Raymond James Financial (RJF) 8-K Raymond James Financial Reports 3RD Quarter Fiscal 2017 Results

July 26, 2017	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 3RD QUARTER FISCAL 2017 RESULTS

• Record quarterly net revenues of $1.62 billion, up 20 percent over the prior year’s fiscal third quarter and 4 percent over the preceding quarter

• Record quarterly net income of $183.4 million, or $1.24 per diluted share

• Adjusted quarterly net income of $185.5 million⁽¹⁾, or $1.26 per diluted share⁽¹⁾

• Records for client assets under administration of $664.4 billion, financial assets under management of $91.0 billion, and net loans at Raymond James Bank of $16.6 billion

ST. PETERSBURG, Fla - Raymond James Financial, Inc. (NYSE: RJF) today reported record net revenues of $1.62 billion and record net income of $183.4 million, or $1.24 per diluted share, for the fiscal third quarter ended June 30, 2017. The results generated in the quarter were largely attributable to growth of client assets as a result of both net recruiting of financial advisors and market appreciation, strong investment banking revenues, and the positive impact from higher short-term interest rates on both net interest income and account and service fees.

For the first nine months of fiscal 2017, net revenues of $4.68 billion increased 19 percent, net income of $442.7 million increased 24 percent, and adjusted net income of $550.8 million⁽¹⁾ increased 47 percent compared to the first nine months of fiscal 2016.

“Record quarterly results were driven by record revenues in the Private Client Group segment, Asset Management segment, and Raymond James Bank,” said Chairman and CEO Paul Reilly. “Our continued success in recruiting and retaining financial advisors has led to records for client assets under administration, financial assets under management, and loan balances at Raymond James Bank.”

Segment Results

Private Client Group

• Record quarterly net revenues of $1.13 billion, up 25 percent over the prior year’s fiscal third quarter and 4 percent over the preceding quarter

• Record quarterly pre-tax income of $128.0 million, a substantial 56 percent increase over the prior year’s fiscal third quarter

• Record Private Client Group assets under administration of $631.5 billion, rising 25 percent over June 2016 and 3 percent over March 2017

• Private Client Group assets in fee-based accounts of $276.9 billion, representing growth of 34 percent over June 2016 and 6 percent over March 2017

Record quarterly net revenues and pre-tax income in the Private Client Group segment were boosted by considerable growth of assets in fee-based accounts, which ended the quarter at 44 percent of the segment’s total client assets. Results in the segment were also aided by higher short-term interest rates, which was partially offset by the impact of clients’ domestic cash sweep balances declining 5 percent from the preceding quarter as clients decreased their cash allocations.

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

1

“While we are pleased with our progress to date, we continue to invest heavily in our technology platform and support areas to help advisors strengthen their relationships with clients while also facilitating compliance in this multifaceted regulatory environment,” said Reilly.

Capital Markets

• Quarterly net revenues of $258.9 million, up 3 percent over the prior year’s fiscal third quarter and 1 percent over the preceding quarter

• Quarterly pre-tax income of $34.6 million, an increase of 6 percent compared to the prior year’s fiscal third quarter but down 16 percent compared to the preceding quarter

• Investment banking revenues of $104.2 million, substantial growth of 43 percent over the prior year’s fiscal third quarter and up 2 percent over the preceding quarter

Improvement in the Capital Markets segment’s quarterly net revenues over the prior year was primarily driven by higher domestic equity investment banking revenues. Meanwhile, uncertainty surrounding corporate tax reform caused weakness in tax credit funds syndication fees during the quarter. Institutional equity and fixed income commissions remained soft, reflecting subdued client activity levels in a low-volatility market environment.

“Investment banking revenues remained strong during the quarter, driven by M&A fees,” said Reilly. “While we are encouraged by the backlog for investment banking, our current outlook for the fixed income business is less optimistic given the flattening yield curve.”

Asset Management

• Record quarterly net revenues of $125.7 million, up 24 percent compared to the prior year’s fiscal third quarter and 8 percent compared to the preceding quarter

• Record quarterly pre-tax income of $43.3 million, representing increases of 33 percent compared to the prior year’s fiscal third quarter and 14 percent compared to the preceding quarter

• Record financial assets under management of $91.0 billion, reflecting growth of 27 percent compared to June 2016 and 6 percent compared to March 2017

Record quarterly results in the Asset Management segment were largely attributable to record financial assets under management, which benefited from market appreciation and an upsurge in fee-based account utilization in the Private Client Group segment as a result of the Department of Labor fiduciary rule. The acquisition of Scout Investments and Reams Asset Management remains on track to close in the December 2017 quarter.

Raymond James Bank

• Record quarterly net revenues of $150.5 million, up 19 percent over the prior year’s fiscal third quarter and 6 percent over the preceding quarter

• Quarterly pre-tax income of $100.0 million, up 12 percent over the prior year’s fiscal third quarter and 9 percent over the preceding quarter

• Record net loans at Raymond James Bank of $16.6 billion, representing growth of 12 percent over June 2016 and 4 percent over March 2017

The Bank’s record quarterly revenues were driven by loan growth, net interest margin improvement, and the expansion of the available-for-sale securities portfolio, which increased 19 percent from the preceding quarter. The credit quality of the Bank’s loan portfolio remained satisfactory, as total nonperforming assets declined to 23 basis points of the Bank’s total assets, comparing favorably to 52 basis points in the prior year’s fiscal third quarter and 27 basis points in the preceding quarter.

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

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Other

The Other segment included $6.6 million of private equity gains in the quarter, of which $3.5 million were attributable to noncontrolling interests. Acquisition-related expenses were $3.4 million during the quarter. The effective tax rate for the quarter was 33.3 percent, which benefited from non-taxable gains in our corporate-owned life insurance portfolio during the quarter.

On May 10, we announced the closing of a registered underwritten public offering of $500 million in aggregate principal amount of the reopened 4.95 percent Senior Notes due 2046. The net proceeds from the offering were approximately $509 million and are expected to be used for working capital and general corporate purposes.

A conference call to discuss the results will take place tomorrow morning, Thursday, July 27th, at 8:15 a.m. ET. For a listen only connection, please call: 877-666-1952(conference code: 55455245), 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 January 26, 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 7,300 financial advisors in 3,000 locations throughout the United States, Canada and overseas. Total client assets are $664 billion. Public since 1983, the firm is listed on the New York Stock Exchange under the symbol RJF. Additional information is available atwww.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 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
	June 30, 2017		June 30, 2016			% Change		March 31, 2017		% Change
	($ in thousands, except per share amounts)
Total revenues	$	1,663,107	$	1,386,997	(3)	20	%	$	1,600,314	4	%
Net revenues	$	1,624,547	$	1,358,964	(3)	20	%	$	1,563,637	4	%
Pre-tax income (2)	$	275,014	$	197,765		39	%	$	165,513	66	%
Net income (2)	$	183,424	$	125,504		46	%	$	112,755	63	%
Earnings per common share:
Basic	$	1.27	$	0.89		43	%	$	0.78	63	%
Diluted	$	1.24	$	0.87		43	%	$	0.77	61	%
Non-GAAP measures: (1)
Adjusted pre-tax income (2)	$	278,380	$	218,260		28	%	$	274,881	1	%
Adjusted net income (2)	$	185,511	$	138,499		34	%	$	188,468	(2	)%
Adjusted basic earnings per common share	$	1.29	$	0.98		32	%	$	1.31	(2	)%
Adjusted diluted earnings per common share	$	1.26	$	0.96		31	%	$	1.28	(2	)%

	Nine months ended
	June 30, 2017		June 30, 2016			% Change
	($ in thousands, except per share amounts)
Total revenues	$	4,792,189	$	4,028,964	(3)	19	%
Net revenues	$	4,680,986	$	3,945,123	(3)	19	%
Pre-tax income (2)	$	646,906	$	564,221		15	%
Net income (2)	$	442,746	$	357,680		24	%
Earnings per common share:
Basic	$	3.09	$	2.51		23	%
Diluted	$	3.02	$	2.47		22	%
Non-GAAP measures: (1)
Adjusted pre-tax income (2)	$	802,306	$	592,603		35	%
Adjusted net income (2)	$	550,847	$	375,672		47	%
Adjusted basic earnings per common share	$	3.84	$	2.64		45	%
Adjusted diluted earnings per common share	$	3.76	$	2.59		45	%

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
	June 30, 2017			June 30, 2016 (3)			% Change		March 31, 2017			% Change
	(in thousands, except per share amounts)
Revenues:
Securities commissions and fees	$	1,017,908		$	871,764		17	%	$	992,112		3	%
Investment banking	104,191			72,714			43	%	102,377			2	%
Investment advisory and related administrative fees	117,378			96,343			22	%	110,280			6	%
Interest	204,224			163,810			25	%	192,544			6	%
Account and service fees	174,084			129,334			35	%	162,981			7	%
Net trading profit	23,404			29,795			(21	)%	15,811			48	%
Other	21,918			23,237			(6	)%	24,209			(9	)%
Total revenues	1,663,107			1,386,997			20	%	1,600,314			4	%
Interest expense	(38,560		)	(28,033		)	38	%	(36,677		)	5	%
Net revenues	1,624,547			1,358,964			20	%	1,563,637			4	%
Non-interest expenses:
Compensation, commissions and benefits	1,082,382			908,884			19	%	1,035,714			5	%
Communications and information processing	77,819			71,717			9	%	76,067			2	%
Occupancy and equipment costs	46,507			40,825			14	%	47,498			(2	)%
Clearance and floor brokerage	12,296			10,214			20	%	11,407			8	%
Business development	39,305			36,488			8	%	41,519			(5	)%
Investment sub-advisory fees	20,133			15,030			34	%	17,778			13	%
Bank loan loss provision	6,209			3,452			80	%	7,928			(22	)%
Acquisition-related expenses	3,366			13,445			(75	)%	1,086			210	%
Other	59,589			54,055			10	%	163,337			(64	)%
Total non-interest expenses	1,347,606			1,154,110			17	%	1,402,334			(4	)%
Income including noncontrolling interests and before provision for income taxes	276,941			204,854			35	%	161,303			72	%
Provision for income taxes	91,590			72,261			27	%	52,758			74	%
Net income including noncontrolling interests	185,351			132,593			40	%	108,545			71	%
Net income/(loss) attributable to noncontrolling interests	1,927			7,089			(73	)%	(4,210		)	NM
Net income attributable to Raymond James Financial, Inc.	$	183,424		$	125,504		46	%	$	112,755		63	%
Earnings per common share – basic	$	1.27		$	0.89		43	%	$	0.78		63	%
Earnings per common share – diluted	$	1.24		$	0.87		43	%	$	0.77		61	%
Weighted-average common shares outstanding – basic	143,712			141,165					143,367
Weighted-average common and common equivalent shares outstanding – diluted	147,103			143,952					146,779

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

5

Raymond James Financial, Inc. Consolidated Statements of Income (Unaudited)
	Nine months ended
	June 30, 2017			June 30, 2016 (3)			% Change
	(in thousands, except per share amounts)
Revenues:
Securities commissions and fees	$	2,994,405		$	2,574,756		16	%
Investment banking	267,993			198,971			35	%
Investment advisory and related administrative fees	335,901			288,816			16	%
Interest	579,550			467,920			24	%
Account and service fees	485,856			373,685			30	%
Net trading profit	59,770			66,379			(10	)%
Other	68,714			58,437			18	%
Total revenues	4,792,189			4,028,964			19	%
Interest expense	(111,203		)	(83,841		)	33	%
Net revenues	4,680,986			3,945,123			19	%
Non-interest expenses:
Compensation, commissions and benefits	3,124,563			2,663,219			17	%
Communications and information processing	226,047			212,337			6	%
Occupancy and equipment costs	140,057			123,505			13	%
Clearance and floor brokerage	36,053			30,727			17	%
Business development	116,186			112,529			3	%
Investment sub-advisory fees	57,206			43,866			30	%
Bank loan loss provision	13,097			26,991			(51	)%
Acquisition-related expenses	17,118			21,332			(20	)%
Other	304,900			141,582			115	%
Total non-interest expenses	4,035,227			3,376,088			20	%
Income including noncontrolling interests and before provision for income taxes	645,759			569,035			13	%
Provision for income taxes	204,160			206,541			(1	)%
Net income including noncontrolling interests	441,599			362,494			22	%
Net income/(loss) attributable to noncontrolling interests	(1,147		)	4,814			NM
Net income attributable to Raymond James Financial, Inc.	$	442,746		$	357,680		24	%
Earnings per common share – basic	$	3.09		$	2.51		23	%
Earnings per common share – diluted	$	3.02		$	2.47		22	%
Weighted-average common shares outstanding – basic	143,059			141,902
Weighted-average common and common equivalent shares outstanding – diluted	146,347			144,618

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

6

Raymond James Financial, Inc. Segment Results (Unaudited)
	Three months ended
	June 30, 2017			June 30, 2016				% Change		March 31, 2017			% Change
	($ in thousands)
Net revenues:
Private Client Group	$	1,127,285		$	900,527			25	%	$	1,085,177		4	%
Capital Markets	258,909			252,054			(3)	3	%	256,171			1	%
Asset Management	125,664			100,940				24	%	116,480			8	%
RJ Bank	150,487			126,584				19	%	141,371			6	%
Other (4)	(7,251		)	28				NM		(8,018		)	10	%
Intersegment eliminations	(30,547		)	(21,169		)				(27,544		)
Total net revenues	$	1,624,547		$	1,358,964			20	%	$	1,563,637		4	%
Pre-tax income/(loss): (2)
Private Client Group	$	127,951		$	81,911			56	%	$	29,372		336	%
Capital Markets	34,607			32,769				6	%	41,251			(16	)%
Asset Management	43,270			32,507				33	%	37,797			14	%
RJ Bank	99,990			88,930				12	%	91,911			9	%
Other (4)	(30,804		)	(38,352		)		20	%	(34,818		)	12	%
Pre-tax income	$	275,014		$	197,765			39	%	$	165,513		66	%

	Nine months ended
	June 30, 2017			June 30, 2016				% Change
	($ in thousands)
Net revenues:
Private Client Group	$	3,252,551		$	2,653,130			23	%
Capital Markets	748,096			715,881			(3)	5	%
Asset Management	356,226			297,978				20	%
RJ Bank	429,873			360,240				19	%
Other (4)	(24,912		)	(24,379		)		(2	)%
Intersegment eliminations	(80,848		)	(57,727		)
Total net revenues	$	4,680,986		$	3,945,123			19	%
Pre-tax income/(loss): (2)
Private Client Group	$	230,681		$	234,283			(2	)%
Capital Markets	97,302			86,024				13	%
Asset Management	122,976			96,996				27	%
RJ Bank	296,022			239,929				23	%
Other (4)	(100,075		)	(93,011		)		(8	)%
Pre-tax income	$	646,906		$	564,221			15	%

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

7

Raymond James Financial, Inc. Selected Operating Data (Unaudited)
	Three months ended
	June 30, 2017			June 30, 2016				% Change		March 31, 2017			% Change
	($ in thousands)
Securities commissions and fees by segment:
Private Client Group	$	902,483		$	739,546			22	%	$	876,882		3	%
Capital Markets:
Equity	58,864			58,916				—		59,647			(1	)%
Fixed Income	65,820			79,306				(17	)%	64,660			2	%
Intersegment eliminations	(9,259		)	(6,004		)				(9,077		)
Total securities commissions and fees	$	1,017,908		$	871,764			17	%	$	992,112		3	%
Investment banking revenues:
Equity:
Underwritings	$	19,172		$	14,373			33	%	$	22,272		(14	)%
Mergers & acquisitions and advisory fees	62,983			36,068				75	%	53,762			17	%
Fixed Income	12,296			10,562				16	%	10,920			13	%
Tax credit funds syndication fees	9,581			11,567				(17	)%	15,177			(37	)%
Other	159			144				10	%	246			(35	)%
Total investment banking revenues	$	104,191		$	72,714			43	%	$	102,377		2	%
Other revenues:
Realized/unrealized gain attributable to private equity investments	$	6,603		$	12,740			(48	)%	$	7,443		(11	)%
Other	15,315			10,497			(3)	46	%	16,766			(9	)%
Total other revenues	$	21,918		$	23,237		(3)	(6	)%	$	24,209		(9	)%
Net income/(loss) attributable to noncontrolling interests:
Private equity investments	$	3,536		$	7,369			(52	)%	$	166		NM
Consolidation of low-income housing tax credit funds	(2,820		)	(1,123		)	(3)	(151	)%	(5,529		)	49	%
Other	1,211			843				44	%	1,153			5	%
Total net income/(loss) attributable to noncontrolling interests	$	1,927		$	7,089		(3)	(73	)%	$	(4,210	)	NM

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

8

Raymond James Financial, Inc. Selected Operating Data (Unaudited)
	Nine months ended
	June 30, 2017			June 30, 2016				% Change
	($ in thousands)
Securities commissions and fees by segment:
Private Client Group	$	2,632,584		$	2,186,127			20	%
Capital Markets:
Equity	182,830			175,244				4	%
Fixed Income	205,854			231,147				(11	)%
Intersegment eliminations	(26,863		)	(17,762		)
Total securities commissions and fees	$	2,994,405		$	2,574,756			16	%
Investment banking revenues:
Equity:
Underwritings	$	55,953		$	30,738			82	%
Mergers & acquisitions and advisory fees	143,919			102,076				41	%
Fixed Income	31,694			30,245				5	%
Tax credit funds syndication fees	35,884			35,520				1	%
Other	543			392				39	%
Total investment banking revenues	267,993			198,971				35	%
Other revenues:
Realized/unrealized gain attributable to private equity investments	$	24,690		$	17,884			38	%
Other	44,024			40,553			(3)	9	%
Total other revenues	68,714			58,437			(3)	18	%
Net income/(loss) attributable to noncontrolling interests:
Private equity investments	$	5,737		$	8,809			(35	)%
Consolidation of low-income housing tax credit funds	(10,362		)	(7,969		)	(3)	(30	)%
Other	3,478			3,974				(12	)%
Total net income/(loss) attributable to noncontrolling interests	(1,147		)	4,814			(3)	NM

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

9

Raymond James Financial, Inc.

Selected Key Metrics

(Unaudited)

Financial metrics:
	For the period ended
	June 30, 2017				June 30, 2016 (3)			March 31, 2017
Total assets	$	33.4	bil.	(5)	$	28.7	bil.	$	32.9	bil.
Total equity (2)	$	5.4	bil.		$	4.7	bil.	$	5.2	bil.
Book value per share	$	37.46			$	33.62		$	36.28
Return on equity - quarter (6)	13.8		%		10.7		%	8.8		%
Adjusted return on equity - quarter (1) (6)	14.0		%		11.8		%	14.4		%
Return on equity - year to date (6)	11.5		%		10.3		%	10.2		%
Adjusted return on equity - year to date (1) (6)	14.1		%		10.8		%	14.2		%
Common equity tier 1 capital ratio	22.3		%	(5)	21.3		%	21.8		%
Tier 1 capital ratio	22.3		%	(5)	21.3		%	21.8		%
Total capital ratio	23.3		%	(5)	22.3		%	22.7		%
Tier 1 leverage ratio	15.1		%	(5)	15.6		%	14.5		%
Pre-tax margin on net revenues - quarter (7)	16.9		%		14.6		%	10.6		%
Adjusted pre-tax margin on net revenues - quarter (1) (7)	17.1		%		16.1		%	17.6		%
Pre-tax margin on net revenues - year to date (7)	13.8		%		14.3		%	12.2		%
Adjusted pre-tax margin on net revenues - year to date (1) (7)	17.1		%		15.0		%	17.1		%
Effective tax rate - quarter	33.3		%		36.5		%	31.9		%
Effective tax rate - year to date	31.6		%		36.6		%	30.3		%

Private Client Group financial advisors:
	As of
	June 30, 2017	June 30, 2016	March 31, 2017
Employees	2,996	2,821	3,001
Independent contractors	4,289	4,013	4,221
Total advisors	7,285	6,834	7,222

Client asset metrics:
	As of
	June 30, 2017		June 30, 2016		% Change		March 31, 2017		% Change
	($ in billions)
Client assets under administration	$	664.4	$	534.5	24	%	$	642.7	3	%
Private Client Group assets under administration	$	631.5	$	506.0	25	%	$	611.0	3	%
Private Client Group assets in fee-based accounts	$	276.9	$	206.7	34	%	$	260.5	6	%
Financial assets under management	$	91.0	$	71.7	27	%	$	85.6	6	%
Clients’ domestic cash sweep balances (8)	$	43.3	$	38.4	13	%	$	45.8	(5	)%

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

10

Raymond James Bank

Selected Key Metrics

(Unaudited)

Selected operating data:
	Three months ended													Nine months ended
	June 30, 2017			June 30, 2016			% Change		March 31, 2017			% Change		June 30, 2017			June 30, 2016			% Change
	($ in thousands)													($ in thousands)
Net interest income	$	145,521		$	123,687		18	%	$	138,511		5	%	$	418,304		$	351,172		19	%
Bank loan loss provision	$	6,209		$	3,452		80	%	$	7,928		(22	)%	$	13,097		$	26,991		(51	)%
Net charge-offs	$	1,161		$	682		70	%	$	19,487		(94	)%	$	19,046		$	2,521		655	%
Net interest margin (% earning assets)	3.14		%	3.10		%	1	%	3.08		%	2	%	3.09		%	3.04		%	2	%

Financial metrics:	As of
	June 30, 2017				June 30, 2016			March 31, 2017
	($ in thousands)
Total assets (9)	$	20,179,273			$	16,610,235		$	19,178,772
Total equity	$	1,772,418			$	1,615,005		$	1,732,882
Total loans, net	$	16,630,191			$	14,799,516		$	15,994,689
Total deposits (9)	$	17,418,127			$	14,240,934		$	16,669,718
Available-for-sale (AFS) securities, at fair value	$	1,878,802			$	418,745		$	1,582,968
Net unrealized loss on AFS securities, before tax	$	(8,997	)		$	(1,592	)	$	(10,835	)
Common equity tier 1 capital ratio	12.4		%	(5)	12.7		%	12.4		%
Tier 1 capital ratio	12.4		%	(5)	12.7		%	12.4		%
Total capital ratio	13.7		%	(5)	14.0		%	13.7		%
Tier 1 leverage ratio	9.3		%	(5)	10.1		%	9.3		%
Commercial and industrial loans	$	7,253,771			$	7,319,194		$	7,281,218
Commercial Real Estate (CRE) and CRE construction loans	$	3,194,555			$	2,631,160		$	3,001,751
Residential mortgage loans	$	2,962,917			$	2,351,431		$	2,815,996
Securities based loans	$	2,279,389			$	1,827,446		$	2,061,454
Tax-exempt loans	$	986,790			$	701,339		$	852,021
Loans held for sale	$	166,609			$	190,402		$	194,290
Credit Metrics:
Allowance for loan losses	$	191,603			$	196,882		$	186,234
Allowance for loan losses (as % of loans)	1.15		%		1.33		%	1.17		%
Total nonperforming assets	$	47,328			$	86,100		$	51,128
Nonperforming assets (as % of total assets)	0.23		%		0.52		%	0.27		%
Total criticized loans (10)	$	270,659			$	275,345		$	215,104

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

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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. 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. Non-GAAP measures for the three and nine months ended June 30, 2016 have been revised from those previously reported to conform to our current presentation, which includes amounts related to the Jay Peak settlement.

	Three months ended									Nine months ended
	June 30, 2017			June 30, 2016			March 31, 2017			June 30, 2017			June 30, 2016
	($ in thousands, except per share amounts)
Net income (2)	$	183,424		$	125,504		$	112,755		$	442,746		$	357,680
Non-GAAP adjustments:
Acquisition-related expenses (11)	3,366			13,445			1,086			17,118			21,332
Other expenses: (12)
Extinguishment of senior notes payable	—			—			8,282			8,282			—
Jay Peak settlement	—			7,050			100,000			130,000			7,050
Sub-total pre-tax non-GAAP adjustments	3,366			20,495			109,368			155,400			28,382
Tax effect of non-GAAP adjustments	(1,279		)	(7,500		)	(33,655		)	(47,299		)	(10,390		)
Non-GAAP adjustments, net of tax	2,087			12,995			75,713			108,101			17,992
Adjusted net income	$	185,511		$	138,499		$	188,468		$	550,847		$	375,672
Pre-tax income (2)	$	275,014		$	197,765		$	165,513		$	646,906		$	564,221
Total pre-tax non-GAAP adjustments (as detailed above)	3,366			20,495			109,368			155,400			28,382
Adjusted pre-tax income	$	278,380		$	218,260		$	274,881		$	802,306		$	592,603
Pre-tax margin on net revenues (7)	16.9		%	14.6		%	10.6		%	13.8		%	14.3		%
Adjusted pre-tax margin on net revenues (7)	17.1		%	16.1		%	17.6		%	17.1		%	15.0		%
Earnings per common share:
Basic	$	1.27		$	0.89		$	0.78		$	3.09		$	2.51
Diluted	$	1.24		$	0.87		$	0.77		$	3.02		$	2.47
Adjusted earnings per common share:
Adjusted basic	$	1.29		$	0.98		$	1.31		$	3.84		$	2.64
Adjusted diluted	$	1.26		$	0.96		$	1.28		$	3.76		$	2.59
Average equity (13)	$	5,298,510		$	4,693,824		$	5,144,313		$	5,148,611		$	4,640,348
Adjusted average equity (13)	$	5,299,553		$	4,705,318		$	5,252,609		$	5,209,715		$	4,646,391
Return on equity (6)	13.8		%	10.7		%	8.8		%	11.5		%	10.3		%
Adjusted return on equity (6)	14.0		%	11.8		%	14.4		%	14.1		%	10.8		%

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

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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. Excludes noncontrolling interests.

3. As a result of our October 1, 2016 adoption of the new consolidation guidance, we deconsolidated a number of tax credit fund VIEs that had been previously consolidated. Certain prior period amounts have been revised from those reported in the prior periods to conform to the current presentation. There was no net impact on our Condensed Consolidated Statements of Income and Comprehensive Income for the prior period as the net change in revenues, interest and other expenses were offset by the impact of the deconsolidation on the net income/(loss) attributable to noncontrolling interests. See our Quarterly Report on Form 10-Q for the quarter ended March 31, 2017 (available at www.sec.gov) for more information.

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

5. Estimated.

6. 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 of equity, computed by dividing annualized adjusted net income attributable to Raymond James Financial, Inc. by adjusted average equity for each respective period.

7. Computed by dividing the 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.

8. Domestic broker-dealer client cash sweep 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.

9. Includes affiliate deposits.

10. 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.

11. Acquisition-related expenses associated with our 2017 announced acquisition of Scout Investments and Reams Asset Management as well as the 2016 acquisitions of the U.S. Private Client Services unit of Deutsche Bank Wealth Management, MacDougall, MacDougall & MacTier, Inc., and Mummert & Company Corporate Finance GmbH.

12. Other expenses include the acceleration of unamortized debt issuance costs due to the early extinguishment (March 15, 2017) of our 6.90% Senior Notes due 2042 and expenses related to the $150 million settlement associated with the Jay Peak matter announced in April 2017. For further information on these items see our Quarterly Report on Form 10-Q for the quarter ended March 31, 2017 (available at www.sec.gov).

13. For the quarter, 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. For the year-to-date period, computed by adding the total equity attributable to Raymond James Financial, Inc. as of each quarter-end date during the indicated year-to-date period to the beginning of the year total and dividing by four. Adjusted average equity is computed by adjusting for the impact on average equity of the non-GAAP adjustments, as applicable for each respective period.

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