RAYMOND JAMES FINANCIAL, INC. 
INDEX
PAGE
Factors affecting "forward-looking statements" 43 Introduction 43 Executive overview 43
Reconciliation of non-GAAP financial measures to GAAP financial measures
45 Segments 46 Net interest analysis 47 Results of OperationsPrivate Client Group 50 Capital Markets 53 Asset Management 54Raymond James Bank 57 Other 58 Certain statistical disclosures by bank holding companies
59
Statement of financial condition analysis
59
Liquidity and capital resources
60
Regulatory
65
Critical accounting estimates
65
Recent accounting developments 66
Risk management 66
42--------------------------------------------------------------------------------RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Management's Discussion and Analysis
FACTORS AFFECTING "FORWARD-LOOKING STATEMENTS"
Certain statements made in this Quarterly Report on Form 10-Q may constitute "forward-looking statements" under the Private Securities Litigation Reform Act of 1995. Forward-looking statements include information concerning future strategic objectives, business prospects, anticipated savings, financial results (including expenses, earnings, liquidity, cash flow and capital expenditures), anticipated timing and benefits of our acquisitions (including our acquisition ofCharles Stanley completed onJanuary 21, 2022 , as well as our proposed acquisition of TriState Capital), and our level of success in integrating acquired businesses, anticipated results of litigation, regulatory developments, impacts of the COVID-19 pandemic, effects of accounting pronouncements, and 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, is 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 theSEC from time to time, including our most recent Annual Report on Form 10-K and subsequent Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, which are available at www.raymondjames.com and theSEC's website at www.sec.gov. We expressly disclaim any obligation to update any forward-looking statement in the event it later turns out to be inaccurate, whether as a result of new information, future events or otherwise.
INTRODUCTION
The following Management's Discussion and Analysis of Financial Condition and
Results of Operations ("MD&A") is intended to help the reader understand the
results of our operations and financial condition. This MD&A is provided as a
supplement to, and should be read in conjunction with, our condensed
consolidated financial statements and accompanying notes to condensed
consolidated financial statements. Where "NM" is used in various percentage
change computations, the computed percentage change has been determined to be
not meaningful.
We operate as a financial holding company and bank holding company. Results in
the businesses in which we operate are highly correlated to general economic
conditions and, more specifically, to the direction of the U.S. equity and fixed
income markets, changes in interest rates, market volatility, corporate and
mortgage lending markets and commercial and residential credit trends. Overall
market conditions, economic, political and regulatory trends, and industry
competition are among the factors which could affect us and which are
unpredictable and beyond our control. These factors affect the financial
decisions made by market participants, including investors, borrowers, and
competitors, impacting their level of participation in the financial markets.
These factors also impact the level of investment banking activity and asset
valuations, which ultimately affect our business results.
EXECUTIVE OVERVIEW
Three months ended
For our fiscal first quarter of 2022, we generated net revenues of$2.78 billion , an increase of 25% compared with the prior-year quarter, and pre-tax income of$558 million , an increase of 40%. Our net income of$446 million was 43% higher than the prior-year quarter and our earnings per diluted share were$2.10 , reflecting a 42% increase. Our annualized return on equity ("ROE") was 21.2%, compared with 17.2% for the prior-year quarter, and annualized return on tangible common equity ("ROTCE") was 23.4%(1), compared with 19.0%(1) for the prior-year quarter. The significant increase in net revenues compared with the prior-year quarter was primarily driven by higher asset management and related administrative fees, primarily attributable to higher PCG client assets in fee-based accounts, and strong investment banking revenues, which also increased compared with the prior-year quarter.
(1) ROTCE is a non-GAAP financial measure. Please see the "Reconciliation of non-GAAP financial measures to GAAP financial measures" in this MD&A for a reconciliation of this non-GAAP financial measure to the most directly comparable GAAP measure, and for other important disclosures.
43
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RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
Management's Discussion and Analysis
Compensation, commissions and benefits expense increased $384 million , or 26%,
primarily attributable to the growth in revenues and pre-tax income compared
with the prior-year quarter. Our compensation ratio, or the ratio of
compensation, commissions and benefits expense to net revenues, was 67.7%,
compared with 67.5% for the prior-year quarter.
Non-compensation expenses increased $16 million , or 5%, primarily due to
increases in communications and information processing and business development
expenses, as well as higher investment sub-advisory fees. Partially offsetting
these increases was a $25 million decrease in the bank loan provision for credit
losses, which was a benefit of $11 million in the current quarter compared with
a provision of $14 million in the prior-year quarter.
Our effective income tax rate was 20.1% for our fiscal first quarter of 2022, a
decrease from 21.8% for the prior-year quarter. The decrease in the effective
tax rate from the prior-year quarter was primarily due to a larger tax benefit
recognized during the current quarter related to share-based compensation that
vested during the period, partially offset by lower valuation gains on our
corporate-owned life insurance portfolio compared with the prior-year quarter.
As of December 31, 2021 , our total capital ratio of 27.0% and tier 1 leverage
ratio of 12.1% were each more than double the regulatory requirement to be
considered well-capitalized. We also continue to have substantial liquidity,
with $1.4 billion (1) of cash at the parent company, which includes cash loaned
to RJ&A. We expect to continue to be opportunistic in deploying our capital in
fiscal 2022, through a combination of organic growth and acquisitions, as
evidenced by our acquisition of Charles Stanley , which we completed on January
21, 2022 , as well as our proposed acquisition of TriState Capital, which we
expect to close later in fiscal 2022. In December 2021 , our Board of Directors
increased the quarterly dividend 31% to $0.34 per share and authorized share
repurchases of up to $1 billion , which replaced the previous authorization. Due
to regulatory restrictions following the announcement of our pending acquisition
of TriState Capital, we do not expect to repurchase common shares until after
closing; however, the increase in the authorization reflects our current
intention to repurchase shares after closing. As of February 4, 2022 , $1 billion
remained available under the share repurchase authorization.
We remain well-positioned entering our fiscal second quarter, with $1.26
trillion of client assets under administration as of December 2021 as well as
strong financial advisor recruiting activity and a robust investment banking
pipeline. With clients' domestic cash sweep balances of $73.5 billion as of
December 2021 , we believe we are also well-positioned for anticipated increases
in short-term interest rates given the exposure to short-term interest rates for
both our RJBDP balances with third-party banks and a significant portion of our
assets at Raymond James Bank . However, we also expect to continue to face
economic uncertainty, including that arising from inflation, supply chain
complications, labor shortages, and uncertainty around U.S. economic policy. In
addition, although the economy has continued to improve since the beginning of
the COVID-19 pandemic, the pace of recovery in the future is uncertain due to
concerns related to the pandemic, including the spread of variants. As a result,
we may experience volatility in asset management fees, brokerage revenues and
investment banking revenues. Although our results during the quarter were
positively impacted by a benefit for credit losses related to our bank loan
portfolio, net loan growth should result in additional provisions for bank loan
losses in future periods and/or future market deterioration could result in
increased provisions in future periods. In addition, although we have been
focused on the management of expenses, we expect that expenses will continue to
increase in fiscal 2022, as business and event-related travel continue to
increase and as we continue to make investments in our people and technology to
support our growth.
(1) For additional information, please see the "Liquidity and capital resources - Sources of liquidity" section in this MD&A.
44
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RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
Management's Discussion and Analysis
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES TO GAAP FINANCIAL MEASURES
We utilize certain non-GAAP financial measures, including ROTCE, as additional
measures to aid in, and enhance, the understanding of our financial results and
related measures. We believe that ROTCE is meaningful to investors as this
measure facilitates comparison of our results to the results of other companies.
Non-GAAP financial measures should be considered in addition to, and not as a
substitute for, measures of financial performance prepared in accordance with
GAAP. In addition, our non-GAAP financial measures may not be comparable to
similarly titled non-GAAP financial measures of other companies. The following
tables provide a reconciliation of non-GAAP financial measures to the most
directly comparable GAAP financial measures for the periods indicated.
Three months ended December 31,
$ in millions 2021 2020
Average equity $ 8,423 $ 7,239
Less:
Average goodwill and identifiable intangible assets, net 878 717
Average deferred tax liabilities, net (64) (45)
Average tangible common equity $ 7,609 $ 6,567
Return on equity 21.2 % 17.2 %
Return on tangible common equity 23.4 % 19.0 %
Average equity is computed by adding the total 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. Tangible common equity is computed by subtracting goodwill and identifiable
intangible assets, net, along with the associated deferred tax liabilities, from
total equity attributable to RJF.
ROE is computed by dividing annualized net income for the period indicated by
average equity for each respective period or, in the case of ROTCE, computed by
dividing annualized net income by average tangible common equity for each
respective period.
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RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
Management's Discussion and Analysis
SEGMENTS
We currently operate through the following five segments: PCG; Capital Markets;
Asset Management;
The following table presents our consolidated and segment net revenues and pre-tax income/(loss) for the periods indicated.
Three months ended December 31,
$ in millions 2021 2020 % change
Total company
Net revenues $ 2,781 $ 2,222 25 %
Pre-tax income $ 558 $ 399 40 %
Private Client Group
Net revenues $ 1,839 $ 1,467 25 %
Pre-tax income $ 195 $ 140 39 %
Capital Markets
Net revenues $ 614 $ 452 36 %
Pre-tax income $ 201 $ 129 56 %
Asset Management
Net revenues $ 236 $ 195 21 %
Pre-tax income $ 107 $ 83 29 %
Raymond James Bank
Net revenues $ 183 $ 167 10 %
Pre-tax income $ 102 $ 71 44 %
Other
Net revenues $ (15) $ 4 NM
Pre-tax loss $ (47) $ (24) (96) %
Intersegment eliminations
Net revenues $ (76) $ (63) (21) %
46--------------------------------------------------------------------------------RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Management's Discussion and Analysis
NET INTEREST ANALYSIS
In response to macroeconomic concerns resulting from the COVID-19 pandemic, theFederal Reserve decreased its benchmark short-term interest rate inMarch 2020 to a range of 0-0.25%. These near-zero short-term interest rates have negatively impacted our net interest income, as well as the fee income 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) which are also sensitive to changes in interest rates. TheFederal Reserve has recently indicated that it intends to increase its short-term interest rates some time during our fiscal 2022 in response to inflationary pressures and given the improving economic and employment conditions since the beginning of the COVID-19 pandemic. Given the relationship between our interest-sensitive assets and liabilities (primarily held in our PCG,Raymond James Bank and Other segments) and the nature of fees we earn from third-party banks on the RJBDP, 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. As a result, we believe we are well-positioned for our net interest earnings to be favorably impacted by any increase in short-term rates that may arise. Conversely, any decreases in short-term interest rates and/or increases in the deposit rates paid to clients would generally have a negative impact on our earnings. Based on our high concentration of floating-rate assets that are funded from clients' domestic cash sweep balances, we estimate (based on static balances as ofDecember 31, 2021 ) that an instantaneous 100 basis point increase in short-term interest rates would result in incremental pre-tax income of approximately$570 million annually, with approximately 65% reflected as net interest income and 35% reflected as account and service fees. The realization of such amounts is dependent upon a number of key assumptions and actual results may differ materially from our estimates. Refer to the discussion of our net interest income within the "Management's Discussion and Analysis - Results of Operations" of our PCG,Raymond James Bank , and Other segments, where applicable. Also refer to "Management's Discussion and Analysis - Results of Operations -Private Client Group - Clients' domestic cash sweep balances" for further information on the RJBDP. 47 --------------------------------------------------------------------------------RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Management's Discussion and Analysis The following table presents our consolidated average interest-earning asset and interest-bearing liability balances, interest income and expense and the related yields and rates. Three months endedDecember 31, 2021 compared with the three months endedDecember 31, 2020 Three months ended December 31, 2021 2020 Average Annualized Average Annualized daily average daily average $ in millions balance Interest rate balance Interest rate Interest-earning assets: Cash and cash equivalents $ 6,076$ 3 0.18 %$ 5,712 $ 4 0.25 % Assets segregated for regulatory purposes and restricted cash 13,011 4 0.12 % 5,816 3 0.21 % Available-for-sale securities 8,511 22 1.02 % 7,478 23 1.21 % Brokerage client receivables 2,484 21 3.35 % 2,082 18 3.48 % Bank loans, net of unearned income and deferred expenses: Loans held for investment: C&I loans 8,581 55 2.49 % 7,535 51 2.63 % CRE loans 2,941 20 2.67 % 2,582 17 2.59 % REIT loans 1,133 7 2.56 % 1,235 8 2.43 % Tax-exempt loans 1,297 8 3.19 % 1,237 8 3.35 % Residential mortgage loans 5,451 37 2.68 % 5,001 35 2.77 % SBL and other 6,289 35 2.20 % 4,286 25 2.29 % Loans held for sale 239 2 2.94 % 141 1 2.94 % Total bank loans, net 25,931 164 2.52 % 22,017 145 2.62 % All other interest-earning assets 2,376 11 1.91 % 2,288 10 2.00 % Total interest-earning assets$ 58,389 $ 225 1.53 %$ 45,393 $ 203 1.78 % Interest-bearing liabilities: Bank deposits: Savings, money market and NOW accounts$ 31,894 $ 2 0.02 %$ 26,637 $ 1 0.02 % Certificates of deposit 843 4 1.87 % 952 5 1.93 % Total bank deposits 32,737 6 0.07 % 27,589 6 0.09 % Brokerage client payables 14,300 1 0.03 % 7,324 1 0.06 % Other borrowings 857 5 2.20 % 866 5 2.19 % Senior notes payable 2,037 23 4.44 % 2,045 24 4.70 % All other interest-bearing liabilities 650 2 1.16 % 574 2 1.14 % Total interest-bearing liabilities$ 50,581 $ 37 0.28 %$ 38,398 $ 38 0.39 % Net interest income$ 188 $ 165 Firmwide net interest margin (net yield on interest-earning assets) 1.29 % 1.45 % Raymond James Bank net interest margin 1.92 % 2.02 %
Nonaccrual loans are included in the average loan balances in the preceding table. Any payments received for corporate nonaccrual loans are applied entirely to principal. Interest income on residential mortgage nonaccrual loans is recognized on a cash basis.
The yield on tax-exempt loans in the preceding table is presented on a
taxable-equivalent basis utilizing the applicable federal statutory rates for
each of the three months ended
Net interest income increased$23 million , or 14%, compared with the prior-year quarter, as significant growth in average interest-earning assets outweighed the year-over-year decrease in net interest margin. 48 --------------------------------------------------------------------------------RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Management's Discussion and Analysis Increases and decreases in interest income and interest expense result from changes in average balances (volume) of interest-earning assets and interest-bearing liabilities, as well as changes in average interest rates. The following table shows the effect that these factors had on the interest earned on our interest-earning assets and the interest incurred on our interest-bearing liabilities. The effect of changes in volume is determined by multiplying the change in volume by the previous period's average yield/cost. Similarly, the effect of rate changes is calculated by multiplying the change in average yield/cost by the previous period's volume. Changes attributable to both volume and rate have been allocated proportionately. Three months ended December 31, 2021 compared to 2021 Increase/(decrease) due to $ in millions Volume Rate Total Interest income: Interest-earning assets: Cash and cash equivalents $ -$ (1) $ (1) Assets segregated for regulatory purposes and restricted cash 4 (3) 1 Available-for-sale securities 3 (4) (1) Brokerage client receivables 4 (1) 3 Bank loans, net of unearned income and deferred expenses: Loans held for investment: C&I loans 7 (3) 4 CRE loans 2 1 3 REIT loans (1) - (1) Tax-exempt loans - - - Residential mortgage loans 3 (1) 2 SBL and other 12 (2) 10 Loans held for sale 1 - 1 Total bank loans, net 24 (5) 19 All other interest-earning assets 2 (1) 1 Total interest-earning assets$ 37 $ (15) $ 22 Interest expense: Interest-bearing liabilities: Bank deposits: Savings, money market and NOW accounts $ 1 $ -$ 1 Certificates of deposit (1) - (1) Total bank deposits - - - Brokerage client payables 1 (1) - Other borrowings - - - Senior notes payable - (1) (1) All other interest-bearing liabilities - - - Total interest-bearing liabilities $ 1$ (2) $ (1) Change in net interest income$ 36 $ (13) $ 23 49
--------------------------------------------------------------------------------RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Management's Discussion and Analysis
RESULTS OF OPERATIONS - PRIVATE CLIENT GROUP
For an overview of our PCG segment operations, as well as a description of the key factors impacting our PCG results of operations, refer to the information presented in "Item 1 - Business" and "Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations" of our 2021 Form 10-K.
Operating results
Three months ended December 31,
$ in millions 2021 2020 % change
Revenues:
Asset management and related administrative fees$ 1,162 $ 885 31 % Brokerage revenues: Mutual and other fund products 171 148 16 % Insurance and annuity products 111 98 13 % Equities, ETFs and fixed income products 115 107 7 % Total brokerage revenues 397 353 12 % Account and service fees: Mutual fund and annuity service fees 114 94 21 % RJBDP fees: Third-party banks 17 21 (19) % Raymond James Bank 50 43 16 % Client account and other fees 49 32 53 % Total account and service fees 230 190 21 % Investment banking 13 6 117 % Interest income 33 30 10 % All other 7 5 40 % Total revenues 1,842 1,469 25 % Interest expense (3) (2) 50 % Net revenues 1,839 1,467 25 % Non-interest expenses: Financial advisor compensation and benefits 1,187 931 27 % Administrative compensation and benefits 283 249 14 % Total compensation, commissions and benefits 1,470 1,180 25 % Non-compensation expenses: Communications and information processing 71 62 15 % Occupancy and equipment 46 43 7 % Business development 27 16 69 % Professional fees 9 13 (31) % All other 21 13 62 % Total non-compensation expenses 174 147 18 % Total non-interest expenses 1,644 1,327 24 % Pre-tax income$ 195 $ 140 39 % 50
--------------------------------------------------------------------------------RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Management's Discussion and Analysis Selected key metrics PCG client asset balances As of December 31, September 30, December 31, September 30, $ in billions 2021 2021 2020 2020 Assets under administration ("AUA")$ 1,199.8 $ 1,115.4 $ 974.2 $
883.3
Assets in fee-based accounts (1)$ 677.8 $ 627.1 $ 532.7 $
475.3
Percent of AUA in fee-based accounts 56.5 % 56.2 % 54.7 % 53.8 %
(1)A portion of our "Assets in fee-based accounts" is invested in "managed
programs" overseen by our Asset Management segment, specifically our Asset
Management Services division of RJ&A ("AMS"). These assets are included in our
Financial assets under management as disclosed in the "Selected key metrics"
section of our "Management's Discussion and Analysis - Results of Operations -
Asset Management."
Fee-based accounts within our PCG segment are comprised of a wide array of
products and programs that we offer our clients. The majority of assets in
fee-based accounts within our PCG segment are invested in programs for which our
financial advisors provide investment advisory services, either on a
discretionary or non-discretionary basis. Administrative services for such
accounts (e.g., record-keeping) are generally performed by our Asset Management
segment and, as a result, a portion of the related revenue is shared with the
Asset Management segment.
We also offer our clients fee-based accounts that are invested in "managed
programs" overseen by AMS, which is part of our Asset Management segment.
Fee-billable assets invested in managed programs are included in both "Assets in
fee-based accounts" in the preceding table and "Financial assets under
management" in the Asset Management segment. Revenues related to managed
programs are shared by our PCG and Asset Management segments. The Asset
Management segment receives a higher portion of the revenues related to accounts
invested in managed programs, as compared to the portion received for
non-managed programs, as it is performing portfolio management services in
addition to administrative services.
The vast majority of the revenues we earn from fee-based accounts is recorded in
"Asset management and related administrative fees" on our Condensed Consolidated
Statements of Income and Comprehensive Income. Fees received from such accounts
are based on the value of client assets in fee-based accounts and vary based on
the specific account types in which the client invests and the level of assets
in the client relationship. As fees for substantially all of such accounts are
billed based on balances as of the beginning of the quarter, revenues from
fee-based accounts may not be immediately affected by changes in asset values,
but rather the impacts are seen in the following quarter. Assets in fee-based
accounts in this segment increased 8% as of December 31, 2021 compared with
September 30, 2021 , which we expect will have a favorable impact on our related
revenues in our fiscal second quarter of 2022, even after the offsetting effect
of fewer days in the second quarter compared to the first quarter.
PCG AUA increased during the three months ended December 31, 2021 , primarily due
to equity market appreciation as well as strong retention and recruiting of
financial advisors. In addition, PCG assets in fee-based accounts continued to
increase as a percentage of overall PCG AUA due to clients' increased preference
for fee-based alternatives versus transaction-based accounts. As a result of the
continued increase in fee-based accounts as a percentage of total PCG AUA, a
significant portion of our PCG revenues is more directly impacted by market
movements.
Financial advisors
December 31, September 30, December 31, September 30,
2021 2021 2020 2020
Employees 3,447 3,461 3,387 3,404
Independent contractors 5,017 5,021 4,846 4,835
Total advisors 8,464 8,482 8,233 8,239
51--------------------------------------------------------------------------------RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Management's Discussion and Analysis The number of financial advisors as ofDecember 31, 2021 decreased slightly compared toSeptember 30, 2021 as new recruits and trainees that were moved into production roles were outpaced by the number of financial advisors who left the firm, including planned retirements, where assets are generally retained at the firm pursuant to advisor succession plans. Advisor departures due to retirements or advisors choosing to leave the business are typically elevated during the December quarter compared to other quarters. The number of financial advisors included in our financial advisor metric has been negatively impacted over the past several quarters by the transfer of advisors who were previously affiliated with the firm as independent contractors or employees to our Registered Investment Advisor & Custody Services ("RCS") division. Advisors in RCS are not included in our financial advisor metric although their client assets, which were$101.6 billion as ofDecember 31, 2021 , are included in PCG AUA. The recruiting pipeline remains robust across our affiliation options despite a competitive recruiting environment.
Clients' domestic cash sweep balances
As of
December 31, September 30, December 31, September 30,
$ in millions 2021 2021 2020 2020
RJBDP:
Raymond James Bank $ 33,097 $ 31,410 $ 26,697 $ 25,599
Third-party banks 24,316 24,496 26,142 25,998
Subtotal RJBDP 57,413 55,906 52,839 51,597
CIP 16,065 10,762 8,769 3,999
Total clients' domestic cash sweep balances
66,668 $ 61,608 $ 55,596
Three months ended December 31,
2021 2020
Average yield on RJBDP - third-party banks 0.28 % 0.31 %
A significant portion of our clients' cash is included in the RJBDP, a multi-bank sweep program in which clients' cash deposits in their accounts are swept into interest-bearing deposit accounts atRaymond James Bank and various third-party banks. We earn servicing fees for the administrative services we provide related to our clients' deposits that are swept to such banks as part of the RJBDP. The amounts from third-party banks are variable in nature and fluctuate based on client cash balances in the program, as well as the level of short-term interest rates and the interest paid to clients by the third-party banks on balances in the RJBDP. 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 balance at third-party banks. The average yield on RJBDP - third-party banks decreased slightly from the prior-year quarter, reflecting the impact of near-zero short-term interest rates and limited demand for deposits at third-party banks. If demand from third-party banks does not improve from current levels and short-term interest rates do not increase, we could continue to experience downward pressure on this yield or, in the case of an increase in short-term interest rates, may not experience a commensurate increase in this yield. The PCG segment also earns RJBDP servicing fees from theRaymond James Bank segment, which are based on the number of accounts that are swept toRaymond James Bank . The fees from theRaymond James Bank segment are eliminated in consolidation. PCG segment results can be impacted by changes in the allocation of client cash balances between RJBDP balances withRaymond James Bank , RJBDP balances with third-party banks, and CIP, as the PCG segment typically earns different amounts from each of the three client cash destinations, depending on multiple factors. Client cash balances continued to increase as ofDecember 31, 2021 . The growing cash balances combined with reduced capacity at third-party banks that participate in the RJBDP, resulted in a significant increase in cash balances held in CIP, also resulting in a significant increase in our assets segregated for regulatory purposes balance presented on our Condensed Consolidated Statements of Financial Condition.
Three months ended
Net revenues of
Asset management and related administrative fees increased$277 million , or 31%, primarily due to higher assets in fee-based accounts at the beginning of the current-year quarter. 52 --------------------------------------------------------------------------------RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Management's Discussion and Analysis
Brokerage revenues increased
Account and service fees increased$40 million , or 21%, primarily due to an increase in mutual fund service fees resulting from higher average mutual fund assets, as well as incremental client account and other fees resulting from our acquisition ofNWPS Holdings, Inc. at the end of our fiscal first quarter of 2021. Compensation-related expenses increased$290 million , or 25%, primarily due to higher revenues and continued improvement in financial performance, as well as an increase in compensation costs to support our growth.
Non-compensation expenses increased
RESULTS OF OPERATIONS - CAPITAL MARKETS
For an overview of our Capital Markets segment operations, as well as a description of the key factors impacting our Capital Markets results of operations, refer to the information presented in "Item 1 - Business" and "Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations" of our 2021 Form 10-K.
Operating results
Three months ended December 31,
$ in millions 2021 2020 % change
Revenues:
Brokerage revenues:
Fixed income $ 120 $ 131 (8) %
Equity 39 42 (7) %
Total brokerage revenues 159 173 (8) %
Investment banking:
Merger & acquisition and advisory 271 149 82 %
Equity underwriting 97 60 62 %
Debt underwriting 44 46 (4) %
Total investment banking 412 255 62 %
Interest income 5 3 67 %
Tax credit fund revenues 35 16 119 %
All other 5 7 (29) %
Total revenues 616 454 36 %
Interest expense (2) (2) - %
Net revenues 614 452 36 %
Non-interest expenses:
Compensation, commissions and benefits 331 252 31 %
Non-compensation expenses:
Communications and information processing 22 19 16 %
Occupancy and equipment 9 9 - %
Business development 8 9 (11) %
Professional fees 14 13 8 %
Acquisition-related expenses 4 - NM
All other 25 21 19 %
Total non-compensation expenses 82 71 15 %
Total non-interest expenses 413 323 28 %
Pre-tax income $ 201 $ 129 56 %
53--------------------------------------------------------------------------------RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Management's Discussion and Analysis
Three months ended
Net revenues of
Investment banking revenues increased$157 million , or 62%, due to a significant increase in merger & acquisition and advisory revenues and, to a lesser extent, equity underwriting revenues. The significant increase in merger & acquisition and advisory revenues reflected an increase in the number of transactions due to continued high levels of client activity, as well as an increase in the average fee per transaction. The increase in equity underwriting was primarily due to higher revenues from private placements. In addition to our strong results during the quarter, our investment banking pipeline remains strong going into our fiscal second quarter and, in part, reflect the investments we have made over the past several years, including our fiscal 2021 acquisitions ofFinanco and Cebile. Brokerage revenues decreased$14 million , or 8%, primarily due to a decrease in fixed income brokerage revenues, which remained solid but were lower than the prior-year quarter as a result of a decline in client activity levels compared with a strong prior-year quarter. While inherently difficult to predict, we expect fixed income brokerage revenues to remain solid in our fiscal second quarter driven in large part by expected continued demand from depository clients.
Compensation-related expenses increased
Non-compensation expenses increased$11 million , or 15%, and included$4 million of acquisition-related expenses, comprised of the amortization of intangible assets with short useful lives which arose from theFinanco and Cebile acquisitions.
RESULTS OF OPERATIONS - ASSET MANAGEMENT
For an overview of our Asset Management segment operations as well as a description of the key factors impacting our Asset Management results of operations, refer to the information presented in "Item 1 - Business" and "Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations" of our 2021 Form 10-K.
Operating results
Three months ended December 31,
$ in millions 2021 2020 % change
Revenues:
Asset management and related administrative fees: Managed programs$ 151 $ 129 17 % Administration and other 76 59 29 % Total asset management and related administrative fees 227 188 21 % Account and service fees 6 4 50 % All other 3 3 - % Net revenues 236 195 21 % Non-interest expenses: Compensation, commissions and benefits 46 45 2 % Non-compensation expenses: Communications and information processing 12 11 9 % Investment sub-advisory fees 37 28 32 % All other 34 28 21 % Total non-compensation expenses 83 67 24 % Total non-interest expenses 129 112 15 % Pre-tax income$ 107 $ 83 29 % Selected key metrics Managed programs Management fees recorded in our Asset Management segment are generally calculated as a percentage of the value of our fee-billable financial assets under management ("AUM"). These AUM include the portion of fee-based AUA in our PCG segment that is invested in programs overseen by our Asset Management segment (included in the "AMS" line of the following table), 54 --------------------------------------------------------------------------------RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Management's Discussion and Analysis
as well as retail accounts managed on behalf of third-party institutions, institutional accounts and proprietary mutual funds that we manage (collectively included in the "Carillon Tower Advisers" line of the following table).
Revenues related to fee-based AUA in our PCG segment are shared by the PCG and Asset Management segments, the amount of which depends on whether clients are invested in assets that are in managed programs overseen by our Asset Management segment and the administrative services provided (see our "Management's Discussion and Analysis - Results of Operations -Private Client Group " for more information). Our AUM in AMS are impacted by market fluctuations and net inflows or outflows of assets, including transfers between fee-based accounts and transaction-based accounts within our PCG segment. Revenues earned byCarillon Tower Advisers for retail accounts managed on behalf of third-party institutions, institutional accounts and our proprietary mutual funds are recorded entirely in the Asset Management segment. Our AUM inCarillon Tower Advisers are impacted by market and investment performance and net inflows or outflows of assets.
Fees for our managed programs are generally collected quarterly. Approximately 65% of these fees are based on balances as of the beginning of the quarter, approximately 10% are based on balances as of the end of the quarter, and approximately 25% are based on average daily balances throughout the quarter.
Financial assets under management
December 31, September 30, December 31, September 30,
$ in billions 2021 2021 2020 2020
AMS (1) $ 145.0 $ 134.4 $ 113.9 $ 102.2
Carillon Tower Advisers 68.9 67.8 64.9 59.5
Subtotal financial assets under management 213.9 202.2 178.8 161.7
Less: Assets managed for affiliated entities (10.7) (10.3) (9.2) (8.6)
Total financial assets under management $ 203.2 $ 191.9 $ 169.6 $ 153.1 (1)Represents the portion of our PCG segment fee-based AUA (as disclosed in
"Assets in fee-based accounts" in the "Selected key metrics - PCG client asset
balances" section of our "Management's Discussion and Analysis - Results of
Operations -
Activity (including activity in assets managed for affiliated entities)
Three months ended December 31,
$ in billions 2021 2020
Financial assets under management at beginning of period $ 202.2 $ 161.7
Carillon Tower Advisers - net outflows (0.4) (0.3)
AMS - net inflows 3.5 1.7
Net market appreciation in asset values 8.6 15.7
Financial assets under management at end of period $ 213.9 $ 178.8
AMS
See "Management's Discussion and Analysis - Results of Operations -
Assets managed byCarillon Tower Advisers include assets managed by its subsidiaries and affiliates:Eagle Asset Management , Scout Investments, Reams Asset Management (a division of Scout Investments), ClariVest Asset Management and Cougar Global Investments. The following table presentsCarillon Tower Advisers' 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. $ in billions December 31, 2021 Average fee rate Equity $ 30.3 0.52 % Fixed income 30.9 0.18 % Balanced 7.7 0.35 % Total financial assets under management $ 68.9 0.35 % 55
--------------------------------------------------------------------------------RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Management's Discussion and Analysis
Non-discretionary asset-based programs
The following table includes assets held in certain non-discretionary asset-based programs for which the Asset Management segment does not exercise discretion but provides administrative support (including for affiliated entities). 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 "). December 31, September 30, December 31, September 30, $ in billions 2021 2021 2020 2020 Total assets$ 392.4 $ 365.3 $ 313.5 $ 280.6 The increase in assets as ofDecember 31, 2021 compared toSeptember 30, 2021 was primarily due to equity market appreciation and continued growth in the PCG segment. Administrative fees associated with these programs are predominantly based on balances at the beginning of the quarter.
The following table includes assets held in asset-based programs in
December 31, September 30, December 31, September 30,
$ in billions 2021 2021 2020 2020
Total assets $ 8.8 $ 8.1 $ 7.6 $ 7.1
Three months ended
Net revenues of
Asset management and related administrative fees increased$39 million , or 21%, driven by higher AUM and higher assets in non-discretionary asset-based programs. The increase in AUM resulted from both equity market appreciation and net inflows at AMS, partially offset by net outflows atCarillon Tower Advisers , which continued to be negatively impacted by the industry shift from actively managed investment strategies to passive investment strategies. BeginningOctober 1, 2021 , AMS has received a lower portion of the client fee on certain managed fee-based products offered to PCG clients through AMS. These changes resulted in a$9 million reduction in asset management and related administrative fees in the Asset Management segment and an approximately$7 million reduction in firmwide pre-tax income during the quarter. Compensation expenses increased$1 million , or 2%, and included the impact of higher net revenues. Non-compensation expenses increased$16 million , or 24%, largely due to higher investment sub-advisory fees, which resulted from the increase in AUM in sub-advised programs, and an increase in platform fees. 56 --------------------------------------------------------------------------------RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Management's Discussion and Analysis
RESULTS OF OPERATIONS - RAYMOND JAMES BANK
For an overview of ourRaymond James Bank segment operations, as well as a description of the key factors impacting ourRaymond James Bank segment results of operations, refer to the information presented in "Item 1 - Business" and "Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations" of our 2021 Form 10-K.
Operating results
Three months ended December 31,
$ in millions 2021 2020 % change
Revenues:
Interest income $ 187 $ 168 11 %
Interest expense (10) (11) (9) %
Net interest income 177 157 13 %
All other 6 10 (40) %
Net revenues 183 167 10 %
Non-interest expenses:
Compensation and benefits 13 12 8 %
Non-compensation expenses:
Bank loan provision/(benefit) for credit losses (11) 14 NM
RJBDP fees to PCG 50 43 16 %
All other 29 27 7 %
Total non-compensation expenses 68 84 (19) %
Total non-interest expenses 81 96 (16) %
Pre-tax income $ 102 $ 71 44 %
Three months ended
Net revenues of
Net interest income increased$20 million , or 13%, due to higher average interest-earning assets. The increase in average interest-earning assets was primarily driven by significant growth in securities-based loans and residential mortgages to PCG clients, as well as increases in average corporate loans and available-for-sale securities. The net interest margin decreased to 1.92% from 2.02% for the prior-year quarter, primarily due to lower short-term interest rates, as well as higher balances of agency-backed available-for-sale securities, which on average have a lower yield than loans. Absent any changes in short-term interest rates during the period, we expect the net interest margin for our fiscal second quarter of 2022 to remain relatively flat to the fiscal first quarter; however we expect net interest income to be positively impacted by the growth in loans. Given that a significant portion of our interest-earning assets are sensitive to changes in market interest rates, our net interest earnings should be favorably impacted by any increase in short-term interest rates. The bank loan benefit for credit losses was$11 million for the current quarter, compared with a provision for credit losses of$14 million for the prior-year quarter. The current quarter benefit was largely attributable to improvement in credit quality in the C&I bank loan portfolio and continued improvement in macroeconomic inputs to our CECL model, which positively impacted most loan portfolios, partially offset by provisions for credit losses related to loan growth. RJBDP fees to PCG increased$7 million , or 16%, due to an increase in the number of accounts swept toRaymond James Bank as part of the RJBDP. These fees are eliminated in consolidation. 57 --------------------------------------------------------------------------------RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Management's Discussion and Analysis
RESULTS OF OPERATIONS - OTHER
This segment includes our private equity investments, interest income on certain corporate cash balances, certain acquisition-related expenses, and certain corporate overhead costs of RJF that are not allocated to other segments, including the interest costs on our public debt. For an overview of our Other segment operations, refer to the information presented in "Item 1 - Business" and "Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations" of our 2021 Form 10-K.
Operating results
Three months ended December 31,
$ in millions 2021 2020 % change
Revenues:
Interest income $ 1 $ 3 (67) %
Gains on private equity investments 5 24 (79) %
All other 2 1 100 %
Total revenues 8 28 (71) %
Interest expense (23) (24) (4) %
Net revenues (15) 4 NM
Non-interest expenses:
Compensation and all other 30 26 15 %
Acquisition-related expenses 2 2 - %
Total non-interest expenses 32 28 14 %
Pre-tax loss $ (47) $ (24) (96) %
Three months ended
The pre-tax loss of
Net revenues decreased$19 million , primarily due to a decrease in private equity valuation gains compared with the prior-year quarter. The current quarter included$5 million of private equity valuation gains, of which$1 million was attributable to noncontrolling interests and was offset within other expenses. The prior-year quarter included$24 million of private equity valuation gains, of which$10 million were attributable to noncontrolling interests and were offset within other expenses. Non-interest expenses increased$4 million , or 14%, primarily due to increases in compensation and benefit expenses, primarily resulting from the continued improvement in the financial performance of our businesses, partially offset by the aforementioned decrease in private equity gains attributable to noncontrolling interests. The$2 million of acquisition-related expenses in the current quarter primarily included professional fees associated with our acquisition ofCharles Stanley and our announced acquisition of TriState Capital. 58 --------------------------------------------------------------------------------RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Management's Discussion and Analysis
CERTAIN STATISTICAL DISCLOSURES BY BANK HOLDING COMPANIES
We are required to provide certain statistical disclosures as a bank holding company under theSEC's Industry Guide 3. The following table provides certain of those disclosures. Three months ended December 31, 2021 2020 Return on assets 2.7% 2.5% Return on equity 21.2% 17.2% Average equity to average assets 12.9% 14.3% Dividend payout ratio 16.2% 17.5%
Return on assets is computed by dividing annualized net income for the period indicated by average assets for each respective period. Average assets is computed by adding total assets as of the date indicated to the prior quarter-end total and dividing by two.
Return on equity is computed by dividing annualized net income for the period indicated by average equity for each respective period. Average equity is computed by adding total equity attributable to RJF as of the date indicated to the prior quarter-end total and dividing by two.
Average equity to average assets is computed by dividing average equity by average assets, as calculated in accordance with the previous explanations.
Dividend payout ratio is computed by dividing dividends declared per common share during the period by earnings per diluted common share for the period.
Refer to the "Net interest analysis" and "Risk management - Credit risk" sections of this MD&A and to the Notes to Condensed Consolidated Financial Statements of this Form 10-Q for the other required disclosures.
STATEMENT OF FINANCIAL CONDITION ANALYSIS
The assets on our Condensed Consolidated Statements of Financial Condition consisted primarily of cash and cash equivalents, assets segregated for regulatory purposes and restricted cash (primarily segregated for the benefit of clients), receivables including bank loans, financial instruments held either for trading purposes or as investments, and other assets. A significant portion of our assets were liquid in nature, providing us with flexibility in financing our business. Total assets of$68.46 billion as ofDecember 31, 2021 were$6.57 billion , or 11%, greater than our total assets as ofSeptember 30, 2021 . The increase in assets was primarily due to a$4.14 billion increase in assets segregated for regulatory purposes and restricted cash, primarily due to a significant increase in client cash balances. Bank loans, net increased by$1.14 billion , primarily due to an increase in securities-based loans and residential mortgages to PCG clients, as well as an increase in corporate loans. In addition, cash and cash equivalents increased$1.02 billion and other investments increased$354 million , primarily due to the purchase ofU.S. Treasuries to meet future broker-dealer customer reserve requirements. As ofDecember 31, 2021 , our total liabilities of$59.81 billion were$6.22 billion , or 12%, greater than our total liabilities as ofSeptember 30, 2021 . The increase in total liabilities was primarily related to the significant increase in client cash balances as ofDecember 31, 2021 , which resulted in a$5.21 billion increase in brokerage client payables, primarily due to an increase in client cash held in our CIP, and a$1.60 billion increase in bank deposits, resulting from a higher RJBDP balance held atRaymond James Bank . Partially offsetting these increases was a decrease in accrued compensation, commissions and benefits of$397 million , primarily due to the seasonal payment of annual bonuses and the funding of profit-sharing and employee stock ownership benefit plans which occurred during the three months endedDecember 31, 2021 . 59 --------------------------------------------------------------------------------RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Management's Discussion and Analysis
LIQUIDITY AND CAPITAL RESOURCES
Liquidity and capital are essential to our business. The primary goal of our liquidity management activities is to ensure adequate funding to conduct our business over a range of economic and market environments. We seek to manage capital levels to support execution of our business strategy, provide financial strength to our subsidiaries, and maintain sustained access to the capital markets, while at the same time meeting our regulatory capital requirements and conservative internal management targets. Liquidity and capital resources are provided primarily through our business operations and financing activities. Financing activities could include bank borrowings, collateralized financing arrangements or additional capital raising activities under our "universal" shelf registration statement. We believe our existing assets, most of which are liquid in nature, together with funds generated from operations and available from committed and uncommitted financing facilities, provide adequate funds for continuing operations at current levels of activity in the short-term. We also believe that we will be able to continue to meet our long-term cash requirements due to our strong financial position and ability to access capital from financial markets.
Liquidity and capital management
Senior management establishes our liquidity and capital management frameworks. Our liquidity and capital management frameworks are overseen by theRJF Asset and Liability Committee , a senior management committee that develops and executes strategies and policies to manage our liquidity risk and interest rate risk, as well as provides oversight over the firm's investments. The liquidity management framework includes senior management's review of short- and long-term cash flow forecasts, review of capital expenditures, monitoring of the availability of alternative sources of financing, and daily monitoring of liquidity in our significant subsidiaries. Our decisions on the allocation of resources to our business units consider, among other factors, projected profitability, cash flow, risk, and future liquidity needs. Our treasury department assists in evaluating, monitoring and controlling the impact that our business activities have on our financial condition and liquidity, and also maintains our relationships with various lenders. The objective of our liquidity management framework is to support the successful execution of our business strategies while ensuring ongoing and sufficient liquidity. Our capital planning and capital risk management processes are governed by the Capital Planning Committee ("CPC"), a senior management committee that provides oversight on our capital planning and ensures that our strategic planning and risk management processes are integrated into the capital planning process. The CPC meets at least quarterly to review key metrics related to the firm's capital, such as debt structure and capital ratios; to analyze potential and emerging risks to capital; to oversee our annual firmwide capital stress test; and to propose capital actions to the Board of Directors, such as declaring dividends, repurchasing securities, and raising capital. To ensure that we have sufficient capital to absorb unanticipated losses, the firm adheres to capital risk appetite statements and tolerances set in excess of regulatory minimums, which are established by the CPC and approved by the Board of Directors. We conduct enterprise-wide capital stress testing to ensure that we maintain adequate capital to adhere to our established tolerances under multiple scenarios, including stressed scenarios.
Cash flows
Cash and cash equivalents (excluding amounts segregated for regulatory purposes and restricted cash) increased$1.02 billion to$8.22 billion during the three months endedDecember 31, 2021 , primarily due to a significant increase in client cash balances and positive net income during the quarter. During the three months endedDecember 31, 2021 , we had a significant increase in client cash balances which increased our brokerage client payables and bank deposits. This cash was largely used to purchaseU.S. Treasuries in our brokerage operations, which were segregated for regulatory purposes or held in anticipation of future broker-dealer customer reserve requirements as ofDecember 31, 2021 , and to increase our bank loan portfolio and available-for-sale securities as part of our banking operations. Due to the timing of the increase in client cash balances, onJanuary 3, 2022 ,$685 million of the$1.02 billion increase in cash and cash equivalents was segregated for regulatory purposes in order to comply with broker-dealer customer reserve requirements. 60 --------------------------------------------------------------------------------RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Management's Discussion and Analysis
Sources of liquidity
Approximately$1.40 billion of our totalDecember 31, 2021 cash and cash equivalents included cash held at the parent company, which included cash loaned to RJ&A. This parent cash balance does not include$385 million of cash set aside by the parent in a restricted account as ofDecember 31, 2021 to be used to fund the acquisition ofCharles Stanley . As ofDecember 31, 2021 , this restricted cash was included in "Assets segregated for regulatory purposes and restricted cash" on our Condensed Consolidated Statements of Financial Condition and is not included in the amounts presented in the following table. OnJanuary 21, 2022 , we completed the acquisition ofCharles Stanley , utilizing$372 million of this restricted cash to complete the acquisition. As ofDecember 31, 2021 , RJF had loaned$875 million 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
December 31, 2021
RJF $ 553
RJ&A 3,470
Raymond James Bank 2,646
Raymond James Ltd. ("RJ Ltd.") 882
Raymond James Financial Services, Inc. 129
Carillon Tower Advisers 95
Other subsidiaries 441
Total cash and cash equivalents $ 8,216
RJF maintained depository accounts at Raymond James Bank with a balance of $229
million as of December 31, 2021 . The portion of this total that was available on
demand without restrictions, which amounted to $152 million as of December 31,
2021 , is reflected in the RJF cash balance and excluded from the Raymond James
Bank cash balance in the preceding table.
On January 3, 2022 , RJ&A segregated an additional $1.04 billion , comprised of
$685 million of cash and $350 million of U.S. Treasuries, to meet its
December 31, 2021 broker-dealer customer reserve requirement, resulting in a
decrease in "Cash and cash equivalents" and "Other investments" on our statement
of financial condition and an increase in "Assets segregated for regulatory
purposes and restricted cash."
A large portion of the
In addition to the cash balances described, we have various other potential sources of cash available to the parent from subsidiaries, as described in the following section.
Liquidity available from subsidiaries
Liquidity is principally available to RJF, the parent company, from
Certain of our broker-dealer subsidiaries are subject to the requirements of the Uniform Net Capital Rule (Rule 15c3-1) under the Securities and Exchange Act of 1934. As a member firm of theFinancial Industry Regulatory Authority ("FINRA"), RJ&A is subject toFINRA's capital requirements, which are substantially the same as Rule 15c3-1. Rule 15c3-1 provides for an "alternative net capital requirement," which RJ&A has elected. Regulations require that minimum net capital, as defined, be equal to the greater of$1.5 million or 2% of aggregate debit items arising from client balances. In addition, covenants in RJ&A's committed financing facilities require its net capital to be a minimum of 10% of aggregate debit items. AtDecember 31, 2021 , 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 and intends to use a portion of its excess net capital to remit dividends to RJF, in conformity with all required regulatory rules or approvals.FINRA may impose certain restrictions, such as restricting withdrawals of equity capital, if a member firm were to fall below a certain threshold or fail to meet minimum net capital requirements which may result in RJ&A limiting dividends it would otherwise remit to RJF. We evaluate regulatory requirements, loan covenants and certain internal tolerances when determining the amount of liquidity available to RJF from RJ&A. 61 --------------------------------------------------------------------------------RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Management's Discussion and AnalysisRaymond James Bank may pay dividends to RJF without prior approval of its regulator as long as the dividends do not exceed the sum ofRaymond James Bank's current calendar year and the previous two calendar years' retained net income, andRaymond James Bank maintains its targeted regulatory capital ratios. Dividends fromRaymond James Bank may be limited to the extent that capital is needed to support its balance sheet growth.
Although we have liquidity available to us from our other subsidiaries, the available amounts are not as significant as those previously described and, in certain instances, may be subject to regulatory requirements.
Borrowings and financing arrangements
Committed financing arrangements
Our ability to borrow is dependent upon compliance with the conditions in our various loan agreements and, in the case of secured borrowings, collateral eligibility requirements. Our committed financing arrangements consist of a tri-party repurchase agreement (i.e., securities sold under agreements to repurchase) and, in the case of our$500 million revolving credit facility agreement (the "Credit Facility"), an unsecured line of credit. The required market value of the collateral associated with the tri-party repurchase agreement ranges from 105% to 125% of the amount financed. The following table presents our committed financing arrangements with third-party lenders, which we generally utilize to finance a portion of our fixed income trading instruments, and the outstanding balances related thereto. December 31, 2021 Total number of $ in millions RJ&A RJF Total arrangements Financing arrangement: Committed secured$ 100 $ -$ 100 1 Committed unsecured 200 300 500 1 Total committed financing arrangements$ 300 $ 300 $ 600 2 Outstanding borrowing amount: Committed secured $ - $ - $ - Committed unsecured - - - Total outstanding borrowing amount $ -
$ - $ -
Our committed unsecured financing arrangement in the preceding table represents our Credit Facility, which provides for maximum borrowings of up to$500 million , with a sublimit of$300 million for RJF. RJ&A may borrow up to$500 million under the Credit Facility, depending on the amount of outstanding borrowings by RJF. For additional details on our committed unsecured financing arrangement, see our discussion of the Credit Facility in Note 16 of the Notes to Consolidated Financial Statements of our 2021 Form 10-K.
Uncommitted financing arrangements
Our uncommitted financing arrangements are in the form of secured lines of credit, secured bilateral or tri-party repurchase agreements, or unsecured lines of credit. Our arrangements with third-party lenders are generally utilized to finance a portion of our fixed income securities or for cash management purposes. 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 ofDecember 31, 2021 , we had outstanding borrowings under two uncommitted secured borrowing arrangements out of a total of 11 uncommitted financing arrangements (seven uncommitted secured and four uncommitted unsecured). However, lenders are under no contractual obligation to lend to us under uncommitted credit facilities. 62
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