To the extent that Raymond James makes forward-looking statements regarding management expectations, strategic objectives, business prospects, anticipated expense savings, financial results, anticipated results of litigation and regulatory proceedings and other similar matters, a variety of factors, many of which are beyond Raymond James' control, could cause actual results and experiences to differ materially from the expectations and objectives expressed in these statements. These factors are described in Raymond James' 2011 annual report on Form 10-K, which is available on raymondjames.com and sec.gov. In addition to those factors, in connection with the Morgan Keegan transaction, the following factors, among others, could cause actual results to differ materially from forward-looking or historical performance: difficulty integrating Raymond James and Morgan Keegan's businesses, or realizing the projected benefits of the transaction; the inability to sustain revenue; in earnings growth; changes in the capital markets; and diversion of management time on integration-related issues. Thank you, I will now turn the call over to Paul Reilly, CEO.

Yes, this is Jeff Julien. Before Paul jumps on here, I'd just like to make one further statement. In this press release, and throughout our conversation here, we mention some non-GAAP results. We have, in the full text of the press release, done a reconciliation of the GAAP to non-GAAP results. For those of you don't have the full press release, it's available either through EDGAR on the 8-K we filed or on our own corporate website, so you can see that reconciliation if you'd like.

Great. Thanks, Jeff, and good morning, this is Paul Reilly. I want to start off saying we're actually pleased with the quarterly results, and I know it's difficult kind of following given the combination. And it's very difficult actually separating the legacy Morgan Keegan businesses and the legacy Raymond James business because we went through in the process of combining especially in ECM and in fixed income, so the numbers aren't always apples to apples. I think -- first, to put the quarter in prospect, you have to remember we've been very consistent. Our long-term goal has been to keep as much revenue as we can, is to make sure the environment for producers was a positive environment, that the transition was a positive experience, and that our cost synergies would come later. And although we did have some severance at the beginning of the quarter in ECM and in fixed income kind of mid-quarter, those costs haven't really flown through. And all the operating costs in terms of dual systems and support are still in place. We told you we would eliminate those redundancies over time, but our focus has been to keep service levels high to retain our producers. And I think you have to put that, so the cost savings will come, but there -- we've purposely not executed on those at this time. We've focused on them, we know they're coming, we know the areas, but they are to come after we get through the integration and make sure that the support levels keep very, very high. This also was not a positive economic environment for our businesses. If you look at the Private Client business, the S&P was down 3.3%, and our assets under administration combined were down about 1.5%, but that's in keeping with…

Yes,let me add a couple of higher level comments myself, some a little bit redundant with what Paul just said. We did do better, as we said, in the press release text. We did do a little better in revenue retention than we had forecast. That was our primary mission. We, as he mentioned, are running redundant systems at 2 different broker-dealers system. There's actually still 2 systems in the fixed income side until we get fully integrated. And obviously, we have some of the attendant costs of people that are running that, and people that we haven't -- we haven't totally rightsized departments as we haven't fully integrated yet. So just to take you back to our comments from prior quarters, we anticipated somewhat minimal accretion from this transaction for the first year or so because of this dynamic, and I'd say that's more or less coming to pass, Morgan Keegan is performing as expected or slightly better, and we are incurring the incremental costs that we expected at the corporate level with additional interest for the debt that we issued. We also have some amortization of RSUs and other retention dollars on a quarterly basis now that were part of the deal, that are incremental expenses at the corporate level. And when you net those things, like we said, we're going to -- we expect somewhat minimal accretion until we get through the complete integration at which time we'll see some better realization of expense reductions. With respect to the actual results for the quarter, I mean, walking through by segment -- and I'm kind of going to respond to some of the comments I've already read in several of the reports that have come out since we released earnings last night. It really is much more appropriate…

Yes. And just again, the highlight is that in a quarter, I think most people in our business showed revenue down. Our revenue is up. We've kept the retention in a market -- in a downdraft market by retaining people. That's been our goal as we've told you from the very beginning, is that we knew we were going to run cost heavy. I think you know us as a shop that manages costs, but we are going to be a little bit heavy through this integration and realize these cost savings as we integrate. And net-net, with a down kind of capital markets and a down S&P this last quarter, I think we had a very reasonable quarter and I think we're very well positioned. Got a lot of work to do on the integration still. It's on schedule. So far we've hit all of our benchmarks, but we've got a lot of work to do. So with that, we'll go ahead and open it up for questions. Brooke?

[Operator Instructions] Your first question comes from Hugh Miller with Sidoti Capital.

I was wondering -- you commented in the press release about the trend in home office visits. Was wondering if you could just help us to quantify what you're seeing there relative to maybe this time last year and the interest for candidate advisors?

I don't have the exact statistics, Hugh, but we are -- visits are way up as opposed to last year, and especially in the employee side. And I think the -- I know what was reported by our guys yesterday, but I don't have the numbers in front of me to quote it, so I'm not going to. But it's driven really by, I think, a number -- a couple of the wire houses where retentions worn off, people didn't like how they transitioned to them. And the interesting thing is they're very large advisors, typically multimillion dollar kind of advisers or teams. So it's -- home office visits are only step one, but I had some concern that the combination would make people wonder a little bit about what the environment is going to be like. And I actually think it had the reverse effect, where people realized that we're becoming a stronger and stronger player, and so we're -- those visits are up.

I think another factor is that prior to this transaction, the Morgan Keegan offices really weren't in a recruiting mode at all. And they certainly now have the ability to recruit to the future Raymond James platform, so they're in some areas where we haven't even been geographically. So that has expanded our universe of recruiters, so to speak.

And I guess as a follow-up, given the dynamic that they are large producers, that they've just went through a period and the retention that they're -- they have is kind of running lower, do you get the feeling that there's -- is there any difference in what they're looking for? Is this going to be an environment where it's very price competitive, with upfront money, or do you think that the outlook is really, "I want to find a home that I'm comfortable working in?" What are you seeing there?

That's a tale of 2 cities there. There are certainly companies that are writing bigger checks than we are. There always has been. We've never been the top kind of retention payer. And the people we get are the people that believe that longer term, not only are they going to, through their earnings, do well here over time, but want to be in an environment that's ours. So we do lose some people to the bigger check, and we get a lot of people who want the environment. And once they're here, I can't tell you how many times people say, "I wish I had done this 10 years ago." So we'll lose people to the check, we will. Some people have to recapitalize or they'll get seduced by the size of the checks, which can be pretty big, and there are still people in the market doing that. So I think you're going to see both, but we're not going to do on that economic deals, and we continue to kind of hold our ground.

But there just -- there seems to be more movement, whether it's for check or for dissatisfaction. There just seems to be more movement out there right now than there has been the last year or so.

Okay. And in the Capital Markets segment, obviously, with going out there and talking with institutional clients following the acquisition and the combined franchise, how are those discussions going with regards to the voting process and how much business do you anticipate that you may lose just given that you're combining the offering and you may have some people that will pay you less than they would for each franchise separately.

Yes. I think that in the Equity Capital Markets side, we didn't assume a lot of synergy on sales and trading outside of the areas where we picked up coverage, we didn't have it before. So we had big overlap there, almost 85% of the names. So even in our own model, we didn't assume a big revenue synergy or really any revenue synergy on the commission side that we felt that we got some good bankers and we've got some good analysts, and that would help, but there certainly was overlap. And we kind of took most of that revenue out of our model. Clients responded very positively. I think they like the combined platform. They liked the parent because they know who we are, and a lot of those clients were the same, both in the Fixed Income and Equity Capital Markets side.

And a couple of questions at the bank. I did notice quite a bit of an uptick in criticized loans. I know that the other asset quality trends continue to look like they were improving. But I was wondering if you could make some comments on kind of what was driving that increase in criticized loans and maybe color on why you weren't a little bit more active on the reserve additions given that rise?

Hugh, it's Steve Raney. During the course of every quarter, we probably have 25 to 30 loans that are being upgraded, downgraded based on their operating performance, loans where we're adding to, and in some cases loans that we're not participating and the refinancer being repaid obviously, so there's a lot of activity that goes on. This quarter, what contributed significantly to that increase in criticized assets was the result of the Shared National Credit exam. We actually thought that the results turned out very favorable, and when I say that, there were no directed charge-offs, there were no loans that were put on nonaccrual as a result of that. However, there were about 5 loans that were -- went from pass rating to criticized via the Shared National Credit exam that contributed to the increasing criticized loans. There was not an increase in -- actually a reduction in nonaccruals and in OREO and more problematic asset categories, but we did have an increase in criticized loans via the Shared National Credit exam. And we already discussed the provision expense impact that was -- that came as a result of that.

Yes. And was there anything specific to a type of loan categorization within those 5 loans that went criticized?

They were across -- broad industry spectrum. So...

Okay. And then the last question at the bank was just with regards to expectations for future loan portfolio expansion. Obviously, I would suspect that the pace was slow, but what are your thoughts there and what are you seeing?

Yes. I mean, you were trying to manage a loan -- the loan portfolio growth in the 7% to 8% range kind of out for the -- on an annualized basis for the next few years. It can be lumpier than that. Obviously, we had a very strong quarter this last quarter. That would translate to loan growth kind of in the $150 million to $200 million per quarter looking out over the next few quarters. The reality is it will, once again, it will be lumpier than that. We may have some quarters that will be short of that and some other quarters that may be higher. I would mention that we did close last week on the purchase of the securities-based loans from Regions Bank that were secured with the Morgan Keegan brokerage accounts, that was $185 million. So that purchase did close. We're now around $300 million in securities-based loans. So that's a category and a product that we're actively growing and working very closely with our Private Client Group financial advisers on.

And what was the closing date of that?

The 20th of July, this quarter.

Okay. And the last question was just with regard to expectations for kind of severance and the timing and the additions as we look out over the next quarter or 2. Can you give us any color and clarity? Do you have a sense there on the timing of some of those expenses?

We have some natural attrition actually on the -- from the back office side of Morgan Keegan, but our goal is to keep most of that in place. We will have some trimming, but our focus is to get the systems integrated. So I think you're really looking not for big numbers in this fiscal year, but really into next fiscal year, where you'll see more of that.

Your next question comes from Alex Blostein with Goldman Sachs.

So maybe just to follow up on the very last question. Can you give us a little bit more sense just in dollar terms how much of a benefit you could see from severance or I guess from lower comp as people kind of leave, bringing you guys to a trim headcount? As well as the technology integration?

I don't think we've quantified the severance. I don't think we've quantified actually, the savings but we think they're -- from today's run rate, what do we say on the beginning of the...

Total savings $60 million, $60 million to $80 million.

$60 million, total.

Including people costs and systems costs and et cetera, et cetera that we expect, but that's upon full integration. I mean, we didn't -- we haven't quantified the comp associated with the relevant severance at this particular point, but it's also scattered throughout all the segments, predominantly Capital Markets, but some in other areas like ops and IT.

Got it. So $60 million to $80 million on an annualized basis from the current expense run rate, is that the way [indiscernible]?

That's upon full integration, that's when we finish integrating the Private Client Group early next calendar year.

Got it. So by early next calendar year, that should be in the run rate -- okay, got you. And then maybe flipping this into a similar question, just kind of spinning it a little bit differently. If you look in your -- if you look at your operating margin, you guys are running again this quarter with 14%, I guess, 14.6%. Again, once everything is said and done, how do you think that's going to shake out for the overall business?

Where -- it depends on a whole bunch of things, what the markets going to do, et cetera, et cetera, et cetera. But I think that the preceding quarter, which I know you referenced in your comments, wasn't a bad measure. If we could add all those and maybe improve a little bit on that. It also depends which businesses become dominant because our businesses have very different margins. But we certainly expect margin, we expect -- have expected margin improvement from adding the scale of Morgan Keegan once the businesses are fully integrated, particularly because they have such an emphasis in the fixed income space, which is a higher margin business than some of the businesses that dominate in our P&L like the Private Client Group.

The numbers that we kind of put out as benchmarks were $20 million to $25 million operational costs savings and the rest were in severance and people costs, in the operating businesses, so we have no reason to believe those are a lot different. And again, it depends on revenue and how the business is doing. So again, our focus has been, we can bring costs down now. And I think a lot of companies would have done that. And it's not that we're oblivious to costs or we don't watch them very closely, we do. But we're running 2 broker dealers with 2 services and we want to keep service levels high, client service high. And we're confident we'll get to the costs. So as we said when we announced this is that people have to be a little patient. We'll get to them, but we're going to make sure the integration happens first. That hasn't changed a bit.

We said that the majority of the accretion will be realized starting in fiscal '14, and that's still the case because that'll be the first full fiscal year that the full integration is completed.

Got it. And then my second question is around -- you guys obviously highlighted there's strong retention on the revenue side. Can you quantify some of the things from the FA perspective, something like, I don't know, percentage of FAs that -- for Morgan Keegan that you've been able to retain versus your prior guidance or your prior thoughts? And maybe some measure of productivity of Morgan Keegan's FAs versus Ray Jay's FAs and where they could potentially go to.

Yes, we've talked about some of these things pre-merger. I guess you -- maybe you weren't covering us then, Alex, maybe. The Morgan Keegan, we have had retention to high 90s percent of those who we made retention offers to, but that was about 560 FAs in the Morgan Keegan system. Obviously, some 400 or so in addition have stayed with us that were at production levels below that, and some may have gone on to other places. But the retention rate of those that we wanted is extraordinarily high. In terms of average production, when we -- prior to the acquisition, we had quantified their average production the same way be calculate it and they were 12% lower than RJA, which we kind of view this somewhat as an opportunity as we presented them with a little more complete suite of products and services that they could expand their practice. And we haven't -- that gap will have to work the close, but we're putting a number of our products on their platform right now, but we're not going to be able to really move heavily against that number until they're on the same operating -- on the back-office platform. So we are introducing process -- products, asset management products, other things, research to them, giving them tools, but we won't get the full benefit and allow that to migrate significantly until we get them on our operating.

Right, like to our CMA account platform, for example.

Got it. And then just a couple of numbers questions. Can you quantify the prop capital boost that you mentioned in your prepared remarks, how much of that contributed to revenues this quarter? And then, how much of the, I guess, minority interest is associated with that kind of gain this quarter? Is it an entire thing? Or is it a little lower, a little higher?

Well, the majority of the revenues were related to that one -- the vast majority was related to that one company that was revalued that I mentioned in the merchant banking space. We have a very small TP interest in that and we have about a 13% or 15% limited partnership interest in that. But the rest, all would be in the noncontrolling interest category. There are other revaluations as well. There's a company we own 100% of that was revalued negatively for the quarter. And then, this is also the quarter, as somebody mentioned in their comments, that we get the audited statements from all the outside venture capital funds that we have investments in, primarily for investment banking relationship purposes, not a lot of money in them, but at least we do have that investment. And those are all revalued based on their audited statements, which added a little over $1 million write-up from those. So the net-net of all those things turned out to not be a very big number to the pretax line relative to the revenues.

I think as people looked through, and I understand the questions too, I want to remind people on our kind of our approach to integration cost. A lot of firms would put in retention as an integration cost, we don't. We have a significant increase in overtime from our ops and technology groups, and it's all to support the integration, we expense it all. We only -- our capital -- we're only putting in that category direct identifiable contracts. So if we hire a consultant to help us, an IT consulting company to help us with the transfer, we charge it. If we'd do it, something for Raymond James so that we can free people to work on it, we don't put it in that category. So we're going to run cost heavy during this process until we get the integration because we're not trying to throw everything in there. We're only using a very, I think, conservative direct allocation of cost, and we're going to continue -- that's just been our nature.

And that goes towards your margin question as well.

And we are definitely -- if you just look up the overtime report, I just looked at it. We're -- I mean, our costs are up to support this integration, to get through it and get systems combined, and they will be for a little bit and -- but we'll get them in line.

Okay. Sorry to follow up on this, but since you guys went there, so on this overtime comment, is that -- when you talk about the $60 million to $80 million of expenses going away, does that include the kind of normalization of the extra time that people put in, et cetera? Or is that might be on top of the $60 million to $80 million? Because it sounds like $60 million to $80 million is just technology and maybe the extra folks that you still have working on your platform.

Yes, $60 million to $80 million on the prerelease was our determination of cost savings for the back office and...

People and systems.

And people and system, and in people, right? All this other stuff that we're carrying, overtime and things like that will go away. Now the $60 million to $80 million is a much big number overtime. But I'm just giving you an example of costs that we are incurring during this integration that we will continue to until the systems are. We're -- we want to make sure that people are supported. Our people are also integrating the Morgan Keegan people, also report to people at Raymond James, and they're streaming those systems and spending a lot of time. So there is a lot of effort during the integration and cost the we are incurring. And I'm sure I don't know what the plane travel is between here and Memphis, but Delta likes us, during this integration time. And we're going to -- we're just going to run heavy for a little bit to our traditional numbers. And I think if you had seen a flat S&P versus one down 3.3% in the quarter, you would've seen, my guess is a little bit of accretion. The market was down a little bit. I think we did well, and the costs are the costs, so -- but don't think we're ignoring them, we're just sticking to our plan.

Got it. All right. Last one for me. At the bank, net interest margin up nicely quarter-over-quarter, 3.69% versus 3.55%. I guess some of those are mix shifts you guys did pick up a little bit of loans. Given the rate dynamic and balancing that with your prospects for future loan growth, how should we think about that shaking out in the next few quarters?

Yes, I mean, I think that the margins were actually relatively stable, but actually I think down just slightly if I'm not mistaken.

[indiscernible]

And I guess the full realization at Canada for the quarter, right? So what we're seeing right now on the new business has been relatively stable, but we do continue to have some resets in our mortgage portfolio from the fixed rate period to the adjusted period. So we're seeing some reduction in our mortgage portfolio in terms of margins. That's been a profitable business for us for the last 18 months though, the new business, in terms of the loans that we are selling to Fannie Mae, the margins have been good in that business. You don't see that in the net interest margin, but you see that in our bottom line. Our commercial business, I would say, over the last couple of quarters has been relatively stable. We had enjoyed a period of wider margins, we saw compression, but I would say over the last couple of quarters has been relatively stable. We're very selective. There's kind of a sweet spot that we play in. There's obviously credits that are below our return objectives, and then there are riskier credits at much wider spreads that we could plan, but we have stayed away from that. So I think that in terms of providing you some guidance going forward, our margin should be relatively stable within 10 basis points of what the run rate has been in the last couple of quarters.

Yes. We have been guiding people to 3.40% to 3.50% roughly, Alex, and just based on the portfolio that's in place.

Got it. So 3.70-ish now, down to 3.40, 3.50.

You can -- in any given quarter though, you can have some loan payoffs the way we recognize a bunch of fees that do get into this line item that distort. And on the other hand, we can have excessive amounts of cash that depress the rate.

Its relatively small right now in terms of our overall loan portfolio. The securities-based loans that we're making have a margin of around 300 basis points, so it reduces our margin but it's a very low-risk asset. Once again, it's small, the impact of that is small right now.

But I think our guidance would stand going forward for the near term.

Your next question comes from Chris Harris with Wells Fargo Securities.

I just want to come back to the costs again really quickly. The $60 million to $80 million in savings we're expecting here. You mentioned kind of the beginning of calendar 2013 for the majority of that. Should we expect the savings to be more back-end loaded, in other words, savings really need to be mostly realized then rather than kind of incremental improvement over the next couple of quarters?

Yes, you got things going couple of ways. You'll see some incremental savings like when we did the rightsizing of the fixed income that was mid quarter, so some of that comp adjustment will get through. And again, the size of the operation there -- has gotten somewhat smaller, but most of it you're going to see after the system integration, after we get both systems combined and we could combine back offices is when we're going to be able to execute on that. So those savings, we're pretty comfortable about getting out of the business. And as you know, we also have extra costs. We have the interest costs on our bonds and we have amortization expense that'll come through on RSUs and things like that. But in terms of getting the hard dollar cost out of the business, we will. But I think we have to look -- once we move the system over, and have it complete, stable and running, we'll get a lot of those costs out.

And there's going to be some real estate cost savings as well as we combine some of the institutional offices in the big cities, as we've done already in New York and other places that once we get those offices combined and either sublease or take a charge or whatever we do for the space that we've abandoned. Yes, there'll be ongoing occupancy expense savings there.

I would keep you on our original guidance. I see no reasons to think the game plan has changed.

Okay. Great. And then in capital markets, I don't think it really surprised anybody that it is a tough environment and revenues clearly aren't around where you guys would like to see them. Trying to get a sense of the magnitude of the change. And I know it's hard because we're now looking at the combined business versus legacy Raymond James in the prior quarter, but can you give us some sense as to the percent decline if you're looking at, like, an apples-to-apples basis, the revenue decline in the quarter in Capital Markets?

In total Capital Markets or in equity Capital Markets?

In total Capital Markets, well, maybe both if you could provide it.

They're such 2 different businesses, that one is hard.

As I mentioned in my comments, equity capital markets was roughly flat quarter-to-quarter. We had some added business with some of the Morgan Keegan units that covered areas we didn't cover. But in any given quarter you've got, within that segment, you've got a mixture of M&A, new issue, business and over-the-desk secondary commissions. And the secondary commissions business has been really tough business. The overall pie has shrunk somewhat going forward here, so now -- and then M&A is lumpy as you know, so -- and as -- but for us, with the added horsepower from some of the Morgan Keegan units, we ended up staying flat quarter-to-quarter. Fixed income, which is one of the strengths that they brought to the table here obviously had a significant increase in revenues, virtually all the increase in the segment was related to the Fixed Income business that they brought to the table, but there were redundancies, et cetera, in that area as well that -- such as a municipal fixed income business and things like that. So you don't necessarily see all the benefits of those synergies in this first quarter.

It sounds pretty good to me, given the environment. I mean, I think some of your peers reporting double-digit percent declines in capital markets revenue. So to the extent you were able to do flat in ECM, I mean, I think that's pretty good. Overall, the organization did about $257 million in total Capital Markets revenues. In a normal environment, where do you think that number could go?

What's normal?

Yes.

Last quarter?

That's so hard to say because the Equity Capital Markets pick up and strong equity markets and fixed income historically tends to go down and vice versa. So I would say that neither of those businesses -- certainly, equity Capital Markets wasn't firing on half its cylinders, but fixed income did okay. I mean, it was not a great quarter, not a bad quarter. We're very happy with the sales folks, the throughput, the inventory turn, the inventory management. All the things we thought we are acquiring in Morgan Keegan, we did. We have very good people. So it's a good business. Quarter was down trading profit wise, as we've explained, as treasuries came in, cost of some trading profits net, but it's a good business. So if the market gets really volatile and bad, I mean, the fixed income business will probably do really well if...

If you look at the overall margin in that business for the quarter of under 11%, that is substandard to what we would expect on a go forward basis. And the revenues -- I don't see why they would -- this was not a blowout good revenue quarter, so I don't see that, that -- that there's certainly some room for upside in the -- on the revenue side as well. But the margin isn't where it needs to be yet.

Mid-teens, Jeff, on the margin is what you'd like to kind of shoot for?

I think that's achievable with the mix of Fixed Income and Equity Capital Markets that we have.

Your next question comes from Devin Ryan with Sandler O'Neill.

The majority of my questions have already been asked, but maybe just get some flavor on the progression of just retail sentiment throughout last quarter. So essentially, did things deteriorate further kind of the back half of the quarter after Facebook and the markets deteriorated a bit more as well. So I just want to get a sense if the things kind of deteriorated as the quarter progressed and if you're seeing or hearing any changes in retail sentiment that's worth noting?

Yes. I think investor's sentiment certainly is -- if we look at our own index, the number of people thinking the economy is going to get better went down fairly dramatically. I think you had Facebook, you had the equity capital markets in Europe, I think as people see the election now, you can't feel too great. I'm not sure about anything. So the investor's sentiment is negative, but if you look at the movement, a lot of it's been from international and to domestic, we haven't seen a big flight in our system out of equities. There's certainly some high historic cash balances in fixed income. So I think we haven't seen the investors kind of abandon the markets, but they're all cautious. And they're going to stay cautious until they get other signs, so that hasn't changed really.

Okay, great. And then just to beat a dead horse just a little bit more here. I just want to make sure I'm clear. Is none of that $60 million to $80 million in annual expense run rate production for Morgan Keegan reflected yet in expenses?

Some of it is, in the areas where we've let people go such as Equity Capital Markets and places like that where we've actually have started to rightsize the business.

And in the Fixed Income, where we went through that reduction mid-quarter, part of that payroll will be through, but part of that revenue is through too. Some of that is a loss of revenue. We do get to keep a lot of the accounts, but some of it is...

Equity Capital Markets isn't made up of all producers. There are a lot of financial analysts and research analysts and other people that don't necessarily have revenue tied to them that we would put in that expense savings category.

We'll get the costs out. And if the markets got really tough, we would move on costs a little quicker just as you would in any business. But right now, the focus is getting a good, smooth transition, and it's been excellent. So the numbers are there, I just think it's going to -- we got to get to them.

Your next question comes from Douglas Sipkin with Susquehanna.

Just had a couple of questions. First, with respect to maybe the SNC and the credit quality stuff. I'm just curious, I mean, it just seems like it's a little bit of a divergence from sort of some of the metrics that you guys are reporting. And maybe it doesn't tie in as much because of the residential, but it looked like the residential finally should have realized improvements. So I'm just wondering, was there any sort of specific nuance to this quarter? It just seems like the SNC -- the impact was a bit of a surprise, considering the way things have been trending.

I guess, like I was just -- going back to my comment, we move loans every quarter up and down, and so -- and I know that each -- last 4 or 5 years, we've had some impact from the Shared National Credit exam. We have 360 borrowers, the vast majority of them are subject to the Shared National Credit exam. So it's been a relatively small number of loans that the Shared National Credit exam were different than how we had things rated. That said, I think the regulators are taking a harsh look at anything that has any leverage to it, even if the cash flows are very strong and the operations and even a growth may be there. Anything that has some leverage to it, even if there's plenty of liquidity and access to capital, they're -- in some cases, once again this is somewhat isolated, moved a loan to a criticized status. Once again, in every situation that impacted this in terms of our provision expense, we feel comfortable with the credits that we're in. And actually, it's kind of funny, a couple of them have announced -- one of them has a planned offering to raise more equity, and another company is refinancing entirely and will probably exit the credit. So none of these were moved to a status that -- where we felt like there was an accrual issue or anything along those lines. So we feel actually pretty comfortable with those downgrades.

And I just want to say you've tracked us for a long time and we tend to be conservative, we do not think that the credit quality has deteriorated at all this quarter.

Okay. That's helpful. Then maybe shifting gears a little bit. Any sort of update on the Asset Management business? I know you guys have been looking to expand there and leadership there sort of indicated that there may be something happening this time, maybe something happening this year, any more color around Asset Management growth plans?

We are very methodically still looking for a large cap manager, either a firm or a lift out. We have been talking to people. It's a very entrepreneurial business, so often people get interested and cold feet and interested and cold -- it's a cycle. And we still want to do that. We're focused on doing it. We continue to meet with people. And if we can strike the right deal with a manager we like that fits into our culture, we will. And those efforts are ongoing. So we haven't lost the focus on it even during this integration, but we don't have anything to announce.

Okay. And -- so historically -- and I know, I mean, this is going back a bit, but Tom James sort of indicated there are certain levels -- buyback was never part of your guide strategy. But at certain levels, certain multiples of book, I forget, it was 1 2, 1 3, you would consider it. I mean, has that changed given sort of the increased leverage on the model, on the sort of buybacks out basically? Just because obviously, you guys are comfortable with the coverage -- while you do in fact have more debt. Or if it gets to sort of some multiple of book, maybe that would be something you would consider again?

We -- our policy has not changed at all. I do think that depending on where we are in a credit or economic cycle, we look at it and make decisions. Right now, we like our liquidity and our position and have no real need -- interest to buy back stock. We're staying very liquid through this period of time. Who knows where the economy is going to go. And so we've announced no buyback plans, but our philosophy hasn't changed. In '08 and '09, we had a lot of opportunity, but we didn't buy back because given the liquidity in the markets, we didn't use our capital. So it's all situational, the philosophy is intact.

Got you. And then just last question. Obviously, you guys look to be having a lot of success on the employee side, you're hiring recently, and clearly some are bigger producers. Any plans to maybe get a little bit more aggressive on the independent side because that also looks like it's becoming a really nice channel as more and more brokers break away and sort of look to go on their own. I mean, is there -- is that a focus for you guys? Do you maybe spend -- plan on spending a little bit more money to continue to upgrade infrastructure or -- just curious, what your thoughts are there because that also looks like it's a hot place with some recruiting now.

Yes, we've actually hired more recruiters. We're focused on it. We've never abandoned the independent channel. I think that some of our competitors, numbers wise, have done better, but we kind of have producer minimums. We're not in the technology roll-up or product sales game. So our focus has been on the high-end producers. We want to add advisers that meet some certain size and quality. So we're still in it, we're still recruiting, we've combined our recruiting efforts actually to try get a more focused penetration, but we have not given up on the independent channel. I think what you see is in great equity capital markets, the independent channel gets very popular with people. In these markets, people become a little more conservative. So it's a little more safe environment, but they're both -- we're recruiting in both, just the -- as a percentage, the employee side has just been busier recently, but we're still focused on both.

[Operator Instructions] Your next question comes from Alim Shaikh with KBW.

In terms of investment banking, what was the breakdown between equity and debt underwriting in advisory?

We do, well, we don't do much -- we do municipal debt underwriting, we don't do -- we're not really into corporate debt underwriting in any meaningful way.

It's small enough, we don't even focus on the number.

In that $70 million line item, is that what it is?

Yes.

It's about $17 million, $18 million M&A. At $23 million plus $5 million, so $28 million in what you'd call traditional underwriting business, new issue business. About $16 million in public finance debt, and then there's about $8 million in our -- in that line item related to our tax credit fund origination business.

Great. And what was the period end share count?

About 137 million.

Your next question comes from Steve Stelmach with FBR.

On the Private Client Group, on the operating margin, you guys mentioned the 9% this quarter. When I look back over the past 10 years of that business, it's averaged right around 9%, yet we're in a pretty lackluster environment. You got a lot more skill today than you have in the past. Where can we expect that number to go to? Or in a better world, I mean, you sort of guided to mid-teens of institutional business. Is that pretty analogous with what you expect to see in PCG or could it go higher?

No, we've focused on kind of 10%.

We have said in the past, Steve, that in a really good market environment that if we got on our mix of contractors, employees including the operations we have in Canada, and the U.K., et cetera, when all that is blended together, we got to 12%, that would be like a good next step.

Yes, Okay. So I mean still, you got a little leverage there, but more so probably coming out in the institutional business in sort of the operating margins?

I'd say today, that's accurate.

Okay, great. And in terms of interest rate sensitivities still for this similar opportunity there, if and when rates ever get so high?

We quit mentioning when short term rates go up.

At this time, there are no further questions. Gentlemen, do you have any closing remarks?

Thank you, Brooke. Just to say, I appreciate the complexity for those who have been following us a long time and the couple that have initiated coverage. This is an unusual quarter in terms of numbers moving around. But we gave you initial guidance on what we thought this could do for us. We also said we thought it could be accretive, it would be more accretive than a positive market. The first quarter was a little more positive, so we got a little running room, but this last quarter certainly wasn't, the first quarter, the combination. So we're sticking to our strategy of just focusing on revenue retention, which I think we've been very successful at, and we don't take for granted that it's over. The integration is going according to plan. The cost savings, as we gave original guidance, we think are there, but we said we would take them later, not earlier, and we're still focused on that. So, so far, so good. We have a lot of work to do and appreciate your questions. And I think when we look back on this, if we continue this -- if we're able to continue executing as we have been, we'll look back a year to 2 from now and say this was great combination, but that's all up to the execution and retention. So thanks for your time.

Thank you. This concludes the conference. You may now disconnect.