Good afternoon, welcome to Raymond James Financial's First Quarter Fiscal 2023 Earnings Call. This call is being recorded and will be available for replay on the company's Investor Relations website. Now I will turn it over to Kristie Waugh, Senior Vice President of Investor Relations at Raymond James Financial. Good afternoon, everyone, and thank you for joining us. We appreciate your time and interest in Raymond James Financial. With us on the call today are Paul Reilly, Chair and Chief Executive Officer, and Paul Shoukry, Chief Financial Officer. The presentation being reviewed today is available on Raymond James' Investor Relations website. Following the prepared remarks, the operator will open the line for questions. Calling your attention to slide two. Please note certain statements made during this call may constitute forward-looking statements. These statements include, but are not limited to, information concerning future strategic objectives, business prospects, financial results, anticipated timing and benefits of our acquisitions and our level of success in integrating acquired businesses, divestitures, anticipated results of litigation and regulatory developments or general economic conditions. In addition, words such as may, will, could, anticipates, expects, believes, or continue, or negatives of such terms or other comparable terminology, as well as any other statement that necessarily depends on future events, are intended to identify forward-looking statements. Please note that there can be no assurance that actual results will not differ materially from those expressed in the forward-looking statements. We urge you to consider the risks described in our most recent Form 10-K and subsequent Forms 10-Q and Forms 8-K, which are available on our Investor Relations website. During today's call, we will also use certain non-GAAP financial measures to provide information pertinent to our management's view of ongoing business performance. A reconciliation of these non-GAAP measures to the most comparable GAAP measures may be found in the schedules accompanying our press release and presentation. With that, I'd like to turn the call over to Chair and CEO, Paul Reilly. Paul? Good afternoon. Thank you for joining us today. Although there was a lot of disappointment for us in the Bucs playoff game, and even more disappointment for me as Paul Shoukry's Bulldogs won the national championship, Raymond James came through again with another good, solid performance. During a volatile and challenging market environment, we generated strong quarterly results, including record net income available to common shareholders of $507 million, annualized return on common equity of 21.3%, and annualized adjusted return on tangible common equity of 26.1%. Once again, these results highlight the value of having diverse and complementary businesses. Record Private Client Group results driven by robust organic growth, along with strong expansion of net interest margins in the bank segment and yields on the RJBDP balances at third-party banks in the PCG segment offset market-driven declines experienced through the Capital Markets businesses. As demonstrated this quarter, with the sharp increase in net interest income and RJBDP fees, we have been and remain well positioned for continued rise in short-term interest rates with diverse and ample funding sources, a high concentration of floating-rate assets, and strong balance sheet flexibility given solid capital ratios. Turning now to the results starting on slide four. In the first fiscal quarter, the firm reported net revenues of $2.79 billion, record pre-tax income of $652 million, and record net income available to common shareholders of $507 million or $2.30 per diluted share. Excluding expenses related to acquisitions and the favorable impact of a $32 million insurance settlement received during the quarter, adjusted net income available to common shareholders was $505 million or $2.29 per diluted share. Quarterly net revenues were flat compared to the prior year quarter and down 2% compared to the preceding quarter, largely driven by the benefit of higher short-term interest rates on net interest income and RJBDP fees from third-party banks, offset by the market-driven declines in investment banking revenues and Asset Management and related administrative fees. Record quarterly net income available to common shareholders increased 14% over the prior year's fiscal first quarter, largely due to higher net interest income and RJBDP fees from third-party banks. As I mentioned earlier, we generated very strong returns with annualized return on common equity of 21.3% and annualized adjusted return on tangible common equity of 26.1%. Impressive results, especially given the challenging market conditions and our strong capital position. Moving on to slide five. We ended the quarter with total client assets under administration of $1.17 trillion. PCG assets and fee-based accounts of $633 billion and financial assets under management of $186 billion. With our unwavering focus on retaining, supporting, and attracting high-quality financial advisors, PCG consistently generates strong organic growth. We ended the quarter with nearly 8,700 financial advisors and generated domestic net new assets of $23 billion in the quarter, representing a 9.8% annualized growth rate on beginning of the period domestic PCG assets. Net new assets were strong this quarter also helped by the seasonally high interest and dividends received in December. Over the trailing 12-month period, we generated net new asset growth of 7.3% of domestic PCG assets at the beginning of the period. During the same 12-month period, we recruited to our domestic independent contractor and employee channels, financial advisors with nearly $300 million of trailing 12-month production and approximately $40 billion of client assets at their previous firms. Total clients domestic cash sweep balances declined 10% to $60 billion, representing 5.9% of domestic PCG assets under administration. The domestic sweep balances represent our lowest cost deposits, as we have yet to utilize enhanced yield savings accounts to attract cash deposits. Total bank loans grew 2% sequentially to a record $44 billion, reflecting growth at both Raymond James Bank and TriState Capital Bank. Moving to slide six. The Private Client Group generated record results with quarterly net revenues of $2.06 billion and pre-tax income of $434 million. Asset-based revenues declined. However, the segment's results were lifted by the benefit from higher short-term interest rates, including increased yields on RJBDPs from third-party banks and the bank segment. The Capital Markets segment generated quarterly net revenues of $295 million and a pre-tax loss of $16 million. Capital Markets revenues declined 52% compared to the record-setting results in the prior year and quarter, mostly driven by lower investment banking revenues, largely due to the volatile and uncertain markets. The Asset Management segment generated pre-tax income of $80 million on net revenues of $207 million. The decreases in net revenue and pre-tax income were largely attributable to lower financial assets under management as net inflows to fee-based accounts in the Private Client Group were offset by a year-over-year fixed income and equity markets decline. The bank segment generated record quarterly net revenues of $508 million and pre-tax income of $136 million. Net revenue growth was primarily due to higher loan balances and significant expansion of the bank's net interest margin to 3.36% for the quarter, up 144 basis points over a year ago quarter and 45 basis points from the preceding quarter, reflecting the flexible and floating rate nature of our balance sheet. Now for more detailed review of our financial first quarter results, I'm gonna turn the call over to Paul Shoukry. Paul? Thank you, Paul. Starting with consolidated revenues on slide eight. Quarterly net revenues of $2.79 billion were flat year-over-year and declined 2% sequentially. Asset Management and related administrative fees declined 10% compared to the prior year quarter and 4% compared to the preceding quarter, in line with the guidance we provided on last quarter's call based on lower fee-based assets at the end of the preceding quarter due to the equity market declines. This quarter, fee-based assets grew 8%. This growth should provide a tailwind for Asset Management and related administrative fees, which we expect to increase 5%-6% in the fiscal second quarter, reflecting two fewer billable days. Brokerage revenues of $484 million declined 13% compared to the prior year's fiscal first quarter and grew 1% over the preceding quarter. The year-over-year decline was largely due to lower fixed income and equity brokerage revenues in the Capital Markets segment, as well as lower asset-based trail revenues in PCG. I'll discuss account and service fees and net interest income shortly. In a much more difficult market environment than we anticipated on last quarter's call, investment banking revenues of $141 million declined 67% compared to the record set in the prior year quarter, and 35% compared to the preceding quarter. Despite a healthy pipeline and good engagement levels, there remains a lot of uncertainty in the pace and timing of deal closings given the heightened market volatility. At this point, it is too difficult to say when conditions will become conducive to increased activity. Other revenues of $44 million declined 45% sequentially, primarily due to lower revenues in the affordable housing investments business, which was seasonally high in the preceding quarter. Looking forward, this business continues to have a strong pipeline. Moving to slide nine. Clients domestic cash sweep balances ended the quarter at $60.4 billion, down 10% compared to the preceding quarter, and representing 5.9% of domestic PCG client assets. The sweep balance declines were experienced in the Client Interest Program at the broker-dealer, as well as with third-party banks. As of last Friday, these balances have declined to just under $57 billion, reflecting the quarterly fee payments of approximately $1.1 billion paid in January, as well as additional cash sorting activity during the month. The Raymond James Bank Deposit Sweep program continues to be a relatively low-cost source of funding, TriState Capital Bank adds an independent deposit franchise, providing a more diversified funding base. As we've seen deposits decline significantly across the entire financial system, we realize even greater value in having multiple funding sources. To that end, we are also in the process of launching an Enhanced Yield Savings Program for our Private Client Group clients. Turning to slide 10. Combined net interest income and RJBDP fees from third-party banks was $723 million, up 253% over the prior year's fiscal first quarter and 19% over the preceding quarter. This strong growth reflects the immediate impact from higher short-term rates given the limited duration and high concentration of floating rate assets on our balance sheet. Our long-standing approach has been to maintain a high concentration of floating rate assets, which is proving to be a significant tailwind in this rising rate environment. The bank's net interest margin, shown on the bottom portion of the slide, increased 45 basis points sequentially to 3.36% for the quarter, and the average yield on RJBDP balances with third-party banks increased 87 basis points to 2.72%. Both the NIM and the average yield on RJBDP balances increased more than we expected on last quarter's call, as the deposit beta on the last rate increase was closer to 15%. The spot NIM for the bank segment is currently close to 3.5%, and the spot yield on RJBDP balances is approximately 3.2%. We currently expect continued near-term tailwinds for net interest income and related fees despite the ongoing cash sorting activity. The anticipated rate increases should also help. Remember, there are two fewer days in the second fiscal quarter. While we still have sweep balances with third-party banks that could be redeployed to the Bank segment, longer term, if rates stabilize at these levels, we expect the bank's NIM will be impacted by the mix of deposits, anticipating a larger portion of higher cost deposits being utilized to fund the future balance sheet growth. While we are pleased to see the significant NIM expansion, as we have said in the past, we have always prioritized net interest income over net interest margin, and our goal is to continue growing net interest income as we deliberately grow the balance sheet over time. Moving to consolidated expenses on slide 11. Beginning with our largest expense, compensation. The total compensation ratio for the quarter was 62.3%, nearly flat from the preceding quarter. The adjusted compensation ratio was 61.7% during the quarter. Despite lower Capital Markets revenues, the compensation ratio largely reflects the significant benefit from higher net interest income and RJBDP fees from third-party banks. As a reminder, the impact of salary increases effective on January 1st and the reset of payroll taxes at the beginning of the calendar year will be reflected in the fiscal 2nd quarter. Non-compensation expenses of $398 million decreased 13% sequentially. Adjusting for acquisition-related non-compensation expenses of $11 million and the favorable impact received of $32 million, both included in our non-GAAP earnings adjustments, non-compensation expenses were $419 million during the quarter. The bank loan provision for credit losses of $14 million in the quarter primarily reflects changes to macroeconomic assumptions used in the CECL models, as well as modest loan growth. I'm proud of our continued disciplined management of expenses exhibited again this quarter. We remain focused on investing in growth and ensuring high service levels for advisors and their clients. Given the benefits from higher short-term interest rates, we expect to maintain our compensation ratio well below 66%, as it has been around 62% over the past two quarters, even with much lower revenues in the Capital Markets segment this quarter. Non-compensation expenses, excluding provision for credit losses and the aforementioned non-GAAP adjustments, are still expected to be around $1.7 billion for the fiscal year. Slide 12 shows the pre-tax margin trend over the past five quarters. In the fiscal first quarter, we generated a pre-tax margin of 23.4%. A very strong result. Highlighting the benefit of our diversified business model, the upside we preserved to higher short-term interest rates, and our consistent focus on being disciplined on expenses. Similar to my comments on the compensation ratio, given the interest rate tailwinds, we currently believe we are well positioned to continue delivering pre-tax margins above the previously disclosed 19%-20% target. Given the cash sorting dynamics as well as interest rate and market uncertainty, we believe it is premature to formally update our targets in this volatile environment. On slide 13, at quarter end, total assets were $77 billion, a 5% sequential decrease, primarily reflecting the decline in Client Interest Program cash balances. The reduction of balance sheet assets help increase the Tier 1 leverage ratio during the quarter. Liquidity and capital remained very strong. RJF corporate cash at the parent ended the quarter at $2 billion, well above our $1.2 billion target. The Tier 1 leverage ratio of 11.3%, the total capital ratio of 21.5% are both more than double the regulatory requirements to be well capitalized. Our capital levels continue to provide significant flexibility to continue being opportunistic and invest in growth. The effective tax rate for the quarter was 21.9%, reflecting a tax benefit recognized for share-based compensation that vested during the period. Going forward, we still believe 24%-25% is an appropriate estimate to use in your models. Slide 14 provides a summary of our capital actions over the past five quarters. In December, the board of directors increased the quarterly cash dividend on common shares 24% to $0.42 per share, and authorized share repurchases of up to $1.5 billion, replacing the previous authorization of $1 billion. During the fiscal first quarter, the firm repurchased 1.29 million shares of common stock for $138 million at an average price of $106 per share. As of January 25th, 2023, $1.4 billion remained available under the board's approved common stock repurchase authorization. Since the closing of the TriState acquisition, on June 1st through January 25th, we have repurchased approximately 3 million common shares for $300 million, or approximately $100 per share under the board authorization. We remain committed to offset the share issuance associated with the acquisition of TriState, as well as share-based compensation dilution, still expect to achieve our objective of repurchasing $1 billion of shares in fiscal 2023. Of course, we will continue to closely monitor market conditions and other capital needs as we plan for these repurchases over the coming quarters. Lastly, on slide 15, we provide key credit metrics for our bank segment, which includes Raymond James Bank and TriState Capital Bank. The credit quality of the loan portfolio remains healthy. Criticized loans as a percentage of total loans held for investment ended the quarter at 1.01%. The bank loan allowance for credit losses as a percentage of total loans held for investment ended the quarter at 0.92%, down from 1.18% at December 2021, nearly flat sequentially. The year-over-year decline in the bank loan allowance for credit losses as a percentage of total loans held for investment reflects the higher proportion of securities-based loans, largely due to the acquisition of TriState Capital Bank. Securities-based loans, which account for approximately 34% of our bank loan portfolio, are generally collateralized by marketable securities and typically do not require an allowance for credit losses. The bank allowance for credit losses on corporate loans as a percentage of corporate loans held for investment was 1.64% at quarter end. We believe this represents an appropriate reserve, but we are continuing to closely monitor any impacts of inflation, supply chain constraints, and a potential recession on our corporate loan portfolio. I'll turn the call back over to Paul Reilly to discuss our outlook. Paul? Thank you, Paul. As I said in the start of the call, I'm pleased with our results and our ability to generate record earnings during what continues to be a very volatile market. While there are many uncertainties, we believe we're well-positioned to drive growth over the long term across all of our businesses. In the Private Client Group, next quarter results will be favorably impacted by the expected 5%-6% sequential increase in Asset Management and related administrative fees. The segment will continue to benefit from higher short-term interest rates, as described by Paul. Focusing more on the long term, I am optimistic we will continue delivering industry-leading growth as current and prospective advisors are attracted to our client-focused values and leading technology and production solutions. In the Capital Market segment, while M&A pipelines remain healthy, the pace and timing of the closings will be heavily influenced by market conditions. In the fixed income space, depository clients are experiencing declining deposit balances and have less cash available for investing in securities, putting pressure on our brokerage activity. However, Sum Ridge, with its rapidly evolving fixed income and trading technology marketplace, enhances our position as this business typically benefits from elevated rate volatility. Over the long term, we are well-positioned across capital markets for growth given the investments we have made over the past five years, which have significantly increased our productive capacity and market share. In the Asset Management segment, financial assets under management are starting the fiscal second quarter up 7% compared to the preceding quarter, which should provide a tailwind to revenues if markets remain conducive. We remain confident that the strong growth of assets in fee-based accounts in the Private Client Group segment will drive long-term growth of financial assets under management. In addition, we expect Raymond James Investment Management, which generated modest net inflows this quarter, to help drive further growth through increased scale, distribution, operational, and marketing synergies. The bank segment is well-positioned for rising short-term interest rates and has ample capital to grow the balance sheet prudently. However, in an increasing rate environment, loan growth will face headwinds until rates stabilize and borrowers adjust to a new normal in the cost of borrowings. Additionally, as cash sorting has continued in the sweep program, we expect to increase the focus on funding the growth of the bank's balance sheet with higher costs, diversified sources over the long term. Currently, we have suite balances at third-party banks that could be redeployed to the bank segment. However, the past has also taught us that cash suite balances can decrease or increase rapidly depending on market conditions. Importantly, the credit quality of the bank segment's loan portfolio remains strong, and we are closely watching economic conditions related to the lending portfolio. In just a short period since the closing of the acquisition of TriState Capital, I am very pleased with their performance, staying true to TriState's independent operating model, including remaining a separately chartered bank with its own client relationships. This model, coupled with our strong capital, should foster its ongoing growth. It's no accident that our businesses are positioned well for future growth. It is a result of our steady focus on making decisions for the long term, especially in volatile and uncertain market conditions. We are well-positioned for the continued rise in short-term interest rates with diverse funding sources, solid loan growth, high concentration of floating rate assets, and ample balance sheet flexibility, given the solid capital ratios, which are all well in excess of regulatory requirements. Finally, in these uncertain times is when clients need trusted advice the most, and I wanna thank our advisors and associates for their unwavering dedication to providing excellent service to their clients each and every day. Our strong results are a direct reflection of your contributions. Thank you very much to all of you. With that, operator, will you please open it up for questions? Thank you. If you'd like to register for a question, press the one followed by the four on your telephone keypad right now. You'll hear a three-tone prompt to acknowledge your request. If your question has been answered and you would like to withdraw your registration, please press the one followed by the three. One moment please for the first question. The first question comes from the line of Devin Ryan with JMP Securities. Please proceed with your question. Hey, thanks. Hi, Paul and Paul. How are you? Great, Devin. Good. Nice to speak with you after the press release in the evening, which is great. I guess just a couple quick ones on my end. First on the buyback. You repurchased $138 million. You know, it's a bit below the implied $250 million average target. I guess the implication is there's gonna be some catch up. I'm just trying to understand the factors that impacted the cadence of whether it was being price conscious or were you in blackout through the quarter that we didn't see or maybe any other reasons. Just trying to think about, again, kind of the cadence there. You know, we're still targeting the $1 billion of repurchases for fiscal 2023, as we've said several times now. That obviously means we would have to ratchet that up on an average basis going forward to get to that $1 billion mark. There was a lot of volatility this particular quarter. As you point out, there's always a blackout period. You know, we were pleased to get $136 million in. Understand that to hit our target going forward, we're gonna have to kind of increase that average. With that being said, we're still gonna... You know, a lot can change between now and the end of the fiscal year. We do monitor, you know, market conditions and all the sources and uses that we have for cash and capital at the firm. Got it. Okay. Thank you. Then just a follow-up here on net interest income in Private Client. Yeah, that's been obviously very strong, and that came in better than we were looking for. You know, we see the decline in the kind of the Client Interest Program. Just trying to think about the other drivers there. You know, was the kind of continued shrink there driven by margin and just higher margin rates? Or, you know, some of your peers had some SEC lending that helped as well. I'm curious if there was any kind of lumpy SEC lending in there. Just trying to think about some of the moving parts that's keeping that really strong. No, SEC lending was not a driver. Really was just the higher yields on both the segregated assets pursuant to, you know, the broker-dealer regulations, as well as the higher yields on the margin balances. I will point out going forward, sort of the last in, first out, type of cash is really the Client Interest Program cash, and that has declined the most dramatically during this cash sorting cycle. You know, we're probably at around $3 billion-$4 billion of those balances today versus sort of the average balance for the quarter of $6 billion. That would be something you would need to consider, which would partially be offset by the higher rates going forward as well, you know, factoring in a full quarter of last quarter's rate hikes and potential rate hikes this quarter. Something that you would need to factor into your modeling. Yep. Understood. Okay, great. I'll leave it there. Thank you very much. Thanks, Devin. Thanks, Devin. The next question comes from the line of Jerry O'Hara from Jefferies. Please proceed with your question. Great. Thanks, and good evening. Hoping you might be able to just give a little incremental color on the enhanced yield product, where you see the sort of demand coming for that and what the, you know, potential kind of rates might be that could be offered to clients. Thanks. Yeah. If you look at, I think almost everyone has offered enhanced yield programs today. They're not new. We just haven't had a need for them because the amount of client cash we've had. As that dwindles more and just even as a defensive mechanism, we will offer them. That's the account, whether people have people in money markets and want an insured product which we have, or if people are thinking of moving their money, they have a competitive yield without moving their money into sweeps or into money markets or fixed income products or things. That's really a number of firms in the industry have primarily been relying on that. We haven't 'cause of the cost of funds. As we've had a... You know, we're reaching an area where we've always said if we get to this area, we'll offer some of those products. The competitive rates in today's market are probably between 3.75%-4%, somewhere. You know, there's some outliers on either side, but that's the cost and what our competitors have been doing. To the point that we're gonna make sure we're always on the positive side of cash. Good news is, even at those much higher rates, we can still earn a spread. Also, since we really have all low yield deposits and almost virtually zero, you know, high cost deposits, adding some will just be, it won't be as big of an impact on our cost of funds, as most places have significant deposits today. Great. Thanks. Then maybe one just on the recruiting environment. You know, is there anything seasonal kind of about turning the calendar that, you know, would be sort of advantageous, as it relates to kind of attracting and recruiting advisors? Perhaps if you could also just kind of touch on, you know, just any of the dynamics around transition assistance and what you're kind of seeing in the marketplace. Thank you. Thank you. I mean, for years everybody said, "Well, we hear it's competitive." It's been competitive a long time. It continues to be competitive. I would say that the competitive environment's about the same. I'd say the only thing new in the last year is there are some third party RIA aggregators that have paid more than, you know, the other firms competing for people in the advisor space. Employee division led the way and set its own record, and our independent division was a little slower. In this first quarter, the independents recruiting faster, the employee a little slower. I mean, through one quarter, but what we see is the backlog very, very strong in both divisions, very large teams. We still feel good about the recruiting and it's, you know, if you just look at the last few years, I think we've been, like, you know, right up at the top of the charts on net new assets and recruiting. Is there, Jerry, any other questions? No, good for me. Thanks, gentlemen. All right. Thanks, Jerry. The next question comes from the line of Manan Gosalia with Morgan Stanley. Please proceed with your question. Hey, good afternoon. Good morning. Hey, Manan. I wanted to ask a question on cash sorting. Can you comment on the broader trends, in cash sorting? We're sort of getting closer to that 5% of client assets that has been a lower end of the range in the past. Is that 5% still a good base for where cash should settle? How quickly do you think we get there? I think the true answer is no one really knows. You know, we. That 5% number was based on that 2016 through '19 period. We don't have a lot of, as an industry, a lot of great historical benchmarking because of course, you know, even in that 2016 to '19 period, the Fed funds target topped out at 2.5%. Arguably, client sensitivity around rate is, you know, heightened when you're at today's Fed fund target rate and, you know, the yields that you can earn on your investable cash balances. You know, 5% is as good a guess as any, but we're certainly not hanging our hat on that potentially being a floor, which is why, as Paul says, we are looking at all the diversified sources of funding that we can offer our clients that would be attractive to our clients. also gives us additional appreciation of the TriState Capital franchise because they have a independent and diversified funding source as well. I don't think we try to figure out where the bottoms are. When we acquired TriState joined us and we talked about diversified funding, I think a lot of people said: "Well, why are you even bringing that up? You got record cash deposits." Well, we always anticipate these time frames. Just in 2019, where we started ready to roll out some higher yielding products because no one wanted cash, all of a sudden we got flooded with cash again overnight. We know these dynamics can change and change rapidly. Cash sorting as reported continued. Whether 5% is the bottom or it goes a little lower, don't know. You know, a lot of the lower balance deposits, which are significant, you know, have been very, very steady. At some point, the higher deposits, you know, probably find a home where it's material enough, you know, at today's rates, to make a difference on the lower. It's just like bank accounts. It's not enough to make a change. We always prepare and fear the worst, but generally, you know, because you just don't know. I hope 5% is the bottom. But we'll see. We'll be prepared if it wasn't. Got it. Okay. Great. In terms of deposits, you know, you noted you're allocating more deposits to the bank rather than a third-party bank program. Is there a specific loan to deposit ratio or liquidity level that you're thinking about maintaining at the bank? You know, how should we think about this going forward if, you know, cash sorting continues at the same rate? Yes. The biggest constraint on that is just sort of the percentage of BDP sweep deposits that we want in our own bank, because we always wanted there to be a cushion of balances that are swept at third-party banks in case balances, as Paul said, do decline more rapidly than we expect. That's really kind of the governing factor. You know, it's roughly at 75% today in terms of the amount of this BDP sweep cash that is going to our own banks. Maybe it will go a little bit higher than that. I mean, of the $14 billion-$15 billion of cash with third-party banks today, a good portion of that could be swept over to our own bank, while still preserving clients' FDIC insurance that we offer them, which is best in class in the industry, by the way, as far as we can tell. We also want to make sure we're being prudent and not exposing ourselves to funding risk by shifting too much over. We have plenty of capital and liquidity, our first source is to fund the banks. You know, that's our business. You know, to the extent, you know, the sweep is really a cash overflow in a lot of ways, but a good part of our business model. You know, right now we're not alarmed. We still have flexibility. At some point, you know, we've known people that have gone up to 90% of cash or something. We just, you know, that's a little too leveraged for us. The next question comes from the line of Alex Blostein with Goldman Sachs. Please proceed with your question. Hey, guys. Good evening. Thanks for the question. Just apologies for Potter, it is related. I'm hoping to just better understand the balancing strategy for you guys from here. On the one hand, Paul, you talked about slowing loan growth in this environment. At the same time, you're talking about launching an enhanced yield product on the deposit side, despite the fact that you have lots of liquidity and third-party bank deposits sweeps still. Maybe help me understand, you know, how much of that $18 billion third-party bank is ultimately sweepable to your bank. How big the Enhanced Yield Program you think ultimately will be for you guys over the next, you know, 12 months? How are you thinking about the overall growth at the bank in terms of the growth in assets? You know, ultimately, the growth in the bank is driven by client demand, right? As Paul said in his prepared remarks, that client demand is experiencing headwinds now that interest rates are on the move, as you would expect. Until they get used to the new normal of interest rates, we expect those headwinds to continue. One thing we will not do is when client demand does slow down, naturally given the rate environment today, we're not gonna stretch for growth or get into asset classes that are not really client-oriented. With that being said, in terms of the funding, we always want to prepare for the future. You know, one quarter is certainly not a trend. We wanna be there for our clients, whether it's a year to two to five years out from now. We wanna make sure that we're, you know, diversifying and strengthening our funding sources, so that we have ample funding for when client demand does come back. 'Cause we know it will eventually come back. We just don't know when or how quickly it will be. That's sort of how we think about the strategy. Long term strategy versus trying to manage it quarter- to- quarter. I think in terms of the amount is we don't know. What you do is you turn on the program, start raising money, and you can always accelerate it by, you know, letting more clients know, pushing it more, changing the rate in the competitive market. I mean, you have lots of levers to speed it up. You certainly can slow it down or you can stop it, you know. You can't do any of those unless you start it. We have the technology up and running. We've got it, you know, tested. Now we're gonna go out and open it up to a degree. If we need it more, we'll spread it out to a broader base of the advisor segments. If it's, if it ends up being more than we need and we see cash goes the other way, we slow it down or turn it off. It's about being prepared. It's the same in TriState has third party sources too. We just prepare to turn them on, make sure they're there, get interest, and then if we need them, we can be more aggressive. If we don't, we can just stop. It's just a balance. If we know how much cash we need. Yeah, if we know how much cash we need, we'd tell you, and we know how much we have to raise. We always assume we can run models and speculate, the truth is we really don't know, so we just need to be able to react to it. The next question comes from the line of Bill Katz with Credit Suisse. Please proceed with your question. Okay. Thank you very much for taking the questions, and also appreciate you moving back the conference call tonight. Just following up on sort of this last line of questioning. As you think about earning asset growth, A, can you grow that in an environment where there's sorting and mixed loan demand? B, if it does grow, could you talk a little bit about the sort of decision-making between loan growth and the investment securities portfolio? Thank you. Again, right now in a tighter funding environment, and more uncertain funding environment, we are certainly prioritizing client demand and client funding needs over the securities portfolio. Just like we prioritized the security portfolio when we needed to accommodate surplus client cash balances. Again, our balance sheet's primarily there for clients. That's kind of the difference between how we think about our balance sheet and many of our peers, is that we really do think about the client demand both on the asset and on the funding side. Yeah, in terms of the loan growth going forward, as Paul says, we really don't know what it's going to be. What we're not going to do is force or stretch for growth. We will continue to provide, you know, have our advisors provide excellent advice to their clients. To the extent that they're need mortgages or securities-based loans or our corporate clients reengage in M&A and they need financing, then we wanna be there for them. Okay. Just a follow-up. maybe switch back to capital for a moment. You know, obviously you sit in a pretty strong capital position, as you both have mentioned. A few updates on what your latest thinking is of where you'd like to have that Tier 1 leverage ratio settle out. I think you've mentioned a couple times of opportunities to deploy your capital. Would you buy back the full $1 billion? Or is it a function of potential M&A? If you're interested in M&A, where might you be looking? Thank you. Yeah. Let me go backwards into the question. At first, we like organic growth the best. It's been our focus, because it's sustained this large, consistent, net new assets. Even when we're not doing acquisitions in the PCG space, we're still growing. We like acquisitions for the right targets, and we can't tell if and when those would happen. I think the last few years people doubted if we were serious, then we closed three deals pretty quickly. Our goals right now on our balance sheet, you know, we gave a Tier 1 target of 10%. We're still at that target. Good news is part of that's earnings. The other reason is just really the shrinking of the corporate balance sheet too. As cash has come off the balance sheet, that ratio went up without really a lot of changes. We're still committed to it. We're committed to the billion-dollar target, as Paul mentioned in his remarks that we wanted to do $1 billion this year. We got partially there this quarter. We know we have to get more aggressive to hit that, but that's our plans. In terms of other capital, we'll always say if, you know, a great acquisition showed up tomorrow, and it required a lot of capital, would we use it instead of buybacks? Possibly. If it's accretive advantage, you know, don't have one, so it's a theoretical question. If it did, you know, we'll always balance what's the best use of the capital. Our plans right now is to focus on our commitment to hit that billion-dollar target. The next question comes from the line of Jim Mitchell with Seaport Global Securities. Please proceed with your que- Hey, good afternoon, guys. Paul, maybe on just the NII thoughts. If you think about average Fed funds could be up. If you look at the forward curve, could be up close to 90 basis points in the first quarter versus the fourth. You have sort of this mix shift in deposits. You have the higher spot NIM going into the first quarter. How do we think about NIM and NII in the first quarter, and how you're thinking about the trajectory? You kind of mentioned you want to grow NII. Can you do that consistently, or should we expect the negative mix shift starts to hurt NII growth, you know, after 1Q? Just trying to think through whether it's 1 Q or full year or whatever you wanna give us. Yeah, obviously there's, Jim, a lot of variables that kind of go into that. As we look into our fiscal second quarter, I mean, we're entering in with a spot rate of 3.5% for the bank's NIM for the bank segment. That's before any additional benefit from further rate hikes potentially. We have grown the bank's portfolio 2%. Their assets have grown 2% sequentially. You know, net-net, when you sort of think about the fact that there's two fewer days in the second quarter than the first quarter, we still believe we'll be able to grow net interest income overall in the second quarter. That will likely be partially offset by a decline in the BDP fees, just because the balances are down, you know, probably the average balances sequentially will probably be down 20%-25%, as we've put a greater proportion of the funds to the bank segment. Again, we'll have a higher spread on those balances. You know, we're entering in with a spot rate of 3.2%, versus the average yield that we earned during the quarter of first quarter of 2.7%. I think also is we'd have to really hustle on raising high cost deposits, which for us to be significant enough to have a huge impact on that number in the shorter term. Obviously, if the cash dynamic of sorting continues, it'll start impacting as we raise. We'll just have to see how that goes. Right. Okay. Maybe just as a follow-up, on admin comp and PCG was up, I think, 21% year-over-year, 7% sequentially. Is that a new run rate? Or is there some intersegment? Because I did notice that the comp and benefits line in corporate other was down 20%+. Was there some kind of shifting of those kind of costs among segments, or is that just a higher upward pressure in that line? Yeah, Jim, I would tell you that the first quarter comparisons to the fourth quarter are always a little bit noisy just because in the fourth quarter we're always trying to adjust the bonus and benefit accruals, you know, to reflect the actual results for the fiscal year. Then we sort of reset those accruals in the first quarter. I think last year at this time it was like an 11% increase in PCG admin comp, as an example. There's a lot of noise comparing the sequential. Year-over-year, of course, we have the acquisitions. We have the Charles Stanley acquisition for the full quarter this year in PCG, as well as just kind of overall growth of the business in the PCG business. With that being said, in the second quarter, we do have the impact of the payroll tax reset as we enter the beginning of the calendar year. We also will see the impact of the salary increases that have become effective on January 1st. Those salary increases this year were significant. As we always have done, we always want to share in the success of the firm with our associates who make that success possible. Particularly in this inflationary environment, given our record results in the fiscal year, we did, we were generous in passing on salary increases to our associates, and that will be reflected fully in the second quarter. The next question comes from the line of Kyle Voigt with KBW. Please proceed with your question. Hi, good evening. Let me question just given the forward curve and market expectations now for the Fed to begin cutting by year-end 2023 and into 2024. I was wondering if you could help us think about deposit betas through a declining Fed funds environment. I think during the last rate cycle, you know, the adjustments on yields or the betas on the way down for the first few cuts in 2019 are relatively high and help support the banking. I guess, is it fair to look back towards that last cycle as a good guide for how you would kind of manage your deposit rates this cycle as well? Yeah, we're still having a hard time being exactly right on what the deposit betas are in this upcycle. Certainly trying to predict what it'll be in a different cycle is very difficult to do. It'd be based on the competitive environment and, you know, a lot of other dynamics that apply at the time. For example, in the last rate cycle, we had surges in cash balances because it was due to the pandemic. When rates were cut, we obviously, you know, had a did not have a funding need per se. We actually had cash that we have to figure out how to place. That may not be the case next time rates decrease. I don't think you can compare different cycles just because each one is so unique. Most people are sort of guessing that, the deposit betas, you know, on the way down will be symmetrical to what they've been on the way up. I guess that's a good guess, but, we really don't know. Okay. Thank you. Just maybe a follow-up just on the net loan growth in the quarter. Just wondering if you could help us understand some of the dynamics by loan bucket. I know we'll see some more info in the Q. It looks like for demand for SBL has been a bit weaker. It also looks like you're seeing decent demand for mortgages, even with the tough backdrop. Just given the rest of this year, this fiscal year, I guess where should we expect more of the loan growth to really come from, and should we kind of expect that slower SBL demand to persist near term? We actually do provide the line by line end of period loans in the supplement. It's kind of buried in there. I know we provide a lot of materials. There is some more detail there. You are right. The SBL balances declined sequentially. That was due to, frankly, a lot of repayments as the interest rates went up dramatically over the last three to six months on those lines. Residential mortgages went up, but a lot of that was due to mortgages that were, again, processed even before the quarter. As you know, mortgages take a while to go through the underwriting and closing process. As we said earlier, we don't know really what the dynamic's gonna look like going forward. It's gonna be based on client demand. We do expect until the rates settle out and clients get used to whatever the new norm is, we do expect headwinds for growth across all loan categories, both floating and fixed really, because the fixed coupons are up as well. Although we don't do much in the way of fixed. Certainly mortgages is a category that, you know, borrowers are still getting used to, you know, 5.5%-6.5% across the industry when it was just 3%-3.5% a year and a half ago. It is a pretty dramatic change in a pretty short period of time. Understood. Thank you. The next question comes from the line of Brennan Hawken with UBS. Please proceed with your. Good afternoon. Thank you for taking my questions. I know you've touched on this a couple times, but I'm still a little confused. I'd love to ask a follow-up. Paul, sorry, Paul Shoukry, you speak about the liquidity in the balance sheet often and, you know, we can certainly see liquidity on the asset side. I guess I'm not 100% clear as to what the impulse is to raise higher cost funding, through this enhanced yield program, when you could simply allow for some of the assets to run off, especially the stuff that's easily replaceable, like securities. Could you maybe clarify that for me? Also, we've seen some competitors launch similar products in the last few quarters, and that has led to a pretty strong mix shift in favor of the higher cost funding. Do you have any estimates or any rough idea about how much mix shift of that type you'll see in your own deposit base? Yeah. To your point, Brennan, we are kind of continuing to let the securities portfolio run off. A lot of that growth over the last two years was really accommodating client cash balances on the balance sheet. We really built that up well beyond our liquidity targets at Raymond James Bank. You know, the answer is really kind of all of the above when it comes to funding. We're doing that. We're also, as Paul said, you know, making sure that we're prepared on many other fronts when it comes to funding, the Enhanced Savings Program. You know, we're starting with, you know, a relatively small amount relative to our overall funding needs. The point that Paul was bringing up is that we just wanna make sure that we have all of these sources turned on, and make sure that they're working so we, you know, understand what the ability, capabilities are, the demand is, et cetera. We learn from it. Then to the extent that we need to, you know, drive more balances through various levers, then we have the ability to do that. It's, it's hard to do that if you don't have it even turned on. I don't know of other institutions that don't have CDs, enhanced wealth and they've been aggressively raising money because of our floating rate balance sheet and our, you know, unusually high liquidity in both on our balance sheet and client cash. Been part of what's driven a lot of the earnings. We could assume that we'll have enough and it'll last forever, or we can start the programs in case they continue to run off more than the industry expects, and we'll still be well-funded. The reason we're starting it is just in case. If we need more, we'll accelerate it. It wouldn't be prudent to wait until all of a sudden we really need it and we don't have any of the programs in place. There's many other firms that have needed it and have been very aggressive because they didn't have that flexibility. We've had the flexibility. We're certainly gonna, as we always look to the long term, and we're gonna have it in place and ready to go. The only way you know you have it in place is when you're executing it and actually collecting deposits. Mm-hmm. Everything's working well, and then you dial it up or you dial it back as you need it. The only other thing I would add, there's so much concern around mix shift, as there understandably so. It's not like the cash isn't moving. We have the best purchase money market fund platform in the industry as far as I can tell. It's, it's institutional shared classes offered to any size client. It's not like the cash is moving to other higher yielding destinations as it should, and the financial advisors help their clients with those type of decisions. To the extent that we can offer an attractive product on balance sheet that meets clients' needs, some are still concerned about money market funds, frankly, because they didn't perform very well in the last couple of cycles. We... To offer an FDIC insured product, which keeps the funding on the balance sheet and actually earns a better spread than if it goes into some of those other products, could be a win-win. That's kinda how we're looking at it as well. Yeah. Sure. Sure. Totally get you on the substitutes being broadly available. Any sense of your expectations for magnitude of how big this program could be? Because it really, frankly depends on the levers that we pull, right? We have levers around, you know, the rate we offer, the size of account that we limit it to, the size of the deposit, et cetera. You know, as Paul said, most of our competitors that have already come out with it have to be aggressive because in the last two years, they deployed almost all of their deposits to fund balance sheet growth. We always said, and we took a lot of criticism for it, you know, one year or so ago, that we wanted to keep that cash very flexible. You know, we don't have the same acute pressures on funding that they have had over the past six months. We're able to be more deliberate in sort of figuring out the right balance for clients and for the firm. The final question comes from the line of Steven Chubak with Wolfe Research. Please proceed with your question. Hi, thanks so much for squeezing me in here. I just have one final question on Capital Markets, and more specifically, the profitability or I guess lack thereof in the quarter. I recognize one quarter does not a trend make. You did incur the pre-tax loss in the segment. What I wanted to better understand is, given the lack of complex that we saw within the segment itself, how you're thinking about managing expenses and comp if we remain in a challenging investment banking backdrop. It's a question we're getting quite a lot because the pre-tax margin was strong for the firm. The comp ratio was certainly well managed for the firm overall, and at the same time, you didn't get the positive comp leverage this quarter, and much of that was obscured by Capital Markets. Any insight you could provide there would be really helpful. I mean, you know, the Capital Markets have been difficult for everyone. You know, there's a couple of factors. One, it didn't have a good quarter. Secondly, compared to a lot of other firms, we don't have any unallocated overheads. There are other firms that certainly had lower results, but every penny of overhead is allocated to a segment. You see a fully loaded P&L. That's not the case in a lot of other firms who, if they had, might have a little bit of different answer or closer answer. It was an off quarter due to, first, both M&A and we all know what's happening with that slowdown and with underwriting. The fixed income business, again, we talked about the cash dynamic at third-party banks. It was challenging. We'll do what we always do. First, we have a very variable comp structure that our bonuses, you know, our bases, although we raised them, are still lower than a lot of places. We, as we did two years ago, right, we took big pay cuts. You could see them even through the executives the year before this year. We have a variable comp structure that'll take care of that, and then we'll have to just look at the business and, you know, make whatever adjustments in those businesses we have to. The good news is corporately, we're actually, you know, we've been very conservative. Although we've hired a lot of people, we have a lot of open positions, and we're just being less aggressive with hiring and making sure we keep the people we need through these cycles. We don't go in like the tech companies, way overloaded. I think in Capital Markets, they're just gonna have to look at what businesses are there and what support they need to make those decisions. You know, certainly we don't plan any sizable layoff programs that you've read in, you know, other firms. That's it for me. Thanks so much for taking my question. Thank you. All right. No further questions. Great. Well, thank you very much. Thanks for joining us. Again, just, overall, I don't think too many people are showing record net income to shareholders this quarter. I think it's a testament to the model and... There's a lot of uncertainties going forward. We all know it. We all knew the questions you'd ask, and, you know, we're committed on the capital repurchases. You know, it's, you know, with the only contingency if something comes up that we think can drive more shareholder value. On the cash and cash sorting, good questions. We could run models and give you answers based on them, but our experiences, they all vary from that. We're just, we're gonna raise as much cash as we need to support the business and not raise it if we don't need it. So far, that's served us well. Appreciate you joining the call and talk soon. That does conclude today's conference. We thank you for your participation and ask you please disconnect your line.