0000720005 us-gaap:OperatingSegmentsMember rjf:InvestmentBankingRevenueMergersAndAcquisitionAndAdvisoryMember rjf:AssetManagementSegmentMember 2018-10-01 2018-12-31

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark one)



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

For the quarterly period ended December 31, ~~2017~~2019



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



For the transition period from		to

Commission File Number: 1-9109

RAYMOND JAMES FINANCIAL, INC.

(Exact name of registrant as specified in its charter)



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

880 Carillon Parkway, St. Petersburg, Florida33716

(Address of principal executive offices) (Zip Code)

~~(727)~~ (727) 567-1000

(Registrant’s telephone number, including area code)

None

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Exchange Act:



Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $.01 par value	RJF	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨☐

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of Regulation S-T ~~(232.405~~(§232.405 of this chapter) during the preceding 12 months (or such shorter period that the registrant was required to submit ~~and post~~ such files). Yes x No ¨☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.



Large accelerated filerx	x	Accelerated filero	☐
Non-accelerated filer	☐	Smaller reporting company	☐

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

		Emerging growth companyo	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ¨☐ No x

Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date.

~~145,614,962~~139,283,886 shares of common stock as of February ~~7, 2018~~6, 2020

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES



INDEX
		PAGE
PART I	FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)	3
	Condensed Consolidated Statements of Financial Condition as of December 31, ~~2017~~2019 and September 30, ~~2017~~2019 (Unaudited)	3
	Condensed Consolidated Statements of Income and Comprehensive Income for the three months ended December 31, ~~2017~~2019 and December 31, ~~2016~~2018 (Unaudited)	4
	Condensed Consolidated Statements of Changes in Shareholders’ Equity for the three months ended December 31, ~~2017~~2019 and December 31, ~~2016~~2018 (Unaudited)	5
	Condensed Consolidated Statements of Cash Flows for the three months ended December 31, ~~2017~~2019 and December ~~30, 2016~~31, 2018 (Unaudited)	6
	Notes to Condensed Consolidated Financial Statements (Unaudited)
	Note 1 - Organization and basis of presentation	8
	Note 2 - Update of significant accounting policies	89
	Note 3 - ~~Acquisitions~~Fair value	11
	Note 4 - ~~Fair value~~Available-for-sale securities	1316
	Note 5 - ~~Available-for-sale securities~~Derivative assets and derivative liabilities	2218
	Note 6 - ~~Derivative financial instruments~~Collateralized agreements and financings	2419
	Note 7 - ~~Collateralized agreements and financings~~Bank loans, net	21
	Note 8 - Variable interest entities	27
	Note 89 - Leases	28
	Note 10 - Bank ~~loans, net~~deposits	29
	Note 911 - ~~Variable interest entities~~Other borrowings	35
	~~Note 10 - Goodwill and identifiable intangible assets, net~~	37
	~~Note 11 - Bank deposits~~	3930
	Note 12 - ~~Other borrowings~~Income taxes	4031
	Note 13 - ~~Income taxes~~Commitments, contingencies and guarantees	4031
	Note 14 - ~~Commitments, contingencies and guarantees~~Accumulated other comprehensive income/(loss)	4234
	Note 15 - ~~Accumulated other comprehensive income/(loss)~~Revenues	4535
	Note 16 - Interest income and interest expense	4837
	Note 17 - Share-based ~~and other~~ compensation	4837
	Note 18 - Regulatory capital requirements	5038
	Note 19 - Earnings per share	5340
	Note 20 - Segment information	5340
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	5643
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	8871
Item 4.	Controls and Procedures	8971
PART II	OTHER INFORMATION
Item 1.	Legal Proceedings	8972
Item 1A.	Risk Factors	8972
Item 2.	~~Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases~~Unregistered Sales of Equity Securities and Use of Proceeds	9072
Item 3.	Defaults Upon Senior Securities	9072
Item 4.	Mine Safety ~~Disclosure~~Disclosures	9072
Item 5.	Other Information	9072
Item 6.	Exhibits	9173
	Signatures	9173

PART I. FINANCIAL INFORMATION

~~Item~~ITEM 1. FINANCIAL STATEMENTS

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

(Unaudited)


$ in thousands, except per share amounts	December 31, 2017			September 30, 2017
$ in millions, except per share amounts							December 31, 2019			September 30, 2019
Assets:
Cash and cash equivalents	$	3,897,529		$	3,669,672		$	4,109		$	3,957
Assets segregated pursuant to regulations and other segregated assets	3,569,414			3,476,085
Cash and cash equivalents segregated pursuant to regulations							2,581			2,014
Securities purchased under agreements to resell	307,742			404,462			326			343
Securities borrowed	184,971			138,319			211			248
Financial instruments, at fair value:
Trading instruments (includes $302,713 and $357,099 pledged as collateral)	597,579			564,263
Available-for-sale securities	2,393,321			2,188,282
Trading instruments ($438 and $535 pledged as collateral)							632			708
Available-for-sale securities ($23 and $24 pledged as collateral)							3,222			3,093
Derivative assets	292,140			318,775			288			338
Private equity investments	189,033			198,779
Other investments (includes $38,591 and $6,640 pledged as collateral)	265,170			220,980
Other investments ($32 and $32 pledged as collateral)							363			365
Brokerage client receivables, net	2,666,268			2,766,771			2,527			2,671
Receivables from brokers, dealers and clearing organizations	219,036			268,021			162			281
Other receivables	642,542			652,769			599			549
Bank loans, net	17,697,298			17,006,795			21,296			20,891
Loans to financial advisors, net	890,072			873,272			991			983
Investments in real estate partnerships held by consolidated variable interest entities	110,662			111,743
Property and equipment, net	454,115			437,374			536			527
Deferred income taxes, net	199,507			313,486			217			231
Goodwill and identifiable intangible assets, net	651,339			493,183			609			611
Other assets	857,161			780,425			1,485			1,020
Total assets	$	36,084,899		$	34,883,456		$	40,154		$	38,830

Liabilities and equity:
Liabilities and shareholders’ equity:
Bank deposits	$	18,725,545		$	17,732,362		$	22,975		$	22,281
Securities sold under agreements to repurchase	229,036			220,942			200			150
Securities loaned	290,307			383,953			239			323
Financial instruments sold but not yet purchased, at fair value:
Trading instruments	213,024			221,449			210			296
Derivative liabilities	356,505			356,964			306			313
Brokerage client payables	5,820,347			5,411,829			4,885			4,361
Payables to brokers, dealers and clearing organizations	189,144			172,714			135			229
Accrued compensation, commissions and benefits	793,687			1,059,996			933			1,272
Other payables	582,548			567,045			919			518
Other borrowings	1,532,826			1,514,012			899			894
Senior notes payable	1,548,975			1,548,839			1,550			1,550
Total liabilities	30,281,944			29,190,105			33,251			32,187
Commitments and contingencies (see Note 14)
Equity
Commitments and contingencies (see Note 13)
Shareholders’ 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; 155,497,352 and 154,228,235 shares issued as of December 31, 2017 and September 30,2017, respectively, and 145,153,686 and 144,096,521 shares outstanding as of December 31, 2017 and September 30, 2017, respectively	1,555			1,542
Common stock; $.01 par value; 350,000,000 shares authorized; 158,571,983 and 158,435,030 shares issued as of December 31, 2019 and September 30, 2019, respectively, and 138,937,307 and 137,841,952 shares outstanding as of December 31, 2019 and September 30, 2019, respectively							2			2
Additional paid-in capital	1,705,308			1,645,397			1,922			1,938
Retained earnings	4,420,368			4,340,054			6,086			5,874
Treasury stock, at cost; 10,311,191 and 10,084,038 common shares as of December 31, 2017 and September 30, 2017, respectively	(410,029		)	(390,081		)
Treasury stock, at cost; 19,634,676 and 20,593,078 common shares as of December 31, 2019 and September 30, 2019, respectively							(1,163		)	(1,210		)
Accumulated other comprehensive loss	(20,454		)	(15,199		)	(5		)	(23		)
Total equity attributable to Raymond James Financial, Inc.	5,696,748			5,581,713			6,842			6,581
Noncontrolling interests	106,207			111,638			61			62
Total equity	5,802,955			5,693,351
Total liabilities and equity	$	36,084,899		$	34,883,456
Total shareholders’ equity							6,903			6,643
Total liabilities and shareholders’ equity							$	40,154		$	38,830

~~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,
$ in thousands, except per share amounts 2017 2016
Revenues:
Securities commissions and fees $ 1,103,566
$ 984,385
Investment banking 64,902
61,425
Investment advisory and related administrative fees 142,023
108,243
Interest 231,729
182,782
Account and service fees 184,301
148,791
Net trading profit 19,870
20,555
Other 19,201
22,587
Total revenues 1,765,592
1,528,768
Interest expense (39,431 ) (35,966 )
Net revenues 1,726,161
1,492,802
Non-interest expenses:

Compensation, commissions and benefits 1,152,767
1,006,467
Communications and information processing 83,731
72,161
Occupancy and equipment costs 49,814
46,052
Business development 33,793
35,362
Investment sub-advisory fees 22,321
19,295
Bank loan loss provision/(benefit) 1,016
(1,040 )
Acquisition-related expenses 3,927
12,666
Other 67,108
94,324
Total non-interest expenses 1,414,477
1,285,287
Income including noncontrolling interests and before provision for income taxes 311,684
207,515
Provision for income taxes 192,401
59,812
Net income including noncontrolling interests 119,283
147,703
Net income attributable to noncontrolling interests 441
1,136
Net income attributable to Raymond James Financial, Inc. $ 118,842
$ 146,567

Earnings per common share – basic $ 0.82
$ 1.03
Earnings per common share – diluted $ 0.80
$ 1.00
Weighted-average common shares outstanding – basic 144,469
142,110
Weighted-average common and common equivalent shares outstanding – diluted 148,261
145,675

Net income attributable to Raymond James Financial, Inc. $ 118,842
$ 146,567
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 (11,953 ) (4,146 )
Unrealized gain/(loss) on currency translations, net of the impact of net investment hedges (187 ) 1,001
Unrealized gain on cash flow hedges 6,885
25,738
Total comprehensive income $ 113,587
$ 169,160



	Three months ended December 31,
in millions, except per share amounts	2019			2018
Revenues:
Asset management and related administrative fees	$	955		$	865
Brokerage revenues:
Securities commissions	363			388
Principal transactions	97			76
Total brokerage revenues	460			464
Account and service fees	178			185
Investment banking	141			137
Interest income	297			316
Other	29			37
Total revenues	2,060			2,004
Interest expense	(51		)	(73		)
Net revenues	2,009			1,931
Non-interest expenses:
Compensation, commissions and benefits	1,351			1,265
Non-compensation expenses:
Communications and information processing	94			92
Occupancy and equipment	57			51
Business development	44			43
Investment sub-advisory fees	26			24
Professional fees	21			22
Bank loan loss provision/(benefit)	(2		)	16
Acquisition and disposition-related expenses	—			15
Other	59			71
Total non-compensation expenses	299			334
Total non-interest expenses	1,650			1,599
Pre-tax income	359			332
Provision for income taxes	91			83
Net income	$	268		$	249

Earnings per common share – basic	$	1.93		$	1.73
Earnings per common share – diluted	$	1.89		$	1.69
Weighted-average common shares outstanding – basic	138.3			144.2
Weighted-average common and common equivalent shares outstanding – diluted	141.5			147.3

Net income	$	268		$	249
Other comprehensive income/(loss), net of tax:
Available-for-sale securities	(1		)	22
Currency translations, net of the impact of net investment hedges	9			(13		)
Cash flow hedges	10			(17		)
Total other comprehensive income/(loss), net of tax	18			(8		)
Total comprehensive income	$	286		$	241


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

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

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

(Unaudited)



	Three months ended December 31,
$ in millions, except per share amounts	2019			2018
Common stock, par value $.01 per share:
Balance beginning of period	$	2		$	2
Share issuances	—			—
Balance end of period	2			2

Additional paid-in capital:
Balance beginning of period	1,938			1,808
Employee stock purchases	6			8
Exercise of stock options and vesting of restricted stock units, net of forfeitures	(63		)	16
Restricted stock, stock option and restricted stock unit expense	41			39
Balance end of period	1,922			1,871

Retained earnings:
Balance beginning of period	5,874			5,032
Net income attributable to Raymond James Financial, Inc.	268			249
Cash dividends declared (see Note 19)	(56		)	(50		)
Other	—			5
Balance end of period	6,086			5,236

Treasury stock:
Balance beginning of period	(1,210		)	(447		)
Purchases/surrenders	(19		)	(464		)
Exercise of stock options and vesting of restricted stock units, net of forfeitures	66			(16		)
Balance end of period	(1,163		)	(927		)

Accumulated other comprehensive loss:
Balance beginning of period	(23		)	(27		)
Other comprehensive income/(loss), net of tax	18			(8		)
Other	—			(4		)
Balance end of period	(5		)	(39		)
Total equity attributable to Raymond James Financial, Inc.	$	6,842		$	6,143

Noncontrolling interests:
Balance beginning of period	$	62		$	84
Net loss attributable to noncontrolling interests	(1		)	(2		)
Capital contributions	—			2
Distributions and other	—			(2		)
Balance end of period	61			82
Total shareholders’ equity	$	6,903		$	6,225

Three months ended December 31,
$ in thousands, except per share amounts 2017 2016
Common stock, par value $.01 per share:
Balance, beginning of year $ 1,542
$ 1,513
Share issuances 13

17
Balance, end of period 1,555
1,530

Additional paid-in capital:

Balance, beginning of year 1,645,397

1,498,921
Employee stock purchases 5,522

4,743
Exercise of stock options and vesting of restricted stock units, net of forfeitures 20,953

18,969
Restricted stock, stock option and restricted stock unit expense 33,373

30,971
Other 63

(322 )
Balance, end of period 1,705,308
1,553,282

Retained earnings:

Balance, beginning of year 4,340,054

3,834,781
Net income attributable to Raymond James Financial, Inc. 118,842

146,567
Cash dividends declared (38,417 ) (34,274 )
Other (111 ) —
Balance, end of period 4,420,368
3,947,074

Treasury stock:

Balance, beginning of year (390,081 ) (362,937 )
Purchases/surrenders (7,183 ) (8,474 )
Exercise of stock options and vesting of restricted stock units, net of forfeitures (12,765 ) (16,458 )
Balance, end of period (410,029 ) (387,869 )

Accumulated other comprehensive loss: ⁽¹⁾

Balance, beginning of year (15,199 ) (55,733 )
Net change in unrealized loss on available-for-sale securities and non-credit portion of other-than-temporary impairment losses, net of tax (11,953 ) (4,146 )
Net change in currency translations and net investment hedges, net of tax (187 ) 1,001
Net change in cash flow hedges, net of tax 6,885
25,738
Balance, end of period (20,454 ) (33,140 )
Total equity attributable to Raymond James Financial, Inc. $ 5,696,748

$ 5,080,877

Noncontrolling interests:

Balance, beginning of year $ 111,638
$ 146,431
Net income attributable to noncontrolling interests 441
1,136
Capital contributions —
4,998
Distributions (5,977 ) (26,557 )
Other 105
(2,284 )
Balance, end of period 106,207
123,724
Total equity $ 5,802,955
$ 5,204,601

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

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

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

		Three months ended December 31,							Three months ended December 31,
$ in thousands		2017			2016
$ in millions									2019			2018
Cash flows from operating activities:
Net income attributable to Raymond James Financial, Inc.		$	118,842		$	146,567
Net income attributable to noncontrolling interests		441			1,136
Net income including noncontrolling interests		119,283			147,703
Adjustments to reconcile net income including noncontrolling interests to net cash provided by operating activities:
Net income									$	268		$	249
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		23,289			19,941				30			26
Deferred income taxes		121,273			10,928				16			6
Premium and discount amortization on available-for-sale securities and unrealized gain on other investments		(496		)	(10,185		)
Premium and discount amortization on available-for-sale securities and loss on other investments									8			3
Provisions for loan losses, legal and regulatory proceedings and bad debts		9,265			33,017				1			32
Share-based compensation expense		34,417			32,572				43			37
Compensation expense payable in common stock of an acquiree		3,925			7,973
Unrealized gain on company owned life insurance, net of expenses		(16,859		)	(5,088		)
Unrealized (gain)/loss on company-owned life insurance policies, net of expenses									(35		)	58
Other		5,693			(5,724		)		9			9
Net change in:
Assets segregated pursuant to regulations and other segregated assets		(96,759		)	1,006,933
Securities purchased under agreements to resell, net of securities sold under agreements to repurchase		104,290			120,393				68			(60		)
Securities loaned, net of securities borrowed		(140,229		)	(232,438		)		(47		)	22
Loans provided to financial advisors, net of repayments		(21,928		)	(14,554		)		(12		)	2
Brokerage client receivables and other accounts receivable, net		123,512			83,887				188			444
Trading instruments, net		(46,547		)	152,474				4			62
Derivative instruments, net		30,449			38,447				52			(60		)
Other assets		(18,799		)	84,289				(81		)	(22		)
Brokerage client payables and other accounts payable		466,763			(481,542		)		465			(242		)
Accrued compensation, commissions and benefits		(266,453		)	(216,889		)		(340		)	(389		)
Proceeds from sales of securitizations and loans held for sale, net of purchases and originations of loans held for sale		(108,470		)	35,162				(91		)	48
Net cash provided by operating activities		325,619			807,299				546			225

Cash flows from investing activities:
Additions to property, buildings and equipment, including software		(35,949		)	(78,371		)
Additions to property and equipment									(36		)	(27		)
Increase in bank loans, net		(645,197		)	(774,376		)		(365		)	(461		)
Proceeds from sales of loans held for investment		21,580			54,163				25			129
Purchases of available-for-sale securities		(339,580		)	(377,235		)		(314		)	(291		)
Available-for-sale securities maturations, repayments and redemptions		114,139			56,647				206			151
Proceeds from sales of available-for-sale securities		—			7,308
Business acquisition, net of cash acquired		(159,200		)	—
Other investing activities, net		(29,669		)	17,124				(18		)	(34		)
Net cash used in investing activities		(1,073,876		)	(1,094,740		)		(502		)	(533		)


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

	Three months ended December 31,							Three months ended December 31,
$ in thousands	2017			2016
$ in millions								2019			2018
Cash flows from financing activities:
Proceeds from borrowings on the RJF Credit Facility	300,000			—				—			300
Proceeds from/(repayments of) short-term borrowings, net	(280,000		)	208,400				6			—
Proceeds from Federal Home Loan Bank advances	—			100,000				850			—
Repayments of Federal Home Loan Bank advances and other borrowed funds	(1,186		)	(1,138		)		(851		)	(1		)
Exercise of stock options and employee stock purchases	25,954			24,143				25			23
Increase in bank deposits	993,183			927,243				694			1,731
Purchases of treasury stock	(20,243		)	(26,058		)		(19		)	(480		)
Dividends on common stock	(32,499		)	(31,255		)		(51		)	(47		)
Distributions to noncontrolling interests, net	(5,977		)	(26,557		)
Net cash provided by financing activities	979,232			1,174,778				654			1,526

Currency adjustment:
Effect of exchange rate changes on cash	(3,118		)	(9,514		)		21			(55		)
Net increase in cash and cash equivalents	227,857			877,823
Cash and cash equivalents at beginning of year	3,669,672			1,650,452
Cash and cash equivalents at end of period	$	3,897,529		$	2,528,275
Net increase in cash and cash equivalents and cash and cash equivalents segregated pursuant to regulations								719			1,163
Cash and cash equivalents and cash and cash equivalents segregated pursuant to regulations at beginning of year								5,971			5,941
Cash and cash equivalents and cash and cash equivalents segregated pursuant to regulations at end of period								$	6,690		$	7,104

Cash and cash equivalents								$	4,109		$	4,322
Cash and cash equivalents segregated pursuant to regulations								2,581			2,782
Total cash and cash equivalents and cash and cash equivalents segregated pursuant to regulations at end of period								$	6,690		$	7,104

Supplemental disclosures of cash flow information:
Cash paid for interest	$	28,026		$	32,442			$	39		$	62
Cash paid for income taxes	$	8,515		$	13,710
Cash paid for income taxes, net								$	9		$	10

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

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

December 31, ~~2017~~2019

NOTE 1 – ORGANIZATION AND BASIS OF PRESENTATION

Organization

Raymond James Financial, Inc. (“RJF,” the “firm” or the “Company”) is a financial holding company ~~whose broker-dealer~~which, together with its subsidiaries, ~~are~~is engaged in various financial services ~~businesses,~~activities, including providing investment management services for retail and institutional clients, the underwriting, distribution, trading and brokerage of equity and debt securities, and the sale of mutual funds and other investment products. ~~In addition, other subsidiaries of RJF provide investment management services for retail and institutional clients,~~The firm also provides corporate and retail banking services, and trust services. For further information about our business segments, see Note ~~20.~~20 of this Form 10-Q. As used herein, the terms “our,” “we,” ~~“our”~~ or “us” refer to RJF and/or one or more of its subsidiaries.

Basis of presentation

The accompanying unaudited condensed consolidated financial statements include the accounts of RJF and its consolidated subsidiaries that are generally controlled through a majority voting interest. We consolidate all of our 100% owned subsidiaries. In addition, we consolidate any variable interest entity (“VIE”) in which we are the primary beneficiary. Additional information on these VIEs is provided in Note 2 ~~and Note 10~~ of our Annual Report on Form 10-K ~~(the “2017~~(“2019 Form 10-K”) for the year ended September 30, ~~2017,~~2019, as filed with the United States (“U.S.”) Securities and Exchange Commission (“SEC”) and in Note ~~9 herein.~~8 of this Form 10-Q. When we do not have a controlling interest in an entity, but we exert significant influence over the entity, we apply the equity method of accounting. All material intercompany balances and transactions have been eliminated in consolidation.

Accounting estimates and assumptions

Certain financial information that is normally included in annual financial statements prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) but is not required for interim reporting purposes has been condensed or omitted. These unaudited condensed consolidated financial statements reflect, in the opinion of management, all adjustments necessary for a fair presentation of ~~the~~our consolidated financial position and results of operations for the periods presented.

The nature of our business is such that the results of any interim period are not necessarily indicative of results for a full year. These unaudited condensed consolidated financial statements should be read in conjunction with Management’s Discussion and Analysis of Financial Condition and Results of Operations and the ~~consolidated financial statements~~Consolidated Financial Statements and ~~notes~~Notes thereto included in our ~~2017~~2019 Form 10-K. To prepare condensed consolidated financial statements in ~~conformity~~accordance with GAAP, we must make certain estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements, and the reported amounts of revenues and expenses for the reporting period. Actual results could differ from those estimates and could have a material impact on the condensed consolidated financial statements.

Reclassifications

Certain prior period amounts have been reclassified to conform to the current period’s presentation.

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited)

NOTE 2 – UPDATE OF SIGNIFICANT ACCOUNTING POLICIES

A summary of our significant accounting policies is included in Note 2 of our ~~2017~~2019 Form 10-K. ~~There have been~~During the three months ended December 31, 2019, there were no significant changes into our significant accounting policies ~~since September 30, 2017.~~

~~Loans to financial advisors, net~~

~~As more fully described in Note 2~~other than the accounting policies adopted or modified as part of our ~~2017 Form 10-K, we offer loans to financial advisors and certain other key revenue producers, primarily for recruiting, transitional cost assistance, and retention purposes. We present~~implementation of new or amended accounting guidance, as noted in the outstanding balance of “Loans to financial advisors, net” on our Condensed Consolidated Statements of Financial Condition, net of the allowance for doubtful accounts. Of the gross balance outstanding, the portion associated with financial advisors who are no longer affiliated with us was approximately $26 million and $22 million at December 31, 2017 and September 30, 2017, respectively. Our allowance for doubtful accounts was approximately $9 million and $8 million at December 31, 2017 and September 30, 2017, respectively.following sections.

~~RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES~~

~~Notes to Condensed Consolidated Financial Statements (Unaudited)~~

Recent accounting developments

Accounting guidance ~~not yet~~recently adopted

~~Revenue recognition -~~ In May 2014, the FASB issued new guidance regarding revenue recognition (ASU 2014-09). 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 fiscal year beginning on October 1, 2018 and allows for full retrospective adoption or modified retrospective adoption. Although, early adoption is permitted for fiscal years beginning after December 15, 2016, we do not plan to early adopt. Upon adoption, we plan to use a modified retrospective approach, with a cumulative effect adjustment to opening retained earnings. 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. Based on our implementation efforts to date, we expect that we will be required to change our current presentation of certain costs from a net presentation within revenues to a gross presentation, particularly with respect to merger & acquisitions advisory transactions and underwriting transactions. We are still evaluating the impact the adoption of this new guidance will have on our financial position and results of operations. We are also still evaluating the impact to our disclosures as a result of adopting this new guidance.

~~Financial instruments -~~ ~~In January 2016, the FASB issued new guidance related to the accounting for financial instruments (ASU 2016-01). 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 our fiscal year beginning on October 1, 2018, generally under a modified retrospective approach, with the exception of the amendments related to equity investments without a readily determinable fair value and the use of an exit price notion to measure financial instruments for disclosure purposes, which will be applied prospectively as of the date of adoption. 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.

Lease accounting - In February 2016, the ~~FASB~~Financial Accounting Standards Board (“FASB”) issued new guidance related to the accounting for leases (ASU 2016-02). The new guidance and subsequent amendments requires the recognition of assets and liabilities on the balance sheet related to the rights and obligations created by lease agreements with terms greater than twelve months, regardless of whether they are classified as finance or operating leases. ~~Consistent with current~~We adopted this guidance ~~the recognition, measurement and presentation~~as 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. This new guidance, including subsequent amendments, is first effective for our fiscal year beginning on October 1, ~~2019. Although early adoption is permitted, we do not plan to early adopt. Upon adoption, we will use a~~2019 using the alternative modified retrospective approach, with ~~a cumulative~~no adjustments to prior periods presented. In addition, we elected the practical expedients permitted under the transition guidance which, among other things, allowed us to carry forward historical lease classification determinations. On the adoption date, we recognized right-of-use assets (“ROU assets”) and lease liabilities of $333 million and $357 million, respectively, in “Other assets” and “Other payables” on our Condensed Consolidated Statements of Financial Condition. The ROU assets and lease liabilities were primarily related to operating leases. The adoption had no effect ~~adjustment~~on our results of operations or cash flows. The impact of the adoption on our regulatory capital measures was insignificant. See Note 9 for further information.

Derivatives and hedging (interest rate) - In October 2018, the FASB issued guidance amending Derivatives and Hedging (Topic 815) to ~~opening retained earnings. Our implementation efforts include reviewing existing leases~~add the overnight index swap rate based on the Secured Overnight Financing Rate (“SOFR”) to the list of U.S. benchmark interest rates that are eligible during the early stages of the market transition from the London Interbank Offered Rate (“LIBOR”) to SOFR (ASU 2018-16). The amendments to this guidance will provide adequate lead time for entities to prepare for changes to interest rate hedging strategies. We adopted the guidance October 1, 2019 and ~~service contracts, which may include embedded leases. This~~will apply the guidance prospectively for qualifying new ~~guidance will~~or re-designated hedging relationships. The adoption did not impact our financial position ~~and~~or results of operations. ~~We are evaluating the magnitude~~

Accounting guidance not yet adopted as of ~~such impact.~~December 31, 2019

Credit losses - In June 2016, the FASB issued new guidance related to the measurement of credit losses on financial instruments (ASU 2016-13). 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, and subsequent updates, broadens the information that an entity must consider in developing its estimated credit losses expected to occur over the

~~RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES~~

~~Notes to Condensed Consolidated Financial Statements (Unaudited)~~

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 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. This new guidance is first effective for our fiscal year beginning on October 1, 2020 and will be adopted under a modified retrospective approach. ~~Early adoption is~~Although permitted, ~~although~~we do not ~~prior~~plan to ~~our fiscal year beginning October 1, 2019. We have begun~~early adopt. Our cross-functional team has continued our implementation efforts, including data collection and ~~evaluation efforts by establishing a cross-functional team to assess~~processing, model development and validation, and establishment of the ~~required changes to our credit loss estimation methodologies~~governance and ~~systems, as well as determine additional data and resources required to comply with the new guidance.~~control processes. We are evaluating the impact the adoption of this new guidance will have on our financial position and results of 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.

~~Statement of Cash Flows (classification of certain cash receipts and cash payments)~~Internal use software (cloud computing) - In August ~~2016,~~2018, the FASB issued ~~amended~~ guidance ~~related~~on the accounting for implementation costs incurred by customers in cloud computing arrangements (ASU 2018-15). This guidance requires implementation costs incurred by customers in cloud computing arrangements to be deferred over the ~~Statement of Cash Flows (ASU 2016-15). The amended guidance involves several aspects~~non-cancelable term 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 ratescloud computing arrangements plus any optional renewal periods (1) that are ~~insignificant in relation~~reasonably certain to be exercised by the ~~effective interest rate~~customer or (2) for which exercise of the ~~borrowing, contingent consideration payments made after a business combination, proceeds from~~renewal option is controlled by 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.cloud service provider. This amended guidance is first effective for our fiscal year beginning ~~October1, 2018 and will~~on October 1, 2020 with early adoption permitted, although we do not plan to early adopt. The guidance may be adopted ~~under a~~either using the prospective or retrospective approach. ~~Early adoption is permitted. The adoption~~We are currently evaluating the impact of this new guidance ~~will impact our Statement of Cash Flows and will not have an impact~~ on our financial position and results of operations.

~~Income tax impact of intra-entity transfers of assets~~Consolidation (decision making fees) - In October ~~2016,~~2018, the FASB issued guidance on how all entities evaluate decision-making fees under the VIE guidance (ASU 2018-17). Under the new guidance, ~~related~~ to the accounting for income tax consequences of intra-entity transfers of assets (ASU 2016-16). Current GAAP prohibits the recognition of current and deferred income taxes for intra-entity asset transfers until the asset has been sold to an outside party. Under this new guidance,determine whether decision-making fees represent a variable interest, an entity ~~should recognize the income tax consequences of an inter-entity transfer of an asset when the transfer occurs.~~considers indirect interests held through related parties under common control on a proportionate basis, rather than in their entirety. This guidance is first effective for our fiscal year beginning on October 1, ~~2018 and will be adopted under a retrospective approach. Early adoption is permitted.~~2020. Although permitted, we do not plan

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited)

to early adopt. We are evaluating the impact the adoption of this new guidance will have on our financial position and results of operations.

~~Statement of Cash Flows (restricted cash)~~Income Taxes (simplification) - In November 2016, the FASB issued new guidance related to the classification and presentation of changes in restricted cash on the Statement of Cash Flows (ASU 2016-18). 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. This guidance is first effective for our fiscal year beginning October 1, 2018 and will be adopted under a retrospective approach. Early adoption is permitted. We are evaluating the impact the adoption of this new guidance will have on our Consolidated Statements of Cash Flows.

~~Definition of a business -~~ In January 2017, the FASB issued amended guidance related to the definition of a business (ASU 2017-01). 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. This guidance is first effective for our fiscal year beginning October 1, 2018 and will be adopted on a prospective basis. Early adoption is permitted. Given the adoption of this amended guidance is dependent upon the nature of future events and circumstances, we are unable to estimate the impact, if any, the adoption of this new guidance will have on our financial position and results of operations.

~~Goodwill -~~ ~~In January 2017,~~December 2019, the FASB issued amended guidance to simplify of the ~~subsequent measurement~~accounting for income taxes (ASU 2019-12). The amendments simplify the accounting for income taxes by removing certain exceptions to the general principles in current guidance related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period, and the recognition of ~~goodwill, eliminating “Step 2” from~~deferred tax liabilities for outside basis differences. The new guidance also simplifies aspects of the ~~goodwill impairment test (ASU 2017-04). In computing~~accounting for franchise taxes and enacted changes in tax laws or rates and clarifies 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~~accounting for transactions that ~~would be required in determining the fair value of assets acquired and liabilities assumed~~result in a business combination. Under this 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. This guidance is first effective for our fiscal year beginning October 1, 2019 and will be adopted on a prospective basis. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. We will adopt this simplification guidancestep-up in the ~~earliest period it applies to our facts and circumstances.~~

~~RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES~~

~~Notes to Condensed Consolidated Financial Statements (Unaudited)~~

~~Callable debt securities -~~ ~~In March 2017, the FASB issued~~tax basis of goodwill. This new 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 (ASU 2017-08). Discounts on callable debt securities will continue to be amortized to the contractual maturity date. This guidance is first effective for our fiscal year beginning on October 1, ~~2019~~2021 with early adoption permitted. We are currently evaluating the impact of this new guidance on our financial position and ~~will~~results of operations.

Equity Securities, Equity Method Investments, and Certain Derivative Instruments - In January 2020, the FASB issued new guidance clarifying the interaction between accounting standards related to equity securities, equity method investments, and certain derivatives (ASU 2020-01). The new guidance, among other things, states that a company should consider observable transactions that require a company to either apply or discontinue the equity method of accounting, for the purposes of applying the fair value measurement alternative immediately before applying or upon discontinuing the equity method. The new guidance is effective for our fiscal year beginning October 1, 2021 and should be ~~adopted using a modified retrospective approach. Early adoption is permitted.~~applied prospectively. We are evaluating the impact the adoption of this new guidance will have on our financial position and results of operations.

~~Share-based payment awards -~~ In May 2017, the FASB issued amended guidance that clarifies when changes to the terms or conditions of share-based payment awards require an entity to apply modification accounting (ASU 2017-09). The amended guidance states an entity should account for the effects of a modification unless certain criteria are met which include that the modified award has the same fair value, vesting conditions and classification as the original award. This amended guidance is first effective for our fiscal year beginning October 1, 2018 and will be adopted on a prospective basis. Early adoption is permitted. Given that this guidance applies to specific transactions and would only become relevant in certain circumstances, we are unable to estimate the impact, if any, this amended guidance may have on our financial position and results of operations.

~~Derivatives and hedging (accounting for hedging activities) -~~ ~~In August 2017, the FASB issued new guidance amending its hedge accounting model (ASU 2017-12). Among other things, the new guidance:~~

~~Expands the ability to hedge nonfinancial and financial risk components.~~

~~Reduces complexity in fair value hedges of interest rate risk.~~

~~Eliminates the requirement to separately measure and report hedge ineffectiveness.~~

~~Generally requires the entire change in the fair value of a hedging instrument to be presented in the same income statement line as the hedged item.~~

~~Modifies accounting for components excluded from the assessment of hedge effectiveness.~~

~~Eases certain documentation and hedge effectiveness assessment requirements.~~

The new guidance is first effective for our fiscal year beginning October 1, 2019 and the amendments are required to be applied to cash flow and net investment hedges that exist on the date of adoption on a modified retrospective basis. Changes to presentation and disclosure requirements are only required on a prospective basis. Early adoption is permitted. We are considering whether we will early adopt this new guidance and the timing thereof, as well as the impact it will have on our financial position and results of operations.

~~NOTE 3 – ACQUISITIONS~~

~~Acquisitions completed during fiscal year 2018~~

In November 2017, we completed our acquisition of 100% of the outstanding shares of Scout Investments, Inc. (the “Scout Group”), an asset management and distribution entity, from UMB Financial Corporation. The Scout Group includes Scout Investments (“Scout”) and its Reams Asset Management division (“Reams”), as well as Scout Distributors. The addition of Scout, an equity asset manager, and Reams, an institutional-focused fixed income specialist, broadened the investment solutions available to our clients and has been integrated into our Asset Management segment. For purposes of certain acquisition-related financial reporting requirements, the Scout Group acquisition was not considered a material acquisition. We accounted for this acquisition under the acquisition method of accounting with the assets and liabilities of the Scout Group recorded as of the acquisition date at their respective fair values in our condensed consolidated financial statements. The Scout Group’s results of operations have been included in our results prospectively from November 17, 2017.

~~Acquisition-related expenses~~

~~The “Acquisition-related expenses” presented in our Condensed Consolidated Statements of Income and Comprehensive Income for~~

the three months ended December 31, 2017 pertain to certain incremental expenses incurred in connection with the Scout Group acquisition. Acquisition-related expenses for the three months ended December 31, 2016 primarily related to our fiscal year 2016 acquisitions of the U.S. Private Client Services unit of Deutsche Bank Wealth Management (“Alex. Brown”) and MacDougall, MacDougall & MacTier Inc. (“3Macs”), which are described further in Note 3 of our 2017 Form 10-K.

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited)

~~The table below presents a summary of acquisition-related expenses incurred in each respective period.~~

Three months ended December 31,
$ in thousands 2017 2016
Legal and regulatory $ 2,281
$ 553
Severance 990
4,803
Information systems integration costs 162
1,205
Acquisition and integration-related incentive compensation costs —
5,474
Early termination costs of assumed contracts —
1,324
Post-closing purchase price contingency —
(2,251 )
All other 494
1,558
Total acquisition-related expenses $ 3,927
$ 12,666

~~RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES~~

~~Notes to Condensed Consolidated Financial Statements (Unaudited)~~

NOTE 43 – FAIR VALUE

Our “Financial instruments owned” and “Financial instruments sold but not yet purchased” on our Condensed Consolidated Statements of Financial Condition are recorded at fair value under GAAP. For further information about such instruments and our significant accounting policies related to fair value, see Note 2 and Note 4 of our ~~2017~~2019 Form 10-K. ~~There have been no material changes to our valuation methodologies or our fair value accounting policies since our year ended September 30, 2017.~~

The following tables ~~below presents~~present assets and liabilities measured at fair value on a recurring ~~and nonrecurring~~ basis. Netting adjustments represent the impact of counterparty and collateral netting on our derivative balances included inon our Condensed Consolidated Statements of Financial Condition. See Note 65 for additional information.



$ in millions	Level 1		Level 2		Level 3		Netting adjustments			Balance as of December 31, 2019
Assets at fair value on a recurring basis:
Trading instruments
Municipal and provincial obligations	$	1	$	149	$	—	$	—		$	150
Corporate obligations	12		80		—		—			92
Government and agency obligations	6		52		—		—			58
Agency mortgage-backed securities (“MBS”) and collateralized mortgage obligations (“CMOs”)	—		230		—		—			230
Non-agency CMOs and asset-backed securities (“ABS”)	—		39		—		—			39
Total debt securities	19		550		—		—			569
Equity securities	10		1		—		—			11
Brokered certificates of deposit	—		33		—		—			33
Other	—		—		19		—			19
Total trading instruments	29		584		19		—			632
Available-for-sale securities ⁽¹⁾	10		3,212		—		—			3,222
Derivative assets
Interest rate - matched book	—		244		—		—			244
Interest rate - other	5		128		—		(89		)	44
Total derivative assets	5		372		—		(89		)	288
Other investments - private equity - not measured at net asset value (“NAV”)	—		—		62		—			62
All other investments	196		1		24		—			221
Subtotal	240		4,169		105		(89		)	4,425
Other investments - private equity - measured at NAV										80
Total assets at fair value on a recurring basis	$	240	$	4,169	$	105	$	(89	)	$	4,505

Liabilities at fair value on a recurring basis:
Trading instruments sold but not yet purchased
Municipal and provincial obligations	$	1	$	—	$	—	$	—		$	1
Corporate obligations	1		16		—		—			17
Government and agency obligations	187		—		—		—			187
Total debt securities	189		16		—		—			205
Equity securities	4		—		—		—			4
Other	—		—		1		—			1
Total trading instruments sold but not yet purchased	193		16		1		—			210
Derivative liabilities
Interest rate - matched book	—		244		—		—			244
Interest rate - other	5		107		—		(71		)	41
Foreign exchange	—		15		—		—			15
Equity	—		6		—		—			6
Total derivative liabilities	5		372		—		(71		)	306
Total liabilities at fair value on a recurring basis	$	198	$	388	$	1	$	(71	)	$	516

$ in thousands Quoted prices
in active
markets for
identical
instruments
(Level 1)
Significant
other
observable
inputs
(Level 2)

Significant
unobservable
inputs
(Level 3)

Netting
adjustments
Balance as of
December 31,
2017
Assets at fair value on a recurring basis
Trading instruments
Municipal and provincial obligations $ 122
$ 197,580
$ —
$ —
$ 197,702
Corporate obligations 11,069
33,723
—
—
44,792
Government and agency obligations 6,376
17,929
—
—
24,305
Agency mortgage-backed securities (“MBS”) and collateralized mortgage obligations (“CMOs”) 2,128
214,680
—
—
216,808
Non-agency CMOs and asset-backed securities (“ABS”) —
52,244
5
—
52,249
Total debt securities 19,695

516,156
5
—
535,856
Equity securities 18,497
803
—
—
19,300
Brokered certificates of deposit —
32,173
—
—
32,173
Other 27
7,511
2,712
—
10,250
Total trading instruments 38,219
556,643
2,717
—
597,579
Available-for-sale securities

Agency MBS and CMOs —
2,285,051
—
—
2,285,051
Other securities 787
—
—
—
787
Auction rate securities (“ARS”) preferred securities —
—
107,483
—
107,483
Total available-for-sale securities 787
2,285,051
107,483
—
2,393,321
Derivative assets
Interest rate contracts
Matched book —
263,851
—
—
263,851
Other —
58,660
—
(30,375 ) 28,285
Foreign exchange contracts —
4
—
—
4
Total derivative assets —
322,515
—
(30,375 ) 292,140
Private equity investments ⁽¹⁾

Not measured at NAV —
—
88,810
—
88,810
Measured at NAV 100,223
Total private equity investments —
—
88,810
—
189,033
Other investments ⁽²⁾
263,978
859
333
—
265,170
Total assets at fair value on a recurring basis $ 302,984

$ 3,165,068

$ 199,343

$ (30,375 )
$ 3,737,243

Assets at fair value on a nonrecurring basis

Bank loans, net

Impaired loans $ —
$ 16,347
$ 23,418
$ —
$ 39,765
Loans held for sale ⁽³⁾
—
69,057
—
—
69,057
Total assets at fair value on a nonrecurring basis $ —
$ 85,404
$ 23,418
$ —
$ 108,822

(continued on next page)

(1) Substantially all of our available-for-sale securities consist of agency MBS and CMOs. See Note 4 for further information.

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited)



$ in millions	Level 1		Level 2		Level 3		Netting adjustments			Balance as of September 30, 2019
Assets at fair value on a recurring basis:
Trading instruments
Municipal and provincial obligations	$	—	$	267	$	—	$	—		$	267
Corporate obligations	8		95		—		—			103
Government and agency obligations	12		67		—		—			79
Agency MBS and CMOs	—		147		—		—			147
Non-agency CMOs and ABS	—		51		—		—			51
Total debt securities	20		627		—		—			647
Equity securities	12		1		—		—			13
Brokered certificates of deposit	—		45		—		—			45
Other	—		—		3		—			3
Total trading instruments	32		673		3		—			708
Available-for-sale securities ⁽¹⁾	10		3,083		—		—			3,093
Derivative assets
Interest rate - matched book	—		280		—		—			280
Interest rate - other	3		182		—		(127		)	58
Total derivative assets	3		462		—		(127		)	338
Other investments - private equity - not measured at NAV	—		—		63		—			63
All other investments	194		1		24		—			219
Subtotal	239		4,219		90		(127		)	4,421
Other investments - private equity - measured at NAV										83
Total assets at fair value on a recurring basis	$	239	$	4,219	$	90	$	(127	)	$	4,504

Liabilities at fair value on a recurring basis:
Trading instruments sold but not yet purchased
Corporate obligations	$	2	$	20	$	—	$	—		$	22
Government and agency obligations	269		—		—		—			269
Total debt securities	271		20		—		—			291
Equity securities	4		—		—		—			4
Other	—		—		1		—			1
Total trading instruments sold but not yet purchased	275		20		1		—			296
Derivative liabilities
Interest rate - matched book	—		280		—		—			280
Interest rate - other	4		142		—		(121		)	25
Foreign exchange	—		2		—		—			2
Equity	—		6		—		—			6
Total derivative liabilities	4		430		—		(121		)	313
Total liabilities at fair value on a recurring basis	$	279	$	450	$	1	$	(121	)	$	609

(continued from previous page)

$ in thousands
Quoted prices
in active
markets for
identical
instruments
(Level 1)

Significant
other
observable
inputs
(Level 2)

Significant
unobservable
inputs
(Level 3)

Netting
adjustments
Balance as of
December 31,
2017
Liabilities at fair value on a recurring basis
Trading instruments sold but not yet purchased
Municipal and provincial obligations $ 742
$ 3,082
$ —
$ —
$ 3,824
Corporate obligations 608
7,394
—
—
8,002
Government obligations 183,510
—
—
—
183,510
Agency MBS and CMOs 328
—
—
—
328
Non-agency MBS and CMOs —
—
—
—
—
Total debt securities 185,188
10,476
—
—
195,664
Equity securities 16,294
4
—
—
16,298
Other 4
—
1,058
—
1,062
Total trading instruments sold but not yet purchased 201,486
10,480
1,058
—
213,024
Derivative liabilities
Interest rate contracts
Matched book —
263,851
—
—
263,851
Other —
86,815
—
(42,284 ) 44,531
Foreign exchange contracts —
19,710
—
—
19,710
Deutsche Bank restricted stock unit (“DBRSU”) obligation (equity) —
28,413
—
—
28,413
Total derivative liabilities —
398,789
—
(42,284 ) 356,505
Total liabilities at fair value on a recurring basis $ 201,486

$ 409,269

$ 1,058

$ (42,284 )
$ 569,529

(1)

~~Of the total private equity investments, the portion we owned was $138 million as~~Substantially all of ~~December 31, 2017. The portion~~our available-for-sale securities consist of ~~the private equity investments we did not own was $51 million as of December 31, 2017~~agency MBS and ~~was included as a component of noncontrolling interests in our Condensed Consolidated Statements of Financial Condition.~~


~~(2)~~	Includes $45 million of financial instruments that are related to obligations to perform under certain deferred compensation plans and Deutsche Bank AG (“DB”) shares with a fair value of $21 million as of December 31, 2017 which we hold as an economic hedge against the DBRSU obligation.CMOs. See ~~Notes 2 and 20 in our 2017 Form 10-K~~Note 4 for ~~additional~~further information.


~~(3)~~	~~Loans classified as held for sale recorded at a fair value lower than cost.~~

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited)

$ in thousands Quoted prices
in active
markets for
identical
instruments
(Level 1) Significant
other
observable
inputs
(Level 2) Significant
unobservable
inputs
(Level 3) Netting
adjustments Balance as of
September 30,
2017
Assets at fair value on a recurring basis
Trading instruments
Municipal and provincial obligations $ 83
$ 221,884
$ —
$ —
$ 221,967
Corporate obligations 9,361
81,577
—
—
90,938
Government and agency obligations 6,354
28,977
—
—
35,331
Agency MBS and CMOs 913
133,070
—
—
133,983
Non-agency CMOs and ABS —
28,442
5
—
28,447
Total debt securities 16,711
493,950
5
—
510,666
Equity securities 16,090
389
—
—
16,479
Brokered certificates of deposit —
31,492
—
—
31,492
Other 32
—
5,594
—
5,626
Total trading instruments 32,833
525,831
5,599
—
564,263
Available-for-sale securities

Agency MBS and CMOs —
2,081,079
—
—
2,081,079
Other securities 1,032
—
—
—
1,032
ARS preferred securities —
—
106,171
—
106,171
Total available-for-sale securities 1,032
2,081,079
106,171
—
2,188,282
Derivative assets
Interest rate contracts
Matched book —
288,035
—

—
288,035
Other —
86,436
—
(55,728 ) 30,708
Foreign exchange contracts —
32
—
—
32
Total derivative assets —

374,503

—

(55,728 )
318,775
Private equity investments ⁽¹⁾

Not measured at NAV —
—
88,885
—
88,885
Measured at NAV 109,894
Total private equity investments —
—
88,885
—
198,779
Other investments ⁽²⁾
220,312
332
336
—
220,980
Total assets at fair value on a recurring basis $ 254,177
$ 2,981,745
$ 200,991
$ (55,728 ) $ 3,491,079

Assets at fair value on a nonrecurring basis

Bank loans, net
Impaired loans $ —
$ 17,474
$ 23,994
$ —
$ 41,468
Loans held for sale ⁽³⁾
—
11,285
—
—
11,285
Total bank loans, net —
28,759
23,994
—
52,753
Other assets: other real estate owned —
880
—
—
880
Total assets at fair value on a nonrecurring basis $ —
$ 29,639
$ 23,994
$ —
$ 53,633

(continued on next page)

~~RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES~~

~~Notes to Condensed Consolidated Financial Statements (Unaudited)~~

(continued from previous page)

$ in thousands
Quoted prices
in active
markets for
identical
instruments
(Level 1)

Significant
other
observable
inputs
(Level 2)

Significant
unobservable
inputs
(Level 3)

Netting
adjustments
Balance as of
September 30,
2017
Liabilities at fair value on a recurring basis

Trading instruments sold but not yet purchased

Municipal and provincial obligations $ 304
$ —
$ —
$ —
$ 304
Corporate obligations 1,286
35,272
—
—
36,558
Government obligations 167,622
—
—
—
167,622
Agency MBS and CMOs 2,477
—
—
—
2,477
Non-agency MBS and CMOs —
5,028
—
—
5,028
Total debt securities 171,689
40,300
—
—
211,989
Equity securities 8,118
1,342
—
—
9,460
Total trading instruments sold but not yet purchased 179,807
41,642
—
—
221,449
Derivative liabilities
Interest rate contracts

Matched book —
288,035
—
—
288,035
Other —
101,893
—
(59,410 ) 42,483
Foreign exchange contracts —
646
—
—
646
DBRSU obligation (equity) —
25,800
—
—
25,800
Total derivative liabilities —
416,374
—
(59,410 ) 356,964
Total liabilities at fair value on a recurring basis $ 179,807
$ 458,016
$ —
$ (59,410 ) $ 578,413


~~(1)~~	Of the total private equity investments, the portion we owned was $145 million as of September 30, 2017. The portion of the private equity investments we did not own was $54 million as of September 30, 2017, and was included as a component of noncontrolling interests in our Condensed Consolidated Statements of Financial Condition.


~~(2)~~	Includes $44 million of financial instruments that are related to obligations to perform under certain deferred compensation plans and DB shares with a fair value of $19 million as of September 30, 2017, which we hold as an economic hedge against the DBRSU obligation. See Notes 2 and 20 in our 2017 Form 10-K for additional information.


~~(3)~~	~~Loans classified as held for sale recorded at a fair value lower than cost.~~

~~Transfers between levels~~

We had $1 million in transfers of financial instruments from Level 1 to Level 2 during both the three months ended December 31, 2017 and 2016. These transfers were a result of decreased market activity in these instruments. There were no transfers from Level 2 to Level 1 during the three months ended December 31, 2017 and $1 million in transfers of financial instruments from Level 2 to Level 1 during the three months ended December 31, 2016. These transfers were a result of increased market activity in these instruments. Our policy is to treat transfers between levels of the fair value hierarchy as having occurred at the end of the reporting period.

~~RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES~~

~~Notes to Condensed Consolidated Financial Statements (Unaudited)~~

~~Changes in~~ Level 3 recurring fair value measurements

The following tables ~~below~~ present the changes in fair value for Level 3 assets and liabilities measured at fair value on a recurring basis. The realized and unrealized gains and losses in the tables ~~below~~ may include changes in fair value that were attributable to both observable and unobservable inputs. ~~Our policy is to treat transfers between levels of~~In the ~~fair value hierarchy as having occurred at the end of the reporting period.~~following tables, gains/(losses) on trading instruments are reported in “Principal transactions” and gains/(losses) on other investments are reported in “Other” revenues.

Three months ended December 31, 2017
Level 3 instruments at fair value
Financial assets
Financial
liabilities
Trading instruments Available-for-sale securities Private equity and other investments Trading instruments
$ in thousands
Non-agency
CMOs & ABS
Other
ARS - preferred
securities

Private
equity
investments

Other
investments
Other
Fair value beginning of period $ 5
$ 5,594
$ 106,171
$ 88,885
$ 336
$ —
Total gains/(losses) for the period

Included in earnings —
(1,207 ) —
2
(3 ) (1,058 )
Included in other comprehensive income —
—
1,312
—
—
—
Purchases and contributions —
20,279
—
—
—
—
Sales —
(21,954 ) —
(77 ) —
—
Distributions —
—
—
—
—
—
Transfers

Into Level 3 —
—
—
—
—
—
Out of Level 3 —
—
—
—
—
—
Fair value end of period $ 5
$ 2,712
$ 107,483
$ 88,810
$ 333
$ (1,058 )
Unrealized gains/(losses) for the period included in earnings for instruments held at the end of the reporting period $ —
$ (243 ) $ 1,312
$ —
$ (3 ) $ (1,058 )



Three months ended December 31, 2019 Level 3 instruments at fair value
	Financial assets								Financial liabilities
	Trading instruments			Other investments					Trading instruments
$ in millions	Other			Private equity investments			All other		Other
Fair value beginning of period	$	3		$	63		$	24	$	(1	)
Total gains/(losses) included in earnings	(1		)	—			—		—
Purchases and contributions	31			—			—		1
Sales and distributions	(14		)	(1		)	—		(1		)
Transfers:
Into Level 3	—			—			—		—
Out of Level 3	—			—			—		—
Fair value end of period	$	19		$	62		$	24	$	(1	)
Unrealized gains/(losses) for the period included in earnings for instruments held at the end of the reporting period	$	—		$	—		$	—	$	—

Three months ended December 31, 2016 Level 3 instruments at fair value
Financial assets
Financial
liabilities
Trading instruments Available-for-sale securities Private equity and other investments Trading instruments
$ in thousands
Non-agency
CMOs &
ABS
Other
ARS –
municipals obligations

ARS -
preferred
securities

Private
equity
investments

Other
investments
Other
Fair value beginning of period $ 7
$ 6,020
$ 25,147
$ 100,018
$ 83,165
$ 441
$ —
Total gains/(losses) for the period

Included in earnings —
(2,589 ) —
1
301
(8 ) (1,792 )
Included in other comprehensive income —
—
217
3,857
—
—
—
Purchases and contributions —
18,683
—
—
—
—
—
Sales —
(11,062 ) —
(23 ) —
(15 ) —
Distributions —
—
—
—
—
—
—
Transfers
Into Level 3 —
—
—
—
—
—
—
Out of Level 3 —
—
—
—
—
(195 ) —
Fair value end of period $ 7
$ 11,052
$ 25,364
$ 103,853
$ 83,466
$ 223
$ (1,792 )
Unrealized gains/(losses) for the period included in earnings for instruments held at the end of the reporting period $ —
$ (124 ) $ 217
$ 3,856
$ 301
$ —
$ (1,792 )



Three months ended December 31, 2018 Level 3 instruments at fair value
	Financial assets							Financial liabilities
	Trading instruments			Other investments				Trading instruments
$ in millions	Other			Private equity investments		All other		Other
Fair value beginning of period	$	1		$	56	$	67	$	(7	)
Total gains/(losses) included in earnings	1			—		—		2
Purchases and contributions	38			3		—		5
Sales and distributions	(37		)	—		—		(4		)
Transfers:
Into Level 3	—			—		—		—
Out of Level 3	—			—		—		—
Fair value end of period	$	3		$	59	$	67	$	(4	)
Unrealized gains/(losses) for the period included in earnings for instruments held at the end of the reporting period	$	1		$	—	$	—	$	—

As of ~~both~~ December 31, ~~2017~~ ~~and September 30, 2017, 10%~~2019, 11% of our assets and 2% of our liabilities were ~~instruments~~measured at fair value on a recurring basis. In comparison, as of September 30, 2019, 12% of our assets and 2% of our liabilities were measured at fair value on a recurring basis. Instruments measured at fair value on a recurring basis categorized as Level 3 ~~as of December 31, 2017 and September 30, 2017~~ represented ~~5% and 6%, respectively,~~2% of our assets measured at fair ~~value. Level 3 instruments~~value as ~~a percentage~~ of ~~total financial instruments decreased as compared to~~both December 31, 2019 and September 30, ~~2017, primarily as a result of the increase in total assets measured at fair value since September 30, 2017.~~2019.

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited)

~~The following table presents the gains/(losses) related to Level 3 recurring fair value measurements included in our Condensed Consolidated Statements of Income and Comprehensive Income.~~

$ in thousands Net trading profit Other revenues Other comprehensive income
For the three months ended December 31, 2017
Total gains/(losses) included in earnings $ (2,265 ) $ (1 ) $ 1,312
Unrealized gains/(losses) for assets held at the end of the reporting period $ (1,301 ) $ (3 ) $ 1,312

For the three months ended December 31, 2016
Total gains/(losses) included in earnings $ (4,381 ) $ 294
$ 4,074
Unrealized gains/(losses) for assets held at the end of the reporting period $ (1,916 ) $ 301
$ 4,073

Quantitative information about level 3 fair value measurements

The following tables ~~below~~ present the valuation techniques and significant unobservable inputs used in the valuation of a ~~significant~~ majority of our financial instruments classified as level 3. These inputs represent those that a market participant would take into account when pricing these instruments. Weighted averages are calculated by weighting each input by the relative fair value of the related financial instrument.



Level 3 financial instrument $ in millions	Fair value at December 31, 2019		Valuation technique(s)	Unobservable input	Range (weighted-average)
Recurring measurements
Other investments - private equity investments (not measured at NAV)	$	50	Income approach - discounted cash flow	Discount rate	25	%
				Terminal earnings before interest, tax, depreciation and amortization (“EBITDA”) multiple	12.5x
				Terminal year	2021 - 2042 (2022)
	$	12	Transaction price or other investment-specific events ⁽¹⁾	Not meaningful ⁽¹⁾	Not meaningful ⁽¹⁾

Level 3 financial instrument
$ in thousands
Fair value at December 31, 2017 Valuation technique(s) Unobservable input
Range
(weighted-average)
Recurring measurements
ARS preferred securities $ 107,483
Discounted cash flow Average discount rate 5.76% - 7.03% (6.32%)

Average interest rates applicable to future interest income on the securities ⁽¹⁾
2.97% - 3.96% (3.12%)

Prepayment year ⁽²⁾
2018 - 2021 (2021)
Private equity investments (not measured at NAV) $ 68,454
Income or market approach
Scenario 1 - income approach - discounted cash flow Discount rate 13% - 25% (22.4%)
Terminal growth rate of cash flows 3% - 3% (3%)
Terminal year 2020 - 2042 (2021)
Scenario 2 - market approach - market multiple method EBITDA Multiple 5.25 - 7.0 (5.8)
Weighting assigned to outcome of scenario 1/scenario 2 87%/13%
$ 20,356

Transaction price or other investment-specific events ⁽³⁾

Not meaningful ⁽³⁾

Not meaningful ⁽³⁾
Nonrecurring measurements
Bank loans: impaired loans - residential $ 20,421
Discounted cash flow Prepayment rate 7 yrs - 12 yrs (10.3 yrs)
Bank loans: impaired loans - corporate $ 2,997

Appraisal or discounted cash flow value ⁽⁴⁾

Not meaningful ⁽⁴⁾

Not meaningful ⁽⁴⁾

~~(continued on next page)~~



Level 3 financial instrument $ in millions	Fair value at September 30, 2019		Valuation technique(s)	Unobservable input	Range (weighted-average)
Recurring measurements
Other investments - private equity investments (not measured at NAV)	$	50	Income approach - discounted cash flow	Discount rate	25	%
				Terminal EBITDA multiple	12.5x
				Terminal year	2021 - 2042 (2022)
	$	13	Transaction price or other investment-specific events ⁽¹⁾	Not meaningful ⁽¹⁾	Not meaningful ⁽¹⁾

~~RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES~~

~~Notes to Condensed Consolidated Financial Statements (Unaudited)~~

~~(continued from previous page)~~

Level 3 financial instrument
$ in thousands

Fair value at
September 30,
2017
Valuation technique(s) Unobservable input Range (weighted-average)
Recurring measurements
ARS preferred securities $ 106,171
Discounted cash flow Average discount rate 5.46% - 6.81% (6.03%)

Average interest rates applicable to future interest income on the securities ⁽¹⁾
2.58% - 3.44% (2.72%)

Prepayment year ⁽²⁾
2017 - 2021 (2021)
Private equity investments (not measured at NAV) $ 68,454
Income or market approach:
Scenario 1 - income approach - discounted cash flow Discount rate 13% - 25% (22.4%)
Terminal growth rate of cash flows 3% - 3% (3%)
Terminal year 2020 - 2042 (2021)
Scenario 2 - market approach - market multiple method EBITDA Multiple 5.25 - 7.0 (5.8)
Weighting assigned to outcome of scenario 1/scenario 2 87%/13%
$ 20,431

Transaction price or other investment-specific events ⁽³⁾

Not meaningful ⁽³⁾

Not meaningful ⁽³⁾
Nonrecurring measurements

Bank loans: impaired loans - residential $ 20,736
Discounted cash flow Prepayment rate 7 yrs. - 12 yrs. (10.4 yrs.)
Bank loans: impaired loans - corporate $ 3,258

Appraisal or discounted cash flow value ⁽⁴⁾

Not meaningful ⁽⁴⁾

Not meaningful ⁽⁴⁾


(1)	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.


~~(2)~~	~~Assumed calendar year of at least a partial redemption of the outstanding security by the issuer.~~

~~(3)~~

Certain ~~private equity~~ investments are valued initially at ~~the~~ transaction price ~~until either~~and updated as other investment-specific events take place which indicate that a change in the carrying values of these investments is appropriate. Other investment-specific events include such events as our periodic review, significant transactions occur, new developments become known, or we receive information from ~~the~~a fund manager ~~that~~which allows us to update our proportionate share of net ~~assets, when any of which indicate that a change in the carrying values of these investments is appropriate.~~assets.


~~(4)~~	The valuation techniques used for the impaired corporate loan portfolio are appraisals less selling costs for the collateral dependent loans and discounted cash flows for impaired loans that are not collateral dependent.

Qualitative ~~disclosure~~information about unobservable inputs

For our recurring fair value measurements categorized within Level 3 of the fair value hierarchy, the sensitivity of the fair value measurement to changes in significant unobservable inputs and interrelationships between those unobservable inputs are described below:

~~Auction rate securities:~~

One of the significant unobservable inputs used in the fair value measurement of auction rate securities presented within our available-for-sale securities portfolio relates to judgments regarding whether the level of observable trading activity is sufficient to conclude markets are active. Where insufficient levels of trading activity are determined to exist as of the reporting date, then management’s assessment of how much weight, if any, to apply to trading prices in inactive markets versus management’s own valuation models could significantly impact the valuation conclusion. The valuation of the securities impacted by changes in management’s assessment of market activity levels could be either higher or lower, depending upon the relationship of the inactive trading prices compared to the outcome of management’s internal valuation models.

The future interest rate and maturity assumptions impacting the valuation of the auction rate securities are directly related. These securities generally have embedded penalty interest rate provisions in the event auctions fail to set the security’s interest rate. These penalty rates are based upon a stated interest rate spread over what is typically a short-term base interest rate index. As short-term

~~RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES~~

~~Notes to Condensed Consolidated Financial Statements (Unaudited)~~

interest rates rise, the penalty rate that is specified in the security increases. Changes in interest rates impact the fair value of our ARS portfolio, as we estimate that at some level of increase in short-term interest rates, issuers of the securities will have the economic incentive to refinance (and thus prepay) the securities. The faster and steeper short-term interest rates rise, the earlier prepayments will likely occur and the higher the fair value of the security. Therefore, the short-term interest rate assumption directly impacts the input related to the timing of any projected prepayment.

Private equity ~~investments:~~investments

The significant unobservable inputs used in the fair value measurement of private equity investments generally relate to the financial performance of the investment entity and the market’s required return on investments from entities in industries in which we hold investments. ~~Significant increases/(decreases)~~Increases in ~~our investment entities’ future economic performance will~~the discount rate and/or a later terminal year would have resulted in a ~~corresponding increase/(decrease) on~~lower fair value measurement. Increases in the ~~valuation results. The~~terminal EBITDA multiple would have resulted in a higher fair value of our investment moves inversely with the market’s expectation of returns from such investments. Should the market require higher returns from industries in which we are invested, all other factors held constant, our investments will decrease in value. Should the market accept lower returns from industries in which we are invested, all other factors held constant, our investments will increase in value.measurement.

Investments in private equity measured at net asset value per share

As more fully described in Note 2 of our ~~2017~~2019 Form 10-K, as a practical expedient, we utilize ~~net asset value (“NAV”)~~NAV or its equivalent to determine the recorded value of a portion of our private equity investments portfolio. We utilize NAV when the fund investment does not have a readily determinable fair value and the NAV of the fund is calculated in a manner consistent with the measurement principles of investment company accounting, including measurement of the investments at fair value.

Our private equity portfolio ~~as of December 31, 2017 included~~includes various direct ~~and third party~~investments, as well as investments in third-party private equity ~~investments~~funds and various legacy private equity funds which we sponsor. The portfolio is primarily invested in a broad range of industries including leveraged buyouts, growth capital, distressed capital, venture capital and mezzanine capital.

Due to the closed-end nature of certain of our fund investments, such investments cannot be redeemed directly with the funds. Our investment is monetized ~~through~~by distributions received through the liquidation of the underlying assets of those ~~funds. We anticipate 90%~~funds, the timing of ~~these underlying assets will be liquidated over a period of five years or less, with the remaining 10%~~which is uncertain.

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

Notes to ~~be liquidated over a period of nine years.~~Condensed Consolidated Financial Statements (Unaudited)

The following table ~~below~~ presents the recorded value and unfunded commitments related to our private equity investments portfolio.



$ in millions	Recorded value		Unfunded commitment
December 31, 2019
Private equity investments measured at NAV	$	80	$	13
Private equity investments not measured at NAV	62
Total private equity investments	$	142

September 30, 2019
Private equity investments measured at NAV	$	83	$	15
Private equity investments not measured at NAV	63
Total private equity investments	$	146

Unfunded commitment
$ in thousands Recorded value RJF Noncontrolling interests Total
December 31, 2017
Private equity investments measured at NAV $ 100,223
$ 20,739
$ 2,256
$ 22,995
Private equity investments not measured at NAV 88,810

Total private equity investments
$ 189,033

September 30, 2017
Private equity investments measured at NAV $ 109,894
$ 20,973
$ 2,273
$ 23,246
Private equity investments not measured at NAV 88,885

Total private equity investments $ 198,779

Of the total private equity investments, the portions we owned were ~~$138~~$97 million and ~~$145~~$99 million as of December 31, ~~2017~~2019 and September 30, ~~2017,~~2019, respectively.The portions of the private equity investments we did not own were ~~$51~~$45 million and ~~$54~~$47 million as of December 31, ~~2017~~2019 and September 30, ~~2017,~~2019, respectively, and were included as a component of noncontrolling interests inon our Condensed Consolidated Statements of Financial Condition.

Many of these fund investments meet the definition of prohibited ~~“covered funds”~~covered funds as defined by the Volcker Rule ofenacted pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act of ~~2010 (the “Dodd-Frank Act”).~~2010. We have received approval from the Board of Governors of the Federal Reserve System (the “Fed”) to continue to hold the majority of our ~~“covered fund”~~covered fund investments ~~for up to an additional five-year conformance period, thereby extending our applicable holding period~~ until July ~~2022 for such investments.~~2022. However, our current focus is on the divestiture of this portfolio.

Financial instruments measured at fair value on a nonrecurring basis

The following table presents assets measured at fair value on a nonrecurring basis along with the valuation techniques and significant unobservable inputs used in the valuation of the assets classified as level 3. These inputs represent those that a market participant would take into account when pricing these instruments. Weighted averages are calculated by weighting each input by the relative fair value of the related financial instrument.



$ in millions	Level 2		Level 3		Total fair value		Valuation technique(s)	Unobservable input	Range (weighted-average)
December 31, 2019
Bank loans, net:
Impaired loans: residential	$	5	$	14	$	19	Discounted cash flow	Prepayment rate	7 yrs. - 12 yrs. (10.4 yrs.)
Impaired loans: corporate	$	—	$	20	$	20	Collateral or discounted cash flow ⁽¹⁾	Not meaningful ⁽¹⁾	Not meaningful ⁽¹⁾
Loan held for sale	$	64	$	—	$	64	N/A	N/A	N/A
Other assets: other real estate owned	$	1	$	—	$	1	N/A	N/A	N/A

September 30, 2019
Bank loans, net:
Impaired loans: residential	$	7	$	14	$	21	Discounted cash flow	Prepayment rate	7 yrs. - 12 yrs. (10.4 yrs.)
Impaired loans: corporate	$	—	$	21	$	21	Collateral or discounted cash flow ⁽¹⁾	Not meaningful ⁽¹⁾	Not meaningful ⁽¹⁾
Loan held for sale	$	66	$	—	$	66	N/A	N/A	N/A
Other assets: other real estate owned	$	1	$	—	$	1	N/A	N/A	N/A


(1)	The valuation techniques used for the corporate loans are based on collateral value less selling costs for the collateral dependent loans and discounted cash flows for impaired loans that are not collateral dependent.

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited)

~~Fair value option~~

~~The~~Financial instruments not recorded at fair value ~~option is an accounting election that allows the reporting entity to apply fair value accounting for certain financial assets and liabilities on an instrument by instrument basis. As of~~ ~~December 31, 2017, the amount of financial instruments for which we had elected the fair value option was not material.~~

~~Other fair value disclosures~~

Many, but not all, of the financial instruments we hold ~~are~~were recorded at fair value inon the Condensed Consolidated Statements of Financial Condition. The following table presents the estimated fair value and fair value hierarchy of financial assets and liabilities that are not recorded at fair value in accordance with GAAP on the Condensed Consolidated Statements of Financial Condition at December 31, 2019 and September 30, 2019. This table excludes financial instruments that are carried at amounts which approximate fair value. Refer to Note 4 of our ~~2017~~2019 Form 10-K for a discussion of the ~~methods and assumptions we apply to the determination of~~ fair value hierarchy classification of our financial instruments that are not recorded at fair value.



$ in millions	Level 1		Level 2		Level 3		Total estimated fair value		Carrying amount
December 31, 2019
Financial assets:
Bank loans, net	$	—	$	139	$	21,034	$	21,173	$	21,193
Financial liabilities:
Bank deposits - certificates of deposit	$	—	$	—	$	1,062	$	1,062	$	1,056
Senior notes payable	$	—	$	1,755	$	—	$	1,755	$	1,550

September 30, 2019
Financial assets:
Bank loans, net	$	—	$	75	$	20,710	$	20,785	$	20,783
Financial liabilities:
Bank deposits - certificates of deposit	$	—	$	—	$	617	$	617	$	605
Senior notes payable	$	—	$	1,760	$	—	$	1,760	$	1,550

The table below presents the estimated fair values by level within the fair value hierarchy and the carrying amounts of certain of our financial instruments not carried at fair value. The carrying amounts below exclude financial instruments which have been recorded at fair value and those recorded at amounts which approximate fair value in the Condensed Consolidated Statements of Financial Condition.

$ in thousands
Quoted prices
in active
markets for
identical
instruments
(Level 1)

Significant
other
observable
inputs
(Level 2)

Significant
unobservable
inputs
(Level 3)
Total estimated fair value Carrying amount
December 31, 2017
Financial assets:
Bank loans, net $ —
$ 104,044
$ 17,353,626
$ 17,457,670
$ 17,588,476
Loans to financial advisors, net $ —
$ —
$ 704,853
$ 704,853
$ 879,929
Financial liabilities:

Bank deposits $ —
$ 18,392,535
$ 329,977
$ 18,722,512
$ 18,725,545
Other borrowings $ —
$ 28,030
$ —
$ 28,030
$ 27,627
Senior notes payable $ —
$ 1,693,153
$ —
$ 1,693,153
$ 1,548,975

September 30, 2017
Financial assets:
Bank loans, net $ —
$ 23,001
$ 16,836,745
$ 16,859,746
$ 16,954,042
Loans to financial advisors, net $ —
$ —
$ 698,862
$ 698,862
$ 863,647
Financial liabilities:

Bank deposits $ —
$ 17,417,678
$ 313,359
$ 17,731,037
$ 17,732,362
Other borrowings $ —
$ 29,278
$ —
$ 29,278
$ 28,813
Senior notes payable $ —
$ 1,647,696
$ —
$ 1,647,696
$ 1,548,839

~~RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES~~

~~Notes to Condensed Consolidated Financial Statements (Unaudited)~~

NOTE 54 – AVAILABLE-FOR-SALE SECURITIES

Available-for-sale securities are primarily comprised of agency MBS and CMOs owned by Raymond James Bank ~~N.A.~~ (“RJ Bank”) ~~and ARS owned by one of our non-broker-dealer subsidiaries.~~. Refer to the discussion of our available-for-sale securities accounting policies, including the fair value determination process, in Note 2 of our ~~2017~~2019 Form 10-K.

The following table details the amortized cost and fair values of our available-for-sale ~~securities were as follows:~~securities.



$ in millions	Cost basis		Gross unrealized gains		Gross unrealized losses			Fair value
December 31, 2019
Agency residential MBS	$	1,622	$	22	$	(1	)	$	1,643
Agency commercial MBS	343		3		—			346
Agency CMOs	1,220		6		(3		)	1,223
Other securities	10		$	—	$	—		10
Total available-for-sale securities	$	3,195	$	31	$	(4	)	$	3,222

September 30, 2019
Agency residential MBS	$	1,555	$	20	$	(1	)	$	1,574
Agency commercial MBS	305		5		—			310
Agency CMOs	1,195		7		(3		)	1,199
Other securities	10		—		—			10
Total available-for-sale securities	$	3,065	$	32	$	(4	)	$	3,093

$ in thousands Cost basis
Gross
unrealized gains

Gross
unrealized losses
Fair value
December 31, 2017
Agency MBS and CMOs $ 2,309,741
$ 180
$ (24,870 ) $ 2,285,051
Other securities 1,575
—
(788 ) 787
Total RJ Bank available-for-sale securities 2,311,316
180
(25,658 ) 2,285,838
ARS preferred securities 101,674
5,809
—
107,483
Total available-for-sale securities $ 2,412,990

$ 5,989

$ (25,658 )
$ 2,393,321
September 30, 2017

Agency MBS and CMOs $ 2,089,153
$ 1,925
$ (9,999 ) $ 2,081,079
Other securities 1,575
—
(543 ) 1,032
Total RJ Bank available-for-sale securities 2,090,728
1,925
(10,542 ) 2,082,111
ARS preferred securities 101,674
4,497
—
106,171
Total available-for-sale securities $ 2,192,402

$ 6,422

$ (10,542 )
$ 2,188,282

See Note 43 for additional information regarding the fair value of available-for-sale securities.

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited)

The following table details the contractual maturities, amortized ~~cost,~~costs, carrying values and current yields for our available-for-sale ~~securities are as presented below.~~securities. Since ~~RJ Bank’s~~our MBS and CMO available-for-sale securities ~~(MBS and CMOs)~~ are backed by mortgages, actual maturities ~~will~~may differ from contractual maturities because borrowers may have the right to prepay obligations without prepayment penalties. ~~Expected maturities~~As of ~~ARS may differ significantly from contractual maturities, as issuers may have~~December 31, 2019, the ~~right to call or prepay obligations with or without call or prepayment penalties.~~average expected duration of our available-for-sale securities portfolio was approximately three years.



	December 31, 2019
$ in millions	Within one year			After one but within five years			After five but within ten years			After ten years			Total
Agency residential MBS
Amortized cost	$	—		$	36		$	787		$	799		$	1,622
Carrying value	$	—		$	36		$	798		$	809		$	1,643
Agency commercial MBS
Amortized cost	$	5		$	207		$	97		$	34		$	343
Carrying value	$	5		$	209		$	98		$	34		$	346
Agency CMOs
Amortized cost	$	—		$	—		$	82		$	1,138		$	1,220
Carrying value	$	—		$	—		$	82		$	1,141		$	1,223
Other securities
Amortized cost	$	—		$	2		$	8		$	—		$	10
Carrying value	$	—		$	2		$	8		$	—		$	10
Total available-for-sale securities
Amortized cost	$	5		$	245		$	974		$	1,971		$	3,195
Carrying value	$	5		$	247		$	986		$	1,984		$	3,222
Weighted-average yield	1.69		%	2.33		%	2.39		%	2.33		%	2.35		%

December 31, 2017
$ in thousands Within one year
After one but
within five years

After five but
within ten years
After ten years Total
Agency MBS and CMOs:
Amortized cost $ —
$ 143,299
$ 745,234
$ 1,421,208
$ 2,309,741
Carrying value —
142,159
737,410
1,405,482
2,285,051
Weighted-average yield —
2.09 % 1.94 % 2.01 % 1.99 %
Other securities:
Amortized cost $ —
$ —
$ —
$ 1,575
$ 1,575
Carrying value —
—
—
787
787
Weighted-average yield —
—
—
—
—
Sub-total agency MBS and CMOs and other securities:

Amortized cost $ —
$ 143,299
$ 745,234
$ 1,422,783
$ 2,311,316
Carrying value —
142,159
737,410
1,406,269
2,285,838
Weighted-average yield —
2.09 % 1.94 % 2.01 % 1.99 %
ARS Preferred securities:

Amortized cost $ —
$ —
$ —
$ 101,674
$ 101,674
Carrying value —
—
—
107,483
107,483
Weighted-average yield —
—
—
2.52 % 2.52 %
Total available-for-sale securities:

Amortized cost $ —
$ 143,299
$ 745,234
$ 1,524,457
$ 2,412,990
Carrying value —
142,159
737,410
1,513,752
2,393,321
Weighted-average yield —
2.09 % 1.94 % 2.05 % 2.01 %

~~RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES~~

~~Notes to Condensed Consolidated Financial Statements (Unaudited)~~

The following table details the gross unrealized losses and fair ~~value,~~values of securities that were in a loss position at the reporting period end, aggregated by investment category and length of time the individual securities have been in a continuous unrealized loss ~~position, are as follows:~~position.



	Less than 12 months					12 months or more					Total
$ in millions	Estimated fair value		Unrealized losses			Estimated fair value		Unrealized losses			Estimated fair value		Unrealized losses
December 31, 2019
Agency residential MBS	$	122	$	—		$	96	$	(1	)	$	218	$	(1	)
Agency commercial MBS	41		—			44		—			85		—
Agency CMOs	219		(1		)	297		(2		)	516		(3		)
Other securities	10		—			—		—			10		—
Total	$	392	$	(1	)	$	437	$	(3	)	$	829	$	(4	)

September 30, 2019
Agency residential MBS	$	166	$	—		$	114	$	(1	)	$	280	$	(1	)
Agency commercial MBS	—		—			44		—			44		—
Agency CMOs	145		(1		)	351		(2		)	496		(3		)
Other securities	2		—			—		—			2		—
Total	$	313	$	(1	)	$	509	$	(3	)	$	822	$	(4	)

Less than 12 months 12 months or more Total
$ in thousands
Estimated
fair value

Unrealized
losses

Estimated
fair value

Unrealized
losses

Estimated
fair value

Unrealized
losses
December 31, 2017
Agency MBS and CMOs $ 1,691,798
$ (14,157 ) $ 535,183
$ (10,713 ) $ 2,226,981
$ (24,870 )
Other securities —
—
787
(788 ) 787
(788 )
Total $ 1,691,798
$ (14,157 ) $ 535,970
$ (11,501 ) $ 2,227,768
$ (25,658 )

Less than 12 months 12 months or more Total
$ in thousands
Estimated
fair value

Unrealized
losses

Estimated
fair value

Unrealized
losses

Estimated
fair value

Unrealized
losses
September 30, 2017
Agency MBS and CMOs $ 1,119,715
$ (5,621 ) $ 295,528
$ (4,378 ) $ 1,415,243
$ (9,999 )
Other securities —
—
1,032
(543 ) 1,032
(543 )
Total $ 1,119,715
$ (5,621 ) $ 296,560
$ (4,921 ) $ 1,416,275
$ (10,542 )

The reference point for determining when securities are in a loss position is the reporting period end. As such, it is possible that a security had a fair value that exceeded its amortized cost on other days during the period.

~~Agency MBS and CMOs and Non-agency CMOs~~

~~The Federal Home Loan Mortgage Corporation (“FHLMC”), Federal National Mortgage Association (“FNMA”) and Government National Mortgage Associations (“GNMA”) guarantee the~~ contractual cash flows of our available-for-sale securities are guaranteed by the ~~agency MBS and CMOs.~~U.S. government or its agencies. At December 31, ~~2017~~,2019, of the ~~195 U.S. government-sponsored enterprise MBS and CMOs~~118 available-for-sale securities in an unrealized loss position, ~~133~~51 were in a continuous unrealized loss position for less than 12 months and 6267 were for 12 months or more. We do not consider these securities to be other-than-temporarily impaired due to the guarantee provided by FNMA, FHLMC, and GNMA of the full payment of principal and interest, and the fact that we have the ability and intent to hold these securities. At December 31, ~~2017,~~2019, debt securities we held ~~from FNMA~~in excess of ten percent of our equity included Federal National Home Mortgage Association (“FNMA”) and ~~FHLMC~~Federal Home Loan Mortgage Corporation (“FHLMC”) which had an amortized cost of ~~$1.56~~$2.07 billion and ~~$626~~$873 million, respectively, and a fair value of ~~$1.54~~$2.08 billion and ~~$617~~$881 million, respectively.

During the three months ended December 31, ~~2017,~~2019 and 2018, there were no sales of ~~agency MBS and CMO~~ available-for-sale securities. During the three months ended December 31, 2016, there were $7 million in proceeds from the sale of non-agency CMO available-for-sale securities. These sales resulted in an insignificant loss, which was included in “Other revenues” on our Condensed Consolidated Statements of Income and Comprehensive Income.

~~ARS~~

Our cost basis in the ARS we hold is the fair value of the securities in the period in which we acquired them. The par value of the ARS we held as of December 31, 2017 was $120 million. Only those ARS whose amortized cost basis we do not expect to recover in full are considered to be other-than-temporarily impaired, as we have the ability and intent to hold these securities. All of our ARS securities are evaluated for OTTI on a quarterly basis. As of December 31, 2017, there were no ARS preferred securities with a fair value less than cost basis.

~~During the three months ended December 31, 2017, there were no sales of ARS. During the three months ended December 31, 2016, sales of ARS were insignificant.~~

~~Other-than-temporarily impaired securities~~

~~There is no intent to sell our ARS and it was not more likely than not that we would be required to sell these securities as of December 31, 2017.~~

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited)

~~Changes in the amount of OTTI related to credit losses recognized in “Other revenues” on available-for-sale securities were as follows:~~

Three months ended December 31,
$ in thousands 2017 2016
Amount related to credit losses on securities we held at the beginning of the period $ —
$ 8,107
Decreases to the amount related to credit losses for securities sold during the period —
(2,353 )
Amount related to credit losses on securities we held at the end of the period $ —
$ 5,754

NOTE 65 – DERIVATIVE ~~FINANCIAL INSTRUMENTS~~ASSETS AND DERIVATIVE LIABILITIES

Our derivative assets and derivative liabilities are recorded at fair value and are included in “Derivative assets” and “Derivative liabilities” inon our Condensed Consolidated Statements of Financial Condition. Cash flows related to our ~~derivative contracts~~derivatives are included within operating activities inon the Condensed Consolidated Statements of Cash Flows. The significant accounting policies governing our ~~derivative financial instruments,~~derivatives, including our methodologies for determining fair value, are described in Note 2 of our ~~2017~~2019 Form 10-K.

~~Derivatives arising from our fixed income business operations~~

We enter into interest rate contracts as part of our fixed income business to facilitate client transactions or to actively manage risk exposures that arise from our client activity, including a portion of our trading inventory. The majority of these derivatives are traded in the over-the-counter market and are executed directly with another counterparty or are cleared and settled through a clearing organization.

We also facilitate matched book derivative transactions in which Raymond James Financial Products, Inc. (“RJFP”), a wholly owned subsidiary, enters into interest rate derivative transactions with clients. For every derivative transaction RJFP enters into with a client, it also enters into an offsetting derivative on terms that mirror the client transaction with a credit support provider, which is a third-party financial institution. Any collateral required to be exchanged under these derivative contracts is administered directly between the client and the third-party financial institution. Due to this pass-through transaction structure, RJFP has completely mitigated the market and credit risk on these derivative contracts. As a result, derivatives for which the fair value is in an asset position have an equal and offsetting derivative liability. RJFP only has credit risk on its uncollected derivative transaction fee revenues. The receivable for uncollected derivative transaction fee revenues of RJFP was $5 million at both December 31, 2017 and September 30, 2017, and is included in “Other receivables” on our Condensed Consolidated Statements of Financial Condition.

~~Derivatives arising from RJ Bank’s business operations~~

We enter into forward foreign exchange contracts and interest rate swaps to hedge certain exposures arising out of RJ Bank’s business operations (see Note 2 of the 2017 Form 10-K for the accounting policies associated with these transactions). Each of these activities is described further below.

We enter into three-month forward foreign exchange contracts primarily to hedge the risks related to RJ Bank’s investment in their Canadian subsidiary as well as their risk resulting from transactions denominated in currencies other than the U.S. dollar. The majority of these derivatives are designated as net investment hedges.

The cash flows associated with certain assets held by RJ Bank provide interest income at fixed interest rates. Therefore, the value of these assets, absent any risk mitigation, is subject to fluctuation based upon changes in market rates of interest over time. RJ Bank enters into floating-rate advances from the Federal Home Loan Bank of Atlanta (“FHLB”) to, in part, fund these assets and then enters into interest rate swaps which swap variable interest payments on this debt for fixed interest payments. These interest rate swaps are designated as cash flow hedges and effectively fix RJ Bank’s cost of funds associated with these assets to mitigate a portion of the market risk.

~~Derivative arising from our acquisition of Alex. Brown~~

As part of our acquisition of Alex. Brown (see Note 3 of the 2017 Form 10-K for additional information regarding the acquisition), we assumed certain DBRSU awards, including the associated plan terms and conditions. The DBRSU awards contain performance conditions based on Deutsche Bank and subsidiaries attaining certain financial results and will ultimately be settled in DB common shares, provided the performance metrics are achieved. The DBRSU obligation results in a derivative, the fair value and notional of

~~RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES~~

~~Notes to Condensed Consolidated Financial Statements (Unaudited)~~

which is measured by multiplying the number of outstanding DBRSU awards to be settled in DB common shares as of the end of the reporting period by the end of reporting period DB share price, as traded on the New York Stock Exchange.

~~Counterparty netting and collateral related to derivative contracts~~

To reduce credit exposure on certain of our derivative transactions, we may enter into a master netting arrangement that allows for net settlement of all derivative transactions with each counterparty. In addition, the credit support annex allows parties to the master netting agreement to mitigate their credit risk by requiring the party which is out of the money to post collateral. We accept collateral in the form of cash or other marketable securities. Where permitted, we elect to net-by-counterparty certain derivative contracts entered into under a legally enforceable master netting agreement and, therefore, the fair value of those derivative contracts are netted by counterparty in the Condensed Consolidated Statements of Financial Condition. As we elect to net-by-counterparty the fair value of such derivative contracts, we also net-by-counterparty cash collateral exchanged as part of those derivative agreements. We may also require certain counterparties to make a deposit at the inception of a derivative agreement, referred to as “initial margin.” This initial margin is included in “Other payables” on our Condensed Consolidated Statements of Financial Condition.

We are also required to maintain cash or marketable security deposits with the clearing organizations we utilize to clear certain of our interest rate derivative transactions. This initial margin is included as a component of “Receivables from brokers, dealers and clearing organizations” for cash initial margin or “Other investments” for marketable securities initial margin in our Condensed Consolidated Statements of Financial Condition. On a daily basis we also pay cash to or receive cash from these clearing organizations due to changes in the fair value of the derivatives which they clear. Such payments are referred to as “variation margin” and are considered to be settlement of the related derivatives.

RJ Bank provides to counterparties for the benefit of its U.S. subsidiaries, a guarantee of payment in the event of the subsidiary’s default under forward foreign exchange contracts. Due to this RJ Bank guarantee and the short-term nature of these derivatives, RJ Bank’s U.S. subsidiaries are generally not required to post collateral with and do not generally receive collateral from the respective counterparties.

~~RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES~~

~~Notes to Condensed Consolidated Financial Statements (Unaudited)~~

Derivative balances included inon our financial statements

The following table ~~below~~ presents the gross fair value and notional amount of ~~derivative contracts~~derivatives by product type, the amounts of counterparty and cash collateral netting inon our Condensed Consolidated Statements of Financial Condition, as well as collateral posted and received under credit support agreements that do not meet the criteria for netting under GAAP.



	December 31, 2019								September 30, 2019
$ in millions	Derivative assets			Derivative liabilities			Notional amount		Derivative assets			Derivative liabilities			Notional amount
Derivatives not designated as hedging instruments
Interest rate - matched book	$	244		$	244		$	2,281	$	280		$	280		$	2,296
Interest rate - other ⁽¹⁾	132			112			10,846		184			146			10,690
Foreign exchange	—			6			551		—			1			573
Equity	—			6			6		—			6			6
Subtotal	376			368			13,684		464			433			13,565
Derivatives designated as hedging instruments
Interest rate	1			—			850		1			—			850
Foreign exchange	—			9			877		—			1			856
Subtotal	1			9			1,727		1			1			1,706
Total gross fair value/notional amount	377			377			$	15,411	465			434			$	15,271
Offset on the Condensed Consolidated Statements of Financial Condition
Counterparty netting	(19		)	(19		)			(24		)	(24		)
Cash collateral netting	(70		)	(52		)			(103		)	(97		)
Total amounts offset	(89		)	(71		)			(127		)	(121		)
Net amounts presented on the Condensed Consolidated Statements of Financial Condition	288			306					338			313
Gross amounts not offset on the Condensed Consolidated Statements of Financial Condition
Financial instruments ⁽²⁾	(254		)	(244		)			(297		)	(280		)
Total	$	34		$	62				$	41		$	33

December 31, 2017 September 30, 2017
$ in thousands Derivative assets Derivative liabilities Notional amount Derivative assets Derivative liabilities Notional amount
Derivatives not designated as hedging instruments
Interest rate contracts:
Matched book $ 263,851
$ 263,851
$ 2,687,828
$ 288,035
$ 288,035
$ 2,766,488
Other 58,660
85,579
5,093,255
86,436
100,503
4,931,809
Foreign exchange contracts 4
7,032
529,000
3
530
437,783
DBRSU obligation (equity) ⁽¹⁾
—
28,413
28,413
—
25,800
25,800
Subtotal 322,515

384,875

8,338,496

374,474

414,868

8,161,880
Derivatives designated as hedging instruments
Interest rate contracts —
1,236
850,000
—
1,390
850,000
Foreign exchange contracts —
12,678
893,317
29
116
1,048,646
Subtotal —

13,914

1,743,317

29

1,506

1,898,646
Total gross fair value/notional amount 322,515

398,789

$ 10,081,813

374,503

416,374

$ 10,060,526
Offset in the Statements of Financial Condition
Counterparty netting (6,471 ) (6,471 ) (6,045 ) (6,045 )
Cash collateral netting (23,904 ) (35,813 ) (49,683 ) (53,365 )
Total amounts offset (30,375 ) (42,284 ) (55,728 ) (59,410 )
Net amounts presented in the Statements of Financial Condition 292,140
356,505
318,775
356,964

Gross amounts not offset in the Statements of Financial Condition
Financial instruments ⁽²⁾
(267,938 ) (263,851 ) (293,340 ) (288,035 )
Total $ 24,202
$ 92,654
$ 25,435
$ 68,929


(1)	Substantially all relates to interest rate derivatives entered into as part of our fixed income business operations, including to be announced (“TBA”) security contracts that are accounted for as derivatives.


(2)	Although the matched book derivative arrangements do not meet the definition of a master netting arrangement as specified by GAAP, the agreement with the third-party intermediary includes terms that are similar to a master netting agreement. As a result, we present the matched book amounts net in the preceding table.

~~(1)~~ The DBRSU obligation is not subject to an enforceable master netting arrangement or other similar arrangement. However, we held shares of DB as an economic hedge against this obligation with a fair value of $21 million and $19 million as of December 31, 2017 and September 30, 2017, respectively, which are a component of “Other investments” on our Condensed Consolidated Statements of Financial Condition. See additional discussion offollowing table details the ~~DBRSUs in Note 17.~~

(2) Although the matched book derivative arrangements do not meet the definition of a master netting arrangement as specified by GAAP, the agreement with the third-party intermediary includes terms that are similar to a master netting agreement. As a result, we present the matched book amounts net in the table above.

~~Gains recognized~~gains/(losses) included in accumulated other comprehensive ~~income/(loss)~~income (“AOCI”), net of income taxes, on derivatives designated as hedging ~~instruments are as follows (see~~instruments. These gains/(losses) included any amounts reclassified from AOCI to net income during the period. See Note 1514 for additional ~~information):~~information.



	Three months ended December 31,
$ in millions	2019			2018
Interest rate (cash flow hedges)	$	10		$	(17	)
Foreign exchange (net investment hedges)	(13		)	37
Total gains/(losses) in AOCI, net of taxes	$	(3	)	$	20

Three months ended December 31,
$ in thousands 2017 2016
Interest rate contracts (cash flow hedges) $ 6,885
$ 25,738
Foreign exchange contracts (net investment hedges) 5,573
11,326
Total gains recognized in AOCI, net of taxes $ 12,458
$ 37,064

There ~~was no hedge ineffectiveness and no~~were 0 components of derivative gains or losses ~~were~~ excluded from the assessment of hedge effectiveness for each of the three months ended December 31, ~~2017~~2019 and ~~2016.~~2018. We expect to reclassify an ~~estimated $1 million as additional~~insignificant amount of interest expense out of AOCI and into earnings within the next 12 months. The maximum length of time over which forecasted transactions are or will be hedged is 108 years.

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited)

~~Gains/~~The following table details the gains/(losses) on derivatives not designated as hedging instruments recognized on the Condensed Consolidated Statements of Income and Comprehensive ~~Income were as follows:~~Income.



$ in millions	Location of gain/(loss) included on the Condensed Consolidated Statements of Income and Comprehensive Income	Gain/(loss) recognized during the three months ended December 31,
$ in millions		2019			2018
Interest rate	Principal transactions/other revenues	$	5		$	2
Foreign exchange	Other revenues	$	(11	)	$	26
Equity	Compensation, commissions and benefits expense	$	—		$	5

$ in thousands
Location of gain/(loss) included in the
Condensed Consolidated Statements of Income and Comprehensive Income
Gain/(loss) recognized during the period
Three months ended December 31,
2017 2016
Interest rate contracts:
Matched book Other revenues $ 38
$ (26 )
Other Net trading profit $ 1,562
$ 2,229
Foreign exchange contracts Other revenues $ (1,366 ) $ 7,914
DBRSUs Compensation, commissions and benefits expense $ (2,613 ) $ (6,725 )
DBRSUs Acquisition-related expenses $ —
$ 350

Risks associated with our derivatives and ~~our~~related risk mitigation ~~related to, our derivative contracts~~

Credit risk

We are exposed to credit losses in the event of nonperformance by the counterparties to forward foreign exchange derivative agreements and interest rate ~~contracts~~derivatives that are not cleared through a clearing organization. Where we are subject to credit exposure, we perform a credit evaluation of counterparties prior to entering into derivative transactions and we monitor their credit standings. ~~Currently, we anticipate that all of the counterparties will be able to fully satisfy their obligations under those agreements.~~ We may require initial margin or collateral from counterparties in the form of cash deposits or other marketable securities to support certain of these obligations as established by the credit threshold specified by the agreement and/or as a result of monitoring the credit standing of the counterparties.

Our only exposure to credit risk in the matched book derivatives operations is related to our uncollected derivative transaction fee ~~revenues.~~revenues, which were insignificant as of both December 31, 2019 and September 30, 2019. We are not exposed to market risk ~~as it relates to~~on these ~~derivative contracts~~derivatives due to the pass-through transaction structure ~~previously described.~~described in Note 2 of our 2019 Form 10-K.

Interest rate and foreign exchange risk

We are exposed to interest rate risk related to certain of our interest rate ~~derivative agreements.~~derivatives. We are also exposed to foreign exchange risk related to our forward foreign exchange ~~derivative agreements.~~derivatives. On a daily basis, we monitor our risk exposure inon our ~~derivative agreements~~derivatives based on established limits with respect to a number of factors, including interest rate, foreign exchange spot and forward rates, spread, ratio, basis and volatility ~~risks. These exposures are monitored~~risks, both ~~on a~~for the total portfolio ~~basis~~ and ~~separately for each agreement for selected~~by maturity ~~periods.~~period.

Derivatives with credit-risk-related contingent features

Certain of ~~the~~our derivative ~~instruments arising from our interest rate contracts and forward foreign exchange~~ contracts contain provisions that require our debt to maintain an investment-grade rating from ~~one~~1 or more of the major credit rating agencies. If our debt were to fall below investment-grade, the counterparties to the derivative instruments could terminate and request immediate payment or demand immediate and ongoing overnight collateralization on our derivative instruments in liability positions. The aggregate fair value of all derivative instruments with such credit-risk-related contingent features that were in a liability position was ~~$10 million at~~ insignificant as of both December 31, ~~2017, for which we had posted $1 million of collateral. Such amounts were not material at~~2019 and September 30, ~~2017.~~2019.

NOTE 76 – COLLATERALIZED AGREEMENTS AND FINANCINGS

Collateralized agreements are securities purchased under agreements to resell (“reverse repurchase agreements”) and securities borrowed. Collateralized financings are securities sold under agreements to repurchase (“repurchase agreements”) and securities loaned. We enter into these transactions in order to facilitate client activities, invest excess cash, acquire securities to cover short positions and finance certain firm activities. The significant accounting policies governing our collateralized agreements and financings are described in Note 2 of our ~~2017~~2019 Form 10-K.

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited)

For financial statement purposes, we do not offset our reverse repurchase agreements, repurchase agreements, securities borrowing and securities lending transactions because the conditions for netting as specified by GAAP are not met. Our reverse repurchase agreements, repurchase agreements, securities borrowing and securities lending transactions are governed by master agreements that are widely used by counterparties and that may allow for net settlements of payments in the normal course, as well as offsetting of all contracts with a given counterparty in the event of bankruptcy or default of one of the parties to the transaction. Although not offset on the Condensed Consolidated Statements of Financial Condition, these transactions are included in the following table.



	Assets						Liabilities
$ in millions	Reverse repurchase agreements			Securities borrowed			Repurchase agreements			Securities loaned
December 31, 2019
Gross amounts of recognized assets/liabilities	$	326		$	211		$	200		$	239
Gross amounts offset on the Condensed Consolidated Statements of Financial Condition	—			—			—			—
Net amounts presented on the Condensed Consolidated Statements of Financial Condition	326			211			200			239
Gross amounts not offset on the Condensed Consolidated Statements of Financial Condition	(326		)	(207		)	(200		)	(229		)
Net amounts	$	—		$	4		$	—		$	10

September 30, 2019
Gross amounts of recognized assets/liabilities	$	343		$	248		$	150		$	323
Gross amounts offset on the Condensed Consolidated Statements of Financial Condition	—			—			—			—
Net amounts presented on the Condensed Consolidated Statements of Financial Condition	343			248			150			323
Gross amounts not offset on the Condensed Consolidated Statements of Financial Condition	(343		)	(243		)	(150		)	(311		)
Net amounts	$	—		$	5		$	—		$	12

Assets Liabilities
$ in thousands Reverse repurchase agreements Securities borrowed Repurchase agreements Securities loaned
December 31, 2017
Gross amounts of recognized assets/liabilities $ 307,742
$ 184,971
$ 229,036
$ 290,307
Gross amounts offset in the Condensed Consolidated Statements of Financial Condition —
—
—
—
Net amounts presented in the Condensed Consolidated Statements of Financial Condition 307,742

184,971

229,036

290,307
Gross amounts not offset in the Condensed Consolidated Statements of Financial Condition (307,742 ) (178,524 ) (229,036 ) (277,154 )
Net amount $ —
$ 6,447
$ —
$ 13,153
September 30, 2017
Gross amounts of recognized assets/liabilities $ 404,462
$ 138,319
$ 220,942
$ 383,953
Gross amounts offset in the Condensed Consolidated Statements of Financial Condition —
—
—
—
Net amounts presented in the Condensed Consolidated Statements of Financial Condition 404,462

138,319

220,942

383,953
Gross amounts not offset in the Condensed Consolidated Statements of Financial Condition (404,462 ) (134,304 ) (220,942 ) (373,132 )
Net amount $ —
$ 4,015
$ —
$ 10,821

~~The required market value of the collateral associated with collateralized agreements and financings generally exceeds the amount financed. Accordingly, the total~~Total collateral received under reverse repurchase agreements and the total amount of collateral posted under repurchase agreements exceeds the carrying value of these agreements inon our Condensed Consolidated Statements of Financial Condition. In the event the market value of the securities we pledge as collateral in these activities declines, we may have to post additional collateral or reduce the borrowing amounts. We monitor such levels daily.

Collateral received and pledged

We receive cash and securities as collateral, primarily in connection with reverse repurchase agreements, securities borrowed, derivative transactions ~~not transacted through a clearing organization,~~ and client margin loans. The collateral we receive reduces our credit exposure to individual counterparties.

In many cases, we are permitted to deliver or repledge financial instruments we have received as collateral ~~for~~to satisfy our ~~own use in~~collateral requirements under our repurchase agreements, securities lending agreements or other secured borrowings, ~~satisfaction of~~to satisfy deposit requirements with clearing organizations, or to otherwise ~~meeting~~meet either our or our clients’ settlement requirements.

The following table ~~below~~ presents financial instruments at fair value that we received as collateral, ~~are~~were not included on our Condensed Consolidated Statements of Financial Condition, and that were available to be delivered or repledged, along with the balances of such instruments that were delivered or repledged, to satisfy one of our purposes ~~described above:~~previously described.



$ in millions	December 31, 2019		September 30, 2019
Collateral we received that was available to be delivered or repledged	$	2,860	$	2,931
Collateral that we delivered or repledged	$	860	$	897

$ in thousands December 31,
2017 September 30,
2017
Collateral we received that is available to be delivered or repledged $ 2,891,841
$ 3,030,736
Collateral that we delivered or repledged $ 957,943
$ 1,068,912

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited)

Encumbered assets

We pledge certain of our ~~financial instruments~~assets to collateralize either repurchase agreements or other secured borrowings, maintain lines of credit, or to satisfy our collateral or settlement requirements with counterparties or clearing organizations who may or may not have the right to deliver or repledge such ~~securities.~~instruments. The following table ~~below~~ presents information about ~~the fair value of~~ our assets that have been pledged for one of the purposes ~~described above:~~previously described.


$ in thousands	December 31, 2017		September 30, 2017
Financial instruments owned, at fair value, pledged to counterparties that:
$ in millions					December 31, 2019		September 30, 2019
Had the right to deliver or repledge	$	341,304	$	363,739	$	493	$	591
Did not have the right to deliver or repledge	$	129,260	$	44,930	$	65	$	65
Bank loans, net pledged at Federal Home Loan Bank (“FHLB”) and the Federal Reserve Bank					$	4,905	$	4,653

Repurchase agreements, repurchase-to-maturity transactions and securities loaned accounted for as secured borrowings

The following table presents the remaining contractual maturity of repurchase agreements and securities lending transactions accounted for as secured ~~borrowings:~~borrowings.



$ in millions	Overnight and continuous		Up to 30 days		30-90 days		Greater than 90 days		Total
December 31, 2019
Repurchase agreements:
Government and agency obligations	$	77	$	—	$	—	$	—	$	77
Agency MBS and CMOs	123		—		—		—		123
Total repurchase agreements	200		—		—		—		200
Securities loaned:
Equity securities	239		—		—		—		239
Total	$	439	$	—	$	—	$	—	$	439

September 30, 2019
Repurchase agreements:
Government and agency obligations	$	70	$	—	$	—	$	—	$	70
Agency MBS and CMOs	80		—		—		—		80
Total repurchase agreements	150		—		—		—		150
Securities loaned:
Equity securities	323		—		—		—		323
Total	$	473	$	—	$	—	$	—	$	473

$ in thousands Overnight and continuous Up to 30 days 30-90 days Greater than 90 days Total
As of December 31, 2017:
Repurchase agreements
Government and agency obligations $ 48,281
$ —
$ —
$ —
$ 48,281
Agency MBS and CMOs 180,755
—
—
—
180,755
Total Repurchase Agreements 229,036

—

—

—

229,036

Securities loaned
Equity securities 290,307
—
—
—
290,307
Total $ 519,343

$ —

$ —

$ —

$ 519,343
Gross amounts of recognized liabilities for repurchase agreements and securities loaned included in the table within this footnote $ 519,343
Amounts related to repurchase agreements and securities loaned not included in the table within this footnote $ —

As of September 30, 2017:
Repurchase agreements
Government and agency obligations $ 107,284
$ —
$ —
$ —
$ 107,284
Agency MBS and CMOs 113,658
—
—
—
113,658
Total Repurchase Agreements 220,942

—

—

—

220,942

Securities loaned
Equity securities 383,953
—
—
—
383,953
Total $ 604,895
$ —
$ —
$ —
$ 604,895
Gross amounts of recognized liabilities for repurchase agreements and securities loaned included in the table within this footnote $ 604,895
Amounts related to repurchase agreements and securities loaned not included in the table within this footnote $ —

As of both December 31, ~~2017~~2019 and September 30, ~~2017,~~2019, we did ~~not~~0t have any “repurchase-to-maturity” agreements, which are repurchase agreements where a security is transferred under an agreement to repurchase and the maturity date of the repurchase agreement matches the maturity date of the underlying security.

NOTE 87 – BANK LOANS, NET

Bank client receivables are comprised of loans originated or purchased by RJ Bank and include commercial and industrial (“C&I”) loans, tax-exempt loans, ~~securities based loans (“SBL”), and~~ commercial and residential real estate loans, securities-based loans (“SBL”) and other loans. These receivables are collateralized by first orand, to a lesser extent, second mortgages on residential or other real property, other assets of the borrower, a pledge of revenue or are unsecured. See Note 2 of our 2019 Form 10-K for a discussion of accounting policies related to bank loans and allowances for losses.

~~RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES~~

~~Notes to Condensed Consolidated Financial Statements (Unaudited)~~

We segregate our loan portfolio into ~~six~~6 loan portfolio segments: C&I, commercial real estate (“CRE”), CRE construction, tax-exempt, residential mortgage, and ~~SBL.~~SBL and other. These portfolio segments also serve as the portfolio loan classes for purposes of credit analysis, except for residential mortgage loans which are further disaggregated into residential first mortgage and residential home equity classes.

~~See Note 2 of our 2017 Form 10-K for a discussion of our accounting policies related~~

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

Notes to bank loans and allowances for losses, including the policies regarding loans held for investment, loans held for sale, off-balance sheet loan commitments, nonperforming assets, troubled debt restructurings (“TDRs”), impaired loans, the allowance for loan losses and reserve for unfunded lending commitments, and loan charge-off policies.Condensed Consolidated Financial Statements (Unaudited)

The following table presents the balances for both the held for sale and held for investment loan portfolios, as well as the associated percentage of each portfolio segment in RJ Bank’s total loan portfolio. “Loans held for sale, net” and “Total loans held for investment, net” in the following table ~~below~~ are presented net of unearned income and deferred expenses, which include purchase premiums, purchase discounts and net deferred origination fees and costs.



	December 31, 2019					September 30, 2019
$ in millions	Balance			%		Balance			%
Loans held for investment:
C&I loans	$	8,043		37	%	$	8,098		38	%
CRE construction loans	167			1	%	185			1	%
CRE loans	3,773			17	%	3,652			17	%
Tax-exempt loans	1,220			6	%	1,241			6	%
Residential mortgage loans	4,705			22	%	4,454			21	%
SBL and other	3,411			16	%	3,349			16	%
Total loans held for investment	21,319					20,979
Net unearned income and deferred expenses	(10		)			(12		)
Total loans held for investment, net	21,309					20,967
Loans held for sale, net	203			1	%	142			1	%
Total loans held for sale and investment	21,512			100	%	21,109			100	%
Allowance for loan losses	(216		)			(218		)
Bank loans, net	$	21,296				$	20,891

December 31, 2017 September 30, 2017
$ in thousands Balance % Balance %
Loans held for investment:

C&I loans $ 7,490,219
42 % $ 7,385,910
43 %
CRE construction loans 164,847
1 % 112,681
1 %
CRE loans 3,136,101
18 % 3,106,290
18 %
Tax-exempt loans 1,136,468
6 % 1,017,791
6 %
Residential mortgage loans 3,270,780
18 % 3,148,730
18 %
SBL 2,530,521
14 % 2,386,697
14 %
Total loans held for investment 17,728,936

17,158,099

Net unearned income and deferred expenses (30,231 )
(31,178 )
Total loans held for investment, net 17,698,705

17,126,921

Loans held for sale, net 189,862
1 % 70,316
—
Total loans held for sale and investment 17,888,567
100 % 17,197,237
100 %
Allowance for loan losses (191,269 )
(190,442 )
Bank loans, net $ 17,697,298

$ 17,006,795

At December 31, ~~2017,~~2019, the FHLB had a blanket lien on RJ Bank’s residential mortgage loan portfolio as security for the repayment of certain borrowings. See Note 1211 for more information regarding borrowings from the FHLB.

Loans held for sale

RJ Bank originated or purchased ~~$358~~$706 million and ~~$522~~$792 million of loans held for sale during the three months ended December 31, ~~2017~~2019, and ~~2016,~~2018, respectively. Proceeds from the sale of these held for sale loans amounted to ~~$92~~$214 million and ~~$150~~$257 million during the three months ended December 31, ~~2017~~2019, and ~~2016,~~2018, respectively. Net gains resulting from such sales ~~amounted to $1 million in both~~were insignificant during the three months ended December 31, ~~2017~~2019 and 2016. Unrealized losses recorded in the Condensed Consolidated Statements of Income and Comprehensive Income to reflect the loans held for sale at the lower of cost or market value were insignificant in both the three months ended December 31, 2017 and 2016.2018.

Purchases and sales of loans held for investment

The following table presents purchases and sales of any loans held for investment by portfolio ~~segment:~~segment.



$ in millions	C&I loans		Residential mortgage loans		Total
Three months ended December 31, 2019
Purchases	$	67	$	158	$	225
Sales	$	20	$	—	$	20
Three months ended December 31, 2018
Purchases	$	262	$	76	$	338
Sales	$	69	$	—	$	69

$ in thousands C&I CRE Residential mortgage Total
Three months ended December 31, 2017
Purchases $ 147,442
$ 20,087
$ 45,011
$ 212,540
Sales $ 31,143
$ —
$ —
$ 31,143
Three months ended December 31, 2016
Purchases $ 114,649
$ 38,980
$ 81,662
$ 235,291
Sales $ 81,579
$ —
$ —
$ 81,579

~~RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES~~

~~Notes to Condensed Consolidated Financial Statements (Unaudited)~~

Sales in the preceding table ~~above~~ represent the recorded investment of loans held for investment that were transferred to loans held for sale and subsequently sold to a third party during the respective period. As more fully described in Note 2 of our ~~2017~~2019 Form 10-K, corporate loan (C&I, CRE and CRE construction) sales generally occur as part of ~~a loan workout situation.~~our credit management activities.

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited)

Aging analysis of loans held for investment

The following table presents an analysis of the payment status of loans held for ~~investment:~~investment. Amounts in the table exclude any net unearned income and deferred expenses.



$ in millions	30-89 days and accruing		90 days or more and accruing		Total past due and accruing		Nonaccrual		Current and accruing		Total loans held for investment
December 31, 2019
C&I loans	$	—	$	—	$	—	$	16	$	8,027	$	8,043
CRE construction loans	—		—		—		—		167		167
CRE loans	—		—		—		7		3,766		3,773
Tax-exempt loans	—		—		—		—		1,220		1,220
Residential mortgage loans:
First mortgage loans	1		—		1		15		4,664		4,680
Home equity loans/lines	—		—		—		—		25		25
SBL and other	—		—		—		—		3,411		3,411
Total loans held for investment	$	1	$	—	$	1	$	38	$	21,280	$	21,319

September 30, 2019
C&I loans	$	—	$	—	$	—	$	19	$	8,079	$	8,098
CRE construction loans	—		—		—		—		185		185
CRE loans	—		—		—		8		3,644		3,652
Tax-exempt loans	—		—		—		—		1,241		1,241
Residential mortgage loans:
First mortgage loans	2		—		2		16		4,409		4,427
Home equity loans/lines	—		—		—		—		27		27
SBL and other	—		—		—		—		3,349		3,349
Total loans held for investment	$	2	$	—	$	2	$	43	$	20,934	$	20,979

$ in thousands
30-89
days and accruing
90 days or more and accruing Total past due and accruing
Nonaccrual ⁽¹⁾
Current and accruing
Total loans held for investment ⁽²⁾
As of December 31, 2017:
C&I loans $ 113
$ —
$ 113
$ 4,843
$ 7,485,263
$ 7,490,219
CRE construction loans —
—
—
—
164,847
164,847
CRE loans —
—
—
—
3,136,101
3,136,101
Tax-exempt loans —
—
—
—
1,136,468
1,136,468
Residential mortgage loans:

First mortgage loans 5,886
—
5,886
32,364
3,205,513
3,243,763
Home equity loans/lines 75
—
75
126
26,816
27,017
SBL 66
—
66
—
2,530,455
2,530,521
Total loans held for investment, net $ 6,140
$ —
$ 6,140
$ 37,333
$ 17,685,463
$ 17,728,936

As of September 30, 2017:
C&I loans $ —
$ —
$ —
$ 5,221
$ 7,380,689
$ 7,385,910
CRE construction loans —
—
—
—
112,681
112,681
CRE loans —
—
—
—
3,106,290
3,106,290
Tax-exempt loans —
—
—
—
1,017,791
1,017,791
Residential mortgage loans:
First mortgage loans 1,853
—
1,853
33,718
3,086,701
3,122,272
Home equity loans/lines 248
—
248
31
26,179
26,458
SBL —
—
—
—
2,386,697
2,386,697
Total loans held for investment, net $ 2,101
$ —
$ 2,101
$ 38,970
$ 17,117,028
$ 17,158,099

The preceding table includes $28 million and $32 million at December 31, 2019 and September 30, 2019, respectively, of nonaccrual loans which were current pursuant to their contractual terms.


~~(1)~~	~~Includes $15 million and $18 million of nonaccrual loans at December 31, 2017 and September 30, 2017, respectively, which are performing pursuant to their contractual terms.~~


~~(2)~~	~~Excludes any net unearned income and deferred expenses.~~

Other real estate owned, included in “Other assets” on our Condensed Consolidated Statements of Financial Condition, was ~~$4 million and $5~~$3 million at both December 31, ~~2017~~2019 and September 30, ~~2017, respectively.~~2019. The recorded investment in mortgage loans secured by one-to-four family residential properties for which formal foreclosure proceedings were in process was ~~$17 million and $18~~$7 million at both December 31, ~~2017~~2019 and September 30, ~~2017, respectively.~~2019.

~~RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES~~

~~Notes to Condensed Consolidated Financial Statements (Unaudited)~~

Impaired loans and troubled debt restructurings

The following table provides a summary of RJ Bank’s impaired ~~loans:~~loans.



	December 31, 2019						September 30, 2019
$ in millions	Gross recorded investment		Unpaid principal balance		Allowance for losses		Gross recorded investment		Unpaid principal balance		Allowance for losses
Impaired loans with allowance for loan losses:
C&I loans	$	16	$	18	$	3	$	19	$	20	$	6
Residential - first mortgage loans	9		12		1		11		13		1
Total	25		30		4		30		33		7
Impaired loans without allowance for loan losses:
CRE loans	7		13		—		8		13		—
Residential - first mortgage loans	11		17		—		11		17		—
Total	18		30		—		19		30		—
Total impaired loans	$	43	$	60	$	4	$	49	$	63	$	7

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited)

December 31, 2017 September 30, 2017
$ in thousands
Gross
recorded
investment

Unpaid
principal
balance

Allowance
for losses

Gross
recorded
investment

Unpaid
principal
balance

Allowance
for losses
Impaired loans with allowance for loan losses:
C&I loans $ 4,843
$ 5,910
$ 1,846
$ 5,221
$ 6,160
$ 1,963
Residential - first mortgage loans 22,663
29,403
2,375
23,977
31,100
2,504
Total 27,506
35,313
4,221
29,198
37,260
4,467
Impaired loans without allowance for loan losses:

CRE loans —
—
—
—
—
—
Residential - first mortgage loans 16,480
24,096
—
16,737
24,899
—
Total 16,480
24,096
—
16,737
24,899
—
Total impaired loans $ 43,986
$ 59,409
$ 4,221
$ 45,935
$ 62,159
$ 4,467

Impaired loan balances with allowances for loan losses have had reserves established based upon management’s analysis. There is no allowance required when the discounted cash flow, collateral value or market value of a loan equals or exceeds the carrying value. These are generally loans in process of foreclosure that have already been adjusted to fair value.

The preceding table includes C&I, CRE and residential first mortgage ~~TDR’s~~loans troubled debt restructurings (“TDRs”) of ~~$26~~$16 million, $7 million and ~~$27~~$17 million, respectively, at December 31, ~~2017~~2019 and $19 million, $8 million and $18 million, respectively, at September 30, ~~2017, respectively.~~2019.

The average balance of the total impaired loans ~~and the related interest income recognized in the Condensed Consolidated Statements of Income and Comprehensive Income were~~was as ~~follows:~~follows.



	Three months ended December 31,
$ in millions	2019		2018
C&I loans	$	18	$	10
CRE loans	7		—
Residential - first mortgage loans	21		27
Total average impaired loan balance	$	46	$	37

Three months ended December 31,
$ in thousands 2017 2016
Average impaired loan balance:
C&I loans $ 4,966
$ 32,808
CRE loans —
2,776
Residential - first mortgage loans 39,935
46,533
Total $ 44,901
$ 82,117
Interest income recognized:
Residential - first mortgage loans $ 287
$ 333
Total $ 287
$ 333

Credit quality indicators

The credit quality of RJ Bank’s loan portfolio is summarized monthly by management using the standard asset classification system utilized by bank regulators for the SBL and residential mortgage loan portfolios and internal risk ratings, which correspond to the same standard asset classifications for the corporate loan portfolios. These classifications are divided into three groups: Not Classified (Pass), Special Mention, and Classified or Adverse Rating (Substandard, Doubtful and Loss). These terms are defined as follows:

Pass – Loans which are well protected by the current net worth and paying capacity of the obligor (or guarantors, if any) or by the fair value, less costs to acquire and sell, of any underlying collateral in a timely manner.

Special Mention – Loans which have potential weaknesses that deserve management’s close attention. These loans are not adversely classified and do not expose RJ Bank to sufficient risk to warrant an adverse classification.

Substandard – Loans which are inadequately protected by the current sound worth and paying capacity of the obligor or by the collateral pledged, if any. Loans with this classification are characterized by the distinct possibility that RJ Bank will sustain some loss if the deficiencies are not corrected.

Doubtful – Loans which have all the weaknesses inherent in loans classified as substandard with the added characteristic that the weaknesses make collection or liquidation in full highly questionable and improbable on the basis of currently-known facts, conditions and values.

~~RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES~~

~~Notes to Condensed Consolidated Financial Statements (Unaudited)~~

Loss – Loans which are considered by management to be uncollectible and of such little value that their continuance on ~~RJ Bank’s~~our books as an asset, without establishment of a specific valuation allowance or charge-off, is not warranted. ~~RJ Bank does~~We do not have any bank loan balances within this classification because, in accordance with ~~its~~our accounting policy, loans, or a portion thereof considered to be uncollectible, are charged-off prior to the assignment of this classification.

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited)

The following table presents the credit quality of RJ Bank’s held for investment loan ~~portfolio was as follows:~~portfolio.



$ in millions	Pass		Special mention		Substandard		Doubtful		Total
December 31, 2019
C&I loans	$	7,799	$	98	$	146	$	—	$	8,043
CRE construction loans	167		—		—		—		167
CRE loans	3,701		36		36		—		3,773
Tax-exempt loans	1,220		—		—		—		1,220
Residential mortgage loans:
First mortgage loans	4,647		9		24		—		4,680
Home equity loans/lines	25		—		—		—		25
SBL and other	3,411		—		—		—		3,411
Total loans held for investment	$	20,970	$	143	$	206	$	—	$	21,319

September 30, 2019
C&I loans	$	7,870	$	152	$	76	$	—	$	8,098
CRE construction loans	185		—		—		—		185
CRE loans	3,630		—		22		—		3,652
Tax-exempt loans	1,241		—		—		—		1,241
Residential mortgage loans:
First mortgage loans	4,392		10		25		—		4,427
Home equity loans/lines	27		—		—		—		27
SBL and other	3,349		—		—		—		3,349
Total loans held for investment	$	20,694	$	162	$	123	$	—	$	20,979

$ in thousands Pass Special mention Substandard Doubtful Total
December 31, 2017
C&I $ 7,343,153
$ 35,606
$ 111,460
$ —
$ 7,490,219
CRE construction 164,847
—
—
—
164,847
CRE 3,097,041
38,933
127
—
3,136,101
Tax-exempt 1,136,468
—
—
—
1,136,468
Residential mortgage:
First mortgage 3,194,572
6,914
42,277
—
3,243,763
Home equity 26,525
315
177
—
27,017
SBL 2,530,521
—
—
—
2,530,521
Total $ 17,493,127
$ 81,768
$ 154,041
$ —
$ 17,728,936

September 30, 2017
C&I $ 7,232,777
$ 63,964
$ 89,169
$ —
$ 7,385,910
CRE construction 112,681
—
—
—
112,681
CRE 3,048,847
57,315
128
—
3,106,290
Tax-exempt 1,017,791
—
—
—
1,017,791
Residential mortgage:
First mortgage 3,068,290
8,467
45,515
—
3,122,272
Home equity 26,352
75
31
—
26,458
SBL 2,386,697
—
—
—
2,386,697
Total $ 16,893,435
$ 129,821
$ 134,843
$ —
$ 17,158,099

Loans classified as special mention, substandard or doubtful are all considered to be “criticized” loans.

The credit quality of RJ Bank’s performing residential first mortgage loan portfolio is additionally assessed utilizing updated loan-to-value (“LTV”) ratios. Current LTVs are updated using the most recently available information (generally updated every six months) and are estimated based on the initial appraisal obtained at the time of origination, adjusted using relevant market indices for housing price changes that have occurred since origination. The value of the homes could vary from actual market values due to changes in the condition of the underlying property, variations in housing price changes within current valuation indices, and other factors. Residential mortgage loans with estimated LTVs in excess of 100% represented much less than 1% of the residential mortgage loan portfolio as of December 31, 2017.

~~RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES~~

~~Notes to Condensed Consolidated Financial Statements (Unaudited)~~

Allowance for loan losses and reserve for unfunded lending commitments

~~Changes~~The following table presents changes in the allowance for loan losses of RJ Bank by portfolio ~~segment are as follows:~~segment.



	Loans held for investment
$ in millions	C&I loans			CRE construction loans			CRE loans			Tax-exempt loans			Residential mortgage loans		SBL and other			Total
Three months ended December 31, 2019
Balance at beginning of period	$	139		$	3		$	46		$	9		$	16	$	5		$	218
Provision/(benefit) for loan losses	—			(1		)	—			(1		)	1		(1		)	(2		)
Net (charge-offs)/recoveries:
Charge-offs	—			—			—			—			—		—			—
Recoveries	—			—			—			—			—		—			—
Net charge-offs	—			—			—			—			—		—			—
Foreign exchange translation adjustment	—			—			—			—			—		—			—
Balance at end of period	$	139		$	2		$	46		$	8		$	17	$	4		$	216

Three months ended December 31, 2018
Balance at beginning of period	$	123		$	3		$	47		$	9		$	17	$	4		$	203
Provision/(benefit) for loan losses	15			—			(1		)	—			1		1			16
Net (charge-offs)/recoveries:
Charge-offs	—			—			—			—			—		—			—
Recoveries	—			—			—			—			1		—			1
Net (charge-offs)/recoveries	—			—			—			—			1		—			1
Foreign exchange translation adjustment	(1		)	—			—			—			—		—			(1		)
Balance at end of period	$	137		$	3		$	46		$	9		$	19	$	5		$	219

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited)

Loans held for investment
$ in thousands C&I
CRE
construction
CRE Tax-exempt Residential mortgage SBL Total
Three months ended December 31, 2017

Balance at beginning of period $ 119,901
$ 1,421
$ 41,749
$ 6,381
$ 16,691
$ 4,299
$ 190,442
Provision/(benefit) for loan losses 2,337
686
(1,104 ) 537
(1,699 ) 259
1,016
Net (charge-offs)/recoveries:

Charge-offs (603 ) —
—
—
(95 ) —
(698 )
Recoveries —
—
—
—
604
—
604
Net (charge-offs)/recoveries (603 ) —
—
—
509
—
(94 )
Foreign exchange translation adjustment (66 ) —
(29 ) —
—
—
(95 )
Balance at end of period $ 121,569
$ 2,107
$ 40,616
$ 6,918
$ 15,501
$ 4,558
$ 191,269

Three months ended December 31, 2016
Balance at beginning of period $ 137,701
$ 1,614
$ 36,533
$ 4,100
$ 12,664
$ 4,766
$ 197,378
Provision/(benefit) for loan losses (1,243 ) 581
(2,010 ) 393
997
242
(1,040 )
Net (charge-offs)/recoveries:

Charge-offs (3,389 ) —
—
—
(87 ) —
(3,476 )
Recoveries —
—
5,013
—
65
—
5,078
Net (charge-offs)/recoveries (3,389 ) —
5,013
—
(22 ) —
1,602
Foreign exchange translation adjustment (164 ) (92 ) (4 ) —
—
—
(260 )
Balance at end of period $ 132,905
$ 2,103
$ 39,532
$ 4,493
$ 13,639
$ 5,008
$ 197,680

The following table presents, by loan portfolio segment, RJ Bank’s recorded investment (excluding any net unearned income and deferred expenses) and the related allowance for loan losses.

Loans held for investment
Allowance for loan losses Recorded investment
$ in thousands Individually evaluated for impairment Collectively evaluated for impairment Total Individually evaluated for impairment Collectively evaluated for impairment Total
December 31, 2017
C&I $ 1,846
$ 119,723
$ 121,569
$ 4,843
$ 7,485,376
$ 7,490,219
CRE construction —
2,107
2,107
—
164,847
164,847
CRE —
40,616
40,616
—
3,136,101
3,136,101
Tax-exempt —
6,918
6,918
—
1,136,468
1,136,468
Residential mortgage 2,389
13,112
15,501
44,429
3,226,351
3,270,780
SBL —
4,558
4,558
—
2,530,521
2,530,521
Total $ 4,235
$ 187,034
$ 191,269
$ 49,272
$ 17,679,664
$ 17,728,936

September 30, 2017
C&I $ 1,963
$ 117,938
$ 119,901
$ 5,221
$ 7,380,689
$ 7,385,910
CRE construction —
1,421
1,421
—
112,681
112,681
CRE —
41,749
41,749
—
3,106,290
3,106,290
Tax-exempt —
6,381
6,381
—
1,017,791
1,017,791
Residential mortgage 2,506
14,185
16,691
47,368
3,101,362
3,148,730
SBL —
4,299
4,299
—
2,386,697
2,386,697
Total $ 4,469
$ 185,973
$ 190,442
$ 52,589
$ 17,105,510
$ 17,158,099



	Loans held for investment
	Allowance for loan losses						Recorded investment
$ in millions	Individually evaluated for impairment		Collectively evaluated for impairment		Total		Individually evaluated for impairment		Collectively evaluated for impairment		Total
December 31, 2019
C&I loans	$	3	$	136	$	139	$	16	$	8,027	$	8,043
CRE construction loans	—		2		2		—		167		167
CRE loans	—		46		46		7		3,766		3,773
Tax-exempt loans	—		8		8		—		1,220		1,220
Residential mortgage loans	1		16		17		26		4,679		4,705
SBL and other	—		4		4		—		3,411		3,411
Total	$	4	$	212	$	216	$	49	$	21,270	$	21,319

September 30, 2019
C&I loans	$	6	$	133	$	139	$	19	$	8,079	$	8,098
CRE construction loans	—		3		3		—		185		185
CRE loans	—		46		46		8		3,644		3,652
Tax-exempt loans	—		9		9		—		1,241		1,241
Residential mortgage loans	1		15		16		28		4,426		4,454
SBL and other	—		5		5		—		3,349		3,349
Total	$	7	$	211	$	218	$	55	$	20,924	$	20,979

The reserve for unfunded lending commitments, which is included in “Other payables” on our Condensed Consolidated Statements of Financial Condition, was ~~$10~~$8 million and $9 million at December 31, ~~2017~~2019 and ~~$11 million at~~ September 30, ~~2017~~.2019, respectively.

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited)

NOTE 98 – VARIABLE INTEREST ENTITIES

A VIE requires consolidation by the entity’s primary beneficiary. We evaluate all of the entities in which we are involved to determine if the entity is a VIE and if so, whether we hold a variable interest and are the primary beneficiary. Refer to Note 2 of our ~~2017~~2019 Form 10-K for a discussion of our principal involvement with VIEs and the accounting policies regarding determination of whether we are deemed to be the primary beneficiary of VIEs.

VIEs where we are the primary beneficiary

Of the VIEs in which we hold an interest, we have determined that certain limited partnerships which are part of our private equity portfolio (“Private Equity ~~Interests, a~~Interests”), certain Low-Income Housing Tax Credit ~~fund~~ (“~~LIHTC fund”~~LIHTC”) in which RJ Bank is an investor and an affiliate of Raymond James Tax Credit Funds, Inc. (“RJTCF”) is the managing member, a LIHTC fund where RJTCF provides an investor member with a guaranteed return on their investment (“Guaranteed LIHTC Fund”), certain other LIHTC funds and the trust we utilize in connection with restricted stock unit (“RSU”) awards granted to certain employees of one of our Canadian ~~subsidiary~~subsidiaries (the “Restricted Stock Trust Fund”) require consolidation in our financial statements, as we are deemed the primary beneficiary of such VIEs. The aggregate assets and liabilities of the VIEs we consolidate are provided in the ~~table below.~~following table. Aggregate assets and aggregate liabilities may differ from the consolidated carrying value of assets and liabilities due to the elimination of intercompany assets and liabilities held by the consolidated VIE.



$ in millions	Aggregate assets		Aggregate liabilities
December 31, 2019
Private Equity Interests	$	63	$	4
LIHTC funds	77		4
Restricted Stock Trust Fund	21		21
Total	$	161	$	29

September 30, 2019
Private Equity Interests	$	65	$	4
LIHTC funds	80		5
Restricted Stock Trust Fund	14		14
Total	$	159	$	23

$ in thousands Aggregate assets Aggregate liabilities
December 31, 2017
Private Equity Interests $ 97,475
$ 3,614
LIHTC Fund in which RJ Bank is an investor member 56,556
1,154
Guaranteed LIHTC Fund 50,870
2,943
Other LIHTC Funds 7,519
2,915
Restricted Stock Trust Fund 17,951
17,951
Total $ 230,371
$ 28,577

September 30, 2017

Private Equity Interests $ 104,414
$ 3,851
LIHTC Fund in which RJ Bank is an investor member 57,719
1,055
Guaranteed LIHTC Fund 51,400
2,872
Other LIHTC Funds 7,418
2,544
Restricted Stock Trust Fund 12,122
12,122
Total $ 233,073
$ 22,444

In the Guaranteed LIHTC Fund, a multi-investor tax credit fund in which RJTCF is the managing member, RJTCF has provided one investor member a guaranteed return on their investment in the fund. See Note 9 in our 2017 Form 10-K for information regarding the financing asset associated with this fund and Note 14 of this Form 10-Q for additional information regarding this commitment.

~~RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES~~

~~Notes to Condensed Consolidated Financial Statements (Unaudited)~~

The following table presents information about the carrying value of the assets ~~liabilities~~ and ~~equity~~liabilities of the VIEs which we consolidate and which are included ~~within~~on our Condensed Consolidated Statements of Financial Condition. ~~The noncontrolling interests presented~~Intercompany balances are eliminated in ~~this table represent the portion of these net assets which are~~consolidation and not ~~ours.~~

$ in thousands December 31, 2017 September 30, 2017
Assets:
Cash and cash equivalents $ 2,343
$ 2,052
Assets segregated pursuant to regulations and other segregated assets 4,242
4,590
Other receivables 79
168
Intercompany receivables 443
454
Other investments 94,610
101,905
Investments in real estate partnerships held by consolidated variable interest entities 110,662
111,743
Trust fund investment in RJF common stock 17,949
12,120
Other assets 43
41
Total assets $ 230,371
$ 233,073

Liabilities and equity:

Other payables $ 11,968
$ 9,667
Intercompany payables 22,302
16,520
Total liabilities 34,270
26,187
RJF equity 96,968
101,445
Noncontrolling interests 99,133
105,441
Total equity 196,101
206,886
Total liabilities and equity $ 230,371
$ 233,073

~~The trust fund investment in RJF common stock~~reflected in the ~~table above is the Restricted Stock Trust Fund, which is included in “Treasury stock” in our Condensed Consolidated Statements of Financial Condition.~~following table.



$ in millions	December 31, 2019		September 30, 2019
Assets:
Cash, cash equivalents and cash segregated pursuant to regulations	$	6	$	7
Other investments	60		63
Other assets	72		75
Total assets	$	138	$	145
Liabilities:
Other payables	$	2	$	4
Total liabilities	$	2	$	4
Noncontrolling interests	$	57	$	60

VIEs where we hold a variable interest but are not the primary beneficiary

As discussed in Note 2 inof our ~~2017~~2019 Form 10-K, we have concluded that for certain VIEs we are not the primary beneficiary and therefore do not consolidate these VIEs. Such VIEs include certain Private Equity Interests, certain LIHTC funds, ~~New Market Tax Credit Funds (“NMTC Funds”)~~ and other limited partnerships. Our risk of loss for these VIEs is limited to our investments in, advances to, and/or receivables due from these VIEs.

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited)

Aggregate assets, liabilities and risk of loss

The aggregate assets, liabilities, and our exposure to loss from those VIEs in which we hold a variable interest, but as to which we have concluded we are not the primary beneficiary, are provided in the ~~table below.~~following table.



	December 31, 2019						September 30, 2019
$ in millions	Aggregate assets		Aggregate liabilities		Our risk of loss		Aggregate assets		Aggregate liabilities		Our risk of loss
Private Equity Interests	$	5,672	$	117	$	63	$	6,317	$	117	$	63
LIHTC funds	6,254		2,117		42		6,001		2,221		64
Other	208		115		4		205		115		4
Total	$	12,134	$	2,349	$	109	$	12,523	$	2,453	$	131

NOTE 9 – LEASES

We have operating leases for the premises we occupy in many of our U.S. and foreign locations, including our employee-based branch office operations. We also lease certain office and technology equipment. At inception, we determine if an arrangement to utilize a building or piece of equipment is a lease and, if so, the appropriate lease classification. If the arrangement is determined to be a lease, we recognize a ROU asset and a corresponding lease liability on our balance sheet. ROU assets represent our right to use an underlying asset for the lease term, and lease liabilities represent our obligation to make lease payments arising from the lease. We have elected the practical expedient, where leases with an initial term of 12 months or less are not recorded as an ROU asset or lease liability. Our lease terms include any noncancelable periods and may reflect periods covered by options to extend or terminate when it is reasonably certain that we will exercise those options. As of December 31, 2019, the weighted average remaining lease term for our operating leases was 5 years.

We record our operating lease ROU assets at the amount of the lease liability plus any prepaid rent and initial direct costs, less any lease incentives and accrued rent. We record lease liabilities at commencement date based on the present value of lease payments over the lease term, which is discounted using our commencement date incremental borrowing rate. Our incremental borrowing rate considers the weighted average yields on our senior notes payable, adjusted for collateralization and tenor. As of December 31, 2019, the weighted-average discount rate for our operating leases was 3.85%. Payments that vary because of changes in facts or circumstances occurring after the commencement date are considered variable and are expensed in the period incurred. For our real estate leases, we elected the practical expedient to account for the lease and non-lease components as a single lease. We have not elected the practical expedient for our equipment leases and account for lease and non-lease components separately. As of December 31, 2019, ROU assets of $324 million and lease liabilities of $349 million were included as components of “Other assets” and “Other payables,” respectively, on our Condensed Consolidated Statements of Financial Condition.

Lease expense

Lease expense for operating lease payments is recognized on a straight-line basis over the lease term if the ROU asset has not been impaired or abandoned.

The components of lease expense were as follows.

December 31, 2017 September 30, 2017
$ in thousands
Aggregate
assets

Aggregate
liabilities

Our risk
of loss

Aggregate
assets

Aggregate
liabilities

Our risk
of loss
Private Equity Interests $ 9,270,590
$ 177,780
$ 71,048
$ 10,485,611
$ 174,354
$ 73,457
LIHTC Funds 5,432,342
2,129,756
86,098
5,372,367
2,134,600
60,959
NMTC Funds 30,196
115
9
30,297
105
9
Other 169,462
88,615
3,535
169,462
88,615
3,163
Total $ 14,902,590

$ 2,396,266

$ 160,690

$ 16,057,737

$ 2,397,674

$ 137,588



$ in million	Three months ended December 31, 2019
Operating lease cost	$	23
Variable lease cost ⁽¹⁾	$	8


(1)	Includes payments for common area maintenance charges and other variable costs that are not reflected in the measurement of ROU assets and lease liabilities.

Finance leases and sublease income were immaterial for all periods presented. Short-term lease expense for the three months ended December 31, 2019 was immaterial.

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited)

~~NOTE 10 - GOODWILL AND IDENTIFIABLE INTANGIBLE ASSETS, NET~~Lease liabilities

~~Our goodwill and identified intangible assets result from various acquisitions. See Note 2~~Maturities of ~~our 2017 Form 10-K for a discussion of our intangible assets and goodwill accounting policies. The following are our goodwill and net identifiable intangible asset balances as of the dates indicated:~~

$ in thousands December 31, 2017 September 30, 2017
Goodwill $ 479,775
$ 410,723
Identifiable intangible assets, net 171,564
82,460
Total goodwill and identifiable intangible assets, net $ 651,339
$ 493,183

As more fully described in Note 3, we acquired Scout Group during the three months ended December 31, 2017, which included a number of identifiable intangible assets as well as goodwill. See Note 12 of our 2017 Form 10-K for a discussion of the components of our goodwill balance and additional information regarding our identifiable intangible assets.

~~Goodwill~~

~~The following summarizes our goodwill by segment, along with the balance and activity for the periods indicated:~~

Segment
$ in thousands Private Client Group Capital Markets Asset Management Total
For the three months ended December 31, 2017
Goodwill as of beginning of period $ 276,713
$ 134,010
$ —
$ 410,723
Additions —
—
69,234
69,234
Foreign currency translation (179 ) (3 ) —
(182 )
Goodwill as of end of period $ 276,534
$ 134,007
$ 69,234
$ 479,775

For the three months ended December 31, 2016
Goodwill as of beginning of period $ 275,521
$ 132,551
$ —
$ 408,072
Additions —
—
—
—
Foreign currency translation (537 ) (1,038 ) —
(1,575 )
Goodwill as of end of period $ 274,984
$ 131,513
$ —
$ 406,497

~~The addition to goodwill during the three months ended December 31, 2017 arose from acquisition of the Scout Group.~~

As described in Note 2 of our 2017 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 performed our latest annual goodwill impairment testing during the quarter ended March 31, 2017, evaluating balanceslease liabilities as of December 31, ~~2016,~~2019 were as follows.



Maturity of lease liabilities for fiscal year ended September 30,	$ in millions
Remainder of 2020	$	65
2021	91
2022	67
2023	54
2024	39
After 2024	73
Total lease payments	389
Less: interest	40
Present value of lease liabilities	$	349

Operating lease payments in the preceding table exclude $98 million of legally binding minimum lease payments for leases signed but not yet commenced. These leases are estimated to commence between fiscal year 2020 and ~~no impairment was identified. In that testing, we performed both a qualitative impairment assessment for certain~~2021 with lease terms ranging from 2 years to 10 years.

Statement of cash flows supplemental information



$ in millions	Three months ended December 31, 2019
Cash outflows - lease liabilities	$	23
Non-cash - ROU assets recorded for new and modified leases	$	12

Minimum future lease commitments (under previous GAAP)

As of the date of adoption, our undiscounted minimum annual rental commitments under operating leases were materially unchanged from the disclosure in Note 17 of our reporting units and a quantitative impairment assessment for our two Raymond James Ltd. (“RJ Ltd.”) reporting units operating in Canada. No events have occurred since our assessment during the quarter ended March 31, 2017 that would cause us to update this impairment testing. See Note 12 in our 20172019 Form 10-K, ~~for further information about our goodwill impairment testing.~~

which is included in the following table.



Fiscal year ended September 30,	$ in millions
2020	$	103
2021	95
2022	79
2023	66
2024	49
Thereafter	127
Total	$	519

~~RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES~~

~~Notes to Condensed Consolidated Financial Statements (Unaudited)~~

~~Identifiable intangible assets, net~~

~~The following table sets forth our identifiable intangible asset balances by segment, net of accumulated amortization, and activity for the periods indicated:~~

Segment
$ in thousands Private Client Group Capital Markets Asset Management Total
For the three months ended December 31, 2017
Net identifiable intangible assets as of beginning of period $ 47,026
$ 23,077
$ 12,357
$ 82,460
Additions —
—
92,290
92,290
Amortization expense (1,496 ) (769 ) (871 ) (3,136 )
Foreign currency translation (9 ) —
(41 ) (50 )
Net identifiable intangible assets as of end of period $ 45,521
$ 22,308
$ 103,735
$ 171,564

For the three months ended December 31, 2016
Net identifiable intangible assets as of beginning of period $ 52,936
$ 27,937
$ 14,101
$ 94,974
Additions —
—

—
—
Amortization expense (1,520 ) (1,565 ) (498 ) (3,583 )
Foreign currency translation (45 ) (38 ) (132 ) (215 )
Net identifiable intangible assets as of end of period $ 51,371
$ 26,334
$ 13,471
$ 91,176

~~The addition of intangible assets during the three months ended December 31, 2017 were attributable to the Scout Group acquisition.~~

~~The following table sets forth our acquired intangible asset balances by asset class:~~

Weighted average useful life
(in years)

Amount acquired
(in thousands)
Customer relationships 13 $ 34,900
Trade name 20 3,590
Developed technology 10 1,800
Intangible assets subtotal 13 $ 40,290
Non-amortizing customer relationships Indefinite 52,000
Total intangible assets acquired $ 92,290

GAAP does not provide for the amortization of indefinite-lived intangible assets. Rather, these assets are subject to an evaluation of potential impairment on an annual basis to determine whether the estimated fair value is in excess of its carrying value, or more often if events or circumstances indicate there may be impairment. In the course of our evaluation of the potential impairment of such indefinite-lived asset, we may perform either a qualitative or a quantitative assessment. If after assessing the totality of events or circumstances, we determine it is more likely than not that the fair value is greater than its carrying amount, then performing a quantitative analysis is not required. However, if we conclude otherwise, we then perform a quantitative impairment analysis. We have elected January 1 as our annual impairment evaluation date, evaluating balances as of December 31.

~~The following summarizes our identifiable intangible assets by type:~~

December 31, 2017 September 30, 2017
$ in thousands Gross carrying value Accumulated amortization Gross carrying value Accumulated amortization
Customer relationships $ 133,610
$ (32,275 ) $ 99,749
$ (31,098 )
Non-amortizing customer relationships 52,000
—
—
—
Trade name 11,854
(2,387 ) 8,366
(2,076 )
Developed technology 3,430
(809 ) 1,630
(706 )
Intellectual property 538
(144 ) 542
(131 )
Non-compete agreements 2,902
(1,347 ) 3,336
(1,551 )
Seller relationship agreements 5,300
(1,108 ) 5,300
(901 )
Total $ 209,634
$ (38,070 ) $ 118,923
$ (36,463 )

~~RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES~~

~~Notes to Condensed Consolidated Financial Statements (Unaudited)~~

NOTE 1110 – BANK DEPOSITS

Bank deposits include savings and money market accounts, certificates of deposit ofwith RJ Bank, Negotiable Order of Withdrawal (“NOW”) accounts and demand deposits. The following table presents a summary of bank deposits including the weighted-average rate, the calculation of which was based on the actual deposit balances at ~~December 31, 2017 and September 30, 2017.~~each respective period.



	December 31, 2019				September 30, 2019
$ in millions	Balance		Weighted-average rate		Balance		Weighted-average rate
Savings and money market accounts	$	21,896	0.17	%	$	21,654	0.25	%
Certificates of deposit	1,056		2.07	%	605		2.33	%
NOW accounts	6		0.01	%	6		0.01	%
Demand deposits (non-interest-bearing)	17		—		16		—
Total	$	22,975	0.26	%	$	22,281	0.31	%

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited)

December 31, 2017 September 30, 2017
$ in thousands Balance Weighted-average rate Balance Weighted-average rate
Savings and money market accounts $ 18,377,271
0.14 % $ 17,391,091
0.14 %
Certificates of deposit 333,010
1.64 % 314,685
1.60 %
NOW accounts 5,982
0.01 % 5,197
0.01 %
Demand deposits (non-interest-bearing) 9,282
—
21,389
—
Total bank deposits $ 18,725,545
0.17 % $ 17,732,362
0.17 %

Total bank deposits in the preceding table ~~above excludes~~exclude affiliate deposits of ~~$246~~$164 million at December 31, ~~2017~~2019 and ~~$243~~$163 million at September 30, ~~2017. These affiliate deposits include $193 million at December 31, 2017 and $192 million at September 30, 2017,~~2019, all of which were held in a deposit account at RJ Bank on behalf of RJF.

Savings and money market accounts in the preceding table ~~above~~ consist primarily of deposits that are cash balances swept from the client investment accounts maintained at Raymond James & Associates, Inc. (“RJ&A”) to RJ Bank. These balances are held in Federal Deposit Insurance Corporation (“FDIC”) ~~insured~~-insured bank accounts through the Raymond James Bank Deposit Program (“RJBDP”). The aggregate amount of individual time deposit account balances that exceeded the FDIC insurance limit at December 31, ~~2017~~2019 was ~~$25~~approximately $45 million.

~~Scheduled~~The following table sets forth the scheduled maturities of certificates of ~~deposit are as follows:~~deposit.



	December 31, 2019				September 30, 2019
$ in millions	Denominations greater than or equal to $100,000		Denominations less than $100,000		Denominations greater than or equal to $100,000		Denominations less than $100,000
Three months or less	$	40	$	22	$	24	$	19
Over three through six months	59		19		26		21
Over six through twelve months	101		93		75		37
Over one through two years	21		108		32		36
Over two through three years	53		194		40		93
Over three through four years	69		137		66		47
Over four through five years	19		121		38		51
Total certificates of deposit	$	362	$	694	$	301	$	304

December 31, 2017 September 30, 2017
$ in thousands
Denominations
greater than or
equal to $100,000

Denominations
less than $100,000

Denominations
greater than or
equal to $100,000

Denominations
less than $100,000
Three months or less $ 11,405
$ 5,583
$ 8,704
$ 4,132
Over three through six months 5,251
4,146
4,692
3,894
Over six through twelve months 42,837
16,649
34,005
11,865
Over one through two years 37,836
20,950
38,713
20,019
Over two through three years 49,602
27,797
48,082
27,847
Over three through four years 9,462
7,281
21,819
12,761
Over four through five years 62,534
31,677
50,805
27,347
Total $ 218,927
$ 114,083
$ 206,820
$ 107,865

Interest expense on deposits, excluding interest expense related to affiliate deposits, is summarized ~~as follows:~~in the following table.



	Three months ended December 31,
$ in millions	2019		2018
Savings, money market, and NOW accounts	$	12	$	33
Certificates of deposit	4		2
Total interest expense on deposits	$	16	$	35

Three months ended December 31,
$ in thousands 2017 2016
Certificates of deposit $ 1,272
$ 1,135
Savings, money market, and NOW accounts 6,237
1,648
Total interest expense on deposits $ 7,509
$ 2,783

~~RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES~~

~~Notes to Condensed Consolidated Financial Statements (Unaudited)~~

NOTE 1211 – OTHER BORROWINGS

The following table details the components of other ~~borrowings:~~borrowings.



$ in millions	December 31, 2019		September 30, 2019
FHLB advances	$	875	$	875
Unsecured lines of credit	6		—
Mortgage notes payable and other	18		19
Total other borrowings	$	899	$	894

$ in thousands December 31, 2017 September 30, 2017
FHLB advances $ 875,000
$ 875,000
RJF Credit Facility 300,000
—
Secured lines of credit 180,000
260,000
Unsecured lines of credit 150,000
350,000
Mortgage notes payable and other 27,826
29,012
Total other borrowings $ 1,532,826
$ 1,514,012

FHLB advances

Borrowings from the FHLB as of December 31, 2019 and September 30, 2019, were comprised of both floating and fixed-rate advances. As of December 31, ~~2017~~2019 and September 30, ~~2017~~2019, the floating-rate advances totaled $850 million. The interest rates on the floating-rate advances, which mature in ~~June 2019 and have interest rates which~~December 2022, reset quarterly ~~totaled $850 million.~~and are generally based on LIBOR. We use interest rate swaps to manage the risk of increases in interest rates associated with these floating-rate advances by converting the balances subject to variable interest rates to a fixed interest rate. Refer to Note 62 of our 2019 Form 10-K for information regarding these interest rate swaps, which are accounted for as hedging instruments. ~~The fixed-rate advance as~~As of both December 31, ~~2017~~2019 and September 30, ~~2017, in~~2019, the ~~amount of~~fixed-rate advance totaled $25 million ~~matures in October 2020~~ and bears interest at a fixed rate of 3.4%. This advance matures in October 2020. All of the advances were secured by a blanket lien granted to the FHLB on our residential mortgage loan portfolio. The weighted average interest ~~rates~~rate on these FHLB advances as of December 31, ~~2017~~2019 and September 30, ~~2017 were 1.74%~~2019 was 2.11% and ~~1.41%~~2.17%, respectively.

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited)

Secured and unsecured financing arrangements

On February 19, 2019, RJF ~~is a party to a~~and RJ&A entered into an unsecured revolving credit facility agreement (the ~~“RJF~~“Credit Facility”). The Credit ~~Facility”) with~~Facility has a maturity date of ~~May 2022 in which~~February 2024 and the lenders ~~are~~include a number of financial institutions. This committed unsecured borrowing facility provides for maximum borrowings of up to $500 million, with a sublimit of $300 million for RJF, at variable rates of ~~interest. The~~interest based on LIBOR, as adjusted for RJF’s credit rating. There were 0 borrowings outstanding on the ~~RJF~~ Credit Facility ~~bear interest at a rate~~as of ~~2.98% per annum. The outstanding borrowings at~~ December 31, ~~2017 were subsequently repaid in January 2018.~~2019. There is a ~~variable rate commitment~~facility fee associated with the ~~RJF~~ Credit Facility, which also varies ~~depending upon~~with RJF’s credit rating. Based upon RJF’s credit rating as of December 31, ~~2017,~~2019, the variable rate ~~commitment~~facility fee, which ~~would apply~~is applied to ~~any difference between the daily borrowed amount and~~ the committed amount, was ~~0.20%~~0.175% per annum. ~~Any borrowings on~~

In addition to the Credit Facility, we maintain various secured and unsecured lines of credit, ~~were short-term and were generally utilized for cash management purposes.~~

~~Any borrowings on secured lines of credit were day-to-day and were~~which are generally utilized to finance certain fixed income securities. In addition we have other collateralized financings included in “Securities sold under agreements to repurchase” on our Condensed Consolidated Statements of Financial Condition. See Note 7securities or for ~~information regarding our collateralized financing arrangements.~~

cash management purposes. Borrowings during the period were generally day-to-day. The interest rates for ~~all of our U.S. and Canadian secured and unsecured financing facilities~~these arrangements are variable and are based on the Fed Funds rate, LIBOR, a lenders prime rate, or the Canadian prime rate, as applicable. ~~For the three months ended~~The weighted average interest rate on our outstanding borrowings as of December 31, ~~2017, interest rates~~2019 was 2.87%.

We also have other collateralized financings included in “Securities sold under agreements to repurchase” and “Securities loaned” on ~~the U.S. facilities that were utilized during the period,~~our Condensed Consolidated Statements of Financial Condition. See Note 6 for information regarding our other ~~than the RJF Credit Facility which was previously described, ranged from 0.85% to 5.30%.~~collateralized financing arrangements.

Mortgage notes payable and other

Mortgage notes payable pertain to mortgage loans on certain of our corporate headquarters offices located in St. Petersburg, Florida. These mortgage loans are secured by land, buildings, and improvements. These mortgage loans bear a fixed interest atrate of 5.7% with repayment terms of monthly interest and principal debt service and have a January 2023 maturity.

NOTE 1312 – INCOME TAXES

~~For discussion of income tax accounting policies and other income tax related information, see Note 2 and Note 16 of our 2017 Form 10-K.~~

The income tax provision for interim periods is comprised of tax on ordinary income provided at the most recent estimated annual effective tax rate, adjusted for the tax effect of discrete items. We estimate the annual effective tax rate quarterly based on the forecasted pretax results of our U.S. and non-U.S. operations. Items unrelated to current year ordinary income are recognized entirely in the period identified as a discrete item of tax. These discrete items generally relate to changes in tax laws, adjustments to the actual liability determined upon filing tax returns, excess tax benefits related to share-based compensation and adjustments to previously recorded reserves for uncertain tax positions.

~~RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES~~

~~Notes to Condensed Consolidated Financial Statements (Unaudited)~~

~~The Tax Cuts and Jobs Act (the “Tax Act”)~~

~~On December 22, 2017, the Tax Act was enacted, which significantly revised the U.S. corporate~~ For discussion of income tax ~~system by, among~~accounting policies and other ~~things, lowering corporate~~ income tax ~~rates from 35% to 21%~~related information, see Notes 2 and ~~implementing a territorial~~16 of our 2019 Form 10-K.

Effective tax ~~system which includes a one-time transition tax on deemed repatriated earnings of foreign subsidiaries. As the firm’s fiscal year end is September 30th, our U.S. federal statutory~~rate

Our effective income tax rate will be 24.5% for our fiscal year ended September 30, 2018, which reflects a blended federal statutory rate of 35% for our first fiscal quarter and 21% for the remaining three fiscal quarters. This blended statutory rate is the basis for calculating our effective tax rate, which is also impacted by other factors.

In response to the enactment of the Tax Act, the SEC issued guidance which summarizes a three-step process to be applied at each reporting period to account for and qualitatively disclose: (1) the effects of the change in tax law for which accounting is complete; (2) provisional amounts (or adjustments to provisional amounts) for the effects of the tax law where accounting is not complete, but that a reasonable estimate has been determined; and (3) a reasonable estimate cannot yet be made and therefore taxes are reflected in accordance with law prior to the enactment of the Tax Act. Further to (2) above, a registrant should record provisional amounts during a “measurement period” when the registrant does not have the necessary information available, prepared, or analyzed in reasonable detail to complete its accounting for the change in tax law. The measurement period ends when a company has obtained, prepared, and analyzed the information necessary to finalize its accounting, not to exceed twelve months from the enactment date of the Tax Act. In accordance with the SEC guidance, our net incomewas 25.3% for the three months ended December 31, ~~2017 included an estimate of the discrete impact of the Tax Act of $117 million, primarily due to the remeasurement of U.S. deferred tax assets at the lower enacted corporate tax rate and, to~~2019, a lesser extent, the transition tax on deemed repatriated earnings of foreign subsidiaries. This estimate incorporates assumptions made based on our current interpretation of the Tax Act and may change, possibly materially, as we complete our analysis and receive additional clarification and implementation guidance.

~~Reduction of U.S. federal corporate tax rate~~

We applied the SEC’s guidance in estimating the remeasurement of U.S. deferred tax assets at the lower enacted corporate tax rate, resulting in an estimated impact of $104 million. This calculation includes projections related to the timing of realization of deferred tax assets during the remainder of fiscal year 2018 and beyond. We will update our calculation throughout the year as more information becomes available. These estimates may change, possibly materially, as we obtain further information regarding the timing of realization of deferred tax assets.

~~Transition tax~~

We also applied the SEC’s guidance in estimating the transition tax, which we anticipate will be approximately $13 million, including the state tax liability associated with deemed repatriation of foreign earnings. Our tax liability calculations include projected amounts of unremitted earnings for our foreign subsidiaries for the remainder of the fiscal year. We will update our calculations throughout the year as more information on our foreign subsidiaries’ earning and profits becomes available. These estimates incorporate assumptions made based on our current interpretation of the Tax Act and may change, possibly materially, as we complete our analysis and receive additional clarification and implementation guidance.

~~Executive compensation deduction limitation~~

We also applied the SEC’s guidance in accounting for the deferred tax assets potentially impacted by the Tax Act legislation. Effective for tax years beginning after December 31, 2017, the Tax Act eliminates the exception for performance-based compensation from the $1 million executive compensation deduction limitation. Our covered employees are paid a portion of performance-based compensation in the form of RSUs and stock awards which creates a deferred tax asset upon grant. The necessary information is not yet available to determine whether the deferred compensation previously granted will be deductible as a business expense as the legislation published to date is unclear on the effects to the deferred tax assets previously recorded. As such, we are unable to calculate a reasonable impact of this tax law change, thus in accordanceslight increase compared with the SEC’s guidance, we did not include a provisional amount in our financial statements. We continue to apply accounting guidance based on the provisions of the tax laws that were in effect immediately prior to the Tax Act being enacted. We will report provisional amounts in the first reporting period in which a reasonable estimate can be determined.

~~Indefinite reinvestment assertion~~

We are in the process of assessing the impact of the Tax Act on our current policy of indefinitely reinvesting foreign earnings, our related assertion to indefinitely reinvestment foreign earnings, as well as any such impact on our consolidated financial statements. Accordingly, no adjustments were included in our Condensed Consolidated Financial Statements for the three months ended December 31, 2017 with respect to the firm’s indefinite reinvestment assertion.

~~RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES~~

~~Notes to Condensed Consolidated Financial Statements (Unaudited)~~

~~Effective tax rate~~

For the three months ended December 31, 2017, our effective income tax rate was 61.7%, including the estimated discrete impact of the Tax Act of $117 million, partially offset by a lower blended federal corporate statutory tax rate of 24.5%. The discrete impact of the Tax Act increased our effective tax rate by 37.6 percentage points. The24.8% effective tax rate for fiscal year ~~2017 was 31.2%.~~2019.

Uncertain tax positions

We anticipate that the uncertain tax position liability balance will not change significantly over the next twelve months.

NOTE 1413 – COMMITMENTS, CONTINGENCIES AND GUARANTEES

Commitments and contingencies

Loan and ~~Underwriting Commitments~~underwriting commitments

In the normal course of business, we enter into commitments for fixed income and equity underwritings. As of December 31, ~~2017~~2019, we had ~~one~~2 such open underwriting ~~commitment,~~commitments, which ~~was~~were subsequently settled in open market transactions and ~~did not result~~none of which resulted in a significant loss.

~~As part of our recruiting efforts, we~~We offer loans to prospective financial advisors and certain key revenue producers primarily for recruiting, transitional cost assistance, and retention purposes (see Note 2 of our ~~2017~~2019 Form 10-K for a discussion of our accounting policies governing these transactions).

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited)

These ~~commitments~~offers are contingent upon ~~the occurrence of~~ certain events occurring, including ~~but not limited~~the individuals joining us and meeting certain conditions outlined in their offer. Our unfunded loan commitments related to ~~the individual joining us. As~~such offers were insignificant as of December 31, 2017, we had made commitments through the extension of formal offers totaling approximately $118 million that had not yet been funded; however, it is possible that not all of our offers will be accepted and therefore, we would not fund the total amount of the offers extended. As of December 31, 2017, $64 million of the total amount extended consisted of unfunded commitments to prospective financial advisors that had accepted our offers, or recently hired producers.2019.

~~As of December 31, 2017, we had not settled purchases of $121 million in syndicated loans. These loan purchases are expected to be settled within 90 days.~~

Commitments to extend credit and other credit-related financial instruments

RJ Bank has outstanding, at any time, a significant number of commitments to extend credit and other credit-related off-balance sheet financial instruments such as standby letters of credit and loan purchases, which then extend over varying periods of time. These arrangements are subject to strict underwriting assessments and each customer’s credit worthiness is evaluated on a case-by-case basis. Fixed-rate commitments are also subject to market risk resulting from fluctuations in interest rates and our exposure is limited to the replacement value of those commitments.

The following table presents RJ Bank’s commitments to extend credit and other credit-related off-balance sheet financial instruments ~~outstanding:~~outstanding.



$ in millions	December 31, 2019		September 30, 2019
Open-end consumer lines of credit (primarily SBL)	$	10,091	$	9,328
Commercial lines of credit	$	1,566	$	1,527
Unfunded loan commitments	$	606	$	599
Standby letters of credit	$	45	$	40

$ in thousands December 31, 2017 September 30, 2017
Standby letters of credit $ 38,436
$ 39,670
Open-end consumer lines of credit (primarily SBL) $ 5,782,262
$ 5,323,003
Commercial lines of credit $ 1,723,429
$ 1,673,272
Unfunded loan commitments $ 521,676
$ 386,950

Open-end consumer lines of credit primarily represent the unfunded amounts of RJ Bank loans to consumers that are secured by marketable securities at advance rates consistent with industry standards. The proceeds from repayment or, if necessary, the liquidation of collateral, which is monitored daily, are expected to satisfy the amounts drawn against these existing lines of credit. These lines of credit are primarily uncommitted, as we reserve the right to not make any advances or may terminate these lines at any time.

Because many of our lending commitments expire without being funded in whole or part, the ~~contract~~contractual amounts are not estimates of our actual future credit exposure or future liquidity requirements. We maintain a reserve to provide for potential losses related to the unfunded lending commitments. See Note 87 for further discussion of this reserve for unfunded lending commitments.

RJ&A enters into margin lending arrangements which allow customers to borrow against the value of qualifying securities. Margin loans are collateralized by the securities held in the customer’s account at RJ&A. Collateral levels and established credit terms are monitored daily and we require customers to deposit additional collateral or reduce balances as necessary.

Investment ~~Commitments~~commitments

A subsidiary of RJ Bank has committed $80 million as an investor member in a LIHTC fund in which a subsidiary of RJTCF is the managing member (see Note 2 of our 2017 Form 10-K for information regarding the accounting policies governing these investments). As of ~~December 31, 2017, the RJ Bank subsidiary~~We had ~~invested $62 million of the committed amount.~~

~~RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES~~

~~Notes to Condensed Consolidated Financial Statements (Unaudited)~~

~~We have~~ unfunded commitments to various investments, including private equity investments ~~which aggregate to $36~~and certain RJ Bank investments, of $44 million as of December 31, ~~2017~~2019. ~~Of the total, we have unfunded commitments of $18 million to internally-sponsored private equity investments in which we control the general partner.~~

~~Acquisition-Related Commitments and Contingencies~~

We have potential contingent payments related to our acquisitions of the Scout Group, The Producer’s Choice LLC and Mummert & Company Corporate Finance GmbH. The estimated fair values of such contingent payments were included in our Condensed Consolidated Statements of Financial Condition as of December 31, 2017.

Other ~~Commitments~~commitments

RJF has committed an amount of up to $225 million, subject to certain limitations and to annual re-approval by the RJF Board of Directors, to either lend to, or guarantee obligations of RJTCF in connection with RJTCF’s low-income housing development/rehabilitation and syndication activities. At ~~December 31, 2017, RJTCF had $111 million outstanding against this commitment. RJTCF may borrow from RJF in order to make~~Raymond James Tax Credit Funds, Inc. (“RJTCF”) sells investments in ~~or fund loans or advances to, either partnerships that purchase and develop properties qualifying for tax credits (“project partnerships”) or LIHTC funds. Investments in~~ project partnerships ~~are sold~~ to various LIHTC funds, which have ~~third party~~third-party investors, and for which RJTCF serves as the managing member or general partner. RJTCF typically sells investments in project partnerships to LIHTC funds within 90 days of their ~~acquisition,~~acquisition. Until such investments are sold to LIHTC funds, RJTCF is responsible for funding investment commitments to such partnerships. As of December 31, 2019, RJTCF had committed approximately $197 million to project partnerships that had not yet been sold to LIHTC funds. Because we expect to sell these project partnerships to LIHTC funds and the ~~proceeds from~~equity funding events arise over future periods, the ~~sales~~contractual commitments are ~~used~~not expected to ~~repay RJTCF’s borrowings from RJF.~~impact our future liquidity requirements. RJTCF may also make short-term loans or advances to project partnerships and LIHTC funds.

As a part of our fixed income public finance operations, we enter into forward commitments to purchase ~~GNMA or FNMA~~agency MBS (see the discussion of these activities within Note 2 of our ~~2017~~2019 Form 10-K). At December 31, ~~2017~~2019, we had ~~$851~~$224 million principal amount of outstanding forward MBS purchase commitments, which were expected to be purchased ~~over the~~within 90 days following ~~90 days.~~commitment. In order to hedge the market interest rate risk to which we would otherwise be exposed between the date of the commitment and the date of sale of the MBS, we enter into ~~to be announced (“TBA”)~~TBA security contracts with investors for generic MBS at specific rates and prices to be delivered on settlement dates in the future. We may be subject to loss if the timing of, or the actual amount of, the MBS differs significantly from the term and notional amount of the TBA security contract to which we entered. These TBA securities and related ~~purchased~~purchase commitments are accounted for at fair value. As of December 31, ~~2017~~2019, the fair value of the TBA securities and the estimated fair value of the purchase commitments were insignificant.

~~Contingencies~~

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited)

RJF and certain of its subsidiaries are subject to regular reviews and inspections by regulatory authorities and self-regulatory organizations. The reviews can result in the imposition of sanctions for regulatory violations, ranging from non-monetary censures to fines and, in serious cases, temporary or permanent suspension from conducting business, or limitations on certain business activities. In addition, regulatory agencies and self-regulatory organizations institute investigations from time to time into industry practices, which can also result in the imposition of such sanctions. Refer to the “Legal and regulatory matter contingencies” discussion within this footnote for information about related loss contingency reserves.

Guarantees

Our U.S. broker-dealer subsidiaries are required by federal law to be members of the Securities Investors Protection Corporation (“SIPC”). The SIPC fund provides protection up to $500 thousand per client for securities and cash held in client accounts, including a limitation of $250 thousand on claims for cash balances. We have purchased excess SIPC coverage through various syndicates of Lloyd’s of London. For RJ&A, our clearing broker-dealer, the additional protection currently provided has an aggregate firm limit of $750 million for cash and securities, including a sub-limit of $1.9 million per client for cash above basic SIPC. Account protection applies when a SIPC member fails financially and is unable to meet obligations to clients. This coverage does not protect against market fluctuations. RJF has provided an indemnity to Lloyd’s of London against any and all losses they may incur associated with the excess SIPC policies.

~~RJTCF issues certain guarantees to various third parties related to project partnerships whose interests have been sold to~~We guarantee the debt of one ~~or more~~ of our private equity investments. The amount of such debt, including the ~~funds in which RJTCF is the managing member or general partner. In some instances, RJTCF is not the primary guarantor~~undrawn portion of ~~these obligations, which aggregated to $3~~a revolving credit facility, was $13 million as of December 31, ~~2017~~.

~~RJTCF has provided a guaranteed return on investment to a third-party investor~~2019. The debt, which matures in ~~the Guaranteed LIHTC Fund and RJF has guaranteed RJTCF’s performance under the arrangement. Under the terms~~2021, is secured by substantially all of the ~~performance guarantee, should~~assets of the ~~underlying LIHTC project partnerships held by the Guaranteed LIHTC Fund fail to deliver a certain amount of tax credits and other tax benefits to this investor~~borrower.

~~RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES~~

~~Notes to Condensed Consolidated Financial Statements (Unaudited)~~

over the next five years, RJTCF is obligated to pay the investor an amount that results in the investor achieving a minimum specified return on their investment. A $16 million financing asset was included in “Other assets,” and a related $16 million liability was included in “Other payables” on our Condensed Consolidated Statements of Financial Condition as of ~~December 31, 2017~~ ~~related to this obligation. The maximum exposure to loss under this guarantee was $17 million at~~ ~~December 31, 2017, which represented the undiscounted future payments due the investor.~~

Legal and regulatory matter contingencies

In addition to ~~the~~any matters that may be specifically described ~~below,~~in the following sections, in the normal course of our business, we have been named, from time to time, as a defendant in various legal actions, including arbitrations, class actions and other litigation, arising in connection with our activities as a diversified financial services institution.

WeRJF and certain of its subsidiaries are ~~also~~ subject to regular reviews and inspections by regulatory authorities and self-regulatory organizations. Reviews can result in the imposition of sanctions for regulatory violations, ranging from non-monetary censures to fines and, in serious cases, temporary or permanent suspension from conducting business, or limitations on certain business activities. In addition, regulatory agencies and self-regulatory organizations institute investigations from time to time ~~to other reviews, investigations~~into industry practices, which can also result in the imposition of such sanctions.

We may contest liability and/or the amount of damages, as appropriate, in each pending matter. Over the last several years, the level of litigation and ~~proceedings~~investigatory activity (both formal and informal) by ~~governmental~~government and self-regulatory agencies regarding our business. Such proceedings may involve, among other things, our sales and trading activities, financial products or offerings we sponsored, underwrote or sold, and operational matters. Some of these proceedings have resulted, and mayhas increased significantly in the ~~future result, in adverse judgments, settlements, fines, penalties, injunctions~~financial services industry. There can be no assurance that material losses will not be incurred from claims that have not yet been asserted or ~~other relief and/or require us~~are not yet determined to ~~undertake remedial actions.~~be material.

WeFor many legal and regulatory matters, we are unable to estimate a range of reasonably possible loss as we cannot predict if, how or when such proceedings or investigations will be resolved or what the eventual settlement, fine, penalty or other relief, if any, may be. A large number of factors may contribute to this inherent unpredictability: the proceeding is in its early stages; the damages sought are unspecified, unsupported or uncertain; it is unclear whether a case brought as a class action will be allowed to proceed on that basis; the other party is seeking relief other than or in addition to compensatory damages (including, in the case of regulatory and governmental proceedings, potential fines and penalties); the matters present significant legal uncertainties; we have not engaged in settlement discussions; discovery is not complete; there are significant facts in dispute; and numerous parties are named as defendants (including where it is uncertain how liability might be shared among defendants).

We contest liability and/or the amount of damages, as appropriate, in each pending matter. Over the last several years, the level of litigation and investigatory activity (both formal and informal) by government and self-regulatory agencies has increased significantly in the financial services industry. While we have identified below certain proceedings that we believe could be material, individually or collectively, there can be no assurance that material losses will not be incurred from claims that have not yet been asserted or are not yet determined to be material.

We may include in some of the descriptions of individual matters below certain quantitative information about the plaintiff’s claim against us as alleged in the plaintiff’s pleadings or other public filings. Although this information may provide insight into the potential magnitude of a matter, it does not represent our estimate of reasonably possible loss or our judgment as to any currently appropriate accrual related thereto.

Subject to the foregoing, ~~we believe,~~ after consultation with counsel, ~~and consideration of the accrued liability amounts included in the accompanying condensed consolidated financial statements,~~we believe that the outcome of such litigation and regulatory proceedings will not have a material adverse effect on our consolidated financial condition. However, the outcome of such litigation and proceedings could be material to our operating results and cash flows for a particular future period, depending on, among other things, our revenues or income for such period.

There are certain matters for which we are unable to estimate the upper end of the range of reasonably possible loss. With respect to legal and regulatory matters for which management has been able to estimate a range of reasonably possible loss ~~(and excluding amounts subject to the below-described indemnification from Regions Financial Corporation (“Regions”)),~~ as of December 31, ~~2017,~~2019, we estimated the upper end of the range of reasonably possible aggregate loss to be approximately ~~$70~~$80 million in excess of the aggregate ~~reserves~~accruals for such matters. Refer to Note 2 of our ~~2017~~2019 Form 10-K for a discussion of our criteria for recognizing liabilities for contingencies.

~~Morgan Keegan Litigation~~We may from time to time include in any descriptions of individual matters herein certain quantitative information about the plaintiff’s claim against us as alleged in the plaintiff’s pleadings or other public filings. Although this information may provide insight into the potential magnitude of a matter, it does not represent our estimate of reasonably possible loss or our judgment as to any currently appropriate accrual related thereto.

~~Indemnification from Regions~~

Under the agreement with Regions governing our 2012 acquisition of Morgan Keegan & Company, Inc., and MK Holding, Inc. and certain of its affiliates (collectively referred to as “Morgan Keegan”), Regions is obligated to indemnify us for losses we may incur in connection with any Morgan Keegan legal proceedings pending as of the closing date for that transaction, which was April 2, 2012, or commenced after the closing date but related to pre-closing matters that were received prior to April 2, 2015.

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited)

The Morgan Keegan matter described below is subject to such indemnification provisions. As of December 31, 2017, management estimated the range of potential liability of all Morgan Keegan matters subject to indemnification, including the cost of defense, to be from $12 million to $44 million. Any loss arising from such matters, after application of any contractual thresholds and other reductions, as set forth in the agreement, will be borne by Regions. As of December 31, 2017 our Condensed Consolidated Statements of Financial Condition included an indemnification asset of $25 million which was included in “Other assets,” and a liability for potential losses of $25 million which was included within “Other payables,” pertaining to the Morgan Keegan matters subject to indemnification. The amount included within “Other payables” is the amount within the range of potential liability related to such matters which management estimated was more likely than any other amount within such range.

~~Morgan Keegan matter (subject to indemnification)~~

In July 2006, Morgan Keegan & Company, Inc., a Morgan Keegan affiliate, and one of its former analysts were named as defendants in a lawsuit filed by Fairfax Financial Holdings Limited and an affiliate in the Superior Court of New Jersey, Law Division, in Morris County, New Jersey. Plaintiffs made claims under a civil RICO statute, for commercial disparagement, tortious interference with contractual relationships, tortious interference with prospective economic advantage and common law conspiracy. Plaintiffs alleged that defendants engaged in a multi-year conspiracy to publish and disseminate false and defamatory information about plaintiffs in order to improperly drive down the stock price of Fairfax, so that others could profit from short positions. Plaintiffs alleged that the defendants’ actions disparaged them and harmed their business relationships. Plaintiffs alleged various categories of damages, including lost insurance business, losses on stock and bond offerings, reputational loss, increased audit fees and directors’ and officers’ insurance premiums, and lost acquisitions. They requested actual and punitive damages and treble damages under their RICO claims. On May 11, 2012, the trial court dismissed the plaintiffs’ RICO claims. On June 27, 2012, the trial court dismissed plaintiffs’ tortious interference with prospective relations claim, but allowed the other claims to go forward. Prior to commencement of a jury trial, the court dismissed the remaining claims with prejudice, and the plaintiffs appealed. On April 27, 2017, the Superior Court of New Jersey, Appellate Division, affirmed the trial court’s dismissal of certain claims against Morgan Keegan, including RICO allegations, while remanding to the trial court the claims of disparagement, tortious interference with prospective business relations, and civil conspiracy, and limiting the actual damages to certain lost insurance business. Plaintiffs petitioned the Supreme Court of New Jersey for review of the Appellate Division’s opinion, but on October 17, 2017, the Supreme Court of New Jersey denied the petition.

NOTE 1514 – ACCUMULATED OTHER COMPREHENSIVE INCOME/(LOSS)

~~Other comprehensive income/(loss)~~

~~The activity in other comprehensive income/(loss), net of the respective tax effect, was as follows:~~

Three months ended December 31,
$ in thousands 2017 2016
Unrealized loss on available-for-sale securities and non-credit portion of other-than-temporary impairment losses $ (11,953 ) $ (4,146 )
Unrealized gain/(loss) on currency translations, net of the impact of net investment hedges (187 ) 1,001
Unrealized gain on cash flow hedges 6,885
25,738
Net other comprehensive income/(loss) $ (5,255 ) $ 22,593

~~RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES~~

~~Notes to Condensed Consolidated Financial Statements (Unaudited)~~

~~Accumulated other comprehensive income/(loss)~~

All of the components of other comprehensive ~~income/(loss) described below,~~income (“OCI”), net of tax, ~~are~~were attributable to RJF. The following table presents the net change in AOCI as well as the changes, and the related tax effects, of each component of ~~accumulated other comprehensive income/(loss):~~AOCI.



$ in millions	Net investment hedges			Currency translations			Subtotal: net investment hedges and currency translations			Available- for-sale securities			Cash flow hedges			Total
Three months ended December 31, 2019
AOCI as of beginning of period	$	110		$	(135	)	$	(25	)	$	21		$	(19	)	$	(23	)
OCI:
OCI before reclassifications and taxes	(17		)	22			5			(2		)	14			17
Amounts reclassified from AOCI, before tax	—			—			—			—			—			—
Pre-tax net OCI	(17		)	22			5			(2		)	14			17
Income tax effect	4			—			4			1			(4		)	1
OCI for the period, net of tax	(13		)	22			9			(1		)	10			18
AOCI as of end of period	$	97		$	(113	)	$	(16	)	$	20		$	(9	)	$	(5	)

Three months ended December 31, 2018
AOCI as of beginning of period	$	88		$	(111	)	$	(23	)	$	(46	)	$	42		$	(27	)
Cumulative effect of adoption of ASU 2016-01	—			—			—			(4		)	—			(4		)
OCI:
OCI before reclassifications and taxes	49			(50		)	(1		)	32			(24		)	7
Amounts reclassified from AOCI, before tax	—			—			—			—			(1		)	(1		)
Pre-tax net OCI	49			(50		)	(1		)	32			(25		)	6
Income tax effect	(12		)	—			(12		)	(10		)	8			(14		)
OCI for the period, net of tax	37			(50		)	(13		)	22			(17		)	(8		)
AOCI as of end of period	$	125		$	(161	)	$	(36	)	$	(28	)	$	25		$	(39	)

$ in thousands Net investment hedges Currency translations Sub-total: net investment hedges and currency translations Available- for-sale securities Cash flow hedges Total
Three months ended December 31, 2017
Accumulated other comprehensive income/(loss) as of the beginning of the period $ 60,201
$ (79,677 ) $ (19,476 ) $ (2,472 ) $ 6,749
$ (15,199 )
Other comprehensive income/(loss) before reclassifications and taxes 7,607
(5,760 ) 1,847
(15,549 ) 6,774
(6,928 )
Amounts reclassified from accumulated other comprehensive income, before tax —
—
—
—
1,409
1,409
Pre-tax net other comprehensive income/(loss) 7,607
(5,760 ) 1,847
(15,549 ) 8,183
(5,519 )
Income tax effect (2,034 ) —
(2,034 ) 3,596
(1,298 ) 264
Net other comprehensive income/(loss) for the period, net of tax 5,573
(5,760 ) (187 ) (11,953 ) 6,885
(5,255 )
Accumulated other comprehensive income/(loss) as of end of period $ 65,774
$ (85,437 ) $ (19,663 ) $ (14,425 ) $ 13,634
$ (20,454 )
Three months ended December 31, 2016
Accumulated other comprehensive income/(loss) as of the beginning of the period $ 86,482
$ (121,576 ) $ (35,094 ) $ (4,156 ) $ (16,483 ) $ (55,733 )
Other comprehensive income/(loss) before reclassifications and taxes 18,098
(17,756 ) 342
(6,858 ) 39,941
33,425
Amounts reclassified from accumulated other comprehensive income/(loss), before tax —
6,537
6,537
(12 ) 1,572
8,097
Pre-tax net other comprehensive income/(loss) 18,098
(11,219 ) 6,879
(6,870 ) 41,513
41,522
Income tax effect (6,772 ) 894
(5,878 ) 2,724
(15,775 ) (18,929 )
Net other comprehensive income/(loss) for the period, net of tax 11,326
(10,325 ) 1,001
(4,146 ) 25,738
22,593
Accumulated other comprehensive income/(loss) as of end of period $ 97,808
$ (131,901 ) $ (34,093 ) $ (8,302 ) $ 9,255
$ (33,140 )

As of October 1, 2018, we adopted accounting guidance (ASU 2016-01) that generally requires changes in the fair value of equity securities to be recorded in net income. Accordingly, as of the date of adoption, we reclassified a cumulative unrealized gain on such securities, net of tax, from AOCI to retained earnings.

Reclassifications from AOCI to net income, excluding taxes, for the three months ended December 31, 2018 were recorded in “Interest expense” on the Condensed Consolidated Statements of Income and Comprehensive Income.

Our net investment hedges and cash flow hedges relate to our derivatives associated with RJ Bank’s business ~~operations (see~~operations. See Note 62 of our 2019 Form 10-K and Note 5 for additional information on these ~~derivatives).~~derivatives.

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited)

~~Reclassifications out of accumulated other comprehensive income/(loss)~~NOTE 15 – REVENUES

The following ~~table presents the income statement line items impacted~~tables present our sources of revenues by ~~reclassifications out~~segment. For further information about our significant accounting policies related to revenue recognition, see Note 2 of ~~accumulated other comprehensive income/(loss), and the related tax effects,~~our 2019 Form 10-K. See Note 20 of this Form 10-Q for ~~the three months ended December 31, 2017 and 2016:~~additional information on our segment results.

Accumulated other comprehensive income/(loss) components:
$ in thousands
Increase/(decrease) in amounts reclassified from accumulated other comprehensive income/(loss) Affected line items in income statement
Three months ended December 31, 2017
RJ Bank cash flow hedges $ 1,409
Interest expense
1,409
Total before tax
Income tax effect (402 ) Provision for income taxes
Total reclassifications for the period $ 1,007
Net of tax
Three months ended December 31, 2016
RJ Bank available-for-sale securities $ (12 ) Other revenue
RJ Bank cash flow hedges 1,572
Interest expense
Currency translations 6,537
Other expense
8,097
Total before tax
Income tax effect (3,076 ) Provision for income taxes
Total reclassifications for the period $ 5,021
Net of tax



	Three months ended December 31, 2019
$ in millions	Private Client Group			Capital Markets			Asset Management		RJ Bank			Other and intersegment eliminations			Total
Revenues:
Asset management and related administrative fees	$	782		$	2		$	176	$	—		$	(5	)	$	955
Brokerage revenues:
Securities commissions:
Mutual and other fund products	144			3			2		—			(1		)	148
Insurance and annuity products	101			—			—		—			—			101
Equities, ETFs and fixed income products	85			30			—		—			(1		)	114
Subtotal securities commissions	330			33			2		—			(2		)	363
Principal transactions ⁽¹⁾	17			82			—		—			(2		)	97
Total brokerage revenues	347			115			2		—			(4		)	460
Account and services fees:
Mutual fund and annuity service fees	90			—			1		—			(1		)	90
RJBDP fees	105			—			—		—			(47		)	58
Client account and other fees	29			1			4		—			(4		)	30
Total account and service fees	224			1			5		—			(52		)	178
Investment banking:
Merger & acquisition and advisory	—			60			—		—			—			60
Equity underwriting	11			39			—		—			—			50
Debt underwriting	—			31			—		—			—			31
Total investment banking	11			130			—		—			—			141
Other:
Tax credit fund revenues	—			18			—		—			—			18
All other ⁽¹⁾	9			—			—		6			(4		)	11
Total other	9			18			—		6			(4		)	29
Total non-interest revenues	1,373			266			183		6			(65		)	1,763
Interest income ⁽¹⁾	49			8			1		231			8			297
Total revenues	1,422			274			184		237			(57		)	2,060
Interest expense	(8		)	(6		)	—		(21		)	(16		)	(51		)
Net revenues	$	1,414		$	268		$	184	$	216		$	(73	)	$	2,009


(1)	These revenues are generally not in scope of the accounting guidance for revenue from contracts with customers.

During the quarter ended December 31, 2016, we sold our interests in a number of Latin American joint ventures which had operations in Uruguay and Argentina. As a component of our computation of the gain or loss resulting from such sales, we recognized the sold entities’ cumulative currency translation balances which, prior to such reclassification, had been a component of the accumulated other comprehensive loss.

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited)



	Three months ended December 31, 2018
$ in millions	Private Client Group			Capital Markets			Asset Management		RJ Bank			Other and intersegment eliminations			Total
Revenues:
Asset management and related administrative fees	$	707		$	2		$	161	$	—		$	(5	)	$	865
Brokerage revenues:
Securities commissions:
Mutual and other fund products	157			2			3		—			(2		)	160
Insurance and annuity products	104			—			—		—			—			104
Equities, ETFs and fixed income products	84			40			—		—			—			124
Subtotal securities commissions	345			42			3		—			(2		)	388
Principal transactions ⁽¹⁾	19			57			—		1			(1		)	76
Total brokerage revenues	364			99			3		1			(3		)	464
Account and services fees:
Mutual fund and annuity service fees	83			—			1		—			(3		)	81
RJBDP fees	109			—			1		—			(41		)	69
Client account and other fees	33			—			7		—			(5		)	35
Total account and service fees	225			—			9		—			(49		)	185
Investment banking:
Merger & acquisition and advisory	—			85			—		—			—			85
Equity underwriting	7			27			—		—			1			35
Debt underwriting	—			17			—		—			—			17
Total investment banking	7			129			—		—			1			137
Other:
Tax credit fund revenues	—			19			—		—			—			19
All other ⁽¹⁾	7			2			—		5			4			18
Total other	7			21			—		5			4			37
Total non-interest revenues	1,310			251			173		6			(52		)	1,688
Interest income ⁽¹⁾	56			10			1		239			10			316
Total revenues	1,366			261			174		245			(42		)	2,004
Interest expense	(10		)	(8		)	—		(42		)	(13		)	(73		)
Net revenues	$	1,356		$	253		$	174	$	203		$	(55	)	$	1,931


(1)	These revenues are generally not in scope of the accounting guidance for revenue from contracts with customers.

At December 31, 2019 and September 30, 2019, net receivables related to contracts with customers were $320 million and $347 million, respectively.

We record deferred revenue from contracts with customers when payment is received prior to the performance of our obligation to the customer. Deferred revenue balances were not material as of December 31, 2019 and September 30, 2019.

We have elected the practical expedient allowable by the accounting guidance to not disclose information about remaining performance obligations pertaining to contracts that have an original expected duration of one year or less.

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited)

NOTE 16 – INTEREST INCOME AND INTEREST EXPENSE

The following table details the components of interest income and interest ~~expense are as follows:~~expense.



	Three months ended December 31,
$ in millions	2019		2018
Interest income:
Assets segregated pursuant to regulations	$	11	$	15
Trading instruments	6		7
Available-for-sale securities	18		16
Margin loans	27		32
Bank loans, net of unearned income	206		214
Loans to financial advisors	5		4
Corporate cash and all other	24		28
Total interest income	$	297	$	316
Interest expense:
Bank deposits	$	16	$	35
Trading instruments sold but not yet purchased	1		2
Brokerage client payables	3		6
Other borrowings	5		6
Senior notes payable	18		18
Other	8		6
Total interest expense	51		73
Net interest income	246		243
Bank loan loss (provision)/benefit	2		(16		)
Net interest income after bank loan loss (provision)/benefit	$	248	$	227

Three months ended December 31,
$ in thousands 2017 2016
Interest income:
Margin balances $ 24,095
$ 19,981
Assets segregated pursuant to regulations and other segregated assets 12,122
7,170
Bank loans, net of unearned income 160,020
135,525
Available-for-sale securities 10,715
3,400
Trading instruments 5,138
5,006
Securities loaned 3,058
2,732
Loans to financial advisors 3,502
3,308
Corporate cash and all other 13,079
5,660
Total interest income $ 231,729
$ 182,782
Interest expense:

Brokerage client liabilities $ 2,529
$ 676
Bank deposits 7,509
2,783
Trading instruments sold but not yet purchased 1,706
1,328
Securities borrowed 1,479
1,228
Borrowed funds 5,865
3,719
Senior notes 18,180
24,699
Other 2,163
1,533
Total interest expense 39,431
35,966
Net interest income 192,298
146,816
Bank loan loss (provision)/benefit (1,016 ) 1,040
Net interest income after bank loan loss provision $ 191,282
$ 147,856

Interest expense related to bank deposits in the ~~above~~preceding table ~~for the three months ended December 31, 2017 and 2016~~ excludes interest expense associated with affiliate deposits, which has been eliminated in consolidation.

NOTE 17 – SHARE-BASED ~~AND OTHER~~ COMPENSATION

~~Share-based compensation plans~~

We have ~~one~~1 share-based compensation plan for our employees, Board of Directors and non-employees ~~(comprised of independent~~(independent contractor financial advisors). Generally, we reissue our treasury shares under The Amended and Restated 2012 Stock Incentive ~~Plan (the “2012 Plan”) authorizes us to grant 40,244,000 new shares, including the shares available for grant under six predecessor plans. We generally issue new shares under the 2012~~ Plan; however, we are also permitted to ~~reissue our treasury~~issue new shares. Annual share-based compensation awards are primarily issued during the first fiscal quarter of each year. Our share-based compensation accounting policies are described in Note 2 of our ~~2017~~2019 Form 10-K. Other information related to our share-based awards ~~are~~is presented in Note 2021 of our ~~2017~~2019 Form 10-K.

~~Stock options~~

~~Expense and income tax benefits related to our stock options awards~~During the three months ended December 31, 2019, we granted approximately 1.5 million RSUs to employees and ~~independent contractor financial advisors is presented below:~~

Three months ended December 31,
$ in thousands 2017 2016
Total share-based expense $ 3,112
$ 4,176
Income tax benefit related to share-based expense 307
545

outside members of our Board of Directors with a weighted-average grant-date fair value of $89.12. For the three months ended December 31, ~~2017, we realized $1 million of excess tax benefits related~~2019, total compensation expense for RSUs granted to our ~~stock option awards which favorably impacted income tax expense in~~employees and members of our ~~Condensed Consolidated Statements~~Board of ~~Income and Comprehensive Income.~~

~~RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES~~

~~Notes to Condensed Consolidated Financial Statements (Unaudited)~~

~~During~~Directors was $40 million, compared with $38 million for the three months ended December 31, ~~2017, we granted~~ no ~~stock options to employees and the stock option awards granted to independent contractor financial advisors~~2018.

As of December 31, 2019, there were ~~not material.~~

~~Pre-tax expense~~$237 million of total pre-tax compensation costs not yet recognized ~~for stock option awards granted to employees and independent contractor financial advisors, net~~(net of estimated ~~forfeitures, and the remaining period over which the expense will be recognized as of December 31, 2017, are presented below:~~

Pre-tax expense not yet recognized Remaining weighted-average amortization period
(in thousands) (in years)
Employees $ 12,757
2.4
Independent contractor financial advisors 4,431
3.5

~~Restricted stock and RSU awards~~

~~Expense and income tax benefits~~forfeitures) related to ~~our restricted equity awards~~RSUs granted to employees and members of our Board of Directors, ~~are presented below:~~

Three months ended December 31,
$ in thousands 2017 2016
Total share-based expense $ 30,477
$ 27,650
Income tax benefit related to share-based expense 8,090
10,035

~~Total share-based expense~~including those granted during the three months ended December 31, ~~2016 included $5 million which is included as a component of “Acquisition-related expenses” on our Condensed Consolidated Statements of Income and Comprehensive Income.~~

For the three months ended December 31, 2017, we realized $8 million of excess tax benefits related to our restricted equity awards which favorably impacted income tax expense in our Condensed Consolidated Statements of Income and Comprehensive Income.

During the three months ended December 31, 2017, we granted 1,089,000 RSUs to employees with a weighted-average grant-date fair value of $86.50. During the three months ended December 31, 2017, we did not grant RSUs to outside members of our Board of Directors.

As of December 31, 2017, there was $184 million of total pre-tax compensation costs not yet recognized, net of estimated forfeitures, related to restricted equity awards granted to employees and members of our Board of Directors.2019. These costs are expected to be recognized over a weighted-average period of ~~3.4~~3.5 years.

~~There were no outstanding RSUs related to our independent contractor financial advisors as of December 31, 2017.~~

~~Restricted stock awards associated with Alex. Brown~~

As part of our acquisition of Alex. Brown, we assumed certain DBRSU awards, including the associated plan terms and conditions. Refer to Note 20 of our 2017 Form 10-K for additional information regarding these awards. The DBRSUs are accounted for as derivatives. See Note 6 for additional information regarding these derivatives.

The net impact of the DBRSUs in our Condensed Consolidated Statements of Income and Comprehensive Income for the three months ended December 31, 2017 and 2016, including the related income tax effects, is presented below:

Three months ended December 31,
$ in thousands 2017 2016
Amortization of DBRSU prepaid compensation asset $ 1,312
$ 1,542
Increase in fair value of derivative liability 2,613
6,375
Net expense before tax $ 3,925
$ 7,917
Income tax benefit $ 1,104
$ 2,920

~~The table above includes the impact of DBRSUs forfeited during the three months ended December 31, 2016.~~

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited)

As of December 31, 2017, there was a $9 million prepaid compensation asset included in “Other assets” in our Condensed Consolidated Statements of Financial Condition related to these DBRSUs. This asset is expected to be amortized over a weighted-average period of 1.8 years. As of December 31, 2017, there was a $28 million derivative liability included in “Accrued compensation, commissions and benefits” in our Condensed Consolidated Statements of Financial Condition based on the December 31, 2017 share price of DB shares of $19.03.

We held shares of DB as of December 31, 2017 as an economic hedge against this obligation. Such shares are included in “Other investments” on our Condensed Consolidated Statements of Financial Condition. The gains/losses on this hedge are included as a component of “Compensation, commissions and benefits expense” and offset a portion of the gains/losses on the DBRSUs incurred during the periods discussed above.

NOTE 18 – REGULATORY CAPITAL REQUIREMENTS

RJF, as a bank holding company and financial holding company, RJ Bank, ~~and~~ our broker-dealer subsidiaries and Raymond James Trust, N.A. (“RJ Trust”) are subject to capital requirements by various regulatory authorities. Capital levels of each entity are monitored to ensure compliance with our various regulatory capital requirements. Failure to meet minimum capital requirements can initiate certain mandatory, and possibly additional discretionary actions, by regulators that, if undertaken, could have a direct material effect on our financial results.

As a bank holding company, RJF is subject to the risk-based capital requirements of the ~~Federal Reserve Board.~~Fed. These risk-based capital requirements are expressed as capital ratios that compare measures of regulatory capital to risk-weighted assets, which involve quantitative measures of our assets, liabilities, and certain off-balance-sheet items as calculated under regulatory ~~accounting~~ guidelines. RJF’s and RJ Bank’s capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk-weightings, and other factors.

In July 2013, the Office of the Comptroller of the Currency (“OCC”), the Fed and the FDIC released final U.S. rules implementing the Basel III capital framework developed by the Basel Committee on Banking Supervision and certain Dodd-Frank Act and other capital provisions and updated the prompt corrective action framework to reflect the new regulatory capital minimums (the “U.S. Basel III Rules”). RJF and RJ Bank report regulatory capital under the Basel III standardized approach. Various aspects of the Basel III rules are subject to multi-year transition periods through December 31, 2018.

RJF and RJ Bank are required to maintain minimum amounts and ratios of Total and Tier 1 capital (as defined in the regulations) to risk-weighted assets (as defined), Tier 1 capital to average assets (as defined), and under rules defined inunder the Basel III capital framework, Common equity Tier 1 capital (“CET1”) to risk-weighted assets. RJF and RJ Bank each calculate these ratios under the Basel III standardized approach in order to assess compliance with both regulatory requirements and their internal capital policies. The minimum CET1, Tier 1 Capital, and Total Capital ratios of RJF and RJ Bank are supplemented by an incremental capital conservation buffer, consisting entirely of capital that qualifies as CET1, that began phasing in on January 1, 2016 in increments of 0.625% per year until it reaches 2.5% of risk weighted assets on January 1, 2019. FailureIn order to maintain ~~the capital conservation buffer could limit~~ our ability to take certain capital actions, including dividends and common equity repurchases, and to make ~~discretionary~~ bonus ~~payments.~~payments, we must hold a capital conservation buffer above our minimum risk-based capital requirements. As of December 31, ~~2017,~~2019, both RJF’s and RJ Bank’s capital levels exceeded the ~~fully-phased in~~ capital conservation buffer requirement and ~~are~~were each categorized as ~~“well capitalized.~~“well-capitalized.”

For further discussion of regulatory capital requirements applicable to certain of our businesses and subsidiaries, see Note 2122 of our ~~2017~~2019 Form 10-K.

~~RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES~~

~~Notes to Condensed Consolidated Financial Statements (Unaudited)~~

To meet requirements for capital adequacy purposes or to be categorized as ~~“well capitalized,~~“well-capitalized,” RJF must maintain minimum CET1, Tier 1 capital, Total capital and Tier 1 leverage amounts and ratios as set forth in the ~~table below.~~following table.



	Actual				Requirement for capital adequacy purposes				To be well-capitalized under regulatory provisions
$ in millions	Amount		Ratio		Amount		Ratio		Amount		Ratio
RJF as of December 31, 2019:
CET1	$	6,230	24.8	%	$	1,133	4.5	%	$	1,636	6.5	%
Tier 1 capital	$	6,230	24.8	%	$	1,510	6.0	%	$	2,014	8.0	%
Total capital	$	6,465	25.7	%	$	2,014	8.0	%	$	2,517	10.0	%
Tier 1 leverage	$	6,230	15.8	%	$	1,573	4.0	%	$	1,967	5.0	%

RJF as of September 30, 2019:
CET1	$	5,971	24.8	%	$	1,085	4.5	%	$	1,567	6.5	%
Tier 1 capital	$	5,971	24.8	%	$	1,446	6.0	%	$	1,928	8.0	%
Total capital	$	6,207	25.8	%	$	1,928	8.0	%	$	2,410	10.0	%
Tier 1 leverage	$	5,971	15.7	%	$	1,525	4.0	%	$	1,906	5.0	%

Actual
Requirement for capital
adequacy purposes
To be well capitalized under regulatory provisions
$ in thousands Amount Ratio Amount Ratio Amount Ratio
RJF as of December 31, 2017:
CET1 $ 5,052,629
22.3 % $ 1,018,048
4.5 % $ 1,470,513
6.5 %
Tier 1 capital $ 5,052,629
22.3 % $ 1,357,397
6.0 % $ 1,809,862
8.0 %
Total capital $ 5,266,339
23.3 % $ 1,809,862
8.0 % $ 2,262,328
10.0 %
Tier 1 leverage $ 5,052,629
14.4 % $ 1,400,054
4.0 % $ 1,750,068
5.0 %

RJF as of September 30, 2017:
CET1 $ 5,081,335
23.0 % $ 994,950
4.5 % $ 1,437,150
6.5 %
Tier 1 capital $ 5,081,335
23.0 % $ 1,326,600
6.0 % $ 1,768,800
8.0 %
Total capital $ 5,293,331
23.9 % $ 1,768,800
8.0 % $ 2,211,000
10.0 %
Tier 1 leverage $ 5,081,335
15.0 % $ 1,359,168
4.0 % $ 1,698,960
5.0 %

~~The decrease in~~ RJF’s Tier 1 capital and Total capital ratios at December 31, ~~2017~~2019 were largely unchanged compared to September 30, ~~2017~~ ~~was primarily due to~~2019, as the impacts of the addition of ROU assets associated with the new lease accounting standard, an increase in ~~goodwill and identifiable intangible~~market risk-weighted assets related to ~~the Scout Group acquisition~~our trading positions, and ~~the~~ growth of ~~corporate loans at RJ Bank.~~the bank loan portfolio were largely offset by positive earnings during the period.

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited)

To meet the requirements for capital adequacy or to be categorized as ~~“well capitalized,~~“well-capitalized,” RJ Bank must maintain CET1, Tier 1 capital, Total capital and Tier 1 leverage amounts and ratios as set forth in the ~~table below.~~following table.



	Actual				Requirement for capital adequacy purposes				To be well-capitalized under regulatory provisions
$ in millions	Amount		Ratio		Amount		Ratio		Amount		Ratio
RJ Bank as of December 31, 2019:
CET1	$	2,289	13.3	%	$	775	4.5	%	$	1,120	6.5	%
Tier 1 capital	$	2,289	13.3	%	$	1,034	6.0	%	$	1,378	8.0	%
Total capital	$	2,504	14.5	%	$	1,378	8.0	%	$	1,723	10.0	%
Tier 1 leverage	$	2,289	8.8	%	$	1,037	4.0	%	$	1,297	5.0	%

RJ Bank as of September 30, 2019:
CET1	$	2,246	13.2	%	$	764	4.5	%	$	1,103	6.5	%
Tier 1 capital	$	2,246	13.2	%	$	1,018	6.0	%	$	1,358	8.0	%
Total capital	$	2,458	14.5	%	$	1,358	8.0	%	$	1,697	10.0	%
Tier 1 leverage	$	2,246	8.8	%	$	1,021	4.0	%	$	1,276	5.0	%

Actual
Requirement for capital
adequacy purposes
To be well capitalized under regulatory provisions
$ in thousands Amount Ratio Amount Ratio Amount Ratio
RJ Bank as of December 31, 2017:
CET1 $ 1,825,550
12.2 % $ 674,617
4.5 % $ 974,446
6.5 %
Tier 1 capital $ 1,825,550
12.2 % $ 899,489
6.0 % $ 1,199,319
8.0 %
Total capital $ 2,013,120
13.4 % $ 1,199,319
8.0 % $ 1,499,148
10.0 %
Tier 1 leverage $ 1,825,550
8.6 % $ 852,884
4.0 % $ 1,066,105
5.0 %

RJ Bank as of September 30, 2017:

CET1 $ 1,821,306
12.5 % $ 654,901
4.5 % $ 945,968
6.5 %
Tier 1 capital $ 1,821,306
12.5 % $ 873,201
6.0 % $ 1,164,268
8.0 %
Total capital $ 2,003,461
13.8 % $ 1,164,268
8.0 % $ 1,455,335
10.0 %
Tier 1 leverage $ 1,821,306
8.9 % $ 816,304
4.0 % $ 1,020,379
5.0 %

~~The decrease in~~ RJ Bank’s Tier 1 ~~and Total~~ capital ~~ratios~~ratio at December 31, ~~2017~~2019 increased slightly compared to September 30, ~~2017~~ ~~was primarily~~2019 due to ~~corporate~~the impact of positive earnings during the current period, partially offset by growth of the bank loan ~~growth.~~portfolio.

Certain of our broker-dealer subsidiaries are subject to the requirements of the Uniform Net Capital Rule (Rule 15c3-1) under the Securities Exchange Act of 1934.

The following table presents the net capital position of RJ~~&A:~~&A.



$ in millions	December 31, 2019			September 30, 2019
Raymond James & Associates, Inc.:
(Alternative Method elected)
Net capital as a percent of aggregate debit items	41.6		%	39.7		%
Net capital	$	1,081		$	1,056
Less: required net capital	(52		)	(53		)
Excess net capital	$	1,029		$	1,003

As of
$ in thousands December 31, 2017 September 30, 2017
Raymond James & Associates, Inc.:
(Alternative Method elected)
Net capital as a percent of aggregate debit items 25.37 % 21.37 %
Net capital $ 694,733
$ 589,420
Less: required net capital (54,758 ) (55,164 )
Excess net capital $ 639,975
$ 534,256

~~RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES~~

~~Notes to Condensed Consolidated Financial Statements (Unaudited)~~

~~The following table presents the net capital position~~As of ~~Raymond James Financial Services, Inc. (“RJFS”):~~

As of
$ in thousands December 31, 2017 September 30, 2017
Raymond James Financial Services, Inc.:
(Alternative Method elected)
Net capital $ 23,489
$ 34,488
Less: required net capital (250 ) (250 )
Excess net capital $ 23,239
$ 34,238

~~The following table presents the risk adjusted capital of RJ Ltd. (in Canadian dollars):~~

As of
$ in thousands December 31, 2017 September 30, 2017
Raymond James Ltd.:
Risk adjusted capital before minimum $ 77,869
$ 108,985
Less: required minimum capital (250 ) (250 )
Risk adjusted capital $ 77,619
$ 108,735

At December 31, ~~2017,~~2019, RJFS, RJ Ltd., RJ Trust and all of our other active regulated domestic and international subsidiaries were in compliance with and ~~met~~exceeded all applicable capital requirements.

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited)

NOTE 19 – EARNINGS PER SHARE

The following table presents the computation of basic and diluted earnings per common ~~share:~~share.



	Three months ended December 31,
in millions, except per share amounts	2019			2018
Income for basic earnings per common share:
Net income	$	268		$	249
Less allocation of earnings and dividends to participating securities	(1		)	—
Net income attributable to RJF common shareholders	$	267		$	249
Income for diluted earnings per common share:
Net income	$	268		$	249
Less allocation of earnings and dividends to participating securities	(1		)	—
Net income attributable to RJF common shareholders	$	267		$	249
Common shares:
Average common shares in basic computation	138.3			144.2
Dilutive effect of outstanding stock options and certain RSUs	3.2			3.1
Average common shares used in diluted computation	141.5			147.3
Earnings per common share:
Basic	$	1.93		$	1.73
Diluted	$	1.89		$	1.69
Stock options and certain RSUs excluded from weighted-average diluted common shares because their effect would be antidilutive	1.5			1.8

Three months ended December 31,
$ in thousands, except per share amounts 2017 2016
Income for basic earnings per common share:
Net income attributable to RJF $ 118,842
$ 146,567
Less allocation of earnings and dividends to participating securities (185 ) (310 )
Net income attributable to RJF common shareholders $ 118,657
$ 146,257
Income for diluted earnings per common share:

Net income attributable to RJF $ 118,842
$ 146,567
Less allocation of earnings and dividends to participating securities (182 ) (303 )
Net income attributable to RJF common shareholders $ 118,660
$ 146,264
Common shares:

Average common shares in basic computation 144,469
142,110
Dilutive effect of outstanding stock options and certain RSUs 3,792
3,565
Average common shares used in diluted computation 148,261
145,675
Earnings per common share:

Basic $ 0.82
$ 1.03
Diluted $ 0.80
$ 1.00
Stock options and certain RSUs excluded from weighted-average diluted common shares because their effect would be antidilutive 1,355
2,127

The allocation of earnings and dividends to participating securities in the preceding table ~~above represent~~represents dividends paid during the period to participating securities plus an allocation of undistributed earnings to participating securities. Participating securities represent unvested restricted stock and certain ~~RSUs~~RSUs. Participating securities and ~~amounted to weighted-average shares of 239 thousand and 310 thousand for the three months ended December 31, 2017 and 2016, respectively. Dividends~~related dividends paid toon these participating securities were insignificant for the three months ended December 31, ~~2017~~2019 and ~~2016.~~2018. Undistributed earnings are allocated to participating securities based upon their right to share in earnings if all earnings for the period had been distributed.

Dividends per common share declared and paid are ~~as follows:~~detailed in the following table for each respective period.



	Three months ended December 31,
	2019		2018
Dividends per common share - declared	$	0.37	$	0.34
Dividends per common share - paid	$	0.34	$	0.30

Three months ended December 31,
2017 2016
Dividends per common share - declared $ 0.25
$ 0.22
Dividends per common share - paid $ 0.22
$ 0.20

NOTE 20 – SEGMENT INFORMATION

We currently operate through the following ~~five business~~5 segments: Private Client ~~Group;~~Group (“PCG”); Capital Markets; Asset Management; RJ Bank; and Other.

The ~~business~~ segments are determined based upon factors such as the services provided and the distribution channels served and are consistent with how we assess performance and determine how to allocate our resources throughout our subsidiaries. For a further discussion of our ~~business~~ segments, see Note 24 of our ~~2017~~2019 Form 10-K.

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited)

The following tables present information concerning operations in these ~~segments of business:~~segments.



	Three months ended December 31,
$ in millions	2019			2018
Net revenues:
Private Client Group	$	1,414		$	1,356
Capital Markets	268			253
Asset Management	184			174
RJ Bank	216			203
Other	(8		)	2
Intersegment eliminations	(65		)	(57		)
Total net revenues	$	2,009		$	1,931
Pre-tax income/(loss):
Private Client Group	$	153		$	164
Capital Markets	29			12
Asset Management	73			64
RJ Bank	135			110
Other	(31		)	(18		)
Total pre-tax income	$	359		$	332

Three months ended December 31,
$ in thousands 2017 2016
Revenues:
Private Client Group $ 1,238,040
$ 1,043,316
Capital Markets 222,534
236,982
Asset Management 150,611
114,096
RJ Bank 178,141
144,517
Other 16,383
15,459
Intersegment eliminations (40,117 ) (25,602 )
Total revenues $ 1,765,592
$ 1,528,768
Income/(loss) excluding noncontrolling interests and before provision for income taxes:
Private Client Group $ 155,063
$ 73,358
Capital Markets 4,807
21,444
Asset Management 57,399
41,909
RJ Bank 114,155
104,121
Other (20,181 ) (34,453 )
Pre-tax income excluding noncontrolling interests 311,243
206,379
Net income attributable to noncontrolling interests 441
1,136
Income including noncontrolling interests and before provision for income taxes $ 311,684
$ 207,515

No individual client accounted for more than ten percent of ~~total~~ revenues in any of the periods presented.



	Three months ended December 31,
$ in millions	2019			2018
Net interest income/(expense):
Private Client Group	$	41		$	46
Capital Markets	2			2
Asset Management	1			1
RJ Bank	210			197
Other and intersegment eliminations	(8		)	(3		)
Net interest income	$	246		$	243

Three months ended December 31,
$ in thousands 2017 2016
Net interest income/(expense):
Private Client Group $ 38,487
$ 30,387
Capital Markets 1,456
2,508
Asset Management 330
63
RJ Bank 163,039
134,272
Other (11,014 ) (20,414 )
Net interest income $ 192,298
$ 146,816

The following table presents our total assets on a segment ~~basis:~~basis.



$ in millions	December 31, 2019		September 30, 2019
Total assets:
Private Client Group	$	9,755	$	9,042
Capital Markets	2,207		2,287
Asset Management	381		401
RJ Bank	26,283		25,516
Other	1,528		1,584
Total	$	40,154	$	38,830

$ in thousands December 31, 2017 September 30, 2017
Total assets:
Private Client Group $ 10,328,475
$ 9,967,320
Capital Markets 2,375,078
2,396,033
Asset Management 347,922
151,111
RJ Bank 21,600,312
20,611,898
Other 1,433,112
1,757,094
Total $ 36,084,899
$ 34,883,456

~~Total assets in the PCG segment included $277 million of~~The following table presents goodwill, at both December 31, 2017 and September 30, 2017. Total assets in the Capital Markets segment included $134 million of goodwill at both December 31, 2017 and September 30, 2017. Total assets in the Asset Management segment included $69 million of goodwill as of December 31, 2017 which was ~~entirely attributable to~~included in our ~~fiscal year 2018 acquisition of the Scout Group.~~

total assets, on a segment basis.



$ in millions	December 31, 2019		September 30, 2019
Goodwill:
Private Client Group	$	276	$	275
Capital Markets	120		120
Asset Management	69		69
Total	$	465	$	464

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited)

We have operations in the U.S., Canada and Europe. Substantially all long-lived assets are located in the U.S. ~~Revenues~~The following table presents our net revenues and pre-tax income ~~before provision for income taxes and excluding noncontrolling interests,~~ classified by major geographic ~~areas~~area in which they were ~~earned, are as follows:~~earned.


	Three months ended December 31,						Three months ended December 31,
$ in thousands	2017			2016
Revenues:
$ in millions							2019			2018
Net revenues:
U.S.	$	1,633,022		$	1,416,281		$	1,875		$	1,796
Canada	99,286			84,845			95			99
Europe	33,284			22,970			39			36
Other	—			4,672
Total	$	1,765,592		$	1,528,768		$	2,009		$	1,931

Pre-tax income/(loss) excluding noncontrolling interests:
Pre-tax income/(loss):
U.S.	$	305,289		$	214,205		$	352		$	330
Canada	8,665			(1,537		)	8			16
Europe	(2,711		)	(2,688		)
Other	—			(3,601		)
Europe ⁽¹⁾							(1		)	(14		)
Total	$	311,243		$	206,379		$	359		$	332


(1)	The pre-tax loss in Europe for the three months ended December 31, 2018 reflects a $15 million loss on the sale of our operations related to research, sales and trading of European equities incurred during the first fiscal quarter of 2019.

~~Our~~The following table presents our total assets by major geographic area in which they were held.



$ in millions	December 31, 2019		September 30, 2019
Total assets:
U.S.	$	37,285	$	35,978
Canada	2,751		2,754
Europe	118		98
Total	$	40,154	$	38,830

The following table presents goodwill, which was included in our total assets, classified by major geographic area in which ~~they were held, are presented below:~~

$ in thousands December 31, 2017 September 30, 2017
Total assets:
U.S. $ 33,291,193
$ 32,200,852
Canada 2,706,114
2,592,480
Europe 78,851
81,090
Other 8,741
9,034
Total $ 36,084,899
$ 34,883,456

Total assets in the U.S. included $425 million and $356 million of goodwill at December 31, 2017 and September 30, 2017, respectively. Total assets in Canada included $45 million of goodwill at both December 31, 2017 and September 30, 2017. Total assets in Europe included $10 million of goodwill at both December 31, 2017 and September 30, 2017.

it was held.



$ in millions	December 31, 2019		September 30, 2019
Goodwill:
U.S.	$	433	$	433
Canada	24		23
Europe	8		8
Total	$	465	$	464

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES


ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

~~ITEM 2.~~ ~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~



INDEX
	PAGE
~~Introduction~~	57
Factors affecting “forward-looking statements”	5744
Introduction	44
Executive overview	5744
Segments	5946
Reconciliation of GAAP measures to non-GAAP financial measures	6047
Net interest analysis	6047
Results of Operations
Private Client Group	6349
Capital Markets	6552
Asset Management	6653
RJ Bank	6855
Other	7258
Certain statistical disclosures by bank holding companies	7358
Liquidity and capital resources	73
~~Sources of liquidity~~	7459
Statement of financial condition analysis	7762
Contractual obligations	7863
Regulatory	7863
Critical accounting estimates	7863
Recent accounting developments	7964
~~Off-Balance~~Off-balance sheet arrangements	7964
Effects of inflation	8064
Risk management	8064

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

~~Management's~~Management’s Discussion and Analysis

~~Introduction~~

The following Management’s Discussion and Analysis (“MD&A”) is intended to help the reader understand the results of our operations and financial condition. This MD&A is provided as a supplement to, and should be read in conjunction with, our condensed consolidated financial statements and accompanying notes to condensed consolidated financial statements. Where “NM” is used in various percentage change computations, the computed percentage change has been determined not to be meaningful.

Factors affecting “forward-looking statements”

Certain statements made in this Quarterly Report on Form 10-Q may constitute “forward-looking statements” under the Private Securities Litigation Reform Act of 1995. Forward-looking statements include information concerning future strategic objectives, business prospects, anticipated savings, financial results (including expenses, earnings, liquidity, cash flow and capital expenditures), industry or market conditions, demand for and pricing of our products, acquisitions and divestitures, anticipated results of litigation, ~~changes in~~our effective tax ~~rules,~~rate, regulatory developments, effects of accounting pronouncements, and general economic conditions. In addition, words such as “believes,” “expects,” “anticipates,” ~~“intends,”~~ “plans,” “estimates,” “projects,~~” “forecasts,~~” and future or conditional verbs such as “will,” “may,” “could,” “should,” and “would,” as well as any other statement that necessarily depends on future events, are intended to identify forward-looking statements. Forward-looking statements are not guarantees, and they involve risks, uncertainties and assumptions. Although we make such statements based on assumptions that we believe to be reasonable, there can be no assurance that actual results will not differ materially from those expressed in the forward-looking statements. We caution investors not to rely unduly on any forward-looking statements and urge you to carefully consider the risks described in our filings with the SEC from time to time, including our most recent Annual Report on Form 10-K and subsequent Quarterly Reports on Form 10-Q, which are available at www.raymondjames.com and the SEC’s website at www.sec.gov. We expressly disclaim any obligation to update any forward-looking statement in the event it later turns out to be inaccurate, whether as a result of new information, future events or otherwise.

~~Executive overview~~Introduction

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to help the reader understand the results of our operations and financial condition. This MD&A is provided as a supplement to, and should be read in conjunction with, our condensed consolidated financial statements and accompanying notes to condensed consolidated financial statements. Where “NM” is used in various percentage change computations, the computed percentage change has been determined to be not meaningful.

We operate as a financial holding company and a bank holding company. Results in the businesses in which we operate are highly correlated to ~~the~~ general ~~overall strength of~~ economic conditions and, more specifically, to the direction of the U.S. equity and fixed income markets, changes in interest rates, market volatility, ~~the~~ corporate and mortgage lending markets and commercial and residential credit trends. Overall market conditions, ~~interest rates,~~ economic, political and regulatory trends, and industry competition are among the factors which could affect us and which are unpredictable and beyond our control. These factors affect the financial decisions made by market participants, ~~which include~~including investors, borrowers, and competitors, impacting their level of participation in the financial markets. These factors also impact the level of investment banking activity ~~including public offerings, as well as trading profits,~~ and asset valuations, ~~or a combination thereof. In turn, these decisions and factors~~which ultimately affect our business results.

Executive overview

Three months ended December 31, ~~2017~~2019 compared with the three months ended December 31, ~~2016~~2018

~~We achieved net~~Net revenues of ~~$1.73~~$2.01 billion ~~a $233~~increased $78 million, or ~~16% increase. Our pre-tax~~4%. Pre-tax income ~~was $311~~of $359 million ~~an increase of $105~~increased $27 million, or ~~51%~~8%. Our net income of ~~$119~~$268 million ~~reflects a decrease of $28~~increased $19 million, or ~~19%~~8%, and our earnings per diluted share ~~was $0.80,~~were $1.89, reflecting a ~~20% decrease.~~

~~During~~12% increase. We achieved an annualized return on equity (“ROE”) during the three months ended December 31, ~~2017, earnings were negatively affected by the estimated discrete impact~~2019 of the Tax Act of $117 million, primarily related to the remeasurement of U.S. deferred tax assets at a lower enacted corporate tax rate. Excluding this discrete impact and $4 million of acquisition-related expenses, adjusted net income was $238.8 million ⁽¹⁾16.0%, ~~an increase of 35%~~ compared with ~~adjusted net income in the prior year. Adjusted earnings per diluted share were $1.61~~ ⁽¹⁾~~, a 33% increase compared with adjusted earnings per diluted share in~~15.9% for the prior year ~~period.~~quarter, and an annualized return on tangible common equity (“ROTCE”) ⁽¹⁾ of 17.5%, compared with 17.6% for the prior year quarter.

~~Net~~The $78 million increase in net revenues ~~increased significantly in~~compared with the ~~PCG, Asset Management~~prior year quarter reflected higher asset management and ~~RJ Bank segments. PCG and Asset Management benefited from growth in client~~related administrative fees, primarily attributable to higher Private Client Group assets in fee-based ~~accounts. RJ Bank had significant growth~~accounts at the beginning of the quarter, which were 12% higher than fee-based assets as of the beginning of the prior year quarter. Fee-based assets as of December 31, 2019 grew 9% compared with the end of the previous quarter, which will impact asset management and related administrative fees in our second fiscal quarter of 2020.

Compensation, commissions and benefits expense increased $86 million, or 7%, due to an increase in ~~average interest-earning assets~~compensable net revenues, which primarily include asset management and ~~an increase in net interest margin. Net~~related administrative fees, brokerage revenues, ~~in our Capital Markets segment declined compared with the prior year period, reflecting a decline in equity~~ and fixed income sales commissions due to low market volatility. Total client assets under administration reached $727.2 billion at December 31, 2017, an 18% increase, primarily attributable to equity market appreciation and strong financial advisor recruiting and retention results.

(1) “Adjusted net income,” and “adjusted earnings per diluted share” are each non-GAAP financial measures. Please see the “reconciliation of GAAP measures to non-GAAP measures” in this Item 2, for a reconciliation of our non-GAAP measures to the most directly comparable GAAP measures, and for other important disclosures.

~~RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES~~

~~Management's Discussion and Analysis~~

~~Non-interest expenses increased $129 million, or 10%. The increase primarily resulted from increased compensation, commissions and benefits expense associated with increased net~~investment banking revenues, as well as increased staffing levels required to support our continued growth and regulatory ~~and~~ compliance requirements. ~~Offsetting this increase was~~

Non-compensation expenses decreased $35 million, or 10%, primarily due to a ~~$30~~$2 million ~~decrease~~loan loss benefit in ~~expenses~~the current year quarter compared with a $16 million loan loss provision for the prior year quarter, as well as a $15 million loss on the sale of our operations related to ~~the Jay Peak matter, which was settled~~research, sales and trading of European equities that occurred in the prior ~~fiscal year.~~year quarter.

(1) “Return on tangible common equity” is a non-GAAP financial measure. Please see the “Reconciliation of GAAP measures to non-GAAP financial measures” in this MD&A for a reconciliation of this non-GAAP financial measure to the most directly comparable GAAP measure, and for other important disclosures.

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

Management’s Discussion and Analysis

Our effective income tax rate was 61.7% for the current quarter, reflecting the estimated discrete impact of the Tax Act of $117 million, partially offset by a lower blended federal corporate statutory tax rate of 24.5%. Excluding the estimated discrete impact of the Tax Act, our adjusted effective tax rate was 24.1% ⁽¹⁾25.3% for the three months ended December 31, ~~2017.~~2019, a slight increase compared with the 24.8% effective tax rate for fiscal year 2019. We estimate our effective income tax rate to be approximately ~~28%~~25% for the remainder of ~~our~~ fiscal year ended September 30, 2018, which reflects the blended federal corporate statutory tax rate, and approximately 24% for fiscal year 2019, reflecting the lower federal corporate statutory tax rate of 21% for the full year.2020. Our future effective ~~tax rates are estimates and are based on assumptions based on our current interpretation of the Tax Act and may change, possibly materially, as we complete our analysis. Our future effective~~income tax rate ~~will also~~may be impacted positively or negatively by non-taxable items ~~such~~(such as ~~the~~ gains or losses earned on our ~~Company-owned~~company-owned life insurance ~~(“COLI”)~~and tax-exempt interest), ~~tax exempt interest and~~ non-deductible expenses ~~such~~(such as meals and ~~entertainment. See Note 13~~entertainment and certain executive compensation), as well as vesting and exercises of equity compensation.

During the three months ended December 31, 2019, we repurchased 126 thousand shares of common stock under our Board of Directors’ share repurchase authorization for $11 million at an average price of approximately $89.30 per share. As of December 31, 2019, we had $739 million of availability remaining under this ~~Form 10-Q for further information on the Tax Act.~~authorization.

A summary of our financial results by segment as compared to the prior year ~~are~~quarter is as follows:

~~Our Private Client Group~~PCG segment ~~generated~~ net revenues of ~~$1.23~~$1.41 billion ~~a 19% increase, and~~increased 4%, while pre-tax income of ~~$155~~$153 million ~~increased 111% over the prior year period which included $30 million in legal expenses related to the Jay Peak matter.~~decreased 7%. The increase in net revenues was primarily attributable to an increase in ~~securities commissions~~asset management and related administrative fees ~~driven by a stronger market environment and continued strong recruiting and retention results. The segment also benefited from the impact of~~due to higher ~~short-term interest rates, resulting~~assets in ~~an increase in account and service fees related to client cash balances in the RJBDP.~~fee-based accounts. Non-interest expenses increased ~~$111~~$69 million, or ~~12%~~6%, primarily resulting from ~~increases~~an increase in compensation ~~commissions~~expenses due to the growth in compensable net revenues and ~~benefits expenses, offset by~~higher staffing levels to support our continued growth and regulatory compliance requirements. Pre-tax income decreased despite an increase in net revenues due to a ~~decrease~~shift in the ~~aforementioned legal expenses.~~revenue mix, as net interest income and RJBDP fees from third-party banks, which have no associated direct payout expense, declined due to lower short-term interest rates. Meanwhile, revenues that have an associated direct payout expense (e.g., asset management and related administrative fees) increased.

~~The~~ Capital Markets ~~segment generated~~ net revenues of ~~$217~~$268 million ~~a 7% decrease over the prior year period.~~increased 6% and pre-tax income of $29 million increased 142%. The ~~decrease~~increase in net revenues was primarily due to ~~a decrease~~an increase in ~~institutional commissions due to lower market volatility. Investment banking~~fixed income brokerage revenues, ~~increased slightly,~~as well as higher debt and equity underwriting revenues. These increases were partially offset by a decline in merger & acquisition and advisory ~~fees more than offset~~revenues and lower equity ~~underwriting fees and tax credit fund syndication fees.~~brokerage revenues. Non-interest expenses ~~were relatively flat compared with~~decreased slightly, as the prior year ~~period which, combined with~~impact of the ~~decline in net revenues, contributed~~aforementioned $15 million loss on the sale of our operations related to ~~a 78% decline in pre-tax income.~~research, sales and trading of European equities was partially offset by higher compensation expense.

Our Asset Management segment ~~benefited from increased fee-based client assets, generating a 32% increase in~~ net revenues ~~to $151~~of $184 million ~~while~~increased 6% and pre-tax income of $73 million increased ~~37% to $57 million.~~14%. The increase in net revenues ~~primarily reflected increases~~was driven by growth in ~~advisory fee revenues from~~Private Client Group assets in fee-based accounts, which increased both in programs managed ~~programs and, to a lesser degree, non-discretionary asset-based administration fee revenues. Financial assets under management in managed programs increased 64% over the prior year level aided~~ by the ~~acquisition of~~Asset Management segment and in other asset-based programs for which the ~~Scout Group during the quarter. Non-interest expenses increased $19 million, or 27%, primarily resulting from increased investment sub-advisory fees and acquisition-related increases in~~segment provides administrative ~~& incentive compensation and benefits expense.~~support.

RJ Bank ~~generated a 20%~~net revenues of $216 million increased 6% and pre-tax income of $135 million increased 23%. The increase in net revenues ~~to $165 million, while pre-tax income increased 10% to $114 million. The increase in pre-tax income resulted primarily from an increase in~~reflected higher net interest income ~~partially offset by higher affiliate deposit fees paid to the Private Client Group due to increased balances. Net interest income increased~~ due to growth in ~~average~~ interest-earning assets, ~~and~~which more than offset the lower net interest margin caused by lower short-term interest rates. Non-interest expenses decreased $12 million, or 13%, due to a $2 million loan loss benefit compared with a $16 million loan loss provision in the prior year quarter, partially offset by an increase in ~~the net interest margin.~~fees for RJBDP paid to PCG.

~~Activities in our~~Our Other segment reflected a pre-tax loss that was ~~$14~~$13 million ~~or 41% less than~~larger compared to the prior year quarter, the result of a modest valuation loss on private equity investments, compared with gains in the prior year quarter, and lower interest income on corporate cash balances due to a decline in interest rates. Non-interest expenses increased $3 million, or 15%, primarily due to ~~a decrease in acquisition-related expenses and lower interest expense related to a decrease in the average outstanding balance and average yield of our senior notes payable.~~higher compensation-related expenses.

(1) “Adjusted effective tax rate” is a non-GAAP financial measure. Please see the “reconciliation of GAAP measures to non-GAAP measures” in this Item 2, for a reconciliation of our non-GAAP measures to the most directly comparable GAAP measures, and for other important disclosures.

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

~~Management's~~Management’s Discussion and Analysis

Segments

We currently operate through ~~four operating segments and our Other segment. The four operating~~five segments. Our business segments are ~~Private Client Group,~~PCG, Capital Markets, Asset Management and RJ Bank. ~~The~~Our Other segment ~~captures~~includes our private equity ~~activities as well as~~investments, interest income on certain corporate cash balances, and certain corporate overhead costs of RJF, ~~that are not allocated to operating segments,~~ including the interest ~~cost~~costs on our public ~~debt and the acquisition and integration costs associated with our acquisitions.~~debt.

The following table presents our consolidated and segment net revenues and pre-tax income/(loss)~~, the latter excluding noncontrolling interests,~~ for the periods ~~indicated~~:indicated.


	Three months ended December 31,								Three months ended December 31,
$ in thousands	2017			2016			% change
$ in millions									2019			2018			% change
Total company
Net revenues	$	1,726,161		$	1,492,802		16	%	$	2,009		$	1,931		4	%
Pre-tax income excluding noncontrolling interests	$	311,243		$	206,379		51	%
Pre-tax income									$	359		$	332		8	%

Private Client Group
Net revenues	$	1,233,051		$	1,040,089		19	%	$	1,414		$	1,356		4	%
Pre-tax income	$	155,063		$	73,358		111	%	$	153		$	164		(7	)%

Capital Markets
Net revenues	$	216,665		$	233,016		(7	)%	$	268		$	253		6	%
Pre-tax income	$	4,807		$	21,444		(78	)%	$	29		$	12		142	%

Asset Management
Net revenues	$	150,600		$	114,082		32	%	$	184		$	174		6	%
Pre-tax income	$	57,399		$	41,909		37	%	$	73		$	64		14	%

RJ Bank
Net revenues	$	165,185		$	138,015		20	%	$	216		$	203		6	%
Pre-tax income	$	114,155		$	104,121		10	%	$	135		$	110		23	%

Other
Net revenues	$	(2,920	)	$	(9,643	)	70	%	$	(8	)	$	2		NM
Pre-tax loss	$	(20,181	)	$	(34,453	)	41	%	$	(31	)	$	(18	)	(72	)%

Intersegment eliminations
Net revenues	$	(36,420	)	$	(22,757	)			$	(65	)	$	(57	)	NM

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

~~Management's~~Management’s Discussion and Analysis

Reconciliation of GAAP measures to non-GAAP financial measures

We utilize certain non-GAAP ~~calculations as additional~~financial measures to aid in, and enhance, the understanding of our financial results and related measures. These non-GAAP financial measures have been separately identified in this document. We believe that the non-GAAP measures provide useful information by excluding certain material items that may not be indicative of our core operating results. We believe that these non-GAAP measures will allow for better evaluation of the operating performance of the business and facilitate aannualized return on tangible common equity is meaningful to investors as this measure facilitates comparison of our results into the ~~current period to those in prior and future periods. The~~results of other companies. This non-GAAP financial ~~information~~measure should be considered in addition to, and not as a substitute for, measures of financial performance prepared in accordance with GAAP. In addition, ~~our~~this non-GAAP ~~measures~~financial measure may not be comparable to similarly titled non-GAAP financial measures of other companies. The following table provides a reconciliation of this non-GAAP financial measure to the most directly comparable GAAP ~~measures to non-GAAP measures~~financial measure for the periods ~~which include non-GAAP adjustments. Non-GAAP measures~~indicated.



	Three months ended December 31,
$ in millions	2019			2018
Average equity	$	6,712		$	6,256
Less:
Average goodwill and identifiable intangible assets, net	610			636
Average deferred tax liabilities, net	(30		)	(33		)
Average tangible common equity	$	6,132		$	5,653

Annualized return on equity	16.0		%	15.9		%
Annualized return on tangible common equity	17.5		%	17.6		%

Annualized return on equity is computed by dividing annualized net income for the ~~three months ended December 31, 2016 have been revised from those previously reported~~period indicated by average equity for each respective period or, in the case of annualized return on tangible common equity, computed by dividing annualized net income by average tangible common equity for each respective period.

Average equity is computed by adding the total equity attributable to ~~conform to our current presentation, which includes amounts related~~Raymond James Financial, Inc. as of the date indicated to the ~~Jay Peak matter.~~prior quarter-end total, and dividing by two, or in the case of average tangible common equity, computed by adding tangible common equity as of the date indicated to the prior quarter-end total, and dividing by two.

Three months ended December 31,
$ in thousands, except per share amounts 2017 2016
Net income ⁽¹⁾
$ 118,842
$ 146,567
Non-GAAP adjustments:

Acquisition-related expenses ⁽²⁾
3,927
12,666
Jay Peak matter ⁽³⁾
—
30,000
Sub-total pre-tax non-GAAP adjustments 3,927
42,666
Tax effect on non-GAAP adjustments above (1,100 ) (12,365 )
Discrete impact of the Tax Act ⁽⁴⁾
117,169
—
Total non-GAAP adjustments, net of tax 119,996
30,301
Adjusted net income $ 238,838
$ 176,868

Earnings per common share:

Basic $ 0.82
$ 1.03
Diluted $ 0.80
$ 1.00
Adjusted earnings per common share:

Adjusted basic $ 1.65
$ 1.24
Adjusted diluted $ 1.61
$ 1.21

Effective tax rate:
For the three months ended December 31, 2017
($ in thousands)
Pre-tax income including noncontrolling interests Provision for income taxes Effective tax rate
$ 311,684
$ 192,401
61.7 %
Less: discrete impact of the Tax Act ⁽⁴⁾
117,169

As adjusted for discrete impact of the Tax Act $ 75,232
24.1 %


~~(1)~~	~~Excludes noncontrolling interests.~~


~~(2)~~	~~See Note 3 of the Notes to Condensed Consolidated Financial Statements in this Form 10-Q.~~


~~(3)~~	~~See Part I. Item 3 - Legal proceedings in our 2017 Form 10-K for more information on the Jay Peak matter.~~


~~(4)~~	~~See Note 13 of the Notes to Condensed Consolidated Financial Statements in this Form 10-Q for more information related to the discrete impact of the Tax Act.~~

Net interest analysis

~~The~~During our fourth fiscal quarter of 2019, the Federal Reserve ~~Bank announced an increase in~~decreased its benchmark short-term interest rate twice, each time by 25 basis points, and implemented a third decrease of 25 basis points in ~~December 2017. This increase is in addition to three 25 basis point interest rate increases since December 2016.~~October 2019. These ~~increases~~decreases in short-term interest rates have had a ~~significant~~negative impact on our ~~overall financial performance,~~first fiscal quarter of 2020 results, as we have certain assets and liabilities, primarily held in our PCG, ~~and~~ RJ Bank and Other segments, which are sensitive to changes in interest rates. Fees we earn from third-party banks on client cash balances swept to such banks as part of RJBDP are also sensitive to changes in interest rates.

Given the relationship ofbetween our ~~interest sensitive~~interest-sensitive assets toand liabilities held in each of these segments ~~increases~~and the nature of fees we earn from third-party banks on the RJBDP, decreases in short-term interest rates generally result in an overall ~~increase~~decrease in our net earnings, although the magnitude of the impact to our net interest margin depends on the yields on interest-earning assets relative to the cost of interest-bearing ~~liabilities.~~

~~In PCG, we also earn fees in lieu of interest income from RJBDP, a multi-bank sweep program in which clients’~~liabilities, including deposit rates paid to clients on their cash deposits in their brokerage accounts are swept into interest-bearing deposit accounts at RJ Bank and various third-party banks. Such fees are recorded in “Account and service fees” in our Condensed Consolidated Statements of Income and Comprehensive Income. RJBDP fees from third-party banks fluctuate based on changesbalances. Conversely, any increases in short-term interest rates ~~relative to~~and/or decreases in the deposit rates paid to clients generally have a positive impact on ~~client~~our earnings.

Refer to the discussion of the specific components of our net interest income within the “Management’s Discussion and Analysis of Financial Condition - Results of Operations” of our PCG, RJ Bank, and Other segments. Also refer to “Management’s Discussion and Analysis of Financial Condition - Results of Operations - Private Client Group - Clients’ domestic cash ~~balances.~~sweep balances” for further information on the RJBDP.

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

~~Management's~~Management’s Discussion and Analysis

~~The following table details the components of our domestic client cash balances:~~

As of
$ in millions December 31,
2017 September 30,
2017 December 31,
2016
RJBDP
RJ Bank $ 18,374
$ 17,387
$ 14,893
Third-party banks 20,836
20,704
25,456
Sub-total RJBDP 39,210
38,091
40,349
Money market 1,710
1,818
2,036
Client interest program 3,334
3,101
3,696
Total domestic client cash balances $ 44,254
$ 43,010
$ 46,081

The short-term interest rate increases in 2017 had a significant impact on fees earned from RJBDP; however, they have not had as significant of an impact on market deposit rates paid on client cash balances. However, subsequent to the December 2017 rate increase, we announced increases in our deposit rates paid on client cash balances and we expect market deposit rates will continue to rise with future increases in short-term interest rates. As such, any future increases in short-term interest rates may have less of an impact on our fees earned from our RJBDP, or could actually reduce our fees earned in this program, depending on the level of deposit rates paid on client cash balances.

If the Federal Reserve Bank was to reverse its previous actions and decrease the benchmark short-term interest rate or if deposit rates that we pay on client cash balances increased and resulted in a decline in spreads earned on our RJBDP program, the impact on our net interest income and account and service fees would be an unfavorable reversal of the positive impact described above.

~~RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES~~

~~Management's Discussion and Analysis~~

The following table presents our consolidated average ~~balance,~~balances, interest income and expense and the related ~~yield~~yields and rates. Average balances are calculated on a daily basis, with the exception of ~~Trading instruments,~~ Loans to financial advisors, net and Corporate cash and all other, which are calculated based on the average of the ~~end of month~~end-of-month balances for each month within the period.


	Three months ended December 31,												Three months ended December 31,
	2017						2016						2019						2018
$ in thousands	Average balance		Interest inc./exp.		Average yield/cost		Average balance		Interest inc./exp.		Average yield/cost
$ in millions													Average balance		Interest inc./exp.		Average yield/cost		Average balance		Interest inc./exp.		Average yield/cost
Interest-earning assets:
Assets segregated pursuant to regulations and other segregated assets	$	2,887,422	$	12,122	1.68	%	$	3,589,973	$	7,170	0.80	%
Securities loaned	361,749		3,058		3.38	%	533,000		2,732		2.05	%
Assets segregated pursuant to regulations													$	2,323	$	11	1.85	%	$	2,431	$	15	2.43	%
Trading instruments	648,088		5,138		3.17	%	604,749		5,006		3.31	%	765		6		3.05	%	722		7		3.86	%
Available-for-sale securities	2,275,219		10,715		1.88	%	999,359		3,400		1.36	%	3,089		18		2.30	%	2,717		16		2.32	%
Margin loans	2,484,016		24,095		3.88	%	2,427,230		19,981		3.29	%	2,438		27		4.51	%	2,726		32		4.68	%
Bank loans, net of unearned income
Bank loans, net of unearned income and deferred expenses:
Loans held for investment:
C&I loans	7,413,409		73,792		3.89	%	7,477,477		71,306		3.75	%	8,078		86		4.15	%	7,763		91		4.58	%
CRE construction loans	140,472		1,723		4.80	%	132,506		1,505		4.44	%	233		3		4.87	%	171		2		5.62	%
CRE loans	3,036,603		28,759		3.71	%	2,549,914		22,254		3.42	%	3,611		37		4.00	%	3,558		41		4.55	%
Tax-exempt loans	1,039,814		6,706		2.58	%	808,160		5,246		2.60	%	1,225		8		3.36	%	1,284		9		3.33	%
Residential mortgage loans	3,245,333		24,790		3.06	%	2,559,074		18,564		2.84	%	4,641		37		3.19	%	3,891		32		3.32	%
SBL	2,471,054		23,240		3.68	%	1,951,644		15,389		3.09	%
SBL and other													3,337		34		3.97	%	3,102		36		4.58	%
Loans held for sale	115,882		1,010		3.46	%	180,052		1,261		2.81	%	161		1		4.06	%	186		3		5.39	%
Total bank loans, net	17,462,567		160,020		3.65	%	15,658,827		135,525		3.47	%	21,286		206		3.85	%	19,955		214		4.27	%
Loans to financial advisors	869,326		3,502		1.61	%	833,760		3,308		1.59	%
Loans to financial advisors, net													979		5		2.10	%	916		4		1.92	%
Corporate cash and all other	4,330,440		13,079		1.21	%	3,215,887		5,660		0.69	%	4,784		24		2.00	%	4,832		28		2.31	%
Total interest-earning assets	$	31,318,827	$	231,729	2.96	%	$	27,862,785	$	182,782	2.62	%	$	35,664	$	297	3.33	%	$	34,299	$	316	3.69	%

Interest-bearing liabilities:
Bank deposits
Bank deposits:
Certificates of deposit	$	323,503	$	1,272	1.56	%	$	303,243	$	1,135	1.48	%	$	782	$	4	2.19	%	$	462	$	2	1.98	%
Savings, money market and NOW accounts	17,820,706		6,237		0.15	%	14,411,122		1,648		0.05	%	21,649		12		0.21	%	20,476		33		0.65	%
Securities borrowed	122,310		1,479		4.84	%	126,247		1,228		3.89	%
Trading instruments sold but not yet purchased	258,095		1,706		2.64	%	266,206		1,328		2.00	%	285		1		1.96	%	297		2		2.85	%
Brokerage client liabilities	4,442,992		2,529		0.23	%	4,919,792		676		0.05	%
Brokerage client payables													3,197		3		0.37	%	3,544		6		0.68	%
Other borrowings	1,031,298		5,865		2.26	%	768,178		3,719		1.94	%	893		5		2.20	%	947		6		2.43	%
Senior notes	1,548,885		18,180		4.69	%	1,680,417		24,699		5.88	%
Senior notes payable													1,550		18		4.71	%	1,550		18		4.69	%
Other	256,161		2,163		3.38	%	249,595		1,533		2.46	%	667		8		3.96	%	752		6		3.20	%
Total interest-bearing liabilities	$	25,803,950	$	39,431	0.61	%	$	22,724,800	$	35,966	0.63	%	$	29,023	$	51	0.68	%	$	28,028	$	73	1.05	%
Net interest income			$	192,298					$	146,816					$	246					$	243

Nonaccrual loans are included in the average loan balances in the ~~table above. Payment or income~~preceding table. Any payments received onfor corporate nonaccrual loans are applied entirely to principal. ~~Income~~Interest income on ~~other~~residential mortgage nonaccrual loans is recognized on a cash basis.

Fee income on ~~all~~bank loans included in interest income for the three months ended December 31, ~~2017~~2019 and ~~2016~~2018 was $9$4 million ~~for both periods.~~and $5 million, respectively.

~~Three months ended December 31, 2017 compared with the three months ended December 31, 2016~~

Net interest income increased $45 million, or 31%, primarily reflecting increases in our RJ Bank and PCG segments, as well as a decrease in interest expense in our Other segment related to our senior notes payable.

The ~~RJ Bank segment’s net interest income increased $29 million, or 21%, resulting from an increase~~yield on tax-exempt loans in ~~average loans outstanding and an increase~~ the ~~available-for-sale securities portfolio, as well as an increase in net interest margin. Refer to~~preceding table is presented on a taxable-equivalent basis utilizing the ~~discussion~~applicable federal statutory rates for each of the ~~specific components of RJ Bank’s net interest income in the RJ Bank section of this MD&A.~~years presented.

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

~~Management's~~Management’s Discussion and Analysis

Net interest income in the PCG segment increased $8 million, or 27%, driven by an increase in interest income from segregated assets, due to the impact of an increase in short-term interest rates on these balances, and an increase in interest income from margin loans primarily due to higher yields on these balances. The favorable impact of the higher interest rates was partially offset by a decrease in average segregated asset balances. A decrease in average client cash balances partially offset the impact of the increased rates paid on these balances.

Interest expense on our senior notes decreased by $7 million, or 26% as a result of a decrease in average outstanding balances, as well as the average rate on our outstanding borrowings. The average outstanding balance and average rate of our senior notes decreased due to our March 2017 redemption of our $350 million 6.90% senior notes and our September 2017 redemption of our $300 million 8.60% senior notes, partially offset by the May 2017 issuance of $500 million 4.95% senior notes.

Results of Operations – Private Client Group

For an overview of our PCG segment operations, as well as ~~the~~a description of the key factors impacting our PCG results of operations, refer to the information presented in “Item 1 - Business” and “Item 7 - Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our ~~2017~~2019 Form 10-K.

Operating results

Three months ended December 31,
$ in thousands 2017 2016 % change
Revenues:
Securities commissions and fees:
Fee-based accounts $ 596,259
$ 472,899
26 %
Mutual funds 163,147
158,590
3 %
Insurance and annuity products 110,789
95,351
16 %
Equity products 83,220
79,436
5 %
Fixed income products 28,337
28,952
(2 )%
New issue sales credits 9,302
17,991
(48 )%
Sub-total securities commissions and fees 991,054
853,219
16 %
Interest 43,476
33,614
29 %
Account and service fees:

Mutual fund and annuity service fees 80,621
68,726
17 %
RJBDP fees - third-party banks 61,007
36,564
67 %
RJBDP fees - RJ Bank 21,258
11,653
82 %
Client account and service fees 22,754
24,697
(8 )%
Client transaction fees and other 7,745
6,786
14 %
Sub-total account and service fees 193,385
148,426
30 %
Other 10,125
8,057
26 %
Total revenues 1,238,040
1,043,316
19 %
Interest expense (4,989 ) (3,227 ) 55 %
Net revenues 1,233,051
1,040,089
19 %
Non-interest expenses:

Sales commissions 736,459
634,512
16 %
Admin & incentive compensation and benefit costs 198,917
171,889
16 %
Communications and information processing 52,800
44,017
20 %
Occupancy and equipment costs 37,757
35,488
6 %
Business development 21,563
23,450
(8 )%
Jay Peak matter —
30,000
(100 )%
Other 30,492
27,375
11 %
Total non-interest expenses 1,077,988
966,731
12 %
Pre-tax income $ 155,063
$ 73,358
111 %



	Three months ended December 31,
$ in millions	2019			2018			% change
Revenues:
Asset management and related administrative fees	$	782		$	707		11	%
Brokerage revenues:
Mutual and other fund products	144			157			(8	)%
Insurance and annuity products	101			104			(3	)%
Equities, ETFs and fixed income products	102			103			(1	)%
Total brokerage revenues	347			364			(5	)%
Account and service fees:
Mutual fund and annuity service fees	90			83			8	%
RJBDP fees:
Third-party banks	58			68			(15	)%
RJ Bank	47			41			15	%
Client account and other fees	29			33			(12	)%
Total account and service fees	224			225			—
Investment banking	11			7			57	%
Interest income	49			56			(13	)%
All other	9			7			29	%
Total revenues	1,422			1,366			4	%
Interest expense	(8		)	(10		)	(20	)%
Net revenues	1,414			1,356			4	%
Non-interest expenses:
Financial advisor compensation and benefits	857			803			7	%
Administrative compensation and benefits	247			229			8	%
Total compensation, commissions and benefits	1,104			1,032			7	%
Non-compensation expenses:
Communications and information processing	59			58			2	%
Occupancy and equipment	44			38			16	%
Business development	27			27			—
Professional fees	8			9			(11	)%
All other	19			28			(32	)%
Total non-compensation expenses	157			160			(2	)%
Total non-interest expenses	$	1,261		$	1,192		6	%
Pre-tax income	$	153		$	164		(7	)%

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

~~Management's~~Management’s Discussion and Analysis

Selected key metrics

~~Client Asset Balances:~~

PCG client asset balances:

As of % change from
$ in billions December 31,
2017 September 30,
2017 December 31,
2016 September 30,
2017 December 31,
2016
PCG assets under administration $ 692.1
$ 659.5
$ 585.6
5 % 18 %
PCG assets in fee-based accounts $ 316.7
$ 294.5
$ 240.2
8 % 32 %



	As of
$ in billions	December 31, 2019			September 30, 2019			December 31, 2018			September 30, 2018
Assets under administration (“AUA”)	$	855.2		$	798.4		$	690.7		$	755.7
Assets in fee-based accounts ⁽¹⁾	$	444.2		$	409.1		$	338.8		$	366.3
Percent of AUA in fee-based accounts	51.9		%	51.2		%	49.1		%	48.5		%

(1)

A portion of our “Assets in fee-based accounts” is invested in “managed programs” overseen by our Asset Management segment, specifically our Asset Management Services division of RJ&A (“AMS”). These assets are included in our Financial assets under management as disclosed in the “Selected key metrics” section of our “Management’s Discussion and Analysis - Results of Operations - Asset Management.”

~~Financial Advisors:~~

December 31, 2017 September 30, 2017 December 31, 2016
Employees 3,038
3,041
2,985
Independent Contractors 4,499
⁽¹⁾
4,305
4,143
Total advisors 7,537
7,346
7,128

~~(1) Our independent contractor financial advisor counts include 126 registered individuals who met the requirements to be classified as~~Fee-based accounts within our PCG segment are comprised of a wide array of products and programs that we offer our clients. The majority of assets in fee-based accounts within our PCG segment are invested in programs for which our financial advisors provide investment advisory services, either on a discretionary or non-discretionary basis. Administrative services for such accounts (e.g., record-keeping) are generally performed by our Asset Management segment and, as a result, a portion of the related revenues is shared with the Asset Management segment.

We also offer our clients fee-based accounts that are invested in “managed programs” overseen by AMS, which is part of our Asset Management segment. Fee-billable assets invested in managed programs are included in both “Assets in fee-based accounts” in the ~~December 31, 2017 period~~preceding table and “Financial assets under management” in the Asset Management segment. Revenues related to managed programs are shared by our PCG and Asset Management segments. The Asset Management segment receives a higher portion of the revenues related to accounts invested in managed programs, as compared to the portion received for non-managed programs, as it is performing portfolio management services in addition to administrative services.

The vast majority of the revenues we earn from fee-based accounts are recorded in “Asset management and related administrative fees” on our Condensed Consolidated Statements of Income and Comprehensive Income. Fees received from such accounts are based on the value of client assets in fee-based accounts and vary based on the specific account types in which the client participates and the level of assets in the client relationship. As fees for substantially all of such accounts are billed based on balances as of the beginning of the quarter, revenues from fee-based accounts may not be immediately impacted by changes in asset values, but rather the impacts are seen in the following ~~our periodic review procedures.~~quarter.

PCG assets under administration increased ~~18% over December 31, 2016, resulting from~~compared with the prior year due to the net addition of financial advisors and equity market ~~appreciation and net client inflows. Our net client inflows were primarily attributable to strong financial advisor recruiting results.~~appreciation. In addition, PCG assets in fee-based accounts continued to increase as a percentage of overall PCG assets under administration ~~increased compared~~due to ~~December 31, 2016, due in part to clients moving to~~clients’ preference for fee-based alternatives versus ~~traditional~~ transaction-based ~~accounts in response to regulatory changes.~~

~~Excluding the impact~~accounts. As a result of the ~~individuals newly qualifying~~continued shift to ~~be classified as~~fee-based accounts, a larger portion of our PCG revenues are more directly impacted by market movements.

Financial advisors:



	December 31, 2019	September 30, 2019	December 31, 2018
Employees	3,331	3,301	3,166
Independent contractors	4,729	4,710	4,649
Total advisors	8,060	8,011	7,815

The number of financial advisors ~~the net increase in financial advisors as of December 31, 2017 compared~~increased primarily due to ~~December 31, 2016 primarily resulted from strong~~continued financial advisor recruiting and high levels of ~~retention. Notwithstanding~~retention, partially offset by planned financial advisor retirements during the December quarter, which is a seasonally typical period for such activity.

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

Management’s Discussion and Analysis

Clients’ domestic cash sweep balances:



	As of
$ in millions	December 31, 2019			September 30, 2019			December 31, 2018
RJBDP
RJ Bank	$	21,891		$	21,649		$	21,138
Third-party banks	15,061			14,043			18,320
Subtotal RJBDP	36,952			35,692			39,458
Money market funds	—			—			4,436
Client Interest Program (“CIP”)	2,528			2,022			2,935
Total clients’ domestic cash sweep balances	$	39,480		$	37,714		$	46,829
Average yield on RJBDP - third-party banks	1.64		%	1.83		%	1.74		%

A significant portion of our clients’ cash is included in the RJBDP, a multi-bank sweep program in which clients’ cash deposits in their accounts are swept into interest-bearing deposit accounts at RJ Bank and various third-party banks. We earn servicing fees for the administrative services we provide related to our clients’ deposits that are swept to such banks as part of the RJBDP. The amounts from third-party banks are variable in nature and fluctuate based on client cash balances in the program, as well as the level of short-term interest rates and the interest paid to clients by the third-party banks on balances in the RJBDP. The “Average yield on RJBDP - third party banks” in the preceding table is computed by dividing RJBDP fees from third-party banks, which are net of the interest paid to clients by the third-party banks, by the average daily RJBDP balances at third-party banks. The PCG segment also earns RJBDP servicing fees from RJ Bank, which are based on the number of accounts that are swept to RJ Bank. The fees from RJ Bank are eliminated in consolidation.

RJBDP fees from third-party banks and the average yield on RJBDP (third-party banks) were negatively impacted by the decrease in short-term interest rates implemented by the Fed toward the beginning of our first quarter of fiscal 2020 and two short-term interest rate decreases implemented during the preceding fiscal quarter. The impact on our earnings of any future fluctuations in short-term interest rates will be largely dependent upon the change in the deposit rate paid on client cash balances. Any additional decreases in short-term interest rates, increases in deposit rates paid to clients, and/or a significant decline in our clients’ cash balances will likely have a negative impact ofon our earnings. Further, PCG segment results are impacted by changes in the ~~overall economy,~~allocation of client cash balances in the RJBDP between RJ Bank and ~~more specifically their impact~~third-party banks. PCG generally earns a higher rate on cash held at third-party banks.

Money market funds were discontinued as a sweep option in June 2019. Balances in those funds were converted to the ~~markets, we believe that this increase in financial advisors is a positive indication of potential future revenue growth in this segment.~~RJBDP or reinvested by the client.

Three months ended December 31, ~~2017~~2019 compared with the three months ended December 31, ~~2016~~2018

Net revenues of ~~$1.23~~$1.41 billion increased ~~$193~~$58 million, or ~~19%~~4%, while pre-tax income of $153 million decreased $11 million, or 7%. ~~The portion of total segment~~Pre-tax income decreased despite an increase in net revenues due to a shift in the revenue mix, as net interest income and RJBDP fees from third-party banks, which have no associated direct payout expense, declined due to lower short-term interest rates. Meanwhile, revenues that ~~we consider~~have an associated direct payout expense (e.g., asset management and related administrative fees) increased.

Asset management and related administrative fees increased $75 million, or 11%, primarily due to ~~be recurring was 82% for~~higher asset balances in fee-based accounts at the ~~three months ended December 31, 2017, an increase from 78% for~~beginning of the ~~prior year period. Recurring~~quarter, reflecting successful financial advisor recruiting and retention, equity market appreciation and the increased utilization of fee-based accounts.

Brokerage revenues ~~include asset-based fees, trailing commissions from mutual funds and variable annuities/insurance products,~~declined $17 million, or 5%, primarily as a result of the decline in mutual fund trails, which were impacted by the conversion of client assets into mutual fund share classes which pay lower rates and ~~annuity service fees, fees earned in our RJBDP program, and interest, all of which contributed~~the continued shift to ~~the increase.~~fee-based accounts.

~~Pre-tax income of $155 million increased $82 million, or 111%.~~

Securities commissions and fees increased $138 million, or 16%. The increased securities commissions and fee revenues were primarily driven by a stronger market environment as well as strong recruiting results.

Total account and service fees ~~increased $45 million, or 30%, primarily~~were flat compared with the prior year quarter, as an increase in mutual fund service fees due to higher ~~RJBDP fees, primarily resulting from~~asset balances and an increase in ~~short-term interest rates since December 2016. Mutual fund and annuity service~~RJBDP fees ~~increased reflecting higher education and marketing support (“EMS”) fees and mutual fund omnibus fees. The increase in EMS fees is primarily~~from RJ Bank due to ~~the increased assets in the program, while the increase in omnibus fees was a result of~~ an increase in the number of ~~positions invested~~accounts, were offset by a decline in ~~fund families on~~RJBDP fees from third-party banks. The decline in RJBDP fees from third-party banks was driven both by lower short-term interest rates and lower client cash balances compared with the ~~omnibus platform.~~prior year quarter.

~~As previously discussed, net~~Net interest income ~~in the PCG segment increased $8~~decreased $5 million, or ~~27%.~~11%, driven by a decrease in interest income from client margin loans and assets segregated pursuant to regulations due to a decrease in average balances and a decline in short-term interest rates. Partially offsetting the decrease in interest income, interest expense also decreased due to the impact of lower deposit rates paid on lower client cash balances in CIP.

~~Non-interest~~

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

Management’s Discussion and Analysis

Compensation-related expenses increased ~~$111~~$72 million, or ~~12%~~7%, ~~primarily~~ due to an increase in sales commission expenses, which increased $102 million, or 16%, in line with the increase in securities commissions and fees. Administrative & incentive compensation and benefits expense increased $27 million, or 16%, primarily due tohigher compensable net revenues, as well as increased staffing levels to support our continued growth and regulatory ~~and~~ compliance requirements. ~~Communications and information processing expense increased $9~~

Non-compensation expenses decreased $3 million, or ~~20%~~2%, ~~a result of~~as decreased legal reserves compared with the prior-year quarter were offset by higher occupancy and equipment expenses. The increase in occupancy and equipment expenses was driven by branch expansion in our ~~continued investment in information technology infrastructure to support our~~employee affiliation option, rising real estate rental rates, and financial advisor growth. ~~Offsetting these increases is a $30 million decrease in expenses related to the Jay Peak matter, which was settled in fiscal year 2017.~~

~~RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES~~

~~Management's Discussion and Analysis~~

Results of Operations – Capital Markets

For an overview of our Capital Markets segment operations, as well as ~~the~~a description of the key factors impacting our Capital Markets results of operations, refer to the information presented in “Item 1 - Business” and “Item 7 - Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our ~~2017~~2019 Form 10-K.

Operating results

Three months ended December 31,
$ in thousands 2017 2016 % change
Revenues:
Securities commissions and fees:
Equity $ 53,371
$ 64,319
(17 )%
Fixed income 65,201
75,374
(13 )%
Sub-total securities commissions and fees 118,572
139,693
(15 )%
Equity underwriting fees 8,956
14,509
(38 )%
Merger & acquisition and advisory fees 42,998
27,174
58 %
Fixed income investment banking 8,132
8,478
(4 )%
Tax credit funds syndication fees 4,817
11,126
(57 )%
Sub-total investment banking 64,903
61,287
6 %
Investment advisory fees 8,335
5,223
60 %
Net trading profit 19,230
19,319
—
Interest 7,325
6,474
13 %
Other 4,169
4,986
(16 )%
Total revenues 222,534
236,982
(6 )%
Interest expense (5,869 ) (3,966 ) 48 %
Net revenues 216,665
233,016
(7 )%
Non-interest expenses:

Sales commissions 42,218
50,973
(17 )%
Admin & incentive compensation and benefit costs 114,322
102,867
11 %
Communications and information processing 17,834
17,647
1 %
Occupancy and equipment costs 8,384
8,455
(1 )%
Business development 10,155
9,602
6 %
Losses and non-interest expenses of real estate partnerships held by consolidated VIEs 2,666
1,796
48 %
Other 18,986
22,337
(15 )%
Total non-interest expenses 214,565
213,677
—
Income before taxes and including noncontrolling interests 2,100
19,339
(89 )%
Noncontrolling interests (2,707 ) (2,105 ) 29 %
Pre-tax income excluding noncontrolling interests $ 4,807
$ 21,444
(78 )%



	Three months ended December 31,
$ in millions	2019			2018			% change
Revenues:
Brokerage revenues:
Fixed income	$	81		$	57		42	%
Equity	34			42			(19	)%
Total brokerage revenues	115			99			16	%
Investment banking:
Merger & acquisition and advisory	60			85			(29	)%
Equity underwriting	39			27			44	%
Debt underwriting	31			17			82	%
Total investment banking	130			129			1	%
Interest income	8			10			(20	)%
Tax credit fund revenues	18			19			(5	)%
All other	3			4			(25	)%
Total revenues	274			261			5	%
Interest expense	(6		)	(8		)	(25	)%
Net revenues	268			253			6	%
Non-interest expenses:
Compensation, commissions and benefits	166			158			5	%
Non-compensation expenses:
Communications and information processing	19			19			—
Occupancy and equipment	9			9			—
Business development	16			12			33	%
Professional fees	10			10			—
Acquisition and disposition-related expenses	—			15			(100	)%
All other	19			18			6	%
Total non-compensation expenses	73			83			(12	)%
Total non-interest expenses	239			241			(1	)%
Pre-tax income	$	29		$	12		142	%

Three months ended December 31, ~~2017~~2019 compared with the three months ended December 31, ~~2016~~2018

Net revenues of ~~$217~~$268 million ~~decreased~~increased $15 million, or 6%, and pre-tax income of $29 million increased $17 million, or 142%.

Total brokerage revenues increased $16 million, or 7%16%, due to an increase in fixed income brokerage revenues, partially offset by a decrease in equity brokerage revenues. The increase in fixed income brokerage revenues was primarily due to ~~lower commissions. Pre-tax income of $5 million decreased $17 million, or 78%.~~

~~Total commission revenues decreased $21 million, or 15%. Institutional fixed income and equity commissions each decreased $11 million as~~an increase in client activity during the current year quarter, largely a result of ~~lower client trading volumes driven by low levels of~~higher interest rate volatility. Equity brokerage revenues continue to be challenged by industry trends, including the separate payment for research and ~~equity market volatility.~~execution services and the shift from high- to low-touch execution services.

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

~~Investment~~Management’s Discussion and Analysis

Total investment banking revenues were flat compared with the prior-year quarter, as increased ~~$4 million, or 6%, due to higher~~equity and debt underwriting revenues were offset by decreased merger & acquisition and advisory ~~fees, partially offset by lower tax credit fund syndication fees and equity underwriting fees. Merger & acquisition and advisory fees~~revenues.

Compensation-related expenses increased ~~$16~~$8 million, or ~~58%~~5%, primarily due to ~~a stronger volume of both domestic and foreign merger & acquisition activity and higher average fees per transaction~~the increase in ~~the current year period versus~~net revenues.

Non-compensation expenses decreased $10 million, or 12%, as the prior year ~~period. Tax credit fund syndication fees decreased $6~~quarter was negatively impacted by a $15 million ~~or 57%, due in part to uncertainty over corporate tax reform impacting new investment activity and the timing of transactions.~~

~~RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES~~

~~Management's Discussion and Analysis~~

~~Equity underwriting fees decreased $6 million, or 38%, primarily due to fewer domestic lead-managed deals in the current year period as compared to the prior year period.~~

~~Non-interest expenses were flat over the prior year period, as a decline in sales commissions, in line~~loss associated with the ~~decline in securities commissions~~sale of our operations related to research, sales and ~~fees, and a decline in other expenses were largely offset by an increase in administrative & incentive compensation and benefits expense.~~trading of European equities.

Results of Operations – Asset Management

For an overview of our Asset Management segment operations as well as ~~the~~a description of the key factors impacting our Asset Management results of operations, refer to the information presented in “Item 1 - Business” and “Item 7 - Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our ~~2017~~2019 Form 10-K.

Operating results

Three months ended December 31,
$ in thousands 2017 2016 % change
Revenues:
Investment advisory and related administrative fees:
Managed programs $ 103,845
$ 76,308
36 %
Non-discretionary asset-based administration 27,068
21,194
28 %
Sub-total investment advisory and related administrative fees 130,913
97,502
34 %
Account and service fees and other 19,698
16,594
19 %
Total revenues 150,611
114,096
32 %
Interest expense (11 ) (14 ) (21 )%
Net revenues 150,600
114,082
32 %
Non-interest expenses:

Compensation and benefits 36,597
27,682
32 %
Communications and information processing 8,444
6,671
27 %
Occupancy and equipment costs 1,424
1,160
23 %
Business development 2,647
2,313
14 %
Investment sub-advisory fees 21,694
17,384
25 %
Other 19,527
15,756
24 %
Total non-interest expenses 90,333
70,966
27 %
Income before taxes and including noncontrolling interests 60,267
43,116
40 %
Noncontrolling interests 2,868
1,207
138 %
Pre-tax income excluding noncontrolling interests $ 57,399
$ 41,909
37 %



	Three months ended December 31,
$ in millions	2019		2018		% change
Revenues:
Asset management and related administrative fees:
Managed programs	$	125	$	117	7	%
Administration and other	51		44		16	%
Total asset management and related administrative fees	176		161		9	%
Account and service fees	5		9		(44	)%
All other	3		4		(25	)%
Net revenues	184		174		6	%
Non-interest expenses:
Compensation, commissions and benefits	45		43		5	%
Non-compensation expenses:
Communications and information processing	11		11		—
Investment sub-advisory fees	25		24		4	%
All other	30		32		(6	)%
Total non-compensation expenses	66		67		(1	)%
Total non-interest expenses	111		110		1	%
Pre-tax income	$	73	$	64	14	%

Selected key metrics

Managed ~~Programs~~ - ~~Our investment advisory~~programs

Management fees recorded in ~~this~~our Asset Management segment ~~were~~are generally calculated as a percentage of the value of our fee-billable financial assets under management (“AUM”). These AUM include the portion of fee-based AUA in our PCG segment that is invested in programs overseen by our Asset Management segment (included in the AMS line of the following table), as well as retail accounts managed on behalf of third-party institutions, institutional accounts and proprietary mutual funds that we manage (collectively included in the “Carillon Tower Advisers” line of the following table).

Revenues related to fee-based AUA in our PCG segment are shared by the PCG and Asset Management segments, the amount of which depends on whether clients are invested in assets that are in managed programs overseen by our Asset Management segment and the administrative services provided (see our “Management’s Discussion and Analysis - Results of Operations - Private Client Group” for more information). Our AUM in AMS are impacted by market fluctuations and net inflows or outflows of assets, including transfers between fee-based accounts and transaction-based accounts within our PCG segment.

Revenues earned by Carillon Tower Advisers for retail accounts managed on behalf of third-party institutions, institutional accounts and our proprietary mutual funds are recorded entirely in the Asset Management segment. Our AUM in Carillon Tower Advisers are impacted by market and investment performance and net inflows or outflows of assets.

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

Management’s Discussion and Analysis

Fees are generally collected quarterly and are based on balances ~~either at~~as of the beginning of the quarter or the end of the quarter, or average assets throughout the quarter. Following the Scout Group acquisition during the three months ended December 30, 2017, approximately 60% of our fees were determined based on asset balances at the beginning of the quarter, 20% were based on asset balances at the end of the quarter and 20% were based on average ~~assets throughout~~daily balances during the quarter.

~~RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES~~

~~Management's Discussion and Analysis~~

Financial assets under management:

~~The following table reflects fee-billable financial assets under management in managed programs at the dates indicated:~~


$ in millions	December 31, 2017			September 30, 2017			December 31, 2016			December 31, 2019			September 30, 2019			December 31, 2018			September 30, 2018
Asset management services division of RJ&A (“AMS”)	$	74,607		$	69,962		$	56,524
Carillon Tower Advisers and affiliates (“Carillon Tower”)	61,245			31,831			27,933
Sub-total financial assets under management	135,852			101,793			84,457
AMS ⁽¹⁾										$	98,648		$	91,802		$	76,235		$	83,289
Carillon Tower Advisers										60,637			58,521			55,925			63,330
Subtotal financial assets under management										159,285			150,323			132,160			146,619
Less: Assets managed for affiliated entities	(5,542		)	(5,397		)	(4,805		)	(7,633		)	(7,221		)	(5,653		)	(5,702		)
Total financial assets under management	$	130,310		$	96,396		$	79,652		$	151,652		$	143,102		$	126,507		$	140,917

~~Carillon Tower above includes its subsidiaries and affiliates Eagle Asset Management, ClariVest Asset Management, Cougar Global Investments, and the newly acquired Scout Group.~~


(1)	Represents the portion of our PCG segment fee-based AUA (as disclosed in “Assets in fee-based accounts” in the “Selected key metrics - PCG client asset balances” section of our “Management’s Discussion and Analysis - Results of Operations - Private Client Group”) that is invested in managed programs overseen by the Asset Management segment.

~~The following table reflects fee-billable financial assets under management (including assets managed for affiliates) in managed programs by objective at the dates indicated:~~

$ in millions December 31, 2017 September 30, 2017 December 31,
2016
Equity $ 57,971
$ 48,936
$ 40,959
Fixed 33,806
11,814
10,920
Balanced 44,075
41,043
32,578
Total financial assets under management $ 135,852
$ 101,793
$ 84,457

Activity (including activity in assets managed for affiliated entities):


	Three months ended December 31,				Three months ended December 31,
$ in millions	2017		2016		2019			2018
Financial assets under management at beginning of period	$	101,793	$	81,729	$	150,323		$	146,619
Carillon Tower - net inflows:
Scout group acquisition	27,087		—
Other	720		88
Carillon Tower Advisers - net outflows					(372		)	(1,580		)
AMS - net inflows	2,178		1,896		2,083			518
Net market appreciation in asset values	4,074		744
Net market appreciation/(depreciation) in asset values					7,251			(13,397		)
Financial assets under management at end of period	$	135,852	$	84,457	$	159,285		$	132,160

AMS division of RJ&A

See “Management’s Discussion and Analysis - Results of Operations - Private Client Group” for further information about our retail client assets, including those fee-based assets invested in programs managed by AMS.

Carillon Tower Advisers

Assets managed by Carillon Tower Advisers include assets managed by its subsidiaries and affiliates: Eagle Asset Management, ClariVest Asset Management, Cougar Global Investments and the Scout Group. The following table presents Carillon Tower Advisers’ AUM by objective, excluding assets for which it does not exercise discretion, as well as the approximate average client fee rate earned on such assets for the most recent fiscal year period.



$ in millions	December 31, 2019		Average fee rate
Equity	$	29,880	0.51%
Fixed income	25,649		0.18%
Balanced	5,108		0.37%
Total financial assets under management	$	60,637	0.36%

Non-discretionary asset-based programs - ~~Our assets~~

Assets held in certain non-discretionary asset-based programs for which the Asset Management segment does not exercise discretion but provides administrative support (including ~~those managed~~ for affiliated entities) totaled ~~$170.9~~$251.3 billion, ~~$157.0~~$229.7 billion, $184.3 billion, and ~~$123.9~~$200.1 billion as of December 31, ~~2017,~~2019, September 30, ~~2017 and~~2019, December 31, ~~2016,~~2018, and September 30, 2018, respectively. The increase in assets over the prior year level was primarily due to ~~market appreciation and to~~ clients moving to fee-based accounts from ~~the traditional~~ transaction-based accounts, ~~in response to U.S. Department of Labor (“DOL”) regulatory changes. The majority of the administrative~~successful financial advisor recruiting and market appreciation. Administrative fees associated with these programs are ~~determined~~predominantly calculated based on balances at the beginning of the quarter.

RJ Trust

Assets held in asset-based programs in RJ Trust (including those managed for affiliated entities) totaled $7.2 billion, $6.6 billion, $5.7 billion, and $6.1 billion as of December 31, 2019, September 30, 2019, December 31, 2018 and September 30, 2018, respectively.

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

Management’s Discussion and Analysis

Three months ended December 31, ~~2017~~2019 compared with the three months ended December 31, ~~2016~~2018

Net revenues of ~~$151~~$184 million increased ~~$37~~$10 million, or ~~32%. Pre-tax~~6%, and pre-tax income of ~~$57~~$73 million increased $9 million, or 14%.

Asset management and related administrative fees increased $15 million, or ~~37%.~~

~~Total investment advisory and related administrative fee revenues increased $33 million, or 34%~~9%, ~~primarily~~ driven by an increase in financial advisory fees due to higher financial assets under management. The increase in financial assets under management was primarily a result of the Scout Group acquisition, as well as both market appreciation and recruiting. Administrative fees also increased during the quarter due to the aforementioned increase in assets held in non-discretionary programs.

~~Account and service fees and other income increased $3 million, or 19%, primarily reflecting increased trust fee revenue due to a 12% increase in trust~~PCG assets in ~~RJ Trust.~~

~~RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES~~

~~Management's Discussion and Analysis~~

Non-interest expenses increased $19 million, or 27%, primarily resulting from a $9 million increase in compensation and benefit expenses, a $4 million increase in investment sub-advisory fees and a $4 million increase in other expense. Compensation and benefit expenses increased primarily due to the Scout Group acquisition, annual salary increases and an increase in personnel overfee-based accounts compared with the prior year ~~to support~~quarter. Assets in fee-based accounts increased both in managed programs overseen by the ~~growth of~~Asset Management segment and in non-discretionary asset-based programs for which the business. The increase in investment sub-advisory fees resulted from increased assets under management in applicable programs. The increase in other expense was primarily due to expenses incurred to support the new funds offered on our platform as a result of the Scout Group acquisition during the current year.segment provides administrative support.

Results of Operations – RJ Bank

For an overview of our RJ Bank segment operations, as well as ~~the~~a description of the key factors impacting our RJ Bank results of operations, refer to the information presented in “Item 1 - Business” and “Item 7 - Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our ~~2017~~2019 Form 10-K.

Operating results


	Three months ended December 31,								Three months ended December 31,
$ in thousands	2017			2016			% change
$ in millions									2019			2018			% change
Revenues:
Interest income	$	175,995		$	140,774		25	%	$	231		$	239		(3	)%
Interest expense	(12,956		)	(6,502		)	99	%	(21		)	(42		)	(50	)%
Net interest income	163,039			134,272			21	%	210			197			7	%
Other income	2,146			3,743			(43	)%
All other									6			6			—
Net revenues	165,185			138,015			20	%	216			203			6	%
Non-interest expenses:
Compensation and benefits	8,876			7,724			15	%	12			11			9	%
Communications and information processing	2,585			1,867			38	%
Occupancy and equipment costs	362			351			3	%
Non-compensation expenses:
Loan loss provision/(benefit)	1,016			(1,040		)	NM		(2		)	16			NM
FDIC insurance premiums	4,834			4,260			13	%
Affiliate deposit account servicing fees	21,258			11,653			82	%
Other	12,099			9,079			33	%
RJBDP fees to PCG									47			41			15	%
All other									24			25			(4	)%
Total non-compensation expenses									69			82			(16	)%
Total non-interest expenses	51,030			33,894			51	%	81			93			(13	)%
Pre-tax income	$	114,155		$	104,121		10	%	$	135		$	110		23	%

Three months ended December 31, 2019 compared with the three months ended December 31, 2018

Net revenues of $216 million increased $13 million, or 6%, and pre-tax income of $135 million increased $25 million, or 23%.

Net interest income increased $13 million, or 7%, as higher interest-earning banking assets offset the negative impact from lower short-term interest rates. The increase in average interest-earning banking assets was driven by growth in average loans of $1.33 billion and a $372 million increase in our average available-for-sale securities portfolio. The net interest margin decreased to 3.23% from 3.25%.

The loan loss provision was a benefit of $2 million, compared to an expense of $16 million in the prior year quarter. The benefit in the current year quarter was primarily attributable to payoffs of certain lower-rated corporate loans and a shift in loan mix to a higher portion of residential mortgage loans, which generally have lower allowances for loan losses than corporate loans.

Compensation and benefits expenses increased $1 million due increased staffing levels to support our continued growth.

Non-compensation expenses (excluding the provision for loan losses) increased $5 million, including a $6 million, or 15%, increase in fees for RJBDP paid to PCG, primarily driven by an increase in the number of accounts. These fees are eliminated in consolidation.

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

~~Management's~~Management’s Discussion and Analysis

The following table presents average ~~balance,~~balances, interest income and expense, the related ~~yield~~yields and rates, and interest spreads and margins for RJ ~~Bank:~~Bank.


	Three months ended December 31,														Three months ended December 31,
	2017							2016							2019							2018
$ in thousands	Average balance			Interest inc./exp.		Average yield/ cost		Average balance			Interest inc./exp.		Average yield/ cost
$ in millions															Average balance			Interest inc./exp.		Average yield/ cost		Average balance			Interest inc./exp.		Average yield/ cost
Interest-earning banking assets:
Cash	$	1,354,464		$	4,432	1.30	%	$	905,877		$	1,244	0.54	%	$	1,201		$	5	1.64	%	$	1,304		$	7	2.24	%
Available-for-sale securities	2,168,610			10,143		1.87	%	872,859			3,077		1.41	%	3,089			18		2.30	%	2,717			16		2.32	%
Bank loans, net of unearned income:
Bank loans, net of unearned income and deferred expenses:
Loans held for investment:
C&I loans	7,413,409			73,792		3.89	%	7,477,477			71,306		3.75	%	8,078			86		4.15	%	7,763			91		4.58	%
CRE construction loans	140,472			1,723		4.80	%	132,506			1,505		4.44	%	233			3		4.87	%	171			2		5.62	%
CRE loans	3,036,603			28,759		3.71	%	2,549,914			22,254		3.42	%	3,611			37		4.00	%	3,558			41		4.55	%
Tax-exempt loans	1,039,814			6,706		3.42	%	808,160			5,246		3.99	%	1,225			8		3.36	%	1,284			9		3.33	%
Residential mortgage loans	3,245,333			24,790		3.06	%	2,559,074			18,564		2.84	%	4,641			37		3.19	%	3,891			32		3.32	%
SBL	2,471,054			23,240		3.68	%	1,951,644			15,389		3.09	%
SBL and other															3,337			34		3.97	%	3,102			36		4.58	%
Loans held for sale	115,882			1,010		3.46	%	180,052			1,261		2.81	%	161			1		4.06	%	186			3		5.39	%
Total loans, net	17,462,567			160,020		3.65	%	15,658,827			135,525		3.47	%
FHLB stock, FRB stock, and other	130,817			1,400		4.25	%	171,818			928		2.14	%
Total bank loans, net															21,286			206		3.85	%	19,955			214		4.27	%
FHLB stock, FRB stock and other															215			2		3.00	%	169			2		3.97	%
Total interest-earning banking assets	21,116,458			$	175,995	3.32	%	17,609,381			$	140,774	3.21	%	25,791			$	231	3.56	%	24,145			$	239	3.94	%
Non-interest-earning banking assets:
Unrealized loss on available-for-sale securities	(15,508		)					(5,138		)
Unrealized gain/(loss) on available-for-sale securities															29							(70		)
Allowance for loan losses	(190,503		)					(196,895		)					(219		)					(204		)
Other assets	402,839							358,673							358							420
Total non-interest-earning banking assets	196,828							156,640							168							146
Total banking assets	$	21,313,286						$	17,766,021						$	25,959						$	24,291
Interest-bearing banking liabilities:
Deposits:
Bank deposits:
Certificates of deposit	$	323,503		$	1,272	1.56	%	$	303,243		$	1,135	1.48	%	$	782		$	4	2.19	%	$	462		$	2	1.98	%
Savings, money market, and NOW accounts	18,065,017			6,945		0.15	%	14,888,763			2,156		0.06	%
Savings, money market and NOW accounts															21,823			12		0.22	%	20,675			34		0.66	%
FHLB advances and other	989,239			4,739		1.87	%	796,174			3,211		1.58	%	888			5		2.22	%	948			6		2.12	%
Total interest-bearing banking liabilities	19,377,759			$	12,956	0.26	%	15,988,180			$	6,502	0.16	%	23,493			$	21	0.36	%	22,085			$	42	0.75	%
Non-interest-bearing banking liabilities	93,462							86,936							180							159
Total banking liabilities	19,471,221							16,075,116							23,673							22,244
Total banking shareholder’s equity	1,842,065							1,690,905
Total banking liabilities and shareholder’s equity	$	21,313,286						$	17,766,021
Total banking shareholders’ equity															2,286							2,047
Total banking liabilities and shareholders’ equity															$	25,959						$	24,291
Excess of interest-earning banking assets over interest-bearing banking liabilities/net interest income	$	1,738,699		$	163,039			$	1,621,201		$	134,272			$	2,298		$	210			$	2,060		$	197
Bank net interest:
Spread						3.06	%						3.05	%						3.20	%						3.19	%
Margin (net yield on interest-earning banking assets)						3.08	%						3.06	%						3.23	%						3.25	%
Ratio of interest-earning banking assets to interest-bearing banking liabilities						108.97	%						110.14	%						109.78	%						109.33	%

Nonaccrual loans are included in the average loan balances ~~presented~~ in the ~~table above. Payment or income~~preceding table. Any payments received onfor corporate nonaccrual loans are applied entirely to principal. ~~Income~~Interest income on ~~other~~residential mortgage nonaccrual loans is recognized on a cash basis.

Fee income on bank loans included in interest income for ~~both~~ the three months ended December 31, ~~2017~~2019 and ~~2016~~2018 was ~~$9 million.~~$4 million and $5 million, respectively.

The yield on tax-exempt loans in the preceding table ~~above~~ is presented on a ~~tax equivalent~~taxable-equivalent basis utilizing the applicable federal statutory tax rates for each of the three months ended December 31, ~~2017~~2019 and ~~2016.~~2018.

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

~~Management's~~Management’s Discussion and Analysis

Increases and decreases in interest income and interest expense result from changes in average balances (volume) of interest-earning ~~banking~~ assets and interest-bearing liabilities, as well as changes in average interest rates. The following table shows the effect that these factors had on the interest earned on our interest-earning assets and the interest incurred on ~~its~~our interest-bearing liabilities. The effect of changes in volume is determined by multiplying the change in volume by the previous period’s average yield/cost. Similarly, the effect of rate changes is calculated by multiplying the change in average yield/cost by the previous year’s volume. Changes ~~applicable~~attributable to both volume and rate have been allocated proportionately.


	Three months ended December 31,									Three months ended December 31,
	2017 compared to 2016									2019 compared to 2018
	Increase/(decrease) due to									Increase/(decrease) due to
$ in thousands	Volume			Rate			Total
Interest revenue:
$ in millions										Volume			Rate			Total
Interest income:
Interest-earning banking assets:
Cash	$	616		$	2,572		$	3,188		$	—		$	(2	)	$	(2	)
Available-for-sale securities	4,131			2,935			7,066			2			—			2
Bank loans, net of unearned income:
Bank loans, net of unearned income and deferred expenses:
Loans held for investment:
C&I loans	(611		)	3,097			2,486			4			(9		)	(5		)
CRE construction loans	90			128			218			2			(1		)	1
CRE loans	4,247			2,258			6,505			1			(5		)	(4		)
Tax-exempt loans	1,503			(43		)	1,460			(1		)	—			(1		)
Residential mortgage loans	4,978			1,248			6,226			7			(2		)	5
SBL	4,096			3,755			7,851
SBL and other										2			(4		)	(2		)
Loans held for sale	(449		)	198			(251		)	(1		)	(1		)	(2		)
Total bank loans, net	13,854			10,641			24,495			14			(22		)	(8		)
FHLB stock, FRB stock, and other	(221		)	693			472			—			—			—
Total interest-earning banking assets	18,380			16,841			35,221			16			(24		)	(8		)
Interest expense:
Interest-bearing liabilities:
Interest-bearing banking liabilities:
Bank deposits:
Certificates of deposit	76			61			137			2			—			2
Money market, savings and NOW accounts	460			4,329			4,789
Savings, money market, and NOW accounts										2			(24		)	(22		)
FHLB advances and other	779			749			1,528			(3		)	2			(1		)
Total interest-bearing liabilities	1,315			5,139			6,454
Total interest-bearing banking liabilities										1			(22		)	(21		)
Change in net interest income	$	17,065		$	11,702		$	28,767		$	15		$	(2	)	$	13

~~The following tables present certain credit quality trends for loans held by RJ Bank:~~

Three months ended December 31,
$ in thousands 2017 2016
Net loan (charge-offs)/recoveries:
C&I loans $ (603 ) $ (3,389 )
CRE loans —
5,013
Residential mortgage loans 509
(22 )
Total $ (94 ) $ 1,602

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

~~Management's~~Management’s Discussion and Analysis

$ in thousands December 31,
2017 September 30,
2017
Nonperforming assets:

Nonperforming loans:

C&I loans $ 4,843
$ 5,221
Residential mortgage loans:
Residential first mortgage 32,364
33,718
Home equity loans/lines 126
31
Total nonperforming loans 37,333
38,970
Other real estate owned:

Residential first mortgage 4,299
4,729
Total other real estate owned 4,299
4,729
Total nonperforming assets $ 41,632
$ 43,699
Total nonperforming assets as a % of RJ Bank total assets 0.19 % 0.21 %
Total loans:
Loans held for sale, net $ 189,862
$ 70,316
Loans held for investment:
C&I loans 7,490,219
7,385,910
CRE construction loans 164,847
112,681
CRE loans 3,136,101
3,106,290
Tax-exempt loans 1,136,468
1,017,791
Residential mortgage loans 3,270,780
3,148,730
SBL 2,530,521
2,386,697
Net unearned income and deferred expenses (30,231 ) (31,178 )
Total loans held for investment 17,698,705
17,126,921
Total loans $ 17,888,567
$ 17,197,237

Total loans in the above table are net of unearned income and deferred expenses. Total loans held for investment included $1.77 billion and $1.61 billion of loans to borrowers domiciled in Canada at December 31, 2017 and September 30, 2017, respectively. At December 31, 2017 and September 30, 2017, there were $1.09 billion and $1.00 billion, respectively, in Canadian dollar-denominated loans held for investment.

~~The following table presents RJ Bank’s allowance for loan losses by loan category:~~

December 31, 2017 September 30, 2017
$ in thousands Allowance Loan category as a % of total loans receivable Allowance Loan category as a % of total loans receivable
Loans held for sale $ —
1 % $ —
—
C&I loans 121,569
42 % 119,901
43 %
CRE construction loans 2,107
1 % 1,421
1 %
CRE loans 40,616
18 % 41,749
18 %
Tax-exempt loans 6,918
6 % 6,381
6 %
Residential mortgage loans 15,501
18 % 16,691
18 %
SBL 4,558
14 % 4,299
14 %
Total $ 191,269
100 % $ 190,442
100 %

~~Three months ended December 31, 2017 compared with the three months ended December 31, 2016~~

~~Net revenues of $165 million increased $27 million, or 20%, primarily reflecting an increase in net interest income. Pre-tax income of $114 million increased $10 million, or 10%.~~

Net interest income increased $29 million, or 21%, due to a $3.51 billion increase in average interest-earning banking assets as well as an increase in net interest margin. The increase in average interest-earning banking assets was driven by a $1.80 billion increase in average loans, a $1.30 billion increase in our average available-for-sale securities portfolio and a $449 million increase in average cash. The increase in average loans was comprised of increases in average residential mortgage loans, corporate loans, tax-exempt loans,

~~RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES~~

~~Management's Discussion and Analysis~~

and SBL. The net interest margin increased to 3.08% from 3.06% due to an increase in asset yields partially offset by an increase in the total cost of funds. The total assets yield increase resulted from an increase in the loan portfolio yield and an increase in the yield on cash, both due to an increase in short-term interest rates. The total cost of funds increased due to an increase in deposit costs. Corresponding to the increase in average interest-earning banking assets, average interest-bearing banking liabilities increased $3.39 billion to $19.38 billion.

The loan loss provision increased by $2 million primarily due to the prior year reflecting a net benefit, a result of the resolution of certain corporate criticized loans. Additionally, the current period loan loss provision increased due to loan growth, partially offset by lower reserve rates on pass-rated loans as a result of improved credit characteristics.

Non-interest expenses (excluding provision for loan losses) increased $15 million, or 43%, primarily reflecting a $10 million increase in affiliate deposit account servicing fees due to an increase in client account balances.

Results of Operations – Other

This segment includes our private equity ~~activities as well as~~investments, interest income on certain corporate cash balances, and certain corporate overhead costs of RJF that are not allocated to other segments, including the interest ~~cost~~costs on our public ~~debt, and the acquisition and integration costs associated with certain acquisitions.~~debt. For an overview of our Other segment operations, refer to the information presented in “Item 1 - Business” of our ~~2017~~2019 Form 10-K.

Operating results

Three months ended December 31,
$ in thousands 2017 2016 % change
Revenues:
Interest income $ 8,289
$ 4,688
77 %
Investment advisory fees 397
484
(18 )%
Other 7,697
10,287
(25 )%
Total revenues 16,383
15,459
6 %
Interest expense (19,303 ) (25,102 ) (23 )%
Net revenues (2,920 ) (9,643 ) 70 %

Non-interest expenses:

Compensation and other 13,055
10,109
29 %
Acquisition-related expenses 3,927
12,666
(69 )%
Total non-interest expenses 16,982
22,775
(25 )%
Loss before taxes and including noncontrolling interests (19,902 ) (32,418 ) 39 %
Noncontrolling interests 279
2,035
86 %
Pre-tax loss excluding noncontrolling interests $ (20,181 ) $ (34,453 ) 41 %



	Three months ended December 31,
$ in millions	2019			2018			% change
Revenues:
Interest income	$	12		$	16		(25	)%
Gains/(losses) on private equity investments	(2		)	4			NM
All other	2			1			100	%
Total revenues	12			21			(43	)%
Interest expense	(20		)	(19		)	5	%
Net revenues	(8		)	2			NM
Total non-interest expenses	23			20			15	%
Pre-tax loss	$	(31	)	$	(18	)	(72	)%

Three months ended December 31, ~~2017~~2019 compared with the three months ended December 31, ~~2016~~2018

The pre-tax loss of $31 million was $13 million larger than the loss generated ~~by this segment of $20 million decreased by $14 million, or 41%.~~in the prior year quarter.

Net revenues decreased $10 million from income of $2 million in ~~this segment increased $7~~the prior year quarter to a loss of $8 million, ~~or 70%,~~ due to ~~an increase~~a modest valuation loss on private equity investments compared with gains in ~~our net interest income of $9 million resulting from both~~the prior year quarter, and a decrease in interest ~~expense and to a lesser extent, an increase in interest income. The decrease in interest expense was~~earned on corporate cash balances due to a decline in ~~the average outstanding balance and average yield of our senior notes. Interest income~~interest rates.

Non-interest expenses increased ~~as a result of the increase in interest rates and higher corporate cash balances. Other revenues decreased~~ $3 million, ~~due to lower net gains (both realized and unrealized) arising from our private equity portfolio.~~or 15%, primarily driven by higher compensation-related expenses.

The acquisition-related expenses for the three months ended December 31, 2017 related to incremental expenses incurred in connection with our acquisition of the Scout Group which closed in November 2017. Prior year acquisition-related expenses primarily related to our acquisitions of Alex. Brown and 3Macs late in our 2016 fiscal year. See Note 3 of the Notes to the Condensed Consolidated Financial Statements in this Form 10-Q for further information.

~~RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES~~

~~Management's Discussion and Analysis~~

Certain statistical disclosures by bank holding companies

We are required to provide certain statistical disclosures ~~required for~~as a bank holding ~~companies pursuant to~~company under the SEC’s Industry Guide 3. The following table provides certain of those disclosures.


	For the three months ended December 31,		Three months ended December 31,
	2017	2016	2019	2018
Return on average assets	1.3%	1.9%
Return on average equity	8.4%	11.7%
Return on assets			2.7%	2.6%
Annualized return on equity			16.0%	15.9%
Average equity to average assets	15.9%	15.8%	17.0%	16.5%
Dividend payout ratio	31.3%	22.0%	19.6%	20.1%

Return on ~~average~~ assets is computed by dividing annualized net income ~~attributable to RJF~~ for the period indicated by average assets for each respective period. Average assets is computed by adding total assets as of the date indicated to the ~~beginning of the year~~prior quarter-end total and dividing by two.

~~Return~~Annualized return on ~~average~~ equity is computed by dividing annualized net income ~~attributable to RJF~~ for the period indicated by average equity ~~attributable to RJF~~ for each respective period. Average equity is computed by adding ~~the~~ total equity attributable to RJF as of the date indicated to the ~~beginning of the year~~prior quarter-end total and dividing by two.

Average equity to average assets is computed by dividing average equity by average assets as calculated in accordance with the ~~above~~previous explanations.

Dividend payout ratio is computed by dividing dividends declared per common share during the period by ~~diluted~~ earnings per diluted common ~~share.~~share for the period.

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

Management’s Discussion and Analysis

Refer to the “Results of Operations - RJ ~~Bank section~~Bank” and “Risk management - Credit risk” sections of ~~this~~ Management’s Discussion and Analysis of Financial Condition and Results of Operations and to the Notes to Condensed Consolidated Financial Statements inof this Form 10-Q for the other required disclosures.

Liquidity and capital resources

Liquidity is essential to our business. The primary goal of our liquidity management activities is to ensure adequate funding to conduct our business over a range of economic and market environments.

Senior management establishes our liquidity and capital management framework. This framework includes senior management’s review of short- and long-term cash flow forecasts, review of monthly capital expenditures, monitoring of the availability of alternative sources of financing, and daily monitoring of liquidity in our significant subsidiaries. Our decisions on the allocation of capital to our business units consider, among other factors, projected profitability and cash flow, risk, and impact on future liquidity needs. Our treasury department assists in evaluating, monitoring and controlling the impact that our business activities have on our financial condition, liquidity and capital structure, and maintains our relationships with various lenders. The ~~objectives~~objective of ~~these policies are~~this framework is to support the successful execution of our business strategies while ensuring ongoing and sufficient liquidity.

Liquidity is provided primarily through our business operations and financing activities. Financing activities could include bank borrowings, repurchase agreement transactions or additional capital raising activities under our “universal” shelf registration statement.

Cash ~~provided by operating activities~~and cash equivalents increased $152 million to $4.11 billion during the three months ended December 31, ~~2017 was $326 million. In addition to operating cash flows related to net income, other increases in cash from operations included:~~

~~An increase of $467 million in brokerage client payables and other accounts payable, mostly~~2019, due to ~~increased client cash balances in brokerage accounts.~~

~~A decrease in our brokerage client receivables and other receivables of $124 million, including a decrease in margin loans.~~

~~A decrease of $104 million in securities purchased under agreements to resell, net of securities sold under agreements to repurchase.~~

~~Offsetting these, cash used in operations resulted from:~~

~~A decrease of $266 million in accrued compensation, commissions and benefits, primarily resulting from the annual payment of certain incentive awards.~~

~~A decrease in securities loaned, net of securities borrowed of $140 million.~~

~~RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES~~

~~Management's Discussion and Analysis~~

~~Purchases and originations of loans held for sale, net of proceeds from sales of securitizations and loans held for sale used $108 million.~~

~~An increase of $97 million in assets segregated pursuant to regulations and other segregated assets, primarily resulting from the increases in client cash balances.~~

~~Net trading instruments increased $47 million.~~

~~Investing activities resulted in the use of $1.07 billion of cash during the three months ended December 31, 2017.~~

~~The primary investing activities were:~~

~~A net increase in RJ Bank loans used $624 million.~~

~~Purchases of available-for-sale securities held at RJ Bank, net of proceeds from maturations, repayments and redemptions within the portfolio, used $225 million.~~

~~We used~~ ~~$159 million, net of cash acquired, for our acquisition of the Scout Group.~~

~~We used $36 million to fund property investments, primarily software and computer equipment.~~

~~Financing activities provided $979~~$654 million of cash provided by financing activities, which was primarily driven by an increase in bank deposits during the ~~three months ended December 31, 2017.~~

~~Increases in cash from financing~~current period. Investing activities ~~resulted from:~~

Anused $502 million primarily due to an increase in ~~RJ Bank deposit balances~~bank loans and the growth of ~~$993 million.~~our available-for-sale securities portfolio during the current period.

~~Net proceeds of $300 million from borrowings on the RJF Credit Facility.~~

~~Offsetting these, decreases in cash from financing activities resulted from:~~

~~Net repayments of~~ ~~$280 million~~ ~~of other lines of credit.~~

~~Payment of dividends to our shareholders of $32 million.~~

We believe our existing assets, most of which are liquid in nature, together with funds generated from operations and available from committed and uncommitted financing facilities provide adequate funds for continuing operations at current levels of activity.

Sources of liquidity

Approximately ~~$1.44~~$1.43 billion of our total December 31, ~~2017~~2019 cash and cash equivalents ~~(a portion~~included cash on hand at the parent, as well as parent cash loaned to RJ&A. The following table presents our holdings of ~~which resides in depository accounts at RJ Bank) was available to us without restrictions. The~~ cash and cash ~~equivalents held were as follows:~~ equivalents.


$ in thousands	December 31, 2017
$ in millions			December 31, 2019
RJF	$	330,258	$	444
RJ&A	1,506,746		1,456
RJ Bank	1,276,703		1,327
RJ Ltd.	440,736		477
RJFS	125,269		129
Carillon Tower Advisers	65,033		82
Other subsidiaries	152,784		194
Total cash and cash equivalents	$	3,897,529	$	4,109

RJF maintained depository accounts at RJ Bank with a balance of ~~$193~~$164 million as of December 31, ~~2017.~~2019. The portion of this total that iswas available on demand without restrictions, which amounted to ~~$152~~$108 million atas of December 31, ~~2017,~~2019, is reflected in the RJF total ~~and~~(and is excluded from the RJ Bank ~~total~~cash balance in the ~~table above.~~preceding table).

RJF had loaned ~~$1.14 billion~~$999 million to RJ&A as of December 31, ~~2017~~2019 (such amount is included in the RJ&A cash balance ~~presented~~ in the ~~table above)~~preceding table), which RJ&A has invested on behalf of RJF in cash and cash equivalents or otherwise deployed in its normal business activities.

In addition to the cash balances described, ~~above,~~ we have various other ~~various~~ potential sources of cash available to the parent from subsidiaries, ~~which are~~as described in the following section.

Liquidity available from subsidiaries

Liquidity is principally available to RJF, the parent company, from RJ&A and RJ Bank.

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

~~Management's~~Management’s Discussion and Analysis

Certain of our broker-dealer subsidiaries are subject to the requirements of the Uniform Net Capital Rule (Rule 15c3-1) under the Securities and Exchange Act of 1934. As a member firm of FINRA, RJ&A is ~~required~~subject to ~~maintain~~FINRA’s capital requirements, which are substantially the same as Rule 15c3-1. Rule 15c3-1 provides for an “alternative net capital requirement,” which RJ&A has elected. Regulations require that minimum net capital, as defined, be equal to the greater of $1$1.5 million or 2% of aggregate debit ~~balances~~items arising from client transactions. In addition, covenants in RJ&A’s committed ~~secured~~ financing facilities require its net capital to be a minimum of 10% of aggregate debit items. At December 31, ~~2017,~~2019, RJ&A significantly exceeded ~~both~~ the minimum regulatory requirements, ~~and~~ the covenants in its financing arrangements pertaining to net ~~capital. At that date, RJ&A had excess~~capital, as well as its internally-targeted net capital tolerances. FINRA may impose certain restrictions, such as restricting withdrawals of ~~$640 million, of which $284 million was available for dividend while still maintaining the internally targeted~~equity capital, if a member firm were to fall below a certain threshold or fail to meet minimum net capital ~~ratio~~requirements.

RJ&A, as a nonbank custodian of ~~15% of aggregate debit items. There are~~Individual Retirement Accounts (“IRAs”), must also ~~limitations on~~satisfy certain Internal Revenue Service (“IRS”) regulations in order to accept new IRA and plan accounts and retain the accounts for which it serves as nonbank custodian. To maintain adequate net worth under these regulations, RJ&A may have to limit dividends to RJF. We evaluate regulatory requirements, loan covenants and certain internal tolerances when determining the amount of ~~dividends that may be declared by a broker-dealer without Financial Industry Regulatory Authority approval.~~liquidity available to RJF from RJ&A.

RJ Bank may pay dividends to ~~the parent company~~RJF without ~~the~~ prior approval of its regulator as long as the dividend does not exceed the sum of RJ Bank’s current calendar year and the previous two calendar years’ retained net income, and RJ Bank maintains its targeted regulatory capital ratios. At December 31, ~~2017,~~2019, RJ Bank had ~~$139~~$351 million of capital in excess of the amount it would need at ~~December 31, 2017~~that date to maintain its targeted ~~total~~regulatory capital ~~to risk-weighted assets ratio of 12.5%,~~ratios, and could pay a dividend of such amount without requiring prior approval of its regulator.

Although we have liquidity available to us from our other subsidiaries, the available amounts are not as significant as ~~the amounts~~those previously described ~~above~~ and, in certain instances, may be subject to regulatory requirements.

Borrowings and financing arrangements

Committed financing arrangements

Our ability to borrow is dependent upon compliance with the conditions in ~~the~~our various loan agreements and, in the case of secured borrowings, collateral eligibility requirements. Our committed financing arrangements are in the form of either tri-party repurchase agreements or, in the case of the ~~RJF~~ Credit Facility, an unsecured line of credit. The required market value of the collateral associated with the committed secured facilities ranges from 102% to 125% of the amount financed.

The following table presents our committed financing arrangements with third-party lenders, which we generally utilize to finance a portion of our fixed income trading instruments held, and the outstanding balances related ~~thereto:~~

thereto.


	As of December 31, 2017							December 31, 2019
$ in thousands	RJ&A		RJF		Total		Total number of arrangements
$ in millions								RJ&A		RJF		Total		Total number of arrangements
Financing arrangement:
Committed secured	$	200,000	$	—	$	200,000	2	$	200	$	—	$	200	2
Committed unsecured	—		300,000		300,000		1
Committed unsecured ⁽¹⁾								200		300		500		1
Total committed financing arrangements	$	200,000	$	300,000	$	500,000	3	$	400	$	300	$	700	3

Outstanding borrowing amount:
Committed secured	$	70,000	$	—	$	70,000		$	—	$	—	$	—
Committed unsecured	—		300,000		300,000			—		—		—
Total outstanding borrowing amount	$	70,000	$	300,000	$	370,000		$	—	$	—	$	—


(1)	The Credit Facility provides for maximum borrowings of up to $500 million, with a sublimit of $300 million for RJF. For additional details on our committed unsecured financing arrangement, see our discussion of the Credit Facility in Note 11 of the Notes to Condensed Consolidated Financial Statements of this Form 10-Q.

Uncommitted financing arrangements

Our uncommitted financing arrangements are in the form of secured lines of credit, secured bilateral or tri-party repurchase agreements, or unsecured lines of credit. Our arrangements with third-party lenders are generally utilized to finance a portion of our fixed income securities or for cash management purposes. Our uncommitted secured financing arrangements generally require us to post collateral in excess of the amount borrowed. As of December 31, ~~2017,~~2019, we had ~~three~~ outstanding borrowings under one uncommitted secured and

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

Management’s Discussion and Analysis

three uncommitted unsecured borrowing arrangements with lenders out of a total of 1511 uncommitted financing arrangements ~~(nine~~(six uncommitted secured and ~~six~~five uncommitted unsecured). However, lenders are under no contractual obligation to lend to us under uncommitted credit facilities.

~~RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES~~

~~Management's Discussion and Analysis~~

The following table presents our borrowings on uncommitted financing arrangements, all of which were in RJ&A.


$ in thousands	As of December 31, 2017
$ in millions			December 31, 2019
Outstanding borrowing amount:
Uncommitted secured	$	339,036	$	200
Uncommitted unsecured	150,000		6
Total outstanding borrowing amount	$	489,036	$	206

Other financings

RJ Bank had $875 million in FHLB borrowings outstanding at December 31, ~~2017,~~2019, comprised of floating-rate advances totaling $850 million and a $25 million fixed-rate advance, all of which ~~are~~were secured by a blanket lien on RJ Bank’s residential mortgage loan portfolio (see Note 1211 of the Notes to Condensed Consolidated Financial Statements inof this Form 10-Q for additional information regarding these borrowings). RJ Bank had an additional ~~$1.49~~$2.62 billion in immediate credit available from the FHLB as of December 31, ~~2017~~2019 and, with the pledge of additional eligible collateral to the FHLB, total available credit of 30% of total assets.

RJ Bank is eligible to participate in the ~~Fed’s~~FRB’s discount-window program; however, we do not view borrowings from the ~~Fed~~FRB as a primary source of funding. The credit available in this program is subject to periodic review, may be terminated or reduced at the discretion of the ~~Fed,~~FRB, and ~~would be~~is secured by pledged C&I loans.

We act as an intermediary between broker-dealers and other financial institutions whereby we borrow securities from one broker-dealer and then lend them to another. Where permitted, we have also loaned, to broker-dealers and other financial institutions, securities owned by clients or the firm. We account for each of these types of transactions as collateralized agreements and financings, with the outstanding balances related to the securities loaned included in “Securities loaned” on our Condensed Consolidated Statements of Financial Condition of this Form 10-Q, in the amount of $239 million as of December 31, 2019. See Note 6 of the Notes to Condensed Consolidated Financial Statements of this Form 10-Q for more information on our securities borrowed and securities loaned.

From time to time we enter into repurchase agreements and reverse repurchase agreements. We account for each of these types of transactions as collateralized agreements and financings, with the outstanding balances onof the repurchase agreements included in “Securities sold under agreements to repurchase” on our Condensed Consolidated Statements of Financial Condition ~~included in~~of this Form 10-Q, in the amount of ~~$229~~$200 million as of December 31, ~~2017 (which~~2019. These balances are reflected in the preceding table of uncommitted financing ~~arrangements above).~~arrangements. Such financings are generally collateralized by non-customer, RJ~~&A owned~~&A-owned securities or by securities that we have received as collateral under reverse repurchase agreements.

The average daily balance outstanding during the five most recent ~~successive~~ quarters, the maximum month-end balance outstanding during the quarter and the ~~period end~~period-end balances for repurchase agreements and reverse repurchase agreements ~~were as follows:~~ is detailed in the following table.

Repurchase transactions Reverse repurchase transactions
For the quarter ended: ($ in thousands)

Average daily
balance
outstanding

Maximum month-end
balance outstanding
during the quarter

End of period
balance
outstanding

Average daily
balance
outstanding

Maximum month-end
balance outstanding
during the quarter

End of period
balance
outstanding
December 31, 2017 $ 218,690
$ 229,036
$ 229,036
$ 443,391
$ 506,711
$ 307,742
September 30, 2017 241,365
247,048
220,942
463,618
503,462
404,462
June 30, 2017 231,378
226,972
226,972
479,653
540,823
483,820
March 31, 2017 204,623
222,476
222,476
410,678
535,224
535,224
December 31, 2016 219,095
241,773
203,378
424,548
445,646
358,493



	Repurchase transactions						Reverse repurchase transactions
For the quarter ended: ($ in millions)	Average daily balance outstanding		Maximum month-end balance outstanding during the quarter		End of period balance outstanding		Average daily balance outstanding		Maximum month-end balance outstanding during the quarter		End of period balance outstanding
December 31, 2019	$	184	$	200	$	200	$	355	$	351	$	326
September 30, 2019	$	170	$	158	$	150	$	334	$	343	$	343
June 30, 2019	$	211	$	212	$	165	$	442	$	479	$	411
March 31, 2019	$	172	$	210	$	210	$	358	$	447	$	447
December 31, 2018	$	171	$	189	$	156	$	413	$	479	$	399

At December 31, ~~2017,~~2019, in addition to the financing arrangements previously described, ~~above,~~ we had ~~$28~~$18 million outstanding on a mortgage loan for our St. Petersburg, Florida home-office complex that is included in “Other borrowings” inon our Condensed Consolidated Statements of Financial Condition ~~included in~~of this Form 10-Q.

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

Management’s Discussion and Analysis

At December 31, ~~2017,~~2019, we had aggregate outstanding senior notes payable of $1.55 billion. Our senior notes payable, exclusive of any unaccreted premiums or discounts and debt issuance costs, iswas comprised of $250 million par 5.625% senior notes due 2024, $500 million par 3.625% senior notes due 2026, and $800 million par 4.95% senior notes due 2046. See Note 15 of our ~~2017~~2019 Form 10-K for additional information.

Our issuer and senior long-term debt ratings as of the most current report ~~are:~~are detailed in the following table.



Rating Agency	Rating	Outlook
Standard & Poor’s Ratings Services	BBB+	Stable
Moody’s Investors Services	Baa1	Stable

~~RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES~~

~~Management's Discussion and Analysis~~

Our current long-term debt ratings depend upon a number of factors, including industry dynamics, operating and economic environment, operating results, operating margins, earnings trends and volatility, balance sheet composition, liquidity and liquidity management, ~~our~~ capital structure, ~~our~~ overall risk management, business diversification and market share, and competitive position in the markets in which we operate. Deteriorations in any of these factors could impact our credit ratings. Any rating downgrades could increase our costs in the event we were to obtain additional financing.

Should our credit rating be downgraded prior to a public debt offering, it is probable that we would have to offer a higher rate of interest to bond holders. A downgrade to below investment grade may make a public debt offering difficult to execute on terms we would consider to be favorable. A downgrade below investment grade could result in the termination of certain derivative contracts and the counterparties to the derivative instruments could request immediate payment or demand immediate and ongoing overnight collateralization on our derivative instruments in liability positions (see Note 65 of the Notes to Condensed Consolidated Financial Statements inof this Form 10-Q for additional information). A credit downgrade could ~~create a reputational issue~~damage our reputation and ~~could also~~ result in certain counterparties limiting their business with us, result in negative comments by analysts, ~~and~~ potentially negatively impact investor and/or clients’ perception of us, and ~~resultantly impact~~cause a decline in our stock ~~price and/~~price. None of our borrowing arrangements contains a condition or event of default related to our ~~clients’ perception of us. A~~credit ratings. However, a credit downgrade would result in ~~RJF~~the firm incurring a higher ~~commitment~~facility fee on ~~any unused balance on one of its borrowing arrangements,~~ the ~~$300~~$500 million ~~RJF~~ Credit Facility, in addition to triggering a higher interest rate applicable to any borrowings outstanding on that line as of and subsequent to such downgrade. Conversely, an improvement in RJF’s current credit rating could have a favorable impact on the ~~commitment~~facility fee, as well as the interest rate applicable to any borrowings on such line. ~~None of our credit agreements contain a condition or event of default related to our credit ratings.~~

Other sources and uses of liquidity

We have company-owned life insurance ~~(“COLI”)~~ policies which are utilized to fund certain non-qualified deferred compensation plans and other employee benefit plans. Certain of our non-qualified deferred compensation plans and other employee benefit plans are ~~self-directed~~employee-directed while others are company-directed. ~~The COLI~~Certain policies ~~that~~which we could readily borrow against ~~have~~had a cash surrender value of ~~approximately $460~~$615 million as of December 31, ~~2017,~~2019, comprised of ~~$254~~$350 million related to employee-directed plans and ~~$206~~$265 million related to company-directed plans, and we were able to borrow up to 90%, or ~~$414~~$554 million, of the December 31, ~~2017~~2019 total without restriction. To effect any such borrowing, the underlying investments would be converted to money market investments, therefore requiring us to take market risk related to the employee-directed plans. There ~~are~~were no borrowings outstanding against any of these policies as of December 31, ~~2017.~~2019.

~~During January 2018, we repaid the $300 million outstanding borrowing on the RJF Credit Facility as of December 31, 2017.~~

On May ~~22, 2015,~~18, 2018, we filed a “universal” shelf registration statement with the SEC pursuant to ~~be in a position to access the~~which we can issue debt, equity and other capital ~~markets~~instruments if and when necessary or perceived by us to be opportune. Subject to certain conditions, this registration statement will be effective through May 18, 2021.

See the ~~“Contractual obligations”~~Contractual obligations section ~~below~~of this MD&A for information regarding our contractual obligations.

Statement of financial condition analysis

The assets on our ~~condensed consolidated statement~~Condensed Consolidated Statements of ~~financial condition consist~~Financial Condition consisted primarily of cash and cash equivalents (a large portion of which is segregated for the benefit of clients), receivables including bank loans, financial instruments held either for ~~either~~ trading purposes or as investments, and other assets. A significant portion of our assets were liquid in nature, providing us with flexibility in financing our business.

Total assets of ~~$36.08~~$40.15 billion at as of December 31, ~~2017~~2019 were ~~$1.20~~$1.32 billion, or 3%, greater than our total assets as of September 30, ~~2017. Our~~2019. The increase in assets was primarily due to a $567 million increase in cash and cash equivalents ~~balances increased $228 million; refer~~segregated pursuant to ~~the discussion of the components of this~~regulations, a $465 million increase in ~~the “Liquidity and Capital Resources” section within this Item 2. Net bank loans receivable increased $691 million~~other assets primarily due to the growth of RJ Bank’s securities-based, residential mortgage, tax-exempt and C&I loan portfolios during the period. Our available-for-sale securities portfolio increased $205 million, as RJ Bank increased their investments in such securities during the period in line with our growth plan for this portfolio. Goodwill and identifiable intangibleROU assets increased $158 million due to the Scout Group acquisition. Offsetting these increases was a net decrease in deferred income taxes of $114 million, primarily due to the remeasurement of U.S. deferred tax assets at a lower enacted corporate tax raterecorded as a result of the ~~Tax Act, which was enacted during~~adoption of new guidance related to the ~~quarter. Brokerage~~

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

Management’s Discussion and Analysis

accounting for leases, and a $405 million increase in bank loans. Offsetting these increases, brokerage client receivables, net and receivables from brokers, dealers and clearing organizations decreased ~~$101~~$144 million ~~primarily due to decreased margin lending at~~and $119 million respectively.

As of December 31, ~~2017.~~

~~As of~~ ~~December 31, 2017~~,2019, our total liabilities of ~~$30.28~~$33.25 billion were ~~$1.09~~$1.06 billion, or 4%3%, greater than our total liabilities as of September 30, ~~2017. Bank deposit~~2019. The increase in total liabilities ~~increased $993~~was comprised of a $694 million asincrease in bank deposits, primarily due to higher RJBDP balances held at RJ Bank ~~retained~~and certificates of deposit issuances during the period, a ~~higher portion of RJBDP balances~~$524 million increase in brokerage client payables, primarily due to ~~fund~~ a ~~portion of their increased securities portfolio and net loan growth. Brokerage client payable balances increased $409 million, reflecting~~

~~RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES~~

~~Management's Discussion and Analysis~~

anseasonal increase in client cash ~~balances~~held in our ~~client interest program.~~CIP as of December 31, 2019, and a net increase of $401 million in other payables primarily due to operating lease liabilities recorded as a result of the adoption of new guidance related to the accounting for leases. Offsetting these increases was a decrease in accrued compensation, commissions and benefits ~~decreased $266~~of $339 million, ~~as a result~~primarily due to the payment of ~~annual payments of certain incentive compensation paid~~accrued bonuses during the ~~quarter.~~three months ended December 31, 2019.

See Notes 2 and 9 of the Notes to Condensed Consolidated Financial Statements of this Form 10-Q for further information on our adoption of the new leasing guidance.

Contractual obligations

~~The Tax Act, which was enacted during~~There were no significant changes to the quarter ended December 31, 2017, includes a one-time transition tax on deemed repatriated earnings of foreign subsidiaries, which is permitted to be paid in annual installments over a period of 8 years based on the schedule outlined in the Tax Act. We currently estimate this transition tax to be $11 million (which excludes the related state tax liability), which is included in our provision for income taxes in our Condensed Consolidated Statements of Income and Comprehensive Income for the quarter ended December 31, 2017.

~~Other than the item described above, as of December 31, 2017, there have been no material changes in our~~ contractual obligations presented in our ~~2017~~2019 Form 10-K, other than in the ordinary course of ~~business.~~business, as of December 31, 2019. See Note 1413 of the Notes to Condensed Consolidated Financial Statements inof this Form 10-Q for additional information regarding ~~certain~~ commitments as of December 31, ~~2017~~2019.

Regulatory

Refer to the discussion of the regulatory environment in which we operate and the impact on our operations of certain rules and regulations ~~including the DOL Rule and the Dodd-Frank Act,~~ in Item 1 “Business - Regulation” and Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Regulatory” inof our ~~2017~~2019 Form 10-K.

RJF and many of its subsidiaries are each subject to various regulatory capital requirements. As of December 31, ~~2017,~~2019, all of our active regulated domestic and international subsidiaries had net capital in excess of minimum requirements. In addition, RJF and RJ Bank were categorized as ~~“well capitalized”~~“well-capitalized” as of December 31, ~~2017.~~

2019. The maintenance of certain risk-based and other regulatory capital levels could impact various capital allocation decisions impacting one or more of our businesses. However, due to the ~~strong~~current capital position of RJF and its regulated subsidiaries, we do not anticipate these capital requirements will have a negative impact on our future business activities.

See Note 18 of the Notes to Condensed Consolidated Financial Statements inof this Form 10-Q for further information on regulatory 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. Management has established detailed policies and control procedures intended to ensure the appropriateness of such estimates and assumptions and their consistent application from period to period. For a description of our significant accounting policies, see Note 2 of the Notes to ~~the~~ Consolidated Financial Statements inof our ~~2017~~2019 Form 10-K.

~~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 consolidated financial statements. Therefore, understanding these critical accounting estimates is important in understanding ~~the~~our reported results of ~~our~~ operations and ~~our~~ financial position. We believe that of our accounting estimates and assumptions, those described in the following sections involve a high degree of judgment and complexity.

Valuation of financial instruments

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. See Note 2 of our ~~2017~~2019 Form 10-K for a discussion of our fair value accounting policies regarding financial instruments owned and financial instruments sold but not yet purchased.

~~Investments in private equity measured at net asset value per share~~

~~Our investments in private equity measured at NAV amounted to $100 million at December 31, 2017.~~

~~RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES~~

~~Management's Discussion and Analysis~~

~~Level~~ See Note 3 ~~assets and liabilities~~

As of December 31, 2017, 10% of our total assets and 2% of our total liabilities were financial instruments measured at fair value on a recurring basis. Financial instruments measured at fair value on a recurring basis categorized as Level 3 amounted to $199 million as of ~~December 31, 2017~~ and represented 5% of our assets measured at fair value. Of the Level 3 assets as of December 31, 2017, our ARS positions comprised $107 million, or 54%, and our private equity investments not measured at NAV comprised $89 million, or 45%, of the total. Level 3 assets represented 3% of total equity as of ~~December 31, 2017~~.

~~Financial instruments which are liabilities categorized as Level 3 were insignificant as of~~ ~~December 31, 2017~~.

~~See Notes 4, 5 and 6~~ of the Notes to ~~the~~ Condensed Consolidated Financial Statements inof this Form 10-Q for additional information on our financial instruments at fair value.

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

Management’s Discussion and Analysis

Loss provisions

Refer to Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Critical accounting estimates - Loss provisions” inof our ~~2017~~2019 Form 10-K for more information.

Loss provisions ~~arising from~~for 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 of our ~~2017~~2019 Form 10-K. In addition, refer to Note 1413 of the Notes to Condensed Consolidated Financial Statements inof this Form 10-Q for information regarding legal and regulatory matter contingencies as of December 31, ~~2017.~~2019.

~~Loss provisions arising from operations of our Broker-Dealers~~

The recorded amounts of loss provisions associated with brokerage client receivables and loans to financial advisors and certain key revenue producers are subject to significant management judgment. For a description of the significant estimates and judgments associated with establishing these broker-dealer related loss provisions and the related allowances for doubtful accounts, see the “Brokerage client receivables, net” and “Loans to financial advisors, net” sections of Note 2 of our 2017 Form 10-K and Note 2 in this Form 10-Q for information regarding the allowance for doubtful accounts associated with loans to financial advisors as of December 31, 2017.

Loan loss provisions arising from operations of RJ Bank

~~RJ Bank provides~~We provide an allowance for loan losses which reflects our continuing evaluation of the probable losses inherent in ~~the~~RJ Bank’s loan portfolio. See the discussion regarding ~~RJ Bank’s~~our methodology in estimating ~~its~~the allowance for loan losses in Note 2 of our ~~2017~~2019 Form 10-K. See Note 7 of the Notes to Condensed Consolidated Financial Statements of this Form 10-Q for additional information on our bank loans.

At December 31, ~~2017~~2019, the amortized cost of all RJ Bank loans was ~~$17.9~~$21.51 billion and ~~an allowance for loan losses of $191 million was recorded against that balance. The total~~the allowance for loan losses was ~~equal to 1.08%~~$216 million, which was 1.01% of the ~~amortized cost of the~~held for investment loan portfolio.

~~RJ Bank’s~~Our process of evaluating ~~its~~ probable loan losses includes a complex analysis of several quantitative and qualitative factors, requiring ~~a substantial amount of~~management judgment. As a result, the allowance for loan losses could be insufficient to cover actual losses. In such an event, any losses in excess of our allowance would result in a decrease in our net income, as well as a decrease in the level of regulatory ~~capital at RJ Bank.~~capital.

Recent accounting developments

For information regarding our recent accounting developments, see Note 2 of the Notes to ~~the~~ Condensed Consolidated Financial Statements inof this Form 10-Q.

~~Off-Balance~~Off-balance sheet arrangements

For information regarding our off-balance sheet arrangements, see Note 222 of the Notes to Consolidated Financial Statements inof our ~~2017~~2019 Form 10-K and Note 1413 of the Notes to Condensed Consolidated Financial Statements inof this Form 10-Q.

~~RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES~~

~~Management's Discussion and Analysis~~

Effects of inflation

Our assets are primarily liquid in nature and are not significantly affected by inflation. However, the rate of inflation affects our expenses, including employee compensation, communications and information processing, and occupancy costs, which may not be readily recoverable through charges for services we provide to our clients. In addition, to the extent inflation results in rising interest rates and has adverse effects upon the securities markets, it may adversely affect our financial position and results of operations.

Risk management

Risks are an inherent part of our business and activities. Management of these risks is critical to our fiscal soundness and profitability. Our risk management processes are multi-faceted and require communication, judgment and knowledge of financial products and markets. We have a formal Enterprise Risk Management (“ERM”) program to assess and review aggregate risks across the firm. Our management takes an active role in the ERM process, which requires specific administrative and business functions to participate in the identification, assessment, monitoring and control of various risks. ~~The results of this process are extensively documented and reported to executive management and the RJF Audit and Risk Committee of the Board of Directors.~~

The principal risks related to our business activities are market, credit, liquidity, operational, model, and ~~regulatory~~compliance.

Governance

Our Board of Directors oversees the firm’s management and ~~legal.~~mitigation of risk, setting a culture that encourages ethical conduct and risk management throughout the firm. Senior management communicates and reinforces this culture through three lines of risk management and a number of senior-level management committees. Our first line of risk management, which includes all of our

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

Management’s Discussion and Analysis

businesses, owns its risks and is responsible for helping to identify, escalate, and mitigate risks arising from its day-to-day activities. The second line of risk management, which includes the Compliance, Legal, and Risk Management departments, supports and provides guidance, advice, and oversight to client-facing businesses and other first-line risk management functions in identifying and mitigating risk. The second line of risk management also tests and monitors the effectiveness of controls, escalates risks when appropriate, and reports on these risks. The third line of risk management, Internal Audit, independently reviews activities conducted by the previous lines of risk management to assess their management and mitigation of risk, providing additional assurance to the Board of Directors and senior management, with a view toward enhancing our oversight, management, and mitigation of risk.

Market risk

Market risk is our risk of loss resulting from the impact of changes in market prices on our trading inventory, ~~derivative~~derivatives 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 Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Risk ~~Management~~management - Market ~~Risk” in~~risk” of our ~~2017~~2019 Form 10-K for a discussion of our market risk, including how we manage such risk. See Notes 3, 4 5 and 65 of the Notes to ~~the~~ Condensed Consolidated Financial Statements inof this Form 10-Q for fair value and other information regarding our trading inventories, available-for-sale securities and derivative instruments.

Interest rate risk

Trading activities

We are exposed to interest rate risk as a result of our trading ~~inventories~~inventory (primarily comprised of fixed income instruments) in our Capital Markets segment. We actively manage the interest rate risk arising from our fixed income trading securities through the use of hedging strategies that involve U.S. Treasury securities, futures contracts, liquid spread products and derivatives.

We monitor ~~daily,~~ the Value-at-Risk (“VaR”) for all of our trading ~~portfolios.~~portfolios on a daily basis. 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. 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~~the Office of the Comptroller of the Currency (“OCC”) and FDIC, requires us to calculate VaR ~~numbers~~ for all of our trading portfolios, including fixed income, equity, foreign exchange and ~~derivative instruments.~~derivatives.

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. 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~~back-testing procedures of our VaR model, whereby we compare each day’s projected VaR to its regulatory-defined daily trading losses, which exclude fees, commissions, reserves, net interest income and intraday trading. Based on these daily “ex ante” versus “ex post” comparisons, we determine whether 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 months ended December 31, ~~2017,~~2019, our regulatory-defined daily loss in our trading portfolios did not exceed our predicted VaR.

~~RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES~~

~~Management's Discussion and Analysis~~

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



	Three months ended December 31, 2019				Period-end VaR					Three months ended December 31,
$ in millions	High		Low		December 31, 2019		September 30, 2019		$ in millions	2019		2018
Daily VaR	$	2	$	1	$	1	$	1	Daily average VaR	$	1	$	1

Three months ended December 31, 2017 Period end VaR Daily average VaR
$ in thousands High Low December 31,
2017 September 30,
2017 December 31,
2017 September 30,
2017 December 31,
2016
Daily VaR $ 2,256
$ 848
$ 848
$ 1,427
$ 1,601
$ 1,827
$ 1,670

The modeling of the risk characteristics of trading positions involves a number of assumptions and approximations. While management believes that ~~its~~these 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.

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

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 https://www.raymondjames.com/investor-relations/~~financial-report~~ ~~under “Market Risk Rule Disclosure.~~financial-information/filings-and-reports within “Other Reports and Information.”

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, review of issuer ratings and 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, we enter into forward commitments to purchase GNMA or FNMA MBS which are issued on behalf of various state and local housing finance agencies. These activities result in exposure to interest rate risk. In order to hedge the interest rate risk to which we would otherwise be exposed between the date of the commitment and the date of sale of the MBS, we enter into TBA security contracts with investors for generic MBS at specific rates and prices to be delivered on settlement dates in the future. See Note 14 of the Notes to Condensed Consolidated Financial Statements in this Form 10-Q for additional information regarding these activities.

Banking operations

RJ Bank maintains an earning asset portfolio that is comprised of cash, C&I loans, tax-exempt loans, ~~SBL, and~~ commercial and residential real estate loans, SBL and other loans, as well as MBS and CMOs ~~(both of which are held~~(held in the available-for-sale securities portfolio), Small Business Administration loan securitizations and a trading portfolio of corporate loans. ~~Those~~These earning assets are primarily funded by client deposits. Based on its current earning asset portfolio, RJ Bank is subject to interest rate risk. ~~During the current period, RJ Bank has focused its interest rate risk analysis on the risk of market interest rates rising given the Federal Reserve Bank’s increases in short-term interest rates.~~ 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 are described in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Risk ~~Management~~management - Market ~~Risk”~~risk” of our ~~2017~~2019 Form 10-K.

We utilize a hedging strategy using interest rate swaps as a result of RJ Bank’s asset and liability management process. For further information regarding this ~~risk management objective, see the discussion of this~~ hedging strategy, insee Note 2 of the Notes to Consolidated Financial Statements of our ~~2017~~2019 Form ~~10-K and in Note 6 of the Notes to Condensed Consolidated Financial Statements in this Form 10-Q.~~10-K.

~~RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES~~

~~Management's Discussion and Analysis~~

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:~~model.


Instantaneous changes in rate	Net interest income ($ in thousands)	Projected change in net interest income	Net interest income ($ in millions)	Projected change in net interest income
+200	$734,185	(0.53)%	$814	(2.75)%
+100	$765,382	3.69%	$849	1.43%
0	$738,110	—	$837	—
-100	$599,527	(18.78)%	$686	(18.04)%

Refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Net ~~Interest Analysis” within~~interest analysis” of this Form 10-Q for a discussion of the impact ~~that an increase~~changes in short-term interest rates could have on the firm’s operations.

The following table shows the contractual maturities of RJ Bank’s loan portfolio at December 31, ~~2017~~2019, including contractual principal repayments. This table does not ~~however,~~ include any estimates of ~~prepayments. These~~ prepayments, which 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. Loan amounts in the table ~~below~~ exclude unearned income and deferred expenses.


	Due in								Due in
$ in thousands	One year or less		> One year – five years		> 5 years		Total
$ in millions									One year or less		> One year – five years		> 5 years		Total
Loans held for investment:
C&I loans	$	152,551	$	3,826,227	$	3,511,441	$	7,490,219	$	185	$	3,837	$	4,021	$	8,043
CRE construction loans	11,612		153,235		—		164,847		44		83		40		167
CRE loans	509,914		2,014,252		611,935		3,136,101		547		2,499		727		3,773
Tax-exempt loans	—		22,630		1,113,838		1,136,468		—		77		1,143		1,220
Residential mortgage loans	1,016		2,739		3,267,025		3,270,780		—		5		4,700		4,705
SBL	2,527,003		3,518		—		2,530,521
SBL and other									3,360		51		—		3,411
Total loans held for investment	3,202,096		6,022,601		8,504,239		17,728,936		4,136		6,552		10,631		21,319
Loans held for sale	—		17,098		161,592		178,690		—		—		188		188
Total loans	$	3,202,096	$	6,039,699	$	8,665,831	$	17,907,626	$	4,136	$	6,552	$	10,819	$	21,507

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

Management’s Discussion and Analysis

The following table shows the distribution of the recorded investment of those RJ Bank loans that mature in more than one year between fixed and adjustable interest rate loans at December 31, ~~2017~~.2019. Loan amounts in the table ~~below~~ exclude unearned income and deferred expenses.


	Interest rate type						Interest rate type
$ in thousands	Fixed		Adjustable		Total
$ in millions							Fixed		Adjustable		Total
Loans held for investment:
C&I loans	$	1,700	$	7,335,968	$	7,337,668	$	148	$	7,710	$	7,858
CRE construction loans	4,588		148,647		153,235		—		123		123
CRE loans	43,732		2,582,455		2,626,187		108		3,118		3,226
Tax-exempt loans	1,104,568		31,900		1,136,468		1,220		—		1,220
Residential mortgage loans	230,142		3,039,622		3,269,764		228		4,477		4,705
SBL	3,518		—		3,518
SBL and other							1		50		51
Total loans held for investment	1,388,248		13,138,592		14,526,840		1,705		15,478		17,183
Loans held for sale	5,650		173,040		178,690		3		185		188
Total loans	$	1,393,898	$	13,311,632	$	14,705,530	$	1,708	$	15,663	$	17,371

Contractual loan terms for C&I, CRE, CRE construction and residential mortgage loans may include an interest rate floor, cap and/or fixed interest rates for a certain period of time, which would impact the timing of the interest rate reset for the respective loan.

See the discussion within the “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Risk management - Credit ~~Risk~~risk - Risk ~~Monitoring~~monitoring process” section of this Form 10-Q for additional information regarding RJ Bank’s interest-only residential mortgage loan portfolio.

~~RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES~~

~~Management's Discussion and Analysis~~

In our RJ Bank available-for-sale securities portfolio, we hold primarily fixed-rate agency MBS and CMOs which were carried at fair value inon our Condensed Consolidated Statements of Financial Condition at December 31, ~~2017~~2019, with changes in the fair value of the portfolio recorded through ~~“Other comprehensive income”~~OCI in our Condensed Consolidated Statements of Income and Comprehensive Income. At December 31, ~~2017,~~2019, our RJ Bank available-for-sale securities portfolio had a fair value ~~$2.29~~of $3.22 billion with a weighted-average yield of ~~1.99%~~2.35% and an average expected duration of three years. See Note 54 of the Notes to Condensed Consolidated Financial Statements inof this Form 10-Q for additional information on the fair value of these securities.

~~Other~~

We hold ARS, which are long-term variable rate securities tied to short-term interest rates, that are accounted for as available-for-sale and are carried at fair value on our Condensed Consolidated Statements of Financial Condition. These securities generally have embedded penalty interest rate provisions in the event auctions fail to set the security’s interest rate. These penalty rates are based upon a stated interest rate spread over what is typically a short-term base interest rate index. As short-term interest rates rise, the penalty rate that is specified in the security increases. Changes in interest rates impact the fair value of our ARS portfolio, as we estimate that at some level of increase in short-term interest rates, issuers of the securities will have the economic incentive to refinance (and thus prepay) the securities. The faster and steeper short-term interest rates rise, the earlier prepayments will likely occur and the higher the fair value of the security. See Note 4 of the Notes to Condensed Consolidated Financial Statements in this Form 10-Q for additional information on the fair value of these securities.

Equity price risk

We are exposed to equity price risk as a ~~consequence~~result of ~~making~~our capital markets ~~in equity securities.~~activities. Our broker-dealer activities are primarily client-driven, with the objective of meeting clients’ needs while earning ~~a trading profit~~revenues to compensate for the risk associated with carrying inventory. We attempt to reduce the risk of loss inherent in our inventory of equity securities by monitoring those security positions throughout each day and establishing position limits.

~~In addition, our private equity investments may be impacted by equity prices.~~

Foreign exchange risk

We are subject to foreign exchange risk due to our investments in foreign subsidiaries as well as transactions and resulting balances denominated in a currency other than the U.S. dollar. For example, a portion of our bank loan portfolio includes loans which are denominated in Canadian dollars totaling $1.14 billion and $1.10 billion at December 31, 2019 and September 30, 2019, respectively. A portion of such loans are held by RJ Bank’s Canadian subsidiary, which is discussed in the following sections.

Investments in foreign subsidiaries

RJ Bank has an investment in a Canadian subsidiary, resulting in foreign exchange risk. To mitigate ~~this~~its foreign exchange risk, RJ Bank utilizes short-term, forward foreign exchange contracts. These ~~derivative agreements~~derivatives are primarily accounted for as net investment hedges in the condensed consolidated financial statements. See Note 65 of the Notes to Condensed Consolidated Financial Statements inof this Form 10-Q for further information regarding these ~~derivative contracts.~~derivatives.

We had foreign exchange risk in our investment in RJ Ltd. of ~~CDN $320~~CAD 363 million at December 31, ~~2017,~~2019, which was not hedged. Foreign exchange gains/losses related to this investment are primarily reflected in ~~other comprehensive income/(loss) (“OCI”)~~OCI on our Condensed Consolidated Statements of Income and Comprehensive Income. See Note 1514 of the Notes to Condensed Consolidated Financial Statements inof this Form 10-Q for further information regarding ~~all of~~ our components of OCI.

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

Management’s Discussion and Analysis

We also have foreign exchange risk associated with our investments in subsidiaries located in ~~the United Kingdom, Germany and France.~~Europe. These investments are not hedged and we do not believe we have material foreign exchange risk either individually, or in the aggregate, pertaining to these subsidiaries.

Transactions and resulting balances denominated in a currency other than the U.S. dollar

We are subject to foreign exchange risk due to our holdings of cash and certain other assets and liabilities resulting from transactions denominated in a currency other than the U.S. dollar. Any ~~currency related~~currency-related gains/losses arising from these foreign currency denominated balances are reflected in ~~“Other revenues”~~“Other” revenues in our Condensed Consolidated Statements of Income and Comprehensive Income. The foreign exchange risk associated with a portion of such transactions and balances denominated in foreign currency are mitigated utilizing short-term, forward foreign exchange contracts. Such derivatives are not designated hedges and therefore, the related gains/losses associated with these contracts are included in ~~“Other revenues”~~“Other” revenues in our Condensed Consolidated Statements of Income and

~~RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES~~

~~Management's Discussion and Analysis~~

Comprehensive Income. See Note 65 of the Notes to Condensed Consolidated Financial Statements inof this Form 10-Q for information regarding our ~~derivative contracts.~~derivatives.

Credit risk

Credit risk is the risk of loss due to adverse changes in a borrower’s, issuer’s or counterparty’s ability to meet its financial obligations under contractual or agreed upon terms. The nature and amount of credit risk depends on the type of transaction, the structure and duration of that transaction, and the parties involved. Credit risk is an integral component of the profit assessment of lending and other financing activities. See further discussion of our credit risk, including how we manage such risk, in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Risk ~~Management~~management - Credit ~~Risk”~~risk” of our ~~2017~~2019 Form 10-K.

~~The~~RJ Bank has a substantial ~~C&I, CRE, tax-exempt, SBL and residential mortgage~~ loan ~~portfolios.~~portfolio. A significant downturn in the overall economy, deterioration in real estate values or a significant issue within any sector or sectors where RJ Bank has a concentration could result in large provisions for loan losses and/or charge-offs.

Our allowance for loan losses is regularly evaluated with adjustments made on a quarterly basis. Several factors were taken into consideration in evaluating the allowance for loan losses at December 31, ~~2017~~2019, including the risk profile of the portfolios, net charge-offs during the period, the level of nonperforming loans and delinquency ratios. RJ Bank also considered the uncertainty related to certain industry sectors and the extent of credit exposure to specific borrowers within the portfolio. Finally, RJ Bank considered current economic conditions and other factors that might impact the portfolio. RJ Bank determined the allowance that was required for specific loan grades based on relative risk characteristics of the loan portfolio.

~~Changes~~ On an ongoing basis, RJ Bank evaluates its methods for determining the allowance for each class of loans and makes enhancements it considers appropriate. There was no material change in RJ Bank’s methodology for determining the allowance for loan losses during the three months ended December 31, 2019.

RJ Bank’s allowance for loan losses as a percentage of bank loans outstanding was 1.01% and 1.04% at December 31, 2019 and September 30, 2019, respectively. See Note 7 in the Notes to the Condensed Consolidated Financial Statements of this Form 10-Q for detail on the changes in RJ ~~Bank were as follows:~~

Three months ended December 31,
$ in thousands 2017 2016
Allowance for loan losses, beginning of year $ 190,442
$ 197,378
Provision for loan losses 1,016
(1,040 )
Charge-offs:
C&I loans (603 ) (3,389 )
Residential mortgage loans (95 ) (87 )
Total charge-offs (698 ) (3,476 )
Recoveries:

CRE loans —
5,013
Residential mortgage loans 604
65
Total recoveries 604
5,078
Net (charge-offs)/recoveries (94 ) 1,602
Foreign exchange translation adjustment (95 ) (260 )
Allowance for loan losses, end of period $ 191,269
$ 197,680
Allowance for loan losses to bank loans outstanding 1.08 % 1.25 %

Bank’s allowance for loan losses.

The loan loss ~~provision increased~~benefit for the three months ended December 31, 2019 was $2 million compared to ~~$1 million from~~ a ~~net $1 million benefit in the prior year. The current year~~ loan loss provision ~~increased due to loan growth, partially offset by lower reserve rates on pass-rated loans resulting from improved credit characteristics. The~~of $16 million for the prior year ~~net benefit resulted from the resolution~~quarter. See further explanation of ~~certain corporate criticized loans. As a result of improved quality in~~ the loan ~~portfolio, the total allowance for loan losses to total to bank loans outstanding declined to 1.08% at December 31, 2017 from 1.25% at December 31, 2016.~~

~~RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES~~

~~Management's~~loss provision increase in “Management’s Discussion and Analysis of Financial Condition and Results of Operations - RJ Bank” of this Form 10-Q.

The level of charge-off activity is a factor that is considered in evaluating the potential for severity of future credit losses. The following table presents net loan (charge-offs)/recoveries and the percentage of net loan (charge-offs)/recoveries to the average outstanding loan balances by loan portfolio ~~segment:~~segment.

Three months ended December 31,
2017 2016
$ in thousands
Net loan
(charge-off)/recovery
amount

% of avg.
outstanding
loans

Net loan
(charge-off)/recovery
amount

% of avg.
outstanding
loans
C&I loans $ (603 ) 0.03 % $ (3,389 ) 0.18 %
CRE loans —
—
5,013
0.79 %
Residential mortgage loans 509
0.06 % (22 ) —
Total $ (94 ) —
$ 1,602
0.04 %

The level of charge-off activity is a factor that is considered in evaluating the potential for severity of future credit losses. The activity during the current period resulted in an insignificant net charge-off, while the prior period reflected net recoveries primarily resulting from the favorable resolution of a CRE criticized loan.

~~The table below presents the nonperforming loans balance and total allowance for loan losses as of the period presented:~~



	Three months ended December 31,
	2019				2018
$ in millions	Net loan (charge-off)/recovery amount		% of avg. outstanding loans		Net loan (charge-off)/recovery amount		% of avg. outstanding loans
Residential mortgage loans	—		—		1		0.06	%
Total	$	—	—	%	$	1	0.01	%

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

Management’s Discussion and Analysis

December 31, 2017 September 30, 2017
$ in thousands
Nonperforming
loan balance

Allowance for
loan losses
balance

Nonperforming
loan balance

Allowance for
loan losses
balance
Loans held for investment:

C&I loans $ 4,843
$ (121,569 ) $ 5,221
$ (119,901 )
CRE construction loans —
(2,107 ) —
(1,421 )
CRE loans —
(40,616 ) —
(41,749 )
Tax-exempt loans —
(6,918 ) —
(6,381 )
Residential mortgage loans 32,490
(15,501 ) 33,749
(16,691 )
SBL —
(4,558 ) —
(4,299 )
Total $ 37,333
$ (191,269 ) $ 38,970
$ (190,442 )
Total nonperforming loans as a % of RJ Bank total loans 0.21 % 0.23 %

The level of nonperforming loans is another indicator of potential future credit losses. The ~~amount of~~following table presents the nonperforming loans ~~decreased during~~balance and total allowance for loan losses for the ~~three months ended December 31, 2017. This decrease was due to a $1 million decrease in nonperforming residential mortgage loans and an insignificant decrease in nonperforming C&I loans.~~ periods presented.



	December 31, 2019					September 30, 2019
$ in millions	Nonperforming loan balance			Allowance for loan losses balance		Nonperforming loan balance			Allowance for loan losses balance
Loans held for investment:
C&I loans	$	16		$	139	$	19		$	139
CRE construction loans	—			2		—			3
CRE loans	7			46		8			46
Tax-exempt loans	—			8		—			9
Residential mortgage loans	15			17		16			16
SBL and other	—			4		—			5
Total	$	38		$	216	$	43		$	218
Total nonperforming loans as a % of RJ Bank total loans	0.18		%			0.21		%

Included in nonperforming residential mortgage loans ~~are $29~~were $9 million in loans for which ~~$14~~$4 million in charge-offs were previously recorded, resulting in less exposure within the remaining balance. See Note 7 in the Notes to the Condensed Consolidated Financial Statements of this Form 10-Q for loan categories as a percentage of total loans receivable.

The nonperforming loan balances ~~above~~in the preceding table exclude ~~$12~~$11 million and ~~$14~~$12 million as of December 31, ~~2017~~2019 and September 30, ~~2017,~~2019, respectively, of residential TDRs which were returned to accrual status in accordance with our policy. Total nonperforming assets, including other real estate acquired in the settlement of residential mortgages, amounted to $41 million and $46 million at December 31, 2019 and September 30, 2019, respectively. Total nonperforming assets as a percentage of RJ Bank total assets was 0.16% and 0.18% at December 31, 2019 and September 30, 2019, respectively.

~~RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES~~

~~Management's Discussion and Analysis~~

Loan underwriting policies

RJ Bank’s underwriting policies for the major types of loans are described in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Risk management - Credit risk” of our ~~2017~~2019 Form 10-K. There were no material changes in RJ Bank’s underwriting policies during the three months ended December 31, ~~2017.~~2019.

Risk monitoring process

Another component of credit risk strategy at RJ Bank is the ongoing risk monitoring and review processes for all residential, SBL, corporate and tax-exempt credit exposures, as well as our rigorous processes to manage and limit credit losses arising from loan delinquencies. There are various other factors included in these processes, depending on the loan portfolio. There were no material changes to those processes and policies during the three months ended December 31, ~~2017.~~2019.

Residential mortgage and SBL and ~~residential mortgage loans~~other loan portfolios

The ~~marketable~~ collateral securing RJ Bank’s SBL and other portfolio is monitored on a recurring basis, with marketable collateral monitored on a daily basis. Collateral adjustments are made by the borrower as necessary to ensure RJ Bank’s loans are adequately secured, resulting in minimizing its credit risk. Collateral calls have been minimal relative to our SBL and other portfolio with no losses incurred to date.

We track and review many factors to monitor credit risk in RJ Bank’s residential mortgage loan portfolio. The ~~qualitative~~ factors include, but are not limited to: loan performance trends, loan product parameters and qualification requirements, borrower credit scores, ~~occupancy (i.e., owner occupied, second home or investment property),~~ level of documentation, loan purpose, geographic concentrations, average loan size ~~loan policy exceptions~~ and ~~updated~~ LTV ratios. These ~~qualitative~~ measures, while considered and reviewed in establishing the allowance for loan losses, have not resulted in any material ~~quantitative~~ adjustments to RJ Bank’s historical loss rates.

RJ Bank obtains the most recently available information (generally updated every six months) to estimate current LTV ratios on the individual loans in the performing residential mortgage loan portfolio. Current LTV ratios are estimated based on the initial appraisal obtained at the time of origination, adjusted using relevant market indices for housing price changes that have occurred since origination. The value of the homes could vary from actual market values due to change in the condition of the underlying property, variations in housing price changes within current valuation indices and other factors.

At December 31, 2017, the average estimated LTV was 53% for the total residential mortgage loan portfolio. Residential mortgage loans with estimated LTVs in excess of 100% represented much less than 1% of the residential mortgage loan portfolio as of December 31, 2017. Credit risk management considers this data in conjunction with delinquency statistics, loss experience and economic circumstances to establish appropriate allowance for loan losses for the residential mortgage loan portfolio.

At ~~December 31, 2017, loans over 30 days delinquent (including nonperforming loans) increased to 0.84% of residential mortgage loans outstanding, compared to 0.73% over 30 days delinquent at September 30, 2017. Our~~ ~~December 31, 2017~~ ~~percentage, however, continues to compare favorably to the national average for over 30 day delinquencies of 4.09% as most recently reported by the Fed.~~

RJ Bank’s significantly lower delinquency rate as compared to its peers is the result of our uniform underwriting policies, the lack of subprime loans and the limited amount of non-traditional loan products.

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

~~Management's~~Management’s Discussion and Analysis

The following table presents a summary of delinquent residential mortgage loans, the vast majority of which isare first mortgage loans, which are comprised of loans which are two or more payments past due as well as loans in the process of foreclosure.

Amount of delinquent residential loans Delinquent residential loans as a percentage of outstanding loan balances
$ in thousands 30-89 days 90 days or more Total 30-89 days 90 days or more Total
December 31, 2017
Residential mortgage loans:

First mortgage loans $ 8,203
$ 19,164
$ 27,367
0.25 % 0.59 % 0.84 %
Home equity loans/lines 75
115
190
0.27 % 0.41 % 0.68 %
Total residential mortgage loans $ 8,278
$ 19,279
$ 27,557
0.25 % 0.59 % 0.84 %

September 30, 2017

Residential mortgage loans:
First mortgage loans $ 3,061
$ 19,823
$ 22,884
0.10 % 0.63 % 0.73 %
Home equity loans/lines 248
18
266
0.91 % 0.07 % 0.98 %
Total residential mortgage loans $ 3,309
$ 19,841
$ 23,150
0.10 % 0.63 % 0.73 %



	Amount of delinquent residential loans						Delinquent residential loans as a percentage of outstanding loan balances
$ in millions	30-89 days		90 days or more		Total		30-89 days		90 days or more		Total
December 31, 2019	$	3	$	9	$	12	0.06	%	0.19	%	0.25	%
September 30, 2019	$	2	$	10	$	12	0.04	%	0.22	%	0.26	%

Our December 31, 2019 percentage continues to compare favorably to the national average for over 30 day delinquencies of 2.64%, as most recently reported by the Fed.

Credit risk is also managed by diversifying the residential mortgage portfolio. The following table details the geographic concentrations (top five states) of RJ Bank’s one-to-four family residential mortgage ~~loans were as follows:~~loans.


December 31, 2017			September 30, 2017
						December 31, 2019
	Loans outstanding as a % of RJ Bank total residential mortgage loans	Loans outstanding as a % of RJ Bank total loans		Loans outstanding as a % of RJ Bank total residential mortgage loans	Loans outstanding as a % of RJ Bank total loans	Loans outstanding as a % of RJ Bank total residential mortgage loans	Loans outstanding as a % of RJ Bank total loans
CA	24.9%	4.6%	CA	23.8%	4.4%	26.4%	5.8%
FL	18.2%	3.4%	FL	18.9%	3.5%	16.5%	3.7%
TX	7.6%	1.4%	TX	7.8%	1.4%	7.9%	1.7%
NY	6.9%	1.3%	NY	6.8%	1.3%	7.4%	1.6%
CO	3.5%	0.6%	CO	3.4%	0.6%	3.8%	0.8%

Loans where borrowers may be subject to payment increases include adjustable rate mortgage loans with terms that initially require payment of interest only. Payments may increase significantly when the interest-only period ends and the loan principal begins to amortize. At December 31, ~~2017~~2019 and September 30, ~~2017,~~2019, these loans totaled ~~$748 million~~$1.40 billion and ~~$683 million,~~$1.29 billion, respectively, or approximately ~~20%~~30% of the residential mortgage portfolio atas of each ~~period.~~of these dates. The weighted average number of years before the remainder of the loans, which were still in their interest-only period at December 31, ~~2017~~2019, begins amortizing is ~~6.9~~6.2 years.

A component of credit risk management for the residential portfolio is the LTV ratio and borrower credit score at origination or purchase. The most recent weighted-average ~~LTV/~~LTV ratios and FICO scores at origination of RJ Bank’s residential first mortgage loan portfolio ~~are as follows:~~were 64% and 765, respectively.



	~~December 31, 2017~~	~~September 30, 2017~~
~~Residential first mortgage loan weighted-average LTV/FICO~~	~~65%/758~~	~~65%/758~~

Corporate and tax-exempt loans

~~Other than loans classified as nonperforming, the amount of~~Credit risk in RJ Bank’s corporate and tax-exempt loan portfolios is monitored on an individual loan basis. The majority of RJ Bank’s tax-exempt loan portfolio is comprised of loans ~~that were delinquent greater than 30 days was not significant as of December 31, 2017.~~to investment-grade borrowers.

~~RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES~~

~~Management's Discussion and Analysis~~

Credit risk is ~~also~~ managed by diversifying the corporate loan portfolio. RJ Bank’s corporate loan portfolio does not contain a significant concentration in any single industry. The following table details the industry concentrations (top five categories) of RJ Bank’s corporate ~~loans are as follows:~~loans.

December 31, 2017 September 30, 2017
Loans outstanding as a % of RJ Bank total corporate loans Loans outstanding as a % of RJ Bank total loans Loans outstanding as a % of RJ Bank total corporate loans Loans outstanding as a % of RJ Bank total loans
Power & infrastructure 5.6% 3.8% Office (real estate) 5.9% 4.0%
Hospitality 4.9% 3.3% Retail real estate 5.3% 3.6%
Retail real estate 4.9% 3.3% Power & infrastructure 5.3% 3.6%
Consumer products and services 4.7% 3.2% Consumer products and services 5.2% 3.5%
Office (real estate) 4.5% 3.0% Hospitality 4.7% 3.2%



	December 31, 2019
	Loans outstanding as a % of RJ Bank total corporate loans	Loans outstanding as a % of RJ Bank total loans
Office real estate	8.2%	4.5%
Business systems and services	7.4%	4.1%
Automotive/transportation	6.5%	3.6%
Hospitality	5.9%	3.2%
Multifamily	5.3%	2.9%

Liquidity risk

See the section “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and capital resources” of this Form 10-Q for information regarding our liquidity and how we manage liquidity risk.

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

Management’s Discussion and Analysis

Operational risk

Operational risk generally refers to the risk of loss resulting from our operations, including, but not limited to, business disruptions, improper or unauthorized execution and processing of transactions, deficiencies in our technology or financial operating systems and inadequacies or breaches in our control processes, including ~~cyber security~~cybersecurity incidents. See Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Risk ~~Management~~management - Operational ~~Risk” in~~risk” of our ~~2017~~2019 Form 10-K for a discussion of our operational risk and certain of our risk mitigation processes. There have been no material changes in such processes during the three months ended December 31, ~~2017.~~2019.

As more fully described in the discussion of our business technology risks included in various risk factors presented in ~~“Item~~Item 1A ~~- Risk~~“Risk Factors” inof our ~~2017~~2019 Form 10-K, despite our implementation of protective measures and endeavoring to modify them as circumstances warrant, our computer systems, software and networks may be vulnerable to human error, natural disasters, power loss, ~~spam attacks, unauthorized access, distributed denial of service attacks, computer viruses~~cyberattacks and other ~~malicious code~~information security breaches, and other events that could have an impact on the security and stability of our operations. Notwithstanding the precautions we take, if one or more of these events were to occur, this could jeopardize the information we confidentially maintain, including that of our clients and counterparties, which is processed, stored in and transmitted through our computer systems and networks, or otherwise cause interruptions or malfunctions in our operations or the operations of our clients or counterparties. To-date, we have not experienced any material losses relating to cyberattacks or other information security breaches; however, there can be no assurances that we will not suffer such losses in the future.

Model ~~Risk~~risk

Model risk refers to the possibility of unintended business outcomes arising from the design, implementation or use of models. See Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Risk ~~Management~~management - Model ~~Risk” in~~risk” of our ~~2017~~2019 Form 10-K for information regarding how we utilize models throughout the firm and how we manage model risk.

~~Regulatory and~~Compliance risk

Compliance risk is the risk of legal ~~risk~~

or regulatory sanctions, financial loss, or reputational damage that the firm may suffer from a failure to comply with applicable laws, external standards, or internal requirements. See Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Risk ~~Management~~management - ~~Regulatory and legal~~Compliance risk” inof our ~~2017~~2019 Form 10-K for information on our ~~regulatory and legal~~compliance risks, including how we manage such risks.

There have been no material changes in our risk mitigation processes during the three months ended December 31, ~~2017.~~2019.

~~Item~~ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

See Item 2 “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Risk ~~Management” in~~management” of this Form 10-Q for our quantitative and qualitative disclosures about market risk.

~~RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES~~

~~Management's Discussion and Analysis~~

~~Item~~ITEM 4. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

Disclosure controls are procedures designed to ensure that information required to be disclosed in our reports filed under the Securities Exchange Act of 1934, such as this report, are recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls are also designed to ensure that such information is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable, not absolute, assurance of achieving the desired control objectives, as ours are designed to do, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we have evaluated the effectiveness of our disclosure controls and procedures pursuant to Securities Exchange Act of 1934 Rule 13a-15(b) as of the end of the period covered by this report. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that these disclosure controls and procedures are effective.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting during the quarter ended December 31, ~~2017~~2019 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

Not applicable.

ITEM 1A. RISK FACTORS

Not applicable.

~~RAYMOND JAMES FINANCIAL, INC.~~ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND ~~SUBSIDIARIES~~

USE OF PROCEEDS


~~ITEM 2.~~	~~MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED SHAREHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES~~

We did not have any sales of unregistered securities for the three months ended December 31, 2019.

We purchase our own stock from time to time in conjunction with a number of activities, each of which is described ~~below.~~in the following paragraphs. The following table presents information on our purchases of our own stock, on a monthly basis, for the three months ended December 31, ~~2017:~~2019.

Total number of shares
purchased

Average price
per share
Number of shares purchased as part of publicly announced plans or programs Approximate dollar value (in thousands) at each month-end, of securities that may yet be purchased under the plans or programs

October 1, 2017 – October 31, 2017 8,493
$ 85.25
—
$ 135,671
November 1, 2017 – November 30, 2017 18,539
$ 85.32
—
$ 135,671
December 1, 2017 – December 31, 2017 205,504
$ 87.32
—
$ 135,671
First quarter 232,536
$ 87.08
—



	Total number of shares purchased	Average price per share		Number of shares purchased as part of publicly announced plans or programs	Approximate dollar value (in millions) at each month-end, of securities that may yet be purchased under the plans or programs

October 1, 2019 – October 31, 2019	5,582	$	84.80	—	$750
November 1, 2019 – November 30, 2019	86,720	$	89.35	—	$750
December 1, 2019 – December 31, 2019	132,723	$	89.33	125,567	$739
First quarter	225,025	$	89.23	125,567

OfIn the preceding table, the total ~~for the three months ended December 31, 2017, share purchases for the trust fund~~number of shares purchased includes shares purchased pursuant to our Restricted Stock Trust Fund, which was established to acquire our common stock in the open market and used to settle RSUs granted as a retention vehicle for certain employees of our wholly owned Canadian ~~subsidiary approximated 72 thousand shares, for a total consideration of $6 million (for~~subsidiaries. For more information on this trust fund, see Note 2 of the Notes to Consolidated Financial Statements of our ~~2017~~2019 Form 10-K and Note 98 of the Notes to Condensed Consolidated Financial Statements inof this Form ~~10-Q).~~10-Q. These activities do not utilize the repurchase ~~authority~~authorization presented in the ~~table above.~~preceding table.

WeThe total number of shares purchased also ~~repurchase~~includes shares ~~when~~repurchased as a result of employees ~~surrender~~surrendering shares as payment for option exercises or withholding taxes. ~~Of the total for the three months ended December 31, 2017, shares surrendered to us by employees for such purposes approximated 161 thousand shares, for a total consideration of $14 million.~~ These activities do not utilize the repurchase ~~authority~~authorization presented in the ~~table above.~~preceding table.


~~ITEM 3.~~	~~DEFAULTS UPON SENIOR SECURITIES~~

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

Not applicable.


~~ITEM 4.~~	~~MINE SAFETY DISCLOSURES~~

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.


~~ITEM 5.~~	~~OTHER INFORMATION~~

ITEM 5. OTHER INFORMATION

Not applicable.

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES


~~ITEM 6.~~	~~EXHIBITS~~

ITEM 6. EXHIBITS



Exhibit Number		Description
3.1		Restated Articles of Incorporation of Raymond James Financial, Inc. as filed with the Secretary of State of Florida on November 25, 2008, incorporated by reference to Exhibit 3(i).1 to the Company’s Annual Report on Form 10-K, filed with the Securities and Exchange Commission on November 28, 2008.
3.2		Amended and Restated By-Laws of Raymond James Financial, Inc., reflecting amendments adopted by the Board of Directors on November 30, 2017, incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on December 5, 2017.
~~10.1~~		~~Form of Restricted Stock Unit Award Notice and Agreement for Stock Bonus Award (time-based vesting), as revised and approved on May 17, 2017, under the Amended and Restated 2012 Stock Incentive Plan.~~
~~10.2~~		Form of Restricted Stock Unit Award Notice and Agreement for Stock Bonus Award (performance-based vesting), as revised and approved on May 17, 2017, under the Amended and Restated 2012 Stock Incentive Plan.
~~10.3~~		~~Form of Restricted Stock Unit Award Notice and Agreement for Non-Bonus Award, as revised and approved on May 17, 2017, under the Amended and Restated 2012 Stock Incentive Plan.~~
~~10.4~~		Form of Restricted Stock Unit Award Notice and Agreement for Stock Bonus Award (time-based vesting) for Canadian Employees, as revised and approved on May 17, 2017, under the Amended and Restated 2012 Stock Incentive Plan.
~~10.5~~		Form of Restricted Stock Unit Award Notice and Agreement for Stock Bonus Award (performance-based vesting) for Canadian Employees, as revised and approved on May 17, 2017, under the Amended and Restated 2012 Stock Incentive Plan.
~~10.6~~		~~Form of Restricted Stock Unit Award Notice and Agreement for Non-Bonus Award for Canadian Employees, as revised and approved on May 17, 2017, under the Amended and Restated 2012 Stock Incentive Plan.~~
11		Statement Re: Computation of per Share Earnings (the calculation of per share earnings is included in Part I, Item 1 in the Notes to Condensed Consolidated Financial Statements (Earnings Per Share) and is omitted here in accordance with Section (b)(11) of Item 601 of Regulation S-K).
12		~~Statement of Computation of Ratio of Earnings to Fixed Charges and Preferred Stock Dividends.~~
31.1		Certification of Paul C. Reilly pursuant to Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2		Certification of ~~Jeffrey P. Julien~~Paul M. Shoukry pursuant to Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32		Certification of Paul C. Reilly and ~~Jeffrey P. Julien~~Paul M. Shoukry pursuant to Rule 13a-14(b) and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS		XBRL Instance ~~Document.~~Document (The instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.).
101.SCH		Inline XBRL Taxonomy Extension Schema Document.
101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB		Inline XBRL Taxonomy Extension Label Linkbase Document.
101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document.
104		Cover Page Interactive Data File - the cover page interactive data file does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



		RAYMOND JAMES FINANCIAL, INC.
		(Registrant)

Date:	February ~~8, 2018~~7, 2020	/s/ Paul C. Reilly
		Paul C. Reilly
		Chairman and Chief Executive Officer

Date:	February ~~8, 2018~~7, 2020	/s/ ~~Jeffrey P. Julien~~Paul M. Shoukry
		~~Jeffrey P. Julien~~Paul M. Shoukry
		~~Executive Vice President - Finance~~ Chief Financial Officer and Treasurer

9173



$ in thousands	Quoted prices in active markets for identical instruments (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)		Netting adjustments			Balance as of December 31, 2017
Assets at fair value on a recurring basis
Trading instruments
Municipal and provincial obligations	$	122	$	197,580	$	—	$	—		$	197,702
Corporate obligations	11,069		33,723		—		—			44,792
Government and agency obligations	6,376		17,929		—		—			24,305
Agency mortgage-backed securities (“MBS”) and collateralized mortgage obligations (“CMOs”)	2,128		214,680		—		—			216,808
Non-agency CMOs and asset-backed securities (“ABS”)	—		52,244		5		—			52,249
Total debt securities	19,695		516,156		5		—			535,856
Equity securities	18,497		803		—		—			19,300
Brokered certificates of deposit	—		32,173		—		—			32,173
Other	27		7,511		2,712		—			10,250
Total trading instruments	38,219		556,643		2,717		—			597,579
Available-for-sale securities
Agency MBS and CMOs	—		2,285,051		—		—			2,285,051
Other securities	787		—		—		—			787
Auction rate securities (“ARS”) preferred securities	—		—		107,483		—			107,483
Total available-for-sale securities	787		2,285,051		107,483		—			2,393,321
Derivative assets
Interest rate contracts
Matched book	—		263,851		—		—			263,851
Other	—		58,660		—		(30,375		)	28,285
Foreign exchange contracts	—		4		—		—			4
Total derivative assets	—		322,515		—		(30,375		)	292,140
Private equity investments ⁽¹⁾
Not measured at NAV	—		—		88,810		—			88,810
Measured at NAV										100,223
Total private equity investments	—		—		88,810		—			189,033
Other investments ⁽²⁾	263,978		859		333		—			265,170
Total assets at fair value on a recurring basis	$	302,984	$	3,165,068	$	199,343	$	(30,375	)	$	3,737,243

Assets at fair value on a nonrecurring basis
Bank loans, net
Impaired loans	$	—	$	16,347	$	23,418	$	—		$	39,765
Loans held for sale ⁽³⁾	—		69,057		—		—			69,057
Total assets at fair value on a nonrecurring basis	$	—	$	85,404	$	23,418	$	—		$	108,822

(continued on next page)



(continued from previous page)

$ in thousands	Quoted prices in active markets for identical instruments (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)		Netting adjustments			Balance as of December 31, 2017
Liabilities at fair value on a recurring basis
Trading instruments sold but not yet purchased
Municipal and provincial obligations	$	742	$	3,082	$	—	$	—		$	3,824
Corporate obligations	608		7,394		—		—			8,002
Government obligations	183,510		—		—		—			183,510
Agency MBS and CMOs	328		—		—		—			328
Non-agency MBS and CMOs	—		—		—		—			—
Total debt securities	185,188		10,476		—		—			195,664
Equity securities	16,294		4		—		—			16,298
Other	4		—		1,058		—			1,062
Total trading instruments sold but not yet purchased	201,486		10,480		1,058		—			213,024
Derivative liabilities
Interest rate contracts
Matched book	—		263,851		—		—			263,851
Other	—		86,815		—		(42,284		)	44,531
Foreign exchange contracts	—		19,710		—		—			19,710
Deutsche Bank restricted stock unit (“DBRSU”) obligation (equity)	—		28,413		—		—			28,413
Total derivative liabilities	—		398,789		—		(42,284		)	356,505
Total liabilities at fair value on a recurring basis	$	201,486	$	409,269	$	1,058	$	(42,284	)	$	569,529



Three months ended December 31, 2017 Level 3 instruments at fair value
	Financial assets													Financial liabilities
	Trading instruments					Available-for-sale securities		Private equity and other investments						Trading instruments
$ in thousands	Non-agency CMOs & ABS		Other			ARS - preferred securities		Private equity investments			Other investments			Other
Fair value beginning of period	$	5	$	5,594		$	106,171	$	88,885		$	336		$	—
Total gains/(losses) for the period
Included in earnings	—		(1,207		)	—		2			(3		)	(1,058		)
Included in other comprehensive income	—		—			1,312		—			—			—
Purchases and contributions	—		20,279			—		—			—			—
Sales	—		(21,954		)	—		(77		)	—			—
Distributions	—		—			—		—			—			—
Transfers
Into Level 3	—		—			—		—			—			—
Out of Level 3	—		—			—		—			—			—
Fair value end of period	$	5	$	2,712		$	107,483	$	88,810		$	333		$	(1,058	)
Unrealized gains/(losses) for the period included in earnings for instruments held at the end of the reporting period	$	—	$	(243	)	$	1,312	$	—		$	(3	)	$	(1,058	)



$ in thousands	Net trading profit			Other revenues			Other comprehensive income
For the three months ended December 31, 2017
Total gains/(losses) included in earnings	$	(2,265	)	$	(1	)	$	1,312
Unrealized gains/(losses) for assets held at the end of the reporting period	$	(1,301	)	$	(3	)	$	1,312

For the three months ended December 31, 2016
Total gains/(losses) included in earnings	$	(4,381	)	$	294		$	4,074
Unrealized gains/(losses) for assets held at the end of the reporting period	$	(1,916	)	$	301		$	4,073



Level 3 financial instrument $ in thousands	Fair value at December 31, 2017		Valuation technique(s)	Unobservable input	Range (weighted-average)
Recurring measurements
ARS preferred securities	$	107,483	Discounted cash flow	Average discount rate	5.76% - 7.03% (6.32%)
				Average interest rates applicable to future interest income on the securities ⁽¹⁾	2.97% - 3.96% (3.12%)
				Prepayment year ⁽²⁾	2018 - 2021 (2021)
Private equity investments (not measured at NAV)	$	68,454	Income or market approach
			Scenario 1 - income approach - discounted cash flow	Discount rate	13% - 25% (22.4%)
				Terminal growth rate of cash flows	3% - 3% (3%)
				Terminal year	2020 - 2042 (2021)
			Scenario 2 - market approach - market multiple method	EBITDA Multiple	5.25 - 7.0 (5.8)
				Weighting assigned to outcome of scenario 1/scenario 2	87%/13%
	$	20,356	Transaction price or other investment-specific events ⁽³⁾	Not meaningful ⁽³⁾	Not meaningful ⁽³⁾
Nonrecurring measurements
Bank loans: impaired loans - residential	$	20,421	Discounted cash flow	Prepayment rate	7 yrs - 12 yrs (10.3 yrs)
Bank loans: impaired loans - corporate	$	2,997	Appraisal or discounted cash flow value ⁽⁴⁾	Not meaningful ⁽⁴⁾	Not meaningful ⁽⁴⁾



Level 3 financial instrument $ in thousands	Fair value at September 30, 2017		Valuation technique(s)	Unobservable input	Range (weighted-average)
Recurring measurements
ARS preferred securities	$	106,171	Discounted cash flow	Average discount rate	5.46% - 6.81% (6.03%)
				Average interest rates applicable to future interest income on the securities ⁽¹⁾	2.58% - 3.44% (2.72%)
				Prepayment year ⁽²⁾	2017 - 2021 (2021)
Private equity investments (not measured at NAV)	$	68,454	Income or market approach:
			Scenario 1 - income approach - discounted cash flow	Discount rate	13% - 25% (22.4%)
				Terminal growth rate of cash flows	3% - 3% (3%)
				Terminal year	2020 - 2042 (2021)
			Scenario 2 - market approach - market multiple method	EBITDA Multiple	5.25 - 7.0 (5.8)
				Weighting assigned to outcome of scenario 1/scenario 2	87%/13%
	$	20,431	Transaction price or other investment-specific events ⁽³⁾	Not meaningful ⁽³⁾	Not meaningful ⁽³⁾
Nonrecurring measurements
Bank loans: impaired loans - residential	$	20,736	Discounted cash flow	Prepayment rate	7 yrs. - 12 yrs. (10.4 yrs.)
Bank loans: impaired loans - corporate	$	3,258	Appraisal or discounted cash flow value ⁽⁴⁾	Not meaningful ⁽⁴⁾	Not meaningful ⁽⁴⁾



$ in thousands	Location of gain/(loss) included in the Condensed Consolidated Statements of Income and Comprehensive Income	Gain/(loss) recognized during the period
		Three months ended December 31,
		2017			2016
Interest rate contracts:
Matched book	Other revenues	$	38		$	(26	)
Other	Net trading profit	$	1,562		$	2,229
Foreign exchange contracts	Other revenues	$	(1,366	)	$	7,914
DBRSUs	Compensation, commissions and benefits expense	$	(2,613	)	$	(6,725	)
DBRSUs	Acquisition-related expenses	$	—		$	350



$ in thousands	C&I		CRE		Residential mortgage		Total
Three months ended December 31, 2017
Purchases	$	147,442	$	20,087	$	45,011	$	212,540
Sales	$	31,143	$	—	$	—	$	31,143
Three months ended December 31, 2016
Purchases	$	114,649	$	38,980	$	81,662	$	235,291
Sales	$	81,579	$	—	$	—	$	81,579



	Loans held for investment
$ in thousands	C&I			CRE construction			CRE			Tax-exempt		Residential mortgage			SBL		Total
Three months ended December 31, 2017
Balance at beginning of period	$	119,901		$	1,421		$	41,749		$	6,381	$	16,691		$	4,299	$	190,442
Provision/(benefit) for loan losses	2,337			686			(1,104		)	537		(1,699		)	259		1,016
Net (charge-offs)/recoveries:
Charge-offs	(603		)	—			—			—		(95		)	—		(698		)
Recoveries	—			—			—			—		604			—		604
Net (charge-offs)/recoveries	(603		)	—			—			—		509			—		(94		)
Foreign exchange translation adjustment	(66		)	—			(29		)	—		—			—		(95		)
Balance at end of period	$	121,569		$	2,107		$	40,616		$	6,918	$	15,501		$	4,558	$	191,269

Three months ended December 31, 2016
Balance at beginning of period	$	137,701		$	1,614		$	36,533		$	4,100	$	12,664		$	4,766	$	197,378
Provision/(benefit) for loan losses	(1,243		)	581			(2,010		)	393		997			242		(1,040		)
Net (charge-offs)/recoveries:
Charge-offs	(3,389		)	—			—			—		(87		)	—		(3,476		)
Recoveries	—			—			5,013			—		65			—		5,078
Net (charge-offs)/recoveries	(3,389		)	—			5,013			—		(22		)	—		1,602
Foreign exchange translation adjustment	(164		)	(92		)	(4		)	—		—			—		(260		)
Balance at end of period	$	132,905		$	2,103		$	39,532		$	4,493	$	13,639		$	5,008	$	197,680



	Segment
$ in thousands	Private Client Group			Capital Markets			Asset Management		Total
For the three months ended December 31, 2017
Goodwill as of beginning of period	$	276,713		$	134,010		$	—	$	410,723
Additions	—			—			69,234		69,234
Foreign currency translation	(179		)	(3		)	—		(182		)
Goodwill as of end of period	$	276,534		$	134,007		$	69,234	$	479,775

For the three months ended December 31, 2016
Goodwill as of beginning of period	$	275,521		$	132,551		$	—	$	408,072
Additions	—			—			—		—
Foreign currency translation	(537		)	(1,038		)	—		(1,575		)
Goodwill as of end of period	$	274,984		$	131,513		$	—	$	406,497



	Weighted average useful life (in years)	Amount acquired (in thousands)
Customer relationships	13	$	34,900
Trade name	20	3,590
Developed technology	10	1,800
Intangible assets subtotal	13	$	40,290
Non-amortizing customer relationships	Indefinite	52,000
Total intangible assets acquired		$	92,290



Accumulated other comprehensive income/(loss) components: $ in thousands	Increase/(decrease) in amounts reclassified from accumulated other comprehensive income/(loss)			Affected line items in income statement
Three months ended December 31, 2017
RJ Bank cash flow hedges	$	1,409		Interest expense
	1,409			Total before tax
Income tax effect	(402		)	Provision for income taxes
Total reclassifications for the period	$	1,007		Net of tax
Three months ended December 31, 2016
RJ Bank available-for-sale securities	$	(12	)	Other revenue
RJ Bank cash flow hedges	1,572			Interest expense
Currency translations	6,537			Other expense
	8,097			Total before tax
Income tax effect	(3,076		)	Provision for income taxes
Total reclassifications for the period	$	5,021		Net of tax



	Actual				Requirement for capital adequacy purposes				To be well capitalized under regulatory provisions
$ in thousands	Amount		Ratio		Amount		Ratio		Amount		Ratio
RJF as of December 31, 2017:
CET1	$	5,052,629	22.3	%	$	1,018,048	4.5	%	$	1,470,513	6.5	%
Tier 1 capital	$	5,052,629	22.3	%	$	1,357,397	6.0	%	$	1,809,862	8.0	%
Total capital	$	5,266,339	23.3	%	$	1,809,862	8.0	%	$	2,262,328	10.0	%
Tier 1 leverage	$	5,052,629	14.4	%	$	1,400,054	4.0	%	$	1,750,068	5.0	%

RJF as of September 30, 2017:
CET1	$	5,081,335	23.0	%	$	994,950	4.5	%	$	1,437,150	6.5	%
Tier 1 capital	$	5,081,335	23.0	%	$	1,326,600	6.0	%	$	1,768,800	8.0	%
Total capital	$	5,293,331	23.9	%	$	1,768,800	8.0	%	$	2,211,000	10.0	%
Tier 1 leverage	$	5,081,335	15.0	%	$	1,359,168	4.0	%	$	1,698,960	5.0	%



Effective tax rate:
For the three months ended December 31, 2017 ($ in thousands)	Pre-tax income including noncontrolling interests		Provision for income taxes		Effective tax rate
	$	311,684	$	192,401	61.7	%
Less: discrete impact of the Tax Act ⁽⁴⁾			117,169
As adjusted for discrete impact of the Tax Act			$	75,232	24.1	%



	As of						% change from
$ in billions	December 31, 2017		September 30, 2017		December 31, 2016		September 30, 2017		December 31, 2016
PCG assets under administration	$	692.1	$	659.5	$	585.6	5	%	18	%
PCG assets in fee-based accounts	$	316.7	$	294.5	$	240.2	8	%	32	%



	December 31, 2017		September 30, 2017	December 31, 2016
Employees	3,038		3,041	2,985
Independent Contractors	4,499	⁽¹⁾	4,305	4,143
Total advisors	7,537		7,346	7,128



	Repurchase transactions						Reverse repurchase transactions
For the quarter ended: ($ in thousands)	Average daily balance outstanding		Maximum month-end balance outstanding during the quarter		End of period balance outstanding		Average daily balance outstanding		Maximum month-end balance outstanding during the quarter		End of period balance outstanding
December 31, 2017	$	218,690	$	229,036	$	229,036	$	443,391	$	506,711	$	307,742
September 30, 2017	241,365		247,048		220,942		463,618		503,462		404,462
June 30, 2017	231,378		226,972		226,972		479,653		540,823		483,820
March 31, 2017	204,623		222,476		222,476		410,678		535,224		535,224
December 31, 2016	219,095		241,773		203,378		424,548		445,646		358,493



	Three months ended December 31, 2017				Period end VaR				Daily average VaR
$ in thousands	High		Low		December 31, 2017		September 30, 2017		December 31, 2017		September 30, 2017		December 31, 2016
Daily VaR	$	2,256	$	848	$	848	$	1,427	$	1,601	$	1,827	$	1,670

Pre-tax expense not yet recognized

Remaining weighted-average amortization period

(in thousands)

(in years)

Independent contractor financial advisors