RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

~~Form 10-Q for the quarter ended~~ ~~December 31, 2016~~

~~INDEX~~



INDEX
		PAGE
PART I.I	FINANCIAL INFORMATION

Item 1.	Financial Statements (Unaudited)	3

	Condensed Consolidated Statements of Financial Condition as of ~~December~~March 31, ~~2016~~2017 and September 30, 2016 (Unaudited)	3

	Condensed Consolidated Statements of Income and Comprehensive Income for the three and six months ended ~~December~~March 31, 2017 and March 31, 2016 ~~and December 31, 2015~~ (Unaudited)	5

	Condensed Consolidated Statements of Changes in Shareholders’ Equity for the ~~three~~six months ended ~~December~~March 31, 2017 and March 31, 2016 ~~and December 31, 2015~~ (Unaudited)	6

	Condensed Consolidated Statements of Cash Flows for the ~~three~~six months ended ~~December~~March 31, 2017 and March 31, 2016 ~~and December 31, 2015~~ (Unaudited)	7

	Notes to Condensed Consolidated Financial Statements (Unaudited)
	Note 1 - Introduction and basis of presentation	9
	Note 2 - Update of significant accounting policies	10
	Note 3 - Acquisitions	11
	Note 4 - Cash and cash equivalents, assets segregated pursuant to regulations, and deposits with clearing organizations	13
	Note 5 - Fair value	14
	Note 6 - Trading instruments and trading instruments sold but not yet purchased	25
	Note 7 - Available for sale securities	26
	Note 8 - Bank loans, net	29
	Note 9 - Variable interest entities	35
	Note 10 - Goodwill and identifiable intangible assets	38
	Note 11 - Bank deposits	42
	Note 12 - Other borrowings	43
	Note 13 - Senior notes payable	44
	Note 14 - Derivative financial instruments	45
	Note 15 - Disclosure of offsetting assets and liabilities, collateral, encumbered assets and repurchase agreements	50
	Note 16 - Income taxes	53
	Note 17 - Commitments, contingencies and guarantees	54
	Note 18 - Accumulated other comprehensive income (loss)	58
	Note 19 - Interest income and interest expense	61
	Note 20 - Share-based compensation	61
	Note 21 - Regulatory capital requirements	63
	Note 22 - Financial instruments with off-balance sheet risk	65
	Note 23 - Earnings per share	66
	Note 24 - Segment information	67

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	6169

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	92107

Item 4.	Controls and Procedures	~~101~~117

PART ~~II.~~II	OTHER INFORMATION	~~101~~

Item 1.	Legal Proceedings	~~101~~117

Item 1A.	Risk Factors	~~101~~118

Item 2.	~~Unregistered Sales~~Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities ~~and Use of Proceeds~~	~~102~~118

Item 3.	Defaults ~~upon~~Upon Senior Securities	~~102~~118

Item 5.	Other Information	~~102~~118

Item 6.	Exhibits	~~103~~119

	Signatures	~~103~~119

~~Index~~

PART I FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

(Unaudited)



	December 31, 2016		September 30, 2016		March 31, 2017		September 30, 2016
	(in thousands)				(in thousands)
Assets:
Cash and cash equivalents	$	2,528,275	$	1,650,452	$	2,636,326	$	1,650,452
Assets segregated pursuant to regulations and other segregated assets	3,867,999		4,884,487		3,829,607		4,884,487
Securities purchased under agreements to resell and other collateralized financings	358,493		470,222		535,224		470,222
Financial instruments, at fair value:
Trading instruments	517,792		766,805		736,782		766,805
Available for sale securities	1,163,524		859,398		1,714,114		859,398
Private equity investments	199,438		194,634		201,761		194,634
Other investments	252,731		296,844		222,585		296,844
Derivative instruments associated with offsetting matched book positions	299,393		422,196		285,898		422,196
Receivables:
Brokerage clients, net	2,601,869		2,714,782		2,716,741		2,714,782
Stock borrowed	154,718		170,860		132,049		170,860
Bank loans, net	15,828,752		15,210,735		15,994,689		15,210,735
Brokers-dealers and clearing organizations	170,768		164,908		97,807		164,908
Loans to financial advisors, net	845,783		838,721		861,346		838,721
Other	619,874		610,417		645,845		610,417
Deposits with clearing organizations	198,856		245,364		199,096		245,364
Prepaid expenses and other assets	796,166		777,224		787,588		777,224
Investments in real estate partnerships held by consolidated variable interest entities	65,306		61,004		59,639		61,004
Property and equipment, net	382,298		321,457		409,543		321,457
Deferred income taxes, net	318,160		322,024		365,869		322,024
Goodwill and identifiable intangible assets, net	499,195		504,442		496,222		504,442
Total assets	$	31,669,390	$	31,486,976	$	32,928,731	$	31,486,976

(continued on next page)

See accompanying Notes to Condensed Consolidated Financial Statements (Unaudited).

~~Index~~

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

(Unaudited)

(continued from previous page)



	December 31, 2016			September 30, 2016			March 31, 2017			September 30, 2016
	($ in thousands)						($ in thousands)
Liabilities and equity:
Trading instruments sold but not yet purchased, at fair value	$	260,543		$	328,938		$	471,704		$	328,938
Securities sold under agreements to repurchase	203,378			193,229			222,476			193,229
Derivative instruments associated with offsetting matched book positions, at fair value	299,393			422,196			285,898			422,196
Payables:
Brokerage clients	6,027,519			6,444,671			6,073,591			6,444,671
Stock loaned	428,600			677,761			403,542			677,761
Bank deposits	15,189,790			14,262,547			16,377,544			14,262,547
Brokers-dealers and clearing organizations	158,320			306,119			228,661			306,119
Trade and other	599,067			583,340			629,598			583,340
Other borrowings	915,921			608,658			756,367			608,658
Accrued compensation, commissions and benefits	701,301			915,954			811,551			915,954
Senior notes payable	1,680,957			1,680,587			1,339,582			1,680,587
Total liabilities	26,464,789			26,424,000			27,600,514			26,424,000
Commitments and contingencies (see Note 15)
Commitments and contingencies (see Note 17)
Equity
Preferred stock; $.10 par value; 10,000,000 shares authorized; -0- shares issued and outstanding	—			—			—			—
Common stock; $.01 par value; 350,000,000 shares authorized; 153,122,715 and 151,424,947 shares issued as of December 31, 2016 and September 30, 2016, respectively, and 142,930,077 and 141,544,511 shares outstanding as of December 31, 2016 and September 30, 2016, respectively	1,530			1,513
Common stock; $.01 par value; 350,000,000 shares authorized; 153,716,695 and 151,424,947 shares issued as of March 31, 2017 and September 30, 2016, respectively, and 143,542,965 and 141,544,511 shares outstanding as of March 31, 2017 and September 30, 2016, respectively							1,536			1,513
Additional paid-in capital	1,553,282			1,498,921			1,595,314			1,498,921
Retained earnings	3,947,074			3,834,781			4,027,927			3,834,781
Treasury stock, at cost; 10,096,174 and 9,766,846 common shares as of December 31, 2016 and September 30, 2016, respectively	(387,869		)	(362,937		)
Treasury stock, at cost; 10,101,753 and 9,766,846 common shares as of March 31, 2017 and September 30, 2016, respectively							(389,595		)	(362,937		)
Accumulated other comprehensive loss	(33,140		)	(55,733		)	(27,434		)	(55,733		)
Total equity attributable to Raymond James Financial, Inc.	5,080,877			4,916,545			5,207,748			4,916,545
Noncontrolling interests	123,724			146,431			120,469			146,431
Total equity	5,204,601			5,062,976			5,328,217			5,062,976
Total liabilities and equity	$	31,669,390		$	31,486,976		$	32,928,731		$	31,486,976

See accompanying Notes to Condensed Consolidated Financial Statements (Unaudited).

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

(Unaudited)


	Three months ended December 31,						Three months ended March 31,						Six months ended March 31,
	2016			2015			2017			2016			2017			2016
	(in thousands, except per share amounts)						(in thousands, except per share amounts)
Revenues:
Securities commissions and fees	$	984,385		$	849,662		$	992,112		$	853,330		$	1,976,497		$	1,702,992
Investment banking	61,425			57,553			102,377			68,704			163,802			126,257
Investment advisory and related administrative fees	108,243			98,602			110,280			93,871			218,523			192,473
Interest	182,782			142,472			192,544			161,638			375,326			304,110
Account and service fees	148,791			116,823			162,981			127,528			311,772			244,351
Net trading profit	20,555			22,169			15,811			14,415			36,366			36,584
Other	22,587			13,576			24,209			21,624			46,796			35,200
Total revenues	1,528,768			1,300,857			1,600,314			1,341,110			3,129,082			2,641,967
Interest expense	(35,966		)	(26,699		)	(36,677		)	(29,109		)	(72,643		)	(55,808		)
Net revenues	1,492,802			1,274,158			1,563,637			1,312,001			3,056,439			2,586,159
Non-interest expenses:
Compensation, commissions and benefits	1,006,467			866,398			1,035,714			887,937			2,042,181			1,754,335
Communications and information processing	72,161			72,138			76,067			68,482			148,228			140,620
Occupancy and equipment costs	46,052			41,789			47,498			40,891			93,550			82,680
Clearance and floor brokerage	12,350			9,996			11,407			10,517			23,757			20,513
Business development	35,362			40,624			41,519			35,417			76,881			76,041
Investment sub-advisory fees	19,295			14,554			17,778			14,282			37,073			28,836
Bank loan loss (benefit) provision	(1,040		)	13,910
Bank loan loss provision							7,928			9,629			6,888			23,539
Acquisition-related expenses	12,666			1,872			1,086			6,015			13,752			7,887
Other	81,974			42,804			163,337			44,723			245,311			87,527
Total non-interest expenses	1,285,287			1,104,085			1,402,334			1,117,893			2,687,621			2,221,978
Income including noncontrolling interests and before provision for income taxes	207,515			170,073			161,303			194,108			368,818			364,181
Provision for income taxes	59,812			62,009			52,758			72,271			112,570			134,280
Net income including noncontrolling interests	147,703			108,064			108,545			121,837			256,248			229,901
Net income attributable to noncontrolling interests	1,136			1,735
Net loss attributable to noncontrolling interests							(4,210		)	(4,010		)	(3,074		)	(2,275		)
Net income attributable to Raymond James Financial, Inc.	$	146,567		$	106,329		$	112,755		$	125,847		$	259,322		$	232,176

Net income per common share – basic	$	1.03		$	0.74		$	0.78		$	0.89		$	1.81		$	1.63
Net income per common share – diluted	$	1.00		$	0.73		$	0.77		$	0.87		$	1.77		$	1.60
Weighted-average common shares outstanding – basic	142,110			143,058			143,367			141,472			142,732			142,273
Weighted-average common and common equivalent shares outstanding – diluted	145,675			146,141			146,779			144,012			146,119			145,047

Net income attributable to Raymond James Financial, Inc.	$	146,567		$	106,329		$	112,755		$	125,847		$	259,322		$	232,176
Other comprehensive income (loss), net of tax:⁽¹⁾
Unrealized loss on available for sale securities and non-credit portion of other-than-temporary impairment losses	(4,146		)	(6,791		)
Unrealized gain (loss) on currency translations, net of the impact of net investment hedges	1,001			(6,615		)
Unrealized gain on cash flow hedges	25,738			3,265
Unrealized gain (loss) on available for sale securities and non-credit portion of other-than-temporary impairment losses							1,952			1,099			(2,194		)	(5,692		)
Unrealized gain on currency translations, net of the impact of net investment hedges							2,223			10,714			3,224			4,099
Unrealized gain (loss) on cash flow hedges							1,531			(11,469		)	27,269			(8,204		)
Total comprehensive income	$	169,160		$	96,188		$	118,461		$	126,191		$	287,621		$	222,379

Other-than-temporary impairment:
Total other-than-temporary impairment, net	$	860		$	374		$	397		$	(353	)	$	1,257		$	21
Portion of recoveries recognized in other comprehensive income	(860		)	(374		)
Portion of (recoveries) losses recognized in other comprehensive income							(397		)	353			(1,257		)	(21		)
Net impairment losses recognized in other revenue	$	—		$	—		$	—		$	—		$	—		$	—

~~Index~~

Regulatory

The following discussion should be read in conjunction with the description of the regulatory framework applicable to the financial services industry and relevant to us as described in the Regulation section of Item 1 on pages 10 - 15 of our 2016 Form 10-K, and the Regulatory section on pages 71 - 72 of our 2016 Form 10-K.

We continue to maintain a number of private equity investments, some of which meet the definition of “covered funds” and therefore are subject to certain limitations under the covered funds provisions of the Volcker Rule. The amount of future investments of this nature that we may make will necessarily be limited ~~in order~~ to maintain compliance ~~levels specified by~~with the Volcker Rule. ~~The extension of~~In its July 2016 announcement extending the conformance deadline to July 21, 2017, provides us additional time to realize the value of many of our investments in their due course and assess what we expect to remain in our portfolio at the conformance deadline in the context of the new regulations and execute appropriate strategies to be in conformance with the Volcker Rule at such time. Additionally, in its July 2016 announcement of the extension of the conformance deadline, the Fed indicated that upon ~~the~~ application of a banking entity, ~~the Fed~~it is permitted to provide up to an additional five years to conform investments in certain illiquid funds, where the banking entity had a contractual commitment to invest in the fund as of May 1, 2010. As ~~many~~the majority of our “covered fund” investments meet the criteria to be considered an illiquid fund under the Volcker Rule, we ~~have~~ submitted a request to extend the conformance period for these investments. During the quarter ending March 31, 2017, we received approval from the Fed to continue to hold these investments for up to an additional five-year conformance period, thereby extending their applicable holding period until July 2022 for such investments. The extension of the conformance deadline provides us additional time to realize the value of many of our ~~investments. This request complied~~investments in due course, to assess what we expect to remain in our portfolio at the conformance deadline and to execute appropriate strategies to comply with the ~~December 9, 2016 guidance provided by~~Volcker Rule at such time.

See Results of Operations - Executive Overview in this Form 10-Q for information on the ~~Fed in filing such extension requests.~~delayed implementation deadline related to the DOL’s final regulation expanding the definition of who is deemed an “investment advice fiduciary” under ERISA as a result of giving investment advice to a plan, plan participant or beneficiary, as well as under the Internal Revenue Code for individual retirement accounts and non-ERISA plans.

Other than as described in the preceding ~~paragraph, there~~paragraphs, we are nonot aware of additional ~~updates to any of the other applicable aspects of~~information concerning the regulatory environment in which we conduct our businesses, as described on pages 10 - 15 of our 2016 Form 10-K.

See Note 1921 of the Notes to Condensed Consolidated Financial Statements in this Form 10-Q for further information on regulatory and capital requirements.

Critical accounting estimates

The condensed consolidated financial statements are prepared in accordance with GAAP, which require us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the reported amounts of revenues and expenses during any reporting period in our condensed consolidated financial statements. For a description of our accounting policies, see Note 2 of the Notes to the Consolidated Financial Statements on pages 108 - 127 of our 2016 Form 10-K, as well as Note 2 of the Notes to Condensed Consolidated Financial Statements in this Form 10-Q.

We believe that of our accounting estimates and assumptions, those described below involve a high degree of judgment and complexity. Due to their nature, estimates involve judgment based upon available information. Actual results or amounts could differ from estimates and the difference could have a material impact on the condensed consolidated financial statements. Therefore, understanding these critical accounting estimates is important in understanding the reported results of our operations and our financial position.

Valuation of financial instruments, investments and other assets

The use of fair value to measure financial instruments, with related gains or losses recognized in our Condensed Consolidated Statements of Income and Comprehensive Income, is fundamental to our financial statements and our risk management processes.

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RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

Management's Discussion and Analysis

See Note 2 on pages 110 - 116 of our 2016 Form 10-K for a discussion of our fair value accounting policies regarding financial instruments owned and financial instruments sold but not yet purchased. Since September 30, 2016, we have not implemented any material changes in the fair value accounting policies described therein during the period covered by this report.

“Trading instruments” and “available for sale securities” are reflected in the Condensed Consolidated Statements of Financial Condition in this Form 10-Q at fair value or amounts that approximate fair value. Unrealized gains and losses related to these financial instruments are reflected in our net income or our total comprehensive income, depending on the underlying purpose of the instrument.

As of ~~December~~March 31, ~~2016~~2017, 8%10% of our total assets and 2%3% of our total liabilities are instruments measured at fair value on a recurring basis.

Financial instruments measured at fair value on a recurring basis categorized as Level 3 amount to ~~$224~~$235 million as of ~~December~~March 31, ~~2016~~2017 and represent 9%7% of our assets measured at fair value. Of the Level 3 assets as of ~~December~~March 31, ~~2016,~~2017, our ARS positions comprise ~~$129~~$131 million, or ~~58%~~56%, and our private equity investments not measured at NAV comprise ~~$83~~$89 million, or ~~37%~~38%, of the total. Level 3 assets represent 4% of total equity as of ~~December~~March 31, ~~2016~~2017.

~~Index~~

Financial instruments which are liabilities categorized as Level 3 ~~amount to approximately $2 million~~are insignificant as of ~~December~~March 31, ~~2016~~2017 and represent less than 1% of liabilities measured at fair value.

Our investments in private equity measured at NAV amount to ~~$116~~$113 million at ~~December~~March 31, ~~2016.~~2017.

See Notes 5, 6, 7 and 1214 of the Notes to Condensed Consolidated Financial Statements in this Form 10-Q for additional information on our financial instruments.

Goodwill impairment

Goodwill, under GAAP, must be allocated to reporting units and tested for impairment at least annually. The annual goodwill impairment testing involves the application of significant management judgment, especially when estimating the fair value of its reporting units. For a discussion of our goodwill accounting policies, see Note 2 on pages 122 - 123 of our 2016 Form 10-K.

We perform goodwill testing on an annual basis or when an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying value. ~~We have elected December 31 as~~During the quarter, we changed our annual goodwill impairment ~~evaluation date.~~test date for all reporting units from December 31 to January 1; however, the results of our test did not change as we continue to evaluate balances as of December 31. We performed our latest annual goodwill impairment testing during the quarter ended March 31, ~~2016.~~2017, evaluating balances as of December 31, 2016, and no impairment was identified. In that testing, we performed both a qualitative impairment assessment for certain of our reporting units and a quantitative impairment assessment for our two RJ Ltd. reporting units operating in Canada.

For each reporting unit ~~that~~on which we ~~performed~~perform a qualitative ~~assessments,~~assessment, we ~~determined~~determine whether it is more likely than not that the carrying value of such reporting unit, including the recorded goodwill, is in excess of the fair value of the reporting unit. In any instance in which we are unable to qualitatively conclude that it is more likely than not that the fair value of the reporting unit exceeds the reporting unit carrying value including goodwill, a quantitative analysis of the fair value of the reporting unit would be performed. Based upon the outcome of our qualitative assessments, we determined that no quantitative analysis of the fair value of any of the reporting units we elected to qualitatively analyze for impairment ~~as of December~~during the quarter ended March 31, ~~2015~~2017 was required, and we concluded that none of the goodwill allocated to any of those reporting units ~~as of December 31, 2015~~ was impaired. No events have occurred since ~~December 31, 2015~~our assessment that would cause us to update this impairment testing.

~~In the RJ Ltd. reporting unit testing, we elected to perform quantitative assessments for the two reporting units within RJ Ltd. that include an allocation of goodwill.~~ Although GAAP provides the option to perform a qualitative analysis which may result in a conclusion that no quantitative analysis of the reporting unit equity value is required, for this year’s annual goodwill testing of our two RJ Ltd. reporting units that include an allocation of goodwill, we elected to perform a quantitative analysis. In these analyses, we make significant assumptions and estimates about, among other things, the extent and timing of future cash flows and discount rates ~~as well as utilize data from peer group~~and which guideline companies to use to assess the equity value of each RJ Ltd. reporting unit. Based upon the outcome of our quantitative assessments, we concluded there was no impairment of ~~goodwill. The fair value of the equity of the RJ Ltd. PCG reporting unit was substantially in excess~~ ~~of its book carrying value, which includes goodwill. However, primarily~~goodwill as ~~a result of the unfavorable impacts of the prolonged commodity recession in Canada on our business, most specifically impacting the natural resources sector of that economy,~~ the fair value of the equity of each of the RJ Ltd. ~~ECM~~ reporting ~~unit is not substantially~~units was in excess of its ~~book~~respective carrying value, which includes goodwill. ~~The RJ Ltd. ECM reporting unit goodwill balance was $16.9 million as of December 31, 2015, and we estimated that the excess~~

See Note 10 of the ~~fair value of the reporting unit over its carrying value~~Notes to Condensed Consolidated Financial Statements in this Form 10-Q for additional information on our goodwill, including ~~goodwill approximated 10% at such time. The equity market conditions in Canada have not improved significantly since the date of~~ our ~~latest~~ goodwill impairment testing. ~~Depending upon how this recent activity impacts our near and long-term projections, an impairment charge of some portion, or perhaps all, of such goodwill could occur.~~

Loss provisions

Refer to the discussion of loss provisions in Item 7 on page 78 of our 2016 Form 10-K.

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Management's Discussion and Analysis

Loss provisions arising from legal and regulatory matters

The recorded amount of liabilities related to legal and regulatory matters is subject to significant management judgment. For a description of the significant estimates and judgments associated with establishing such accruals, see the “Contingent liabilities” section of Note 2 on page 123 of our 2016 Form 10-K. In addition, refer to Note 1517 of the Notes to Condensed Consolidated Financial Statements in this Form 10-Q for information regarding legal and regulatory matter contingencies as of ~~December~~March 31, ~~2016.~~

~~Index~~

2017.

Loss provisions arising from operations of our Broker-Dealers

The recorded amount of liabilities associated with brokerage client receivables and loans to financial advisors and certain key revenue producers, is subject to significant management judgment. See Note 2 of the Notes to Condensed Consolidated Financial Statements in this Form 10-Q for information regarding the allowance for doubtful accounts associated with loans to financial advisors as of ~~December~~March 31, ~~2016.~~2017.

Loan loss provisions arising from operations of RJ Bank

RJ Bank provides an allowance for loan losses which reflects our continuing evaluation of the probable losses inherent in the loan portfolio. See the discussion regarding RJ Bank’s methodology in estimating its allowance for loan losses in Item 7A - Credit Risk, on pages 88 - 92 of our 2016 Form 10-K.

At ~~December~~March 31, ~~2016~~2017, the amortized cost of all RJ Bank loans was ~~$16.03~~$16.2 billion and an allowance for loan losses of ~~$198~~$186 million was recorded against that balance. The total allowance for loan losses is equal to ~~1.25%~~1.17% of the amortized cost of the loan portfolio.

RJ Bank’s process of evaluating its probable loan losses includes a complex analysis of several quantitative and qualitative factors, requiring a substantial amount of judgment. Due to the uncertainty associated with this subjectivity, our underlying assumptions and judgments could prove to be inaccurate, and the allowance for loan losses could then be insufficient to cover actual losses. In such an event, any losses would result in a decrease in our net income as well as a decrease in the level of regulatory capital at RJ Bank.

Income taxes

For a description of the significant assumptions, judgments and interpretations associated with the accounting for income taxes, see the income taxes section of Item 7 on page 78 of our 2016 Form 10-K.

Effective October 1, 2016, we adopted new accounting guidance related to simplifying certain aspects of accounting for stock compensation which directly impacted our income tax expense for the ~~three~~six months ended ~~December~~March 31, ~~2016.~~2017. See Notes 1 and 1416 in the Notes to Condensed Consolidated Financial Statements in this Form 10-Q for further information on our adoption of this new accounting guidance.

Effects of recently issued accounting standards, and accounting standards not yet adopted

In May 2014, the FASB issued new guidance regarding revenue recognition. The new guidance is a comprehensive new revenue recognition model that requires a company to recognize revenue to depict the transfer of goods or services to a customer at an amount that reflects the consideration it expects to receive in exchange for those goods or services. It also provides guidance on accounting for certain contract costs and requires additional disclosures. This new revenue recognition guidance, including subsequent amendments, is first effective for our financial report covering the quarter ending December 31, 2018. Although, early adoption is permitted for fiscal years beginning after December 15, 2016, we do not ~~currently~~ plan to early adopt. Upon adoption, we may use either a full retrospective or a modified retrospective approach with respect to presentation of comparable periods prior to the effective date. We are still evaluating which transition approach to use. We are also still evaluating the impact the adoption of this new guidance will have on our financial position and results of operations. Our implementation efforts include identifying revenues and costs within the scope of the standard, analyzing contracts and reviewing potential changes to our existing revenue recognition accounting policies. Under the new standard, we may be required to change our current presentation of certain costs from a net presentation within revenues to a gross presentation, particularly with respect to mergers and acquisitions advisory and underwriting transactions.

In June 2014, the FASB issued amended guidance for the accounting for share-based payments when the terms of an award provide that a performance target could be achieved after the requisite service period. The new guidance requires that a performance target that affects vesting of an award

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RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

Management's Discussion and that could be achieved after the requisite service period be treated as a performance condition. This new guidance is first effective for this interim financial report covering the quarter ending December 31, 2016. The adoption of this new guidance had no significant impact on our financial position or results of operations.Analysis

In August 2014, the FASB issued amended guidance that requires an entity’s management to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the entity’s ability to continue as a going concern. The new guidance: (1) provides for a definition of substantial doubt, (2) requires an evaluation every reporting period including interim periods, (3) provides principles for considering the mitigating effect of management’s plans, (4) requires certain disclosures when substantial doubt is alleviated as a result of consideration of management’s plans, (5) requires an express statement and other disclosures when substantial doubt is not alleviated, and (6) requires an assessment for a period of one year after the date that the financial statements are issued (or available to be issued). This new guidance is first effective for this interim financial

~~Index~~

~~report covering the quarter ending December 31, 2016. The adoption of this guidance has no impact on our consolidated financial statements or related disclosures.~~

In November 2014, the FASB issued amended guidance regarding the accounting for hybrid financial instruments (which in this context would apply to any shares of RJF stock that include embedded derivative features such as conversion rights, redemption rights, voting rights, and liquidation and dividend payment preferences) issued in the form of a share. The new guidance clarifies how current GAAP should be interpreted in evaluating the economic characteristics and risks of a host contract in a hybrid financial instrument that is issued in the form of a share. This new guidance is first effective for this interim financial report covering the quarter ending December 31, 2016. The adoption of this guidance had no significant impact on our financial position or results of operations.

In January 2015, the FASB issued guidance that eliminates from GAAP the concept of extraordinary items. This new guidance is effective for us for this fiscal year which commenced on October 1, 2016. The adoption of this new guidance has had no impact on the presentation in our consolidated statements of income.

In February 2015, the FASB issued amended guidance to the consolidation model. In October 2016, the FASB issued an additional amendment to this guidance. The impact of these amendments on the consolidation model are to:

Eliminates the deferral of the application of the new consolidation model, which had resulted in the application of prior accounting guidance to consolidation determinations of certain investment funds.

Make certain changes to the variable interest consolidation model.

Make certain changes to the voting interest consolidation model.

This amended guidance iswas first effective for us ~~in this interim financial report covering~~during the quarter ending December 31, 2016. See Notes 1 and 9 of the Notes to Condensed Consolidated Financial Statements in this Form 10-Q for discussions of the impact the adoption of this new guidance had ~~on our consolidated financial statements.~~

In April 2015, the FASB issued guidance governing a customer’s accounting for fees paid in a cloud computing arrangement. Under the new guidance, if a cloud computing arrangement includes a software license, then the customer should account for the software license element of the arrangement consistent with the acquisition of other software licenses. If a cloud computing arrangement does not include a software license, the customer should account for the arrangement as a service contract. This new guidance is effective for us for this fiscal year which commenced on October 1, 2016. Our adoption of this new guidance had no significant impact on our consolidated financial statements.

In June 2015, the FASB issued amended guidance related to technical corrections and improvements. This amended guidance: 1) includes amendments related to differences between the original guidance and the codification. 2) Provides guidance clarification and reference corrections. 3) Streamlines or simplifies the codification through minor structural changes to headings or minor edits of text to improve the usefulness and understandability of the codification. 4) Makes minor improvements to the guidance. The amendments that require transition guidance are effective for this fiscal year that commenced on October 1, 2016. The adoption of this new guidance did not have any significant impact on our consolidated financial statements.

In September 2015, the FASB issued guidance governing adjustments to the provisional amounts recognized at the acquisition date with a corresponding adjustment to goodwill. Such adjustments are required when new information is obtained about facts and circumstances that existed as of the acquisition date that, if known, would have affected the measurement amounts initially recognized or would have resulted in the recognition of additional assets and liabilities. This new guidance eliminates the requirement to retrospectively account for such adjustments. This new guidance is effective for this fiscal year that commenced on October 1, 2016. The adoption of this new guidance has had no impact on our consolidated financial statements.

In November 2015, the FASB issued guidance simplifying the presentation of deferred income taxes on the statement of financial position by eliminating the requirement to separately present current and noncurrent deferred tax liabilities and assets on such statements. Given that we do not present current and noncurrent balances separately on our condensed consolidated statements of financial position, this simplifying guidance will have no impact our condensed consolidated statements of financial position.

~~Index~~

In January 2016, the FASB issued guidance related to the accounting for financial instruments. Among its provisions, this new guidance:

Requires equity investments (other than those accounted for under the equity method or those that result from the consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income. However, an entity may choose to measure equity investments that do not have readily determinable fair values at cost minus impairment, if any.

Simplifies the impairment assessment of equity investments without readily determinable fair values by requiring a qualitative assessment to identify impairment.

Eliminates the requirement to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost on the balance sheet.

Requires the use of the exit price notion when measuring the fair value of financial instruments for disclosure purposes.

Requires an entity to present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk when the entity has elected to measure the liability at fair value in accordance with the fair value option.

Requires separate presentation of financial assets and financial liabilities by measurement category and form of financial asset (that is, securities or loans and receivables) on the balance sheet or the accompanying notes to the financial statements.

Clarifies that an entity should evaluate the need for a valuation allowance on a deferred tax asset related to available for sale securities in combination with the entity’s other deferred tax assets.

This new guidance is effective for us for our fiscal year commencing on October 1, 2018. Early adoption is generally not permitted. We are evaluating the impact, if any, the adoption of this new guidance will have on our financial position and results of operations.

In February 2016, the FASB issued new guidance related to the accounting for leases. The new guidance requires the recognition of assets and liabilities on the balance sheet related to the rights and obligations created by lease agreements regardless of whether they are classified as finance or operating leases. Consistent with current guidance, the recognition, measurement and presentation of expenses and cash flows arising from a lease will primarily depend upon its classification as a finance or operating lease. The new guidance requires new disclosures to help financial statement users better understand the amount, timing, and cash flows arising from leases. The new guidance is first effective for our financial report covering the quarter ended December 31, 2019, early adoption is permitted. This new guidance will impact our financial position and results of operations. We are evaluating the magnitude of such impact.

In March 2016, the FASB issued new guidance related to derivatives and hedging, specifically the effect of derivative contract novations on existing hedge accounting relationships. The new guidance clarifies that a change in counterparty to a derivative instrument that has been designated as a hedging instrument under the current guidance does not, in and of itself, require re-designation of that hedging relationship provided that all other hedge accounting criteria continue to be met. The new guidance is first effective for our financial report covering the quarter ended December 31, 2017, early adoption is permitted. We are evaluating the impact the adoption of this new guidance will have on our financial position and results of operations.

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Management's Discussion and Analysis

In March 2016, the FASB issued new guidance related to derivatives and hedging, specifically contingent put and call options in debt instruments. The new guidance clarifies the requirements for assessing whether contingent call (put) options that can accelerate the payment of principal on debt instruments are clearly and closely related to their debt hosts. An entity performing the assessment is required to assess the embedded call (put) options solely in accordance with the following four-step decision sequence; an entity must consider 1) whether the payoff is adjusted based on changes in an index, 2) whether the payoff is indexed to an underlying other than interest rates or credit risk, 3) whether the debt involves a substantial premium or discount and 4) whether the call (put) option is contingently exercisable. The new guidance is first effective for our financial report covering the quarter ended December 31, 2017, early adoption is permitted. We are evaluating the impact the adoption of this new guidance will have on our financial position and results of operations.

In March 2016, the FASB issued new guidance related to equity method investments and joint ventures. The new guidance eliminates the requirement that when an investment qualifies for use of the equity method as a result of an increase in the level of ownership interest or degree of influence, an investor must adjust the investment, results of operations, and retained earnings retroactively on a step-by-step basis as if the equity method had been in effect during all previous periods that the investment had been held. Additionally, the new guidance requires that the equity method investor add the cost of acquiring the additional interest in the investee to the current basis of the investor’s previously held interest and adopt the equity method of accounting as of the date the investment becomes qualified for equity method accounting and therefore upon qualifying for the equity method of accounting, no retroactive adjustment of the investment is required. The new guidance is first effective for our financial report covering the quarter ended December 31, 2017, early adoption is permitted. Given that this guidance applies to entity specific

~~Index~~

transactions and would only become relevant in certain circumstances, we are unable to estimate the impact, if any, this new guidance may have on our financial position.

In March 2016, the FASB issued amended guidance related to stock compensation. The amended guidance involves several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. The amended guidance is first effective for our financial report covering the quarter ended December 31, 2017, although early adoption is permitted. We elected to adopt this new guidance ~~early, see~~early. See Notes 1 and 1416 of the Notes to Condensed Consolidated Financial Statements in this Form 10-Q for discussions of the impact the adoption of this new guidance had on our consolidated financial statements.

In June 2016, the FASB issued new guidance related to the measurement of credit losses on financial instruments. The amended guidance involves several aspects of the accounting for credit losses related to certain financial instruments including assets measured at amortized cost, available-for-sale debt securities and certain off-balance sheet commitments. The new guidance broadens the information that an entity must consider in developing its estimated credit losses expected to occur over the remaining life of assets measured either collectively or individually to include historical experience, current conditions and reasonable and supportable forecasts, replacing the existing incurred credit loss model and other models with the Current Expected Credit Losses (“CECL”) model. The new guidance expands the disclosure requirements regarding an entity’s assumptions, models, and methods for estimating credit ~~losses. Additionally the new guidance~~losses and requires new disclosures of the amortized cost balance for each class of financial asset by credit quality indicator, disaggregated by the year of origination. The new guidance is first effective for our financial report covering the quarter ended December 31, ~~2020, early~~2020. Early adoption is permitted although not prior to our financial report covering the quarter ended December 31, 2019. We have begun our implementation and evaluation efforts by establishing a cross-functional team to assess the required changes to our credit loss estimation methodologies and systems, as well as determine additional data and resources required to comply with the new guidance. We are evaluating the impact the adoption of this new guidance will have on our financial position and results of ~~operations.~~operations, which will depend on, among other things, the current and expected macroeconomic conditions and the nature and characteristics of financial assets held by us on the date of adoption.

In August 2016, the FASB issued amended guidance related to the Statement of Cash Flows. The amended guidance involves several aspects of the classification of certain cash receipts and cash payments including debt prepayment or debt extinguishment costs, settlement of zero-coupon debt instruments or other debt instruments with coupon interest rates that are insignificant in relation to the effective interest rate of the borrowing, contingent consideration payments made after a business combination, proceeds from the settlement of insurance claims, proceeds from the settlement of corporate-owned life insurance policies, including bank-owned life insurance policies, distributions received from equity method investees, beneficial interests in securitization transactions and separately identifiable cash flows and application of the predominance principle. The amended guidance is first effective for our financial report covering the quarter ended December 31, ~~2017,~~2017; however, early adoption is permitted. The adoption of this new guidance will impact our Statement of Cash ~~Flows,~~Flows; however, we are evaluating the impact the adoption of this new guidance will have on our financial position and results of operations.

In October 2016, the FASB issued guidance related to the accounting for income tax consequences of intra-entity transfers of assets. Current GAAP prohibits the recognition of current and deferred income taxes for intra-entity asset transfer until the asset has been sold to an outside party. Under the new guidance, an entity should recognize the income tax consequences of an

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RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

Management's Discussion and Analysis

inter-entity transfer of an asset when the transfer occurs. The guidance is first effective for our financial report covering the quarter ended December 31, ~~2018,~~2018; however, early adoption is permitted. We are evaluating the impact the adoption of this new guidance will have on our financial position and results of operations.

In November 2016, the FASB issued guidance related to the classification and presentation of changes in restricted cash on the Statement of Cash Flows. Current GAAP does not provide guidance to address how to classify and present changes in restricted cash or restricted cash equivalents that occur when there are transfers between cash, cash equivalents and restricted cash or restricted cash equivalents and when there are direct cash receipts into restricted cash or restricted cash equivalents or direct cash payments made from restricted cash or restricted cash equivalents. Under the new guidance, an entity should present in their Statement of Cash Flows the changes during the period in the total of cash and cash equivalents and amounts described as restricted cash or restricted cash equivalents when reconciling the beginning-of-period and ending-of-period total amounts shown on the statement of cash flows. The guidance is first effective for our financial report covering the quarter ended December 31, 2018, early adoption is permitted. We are evaluating the impact the adoption of this new guidance will have on our Consolidated Statements of Cash Flows.

In December 2016, the FASB issued amended guidance related to technical corrections and improvements. This amended guidance makes changes to clarify, correct errors, or make minor improvements to the accounting standards codification. Generally, the amendment is effective immediately. The adoption of this guidance does not have any material impact on our consolidated financial statements.

In January 2017, the FASB issued amended guidance related to the definition of a business. This amended guidance clarifies the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The guidance is first effective for our financial report covering the quarter ended December 31, ~~2018, early~~2018. Early adoption is permitted in certain circumstances. Given the adoption of this amended

~~Index~~

guidance is dependent upon the nature of future events and circumstances, we are still evaluating the impact, if any, the adoption of this new guidance will have on our financial position and results of operations.

In January 2017, the FASB issued amended guidance to simplify the subsequent measurement of goodwill, eliminating “Step 2” from the goodwill impairment test. In computing the implied fair value of goodwill under Step 2, an entity had to perform procedures to determine the fair value at the impairment testing date of its assets and liabilities following the procedure that would be required in determining the fair value of assets acquired and liabilities assumed in a business combination. Under the amended guidance, an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount and subsequently recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. The guidance is first effective for our financial report covering the quarter ended December 31, ~~2019,~~2019; however, early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. We will adopt this simplification guidance in the earliest period it applies to our facts and circumstances.

In March 2017, the FASB issued guidance that requires certain premiums on callable debt securities to be amortized to the earliest call date instead of the contractual life of the security. Discounts on callable debt securities will continue to be amortized to the contractual maturity date. This guidance is first effective for our financial report covering the quarter ended December 31, 2019; however, early adoption is permitted. The guidance will be adopted using a modified retrospective approach. We are evaluating the impact the adoption of this new guidance will have on our financial position and results of operations.

Off-Balance Sheet arrangements

For information regarding our off-balance sheet arrangements, see Note 2022 of the Notes to Condensed Consolidated Financial Statements in this Form 10-Q, and Note 26 on pages 194 - 195 of the Notes to Consolidated Financial Statements in our 2016 Form 10-K.

Effects of inflation

For information regarding the effects of inflation on our business, see the Effects of Inflation section of Item 7 on page 83 of our 2016 Form 10-K.

Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

RISK MANAGEMENT

For a description of our risk management policies, including a discussion of our primary market risk exposures, which include market risk and interest rate risk, as well as a discussion of our equity price risk, foreign exchange risk, credit risk including a discussion of our loan underwriting policies and risk monitoring processes applicable to RJ Bank, liquidity risk, operational risk, and regulatory and legal risk, and a discussion of how these exposures are managed, refer to Item 7A on pages 83 - 98 of our 2016 Form 10-K.

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Management's Discussion and Analysis

Market risk

Market risk is our risk of loss resulting from changes in market prices of our inventory, hedge, interest rate derivative and investment positions. We have exposure to market risk primarily through our broker-dealer trading operations and, to a lesser extent, through our banking operations. See pages 83 - 84 of our 2016 Form 10-K for a discussion of our market risk including how we manage it.

See Notes 5, 6, 7 and 714 of the Notes to the Condensed Consolidated Financial Statements in this Form 10-Q for fair value and other information regarding our trading inventories, ~~and~~ available for sale ~~securities.~~securities and derivative instruments.

Interest rate risk

Trading activities

We are exposed to interest rate risk as a result of our trading inventories (primarily comprised of fixed income instruments) in our Capital Markets segment, as well as our RJ Bank operations. See pages 84 - 87 of our 2016 Form 10-K for discussion of how we manage our interest rate risk.

We actively manage the interest rate risk arising from our fixed income trading securities through the use of hedging ~~techniques~~strategies that involve U.S. Treasury securities and futures contracts, liquid spread products, and swaps.

We monitor daily, the Value-at-Risk (“VaR”) for all of our trading portfolios. VaR is an appropriate statistical technique for estimating potential losses in trading portfolios due to typical adverse market movements over a specified time horizon with a suitable confidence level.

~~Index~~

We apply the Fed’s Market Risk Rule (“MRR”) for the purpose of calculating our capital ratios. The MRR, also known as the “Risk-Based Capital Guidelines: Market Risk” rule released by the Fed, OCC and FDIC, requires us to calculate VaR numbers for all of our trading portfolios, including fixed income, equity, foreign exchange, and derivative instruments.

To calculate VaR, we use historical simulation. This approach assumes that historical changes in market conditions, such as in interest rates and equity prices, are representative of future changes. The simulation is based on daily market data for the previous twelve months. VaR is reported at a 99% confidence level for a one-day time horizon. Assuming that future market conditions change as they have in the past twelve months, we would expect to incur losses greater than those predicted by our one-day VaR estimates about once every 100 trading days, or about three times per year on average. For regulatory capital calculation purposes, we also report VaR numbers for a ten-day time horizon.

The Fed’s MRR requires us to perform daily back testing procedures of our VaR model, whereby we compare each day’s projected VaR to its regulatory-defined daily trading losses, which excludes fees, commissions, reserves, net interest income, and intra-day trading. Based on these daily “ex ante” versus “ex post” comparisons, we verify that the number of times that regulatory-defined daily trading losses exceed VaR is consistent with our expectations at a 99% confidence level. During the ~~three~~six months ended ~~December~~March 31, ~~2016,~~2017, our regulatory-defined daily loss in our trading portfolios exceeded our predicted VaR once.

The following table sets forth the high, low, and daily average VaR for all of our trading portfolios, including fixed income, equity, and derivative instruments, as of the period and dates indicated:

Three months ended December 31, 2016 VaR at
High Low
Daily Average
December 31,
2016 September 30, 2016
(in thousands)
Daily VaR $ 2,274
$ 1,113
$ 1,670
$ 1,881
$ 1,804



	Six months ended March 31, 2017						VaR at
	High		Low		Daily Average		March 31, 2017		September 30, 2016
	(in thousands)
Daily VaR	$	2,952	$	1,113	$	1,819	$	2,309	$	1,804

The modeling of the risk characteristics of trading positions involves a number of assumptions and approximations. While management believes that its assumptions and approximations are reasonable, there is no uniform industry methodology for estimating VaR, and different assumptions or approximations could produce materially different VaR estimates. As a result, VaR statistics are more reliable when used as indicators of risk levels and trends within a firm than as a basis for inferring differences in risk-taking across firms.

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Management's Discussion and Analysis

Separately, RJF provides additional market risk disclosures to comply with the MRR. The results of the application of this market risk capital rule are available on our website under “More... - Investors - Financial Reports - Market Risk Rule Disclosure” within 45 days after the end of each of our reporting periods (the information on our website is not incorporated by reference into this report).

Should markets suddenly become more volatile, actual trading losses may exceed VaR results presented on a single day and might accumulate over a longer time horizon, such as a number of consecutive trading days. Accordingly, management applies additional controls including position limits, a daily review of trading results, review of the status of aged inventory, independent controls on pricing, monitoring of concentration risk, and review of issuer ratings, as well as stress testing. We utilize stress testing to complement our VaR analysis so as to measure risk under historical and hypothetical adverse scenarios. During volatile markets we may choose to pare our trading inventories to reduce risk.

As a part of our fixed income public finance operations, RJ&A enters into forward commitments to purchase GNMA or FNMA MBS which are issued on behalf of various state and local housing finance agencies (see further discussion of these activities within “financial instruments owned, financial instruments sold but not purchased and fair value” in Note 2 on page 112 of our 2016 Form 10-K). These activities result in exposure to interest rate risk. In order to hedge the interest rate risk to which RJ&A would otherwise be exposed between the date of the commitment and the date of sale of the MBS, RJ&A enters into TBA security contracts with investors for generic MBS securities at specific rates and prices to be delivered on settlement dates in the future. See Note 1517 of the Notes to Condensed Consolidated Financial Statements in this Form 10-Q for additional information regarding these activities and the related balances outstanding as of ~~December~~March 31, ~~2016.~~2017.

Banking operations

RJ Bank maintains an earning asset portfolio that is comprised of C&I loans, tax-exempt loans, SBL, and commercial and residential real estate loans, as well as MBS and CMOs (both of which are held in the available for sale securities portfolio), Small Business Administration (“SBA”) loan securitizations and a trading portfolio of corporate loans. Those earning assets are primarily

~~Index~~

funded by RJ Bank’s obligations to customers (i.e. customer deposits). Based on its current earning asset portfolio, RJ Bank is subject to interest rate risk. The current economic environment has led to an extended period of low market interest rates. As a result, the majority of RJ Bank’s adjustable rate assets and liabilities have experienced a reduction in interest rate yields and costs that reflect these very low market interest rates. During the current period, RJ Bank has focused its interest rate risk analysis on the risk of market interest rates rising. RJ Bank analyzes interest rate risk based on forecasted net interest income, which is the net amount of interest received and interest paid, and the net portfolio valuation, both in a range of interest rate scenarios.

One of the objectives of RJ Bank’s Asset Liability Management Committee is to manage the sensitivity of net interest income to changes in market interest rates. The methods used to measure this sensitivity, including the economic value of equity (“EVE”) are described in Item 7A on page 85 of our 2016 Form 10-K. There were no material changes to these methods during the ~~three~~six months ended ~~December~~March 31, ~~2016.~~2017.

In February 2015, we implemented a hedging strategy using interest rate swaps as a result of RJ Bank’s asset and liability management process described above. For further information regarding this risk management objective, see the discussion of the RJ Bank Interest Hedges in the derivative contracts section of Note 2 of the Notes to Consolidated Financial Statements on pages 114 - 115 of our 2016 Form 10-K and additional information in Note 1214 of the Notes to Condensed Consolidated Financial Statements in this Form 10-Q.

The following table is an analysis of RJ Bank’s estimated net interest income over a 12 month period based on instantaneous shifts in interest rates (expressed in basis points) using RJ Bank’s own asset/liability model:


Instantaneous changes in rate	Net interest income	Projected change in net interest income	Net interest income	Projected change in net interest income
	($ in thousands)		($ in thousands)
+300	$610,075	(0.21)%	$596,683	(8.69)%
+200	$619,618	1.35%	$612,835	(6.22)%
+100	$628,786	2.85%	$635,580	(2.74)%
0	$611,355	—	$653,467	—
-75	$528,985	(13.47)%
-100			$577,984	(11.55)%

Refer to the Net Interest section of MD&A, in Item 2 of this Form 10-Q, for a discussion and estimate of the potential favorable impact on RJF’s pre-tax income that could result from an increase in short-term interest rates applicable to RJF’s entire operations.

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Management's Discussion and Analysis

The EVE analysis is a point in time analysis of current interest-earning assets and interest-bearing liabilities, which incorporates all cash flows over their estimated remaining lives, discounted at current rates. The EVE approach is based on a static balance sheet and provides an indicator of future earnings and capital levels as the changes in EVE indicate the anticipated change in the value of future cash flows. RJ Bank monitors sensitivity to changes in EVE utilizing board approved limits. These limits set a risk tolerance to changing interest rates and assist RJ Bank in determining strategies for mitigating this risk as it approaches these limits.

The following table presents an analysis of RJ Bank’s estimated EVE sensitivity based on instantaneous shifts in interest rates (expressed in basis points) using RJ Bank’s own asset/liability model:

Instantaneous changes in rate Projected change in EVE

+300 (11.66)%
+200 (6.70)%
+100 (1.03)%
0 —
-75 (11.07)%

~~Index~~



Instantaneous changes in rate		Projected change in EVE

+300		(16.44)%
+200		(11.68)%
+100		(5.49)%
0		—
-100		(12.40)%

The following table shows the contractual maturities of RJ Bank’s loan portfolio at ~~December~~March 31, ~~2016~~2017, including contractual principal repayments. This table does not, however, include any estimates of prepayments. These prepayments could shorten the average loan lives and cause the actual timing of the loan repayments to differ significantly from those shown in the following table:


	Due in								Due in
	One year or less		> One year – five years		> 5 years		Total⁽¹⁾		One year or less		> One year – five years		> 5 years		Total⁽¹⁾
	(in thousands)								(in thousands)
Loans held for sale	$	—	$	17,788	$	170,069	$	187,857	$	606	$	27,130	$	166,554	$	194,290
Loans held for investment:
C&I loans	130,412		4,622,841		2,798,587		7,551,840		54,612		4,115,934		3,110,672		7,281,218
CRE construction loans	27,218		94,990		10,352		132,560		45,759		61,321		12,735		119,815
CRE loans	302,721		1,780,496		583,301		2,666,518		445,924		1,881,919		554,093		2,881,936
Tax-exempt loans	—		5,250		853,788		859,038		—		5,250		846,771		852,021
Residential mortgage loans	825		1,816		2,650,896		2,653,537		3,099		2,546		2,810,351		2,815,996
SBL	1,996,347		5,248		—		2,001,595		2,053,946		7,508		—		2,061,454
Total loans held for investment	2,457,523		6,510,641		6,896,924		15,865,088		2,603,340		6,074,478		7,334,622		16,012,440
Total loans	$	2,457,523	$	6,528,429	$	7,066,993	$	16,052,945	$	2,603,946	$	6,101,608	$	7,501,176	$	16,206,730



Florida		No. 59-1517485
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)



Large accelerated filer x		Accelerated filer o

Non-accelerated filer o(Do not check if a smaller reporting company)		Smaller reporting company o

		Emerging growth company o


	Three months ended December 31,							Six months ended March 31,
	2016				2015			2017				2016
	(in thousands, except per share amounts)							(in thousands, except per share amounts)
Common stock, par value $.01 per share:
Balance, beginning of year	$	1,513			$	1,491		$	1,513			$	1,491
Share issuances	17				10			23				16
Balance, end of period	1,530				1,501			1,536				1,507

Additional paid-in capital:
Balance, beginning of year	1,498,921				1,344,779			1,498,921				1,344,779
Employee stock purchases	4,743				5,054			12,741				18,938
Exercise of stock options and vesting of restricted stock units, net of forfeitures	18,969				8,996			30,732				13,954
Restricted stock, stock option and restricted stock unit expense	30,971				21,104			52,288				39,962
Excess tax benefit from share-based payments	—			⁽¹⁾	34,791			—			⁽¹⁾	34,791
Other	(322		)		229			632				362
Balance, end of period	1,553,282				1,414,953			1,595,314				1,452,786

Retained earnings:(2)
Balance, beginning of year ⁽²⁾	3,834,781				3,422,169
Balance, beginning of year								3,834,781				3,422,169
Net income attributable to Raymond James Financial, Inc.	146,567				106,329			259,322				232,176
Cash dividends declared	(34,274		)		(30,535		)	(66,176		)		(59,142		)
Balance, end of period	3,947,074				3,497,963			4,027,927				3,595,203

Treasury stock:
Balance, beginning of year	(362,937		)		(203,455		)	(362,937		)		(203,455		)
Purchases/surrenders	(8,474		)		(6,009		)	(9,113		)		(152,284		)
Exercise of stock options and vesting of restricted stock units, net of forfeitures	(16,458		)		(5,045		)	(17,545		)		(5,717		)
Balance, end of period	(387,869		)		(214,509		)	(389,595		)		(361,456		)

Accumulated other comprehensive loss: ⁽³⁾
Balance, beginning of year	(55,733		)		(40,503		)	(55,733		)		(40,503		)
Net change in unrealized gain/loss on available for sale securities and non-credit portion of other-than-temporary impairment losses, net of tax	(4,146		)		(6,791		)	(2,194		)		(5,692		)
Net change in currency translations and net investment hedges, net of tax	1,001				(6,615		)	3,224				4,099
Net change in cash flow hedges, net of tax	25,738				3,265			27,269				(8,204		)
Balance, end of period	(33,140		)		(50,644		)	(27,434		)		(50,300		)
Total equity attributable to Raymond James Financial, Inc.	$	5,080,877			$	4,649,264		$	5,207,748			$	4,637,740

Noncontrolling interests:(2)
Balance, beginning of year ⁽²⁾	$	146,431			$	154,454
Balance, beginning of year								$	146,431			$	154,454
Net income attributable to noncontrolling interests	1,136				1,735			(3,074		)		(2,275		)
Capital contributions	4,998				8,064			9,776				695
Distributions	(26,557		)		(3,396		)	(28,435		)		(5,033		)
Derecognition resulting from sales								(4,628		)		—
Other	(2,284		)		(1,035		)	399				(2,187		)
Balance, end of period	123,724				159,822			120,469				145,654
Total equity	$	5,204,601			$	4,809,086		$	5,328,217			$	4,783,394

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

	Six months ended March 31,
	2017			2016
	(in thousands)
Cash flows from operating activities:
Net income attributable to Raymond James Financial, Inc.	$	259,322		$	232,176
Net loss attributable to noncontrolling interests	(3,074		)	(2,275		)
Net income including noncontrolling interests	256,248			229,901

Adjustments to reconcile net income including noncontrolling interests to net cash provided by (used in) operating activities:
Depreciation and amortization	40,959			35,652
Deferred income taxes	(38,181		)	(13,295		)
Premium and discount amortization on available for sale securities and unrealized/realized gain on other investments	(18,976		)	(3,852		)
Provisions for loan losses, legal proceedings, bad debts and other accruals	143,993			38,955
Share-based compensation expense	66,015			42,735
Other	(2,067		)	1,015
Net change in:
Assets segregated pursuant to regulations and other segregated assets	1,054,930			(704,005		)
Securities purchased under agreements to resell and other collateralized financings, net of securities sold under agreements to repurchase	(35,755		)	(96,577		)
Stock loaned, net of stock borrowed	(235,408		)	133,120
Loans provided to financial advisors, net of repayments	(33,945		)	(70,836		)
Brokerage client receivables and other accounts receivable, net	23,233			(136,374		)
Trading instruments, net	174,079			(16,708		)
Prepaid expenses and other assets	158,758			129,318
Brokerage client payables and other accounts payable	(431,259		)	605,528
Accrued compensation, commissions and benefits	(108,250		)	(168,896		)
Proceeds from sales of securitizations and loans held for sale, net of purchases and originations of loans held for sale	77,765			(63,180		)
Net cash provided by (used in) operating activities	1,092,139			(57,499		)

Cash flows from investing activities:
Additions to property and equipment	(123,338		)	(58,180		)
Increase in bank loans, net	(1,103,445		)	(1,490,887		)
Purchases of Federal Home Loan Bank/Federal Reserve Bank stock	(4,875		)	(3,231		)
Proceeds from sales of loans held for investment	106,223			65,443
Purchases, or contributions, to private equity or other investments, net of proceeds from sales of, or distributions received from, private equity and other investments	51,455			(60,639		)
Purchases of available for sale securities	(1,012,238		)	(87,676		)
Available for sale securities maturations, repayments and redemptions	115,976			42,729
Proceeds from sales of available for sale securities	32,841			1,530
Other investing activities, net of proceeds received	2,399			4,432
Net cash used in investing activities	$	(1,935,002	)	$	(1,586,479	)


(continued on next page)




See accompanying Notes to Condensed Consolidated Financial Statements (Unaudited).

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

	Three months ended December 31,
	2016			2015
	(in thousands)
Cash flows from operating activities:
Net income attributable to Raymond James Financial, Inc.	$	146,567		$	106,329
Net income attributable to noncontrolling interests	1,136			1,735
Net income including noncontrolling interests	147,703			108,064

Adjustments to reconcile net income including noncontrolling interests to net cash provided by operating activities:
Depreciation and amortization	19,941			17,909
Deferred income taxes	10,928			6,631
Premium and discount amortization on available for sale securities and unrealized/realized gain on other investments	(10,185		)	2,587
Provisions for loan losses, legal proceedings, bad debts and other accruals	33,017			22,588
Share-based compensation expense	40,545			22,400
Other	(5,490		)	(3,684		)
Net change in:
Assets segregated pursuant to regulations and other segregated assets	1,016,538			(171,359		)
Securities purchased under agreements to resell and other collateralized financings, net of securities sold under agreements to repurchase	121,878			(18,345		)
Stock loaned, net of stock borrowed	(233,019		)	65,959
Loans provided to financial advisors, net of repayments	(13,513		)	(38,500		)
Brokerage client receivables and other accounts receivable, net	91,410			246,998
Trading instruments, net	192,716			162,685
Prepaid expenses and other assets	85,740			82,542
Brokerage client payables and other accounts payable	(507,562		)	58,391
Accrued compensation, commissions and benefits	(218,034		)	(242,815		)
Proceeds from sales of securitizations and loans held for sale, net of purchases and originations of loans held for sale	35,162			(74,078		)
Net cash provided by operating activities	807,775			247,973

Cash flows from investing activities:
Additions to property and equipment	(78,659		)	(32,581		)
Increase in bank loans, net	(782,388		)	(770,371		)
Purchases of Federal Home Loan Bank/Federal Reserve Bank stock	(4,250		)	(1,063		)
Proceeds from sales of loans held for investment	54,163			35,375
Purchases, or contributions, to private equity or other investments, net of proceeds from sales of, or distributions received from, private equity and other investments	16,924			(25,128		)
Purchases of available for sale securities	(377,235		)	(77,223		)
Available for sale securities maturations, repayments and redemptions	56,647			21,627
Proceeds from sales of available for sale securities	7,308			—
Other investing activities, net of proceeds received	2,341			(281		)
Net cash used in investing activities	$	(1,105,149	)	$	(849,645	)






(continued on next page)



See accompanying Notes to Condensed Consolidated Financial Statements (Unaudited).



x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
	THE SECURITIES EXCHANGE ACT OF 1934



¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
	THE SECURITIES EXCHANGE ACT OF 1934


(1)	All components of other comprehensive income (loss), net of tax, are attributable to Raymond James Financial, Inc.


(1)	During the ~~current period,~~six months ended March 31, 2017, we adopted new stock compensation simplification guidance. See Notes 1, 16 and 1420 for additional information.


(2)	Each respective prior period balance has been restated to reflect the impact of the deconsolidation of certain ~~VIEs, see~~VIEs. See Note 1 for additional information.


(3)	All components of other comprehensive (loss) income, net of tax, are attributable to Raymond James Financial, Inc.


	For the three months ended December 31,					Three months ended March 31,						Six months ended March 31,
	2016			2015		2017			2016			2017			2016
	(in thousands)					(in thousands)
Acquisition and integration related incentive compensation costs⁽¹⁾	$	5,474		$	—	$	—		$	—		$	5,474		$	—
Severance⁽²⁾	4,803			—		754			—			5,557			—
Early termination costs of assumed contracts	1,324			—		5			—			1,329			—
Information systems integration costs	1,205			—		417			1,655			1,622			1,655
Legal and regulatory	553			1,501		274			422			827			1,923
Post-closing purchase price contingency (favorable) interim determination computed as of the end of the period	(2,251		)	—
Pre-Alex. Brown closing date unrealized loss in the fair value of DB shares purchased to satisfy the DBRSU liability⁽³⁾	—			154
Post-closing purchase price contingency						(1,248		)	—			(3,499		)	—
DBRSU obligation and related hedge⁽³⁾						798			3,165		⁽⁴⁾	798			3,319		⁽⁴⁾
Travel and all other	1,558			217		86			773			1,644			990
Total acquisition-related expenses	$	12,666		$	1,872	$	1,086		$	6,015		$	13,752		$	7,887


(1)	Primarily comprised of non-recurring ~~RSU~~restricted stock unit (“RSU”) grants authorized by the Board of Directors in their November 2016 meeting, made to certain employees and consultants for acquisition-related purposes. See Note 1820 for discussion of share-based compensation.


(4)	Represents the pre-Alex. Brown closing date unrealized loss on DB shares purchased to satisfy the DBRSU obligation.


	December 31, 2016		September 30, 2016		March 31, 2017		September 30, 2016
	(in thousands)				(in thousands)
Cash and cash equivalents:
Cash in banks	$	2,527,731	$	1,649,593	$	2,634,934	$	1,649,593
Money market fund investments	544		859		1,392		859
Total cash and cash equivalents ⁽¹⁾	$	2,528,275	$	1,650,452	$	2,636,326	$	1,650,452

Assets segregated pursuant to federal regulations and other segregated assets ⁽²⁾	$	3,867,999	$	4,884,487
Assets segregated pursuant to regulations and other segregated assets ⁽²⁾					$	3,829,607	$	4,884,487

Deposits with clearing organizations:
Cash and cash equivalents	$	145,629	$	215,856	$	148,712	$	215,856
Government and agency obligations	53,227		29,508		50,384		29,508
Total deposits with clearing organizations	$	198,856	$	245,364	$	199,096	$	245,364


December 31, 2016	Quoted prices in active markets for identical assets (Level 1) ⁽¹⁾		Significant other observable inputs (Level 2) ⁽¹⁾		Significant unobservable inputs (Level 3)			Netting adjustments ⁽²⁾			Balance as of December 31, 2016
March 31, 2017													Quoted prices in active markets for identical assets (Level 1) ⁽¹⁾		Significant other observable inputs (Level 2) ⁽¹⁾		Significant unobservable inputs (Level 3)			Netting adjustments ⁽²⁾			Balance as of March 31, 2017
	(in thousands)												(in thousands)
Assets at fair value on a recurring basis:
Trading instruments:
Municipal and provincial obligations	$	87	$	116,143	$	—		$	—		$	116,230	$	55	$	239,752	$	—		$	—		$	239,807
Corporate obligations	6,301		58,591		—			—			64,892		11,574		117,130		—			—			128,704
Government and agency obligations	6,412		42,176		—			—			48,588		7,230		72,779		—			—			80,009
Agency mortgage-backed securities (“MBS”) and collateralized mortgage obligations (“CMOs”)	9,477		116,187		—			—			125,664		394		136,658		—			—			137,052
Non-agency CMOs and asset-backed securities (“ABS”)	—		43,237		7			—			43,244		—		56,397		7			—			56,404
Total debt securities	22,277		376,334		7			—			398,618		19,253		622,716		7			—			641,976
Derivative contracts	—		114,930		—			(59,010		)	55,920		—		73,771		—			(45,705		)	28,066
Equity securities	15,879		1,938		—			—			17,817		20,160		970		—			—			21,130
Brokered certificates of deposit	—		34,349		—			—			34,349		—		32,445		—			—			32,445
Other	36		—		11,052			—			11,088		24		—		13,141			—			13,165
Total trading instruments	38,192		527,551		11,059			(59,010		)	517,792		39,437		729,902		13,148			(45,705		)	736,782
Available for sale securities:
Agency MBS and CMOs	—		992,994		—			—			992,994		—		1,547,579		—			—			1,547,579
Non-agency CMOs	—		39,915		—			—			39,915		—		33,837		—			—			33,837
Other securities	1,398		—		—			—			1,398		1,552		—		—			—			1,552
Auction rate securities (“ARS”):
Municipals	—		—		25,364			—			25,364
Municipal obligations													—		—		25,728			—			25,728
Preferred securities	—		—		103,853			—			103,853		—		—		105,418			—			105,418
Total available for sale securities	1,398		1,032,909		129,217			—			1,163,524		1,552		1,581,416		131,146			—			1,714,114
Private equity investments not measured at net asset value (“NAV”)	—		—		83,466		⁽³⁾	—			83,466
Other investments ⁽⁴⁾	252,188		320		223			—			252,731
Private equity investments:
Measured at fair value													—		—		88,623			—			88,623
Measured at net asset value (“NAV”)																							113,138
Total private equity investments													—		—		88,623			—			201,761
Other investments ⁽³⁾													221,889		322		374			—			222,585
Derivative instruments associated with offsetting matched book positions	—		299,393		—			—			299,393		—		285,898		—			—			285,898
Deposits with clearing organizations:
Government and agency obligations	53,227		—		—			—			53,227		50,384		—		—			—			50,384
Other assets:
Derivative contracts ⁽⁵⁾	—		14,844		—			—			14,844
Derivative contracts ⁽⁴⁾													—		276		—			—			276
Other assets													—		—		2,148		⁽⁵⁾	—			2,148
Total other assets													—		276		2,148			—			2,424
Total assets at fair value on a recurring basis	$	345,005	$	1,875,017	$	223,965		$	(59,010	)	$	2,384,977	$	313,262	$	2,597,814	$	235,439		$	(45,705	)	$	3,213,948

Assets at fair value on a nonrecurring basis:
Bank loans, net:
Impaired loans	$	—	$	21,044	$	40,450		$	—		$	61,494	$	—	$	20,670	$	41,081		$	—		$	61,751
Loans held for sale⁽⁶⁾	—		21,405		—			—			21,405		—		60,538		—			—			60,538
Total bank loans, net	—		42,449		40,450			—			82,899		—		81,208		41,081			—			122,289
Other real estate owned (“OREO”)⁽⁷⁾	—		1,118		—			—			1,118
Other assets: Other real estate owned (“OREO”)⁽⁷⁾													—		790		—			—			790
Total assets at fair value on a nonrecurring basis	$	—	$	43,567	$	40,450		$	—		$	84,017	$	—	$	81,998	$	41,081		$	—		$	123,079
																									(continued on next page)


~~(5)~~(4)	Consists of derivatives arising from RJ Bank’s business operations, see Note 1214 for additional information.


(5)	Includes the fair value of forward commitments to purchase GNMA or FNMA (as hereinafter defined) MBS arising from our fixed income public finance operations. See Note 2 and Note 21 of our 2016 Form 10-K for additional information.


(6)	Includes individual loans classified as held for sale, which were recorded at a fair value lower than cost.


(7)	Represents the fair value of foreclosed properties which were measured at a fair value subsequent to their initial classification as OREO. The recorded value in the Condensed Consolidated Statements of Financial Condition is net of the estimated selling costs.


~~(9)~~	The balance reflects the ~~DBRSUs~~DBRSU obligation from our acquisition of Alex. Brown. See ~~Note 12~~Notes 14 and 20 for additional information.


~~(6)~~(4)	Consists of derivatives arising from RJ Bank’s business operations, see Note 1214 for additional information.


~~(7)~~(5)	Includes the fair value of forward commitments to purchase GNMA or FNMA (as hereinafter defined) MBS arising from our fixed income public finance operations. See Note 2 and Note 21 of our 2016 Form 10-K for additional information.


~~(8)~~(6)	Includes individual loans classified as held for sale, which were recorded at a fair value lower than cost.


~~(9)~~(7)	Represents the fair value of foreclosed properties which were measured at a fair value subsequent to their initial classification as OREO. The recorded value in the Consolidated Statements of Financial Condition is net of the estimated selling costs.


~~(10)~~(8)	The balance reflects the DBRSUs ~~which arose~~obligation from our acquisition of Alex. ~~Brown, see a discussion of the circumstances giving rise to this derivative in Note 3 on pages 127 - 129 of our 2016 Form 10-K.~~Brown. See Notes 14 and 20 for additional information.


Three months ended December 31, 2016 Level 3 assets at fair value (in thousands)
Three months ended March 31, 2017 Level 3 assets at fair value (in thousands)																						Three months ended March 31, 2017 Level 3 assets at fair value (in thousands)
	Financial assets																		Financial liabilities			Financial assets																Financial liabilities
	Trading instruments					Available for sale securities					Private equity, other investments and other assets								Payables- trade and other			Trading instruments					Available for sale securities				Private equity, other investments and other assets							Payables- trade and other
	Non- agency CMOs & ABS		Other			ARS – municipals		ARS - preferred securities			Private equity investments		Other investments			Other assets			Other liabilities			Non- agency CMOs & ABS		Other			ARS – municipal obligations		ARS - preferred securities		Private equity investments			Other investments		Other assets		Other liabilities
Fair value September 30, 2016	$	7	$	3,572		$	25,147	$	100,018		$	83,165	$	441		$	2,448		$	(67	)
Fair value beginning of period																						$	7	$	11,052		$	25,364	$	103,853	$	83,466		$	223	$	—	$	(1,856	)
Total gains (losses) for the period:
Included in earnings	—		(141		)	—		1			301		(8		)	(2,448		)	(1,789		)	—		(383		)	—		—		(11		)	151		2,148		1,792
Included in other comprehensive income	—		—			217		3,857			—		—			—			—			—		—			364		1,565		—			—		—		—
Purchases and contributions	—		18,683			—		—			—		—			—			—			—		22,418			—		—		5,168			—		—		—
Sales	—		(11,062		)	—		(23		)	—		—			—			—			—		(19,946		)	—		—		—			—		—		—
Redemptions by issuer	—		—			—		—			—		(15		)	—			—			—		—			—		—		—			—		—		—
Distributions	—		—			—		—			—		—			—			—			—		—			—		—		—			—		—		—
Transfers: ⁽¹⁾
Into Level 3	—		—			—		—			—		—			—			—			—		—			—		—		—			—		—		—
Out of Level 3	—		—			—		—			—		(195		)	—			—			—		—			—		—		—			—		—		—
Fair value December 31, 2016	$	7	$	11,052		$	25,364	$	103,853		$	83,466	$	223		$	—		$	(1,856	)
Fair value end of period																						$	7	$	13,141		$	25,728	$	105,418	$	88,623		$	374	$	2,148	$	(64	)

Change in unrealized gains (losses) for the period included in earnings (or changes in net assets) for assets held at the end of the reporting period	$	—	$	(124	)	$	217	$	3,856		$	301	$	—		$	—		$	(4,240	)	$	—	$	(303	)	$	364	$	1,565	$	—		$	151	$	3,940	$	—


~~(1)~~	~~Our policy is that the end of each respective quarterly reporting period determines when transfers of financial instruments between levels are recognized.~~


Three months ended December 31, 2015 Level 3 assets at fair value (in thousands)
Six months ended March 31, 2017 Level 3 assets at fair value (in thousands)																											Six months ended March 31, 2017 Level 3 assets at fair value (in thousands)
				Financial assets																				Financial liabilities			Financial assets																		Financial liabilities
				Trading instruments					Available for sale securities						Private equity, other investments and other assets									Payables- trade and other			Trading instruments					Available for sale securities					Private equity, other investments and other assets								Payables- trade and other
	Corporate Obligations			Non- agency CMOs & ABS		Other			ARS – municipals			ARS - preferred securities			Private equity investments ⁽¹⁾			Other investments			Other assets			Other liabilities			Non- agency CMOs & ABS		Other			ARS – municipal obligations		ARS - preferred securities			Private equity investments		Other investments			Other assets			Other liabilities
Fair value September 30, 2015	$	156		$	9	$	1,986		$	28,015		$	110,749		$	77,435		$	565		$	4,975		$	(58	)
Fair value beginning of period																											$	7	$	3,572		$	25,147	$	100,018		$	83,165	$	441		$	2,448		$	(67	)
Total gains (losses) for the period:	Total gains (losses) for the period:
Included in earnings	(40		)	—		(249		)	—			—			—			(7		)	(3,449		)	(9		)	—		(524		)	—		1			290		143			(300		)	3
Included in other comprehensive income	—			—		—			(535		)	(7,850		)	—			—			—			—			—		—			581		5,422			—		—			—			—
Purchases and contributions	73			—		19,017			—			—			915			—			—			—			—		41,101			—		—			5,168		—			—			—
Sales	—			—		(18,790		)	—			—			(18		)	—			—			—			—		(31,008		)	—		(23		)	—		(15		)	—			—
Redemptions by issuer	—			—		—			—			—			—			—			—			—			—		—			—		—			—		—			—			—
Distributions	—			—		—			—			—			(18		)	(65		)	—			—			—		—			—		—			—		—			—			—
Transfers: ⁽²⁾
Into Level 3	—			—		—			—			—			—			—			—			—			—		—			—		—			—		—			—			—
Out of Level 3	—			—		—			—			—			—			—			—			—			—		—			—		—			—		(195		)	—			—
Fair value December 31, 2015	$	189		$	9	$	1,964		$	27,480		$	102,899		$	78,314		$	493		$	1,526		$	(67	)
Fair value end of period																											$	7	$	13,141		$	25,728	$	105,418		$	88,623	$	374		$	2,148		$	(64	)

Change in unrealized gains (losses) for the period included in earnings (or changes in net assets) for assets held at the end of the reporting period	$	(40	)	$	—	$	(11	)	$	—		$	—		$	—		$	(7	)	$	(3,449	)	$	—		$	—	$	(423	)	$	581	$	5,422		$	301	$	151		$	(300	)	$	—



Three months ended March 31, 2016 Level 3 assets at fair value (in thousands)
				Financial assets																				Financial liabilities
	Trading instruments									Available for sale securities						Private equity, other investments and other assets								Payables- trade and other
	Corporate Obligations			Non- agency CMOs & ABS			Other			ARS – municipals obligations			ARS - preferred securities			Private equity investments ⁽¹⁾			Other investments			Other assets		Other liabilities
Fair value beginning of period	$	189		$	9		$	1,964		$	27,480		$	102,899		$	78,314		$	493		$	1,526	$	(67	)
Total gains (losses) for the period:
Included in earnings	(97		)	—			(100		)	133			—			—			18			1,586		—
Included in other comprehensive income	—			—			—			(583		)	(300		)	—			—			—		—
Purchases and contributions	2			—			19,470			—			—			—			—			—		—
Sales	(94		)	—			(7,038		)	(1,583		)	—			—			—			—		—
Redemptions by issuer	—			—			—			(25		)	—			—			—			—		—
Distributions	—			(1		)	—			—			—			(5,175		)	(72		)	—		—
Transfers:
Into Level 3	—			—			—			—			—			—			—			—		—
Out of Level 3	—			—			—			—			—			—			—			—		—
Fair value end of period	$	—		$	8		$	14,296		$	25,422		$	102,599		$	73,139		$	439		$	3,112	$	(67	)

Change in unrealized gains (losses) for the period included in earnings (or changes in net assets) for assets held at the end of the reporting period	$	—		$	—		$	(60	)	$	(637	)	$	(300	)	$	—		$	18		$	1,586	$	—


(1)	Effective September 30, 2016, we adopted new accounting guidance related to the classification and disclosure of certain investments using NAV as a practical expedient to measure the fair value of the investment. The prior year amounts reflect the effect of reclassifications to conform the prior year period to current period presentation.



Six months ended March 31, 2016 Level 3 assets at fair value (in thousands)
				Financial assets																					Financial liabilities
				Trading instruments						Available for sale securities						Private equity, other investments and other assets									Payables- trade and other
	Corporate Obligations			Non- agency CMOs & ABS			Other			ARS – municipal obligations			ARS - preferred securities			Private equity investments ⁽¹⁾			Other investments			Other assets			Other liabilities
Fair value beginning of period	$	156		$	9		$	1,986		$	28,015		$	110,749		$	77,435		$	565		$	4,975		$	(58	)
Total gains (losses) for the period:
Included in earnings	(137		)	—			(349		)	133			—			—			11			(1,863		)	—
Included in other comprehensive income	—			—			—			(1,118		)	(8,150		)	—			—			—			—
Purchases and contributions	75			—			38,487			—			—			915			—			—			(9		)
Sales	(94		)	—			(25,828		)	(1,583		)	—			(18		)	—			—			—
Redemptions by issuer	—			—			—			(25		)	—			—			—			—			—
Distributions	—			(1		)	—			—			—			(5,193		)	(137		)	—			—
Transfers:
Into Level 3	—			—			—			—			—			—			—			—			—
Out of Level 3	—			—			—			—			—			—			—			—			—
Fair value end of period	$	—		$	8		$	14,296		$	25,422		$	102,599		$	73,139		$	439		$	3,112		$	(67	)

Change in unrealized gains (losses) for the period included in earnings (or changes in net assets) for assets held at the end of the reporting period	$	—		$	1		$	(71	)	$	(1,073	)	$	(8,150	)	$	—		$	11		$	(1,863	)	$	—


	Net trading profit			Other revenues			Other comprehensive income			Net trading profit			Other revenues			Other comprehensive income
	(in thousands)									(in thousands)
For the three months ended December 31, 2016
For the three months ended March 31, 2017
Total (losses) gains included in earnings	$	(141	)	$	(3,943	)	$	4,074		$	(383	)	$	4,080		$	1,929
Change in unrealized (losses) gains for assets held at the end of the reporting period	$	(124	)	$	(3,939	)	$	4,073		$	(303	)	$	4,091		$	1,929

For the three months ended December 31, 2015
For the six months ended March 31, 2017
Total (losses) gains included in earnings										$	(524	)	$	137		$	6,003
Change in unrealized (losses) gains for assets held at the end of the reporting period										$	(423	)	$	152		$	6,003

For the three months ended March 31, 2016
Total (losses) gains included in earnings										$	(197	)	$	1,737		$	(883	)
Change in unrealized (losses) gains for assets held at the end of the reporting period										$	(60	)	$	1,604		$	(937	)

For the six months ended March 31, 2016
Total losses included in earnings	$	(289	)	$	(3,465	)	$	(8,385	)	$	(486	)	$	(1,719	)	$	(9,268	)
Change in unrealized losses for assets held at the end of the reporting period	$	(51	)	$	(3,456	)	$	—		$	(70	)	$	(1,852	)	$	(9,223	)


(a)	Represents discount rates used when we have determined that market participants would take these discounts into account when pricing the investments.


(b)	Future interest rates are projected based upon a forward interest rate path, plus a spread over such projected base rate that is applicable to each future period for each security within this portfolio segment. The interest rates presented represent the average interest rate over all projected periods for securities within the portfolio segment.