~~0000720005 us-gaap:AccumulatedTranslationAdjustmentMember 2020-03-31~~0000720005rjf:AccountAndServiceFeeRevenueMemberus-gaap:OperatingSegmentsMemberrjf:RjBankMember2019-04-012019-06-30

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark one)



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

For the quarterly period ended ~~March 31,~~June 30, 2020



☐			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						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 every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or such shorter period that the registrant was required to submit 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 filer	x	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

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.

~~137,030,516~~137,159,781 shares of common stock as of ~~May 5,~~August 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 ~~March 31,~~June 30, 2020 and September 30, 2019 (Unaudited)	3
	Condensed Consolidated Statements of Income and Comprehensive Income for the three and ~~six~~nine months ended ~~March 31,~~June 30, 2020 and ~~March 31,~~June 30, 2019 (Unaudited)	4
	Condensed Consolidated Statements of Changes in Shareholders’ Equity for the three and ~~six~~nine months ended ~~March 31,~~June 30, 2020 and ~~March 31,~~June 30, 2019 (Unaudited)	5
	Condensed Consolidated Statements of Cash Flows for the ~~six~~nine months ended ~~March 31,~~June 30, 2020 and ~~March 31,~~June 30, 2019 (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 - Fair value	1011
	Note 4 - Available-for-sale securities	1617
	Note 5 - Derivative assets and derivative liabilities	1819
	Note 6 - Collateralized agreements and financings	2021
	Note 7 - Bank loans, net	2122
	Note 8 - Variable interest entities	2829
	Note 9 - Goodwill and identifiable intangible assets, net	2930
	Note 10 - Leases	2930
	Note 11 - Bank deposits	3132
	Note 12 - Other borrowings	3233
	Note 13 - Senior notes payable	3334
	Note 14 - Income taxes	3334
	Note 15 - Commitments, contingencies and guarantees	3435
	Note 16 - Accumulated other comprehensive income/(loss)	3738
	Note 17 - Revenues	3839
	Note 18 - Interest income and interest expense	4243
	Note 19 - Share-based compensation	4243
	Note 20 - Regulatory capital requirements	4344
	Note 21 - Earnings per share	4546
	Note 22 - Segment information	4546
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	4849
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	8487
Item 4.	Controls and Procedures	8487
PART II	OTHER INFORMATION
Item 1.	Legal Proceedings	8588
Item 1A.	Risk Factors	8588
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	8891
Item 3.	Defaults Upon Senior Securities	8891
Item 4.	Mine Safety Disclosures	8891
Item 5.	Other Information	8891
Item 6.	Exhibits	8992
	Signatures	8992

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

(Unaudited)


$ in millions, except per share amounts	June 30, 2020		September 30, 2019
Assets:
Cash and cash equivalents	$	5,632	$	3,957
Cash and cash equivalents segregated pursuant to regulations	3,205		2,014
Securities purchased under agreements to resell	193		343
Securities borrowed	300		248
Financial instruments, at fair value:
Trading instruments ($270 and $535 pledged as collateral)	361		708
Available-for-sale securities ($24 and $24 pledged as collateral)	5,630		3,093
Derivative assets	452		338
Other investments ($40 and $32 pledged as collateral)	327		365
Brokerage client receivables, net	2,346		2,671
Receivables from brokers, dealers and clearing organizations	472		281
Other receivables	616		549
Bank loans, net	21,223		20,891
Loans to financial advisors, net	992		983
Property and equipment, net	537		527
Deferred income taxes, net	222		231
Goodwill and identifiable intangible assets, net	602		611
Other assets	1,572		1,020
Total assets	$	44,682	$	38,830

Liabilities and shareholders’ equity:
Bank deposits	$	25,372	$	22,281
Securities sold under agreements to repurchase	228		150
Securities loaned	88		323
Financial instruments sold but not yet purchased, at fair value:
Trading instruments	154		296
Derivative liabilities	394		313
Brokerage client payables	5,955		4,361
Payables to brokers, dealers and clearing organizations	190		229
Accrued compensation, commissions and benefits	1,109		1,272
Other payables	1,243		518
Other borrowings	890		894
Senior notes payable	2,044		1,550
Total liabilities	37,667		32,187
Commitments and contingencies (see Note 15)
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; 158,909,194 and 158,435,030 shares issued as of June 30, 2020 and September 30, 2019, respectively, and 137,025,724 and 137,841,952 shares outstanding as of June 30, 2020 and September 30, 2019, respectively	2		2
Additional paid-in capital	1,984		1,938
Retained earnings	6,326		5,874
Treasury stock, at cost; 21,883,470 and 20,593,078 common shares as of June 30, 2020 and September 30, 2019, respectively	(1,348)		(1,210)
Accumulated other comprehensive income/(loss)	1		(23)
Total equity attributable to Raymond James Financial, Inc.	6,965		6,581
Noncontrolling interests	50		62
Total shareholders’ equity	7,015		6,643
Total liabilities and shareholders’ equity	$	44,682	$	38,830

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

$ in millions, except per share amounts March 31, 2020 September 30, 2019
Assets:

Cash and cash equivalents $ 10,648
$ 3,957
Cash and cash equivalents segregated pursuant to regulations 4,045
2,014
Securities purchased under agreements to resell 130
343
Securities borrowed 250
248
Financial instruments, at fair value:
Trading instruments ($236 and $535 pledged as collateral)
445
708
Available-for-sale securities ($28 and $24 pledged as collateral)
4,265
3,093
Derivative assets 447
338
Other investments ($40 and $32 pledged as collateral)
316
365
Brokerage client receivables, net 2,491
2,671
Receivables from brokers, dealers and clearing organizations 445
281
Other receivables 846
549
Bank loans, net 21,788
20,891
Loans to financial advisors, net 982
983
Property and equipment, net 543
527
Deferred income taxes, net 224
231
Goodwill and identifiable intangible assets, net 603
611
Other assets 1,341
1,020
Total assets $ 49,809
$ 38,830

Liabilities and shareholders’ equity:
Bank deposits $ 30,023
$ 22,281
Securities sold under agreements to repurchase 215
150
Securities loaned 28
323
Financial instruments sold but not yet purchased, at fair value:
Trading instruments 24
296
Derivative liabilities 427
313
Brokerage client payables 7,076
4,361
Payables to brokers, dealers and clearing organizations 284
229
Accrued compensation, commissions and benefits 929
1,272
Other payables 1,034
518
Other borrowings 891
894
Senior notes payable 2,044
1,550
Total liabilities 42,975

32,187
Commitments and contingencies (see Note 15)

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; 158,731,812 and 158,435,030 shares issued as of March 31, 2020 and September 30, 2019, respectively, and 136,787,387 and 137,841,952 shares outstanding as of March 31, 2020 and September 30, 2019, respectively
2
2
Additional paid-in capital 1,953
1,938
Retained earnings 6,205
5,874
Treasury stock, at cost; 21,944,425 and 20,593,078 common shares as of March 31, 2020 and September 30, 2019, respectively
(1,351 ) (1,210 )
Accumulated other comprehensive loss (11 ) (23 )
Total equity attributable to Raymond James Financial, Inc. 6,798
6,581
Noncontrolling interests 36
62
Total shareholders’ equity 6,834
6,643
Total liabilities and shareholders’ equity $ 49,809
$ 38,830

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

(Unaudited)


	Three months ended June 30,						Nine months ended June 30,
in millions, except per share amounts	2020		2019		2020		2019
Revenues:
Asset management and related administrative fees	$	867	$	879	$	2,828	$	2,527
Brokerage revenues:
Securities commissions	343		358		1,116		1,095
Principal transactions	143		93		345		262
Total brokerage revenues	486		451		1,461		1,357
Account and service fees	134		183		484		559
Investment banking	139		139		428		439
Interest income	217		321		799		961
Other	33		27		47		95
Total revenues	1,876		2,000		6,047		5,938
Interest expense	(42)		(73)		(136)		(221)
Net revenues	1,834		1,927		5,911		5,717
Non-interest expenses:
Compensation, commissions and benefits	1,277		1,277		4,050		3,767
Non-compensation expenses:
Communications and information processing	100		92		293		278
Occupancy and equipment	55		55		168		159
Business development	21		57		106		141
Investment sub-advisory fees	23		24		75		70
Professional fees	24		22		68		61
Bank loan loss provision/(benefit)	81		(5)		188		16
Acquisition and disposition-related expenses	—		—		—		15
Other	55		63		167		189
Total non-compensation expenses	359		308		1,065		929
Total non-interest expenses	1,636		1,585		5,115		4,696
Pre-tax income	198		342		796		1,021
Provision for income taxes	26		83		187		252
Net income	$	172	$	259	609		769

Earnings per common share – basic	$	1.25	$	1.84	$	4.41	$	5.42
Earnings per common share – diluted	$	1.23	$	1.80	$	4.33	$	5.30
Weighted-average common shares outstanding – basic	137.1		140.4		137.9		141.8
Weighted-average common and common equivalent shares outstanding – diluted	139.4		143.6		140.5		144.8

Net income	$	172	$	259	$	609	$	769
Other comprehensive income/(loss), net of tax:
Available-for-sale securities	5		24		67		65
Currency translations, net of the impact of net investment hedges	11		6		(6)		1
Cash flow hedges	(4)		(19)		(37)		(49)
Total other comprehensive income, net of tax	12		11		24		17
Total comprehensive income	$	184	$	270	$	633	$	786

Three months ended March 31, Six months ended March 31,
in millions, except per share amounts 2020 2019 2020 2019
Revenues:
Asset management and related administrative fees $ 1,006
$ 783
$ 1,961
$ 1,648
Brokerage revenues:
Securities commissions 410
349
773
737
Principal transactions 105
93
202
169
Total brokerage revenues 515
442
975
906
Account and service fees 172
191
350
376
Investment banking 148
163
289
300
Interest income 285
324
582
640
Other (15 ) 31
14
68
Total revenues 2,111
1,934

4,171

3,938
Interest expense (43 ) (75 ) (94 ) (148 )
Net revenues 2,068
1,859

4,077

3,790
Non-interest expenses:

Compensation, commissions and benefits 1,422
1,225
2,773
2,490
Non-compensation expenses:
Communications and information processing 99
94
193
186
Occupancy and equipment 56
53
113
104
Business development 41
41
85
84
Investment sub-advisory fees 26
22
52
46
Professional fees 23
17
44
39
Bank loan loss provision 109
5
107
21
Acquisition and disposition-related expenses —
—
—
15
Other 53
55
112
126
Total non-compensation expenses 407
287
706
621
Total non-interest expenses 1,829
1,512

3,479

3,111
Pre-tax income 239
347

598

679
Provision for income taxes 70
86
161
169
Net income $ 169
$ 261

437

510

Earnings per common share – basic $ 1.22
$ 1.85
$ 3.15
$ 3.58
Earnings per common share – diluted $ 1.20
$ 1.81
$ 3.09
$ 3.51
Weighted-average common shares outstanding – basic 138.4
140.8
138.4
142.5
Weighted-average common and common equivalent shares outstanding – diluted 141.1
143.9
141.3
145.4

Net income $ 169

$ 261

$ 437

$ 510
Other comprehensive income/(loss), net of tax:

Available-for-sale securities 63
19
62
41
Currency translations, net of the impact of net investment hedges (26 ) 8
(17 ) (5 )
Cash flow hedges (43 ) (13 ) (33 ) (30 )
Total other comprehensive income/(loss), net of tax (6 )
14

12

6
Total comprehensive income $ 163
$ 275

$ 449

$ 516

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 June 30,						Nine months ended June 30,
$ in millions, except per share amounts	2020		2019		2020		2019
Common stock, par value $.01 per share:
Balance beginning of period	$	2	$	2	$	2	$	2
Share issuances	—		—		—		—
Balance end of period	2		2		2		2

Additional paid-in capital:
Balance beginning of period	1,953		1,917		1,938		1,808
Employee stock purchases	12		7		29		27
Exercise of stock options and vesting of restricted stock units, net of forfeitures	(3)		2		(74)		27
Restricted stock, stock option and restricted stock unit expense	22		21		91		85
Acquisition of noncontrolling interest and other	—		(32)		—		(32)
Balance end of period	1,984		1,915		1,984		1,915

Retained earnings:
Balance beginning of period	6,205		5,448		5,874		5,032
Net income attributable to Raymond James Financial, Inc.	172		259		609		769
Cash dividends declared (see Note 21)	(51)		(47)		(157)		(146)
Other	—		(1)		—		4
Balance end of period	6,326		5,659		6,326		5,659

Treasury stock:
Balance beginning of period	(1,351)		(976)		(1,210)		(447)
Purchases/surrenders	—		(86)		(222)		(598)
Exercise of stock options and vesting of restricted stock units, net of forfeitures	3		2		84		(15)
Balance end of period	(1,348)		(1,060)		(1,348)		(1,060)

Accumulated other comprehensive income/(loss):
Balance beginning of period	(11)		(25)		(23)		(27)
Other comprehensive income, net of tax	12		11		24		17
Other	—		—		—		(4)
Balance end of period	1		(14)		1		(14)
Total equity attributable to Raymond James Financial, Inc.	$	6,965	$	6,502	$	6,965	$	6,502

Noncontrolling interests:
Balance beginning of period	$	36	$	69	$	62	$	84
Net loss attributable to noncontrolling interests	(2)		(2)		(26)		(16)
Capital contributions	—		—		—		2
Distributions and other	16		(5)		14		(8)


Balance end of period	50		62		50		62
Total shareholders’ equity	$	7,015	$	6,564	$	7,015	$	6,564

Three months ended March 31, Six months ended March 31,
$ in millions, except per share amounts 2020 2019 2020 2019
Common stock, par value $.01 per share:
Balance beginning of period $ 2
$ 2
$ 2
$ 2
Share issuances —

—
—
—
Balance end of period 2
2

2

2

Additional paid-in capital:

Balance beginning of period 1,922

1,871
1,938
1,808
Employee stock purchases 11

12
17
20
Exercise of stock options and vesting of restricted stock units, net of forfeitures (8 )

9
(71 ) 25
Restricted stock, stock option and restricted stock unit expense 28

25
69
64
Balance end of period 1,953
1,917

1,953

1,917

Retained earnings:

Balance beginning of period 6,086

5,236
5,874
5,032
Net income attributable to Raymond James Financial, Inc. 169

261
437
510
Cash dividends declared (see Note 21) (50 ) (49 ) (106 ) (99 )
Other —
—
—
5
Balance end of period 6,205
5,448
6,205
5,448

Treasury stock:

Balance beginning of period (1,163 ) (927 ) (1,210 ) (447 )
Purchases/surrenders (203 ) (48 ) (222 ) (512 )
Exercise of stock options and vesting of restricted stock units, net of forfeitures 15
(1 ) 81
(17 )
Balance end of period (1,351 ) (976 ) (1,351 ) (976 )

Accumulated other comprehensive loss:

Balance beginning of period (5 ) (39 ) (23 ) (27 )
Other comprehensive income/(loss), net of tax (6 ) 14
12
6
Other —
—
—
(4 )
Balance end of period (11 ) (25 ) (11 ) (25 )
Total equity attributable to Raymond James Financial, Inc. $ 6,798

$ 6,366
$ 6,798
$ 6,366

Noncontrolling interests:

Balance beginning of period $ 61
$ 82
$ 62
$ 84
Net loss attributable to noncontrolling interests (23 ) (12 ) (24 ) (14 )
Capital contributions —
—
—
2
Distributions and other (2 ) (1 ) (2 ) (3 )
Balance end of period 36
69
36
69
Total shareholders’ equity $ 6,834
$ 6,435
$ 6,834
$ 6,435

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

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Six months ended March 31,
$ in millions 2020 2019
Cash flows from operating activities:
Net income $ 437
$ 510
Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization 58
53
Deferred income taxes (14 ) (1 )
Premium and discount amortization on available-for-sale securities and loss on other investments 43
7
Provisions for loan losses, legal and regulatory proceedings and bad debts 124
38
Share-based compensation expense 74
65
Unrealized (gain)/loss on company-owned life insurance policies, net of expenses 76
8
Other (4 ) 27
Net change in:

Securities purchased under agreements to resell, net of securities sold under agreements to repurchase 273
(53 )
Securities loaned, net of securities borrowed (297 ) 319
Loans provided to financial advisors, net of repayments (11 ) 1
Brokerage client receivables and other accounts receivable, net (203 ) 587
Trading instruments, net —
(36 )
Derivative instruments, net (25 ) (93 )
Other assets (176 ) (118 )
Brokerage client payables and other accounts payable 2,937
(1,088 )
Accrued compensation, commissions and benefits (340 ) (229 )
Proceeds from sales of securitizations and loans held for sale, net of purchases and originations of loans held for sale (9 ) 23
Net cash provided by operating activities 2,943
20

Cash flows from investing activities:

Additions to property and equipment (71 ) (59 )
Increase in bank loans, net (1,066 ) (779 )
Proceeds from sales of loans held for investment 25
184
Purchases of available-for-sale securities (1,403 ) (509 )
Available-for-sale securities maturations, repayments and redemptions 435
295
Other investing activities, net (10 ) (42 )
Net cash used in investing activities (2,090 ) (910 )

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Six months ended March 31,
$ in millions 2020 2019
Cash flows from financing activities:
Proceeds from borrowings on the RJF Credit Facility —
300
Repayments of borrowings on the RJF Credit Facility —
(300 )
Proceeds from Federal Home Loan Bank advances 850
—
Repayments of Federal Home Loan Bank advances and other borrowed funds (853 ) (3 )
Proceeds from senior notes issuances, net of debt issuance costs paid 495
—
Exercise of stock options and employee stock purchases 43
43
Increase in bank deposits 7,742
1,676
Purchases of treasury stock (222 ) (521 )
Dividends on common stock (103 ) (95 )
Distributions to noncontrolling interests, net (1 ) (1 )
Net cash provided by financing activities 7,951
1,099

Currency adjustment:

Effect of exchange rate changes on cash (82 ) (31 )
Net increase in cash and cash equivalents and cash and cash equivalents segregated pursuant to regulations 8,722
178
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 $ 14,693
$ 6,119

Cash and cash equivalents $ 10,648
$ 3,831
Cash and cash equivalents segregated pursuant to regulations 4,045
2,288
Total cash and cash equivalents and cash and cash equivalents segregated pursuant to regulations at end of period $ 14,693
$ 6,119

Supplemental disclosures of cash flow information:

Cash paid for interest $ 92
$ 147
Cash paid for income taxes, net $ 176
$ 188

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


	Nine months ended June 30,
$ in millions	2020		2019
Cash flows from operating activities:
Net income	$	609	$	769
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	88		81
Deferred income taxes	(13)		(22)
Premium and discount amortization on available-for-sale securities and loss on other investments	53		14
Provisions for loan losses, legal and regulatory proceedings and bad debts	209		45
Share-based compensation expense	97		88
Unrealized gain on company-owned life insurance policies, net of expenses	(10)		(9)
Other	4		31
Net change in:
Securities purchased under agreements to resell, net of securities sold under agreements to repurchase	226		(61)
Securities loaned, net of securities borrowed	(287)		(44)
Loans provided to financial advisors, net of repayments	(23)		(28)
Brokerage client receivables and other accounts receivable, net	126		679
Trading instruments, net	216		(52)
Derivative instruments, net	(68)		(137)
Other assets	(64)		(83)
Brokerage client payables and other accounts payable	1,621		(1,300)
Accrued compensation, commissions and benefits	(161)		(99)
Proceeds from sales of securitizations and loans held for sale, net of purchases and originations of loans held for sale	32		27
Net cash provided by/(used in) operating activities	2,655		(101)

Cash flows from investing activities:
Additions to property and equipment	(97)		(102)
Increase in bank loans, net	(978)		(1,226)
Proceeds from sales of loans held for investment	272		210
Purchases of available-for-sale securities	(3,147)		(689)
Available-for-sale securities maturations, repayments and redemptions	744		456
Proceeds from sales of available-for-sale securities	222		—
Business acquisition, net of cash acquired	(5)		(5)
Other investing activities, net	(31)		(30)
Net cash used in investing activities	(3,020)		(1,386)

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



RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
	Nine months ended June 30,
$ in millions	2020		2019
Cash flows from financing activities:
Proceeds from borrowings on the RJF Credit Facility	—		300
Repayments of borrowings on the RJF Credit Facility	—		(300)
Proceeds from short-term borrowings, net	—		50
Proceeds from Federal Home Loan Bank advances	850		850
Repayments of Federal Home Loan Bank advances and other borrowed funds	(854)		(854)
Proceeds from senior notes issuances, net of debt issuance costs paid	494		—
Exercise of stock options and employee stock purchases	55		53
Increase in bank deposits	3,091		2,224
Purchases of treasury stock	(222)		(616)
Dividends on common stock	(154)		(143)
Acquisitions of and distributions to noncontrolling interests, net	(2)		(54)
Net cash provided by financing activities	3,258		1,510

Currency adjustment:
Effect of exchange rate changes on cash	(27)		(12)
Net increase in cash and cash equivalents and cash and cash equivalents segregated pursuant to regulations	2,866		11
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	$	8,837	$	5,952

Cash and cash equivalents	$	5,632	$	3,596
Cash and cash equivalents segregated pursuant to regulations	3,205		2,356
Total cash and cash equivalents and cash and cash equivalents segregated pursuant to regulations at end of period	$	8,837	$	5,952

Supplemental disclosures of cash flow information:
Cash paid for interest	$	118	$	208
Cash paid for income taxes, net	$	202	$	295

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

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

June 30, 2020

~~March 31, 2020~~

NOTE 1 – ORGANIZATION AND BASIS OF PRESENTATION

Organization

Raymond James Financial, Inc. (“RJF,” the “firm” or the “Company”) is a financial holding company which, together with its subsidiaries, is engaged in various financial services 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. The firm also provides corporate and retail banking services, and trust services. For further information about our business segments, see Note 22 of this Form 10-Q. As used herein, the terms “our,” “we,” 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 of our Annual Report on Form 10-K (“2019 Form 10-K”) for the year ended September 30, 2019, as filed with the United States (“U.S.”) Securities and Exchange Commission (“SEC”) and in Note 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 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 and Notes thereto included in our 2019 Form 10-K. To prepare condensed consolidated financial statements in 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 2019 Form 10-K. During the ~~six~~nine months ended ~~March 31,~~June 30, 2020, there were no significant changes to our significant accounting policies other than the accounting policies adopted or modified as part of our implementation of new or amended accounting guidance, as noted in the following sections.

Recent accounting developments

Accounting guidance recently adopted

Lease accounting - In February 2016, the 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

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

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

of whether they are classified as finance or operating leases. We adopted this guidance as of October 1, 2019 using the alternative modified retrospective approach, with 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 on our results of operations or cash flows. The impact of the adoption on our regulatory capital measures was insignificant. See Note 10 for further information.

Derivatives and hedging (interest rate) - In October 2018, the FASB issued guidance amending Derivatives and Hedging (Topic 815) to 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 will apply the guidance prospectively for qualifying new or re-designated hedging relationships. The adoption did not impact our financial position or results of operations.

Reference rate reform - In March 2020, the FASB issued guidance to ease the financial reporting burdens of the expected market transition from LIBOR and other interbank offered rates to alternative reference rates, such as SOFR (ASU 2020-04). The guidance simplifies the accounting for modifying contracts (including those in hedging relationships) that refer to LIBOR and other interbank offered rates. In addition, the guidance allows for changes to the critical terms of a hedging relationship affected by reference rate reform without having to dedesignate the relationship. The guidance was effective upon issuance and generally can be applied through December 31, 2022. We have elected certain expedients for cash flow hedges to assert that the hedged forecasted transaction remains probable, regardless of any expected modification in terms related to reference rate reform. The ~~expedient~~expedients elected did not impact our financial position or results of operations.

Accounting guidance not yet adopted as of ~~March 31,~~June 30, 2020

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 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. Although permitted, we do not plan to early adopt. Our cross-functional team ~~has continued our~~continues with the implementation efforts. We are in the process of validating our credit loss models ~~as well as~~and establishing formal ~~policies~~procedures and ~~procedures, including~~ control documentation related to this new guidance. In addition, we are ~~developing the new~~finalizing required disclosures ~~required by this new guidance.~~and policies. We continue to evaluate the impact the adoption of this new guidance will have on our financial position and results of operations. The impact will ultimately depend on, among other things, ~~changes to~~ our methodologies, management judgments, current and expected macroeconomic conditions, and the nature and characteristics of financial assets held by us on the date of adoption.

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited)

Internal use software (cloud computing) - In August 2018, the FASB issued guidance 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 and recognized over the non-cancelable term of the cloud computing arrangements plus any optional renewal periods (1) that are reasonably certain to be exercised by the customer or (2) for which exercise of the renewal option is controlled by the cloud service provider. This amended guidance is first effective for our fiscal year beginning on October 1, 2020, with early adoption permitted, ~~although we do not plan to early adopt. The guidance~~and may be adopted using either ~~using the~~a prospective or retrospective approach. We ~~are currently evaluating the~~plan to adopt this standard prospectively effective for annual periods beginning October 1, 2020. The impact of this ~~new~~amended guidance is dependent on ~~our financial position and results of operations.~~implementation costs incurred subsequent to adoption.

Consolidation (decision making fees) - In October 2018, the FASB issued guidance on how all entities evaluate decision-making fees under the VIE guidance (ASU 2018-17). Under the new guidance, to determine whether decision-making fees represent a variable interest, an entity 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, 2020. Although permitted, we do not plan to early adopt. We are evaluating the impact the adoption of this new guidance will have on our financial position and results of operations.

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited)

NOTE 3 – 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 2019 Form 10-K. The following tables present assets and liabilities measured at fair value on a recurring basis. Netting adjustments represent the impact of counterparty and collateral netting on our derivative balances included on our Condensed Consolidated Statements of Financial Condition. See Note 5 for additional information.


$ in millions	Level 1		Level 2		Level 3		Netting adjustments		Balance as of June 30, 2020
Assets at fair value on a recurring basis:
Trading instruments
Municipal and provincial obligations	$	5	$	77	$	—	$	—	$	82
Corporate obligations	6		46		—		—		52
Government and agency obligations	16		66		—		—		82
Agency mortgage-backed securities (“MBS”) and collateralized mortgage obligations (“CMOs”)	—		102		—		—		102
Non-agency CMOs and asset-backed securities (“ABS”)	—		7		—		—		7
Total debt securities	27		298		—		—		325
Equity securities	9		—		—		—		9
Brokered certificates of deposit	—		12		—		—		12
Other	—		—		15		—		15
Total trading instruments	36		310		15		—		361
Available-for-sale securities ⁽¹⁾	16		5,614		—		—		5,630
Derivative assets
Interest rate - matched book	—		351		—		—		351
Interest rate - other	15		239		—		(153)		101

Total derivative assets	15		590		—		(153)		452
Other investments - private equity - not measured at net asset value (“NAV”)	—		—		30		—		30
All other investments	201		1		22		—		224
Subtotal	268		6,515		67		(153)		6,697
Other investments - private equity - measured at NAV									73
Total assets at fair value on a recurring basis	$	268	$	6,515	$	67	$	(153)	$	6,770

Liabilities at fair value on a recurring basis:
Trading instruments sold but not yet purchased
Municipal and provincial obligations	$	1	$	—	$	—	$	—	$	1
Corporate obligations	—		3		—		—		3
Government and agency obligations	105		—		—		—		105
Non-agency CMOs and ABS	—		3		—		—		3
Total debt securities	106		6		—		—		112
Equity securities	42		—		—		—		42

Total trading instruments sold but not yet purchased	148		6		—		—		154
Derivative liabilities
Interest rate - matched book	—		351		—		—		351
Interest rate - other	17		154		—		(141)		30
Foreign exchange	—		12		—		—		12
Other	—		1		—		—		1
Total derivative liabilities	17		518		—		(141)		394
Total liabilities at fair value on a recurring basis	$	165	$	524	$	—	$	(141)	$	548

$ in millions Level 1 Level 2 Level 3
Netting
adjustments
Balance as of
March 31,
2020
Assets at fair value on a recurring basis:
Trading instruments
Municipal and provincial obligations $ —
$ 14
$ —
$ —
$ 14
Corporate obligations 12
9
—
—
21
Government and agency obligations 30
28
—
—
58
Agency mortgage-backed securities (“MBS”) and collateralized mortgage obligations (“CMOs”) —
281
—
—
281
Non-agency CMOs and asset-backed securities (“ABS”) —
17
—
—
17
Total debt securities 42

349
—
—
391
Equity securities 9
—
—
—
9
Brokered certificates of deposit —
24
—
—
24
Other —
—
21
—
21
Total trading instruments 51
373
21
—
445
Available-for-sale securities ⁽¹⁾
16
4,249
—
—
4,265
Derivative assets
Interest rate - matched book —
351
—
—
351
Interest rate - other 93
266
—
(263 ) 96
Total derivative assets 93
617
—
(263 ) 447
Other investments - private equity - not measured at net asset value (“NAV”) —
—
30
—
30
All other investments 192
1
22
—
215
Subtotal 352
5,240
73
(263 ) 5,402
Other investments - private equity - measured at NAV 71
Total assets at fair value on a recurring basis $ 352

$ 5,240

$ 73

$ (263 )
$ 5,473

Liabilities at fair value on a recurring basis:
Trading instruments sold but not yet purchased
Municipal and provincial obligations $ 1
$ —
$ —
$ —
$ 1
Corporate obligations 1
7
—
—
8
Government and agency obligations 6
—
—
—
6
Non-agency CMOs and ABS —
6
—
—
6
Total debt securities 8
13
—
—
21
Equity securities 3
—
—
—
3
Other —
—
—
—
—
Total trading instruments sold but not yet purchased 11
13
—
—
24
Derivative liabilities
Interest rate - matched book —
351
—
—
351
Interest rate - other 102
185
—
(218 ) 69
Foreign exchange —
6
—
—
6
Equity —
1
—
—
1
Total derivative liabilities 102
543
—
(218 ) 427
Total liabilities at fair value on a recurring basis $ 113
$ 556
$ —
$ (218 ) $ 451

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


~~(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


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


$ 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
Other	—		6		—		—		6
Total derivative liabilities	4		430		—		(121)		313
Total liabilities at fair value on a recurring basis	$	279	$	450	$	1	$	(121)	$	609

(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)

Level 3 recurring fair value measurements

The following tables 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 may include changes in fair value that were attributable to both observable and unobservable inputs. In the 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 June 30, 2020 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	$	21	$	30	$	22	$	—
Total gains/(losses) included in earnings	(5)		—		—		—
Purchases and contributions	11		—		—		—
Sales and distributions	(12)		—		—		—
Transfers:
Into Level 3	—		—		—		—
Out of Level 3	—		—		—		—
Fair value end of period	$	15	$	30	$	22	$	—
Unrealized gains/(losses) for the period included in earnings for instruments held at the end of the reporting period	$	2	$	—	$	—	$	—


Three months ended March 31, 2020 Level 3 instruments at fair value
Nine Months Ended June 30, 2020 Level 3 instruments at fair value													Nine Months Ended June 30, 2020 Level 3 instruments at fair value
	Financial assets									Financial liabilities				Financial assets									Financial liabilities
	Trading instruments			Other investments						Trading instruments				Trading instruments		Other investments						Trading instruments
$ in millions	Other			Private equity investments			All other			Other			$ in millions	Other		Private equity investments		All other		Other
Fair value beginning of period	$	19		$	62		$	24		$	(1	)	Fair value beginning of period	$	3	$	63	$	24	$	(1)
Total gains/(losses) included in earnings	3			(32		)	(2		)	—			Total gains/(losses) included in earnings	(2)		(32)		(2)		—
Purchases and contributions	22			—			—			1			Purchases and contributions	64		—		—		2
Sales and distributions	(23		)	—			—			—			Sales and distributions	(50)		(1)		—		(1)
Transfers:													Transfers:
Into Level 3	—			—			—			—			Into Level 3	—		—		—		—
Out of Level 3	—			—			—			—			Out of Level 3	—		—		—		—
Fair value end of period	$	21		$	30		$	22		$	—		Fair value end of period	$	15	$	30	$	22	$	—
Unrealized gains/(losses) for the period included in earnings for instruments held at the end of the reporting period	$	5		$	(32	)	$	(2	)	$	—		Unrealized gains/(losses) for the period included in earnings for instruments held at the end of the reporting period	$	1	$	(32)	$	(2)	$	—


Three months ended June 30, 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	$	2	$	59	$	67	$	(7)
Total gains/(losses) included in earnings	(1)		—		(2)		—
Purchases and contributions	26		—		—		7
Sales and distributions	(26)		—		—		(3)
Transfers:
Into Level 3	—		—		—		—
Out of Level 3	—		—		—		—
Fair value end of period	$	1	$	59	$	65	$	(3)
Unrealized gains/(losses) for the period included in earnings for instruments held at the end of the reporting period	$	1	$	—	$	(2)	$	—

Six months ended March 31, 2020
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 3
(32 ) (2 ) —
Purchases and contributions 53
—
—
2
Sales and distributions (38 ) (1 ) —
(1 )
Transfers:

Into Level 3 —
—
—
—
Out of Level 3 —
—
—
—
Fair value end of period $ 21
$ 30
$ 22
$ —
Unrealized gains/(losses) for the period included in earnings for instruments held at the end of the reporting period $ 5
$ (32 ) $ (2 ) $ —

Three months ended March 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
$ 59
$ 67
$ (4 )
Total gains/(losses) included in earnings (1 ) —
—
—
Purchases and contributions 22
—
—
4
Sales and distributions (22 ) —
—
(7 )
Transfers:
Into Level 3 —
—
—
—
Out of Level 3 —
—
—
—
Fair value end of period $ 2
$ 59
$ 67
$ (7 )
Unrealized gains/(losses) for the period included in earnings for instruments held at the end of the reporting period $ 1
$ —
$ —
$ —

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited)

Six months ended March 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 $ 1
$ 56
$ 67
$ (7 )
Total gains/(losses) included in earnings —
—
—
2
Purchases and contributions 60
3
—
9
Sales and distributions (59 ) —
—
(11 )
Transfers:
Into Level 3 —
—
—
—
Out of Level 3 —
—
—
—
Fair value end of period $ 2
$ 59
$ 67
$ (7 )
Unrealized gains/(losses) for the period included in earnings for instruments held at the end of the reporting period $ —
$ —
$ —
$ —


Nine Months Ended June 30, 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	$	1	$	56	$	67	$	(7)
Total gains/(losses) included in earnings	(1)		—		(2)		2
Purchases and contributions	86		3		—		16
Sales and distributions	(85)		—		—		(14)
Transfers:
Into Level 3	—		—		—		—
Out of Level 3	—		—		—		—
Fair value end of period	$	1	$	59	$	65	$	(3)
Unrealized gains/(losses) for the period included in earnings for instruments held at the end of the reporting period	$	1	$	—	$	(2)	$	—

The net unrealized losses on our Level 3 private equity investments for the ~~three and six~~nine months ended ~~March 31,~~June 30, 2020 were primarily driven by the negative impact of the coronavirus (“COVID-19”) pandemic on certain of our investments.

As of ~~March 31,~~June 30, 2020, ~~11%~~15% of our assets and 1% of our liabilities were 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. As of ~~March 31,~~June 30, 2020 and September 30, 2019, instruments measured at fair value on a recurring basis categorized as Level 3 represented 1% and 2%, respectively, of our assets measured at fair value.

Quantitative information about level 3 fair value measurements

The following tables present the valuation techniques and significant unobservable inputs used in the valuation of certain of our private equity investments 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. Certain investments are valued initially at transaction price 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 or new developments become known.

Recurring measurements

$ in millions

Fair value at June 30, 2020

Valuation technique(s)

Unobservable input

Range
(weighted-average)

Other investments - private equity investments (not measured at NAV)

Discounted cash flow, transaction price or other investment-specific events

Discount rate

25%

Terminal earnings before interest, tax, depreciation and amortization (“EBITDA”) multiple

9.0x

Terminal year

2021 - 2042 (2024)

Fair value at September 30, 2019

Other investments - private equity investments (not measured at NAV)

Discounted cash flow, transaction price or other investment-specific events

Discount rate

25%

Terminal EBITDA multiple

12.5x

Terminal year

2021 - 2042 (2022)

Recurring measurements Fair value at March 31, 2020 Valuation technique(s) Unobservable input
Range
(weighted-average)
$ in millions
Other investments - private equity investments (not measured at NAV) $ 30
Discounted cash flow, transaction price or other investment-specific events Discount rate 25 %
Terminal earnings before interest, tax, depreciation and amortization (“EBITDA”) multiple 9.0x
Terminal year 2021 - 2042 (2024)
Fair value at September 30, 2019
Other investments - private equity investments (not measured at NAV) $ 63
Discounted cash flow, transaction price or other investment-specific events Discount rate 25 %
Terminal EBITDA multiple 12.5x
Terminal year 2021 - 2042 (2022)

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

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

Qualitative 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 in the following section.

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited)

Private equity 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. Increases in the discount rate would have resulted in a lower fair value measurement. Increases in the terminal EBITDA multiple would have resulted in a higher fair value measurement. Increases in the terminal year are dependent upon each investment’s strategy, but generally result in a lower fair value measurement.

Investments in private equity measured at net asset value per share

As more fully described in Note 2 of our 2019 Form 10-K, as a practical expedient, we utilize 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 includes various direct investments, as well as investments in third-party private equity 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 by distributions received through the liquidation of the underlying assets of those funds, the timing of which is uncertain.

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


$ in millions	Recorded value		Unfunded commitment
June 30, 2020
Private equity investments measured at NAV	$	73	$	9
Private equity investments not measured at NAV	30
Total private equity investments	$	103

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

$ in millions Recorded value Unfunded commitment
March 31, 2020
Private equity investments measured at NAV $ 71
$ 12
Private equity investments not measured at NAV 30

Total private equity investments
$ 101

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

Total private equity investments $ 146

Of the total private equity investments, the portions we owned were ~~$79~~$81 million and $99 million as of ~~March 31,~~June 30, 2020 and September 30, 2019, respectively. The portions of the private equity investments we did not own were $22 million and $47 million as of ~~March 31,~~June 30, 2020 and September 30, 2019, respectively, and were included as a component of noncontrolling interests on our Condensed Consolidated Statements of Financial Condition.

Many of these fund investments meet the definition of prohibited covered funds as defined by the Volcker Rule enacted pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act of 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 investments until July 2022. However, our current focus is on the divestiture of this portfolio.

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited)

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)
June 30, 2020
Bank loans, net:
Impaired loans: residential	$	5	$	13	$	18	Discounted cash flow	Prepayment rate	7 yrs. - 12 yrs. (10.4 yrs.)
Impaired loans: corporate	$	—	$	7	$	7	Collateral or discounted cash flow ⁽¹⁾	Not meaningful ⁽¹⁾	Not meaningful ⁽¹⁾
Loan held for sale	$	21	$	—	$	21	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

$ in millions Level 2 Level 3 Total fair value Valuation technique(s) Unobservable input
Range
(weighted-average)
March 31, 2020
Bank loans, net:
Impaired loans: residential $ 4
$ 14
$ 18
Discounted cash flow Prepayment rate 7 yrs. - 12 yrs. (10.4 yrs.)
Impaired loans: corporate $ —
$ 10
$ 10

Collateral or discounted cash flow ⁽¹⁾

Not meaningful ⁽¹⁾

Not meaningful ⁽¹⁾
Loan held for sale $ 67
$ —
$ 67
N/A N/A N/A
Other assets: other real estate owned $ 2
$ —
$ 2
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.


~~(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.

Financial instruments not recorded at fair value

Many, but not all, of the financial instruments we hold were recorded at fair value on 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 ~~March 31,~~June 30, 2020 and September 30, 2019. This table excludes financial instruments that are carried at amounts which approximate fair value. Refer to Note 4 of our 2019 Form 10-K for a discussion of the fair value hierarchy classification of our financial instruments that are not recorded at fair value.


$ in millions	Level 2		Level 3		Total estimated fair value		Carrying amount
June 30, 2020
Financial assets:
Bank loans, net	$	65	$	21,278	$	21,343	$	21,177

Financial liabilities:
Bank deposits - certificates of deposit	$	—	$	1,126	$	1,126	$	1,088
Senior notes payable	$	2,413	$	—	$	2,413	$	2,044

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

$ in millions Level 2 Level 3 Total estimated fair value Carrying amount
March 31, 2020
Financial assets:
Bank loans, net $ 56
$ 21,823
$ 21,879
$ 21,693
Financial liabilities:

Bank deposits - certificates of deposit $ —
$ 1,191
$ 1,191
$ 1,150
Senior notes payable $ 2,208
$ —
$ 2,208
$ 2,044

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

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited)

NOTE 4 – AVAILABLE-FOR-SALE SECURITIES

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

The following table details the amortized cost and fair values of our available-for-sale securities.


$ in millions	Cost basis		Gross unrealized gains		Gross unrealized losses		Fair value
June 30, 2020
Agency residential MBS	$	2,895	$	69	$	(1)	$	2,963
Agency commercial MBS	570		20		—		590
Agency CMOs	2,032		29		—		2,061
Other securities	15		1		—		16
Total available-for-sale securities	$	5,512	$	119	$	(1)	$	5,630

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 millions Cost basis
Gross
unrealized gains

Gross
unrealized losses
Fair value
March 31, 2020
Agency residential MBS $ 1,929
$ 56
$ —
$ 1,985
Agency commercial MBS 533
16
—
549
Agency CMOs 1,677
39
(1 ) 1,715
Other securities 15
1
—
16
Total available-for-sale securities $ 4,154
$ 112
$ (1 ) $ 4,265

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

See Note 3 for additional information regarding the fair value of available-for-sale securities.

The following table details the contractual maturities, amortized costs, carrying values and current yields for our available-for-sale securities. Since our MBS and CMO available-for-sale securities are backed by mortgages, actual maturities may differ from contractual maturities because borrowers may have the right to prepay obligations without prepayment penalties. As of ~~March 31,~~June 30, 2020, the duration of our available-for-sale securities portfolio was approximately three years.


	June 30, 2020
$ 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	$	—		$	27		$	1,130		$	1,738		$	2,895
Carrying value	$	—		$	28		$	1,160		$	1,775		$	2,963
Agency commercial MBS
Amortized cost	$	12		$	170		$	285		$	103		$	570
Carrying value	$	12		$	175		$	298		$	105		$	590
Agency CMOs
Amortized cost	$	—		$	11		$	81		$	1,940		$	2,032
Carrying value	$	—		$	11		$	82		$	1,968		$	2,061
Other securities
Amortized cost	$	—		$	3		$	12		$	—		$	15
Carrying value	$	—		$	4		$	12		$	—		$	16
Total available-for-sale securities
Amortized cost	$	12		$	211		$	1,508		$	3,781		$	5,512
Carrying value	$	12		$	218		$	1,552		$	3,848		$	5,630
Weighted-average yield	1.99		%	2.29		%	2.05		%	1.82		%	1.90		%

March 31, 2020
$ 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 $ —
$ 32
$ 791
$ 1,106
$ 1,929
Carrying value $ —
$ 33
$ 818
$ 1,134
$ 1,985
Agency commercial MBS
Amortized cost $ —
$ 189
$ 265
$ 79
$ 533
Carrying value $ —
$ 193
$ 276
$ 80
$ 549
Agency CMOs
Amortized cost $ —
$ 2
$ 79
$ 1,596
$ 1,677
Carrying value $ —
$ 2
$ 81
$ 1,632
$ 1,715
Other securities
Amortized cost $ —
$ 3
$ 12
$ —
$ 15
Carrying value $ —
$ 4
$ 12
$ —
$ 16
Total available-for-sale securities
Amortized cost $ —
$ 226
$ 1,147
$ 2,781
$ 4,154
Carrying value $ —
$ 232
$ 1,187
$ 2,846
$ 4,265
Weighted-average yield — % 2.28 % 2.34 % 2.25 % 2.27 %

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited)

The following table details the gross unrealized losses and fair 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.


	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
June 30, 2020
Agency residential MBS	$	284	$	(1)	$	—	$	—	$	284	$	(1)

Agency CMOs	149		—		—		—		149		—

Total	$	433	$	(1)	$	—	$	—	$	433	$	(1)

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 millions Estimated
fair value Unrealized
losses Estimated
fair value Unrealized
losses Estimated
fair value Unrealized
losses
March 31, 2020
Agency residential MBS $ 7
$ —
$ —
$ —
$ 7
$ —
Agency commercial MBS 14
—
22
—
36
—
Agency CMOs 63
(1 ) 18
—
81
(1 )
Total $ 84
$ (1 ) $ 40
$ —
$ 124
$ (1 )

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 )

The contractual cash flows of our available-for-sale securities are guaranteed by the U.S. government or its agencies. At ~~March 31,~~June 30, 2020, of the 2026 available-for-sale securities in an unrealized loss position, 14all were in a continuous unrealized loss position for less than 12 ~~months and 6 were for 12 months or more.~~months. At ~~March 31,~~June 30, 2020, debt securities we held in excess of ten percent of our equity included Federal National Home Mortgage Association (“FNMA”) and Federal Home Loan Mortgage Corporation (“FHLMC”) which had an amortized cost of ~~$2.67~~$3.78 billion and ~~$1.22~~$1.44 billion, respectively, and a fair value of ~~$2.74~~$3.86 billion and ~~$1.25~~$1.47 billion, respectively.

During the three and ~~six~~nine months ended ~~March 31,~~June 30, 2020, we received proceeds of $222 million, resulting in an insignificant gain, from sales of available-for-sale securities. The gain from the sales was included in “Other” revenues on our Condensed Consolidated Statements of Income and Comprehensive Income. During the three and nine months ended June 30, 2019, there were no0 sales of available-for-sale securities.

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited)

NOTE 5 – DERIVATIVE ASSETS AND DERIVATIVE LIABILITIES

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

Derivative balances included on our financial statements

The following table presents the gross fair value and notional amount of derivatives by product type, the amounts of counterparty and cash collateral netting on 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.


	June 30, 2020										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	$	351	$	351	$	2,182	$	280	$	280	$	2,296
Interest rate - other ⁽¹⁾	254		171		15,443		184		146		10,690
Foreign exchange	—		5		623		—		1		573
Other	—		1		516		—		6		272
Subtotal	605		528		18,764		464		433		13,831
Derivatives designated as hedging instruments
Interest rate	—		—		850		1		—		850
Foreign exchange	—		7		842		—		1		856
Subtotal	—		7		1,692		1		1		1,706
Total gross fair value/notional amount	605		535		$	20,456	465		434		$	15,537
Offset on the Condensed Consolidated Statements of Financial Condition
Counterparty netting	(41)		(41)				(24)		(24)
Cash collateral netting	(112)		(100)				(103)		(97)
Total amounts offset	(153)		(141)				(127)		(121)
Net amounts presented on the Condensed Consolidated Statements of Financial Condition	452		394				338		313
Gross amounts not offset on the Condensed Consolidated Statements of Financial Condition
Financial instruments ⁽²⁾	(373)		(351)				(297)		(280)
Total	$	79	$	43			$	41	$	33

March 31, 2020 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 $ 351
$ 351
$ 2,265
$ 280
$ 280
$ 2,296
Interest rate - other ⁽¹⁾
359
286
16,686
184
146
10,690
Foreign exchange —
3
576
—
1
573
Equity —
1
1
—
6
6
Subtotal 710

641

19,528

464

433

13,565
Derivatives designated as hedging instruments
Interest rate —
1
850
1
—
850
Foreign exchange —
3
816
—
1
856
Subtotal —

4

1,666

1

1

1,706
Total gross fair value/notional amount 710

645

$ 21,194

465

434

$ 15,271
Offset on the Condensed Consolidated Statements of Financial Condition
Counterparty netting (93 ) (93 ) (24 ) (24 )
Cash collateral netting (170 ) (125 ) (103 ) (97 )
Total amounts offset (263 ) (218 ) (127 ) (121 )
Net amounts presented on the Condensed Consolidated Statements of Financial Condition 447

427
338
313

Gross amounts not offset on the Condensed Consolidated Statements of Financial Condition
Financial instruments ⁽²⁾
(372 ) (351 ) (297 ) (280 )
Total $ 75
$ 76
$ 41
$ 33

(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.


~~(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.


~~(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.

The following table details the gains/(losses) included in accumulated other comprehensive income (“AOCI”), net of income taxes, on derivatives designated as hedging instruments. These gains/(losses) included any amounts reclassified from AOCI to net income during the period. See Note 16 for additional information.


	Three months ended June 30,						Nine months ended June 30,
$ in millions	2020		2019		2020		2019
Interest rate (cash flow hedges)	$	(4)	$	(19)	$	(37)	$	(49)
Foreign exchange (net investment hedges)	(21)		(12)		18		14
Total gains/(losses) in AOCI, net of taxes	$	(25)	$	(31)	$	(19)	$	(35)

Three months ended March 31, Six months ended March 31,
$ in millions 2020 2019 2020 2019
Interest rate (cash flow hedges) $ (43 ) $ (13 ) $ (33 ) $ (30 )
Foreign exchange (net investment hedges) 52
(11 ) 39
26
Total gains/(losses) in AOCI, net of taxes $ 9
$ (24 ) $ 6
$ (4 )

There were 0 components of derivative gains or losses excluded from the assessment of hedge effectiveness for each of the three and ~~six~~nine months ended ~~March 31,~~June 30, 2020 and 2019. We expect to reclassify ~~$12~~$15 million 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 87 years.

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited)

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.


$ in millions			Three months ended June 30,									Nine months ended June 30,
		Location of gain/(loss)			2020			2019			2020			2019
Interest rate	Principal transactions/other revenues		$	—		$	2		$	5		$	4
Foreign exchange	Other revenues		$	(19)		$	(8)		$	13		$	14
Other	Compensation, commissions and benefits expense		$	—		$	—		$	(1)		$	5

$ in millions Three months ended March 31, Six months ended March 31,
Location of gain/(loss) 2020 2019 2020 2019
Interest rate Principal transactions/other revenues $ —
$ —
$ 5
$ 2
Foreign exchange Other revenues $ 43
$ (4 ) $ 32
$ 22
Equity Compensation, commissions and benefits expense $ (1 ) $ —
$ (1 ) $ 5

Risks associated with our derivatives and related risk mitigation

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~~ 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. 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, which were insignificant as of both ~~March 31,~~June 30, 2020 and September 30, 2019. We are not exposed to market risk on these derivatives due to the pass-through transaction structure 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 derivatives. We are also exposed to foreign exchange risk related to our forward foreign exchange derivatives. On a daily basis, we monitor our risk exposure on our 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, both for the total portfolio and by maturity period.

Derivatives with credit-risk-related contingent features

Certain of our derivative contracts contain provisions that require our debt to maintain an investment-grade rating from 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 insignificant as of both ~~March 31,~~June 30, 2020 and September 30, 2019.

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited)

NOTE 6 – 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 2019 Form 10-K.

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
June 30, 2020
Gross amounts of recognized assets/liabilities	$	193	$	300	$	228	$	88
Gross amounts offset on the Condensed Consolidated Statements of Financial Condition	—		—		—		—
Net amounts presented on the Condensed Consolidated Statements of Financial Condition	193		300		228		88
Gross amounts not offset on the Condensed Consolidated Statements of Financial Condition	(193)		(293)		(228)		(78)
Net amounts	$	—	$	7	$	—	$	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 millions Reverse repurchase agreements Securities borrowed Repurchase agreements Securities loaned
March 31, 2020
Gross amounts of recognized assets/liabilities $ 130
$ 250
$ 215
$ 28
Gross amounts offset on the Condensed Consolidated Statements of Financial Condition —
—
—
—
Net amounts presented on the Condensed Consolidated Statements of Financial Condition 130

250

215

28
Gross amounts not offset on the Condensed Consolidated Statements of Financial Condition (130 ) (240 ) (215 ) (24 )
Net amounts $ —
$ 10
$ —
$ 4

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

Total collateral received under reverse repurchase agreements and the total amount of collateral posted under repurchase agreements exceeds the carrying value of these agreements on our Condensed Consolidated Statements of Financial Condition.

Collateral received and pledged

We receive cash and securities as collateral, primarily in connection with reverse repurchase agreements, securities borrowed, derivative transactions 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 to satisfy our collateral requirements under our repurchase agreements, securities lending agreements or other secured borrowings, to satisfy deposit requirements with clearing organizations, or to otherwise meet either our or our clients’ settlement requirements.

The following table presents financial instruments at fair value that we received as collateral, 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 previously described.


$ in millions	June 30, 2020		September 30, 2019
Collateral we received that was available to be delivered or repledged	$	2,516	$	2,931
Collateral that we delivered or repledged	$	723	$	897

$ in millions March 31,
2020 September 30,
2019
Collateral we received that was available to be delivered or repledged $ 2,503
$ 2,931
Collateral that we delivered or repledged $ 763
$ 897

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited)

Encumbered assets

We pledge certain of our 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 instruments. The following table presents information about our assets that have been pledged for one of the purposes previously described.


$ in millions	June 30, 2020		September 30, 2019
Had the right to deliver or repledge	$	334	$	591
Did not have the right to deliver or repledge	$	65	$	65
Bank loans, net pledged at Federal Home Loan Bank (“FHLB”) and the Federal Reserve Bank (“FRB”)	$	5,352	$	4,653

$ in millions March 31,
2020 September 30,
2019
Had the right to deliver or repledge $ 304
$ 591
Did not have the right to deliver or repledge $ 65
$ 65
Bank loans, net pledged at Federal Home Loan Bank (“FHLB”) and the Federal Reserve Bank $ 5,157
$ 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.


$ in millions	Overnight and continuous		Up to 30 days		30-90 days		Greater than 90 days		Total
June 30, 2020
Repurchase agreements:
Government and agency obligations	$	104	$	—	$	—	$	—	$	104
Agency MBS and CMOs	124		—		—		—		124
Total repurchase agreements	228		—		—		—		228
Securities loaned:
Equity securities	88		—		—		—		88
Total	$	316	$	—	$	—	$	—	$	316



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 millions Overnight and continuous Up to 30 days 30-90 days Greater than 90 days Total
March 31, 2020
Repurchase agreements:
Government and agency obligations $ 45
$ —
$ —
$ —
$ 45
Agency MBS and CMOs 170
—
—
—
170
Total repurchase agreements 215

—

—

—

215
Securities loaned:
Equity securities 28
—
—
—
28
Total $ 243

$ —

$ —

$ —

$ 243

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

As of both ~~March 31,~~June 30, 2020 and September 30, 2019, we did 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 7 – 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, commercial and residential real estate loans, securities-based loans (“SBL”) and other loans. These receivables are collateralized by first and, 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.

We segregate our loan portfolio into 6 loan portfolio segments: C&I, commercial real estate (“CRE”), CRE construction, tax-exempt, residential mortgage, and 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.

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

Notes to 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 are presented net of unearned income and deferred expenses, which include purchase premiums, purchase discounts and net deferred origination fees and costs.


	June 30, 2020						September 30, 2019
$ in millions	Balance		%		Balance		%
Loans held for investment:
C&I loans	$	7,731	36	%	$	8,098	38	%
CRE construction loans	219		1	%	185		1	%
CRE loans	3,695		17	%	3,652		17	%
Tax-exempt loans	1,290		6	%	1,241		6	%
Residential mortgage loans	4,917		23	%	4,454		21	%
SBL and other	3,631		17	%	3,349		16	%
Total loans held for investment	21,483				20,979
Net unearned income and deferred expenses	(12)				(12)
Total loans held for investment, net	21,471				20,967
Loans held for sale, net	86		—		142		1	%
Total loans held for sale and investment	21,557		100	%	21,109		100	%
Allowance for loan losses	(334)				(218)
Bank loans, net	$	21,223			$	20,891

March 31, 2020 September 30, 2019
$ in millions Balance % Balance %
Loans held for investment:

C&I loans $ 8,316
38 % $ 8,098
38 %
CRE construction loans 180
1 % 185
1 %
CRE loans 3,830
17 % 3,652
17 %
Tax-exempt loans 1,266
5 % 1,241
6 %
Residential mortgage loans 4,864
22 % 4,454
21 %
SBL and other 3,546
16 % 3,349
16 %
Total loans held for investment 22,002

20,979

Net unearned income and deferred expenses (13 )
(12 )
Total loans held for investment, net 21,989

20,967

Loans held for sale, net 123
1 % 142
1 %
Total loans held for sale and investment 22,112
100 % 21,109
100 %
Allowance for loan losses (324 )
(218 )
Bank loans, net $ 21,788

$ 20,891

At ~~March 31,~~June 30, 2020, the FHLB had a blanket lien on RJ Bank’s residential mortgage loan portfolio as security for the repayment of certain borrowings. See Note 12 for more information regarding borrowings from the FHLB.

Loans held for sale

RJ Bank originated or purchased ~~$443~~$185 million and ~~$1.15~~$1.33 billion of loans held for sale during the three and ~~six~~nine months ended ~~March 31,~~June 30, 2020, respectively, and ~~$475~~$522 million and ~~$1.27~~$1.79 billion during the three and ~~six~~nine months ended ~~March 31,~~June 30, 2019, respectively. Proceeds from the sale of these held for sale loans amounted to ~~$220~~$130 million and ~~$434~~$564 million during the three and ~~six~~nine months ended ~~March 31,~~June 30, 2020, respectively, and ~~$100~~$159 million and ~~$357~~$516 million during the three and ~~six~~nine months ended ~~March 31,~~June 30, 2019, respectively. Net gains resulting from such sales were insignificant in all periods during the three and ~~six~~nine months ended ~~March 31,~~June 30, 2020 and 2019.

Purchases and sales of loans held for investment

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


$ in millions	C&I loans		CRE loans		Residential mortgage loans		Total		$ in millions	C&I loans		CRE loans		Residential mortgage loans		Total
Three months ended March 31, 2020
Three months ended June 30, 2020									Three months ended June 30, 2020
Purchases	$	296	$	5	$	100	$	401	Purchases	$	—	$	—	$	113	$	113
Sales	$	—	$	—	$	—	$	—	Sales	$	265	$	27	$	—	$	292
Six months ended March 31, 2020
Nine months ended June 30, 2020									Nine months ended June 30, 2020
Purchases	$	363	$	5	$	258	$	626	Purchases	$	363	$	5	$	371	$	739
Sales	$	20	$	—	$	—	$	20	Sales	$	285	$	27	$	—	$	312
Three months ended March 31, 2019
Three months ended June 30, 2019									Three months ended June 30, 2019
Purchases	$	428	$	25	$	46	$	499	Purchases	$	247	$	10	$	132	$	389
Sales	$	24	$	—	$	—	$	24	Sales	$	7	$	—	$	—	$	7
Six months ended March 31, 2019
Nine months ended June 30, 2019									Nine months ended June 30, 2019
Purchases	$	690	$	25	$	122	$	837	Purchases	$	937	$	35	$	254	$	1,226
Sales	$	93	$	—	$	—	$	93	Sales	$	100	$	—	$	—	$	100

Sales in the preceding table represent the recorded investment (i.e., net of charge-offs and discounts or premiums) 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 2019 Form 10-K, corporate loan (C&I, CRE and CRE construction) sales generally occur as part of 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. 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
June 30, 2020
C&I loans	$	—	$	—	$	—	$	1	$	7,730	$	7,731
CRE construction loans	—		—		—		—		219		219
CRE loans	—		—		—		6		3,689		3,695
Tax-exempt loans	—		—		—		—		1,290		1,290
Residential mortgage loans:
First mortgage loans	4		—		4		14		4,875		4,893
Home equity loans/lines	—		—		—		—		24		24
SBL and other	—		—		—		—		3,631		3,631
Total loans held for investment	$	4	$	—	$	4	$	21	$	21,458	$	21,483

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 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
March 31, 2020
C&I loans $ —
$ —
$ —
$ 4
$ 8,312
$ 8,316
CRE construction loans —
—
—
—
180
180
CRE loans —
—
—
6
3,824
3,830
Tax-exempt loans —
—
—
—
1,266
1,266
Residential mortgage loans:

First mortgage loans 1
—
1
14
4,824
4,839
Home equity loans/lines —
—
—
—
25
25
SBL and other —
—
—
—
3,546
3,546
Total loans held for investment $ 1
$ —
$ 1
$ 24
$ 21,977
$ 22,002

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

The preceding table includes $9$6 million and $32 million at ~~March 31,~~June 30, 2020 and September 30, 2019, respectively, of nonaccrual loans which were current pursuant to their contractual terms.

Other real estate owned, included in “Other assets” on our Condensed Consolidated Statements of Financial Condition, was $2 million and $3 million at ~~both March 31,~~June 30, 2020 and September 30, ~~2019.~~2019, respectively. The recorded investment in mortgage loans secured by one-to-four family residential properties for which formal foreclosure proceedings were in process was $6 million and $7 million at ~~both March 31,~~June 30, 2020 and September 30, ~~2019.~~2019, respectively.

Impaired loans and troubled debt restructurings

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


	March 31, 2020						September 30, 2019							June 30, 2020										September 30, 2019
$ in millions	Gross recorded investment		Unpaid principal balance		Allowance for losses		Gross recorded investment		Unpaid principal balance		Allowance for losses		$ 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:													Impaired loans with allowance for loan losses:
C&I loans	$	4	$	4	$	1	$	19	$	20	$	6	C&I loans	$	1	$	1	$	1	$	19	$	20	$	6

Residential - first mortgage loans	8		10		1		11		13		1		Residential - first mortgage loans	8		10		1		11		13		1

Total	12		14		2		30		33		7		Total	9		11		2		30		33		7
Impaired loans without allowance for loan losses:													Impaired loans without allowance for loan losses:

CRE loans	7		12		—		8		13		—		CRE loans	7		12		—		8		13		—

Residential - first mortgage loans	11		17		—		11		17		—		Residential - first mortgage loans	11		16		—		11		17		—
Total	18		29		—		19		30		—		Total	18		28		—		19		30		—
Total impaired loans	$	30	$	43	$	2	$	49	$	63	$	7	Total impaired loans	$	27	$	39	$	2	$	49	$	63	$	7

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.

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited)

The preceding table includes CRE and residential first mortgage loans troubled debt restructurings (“TDRs”) of $7$6 million and ~~$17~~$16 million, respectively, at ~~March 31,~~June 30, 2020 and C&I, CRE and residential first mortgage loans TDRs of $19 million, $8 million and $18 million, respectively, at September 30, 2019.

The average balance of the total impaired loans was as follows.


	Three months ended June 30,						Nine months ended June 30,
$ in millions	2020		2019		2020		2019
C&I loans	$	2	$	26	$	10	$	19
CRE loans	6		10		7		4

Residential - first mortgage loans	19		24		20		25

Total average impaired loan balance	$	27	$	60	$	37	$	48

Three months ended March 31, Six months ended March 31,
$ in millions 2020 2019 2020 2019
C&I loans $ 9
$ 27
$ 13
$ 16
CRE loans 7
3
7
2
Residential - first mortgage loans 20
25
21
26
Total average impaired loan balance $ 36
$ 55
$ 41
$ 44

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.

Loss – Loans which are considered by management to be uncollectible and of such little value that their continuance on our books as an asset, without establishment of a specific valuation allowance or charge-off, is not warranted. We do not have any bank loan balances within this classification because, in accordance with 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.


$ in millions	Pass		Special mention		Substandard		Doubtful		Total
June 30, 2020
C&I loans	$	7,384	$	281	$	66	$	—	$	7,731
CRE construction loans	219		—		—		—		219
CRE loans	3,341		262		92		—		3,695
Tax-exempt loans	1,290		—		—		—		1,290
Residential mortgage loans:
First mortgage loans	4,861		9		23		—		4,893
Home equity loans/lines	24		—		—		—		24
SBL and other	3,631		—		—		—		3,631
Total loans held for investment	$	20,750	$	552	$	181	$	—	$	21,483

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 millions Pass Special mention Substandard Doubtful Total
March 31, 2020
C&I loans $ 8,045
$ 142
$ 129
$ —
$ 8,316
CRE construction loans 180
—
—
—
180
CRE loans 3,745
36
49
—
3,830
Tax-exempt loans 1,266
—
—
—
1,266
Residential mortgage loans:
First mortgage loans 4,808
8
23
—
4,839
Home equity loans/lines 25
—
—
—
25
SBL and other 3,546
—
—
—
3,546
Total loans held for investment $ 21,615
$ 186
$ 201
$ —
$ 22,002

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

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

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited)

Allowance for loan losses and reserve for unfunded lending commitments

The following table presents changes in the allowance for loan losses of RJ Bank by portfolio 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 June 30, 2020
Balance at beginning of period	$	197	$	3	$	88	$	11	$	18	$	7	$	324
Provision/(benefit) for loan losses	59		1		20		2		1		(2)		81
Net (charge-offs)/recoveries:
Charge-offs ⁽¹⁾	(71)		—		(2)		—		—		—		(73)
Recoveries	—		—		—		—		1		—		1
Net (charge-offs)/recoveries	(71)		—		(2)		—		1		—		(72)
Foreign exchange translation adjustment	1		—		—		—		—		—		1
Balance at end of period	$	186	$	4	$	106	$	13	$	20	$	5	$	334

Nine months ended June 30, 2020
Balance at beginning of period	$	139	$	3	$	46	$	9	$	16	$	5	$	218
Provision for loan losses	118		1		62		4		3		—		188
Net (charge-offs)/recoveries:
Charge-offs ⁽¹⁾	(71)		—		(2)		—		—		—		(73)
Recoveries	—		—		—		—		1		—		1
Net (charge-offs)/recoveries	(71)		—		(2)		—		1		—		(72)
Foreign exchange translation adjustment	—		—		—		—		—		—		—
Balance at end of period	$	186	$	4	$	106	$	13	$	20	$	5	$	334

Three months ended June 30, 2019
Balance at beginning of period	$	140	$	3	$	45	$	8	$	17	$	5	$	218
Provision/(benefit) for loan losses	(8)		1		1		1		(1)		1		(5)
Net (charge-offs)/recoveries:
Charge-offs ⁽¹⁾	—		—		—		—		—		—		—
Recoveries	1		—		—		—		—		—		1
Net recoveries	1		—		—		—		—		—		1
Foreign exchange translation adjustment	1		—		—		—		—		—		1
Balance at end of period	$	134	$	4	$	46	$	9	$	16	$	6	$	215

Nine months ended June 30, 2019
Balance at beginning of period	$	123	$	3	$	47	$	9	$	17	$	4	$	203
Provision/(benefit) for loan losses	13		1		2		—		(2)		2		16
Net (charge-offs)/recoveries:
Charge-offs ⁽¹⁾	(3)		—		(3)		—		—		—		(6)
Recoveries	1		—		—		—		1		—		2
Net (charge-offs)/recoveries	(2)		—		(3)		—		1		—		(4)
Foreign exchange translation adjustment	—		—		—		—		—		—		—
Balance at end of period	$	134	$	4	$	46	$	9	$	16	$	6	$	215

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 March 31, 2020

Balance at beginning of period $ 139
$ 2
$ 46
$ 8
$ 17
$ 4
$ 216
Provision for loan losses 59
1
42
3
1
3
109
Net (charge-offs)/recoveries:

Charge-offs —
—
—
—
—
—
—
Recoveries —
—
—
—
—
—
—
Net (charge-offs)/recoveries —
—
—
—
—
—
—
Foreign exchange translation adjustment (1 ) —
—
—
—
—
(1 )
Balance at end of period $ 197
$ 3
$ 88
$ 11
$ 18
$ 7
$ 324

Six months ended March 31, 2020
Balance at beginning of period $ 139
$ 3
$ 46
$ 9
$ 16
$ 5
$ 218
Provision for loan losses 59
—
42
2
2
2
107
Net (charge-offs)/recoveries:

Charge-offs —
—
—
—
—
—
—
Recoveries —
—
—
—
—
—
—
Net (charge-offs)/recoveries —
—
—
—
—
—
—
Foreign exchange translation adjustment (1 ) —
—
—
—
—
(1 )
Balance at end of period $ 197
$ 3
$ 88
$ 11
$ 18
$ 7
$ 324

Three months ended March 31, 2019
Balance at beginning of period $ 137
$ 3
$ 46
$ 9
$ 19
$ 5
$ 219
Provision/(benefit) for loan losses 6
—
2
(1 ) (2 ) —
5
Net (charge-offs)/recoveries:

Charge-offs (3 ) —
(3 ) —
—
—
(6 )
Recoveries —
—
—
—
—
—
—
Net (charge-offs)/recoveries (3 ) —
(3 ) —
—
—
(6 )
Foreign exchange translation adjustment —
—
—
—
—
—
—
Balance at end of period $ 140
$ 3
$ 45
$ 8
$ 17
$ 5
$ 218

Six months ended March 31, 2019
Balance at beginning of period $ 123
$ 3
$ 47
$ 9
$ 17
$ 4
$ 203
Provision/(benefit) for loan losses 21
—
1
(1 ) (1 ) 1
21
Net (charge-offs)/recoveries:

Charge-offs (3 ) —
(3 ) —
—
—
(6 )
Recoveries —
—
—
—
1
—
1
Net (charge-offs)/recoveries (3 ) —
(3 ) —
1
—
(5 )
Foreign exchange translation adjustment (1 ) —
—
—
—
—
(1 )
Balance at end of period $ 140
$ 3
$ 45
$ 8
$ 17
$ 5
$ 218

(1) Charge-offs related to loan sales amounted $61 million for both the three and nine months ended June 30, 2020 and $2 million for the nine months ended June 30, 2019.

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited)

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 millions Individually evaluated for impairment Collectively evaluated for impairment Total Individually evaluated for impairment Collectively evaluated for impairment Total
March 31, 2020
C&I loans $ 1
$ 196
$ 197
$ 4
$ 8,312
$ 8,316
CRE construction loans —
3
3
—
180
180
CRE loans —
88
88
6
3,824
3,830
Tax-exempt loans —
11
11
—
1,266
1,266
Residential mortgage loans 1
17
18
25
4,839
4,864
SBL and other —
7
7
—
3,546
3,546
Total $ 2
$ 322
$ 324
$ 35
$ 21,967
$ 22,002

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


	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
June 30, 2020
C&I loans	$	1	$	185	$	186	$	1	$	7,730	$	7,731
CRE construction loans	—		4		4		—		219		219
CRE loans	—		106		106		6		3,689		3,695
Tax-exempt loans	—		13		13		—		1,290		1,290
Residential mortgage loans	1		19		20		25		4,892		4,917
SBL and other	—		5		5		—		3,631		3,631
Total	$	2	$	332	$	334	$	32	$	21,451	$	21,483

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 $11 million and $9 million at ~~both March 31,~~June 30, 2020 and September 30, 2019, respectively.

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited)

NOTE 8 – 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 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”), certain Low-Income Housing Tax Credit (“LIHTC”) funds and the trust we utilize in connection with restricted stock unit (“RSU”) awards granted to certain employees of one of our Canadian 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 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
June 30, 2020
Private Equity Interests	$	33	$	4
LIHTC funds	246		159
Restricted Stock Trust Fund	19		19
Total	$	298	$	182

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

$ in millions Aggregate assets Aggregate liabilities
March 31, 2020
Private Equity Interests $ 34
$ 4
LIHTC funds 75
5
Restricted Stock Trust Fund 19
19
Total $ 128
$ 28

September 30, 2019

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

The following table presents information about the carrying value of the assets and liabilities of the VIEs which we consolidate and which are included on our Condensed Consolidated Statements of Financial Condition. Intercompany balances are eliminated in consolidation and not reflected in the following table.


$ in millions	June 30, 2020		September 30, 2019
Assets:
Cash, cash equivalents and cash segregated pursuant to regulations	$	7	$	7

Other investments	32		63
Other assets	240		75
Total assets	$	279	$	145
Liabilities:
Other payables	$	156	$	4
Total liabilities	$	156	$	4
Noncontrolling interests	$	50	$	60

$ in millions March 31, 2020 September 30, 2019
Assets:
Cash, cash equivalents and cash segregated pursuant to regulations $ 6
$ 7
Other investments 33
63
Other assets 70
75
Total assets $ 109
$ 145
Liabilities:

Other payables $ 4
$ 4
Total liabilities $ 4
$ 4
Noncontrolling interests $ 35
$ 60

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

As discussed in Note 2 of our 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, 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 following table.


	June 30, 2020										September 30, 2019
$ in millions	Aggregate assets		Aggregate liabilities		Our risk of loss		Aggregate assets		Aggregate liabilities		Our risk of loss
Private Equity Interests	$	4,404	$	107	$	61	$	6,317	$	117	$	63
LIHTC funds	6,218		1,977		25		6,001		2,221		64
Other	216		130		5		205		115		4
Total	$	10,838	$	2,214	$	91	$	12,523	$	2,453	$	131

March 31, 2020 September 30, 2019
$ in millions
Aggregate
assets

Aggregate
liabilities

Our risk
of loss

Aggregate
assets

Aggregate
liabilities

Our risk
of loss
Private Equity Interests $ 5,175
$ 128
$ 59
$ 6,317
$ 117
$ 63
LIHTC funds 6,500
2,041
40
6,001
2,221
64
Other 220
129
4
205
115
4
Total $ 11,895

$ 2,298

$ 103

$ 12,523

$ 2,453

$ 131

NOTE 9 - GOODWILL AND IDENTIFIABLE INTANGIBLE ASSETS, NET

Our goodwill and identified intangible assets result from various acquisitions. See ~~Note~~Notes 2 and 11 of our 2019 Form 10-K for information about our goodwill and intangible assets, including the related accounting policies.

We perform goodwill and indefinite-lived intangible asset impairment 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 or indicate that the asset is impaired. We performed our latest annual impairment testing for our goodwill and indefinite-lived intangible asset as of our January 1, 2020 evaluation date, evaluating balances as of December 31, 2019. We performed a qualitative impairment assessment for each of our reporting units that had goodwill, as well as for our indefinite-lived intangible asset. Based upon the outcome of our qualitative assessments, 0 impairment was identified.

Our qualitative assessments consider macroeconomic indicators, such as trends in equity and fixed income markets, gross domestic product, unemployment rates, interest rates, housing markets and trade policy. We also consider regulatory changes, reporting unit specific results, and changes in key personnel and strategy. Changes in these indicators, and our ability to respond to such changes, may trigger the need for impairment testing at a point other than our annual assessment date.

Subsequent to our annual impairment testing, as a result of a deterioration in market conditions due to the COVID-19 pandemic, we performed an evaluation to determine whether the economic impacts resulting from the pandemic were indicators requiring us to perform an impairment test as of ~~March 31,~~June 30, 2020. Multiple factors, including performance, macroeconomic, and fair value indicators, were assessed with respect to each of our reporting units to determine whether it was more likely than not that the estimated fair value of any of these reporting units was less than its estimated carrying value. As a result of our review, we concluded that the fair value of our reporting units had not more likely than not been reduced below their respective carrying values and that the impact of the COVID-19 pandemic through the end of our ~~second~~ fiscal third quarter of 2020 was not a triggering event to perform a quantitative test. We will continue to monitor the effects of the COVID-19 pandemic, including ~~continued~~ market declines, unfavorable economic conditions, declining financial performance, and other factors that could increase the risk of impairment of our goodwill and indefinite-lived intangible asset in future periods.

NOTE 10 – 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 ~~March 31,~~June 30, 2020, the ~~weighted average~~weighted-average remaining lease term for our operating leases was five 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~~weighted-average yields on our senior notes payable, adjusted for collateralization and tenor. As of ~~March 31,~~June 30, 2020, the ~~weighted-~~

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited)

~~average~~weighted-average discount rate for our operating leases was ~~3.86%~~3.84%. 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 ~~March 31,~~June 30, 2020, ROU assets of ~~$327~~$326 million and lease liabilities of $351 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.


$ in million	Three months ended June 30, 2020		Nine months ended June 30, 2020
Operating lease costs	$	25	$	71
Variable lease costs	$	6	$	18

$ in million Three months ended March 31, 2020 Six months ended March 31, 2020
Operating lease costs $ 23
$ 46
Variable lease costs $ 4
$ 12

Variable lease costs in the preceding table 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 expenses for the three and ~~six~~nine months ended ~~March 31,~~June 30, 2020 were immaterial.

Lease liabilities

Maturities of lease liabilities as of ~~March 31,~~June 30, 2020 were as follows.


Maturity of lease liabilities for fiscal year ended September 30,	$ in millions
Remainder of 2020	$	18
2021	102
2022	79
2023	63
2024	46
After 2024	85
Total lease payments	393
Less: interest	42
Present value of lease liabilities	$	351

Maturity of lease liabilities for fiscal year ended September 30, $ in millions
Remainder of 2020 $ 43
2021 95
2022 72
2023 58
2024 44
After 2024 79
Total lease payments 391
Less: interest 40
Present value of lease liabilities $ 351

Operating lease payments in the preceding table exclude ~~$93~~$188 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 2021 with lease terms ranging from ~~two~~five years to ~~ten~~11 years.

Statement of cash flows supplemental information


$ in millions	Three months ended June 30, 2020		Nine months ended June 30, 2020
Cash outflows - lease liabilities	$	26	$	73
Non-cash - ROU assets recorded for new and modified leases	$	21	$	60

$ in millions Three months ended March 31, 2020 Six months ended March 31, 2020
Cash outflows - lease liabilities $ 24
$ 47
Non-cash - ROU assets recorded for new and modified leases $ 27
$ 39

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited)

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 2019 Form 10-K, 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

NOTE 11 – BANK DEPOSITS

Bank deposits include savings and money market accounts, certificates of deposit with 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 each respective period.


	June 30, 2020						September 30, 2019
$ in millions	Balance		Weighted-average rate		Balance		Weighted-average rate
Savings and money market accounts	$	24,106	0.01	%	$	21,654	0.25	%
Certificates of deposit	1,088		1.98	%	605		2.33	%
NOW accounts	156		1.92	%	6		0.01	%
Demand deposits (non-interest-bearing)	22		—		16		—
Total	$	25,372	0.11	%	$	22,281	0.31	%

March 31, 2020 September 30, 2019
$ in millions Balance Weighted-average rate Balance Weighted-average rate
Savings and money market accounts $ 28,715
0.01 % $ 21,654
0.25 %
Certificates of deposit 1,150
1.99 % 605
2.33 %
NOW accounts 136
1.92 % 6
0.01 %
Demand deposits (non-interest-bearing) 22
—
16
—
Total $ 30,023
0.09 % $ 22,281
0.31 %

Total bank deposits in the preceding table exclude affiliate deposits of ~~$179~~$185 million at ~~March 31,~~June 30, 2020 and $163 million at September 30, 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 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 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 ~~March 31,~~June 30, 2020 was approximately ~~$65~~$47 million.

The following table sets forth the scheduled maturities of certificates of deposit.

March 31, 2020 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 $ 84
$ 20
$ 24
$ 19
Over three through six months 57
26
26
21
Over six through twelve months 67
85
75
37
Over one through two years 26
175
32
36
Over two through three years 54
160
40
93
Over three through four years 68
171
66
47
Over four through five years 7
150
38
51
Total certificates of deposit $ 363
$ 787
$ 301
$ 304


	June 30, 2020						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	$	71	$	30	$	24	$	19
Over three through six months	55		73		26		21
Over six through twelve months	28		22		75		37
Over one through two years	36		198		32		36
Over two through three years	58		149		40		93
Over three through four years	56		156		66		47
Over four through five years	7		149		38		51
Total certificates of deposit	$	311	$	777	$	301	$	304

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited)

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


	Three months ended June 30,						Nine months ended June 30,
$ in millions	2020		2019		2020		2019
Savings, money market, and NOW accounts	$	2	$	29	$	20	$	96
Certificates of deposit	5		4		15		9
Total interest expense on deposits	$	7	$	33	$	35	$	105

Three months ended March 31, Six months ended March 31,
$ in millions 2020 2019 2020 2019
Savings, money market, and NOW accounts $ 6
$ 34
$ 18
$ 67
Certificates of deposit 6
3
10
5
Total interest expense on deposits $ 12
$ 37
$ 28
$ 72

NOTE 12 – OTHER BORROWINGS

The following table details the components of other borrowings.


$ in millions	June 30, 2020		September 30, 2019
FHLB advances	$	875	$	875



Mortgage notes payable and other	15		19
Total other borrowings	$	890	$	894

$ in millions March 31, 2020 September 30, 2019
FHLB advances $ 875
$ 875
Mortgage notes payable and other 16
19
Total other borrowings $ 891
$ 894

FHLB advances

Borrowings from the FHLB as of ~~March 31,~~June 30, 2020 and September 30, 2019, were comprised of both floating and fixed-rate advances. As of ~~March 31,~~June 30, 2020 and September 30, 2019, the floating-rate advances totaled $850 million. The interest rates on the floating-rate advances, which mature in December 2022, reset quarterly 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 2 of our 2019 Form 10-K for information regarding these interest rate swaps, which are accounted for as hedging instruments. As of both ~~March 31,~~June 30, 2020 and September 30, 2019, the fixed-rate advance totaled $25 million 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~~weighted-average interest rate on these FHLB advances as of ~~March 31,~~June 30, 2020 and September 30, 2019 was ~~1.42%~~0.50% and 2.17%, respectively.

Secured and unsecured financing arrangements

On February 19, 2019, RJF and RJ&A entered into an unsecured revolving credit facility agreement (the “Credit Facility”). The Credit Facility has a maturity date of February 2024 and the lenders 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. RJ&A may borrow up to $500 million under the Credit Facility, depending on the amount of outstanding borrowings of RJF. The interest rates on borrowings under the Credit Facility are variable and based on LIBOR, as adjusted for RJF’s credit rating. There were 0 borrowings outstanding on the Credit Facility as of ~~March 31,~~June 30, 2020. There is a facility fee associated with the Credit Facility, which also varies with RJF’s credit rating. Based upon RJF’s credit rating as of ~~March 31,~~June 30, 2020, the variable rate facility fee, which is applied to the committed amount, was 0.175% per annum.

In addition to the Credit Facility, we maintain various secured and unsecured lines of credit, which are generally utilized to finance certain fixed income securities or for cash management purposes. Borrowings during the period were generally day-to-day and there were no borrowings outstanding on these arrangements as of ~~March 31,~~June 30, 2020. The interest rates for these arrangements are variable and are based on the Fed Funds rate, LIBOR, a lenders prime rate, or the Canadian prime rate, as applicable.

We also have other collateralized financings included in “Securities sold under agreements to repurchase” and “Securities loaned” on our Condensed Consolidated Statements of Financial Condition. See Note 6 for information regarding our other 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 rate of 5.7% with repayment terms of monthly interest and principal debt service and have a January 2023 maturity.

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited)

NOTE 13 – SENIOR NOTES PAYABLE

The following table summarizes our senior notes payable.


$ in millions	June 30, 2020		September 30, 2019
5.625% senior notes, due 2024	$	250	$	250
3.625% senior notes, due 2026	500		500
4.65% senior notes, due 2030	500		—
4.95% senior notes, due 2046	800		800
Total principal amount	2,050		1,550
Unaccreted premium/(discount)	9		11
Unamortized debt issuance costs	(15)		(11)
Total senior notes payable	$	2,044	$	1,550

$ in millions March 31, 2020 September 30, 2019
5.625% senior notes, due 2024 $ 250
$ 250
3.625% senior notes, due 2026 500
500
4.65% senior notes, due 2030 500
—
4.95% senior notes, due 2046 800
800
Total principal amount 2,050
1,550
Unaccreted premium/(discount) 10
11
Unamortized debt issuance costs (16 ) (11 )
Total senior notes payable $ 2,044
$ 1,550

In March 2012, we sold in a registered underwritten public offering $250 million in aggregate principal amount of 5.625% senior notes due April 2024. Interest on these senior notes is payable semi-annually. We may redeem some or all of these senior notes at any time prior to their maturity, at a redemption price equal to the greater of (i) 100% of the principal amount of the notes redeemed, or (ii) the sum of the present values of the remaining scheduled payments of principal and interest thereon, discounted to the redemption date at a discount rate equal to a designated U.S. Treasury rate, plus 50 basis points, plus accrued and unpaid interest thereon to the redemption date.

In July 2016, we sold in a registered underwritten public offering $500 million in aggregate principal amount of 3.625% senior notes due September 2026. Interest on these senior notes is payable semi-annually. We may redeem some or all of these senior notes at any time prior to their maturity, at a redemption price equal to the greater of (i) 100% of the principal amount of the notes redeemed, or (ii) the sum of the present values of the remaining scheduled payments of principal and interest thereon, discounted to the redemption date at a discount rate equal to a designated U.S. Treasury rate, plus 35 basis points, plus accrued and unpaid interest thereon to the redemption date.

In March 2020, we sold in a registered underwritten public offering $500 million in aggregate principal amount of 4.65% senior notes due April 2030. Interest on these senior notes is payable semi-annually. We may redeem some or all of these senior notes at any time prior to January 1, 2030, at a redemption price equal to the greater of (i) 100% of the principal amount of the notes redeemed, or (ii) the sum of the present values of the remaining scheduled payments of principal and interest thereon, discounted to the redemption date at a discount rate equal to a designated U.S. Treasury rate, plus 50 basis points; and on or after January 1, 2030, at 100% of the principal amount of the notes redeemed; plus, in each case, accrued and unpaid interest thereon to the redemption date.

In July 2016, we sold in a registered underwritten public offering $300 million in aggregate principal amount of 4.95% senior notes due July 2046. In May 2017, we reopened the offering and sold, in a registered underwritten public offering, an additional $500 million in aggregate principal amount of 4.95% senior notes due July 2046. These additional senior notes were consolidated, formed into a single series, and are fully fungible with the $300 million in aggregate principal amount 4.95% senior notes issued in July 2016. Interest on these senior notes is payable semi-annually. We may redeem some or all of these senior notes at any time prior to their maturity, at a redemption price equal to the greater of (i) 100% of the principal amount of the notes redeemed, or (ii) the sum of the present values of the remaining scheduled payments of principal and interest thereon, discounted to the redemption date at a discount rate equal to a designated U.S. Treasury rate, plus 45 basis points, plus accrued and unpaid interest thereon to the redemption date.

NOTE 14 – INCOME TAXES

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. For discussion of income tax accounting policies and other income tax related information, see Notes 2 and 16 of our 2019 Form 10-K.

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited)

Effective tax rate

Our effective income tax rate was ~~26.9%~~23.5% for the ~~six~~nine months ended ~~March 31,~~June 30, 2020, which was ~~higher~~lower than the 24.8% effective tax rate for fiscal year 2019. The ~~increase~~decrease in the effective tax rate compared to the prior year effective tax rate was primarily due to the ~~unfavorable~~favorable impact inof permanent tax benefits on lower pre-tax earnings during the ~~current period of non-deductible valuation losses associated with our company-owned life insurance policies.~~nine months ended June 30, 2020.

Uncertain tax positions

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

NOTE 15 – COMMITMENTS, CONTINGENCIES AND GUARANTEES

Commitments and contingencies

Loan and underwriting commitments

In the normal course of business, we enter into commitments for ~~fixed income~~debt and equity underwritings. As of ~~March 31,~~June 30, 2020,, we had 411 such open underwriting commitments, which were subsequently settled in open market transactions and none of which resulted in a significant loss.

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 2019 Form 10-K for a discussion of our accounting policies governing these transactions). These offers are contingent upon certain events occurring, including the individuals joining us and meeting certain conditions outlined in their offer. Our unfunded loan commitments related to such offers were insignificant as of ~~March 31,~~June 30, 2020.

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.


$ in millions	June 30, 2020		September 30, 2019
Open-end consumer lines of credit (primarily SBL)	$	11,397	$	9,328
Commercial lines of credit	$	1,373	$	1,527
Unfunded loan commitments	$	592	$	599
Standby letters of credit	$	30	$	40

$ in millions March 31, 2020 September 30, 2019
Open-end consumer lines of credit (primarily SBL) $ 10,758
$ 9,328
Commercial lines of credit $ 1,153
$ 1,527
Unfunded loan commitments $ 676
$ 599
Standby letters of credit $ 40
$ 40

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 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 7 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.

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited)

Investment commitments

We had unfunded commitments to various investments, including private equity investments and certain RJ Bank investments, of ~~$41~~$38 million as of ~~March 31, 2020~~.June 30, 2020.

Other commitments

Raymond James Tax Credit Funds, Inc. (“RJTCF”) sells investments in project partnerships to various LIHTC funds, which have 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. Until such investments are sold to LIHTC funds, RJTCF is responsible for funding investment commitments to such partnerships. As of ~~March 31,~~June 30, 2020, RJTCF had committed approximately ~~$204~~$130 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 equity funding events arise over future periods, the contractual commitments are not expected to 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 agency MBS (see the discussion of these activities within Note 2 of our 2019 Form 10-K). At ~~March 31,~~June 30, 2020,, we had ~~$331~~$426 million principal amount of outstanding forward MBS purchase commitments, which were expected to be purchased within 90 days following 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 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 purchase commitments are accounted for at fair value. As of ~~March 31,~~June 30, 2020,, the fair value of the TBA securities and the estimated fair value of the purchase commitments were insignificant.

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.

We guarantee the debt of one of our private equity investments. The amount of such debt, including the undrawn portion of a revolving credit facility, was $13 million as of ~~March 31,~~June 30, 2020. The debt, which matures in ~~2021,~~2022, is secured by substantially all of the assets of the borrower.

Legal and regulatory matter contingencies

In addition to any matters that may be specifically described 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.

RJF and certain of its subsidiaries are 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, among other things, 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 investigatory activity (both formal and informal) by government and self-regulatory agencies has increased significantly in the financial services industry. 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.

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited)

For 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). Subject to the foregoing, after consultation with counsel, 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 as of ~~March 31,~~June 30, 2020, we estimated the upper end of the range of reasonably possible aggregate loss to be approximately ~~$80~~$125 million in excess of the aggregate accruals for such matters. Refer to Note 2 of our 2019 Form 10-K for a discussion of our criteria for recognizing liabilities for contingencies.

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.

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited)

NOTE 16 – ACCUMULATED OTHER COMPREHENSIVE INCOME/(LOSS)

All of the components of other comprehensive income (“OCI”), net of tax, 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 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 June 30, 2020
AOCI as of beginning of period	$	149	$	(191)	$	(42)	$	83	$	(52)	$	(11)
OCI:
OCI before reclassifications and taxes	(29)		32		3		7		(7)		3
Amounts reclassified from AOCI, before tax	—		—		—		—		2		2
Pre-tax net OCI	(29)		32		3		7		(5)		5
Income tax effect	8		—		8		(2)		1		7
OCI for the period, net of tax	(21)		32		11		5		(4)		12
AOCI as of end of period	$	128	$	(159)	$	(31)	$	88	$	(56)	$	1

Nine months ended June 30, 2020
AOCI as of beginning of period	$	110	$	(135)	$	(25)	$	21	$	(19)	$	(23)
OCI:
OCI before reclassifications and taxes	23		(24)		(1)		90		(51)		38
Amounts reclassified from AOCI, before tax	—		—		—		—		2		2
Pre-tax net OCI	23		(24)		(1)		90		(49)		40
Income tax effect	(5)		—		(5)		(23)		12		(16)
OCI for the period, net of tax	18		(24)		(6)		67		(37)		24
AOCI as of end of period	$	128	$	(159)	$	(31)	$	88	$	(56)	$	1

Three months ended June 30, 2019
AOCI as of beginning of period	$	114	$	(142)	$	(28)	$	(9)	$	12	$	(25)

OCI:
OCI before reclassifications and taxes	(16)		18		2		32		(24)		10
Amounts reclassified from AOCI, before tax	—		—		—		—		(1)		(1)
Pre-tax net OCI	(16)		18		2		32		(25)		9
Income tax effect	4		—		4		(8)		6		2
OCI for the period, net of tax	(12)		18		6		24		(19)		11
AOCI as of end of period	$	102	$	(124)	$	(22)	$	15	$	(7)	$	(14)

Nine months ended June 30, 2019
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	18		(13)		5		90		(64)		31
Amounts reclassified from AOCI, before tax	—		—		—		—		(4)		(4)
Pre-tax net OCI	18		(13)		5		90		(68)		27
Income tax effect	(4)		—		(4)		(25)		19		(10)
OCI for the period, net of tax	14		(13)		1		65		(49)		17
AOCI as of end of period	$	102	$	(124)	$	(22)	$	15	$	(7)	$	(14)

$ 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 March 31, 2020
AOCI as of beginning of period $ 97
$ (113 ) $ (16 ) $ 20
$ (9 ) $ (5 )
OCI:
OCI before reclassifications and taxes 69
(78 ) (9 ) 85
(58 ) 18
Amounts reclassified from AOCI, before tax —
—
—
—
—
—
Pre-tax net OCI 69
(78 ) (9 ) 85
(58 ) 18
Income tax effect (17 ) —
(17 ) (22 ) 15
(24 )
OCI for the period, net of tax 52
(78 ) (26 ) 63
(43 ) (6 )
AOCI as of end of period $ 149
$ (191 ) $ (42 ) $ 83
$ (52 ) $ (11 )

Six months ended March 31, 2020
AOCI as of beginning of period $ 110
$ (135 ) $ (25 ) $ 21
$ (19 ) $ (23 )
OCI:
OCI before reclassifications and taxes 52
(56 ) (4 ) 83
(44 ) 35
Amounts reclassified from AOCI, before tax —
—
—
—
—
—
Pre-tax net OCI 52
(56 ) (4 ) 83
(44 ) 35
Income tax effect (13 ) —
(13 ) (21 ) 11
(23 )
OCI for the period, net of tax 39
(56 ) (17 ) 62
(33 ) 12
AOCI as of end of period $ 149
$ (191 ) $ (42 ) $ 83
$ (52 ) $ (11 )

Three months ended March 31, 2019
AOCI as of beginning of period $ 125
$ (161 ) $ (36 ) $ (28 ) $ 25
$ (39 )
OCI:
OCI before reclassifications and taxes (15 ) 19
4
26
(16 ) 14
Amounts reclassified from AOCI, before tax —
—
—
—
(2 ) (2 )
Pre-tax net OCI (15 ) 19
4
26
(18 ) 12
Income tax effect 4
—
4
(7 ) 5
2
OCI for the period, net of tax (11 ) 19
8
19
(13 ) 14
AOCI as of end of period $ 114
$ (142 ) $ (28 ) $ (9 ) $ 12
$ (25 )

Six months ended March 31, 2019
AOCI as of beginning of period $ 88
$ (111 ) $ (23 ) $ (46 ) $ 42
$ (27 )
Cumulative effect of adoption of ASU 2018-02 —
—
—
(4 ) —
(4 )
OCI:
OCI before reclassifications and taxes 34
(31 ) 3
58
(40 ) 21
Amounts reclassified from AOCI, before tax —
—
—
—
(3 ) (3 )
Pre-tax net OCI 34
(31 ) 3
58
(43 ) 18
Income tax effect (8 ) —
(8 ) (17 ) 13
(12 )
OCI for the period, net of tax 26
(31 ) (5 ) 41
(30 ) 6
AOCI as of end of period $ 114
$ (142 ) $ (28 ) $ (9 ) $ 12
$ (25 )

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 and ~~six~~nine months ended ~~March 31,~~June 30, 2020 and 2019 were recorded in “Interest expense” on the Condensed Consolidated Statements of Income and Comprehensive Income.

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

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

Our net investment hedges and cash flow hedges relate to our derivatives associated with RJ Bank’s business operations. See Note 2 of our 2019 Form 10-K and Note 5 for additional information on these derivatives.

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited)

NOTE 17 – REVENUES

The following tables present our sources of revenues by segment. For further information about our significant accounting policies related to revenue recognition, see Note 2 of our 2019 Form 10-K. See Note 22 of this Form 10-Q for additional information on our segment results.


	Three months ended June 30, 2020
$ in millions	Private Client Group		Capital Markets		Asset Management		RJ Bank		Other and intersegment eliminations		Total
Revenues:
Asset management and related administrative fees	$	715	$	1	$	157	$	—	$	(6)	$	867
Brokerage revenues:
Securities commissions:
Mutual and other fund products	131		2		2		—		(1)		134
Insurance and annuity products	88		—		—		—		—		88
Equities, ETFs and fixed income products	84		37		—		—		—		121
Subtotal securities commissions	303		39		2		—		(1)		343
Principal transactions ⁽¹⁾	16		127		—		—		—		143
Total brokerage revenues	319		166		2		—		(1)		486
Account and services fees:
Mutual fund and annuity service fees	82		—		1		—		—		83
RJBDP fees	63		1		—		—		(44)		20


Client account and other fees	32		1		2		—		(4)		31
Total account and service fees	177		2		3		—		(48)		134
Investment banking:
Merger & acquisition and advisory	—		60		—		—		—		60
Equity underwriting	7		35		—		—		—		42
Debt underwriting	—		37		—		—		—		37
Total investment banking	7		132		—		—		—		139
Other:
Tax credit fund revenues	—		20		—		—		—		20
All other ⁽¹⁾	4		—		1		9		(1)		13
Total other	4		20		1		9		(1)		33
Total non-interest revenues	1,222		321		163		9		(56)		1,659
Interest income ⁽¹⁾	31		4		—		181		1		217
Total revenues	1,253		325		163		190		(55)		1,876
Interest expense	(4)		(2)		—		(12)		(24)		(42)
Net revenues	$	1,249	$	323	$	163	$	178	$	(79)	$	1,834

Three months ended March 31, 2020
$ in millions Private Client Group Capital Markets Asset Management RJ Bank Other and intersegment eliminations Total
Revenues:
Asset management and related administrative fees $ 833
$ 1
$ 177
$ —
$ (5 ) $ 1,006
Brokerage revenues:
Securities commissions:
Mutual and other fund products 163
1
2
—
—
166
Insurance and annuity products 99
—
—
—
—
99
Equities, ETFs and fixed income products 105
40
—
—
—
145
Subtotal securities commissions 367

41

2

—

—

410
Principal transactions ⁽¹⁾
17
89
—
—
(1 ) 105
Total brokerage revenues 384

130

2

—

(1 )
515
Account and services fees:
Mutual fund and annuity service fees 88
—
—
—
—
88
RJBDP fees 99
—
—
—
(48 ) 51
Client account and other fees 35
2
4
—
(8 ) 33
Total account and service fees 222

2

4

—

(56 )
172
Investment banking:
Merger & acquisition and advisory —
72
—
—
—
72
Equity underwriting 11
43
—
—
—
54
Debt underwriting —
22
—
—
—
22
Total investment banking 11

137

—

—

—

148
Other:
Tax credit fund revenues —
12
—
—
—
12
All other ⁽¹⁾
7
4
1
5
(44 ) (27 )
Total other 7

16

1

5

(44 )
(15 )
Total non-interest revenues 1,457

286

184

5

(106 )
1,826
Interest income ⁽¹⁾
45
10
—
223
7
285
Total revenues 1,502
296
184
228
(99 ) 2,111
Interest expense (7 ) (6 ) —
(18 ) (12 ) (43 )
Net revenues $ 1,495
$ 290
$ 184
$ 210
$ (111 ) $ 2,068


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

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited)


	Three months ended June 30, 2019
$ in millions	Private Client Group		Capital Markets		Asset Management		RJ Bank		Other and intersegment eliminations		Total
Revenues:
Asset management and related administrative fees	$	718	$	2	$	165	$	—	$	(6)	$	879
Brokerage revenues:
Securities commissions:
Mutual and other fund products	147		1		2		—		—		150
Insurance and annuity products	105		—		—		—		—		105
Equities, ETFs and fixed income products	74		29		—		—		—		103
Subtotal securities commissions	326		30		2		—		—		358
Principal transactions ⁽¹⁾	20		74		—		—		(1)		93
Total brokerage revenues	346		104		2		—		(1)		451
Account and services fees:
Mutual fund and annuity service fees	85		—		—		—		(1)		84
RJBDP fees	111		—		1		—		(46)		66


Client account and other fees	32		1		7		—		(7)		33
Total account and service fees	228		1		8		—		(54)		183
Investment banking:
Merger & acquisition and advisory	—		80		—		—		—		80
Equity underwriting	10		27		—		—		—		37
Debt underwriting	—		22		—		—		—		22
Total investment banking	10		129		—		—		—		139
Other:
Tax credit fund revenues	—		16		—		—		—		16
All other ⁽¹⁾	3		(1)		1		7		1		11
Total other	3		15		1		7		1		27
Total non-interest revenues	1,305		251		176		7		(60)		1,679
Interest income ⁽¹⁾	56		10		1		246		8		321
Total revenues	1,361		261		177		253		(52)		2,000
Interest expense	(10)		(10)		—		(38)		(15)		(73)
Net revenues	$	1,351	$	251	$	177	$	215	$	(67)	$	1,927

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

Three months ended March 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 $ 638
$ 1
$ 149
$ —
$ (5 ) $ 783
Brokerage revenues:
Securities commissions:
Mutual and other fund products 145
1
2
—
—
148
Insurance and annuity products 99
—
—
—
—
99
Equities, ETFs and fixed income products 74
30
—
—
(2 ) 102
Subtotal securities commissions 318
31
2
—
(2 ) 349
Principal transactions ⁽¹⁾
20
72
—
—
1
93
Total brokerage revenues 338

103

2

—

(1 )
442
Account and services fees:
Mutual fund and annuity service fees 82
—
1
—
(5 ) 78
RJBDP fees 122
—
1
—
(44 ) 79
Client account and other fees 27
2
8
—
(3 ) 34
Total account and service fees 231

2

10

—

(52 )
191
Investment banking:
Merger & acquisition and advisory —
121
—
—
—
121
Equity underwriting 8
18
—
—
(1 ) 25
Debt underwriting —
17
—
—
—
17
Total investment banking 8

156

—

—

(1 )
163
Other:
Tax credit fund revenues —
14
—
—
—
14
All other ⁽¹⁾
9
—
—
7
1
17
Total other 9

14

—

7

1

31
Total non-interest revenues 1,224

276

161

7

(58 )
1,610
Interest income ⁽¹⁾
58
9
1
247
9
324
Total revenues 1,282

285

162

254

(49 )
1,934
Interest expense (11 ) (8 ) —
(42 ) (14 ) (75 )
Net revenues $ 1,271

$ 277

$ 162

$ 212

$ (63 )
$ 1,859


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

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited)


	Nine Months Ended June 30, 2020
$ in millions	Private Client Group		Capital Markets		Asset Management		RJ Bank		Other and intersegment eliminations		Total
Revenues:
Asset management and related administrative fees	$	2,330	$	4	$	510	$	—	$	(16)	$	2,828
Brokerage revenues:
Securities commissions:
Mutual and other fund products	438		6		6		—		(2)		448
Insurance and annuity products	288		—		—		—		—		288
Equities, ETFs and fixed income products	274		107		—		—		(1)		380
Subtotal securities commissions	1,000		113		6		—		(3)		1,116
Principal transactions ⁽¹⁾	50		298		—		—		(3)		345
Total brokerage revenues	1,050		411		6		—		(6)		1,461
Account and services fees:
Mutual fund and annuity service fees	260		—		2		—		(1)		261
RJBDP fees	267		1		—		—		(139)		129


Client account and other fees	96		4		10		—		(16)		94
Total account and service fees	623		5		12		—		(156)		484
Investment banking:
Merger & acquisition and advisory	—		192		—		—		—		192
Equity underwriting	29		117		—		—		—		146
Debt underwriting	—		90		—		—		—		90
Total investment banking	29		399		—		—		—		428
Other:
Tax credit fund revenues	—		50		—		—		—		50
All other ⁽¹⁾	20		4		2		20		(49)		(3)
Total other	20		54		2		20		(49)		47
Total non-interest revenues	4,052		873		530		20		(227)		5,248
Interest income ⁽¹⁾	125		22		1		635		16		799
Total revenues	4,177		895		531		655		(211)		6,047
Interest expense	(19)		(14)		—		(51)		(52)		(136)
Net revenues	$	4,158	$	881	$	531	$	604	$	(263)	$	5,911

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

Six months ended March 31, 2020
$ in millions Private Client Group Capital Markets Asset Management RJ Bank Other and intersegment eliminations Total
Revenues:
Asset management and related administrative fees $ 1,615
$ 3
$ 353
$ —
$ (10 ) $ 1,961
Brokerage revenues:
Securities commissions:
Mutual and other fund products 307
4
4
—
(1 ) 314
Insurance and annuity products 200
—
—
—
—
200
Equities, ETFs and fixed income products 190
70
—
—
(1 ) 259
Subtotal securities commissions 697

74

4

—

(2 )
773
Principal transactions ⁽¹⁾
34
171
—
—
(3 ) 202
Total brokerage revenues 731

245

4

—

(5 )
975
Account and services fees:
Mutual fund and annuity service fees 178
—
1
—
(1 ) 178
RJBDP fees 204
—
—
—
(95 ) 109
Client account and other fees 64
3
8
—
(12 ) 63
Total account and service fees 446

3

9

—

(108 )
350
Investment banking:
Merger & acquisition and advisory —
132
—
—
—
132
Equity underwriting 22
82
—
—
—
104
Debt underwriting —
53
—
—
—
53
Total investment banking 22

267

—

—

—

289
Other:
Tax credit fund revenues —
30
—
—
—
30
All other ⁽¹⁾
16
4
1
11
(48 ) (16 )
Total other 16

34

1

11

(48 )
14
Total non-interest revenues 2,830

552

367

11

(171 )
3,589
Interest income ⁽¹⁾
94
18
1
454
15
582
Total revenues 2,924

570

368

465

(156 )
4,171
Interest expense (15 ) (12 ) —
(39 ) (28 ) (94 )
Net revenues $ 2,909

$ 558

$ 368

$ 426

$ (184 )
$ 4,077


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

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited)


	Nine Months Ended June 30, 2019
$ in millions	Private Client Group		Capital Markets		Asset Management		RJ Bank		Other and intersegment eliminations		Total
Revenues:
Asset management and related administrative fees	$	2,063	$	5	$	475	$	—	$	(16)	$	2,527
Brokerage revenues:
Securities commissions:
Mutual and other fund products	449		4		7		—		(2)		458
Insurance and annuity products	308		—		—		—		—		308
Equities, ETFs and fixed income products	232		99		—		—		(2)		329
Subtotal securities commissions	989		103		7		—		(4)		1,095
Principal transactions ⁽¹⁾	59		203		—		1		(1)		262
Total brokerage revenues	1,048		306		7		1		(5)		1,357
Account and services fees:
Mutual fund and annuity service fees	250		—		2		—		(9)		243
RJBDP fees	342		—		3		—		(131)		214


Client account and other fees	92		3		22		—		(15)		102
Total account and service fees	684		3		27		—		(155)		559
Investment banking:
Merger & acquisition and advisory	—		286		—		—		—		286
Equity underwriting	25		72		—		—		—		97
Debt underwriting	—		56		—		—		—		56
Total investment banking	25		414		—		—		—		439
Other:
Tax credit fund revenues	—		49		—		—		—		49
All other ⁽¹⁾	19		1		1		19		6		46
Total other	19		50		1		19		6		95
Total non-interest revenues	3,839		778		510		20		(170)		4,977
Interest income ⁽¹⁾	170		29		3		732		27		961
Total revenues	4,009		807		513		752		(143)		5,938
Interest expense	(31)		(26)		—		(122)		(42)		(221)
Net revenues	$	3,978	$	781	$	513	$	630	$	(185)	$	5,717

Six months ended March 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 $ 1,345
$ 3
$ 310
$ —
$ (10 ) $ 1,648
Brokerage revenues:
Securities commissions:
Mutual and other fund products 302
3
5
—
(2 ) 308
Insurance and annuity products 203
—
—
—
—
203
Equities, ETFs and fixed income products 158
70
—
—
(2 ) 226
Subtotal securities commissions 663
73
5
—
(4 ) 737
Principal transactions ⁽¹⁾
39
129
—
1
—
169
Total brokerage revenues 702
202
5
1
(4 ) 906
Account and services fees:
Mutual fund and annuity service fees 165
—
2
—
(8 ) 159
RJBDP fees 231
—
2
—
(85 ) 148
Client account and other fees 60
2
15
—
(8 ) 69
Total account and service fees 456
2
19
—
(101 ) 376
Investment banking:
Merger & acquisition and advisory —
206
—
—
—
206
Equity underwriting 15
45
—
—
—
60
Debt underwriting —
34
—
—
—
34
Total investment banking 15
285
—
—
—
300
Other:
Tax credit fund revenues —
33
—
—
—
33
All other ⁽¹⁾
16
2
—
12
5
35
Total other 16
35
—
12
5
68
Total non-interest revenues 2,534
527
334
13
(110 ) 3,298
Interest income ⁽¹⁾
114
19
2
486
19
640
Total revenues 2,648
546
336
499
(91 ) 3,938
Interest expense (21 ) (16 ) —
(84 ) (27 ) (148 )
Net revenues $ 2,627
$ 530
$ 336
$ 415
$ (118 ) $ 3,790
(1) These revenues are generally not in scope of the accounting guidance for revenue from contracts with customers.


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

At ~~March 31,~~June 30, 2020 and September 30, 2019, net receivables related to contracts with customers were ~~$319~~$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 ~~March 31,~~June 30, 2020 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 18 – INTEREST INCOME AND INTEREST EXPENSE

The following table details the components of interest income and interest expense.


	Three months ended June 30,						Nine months ended June 30,
$ in millions	2020		2019		2020		2019
Interest income:
Assets segregated pursuant to regulations	$	3	$	14	$	25	$	46
Trading instruments	4		7		17		20
Available-for-sale securities	23		18		60		51
Margin loans	18		30		66		93
Bank loans, net of unearned income and deferred expenses	157		221		561		655
Loans to financial advisors	5		5		15		14
Corporate cash and all other	7		26		55		82
Total interest income	$	217	$	321	$	799	$	961
Interest expense:
Bank deposits	$	7	$	33	$	35	$	105
Trading instruments sold but not yet purchased	1		2		3		6
Brokerage client payables	3		5		9		16
Other borrowings	5		5		15		16
Senior notes payable	24		19		61		55
Other	2		9		13		23
Total interest expense	42		73		136		221
Net interest income	175		248		663		740
Bank loan loss (provision)/benefit	(81)		5		(188)		(16)
Net interest income after bank loan loss (provision)/benefit	$	94	$	253	$	475	$	724

Three months ended March 31, Six months ended March 31,
$ in millions 2020 2019 2020 2019
Interest income:
Assets segregated pursuant to regulations $ 11
$ 17
$ 22
$ 32
Trading instruments 7
6
13
13
Available-for-sale securities 19
17
37
33
Margin loans 21
31
48
63
Bank loans, net of unearned income and deferred expenses 198
220
404
434
Loans to financial advisors 5
5
10
9
Corporate cash and all other 24
28
48
56
Total interest income $ 285

$ 324

$ 582

$ 640
Interest expense:

Bank deposits $ 12
$ 37
$ 28
$ 72
Trading instruments sold but not yet purchased 1
2
2
4
Brokerage client payables 3
5
6
11
Other borrowings 5
5
10
11
Senior notes payable 19
18
37
36
Other 3
8
11
14
Total interest expense 43

75

94

148
Net interest income 242
249
488
492
Bank loan loss provision (109 ) (5 ) (107 ) (21 )
Net interest income after bank loan loss provision $ 133
$ 244
$ 381
$ 471

Interest expense related to bank deposits in the preceding table excludes interest expense associated with affiliate deposits, which has been eliminated in consolidation.

NOTE 19 – SHARE-BASED COMPENSATION

We have 1 share-based compensation plan for our employees, Board of Directors and non-employees (independent contractor financial advisors). Generally, we reissue our treasury shares under The Amended and Restated 2012 Stock Incentive Plan; however, we are also permitted to issue new shares. Annual share-based compensation awards are primarily issued during the fiscal first ~~fiscal~~ quarter of each year. Our share-based compensation accounting policies are described in Note 2 of our 2019 Form 10-K. Other information related to our share-based awards is presented in Note 21 of our 2019 Form 10-K.

During the three and ~~six~~nine months ended ~~March 31,~~June 30, 2020, we granted approximately 100 thousand and ~~1.6~~1.7 million RSUs, respectively, to employees and outside members of our Board of Directors with a weighted-average grant-date fair value of ~~$79.73~~$64.98 and ~~$88.53,~~$87.76, respectively. For the three and ~~six~~nine months ended ~~March 31,~~June 30, 2020, total compensation expense for RSUs granted to our employees and members of our Board of Directors was ~~$27~~$22 million and ~~$67~~$89 million, respectively, compared with ~~$23~~$20 million and ~~$61~~$81 million, respectively, for the three and ~~six~~nine months ended ~~March 31,~~June 30, 2019.

As of ~~March 31,~~June 30, 2020, there were ~~$216~~$196 million of total pre-tax compensation costs not yet recognized (net of estimated forfeitures) related to RSUs granted to employees and members of our Board of Directors, including those granted during the ~~six~~nine months ended ~~March 31,~~June 30, 2020. These costs are expected to be recognized over a weighted-average period of ~~3.4~~3.2 years.

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited)

NOTE 20 – REGULATORY CAPITAL REQUIREMENTS

RJF, as a bank holding company and financial holding company, RJ Bank, 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 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 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.

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 under 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. In order to maintain our ability to take certain capital actions, including dividends and common equity repurchases, and to make bonus payments, we must hold a capital conservation buffer above our minimum risk-based capital requirements. As of ~~March 31,~~June 30, 2020, both RJF’s and RJ Bank’s capital levels exceeded the capital conservation buffer requirement and were each categorized as “well-capitalized.”

For further discussion of regulatory capital requirements applicable to certain of our businesses and subsidiaries, see Note 22 of our 2019 Form 10-K.

To meet requirements for capital adequacy purposes or to be categorized as “well-capitalized,” RJF must maintain minimum CET1, Tier 1 capital, Total capital and Tier 1 leverage amounts and ratios as set forth in the 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 June 30, 2020:
CET1	$	6,351	24.8	%	$	1,152	4.5	%	$	1,664	6.5	%
Tier 1 capital	$	6,351	24.8	%	$	1,536	6.0	%	$	2,047	8.0	%
Total capital	$	6,661	26.0	%	$	2,047	8.0	%	$	2,559	10.0	%
Tier 1 leverage	$	6,351	14.5	%	$	1,749	4.0	%	$	2,187	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 millions Amount Ratio Amount Ratio Amount Ratio
RJF as of March 31, 2020:
CET1 $ 6,183
24.1 % $ 1,156
4.5 % $ 1,669
6.5 %
Tier 1 capital $ 6,183
24.1 % $ 1,541
6.0 % $ 2,054
8.0 %
Total capital $ 6,490
25.3 % $ 2,054
8.0 % $ 2,568
10.0 %
Tier 1 leverage $ 6,183
14.2 % $ 1,745
4.0 % $ 2,181
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 %

As of June 30, 2020, RJF’s Tier 1 capital ratio was unchanged and our Total capital ~~ratios at March 31, 2020 decreased~~ratio increased slightly compared to September 30, 2019, ~~due to the impact of increases to cash segregated pursuant to regulations and growth of bank assets, primarily bank loans, partially offset by the impact of higher equity~~ due to positive earnings, net of share repurchases and ~~dividends.~~dividends, offset by the impacts of an increase in cash and cash equivalents segregated pursuant to regulations and growth in available-for-sale securities held at RJ Bank. RJF’s Tier 1 leverage ratio at ~~March 31,~~June 30, 2020 decreased compared to September 30, 2019, due to the growth of average assets, primarily related to cash, cash and cash equivalents segregated pursuant to regulations and ~~bank loans,~~available-for-sale securities held at RJ Bank, partially offset by the aforementioned change in equity.

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,” RJ Bank must maintain CET1, Tier 1 capital, Total capital and Tier 1 leverage amounts and ratios as set forth in the 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 June 30, 2020:
CET1	$	2,247	12.8	%	$	790	4.5	%	$	1,141	6.5	%
Tier 1 capital	$	2,247	12.8	%	$	1,053	6.0	%	$	1,404	8.0	%
Total capital	$	2,468	14.1	%	$	1,404	8.0	%	$	1,755	10.0	%
Tier 1 leverage	$	2,247	7.6	%	$	1,187	4.0	%	$	1,484	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 millions Amount Ratio Amount Ratio Amount Ratio
RJ Bank as of March 31, 2020:
CET1 $ 2,232
12.7 % $ 792
4.5 % $ 1,144
6.5 %
Tier 1 capital $ 2,232
12.7 % $ 1,056
6.0 % $ 1,408
8.0 %
Total capital $ 2,454
13.9 % $ 1,408
8.0 % $ 1,760
10.0 %
Tier 1 leverage $ 2,232
8.1 % $ 1,102
4.0 % $ 1,377
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 %

RJ Bank’s Tier 1 capital and Total capital ratios at ~~March 31,~~June 30, 2020 decreased compared to September 30, 2019, due to dividends paid during the period exceeding earnings and growth in assets, primarily ~~bank loans.~~available-for-sale securities. RJ Bank’s Tier 1 leverage ratio at ~~March 31,~~June 30, 2020 decreased compared to September 30, 2019, due to the growth in average assets, primarily related to cash, available-for-sale securities and bank loans, as well as the aforementioned change in equity.

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.


$ in millions	June 30, 2020			September 30, 2019
Raymond James & Associates, Inc.:
(Alternative Method elected)
Net capital as a percent of aggregate debit items	46.1		%	39.7		%
Net capital	$	1,183		$	1,056
Less: required net capital	(51)			(53)
Excess net capital	$	1,132		$	1,003

$ in millions March 31, 2020 September 30, 2019
Raymond James & Associates, Inc.:

(Alternative Method elected)
Net capital as a percent of aggregate debit items 41.5 % 39.7 %
Net capital $ 1,122
$ 1,056
Less: required net capital (54 ) (53 )
Excess net capital $ 1,068
$ 1,003

As of ~~March 31,~~June 30, 2020, RJFS, RJ Ltd., RJ Trust and all of our other active regulated domestic and international subsidiaries were in compliance with and exceeded all applicable capital requirements.

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited)

NOTE 21 – EARNINGS PER SHARE

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


	Three months ended June 30,						Nine months ended June 30,
in millions, except per share amounts	2020		2019		2020		2019
Income for basic earnings per common share:
Net income	$	172	$	259	$	609	$	769
Less allocation of earnings and dividends to participating securities	—		(1)		(1)		(1)
Net income attributable to RJF common shareholders	$	172	$	258	$	608	$	768
Income for diluted earnings per common share:
Net income	$	172	$	259	$	609	$	769
Less allocation of earnings and dividends to participating securities	—		(1)		(1)		(1)
Net income attributable to RJF common shareholders	$	172	$	258	$	608	$	768
Common shares:
Average common shares in basic computation	137.1		140.4		137.9		141.8
Dilutive effect of outstanding stock options and certain RSUs	2.3		3.2		2.6		3.0
Average common shares used in diluted computation	139.4		143.6		140.5		144.8
Earnings per common share:
Basic	$	1.25	$	1.84	$	4.41	$	5.42
Diluted	$	1.23	$	1.80	$	4.33	$	5.30
Stock options and certain RSUs excluded from weighted-average diluted common shares because their effect would be antidilutive	1.8		0.2		1.6		0.5

Three months ended March 31, Six months ended March 31,
in millions, except per share amounts 2020 2019 2020 2019
Income for basic earnings per common share:
Net income $ 169
$ 261
$ 437
$ 510
Less allocation of earnings and dividends to participating securities —
—
(1 ) —
Net income attributable to RJF common shareholders $ 169
$ 261
$ 436
$ 510
Income for diluted earnings per common share:

Net income $ 169
$ 261
$ 437
$ 510
Less allocation of earnings and dividends to participating securities —
—
(1 ) —
Net income attributable to RJF common shareholders $ 169
$ 261
$ 436
$ 510
Common shares:

Average common shares in basic computation 138.4
140.8
138.4
142.5
Dilutive effect of outstanding stock options and certain RSUs 2.7
3.1
2.9
2.9
Average common shares used in diluted computation 141.1
143.9
141.3
145.4
Earnings per common share:

Basic $ 1.22
$ 1.85
$ 3.15
$ 3.58
Diluted $ 1.20
$ 1.81
$ 3.09
$ 3.51
Stock options and certain RSUs excluded from weighted-average diluted common shares because their effect would be antidilutive 0.7
0.5
0.6
1.6

The allocation of earnings and dividends to participating securities in the preceding table 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. Participating securities and related dividends paid on these participating securities were insignificant for the three and ~~six~~nine months ended ~~March 31,~~June 30, 2020 and 2019. 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 detailed in the following table for each respective period.


	Three months ended June 30,						Nine months ended June 30,
	2020		2019		2020		2019
Dividends per common share - declared	$	0.37	$	0.34	$	1.11	$	1.02
Dividends per common share - paid	$	0.37	$	0.34	$	1.08	$	0.98

Three months ended March 31, Six months ended March 31,
2020 2019 2020 2019
Dividends per common share - declared $ 0.37
$ 0.34
$ 0.74
$ 0.68
Dividends per common share - paid $ 0.37
$ 0.34
$ 0.71
$ 0.64

NOTE 22 – SEGMENT INFORMATION

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

The 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 segments, see Note 24 of our 2019 Form 10-K.

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited)

The following ~~tables present~~table presents information concerning operations in these segments.


	Three months ended June 30,						Nine months ended June 30,
$ in millions	2020		2019		2020		2019
Net revenues:
Private Client Group	$	1,249	$	1,351	$	4,158	$	3,978
Capital Markets	323		251		881		781
Asset Management	163		177		531		513
RJ Bank	178		215		604		630
Other	(20)		(4)		(72)		(2)
Intersegment eliminations	(59)		(63)		(191)		(183)
Total net revenues	$	1,834	$	1,927	$	5,911	$	5,717
Pre-tax income/(loss):
Private Client Group	$	91	$	140	$	414	$	436
Capital Markets	62		24		119		77
Asset Management	60		65		206		184
RJ Bank	14		138		163		384
Other	(29)		(25)		(106)		(60)
Total pre-tax income	$	198	$	342	$	796	$	1,021

Three months ended March 31, Six months ended March 31,
$ in millions 2020 2019 2020 2019
Net revenues:
Private Client Group $ 1,495
$ 1,271
$ 2,909
$ 2,627
Capital Markets 290
277
558
530
Asset Management 184
162
368
336
RJ Bank 210
212
426
415
Other (44 ) —
(52 ) 2
Intersegment eliminations (67 ) (63 ) (132 ) (120 )
Total net revenues $ 2,068
$ 1,859
$ 4,077
$ 3,790
Pre-tax income/(loss):
Private Client Group $ 170
$ 132
$ 323
$ 296
Capital Markets 28
41
57
53
Asset Management 73
55
146
119
RJ Bank 14
136
149
246
Other (46 ) (17 ) (77 ) (35 )
Total pre-tax income $ 239
$ 347
$ 598
$ 679

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

Three months ended March 31, Six months ended March 31,
$ in millions 2020 2019 2020 2019
Net interest income/(expense):
Private Client Group $ 38
$ 47
$ 79
$ 93
Capital Markets 4
1
6
3
Asset Management —
1
1
2
RJ Bank 205
205
415
402
Other and intersegment eliminations (5 ) (5 ) (13 ) (8 )
Net interest income $ 242
$ 249
$ 488
$ 492

The following table presents our net interest on a segment basis.


	Three months ended June 30,						Nine months ended June 30,
$ in millions	2020		2019		2020		2019
Net interest income/(expense):
Private Client Group	$	27	$	46	$	106	$	139
Capital Markets	2		—		8		3
Asset Management	—		1		1		3
RJ Bank	169		208		584		610
Other and intersegment eliminations	(23)		(7)		(36)		(15)
Net interest income	$	175	$	248	$	663	$	740

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


$ in millions	June 30, 2020		September 30, 2019
Total assets:
Private Client Group	$	11,655	$	9,042
Capital Markets	2,301		2,287
Asset Management	367		401
RJ Bank	28,830		25,516
Other	1,529		1,584
Total	$	44,682	$	38,830

$ in millions March 31, 2020 September 30, 2019
Total assets:
Private Client Group $ 12,531
$ 9,042
Capital Markets 2,118
2,287
Asset Management 348
401
RJ Bank 33,434
25,516
Other 1,378
1,584
Total $ 49,809
$ 38,830

The following table presents goodwill, which was included in our total assets, on a segment basis.


$ in millions	June 30, 2020		September 30, 2019
Goodwill:
Private Client Group	$	276	$	275
Capital Markets	120		120
Asset Management	69		69
Total	$	465	$	464

$ in millions March 31, 2020 September 30, 2019
Goodwill:
Private Client Group $ 274
$ 275
Capital Markets 120
120
Asset Management 69
69
Total $ 463
$ 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. The following table presents our net revenues and pre-tax income classified by major geographic area in which they were earned.

Three months ended March 31, Six months ended March 31,
$ in millions 2020 2019 2020 2019
Net revenues:
U.S. $ 1,920
$ 1,729
$ 3,795
$ 3,525
Canada 112
90
207
189
Europe 36
40
75
76
Total $ 2,068
$ 1,859
$ 4,077
$ 3,790
Pre-tax income/(loss):

U.S. $ 227
$ 334
$ 579
$ 664
Canada 13
7
21
23
Europe ⁽¹⁾
(1 ) 6
(2 ) (8 )
Total $ 239
$ 347
$ 598
$ 679


~~(1)~~	The pre-tax loss in Europe for the six months ended March 31, 2019 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.


	Three months ended June 30,						Nine months ended June 30,
$ in millions	2020		2019		2020		2019
Net revenues:
U.S.	$	1,706	$	1,793	$	5,501	$	5,318
Canada	86		101		293		290
Europe	42		33		117		109
Total	$	1,834	$	1,927	$	5,911	$	5,717
Pre-tax income/(loss):
U.S.	$	191	$	330	$	770	$	994
Canada	5		12		26		35
Europe ⁽¹⁾	2		—		—		(8)
Total	$	198	$	342	$	796	$	1,021

(1) The pre-tax loss in Europe for the nine months ended June 30, 2019 reflects a $15 million loss on the sale of our operations related to research, sales and trading of European equities incurred during the fiscal first quarter of 2019.

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


$ in millions	March 31, 2020		September 30, 2019		$ in millions	June 30, 2020		September 30, 2019
Total assets:					Total assets:
U.S.	$	46,507	$	35,978	U.S.	$	41,459	$	35,978
Canada	3,189		2,754		Canada	3,099		2,754
Europe	113		98		Europe	124		98
Total	$	49,809	$	38,830	Total	$	44,682	$	38,830

The following table presents goodwill, which was included in our total assets, classified by major geographic area in which it was held.


$ in millions	June 30, 2020		September 30, 2019
Goodwill:
U.S.	$	433	$	433
Canada	24		23
Europe	8		8
Total	$	465	$	464

$ in millions March 31, 2020 September 30, 2019
Goodwill:
U.S. $ 433
$ 433
Canada 22
23
Europe 8
8
Total $ 463
$ 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
~~INDEX~~		PAGE
		~~PAGE~~
Factors affecting “forward-looking statements”	4950
Introduction		4950
Executive overview		4950
Segments		5253
Reconciliation of GAAP measures to non-GAAP financial measures		5354
Net interest analysis		5354
Results of Operations
Private Client Group		5657
Capital Markets		6061
Asset Management		6162
RJ Bank		6465
Other		6869
Certain statistical disclosures by bank holding companies		6970
Liquidity and capital resources		7071
Statement of financial condition analysis		7375
Contractual obligations		7475
Regulatory		7475
Critical accounting estimates		7578
Recent accounting developments		7679
Off-balance sheet arrangements		7679
Effects of inflation		7679
Risk management		7679

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

Management’s Discussion and Analysis

FACTORS AFFECTING “FORWARD-LOOKING STATEMENTS”

~~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, our effective tax rate, regulatory developments, effects of accounting pronouncements, and general economic conditions. In addition, words such as “believes,” “expects,” “anticipates,” “plans,~~” “estimates,~~” 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.

~~Introduction~~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 bank holding company. Results in the businesses in which we operate are highly correlated to general economic conditions and, more specifically, to the direction of the U.S. equity and fixed income markets, changes in interest rates, market volatility, corporate and mortgage lending markets and commercial and residential credit trends. Overall market conditions, 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, including investors, borrowers, and competitors, impacting their level of participation in the financial markets. These factors also impact the level of investment banking activity and asset valuations, which ultimately affect our business results.

~~Executive overview~~EXECUTIVE OVERVIEW

Quarter ended ~~March 31,~~June 30, 2020 compared with the quarter ended ~~March 31,~~June 30, 2019

OnIn March ~~11,~~ 2020, the World Health Organization declared COVID-19 a pandemic and ~~on March 13, 2020,~~ the United States declared a national emergency due to the impact of the pandemic. As a result of the spread of COVID-19, governments and other authorities around the world ~~have~~ imposed measures intended to control the spread of the disease, including restrictions on travel and the conduct of business, such as stay-at-home orders, quarantines, travel bans, border closings, business closures and other similar measures. In response, we activated our business continuity plan endeavoring to safeguard our ~~employees, with~~associates, and nearly all of our ~~employees now~~associates transitioned to working remotely, while still maintaining our standard of client service. Although economies began to reopen during our fiscal third quarter, a substantial portion of our associates continued to work remotely. Our systems and infrastructure have continued to support ~~the~~ increased volumes of activity without any significant operational or technology disruptions.

The ~~worldwide~~economic uncertainty that has resulted from the COVID-19 pandemic ~~had~~continued during our fiscal third quarter and market volatility remained elevated; however, market sentiment improved, reflected in the recovery of U.S. equity markets during the quarter. Certain of our businesses benefited from the equity market appreciation, and PCG assets in fee-based accounts recovered, increasing 16%, which will have a ~~negative~~positive impact on our ~~business during~~fiscal fourth quarter results. However, our results continued to be negatively affected by the significant reduction in interest rates implemented by The Federal Reserve toward the end of our fiscal second quarter ~~ended March 31, 2020, as~~and an elevated bank loan loss provision due to the ~~spread~~economic impact and uncertainty attributable to the pandemic. Uncertainty remains with regard to the extent and duration of the ~~disease and measures intended~~disruptions related to ~~prevent~~the COVID-19 pandemic as well as its ~~spread have caused significant volatility and disruption in~~continuing impacts on the ~~financial markets both globally and in the U.S.~~global economy. We expect the COVID-19 pandemic and the measures taken to prevent its spread and to support the economy to continue to have ~~a more significant~~an impact on our business during the remainder of fiscal ~~2020 than it did during the quarter ended March 31,~~ 2020, although the extent of such effects will depend on future developments ~~that~~which are highly uncertain and cannot be predicted.

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

Management’s Discussion and Analysis

During the quarter ended ~~March 31,~~June 30, 2020, net revenues of ~~$2.07~~$1.83 billion ~~increased $209~~decreased $93 million, or ~~11%~~5%, compared with the prior-year quarter. Pre-tax income of ~~$239~~$198 million decreased ~~$108~~$144 million, or ~~31%~~42%, and net income of ~~$169~~$172 million decreased ~~$92~~$87 million, or ~~35%~~34%, both primarily due to a significant increase in the bank loan loss provision in response to the ~~rapid and widespread~~ economic deterioration caused by the COVID-19 pandemic. Our earnings per diluted share were ~~$1.20,~~$1.23, reflecting a ~~34%~~32% decrease. Our annualized return on equity (“ROE”) for the quarter was ~~9.9%~~10.0%, compared with ~~16.7%~~16.1% in the prior-year quarter, and our annualized return on tangible common equity (“ROTCE”) ⁽¹⁾was ~~10.8%~~10.9%, compared with ~~18.5%~~17.8% for the prior-year quarter.

The ~~$209~~$93 million ~~increase~~decrease in net revenues compared with the prior-year quarter primarily reflected ~~higher asset management~~the impact of lower short-term interest rates on both net interest income and ~~related administrative~~RJBDP fees ~~attributable to higher PCG assets in fee-based accounts at the beginning of the quarter, which~~from third-party banks. These declines were ~~31% higher than fee-based assets as of the beginning of the prior-year quarter. Brokerage revenues also increased during the quarter as the significant market volatility in March drove~~partially offset by an increase in brokerage revenues, as the fixed income business generated strong results due to higher client activity. Offsetting these increases, other revenues were negatively impacted by valuation losses on private equity investments, a portion of which was attributable to noncontrolling interests, which was reflected as an offset in other expenses. RJBDP fees and net interest income were negatively impacted by lower short-term interest rates.activity levels.

Compensation, commissions and benefits ~~expense~~expenses were flat versus the prior-year quarter. Non-compensation expenses increased ~~$197~~$51 million, or ~~16%~~17%, due to an $86 million increase in compensable net revenues, which primarily include asset management and related administrative fees, brokerage revenues, and investment banking revenues, as well as increased staffing levels required to support our continued growth and regulatory compliance requirements.

~~Non-compensation expenses increased $120 million, or 42%, primarily due to~~ the ~~aforementioned~~ bank loan loss provision, ~~of $109 million.~~

~~Pursuant to our Board of Directors’ share repurchase authorization, we repurchased approximately 2.5~~which was $81 million ~~shares of common stock during~~in the current-year quarter ~~for $202~~compared with a $5 million ~~at an average price of approximately $79 per share. Due to~~benefit in the ~~heightened market uncertainty~~prior-year quarter, partially offset by a decrease in business development expenses, as travel and conferences were halted as a result of the COVID-19 ~~crisis, share buybacks have been suspended since mid-March and, as~~pandemic.

Our effective income tax rate of ~~March 31,~~13.1% for our fiscal third quarter of 2020 ~~we had $537 million~~primarily reflected the impact of ~~availability remaining under this authorization.~~significant non-taxable gains on our corporate-owned life insurance portfolio on lower pre-tax earnings for the quarter.

The firm ended the quarter with capital ratios well in excess of regulatory requirements and substantial liquidity, with ~~nearly $2~~over $2.1 billion⁽²⁾ of cash at the parent company, which included the proceeds of a $500 million 10-year senior notes issuance ~~in March.~~at the end of our fiscal second quarter of 2020.

Certain of the impacts of the COVID-19 pandemic will likely continue to affect our results in future quarters to a greater extent than in the second fiscal quarter. Equity market declines toward the end of the quarter drove a 14% decline in fee-based assets and a 15% decline in financial assets under management as of March 31, 2020, which will negatively impact asset management and related administrative fees in our PCG and Asset Management segments in our third fiscal quarter of 2020.quarters. Our net interest income and RJBDP fees from third-party banks will continue to be negatively affected by the ~~full impact of the 150~~225 basis point reduction ~~in March~~ by the Federal Reserve inof its benchmark short-term interest ~~rate.~~rate since August 2019. In Capital Markets, ~~while our~~the high degree of market uncertainty will likely result in more volatility of both brokerage revenues and investment banking pipeline remains healthy, it is likely that we will experience a near-term slowdown in mergers & acquisitions and underwriting activity due to market uncertainty. In addition, if market volatility declines, it is likely that brokerage revenues ~~will decline compared with~~during the ~~second fiscal quarter of 2020.~~pandemic. While our results during the ~~second~~third quarter were negatively impacted by ~~the~~elevated bank loan loss ~~provision and private equity valuation~~provisions, including losses on certain corporate loans that were sold during the quarter, further market deterioration could result in additional provisions ~~and losses~~ in future quarters. Due to the uncertainty caused by the COVID-19 pandemic, and related negative impact on our results, we are evaluating ways to reduce costs and find efficiencies to remain well-positioned for future growth and success. To that end, we are currently engaged in a firm-wide process of evaluating both compensation and non-compensation expenses.

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

•Our PCG segment net revenues of ~~$1.50~~$1.25 billion ~~increased 18%~~decreased 8%, while pre-tax income of ~~$170~~$91 million ~~increased 29%~~decreased 35%. The ~~increase~~$102 million decrease in net revenues was primarily attributable to ~~an increase~~the decrease in short-term interest rates, which negatively impacted both net interest income and RJBDP fees from third party banks. Brokerage revenues also declined compared with the prior-year quarter, primarily due to a decline in revenues from annuity products and mutual fund products. Non-interest expenses decreased $53 million, or 4%, primarily resulting from a decrease in travel and conference-related expenses as a result of the COVID-19 pandemic, as well as lower compensation expenses due to a decrease in compensable net revenues, which primarily include asset management and related administrative fees, ~~due to higher assets in fee-based accounts at the beginning of the quarter, as well as an increase in~~ brokerage revenues due to strong client activity driven by market volatility toward the end of the quarter. Non-interest expenses increased $186 million, or 16%, primarily resulting from an increase in compensation expenses due to the growth in compensable net revenues and ~~higher staffing levels to support our continued growth and regulatory compliance requirements.~~investment banking revenues.

•Capital Markets net revenues of ~~$290~~$323 million increased 5%29% and pre-tax income of ~~$28~~$62 million ~~decreased 32%~~increased 158%. The $72 million increase in net revenues was primarily due to an increase in fixed income and, to a lesser extent, equity brokerage revenues due to higher client activity, as ~~a result of market volatility, as~~ well as an increase in debt and equity underwriting revenues. These increases were partially offset by a decline in merger & acquisition revenues compared with the prior-year quarter due to market uncertainty. Non-interest expenses increased $34 million, or 15%, due to an increase in compensation expense, primarily as a result of the increase in net revenues.

•Our Asset Management segment net revenues of $163 million decreased 8% and pre-tax income of $60 million decreased 8%. The decrease in net revenues was largely driven by lower average financial assets under management at Carillon Tower Advisers.

(1) “ROTCE” 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.


~~(2)~~	~~For additional information, please see the “Liquidity and capital resources - Sources of liquidity” section in this MD&A.~~

(2) For additional information, please see the “Liquidity and capital resources - Sources of liquidity” section in this MD&A.

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

Management’s Discussion and Analysis

& acquisition revenues compared with a strong prior-year quarter. Non-interest expenses increased $26 million, or 11%, primarily resulting from an increase in compensation expense, primarily due to the mix of revenues.

Our Asset Management segment net revenues of $184 million increased 14% and pre-tax income of $73 million increased 33%. The increase in net revenues was driven by higher average financial assets under management, as well as higher beginning assets in programs for which the segment provides administrative support.

•RJ Bank net revenues of ~~$210~~$178 million decreased 1%17% and pre-tax income of $14 million decreased 90%. Net revenues ~~were essentially flat as higher interest-earning banking assets offset~~decreased $37 million due to the negative impact from lower short-term interest ~~rates.~~rates, partially offset by the benefit from higher interest-earning assets. Non-interest expenses increased ~~$120~~$87 million, or ~~158%~~113%, as RJ Bank recorded a loan loss provision of ~~$109~~$81 million compared to a benefit of $5 million in the prior-year ~~quarter, in response to the impact of COVID-19.~~quarter.

•Our Other segment reflected a pre-tax loss that was ~~$29~~$4 million larger compared to the prior-year quarter, primarily the result of ~~private equity valuation losses in~~lower interest income on corporate cash balances due to the ~~current-year quarter compared with gains~~negative impact of inlower short-term interest rates, as well as increased interest expense due to the ~~prior-year~~issuance of $500 million of senior notes at the end of the fiscal second quarter.

~~Six~~Nine months ended ~~March 31,~~June 30, 2020 compared with the ~~six~~nine months ended ~~March 31,~~June 30, 2019

Net revenues of ~~$4.08~~$5.91 billion increased ~~$287~~$194 million, or 8%3%. Pre-tax income of ~~$598~~$796 million decreased ~~$81~~$225 million, or ~~12%~~22%. Our net income of ~~$437~~$609 million decreased ~~$73~~$160 million, or ~~14%~~21%, and our earnings per diluted share were ~~$3.09,~~$4.33, reflecting ~~a 12%~~an 18% decrease. Our annualized ROE during the ~~six~~nine months ended ~~March 31,~~June 30, 2020 was ~~13.0%~~11.9%, compared with 16.2% for the prior-year period, and annualized ROTCE ⁽¹⁾ was ~~14.2%~~13.1%, compared with 17.9% for the prior-year period.

The ~~$287~~$194 million increase in net revenues compared with the prior-year period ~~reflects~~included higher asset management and related administrative fees, primarily attributable to higher average PCG assets in fee-based accounts at the beginning of the current-year ~~periods. Brokerage~~periods and higher brokerage revenues, ~~also increased, primarily~~largely due to higher market volatility and a significant increase in ~~our second fiscal quarter.~~institutional fixed income client activity in the current-year period. Offsetting these increases ~~other revenues~~ were ~~negatively impacted by~~the negative impacts of lower short-term interest rates on our net interest income and RJBDP fees from third-party banks, and valuation losses on private equity investments, a portion of which was attributable to noncontrolling interests ~~which was reflected~~(reflected as an offset in other ~~expenses. RJBDP fees and net interest income were negatively impacted due to lower short-term interest rates.~~expenses).

Compensation, commissions and benefits expense increased $283 million, or ~~11%~~8%, mostly due to an increase in compensable net ~~revenues, as well as increased staffing levels required to support our continued growth and regulatory compliance requirements.~~revenues.

Non-compensation expenses increased ~~$85~~$136 million, or ~~14%~~15%, ~~primarily~~ due to a ~~$107~~$188 million bank loan loss provision, compared with a ~~$21~~$16 million bank loan loss provision ~~for~~during the prior-year ~~period,~~period. This increase was partially offset by lower travel and conference-related expenses as a result of the ~~$15 million loss on~~COVID-19 pandemic and the ~~sale of our operations related~~aforementioned private equity valuation losses attributable to ~~research, sales and trading of European equities that occurred~~noncontrolling interests, which is an offset in ~~the prior-year period.~~other expenses.

Our effective income tax rate was ~~26.9%~~23.5% for the ~~six~~nine months ended ~~March 31,~~June 30, 2020, ~~an increase~~a decrease compared with the 24.8% effective tax rate for fiscal year 2019, primarily due to the ~~unfavorable~~favorable impact inof permanent tax benefits on lower pre-tax earnings during the ~~current-year period of non-deductible valuation losses associated with our company-owned life insurance policies.~~nine months ended June 30, 2020.

Pursuant to our Board of Directors’ share repurchase authorization, we repurchased approximately 2.7 million shares of common stock during the first six months ~~ended March 31, 2020~~of our current fiscal year for $213 million at an average price of approximately $80 per share. Due to heightened market uncertainty as a result of the COVID-19 crisis, share buybacks were suspended from mid-March through the end of our fiscal third quarter. As of June 30, 2020, we had $537 million of availability remaining under the previously-announced authorization. We resumed share repurchases to offset dilution in our fiscal fourth quarter.

A summary of our financial results by segment as compared to the prior-year period is as follows:

•PCG segment net revenues of ~~$2.91~~$4.16 billion increased ~~11%~~5%, while pre-tax income of ~~$323~~$414 million ~~increased 9%~~decreased 5%. The $180 million increase in net revenues was primarily attributable to an increase in asset management and related administrative fees due to higher average assets in fee-based accounts at the beginning of each of the current-year ~~periods, as well as an~~periods. Offsetting this increase ~~in brokerage revenues due to strong client activity driven by market volatility in our second fiscal quarter. Offsetting these increases~~ were decreases in RJBDP fees from third-party banks and net interest income due to lower short-term interest rates. Non-interest expenses increased ~~$255~~$202 million, or ~~11%~~6%, primarily resulting from an increase in compensation expenses largely due to the growth in compensable net ~~revenues and higher staffing levels to support our continued growth and regulatory compliance requirements.~~revenues.

•Capital Markets net revenues of ~~$558~~$881 million increased 5%13% and pre-tax income of ~~$57~~$119 million increased 8%55%. The $100 million increase in net revenues was primarily due to an increase in fixed income brokerage revenues, due to higher client activity, ~~driven by market volatility,~~ as well as ~~an increase~~increases in equity and debt underwriting revenues. These increases were partially offset by a decline in merger & acquisition and advisory ~~revenues.~~revenues, which were negatively impacted by the market uncertainty caused by the COVID-19 pandemic. Non-interest expenses increased 5%$58 million, or 8%, due to higher compensation expenses, primarily as a result of the increase in revenues.

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

Management’s Discussion and Analysis

•expenses, as a result of the increase in revenues, and higher business development expenses, professional fees and other expenses. These increases were partially offset by the aforementioned $15 million loss on the sale of our operations related to research, sales and trading of European equities in the prior-year period.

Our Asset Management segment net revenues of ~~$368~~$531 million increased ~~10%~~4% and pre-tax income of ~~$146~~$206 million increased ~~23%~~12%. The increase in net revenues was driven by higher average ~~financial~~beginning-of-quarter assets ~~under management, as well as higher assets at the beginning of each of the current-year quarters~~ in programs offered to PCG clients for which the segment provides administrative ~~support.~~support, as well as higher average financial assets under management during the current-year period.

•RJ Bank net revenues of ~~$426~~$604 million ~~increased 3%~~decreased 4% and pre-tax income of ~~$149~~$163 million decreased ~~39%~~58%. The ~~increase~~$26 million decrease in net revenues reflected ~~higher net~~the negative impact of lower short-term interest ~~income due to growth in interest-earning assets,~~rates, which more than offset the ~~lower net interest margin caused by lower short-term interest rates.~~growth in interest-earning assets. Non-interest expenses increased ~~$108~~$195 million, or ~~64%~~79%, primarily due to ~~an $86~~a $172 million increase in the loan loss ~~provision, as well as an increase in fees for RJBDP paid to PCG.~~provision.

•Our Other segment reflected a pre-tax loss that was ~~$42~~$46 million larger compared to the prior-year period, primarily due to private equity valuation losses, as compared to gains in the prior-year period, ~~and~~ lower interest income on corporate cash balances due to lower short-term interest ~~rates.~~rates, and increased interest expense, due to the issuance of $500 million of senior notes at the end of the fiscal second quarter.

~~Segments~~SEGMENTS

We currently operate through five segments. Our business segments are PCG, Capital Markets, Asset Management and RJ Bank. Our Other segment includes our private equity investments, interest income on certain corporate cash balances, and certain corporate overhead costs of RJF, including the interest costs on our public debt.

The following table presents our consolidated and segment net revenues and pre-tax income/(loss) for the periods indicated.


	Three months ended June 30,										Nine months ended June 30,
$ in millions	2020		2019		% change		2020		2019		% change
Total company
Net revenues	$	1,834	$	1,927	(5)	%	$	5,911	$	5,717	3	%
Pre-tax income	$	198	$	342	(42)	%	$	796	$	1,021	(22)	%

Private Client Group
Net revenues	$	1,249	$	1,351	(8)	%	$	4,158	$	3,978	5	%
Pre-tax income	$	91	$	140	(35)	%	$	414	$	436	(5)	%

Capital Markets
Net revenues	$	323	$	251	29	%	$	881	$	781	13	%
Pre-tax income	$	62	$	24	158	%	$	119	$	77	55	%

Asset Management
Net revenues	$	163	$	177	(8)	%	$	531	$	513	4	%
Pre-tax income	$	60	$	65	(8)	%	$	206	$	184	12	%

RJ Bank
Net revenues	$	178	$	215	(17)	%	$	604	$	630	(4)	%
Pre-tax income	$	14	$	138	(90)	%	$	163	$	384	(58)	%

Other
Net revenues	$	(20)	$	(4)	(400)	%	$	(72)	$	(2)	(3,500)	%
Pre-tax loss	$	(29)	$	(25)	(16)	%	$	(106)	$	(60)	(77)	%

Intersegment eliminations
Net revenues	$	(59)	$	(63)	NM		$	(191)	$	(183)	NM

Three months ended March 31, Six months ended March 31,
$ in millions 2020 2019 % change 2020 2019 % change
Total company
Net revenues $ 2,068
$ 1,859
11 % $ 4,077
$ 3,790
8 %
Pre-tax income $ 239
$ 347
(31 )% $ 598
$ 679
(12 )%

Private Client Group

Net revenues $ 1,495
$ 1,271
18 % $ 2,909
$ 2,627
11 %
Pre-tax income $ 170
$ 132
29 % $ 323
$ 296
9 %

Capital Markets

Net revenues $ 290
$ 277
5 % $ 558
$ 530
5 %
Pre-tax income $ 28
$ 41
(32 )% $ 57
$ 53
8 %

Asset Management

Net revenues $ 184
$ 162
14 % $ 368
$ 336
10 %
Pre-tax income $ 73
$ 55
33 % $ 146
$ 119
23 %

RJ Bank

Net revenues $ 210
$ 212
(1 )% $ 426
$ 415
3 %
Pre-tax income $ 14
$ 136
(90 )% $ 149
$ 246
(39 )%

Other

Net revenues $ (44 ) $ —
NM
$ (52 ) $ 2
NM
Pre-tax loss $ (46 ) $ (17 ) (171 )% $ (77 ) $ (35 ) (120 )%

Intersegment eliminations

Net revenues $ (67 ) $ (63 ) NM
$ (132 ) $ (120 ) NM

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

Management’s Discussion and Analysis

RECONCILIATION OF GAAP MEASURES TO NON-GAAP FINANCIAL MEASURES

~~Reconciliation of GAAP measures to non-GAAP financial measures~~

We utilize certain non-GAAP 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 annualized return on tangible common equity is meaningful to investors as this measure facilitates comparison of our results to the results of other companies. This non-GAAP financial measure should be considered in addition to, and not as a substitute for, measures of financial performance prepared in accordance with GAAP. In addition, this non-GAAP 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 financial measure for the periods indicated.


	Three months ended June 30,									Nine months ended June 30,
$ in millions	2020			2019			2020			2019




















Average equity	$	6,882		$	6,434		$	6,797		$	6,345
Less:
Average goodwill and identifiable intangible assets, net	603			633			606			634
Average deferred tax liabilities, net	(32)			(31)			(30)			(32)
Average tangible common equity	$	6,311		$	5,832		$	6,221		$	5,743




Return on equity	10.0		%	16.1		%	11.9		%	16.2		%

Return on tangible common equity	10.9		%	17.8		%	13.1		%	17.9		%

Three months ended March 31, Six months ended March 31,
$ in millions 2020 2019 2020 2019
Average equity $ 6,820
$ 6,255
$ 6,740
$ 6,292
Less:
Average goodwill and identifiable intangible assets, net 606
632
608
634
Average deferred tax liabilities, net (31 ) (35 ) (30 ) (34 )
Average tangible common equity $ 6,245
$ 5,658
$ 6,162
$ 5,692

Return on equity 9.9 % 16.7 % 13.0 % 16.2 %
Return on tangible common equity 10.8 % 18.5 % 14.2 % 17.9 %

Return on equity is computed by dividing annualized net income for the period indicated by average equity for each respective period or, in the case of return on tangible common equity, computed by dividing annualized net income by average tangible common equity for each respective period.

Average equity for the quarter-to-date period is computed by adding the total equity attributable to ~~Raymond James Financial, Inc.~~RJF as of the date indicated to the 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. Average equity for the year-to-date period is computed by adding the total equity attributable to ~~Raymond James Financial, Inc.~~RJF as of each quarter-end date during the indicated year-to-date period to the beginning of the year total, and dividing by ~~three,~~four, or in the case of average tangible common equity, computed by adding tangible common equity as of each quarter-end date during the indicated year-to-date period to the beginning of the year total, and dividing by ~~three.~~four.

~~Net interest analysis~~NET INTEREST ANALYSIS

In response to macroeconomic concerns resulting from the COVID-19 pandemic, The Federal Reserve decreased its benchmark short-term interest rate twice ~~toward the end of our second fiscal quarter~~in March 2020 to a range of 0-0.25%, for a total decrease of 150 basis ~~points during the quarter.~~points. These decreases in short-term interest rates, as well as the three rate cuts implemented in 2019 (225 basis points in total) have had a negative impact on our fiscal year 2020 results, as we have certain assets and liabilities, primarily held in our PCG, 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 the RJBDP are also sensitive to changes in interest rates. AsThe negative impact of the decline in short-term interest ~~rate decreases during our second fiscal quarter occurred~~rates outweighed the growth in ~~March,~~interest-earning assets and RJBDP balances swept to third-party banks compared with the prior year, and we expect ~~that these decreases will have~~ a ~~more significant~~continuation of this negative impact ~~on our results~~ for the remainder of fiscal 2020. In addition, during the second fiscal quarter of 2020 we issued $500 million in aggregate principal amount of 4.65% senior notes. While this issuance strengthened our liquidity position, it will also increase our interest expense in future periods.

Given the relationship between our interest-sensitive assets and liabilities held in each of these segments 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 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, including deposit rates paid to clients on their cash balances. Conversely, any increases in short-term interest rates and/or decreases in the deposit rates paid to clients generally have a positive impact on our earnings.

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

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

~~Management’s Discussion and Analysis~~

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

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

Management’s Discussion and Analysis

Quarter ended ~~March 31,~~June 30, 2020 compared with the quarter ended ~~March 31,~~June 30, 2019


	Three months ended June 30,
	2020										2019
$ 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	$	3,411	$	3��	0.34	%	$	2,268	$	14	2.62	%
Trading instruments	313		4		4.59	%	771		7		3.53	%
Available-for-sale securities	4,437		23		2.01	%	2,901		18		2.41	%
Margin loans	2,068		18		3.44	%	2,528		30		4.83	%
Bank loans, net of unearned income and deferred expenses:
Loans held for investment:
C&I loans	7,994		59		2.93	%	8,278		98		4.68	%
CRE construction loans	212		2		3.60	%	248		4		5.45	%
CRE loans	3,773		25		2.66	%	3,359		39		4.53	%
Tax-exempt loans	1,272		9		3.34	%	1,291		9		3.35	%
Residential mortgage loans	4,983		37		2.97	%	4,127		34		3.32	%
SBL and other	3,576		24		2.59	%	3,125		36		4.64	%
Loans held for sale	111		1		3.22	%	118		1		4.78	%
Total bank loans, net	21,921		157		2.87	%	20,546		221		4.30	%
Loans to financial advisors, net	973		5		1.94	%	912		5		2.06	%
Corporate cash and all other	7,675		7		0.31	%	4,272		26		2.45	%
Total interest-earning assets	$	40,798	$	217	2.09	%	$	34,198	$	321	3.76	%

Interest-bearing liabilities:
Bank deposits:
Savings, money market and NOW accounts	$	25,060	$	2	0.02	%	$	20,842	$	29	0.57	%
Certificates of deposit	1,104		5		2.00	%	561		4		2.33	%
Trading instruments sold but not yet purchased	71		1		0.83	%	307		2		2.39	%
Brokerage client payables	4,790		3		0.17	%	3,054		5		0.61	%
Other borrowings	891		5		2.25	%	898		5		2.20	%
Senior notes payable	2,045		24		4.74	%	1,550		19		4.71	%
Other	272		2		4.23	%	791		9		4.81	%
Total interest-bearing liabilities	$	34,233	$	42	0.48	%	$	28,003	$	73	1.03	%
Net interest income			$	175					$	248

Three months ended March 31,
2020 2019
$ 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 $ 2,820
$ 11
1.58 % $ 2,711
$ 17
2.47 %
Trading instruments 708
7
4.21 % 687
6
3.59 %
Available-for-sale securities 3,443
19
2.28 % 2,876
17
2.43 %
Margin loans 2,367
21
3.55 % 2,599
31
4.76 %
Bank loans, net of unearned income and deferred expenses:
Loans held for investment:
C&I loans 8,043
81
3.99 % 8,160
97
4.76 %
CRE construction loans 181
2
4.58 % 197
3
5.70 %
CRE loans 3,735
36
3.81 % 3,379
40
4.73 %
Tax-exempt loans 1,212
8
3.36 % 1,280
8
3.34 %
Residential mortgage loans 4,847
38
3.13 % 3,979
34
3.33 %
SBL and other 3,469
31
3.60 % 3,066
37
4.71 %
Loans held for sale 142
2
3.85 % 144
1
4.26 %
Total bank loans, net 21,629
198
3.67 % 20,205
220
4.38 %
Loans to financial advisors, net 979
5
2.08 % 901
5
2.01 %
Corporate cash and all other 6,321
24
1.40 % 4,897
28
2.38 %
Total interest-earning assets $ 38,267

$ 285
2.97 % $ 34,876

$ 324
3.72 %

Interest-bearing liabilities:

Bank deposits:
Savings, money market and NOW accounts $ 22,877
$ 6
0.12 % $ 20,751
$ 34
0.64 %
Certificates of deposit 1,094
6
2.03 % 560
3
2.26 %
Trading instruments sold but not yet purchased 222
1
1.93 % 286
2
2.67 %
Brokerage client payables 3,838
3
0.26 % 3,582
5
0.58 %
Other borrowings 892
5
2.26 % 967
5
2.35 %
Senior notes payable 1,556
19
4.71 % 1,550
18
4.70 %
Other 483
3
3.84 % 762
8
3.62 %
Total interest-bearing liabilities $ 30,962
$ 43
0.57 % $ 28,458
$ 75
1.04 %
Net interest income $ 242
$ 249

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

Management’s Discussion and Analysis

~~Six~~Nine months ended ~~March 31,~~June 30, 2020 compared with the ~~six~~nine months ended ~~March 31,~~June 30, 2019


	Nine months ended June 30,
	2020										2019
$ 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	$	2,852	$	25	1.16	%	$	2,472	$	46	2.50	%
Trading instruments	596		17		3.77	%	727		20		3.66	%
Available-for-sale securities	3,654		60		2.18	%	2,831		51		2.39	%
Margin loans	2,290		66		3.86	%	2,620		93		4.75	%
Bank loans, net of unearned income and deferred expenses:
Loans held for investment:
C&I loans	8,039		226		3.69	%	8,065		286		4.67	%
CRE construction loans	209		7		4.36	%	205		9		5.58	%
CRE loans	3,706		98		3.49	%	3,433		120		4.60	%
Tax-exempt loans	1,236		25		3.35	%	1,285		26		3.34	%
Residential mortgage loans	4,823		112		3.09	%	3,999		100		3.32	%
SBL and other	3,460		89		3.37	%	3,098		109		4.64	%
Loans held for sale	138		4		3.77	%	149		5		4.87	%
Total bank loans, net	21,611		561		3.46	%	20,234		655		4.32	%
Loans to financial advisors, net	975		15		2.04	%	909		14		2.00	%
Corporate cash and all other	5,963		55		1.10	%	4,651		82		2.33	%
Total interest-earning assets	$	37,941	$	799	2.79	%	$	34,444	$	961	3.71	%

Interest-bearing liabilities:
Bank deposits:
Savings, money market and NOW accounts	$	23,190	$	20	0.11	%	$	20,689	$	96	0.62	%
Certificates of deposit	993		15		2.06	%	527		9		2.20	%
Trading instruments sold but not yet purchased	194		3		1.80	%	297		6		2.63	%
Brokerage client payables	3,929		9		0.31	%	3,395		16		0.62	%
Other borrowings	892		15		2.24	%	936		16		2.33	%
Senior notes payable	1,716		61		4.73	%	1,550		55		4.70	%
Other	473		13		3.55	%	771		23		3.89	%
Total interest-bearing liabilities	$	31,387	$	136	0.57	%	$	28,165	$	221	1.04	%
Net interest income			$	663					$	740

Six months ended March 31,
2020 2019
$ 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 $ 2,578
$ 22
1.70 % $ 2,572
$ 32
2.45 %
Trading instruments 738
13
3.60 % 705
13
3.73 %
Available-for-sale securities 3,265
37
2.29 % 2,796
33
2.38 %
Margin loans 2,402
48
4.04 % 2,665
63
4.71 %
Bank loans, net of unearned income and deferred expenses:
Loans held for investment:
C&I loans 8,061
167
4.07 % 7,959
188
4.67 %
CRE construction loans 207
5
4.75 % 184
5
5.66 %
CRE loans 3,673
73
3.91 % 3,469
81
4.64 %
Tax-exempt loans 1,218
16
3.36 % 1,282
17
3.34 %
Residential mortgage loans 4,743
75
3.16 % 3,934
66
3.32 %
SBL and other 3,403
65
3.78 % 3,085
73
4.65 %
Loans held for sale 151
3
3.97 % 165
4
4.90 %
Total bank loans, net 21,456
404
3.76 % 20,078
434
4.32 %
Loans to financial advisors, net 977
10
2.09 % 908
9
1.97 %
Corporate cash and all other 5,663
48
1.63 % 4,850
56
2.36 %
Total interest-earning assets $ 37,079
$ 582
3.14 % $ 34,574
$ 640
3.70 %

Interest-bearing liabilities:

Bank deposits:
Savings, money market and NOW accounts $ 22,260
$ 18
0.16 % $ 20,612
$ 67
0.64 %
Certificates of deposit 937
10
2.10 % 510
5
2.13 %
Trading instruments sold but not yet purchased 254
2
1.94 % 291
4
2.77 %
Brokerage client payables 3,513
6
0.31 % 3,563
11
0.63 %
Other borrowings 893
10
2.23 % 956
11
2.39 %
Senior notes payable 1,553
37
4.71 % 1,550
36
4.70 %
Other 573
11
3.92 % 760
14
3.41 %
Total interest-bearing liabilities $ 29,983
$ 94
0.62 % $ 28,242
$ 148
1.05 %
Net interest income
$ 488

$ 492

Nonaccrual loans are included in the average loan balances in the preceding tables. Any payments received for corporate nonaccrual loans are applied entirely to principal. Interest income on residential mortgage nonaccrual loans is recognized on a cash basis.

Fee income on bank loans included in interest income was $5$1 million and $9$10 million during three and ~~six~~nine months ended ~~March 31,~~June 30, 2020, respectively, and $6$3 million and ~~$11~~$14 million during three and ~~six~~nine months ended ~~March 31,~~June 30, 2019, respectively.

The yield on tax-exempt loans in the preceding tables is presented on a taxable-equivalent basis utilizing the applicable federal statutory rates for each of the years presented.

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

Management’s Discussion and Analysis

RESULTS OF OPERATIONS – PRIVATE CLIENT GROUP

~~Results of Operations – Private Client Group~~

For an overview of our PCG segment operations, as well as 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 2019 Form 10-K.

Operating results


	Three months ended June 30,										Nine months ended June 30,
$ in millions	2020		2019		% change		2020		2019		% change
Revenues:
Asset management and related administrative fees	$	715	$	718	—		$	2,330	$	2,063	13	%
Brokerage revenues:
Mutual and other fund products	131		147		(11)	%	438		449		(2)	%
Insurance and annuity products	88		105		(16)	%	288		308		(6)	%
Equities, ETFs and fixed income products	100		94		6	%	324		291		11	%
Total brokerage revenues	319		346		(8)	%	1,050		1,048		—
Account and service fees:
Mutual fund and annuity service fees	82		85		(4)	%	260		250		4	%
RJBDP fees:
Third-party banks	20		67		(70)	%	129		215		(40)	%
RJ Bank	43		44		(2)	%	138		127		9	%
Client account and other fees	32		32		—		96		92		4	%
Total account and service fees	177		228		(22)	%	623		684		(9)	%
Investment banking	7		10		(30)	%	29		25		16	%
Interest income	31		56		(45)	%	125		170		(26)	%
All other	4		3		33	%	20		19		5	%
Total revenues	1,253		1,361		(8)	%	4,177		4,009		4	%
Interest expense	(4)		(10)		(60)	%	(19)		(31)		(39)	%
Net revenues	1,249		1,351		(8)	%	4,158		3,978		5	%
Non-interest expenses:
Financial advisor compensation and benefits	783		805		(3)	%	2,555		2,358		8	%
Administrative compensation and benefits	235		237		(1)	%	727		700		4	%
Total compensation, commissions and benefits	1,018		1,042		(2)	%	3,282		3,058		7	%
Non-compensation expenses:
Communications and information processing	66		57		16	%	187		174		7	%
Occupancy and equipment	42		43		(2)	%	130		122		7	%
Business development	12		37		(68)	%	63		90		(30)	%
Professional fees	8		8		—		25		24		4	%
All other	12		24		(50)	%	57		74		(23)	%
Total non-compensation expenses	140		169		(17)	%	462		484		(5)	%
Total non-interest expenses	1,158		1,211		(4)	%	3,744		3,542		6	%
Pre-tax income	$	91	$	140	(35)	%	$	414	$	436	(5)	%

Three months ended March 31, Six months ended March 31,
$ in millions 2020 2019 % change 2020 2019 % change
Revenues:
Asset management and related administrative fees $ 833
$ 638
31 % $ 1,615
$ 1,345
20 %
Brokerage revenues:

Mutual and other fund products 163
145
12 % 307
302
2 %
Insurance and annuity products 99
99
—
200
203
(1 )%
Equities, ETFs and fixed income products 122
94
30 % 224
197
14 %
Total brokerage revenues 384
338
14 % 731
702
4 %
Account and service fees:

Mutual fund and annuity service fees 88
82
7 % 178
165
8 %
RJBDP fees:

Third-party banks 51
80
(36 )% 109
148
(26 )%
RJ Bank 48
42
14 % 95
83
14 %
Client account and other fees 35
27
30 % 64
60
7 %
Total account and service fees 222
231
(4 )% 446
456
(2 )%
Investment banking 11
8
38 % 22
15
47 %
Interest income 45
58
(22 )% 94
114
(18 )%
All other 7
9
(22 )% 16
16
—
Total revenues 1,502

1,282

17 %
2,924

2,648

10 %
Interest expense (7 ) (11 ) (36 )% (15 ) (21 ) (29 )%
Net revenues 1,495
1,271
18 % 2,909
2,627
11 %
Non-interest expenses:

Financial advisor compensation and benefits 915
750
22 % 1,772
1,553
14 %
Administrative compensation and benefits 245
234
5 % 492
463
6 %
Total compensation, commissions and benefits 1,160
984
18 % 2,264
2,016
12 %
Non-compensation expenses:

Communications and information processing 62
59
5 % 121
117
3 %
Occupancy and equipment 44
41
7 % 88
79
11 %
Business development 24
26
(8 )% 51
53
(4 )%
Professional fees 9
7
29 % 17
16
6 %
All other 26
22
18 % 45
50
(10 )%
Total non-compensation expenses 165
155
6 % 322
315
2 %
Total non-interest expenses $ 1,325
$ 1,139
16 % $ 2,586
$ 2,331
11 %
Pre-tax income $ 170
$ 132
29 % $ 323
$ 296
9 %

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

Management’s Discussion and Analysis

Selected key metrics

PCG client asset ~~balances:~~

balances


	As of																			As of
$ in billions	March 31, 2020			December 31, 2019			September 30, 2019			March 31, 2019			December 31, 2018			September 30, 2018			$ in billions	June 30, 2020			March 31, 2020			September 30, 2019			June 30, 2019			March 31, 2019			September 30, 2018
Assets under administration (“AUA”)	$	734.0		$	855.2		$	798.4		$	760.0		$	690.7		$	755.7		Assets under administration (“AUA”)	$	833.1		$	734.0		$	798.4		$	787.4		$	760.0		$	755.7
Assets in fee-based accounts ⁽¹⁾	$	383.5		$	444.2		$	409.1		$	378.4		$	338.8		$	366.3		Assets in fee-based accounts ⁽¹⁾	$	443.0		$	383.5		$	409.1		$	398.0		$	378.4		$	366.3
Percent of AUA in fee-based accounts	52.2		%	51.9		%	51.2		%	49.8		%	49.1		%	48.5		%	Percent of AUA in fee-based accounts	53.2		%	52.2		%	51.2		%	50.5		%	49.8		%	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.”

(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.”

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 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 affected by changes in asset values, but rather the impacts are seen in the following quarter.

~~Despite~~PCG assets under administration increased due to the net addition of financial advisors ~~in the current quarter, PCG assets under administration decreased due to the decline in~~and equity ~~markets as a result of the COVID-19 pandemic.~~market appreciation. In addition, PCG assets in fee-based accounts continued to increase as a percentage of overall PCG assets under administration due to clients’ preference for fee-based alternatives versus transaction-based accounts. As a result of the shift to fee-based accounts over the past several years, a larger portion of our PCG revenues are more directly impacted by market movements. ~~Therefore, further declines in equity markets would negatively affect our PCG revenues.~~

Financial ~~advisors:~~advisors


	June 30, 2020	March 31, 2020	September 30, 2019	June 30, 2019
Employees	3,379	3,376	3,301	3,228
Independent contractors	4,776	4,772	4,710	4,676
Total advisors	8,155	8,148	8,011	7,904

March 31,
2020 December 31,
2019 September 30,
2019 March 31,
2019
Employees 3,376
3,331
3,301
3,192
Independent contractors 4,772
4,729
4,710
4,670
Total advisors 8,148
8,060
8,011
7,862

~~The~~Although the number of financial advisors increased ~~primarily~~from prior periods, the net addition of financial advisors was low relative to recent quarters as the COVID-19 pandemic impacted experienced financial advisor transitions, particularly in the employee channel due to ~~continued~~office closures, and slowed the transitions of new trainees. While financial advisor recruiting activity has started to recover and ~~high levels of retention. The~~the pipeline remains solid, the impact of the COVID-19 pandemic on future recruiting is ~~uncertain; however, we are likely to see a slowdown in recruiting until travel restrictions and other social distancing measures subside.~~uncertain.

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

Management’s Discussion and Analysis

Clients’ domestic cash sweep ~~balances:~~balances


	As of
$ in millions	June 30, 2020		March 31, 2020		December 31, 2019		September 30, 2019		June 30, 2019
RJBDP
RJ Bank	$	24,101	$	28,711	$	21,891	$	21,649	$	21,600
Third-party banks	24,661		20,379		15,061		14,043		14,425
Subtotal RJBDP	48,762		49,090		36,952		35,692		36,025

Client Interest Program (“CIP”)	3,157		3,782		2,528		2,022		2,130
Total clients’ domestic cash sweep balances	$	51,919	$	52,872	$	39,480	$	37,714	$	38,155

As of
$ in millions March 31,
2020 December 31,
2019 September 30,
2019 March 31,
2019
RJBDP
RJ Bank $ 28,711
$ 21,891
$ 21,649
$ 21,023
Third-party banks 20,379
15,061
14,043
14,343
Subtotal RJBDP 49,090
36,952
35,692
35,366
Money market funds —
—
—
4,001
Client Interest Program (“CIP”) 3,782
2,528
2,022
2,349
Total clients’ domestic cash sweep balances $ 52,872
$ 39,480
$ 37,714
$ 41,716


	Three months ended June 30,						Nine months ended June 30,
	2020		2019		2020		2019
Average yield on RJBDP - third-party banks	0.33	%	1.95	%	0.97	%	1.90	%

Three months ended March 31, Six months ended March 31,
2020 2019 2020 2019
Average yield on RJBDP - third-party banks 1.33 % 2.00 % 1.48 % 1.87 %

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 annualized RJBDP fees from third-party banks, which are net of the interest expense paid to clients by the third-party banks, by the average daily RJBDP balance 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 significant decrease in short-term interest rates. The Federal Reserve decreased its benchmark short-term interest rate twice toward the end of our fiscal second ~~fiscal~~ quarter, to a range of 0-0.25%, a total decrease of 150 basis points. These decreases were in addition to the three rate cuts implemented induring 2019 (225 basis points in total). As the interest rate decreases during our second fiscal quarter of 2020 occurred in March, we expect that our average yield on RJBDP (third-party banks) will decrease to approximately 0.30% beginning with our third fiscal quarter. 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 on our earnings. Further, PCG segment results are impacted by changes in the allocation of client cash balances in the RJBDP between RJ Bank and third-party banks.

~~Money market funds were discontinued as a sweep option in June 2019. Balances in those funds were converted to the RJBDP or reinvested by the client.~~

~~The significant increase in clients’ cash balances as of~~Although lower compared with March 31, 2020, ~~was~~client cash balances remained elevated as of June 30, 2020 as a result of the market ~~volatility and~~uncertainty caused by the ~~steep declines in the equity markets during the second fiscal quarter of 2020.~~COVID-19 pandemic.

Quarter ended ~~March 31,~~June 30, 2020 compared with the quarter ended ~~March 31,~~June 30, 2019

Net revenues of ~~$1.50~~$1.25 billion ~~increased $224~~decreased $102 million, or ~~18%~~8%, and pre-tax income of ~~$170~~$91 million ~~increased $38~~decreased $49 million, or ~~29%~~35%.

Asset management and related administrative fees ~~increased $195 million, or 31%, due to higher asset balances~~were largely unchanged, as assets in fee-based accounts at the beginning of the quarter were relatively flat compared with the beginning of the prior-year quarter. As assets in fee-based accounts are billed primarily on balances at the beginning of the quarter, the ~~14% decline~~16% increase in fee-based assets during the current quarter will ~~negatively~~positively impact asset management fees in our ~~third~~ fiscal fourth quarter.

Brokerage revenues ~~increased $46~~decreased $27 million, or ~~14%~~8%, ~~primarily~~reflecting lower revenues from annuity products and lower mutual fund revenues. Offsetting these decreases was an increase in revenues from equities, ETFs, and fixed income products due to ~~strong~~an increase in client ~~activity driven by market volatility toward the end of the quarter as a result of the COVID-19 pandemic.~~activity.

Account and service fees decreased $9$51 million, or 4%22%, due to the decline in RJBDP fees from third-party banks, ~~primarily~~ driven by lower short-term interest rates compared with the prior-year ~~quarter. Partially offsetting this decrease was an~~quarter, which more than offset the impact of the significant increase in ~~RJBDP fees from RJ Bank, due~~cash balances swept to ~~an increase in the number of accounts, and increases in mutual fund service fees and client account and other fees, primarily due to higher average assets and activity during the quarter.~~such banks.

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

~~Management’s Discussion and Analysis~~

Net interest income decreased $9$19 million, or 19%, driven by a decrease in interest income from client margin loans and assets segregated pursuant to regulations due to 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 client cash balances in CIP.

Compensation-related expenses increased $176 million, or 18%, due to higher compensable net revenues, as well as increased staffing levels over the prior-year quarter to support our continued growth and regulatory compliance requirements.

~~Non-compensation expenses increased $10 million, or 6%, primarily due to increased costs to support our growth, as well as higher legal reserves.~~

~~Six months ended March 31, 2020 compared with the six months ended March 31, 2019~~

~~Net revenues of $2.91 billion increased $282 million, or 11%, and pre-tax income of $323 million increased $27 million, or 9%.~~

~~Asset management and related administrative fees increased $270 million, or 20%, primarily due to higher assets in fee-based accounts at the beginning of the current-year periods.~~

Brokerage revenues increased $29 million, or 4%, primarily due to strong client activity driven by market volatility toward the end of our second fiscal quarter. Partially offsetting this increase was a decline in mutual fund trails, which were impacted by the conversion of client assets into mutual fund share classes which pay lower rates, and the continued shift to fee-based accounts.

~~Account and service fees decreased $10 million, or 2%~~41%, driven by a decline in ~~RJBDP fees from third-party banks, as a result of lower~~ short-term interest ~~rates. Partially offsetting this decrease was an increase in mutual fund service fees, primarily due to higher assets, and higher RJBDP fees from RJ Bank due to an increase in~~rates, reducing the ~~number of accounts at RJ Bank.~~

~~Net~~ interest income ~~decreased $14 million, or 15%, driven by a decrease in interest income from~~earned on assets segregated pursuant to regulations ~~due a decline in short-term interest rates,~~ and ~~a decrease in interest income from~~ client margin loans, ~~due to the decline in short-term interest rates~~ and a decline in average client margin loan balances. Partially offsetting the decrease in interest income, interest expense also decreased due to the impact of lower deposit rates paid on client cash balances in CIP.

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

Management’s Discussion and Analysis

Compensation-related expenses decreased $24 million, or 2%, due to lower compensable net revenues. Compensation-related expenses did not decrease at the same rate as net revenues, as a significant portion of the decline in net revenues related to net interest income and RJBDP fees from third-party banks, which have no associated direct payout expense.

Non-compensation expenses decreased $29 million, or 17%, primarily as a result of decreases in travel and conference-related expenses as a result of the COVID-19 pandemic, as well as lower legal and regulatory reserves. Partially offsetting these decreases was an increase in communications and information processing expense.

Nine months ended June 30, 2020 compared with the nine months ended June 30, 2019

Net revenues of $4.16 billion increased $180 million, or 5%, and pre-tax income of $414 million decreased $22 million, or 5%.

Asset management and related administrative fees increased $267 million, or 13%, primarily due to higher average assets in fee-based accounts at the beginning of each of the current-year quarterly billing periods compared with the prior-year periods.

Brokerage revenues were flat as the impact of increased trading activity resulting from higher levels of market volatility in the current-year period, was offset by a decrease in mutual fund trails and lower revenues from annuity products.

Account and service fees decreased $61 million, or 9%, driven by a decline in RJBDP fees from third-party banks, as a result of lower short-term interest rates, which more than offset the impact of the increase in cash balances swept to such banks. Partially offsetting this decrease was an increase in mutual fund service fees, and higher RJBDP fees from RJ Bank due to an increase in the number of accounts at RJ Bank.

Net interest income decreased $33 million, or 24%, primarily driven by a decline in short-term interest rates, reducing the interest income earned on assets segregated pursuant to regulations and client margin loans. Partially offsetting the decrease in interest income, interest expense also decreased due to the impact of lower deposit rates paid on client cash balances in CIP.

Compensation-related expenses increased ~~$248~~$224 million, or ~~12%~~7%, primarily due to higher compensable net ~~revenues,~~revenues.

Non-compensation expenses decreased $22 million, or 5%, primarily as a result of decreases in conference and travel-related expenses as a result of the COVID-19 pandemic, as well as ~~increased staffing levels~~lower legal reserves. Partially offsetting these decreases were increases in ~~the current year to support our continued growth and regulatory compliance requirements.~~

~~Non-compensation expenses increased $7 million, or 2%, primarily due to increased~~ costs to support our growth.

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

Management’s Discussion and Analysis

RESULTS OF OPERATIONS – CAPITAL MARKETS

~~Results of Operations – Capital Markets~~

For an overview of our Capital Markets segment operations, as well as 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 2019 Form 10-K.

Operating results


	Three months ended June 30,										Nine months ended June 30,
$ in millions	2020		2019		% change		2020		2019		% change
Revenues:
Brokerage revenues:
Fixed income	$	125	$	73	71	%	$	296	$	201	47	%
Equity	41		31		32	%	115		105		10	%
Total brokerage revenues	166		104		60	%	411		306		34	%
Investment banking:
Merger & acquisition and advisory	60		80		(25)	%	192		286		(33)	%
Equity underwriting	35		27		30	%	117		72		63	%
Debt underwriting	37		22		68	%	90		56		61	%
Total investment banking	132		129		2	%	399		414		(4)	%
Interest income	4		10		(60)	%	22		29		(24)	%
Tax credit fund revenues	20		16		25	%	50		49		2	%
All other	3		2		50	%	13		9		44	%
Total revenues	325		261		25	%	895		807		11	%
Interest expense	(2)		(10)		(80)	%	(14)		(26)		(46)	%
Net revenues	323		251		29	%	881		781		13	%
Non-interest expenses:
Compensation, commissions and benefits	195		160		22	%	545		486		12	%
Non-compensation expenses:
Communications and information processing	19		18		6	%	58		56		4	%
Occupancy and equipment	9		8		13	%	27		26		4	%
Business development	7		12		(42)	%	38		37		3	%
Professional fees	12		11		9	%	35		31		13	%
Acquisition and disposition-related expenses	—		—		—		—		15		(100)	%
All other	19		18		6	%	59		53		11	%
Total non-compensation expenses	66		67		(1)	%	217		218		—
Total non-interest expenses	261		227		15	%	762		704		8	%
Pre-tax income	$	62	$	24	158	%	$	119	$	77	55	%

Three months ended March 31, Six months ended March 31,
$ in millions 2020 2019 % change 2020 2019 % change
Revenues:
Brokerage revenues:

Fixed income $ 90
$ 71
27 % $ 171
$ 128
34 %
Equity 40
32
25 % 74
74
—
Total brokerage revenues 130
103
26 % 245
202
21 %
Investment banking:

Merger & acquisition and advisory 72
121
(40 )% 132
206
(36 )%
Equity underwriting 43
18
139 % 82
45
82 %
Debt underwriting 22
17
29 % 53
34
56 %
Total investment banking 137
156
(12 )% 267
285
(6 )%
Interest income 10
9
11 % 18
19
(5 )%
Tax credit fund revenues 12
14
(14 )% 30
33
(9 )%
All other 7
3
133 % 10
7
43 %
Total revenues 296
285
4 % 570
546
4 %
Interest expense (6 ) (8 ) (25 )% (12 ) (16 ) (25 )%
Net revenues 290
277
5 % 558
530
5 %
Non-interest expenses:

Compensation, commissions and benefits 184
168
10 % 350
326
7 %
Non-compensation expenses:
Communications and information processing 20
19
5 % 39
38
3 %
Occupancy and equipment 9
9
—
18
18
—
Business development 15
13
15 % 31
25
24 %
Professional fees 13
10
30 % 23
20
15 %
Acquisition and disposition-related expenses —
—
—
—
15
(100 )%
All other 21
17
24 % 40
35
14 %
Total non-compensation expenses 78
68
15 % 151
151
—
Total non-interest expenses 262
236
11 % 501
477
5 %
Pre-tax income $ 28
$ 41
(32 )% $ 57
$ 53
8 %

Quarter ended ~~March 31,~~June 30, 2020 compared with the quarter ended ~~March 31,~~June 30, 2019

Net revenues of ~~$290~~$323 million increased ~~$13~~$72 million, or 5%29%, and pre-tax income of ~~$28~~$62 million ~~decreased $13~~increased $38 million, or ~~32%~~158%.

Brokerage revenues increased ~~$27~~$62 million, or ~~26%~~60%, due to an increase in ~~both~~ fixed income and, to a lesser extent, equity brokerage revenues. The increase in brokerage revenues reflected an increase in client activity during the current-year ~~quarter resulting from market volatility, partially offset by losses of approximately $6 million on our~~quarter. Our trading inventory ~~both~~levels remain relatively low due to ~~the COVID-19 pandemic. We reduced~~ our ~~trading inventory toward the end of the quarter to reduce our risk.~~risk mitigation efforts.

Investment banking revenues ~~decreased $19~~increased $3 million, or ~~12%~~2%, due to an increase in both debt and equity underwriting revenues, as a ~~decrease~~result of increased market activity, particularly for debt underwritings. Offsetting the increase in underwriting revenues was a decline in the number of ~~completed~~ merger & acquisition transactions compared with ~~a strong~~the prior-year ~~quarter. Partially offsetting the decrease in mergers & acquisitions was an increase in equity underwriting revenues primarily~~quarter due to ~~an increase in activity compared with~~market uncertainty as a ~~difficult prior-year quarter, which was negatively impacted by~~result of the ~~U.S. government shutdown during that period. While investment banking results during the second fiscal quarter were solid, merger~~COVID-19 pandemic. Merger & acquisition and underwriting activity may be negatively impacted in future quarters if market uncertainty continues.

Compensation-related expenses increased ~~$16~~$35 million, or ~~10%~~22%, primarily due to the ~~mix of revenues, as revenues with higher payout percentages increased, while revenues with lower payout percentages declined.~~increase in revenues.

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

Management’s Discussion and Analysis

Non-compensation expenses ~~increased $10~~decreased $1 million, or ~~15%~~1%, ~~reflecting increases in professional fees and~~as lower business development costs ~~primarily related~~as a result of less travel and conference-related expenses due to the COVID-19 pandemic were partially offset by smaller increases across various expense categories.

Nine months ended June 30, 2020 compared with the nine months ended June 30, 2019

Net revenues of $881 million increased $100 million, or 13%, and pre-tax income of $119 million increased $42 million, or 55%.

Brokerage revenues increased $105 million, or 34%, due to a significant increase in ~~underwriting~~fixed income brokerage revenues, as well as an increase in ~~other expenses.~~

~~Six months ended March 31, 2020 compared with the six months ended March 31, 2019~~

~~Net revenues of $558 million increased $28 million, or 5%, and pre-tax income of $57 million increased $4 million, or 8%.~~

~~Brokerage revenues increased $43 million, or 21%, due to an increase in fixed income~~equity brokerage revenues. The increase in fixed income brokerage revenues was primarily due to an increase in client activity during the current-year period, ~~largely a result of higher market volatility,~~ particularly toward the end of our fiscal second quarter and into our fiscal third quarter. Equity brokerage revenues were challenged earlier in the year, but increased during our fiscal second ~~fiscal quarter~~and third quarters due to strong client activity driven by market volatility as a result of the COVID-19 pandemic.

Investment banking revenues decreased ~~$18~~$15 million, or 6%4%, due to a significant decline in merger & acquisition activity compared with a strong ~~first half of fiscal 2019.~~period-year period. This activity was negatively impacted by the uncertainty caused by COVID-19 during the current-year period. Offsetting the decrease was an increase in both equity ~~underwriting~~ and debt underwriting net revenues, with an increase in the number of deals, as well as larger individual transactions.

Compensation-related expenses increased ~~$24~~$59 million, or 7%12%, primarily due to the increase in revenues.

Non-compensation expenses were unchanged compared with the prior-year period, as increases in ~~business development,~~ professional fees and other expenses were offset by a loss in the prior-year period of $15 million associated with the sale of our operations related to research, sales and trading of European equities.

~~Results of Operations~~RESULTS OF OPERATIONS – ~~Asset Management~~ASSET MANAGEMENT

For an overview of our Asset Management segment operations as well as 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 2019 Form 10-K.

Operating results


	Three months ended June 30,										Nine months ended June 30,
$ in millions	2020		2019		% change		2020		2019		% change
Revenues:
Asset management and related administrative fees:
Managed programs	$	109	$	120	(9)	%	$	358	$	346	3	%
Administration and other	48		45		7	%	152		129		18	%
Total asset management and related administrative fees	157		165		(5)	%	510		475		7	%
Account and service fees	3		8		(63)	%	12		27		(56)	%
All other	3		4		(25)	%	9		11		(18)	%
Net revenues	163		177		(8)	%	531		513		4	%
Non-interest expenses:
Compensation, commissions and benefits	44		47		(6)	%	134		135		(1)	%
Non-compensation expenses:
Communications and information processing	10		12		(17)	%	33		33		—
Investment sub-advisory fees	23		23		—		74		68		9	%
All other	26		30		(13)	%	84		93		(10)	%
Total non-compensation expenses	59		65		(9)	%	191		194		(2)	%
Total non-interest expenses	103		112		(8)	%	325		329		(1)	%
Pre-tax income	$	60	$	65	(8)	%	$	206	$	184	12	%

Three months ended March 31, Six months ended March 31,
$ in millions 2020 2019 % change 2020 2019 % change
Revenues:
Asset management and related administrative fees:
Managed programs $ 124
$ 109
14 % $ 249
$ 226
10 %
Administration and other 53
40
33 % 104
84
24 %
Total asset management and related administrative fees 177
149
19 % 353
310
14 %
Account and service fees 4
10
(60 )% 9
19
(53 )%
All other 3
3
—
6
7
(14 )%
Net revenues 184
162
14 % 368
336
10 %
Non-interest expenses:

Compensation, commissions and benefits 45
45
—
90
88
2 %
Non-compensation expenses:
Communications and information processing 12
10
20 % 23
21
10 %
Investment sub-advisory fees 26
21
24 % 51
45
13 %
All other 28
31
(10 )% 58
63
(8 )%
Total non-compensation expenses 66
62
6 % 132
129
2 %
Total non-interest expenses 111
107
4 % 222
217
2 %
Pre-tax income $ 73
$ 55
33 % $ 146
$ 119
23 %

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

Management’s Discussion and Analysis

Selected key metrics

Managed programs

Management fees recorded in our Asset Management segment 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

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

~~Management’s Discussion and Analysis~~

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.

Fees are generally collected quarterly. Approximately ~~65%~~60% of these fees are based on balances as of the beginning of the quarter, approximately ~~10%~~15% are based on balances as of the end of the quarter, and approximately 25% are based on average daily balances throughout the quarter.

Financial assets under ~~management:~~management


$ in millions	June 30, 2020		March 31, 2020		September 30, 2019		June 30, 2019		March 31, 2019		September 30, 2018
AMS ⁽¹⁾	$	96,048	$	83,971	$	91,802	$	89,106	$	84,906	$	83,289
Carillon Tower Advisers	57,457		51,674		58,521		60,737		59,852		63,330
Subtotal financial assets under management	153,505		135,645		150,323		149,843		144,758		146,619
Less: Assets managed for affiliated entities	(8,094)		(7,456)		(7,221)		(6,712)		(6,220)		(5,702)
Total financial assets under management	$	145,411	$	128,189	$	143,102	$	143,131	$	138,538	$	140,917

$ in millions March 31,
2020 December 31,
2019 September 30,
2019 March 31,
2019 December 31,
2018 September 30,
2018
AMS ⁽¹⁾
$ 83,971
$ 98,648
$ 91,802
$ 84,906
$ 76,235
$ 83,289
Carillon Tower Advisers 51,674
60,637
58,521
59,852
55,925
63,330
Subtotal financial assets under management 135,645
159,285
150,323
144,758
132,160
146,619
Less: Assets managed for affiliated entities (7,456 ) (7,633 ) (7,221 ) (6,220 ) (5,653 ) (5,702 )
Total financial assets under management $ 128,189
$ 151,652
$ 143,102
$ 138,538
$ 126,507
$ 140,917

(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.


~~(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.

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


	Three months ended June 30,						Nine months ended June 30,
$ in millions	2020		2019		2020		2019
Financial assets under management at beginning of period	$	135,645	$	144,758	$	150,323	$	146,619
Carillon Tower Advisers - net outflows	(1,968)		(910)		(4,356)		(3,584)
AMS - net inflows	1,534		1,751		4,806		4,138
Net market appreciation/(depreciation) in asset values	18,294		4,244		2,732		2,670
Financial assets under management at end of period	$	153,505	$	149,843	$	153,505	$	149,843

Three months ended March 31, Six months ended March 31,
$ in millions 2020 2019 2020 2019
Financial assets under management at beginning of period $ 159,285
$ 132,160
$ 150,323
$ 146,619
Carillon Tower Advisers - net outflows (2,016 ) (1,094 ) (2,388 ) (2,674 )
AMS - net inflows 1,189
1,869
3,272
2,387
Net market appreciation/(depreciation) in asset values (22,813 ) 11,823
(15,562 ) (1,574 )
Financial assets under management at end of period $ 135,645
$ 144,758
$ 135,645
$ 144,758

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.

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

Management’s Discussion and Analysis

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.~~periods presented.


$ in millions	June 30, 2020		Average fee rate for the three months ended June 30, 2020
Equity	$	25,431	0.54	%
Fixed income	27,066		0.18	%
Balanced	4,960		0.37	%
Total financial assets under management	$	57,457	0.35	%

$ in millions March 31, 2020 Average fee rate
Equity $ 21,518
0.54%
Fixed income 25,641
0.18%
Balanced 4,515
0.37%
Total financial assets under management $ 51,674
0.35%

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

~~Management’s Discussion and Analysis~~

Non-discretionary asset-based programs


$ in millions	June 30, 2020		March 31, 2020		September 30, 2019		June 30, 2019		March 31, 2019		September 30, 2018
Total assets	$	253,686	$	217,284	$	229,735	$	220,128	$	206,953	$	200,140

$ in billions March 31,
2020 December 31,
2019 September 30,
2019 March 31,
2019 December 31,
2018 September 30,
2018
Total assets $ 217.3
$ 251.3
$ 229.7
$ 207.0
$ 184.3
$ 200.1

The preceding table includes assets held in certain non-discretionary asset-based programs for which the Asset Management segment does not exercise discretion but provides administrative support (including for affiliated entities). The increase in assets over the prior-year level was primarily due to clients moving to fee-based accounts from transaction-based accounts, ~~and~~ successful financial advisor ~~recruiting.~~recruiting and retention, and equity market appreciation. The ~~decrease~~increase in assets during our ~~second~~ fiscal third quarter was primarily due to the recovery of equity markets from the decline in ~~equity markets toward~~ the ~~end of our~~fiscal second ~~fiscal~~ quarter ~~due to~~caused by the COVID-19 pandemic. As administrative fees associated with these programs are predominantly based on balances at the beginning of the quarter, the ~~14% decline~~17% increase in assets during the fiscal third quarter will ~~negatively~~positively impact our ~~third~~ fiscal fourth quarter revenues.

RJ Trust


$ in billions	June 30, 2020		March 31, 2020		September 30, 2019		June 30, 2019		March 31, 2019		September 30, 2018
Total assets	$	7.1	$	6.4	$	6.6	$	6.4	$	6.2	$	6.1

$ in billions March 31,
2020 December 31,
2019 September 30,
2019 March 31,
2019 December 31,
2018 September 30,
2018
Total assets $ 6.4
$ 7.2
$ 6.6
$ 6.2
$ 5.7
$ 6.1

The preceding table includes assets held in asset-based programs in RJ Trust (including those managed for affiliated entities).

Quarter ended ~~March 31,~~June 30, 2020 compared with the quarter ended ~~March 31,~~June 30, 2019

Net revenues of ~~$184~~$163 million ~~increased $22~~decreased $14 million, or ~~14%~~8%, and pre-tax income of ~~$73~~$60 million ~~increased $18~~decreased $5 million, or ~~33%~~8%.

Asset management and related administrative fee revenues ~~increased $28~~decreased $8 million, or ~~19%~~5%, ~~driven by higher~~primarily due to lower average financial assets under management ~~and higher beginning assets~~at Carillon Tower Advisers, largely as a result of net outflows since the prior-year quarter, as well as the significant equity market decline in ~~non-discretionary asset-based programs.~~March 2020, which has since largely rebounded. Although AMS financial assets under management ~~and assets in non-discretionary asset-based programs~~were higher than at ~~the end of the quarter were lower than~~ the end of the prior-year quarter, revenues ~~increased~~decreased as ~~the majority of~~ assets in these programs are billed based on balances as of the beginning of the ~~quarter.~~quarter, which reflected the significant equity market decline in our fiscal second quarter due to the COVID-19 pandemic. The ~~decline~~increase in these assets as of ~~March 31,~~June 30, 2020, primarily due to the ~~negative~~ market ~~impact~~recovery in our fiscal third quarter, will positively affect our fiscal fourth quarter results.

Account and service fees declined $5 million, or 63%, primarily due to a decline in servicing fees related to the money market sweep program, which was discontinued in June 2019. A significant portion of these revenues were offset by fees paid to PCG related to the money market sweep program, which were reflected in Other expenses and eliminated in consolidation.

Compensation expenses decreased $3 million, or 6%, and non-compensation expenses decreased $6 million, or 9%. The decrease in non-compensation expenses was primarily due to a decline in travel-related expenses in response to the COVID-19 pandemic ~~toward~~and a decline in fees paid to PCG related to the ~~end~~aforementioned discontinuance of the ~~quarter, will negatively affect our third fiscal quarter results.~~money market sweep program.

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

Management’s Discussion and Analysis

Nine months ended June 30, 2020 compared with the nine months ended June 30, 2019

Net revenues of $531 million increased $18 million, or 4%, and pre-tax income of $206 million increased $22 million, or 12%.

Asset management and related administrative fees increased $35 million, or 7%, driven by higher assets in non-discretionary asset-based programs at the beginning of each of the current-year quarterly billing periods compared with the prior-year period, as well as higher average financial assets under management during the current-year period.

Account and service fees declined $15 million, or 56%, primarily due to a decline in servicing fees related to the money market sweep program, which was discontinued in June 2019.

Non-compensation expenses ~~increased $4~~decreased $3 million, or 6%2%, primarily due to the aforementioned decline in fees paid to PCG associated with the money market sweep program, which was discontinued in June 2019, and lower travel-related expenses due to the COVID-19 pandemic, partially offset by an increase in investment sub-advisory fees resulting from an increase in assets under management in sub-advised programs.

~~Six months ended March 31, 2020 compared with the six months ended March 31, 2019~~

~~Net revenues of $368 million increased $32 million, or 10%, and pre-tax income of $146 million increased $27 million, or 23%.~~

Asset management and related administrative fees increased $43 million, or 14%, driven by higher average financial assets under management and higher beginning assets in non-discretionary asset-based programs. Although financial assets under management and assets in non-discretionary asset-based programs at the end of the period were lower than the end of the prior-year period, revenues increased as the majority of assets in these programs are billed based on balances as of the beginning of each quarter.

~~Non-compensation expenses increased $3 million, or 2%, primarily due to an increase in investment sub-advisory fees resulting from an increase in assets under management in sub-advised programs.~~

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

~~Management’s Discussion and Analysis~~

~~Results of Operations~~RESULTS OF OPERATIONS – RJ ~~Bank~~BANK

For an overview of our RJ Bank segment operations, as well as 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 2019 Form 10-K.

Operating results


	Three months ended June 30,										Nine months ended June 30,
$ in millions	2020		2019		% change		2020		2019		% change
Revenues:
Interest income	$	181	$	246	(26)	%	$	635	$	732	(13)	%
Interest expense	(12)		(38)		(68)	%	(51)		(122)		(58)	%
Net interest income	169		208		(19)	%	584		610		(4)	%
All other	9		7		29	%	20		20		—
Net revenues	178		215		(17)	%	604		630		(4)	%
Non-interest expenses:
Compensation and benefits	13		13		—		38		36		6	%
Non-compensation expenses:
Loan loss provision/(benefit)	81		(5)		NM		188		16		1,075	%
RJBDP fees to PCG	43		44		(2)	%	138		127		9	%
All other	27		25		8	%	77		67		15	%
Total non-compensation expenses	151		64		136	%	403		210		92	%
Total non-interest expenses	164		77		113	%	441		246		79	%
Pre-tax income	$	14	$	138	(90)	%	$	163	$	384	(58)	%

Three months ended March 31, Six months ended March 31,
$ in millions 2020 2019 % change 2020 2019 % change
Revenues:
Interest income $ 223
$ 247
(10 )% $ 454
$ 486
(7 )%
Interest expense (18 ) (42 ) (57 )% (39 ) (84 ) (54 )%
Net interest income 205
205
—
415
402
3 %
All other 5
7
(29 )% 11
13
(15 )%
Net revenues 210
212
(1 )% 426
415
3 %
Non-interest expenses:

Compensation and benefits 13
12
8 % 25
23
9 %
Non-compensation expenses:

Loan loss provision/(benefit) 109
5
2,080 % 107
21
410 %
RJBDP fees to PCG 48
42
14 % 95
83
14 %
All other 26
17
53 % 50
42
19 %
Total non-compensation expenses 183
64
186 % 252
146
73 %
Total non-interest expenses 196
76
158 % 277
169
64 %
Pre-tax income $ 14
$ 136
(90 )% $ 149
$ 246
(39 )%

Quarter ended ~~March 31,~~June 30, 2020 compared with the quarter ended ~~March 31,~~June 30, 2019

Net revenues of ~~$210~~$178 million decreased $2$37 million, or 1%17%, and pre-tax income of $14 million decreased ~~$122~~$124 million, or 90%~~, primarily due to a higher bank loan loss provision.~~ .

Net interest income ~~was flat~~decreased $39 million, or 19%, as ~~the impacts of higher interest-earning banking assets offset~~ the negative impact from lower short-term ~~interest rates.~~rates offset the higher interest-earning assets. The increase in average interest-earning ~~banking~~ assets was driven by growth in average ~~loans of $1.42 billion, average~~ cash balances of ~~$661 million,~~$1.99 billion, average available-for-sale securities portfolio of $1.54 billion, and average ~~available-for-sale portfolio~~loans of ~~$567 million.~~$1.38 billion. The net interest margin decreased to ~~3.02%~~2.29% from ~~3.35%~~3.37% due to the significant decline in short-term interest ~~rates. As~~rates and the ~~most recent~~corresponding decline in LIBOR, the rate ~~cuts implemented by~~on which the Federal Reserve did not occur until late in our second fiscal quarter, we expect this decline to have a more significant impact on our net interest income and net interest margin in the third fiscal quarter. In addition,pricing for most of RJ Bank’s assets ~~are priced based on LIBOR.~~is based. Based on current LIBOR rates, we expect our net interest margin to further decline to ~~approximately 2.5%~~2.1% - 2.2% over the next two quarters.

The loan loss provision was ~~$109~~$81 million compared to a $5 million benefit in the prior-year quarter. The increase in the provision in the current-year quarter was in response to ~~the rapid and widespread economic~~continued deterioration of macroeconomic conditions caused by ~~COVID-19.~~the COVID-19 pandemic and included write-downs on certain corporate loans sold during the quarter. Continued deterioration of macroeconomic conditions ~~may~~will likely require us to increase our allowance for loan losses in the future or to experience loan losses in excess of

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

Management’s Discussion and Analysis

current reserves. Additional sales of certain corporate loans are also expected in the fiscal fourth quarter to further reduce credit risk in certain sectors.

Compensation ~~and benefits~~ expenses ~~increased $1 million, or 8%, due increased staffing levels to support our continued growth.~~

~~Non-compensation~~were flat compared with the prior-year quarter, while non-compensation expenses (excluding the provision for loan losses) increased ~~$15~~$1 million. The increase in non-compensation expenses included a $6 million, or 14%, increase in fees for RJBDP paid to PCG, primarily driven by an increase in the number of accounts, and an increase in FDIC insurance premiums due to the increase in deposit balances. RJBDP fees paid to PCG are eliminated in consolidation.

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

~~Management’s Discussion and Analysis~~

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


	Three months ended June 30,
	2020										2019
$ in millions	Average balance		Interest inc./exp.		Average yield/ cost		Average balance		Interest inc./exp.		Average yield/ cost
Interest-earning assets:
Cash	$	2,990	$	—	0.11	%	$	998	$	5	2.36	%
Available-for-sale securities	4,437		23		2.01	%	2,901		18		2.41	%
Bank loans, net of unearned income and deferred expenses:
Loans held for investment:
C&I loans	7,994		59		2.93	%	8,278		98		4.68	%
CRE construction loans	212		2		3.60	%	248		4		5.45	%
CRE loans	3,773		25		2.66	%	3,359		39		4.53	%
Tax-exempt loans	1,272		9		3.34	%	1,291		9		3.35	%
Residential mortgage loans	4,983		37		2.97	%	4,127		34		3.32	%
SBL and other	3,576		24		2.59	%	3,125		36		4.64	%
Loans held for sale	111		1		3.22	%	118		1		4.78	%
Total bank loans, net	21,921		157		2.87	%	20,546		221		4.30	%
FHLB stock, FRB stock and other	217		1		1.50	%	168		2		4.42	%
Total interest-earning assets	29,565		$	181	2.45	%	24,613		$	246	4.00	%
Non-interest-earning assets:
Unrealized gain/(loss) on available-for-sale securities	116						(6)
Allowance for loan losses	(319)						(218)
Other assets	407						390
Total non-interest-earning assets	204						166
Total assets	$	29,769					$	24,779
Interest-bearing liabilities:
Bank deposits:
Savings, money market and NOW accounts	$	25,241	$	2	0.02	%	$	20,989	$	30	0.59	%
Certificates of deposit	1,104		5		2.00	%	561		4		2.33	%
FHLB advances and other	888		5		2.23	%	895		4		2.08	%
Total interest-bearing liabilities	27,233		$	12	0.17	%	22,445		$	38	0.69	%
Non-interest-bearing liabilities	253						156
Total liabilities	27,486						22,601
Total shareholder’s equity	2,283						2,178
Total liabilities and shareholder’s equity	$	29,769					$	24,779
Excess of interest-earning assets over interest-bearing liabilities/net interest income	$	2,332	$	169			$	2,168	$	208
Bank net interest:
Spread					2.28	%					3.31	%
Margin (net yield on interest-earning banking assets)					2.29	%					3.37	%
Ratio of interest-earning assets to interest-bearing liabilities					108.56	%					109.66	%

Three months ended March 31,
2020 2019
$ in millions Average
balance Interest
inc./exp. Average
yield/
cost Average
balance Interest
inc./exp. Average
yield/
cost
Interest-earning banking assets:
Cash $ 2,052
$ 5
0.89 % $ 1,391
$ 9
2.40 %
Available-for-sale securities 3,443
19
2.28 % 2,876
17
2.43 %
Bank loans, net of unearned income and deferred expenses:
Loans held for investment:
C&I loans 8,043
81
3.99 % 8,160
97
4.76 %
CRE construction loans 181
2
4.58 % 197
3
5.70 %
CRE loans 3,735
36
3.81 % 3,379
40
4.73 %
Tax-exempt loans 1,212
8
3.36 % 1,280
8
3.34 %
Residential mortgage loans 4,847
38
3.13 % 3,979
34
3.33 %
SBL and other 3,469
31
3.60 % 3,066
37
4.71 %
Loans held for sale 142
2
3.85 % 144
1
4.26 %
Total bank loans, net 21,629
198
3.67 % 20,205
220
4.38 %
FHLB stock, FRB stock and other 230
1
2.48 % 153
1
4.44 %
Total interest-earning banking assets 27,354
$ 223
3.28 % 24,625

$ 247
4.04 %
Non-interest-earning banking assets:

Unrealized gain/(loss) on available-for-sale securities 53

(33 )

Allowance for loan losses (217 )

(220 )
Other assets 399

400

Total non-interest-earning banking assets 235

147

Total banking assets $ 27,589

$ 24,772

Interest-bearing banking liabilities:

Bank deposits:

Savings, money market and NOW accounts $ 23,045
$ 7
0.13 % $ 20,923
$ 35
0.66 %
Certificates of deposit 1,094
6
2.03 % 560
3
2.26 %
FHLB advances and other 893
5
2.24 % 914
4
2.17 %
Total interest-bearing banking liabilities 25,032
$ 18
0.29 % 22,397
$ 42
0.77 %
Non-interest-bearing banking liabilities 242

258

Total banking liabilities 25,274

22,655

Total banking shareholder’s equity 2,315

2,117

Total banking liabilities and shareholder’s equity $ 27,589

$ 24,772

Excess of interest-earning banking assets over interest-bearing banking liabilities/net interest income $ 2,322
$ 205
$ 2,228
$ 205

Bank net interest:

Spread

2.99 %

3.27 %
Margin (net yield on interest-earning banking assets)

3.02 %

3.35 %
Ratio of interest-earning banking assets to interest-bearing banking liabilities

109.28 %
109.95 %

Nonaccrual loans are included in the average loan balances in the preceding table. Any payments received for corporate nonaccrual loans are applied entirely to principal. Interest income on residential mortgage nonaccrual loans is recognized on a cash basis.

Fee income on bank loans included in interest income for the three months ended ~~March 31,~~June 30, 2020 and 2019 was $5$1 million and $6$3 million, respectively.

The yield on tax-exempt loans in the preceding table is presented on a tax-equivalent basis utilizing the applicable federal statutory tax rates for each of the three months ended ~~March 31,~~June 30, 2020 and 2019.

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

Management’s Discussion and Analysis

Increases and decreases in interest income and interest expense result from changes in average balances (volume) of interest-earning 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 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 attributable to both volume and rate have been allocated proportionately.


	Three months ended June 30,
	2020 compared to 2019
	Increase/(decrease) due to
$ in millions	Volume		Rate		Total
Interest income:
Interest-earning assets:
Cash	$	12	$	(17)	$	(5)
Available-for-sale securities	10		(5)		5
Bank loans, net of unearned income and deferred expenses:
Loans held for investment:
C&I loans	(3)		(36)		(39)
CRE construction loans	(1)		(1)		(2)
CRE loans	5		(19)		(14)

Residential mortgage loans	8		(5)		3
SBL and other	5		(17)		(12)

Total bank loans, net	14		(78)		(64)
FHLB stock, FRB stock, and other	1		(2)		(1)
Total interest-earning assets	37		(102)		(65)
Interest expense:
Interest-bearing liabilities:
Bank deposits:
Savings, money market, and NOW accounts	6		(34)		(28)
Certificates of deposit	1		—		1
FHLB advances and other	—		1		1
Total interest-bearing liabilities	7		(33)		(26)
Change in net interest income	$	30	$	(69)	$	(39)

Three months ended March 31,
2020 compared to 2019
Increase/(decrease) due to
$ in millions Volume Rate Total
Interest income:
Interest-earning banking assets:
Cash $ 4
$ (8 ) $ (4 )
Available-for-sale securities 3
(1 ) 2
Bank loans, net of unearned income and deferred expenses:
Loans held for investment:
C&I loans (1 ) (15 ) (16 )
CRE construction loans —
(1 ) (1 )
CRE loans 4
(8 ) (4 )
Residential mortgage loans 6
(2 ) 4
SBL and other 6
(12 ) (6 )
Loans held for sale 1
—
1
Total bank loans, net 16

(38 ) (22 )
Total interest-earning banking assets 23
(47 ) (24 )
Interest expense:

Interest-bearing banking liabilities:

Bank deposits:

Savings, money market, and NOW accounts 4
(32 ) (28 )
Certificates of deposit 4
(1 ) 3
FHLB advances and other (1 ) 2
1
Total interest-bearing banking liabilities 7
(31 ) (24 )
Change in net interest income $ 16
$ (16 ) $ —

~~Six~~Nine months ended ~~March 31,~~June 30, 2020 compared with the ~~six~~nine months ended ~~March 31,~~June 30, 2019

Net revenues of ~~$426~~$604 million ~~increased $11~~decreased $26 million, or 3%4%, and pre-tax income of ~~$149~~$163 million decreased ~~$97~~$221 million, or ~~39%~~58%.

Net interest income ~~increased $13~~decreased $26 million, or 3%4%, as ~~higher interest-earning banking assets offset~~ the negative impact from lower short-term interest ~~rates.~~rates more than offset higher interest-earning assets. The increase in average interest-earning ~~banking~~ assets was primarily driven by growth in average loans of $1.38 billion, average cash balances of $847 million, and ~~a $469~~an $823 million increase in our average available-for-sale securities portfolio. The net interest margin for the current-year period decreased to ~~3.12%~~2.82% from ~~3.30%.~~3.32% for the prior-year period.

The loan loss provision was ~~$107~~$188 million, compared to ~~$21~~$16 million in the prior-year period. The increase in the provision in the current-year period was primarily attributable to the economic impacts of the COVID-19 pandemic during the ~~second fiscal quarter.~~current-year period as well as the aforementioned corporate loan sales.

Compensation and benefits expenses increased $2 million due to annual raises and increased staffing levels to support our continued growth.

Non-compensation expenses (excluding the provision for loan losses) increased ~~$20~~$21 million, including ~~a $12~~an $11 million, or ~~14%~~9%, 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 Discussion and Analysis

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


	Nine months ended June 30,
	2020										2019
$ in millions	Average balance		Interest inc./exp.		Average yield/ cost		Average balance		Interest inc./exp.		Average yield/ cost
Interest-earning assets:
Cash	$	2,078	$	10	0.66	%	$	1,231	$	21	2.33	%
Available-for-sale securities	3,654		60		2.18	%	2,831		51		2.39	%
Bank loans, net of unearned income and deferred expenses:
Loans held for investment:
C&I loans	8,039		226		3.69	%	8,065		286		4.67	%
CRE construction loans	209		7		4.36	%	205		9		5.58	%
CRE loans	3,706		98		3.49	%	3,433		120		4.60	%
Tax-exempt loans	1,236		25		3.35	%	1,285		26		3.34	%
Residential mortgage loans	4,823		112		3.09	%	3,999		100		3.32	%
SBL and other	3,460		89		3.37	%	3,098		109		4.64	%
Loans held for sale	138		4		3.77	%	149		5		4.87	%
Total bank loans, net	21,611		561		3.46	%	20,234		655		4.32	%
FHLB stock, FRB stock and other	220		4		2.33	%	163		5		4.27	%
Total interest-earning assets	27,563		$	635	3.07	%	24,459		$	732	3.99	%
Non-interest-earning assets:
Unrealized gain/(loss) on available-for-sale securities	66						(37)
Allowance for loan losses	(251)						(214)
Other assets	388						404
Total non-interest-earning assets	203						153
Total assets	$	27,766					$	24,612
Interest-bearing liabilities:
Bank deposits:
Savings, money market and NOW accounts	$	23,364	$	21	0.12	%	$	20,861	$	99	0.64	%
Certificates of deposit	993		15		2.06	%	527		9		2.20	%
FHLB advances and other	889		15		2.23	%	919		14		2.13	%
Total interest-bearing liabilities	25,246		$	51	0.27	%	22,307		$	122	0.73	%
Non-interest-bearing liabilities	225						191
Total liabilities	25,471						22,498
Total shareholder’s equity	2,295						2,114
Total liabilities and shareholder’s equity	$	27,766					$	24,612
Excess of interest-earning assets over interest-bearing liabilities/net interest income	$	2,317	$	584			$	2,152	$	610
Bank net interest:
Spread					2.80	%					3.26	%
Margin (net yield on interest-earning banking assets)					2.82	%					3.32	%
Ratio of interest-earning assets to interest-bearing liabilities					109.18	%					109.65	%

Six months ended March 31,
2020 2019
$ in millions
Average
balance

Interest
inc./exp.

Average
yield/
cost

Average
balance

Interest
inc./exp.

Average
yield/
cost
Interest-earning banking assets:
Cash $ 1,624
$ 10
1.17 % $ 1,347
$ 16
2.32 %
Available-for-sale securities 3,265
37
2.29 % 2,796
33
2.38 %
Bank loans, net of unearned income and deferred expenses:

Loans held for investment:
C&I loans 8,061
167
4.07 % 7,959
188
4.67 %
CRE construction loans 207
5
4.75 % 184
5
5.66 %
CRE loans 3,673
73
3.91 % 3,469
81
4.64 %
Tax-exempt loans 1,218
16
3.36 % 1,282
17
3.34 %
Residential mortgage loans 4,743
75
3.16 % 3,934
66
3.32 %
SBL and other 3,403
65
3.78 % 3,085
73
4.65 %
Loans held for sale 151
3
3.97 % 165
4
4.90 %
Total bank loans, net 21,456
404
3.76 % 20,078
434
4.32 %
FHLB stock, FRB stock and other 222
3
2.74 % 161
3
4.19 %
Total interest-earning banking assets 26,567
$ 454
3.41 % 24,382
$ 486
3.99 %
Non-interest-earning banking assets:

Unrealized gain/(loss) on available-for-sale securities 41

(52 )

Allowance for loan losses (218 )

(212 )

Other assets 379

411

Total non-interest-earning banking assets 202

147

Total banking assets $ 26,769

$ 24,529

Interest-bearing banking liabilities:

Bank deposits:

Savings, money market and NOW accounts $ 22,431
$ 19
0.17 % $ 20,798
$ 69
0.66 %
Certificates of deposit $ 937
$ 10
2.10 % $ 510
$ 5
2.13 %
FHLB advances and other 890
10
2.23 % 931
10
2.15 %
Total interest-bearing banking liabilities 24,258
$ 39
0.32 % 22,239
$ 84
0.76 %
Non-interest-bearing banking liabilities 211

208

Total banking liabilities 24,469

22,447

Total banking shareholder’s equity 2,300

2,082

Total banking liabilities and shareholder’s equity $ 26,769

$ 24,529

Excess of interest-earning banking assets over interest-bearing banking liabilities/net interest income $ 2,309
$ 415
$ 2,143
$ 402

Bank net interest:

Spread

3.09 %

3.23 %
Margin (net yield on interest-earning banking assets)

3.12 %

3.30 %
Ratio of interest-earning banking assets to interest-bearing banking liabilities

109.52 %
109.64 %

Fee income on bank loans included in interest income for the ~~six~~nine months ended ~~March 31,~~June 30, 2020 and 2019 was $9$10 million and ~~$11~~$14 million, respectively.

The yield on tax-exempt loans in the preceding table is presented on a taxable-equivalent basis utilizing the applicable federal statutory tax rates for each of the ~~six~~nine months ended ~~March 31,~~June 30, 2020 and 2019.

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

Management’s Discussion and Analysis


	Nine months ended June 30,
	2020 compared to 2019
	Increase/(decrease) due to
$ in millions	Volume		Rate		Total
Interest income:
Interest-earning assets:
Cash	$	15	$	(26)	$	(11)
Available-for-sale securities	15		(6)		9
Bank loans, net of unearned income and deferred expenses:
Loans held for investment:
C&I loans	(1)		(59)		(60)
CRE construction loans	—		(2)		(2)
CRE loans	10		(32)		(22)
Tax-exempt loans	(1)		—		(1)
Residential mortgage loans	20		(8)		12
SBL and other	13		(33)		(20)
Loans held for sale	—		(1)		(1)
Total bank loans, net	41		(135)		(94)
FHLB stock, FRB stock, and other	1		(2)		(1)
Total interest-earning assets	72		(169)		(97)
Interest expense:
Interest-bearing liabilities:
Bank deposits:
Savings, money market, and NOW accounts	12		(90)		(78)
Certificates of deposit	7		(1)		6
FHLB advances and other	(2)		3		1
Total interest-bearing liabilities	17		(88)		(71)
Change in net interest income	$	55	$	(81)	$	(26)

RESULTS OF OPERATIONS – OTHER

Six months ended March 31,
2020 compared to 2019
Increase/(decrease) due to
$ in millions Volume Rate Total
Interest income:
Interest-earning banking assets:
Cash $ 3
$ (9 ) $ (6 )
Available-for-sale securities 5
(1 ) 4
Bank loans, net of unearned income and deferred expenses:
Loans held for investment:
C&I loans 2
(23 ) (21 )
CRE construction loans 1
(1 ) —
CRE loans 5
(13 ) (8 )
Tax-exempt loans (1 ) —
(1 )
Residential mortgage loans 13
(4 ) 9
SBL and other 8
(16 ) (8 )
Loans held for sale —
(1 ) (1 )
Total bank loans, net 28
(58 ) (30 )
FHLB stock, FRB stock, and other 1
(1 ) —
Total interest-earning banking assets 37
(69 ) (32 )
Interest expense:

Interest-bearing banking liabilities:

Bank deposits:

Savings, money market, and NOW accounts 5
(55 ) (50 )
Certificates of deposit 5
—
5
Total interest-bearing banking liabilities 10
(55 ) (45 )
Change in net interest income $ 27
$ (14 ) $ 13

~~Results of Operations – Other~~

This segment includes our private equity 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 costs on our public debt. For an overview of our Other segment operations, refer to the information presented in “Item 1 - Business” of our 2019 Form 10-K.

Operating results


	Three months ended June 30,										Nine months ended June 30,
$ in millions	2020		2019		% change		2020		2019		% change
Revenues:
Interest income	$	3	$	12	(75)	%	$	27	$	42	(36)	%
Gains/(losses) on private equity investments	1		2		(50)	%	(40)		8		NM
All other	2		1		100	%	4		5		(20)	%
Total revenues	6		15		(60)	%	(9)		55		NM
Interest expense	(26)		(19)		37	%	(63)		(57)		11	%
Net revenues	(20)		(4)		(400)	%	(72)		(2)		(3,500)	%



Total non-interest expenses	9		21		(57)	%	34		58		(41)	%
Pre-tax loss	$	(29)	$	(25)	(16)	%	$	(106)	$	(60)	(77)	%

Three months ended March 31, Six months ended March 31,
$ in millions 2020 2019 % change 2020 2019 % change
Revenues:
Interest income $ 12
$ 14
(14 )% $ 24
$ 30
(20 )%
Gains/(losses) on private equity investments (39 ) 2
NM
(41 ) 6
NM
All other —
3
(100 )% 2
4
(50 )%
Total revenues (27 ) 19
NM
(15 ) 40
NM
Interest expense (17 ) (19 ) (11 )% (37 ) (38 ) (3 )%
Net revenues (44 ) —
NM
(52 ) 2
NM
Total non-interest expenses 2
17
(88 )% 25
37
(32 )%
Pre-tax loss $ (46 ) $ (17 ) (171 )% $ (77 ) $ (35 ) (120 )%

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

Management’s Discussion and Analysis

Quarter ended ~~March 31,~~June 30, 2020 compared with the quarter ended ~~March 31,~~June 30, 2019

The pre-tax loss of ~~$46~~$29 million was ~~$29~~$4 million larger than the loss generated in the prior-year quarter.

Net revenues for the current quarter ~~included $39~~decreased $16 million ~~of private equity valuation losses, compared with gains of $2~~due to a $9 million decrease in ~~the prior-year quarter. During the current quarter, $22 million of the losses~~interest income earned on ~~private equity were attributable~~corporate cash balances due to noncontrolling interests, which were reflected as an offset within other expenses. These valuation losses were primarily the result of the negative impact of the COVID-19 pandemic on certain of our investments. Although net interest was flat compared with the prior-year quarter, we expect the impact of the decline inlower short-term interest rates, ~~implemented toward~~which more than offset the ~~end of the quarter, and~~increase in average balances, as well as a $7 million increase in interest expense due to the issuance of $500 million of senior notes ~~payable at the end of the quarter to negatively affect our net interest~~ in ~~this segment in future quarters.~~March 2020.

Non-interest expenses decreased ~~$15~~$12 million, or ~~88%~~57%, primarily due to the aforementioned $22 million offset of private equity valuation losses related to noncontrolling interests in other expenses. Increases in compensation-related expenses and advertising expenses partially offset thea decrease in ~~other expenses.~~compensation expenses due to lower earnings.

~~Six~~Nine months ended ~~March 31,~~June 30, 2020 compared with the ~~six~~nine months ended ~~March 31,~~June 30, 2019

The pre-tax loss of ~~$77~~$106 million was ~~$42~~$46 million larger than the loss generated in the prior-year period.

Net revenues decreased ~~$54~~$70 million from ~~income~~a loss of $2 million in the prior-year period to a loss of ~~$52~~$72 million, primarily due to ~~$41~~$40 million of private equity valuation losses, compared with gains of $6$8 million in the prior-year period. In the current-year period, $23 million of the losses on private equity investments were attributable to noncontrolling interests, which ~~were~~are reflected as an offset within other expenses. These valuation losses were primarily the result of the negative impact of the COVID-19 pandemic on certain of our investments. Interest income earned on corporate cash balances also decreased due to lower short-term interest rates, partially offset by the impact of higher average ~~balances.~~balances, and interest expense increased as a result of the aforementioned issuance of $500 million of senior notes.

Non-interest expenses decreased ~~$12~~$24 million, or ~~32%~~41%, primarily due to the aforementioned $23 million offset of private equity valuation losses attributable to noncontrolling interests. ~~Increases in compensation-related expenses and advertising expenses partially offset the decrease in other expenses.~~

~~Certain statistical disclosures by bank holding companies~~CERTAIN STATISTICAL DISCLOSURES BY BANK HOLDING COMPANIES

We are required to provide certain statistical disclosures as a bank holding company under the SEC’s Industry Guide 3. The following table provides certain of those disclosures.


	Three months ended June 30,			Nine months ended June 30,
	2020	2019	2020	2019
Return on assets	1.5%	2.7%	1.9%	2.7%
Return on equity	10.0%	16.1%	11.9%	16.2%
Average equity to average assets	14.6%	16.7%	15.7%	16.6%
Dividend payout ratio	30.1%	18.9%	25.6%	19.2%

Three months ended March 31, Six months ended March 31,
2020 2019 2020 2019
Return on assets 1.5% 2.7% 2.0% 2.7%
Return on equity 9.9% 16.7% 13.0% 16.2%
Average equity to average assets 15.2% 16.3% 15.7% 16.5%
Dividend payout ratio 30.8% 18.8% 23.9% 19.4%

Return on assets is computed by dividing annualized net income for the period indicated by average assets for each respective period. Average assets for the quarter is computed by adding total assets as of the date indicated to the prior quarter-end total, and dividing by two. Average assets for the year-to-date period is computed by adding total assets as of each quarter-end date during the year-to-date period to the beginning of the year total, and dividing by ~~three.~~four.

Return on equity is computed by dividing annualized net income for the period indicated by average equity for each respective period. Average equity for the quarter is computed by adding total equity attributable to RJF as of the date indicated to the prior quarter-end total, and dividing by two. Average equity for the year-to-date period is computed by adding total equity attributable to RJF as of each quarter-end date during the year-to-date period to the beginning of the year total, and dividing by ~~three.~~four.

Average equity to average assets is computed by dividing average equity by average assets, as calculated in accordance with the previous explanations.

Dividend payout ratio is computed by dividing dividends declared per common share during the period by earnings per diluted common share for the period.

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

~~Management’s Discussion and Analysis~~

Refer to the “Results of Operations - RJ Bank” and “Risk management - Credit risk” sections of Management’s Discussion and Analysis of Financial Condition and Results of Operations and to the Notes to Condensed Consolidated Financial Statements of this Form 10-Q for the other required disclosures.

~~Liquidity~~

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

Management’s Discussion and ~~capital resources~~Analysis

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 objective of 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 and cash equivalents increased ~~$6.69~~$1.68 billion to ~~$10.65~~$5.63 billion during the ~~six~~nine months ended ~~March 31,~~June 30, 2020, primarily due to ~~$7.95~~$3.26 billion of cash provided by financing activities ~~partially~~and $2.66 billion of cash provided by operating activities, offset by cash used in investing activities ~~which used $2.09~~of $3.02 billion and an increase in the amount of cash required to be segregated pursuant to regulations of $1.19 billion. Cash provided by financing activities ~~mainly~~primarily related to an increase in bank deposits, as client cash balances increased ~~significantly~~ due to the impact of the COVID-19 pandemic, and proceeds from our senior notes issuance ~~during the current period,~~in March 2020, partially offset by our open-market share repurchases and dividends on our common stock. ~~Investing~~Cash used in investing activities primarily related to ana net increase in ~~bank loans and growth of~~ our available-for-sale securities portfolio ~~during the current period.~~due to our growth strategy for this portfolio, and a net increase in bank loans.

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

~~Nearly $2~~Over $2.1 billion of our total ~~March 31,~~June 30, 2020 cash and cash equivalents included cash on hand at the parent, as well as parent cash loaned to RJ&A. The following table presents our holdings of cash and cash equivalents.


$ in millions	June 30, 2020
RJF	$	479
RJ&A	2,603
RJ Bank	1,519
RJ Ltd.	662
RJFS	123
Carillon Tower Advisers	69
Other subsidiaries	177
Total cash and cash equivalents	$	5,632

$ in millions March 31, 2020
RJF $ 445
RJ&A 2,193
RJ Bank 6,992
RJ Ltd. 666
RJFS 155
Carillon Tower Advisers 52
Other subsidiaries 145
Total cash and cash equivalents $ 10,648

The significant increase in cash and cash equivalents as of March 31, 2020 was primarily due to an increase in client cash balances as a result of the market volatility toward the end of our second fiscal quarter. Subsequent to March 31, 2020, we utilized additional capacity with third-party banks in our RJBDP, which reduced cash and cash equivalents at RJ Bank by approximately $4 billion.

RJF maintained depository accounts at RJ Bank with a balance of ~~$179~~$185 million as of ~~March 31,~~June 30, 2020. The portion of this total that was available on demand without restrictions, which amounted to $108 million as of ~~March 31,~~June 30, 2020, is reflected in the RJF total (and is excluded from the RJ Bank cash balance in the preceding table).

RJF had loaned ~~$1.50~~$1.66 billion to RJ&A as of ~~March 31,~~June 30, 2020 (such amount is included in the RJ&A cash balance in the preceding table), which RJ&A has invested on behalf of RJF in cash and cash equivalents or otherwise deployed in its normal business activities. ~~On April 1, 2020, we deposited approximately $350 million of cash into RJ&A’s segregated reserve accounts as a result of our March 31, 2020 reserve calculation.~~

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

~~Management’s Discussion and Analysis~~

In addition to the cash balances described, we have various other potential sources of cash available to the parent from subsidiaries, as described in the following section.

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

Management’s Discussion and Analysis

Liquidity available from subsidiaries

Liquidity is principally available to RJF, the parent company, from RJ&A and RJ Bank.

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 subject to 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 $1.5 million or 2% of aggregate debit items arising from client transactions. In addition, covenants in RJ&A’s committed financing facilities require its net capital to be a minimum of 10% of aggregate debit items. At ~~March 31,~~June 30, 2020, RJ&A significantly exceeded the minimum regulatory requirements, the covenants in its financing arrangements pertaining to net capital, as well as its internally-targeted net capital tolerances. FINRA may impose certain restrictions, such as restricting withdrawals of equity capital, if a member firm were to fall below a certain threshold or fail to meet minimum net capital requirements.

RJ&A, as a nonbank custodian of Individual Retirement Accounts (“IRAs”), must also 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 liquidity available to RJF from RJ&A.

RJ Bank may pay dividends to RJF without 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 ~~March 31,~~June 30, 2020, RJ Bank had ~~$253~~$274 million of capital in excess of the amount it would need at that date to maintain its targeted regulatory capital 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 those previously described 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 our various loan agreements and, in the case of secured borrowings, collateral eligibility requirements. Our committed financing arrangements ~~are in the form~~consist of ~~either~~a tri-party repurchase ~~agreements~~agreement or, in the case of the Credit Facility, an unsecured line of credit. The required market value of the collateral associated with the committed secured ~~facilities~~facility ranges from 105% 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.


	June 30, 2020
$ in millions	RJ&A		RJF		Total		Total number of arrangements
Financing arrangement:
Committed secured	$	100	$	—	$	100	1
Committed unsecured ⁽¹⁾	200		300		500		1
Total committed financing arrangements	$	300	$	300	$	600	2

Outstanding borrowing amount:
Committed secured	$	—	$	—	$	—
Committed unsecured	—		—		—
Total outstanding borrowing amount	$	—	$	—	$	—

March 31, 2020
$ in millions RJ&A RJF Total Total number of arrangements
Financing arrangement:
Committed secured $ 100
$ —
$ 100
1
Committed unsecured ⁽¹⁾
200
300
500
1
Total committed financing arrangements $ 300
$ 300
$ 600
2

Outstanding borrowing amount:
Committed secured $ —
$ —
$ —

Committed unsecured —
—
—

Total outstanding borrowing amount $ —
$ —
$ —

(1) The Credit Facility provides for maximum borrowings of up to $500 million, with a sublimit of $300 million for RJF. RJ&A may borrow up to $500 million under the Credit Facility, depending on the amount of outstanding borrowings by RJF. For additional details on our committed unsecured financing arrangement, see our discussion of the Credit Facility in Note 12 of the Notes to Condensed Consolidated Financial Statements of this Form 10-Q.

~~(1)~~

The Credit Facility provides for maximum borrowings of up to $500 million, with a sublimit of $300 million for RJF. RJ&A may borrow up to $500 million under the Credit Facility, depending on the amount of outstanding borrowings by RJF. For additional details on our committed unsecured financing arrangement, see our discussion of the Credit Facility in Note 12 of the Notes to Condensed Consolidated Financial Statements of this Form 10-Q.

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

Management’s Discussion and Analysis

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 ~~March 31,~~June 30, 2020, we had outstanding borrowings under two uncommitted secured borrowing arrangements with lenders out of a total of 11 uncommitted financing arrangements ~~(six~~(seven uncommitted secured and ~~five~~four uncommitted unsecured). However, lenders are under no contractual obligation to lend to us under uncommitted credit facilities.

The following table presents our borrowings on uncommitted financing arrangements, all of which were in RJ&A.


$ in millions	June 30, 2020
Outstanding borrowing amount:
Uncommitted secured	$	228
Uncommitted unsecured	—
Total outstanding borrowing amount	$	228

$ in millions March 31, 2020
Outstanding borrowing amount:
Uncommitted secured $ 215
Uncommitted unsecured —
Total outstanding borrowing amount $ 215

Other financings

RJ Bank had $875 million in FHLB borrowings outstanding at ~~March 31,~~June 30, 2020, comprised of floating-rate advances totaling $850 million and a $25 million fixed-rate advance, all of which were secured by a blanket lien on RJ Bank’s residential mortgage loan portfolio (see Note 12 of the Notes to Condensed Consolidated Financial Statements of this Form 10-Q for additional information regarding these borrowings). RJ Bank had an additional ~~$2.82~~$2.96 billion in immediate credit available from the FHLB as of ~~March 31,~~June 30, 2020 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 FRB’s discount-window program; however, we do not view borrowings from the 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 FRB, and 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 ~~$28~~$88 million as of ~~March 31,~~June 30, 2020. 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 of the repurchase agreements included in “Securities sold under agreements to repurchase” on our Condensed Consolidated Statements of Financial Condition of this Form 10-Q, in the amount of ~~$215~~$228 million as of ~~March 31,~~June 30, 2020. These balances are reflected in the preceding table of uncommitted financing arrangements. Such financings are generally collateralized by non-customer, RJ&A-owned securities or by securities that we have received as collateral under reverse repurchase agreements.

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

Management’s Discussion and Analysis

The average daily balance outstanding during the five most recent quarters, the maximum month-end balance outstanding during the quarter and the period-end balances for repurchase agreements and reverse repurchase agreements are detailed in the following table.


	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
June 30, 2020	$	222	$	278	$	228	$	168	$	193	$	193
March 31, 2020	$	218	$	238	$	215	$	283	$	388	$	130
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

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
March 31, 2020 $ 218
$ 238
$ 215
$ 283
$ 388
$ 130
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

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

~~Management’s Discussion and Analysis~~

At ~~March 31,~~June 30, 2020, in addition to the financing arrangements previously described, we had ~~$16~~$15 million outstanding on a mortgage loan for our St. Petersburg, Florida home-office complex that is included in “Other borrowings” on our Condensed Consolidated Statements of Financial Condition of this Form 10-Q.

At ~~March 31,~~June 30, 2020, we had aggregate outstanding senior notes payable of $2.04 billion. Our senior notes payable, exclusive of any unaccreted premiums or discounts and debt issuance costs, was comprised of $250 million par 5.625% senior notes due 2024, $500 million par 3.625% senior notes due 2026, $500 million par 4.65% senior notes due 2030, which were issued during our fiscal second ~~fiscal~~ quarter of 2020, and $800 million par 4.95% senior notes due 2046. See Note 13 of the Notes to Condensed Consolidated Financial Statements of this Form 10-Q for additional information.

Our issuer and senior long-term debt ratings as of the most current report are detailed in the following table.

Rating Agency

Rating

Outlook

Standard & Poor’s Ratings Services

BBB+

Stable

Moody’s Investors Services

Baa1

Stable

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, capital structure, 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 5 of the Notes to Condensed Consolidated Financial Statements of this Form 10-Q for additional information). A credit downgrade could damage our reputation and result in certain counterparties limiting their business with us, result in negative comments by analysts, potentially negatively impact investor and/or clients’ perception of us, and cause a decline in our stock price. None of our borrowing arrangements contains a condition or event of default related to our credit ratings. However, a credit downgrade would result in the firm incurring a higher facility fee on the $500 million 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 facility fee, as well as the interest rate applicable to any borrowings on such line.

Other sources and uses of liquidity

We have company-owned life insurance 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 employee-directed while others are company-directed. Certain policies which we could readily borrow against had a cash surrender value of ~~$512~~$610 million as of ~~March 31,~~June 30, 2020, comprised of ~~$298~~$363 million related to employee-directed plans and ~~$214~~$247 million related to company-directed plans, and we were able to borrow up to 90%, or ~~$461~~$549 million, of the ~~March 31,~~June 30, 2020 total without restriction. To effect any such borrowing, the underlying investments would be converted to money market investments, therefore requiring us to

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

Management’s Discussion and Analysis

take market risk related to the employee-directed plans. There were no borrowings outstanding against any of these policies as of ~~March 31,~~June 30, 2020.

On May 18, 2018, we filed a “universal” shelf registration statement with the SEC pursuant to which we can issue debt, equity and other capital 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 section of this MD&A for information regarding our contractual obligations.

~~Statement of financial condition analysis~~STATEMENT OF FINANCIAL CONDITION ANALYSIS

The assets on our Condensed Consolidated Statements of 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 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.

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

~~Management’s Discussion and Analysis~~

Total assets of ~~$49.81~~$44.68 billion as of ~~March 31,~~June 30, 2020 were ~~$10.98~~$5.85 billion, or ~~28%~~15%, greater than our total assets as of September 30, 2019. The increase in assets was primarily due to a ~~$8.72~~$2.87 billion increase in cash and cash and cash equivalents, including cash and cash equivalents segregated pursuant to regulations, primarily due to a significant increase in client cash balances due to the market volatility as a result of the COVID-19 pandemic, as well as proceeds from our $500 million senior notes issuance in March 2020. In addition, available-for-sale securities increased ~~$1.17~~$2.54 billion, ~~bank loans, net increased $897 million and~~ other assets increased ~~$321~~$552 million, primarily due to ROU assets recorded as a result of the adoption of new guidance related to the accounting for ~~leases.~~leases, and bank loans, net increased $332 million. Offsetting these increases, ~~securities purchased under agreements to resell and~~ trading instruments and brokerage client receivables, net decreased ~~$213~~$347 million and ~~$263~~$325 million, respectively.

As of ~~March 31,~~June 30, 2020, our total liabilities of ~~$42.98~~$37.67 billion were ~~$10.79~~$5.48 billion, or ~~34%~~17%, greater than our total liabilities as of September 30, 2019. The increase in total liabilities was primarily related to the significant increase in client cash balances and was comprised of a ~~$7.74~~$3.09 billion increase in bank deposits, reflecting higher RJBDP balances held at RJ Bank and ~~certificates~~certificate of deposit issuances during the period, and a ~~$2.72~~$1.59 billion increase in brokerage client payables, primarily due to an increase in client cash held in our CIP as of ~~March 31,~~June 30, 2020. In addition, other payables increased ~~$516~~$725 million, primarily due to operating lease liabilities recorded as a result of the adoption of new guidance related to the accounting for leases and an increase in payables resulting from unsettled securities purchases. In addition, senior notes payable increased $494 million due to the issuance of $500 million of 4.65% senior notes due April 2030. Offsetting these increases was a decrease in accrued compensation, commissions and benefits of $343 million, primarily due to the annual payment of certain incentive compensation during the six months ended March 31, 2020.

See Notes 2 and 10 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~~CONTRACTUAL OBLIGATIONS

In March 2020, we sold in a registered underwritten public offering $500 million in aggregate principal amount of 4.65% senior notes due April 2030. Refer to Note 13 of the Notes to Condensed Consolidated Financial Statements of this Form 10-Q for additional information regarding our senior notes.

Other than the item previously described, there were no other changes to the contractual obligations presented in our 2019 Form 10-K, other than in the ordinary course of business. See Note 15 of the Notes to Condensed Consolidated Financial Statements of this Form 10-Q for additional information regarding our commitments as of ~~March 31,~~June 30, 2020.

~~Regulatory~~REGULATORY

Refer to the discussion of the regulatory environment in which we operate and the impact on our operations of certain rules and regulations in “Item 1 - Business - Regulation” and “Item 7 - Management’s Discussion and Analysis of Financial Condition and Results of Operations - Regulatory” of our 2019 Form 10-K.

RJF and many of its subsidiaries are each subject to various regulatory capital requirements. As of ~~March 31,~~June 30, 2020, 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” as of ~~March 31,~~June 30, 2020. The maintenance of certain risk-based and other regulatory capital levels could influence various capital allocation decisions impacting one or more of our businesses. However, due to the current

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

Management’s Discussion and Analysis

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.

Legislative and regulatory changes in connection with COVID-19

The COVID-19 pandemic has resulted in governments around the world implementing several measures to help control the spread of the virus, including, among others, quarantines, travel restrictions and business curtailments. In addition, governments globally intervened with fiscal policy to mitigate the impact of the pandemic, including the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act in the U.S., which aimed to provide economic relief to businesses and individuals.

The CARES Act includes a broad range of provisions intended to support the U.S. economy. Among its provisions, the act allocates funds for a new Paycheck Protection Program that expands an existing Small Business Administration (“SBA”) loan guarantee program for small businesses to keep their employees on payroll and make other eligible payments. Currently, the firm does not act as a lender under these programs and facilities, and has no plans to do so.

The CARES Act also provides certain temporary regulatory relief for financial institutions, including RJF and its subsidiaries. The act permits financial institutions to temporarily suspend ~~requirements under GAAP for COVID-19-related loan modifications that~~

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

~~Management’s Discussion and Analysis~~

~~would otherwise be classified as TDRs and to suspend~~ any determination of a loan modified as a result of the effects of COVID-19 as being a TDR, including impairment for accounting purposes. We elected to apply the CARES Act relief to certain loan modifications that relate to short-term payment deferrals and have not classified such modifications as TDRs. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Risk management - Credit risk” for further information on the impact of such loan modifications. The act also permits financial institutions to temporarily delay the implementation of CECL for estimating allowances for credit losses. Given our later adoption date of October 1, 2020, we do not anticipate delaying our adoption. In addition, the Federal Reserve, the FDIC and the OCC issued a joint statement providing banking organizations optional temporary relief by delaying the initial adoption impact of CECL on regulatory capital for two years, followed by a three-year transition period to phase out the aggregate amount of the capital benefit provided during 2020 and 2021 (i.e., a five-year transition period). As we do not adopt CECL until October 1, 2020, we are currently evaluating whether we intend to avail ourselves of such relief.

The CARES Act grants potential tax relief and liquidity to businesses, including corporate tax provisions that: temporarily allow for the carryback of net operating losses and remove limitations on the use of loss carryforwards, increase interest expense deduction limitations, and allow accelerated depreciation deductions on certain asset improvements. In addition, the CARES Act allows employers to defer the payment, including the deposit, of payroll taxes for the 2020 calendar year from March 27, 2020 until December 31, 2021 for 50 percent of such taxes and December 31, 2022 for the remaining 50 percent.

The CARES Act further provides a number of consumer finance protections. The act ~~also~~ provides a range of forbearance rights with respect to any federally backed residential or multi-family mortgage loan and generally limits the ability of a lender or servicer to institute foreclosure or similar proceedings. The act additionally imposes a moratorium on evictions from dwellings of many tenants. These provisions are consistent with supervisory guidance previously issued by federal banking agencies, which also stated that they would not criticize financial institutions for working with customers affected by the outbreak in a safe and sound manner. We ~~are modifying~~have modified our processes to ensure full compliance and are working as appropriate to support affected businesses and individuals during this time.

In addition to guidance regarding supporting customers, federal banking agencies have also taken a number of other actions. The Federal Reserve, for example, has taken active steps to inject liquidity into the economy. The Federal Reserve has reduced the benchmark interest rate in an attempt to stimulate the economy. As previously mentioned, this has and will continue to negatively impact our net interest earnings. In addition, the Federal Reserve has established a number of new facilities, including to provide liquidity for issuers of commercial paper, money market funds, new bond and loan issuances, outstanding corporate bonds, primary dealers, and small and medium-sized businesses, and has reduced the interest rates on borrowings under its discount window.

Many state and local authorities have also taken, or are considering taking, legislative, executive, or other action to respond to the economic disruptions caused by the spread of COVID-19, including with respect to foreclosure and repossession moratoriums.

The Company’s legislative and regulatory environment is continually changing in response to the outbreak of COVID-19, and new or modified laws, regulations and guidance may be promulgated at very short notice.

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

Management’s Discussion and Analysis

The Volcker Rule

In June 2020, the Fed, Commodity Futures Trading Commission, FDIC, Office of the Comptroller of the Currency (“OCC”) and the SEC finalized amendments to the rules implementing the Volcker Rule. The final rule includes new exclusions from the Volcker Rule’s general prohibition on banking entities investing in and sponsoring private equity funds, hedge funds, and certain other investment vehicles (collectively, “covered funds”) for credit funds, venture capital funds, family wealth management vehicles, and customer facilitation vehicles. The final rule also revises existing exclusions for foreign public funds, loan securitizations, and public welfare and small business funds. In addition, the final rule modifies the “Super 23” provisions of the Volcker Rule, which prohibit banking entities from extending credit to and entering into certain transactions with advised or sponsored covered funds, by exempting certain short-term extensions of credit, among several other previously prohibited transactions.

Many of the amendments contained in the final rule address aspects of the existing regulations that have, since their adoption in 2013, proven in practice to be complex and burdensome or to have unintended consequences. The final rule is intended to clarify and simplify compliance with the implementing regulations and permit additional fund activities that do not present the risks that the Volcker Rule was intended to address.

The final rule will become effective on October 1, 2020 for all banking entities subject to the Volcker Rule, including RJF and its subsidiaries.

Community Reinvestment Act regulations

The OCC issued a final rule comprehensively amending the Community Reinvestment Act (“CRA”) regulations applicable to RJ Bank and other OCC-regulated banks in May 2020. At the core of the OCC’s final rule is a set of new general performance standards that establish more quantitative measures of CRA performance than the tests set forth in existing CRA regulations.

While RJ Bank will be required to comply with the final rule by January 2023, the OCC has deferred to a future rulemaking process the important decision of how key thresholds and benchmarks used in the rule will be applied to determine the level of performance necessary to achieve a particular performance rating. As a result, the final rule creates some uncertainty for RJ Bank and other OCC-regulated banks in planning their CRA activities until that decision in made.

Neither the FDIC nor the Fed joined the OCC in issuing the final rule. State-chartered banks will therefore continue to operate under the FDIC’s and Fed’s existing CRA regulations rather than the final rule. In June 2020, certain organizations filed suit against the OCC asking a court to issue an order setting the rule aside, while in the same month, the U.S. House of Representatives passed a Congressional Review Act resolution of disapproval in an attempt to nullify the rule. These developments create further uncertainty for RJ Bank and others in planning their CRA activities.

Fiduciary duty

In June 2019, the SEC adopted a package of rulemakings and interpretations related to the provision of advice by broker-dealers and investment advisers, including Regulation Best Interest and Form CRS. Among other things, Regulation Best Interest requires a broker-dealer to act in the best interest of a retail customer when making a recommendation to that customer of any securities transaction or investment strategy involving securities. Form CRS requires that broker-dealers and investment advisers provide retail investors with a brief summary document containing simple, easy-to-understand information about the nature of the relationship between the parties. As of June 30, 2020, we are now required to comply with Regulation Best Interest and Form CRS. Implementation of the regulations required us to review and modify our policies and procedures, as well as associated supervisory and compliance controls, satisfy additional disclosure obligations, and provide related education and training to financial advisors, which has led to additional costs. Additionally, various states have proposed, or adopted, laws and regulations seeking to impose new standards of conduct on broker-dealers that may differ from the SEC’s new regulations, which will lead to additional implementation costs. The Department of Labor (“DOL”) has also reinstated the historical “five-part test” for determining who is an investment advice “fiduciary” when dealing with certain retirement plans and accounts and proposed a new exemption to allow investment advice fiduciaries to receive transaction-based compensation and engage in certain principal trades. We are studying and evaluating the proposal. The total impact of the DOL change on our business will not be fully known until the proposal is finalized and could lead to additional costs.

See Note 20 of the Notes to Condensed Consolidated Financial Statements of this Form 10-Q for further information on regulatory capital requirements.

~~Critical accounting estimates~~

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

Management’s Discussion and Analysis

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 Consolidated Financial Statements of our 2019 Form 10-K.

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 our reported results of operations and 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. Recent market disruptions as a result of the COVID-19 pandemic have made it more challenging for us to determine the amount of our allowance for loan losses and the fair value of certain of our assets, particularly our private equity investments. The current circumstances have required a greater reliance on judgment than in recent periods in determining these amounts as of ~~March 31,~~June 30, 2020.

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

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

~~Management’s Discussion and Analysis~~

the Notes to Consolidated Financial Statements of our 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. See Note 3 of the Notes to Condensed Consolidated Financial Statements of this Form 10-Q for additional information on our financial instruments at fair value.

Loss provisions

Refer to “Item 7 - Management’s Discussion and Analysis of Financial Condition and Results of Operations - Critical accounting estimates - Loss provisions” of our 2019 Form 10-K for more information.

Loss provisions 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 the Notes to Consolidated Financial Statements of our 2019 Form 10-K. In addition, refer to Note 15 of the Notes to Condensed Consolidated Financial Statements of this Form 10-Q for information regarding legal and regulatory matter contingencies as of ~~March 31,~~June 30, 2020.

Loan loss provisions arising from operations of RJ Bank

We provide an allowance for loan losses which reflects our continuing evaluation of the probable losses inherent in RJ Bank’s loan portfolio. See the discussion regarding our methodology in estimating the allowance for loan losses in Note 2 of the Notes to Consolidated Financial Statements of our 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 ~~March 31,~~June 30, 2020,, the amortized cost of all RJ Bank loans was ~~$22.11~~$21.56 billion and the allowance for loan losses was ~~$324~~$334 million, which was ~~1.47%~~1.56% of the held for investment loan portfolio.

Our process of evaluating probable loan losses includes a complex analysis of several quantitative and qualitative factors, requiring 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.

~~Recent accounting developments~~

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

Management’s Discussion and Analysis

RECENT ACCOUNTING DEVELOPMENTS

For information regarding our recent accounting developments, see Note 2 of the Notes to Condensed Consolidated Financial Statements of this Form 10-Q.

~~Off-balance sheet arrangements~~OFF-BALANCE SHEET ARRANGEMENTS

For information regarding our off-balance sheet arrangements, see Note 2 of the Notes to Consolidated Financial Statements of our 2019 Form 10-K and Note 15 of the Notes to Condensed Consolidated Financial Statements of this Form 10-Q.

~~Effects of inflation~~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~~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 principal risks related to our business activities are market, credit, liquidity, operational, model, and compliance.

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

~~Management’s Discussion and Analysis~~

Governance

Our Board of Directors oversees the firm’s management and 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 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, 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 - Market risk” of our 2019 Form 10-K for a discussion of our market risk, including how we manage such risk. See Notes 3, 4 and 5 of the Notes to Condensed Consolidated Financial Statements of 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 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. ~~During our second fiscal quarter of 2020, in~~In response to

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

Management’s Discussion and Analysis

the significant market ~~volatility as a result of~~uncertainty caused by the COVID-19 pandemic, we took steps to proactively manage our market risk exposures, including enhanced review and monitoring of exposures and risk mitigation efforts. As a result, we reduced our trading inventory ~~during the quarter~~levels to reduce risk.

We monitor the Value-at-Risk (“VaR”) for all of our trading 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, the ~~Office of the Comptroller of the Currency (“OCC”)~~OCC and FDIC, requires us to calculate VaR for all of our trading portfolios, including fixed income, equity, foreign exchange and 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 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. Regulatory-defined daily trading losses are used to evaluate the performance of our VaR model and are not comparable to our actual daily net revenues. 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 ~~and six~~ months ended ~~March 31,~~June 30, 2020, our regulatory-defined daily loss in our trading portfolios did not exceed our predicted VaR. During the nine months ended June 30, 2020, our regulatory-defined daily loss in our trading portfolios exceeded our predicted VaR on eleven occasions due to significantly higher levels of market volatility during our fiscal second quarter as a result of the COVID-19 pandemic.

~~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.

Six months ended March 31, 2020 Period-end VaR Three months ended March 31, Six months ended March 31,
$ in millions High Low March 31,
2020 September 30,
2019 $ in millions 2020 2019 2020 2019
Daily VaR $ 2
$ 1
$ 1
$ 1
Daily average VaR $ 1
$ 1
$ 1
$ 1


	Nine months ended June 30, 2020						Period-end VaR							Three months ended June 30,				Nine months ended June 30,
$ in millions	High		Low		June 30, 2020		September 30, 2019		$ in millions	2020		2019		2020		2019
Daily VaR	$	6	$	1	$	5	$	1	Daily average VaR	$	2	$	1	$	2	$	1

The modeling of the risk characteristics of trading positions involves a number of assumptions and approximations. While management believes that 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.

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-information/filings-and-reports within “Other Reports and Information.”

Should markets suddenly become more volatile, as they did in our fiscal second ~~fiscal~~ quarter of 2020, 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 we did during our fiscal second ~~fiscal~~ quarter of 2020.

Banking operations

RJ Bank maintains an earning asset portfolio that is comprised of cash, C&I loans, tax-exempt loans, commercial and residential real estate loans, SBL and other loans, as well as MBS and CMOs (held in the available-for-sale securities portfolio), SBA loan securitizations and a trading portfolio of corporate loans. These earning assets are primarily funded by client deposits. Based on its

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

Management’s Discussion and Analysis

current earning asset portfolio, RJ Bank is subject to interest rate risk. 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 - Market risk” of our 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 hedging strategy, see Note 2 of the Notes to Consolidated Financial Statements of our 2019 Form 10-K.

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


Instantaneous changes in rate	Net interest income ($ in millions)	Projected change in net interest income
+200	$848	32.5%
+100	$796	24.4%
0	$640	—
-25	$606	(5.3)%

Instantaneous changes in rate
Net interest income
($ in millions)

Projected change in
net interest income
+200 $951 30.27%
+100 $893 22.33%
0 $730 —
-25 $683 (6.44)%

Refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Net interest analysis” of this Form 10-Q for a discussion of the impact changes in short-term interest rates could have on the firm’s operations.

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

~~Management’s Discussion and Analysis~~

The following table shows the contractual maturities of RJ Bank’s loan portfolio at ~~March 31,~~June 30, 2020,, including contractual principal repayments. This table does not include any estimates of 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 table. Loan amounts in the table exclude unearned income and deferred expenses.


	Due in
$ in millions	One year or less		> One year – five years		> five years		Total
Loans held for investment:
C&I loans	$	208	$	4,425	$	3,098	$	7,731
CRE construction loans	25		153		41		219
CRE loans	559		2,466		670		3,695
Tax-exempt loans	—		76		1,214		1,290
Residential mortgage loans	—		5		4,912		4,917
SBL and other	3,610		21		—		3,631
Total loans held for investment	4,402		7,146		9,935		21,483
Loans held for sale	—		—		83		83
Total loans	$	4,402	$	7,146	$	10,018	$	21,566

Due in
$ in millions One year or less > One year – five years > five years Total
Loans held for investment:

C&I loans $ 165
$ 4,077
$ 4,074
$ 8,316
CRE construction loans 10
128
42
180
CRE loans 627
2,610
593
3,830
Tax-exempt loans —
76
1,190
1,266
Residential mortgage loans —
4
4,860
4,864
SBL and other 3,526
20
—
3,546
Total loans held for investment 4,328
6,915
10,759
22,002
Loans held for sale —
—
115
115
Total loans $ 4,328
$ 6,915
$ 10,874
$ 22,117

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 ~~March 31,~~June 30, 2020. Loan amounts in the table exclude unearned income and deferred expenses.


	Interest rate type
$ in millions	Fixed		Adjustable		Total
Loans held for investment:
C&I loans	$	126	$	7,397	$	7,523
CRE construction loans	1		193		194
CRE loans	72		3,064		3,136
Tax-exempt loans	1,290		—		1,290
Residential mortgage loans	210		4,707		4,917
SBL and other	—		21		21
Total loans held for investment	1,699		15,382		17,081
Loans held for sale	4		79		83
Total loans	$	1,703	$	15,461	$	17,164

Interest rate type
$ in millions Fixed Adjustable Total
Loans held for investment:

C&I loans $ 140
$ 8,011
$ 8,151
CRE construction loans 2
168
170
CRE loans 70
3,133
3,203
Tax-exempt loans 1,266
—
1,266
Residential mortgage loans 222
4,642

4,864
SBL and other —
20
20
Total loans held for investment 1,700
15,974
17,674
Loans held for sale 2
113
115
Total loans $ 1,702
$ 16,087
$ 17,789

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 monitoring process” section of this Form 10-Q for additional information regarding RJ Bank’s interest-only residential mortgage loan portfolio.

In our RJ Bank available-for-sale securities portfolio, we hold primarily fixed-rate agency MBS and CMOs which were carried at fair value on our Condensed Consolidated Statements of Financial Condition at ~~March 31,~~June 30, 2020, with changes in the fair value of the portfolio recorded through OCI in our Condensed Consolidated Statements of Income and Comprehensive Income. At ~~March 31,~~June 30, 2020, our RJ Bank available-for-sale securities portfolio had a fair value of ~~$4.27~~$5.63 billion with a weighted-average yield of ~~2.27%~~1.90% and a duration of three years. See Note 4 of the Notes to Condensed Consolidated Financial Statements of this Form 10-Q for additional information.

Equity price risk

We are exposed to equity price risk as a result of our capital markets activities. Our broker-dealer activities are primarily client-driven, with the objective of meeting clients’ needs while earning 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.

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

~~Management’s Discussion and Analysis~~

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 $1.11 billion and $1.10 billion at ~~March 31,~~June 30, 2020 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 its foreign exchange risk, RJ Bank utilizes short-term, forward foreign exchange contracts. These derivatives are primarily accounted for as net investment hedges in the condensed consolidated financial statements. See Note 5 of the Notes to Condensed Consolidated Financial Statements of this Form 10-Q for further information regarding these derivatives.

We had foreign exchange risk in our investment in RJ Ltd. of CAD ~~338~~346 million at ~~March 31,~~June 30, 2020, which was not hedged. Foreign exchange gains/losses related to this investment are primarily reflected in OCI on our Condensed Consolidated Statements of Income and Comprehensive Income. See Note 16 of the Notes to Condensed Consolidated Financial Statements of this Form 10-Q for further information regarding 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 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 gains/losses arising from these foreign currency denominated balances are reflected in “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 in our Condensed Consolidated Statements of Income and Comprehensive Income. See Note 5 of the Notes to Condensed Consolidated Financial Statements of this Form 10-Q for information regarding our 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 - Credit risk” of our 2019 Form 10-K.

The ~~sharp~~ decline in economic activity as a result of COVID-19 has caused increased credit risk in general and particularly with regard to companies in sectors that have been most significantly impacted by the economic disruption, including ~~oil and gas,~~energy, airlines, entertainment and leisure, restaurants and gaming. Given the stresses on our clients’ liquidity, we have enhanced our credit monitoring activities, with an increased focus on monitoring our credit exposures and counterparty credit risk, including the risk that trades may not settle with a given counterparty. We have required collateral to be posted across our credit risk exposures in accordance with agreements with our borrowers and counterparties.

RJ Bank has a substantial loan portfolio. While RJ Bank’s loan portfolio is diversified, a significant downturn in the overall economy, ~~such as the downturn during our second fiscal quarter,~~ deterioration in real estate values or a significant issue within any sector or sectors where RJ Bank has a concentration will generally result in large provisions for loan losses and/or charge-offs. RJ Bank determines the allowance required for specific loan grades based on relative risk characteristics of the loan portfolio. On an ongoing basis, RJ Bank evaluates its methods for determining the allowance for each class of loans and makes enhancements it considers appropriate.

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 ~~March 31,~~June 30, 2020,, including the risk profile of the portfolios, net charge-offs during the period, the level of nonperforming loans, delinquency ratios and the impact of the COVID-19 pandemic. RJ Bank also

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

~~Management’s Discussion and Analysis~~

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 that might impact the portfolio. In response to the COVID-19 pandemic, we performed a portfolio-wide assessment on our loan portfolio. As a result, we downgraded loans in certain impacted industries, which gave rise to ~~an increase in the~~elevated loan loss ~~provision~~provisions during our fiscal second and third quarters. In addition, we sold approximately $355 million, before charge-offs and discounts or premiums, of corporate loans in industries that we believe to be most vulnerable to the ~~current quarter.~~COVID-19 pandemic. We will continue to assess the impact of COVID-19 and, as more information becomes available regarding the financial repercussions to our borrowers, the risk ratings for individual loans will be updated and the allowance will be adjusted accordingly. Additional sales of corporate loans are also expected in the fiscal fourth quarter to further reduce credit risk in certain sectors.

RJ Bank’s allowance for loan losses as a percentage of bank loans ~~outstanding~~held for investment was ~~1.47%~~1.56% and 1.04% at ~~March 31,~~June 30, 2020 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’s allowance for loan losses.

The bank loan loss provision for the ~~six~~nine months ended ~~March 31,~~June 30, 2020 was ~~$107~~$188 million compared to a loan loss provision of ~~$21~~$16 million for the prior-year period. See further explanation of the loan loss provision increase in “Management’s Discussion and Analysis - Results of Operations - RJ Bank” of this Form 10-Q.

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

Management’s Discussion and Analysis

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.


	Three months ended June 30,														Nine months ended June 30,
	2020						2019						2020				2019
$ in millions	Net loan (charge-off)/recovery amount ⁽¹⁾		% of avg. outstanding loans		Net loan (charge-off)/recovery amount ⁽¹⁾		% of avg. outstanding loans		Net loan (charge-off)/recovery amount ⁽¹⁾		% of avg. outstanding loans		Net loan (charge-off)/recovery amount ⁽¹⁾		% of avg. outstanding loans
C&I loans	$	(71)	3.55	%	$	1	0.06	%	$	(71)	1.18	%	$	(2)	0.02	%
CRE loans	(2)		0.21	%	—		—		(2)		0.07	%	(3)		0.13	%

Residential mortgage loans	1		0.08	%	—		—		1		0.03	%	1		0.02	%


Total	$	(72)	1.31	%	$	1	0.02	%	$	(72)	0.44	%	$	(4)	0.03	%

Three months ended March 31, Six months ended March 31,
2020 2019 2020 2019
$ in millions
Net loan
(charge-off)/recovery
amount

% of avg.
outstanding
loans

Net loan
(charge-off)/recovery
amount

% of avg.
outstanding
loans
Net loan
(charge-off)/recovery
amount
% of avg.
outstanding
loans
Net loan
(charge-off)/recovery
amount
% of avg.
outstanding
loans
C&I loans $ —
—
$ (3 ) 0.06 % $ —
—
$ (3 ) 0.06 %
CRE loans —
—
(3 ) 0.20 % —
—
(3 ) 0.19 %
Residential mortgage loans —
—
—
—
—
—
1
0.04 %
Total $ —
—
$ (6 ) 0.06 % $ —
—
$ (5 ) 0.05 %

(1) Charge-offs related to loan sales amounted $61 million for both the three and nine months ended June 30, 2020 and $2 million for the nine months ended June 30, 2019.

The level of nonperforming loans is another indicator of potential future credit losses. The following table presents the nonperforming loans balance and total allowance for loan losses for the periods presented.

March 31, 2020 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 $ 4
$ 197
$ 19
$ 139
CRE construction loans —
3
—
3
CRE loans 6
88
8
46
Tax-exempt loans —
11
—
9
Residential mortgage loans 14
18
16
16
SBL and other —
7
—
5
Total $ 24
$ 324
$ 43
$ 218
Total nonperforming loans as a % of RJ Bank total loans 0.11 % 0.21 %


	June 30, 2020								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	$	1		$	186	$	19		$	139
CRE construction loans	—			4		—			3
CRE loans	6			106		8			46
Tax-exempt loans	—			13		—			9
Residential mortgage loans	14			20		16			16
SBL and other	—			5		—			5

Total	$	21		$	334	$	43		$	218
Total nonperforming loans as a % of RJ Bank total loans	0.07		%			0.21		%

Included in nonperforming residential mortgage loans were $7 million in loans for which $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 in the preceding table exclude $11 million and $12 million as of ~~March 31,~~June 30, 2020 and September 30, 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 ~~$27~~$23 million and $46 million at ~~March 31,~~June 30, 2020 and September 30, 2019, respectively. Total nonperforming assets as a percentage of RJ Bank total assets were 0.08% and 0.18% at ~~March 31,~~June 30, 2020 and September 30, 2019, respectively. Although our nonperforming assets as a percentage of RJ Bank assets remained low as of ~~March 31,~~June 30, 2020, ~~and we had no charge-offs during our second fiscal quarter,~~ prolonged or further market deterioration could result in an increase in our nonperforming assets, an increase in our allowance for loan losses and/or an increase

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

~~Management’s Discussion and Analysis~~

in net charge-offs in future periods, although the extent will depend on future developments that are highly uncertain and cannot be predicted.

We have received requests from certain clients for forbearance, or deferral of their loan payments to us, driven or exacerbated by the economic impacts of the ~~COVID~~COVID-19 pandemic. Certain clients have also requested modifications of covenant terms. ~~The~~In accordance with the CARES Act, ~~permits, among other things, financial institutions~~we have elected to ~~suspend requirements under GAAP for loan modifications~~not apply TDR classification to ~~borrowers affected by~~any COVID-19 ~~and is intended to provide interpretive guidance as to conditions that would constitute a short-term modification that would not meet the definition of a TDR. We have made certain~~related loan modifications that ~~relate~~were performed after March 1, 2020 to ~~short-term payment deferrals that are not considered TDRs.~~borrowers who were current as of December 31, 2019. Based on the outstanding principal balance as of the end of ~~April~~June 30, 2020, we have ~~received~~active short-term payment ~~deferral requests~~deferrals on approximately 3%$364 million and 2%$126 million of our corporate and residential loans, respectively. The borrower’s past due and nonaccrual status will not be impacted during the deferral period.

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 2019 Form 10-K. There were no material changes in RJ Bank’s underwriting policies during the ~~six~~nine months ended ~~March 31,~~June 30, 2020.

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 ~~six~~nine months ended ~~March 31,~~June 30, 2020.

Residential mortgage and SBL and other loan portfolios

The 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 factors include, but are not limited to: loan performance trends, loan product parameters and qualification requirements, borrower credit scores, level of documentation, loan purpose, geographic concentrations, average loan size and LTV ratios. These measures, while considered and reviewed in establishing the allowance for loan losses, have not resulted in any material adjustments to RJ Bank’s historical loss rates.

The following table presents a summary of delinquent residential mortgage loans, the vast majority of which are 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 millions	30-89 days		90 days or more		Total		30-89 days		90 days or more		Total
June 30, 2020	$	5	$	7	$	12	0.10	%	0.14	%	0.24	%
September 30, 2019	$	2	$	10	$	12	0.04	%	0.22	%	0.26	%

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
March 31, 2020 $ 2
$ 8
$ 10
0.04 % 0.16 % 0.20 %
September 30, 2019 $ 2
$ 10
$ 12
0.04 % 0.22 % 0.26 %

Our ~~March 31,~~June 30, 2020 percentage continues to compare favorably to the national average for over 30 day delinquencies of ~~2.54%~~2.51%, as most recently reported by the Fed.

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

~~Management’s Discussion and Analysis~~

Credit risk is also managed by diversifying the residential mortgage portfolio. Most of the loans in our residential loan portfolio are to Private Client Group clients across the country. The following table details the geographic concentrations (top five states) of RJ Bank’s one-to-four family residential mortgage loans.

March 31, 2020
Loans outstanding as a % of RJ Bank total residential mortgage loans Loans outstanding as a % of RJ Bank total loans
CA 26.0% 5.7%
FL 16.5% 3.6%
TX 8.1% 1.8%
NY 7.2% 1.6%
CO 3.9% 0.9%


	June 30, 2020
	Loans outstanding as a % of RJ Bank total residential mortgage loans	Loans outstanding as a % of RJ Bank total loans
CA	25.8%	5.9%
FL	16.4%	3.8%
TX	8.2%	1.9%
NY	7.1%	1.6%
CO	4.1%	0.9%

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 ~~March 31,~~June 30, 2020 and September 30, 2019, these loans totaled ~~$1.51~~$1.57 billion and $1.29 billion, respectively, or approximately 32% and 30% of the residential mortgage portfolio, ~~as of each of these dates.~~respectively. The ~~weighted average~~weighted-average number of years before the remainder of the loans, which were still in their interest-only period at ~~March 31,~~June 30, 2020,, begins amortizing is ~~5.9~~6 years.

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

Management’s Discussion and Analysis

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 ratios and FICO scores at origination of RJ Bank’s residential first mortgage loan portfolio were 64% and 762, respectively.

Corporate and tax-exempt loans

Credit risk in RJ Bank’s corporate and tax-exempt loan portfolios are monitored on an individual loan basis. The majority of RJ Bank’s tax-exempt loan portfolio is comprised of loans to investment-grade borrowers.

Credit risk is 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.


	June 30, 2020
	Loans outstanding as a % of RJ Bank total corporate loans	Loans outstanding as a % of RJ Bank total loans
Office real estate	7.4%	4.0%
Automotive/transportation	7.2%	3.9%
Business systems and services	6.6%	3.6%
Hospitality	6.6%	3.6%
Multi-family	5.2%	2.8%

March 31, 2020
Loans outstanding as a % of RJ Bank total corporate loans Loans outstanding as a % of RJ Bank total loans
Automotive/transportation 7.4% 4.1%
Office real estate 7.2% 3.9%
Business systems and services 7.1% 3.9%
Hospitality 6.9% 3.8%
Multifamily 5.3% 2.9%

RJ Bank’s exposure to the energy, ~~airline, entertainment/~~airlines, entertainment and leisure, restaurant and gaming sectors, those most affected by the economic disruption from the COVID-19 pandemic, were each less than 2% of the loan portfolio as of ~~March 31,~~June 30, 2020.

Although we saw ~~significant~~ deterioration in oil prices during ~~our second~~the current fiscal ~~quarter,~~year, our energy portfolio primarily consists of loans to midstream distribution companies and convenience stores, with no loans to exploration and production enterprises. As a result, the portfolio has minimal direct commodity price exposure. However, if we continue to see a significant deterioration in oil prices, our clients, and as a result our loans to such clients, could be negatively impacted in the future.

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.

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 cybersecurity incidents. See “Item 7 - Management’s Discussion and

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

~~Management’s Discussion and Analysis~~

Analysis of Financial Condition and Results of Operations - Risk management - Operational risk” of our 2019 Form 10-K for a discussion of our operational risk and certain of our risk mitigation processes.

In response to the COVID-19 pandemic, we activated and successfully executed on our business continuity protocols and continue to monitor the COVID-19 crisis under such protocols. We have endeavored to safeguard our ~~employees~~associates and to ensure continuity of business operations for our clients. As a result, ~~nearly all~~most of our ~~employees~~associates are working remotely. Our systems and infrastructure have continued to support the increased volumes of activity, without any significant operational or technology disruptions. We did not incur any material losses related to our operational risks during the ~~six~~nine months ended ~~March 31,~~June 30, 2020. The firm continues to monitor the situation and has developed a phased approach to reopening our offices based on regional indicators and in compliance with all applicable laws and regulations. As of June 30, 2020, we have reopened certain of our offices in a limited capacity and are working under strict precautions.

As more fully described in the discussion of our business technology risks included in various risk factors presented in “Item 1A - Risk Factors” of our 2019 Form 10-K and “Part II - Other Information - Item 1A - Risk Factors” of this Form 10-Q, 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, cyber-attacks and other information security breaches, and other events that could have an impact on the security and stability of our operations. To-date, we have not experienced any material losses relating to cyber-attacks or other information security breaches; however, there can be no assurances that we will not suffer such losses in the future.

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

Management’s Discussion and Analysis

Model 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 - Model risk” of our 2019 Form 10-K for information regarding how we utilize models throughout the firm and how we manage model risk.

Compliance risk

Compliance risk is the risk of legal 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 - Compliance risk” of our 2019 Form 10-K for information on our compliance risks, including how we manage such risks. There have been no material changes in our compliance risk mitigation processes during the ~~six~~nine months ended ~~March 31,~~June 30, 2020.

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” of this Form 10-Q for our quantitative and qualitative disclosures about market risk.

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 ~~March 31,~~June 30, 2020 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

Our operations and financial results are subject to various risks and uncertainties which could adversely affect our business, financial condition, results of operations, liquidity and the trading price of our common stock. For information regarding these risks and uncertainties, see “Item 1A - Risk Factors” of our 2019 Form 10-K. The following represents material changes to our risk factors disclosed in our 2019 Form 10-K.

RISKS RELATED TO OUR BUSINESS AND INDUSTRY

The recent outbreak of COVID-19 has adversely affected, and will likely continue to adversely affect, our business, financial condition, liquidity and results of operations.

The worldwide COVID-19 pandemic has negatively affected our business and the entire financial services industry and is likely to continue to do so. Since the beginning of January 2020, the outbreak has caused ~~significant volatility~~economic uncertainty and, particularly in our fiscal second quarter disruption in the financial markets both globally and in the U.S., and on March 13, 2020, the United States declared a national emergency with respect to COVID-19. The pandemic has led governments and other authorities around the world, including federal, state and local authorities in the U.S., to impose measures intended to control its spread, including restrictions on travel and the conduct of business, such as stay-at-home orders, quarantines, travel bans, border closings, business closures and other similar measures. If COVID-19, or another highly infectious or contagious disease, continues to spread or the response to contain it is unsuccessful, we will likely experience further adverse effects on our business, financial condition, liquidity, and results of operations. A prolonged period of economic deterioration may also result in impairment of goodwill and identifiable intangible assets. The extent of such effects will depend on future developments which are highly uncertain and cannot be predicted, including the geographic spread of the virus, the overall severity of the disease, the duration of the outbreak, the measures taken by various governmental authorities in response to the outbreak and the possible further impacts on the global economy.

The continued spread of COVID-19 ~~or another highly infectious or contagious disease,~~ has caused and could continue to cause ~~severe~~ disruptions in our business. These effects have included restrictions on our employees’ ability to travel, as well as temporary partial or full closures of our facilities and the facilities of our customers, suppliers, or other vendors. We often recruit skilled professionals and new clients by visiting their offices or having them visit our offices. ~~Consequently, any~~Although we have transitioned such visits to virtual meetings, continued travel restrictions or other disruptions that prevent us from meeting with professional prospects or potential new clients may adversely impact our ability to recruit such professional prospects or engage potential new clients. ~~Although~~While we maintain contingency plans for events such as pandemic outbreaks, the further spread of COVID-19 or a similar contagious disease could also impair the availability of our executive officers who are necessary to conduct our business. In addition, any continued spread of COVID-19 or new outbreak could harm the operations of third-party service providers who perform critical services for our business.

The COVID-19 pandemic has caused, and is likely to continue to cause, ~~severe~~ economic, market and other disruptions worldwide. As a result of a shift to fee-based accounts over the past several years, a larger portion of our client assets is more directly affected by market movements. The significant decrease in the market value of our clients’ assets ~~has~~during our fiscal second quarter had ~~and will continue to have~~ a negative impact on our financial results due to the fact that asset-based fees are earned on the market value of the underlying client assets, many of which are billed based on assets as of the beginning of a quarter. ~~This market decline~~Although equity markets recovered during our fiscal third quarter, any future declines in equity markets will likely have a greater negative affect on revenues and profitability than would have been experienced in prior years due to the increased proportion of our asset-based revenues. Market volatility, such as that seen in our fiscal second quarter, could also cause clients to move their investments to lower margin products, or withdraw them, which could have an adverse impact on our profitability. We could also experience a material reduction in trading volume and lower securities prices in times of market ~~volatility,~~uncertainty, which would result in lower brokerage revenues, including losses on firm inventory. The fair values of certain of our investments could also continue to be negatively impacted, resulting in additional unrealized or realized losses on such investments. In addition, the market ~~volatility and~~ uncertainty related to the COVID-19 pandemic has caused a slowdown in merger & acquisition activity and may cause our institutional clients to abandon announced transactions and/or cease exploration of potential transactions, which could negatively impact our Capital Markets ~~revenues, including those derived from our investment banking business.~~revenues.

Moreover, certain actions taken by U.S. or other governmental authorities, including the Federal Reserve, that are intended to ameliorate the macroeconomic effects of COVID-19 have had, and will continue to have, a negative effect on our business. The

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

Fed significantly lowered interest rates in response to COVID-19 pandemic concerns in March. These decreases in short-term interest rates, in addition

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

to those in late 2019, have had a negative impact on our results, as we have certain assets and liabilities, primarily held in our PCG, 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. These market interest rate declines will continue to negatively impact results in future quarters.

In addition, we are generally exposed to the credit risk that third-parties that owe us money, securities or other assets will fail to meet their obligations to us due to numerous causes, and this risk has been and may further be exacerbated by the macroeconomic effects of COVID-19. We lend to businesses and individuals, including through offering C&I loans, commercial and residential mortgage loans, tax-exempt loans, home equity lines of credit, and other loans generally collateralized by securities. We also incur credit risk through our investments. Our credit risk has increased, and such risk and credit losses may continue to increase to the extent our loans or investments are to borrowers or issuers who, as a group, may be uniquely or disproportionately affected by declining economic or market conditions as a result of COVID-19 such as those operating in the airline, restaurant, gaming, entertainment/leisure and energy sectors. The deterioration of our credit exposure due to COVID-19 has led to additional loan loss provisions and charge-offs and could lead to further additional loan loss provisions and/or ~~charges-offs,~~charge-offs, or credit impairment of our investments, and subsequently have a material impact on our net income, regulatory capital and liquidity.

We cannot assure you that conditions in financial markets will not ~~continue to~~further deteriorate as a result of the pandemic, or that our access to capital and other sources of funding will not become constrained, resulting in actions such as restructuring debt or obtaining additional financing on terms that may be onerous or highly dilutive.

Any cyber-attack or other security breach of our technology systems, or those of our clients or other third-party vendors we rely on, could subject us to significant liability and harm our reputation.

Our operations rely heavily on the secure processing, storage and transmission of sensitive and confidential financial, personal and other information in our computer systems and networks. There have been several highly publicized cases involving financial services companies reporting the unauthorized disclosure of client or other confidential information in recent years, as well as cyber-attacks involving the theft, dissemination and destruction of corporate information or other assets, in some cases as a result of failure to follow procedures by employees or contractors or as a result of actions by third parties. Like other financial services firms, we experience malicious cyber activity directed at our computer systems, software, networks and its users on a daily basis. This malicious activity includes attempts at unauthorized access, implantation of computer viruses or malware, and denial-of-service attacks. We also experience large volumes of phishing and other forms of social engineering attempted for the purpose of perpetrating fraud against the firm, our associates, our advisors or our clients. Additionally, like many large enterprises, since mid-March 2020, we have shifted the majority of our associates to remote work arrangements in response to the COVID-19 pandemic. This change in our operating model has enabled us to successfully continue business operations, but also introduces potential new vulnerabilities to cyber threats. We seek to continuously monitor for and nimbly react to any and all such activity, and we develop our systems to protect our technology infrastructure and data from misuse, misappropriation or corruption.

Cyber-attacks can originate from a variety of sources, including third parties affiliated with foreign governments, organized crime or terrorist organizations. Third parties may also attempt to place individuals within our firm or induce employees, clients or other users of our systems to disclose sensitive information or provide access to our data, and these types of risks may be difficult to detect or prevent. Although cybersecurity incidents among financial services firms are on the rise, we have not experienced any material losses relating to cyber-attacks or other information security breaches. However, the techniques used in these attacks are increasingly sophisticated, change frequently and are often not recognized until launched. Although we seek to maintain a robust suite of authentication and layered information security controls, including our cyber threat analytics, data encryption and tokenization technologies, anti-malware defenses and vulnerability management program, any one or combination of these controls could fail to detect, mitigate or remediate these risks in a timely manner. 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 and other malicious code, and other events that could result in significant liability and damage to our reputation, and have an ongoing impact on the security and stability of our operations.

We also rely on numerous third-party service providers to conduct other aspects of our business operations, and we face similar risks relating to them. While we regularly conduct security assessments on these third-party vendors, we cannot be certain that their information security protocols are sufficient to withstand a cyber-attack or other security breach. In addition, in order to access our products and services, our customers may use computers and other devices that are beyond our security control systems.

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

Notwithstanding the precautions we take, if a cyber-attack or other information security breach were to occur, this could jeopardize the information we confidentially maintain, or otherwise cause interruptions in our operations or those of our clients and counterparties,

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

exposing us to liability. As attempted attacks continue to evolve in scope and sophistication, we may be required to expend substantial additional resources to modify or enhance our protective measures, to investigate and remediate vulnerabilities or other exposures or to communicate about cyber-attacks to our customers. Though we have insurance against some cyber-risks and attacks, we may be subject to litigation and financial losses that exceed our policy limits or are not covered under any of our current insurance policies. A technological breakdown could also interfere with our ability to comply with financial reporting and other regulatory requirements, exposing us to potential disciplinary action by regulators. Additionally, the SEC issued guidance in February 2018 stating that, as a public company, we are expected to have controls and procedures that relate to cybersecurity disclosure, and are required to disclose information relating to certain cyber-attacks or other information security breaches in disclosures required to be made under the federal securities laws. Further, successful cyber-attacks at other large financial institutions or other market participants, whether or not we are affected, could lead to a general loss of customer confidence in financial institutions that could negatively affect us, including harming the market perception of the effectiveness of our security measures or the financial system in general, which could result in reduced use of our financial products and services.

Further, in light of the high volume of transactions we process, the large number of our clients, partners and counterparties, the increasing sophistication of malicious actors, and the COVID-19 pandemic response, a cyber-attack could occur and persist for an extended period of time without detection. We expect that any investigation of a cyber-attack would take substantial amounts of time, and that there may be extensive delays before we obtain full and reliable information. During such time we would not necessarily know the extent of the harm or how best to remediate it, and certain errors or actions could be repeated or compounded before they are discovered and remediated, all of which would further increase the costs and consequences of such an attack.

We may also be subject to liability under various data protection laws. In providing services to clients, we manage, utilize and store sensitive or confidential client or employee data, including personal data. As a result, we are subject to numerous laws and regulations designed to protect this information, such as U.S. federal, state and international laws governing the protection of personally identifiable information. These laws and regulations are increasing in complexity and number. If any person, including any of our associates, negligently disregards or intentionally breaches our established controls with respect to client or employee data, or otherwise mismanages or misappropriates such data, we could be subject to significant monetary damages, regulatory enforcement actions, fines and/or criminal prosecution. In addition, unauthorized disclosure of sensitive or confidential client or employee data, whether through system failure, employee negligence, fraud or misappropriation, could damage our reputation and cause us to lose clients and related revenue. Potential liability in the event of a security breach of client data could be significant. Depending on the circumstances giving rise to the breach, this liability may not be subject to a contractual limit or an exclusion of consequential or indirect damages.

See ~~Item~~“Item 7 ~~“Management’s~~- Management’s Discussion and Analysis of Financial Condition and Results of Operations - Risk management - Operational risk” of our 2019 Form 10-K and ~~Item~~“Item 2 ~~“Management’s~~- Management’s Discussion and Analysis of Financial Condition and Results of Operations - Risk management - Operational risk” of this Form 10-Q for additional information regarding our exposure to and approaches for managing operational risks.

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

We did not have any sales of unregistered securities for the ~~six~~nine months ended ~~March 31,~~June 30, 2020.

We purchase our own stock from time to time in conjunction with a number of activities, each of which is described in the following paragraphs. The following table presents information on our purchases of our own stock, on a monthly basis, for the ~~six~~nine months ended ~~March 31,~~June 30, 2020.


	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

January 1, 2020 – January 31, 2020	40,106	$	89.74	32,988	$736
February 1, 2020 – February 29, 2020	721,432	$	89.47	719,250	$672
March 1, 2020 – March 31, 2020	1,800,682	$	74.94	1,795,764	$537
Second quarter	2,562,220	$	79.26	2,548,002

April 1, 2020 – April 30, 2020	—	$	—	—	$537
May 1, 2020 – May 31, 2020	—	$	—	—	$537
June 1, 2020 – June 30, 2020	—	$	—	—	$537
Third quarter	—	$	—	—

Fiscal year-to-date total	2,787,245	$	80.06	2,673,569

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

January 1, 2020 – January 31, 2020 40,106
$ 89.74
32,988
$736
February 1, 2020 – February 29, 2020 721,432
$ 89.47
719,250
$672
March 1, 2020 – March 31, 2020 1,800,682
$ 74.94
1,795,764
$537
Second quarter 2,562,220
$ 79.26
2,548,002

Fiscal year-to-date total 2,787,245
$ 80.06
2,673,569

In the preceding table, the total 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 subsidiaries. For more information on this trust fund, see Note 2 of the Notes to Consolidated Financial Statements of our 2019 Form 10-K and Note 8 of the Notes to Condensed Consolidated Financial Statements of this Form 10-Q. These activities do not utilize the repurchase authorization presented in the preceding table.

The total number of shares purchased also includes shares repurchased as a result of employees surrendering shares as payment for option exercises or withholding taxes. These activities do not utilize the repurchase authorization presented in the preceding table.

In response to the heightened market volatility as a result of the COVID-19 pandemic, we ~~have~~ suspended our share repurchases ~~since~~from mid-March ~~2020.~~2020 through the end of our fiscal third quarter. We resumed share repurchases to offset dilution in our fiscal fourth quarter.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

Not applicable.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

Not applicable.

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

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.
~~4.1~~10.1		~~Seventh Supplemental Indenture,~~ Second Amendment to Credit Agreement,dated as of ~~March 31,~~ May 27,2020, ~~for~~among Raymond James Financial,Inc.,Raymond James &Associates,Inc., the ~~4.650% Senior Notes due 2030, between Raymond James Financial, Inc.~~Lenders party thereto and ~~The~~ Bank of ~~New York Mellon Trust Company,~~ America,.N.A.~~, as trustee, incorporated by reference to Exhibit 4.2 to the Company’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on March 31, 2020.~~
~~10.1~~31.1		Raymond James Financial, Inc. Amended and Restated 2012 Stock Incentive Plan (as amended through February 20, 2020), incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on February 24, 2020.
~~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 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 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 ~~(The~~- 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)



			~~RAYMOND JAMES FINANCIAL, INC.~~
Date:		August 7, 2020	~~(Registrant)~~

~~Date:~~	~~May 8, 2020~~	/s/ Paul C. Reilly
			Paul C. Reilly
			Chairman and Chief Executive Officer

~~Date:~~		~~May 8,~~



Date:		August 7, 2020	/s/ Paul M. Shoukry
			Paul M. Shoukry
			Chief Financial Officer and Treasurer

8992



	Three months ended March 31,						Six months ended March 31,
in millions, except per share amounts	2020			2019			2020			2019
Revenues:
Asset management and related administrative fees	$	1,006		$	783		$	1,961		$	1,648
Brokerage revenues:
Securities commissions	410			349			773			737
Principal transactions	105			93			202			169
Total brokerage revenues	515			442			975			906
Account and service fees	172			191			350			376
Investment banking	148			163			289			300
Interest income	285			324			582			640
Other	(15		)	31			14			68
Total revenues	2,111			1,934			4,171			3,938
Interest expense	(43		)	(75		)	(94		)	(148		)
Net revenues	2,068			1,859			4,077			3,790
Non-interest expenses:
Compensation, commissions and benefits	1,422			1,225			2,773			2,490
Non-compensation expenses:
Communications and information processing	99			94			193			186
Occupancy and equipment	56			53			113			104
Business development	41			41			85			84
Investment sub-advisory fees	26			22			52			46
Professional fees	23			17			44			39
Bank loan loss provision	109			5			107			21
Acquisition and disposition-related expenses	—			—			—			15
Other	53			55			112			126
Total non-compensation expenses	407			287			706			621
Total non-interest expenses	1,829			1,512			3,479			3,111
Pre-tax income	239			347			598			679
Provision for income taxes	70			86			161			169
Net income	$	169		$	261		437			510

Earnings per common share – basic	$	1.22		$	1.85		$	3.15		$	3.58
Earnings per common share – diluted	$	1.20		$	1.81		$	3.09		$	3.51
Weighted-average common shares outstanding – basic	138.4			140.8			138.4			142.5
Weighted-average common and common equivalent shares outstanding – diluted	141.1			143.9			141.3			145.4

Net income	$	169		$	261		$	437		$	510
Other comprehensive income/(loss), net of tax:
Available-for-sale securities	63			19			62			41
Currency translations, net of the impact of net investment hedges	(26		)	8			(17		)	(5		)
Cash flow hedges	(43		)	(13		)	(33		)	(30		)
Total other comprehensive income/(loss), net of tax	(6		)	14			12			6
Total comprehensive income	$	163		$	275		$	449		$	516



Recurring measurements	Fair value at March 31, 2020		Valuation technique(s)	Unobservable input	Range (weighted-average)
$ in millions
Other investments - private equity investments (not measured at NAV)	$	30	Discounted cash flow, transaction price or other investment-specific events	Discount rate	25	%
				Terminal earnings before interest, tax, depreciation and amortization (“EBITDA”) multiple	9.0x
				Terminal year	2021 - 2042 (2024)
	Fair value at September 30, 2019
Other investments - private equity investments (not measured at NAV)	$	63	Discounted cash flow, transaction price or other investment-specific events	Discount rate	25	%
				Terminal EBITDA multiple	12.5x
				Terminal year	2021 - 2042 (2022)



$ in millions	March 31, 2020		Average fee rate
Equity	$	21,518	0.54%
Fixed income	25,641		0.18%
Balanced	4,515		0.37%
Total financial assets under management	$	51,674	0.35%