Raymond James Financial(RJF)2024-11-26 21:53Regulatory Compliance and Capital Requirements - Raymond James Bank and TriState Capital Bank are categorized as well-capitalized as of September 30, 2024[96] - The FDIC's deposit insurance covers up to 10 billion in assets, including Raymond James Bank and TriState Capital Bank, is based on a scorecard method evaluating financial performance and stress resilience[92] - Failure to meet capital requirements could result in constraints on distributions, including limitations on dividend payments and stock repurchases for RJF, Raymond James Bank, and TriState Capital Bank[86] - Raymond James Ltd. in Canada provides investor protection up to 1 million CAD per client, with additional coverage of 1 million CAD for certain accounts[114] - U.K. subsidiaries are regulated by the FCA and benefit from the Financial Ombudsman Service and the Financial Services Compensation Scheme[115] - Raymond James Corporate Finance GmbH in Germany is licensed by BaFin and must comply with capital, liquidity, governance, and business conduct requirements[116] - U.S. investment advisory operations are regulated under the Investment Advisers Act of 1940, with asset managers registered with the SEC[117] - The U.S. Bank Secrecy Act mandates client identification verification and monitoring of transactions to combat money laundering and terrorism[118] - The U.S. Treasury's Office of Foreign Assets Control enforces economic and trade sanctions programs[119] - The California Privacy Rights Act (CPRA) became enforceable in 2023, requiring additional disclosures and data subject rights for California residents[125] - The E.U. and U.K. GDPR imposes strict data protection compliance requirements for companies processing personal data of E.U. and U.K. residents[126] - SEC amendments to Regulation S-P require broker-dealers to notify individuals of unauthorized access to sensitive customer information within 30 days, effective December 21, 2025[127] - The E.U. Artificial Intelligence Act poses challenges for transparency, fairness, and accountability in AI use[128] Credit Risk and Allowance for Credit Losses - The company's allowance for credit losses on loans was 457 million as of September 30, 2024, with a portion related to the Raymond James Bank allowance for credit losses (ACL) on C&I and CRE portfolio segments[567] - The collective ACL is estimated using a current expected credit losses methodology based on historical losses, current conditions, and economic forecasts[567] - The company uses third-party historical information combined with macroeconomic variables to estimate probability of default (PD) and loss given default (LGD)[569] - For the C&I portfolio segment, the company reverts to historical loss information over a one-year period using a straight-line reversion approach after the forecast period[569] - For the CRE portfolio segment, the company incorporates a forecast of macroeconomic variables over the remaining life of the assets[569] - The assessment of the September 30, 2024 collective ACL on Raymond James Bank loans related to the C&I and CRE portfolio segments was identified as a critical audit matter[570] - The audit involved evaluating the collective ACL methodology, including the methods and models used to estimate PDs and LGDs, and their significant assumptions[570] - The audit also included evaluating the qualitative factors by portfolio segment and the conceptual soundness and performance of the PD and LGD models[570] - Credit risk professionals assisted in evaluating the company's collective ACL methodology for compliance with U.S. GAAP and assessing the conceptual soundness of the models[572] - The sufficiency of the audit evidence was assessed by evaluating the cumulative results of the audit procedures and the qualitative aspects of the company's accounting practices[574] - The allowance for credit losses (ACL) is estimated using multiple methodologies, considering factors like economic conditions and collateral value[663][665] - Credit losses are charged off against the allowance, with recoveries credited back, and adjustments made in earnings each reporting period[666] - The allowance for credit losses on loans is estimated using credit risk models incorporating macroeconomic indicators like GDP and unemployment rates[667] - Loans are evaluated collectively or individually based on risk characteristics, with allowances comprising quantitative and qualitative components[668][669] - The allowance for credit losses on unfunded lending commitments is estimated based on expected funding probabilities and portfolio mix[675] - Loans to financial advisors are evaluated using credit risk models, considering factors like affiliation status and repayment ability[676] - Available-for-sale securities are assessed for credit losses quarterly, with zero credit losses expected for U.S. government-backed securities[677][678] Financial Performance and Metrics - Total assets increased to 82,992 million in September 2024 from 2,068 million, up 18.9% from 14,923 million, a 14.9% increase from 4,232 million in 2024, a 12.9% increase from 8,213 million in 2024, up 12.5% from 9.70 in 2024 from 56,010 million in September 2024, up 3.3% from 469 million, a significant improvement from 11,894 million in September 2024, up 16.5% from 2,068 million in 2024, up from 1,509 million in 2022[578] - Total equity attributable to Raymond James Financial, Inc. rose to 10,214 million in 2023 and 2,155 million in 2024, a significant improvement from a net cash used in operating activities of 1,811 million in 2024, down from 6,269 million in 2022[579] - Repurchases of common stock and share-based awards totaled 862 million in 2023 and 383 million in 2024, slightly higher than 277 million in 2022[579] - Proceeds from FHLB advances were 3,200 million in 2023 but up from 1,350 million in 2024, compared to 967 million in 2022[579] - Net cash used in investing activities was 274 million in 2023 but lower than 438 million in 2024, down from 5,879 million in 2022[579] - Net increase in cash and cash equivalents for the year ended September 2024 was 2.111 billion in 2023 and a decrease of 14.348 billion at the end of September 2024, up from 14.659 billion in 2022[580] - Cash paid for interest in 2024 was 1.31 billion in 2023 and $323 million in 2022[580] Revenue Recognition and Financial Instruments - Asset management and related administrative fees are recognized monthly based on the value of client assets, which are impacted by market fluctuations and net inflows or outflows[590] - Brokerage revenues include upfront commissions and trailing commissions, with trailing commissions recognized when it is probable that a significant reversal will not occur[594] - Principal transactions revenues include gains and losses on inventories of fixed income products, equity securities, and derivatives[596] - Investment banking revenues are recognized based on the amount of the transaction and the role in the transaction, with underwriting revenues recognized on trade date[599] - Cash equivalents include money market funds or highly liquid investments with maturities of three months or less[600] - Assets segregated for regulatory purposes and restricted cash include cash, cash equivalents, and highly liquid securities such as U.S. Treasuries[603] - Reverse repurchase agreements and repurchase agreements are accounted for as collateralized agreements and financings, respectively, with collateral values evaluated daily to ensure market value sufficiency[605] - Securities borrowed transactions require cash deposits generally in excess of the market value of securities borrowed, while securities loaned transactions receive cash in excess of the market value of securities loaned[606] - Financial instruments are classified into three levels based on fair value hierarchy: Level 1 (highly liquid instruments), Level 2 (observable inputs), and Level 3 (unobservable inputs requiring significant judgment)[610][611] - Trading assets and liabilities are recorded at fair value, with Level 1 instruments valued using quoted prices in active markets[616] - Available-for-sale securities, primarily agency MBS and U.S. Treasuries, are classified within Level 2 of the fair value hierarchy, with fair values determined using third-party pricing services[621] - Derivative assets and liabilities are recorded at fair value, with netting by counterparty allowed under master netting agreements to reduce credit exposure[623] - Interest rate derivatives are classified within Level 2 of the fair value hierarchy, with fair values obtained from internal or third-party pricing models[626] - Foreign-exchange derivatives, primarily forward contracts, are classified within Level 2 of the fair value hierarchy, with fair values determined using third-party pricing services[629] - Private equity investments are measured at fair value, with the majority utilizing the NAV of the fund as a practical expedient and the remainder using Level 3 valuation techniques[632] - Fractional shares held by clients are included in "Other assets" and recorded at fair value based on quoted prices in active markets, classified within Level 1 of the fair value hierarchy[633] - Brokerage client receivables are reported at their outstanding principal balance, net of any allowance for credit losses, and are generally collateralized by securities owned by clients[634] - Other receivables, net, primarily include receivables from brokers, dealers, and clearing organizations, with minimal credit risk due to the low probability of clearing organization default[635] - Bank loans held for investment are recorded at unpaid principal balance plus premiums or less discounts, net of deferred fees and costs, and include securities-based loans, commercial and industrial loans, and residential mortgage loans[637] - Residential mortgage loans held for sale are carried at the lower of cost or estimated fair value, with fair values estimated using observable prices from counterparties for similar loans[641] - Small Business Administration (SBA) loans are accounted for at the lower of cost or estimated fair value, with fair values determined based on committed sales price, third-party price quotes, or third-party pricing services[642] - Corporate loans, including commercial and industrial loans, are designated as held for investment upon inception and recorded in loans receivable, with fair value estimates based on collateral value less selling costs or discounted cash flows[644] - Unfunded lending commitments are secured by collateral such as marketable securities, accounts receivable, inventory, and real estate, with the allowance for potential credit losses included in "Other payables"[645][648] - Loan modifications to borrowers experiencing financial difficulty may involve principal forgiveness, interest rate reduction, payment delay, or term extension, and are subject to nonaccrual policies[650] - Nonperforming assets include nonperforming loans and other real estate owned, with loans placed on nonaccrual status when full payment of principal and interest is in doubt or the loan is past due 90 days or more[652] - Loans to financial advisors are considered past due after 30 days of delinquency and placed on nonaccrual status if full payment is in doubt or 180 days delinquent[661] - The company evaluates loans for potential write-downs when full collection is unlikely, with charge-offs taken against the allowance for credit losses[662] Asset Management and Valuation - Goodwill is evaluated for impairment annually or when events indicate potential impairment, using qualitative or quantitative assessments[683][684] - Company-owned life insurance policies are recorded at cash surrender value as determined by the insurer, used to fund non-qualified deferred compensation plans and other employee benefit plans[689] - Investments in Low-Income Housing Tax Credit (LIHTC) funds and similar structures are consolidated and included in "Other assets" on the Consolidated Statements of Financial Condition[691] - The Bank segment holds tax-beneficial investments, including LIHTC funds managed by RJAHI, also included in "Other assets"[692] - Property and equipment are depreciated using the straight-line method over estimated useful lives: buildings (15-40 years), furniture (3-10 years), software (2-10 years), and leasehold improvements (lesser of useful life or lease term)[693] - Internally developed software costs are capitalized when they result in additional functionality, while preliminary and post-project activities are expensed as incurred[693] - Lease liabilities are recorded at the present value of lease payments, discounted using the incremental borrowing rate or imputed lease rate[697] - Bank deposits include money market accounts, savings accounts, and certificates of deposit, with interest rates primarily determined by market rates[698] - Contingent liabilities are recognized when a loss is probable and reasonably estimable, with the most likely amount within the range accrued[699] - Legal and regulatory liabilities are recorded in "Other payables" and adjusted periodically based on management's judgment[700]