Good afternoon, and welcome to Raymond James Financial's Fourth Quarter and Fiscal 2023 Earnings Call. This call is being recorded, and will be available for replay on the company's Investor Relations Web site. I am Kristie Waugh, Senior Vice President of Investor Relations, and thank you for joining us today. 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 our Investor Relations Web site. 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 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 negative 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 these 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 Web site. 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 presentation and press release. Now, I'll turn the call over to Chair and CEO, Paul Reilly. Paul?

Good evening and thank you for joining us today. I've spent a lot of time in these last few weeks in front of our advisors. First, traveling with our top-producing independent advisors on a great trip, great to see the success in their business and the positive nature of how they feel about the firm. And then, attending our RCF Conference, our RIA division and clearing firm. Again, that division is over 10% of our private client group assets now. And it's great to see the growth and the enthusiasm there also. Now turning to our results, despite the challenging environment, which included a regional banking crisis, heightened volatility, and rapidly rising interest rates, we generated record net revenues and earnings for the last fiscal year. That's our third consecutive year of record results in very different market environments, was achieved by staying true to our core; we put clients first, we act with integrity, we value independence, and think long-term. These core values are more than words on a page, they are lived day in and day out by our advisors and associates. This dedication and focus provide stability during tough economic times and what makes me confident about our continued success in the future. Reviewing fourth quarter results, starting on slide four, the firm reported record quarterly net revenues of $3.05 billion, a net income available to common shareholders of $432 million or $2.02 per diluted share. Excluding expenses related to acquisitions, adjusted net income available to common shareholders was $457 million or $2.13 per diluted share. The increase in asset management revenues and interest-related revenues drove significant revenue growth over the prior year, with net revenues increasing 8%. Quarterly results were negatively impacted by elevated provisions for legal and regulatory matters, including an incremental $55 million provision…

Thank you, Paul. Starting on slide 10, consolidated net revenues were a record were a record $3.05 billion in the fourth quarter, up 8% over the prior year and 5% sequentially. Asset management and related administrative fees grew 12% compared to the prior-year quarter and 5% sequentially due to the higher assets in fee-based accounts at the end of the preceding quarter. This quarter, fee-based assets declined 2%, which will be a headwind for our asset management and related administrative fees in the fiscal first quarter of 2024. Brokerage revenues of $480 million were flat year-over-year, and increased 4% sequentially. Year-over-year, the lower fixed income brokerage revenues in the Capital Markets segment were offset by higher brokerage revenues in PCG. I'll discuss account and service fees and net interest income shortly. Investment banking revenues of $202 million declined 7% year-over-year. Sequentially, the 34% increase was driven predominantly by higher M&A and advisory revenues as well as a solid quarter for public finance. We are cautiously optimistic that the environment for M&A is improving, and we continue to see a healthy investment banking pipeline and solid new business activity. However, there remains a lot of uncertainty in the pace and timing of deals launching and closing given the heightened market volatility and geopolitical concerns. So, while we may not see significant improvement in the next fiscal quarter, we are hoping for better results over the next 6 to 12 months. Other revenues of $54 million were down 33% compared to the prior year quarter, primarily due to lower revenues from affordable housing investments. The pipeline for that business remains strong, but several closings slipped to fiscal 2024 due to higher interest rates. Moving to slide 11, clients domestic cash sweep and enhanced saving program balances ended the quarter at $56.4 billion,…

Thank you, Paul. As I said from the start of the call, I am pleased with our results for the fiscal 2023 and our ability to generate record earnings even in challenging market conditions. The record results this fiscal year once again highlight the strength of our diverse and complementary businesses. And while there is still near-term economic uncertainty, I believe we are in a position of strength and are well positioned to drive growth over the long-term across all of our businesses. In the Private Client Group, next quarter results will be negatively impacted by the 2% sequential decline in assets and fee-based accounts. Near-term, we expect some headwinds to enter sensitive earnings at both PCG and the Bank segment given ongoing cash sorting activity. However, 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 product solutions. Our advisor recruiting activity has picked up significantly over the last two months with record numbers of large teams in the pipeline. In the Capital Market segment, as we saw this quarter, there are some signs of improvement in investment banking, and we continue to have a healthy M&A pipeline and good engagement levels. But while there are still reasons for optimism, we expect the pace and timing of transactions to be heavily influenced by market conditions and would expect activity to likely pick up over the next six to 12 months. And in the fixed income space, the dynamics of last year persist. Depository clients are experiencing declining deposit balances and have less cash available for investing in securities, putting pressure on our brokerage activity. We hope once rates and cash balances stabilize, we can start to see an improvement. So, while there are…

Thank you. [Operator Instructions] Our first question comes from Dan Fannon with Jefferies. Your line is open.

Thanks. Was hoping you could expand upon the record backlog you talked about for advisors joining your platform, maybe some context around the size and scope of that? And also, it seems like there is more industry movement. You mentioned attrition being very low for the year. Just wondering if you're seeing any uptick in terms of attrition across your platform more recently as you mentioned more advisor movement across the industry?

Okay. Well, that's a good question. I think that, first, the attrition still stayed around 1%, that's slightly up from last year but it's in the same ballpark, kind of rounding. So, we're happy to see that given the market has been very, very competitive. If you look at industry data, advisor movement is down about 15% industry-wide, if you believe the data. But what we're seeing in terms -- what we're not seeing in number of advisors we're seeing in size of team. So, just last month, we added a bank platform with $3 billion in assets, 27 advisors. And when we look at the backlog, especially in the last two months, the number of teams that are generating $10 million to $20 million of revenue, we've never had so many come through at once. So, that has been a really big pickup that's -- and the pipeline, not saying we're going to close them all, but we've never had this many at one time where we're down to the final negotiating line, as well as people that have committed we haven't announced. So, it's been a pickup from a little slower activity, but I would say that, between last year and this year, it's just last year was larger teams at the end, this year it's just significant number of very large teams that are in the pipeline.

Thanks, it's helpful. And then just a question as you think about the coming fiscal year and expenses, if the capital markets activity remain somewhat depressed or around these levels, should we think about non-comp expenses or how should we think about non-comp expense and levers that you think or you're looking to pull to potentially improve the profitability and/or even maintain profitability in a more challenged revenue environment?

Yes, I mean for capital market specifically, most of the expenses are comp expenses. And we had continued to invest in that business, even through this difficult environment, we were opportunistic, as we explained in our Analyst Day, in adding about a dozen MDs particularly to our healthcare group and other groups. So, we're still investing in the business long-term. We think it's attractive. We have a great platform there. Really, if you look at the losses that the [debt] (ph) segment generated this year, about $150 million of it or $135 million of it or so was related to growth expenses and retention expense -- deferred comp expenses that we're amortizing throughout the year, so more than the entire loss of the segment was really growth-related or deferred comp-related. So, overall, as to the firm, non-compensation expenses we expect will continue to grow. We manage them very well this year when we talked about excluding the legal, and regulatory in the loan loss provision, we're already close to that $1.7 billion target we laid out a year ago. And we expect it to continue growing from this level because a lot of those costs are growth expenses, whether it be the FDIC insurance expenses, we continue to put more deposits at the bank, et cetera. So, they were negatively impacted this year by legal and regulatory after a very benign year last year, but net-net we would continue to expect non-compensation expenses to grow, while also being very focused on managing the controllable expenses that we can manage while still ensuring high support levels for advisors and their clients.

Great, thank you.

Our next question comes from Kyle Voigt of KBW. Your line is open.

Hi, good evening. So, just with the nearly $1.5 billion of excess capital above that 10% target, you mentioned the suspension repurchases in the quarter due to knowing about the regulatory matter. When we think about the pace of repurchases in fiscal 2024, Paul, should we still think about that $300 million to $350 million per quarter run rate or should we expect a little bit of a catch up given there were no repurchases last quarter and given how much excess capital you have on the balance sheet?

Yes, I think when you think about excess capital, I would just start with the capital prioritization framework that we've been following almost since our inception really, which is, first and foremost, to use the excess capital to invest in growth. So, Paul talked about the prospects that we have for organic growth, which we're pretty bullish on right now just given the pipeline, not only in PCG, bur really across our businesses. And then we're also active on the acquisition front, looking at opportunities that are a good cultural fit, first and foremost, but that would also be good strategic fits. And pricing across all M&A right now is challenging because there are gaps between buyers and sellers, but we feel like we can, through continued dialogue, find good opportunities there over time. And then to the extent that we can invest the capital in growth and we have this -- our ongoing dividend, which is 20% to 30% of earnings, and then buybacks. And we do have to play some catch-up on the buybacks since we didn't do any this quarter. I think we have about $250 million more to offset the issuance associated with TriState acquisition in two years of share-based compensation. So, we'll get back to doing that. And then we have a commitment to offset dilution going forward, which is about $200 million a year. But if we have the excess capital which we currently have and we deem the price to be attractive, then we would obviously be opportunistic above and beyond that offsetting of dilution.

Great, thank you. And then just for a follow-up, just want to touch on the admin comp line within the PCG segment, moved lower sequentially in the quarter, came in a bit lower than expected. If we take a step back and look at the full-year, that admin comp grew by more than 15%, which is a similar rate to fiscal 2022, although I think there were some acquisitions in there and some unusual or higher than expected raises that went into effect over that period. As we look out to fiscal 2024 or over the medium-term, just how should we think about growth in that admin comp line on a normalized basis?

You've touched on it, that 16% growth in PCG admin comp does include growth investments, a full year of Charles Stanley is in there, as well as all of the support staff for all of the advisors that we bring onboard, that their compensation goes into the admin comp as well. So, we've invested in the platform, and this year we had, on top of that, as you pointed out, we were very generous in passing on the financial success for the associates in the form of higher raises last year, and then that's reflected in these numbers as well. Looking forward, we are again focused -- again while expecting continued growth in this line item, certainly would expect it to sort of be a reduction in the growth rate from what we experienced this year, given the aforementioned factors.

Great, thank you.

Our next question comes from Brennan Hawken with UBS. Your line is open.

Hi, this is Ben Rubin filling in for Brennan. Thank you for taking my question. I first want to ask about the composition of the loan book. We did see some growth in the loan book and the balance sheet for the first time in several quarters. I guess, my first question is, how are you thinking about balance sheet growth on the loan side in fiscal year 2024, maybe on commercial versus consumer underwriting? And then also, what type of balance sheet growth does your NII guide interpret as we look to next quarter? Thank you.

Yes, the near-term NII guide factors in very modest loan growth, just given the environment still being pretty -- in terms of the demand being pretty muted, particularly on the corporate side now. But we were pleased to see the growth during the quarter. And a lot of it was driven by securities-based loans and residential mortgages. And while we expect mortgage volume to decelerate, given much higher rates now, we are optimistic about the securities-based loan portfolio in both Raymond James Bank and TriState as we look forward over the next 12 months. And that's based on two factors. The first is the repayments of those balances have really stabilized, as you would expect, accelerated significantly as rates were rising, almost doubling in some cases over the last 12 months. And so, that has stabilized. And we are starting to see new origination. And on the TriState Capital side, a lot of benefit from what they call transitions, or essentially existing clients bringing on and recruiting new advisors. So, we are optimistic about that portfolio going forward over the next 12 months.

I would just add, we are open for business, we have more than adequate cash and buffer, and certainly the capital, and it's really just the loan demand. So, hopefully, the SBLs continue to go from being repaid to starting to grow, as we saw the indication last quarter. The mortgage business is obviously slow. And the commercial loans, we're open to it. But it's a very slow market. And spreads are widening for the deals that are coming out. But again, it's more of a muted market. So, you saw this quarter, we're open for business. We just have to find the loans that we're comfortable with.

Great, that's very helpful. And then, for my follow-up, I'll kind of touch back on Dan's first question about net new assets. So, net new asset growth in the quarter was 5%. It's a bit below the high single-digit percentages you guys have been printing in recent years. I was just wondering if you can give me some color if there was any noise, any advisor departures that were lumpy that may have impacted the quarter, and whether or not this, let's call it, mid-single-digit range is more appropriate. Or should we kind of -- is it some revert back to the high single digits once the advisor market, if it does improve from here? Thank you.

I think for the quarter, I mean, it's been a dynamic year in a lot of ways, in terms of as you look at advisor count. I think that we had one program, which we previously talked about, that we exited from the platform. We kept 60% of the advisors, 40% left. And it cost us $4.6 billion in assets and 60 advisors. But we think from a profitability and long term, it was the right program. If you look just this month, again, adding a $3 billion bank program and 27 advisors just in one recruit, there are a lot of big projects like that. So, we're still optimistic whether we get the double digits we had in a couple of quarters. It's a big number, depending on the markets. But we expect to do very, very well. But that'll be up to recruiting and what happens to the Capital Markets. So, I don't know if you have anything to add, Paul.

Great, thanks for taking my questions.

Our next question comes from Steven Chubak with Wolfe Research. Your line is open.

Good afternoon, Paul and Paul.

Hey, Steve.

Hey, Steve.

Hey. So, I wanted to start off with a question on spread revenue, came in better than your guidance in the quarter, it also trended better than what we saw at some of your peers and given you have a larger proportion of client cash that swept to third-party banks, to what extent is the spread revenue benefit from improved pricing from those partner banks provide any incremental boost. We know banks are seeking out alternative sources of liquidity. There's a lot of demand for that whether you benefit from any improved pricing on some of those third-party sweeps?

I think our better performance than many peers is really just a reflection of our long-term focus on kind of maintaining a flexible approach that's focused on giving clients as much FDIC insurance as possible. And you see that with the growth and enhanced savings program balances, which give us more flexibility in that dry powder that effectively puts more sweep balances with third-party banks as we await growth of the Bank's balance sheet as Paul discussed earlier. And that in that dynamic, as you point out, Steve is absolutely correct. The banks, the demand from third-party banks is only increasing by the week and as contracts renew, we are able to renew at more favorable terms. So, that played a role, bigger picture of what really played a role was us just maintaining that sort of long-term flexible approach to managing the balance sheet and offering clients as much FDIC coverage as we possibly can to our various products.

It's great. And for my follow-up, wanted to drill down into some of the October deposit trends, Paul that you would say that, given the sensitivity of spread revenue to changes in deposit mix, I was hoping you could provide some additional granularity disaggregating this sweep and ESP deposit levels and maybe help size the impact of the advisor payout?

When you say the advisor payout, are you referring to the quarterly fee billings or what have you…

Quarterly fee billings, which honestly, I care less about that, I really just was hoping to get the ESP and sweep deposit levels disaggregated given the sensitivity?

Got it. Yes, so we were down as a couple of days ago, $600 million, but this does bounce around from day-to-day. I mean, we had a $200 million positive day, yesterday, so at quarter-end we have $500 million. So, the balances are at numbers, we're not used to high and low coming in and out. But the enhanced savings program is up probably $200 million to $300 million so far this month. And so, the net and the offset to that would obviously be the sweep balances, which frankly are doing much better than we would have expected given that we had the quarterly fee billings earlier this month as well. So, net-net cash to be down 500 to 600. When you add those two components, considering the $1.2 billion of quarterly fee billings, we're pretty pleased with our situation right now. But again, it's day to day can change today or tomorrow. So, we're going to monitor it closely.

Sorry, go ahead.

Important thing for us, I mean just not on earnings, but the fact that we have so much money to third-party bank. So, we could use if we wanted to. And we really haven't been borrowing. So, we have a lot of comfort to be able to go ahead and still have all the flexibility we need. But there has been the mix change with ESP with higher deposit costs. That's what you've been seeing net-net.

Got it, that's helpful color. Thanks for taking my questions.

Thanks, Steve.

Our next question comes from Mark McLaughlin with Bank of America. Your line is open.

Hi, thanks for taking my question. I was hoping you could provide us with some more color around deposit cost mix and specifically the pickup in money market and savings account yield?

Yes, I think we just sort of covered the growth and enhanced savings program balance for us, I mean in terms of the deposit cost, that is the biggest factor because that those costs somewhere around 5%. And so, to the extent that the mix of the total client cash balances shift to those Enhanced Saving Program balances, you're picking up probably 350 or so, 3.5 percentage points of cost effectively. So, I would say that's probably the biggest factor and the higher deposit costs. And why you saw the NIM really contract sequentially was largely due to us intentionally growing the higher cost deposits. But again, a lot of that is geography. Because effectively what we have done is raised the higher cost deposits of the Bank segment to that and savings program, and then essentially shifted more of the lower cost sweep balances to third-party banks. And so, that shows the NIM at the Bank segment, contracting sequentially, but you see the corresponding benefit to the firm with third-party fees, which shows up in the PCG segment. And that's why, as Steve pointed out, we were able to generate better than expected and better than industry trends, at least on the sequential basis.

Yes, very clear. I appreciate that context. Also, for my follow-up, how is feedback and adoption for RCS been. I was curious on what the mix between outside advisors joining the platform was versus the transition of existing advisors on the platform?

I think that the growth has been great, we're over 10% now of our assets in the RCS division. When we first probably opened it, we had a bigger movement of internal people who wanted to go just switched platform, which again as part of the noise and advisor count, when the advisors moved from our employer independent division, we count them as advisors. And once we're in the RCS, they're not registered. They're RIAs. So, they're one firm, right? So, we dropped them out of the advisor count, so but the assets have stayed and I think the proof point in that is the growth, D&A and assets, which I think for the year, and for the quarter have been above most of the players in the market. The speed and the recruiting outside has picked up to now that we've gotten the platform much more robust and increased the technology significantly. Hopefully the long-term growth will come from the outside. But we do have people here if they want to operate in the RIA format. They're welcome to switch affiliation options. But that has slowed down over the last couple of years from the initial opening of it or more people came over.

Appreciate the color. Thanks.

Our next question comes from Jim Mitchell with Seaport Global. Your line is open.

Thanks. Good afternoon, guys. Maybe Paul, I mean you talked a lot about sorting, I guess starting to decelerate, ESP growth, decelerating. You have some pricing benefits on third-party sweeps. If we look beyond the first quarter or next quarter in terms of the guidance on rate sensitive revenue, do you start to see things stabilizing? I guess I'm not asking for specific guidance, but if it kind of help us think through the puts and takes and when we start to see those revenues, maybe potentially stabilize?

I don't think anyone can really tell you exactly when cash sorting will fully stabilize across the industry. I know a lot of firms have been trying to convince you of that for the last 12 to 18 months, but we've been trying to be pretty transparent with you guys. And so, what we have said in the last three months, at least is that we feel like we're closer to the end of the sorting dynamic than the beginning. And you sort of are seeing that in the numbers. But we're not going to sort of declare an end to that dynamic until we have several months of data to support that. But to your point, longer-term, we are excited about the position that we're in now with a strong capital position, with the $16 billion, almost as cash with third-party banks. That gives us a lot of dry powder to really grow the balance sheet when the attractive opportunities come. And we think we'll be in a position of strength there because not a lot of other firms in our space will have the capital and funding to pursue that attractive growth. So, we're in a great position. Again, it's a reflection of that long-term client focus, the flexible balance sheet that we've always strived to maintain even when being criticized for it over the last few years, but it puts us in a pretty good position now.

I think, Jim, I think for us to really be able to call it in and it's really when interest rates stabilize if the Fed was starting to raise rates again, that ultimately has securities and if it's money market funds, you have a higher rate competitors, so you have to raise rates. I mean that's really the if -- and it appears that the Fed is closer to the end of the cycle of doing that, and rates stabilize, I think sorting will stabilize also.

Right. That's fair. And maybe just to follow-up on the credit side, some pretty big additions to reserves. You said you feel comfortable. I guess, what changes that, you mentioned macro, just trying to think through how you're feeling about the credit provision story there, given that loan growth has been pretty flattish.

We think credits are -- we like the profile, we like the risk, we've always tried to be proactive on adding to reserves to make sure we're well-reserved and often are ahead of movements. The one thing we don't control sometimes is our models. Some of our macroeconomic models are based on Moody's. If they change their outlook, that has an impact to us. But we try to stay ahead of the credit and more, as you could see in '09 through a very tough credit period, we did pretty well, but we're pretty credit tough. Maybe what's different this cycle and starting in COVID, we have sold off loans, but we didn't like the credit yield trade-offs and risk trade-offs, and we continue to do that kind of a one-off basis. So, that's been an extra tool that we've used to manage credit. So, we're feeling pretty good. Now, if the economy spins out of control, then you've got other issues. But it seems like even if things slowdown, which they may. As long as people are employed and buying, we think we'll get through it pretty well.

Right. So, the additions are more macro-driven rather than specific concerns internally?

I would say the additions this quarter were sort of a number of items of specific loans where we, as Paul said, try to get in front of it with additional reserves when possible. There are also a modest amount, I think, charge-offs are flat sequentially. So, nothing thematic, we feel good about the portfolio overall, but we try to get ahead of things, especially when the market environment is as unpredictable as it is, as Paul said.

For last quarter, the macro had a bigger impact than it did this quarter. It wasn't a big macro outlook change this quarter. That's right.

Okay, great. Thank you very much.

Our next question comes from Devin Ryan with JMP Securities. Your line is open.

Okay, great. Thanks, Paul and Paul. And most have been covered here, but I do want to just touch on the fixed-income businesses briefly. So, the debt underwriting obviously had its best quarter in some time, it can be a little bit of seasonality there, but did have a better result than some peers. So, just curious whether that's some idiosyncratic deals or if you're actually seeing conditions for that business maybe starting to improve a little bit from depressed levels. And then, I guess, conversely, the fixed-income brokerage business took a little bit of a step lower from already a pretty tough level. So, just whether you see any catalysts on the horizon that could drive better results there as well.

I think the fixed-income debt, certainly the activity was up. We did have a pretty big deal in the quarter also. So, that was part of the pickup and it's long-term client we're in rotation. We happen to have a big -- our term for kind of the big underwriting. So, it's a little bit of both, I would say, but certainly the big deal had an impact. And I just -- the lack of interest rate kind of, as Paul talked about with the depositories, without excess cash, they're waiting for stabilizing too. So, that part of our franchise has certainly been slow. And I think in general, the trading has been, as you look at spreads, whether in AAA munis or mortgage securities or stuff that have very high spreads. Right now, people are just waiting for rates to pick out because certainly the spreads there are higher than they've been in a while, but the activity is not way up. So, I think people are waiting to feel like they know where interest rates are going to stabilize. And until then, it's going to be a tough business, maybe a little better. It's hard for it to get a lot lower, not impossible, but when it really picks up is I think you're going to have to see more of a stabilized outlook and interest rates.

Got it. Okay.

I mean, the big ad has been, SumRidge has done extremely well since joining us, too. So, they've been a great addition and well ahead of what we would expect in the traditional business, but at lows given the interest rate environment.

Yes, got it. Okay. Good color there. And then, just follow-up briefly just on kind of corporate M&A, I hear all the comments around growth opportunities with capital and obviously opportunistic buybacks, but just more broadly, how you would just characterize the flow of deals you're seeing across the firm right now? And then just where the appetite is at the moment, just given the higher cost of capital how much of that calculation and maybe appetite for M&A has changed because you guys clearly have been acquisitive over the last several years here.

I think that first, cost of capital is impacting deals. So, it's two things. First, it's pricing. So, with the buyers, the cost of capital is saying, well, this is significantly higher, and pricing has been slower to come down, which isn't unusual in other M&A cycles that I've lived through. The price is slowest to adjust, and so that we have empathy for M&A bankers because we look at things too. We have the same thing when you look at debt was free and then you layer on a seven or eight or whatever the cost of rate is, and especially for a lot of M&A firms where it's more higher risk debt. I mean, it impacts the pricing. It just has to. So, we see that both in the M&A business, it's backed up. So, you can see people doing deals now in the fourth quarter. We don't expect the next quarter to be a lot different, but backlog's good. People are waiting, but that gap, which I think a lot of it's from lending pricing and the cost of capital is impacting it and you can see it in all the firms. And I'd say the same thing when we run numbers, it has an impact. Even with our excess capital, we assume we have to replace it, it makes it tougher. And most of the prices, most prices adjust a little bit or cost of capital falls. It's going to be harder. Or people just wait it out long enough and go, okay, the lower price is the new price. It's going to take one of those factors for it to really pick up. So, that's why we gave more of a six to 12 month outlook in our M&A business. Just, we think that the market's starting to see that, but let's see if it adjusts or not. I don't think it's going to happen overnight.

Okay. That's great. I'll leave it there. Thanks guys.

All right. Thanks, Devin.

Our final question comes from Michael Cyprys with Morgan Stanley. Your line is open.

Hey, good evening. Thanks for squeezing me in here. Just a question on the bank capital rules, we've seen some proposals from the banking regulators, including the Basel III Endgame proposal. Just curious how you see that impacting the opportunity set for your capital markets business, given you're under the 100 billion asset threshold. Just curious how you think about the opportunity set for yourselves, but then as you look out over the coming years, I'm sure eventually you probably hope you cross a hundred billion and grow to that level. Just how do you think about that impacting potentially your capital markets business? Which areas you think might be more impacted and how do you think about preparing for that?

Well, a couple of things. First at our $78 billion and 1% growth, it's going to take a lot of time to hit a hundred. And I think people forget that one of the big jumps in our assets is because of the TriState acquisition. We have no plans to acquire another bank. In fact, it took us five years of looking to acquire TriState, which was the perfect fit to joining the family. But we're not looking for another banking franchise. Almost anything else we do doesn't significantly drive our asset size. So, we think we've got a certainly I'd say 5 year, you have to cross and then you get a year to comply. So, and it could be much longer. So, I -- most of all the rules as you cited, there was a 100 billion. And so, I think we have time to do that. Now, having said that, we're already internally doing studies on the impact of reporting requirements, the capital requirements, the technology everything that's going to be impacted and the regulatory expectations, which do change, when you cross a 100 billion, so we have both inside and outside how we've been hiring some people, and this is kind of 5 years in advance. So, we're not -- we're not taking it for granted. We know we'll grow, but as you said, almost a 100 billion became the old 500 billion before they changed the rule and then 250 billion. So, it has brought a lot of those rules down for significantly higher heavy -- higher lift. But I think right now that's in the future for us, so always.

And just to add one thing to that timeline, one of the reasons it will be we expect to be around that long is because one of the things we did during COVID is really accommodated client cash balances on the balance sheet to the securities portfolio. And so, we expect over the next year, for example, for a lot of the Bank's loan growth to be essentially funded with securities that mature out of that portfolio, so you don't get as much net growth from the loan growth because it's a repositioning of those assets.

Thankful. That's a good clarification, because we still expect to grow the bank loan portfolio, so but it's just as being funded on balance sheet and off balance sheets.

Great. And just a follow-up on that point, as banks that are impacted by the rules, either pullback of certain areas, or reprice certain products, how do you think about the opportunities set for you guys to step in given that the rules won't apply for you for many years? Where do you see the biggest opportunity set for your capital markets business or more broadly, from these rules impacting a lot of banks?

I think if you look at acquiring capital markets businesses, or fixed income businesses, or asset management businesses really don't significantly impact our asset size. So, what would really impact is acquiring a bank because you're acquiring balance sheet. Those businesses, especially the M&A, fixed income, like even today we operate. When Morgan Keegan joined us seven or eight years ago, we had a beta of inventory database and inventory today, we have less, we've operated well under the inventory. So, I don't -- we think there's a lot of room to acquire a lot of business, those businesses in that space, without really altering trajectory and talked about $200 billion, it's the banking side that impacts the balance sheet, really. That's not our focus.

Okay, thank you.

This concludes our Q&A session. I will now turn the call back to Paul Reilly for closing remarks.

So, first, I appreciate the time. It's been really outside the kind of a regulatory charge, it would have been a really outstanding quarter that still is a very good quarter. And so, we're focused still going into an uncertain market. But we've always been in our business have outperformed because of our capital and cash. And especially in down markets, be nice to be enough capital markets and interest rates to come in and then it'll be kind of an easy year, but we always assume we have to work for it every year. Market is competitive. So, we're just doing what we've done. We've been managing expenses. A lot of people say what are you going to do to manage expenses? We have been doing that especially over the last few quarters. And plan to continue to do that until, we can see growth to support those. So, appreciate you joining the call and all the time you spent with us, and we'll talk to you soon.

This concludes today's conference call. Thank you for your participation. You may now disconnect.