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Operator
Good morning.
My name is Chris I will be your conference operator today.
At this time, I would like to welcome everyone to the Raymond James financial quarterly analyst call.
All lines have been placed on mute to prevent any background noise.
After the speakers' remarks there will be a question-and-answer session.
(Operator Instructions)
Thank you.
Mr.
Reilly, you may begin your conference.
Paul Reilly - CEO
Well, good morning and welcome.
I'm joined here by an all-star cast of Jeff Julien, Tom James, Steve Raney, Jennifer Ackart, Paul Matecki and Chet Helck.
So we will be able to ask any questions and some numbers that have a little bit of a noise going in and out, but all in all, a very, very strong year and I think a very solid quarter.
Of course, this marks our 95th consecutive quarter of profitability, something we don't like to forget here.
We've performed through all markets here, up and down, and very proud of the results.
And reflecting, just for a second on our year results, up 14% for record net revenue, $3.33 billion, and up 22% for record net income of $278 million.
I don't think there are too many companies that will report this year who have gone through major acquisitions, record numbers on both lines.
If you really think about it, some $450 million of pretax income, with a net ARS charge of around $41 million or $42 million this year, and if you added back income potential from spread on cash of $90 million potential we talked about, there is an awful lot of earnings power here at Raymond James and I think it is a very, very solid year.
The quarter had a little bit of noise moving through it.
I am going to have Jeff go through some of the tax provisions and things a little bit later.
But, net,net if you look at our GAAP EPS, it was probably boosted a little bit, but around $0.02 with ARS and about $0.04 for really downdraft from the COLI adjustment on taxes and some other tax adjustments that we will get into a little bit later that probably bunched up in the quarter.
But if you look at operating earnings, very, very solid for the quarter, also, given a very, very uncertain market.
There are 4 kind of separate stories in here if you look at our major segments.
The PCG segment performed extremely well.
We know that the S&P was down 14.3%, the 500.
Our assets under administration down only 8% percent, and revenue only down 1%.
So very, very strong performance from the PCG segment, really driven by record productivity.
Our employee channel, about 543 million which is a record -- thousand, sorry about that.
Our independent channel about 357,000 and RJL, 373,000 -- all kind of record productivity numbers from our financial advisors.
Although net recruiting was up slightly in terms of financial advisor counts, we are seeing a fairly significant lift in number of people looking at Raymond James and coming through for visits, as there seems to be, especially on the employee side, much more interest in our platform and interest in moving from certain firms.
So, all in all, we had a very strong performance in the quarter, aided a little bit by that a good percentage of our assets are built in advance, which will be a little challenge going into the next quarter, a little bit of a headwind for this segment as, with the assets down and our pre-billings, as we go into the next quarter, put a little bit of drag on PCG but very, very strong and well-positioned.
Our Asset Management business similarly had a very strong quarter and year, up 54% really pretax over last year's fourth quarter.
Our assets under management were down 12% but we've experienced very good inflows into the business with the Dow down and again, I think very solid performance given a very, very rocky market.
Raymond James Bank, we are proud that loans were up almost $300 million for the quarter.
And, that's before the Allied Irish Bank acquisition which did not happen in the quarter as we thought from the operating release.
We expect that to happen next quarter.
A little bit of noise that Jeff will probably get into a little more detail, that if you really look at our net interest rate spread, it is biased a little bit by about a $1.3 billion in extra deposits.
And the reasons those deposits are in there, is that with capacity in our bank sweep program being pretty well maxed out, we were able to put those deposits into the bank and get FDI insurance and earn a smaller spread, but a positive spread for the Company and a return for our clients, and some FDIC insurance.
If you took out those extra deposits, our spread was down slightly from 347 [bips] to 333 so we've been talking about a target being near, closer to 325, and you can see it came down slightly.
But, still very, very solid.
Credit quality continued to improve and I think the Bank has performed very, very well.
We also have a refiling, it's a technical refiling of our bank holding company application.
Given that our application has been out for a long period of time through auction rate securities and other issues, we technically have withdrawn it, resubmitting it, but expect approval very quickly into this quarter.
And, expect that to be completed this quarter.
So, I'd call it more of a technical change than a change in direction for the bank holding company application and conversion.
Capital Markets was kind of the story for the quarter just because there's a lot going on as we've read at other companies, even generating losses in their capital markets segment, we did not, despite the difficulty in this market.
Our IPOs -- the IPO market was basically shut for 2 months, as we all know.
And ECM and the secondary offerings faced a very, very difficult market.
As you see from our stats, which don't always really indicate the volume but indicate direction, our number of lead managed deals between Canada and the US were down 15 to 8.
Commission volume was down 9% domestically and the equity commissions for ECM.
So very challenging market going up, going into the quarter.
In spite of that, if you look at the results, we've continued to build out.
We've had a number of very senior tech hires; we've announced 6 senior tech hires during the quarter.
We have the Howe Barnes acquisition closing previously, where we're still carrying people.
Also, those markets, the FIG market has been a little slow as all of the investment banking businesses really have been.
But even with all of that, you can see the results were still positive.
Tax credit funds, had a strong month with [health] and our M&A activity was very strong.
If you look at M&A revenue, it was flat really from the last quarter than the preceding year's last quarter.
But, those were very, very strong quarters for us in the M&A business.
And backlog in all the business, both in banking and in M&A look very, very robust.
Obviously, we think M&A will continue to perform pretty well.
The banking business is going to depend really on the capital markets going forward, which are certainly uncertain.
Fixed income, because of the low interest, rate environment, the flat yield curve, the US domestic downgrade, the noise in Europe, has been a very challenging business.
We eked out what I call a trading profit for the quarter -- very, very small on fixed income.
Commissions were up 11%, though, over the last quarter, I guess is the positive news but very challenging market and has continued to be challenging into this quarter.
So with all that, we are still slightly profitable in the capital markets business which I think is a good sign and with the pickup of the market I do think we have earnings power there, also.
So, that was kind of the overall from a business segment standpoint.
I'm going to turn it over to Jeff to give us a little more color on some of the numbers.
And then, talk about going forward a little bit.
Jeff?
Jeff Julien - SVP, Finance and CFO
Let me talk -- just add a little color to each of the segments or to some of the segments.
Within the Private Client Group segment, this past quarter, we've done -- we continue to do recurring revenue calculations to steer our businesses in that direction and for the quarter, about 60% of the private client group revenues are recurring revenues, which is the highest it has ever been.
And again, that's without interest earnings at the same spread level we've historically been used to which would increase that number even further.
It was -- as you noticed, I hope, in the press release, the FA count has resumed it's upward climb, at least.
It was up 20 for the quarter and 23 for the year.
Not robust net recruiting results but at least moving in the right direction.
And then Paul mentioned assets under administration -- while they were down 8% for the quarter they were down -- they were up 3% for the year.
So, we still had a slight increase, year-over-year.
People ask me a lot how much are your assets under administration correlated to the move in the equity markets?
I've told people that -- it's not scientific, but I think about 60% to 65% of our assets are equity related.
We have to get a little better at looking through mutual funds and annuities and other packaged products to really tell.
And the 8% move this quarter relative to the 14% move in the S&P 500 sort of bears that out, that that's about the right sensitivity.
In the Asset Management sector, assets under management, which are more closely tied to the equity markets as that's the vast majority of our managed assets, they were down 12% for the quarter but again, up 7% year-over-year.
And, that's in the face of a slightly down S&P, so that obviously shows we've had good net flows throughout the year in that segment.
Expanding on the Bank just a little bit, the loan growth for the year was about $450 million and about two-thirds of that came here in this last quarter.
So, we've had a lot of late loan growth in the Bank as we finally have identified some opportunities, particularly in the secondary market.
The net interest spread -- we are carrying, I guess, on average in that quarter about $1.3 billion of cash above and beyond our normal cash liquidity level.
We didn't strip out all the cash in getting to the adjusted rate, we just stripped it down to our traditional liquidity levels in the Bank, which gave us that 3.33% spread that you see in the press release.
We will continue to report that this way as long as we are carrying these cash balances in excess of our targets.
Again, they don't hurt us right now.
They're good for earnings and ROE.
We put them into the Fed which is a zero-risk-rated asset class, so it's not hurting any of our capital ratios other than the TCU ratio, the total assets and we are sensitive to that as well.
But it is certainly a negative to the overall spread, which is why we will continue to report it both ways.
Paul mentioned credit quality -- this provision of $5.4 million for the quarter is the lowest we've had in quite a while.
And, $33.7 million for the year compares to $80.4 million in the prior year.
So, a 58% improvement which we hope that any future growth in the provision from these levels of -- we hope is related to actual growth in loan balances, not credit problems.
Some overall comments --on the P&L, you may have noticed we added a line item called Account and Service Fees.
We had various fee revenues flowing through what was formerly called Financial Service Fees and also some of them flowing through Other Revenues and it was somewhat confusing and I will say, even internally, which ones belonged where.
So what we have done is combined all the fees that we get from clients and vendors, et cetera into Account and Service Fees into one line item.
And we will be putting a table in MD&A that shows the major components of that line item because it's a fairly big number, as you can see on the income statement.
That will give you better detail over that.
And I think that's a better presentation, particularly, with the detailed table.
We had a slight ARS reversal in the quarter.
We were estimating in June about $45 million charge valuation, charge on what we thought we would repurchase.
It turned out we ended up buying less than we thought we would.
We reserved for everyone that was eligible; everyone that was eligible didn't respond or has already liquidated in another place, et cetera, et cetera, or had a [cut] it out and we never found the people, et cetera.
We ended up buying about $245 million face value of ARS versus the $280 million to $290 million estimate that we had originally.
And that resulted in a $41 million valuation reserve versus the $45 million that we were estimating, so we had a $3.5 million reversal here in this particular quarter.
I expect that to be -- we won't even have that line item going forward, whatever little activity there is over time will probably just be in the Other category.
By the way, now that we've combined these Account and Service Fees into 1 line item, there's really very little flowing through the Other revenues and the biggest, probably the single biggest item that will be going through there is the write-ups -- or write downs in private equity that we have had in the past, particularly in the prior quarter that we talked about last time.
For the entire firm recurring revenue was not much changed, right on 55% for the year.
We are again still hopeful that over time, particularly with interest, that, that increases.
Tax rate, obviously was very distorted this particular quarter.
As seen in some of the notes already this morning -- COLI was the biggest factor.
We've been victims of this before in both good and bad markets, it does distort our tax rate as we have about $120 million going into this quarter of face value --or of life insurance value that suffered about a $15 million loss in the quarter which is a non-deductible loss.
That was about 5% additional on the tax rate for the quarter.
The other couple percentage points really relate to truing up our actual expense for the year as we complete some of the returns and estimates to what we had provided throughout the year.
And what we have found is that, as more states get aggressive in requiring consolidated returns and some are even raising rates, we've had one raise, and I guess a couple on tap to raise rates next quarter and get more aggressive in interpreting what's includable in their state's revenue and get more aggressive about auditing, et cetera, that our overall state tax provision was a little light.
And we will be adjusting that going forward.
And for those of you doing models, we will probably end up using a 39% blended rate or something going forward in 2012 to reflect that.
So this really is a lot of that -- this last 2% of the tax provision belonged throughout the year but it all was a catch-up in this fourth quarter.
The ROE for the quarter was 10.7% for the year, 11.3%, but if we eliminate the ARS activity for the year, it was about 12.25%, so still at the very low end of the range that we'd like to see.
Again we are not enjoying the interest earnings that we traditionally would and we've talked about that ad nauseum, but we also had no capital markets help in this particular quarter and year relative to the prior year.
We have repurchased through the end of September, in the last 45 days of the quarter, we had repurchased 637,000 shares.
And as of today, in the last 60 days, as we mentioned in the press release, we've repurchased a little over 1 million shares of our stock at what we would deem to be advantageous prices as we had some dips in our stock that we think made it a compelling value.
And, unlike 2009 and we had sufficient liquidity to feel comfortable going into the market and repurchasing those shares.
The book value per shares reported at $20.99.
I will also tell you that tangible book value per share is $20.41, which is a number I know that people like to report, at least on our peers.
Comp ratio was up slightly in the quarter predominantly on the drop in revenue in capital markets.
But, for 2011 versus 2010 it was actually down slightly for the year.
But, in all the periods for this particular year it has been in a very, very tight range around that 68%, 69% -- 67% to 69% range, I guess I'll call it.
So it hasn't been a huge variation from that.
On a positive note we are not -- we did not gross up our balance sheet to comply with the thrift, qualified thrift lender requirements as we have in the last 3 years.
So, when you see our balance sheet for 9/30/11 it will be our true balance sheet, not with several billion dollars of overnight borrowed cash on it.
We have not completed our conversion, as Paul reported, but the OCC, I guess, feels comfortable enough that it's imminent that they did not require us to go through those gymnastics at this particular year-end and hopefully we won't have to do that again, now.
And looking forward, which Paul can expand on here in a minute, a couple of key points.
One is that billable RAP assets, which is a number that is important for PCG predominantly -- but billable RAP assets were down 6% on 10/1 versus July 1, so that's a little bit of a headwind going into this next quarter.
But on a positive note, I pointed out, the Bank had a lot of late loan growth, which for the interest earnings will be reflected here in this next quarter and the rest of next year.
So with that, I'll turn it back to Paul and wrap it up and then we will take questions.
Paul Reilly - CEO
Thanks, Jeff.
I know the tax rate added a bunch of noise and under a 999 system it might have been a little easier to estimate them, but we're not in that environment.
So, I do think that the pressure on the tax rate will be up to next year as the states have been a little bit higher and we have some more nondeductible items.
So, the short-term outlook is just uncertain because of the capital markets.
The Company's balance sheet is in strong shape, we continue to add people in all of our businesses strategically, very good people.
And, we will strategically add as the market allows us to.
So we are still focused on recruiting for areas in all of our businesses.
Obviously, a little more cautious in the capital markets area, but if there are dislocations of very good people or businesses we will continue to look at them.
So, I think overall, Company is in great shape.
We believe we're well positioned, but obviously in the market we are in right now, there's some uncertainty in terms of looking to this coming quarter.
We try to keep a long-term view, we will manage expenses and continue to focus on building our business and just work through this uncertainty period.
Which I hope resolves itself; maybe a little less optimistic on the government solving the deficit in the short-term through the election, but that's something we will all have to work through.
So, with that, you probably have a lot of questions on some of the activity through the numbers this quarter so I will go ahead and Chris, I'm going to turn it over to you to get questions.
Operator
(Operator Instructions) Hugh Miller, Sidoti.
Hugh Miller - Analyst
Good morning.
I had a question.
I guess, obviously, your PCG segment held up, as you mentioned, very well given the exposure to fee-based accounts and so forth.
But just wanted to get your view on -- still a volatile environment here, and kind of what you are hearing from brokers about retail activity levels and their willingness to stick to their investment plans and so forth, and what you're seeing there even into October?
Paul Reilly - CEO
I think what you are seeing, you are seeing people sticking very closely to it.
Obviously cash is up some, and people have been more cautious.
But actually, have been positively surprised that both advisors and clients have been sticking closely to their investment plans.
Obviously, those with less risk tolerance or closer term issues have had to adjust but, people have hung in there.
Now, I think the individual investor isn't any different than corporate America and is being cautious trying to figure out what is going on, looking forward.
But, I think they've hung in there pretty well.
Hugh Miller - Analyst
Okay.
And, you mentioned, obviously we saw a slight tick up in net advisors during the quarter and you mentioned that home office visits are improving in this interest in looking at Raymond James -- what do you really see as the driving factor of that?
And, your expectations for recruiting as we head into fiscal 12?
Paul Reilly - CEO
I think it's just, first, we've had a very stable platform and we've had a number of our competitors, especially larger competitors that continue to have a lot of news and advisors, others that have been -- some through acquisitions by those companies, have been in environments they haven't enjoyed and as their companies get in the news I think they are interested in looking for platforms that they view are stable and maybe represent the platforms they grew up in.
So, as retention wears off in some places, environments changes -- honestly, slowdowns are good for people to take a pause and look at when you were really, really busy and doing well, you are less inclined to stop and look around.
When it slows down a little bit, you're more willing to look around and our platform has been very, very consistent, the service level is high, we're very advisor-centric, and when people pause they look at us.
And so, the good news of a downturn, if there is one, we are not rooting for one, is that we tend to do very well in recruiting.
We'd rather win in a competitive growth environment but if it's slowing down, I think, that's the positive to us.
And again, as other people make changes and other competitors, we tend to be stable and we get an influx of people looking at us.
Do you want to add any more color, Chet?
Chet Helck - COO
I agree with that.
I think that the other macro factor that you have to recognize is the Raymond James brand has really come through this market cycle much stronger relative to the competition then when we went into the cycle.
And so all the numbers that we see in brand strength measuring metrics from both the retail side -- I mean, the client-side, investor side as well as from the professional side, tell us that we have a great deal more respect and just knowledge out there.
People know who we are now and they respect who we are and when people decide to make a move we have, more frequently get a chance to talk to them than maybe we would have 5 years ago or certainly 10 years ago.
We have become a bigger, stronger Company.
Hugh Miller - Analyst
I appreciate the color insight there.
Of the retention awards that you saw given out following the recession to advisors for them to stay at companies, what is the typical duration of what you are seeing from those?
And, are we coming up to any points where their obligations may be completed and they can kind of look to go elsewhere without having to repay a substantial portion of that retention?
Chet Helck - COO
They vary by company and when people joined and all sorts -- there are certain firms that do have awards coming up in this coming year.
So, I probably don't want to go into too much of that detail.
We know where the flow is coming from right now.
There is just more activity because of all those factors.
Hugh Miller - Analyst
Okay, all right.
Paul Reilly - CEO
I think, Hugh, they probably range from 3 years to 7 years, something like that.
So we are starting to see the early ones come off.
Hugh Miller - Analyst
Good, okay.
And, obviously, we've seen an interesting dynamic over the last quarter in the equity fund flows and -- was wondering whether or not your discussions with prospective asset managers -- have those kind of changed at all?
Expectations changed at all?
And what are the dynamics of those discussions?
Paul Reilly - CEO
I guess were all kind of pausing a little bit, here.
I don't think we've seen any major shifts in the short-term.
Obviously, we're all aware where funds are flowing but, been relatively stable, nothing major change recently.
Hugh Miller - Analyst
So you're still not seeing expectations for pricing that has come in on the discussions you're having with the people that you'd like to kind of -- to acquire?
Paul Reilly - CEO
Are you talking about acquiring people?
Hugh Miller - Analyst
No, no, well acquiring an asset management firm, which is something you guys have talked about.
Just wondering if those discussions, with the prospective people you would like to kind of look at -- have they changed at all given the dynamics of the equity flow market?
Paul Reilly - CEO
It's a double edged sword.
When things are down people think it's not the right time to sell till all their pricing comes in, and when things are up, sometimes they want to get to the next level.
So, you always just have to find the right manager, the right culture, the right time to sell so we are very actively talking to a lot of people in general terms.
Haven't pulled the trigger, haven't found the right fit yet.
But, I'd say people are very open to talking.
I don't think pricing has changed a lot but we are really just trying to find the right fit to add -- for us to add, but I wouldn't say there are any significant changes.
Chet Helck - COO
The only thing I would say is probably that we are screening out more of the people we talk to simply because the track records don't meet differentials that we'd like to see in terms of alpha over longer periods of investment results.
So that when we go through the screens of the people we're talking to you see too much risk that a very short-term downdraft in performance would result in lost assets under management and as a consequence, we have been very careful on that front.
Hugh Miller - Analyst
Okay, good color there, appreciate it.
I know that you guys have talked about, within the retail segment, the composition of fee-based generation, predominantly based on the prior quarter's balances.
Can you just remind us, within the asset management segment, how that composition is with regards to prior quarter versus current quarter?
Paul Reilly - CEO
Sum up front bill versus average bill versus back-end --
Jeff Julien - SVP, Finance and CFO
About two-thirds of the assets are billed at the beginning of the quarter.
And, about -- and the balance is split pretty evenly between average daily and then the institutional accounts are billed at the end of the quarter, which is why asset management showed a slight downtick in revenues because they were -- they did have a block of assets, they're institutional accounts that were billed as of the end of the quarter, in arrears as well as those on the average daily -- hurt a little bit versus the prior quarter as well.
Hugh Miller - Analyst
But you still had net sales growth?
Jeff Julien - SVP, Finance and CFO
Yes.
Yes.
Paul Reilly - CEO
So essentially it was offset and the factors weren't as large and while you hesitate to ever mention market value, market values are up 8% from the end of the quarter, too.
So, hopefully we'll get a new market at the end of March that will put us back where we were.
Hugh Miller - Analyst
Okay.
And the last question I had is with regards to the Bank and the shared national credit program.
I was wondering whether or not the loan portfolio expansion -- is that really more indicative of pick-up in demand?
Or, is it more a reduction in lending competition you're seeing possibly within that program and so that you're able to kind of get allotted a greater percentage of the things that you're kind of wanting to lend to?
Steve Raney - President and CEO, Raymond James Bank
Hey, Hugh, it's Steve Raney, good morning.
This last quarter, approximately 65% of our new fundings were actually secondary market acquisitions, most of which were add-ons to existing positions where we, at the initial, primary syndication where we may have, for example, may have committed 25 and we only got 10, prices have come in a little bit the last quarter and we were able to add to some positions.
Here, more recently, in the last, I would say 45 days, the primary markets have really, really slowed down quite a bit.
But, for the bulk of the September quarter, the beginning part of the quarter, the primary markets were pretty busy and then the second half of the quarter we were adding, adding to positions in the secondary market.
Prices, once again, had come down to more reasonable levels, where before, most loans were trading at a premium, we were able to add to some positions at slight discounts.
Jeff Julien - SVP, Finance and CFO
But, still what we are adding are in credits that will be subject to [stickerage] (multiple speakers)
Steve Raney - President and CEO, Raymond James Bank
[Now.]
Hugh Miller - Analyst
Okay.
Thank you very much.
Operator
Devin Ryan, Sandler O'Neill.
Devin Ryan - Analyst
Good morning, guys.
Just on the investment banking front, when you look at investment banking revenues, you guys had another strong quarter in what was really a tough environment and then for all of 2011, revenues were up 50% in investment banking.
So, to me it's pretty clear you guys have picked up market share and also are benefiting from a pretty diverse footprint.
But, I just want to get your sense, is there anything else that you would attribute that performance to and when you think about banking and where you are currently versus where you think you could be in a more functioning market, do you still feel like there's a way to go from here?
Paul Reilly - CEO
There are a couple of factors, if you look at the year as a whole, certainly our strength in the REIT and MLT space and energy were big factors in our year.
Those markets picked up early.
And, we did very well in them.
So, if you look on year-over-year performance they were driven by those.
We really believe that there is a lot of room for pick up, as you still see.
What I call middle-market IPOs never really hitting stride.
We do have, with the Howe Barnes acquisition, significantly have expanded our FIG business and certainly the banking space at these prices, there aren't a lot of sellers and there aren't a lot of forced sellers, either.
So people aren't raising capital to buy and people aren't selling given the pricing environment.
But, we believe that will come back.
We've made a significant investment in technology versus acquisitions; we've acquired people and we believe we're well positioned there.
So, we believe there is a lot of firepower.
And so, if you look at revenue per bank or in other things, a lot of room to grow in banking.
For the quarter -- the quarter looked probably a little better in banking than it really was.
2 factors -- again, M&A has been very strong.
The Lane Berry acquisition has paid off extremely well.
The people have integrated and are performing very well; backlog looks good; they're continuing to generate good numbers in the M&A space.
But also, this quarter, we had a very strong, usually strong tax credit fund.
So when you add it all into banking, maybe banking was down a little more this quarter given the markets boostered by tax credit funds, but in any normal, what I would call, whatever normal is -- Tom promised me that this would be a fun business in a normal environment when I joined in '09.
So I'm still waiting for that.
Any kind of normalized environment, I think we have a lot of room for growth in equity capital markets and we've made bets in people -- I think there's positives ahead, but we need the market there, too, to do it.
Devin Ryan - Analyst
Okay, that's helpful.
Just a follow-up on the financial advisor recruiting question that were just asked, is there anything changing from an economic perspective in terms of what you're having to pay right now?
Or do you see any signs of things changing maybe as competitors are pulling back just given how tough the markets have been?
Paul Reilly - CEO
Well, we are consistent.
We're not the high payers in the Street, never have been, never plan to be.
We've pretty much held our front money, maybe it's up slightly, but we've kind of held and I think that maybe other people have come in or were having advisors that just say the money isn't worth it.
They want to be in an environment that they're used to working in.
So we'll see what happens with some of the bigger banks who were kind of leaders in the front money charge on the employee side and probably one independent firm has been a leader on the independent side in front money.
We have been pretty consistent, kind of holding the line in what we consider is economic feel and fair pricing.
So it hasn't gone away, maybe not as vicious as it was a year ago, but there's still people offering more money than we do for transition.
Devin Ryan - Analyst
Okay.
And then, just lastly, just a couple of quick modeling questions here.
So when we look at other revenues as you are now reporting them, are there any negative marks on investments there that depress that line item from maybe where -- or how we should think about it going forward in a more steady market?
That's the first, and then secondly, just on the COLI losses that impacted the tax rate, was there any other income statement impact from the COLI losses this quarter?
Paul Reilly - CEO
I think on marks there aren't any inherent build-up negative marks or positive marks outside of how those businesses are doing in private equity.
So we mark them every quarter to what we think the values are.
We try to do it conservatively but consistently so I don't think there's anything eminent in the flow outside of how those businesses have performed.
Jeff Julien - SVP, Finance and CFO
There were big marks up in the June quarter.
Paul Reilly - CEO
Yes.
Jeff Julien - SVP, Finance and CFO
We talked about last time, that's what's making the comparison look funny.
Devin Ryan - Analyst
Okay.
Jeff Julien - SVP, Finance and CFO
This quarter was more normal.
There are also some negatives that flow in there.
There are some OTTI impairment on some securities at the bank and things.
So there's some, I will call them expenses, but losses that flowed to other revenues, as well.
So that's why you had a negative number last year.
Devin Ryan - Analyst
Okay just secondly on the COLI issue, was there any income statement impact other than the impact on the tax rate?
Jeff Julien - SVP, Finance and CFO
No, the revenue and expense line -- revenue and expense is net in the same line so it's just a tax impact on the revenue side that gets reflected not on the expense side which is why it swings.
There's a gain or loss on the investment and then there's a comp expense on the other side which net against one another.
Paul Reilly - CEO
And the difficult part, I think, for modeling for you all, is if the market is up, you gain back that COLI, and it reverses.
So you're going to -- the flows make it difficult when these markets gyrate the way they did last quarter.
Jeff Julien - SVP, Finance and CFO
We model it flat starting the year and then as we learn more about where the market is trending over the course of the year we try to adjust it and it was -- the COLI portfolio was up $12 million by the end of June year-to-date, ended up the year down $3 million so that's a big swing for one quarter.
Devin Ryan - Analyst
Okay, thanks, guys.
Operator
Joel Jeffrey, KBW.
Joel Jeffrey - Analyst
Morning, guys.
Just a quick follow-up on the investment banking line.
I mean, thinking about it going forward, what should we expect from this tax credit fund?
Is this something we should be looking to, to try to model in on a more consistent basis or is it just relatively lumpy?
Paul Reilly - CEO
I will let -- Tom actually oversees that.
I'll let him comment on that.
Tom James - Executive Chairman
In the general sense, over the longer run, the tax credit fund business has grown relative to the competition and we're either second or third largest originator of tax credit housing for CRA purposes mainly in banks, although the rate of return got high enough to attract in some insurance companies and other general corporations last year.
So the volume we handled this last year was a record volume.
Now, prices have recovered, meaning the yield returns, or rate of returns available to the institutions have dropped and that makes it very difficult to know what this year's volume might be compared to last year.
So in the short run, I would tell you, when they look at the numbers they probably think last year was so good that they should budget down.
The fact is that investor interest that we see out there and the number of deals in the marketplace are large enough to sustain revenues but you just can't tell because the investor waits to commit till they see what kind of returns they can earn and that's why you see such a dramatic effect toward the year-end.
Because that's when they are really doing the transactions, especially after movements in price.
But, it's a much improved business here at the firm and as a result it can have a material effect if they have a big quarter.
Paul Reilly - CEO
And I think that business -- it's fund based so when the funds close you get a little lumpiness.
We just had a big quarter so I wouldn't -- this would not be an average go-forward quarter.
And again, I think the banking business is going to be dependent on the market.
That's the hard thing looking at the quarter.
Backlog is strong, we don't see companies withdrawing, they're just waiting.
And we get any kind of stabilization or stable growth on the market, I think we're going to see a flurry of activity, but I can't tell you if and when that will happen and that's the tough thing in that business right now.
Tom James - Executive Chairman
Yes, Paul will tell you that mandates are at record highs.
So, there's plenty of activity in the channel on theory, it is just converting it to business.
Jeff Julien - SVP, Finance and CFO
But just on relative magnitude the tax credit fund business might be at $10 million to $15 million to $20 million pretax business for us over the course of a year.
It's not something that's going to dramatically move the needle on the capital markets.
(multiple speakers)
Tom James - Executive Chairman
It was up 90% this last year so, it did have an impact to the year but it will be up again next year, too.
Jeff Julien - SVP, Finance and CFO
That business was on the brink.
Fannie and Freddie pulled out because they were 60% of the market.
It has recovered.
Paul Reilly - CEO
They didn't need tax credits last year.
(laughter)
Jeff Julien - SVP, Finance and CFO
A lot of them still don't need tax credits.
Joel Jeffrey - Analyst
Okay, great.
And just a quick modeling question for Steve, I know it sounds like the Allied Irish acquisition is just about to close or has closed.
You talked about an additional provision last quarter -- is that something we should expect in the current quarter?
Steve Raney - President and CEO, Raymond James Bank
With the closing of the bank it will happen.
Now, the loans have not closed.
Joel Jeffrey - Analyst
Okay.
Steve Raney - President and CEO, Raymond James Bank
Subject to regulatory approval and the approval is really tied to the holding company approval.
So, that's why the delay.
But, so if we do close on that package there will be a provision for it.
That's what I call good provisions.
Paul Reilly - CEO
Were hopeful that happens towards the end of this quarter we're sitting in right now.
Steve Raney - President and CEO, Raymond James Bank
Once again, Joel, that was about $7.25 million that we had -- that number is still a good number to use for your model.
Joel Jeffrey - Analyst
Okay, great.
And then, can you just remind us what is the remaining authorization on your stock buyback?
Jeff Julien - SVP, Finance and CFO
About $50 million.
Steve Raney - President and CEO, Raymond James Bank
You might think of that as more evergreen.
We try to bring it back to that $75 million level a couple of times a year if it deviates from that.
It's really not -- there's plenty of capital to buy back stock, it's just that you don't get an opportunity to buy back blocks at attractive prices.
Paul Reilly - CEO
We hope to have the opportunity to buy more and we hope we don't.
So -- (laughter)
Joel Jeffrey - Analyst
Great, thanks for taking my questions.
Operator
Douglas Sipkin, Ticonderoga Securities.
Douglas Sipkin - Analyst
Thank you and good morning to all.
Just had a couple of follow-ups -- maybe, it sounds like the bank conversion is going to be happening real soon.
Maybe Steve can articulate -- what are some of the benefits of this conversion for the bank business for you guys?
Steve Raney - President and CEO, Raymond James Bank
Doug, we've been really operating like a national bank.
Our balance sheet composition and the way we conduct our business is more commercial-lending oriented.
We are growing our residential business as well.
But, for all intents and purposes, the actual conversion itself will not impact the way we're conducting our business.
We've been operating in that environment for the past few years and, as Paul mentioned, the OCC allowed us to not have to do the gross up at the end of the year, really reflecting how imminent the conversion should be at this point.
But no change in the business model at this point based on the conversion.
Douglas Sipkin - Analyst
But, I mean there's some reason why you guys did it initially, right?
It allows you to have more commercial loans I think?
Steve Raney - President and CEO, Raymond James Bank
That is correct.
Yes.
Tom James - Executive Chairman
But we've been doing that anyway and then meeting this test at the end of the year, through this balance sheet gross up tests, but it would certainly preclude us needing to do that going forward.
But, they, even this year agreed we didn't need to do it even though we hadn't converted yet.
Douglas Sipkin - Analyst
Got you.
Okay.
So, just looking at some of the larger banks and I'm not sure they're very common, but there seems to be an indication that credit quality was improving but a slower pace, maybe flattening out.
Your results, it looks like credit quality improved quite a bit.
I was actually a little surprised with that.
I was hoping maybe you could comment on that?
Maybe just give a little color on the outlook, at least obviously, the next 3 months or so?
Paul Reilly - CEO
I think first you got to look back.
I mean we didn't have the credit issues that other banks had.
We certainly had more than we would have liked.
But if you benchmark our mortgage portfolio against industry numbers and our [nik] exams and our C&I against industry comparables, we did very well.
So I think you are seeing us, business as usual, our numbers don't show any releases of reserves.
We're operating like we've always operated, except '09 we took a little more credit losses as the markets deteriorated.
But I think comparing us to those institutions with very different loan portfolios is not a good benchmark.
Steve Raney - President and CEO, Raymond James Bank
Just looking at some of the segments, Doug, that we play in, our commercial real estate exposures have come down dramatically in the last couple of years and that's where most institutions had issues in addition to the residential portfolio.
Our C&I, commercial and industrial portfolio has held up very nicely.
We've had very strong credit performance in that segment of our balance sheet and in that business.
But the project finance real estate and we virtually don't have any development and land and construction loans anymore.
So we had a very benign quarter credit-wise, in terms of our commercial portfolio and we actually did see some improvement in the residential past dues for the quarter.
So in terms of the credit charges in the residential portfolio, that was relatively stable.
And the change, quarter over quarter, in terms of charge-offs and provision expense were related to, once again, a strong quarter in our commercial portfolio.
Douglas Sipkin - Analyst
Got you.
And then, maybe just a clarification.
Looking for just the exact details on the repurchase, it sounds like you guys repurchased just under 640,000 shares in the quarter.
But then, I heard 1 million shares now.
Is the implication that you actually were able to repurchase shares in October?
Paul Reilly - CEO
Yes.
Jeff Julien - SVP, Finance and CFO
Or early October.
Paul Reilly - CEO
The 1.03 million shares was since the beginning of this repurchase cycle through today.
Douglas Sipkin - Analyst
I got you.
And you guys are -- that's interesting that you guys are allowed -- most companies are blocked out around the earnings time.
Paul Reilly - CEO
No, they weren't.
Jeff Julien - SVP, Finance and CFO
We actually announced that we refreshed and we were repurchasing stock.
Douglas Sipkin - Analyst
I got you.
Okay, that's all.
Thanks for answering my questions.
Paul Reilly - CEO
We weren't repurchasing this week if that was your question.
Operator
(Operator Instructions)
Steve Stelmach, FBR Capital Markets.
Steve Stelmach - Analyst
Hi, good morning.
Just real quick on -- to revisit the provision.
You gave some guidance in terms of dollar amounts, which is helpful but provisions matching charge-offs seems appropriate given the trajectory of credit improving, but at what point does the allowance for loan losses as a percentage of loans sort of trough?
That's been coming due to loan growth.
At what level, Steve, would you like to see that number?
Steve Raney - President and CEO, Raymond James Bank
I would think we are anticipating some continued credit improvement over the next 12 to 18 months, so we would see that maybe trend down a little bit in terms of allowance to total loans.
We would think that the provision expense for this quarter will hopefully be, as Jeff alluded to, tied more to growth than downgrades, but you are always subject to individual loans having some issues and you having to add reserves.
But we would anticipate some slight decrease in terms of allowance to total loans occurring during the course of this year.
Steve Stelmach - Analyst
Okay.
Now, is anything on the loan mix going to influence that, as well?
Or do you sort of like the makeup of the loan book right now?
Steve Raney - President and CEO, Raymond James Bank
I think that the current mix is going to be relatively stable with the exception of the addition of the $500 million of the Allied Irish portfolio when that closes that's going to increase the commercial portfolio as a percentage of total assets, but we're trying to grow both our residential portfolio and our commercial portfolio in balance with one another.
Steve Stelmach - Analyst
Okay, great.
And then, just real quickly on the repurchase did you -- if you said it, I missed it, I apologize.
Did you give a dollar amount or average share price the repurchase occurred at?
Jeff Julien - SVP, Finance and CFO
There's $50 million remaining on a $75 million authorization.
Paul Reilly - CEO
$25
Jeff Julien - SVP, Finance and CFO
I think you can do the math.
(laughter)
Paul Reilly - CEO
Average $25.
Close enough.
Steve Stelmach - Analyst
$25.
Thanks, appreciate it.
Operator
At this time you have no further questions.
Paul Reilly - CEO
Okay, well great.
Appreciate talking -- sharing this time with you.
It's kind of a tough market.
Here in St.
Petersburg as we see the sunrise and 70 degree weather it's kind of hard to realize we are being impacted by what's happening in Greece in our markets but I guess all the capital markets are right now.
Net net, business is well positioned, we're optimistic medium and long-term, short-term, we're a little bit captive by the markets but we're going to continue to operate the business as we have for almost 50 years and continue to build it for the long-term.
And we will talk to you again next quarter.
Thanks.
Operator
Ladies and gentlemen this concludes today's conference call.
You may now disconnect.