. See Note 2 of the Notes to Consolidated Financial Statements of our 2023 Form 10-K for additional information about our determination of the allowance for credit losses associated with certain of our brokerage lending activities. We offer loans to financial advisors for retention and recruiting purposes. We have credit risk and may incur a loss primarily in the event that such borrower is no longer affiliated with us. See Note 2 of the Notes to Consolidated Financial Statements of our 2023 Form 10-K and Note 8 of the Notes to Condensed Consolidated Financial Statements of this Form 10-Q for further information about our loans to financial advisors. Banking activities Our Bank segment has a substantial loan portfolio. Our strategy for credit risk management related to bank loans includes well-defined credit policies, uniform underwriting criteria, and ongoing risk monitoring and review processes for all credit exposures. The strategy also includes diversification across loan types, geographic locations, industries and clients, regular credit examinations and management reviews of all corporate and tax-exempt loans as well as individual delinquent residential loans. The credit risk management process also includes independent reviews at least annually of the credit risk monitoring process that performs assessments of compliance with credit policies, risk ratings, and other critical credit information. We seek to identify potential problem loans early, record any necessary risk rating changes and charge-offs promptly, and maintain appropriate reserve levels for expected losses. We utilize a thorough credit risk rating system to measure the credit quality of individual corporate and tax-exempt loans and related unfunded lending commitments. For our residential mortgage loans and substantially all of our SBL, we utilize the credit risk rating system used by bank regulators in measuring the credit quality of each homogeneous class of loans. In evaluating credit risk, we consider trends in loan performance, historical experience through various economic cycles, industry or client concentrations, the loan portfolio composition and macroeconomic factors (both current and forecasted). These factors have a potentially negative impact on loan performance and net charge-offs. While our bank loan portfolio is diversified, a significant downturn in the overall economy, deterioration in real estate values or a significant issue within any sector or sectors where we have a concentration will generally result in large provisions for credit losses and/or charge-offs. We determine the allowance required for specific loan pools based on relative risk characteristics of the loan portfolio. On an ongoing basis, we evaluate our methods for determining the allowance for each class of loans and make enhancements we consider appropriate. Our allowance for credit losses methodology is described in Note 2 of the Notes to Consolidated Financial Statements of our 2023 Form 10-K. As our bank loan portfolio is segregated into six portfolio segments, likewise, the allowance for credit losses is segregated by these same segments. See “Item 7 - Management’s Discussion and Analysis of Financial Condition and Results of Operations - Risk management - Credit risk” of our 2023 Form 10-K for further information about the risk characteristics relevant to each portfolio segment. The level of charge-off activity is a factor that is considered in evaluating the potential severity of future credit losses. The following table presents net loan (charge-offs)/recoveries and the annualized percentage of net loan (charge-offs)/recoveries to the average outstanding loan balances by loan portfolio segment. Three months ended March 31, Six months ended March 31, 2024 2023 2024 2023 $ in millions Net loan (charge-off)/recovery amount Annualized % of avg. outstanding loans Net loan (charge-off)/recovery amount Annualized % of avg. outstanding loans Net loan (charge-off)/recovery amount Annualized % of avg. outstanding loans Net loan (charge-off)/recovery amount Annualized % of avg. outstanding loans C&I loans $ (23) 0.89 % $ (20) 0.71 % $ (29) 0.56 % $ (24) 0.43 % CRE loans (5) 0.27 % — — % (7) 0.19 % 2 0.06 % Total loans held for sale and investment $ (28) 0.25 % $ (20) 0.18 % $ (36) 0.16 % $ (22) 0.10 % 88 RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Management’s Discussion and Analysis Index The level of nonperforming assets is another indicator of potential future credit losses. Nonperforming assets are comprised of both nonperforming loans and other real estate owned. Nonperforming loans include those loans which have been placed on nonaccrual status and certain accruing loans which are 90 days or more past due and in the process of collection. The following table presents the balance of nonperforming loans, nonperforming assets, and related key credit ratios. $ in millions March 31, 2024 September 30, 2023 Nonperforming loans (1) $ 187 $ 128 Nonperforming assets $ 187 $ 128 Nonperforming loans as a % of total loans held for sale and investment 0.42 % 0.29 % Allowance for credit losses as a % of nonperforming loans 252 % 370 % Nonperforming assets as a % of Bank segment total assets 0.31 % 0.21 % (1) Nonperforming loans at March 31, 2024 and September 30, 2023 included $103 million and $96 million, respectively, of loans, which were current pursuant to their contractual terms. The increase in nonperforming loans and assets as of March 31, 2024 as compared with September 30, 2023 was primarily due to certain loans that were placed on nonaccrual status with an associated allowance during the three and six months ended March 31, 2024. See the table summarizing nonaccrual loans by category in Note 7 of the Notes to Condensed Consolidated Financial Statements of this Form 10-Q. Although our nonperforming assets as a percentage of our Bank segment’s assets remained low as of March 31, 2024, any prolonged period of market deterioration could result in an increase in our nonperforming assets, an increase in our allowance for credit losses and/or an increase in net charge-offs in future periods, although the extent would depend on future developments that are highly uncertain. See further explanation of our bank loan portfolio segments, allowance for credit losses, and the credit loss provision in Note 7 of the Notes to Condensed Consolidated Financial Statements of this Form 10-Q and “Management’s Discussion and Analysis - Results of Operations - Bank” of this Form 10-Q and Note 2 of the Notes to Consolidated Financial Statements of our 2023 Form 10-K. Loan underwriting policies Our underwriting policies for the major types of bank loans are described in “Item 7 - Management’s Discussion and Analysis of Financial Condition and Results of Operations - Risk management - Credit risk” of our 2023 Form 10-K. Risk monitoring process Another component of credit risk strategy for our bank loan portfolio is the ongoing risk monitoring and review processes, including our internal loan review process, as well as our rigorous processes to manage and limit credit losses arising from loan delinquencies. There are various other factors included in these processes, depending on the loan portfolio. There were no significant changes to those processes during the three months ended March 31, 2024. See further discussion of our risk monitoring process in “Item 7 - Management’s Discussion and Analysis of Financial Condition and Results of Operations - Risk management - Credit risk - Banking activities” of our 2023 Form 10-K. SBL and residential mortgage loan portfolios Substantially all collateral securing our SBL portfolio is monitored on a daily basis. Collateral adjustments, as triggered by our monitoring procedures, are made by the borrower as necessary to ensure our loans are adequately secured, resulting in minimizing our credit risk. Collateral calls have been minimal relative to our SBL portfolio with no losses incurred during the three and six months ended March 31, 2024. We track and review many factors to monitor credit risk in our residential mortgage loan portfolio. The factors include, but are not limited to: loan performance trends, loan product parameters and qualification requirements, borrower credit scores, level of documentation, loan purpose, geographic concentrations, average loan size, risk rating, and LTV ratios. See Note 7 of the Notes to the Condensed Consolidated Financial Statements of this Form 10-Q for additional information about our residential mortgage loan portfolio. 89 RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Management’s Discussion and Analysis Index The following table presents a summary of delinquent residential mortgage loans, the vast majority of which are first mortgage loans, which are comprised of loans which are two or more payments past due as well as loans in the process of foreclosure. Amount of delinquent residential mortgage loans Delinquent residential mortgage loans as a percentage of outstanding residential mortgage loan balances $ in millions 30-89 days 90 days or more Total 30-89 days 90 days or more Total March 31, 2024 $ 3 $ 4 $ 7 0.03 % 0.05 % 0.08 % September 30, 2023 $ 3 $ 4 $ 7 0.03 % 0.05 % 0.08 % Our March 31, 2024 percentage compares favorably to the national average for over 30 day delinquencies of 1.94%, as most recently reported by the Fed. Credit risk is also managed by diversifying the residential mortgage portfolio. Most of the loans in our residential loan portfolio are to PCG clients across the U.S. The following table details the geographic concentrations (top five states) of our one-to-four family residential mortgage loans. March 31, 2024 Loans outstanding as a % of total residential mortgage loans held for sale and investment Loans outstanding as a % of total loans held for sale and investment California 24% 5% Florida 18% 4% Texas 8% 2% New York 8% 2% Colorado 4% 1% The occurrence of a natural disaster or severe weather event in any of these states, for example wildfires in California and hurricanes in Florida, could result in additional credit loss provisions and/or charge-offs on our loans in such states and therefore negatively impact our net income and regulatory capital in any given period. Loans where borrowers may be subject to payment increases include adjustable rate mortgage loans with terms that initially require payment of interest only. Payments may increase significantly when the interest-only period ends and the loan principal begins to amortize. At March 31, 2024 and September 30, 2023, these loans totaled $2.89 billion and $2.85 billion, respectively, or approximately 32% and 33% of the residential mortgage portfolio, respectively. The weighted-average number of years before the remainder of the loans, which were still in their interest-only period at March 31, 2024, begins amortizing is five years. Corporate and tax-exempt loans Credit risk in our corporate and tax-exempt loan portfolios is monitored on an individual loan basis for trends in borrower operating performance, payment history, credit ratings, collateral performance, loan covenant compliance, municipality demographics and other factors including industry performance and concentrations. The majority of our tax-exempt loan portfolio is comprised of loans to investment-grade borrowers. Credit risk is managed by diversifying the corporate bank loan portfolio. Furthermore, we monitor the concentration in any one industry and have established limits relative to capital. In addition, credit quality trends are monitored by industry to determine if a change in the risk exposure to a certain industry may warrant a change in our underwriting standards. Our corporate bank loan portfolio does not contain a significant concentration in any single industry. The following table details the industry concentrations (top five categories) of our corporate bank loans. March 31, 2024 Loans outstanding as a % of total corporate bank loans held for sale and investment Loans outstanding as a % of total loans held for sale and investment Multi-family 13% 6% Industrial warehouse 10% 4% Office real estate 8% 3% Loan fund 6% 3% Consumer products and services 5% 2% 90 RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Management’s Discussion and Analysis Index The Fed’s measures to control inflation, including through increases in short-term interest rates in prior fiscal years, have had a dampening effect on certain sectors of the economy. Coupled with the present uncertainty regarding future Fed interest rate cuts, both in terms of timing and magnitude, we expect that such dampening could continue through the second half of our fiscal 2024 and could continue to negatively impact borrowers. We continue to closely monitor economic factors, including inflation and interest rates, that may impact our corporate loan portfolio. Additionally, in our fiscal 2023 and year-to-date fiscal 2024 we have sold, and may continue to sell, corporate loans as part of our credit risk mitigation strategies. The aforementioned dampening effect on the economy and changes in business and consumer behavior have most notably impacted the commercial real estate sector, specifically office real estate loans. Risks related to such loans have increased due to pressure from higher interest rates, uncertainty related to tenant lease renewals, and elevated refinancing risks for loans with near-term maturities, among other issues. To mitigate risks related to our CRE portfolio, we continue to maintain conservative underwriting standards, including LTV limits that generally range between 65% to 80% at origination, depending upon property type and, in times of uncertainty, we may originate loans at even tighter thresholds. Currently, LTV at origination is generally at or below 70% for newly-originated CRE loans. These LTV ratios are subject to change over the life of the loan as property values change. We seek to mitigate our refinancing risks in our CRE portfolio by subjecting loans with stated maturities in the near term to enhanced monitoring procedures. For example, approximately 40% of our office real estate loans are scheduled to mature in calendar years 2024 and 2025. Such office real estate loans with near-term maturities are subject to monthly reporting if a loan reaches our lowest pass rating. We also remain in frequent contact with the related borrowers well in advance of a loan’s stated maturity to take action on the loan ahead of any credit concerns, including working with the borrower to restructure the loan as necessary and ensuring that our allowances for credit losses are adequate to cover potential losses on the loans. As of March 31, 2024, our highest industry concentrations within our CRE portfolio were multi-family, industrial warehouse, and office real estate which were 5%, 4%, and 3%, respectively, of total loans held for sale and investment. As a result of the aforementioned pressures on office real estate loans within our CRE portfolio, we are actively monitoring credit metrics across these loans. As of March 31, 2024, 11% of such loans were considered criticized loans and only 5% were nonperforming. As of March 31, 2024, our allowance for credit losses related to office real estate CRE loans represented 5% of the amortized cost of such loans. In addition to the aforementioned CRE loans, we also have certain owner-occupied commercial real estate loans of approximately $200 million as of March 31, 2024 that were appropriately classified as C&I loans as the primary source of repayment for these loans is based on the financial strength of the owner and the cash flows of the respective business rather than the ability of the collateral to generate cash flows. Liquidity risk See the section “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and capital resources” of this Form 10-Q for information regarding our liquidity and how we manage liquidity risk. Operational risk Operational risk generally refers to the risk of loss resulting from our operations, including, but not limited to, business disruptions, improper or unauthorized execution and processing of transactions, deficiencies in our technology or financial operating systems and inadequacies or breaches in our control processes, including cybersecurity incidents. See “Item 7 - Management’s Discussion and Analysis of Financial Condition and Results of Operations - Risk management - Operational risk” of our 2023 Form 10-K for a discussion of our operational risk and certain of our risk mitigation processes. Effective the last week of May 2024, certain of our broker-dealer securities transactions, including those in the United States and Canada, will transition from a trade date plus two business days settlement timeframe to a trade date plus one business day (“T+1”) settlement timeframe. The transition to a T+1 settlement timeframe subjects us to increased operational risk with respect to reporting and timely settlement of transactions, and heightens the need for careful coordination with and dependencies on other industry participants. Our cross-functional working groups have partnered with industry groups to prepare us for the upcoming transition to a T+1 settlement timeframe, and we have taken appropriate action to meet the transition deadline. As a result, we do not expect the transition to T+1 to have a material impact on our results of operations or financial condition. Periods of severe market volatility can result in a significantly higher level of transactions on specific days, which may present operational challenges from time to time that may result in losses. These losses can result from, but are not limited to, trade 91 RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Management’s Discussion and Analysis Index errors, failed transaction settlements, late collateral calls to borrowers and counterparties, or interruptions to our system processing. We did not incur any significant losses related to such operational challenges during the six months ended March 31, 2024. As more fully described in the discussion of our business technology risks included in various risk factors presented in “Item 1A - Risk Factors” of our 2023 Form 10-K, despite our implementation of protective measures and endeavoring to modify them as circumstances warrant, our computer systems, software and networks may be vulnerable to human error, natural disasters, power loss, cyber-attacks and other information security breaches, and other events that could have an impact on the security and stability of our operations. Model risk Model risk refers to the possibility of unintended business outcomes arising from the design, implementation or use of models. See “Item 7 - Management’s Discussion and Analysis of Financial Condition and Results of Operations - Risk management - Model risk” of our 2023 Form 10-K for information regarding how we utilize models throughout the firm and how we manage model risk. Compliance risk Compliance risk is the risk of legal or regulatory sanctions, financial loss, or reputational damage that the firm may suffer from a failure to comply with applicable laws, external standards, or internal requirements. See “Item 7 - Management’s Discussion and Analysis of Financial Condition and Results of Operations - Risk management - Compliance risk” of our 2023 Form 10-K for information on our compliance risks, including how we manage such risks. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK See “Item 2 - Management’s Discussion and Analysis of Financial Condition and Results of Operations - Risk management” of this Form 10-Q for our quantitative and qualitative disclosures about market risk.