What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-08-06 compared with 2024-05-07 · 375 added, 325 removed, 1297 unchanged (35% of the section changed)

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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 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), anticipated timing and benefits of our acquisitions, and our level of success integrating acquired businesses, anticipated results of litigation, regulatory developments, and general economic conditions.

In addition, words such as “believes,” “expects,” “anticipates,” “estimates,” “projects,” and future or conditional verbs such as “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.

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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%.

Quarter ended June 30, 2024 compared with the quarter ended June 30, 2023

For our fiscal third quarter of 2024, we generated net revenues of $3.23 billion, an increase of 11% compared with the prior-year quarter, and pre-tax income of $644 million, an increase of 33% compared with the prior-year quarter.

Our net income available to common shareholders of $491 million also increased 33%, and our earnings per diluted share were $2.31, reflecting an increase of 35%.

Our annualized return on common equity (“ROCE”) for the quarter was 17.8%, compared with 14.9% for the prior-year quarter, and our annualized return on tangible common equity (“ROTCE”) was 21.2% (1) , compared with 18.3% (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.

Excluding the impact of $23 million of expenses related to acquisitions completed in prior years, such as compensation expenses related to retention awards and amortization of identifiable intangible assets, our adjusted net income available to common shareholders was $508 million (1) for the three months ended June 30, 2024, an increase of 27% compared with adjusted net income available to common shareholders for the prior-year quarter.

Our adjusted earnings per diluted share were $2.39 (1) , an increase of 29% compared with the prior-year quarter.

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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.

Brokerage revenues also increased compared with the prior-year quarter primarily due to an increase in client activity in the PCG segment.

Investment banking revenues increased compared with the prior-year quarter largely due to higher debt and equity underwriting revenues.

Combined net interest income and RJBDP fees from third-party banks declined compared with the prior-year quarter, as the benefits of higher short-term interest rates and higher average interest-earning asset balances 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 in our Bank segment, as RJBDP balances swept to the Bank segment declined and a significant portion was replaced by higher-cost ESP balances, which was introduced to PCG clients in March 2023.

Compensation, commissions and benefits expense increased 13%, primarily due to an increase in compensable revenues, as well as an increase in compensation costs to support our growth and annual salary increases.

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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.

Non-compensation expenses decreased 13%, largely due to a significant decrease in provisions for legal and regulatory matters, as well as a decrease in the provision for credit losses on bank loans to a benefit of $10 million in the current quarter compared with a provision of $54 million in the prior-year quarter.

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 to support our growth, higher investment sub-advisory fees which are highly correlated with the increase in asset management fee revenues, as well as higher occupancy and business development expenses.

Our effective income tax rate was 23.6% for our fiscal third quarter of 2024, a decrease compared with the 24.1% effective income tax rate for the prior-year quarter, primarily due to a change in the amount of nondeductible fines and penalties compared with the prior-year quarter, partially offset by the impact of a lower tax benefit recognized related to nontaxable valuation gains associated with our company-owned life insurance policies.

As of June 30, 2024, our Tier 1 leverage ratio of 12.7% and Total capital ratio of 23.6% were both significantly higher than the regulatory requirement to be considered well-capitalized.

We also continue to have substantial liquidity with $2.1 billion (2) of cash at the parent as of June 30, 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.

During the three months ended June 30, 2024, we repurchased 2.0 million shares of our common stock for $243 million at an average price of $122 per share under the Board of Directors’ common stock repurchase authorization.

We expect to continue to repurchase our common stock to offset dilution from share-based compensation and to be opportunistic with incremental repurchases.

Given our capital and liquidity levels, we expect to accelerate our share repurchase activity;

however, we will continue to monitor market conditions and other capital needs as we consider the magnitude and timing of these repurchases.

As we look ahead to our fiscal fourth quarter of 2024, we believe we are well-positioned for long-term growth with our strong capital position, total client assets under administration of $1.48 trillion, and net bank loans of $45.1 billion.

We expect our fiscal fourth quarter of 2024 results to be favorably impacted by higher asset management and related administrative fees, which will benefit from the 3% sequential increase in PCG fee-based assets and 1% sequential increase in financial assets under management as of June 30, 2024.

In addition, our financial advisor recruiting activity remains robust, including a strong recruiting pipeline.

While the timing of transaction closings remains heavily influenced by external factors, we have a healthy investment banking pipeline and we expect investment banking revenues to continue to improve over the next few quarters.

We expect our combined net interest income and RJBDP fees from third-party banks for the remainder of the fiscal year to be relatively unchanged from our current quarter aggregate level, but such revenues are largely dependent on the level of short-term interest rates, client cash balances and other factors that may impact the current cash environment.

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.

(1) Adjusted compensation ratio is a non-GAAP financial measure.

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Management’s Discussion and Analysis

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.

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.

Nine months ended June 30, 2024 compared with the nine months ended June 30, 2023

For the nine months ended June 30, 2024, we generated net revenues of $9.36 billion, an increase of 9% compared with the prior-year period, and pre-tax income of $1.88 billion, an increase of 11%.

Our net income available to common shareholders of $1.46 billion was 12% higher than the prior-year period and our earnings per diluted share were $6.85, reflecting a 15% increase.

Our annualized ROCE was 18.2%, compared with 17.9% for the prior-year period, and our annualized ROTCE was 21.8% (1) , compared with 22.0% (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.

Excluding the impact of $72 million of expenses related to acquisitions completed in prior years, adjusted net income available to common shareholders for the nine months ended June 30, 2024 was $1.52 billion (1) , an increase of 12% 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 $7.10 (1) , an increase of 15% compared with the prior-year period.

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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.

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 asset balances 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 RJBDP balances swept to the Bank segment declined compared with the prior-year period and a significant portion was replaced with higher-cost ESP balances, as well as an increase in certificate of deposit balances.

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.

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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.

Non-compensation expenses decreased 3%, largely due to a significant decrease in expenses related to legal and regulatory matters, 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, as well as a decrease in the bank loan provision for credit losses.

Partially offsetting these decreases in expenses, was the impact of higher communications and information processing expenses resulting from continued investments in technology to benefit our clients and advisors and to support our growth, a $32 million insurance settlement received in the prior-year period related to a previously-settled litigation matter that did not recur, higher non-interest expenses related to deposits, including an FDIC special assessment of $10 million, as well as higher investment sub-advisory fees resulting from growth in assets under management in sub-advised programs.

Occupancy and equipment and business development expenses also increased compared with the prior-year period.

Our effective income tax rate was 22.1% for the nine months ended June 30, 2024, a decrease from 23.0% for the prior-year period, primarily due to the impact of a higher tax benefit recognized in the current-year period related to nontaxable valuation gains associated with our company-owned life insurance policies, as well as a change in the amount of nondeductible fines and penalties compared with the prior-year period.

(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.

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Management’s Discussion and Analysis

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

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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,

Three months ended June 30, Nine months ended June 30,

$ in millions

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Expenses related to acquisitions:

Compensation, commissions and benefits — Acquisition-related retention

Compensation, commissions and benefits:

Acquisition-related retention

Other acquisition-related compensation — 10 — 10

Total “Compensation, commissions and benefits” expense 11 28 33 63

Communications and information processing — — 1 —

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Compensation, commissions and benefits expense $ 2,090 $ 1,851 $ 6,054 $ 5,407

Acquisition-related retention (as detailed above)

Total compensation-related acquisition expenses (as detailed above)

Adjusted “Compensation, commissions and benefits” expense $ 2,079 $ 1,823 $ 6,021 $ 5,344

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Management’s Discussion and Analysis

Three months ended March 31, Six months ended March 31,

$ in millions, except per share amounts 2024 2023 2024 2023

Three months ended June 30, Nine months ended June 30,

2024 2023 2024 2023

Total compensation ratio 64.7 % 63.7 % 64.7 % 63.1 %

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Acquisition-related retention 0.3 % 0.7 % 0.4 % 0.6 %

Other acquisition-related compensation — % 0.3 % — % 0.1 %

Total “Compensation, commissions and benefits” expenses related to acquisitions 0.3 % 1.0 % 0.4 % 0.7 %

Adjusted total compensation ratio 64.4 % 62.7 % 64.3 % 62.4 %

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Expenses related to acquisitions:

Compensation, commissions and benefits — Acquisition-related retention

Compensation, commissions and benefits:

Acquisition-related retention

0.05 0.09 0.15 0.24

Other acquisition-related compensation — 0.05 — 0.05

Total “Compensation, commissions and benefits” expense 0.05 0.14 0.15 0.29

Communications and information processing — — — —

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Amortization of identifiable intangible assets 0.05 0.05 0.16 0.15

0.05 0.05 0.11 0.10

All other acquisition-related expenses — — 0.01 —

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Adjusted diluted earnings per common share $ 2.39 $ 1.85 $ 7.10 $ 6.17

RAYMOND JAMES FINANCIAL, INC.

AND SUBSIDIARIES

Management’s Discussion and Analysis

Three months ended June 30, Nine months ended June 30,

$ in millions 2024 2023 2024 2023

Average common equity $ 11,012 $ 9,873 $ 10,717 $ 9,705

1 unchanged sentence

Expenses related to acquisitions:

Compensation, commissions and benefits — Acquisition-related retention

Compensation, commissions and benefits:

Acquisition-related retention

Other acquisition-related compensation — 4 — 2

Total “Compensation, commissions and benefits” expense 5 13 17 29

Communications and information processing — — — —

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Adjusted average common equity $ 11,020 $ 9,888 $ 10,744 $ 9,722

RAYMOND JAMES FINANCIAL, INC.

AND SUBSIDIARIES

Management’s Discussion and Analysis

Three months ended March 31, Six months ended March 31,

$ in millions 2024 2023 2024 2023

Average common equity $ 11,012 $ 9,873 $ 10,717 $ 9,705

4 unchanged sentences

Expenses related to acquisitions:

Compensation, commissions and benefits — Acquisition-related retention

Compensation, commissions and benefits:

Acquisition-related retention

Other acquisition-related compensation — 4 — 2

Total “Compensation, commissions and benefits” expense 5 13 17 29

Communications and information processing — — — —

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Adjusted return on tangible common equity 21.9 % 19.7 % 22.5 % 22.7 %

RAYMOND JAMES FINANCIAL, INC.

AND SUBSIDIARIES

Management’s Discussion and Analysis

Total compensation ratio is computed by dividing compensation, commissions and benefits expense by net revenues for each respective period.

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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.

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 four, or in the case of average tangible common equity, computed by adding tangible common equity as of each quarter-end date during the indicated year-to-date period to the beginning of year total, and dividing by four.

Adjusted average common equity is computed by adjusting for the impact on average common equity of the non-GAAP adjustments, as applicable for each respective period.

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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.

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 June 30, 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 continues 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.

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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.

Increases in short-term interest rates have historically resulted in an increase in our net earnings and, notwithstanding potential offsetting favorable impacts in other areas of our business, we expect decreases in short-term interest rates to generally reduce our net earnings.

As it relates to our net interest income, the magnitude of the effect of a decrease in interest rates depends on a number of factors impacting balances, asset yields, and the cost of funding.

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.

Decreases in short-term interest rates generally also result in a decrease to our RJBDP fees earned from third-party banks, although the magnitude of the impact may also be impacted by demand for cash balances by third-party banks and the rate paid to clients on their cash sweep balances.

Rates paid to clients on their cash balances are generally impacted by the level of short-term interest rates, as well as competitive industry dynamics impacting rates paid to clients and the demand for client cash.

Additionally, any future changes to regulatory rules or interpretations governing the fees the firm earns on cash sweep balances could also impact the rates we pay to clients on cash balances.

In recent fiscal years, we have sought to continue to meet client needs for higher yields on cash balances in a relatively higher interest rate environment without sacrificing the benefits of FDIC insurance on such balances by introducing new products leveraging our bank subsidiaries or through initiatives offered within the RJBDP.

Such programs include our ESP which was introduced to our clients in fiscal year 2023 where such deposits are held by Raymond James Bank and offer enhanced rates and FDIC coverage of up to $50 million for certain accounts, as well as initiatives offered from time-to-time within the RJBDP program which may offer enhanced rates to clients on certain balances within the program.

These programs, while meeting client needs and diversifying our funding sources, have a higher relative cost than other alternatives therefore reducing our net interest margin and yields on RJBDP balances.

Combined net interest income and RJBDP fees from third-party banks was $672 million and $2.06 billion for the three and nine months ended June 30, 2024, respectively, compared to $708 million and $2.16 billion for the three and nine months ended June 30, 2023.

The 5% decline for both periods compared with the comparable prior-year periods was 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 RJBDP balances swept to the Bank segment 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 certificate of deposit balances for the year-to-date period.

However, the growth in the ESP balances year over year has allowed us to deploy a relatively 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 third-party 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.

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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,

Quarter ended June 30, 2024 compared with the quarter ended June 30, 2023

Three months ended June 30,

$ in millions Average

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Changes attributable to both volume and rate have been allocated proportionately.

Three months ended March 31,

Three months ended June 30,

2024 compared to 2023

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Management’s Discussion and Analysis

Six months ended March 31, 2024 compared with the six months ended March 31, 2023

Six months ended March 31,

Nine months ended June 30, 2024 compared with the nine months ended June 30, 2023

Nine months ended June 30,

$ in millions Average

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Changes attributable to both volume and rate have been allocated proportionately.

Six months ended March 31,

Nine months ended June 30,

2024 compared to 2023

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Loans held for investment:

SBL (5) 68 63

C&I loans (46) 77 31

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Operating results

Three months ended March 31, Six months ended March 31,

Three months ended June 30, Nine months ended June 30,

$ in millions 2024 2023 % change 2024 2023 % change

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PCG client asset balances

$ in billions March 31,

2024 December 31,

$ in billions June 30,

2024 March 31,

2024 September 30,

2023 June 30,

2023 March 31,

2023 December 31,

2023 September 30,

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PCG net new assets

Three months ended March 31, Six months ended March 31,

Three months ended June 30, Nine months ended June 30,

$ in millions 2024 2023 2024 2023

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(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.

This metric for the three and nine months ended June 30, 2023 includes the impact of the departure of approximately $5 billion of assets under administration, representing the portion of advisors previously associated through a single relationship in the firm’s independent contractors division whose affiliation with the firm ended in the fiscal third quarter of 2023.

(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 AUA and PCG assets in fee-based accounts as of June 30, 2024 increased 2% and 3%, respectively, compared with March 31, 2024, and increased 15% and 18%, respectively, compared with June 30, 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.

13 unchanged sentences

Financial advisors

2024 March 31,

2024 December 31,

1 unchanged sentence

2023 June 30,

2023 March 31,

Employees 3,812 3,747 3,718 3,693 3,654

2 unchanged sentences

Total advisors 8,782 8,761 8,710 8,712 8,704

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.

The number of financial advisors as of June 30, 2024 increased compared with March 31, 2024 and June 30, 2023, as new recruits and trainees that were moved into production roles exceeded departures and planned retirements.

Generally, with planned retirements, assets are retained at the firm pursuant to advisor succession plans.

During the three months ended June 30, 2024, approximately 50 financial advisors transferred to our RCS division, primarily related to one firm with financial advisors previously affiliated as independent contractors.

During the nine months ended June 30, 2024, approximately 90 financial advisors transferred to RCS.

Advisors in our RCS division are not included in our financial advisor metric although their client assets are included in PCG AUA.

We may continue to experience transfers to our RCS division;

however, consistent with our experience in fiscal 2023 and fiscal 2024 to date, we would not expect these financial advisor transfers to significantly impact our results of operations.

Clients’ domestic cash sweep balances and ESP balances

$ in millions March 31,

$ in millions June 30,

2024 March 31,

2024 December 31,

1 unchanged sentence

2023 June 30,

2023 March 31,

Bank segment $ 23,371 $ 23,405 $ 23,912 $ 25,355 $ 27,915

9 unchanged sentences

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,

Three months ended June 30, Nine months ended June 30,

2024 2023 2024 2023

8 unchanged sentences

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.

See “Management’s Discussion and Analysis - Net interest analysis” for further information regarding factors impacting the servicing fees we receive related to the RJBDP, as well as the interest paid to clients on their cash balances.

RAYMOND JAMES FINANCIAL, INC.

1 unchanged sentence

Management’s Discussion and Analysis

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.

The average yield on RJBDP - third-party banks for the three and nine months ended June 30, 2024 increased from the prior year largely as a result of the increases in the Fed’s short-term benchmark interest rate;

however, the average yield on RJBDP - third-party banks for the three months ended June 30, 2024 decreased 18 basis points compared with the preceding quarter as a result of an increase in certain balances in the RJBDP program which offered a higher yield.

See “Management’s Discussion and Analysis - Net interest analysis” for further information.

Total clients’ domestic cash sweep and ESP balances decreased 3% compared with March 31, 2024, with decreases in both RJBDP balances and the ESP, which was introduced to clients in March 2023.

Total clients’ domestic cash sweep and ESP balances also decreased 3% compared with June 30, 2023, where a decline in client cash sweep balances was largely offset by growth in the ESP.

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

For example, the ESP 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 June 30, 2024 compared with the quarter ended June 30, 2023

Net revenues of $2.42 billion increased 11% and pre-tax income of $441 million increased 7%.

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.

Asset management and related administrative fees increased $200 million, or 17%, 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 primarily from advisor recruiting.

Brokerage revenues increased $60 million, or 17%, primarily due to higher client activity in the current quarter.

Account and service fees decreased $15 million, or 3%, 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, while RJBDP fees from third-party banks increased largely due to higher average balances swept to third-party banks.

Partially offsetting the decline in total RJBDP fees was an increase in mutual fund service fees, primarily resulting from higher average mutual fund assets held in client accounts.

Other revenues decreased $12 million, or 48%, primarily due to a favorable arbitration award during the prior-year quarter, which did not recur in the current quarter.

Compensation-related expenses increased $210 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.

Non-compensation expenses decreased $6 million, or 2%, due to lower provisions for legal and regulatory matters, partially offset by higher communications and information processing expenses and occupancy expenses as a result of our growth, and higher business development expenses.

Nine months ended June 30, 2024 compared with the nine months ended June 30, 2023

Net revenues of $6.98 billion increased 9% and pre-tax income of $1.32 billion increased 3%.

Asset management and related administrative fees increased $519 million, or 16%, 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, as well as growth primarily from advisor recruiting.

Brokerage revenues increased $140 million, or 13%, primarily due to higher client activity in the current-year period, as well as higher trailing revenues, largely due to higher asset values.

RAYMOND JAMES FINANCIAL, INC.

AND SUBSIDIARIES

Management’s Discussion and Analysis

Account and service fees decreased $59 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.

Net interest income increased $9 million, or 3%, reflecting the increase in short-term interest rates.

Other revenues decreased by $17 million, or 43%, primarily due to the aforementioned favorable arbitration award during the prior-year period.

Compensation-related expenses increased $563 million, or 13%, 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 1%, compared with the prior-year period primarily due to the positive impact of a net legal and regulatory reserve release in the current-year period compared with provisions for legal and regulatory matters in the prior-year period, partially offset by higher communications and information processing, business development, and occupancy expenses largely to support our growth.

RAYMOND JAMES FINANCIAL, INC.

1 unchanged sentence

Management’s Discussion and Analysis

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

1 unchanged sentence

Operating results

Three months ended March 31, Six months ended March 31,

Three months ended June 30, Nine months ended June 30,

$ in millions 2024 2023 % change 2024 2023 % change

37 unchanged sentences

$ (14) $ (34) 59 % $ (28) $ (84) 67 %

Quarter ended March 31, 2024 compared with the quarter ended March 31, 2023

Quarter ended June 30, 2024 compared with the quarter ended June 30, 2023

Net revenues of $330 million increased 20% and the pre-tax loss was $14 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.

Investment banking revenues increased $32 million, or 23%, compared with the prior-year quarter, primarily due to improvement in debt underwriting revenues in both our public finance and fixed income businesses, as well as higher equity underwriting revenues.

Merger & acquisition and advisory revenues were slightly higher compared with the prior-year quarter.

Brokerage revenues increased $11 million, or 10%, due to higher fixed income brokerage revenues, primarily resulting from an increase in activity by depository institution clients.

Compensation-related expenses increased $23 million, or 10%, 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 increased $11 million, or 12%, primarily due to an increase in professional fees, largely resulting from higher investment banking deal expenses and external legal fees, as well as higher occupancy expenses.

RAYMOND JAMES FINANCIAL, INC.

1 unchanged sentence

Management’s Discussion and Analysis

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

Nine months ended June 30, 2024 compared with the nine months ended June 30, 2023

Net revenues of $989 million increased 13% and the pre-tax loss was $28 million, compared with a pre-tax loss of $84 million for the prior-year period.

Investment banking revenues increased $95 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.

Brokerage revenues increased $9 million, or 2%, due to increases in equity brokerage revenues and, to a lesser extent, fixed income brokerage revenues.

Compensation-related expenses increased $57 million, or 9%, 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.

Non-compensation expenses increased $3 million, or 1%, primarily due to higher communications and information processing expenses and occupancy expenses, largely offset by lower provisions for legal and regulatory matters and external legal fee expenses.

RESULTS OF OPERATIONS – ASSET MANAGEMENT

1 unchanged sentence

Operating results

Three months ended March 31, Six months ended March 31,

Three months ended June 30, Nine months ended June 30,

$ in millions 2024 2023 % change 2024 2023 % change

34 unchanged sentences

Financial assets under management

$ in billions March 31,

2024 December 31,

$ in billions June 30,

2024 March 31,

2024 September 30,

2023 June 30,

2023 March 31,

2023 December 31,

2023 September 30,

9 unchanged sentences

Activity (including activity in assets managed for affiliated entities)

Three months ended March 31, Six months ended March 31,

Three months ended June 30, Nine months ended June 30,

$ in billions 2024 2023 2024 2023

10 unchanged sentences

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

As of June 30, 2024

$ in billions AUM Average fee rate

9 unchanged sentences

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,

$ in billions June 30,

2024 March 31,

2024 September 30,

2023 June 30,

2023 March 31,

2023 December 31,

2023 September 30,

Total assets $ 474.7 $ 462.9 $ 391.1 $ 399.2 $ 378.7 $ 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.

The increase in these assets as of June 30, 2024 compared with March 31, 2024 and June 30, 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.

2 unchanged sentences

(including those managed for affiliated entities).

$ in billions March 31,

2024 December 31,

$ in billions June 30,

2024 March 31,

2024 September 30,

2023 June 30,

2023 March 31,

2023 December 31,

2023 September 30,

1 unchanged sentence

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

Quarter ended June 30, 2024 compared with the quarter ended June 30, 2023

Net revenues of $265 million increased 17% and pre-tax income of $112 million increased 26%.

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.

Asset management and related administrative fees increased $37 million, or 17%, driven by higher beginning balances of financial assets under management and assets in non-discretionary asset-based programs at AMS, primarily due to market-driven appreciation in asset values and net inflows to PCG fee-based accounts.

Compensation expenses increased $5 million, or 10%, primarily due to higher revenues.

Non-compensation expenses increased $11 million, or 13%, 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

Nine months ended June 30, 2024 compared with the nine months ended June 30, 2023

Net revenues of $752 million increased 16% and pre-tax income of $305 million increased 22%.

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.

Asset management and related administrative fees increased $100 million, or 16%, driven by higher beginning balances of financial assets under management and assets in non-discretionary asset-based programs at AMS, primarily due to market-driven appreciation in asset values and net inflows to PCG fee-based accounts.

Compensation expenses increased $17 million, or 11%, 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.

Non-compensation expenses increased $32 million, or 13%, largely due to higher investment sub-advisory fees, resulting from the increase in assets under management in sub-advised programs, as well as higher communications and information processing expenses.

RAYMOND JAMES FINANCIAL, INC.

4 unchanged sentences

Operating results

Three months ended March 31, Six months ended March 31,

Three months ended June 30, Nine months ended June 30,

$ in millions 2024 2023 % change 2024 2023 % change

8 unchanged sentences

Non-compensation expenses:

Bank loan provision for credit losses 21 28 (25) % 33 42 (21) %

Bank loan provision/(benefit) for credit losses

(10) 54 NM 23 96 (76) %

RJBDP fees to PCG

4 unchanged sentences

Pre-tax income $ 115 $ 66 74 % $ 282 $ 293 (4) %

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.

Quarter ended June 30, 2024 compared with the quarter ended June 30, 2023

Net revenues of $418 million decreased 19%, while pre-tax income of $115 million increased 74%.

Net interest income decreased $91 million, or 18%, as the favorable impact from higher short-term rates in the current quarter was more than offset by increased interest expense resulting from a higher-cost mix of deposits, as RJBDP balances declined and a significant portion was replaced with higher-cost ESP balances, which was introduced to clients in March 2023.

The Bank segment net interest margin decreased to 2.64% from 3.26% 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.

The bank loan benefit for credit losses was $10 million for the current quarter, compared with a bank loan provision for credit losses of $54 million for the prior-year quarter.

The bank loan benefit for credit losses for the current quarter primarily reflected the positive impacts of net loan repayments, sales, and improved loan grades on the C&I loan portfolio, and an improvement in forecasted home prices on the residential mortgage portfolio, partially offset by the impact of loan downgrades in our CRE portfolio.

The bank loan provision for credit losses for the prior-year quarter largely reflected the impacts of a weaker economic outlook for the CRE portfolio as reflected in Moody’s CRE Price Index utilized in our CECL model and, to a lesser extent, loan downgrades.

Non-compensation expenses, excluding the bank loan provision for credit losses, decreased $78 million, or 23%, 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 the impact of higher 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.

RAYMOND JAMES FINANCIAL, INC.

1 unchanged sentence

Management’s Discussion and Analysis

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.

Nine months ended June 30, 2024 compared with the nine months ended June 30, 2023

Net revenues of $1.28 billion decreased 18% and pre-tax income of $282 million decreased 4%.

Net interest income decreased $273 million, or 18%, primarily due to increased interest expense resulting from a higher-cost mix of deposits, as 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 certificate of deposit balances.

The increase in interest expense was partially offset by an increase in interest income, primarily 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 2.68% from 3.41% for the prior-year period.

The bank loan provision for credit losses was $23 million for the current-year period, compared with $96 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.

The bank loan provision for credit losses for the current-year period primarily reflected the impacts of loan growth, 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, loan repayments, and loan sales.

The bank loan provision for credit losses for the prior-year period primarily reflected the impacts of a weakened macroeconomic outlook for certain loan portfolios, including the impact of a weaker economic outlook for the CRE portfolio as reflected in Moody’s CRE Price Index utilized in our CECL model, as well as loan downgrades during the prior-year period, partially offset by the impact of loan repayments and sales, which had a larger impact than provisions on new loans during the prior-year period.

Non-compensation expenses, excluding the bank loan provision for credit losses, decreased $195 million, or 19%, primarily due to a decrease in RJBDP fees paid to PCG.

RJBDP fees to PCG decreased $229 million, or 27%, 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.

These Bank segment fees and the related revenues earned by the PCG segment are eliminated in consolidation.

Non-compensation expenses also decreased as a result of a smaller provision for credit losses on unfunded lending comments in the current-year period.

These decreases were partially offset by increases in expenses related to deposits, including an incremental FDIC special assessment enacted during the current-year period and expenses related to the ESP and certificate of deposit issuances during the current-year period, as well as higher communications and information processing expenses.

The FDIC special assessment resulted in $10 million of incremental expense for the nine months ended June 30, 2024.

RAYMOND JAMES FINANCIAL, INC.

AND SUBSIDIARIES

Management’s Discussion and Analysis

RESULTS OF OPERATIONS – OTHER

2 unchanged sentences

Operating results

Three months ended March 31, Six months ended March 31,

Three months ended June 30, Nine months ended June 30,

$ in millions 2024 2023 % change 2024 2023 % change

Interest income $ 47 $ 37 27 % $ 140 $ 103 36 %

All other (2) 1 NM — 4 (100) %

All other 6 2 200 % 6 6 — %

Total revenues 53 39 36 % 146 109 34 %

4 unchanged sentences

Insurance settlement received — — — % — (32) 100 %

All other (22) 7 NM (16) 12 NM

All other 9 34 (74) % (7) 46 NM

Total non-interest expenses 38 61 (38) % 71 85 (16) %

Pre-tax income/(loss)

$ 7 $ (23) NM $ 10 $ (5) NM

$ (10) $ (46) 78 % $ — $ (51) 100 %

Quarter ended June 30, 2024 compared with the quarter ended June 30, 2023

Pre-tax loss was $10 million, compared with a pre-tax loss of $46 million for the prior-year quarter.

Net revenues increased $13 million primarily due to an increase in interest income earned as a result of higher average corporate cash balances, as well as higher short-term interest rates applicable to such balances.

Non-interest expenses decreased $23 million, primarily due to a provision for legal and regulatory matters in the prior-year quarter which did not recur in the current quarter.

Nine months ended June 30, 2024 compared with the nine months ended June 30, 2023

Pre-tax earnings were breakeven compared with a pre-tax loss of $51 million for the prior-year period.

Net revenues increased $37 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 and, to a lesser extent, higher average corporate cash balances.

Non-interest expenses decreased $14 million, or 16%, primarily due to the positive impact of a net legal and regulatory reserve release in the current-year period compared with a provision in the prior-year period, partially offset by the impacts of a $32 million insurance settlement received during the prior-year period related to a previously-settled legal matter that did not recur in the current-year period and, to a lesser extent, higher compensation expenses in the current-year period.

RAYMOND JAMES FINANCIAL, INC.

1 unchanged sentence

Management’s Discussion and Analysis

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

1 unchanged sentence

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.

Total assets of $80.63 billion as of June 30, 2024 were $2.27 billion, or 3%, greater than our total assets as of September 30, 2023.

Bank loans, net increased $1.37 billion primarily driven by increases in SBL, residential mortgage loans, and CRE loans, partially offset by a decrease in C&I loans, largely resulting from net loan repayments and sales.

Other assets increased $429 million, primarily due to valuation increases on our company-owned life insurance policies.

Assets segregated for regulatory purposes and restricted cash increased $406 million, primarily due to an increase in client cash balances in our broker-dealer subsidiaries.

Other receivables, net, trading assets, and brokerage client receivables, net also increased $325 million, $285 million, and $273 million, respectively.

These increases were partially offset by a $651 million decrease in available-for-sale securities primarily driven by net maturities.

As of June 30, 2024, our total liabilities of $69.44 billion were $1.27 billion, or 2%, greater than our total liabilities as of September 30, 2023.

Collateralized financings increased $817 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.

RAYMOND JAMES FINANCIAL, INC.

AND SUBSIDIARIES

Management’s Discussion and Analysis

Bank deposits increased $202 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.

Trading liabilities and other payables also increased $175 million and $153 million, respectively.

LIQUIDITY AND CAPITAL RESOURCES

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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.

These actions include reallocating client cash balances in the RJBDP from third-party banks to our bank subsidiaries thereby bringing those deposits onto our Condensed 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 borrowing from the Federal Reserve’s discount window.

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.

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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.

RAYMOND JAMES FINANCIAL, INC.

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Management’s Discussion and Analysis

Liquidity and capital management

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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.

RAYMOND JAMES FINANCIAL, INC.

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Management’s Discussion and Analysis

Capital structure

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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.

RAYMOND JAMES FINANCIAL, INC.

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Management’s Discussion and Analysis

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

June 30, 2024 September 30, 2023

Common equity tier 1 capital/Tier 1 capital

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Total capital $ 10,707 $ 9,934

RAYMOND JAMES FINANCIAL, INC.

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Management’s Discussion and Analysis

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

June 30, 2024 September 30, 2023

On-balance sheet assets:

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government and its agencies.

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.

Cash and cash equivalents (excluding amounts segregated for regulatory purposes and restricted cash) of $9.10 billion at June 30, 2024 decreased $218 million compared with September 30, 2023.

The decrease in cash and cash equivalents primarily resulted from investments in bank loans, property and equipment, and loans to financial advisors, as well as common stock repurchases and dividends paid on our common and preferred stock.

These decreases were partially offset by net income and net maturities of available-for-sale securities during the period.

RAYMOND JAMES FINANCIAL, INC.

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Management’s Discussion and Analysis

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.

Approximately $2.11 billion of our total June 30, 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 June 30, 2024, RJF had loaned $1.39 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

$ in millions June 30, 2024

TriState Capital Bank 2,995

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(“RJ Ltd.”) 610

Raymond James Capital Services, LLC 177

Raymond James Financial Services, Inc.

Charles Stanley Group Limited (“Charles Stanley”) 121

Raymond James Trust Company of New Hampshire 124

Raymond James Capital Services, LLC 83

Charles Stanley Group Limited (“Charles Stanley”) 119

Other subsidiaries 302

Total cash and cash equivalents $ 9,095

RAYMOND JAMES FINANCIAL, INC.

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Management’s Discussion and Analysis

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.

RJF maintained depository accounts at Raymond James Bank and TriState Capital Bank totaling $294 million as of June 30, 2024.

The portion of this total that was available on demand without restrictions, which amounted to $250 million as of June 30, 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.

and Charles Stanley, as of June 30, 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.

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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.

At June 30, 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.

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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.

RAYMOND JAMES FINANCIAL, INC.

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Management’s Discussion and Analysis

Borrowings and financing arrangements

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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.

As of June 30, 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 June 30, 2024.

See Note 14 of the Notes to Condensed Consolidated Financial Statements of this Form 10-Q for additional information regarding our Credit Facility.

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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.

RAYMOND JAMES FINANCIAL, INC.

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Management’s Discussion and Analysis

have a total of 12 uncommitted financing arrangements with third-party lenders (eight uncommitted secured and four uncommitted unsecured);

As of June 30, 2024, we had outstanding borrowings of $374 million under four uncommitted secured borrowing arrangements out of a total of 12 uncommitted financing arrangements (eight uncommitted secured and four uncommitted unsecured).

However, lenders are generally under no contractual obligation to lend to us under uncommitted credit facilities.

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during the quarter End of period

June 30, 2024 $ 407 $ 374 $ 374 $ 349 $ 311 $ 311

March 31, 2024 $ 256 $ 371 $ 371 $ 244 $ 449 $ 449

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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.

We had $950 million in FHLB borrowings outstanding at June 30, 2024, comprised of floating-rate and fixed-rate advances.

The interest rates on our floating-rate advances are based on SOFR.

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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.

As of June 30, 2024, we had $9.57 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.

RAYMOND JAMES FINANCIAL, INC.

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Management’s Discussion and Analysis

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.

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.

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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.

While we had borrowings outstanding as of June 30, 2024, the clearing organization is under no contractual obligation to lend to us under this arrangement.

At June 30, 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.

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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.

We account for each of these types of transactions as collateralized agreements and financings, with the outstanding balance of $780 million as of June 30, 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.

RAYMOND JAMES FINANCIAL, INC.

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Management’s Discussion and Analysis

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.

At June 30, 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.

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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.

RAYMOND JAMES FINANCIAL, INC.

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Management’s Discussion and Analysis

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 investors.

A downgrade to below investment grade may make a public debt offering difficult to execute on terms we would consider to be favorable.

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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.

Those policies against which we could readily borrow had a cash surrender value of $1.11 billion as of June 30, 2024, comprised of $746 million related to employee-directed plans and $363 million related to company-directed plans, and we were able to borrow up to 90%, or $998 million, of the June 30, 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.

RAYMOND JAMES FINANCIAL, INC.

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Management’s Discussion and Analysis

There were no borrowings outstanding against any of these policies as of June 30, 2024.

On May 8, 2024, 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 8, 2027.

Prior to its expiration, we intend to renew the shelf registration statement.

In May 2024, Raymond James Bank entered into a joint venture with a third party to offer private credit solutions in order to finance merger and acquisitions transactions.

All loans made by the joint venture to borrower companies are subject to unanimous approval by both Raymond James Bank and the joint venture member.

Raymond James Bank may make advances through a loan to the joint venture.

The activity of this joint venture did not have a significant impact on our financial position as of June 30, 2024 or results of operations for the three months ended June 30, 2024.

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.

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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.

As of June 30, 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 June 30, 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.

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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.

RAYMOND JAMES FINANCIAL, INC.

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Management’s Discussion and Analysis

In March 2024, the SEC adopted a final rule that requires registrants to provide significantly enhanced and standardized climate-related disclosures in their annual reports.

Under the final rule, the aforementioned disclosures are effective for annual periods beginning with our fiscal 2026, except for disclosures of Scope 1 and 2 greenhouse gas emissions and certain other disclosures which are effective for annual periods beginning with our fiscal 2027.

However, several legal challenges were filed following issuance of the final rule, and the consolidated petitions are currently being reviewed by the Eighth Circuit Court of Appeals.

The SEC has stayed the final rule pending completion of judicial review and has indicated that a new implementation period will be provided upon lifting of the stay.

We are monitoring the legal activity while continuing to evaluate the impact that this new rule 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.

In related rulemakings, the DOL also finalized amendments to several class prohibited transaction exemptions (“PTEs”), which exempt certain compensation arrangements that would otherwise be prohibited.

In July 2024, two federal district courts separately issued nationwide stays of the effective date of the final rule and PTE amendments pending consideration of the merits.

We are monitoring the legal activity while continuing to evaluate the impact these new rules could have on our business.

If the rules become effective as promulgated, we expect compliance will require us to alter certain of our business practices and 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.

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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.

RAYMOND JAMES FINANCIAL, INC.

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Management’s Discussion and Analysis

The rule will become effective on September 4, 2024, unless it is enjoined or stayed as a result of legal challenges.

Compliance with the rule could require us to alter our business practices where such non-competition agreements are present and would result in the accelerated recognition of compensation expense related to certain of our deferred compensation plans.

CRITICAL ACCOUNTING ESTIMATES

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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.

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 June 30, 2024.

RAYMOND JAMES FINANCIAL, INC.

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Management’s Discussion and Analysis

Allowance for credit losses

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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.

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 June 30, 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 June 30, 2024.

As of June 30, 2024, use of the downside case scenario would have resulted in an increase of approximately $180 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 $30 million in the quantitative portion of our allowance for credit losses on bank loans at June 30, 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.

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The downside case scenario utilized in this hypothetical sensitivity analysis assumes a moderate recession.

To the extent

RAYMOND JAMES FINANCIAL, INC.

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Management’s Discussion and Analysis

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.

To the extent 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.

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 June 30, 2024.

ACCOUNTING STANDARDS UPDATE

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We are evaluating the impact that this new guidance will have on our disclosures.

RAYMOND JAMES FINANCIAL, INC.

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Management’s Discussion and Analysis

In December 2023, the FASB issued amended guidance related to disclosures for income taxes (ASU 2023-09).

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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.

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 nine months ended June 30, 2024.

RISK MANAGEMENT

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Our legal department provides legal advice and guidance to each of these three lines of risk management.

RAYMOND JAMES FINANCIAL, INC.

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Management’s Discussion and Analysis

Market risk is our risk of loss resulting from the impact of changes in market prices on our trading inventory, derivatives, and investment positions.

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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.

We also hold investments within our available-for-sale securities portfolio, and from time to time may hold SBA loan securitizations not yet sold.

Our primary market risks relate to interest rates, equity prices, and foreign exchange rates.

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While Market Risk Management maintains ongoing communication with the revenue-generating business units, it is independent of such units.

RAYMOND JAMES FINANCIAL, INC.

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Management’s Discussion and Analysis

Interest rate risk

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VaR is reported at a 99% confidence level for a one-day time horizon.

RAYMOND JAMES FINANCIAL, INC.

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Management’s Discussion and Analysis

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.

Assuming that future market conditions change as they have in the past twelve months, we would expect to incur losses greater than those predicted by our one-day VaR estimates about once every 100 trading days, or about three times per year on average.

For regulatory capital calculation purposes, we also report VaR and Stressed VaR numbers for a ten-day time horizon.

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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.

RAYMOND JAMES FINANCIAL, INC.

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Management’s Discussion and Analysis

The following table sets forth the high, low, period-end and average daily one-day VaR for all of our trading portfolios, including fixed income and equity instruments, and for our derivatives for the periods and dates indicated.

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,

Nine months ended June 30, 2024 Period-end VaR Three months ended June 30, Nine months ended June 30,

$ in millions High Low June 30,

2024 September 30,

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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.

During the three and nine months ended June 30, 2024, our regulatory-defined daily losses in our trading portfolios exceeded our predicted VaR on one occasion and two occasions, respectively.

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.”

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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-

The model also considers interest rate-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.

RAYMOND JAMES FINANCIAL, INC.

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Management’s Discussion and Analysis

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.

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 60% as interest rates rise and approximately 50% as interest rates 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.

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-200 $1,575 (8)%

(1) Our 0-basis point scenario was based on interest rates as of March 31, 2024.

(1) Our 0-basis point scenario was based on interest rates as of June 30, 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.

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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.

At June 30, 2024, our available-for-sale securities portfolio had a fair value of $8.53 billion with a weighted-average yield of 2.25% and a weighted-average life, after factoring in estimated prepayments, of 4.0 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.

As of June 30, 2024, the effective duration of our available-for-sale securities portfolio was approximately 3.29, which means that we would expect the market value of our available-for-sale securities portfolio to decline approximately 3.29% for every 100-basis point increase in interest rates and increase approximately 3.29% 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 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 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.

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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.

As of June 30, 2024, our EVE analyses were within approved limits.

RAYMOND JAMES FINANCIAL, INC.

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Management’s Discussion and Analysis

The following table shows the maturities of our bank loan portfolio at March 31, 2024, including contractual principal repayments.

The following table shows the maturities of our bank loan portfolio at June 30, 2024, including contractual principal repayments.

Maturities are generally determined based upon contractual terms;

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Total loans held for sale and investment $ 17,387 $ 12,870 $ 6,151 $ 9,197 $ 45,605

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.

The following table shows the distribution of the recorded investment of those bank loans that mature in more than one year between fixed and adjustable interest rate loans at June 30, 2024.

Interest rate type

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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.

For example, our bank loan portfolio includes loans which are denominated in Canadian dollars (“CAD”), totaling $1.28 billion and $1.40 billion at June 30, 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.

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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.

At June 30, 2024, we had foreign exchange risk in our investment in RJ Ltd.

of CAD 431 million and in our investment in Charles Stanley of £284 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.

however, we do not believe we had material foreign exchange risk either individually, or in the aggregate, pertaining to these subsidiaries as of June 30, 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.

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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.

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Management’s Discussion and Analysis

Brokerage activities

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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

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Management’s Discussion and Analysis

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.

See Note 2 of the Notes to Consolidated Financial Statements of our 2023 Form 10-K and Notes 5 and 6 of the Notes to Condensed Consolidated Financial Statements of this Form 10-Q for further information about our credit risk mitigation related to derivatives and collateralized agreements.

Our client activities involve the execution, settlement, and financing of various transactions on behalf of our clients.

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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.

For our SBL and residential mortgage loans, we utilize the credit risk rating system used by bank regulators in measuring the credit quality of each homogeneous class of loans.

In evaluating credit risk, we consider trends in loan performance, historical experience through various economic cycles, industry or client concentrations, the loan portfolio composition and macroeconomic factors (both current and forecasted).

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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.

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Management’s Discussion and Analysis

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,

Three months ended June 30, Nine months ended June 30,

2024 2023 2024 2023

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CRE loans (1) 0.05 % (9) 0.51 % (8) 0.14 % (7) 0.13 %

Residential mortgage loans 1 0.04 % — — % 1 0.09 % — — %

Total loans held for sale and investment $ (6) 0.05 % $ (15) 0.14 % $ (42) 0.13 % $ (37) 0.11 %

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Management’s Discussion and Analysis

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.

Nonperforming loans include those loans which have been placed on nonaccrual status and any 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

$ in millions June 30, 2024 September 30, 2023

Nonperforming loans (1)

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Nonperforming assets as a % of Bank segment total assets 0.26 % 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.

(1) Nonperforming loans at June 30, 2024 and September 30, 2023 included $56 million and $96 million, respectively, of loans, which were current pursuant to their contractual terms.

The increase in nonperforming loans and assets as of June 30, 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 nine months ended June 30, 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.

Although our nonperforming assets as a percentage of our Bank segment’s assets remained low as of June 30, 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.

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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.

There were no significant changes to those processes during the three months ended June 30, 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.

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Management’s Discussion and Analysis

SBL and residential mortgage loan portfolios

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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.

Collateral calls have been minimal relative to our SBL portfolio with no losses incurred during the three and nine months ended June 30, 2024.

We track and review many factors to monitor credit risk in our residential mortgage loan portfolio.

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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.

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Management’s Discussion and Analysis

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.

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$ 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 %

June 30, 2024 $ 7 $ 3 $ 10 0.08 % 0.03 % 0.11 %

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.

Our June 30, 2024 percentage compares favorably to the national average for over 30 day delinquencies of 1.88%, as most recently reported by the Fed.

Credit risk is also managed by diversifying the residential mortgage portfolio.

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The following table details the geographic concentrations (top five states) of our one-to-four family residential mortgage loans.

March 31, 2024

June 30, 2024

Loans outstanding as a % of

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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.

At June 30, 2024 and September 30, 2023, these loans totaled $2.94 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 June 30, 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.

All corporate and tax-exempt loans are independently underwritten in accordance with our credit policies, are subject to approval by a loan committee, and credit quality is monitored on an ongoing basis by our lending staff.

Our corporate loans are generally secured by all assets of the borrower and in some instances are secured by mortgages on specific real estate.

The majority of our tax-exempt loan portfolio is comprised of loans to investment-grade borrowers, and such loans are generally secured by a pledge of revenue.

In a limited number of transactions, loans in the portfolio are extended on an unsecured basis.

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Management’s Discussion and Analysis

One way in which we manage credit risk is through diversification of the corporate bank loan portfolio.

We monitor industry concentrations and have established limits relative to capital as part of our overall liquidity and capital planning.

Further, key credit policies are reviewed at least annually by senior bank executives to ensure policies align with our banks’ risk appetites.

Credit policies for our corporate loans include criteria related to single borrower loan limits, loan term and structure parameters (including guidance on leverage, debt service coverage ratios, and debt repayment ability), industry concentration limits, secondary sources of repayment, municipality demographics, and other criteria.

Credit policies for our CRE loans also include LTV limits based upon property type.

In addition, credit quality trends are monitored by industry to determine if a change in the risk exposure to a certain industry may warrant incremental monitoring or tightening of our underwriting standards during times of market uncertainty.

We also utilize loan sales and other risk mitigation techniques to manage the size and risk profile of our corporate bank loans.

Corporate and tax-exempt loans are also subject to regulatory review.

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

June 30, 2024

Loans outstanding as a % of

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Loan fund 6% 3%

Consumer products and services 5% 2%

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Management’s Discussion and Analysis

Subscription lines 5% 2%

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 expect that the continued elevated interest rates coupled with the uncertainty regarding the timing of future Fed interest rate cuts will negatively impact borrowers through the remainder of our fiscal 2024.

We continue to closely monitor economic factors, including inflation and interest rates, that may impact our corporate loan portfolio.

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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.

To mitigate risks related to our CRE portfolio, the expected cash flows from all significant new or renewed income-producing property commitments are stress tested to reflect risks related to varying interest rates, vacancy rates, and rental rates.

Additionally, 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.

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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 of June 30, 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.

As of June 30, 2024, 11% of such loans were considered criticized loans and only 5% were nonperforming.

As of June 30, 2024, our allowance for credit losses related to office real estate CRE loans represented 6% of the amortized cost of such loans.

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Management’s Discussion and Analysis

As of June 30, 2024, our CRE portfolio included CRE construction loans of less than 2% of total loans held for sale and investment.

Construction CRE loans involve risks such as project budget overruns, performance variables related to the contractor and subcontractors, or the inability to sell the project or secure permanent financing once the project is completed.

With respect to commercial construction of residential developments, there is also the risk that the builder has a geographic concentration of developments.

Construction CRE loans are monitored on an ongoing basis to ensure projects are on time and within budget to evaluate credit risk.

Consistent with all CRE loans, construction CRE loans are also monitored for geographic concentration, as well as the total relationship exposure.

Furthermore, CRE construction loans designated as higher risk are reviewed at least quarterly by senior bank executives.

In addition to the aforementioned CRE loans, we also have certain owner-occupied commercial real estate loans of approximately $200 million as of June 30, 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

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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.

Effective the last week of May 2024, certain of our broker-dealer securities transactions, including those in the United States and Canada, transitioned 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.

The transition to T+1 did not 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

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Management’s Discussion and Analysis

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.

These losses can result from, but are not limited to, trade errors, failed transaction settlements, late collateral calls to borrowers and counterparties, or interruptions to our system processing.

We did not incur any significant losses related to such operational challenges during the nine months ended June 30, 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.

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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.

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Management’s Discussion and Analysis

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis