EX-99.1 2 rjf2018_1231q118earnings.htm EXHIBIT 99.1 JANUARY 24, 2018 EARNINGS RELEASE Exhibit



rjflogodecember17.gif

January 24, 2018
 
FOR IMMEDIATE RELEASE
 
 
Media Contact: Steve Hollister, 727.567.2824
 
 
Investor Contact: Paul Shoukry, 727.567.5133
 
 
raymondjames.com/news-and-media/press-releases

        

RAYMOND JAMES FINANCIAL REPORTS FIRST QUARTER FISCAL 2018 RESULTS
 
•
Record quarterly net revenues of $1.73 billion, up 16% over the prior year’s fiscal first quarter and 2% over the preceding quarter
•
Quarterly net income of $118.8 million, or $0.80 per diluted share, and adjusted quarterly net income of $238.8 million(1), or $1.61 per diluted share(1) 
•
Records for the number of Private Client Group financial advisors of 7,537, client assets under administration of $727.2 billion, financial assets under management of $130.3 billion, and net loans at Raymond James Bank of $17.7 billion
•
Annualized return on equity for the quarter of 8.4%, and adjusted annualized return on equity for the quarter of 16.8%(1)

ST. PETERSBURG, Fla - Raymond James Financial, Inc. (NYSE: RJF) today reported record net revenues of $1.73 billion and net income of $118.8 million, or $0.80 per diluted share, for the fiscal first quarter ended December 31, 2017. Earnings during the quarter were negatively affected by the estimated discrete impact of the Tax Cuts and Jobs Act (“Tax Act”) of $117 million, primarily related to the remeasurement of U.S. deferred tax assets at a lower enacted corporate tax rate. Excluding this discrete impact and $4 million of acquisition-related expenses, adjusted quarterly net income was $238.8 million(1), or $1.61 per diluted share(1).

“Record client assets and the benefit from higher short-term interest rates enabled the Private Client Group, Asset Management and Raymond James Bank segments to generate record net revenues and pre-tax income in the fiscal first quarter,” said Chairman and CEO Paul Reilly. “Our continued success in attracting and retaining financial advisors, the reduction in the corporate tax rate, and the increase in short-term interest rates in December should provide significant tailwinds for our results going forward.”

Segment Results

Private Client Group

•
Record quarterly net revenues of $1.23 billion, up 19% over the prior year’s fiscal first quarter and 5% over the preceding quarter
•
Record quarterly pre-tax income of $155.1 million, an increase of 111% over the prior year’s fiscal first quarter, which included a $30 million legal charge, and 9% over the preceding quarter
•
Record Private Client Group assets under administration of $692.1 billion, growth of 18% over December 2016 and 5% over September 2017
•
Private Client Group assets in fee-based accounts of $316.7 billion, a substantial increase of 32% over December 2016 and 8% over September 2017

Growth in securities commissions and fees, as well as higher short-term interest rates, helped the segment generate record results in the fiscal first quarter. The number of financial advisors reached a record 7,537, aided by strong recruiting of independent contractors during the quarter. The portion of assets in fee-based accounts continued to grow, representing 46% of total Private Client group assets under administration at the end of the quarter.

“While a few large firms in our industry exited the Protocol for Broker Recruiting during the quarter, Raymond James remains committed to supporting the agreement, as we believe the integrity of the advisor-client relationship is

Please refer to the footnotes at the end of this press release for additional information.
1


integral to putting clients’ interests first,” said Reilly. “We also believe our ability to attract and retain advisors is strengthened by our recognition of the relationship between financial advisors and their clients.”

Capital Markets

•
Quarterly net revenues of $216.7 million, down 7% compared to the prior year’s fiscal first quarter and 18% compared to the preceding quarter
•
Quarterly pre-tax income of $4.8 million, down 78% compared to the prior year’s fiscal first quarter and 89% compared to the preceding quarter

Results in the Capital Markets segment during the quarter were negatively impacted by a large sequential decline in investment banking revenues following a very strong fourth quarter of fiscal 2017. Additionally, while institutional commissions improved on a sequential basis, low equity market and interest rate volatility during the quarter contributed to a 15% decline in the segment’s total commissions compared to the prior year’s fiscal first quarter.

“The sequential decline in investment banking revenues was largely attributable to the timing of closings,” said Reilly. “We remain optimistic about our activity levels for both equity underwriting and M&A advisory, while tax reform will likely cause near-term uncertainty for both the Public Finance and Tax Credit Funds businesses.”

Asset Management

•
Record quarterly net revenues of $150.6 million, up 32% compared to the prior year’s fiscal first quarter and 15% compared to the preceding quarter
•
Record quarterly pre-tax income of $57.4 million, an increase of 37% over the prior year’s fiscal first quarter and 18% over the preceding quarter
•
Record financial assets under management of $130.3 billion, reflecting growth of 63% compared to December 2016 and 35% compared to September 2017

Record quarterly revenues and pre-tax income in the Asset Management segment were lifted by record financial assets under management. The increase in financial assets under management was driven by strong organic growth, market appreciation, and the acquisition of Scout Investments and its Reams Asset Management division, which closed on November 17, 2017, adding approximately $27 billion of financial assets under management.

“We are excited to welcome the Scout and Reams teams to the Raymond James family,” said Reilly. “The acquisition significantly expands Carillon Tower Advisers’ product offering and capabilities.”

Raymond James Bank

•
Record quarterly net revenues of $165.2 million, up 20% over the prior year’s fiscal first quarter and 1% over the preceding quarter
•
Record quarterly pre-tax income of $114.2 million, up 10% over the prior year’s fiscal first quarter and 1% over the preceding quarter
•
Record net loans at Raymond James Bank of $17.7 billion, representing growth of 12% over December 2016 and 4% over September 2017

The Bank’s results were lifted by loan growth, the expansion of the available-for-sale, agency-backed securities portfolio, and continued improvement of credit metrics. These factors led to record net interest earnings and a modest loan loss provision for the quarter. The Bank’s net interest margin for the quarter was 3.08%, which increased 2 basis points over the prior year’s fiscal first quarter but declined 3 basis points compared to the preceding quarter. The modest sequential decline in the Bank’s net interest margin was primarily attributable to an increase in the Bank’s excess cash balances and the aforementioned securities portfolio.

Income Tax Rate

The effective tax rate for the quarter was 61.7%, which reflects the $117 million estimated discrete impact of the Tax Act as well as a lower blended federal corporate statutory tax rate of 24.5%(2). Excluding the discrete impact of the Tax Act, our adjusted effective tax rate for the quarter was 24.1%(1).


Please refer to the footnotes at the end of this press release for additional information.
2


A conference call to discuss the results will take place tomorrow morning, Thursday, January 25th, at 8:15 a.m. ET. For a listen-only connection, please call: 877-666-1952 (conference code: 6078889), or visit www.raymondjames.com/investor-relations/earnings/earnings-conference-call for a live audio webcast. An audio replay of the call will be available until July 25, 2018, on the Investor Relations page of our website at www.raymondjames.com.

About Raymond James Financial, Inc.

Raymond James Financial, Inc. (NYSE: RJF) is a leading diversified financial services company providing private client group, capital markets, asset management, banking and other services to individuals, corporations and municipalities. The company has approximately 7,500 financial advisors in 3,000 locations throughout the United States, Canada and overseas. Total client assets are $727 billion. Public since 1983, the firm is listed on the New York Stock Exchange under the symbol RJF. Additional information is available at www.raymondjames.com.

Forward Looking Statements

Certain statements made in this press release and the associated conference call may constitute “forward-looking statements” under the Private Securities Litigation Reform Act of 1995. Forward-looking statements include information concerning future strategic objectives, business prospects, anticipated savings, financial results (including expenses, earnings, liquidity, cash flow and capital expenditures), industry or market conditions, demand for and pricing of our products, acquisitions and divestitures, anticipated results of litigation and changes in tax rules and regulatory developments, or general economic conditions. In addition, words such as “believes,” “expects,” “anticipates,” “intends,” “plans,” “estimates,” “projects,” “forecasts,” and future or conditional verbs such as “will,” “may,” “could,” “should,” and “would,” as well as any other statement that necessarily depends on future events, are intended to identify forward-looking statements. Forward-looking statements are not guarantees, and they involve risks, uncertainties and assumptions. Although we make such statements based on assumptions that we believe to be reasonable, there can be no assurance that actual results will not differ materially from those expressed in the forward-looking statements. We caution investors not to rely unduly on any forward-looking statements and urge you to carefully consider the risks described in our filings with the Securities and Exchange Commission (the “SEC”) from time to time, including our most recent Annual Report on Form 10-K and subsequent Quarterly Reports on Form 10-Q, which are available at www.raymondjames.com and the SEC’s website at www.sec.gov. We expressly disclaim any obligation to update any forward-looking statement in the event it later turns out to be inaccurate, whether as a result of new information, future events, or otherwise.




Please refer to the footnotes at the end of this press release for additional information.
3



Raymond James Financial, Inc.
Selected financial highlights
(Unaudited)
 
 
 
 
 
 
 
 
 
 
 
Summary results of operations
 
 
 
 
 
 
 
 
 
Three months ended
 
% change from
$ in thousands, except per share amounts
 
December 31,
2017
 
December 31,
2016
 
September 30,
2017
 
December 31,
2016
 
September 30,
2017
Total revenues
 
$
1,765,592

 
$
1,528,768

 
$
1,732,686

 
15%
 
2%
Net revenues
 
$
1,726,161

 
$
1,492,802


$
1,690,111

 
16%
 
2%
Pre-tax income (3)
 
$
311,243

 
$
206,379

 
$
278,440

 
51%
 
12%
Net income (3)
 
$
118,842

 
$
146,567

 
$
193,489

 
(19)%
 
(39)%
 
 
 
 
 
 
 
 
 
 
 
Earnings per common share:
 
 
 
 
 
 
 
 
Basic
 
$
0.82

 
$
1.03

 
$
1.34

 
(20)%
 
(39)%
Diluted
 
$
0.80

 
$
1.00

 
$
1.31

 
(20)%
 
(39)%
 
 
 
 
 
 
 
 
 
 
 
Non-GAAP measures: (1)
 
 
 
 
 
 
 
 
 
 
Adjusted pre-tax income (3)
 
$
315,170

 
$
249,045

 
$
316,781

 
27%
 
(1)%
Adjusted net income (3)
 
$
238,838

 
$
176,868

 
$
217,260

 
35%
 
10%
Adjusted basic earnings per common share
 
$
1.65

 
$
1.24

 
$
1.51

 
33%
 
9%
Adjusted diluted earnings per common share
 
$
1.61

 
$
1.21

 
$
1.47

 
33%
 
10%
 
 
 
 
 
 
 
 
 
 
 



Please refer to the footnotes at the end of this press release for additional information.
4


Raymond James Financial, Inc.
Consolidated Statements of Income
(Unaudited)
 
 
 
 
 
 
 
 
 
Three months ended
 
% change from
$ in thousands, except per share amounts
 
December 31,
2017
 
December 31,
2016
 
September 30,
2017
 
December 31,
2016
 
September 30,
2017
Revenues:
 
 
 
 
 
 
 
 
 
 
Securities commissions and fees
 
$
1,103,566

 
$
984,385

 
$
1,026,505

 
12%
 
8%
Investment banking
 
64,902

 
61,425

 
130,682

 
6%
 
(50)%
Investment advisory and related administrative fees
 
142,023

 
108,243

 
127,088

 
31%
 
12%
Interest
 
231,729

 
182,782

 
222,576

 
27%
 
4%
Account and service fees
 
184,301

 
148,791

 
181,418

 
24%
 
2%
Net trading profit
 
19,870

 
20,555

 
22,110

 
(3)%
 
(10)%
Other
 
19,201

 
22,587

 
22,307

 
(15)%
 
(14)%
Total revenues
 
1,765,592


1,528,768

 
1,732,686

 
15%
 
2%
Interest expense
 
(39,431
)
 
(35,966
)
 
(42,575
)
 
10%
 
(7)%
Net revenues
 
1,726,161

 
1,492,802

 
1,690,111

 
16%
 
2%
Non-interest expenses:
 
 
 
 
 
 
 

 

Compensation, commissions and benefits
 
1,152,767

 
1,006,467

 
1,103,824

 
15%
 
4%
Communications and information processing
 
83,731

 
72,161

 
84,914

 
16%
 
(1)%
Occupancy and equipment costs
 
49,814

 
46,052

 
50,680

 
8%
 
(2)%
Business development
 
33,793

 
35,362

 
38,740

 
(4)%
 
(13)%
Investment sub-advisory fees
 
22,321

 
19,295

 
21,450

 
16%
 
4%
Bank loan loss provision/(benefit)
 
1,016

 
(1,040
)
 
(110
)
 
NM
 
NM
Acquisition-related expenses
 
3,927

 
12,666

 
877

 
(69)%
 
348%
Losses on extinguishment of debt
 
—

 
—

 
37,464

 
—
 
(100)%
Other
 
67,108

 
94,324

 
70,053

 
(29)%
 
(4)%
Total non-interest expenses
 
1,414,477

 
1,285,287

 
1,407,892

 
10%
 
—
Income including noncontrolling interests and before provision for income taxes
 
311,684

 
207,515

 
282,219

 
50%
 
10%
Provision for income taxes
 
192,401

 
59,812

 
84,951

 
222%
 
126%
Net income including noncontrolling interests
 
119,283

 
147,703

 
197,268

 
(19)%
 
(40)%
Net income attributable to noncontrolling interests
 
441

 
1,136

 
3,779

 
(61)%
 
(88)%
Net income attributable to Raymond James Financial, Inc.
 
$
118,842

 
$
146,567

 
$
193,489

 
(19)%
 
(39)%
 
 
 
 
 
 
 
 

 

Earnings per common share – basic
 
$
0.82

 
$
1.03

 
$
1.34

 
(20)%
 
(39)%
Earnings per common share – diluted
 
$
0.80

 
$
1.00

 
$
1.31

 
(20)%
 
(39)%
Weighted-average common shares outstanding – basic
 
144,469

 
142,110

 
143,913

 
2%
 
—
Weighted-average common and common equivalent shares outstanding – diluted
 
148,261

 
145,675

 
147,761

 
2%
 
—















Please refer to the footnotes at the end of this press release for additional information.
5


Raymond James Financial, Inc.
Segment Results
(Unaudited)
 
 
 
 
 
 
 
 
 
 
 
 
 
Three months ended
 
% change from
$ in thousands
 
December 31,
2017
 
December 31,
2016
 
September 30,
2017
 
December 31,
2016
 
September 30,
2017
Net revenues:
 
 
 
 
 
 
 
 
 
 
Private Client Group
 
$
1,233,051

 
$
1,040,089

 
$
1,169,082

 
19%
 
5%
Capital Markets
 
216,665

 
233,016

 
265,587

 
(7)%
 
(18)%
Asset Management
 
150,600

 
114,082

 
131,432

 
32%
 
15%
RJ Bank
 
165,185

 
138,015

 
162,797

 
20%
 
1%
Other (4)
 
(2,920
)
 
(9,643
)
 
(4,958
)
 
70%
 
41%
Intersegment eliminations
 
(36,420
)
 
(22,757
)
 
(33,829
)
 

 

Total net revenues
 
$
1,726,161

 
$
1,492,802

 
$
1,690,111

 
16%
 
2%
 
 
 
 
 
 
 
 

 

Pre-tax income/(loss): (3)
 
 
 
 
 
 
 

 

Private Client Group
 
$
155,063

 
$
73,358

 
$
142,269

 
111%
 
9%
Capital Markets
 
4,807

 
21,444

 
43,934

 
(78)%
 
(89)%
Asset Management
 
57,399

 
41,909

 
48,760

 
37%
 
18%
RJ Bank
 
114,155

 
104,121

 
113,281

 
10%
 
1%
Other (4)
 
(20,181
)
 
(34,453
)
 
(69,804
)
 
41%
 
71%
Pre-tax income
 
$
311,243

 
$
206,379

 
$
278,440

 
51%
 
12%
































Please refer to the footnotes at the end of this press release for additional information.
6




Raymond James Financial, Inc.
Selected Operating Data
(Unaudited)
 
 
 
 
 
 
 
 
 
 
 
 
 
Three months ended
 
% change from
$ in thousands
 
December 31,
2017
 
December 31,
2016
 
September 30,
2017
 
December 31,
2016
 
September 30,
2017
Securities commissions and fees by segment:
 
 
 
 
 
 
 
 
 
 
Private Client Group
 
$
991,054

 
$
853,219

 
$
933,720

 
16%
 
6%
Capital Markets:
 
 
 
 
 
 
 

 

Equity
 
53,371

 
64,319

 
40,112

 
(17)%
 
33%
Fixed Income
 
65,201

 
75,374

 
61,895

 
(13)%
 
5%
Intersegment eliminations
 
(6,060
)
 
(8,527
)
 
(9,222
)
 

 

Total securities commissions and fees
 
$
1,103,566

 
$
984,385

 
$
1,026,505

 
12%
 
8%
 
 
 
 
 
 
 
 

 

Investment banking revenues:
 
 
 
 
 
 
 

 

Equity:
 
 
 
 
 
 
 

 

Underwritings
 
$
8,956

 
$
14,509

 
$
16,892

 
(38)%
 
(47)%
Mergers & acquisitions and advisory fees
 
42,998

 
27,174

 
84,503

 
58%
 
(49)%
Fixed Income
 
8,132

 
8,478

 
11,540

 
(4)%
 
(30)%
Tax credit funds syndication fees
 
4,817

 
11,126

 
18,214

 
(57)%
 
(74)%
Other
 
(1
)
 
138

 
(467
)
 
NM
 
(100)%
Total investment banking revenues
 
$
64,902

 
$
61,425

 
$
130,682

 
6%
 
(50)%
 
 
 
 
 
 
 
 

 

Other revenues:
 
 
 
 
 
 
 

 

Realized/unrealized gain attributable to private equity investments
 
$
6,940

 
$
10,644

 
$
6,696

 
(35)%
 
4%
Other
 
12,261

 
11,943

 
15,611

 
3%
 
(21)%
Total other revenues
 
$
19,201

 
$
22,587

 
$
22,307

 
(15)%
 
(14)%
 
 
 
 
 
 
 
 
 
 
 
Net income/(loss) attributable to noncontrolling interests:
 
 
 
 
 
 
 
 
Private equity investments
 
$
279

 
$
2,035

 
$
5,958

 
(86)%
 
(95)%
Consolidation of low-income housing tax credit funds
 
(2,779
)
 
(2,013
)
 
(3,560
)
 
(38)%
 
22%
Other
 
2,941

 
1,114

 
1,381

 
164%
 
113%
Total net income attributable to noncontrolling interests
 
$
441

 
$
1,136

 
$
3,779

 
(61)%
 
(88)%


















Please refer to the footnotes at the end of this press release for additional information.
7


Raymond James Financial, Inc.
Selected Key Metrics
(Unaudited)
 
 
For the period ended
Total company
 
December 31,
2017
 
December 31,
2016
 
September 30,
2017
Total assets
 
$
36.1
 bil.
(5) 
$
31.7
 bil.
 
$
34.9
 bil.
Total equity (3)
 
$
5.7
 bil.
 
$
5.1
 bil.
 
$
5.6
 bil.
Book value per share (6)
 
$
39.25

 
$
35.55

 
$
38.74

Tangible book value per share (1) (6)
 
$
34.94

 
$
32.26

 
$
35.58

Return on equity - quarter (7)
 
8.4
%
 
11.7
%
 
14.1
%
Adjusted return on equity - quarter (1) (7)
 
16.8
%
 
14.0
%
 
15.8
%
Total compensation ratio - quarter (8)
 
66.8
%
 
67.4
%
 
65.3
%
Pre-tax margin on net revenues - quarter (9)
 
18.0
%
 
13.8
%
 
16.5
%
Adjusted pre-tax margin on net revenues - quarter (1) (9)
 
18.3
%
 
16.7
%
 
18.7
%
Effective tax rate - quarter
 
61.7
%
 
29.0
%
 
30.1
%
Adjusted effective tax rate - quarter (1)
 
24.1
%
 
NA

 
NA

 
 
 
 
 
 
 
Total company capital ratios:
 
 
 
 
 
 
Tier 1 capital ratio
 
22.4
%
(5) 
21.2
%
 
23.0
%
Total capital ratio
 
23.4
%
(5) 
22.2
%
 
23.9
%
Tier 1 leverage ratio
 
14.4
%
(5) 
14.5
%
 
15.0
%
Client asset metrics ($ in billions)
 
As of
 
% change from
 
 
December 31,
2017
 
December 31,
2016
 
September 30,
2017
 
December 31,
2016
 
September 30,
2017
Client assets under administration
 
$
727.2

 
$
616.9

 
$
692.9

 
18%
 
5%
Private Client Group assets under administration
 
$
692.1

 
$
585.6

 
$
659.5

 
18%
 
5%
Private Client Group assets in fee-based accounts
 
$
316.7

 
$
240.2

 
$
294.5

 
32%
 
8%
Financial assets under management
 
$
130.3

 
$
79.7

 
$
96.4

 
63%
 
35%
Clients’ domestic cash balances (10)
 
$
44.3

 
$
46.1

 
$
43.0

 
(4)%
 
3%
Private Client Group financial advisors
 
As of
 
 
December 31,
2017
 
December 31,
2016
 
September 30,
2017
Employees
 
3,038

 
2,985

 
3,041

Independent contractors
 
4,499

(11) 
4,143

 
4,305

Total advisors
 
7,537

 
7,128

 
7,346

Raymond James Bank ($ in thousands)
 
For the period ended
 
 
December 31,
2017
 
December 31,
2016
 
September 30,
2017
Total assets (12)
 
$
21,866,592

 
$
18,159,566

 
$
20,882,722

Total equity
 
$
1,821,615

 
$
1,721,617

 
$
1,823,342

Bank loans, net
 
$
17,697,298

 
$
15,828,752

 
$
17,006,795

Bank loan loss provision/(benefit)
 
$
1,016

 
$
(1,040
)
 
$
(110
)
Net charge-offs/(recoveries)
 
$
94

 
$
(1,602
)
 
$
1,606

Allowance for loan losses
 
$
191,269

 
$
197,680

 
$
190,442

Allowance for loan losses (as % of loans)
 
1.08
%
 
1.25
%
 
1.11
%
Total nonperforming assets
 
$
41,632

 
$
69,127

 
$
43,699

Nonperforming assets (as % of total assets)
 
0.19
%
 
0.38
%
 
0.21
%
Total criticized loans (13)
 
$
235,809

 
$
222,766

 
$
264,664

Criticized loans (as % of loans)
 
1.32
%
 
1.39
%
 
1.54
%
 
 
 
 
 
 
 
RJ Bank capital ratios:
 
 
 
 
 
 
Tier 1 capital ratio
 
12.2
%
(5) 
12.5
%
 
12.5
%
Total capital ratio
 
13.4
%
(5) 
13.7
%
 
13.8
%
Tier 1 leverage ratio
 
8.6
%
(5) 
9.7
%
 
8.9
%


Please refer to the footnotes at the end of this press release for additional information.
8



Raymond James Bank
Net Interest Analysis
(Unaudited)

 
 
 
 
 
 
 
 
 
 
 
Three months ended
 
 
December 31, 2017
 
December 31, 2016
 
September 30, 2017
$ in thousands
 
Average
balance
 
Interest
inc./exp.
 
Average
yield/cost
 
Average
balance
 
Interest
inc./exp.
 
Average
yield/cost
 
Average
balance
 
Interest
inc./exp.
 
Average
yield/cost
Interest-earning banking assets:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash
 
$
1,354,464

 
$
4,432

 
1.30
%
 
$
905,877

 
$
1,244

 
0.54
%
 
$
992,646

 
$
3,100

 
1.24
%
Available-for-sale securities
 
2,168,610

 
10,143

 
1.87
%
 
872,859

 
3,077

 
1.41
%
 
2,018,890

 
9,433

 
1.87
%
Loans, net of unearned income:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Loans held for investment:
 
 
 
 
 
 
 
 
 
 
 


 
 
 
 
 
 
Commercial and industrial loans
 
7,413,409

 
73,792

 
3.89
%
 
7,477,477

 
71,306

 
3.75
%
 
7,326,719

 
72,247

 
3.86
%
Commercial real estate (CRE) construction loans
 
140,472

 
1,723

 
4.80
%
 
132,506

 
1,505

 
4.44
%
 
120,400

 
1,455

 
4.73
%
CRE loans
 
3,036,603

 
28,759

 
3.71
%
 
2,549,914

 
22,254

 
3.42
%
 
3,042,657

 
29,472

 
3.79
%
Tax-exempt loans (14)
 
1,039,814

 
6,706

 
3.42
%
 
808,160

 
5,246

 
3.99
%
 
984,786

 
6,362

 
3.98
%
Residential mortgage loans
 
3,245,333

 
24,790

 
3.06
%
 
2,559,074

 
18,564

 
2.84
%
 
3,047,822

 
23,126

 
3.03
%
Securities-based loans
 
2,471,054

 
23,240

 
3.68
%
 
1,951,644

 
15,389

 
3.09
%
 
2,332,112

 
21,452

 
3.60
%
Loans held for sale
 
115,882

 
1,010

 
3.46
%
 
180,052

 
1,261

 
2.81
%
 
173,527

 
1,440

 
3.35
%
Total loans, net
 
17,462,567

 
160,020

 
3.65
%
 
15,658,827

 
135,525

 
3.47
%
 
17,028,023

 
155,554

 
3.67
%
FHLB stock, Federal Reserve Bank of Atlanta stock, and other
 
130,817

 
1,400

 
4.25
%
 
171,818

 
928

 
2.14
%
 
185,559

 
1,250

 
2.68
%
Total interest-earning banking assets
 
21,116,458

 
$
175,995

 
3.32
%
 
17,609,381

 
$
140,774

 
3.21
%
 
20,225,118

 
$
169,337

 
3.36
%
Total interest-bearing banking liabilities
 
19,377,759

 
$
12,956

 
0.26
%
 
15,988,180

 
$
6,502

 
0.16
%
 
18,483,961

 
$
12,845

 
0.27
%
Excess of interest-earning banking assets over interest-bearing banking liabilities/net interest income
 
$
1,738,699

 
$
163,039

 
 
 
$
1,621,201

 
$
134,272

 
 
 
$
1,741,157

 
$
156,492

 
 
Net interest margin (net yield on interest-earning banking assets)
 
 

 
 

 
3.08
%
 
 

 
 

 
3.06
%
 
 
 
 
 
3.11
%


Please refer to the footnotes at the end of this press release for additional information.
9


Raymond James Financial, Inc.
Reconciliation of GAAP measures to non-GAAP measures
(Unaudited)

We utilize certain non-GAAP calculations as additional measures to aid in, and enhance, the understanding of our financial results and related measures. We believe that the non-GAAP measures provide useful information by excluding certain material items that may not be indicative of our core operating results. We believe that these non-GAAP measures will allow for better evaluation of the operating performance of the business and facilitate a meaningful comparison of our results in the current period to those in prior and future periods. In the case of tangible book value per share, we believe that this measure is meaningful as it is a measure we and investors use to assess capital strength. The non-GAAP financial information should be considered in addition to, not as a substitute for, measures of financial performance prepared in accordance with GAAP. In addition, our non-GAAP measures may not be comparable to similarly titled non-GAAP measures of other companies. The following table provides a reconciliation of GAAP measures to non-GAAP measures for the periods which include non-GAAP adjustments.
 
 
Three months ended
$ in thousands, except per share amounts
 
December 31,
2017
 
December 31,
2016
 
September 30,
2017
Net income (3)
 
$
118,842

 
$
146,567

 
$
193,489

Non-GAAP adjustments:
 
 
 
 
 
 
Acquisition-related expenses (15)
 
3,927

 
12,666

 
877

Losses on extinguishment of debt (16)
 
—

 
—

 
37,464

Jay Peak settlement (17)
 
—

 
30,000

 
—

Sub-total pre-tax non-GAAP adjustments
 
3,927

 
42,666

 
38,341

Tax effect on non-GAAP adjustments above
 
(1,100
)
 
(12,365
)
 
(14,570
)
Discrete impact of the Tax Act (18)
 
117,169

 
—

 
—

Total non-GAAP adjustments, net of tax
 
119,996

 
30,301

 
23,771

Adjusted net income
 
$
238,838

 
$
176,868

 
$
217,260

 
 
 
 
 
 
 
Pre-tax income (3)
 
$
311,243

 
$
206,379

 
$
278,440

Pre-tax non-GAAP adjustments (as detailed above)
 
3,927

 
42,666

 
38,341

Adjusted pre-tax income
 
$
315,170

 
$
249,045

 
$
316,781

Pre-tax margin on net revenues (9)
 
18.0
%
 
13.8
%
 
16.5
%
Adjusted pre-tax margin on net revenues (9)
 
18.3
%
 
16.7
%
 
18.7
%
 
 
 
 
 
 
 
Earnings per common share:
 
 
 
 
 
 
Basic
 
$
0.82

 
$
1.03

 
$
1.34

Diluted
 
$
0.80

 
$
1.00

 
$
1.31

Adjusted earnings per common share:
 
 
 
 
 
 
Adjusted basic
 
$
1.65

 
$
1.24

 
$
1.51

Adjusted diluted
 
$
1.61

 
$
1.21

 
$
1.47

 
 
 
 
 
 
 
Average equity (19)
 
$
5,639,231

 
$
4,998,712

 
$
5,485,493

Adjusted average equity (19)
 
$
5,699,229

 
$
5,054,001

 
$
5,497,378

Return on equity (7)
 
8.4
%
 
11.7
%
 
14.1
%
Adjusted return on equity (7)
 
16.8
%
 
14.0
%
 
15.8
%
Total equity (3)
 
$
5,696,748

 
$
5,080,877

 
$
5,581,713

Non-GAAP adjustments:
 
 
 
 
 
 
Goodwill and identifiable intangible assets, net of related deferred taxes
 
624,655

 
469,336

 
454,818

Tangible total equity
 
$
5,072,093

 
$
4,611,541

 
$
5,126,895

Common shares outstanding
 
145,154

 
142,930

 
144,097

Book value per share (6)
 
$
39.25

 
$
35.55

 
$
38.74

Tangible book value per share (6)

 
$
34.94

 
$
32.26

 
$
35.58

Effective tax rate:
 
 
 
 
 
 
For the three months ended December 31, 2017                           ($ in thousands)
 
Pre-tax income including noncontrolling interests
 
Provision for income taxes
 
Effective tax rate
 
 
$
311,684

 
$
192,401

 
61.7
%
Less: discrete impact of the Tax Act (18)
 
 
 
117,169

 
 
As adjusted for discrete impact of the Tax Act
 

 
$
75,232

 
24.1
%

Please refer to the footnotes at the end of this press release for additional information.
10


Footnotes

1.
These are non-GAAP measures. See the schedule on the previous page of this release for a reconciliation of our non-GAAP measures to the most directly comparable GAAP measures and for more information on these measures.

2.
Our U.S. federal statutory tax rate will be 24.5% for the fiscal year ended September 30, 2018, which reflects a blended federal statutory rate of 35% for the fiscal first quarter and 21% for the remaining three fiscal quarters. 

3.
Excludes noncontrolling interests.

4.
The Other segment includes the results of our private equity activities, as well as certain corporate overhead costs of Raymond James Financial, Inc., including the interest costs on our public debt, losses on extinguishment of debt and the acquisition and integration costs associated with certain acquisitions.

5.
Estimated.

6.
Computed by dividing total equity attributable to Raymond James Financial, Inc. by the number of common shares outstanding at the end of each respective period or, in the case of tangible book value, computed by dividing tangible total equity by the number of common shares outstanding at the end of each respective period. Tangible total equity is defined as total equity attributable to Raymond James Financial, Inc. less goodwill and intangible assets, net of related deferred taxes.

7.
Computed by dividing annualized net income attributable to Raymond James Financial, Inc. by average equity for each respective period or, in the case of adjusted return on equity, computed by dividing annualized adjusted net income attributable to Raymond James Financial, Inc. by adjusted average equity for each respective period.

8.
Computed by dividing compensation, commissions and benefits expense by net revenues for each respective period.

9.
Computed by dividing pre-tax income attributable to Raymond James Financial, Inc. by net revenues for each respective period or, in the case of adjusted pre-tax margin on net revenues, computed by dividing adjusted pre-tax income attributable to Raymond James Financial, Inc. by net revenues for each respective period.

10.
Domestic broker-dealer client cash balances are deposited or invested in the Raymond James Bank Deposit Program, client interest program and/or money market funds, depending on the clients’ elections.

11.
Includes 126 registered individuals who met the requirements to be classified as financial advisors in the current quarter following our periodic review procedures.

12.
Includes affiliate deposits.

13.
Represents the loan balance for all loans within the held for investment loan portfolio in the Special Mention, Substandard, Doubtful and Loss classifications as utilized by the banking regulators. In accordance with its accounting policy, RJ Bank does not have any loan balances within the Loss classification as loans or any portion thereof, which are considered to be uncollectible, are charged-off prior to assignment to this classification.

14.
The average yield is presented on a tax-equivalent basis for each respective period.

15.
Represents acquisition-related expenses associated with our current year acquisition of Scout Investments and its Reams Asset Management division as well as our 2016 acquisitions of the U.S. Private Client Services unit of Deutsche Bank Wealth Management and MacDougall, MacDougall & MacTier, Inc.

16.
Losses on extinguishment of debt include a make-whole premium and the acceleration of unamortized debt issuance costs associated with the early extinguishment of our 8.60% Senior Notes due 2019.

17.
Other expenses include legal expenses associated with the Jay Peak settlement. For further information see our Annual Report on Form 10-K for the year ended September 30, 2017 (available at www.sec.gov).

18.
The discrete impact of the Tax Act includes the remeasurement of U.S. deferred tax assets at the lower enacted corporate tax rate and, to a lesser extent, a one-time transition tax on deemed repatriated earnings of foreign subsidiaries.

19.
Computed by adding the total equity attributable to Raymond James Financial, Inc. as of the date indicated to the prior quarter-end total, and dividing by two. Adjusted average equity is computed by adjusting for the impact on average equity of the non-GAAP adjustments, as applicable for each respective period.


11