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UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
On June 1, 2022, Raymond James Financial, Inc (“Raymond James” or “RJF”) completed its acquisition of TriState Capital Holdings Inc. (“TriState Capital” or “TSC”), including its wholly owned subsidiaries,
TriState Capital Bank and Chartwell Investment Partners, LLC (“Chartwell”), in a cash and stock merger transaction valued at $1.4 billion (the “Acquisition”). TriState Capital’s results of operations have been included in Raymond James’ results prospectively from the closing date of June 1, 2022. Refer to Note 3 of Raymond James’ June 30, 2022 Quarterly Report on Form 10-Q (“Form 10-Q”) for more information related to the Acquisition.
The following unaudited pro forma condensed combined financial information has been prepared in accordance with Article 11 of Regulation S-X (“Article 11”).
The Unaudited Pro Forma Condensed Combined Statements of Income for the nine months ended June
30, 2022 and the year ended September 30, 2021 give effect to the Acquisition as if it were completed on October 1, 2020, the first day of Raymond James’ fiscal year 2021. Raymond James and TriState Capital had different fiscal years within 93 days (September 30 and December 31, respectively). As a result, the Unaudited Pro Forma Condensed Combined Statement of Income for the year ended September 30, 2021 combines the historical audited Consolidated Statement of Income of Raymond James Financial, Inc. for the year ended September 30, 2021 and the historical audited Consolidated Statement of Income of TriState Capital Holdings, Inc. for the year ended December 31, 2021. TriState Capital’s historical unaudited statement
of income for the period ended June 30, 2022 represents the eight months preceding the Acquisition and was prepared by adding the unaudited results for the two months ended May 31, 2022 (which is the date immediately preceding the Acquisition), the quarterly Unaudited Condensed Consolidated Statement of Income for the three months ended March 31, 2022 and the quarterly Unaudited Condensed Consolidated Statement of Income for the three months ended December 31, 2021. As a result of the Acquisition, TriState Capital’s results for the month of June 2022 are included in the Unaudited Condensed Consolidated Statement of Income of RJF. The unaudited pro forma condensed combined financial information prepared in accordance with Article 11 is not required to, and does not, include
an unaudited pro forma condensed combined balance sheet because the Unaudited Condensed Consolidated Balance Sheet of RJF as of June 30, 2022, which was included in RJF’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2022, filed on August 8, 2022, already reflects the Acquisition.
The unaudited pro forma condensed combined financial information has been prepared for informational purposes only and is subject to the assumptions and uncertainties set forth in the notes thereto. The Unaudited Pro Forma Condensed Combined Statements of Income do not reflect the costs of any integration activities or benefits that may result from future cost savings due to revenue synergies, procurement savings or operational efficiency that may result from
the Acquisition. The Unaudited Pro Forma Condensed Combined Statements of Income are not intended to represent or be indicative of the consolidated results of operations of the combined entity that would have been reported had the Acquisition been completed as of October 1, 2020, and should not be construed as representative of the future consolidated results of operations of the combined entity.
The unaudited pro forma condensed combined financial information should be read in conjunction with the following:
1.Unaudited Condensed Consolidated Financial Statements and accompanying Notes of Raymond James Financial, Inc., as filed in its Quarterly Report on Form 10-Q for the quarter ended June
30, 2022 with the United States Securities and Exchange Commission (“SEC”) on August 8, 2022;
2.Audited Consolidated Financial Statements and accompanying Notes of Raymond James Financial Inc., as filed in its Annual Report on Form 10-K for the year ended September 30, 2021 with the SEC on November 23, 2021;
3.Unaudited Condensed Consolidated Financial Statements and accompanying Notes of TriState Capital Holdings, Inc. as filed in its Quarterly Report on Form 10-Q for the quarter ended March 31, 2022 with the SEC on May
9, 2022 (which is included as Exhibit 99.2 to this Current Report on Form 8-K/A); and
4.Audited Consolidated Financial Statements and accompanying Notes of Tristate Capital Holdings, Inc. as filed in its Annual Report on Form 10-K for the year ended December 31, 2021 with the SEC on March 1, 2022 (which is included as Exhibit 99.1 to this Current Report on Form 8-K/A).
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
NOTE 1 - BASIS OF PRESENTATION
The Unaudited Pro Forma Condensed Combined Statements of Income have been prepared in accordance with Article 11. Raymond James’ fiscal year end is September 30, and TriState Capital’s fiscal year end is December 31. The Unaudited Pro Forma Condensed Combined Statements of Income give effect to the Acquisition as if it were completed on October 1, 2020, the first day of Raymond James’ fiscal year 2021.
The
Unaudited Pro Forma Condensed Combined Statement of Income for the year ended September 30, 2021 combines the historical audited Consolidated Statement of Income of Raymond James Financial, Inc. for the year ended September 30, 2021 and the historical audited Consolidated Statement of Income of TriState Capital Holdings, Inc. for the year ended December 31, 2021. TriState Capital’s historical unaudited statement of income for the period ended June 30, 2022 represents the eight months preceding the Acquisition and was prepared by adding the unaudited results for the two months ended May 31, 2022 (which is the date immediately preceding the Acquisition), the quarterly Unaudited Condensed Consolidated Statement of Income for
the three months ended March 31, 2022 and the quarterly Unaudited Condensed Consolidated Statement of Income for the three months ended December 31, 2021. Therefore, TriState Capital’s historical three months ended December 31, 2021 are included in both the annual and interim Unaudited Pro Forma Condensed Combined Statements of Income. Total revenues and net income for TriState Capital’s three months ended December 31, 2021 were $80 million and $23 million, respectively. As a result of the Acquisition, TriState Capital’s results for the month of June are included in the Unaudited Condensed Consolidated Statement of Income of RJF.
The Acquisition has been
accounted for under the Accounting Standards Codification (“ASC”) Topic 805, Business Combinations (“ASC 805”). Under ASC 805, the total consideration transferred was calculated as described in Note 3 of Raymond James’ June 30, 2022 Form 10-Q.
The unaudited pro forma financial information has been prepared in a manner consistent with the accounting policies adopted by Raymond James. Refer to Note 2 of Raymond James’ June 30, 2022 Form 10-Q for information on RJF’s significant accounting policies.
As discussed in Note 2, certain reclassifications were made to align Raymond James
and TriState Capital’s financial statement presentation.
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
NOTE 2 - RECLASSIFICATIONS
Certain reclassifications were made to TriState Capital’s historical consolidated statements of income in order to align TriState Capital’s presentation with that of Raymond
James. Additionally, certain reclassifications were made to the Raymond James historical audited consolidated statement of income for the year ended September 30, 2021 to conform with Raymond James financial statement presentation in its most recent June 30, 2022 Form 10-Q.
The following table presents TriState Capital’s Reclassified Historical Unaudited Condensed Consolidated Statement of Income for the period ended June 30, 2022:
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
The following table presents TriState Capital’s Reclassified Historical Consolidated Statement of Income for the twelve-month period ended December 31, 2021:
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
Beginning with RJF’s fiscal third quarter of 2022, RJF reclassified acquisition-related expenses which were previously reported in “Acquisition-related expenses” on our Condensed Consolidated Statements of Income and Comprehensive Income to the respective income statement line items that align with the nature of the expense, including reclassifications to “Compensation, commissions, and benefits,”“Professional fees,” or “Other” expenses, as appropriate. The following table presents certain reclassifications necessary to make the presentation of Raymond James Historical Consolidated Statement
of Income for the year ended September 30, 2021 conform with the financial statement presentation in the June 30, 2022 Form 10-Q.
Presentation in RJF Historical Consolidated Financial Statements ($ in millions)
Presentation in Unaudited Pro Forma Condensed Combined Financial Statements
RJF Pre-Reclassifications
Reclassified Amounts
RJF as Reclassified
Acquisition and disposition-related expenses
$
19
$
(19)
$
—
Compensation,
commissions and benefits
—
1
1
Professional fees
—
10
10
Other
—
8
8
$
19
$
—
$
19
NOTE
3 - CONSIDERATION TRANSFERRED AND FAIR VALUE ESTIMATE OF ASSETS ACQUIRED AND LIABILITIES ASSUMED
RJF accounted for the completed Acquisition as a business combination in accordance with GAAP. Accordingly, the purchase price attributable to the Acquisition was allocated to the assets acquired and liabilities assumed based on their estimated fair values. Refer to Note 3 of the Raymond James’ June 30, 2022 Form 10-Q for information on the purchase consideration, fair value estimates of the assets acquired and liabilities assumed, and resulting goodwill as of the June 1, 2022 acquisition date.
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
NOTE 4 - ADJUSTMENTS TO UNAUDITED CONDENSED COMBINED STATEMENTS OF INCOME
Pro forma accounting adjustments related to the Acquisition in the accompanying Unaudited Pro Forma Condensed Combined Statements of Income are as follows:
(4a) Represents the elimination
of interest income recorded by Raymond James and interest expense recorded by TriState Capital in the historical results of income related to a pre-acquisition $125 million par value debt security ($123 million fair value on the closing date) that was effectively settled upon closing of the Acquisition.
(4b) Represents the adjustments to interest income to eliminate TriState Capital’s historical amortization of net premiums on pre-closing date acquired loans and investments of $11 million and $18 million for the nine months ended June 30, 2022 and year ended September 30, 2021, respectively, and to record the estimated accretion of the discount resulting from the fair value determination as of the acquisition date on loans and investments of $43 million and $63 million
for the nine months ended June 30, 2022 and year ended September 30, 2021, respectively.
(4c) Represents the adjustment to interest expense for the estimated accretion of the discount on the acquisition date deposits and other borrowings of $1 million for the period ended June 30, 2022 and $1 million for the year ended September 30, 2021.
(4d) Represents new retention-related compensation arrangements executed with certain employees of TriState Capital in connection with the Acquisition, resulting in increased compensation expense of $4 million for the nine months
ended June 30, 2022 and $7 million for the year ended September 30, 2021.
(4e) The initial provision for credit losses on loans and lending commitments acquired in the Acquisition is $26 million (included in “Bank loan provision/(benefit) for credit losses”) and $5 million (included in “Other” expenses). Adjustments reflect those required to record them in the year ended September 30, 2021 to reflect the Acquisition as if it had occurred on October 1, 2020.
(4f) Represents the net increase in intangible amortization expense as a result of the fair value
determination of intangible assets and the removal of historical amortization of $1 million and $2 million for the period ended June 30, 2022 and year ended September 30, 2021 associated with intangible assets previously recorded by TriState Capital. Refer to Note 3 of the Raymond James’ June 30, 2022 Form 10-Q for information on the estimated fair values as of the June 1, 2022 acquisition date and useful lives of acquired intangibles for TriState Capital, which are being amortized using a straight-line method.
(4g) Includes the removal of a $3 million loss on the pre-acquisition debt instrument mentioned in item 4(a) above where such loss reflects the difference between
the par value of the instrument and its fair value at the Acquisition date as well as adjusting accrued interest income recorded in the period ended June 30, 2022. This amount was recorded in the year ended September 30, 2021 to reflect the Acquisition as if it had occurred on October 1, 2020.
(4h) Represents the income tax expense related to the pro forma transaction accounting adjustments made to the Unaudited Pro Forma Condensed Combined Statements of Income based on the RJF statutory rate of 25% and 24% for the nine months ended June 30, 2022 and year ended September 30, 2021,
respectively.
(4i) Represents the removal of TriState Capital’s historical preferred dividends on the Series C Convertible Preferred Stock which were cash settled on the closing date as part of the Acquisition.
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
NOTE 5 - EARNINGS PER SHARE
The
pro forma earnings per common share is computed by dividing combined pro forma net income available to common shareholders (less allocation of earnings and dividends to participating securities) by pro forma weighted-average common shares outstanding (basic or diluted as applicable). The pro forma weighted-average common shares outstanding is based on Raymond James’ historical weighted-average common shares adjusted for the issuance of 8.0 million shares of common stock to the TriState Capital stockholders, assuming the Acquisition occurred on October 1, 2020. As part of the Acquisition, approximately 551 thousand participating restricted stock awards (“TriState Capital RSAs”) were issued to certain TriState Capital employees. The pro forma allocation of earnings and dividends to participating securities in the table below represents dividends paid during the period to participating securities, including the
TriState Capital RSAs, plus an allocation of undistributed earnings to such participating securities. Undistributed earnings are allocated to participating securities based upon their right to share in earnings if all earnings for the period had been distributed.
The following table sets forth a reconciliation of the weighted-average common shares outstanding used to compute pro forma basic and diluted earnings per share.
Combined pro forma net income available to RJF common shareholders
$
1,167
$
1,494
Less pro forma allocation of earnings and dividends to participating securities
4
6
Combined
pro forma net income available to common shareholders, less allocation of earnings and dividends to participating securities:
$
1,163
$
1,488
Historical RJF weighted average shares outstanding – diluted
213.5
211.2
Impact
of RJF common shares issued to TriState shareholders pursuant to the merger on this computation
7.1
(i)
8.0
Pro forma weighted average shares – diluted
220.6
219.2
Pro forma diluted EPS
$
5.27
$
6.79
(i)
Because these shares were issued on June 1, 2022, they have been outstanding and included for one month in RJF's historical weighted average shares outstanding for the nine months ended June 30, 2022. Therefore, the number of common shares issued to TriState Capital shareholders is calculated by multiplying the total number of common shares issued of 8.0 million by 8 months / 9 months.
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
NOTE 6 - TRANSACTION COSTS
Raymond James and TriState Capital each incurred certain nonrecurring charges in connection with the Acquisition which are reflected in their respective historical consolidated statements of income, which are not adjusted in these pro-forma presentations. These costs consist primarily of legal and professional fees. These costs will not continue to be incurred after the closing date and therefore
will not adversely affect the combined company’s statements of income beyond twelve months after the Acquisition. There are no material transaction costs related to the Acquisition expected to be incurred after June 30, 2022 that would trigger a pro forma adjustment. The following table sets forth the Acquisition related transaction costs incurred and the tax effects for both Raymond James and TriState Capital.
Pro
Forma Interim Period
Pro Forma Annual Period
$ in millions
RJF
TSC
RJF
TSC
Acquisition related costs incurred:
Compensation,
commissions and benefits
$
2
$
—
$
—
$
—
Professional fees
6
12
2
3
Other
expenses
1
—
—
—
Total acquisition related transaction costs
$
9
$
12
$
2
$
3
RJF
statutory tax rate
25
%
25
%
24
%
24
%
Tax effect
$
(2)
$
(3)
$
—
$
(1)
Total
acquisition related transaction costs, net of tax
$
7
$
9
$
2
$
2
10
Dates Referenced Herein and Documents Incorporated by Reference
