~~0000720005 us-gaap:AccumulatedTranslationAdjustmentMember 2020-03-31~~

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, ~~2020~~2021



☐			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~~137,418,106 shares of common stock as of May ~~5, 2020~~4, 2021

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, 2020 and September 30, 2019~~ (Unaudited)	3
			Condensed Consolidated Statements of Income and Comprehensive Income ~~for the three and six months ended March 31, 2020 and March 31, 2019~~ (Unaudited)	4
			Condensed Consolidated Statements of Changes in Shareholders’ Equity ~~for the three and six months ended March 31, 2020 and March 31, 2019~~ (Unaudited)	5
			Condensed Consolidated Statements of Cash Flows ~~for the six months ended March 31, 2020 and March 31, 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~~Acquisitions	1013
			Note 4 - Fair value	14
			Note 5 - Available-for-sale securities	1620
			Note 56 - Derivative assets and derivative liabilities	1822
			Note 67 - Collateralized agreements and financings	2023
			Note 78 - Bank loans, net	2126
			Note 89 - Loans to financial advisors, net	32
			Note 10 - Variable interest entities	2832
			Note 911 - Goodwill and identifiable intangible assets, net	2933
			Note 1012 - Leases	2934
			Note 1113 - Bank deposits	3135
			Note ~~12 - Other borrowings~~	32
	~~Note 13~~14 - Senior notes payable	3336
			Note 1415 - Income taxes	3337
			Note 1516 - Commitments, contingencies and guarantees	3437
			Note 1617 - Accumulated other comprehensive income/(loss)	3740
			Note 1718 - Revenues	3841
			Note 1819 - Interest income and interest expense	4245
			Note 1920 - Share-based compensation	4245
			Note 2021 - Regulatory capital requirements	4345
			Note 2122 - Earnings per share	4548
			Note 2223 - Segment information	4548
Item 2.			Management’s Discussion and Analysis of Financial Condition and Results of Operations	4851
Item 3.			Quantitative and Qualitative Disclosures about Market Risk	8488
Item 4.			Controls and Procedures	8489
PART II			OTHER INFORMATION
Item 1.			Legal Proceedings	8589
Item 1A.			Risk Factors	8589
Item 2.			Unregistered Sales of Equity Securities and Use of Proceeds	8890
Item 3.			Defaults Upon Senior Securities	8890
Item 4.			Mine Safety Disclosures	8890
Item 5.			Other Information	8890
Item 6.			Exhibits	8991
			Signatures	8991

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	March 31, 2021		September 30, 2020
Assets:
Cash and cash equivalents	$	5,851	$	5,390
Assets segregated pursuant to regulations ($5,250 and $0, at fair value)	9,674		4,244
Collateralized agreements	451		422
Financial instruments, at fair value:
Trading assets ($363 and $265 pledged as collateral)	567		513
Available-for-sale securities ($21 and $23 pledged as collateral)	8,158		7,650
Derivative assets	304		438
Other investments ($40 and $37 pledged as collateral)	370		334
Brokerage client receivables, net	2,513		2,435
Other receivables, net	1,007		927
Bank loans, net	22,879		21,195
Loans to financial advisors, net	988		1,012
Property and equipment, net	543		535
Deferred income taxes, net	277		262
Goodwill and identifiable intangible assets, net	868		600
Other assets	1,616		1,525
Total assets	$	56,066	$	47,482

Liabilities and shareholders’ equity:
Bank deposits	$	29,254	$	26,801
Collateralized financings	278		250
Financial instrument liabilities, at fair value:
Trading liabilities	212		240
Derivative liabilities	324		393
Brokerage client payables	12,475		6,792
Accrued compensation, commissions and benefits	1,372		1,384
Other payables	1,608		1,513
Other borrowings	861		888
Senior notes payable	2,045		2,045
Total liabilities	48,429		40,306
Commitments and contingencies (see Note 16)	0		0
Shareholders’ equity
Preferred stock; $.10 par value; 10,000,000 shares authorized; -0- shares issued and outstanding	0		0
Common stock; $.01 par value; 350,000,000 shares authorized; 159,231,968 and 159,007,158 shares issued as of March 31, 2021 and September 30, 2020, respectively, and 137,155,669 and 136,556,559 shares outstanding as of March 31, 2021 and September 30, 2020, respectively	2		2
Additional paid-in capital	2,028		2,007
Retained earnings	7,004		6,484
Treasury stock, at cost; 22,076,299 and 22,450,599 common shares as of March 31, 2021 and September 30, 2020, respectively	(1,404)		(1,390)
Accumulated other comprehensive income/(loss)	(38)		11
Total equity attributable to Raymond James Financial, Inc.	7,592		7,114
Noncontrolling interests	45		62
Total shareholders’ equity	7,637		7,176
Total liabilities and shareholders’ equity	$	56,066	$	47,482

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 March 31,				Six months ended March 31,
in millions, except per share amounts	2021		2020		2021		2020
Revenues:
Asset management and related administrative fees	$	1,173	$	1,006	$	2,240	$	1,961
Brokerage revenues:
Securities commissions	443		410		824		773
Principal transactions	148		105		295		202
Total brokerage revenues	591		515		1,119		975
Account and service fees	159		172		304		350
Investment banking	242		148		503		289
Interest income	200		285		403		582
Other	44		(15)		100		14
Total revenues	2,409		2,111		4,669		4,171
Interest expense	(37)		(43)		(75)		(94)
Net revenues	2,372		2,068		4,594		4,077
Non-interest expenses:
Compensation, commissions and benefits	1,648		1,422		3,148		2,773
Non-compensation expenses:
Communications and information processing	107		99		206		193
Occupancy and equipment	57		56		114		113
Business development	21		41		44		85
Investment sub-advisory fees	31		26		59		52
Professional fees	24		23		54		44
Bank loan provision/(benefit) for credit losses	(32)		109		(18)		107
Acquisition-related expenses	0		0		2		0

Other	69		53		139		112
Total non-compensation expenses	277		407		600		706
Total non-interest expenses	1,925		1,829		3,748		3,479
Pre-tax income	447		239		846		598
Provision for income taxes	92		70		179		161
Net income	$	355	$	169	$	667	$	437

Earnings per common share – basic	$	2.58	$	1.22	$	4.85	$	3.15
Earnings per common share – diluted	$	2.51	$	1.20	$	4.74	$	3.09
Weighted-average common shares outstanding – basic	137.8		138.4		137.3		138.4
Weighted-average common and common equivalent shares outstanding – diluted	141.2		141.1		140.4		141.3

Net income	$	355	$	169	$	667	$	437
Other comprehensive income/(loss), net of tax:
Available-for-sale securities	(76)		63		(93)		62
Currency translations, net of the impact of net investment hedges	2		(26)		20		(17)
Cash flow hedges	19		(43)		24		(33)
Total other comprehensive income/(loss), net of tax	(55)		(6)		(49)		12
Total comprehensive income	$	300	$	163	$	618	$	449

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 March 31,				Six months ended March 31,
$ in millions, except per share amounts	2021		2020		2021		2020
Common stock, par value $.01 per share:
Balance beginning of period	$	2	$	2	$	2	$	2
Share issuances	0		0		0		0
Balance end of period	2		2		2		2

Additional paid-in capital:
Balance beginning of period	1,996		1,922		2,007		1,938
Employee stock purchases	9		11		15		17
Exercise of stock options and vesting of restricted stock units, net of forfeitures	(7)		(8)		(66)		(71)
Restricted stock, stock option and restricted stock unit expense	30		28		72		69

Balance end of period	2,028		1,953		2,028		1,953

Retained earnings:
Balance beginning of period	6,702		6,086		6,484		5,874
Cumulative adjustments for changes in accounting principles	0		0		(35)		0
Net income attributable to Raymond James Financial, Inc.	355		169		667		437
Cash dividends declared (see Note 22)	(53)		(50)		(112)		(106)
Balance end of period	7,004		6,205		7,004		6,205

Treasury stock:
Balance beginning of period	(1,354)		(1,163)		(1,390)		(1,210)
Purchases/surrenders	(61)		(203)		(79)		(222)
Exercise of stock options and vesting of restricted stock units, net of forfeitures	11		15		65		81
Balance end of period	(1,404)		(1,351)		(1,404)		(1,351)

Accumulated other comprehensive income/(loss):
Balance beginning of period	17		(5)		11		(23)
Other comprehensive income, net of tax	(55)		(6)		(49)		12

Balance end of period	(38)		(11)		(38)		(11)
Total equity attributable to Raymond James Financial, Inc.	$	7,592	$	6,798	$	7,592	$	6,798

Noncontrolling interests:
Balance beginning of period	$	75	$	61	$	62	$	62
Net income/(loss) attributable to noncontrolling interests	(1)		(23)		12		(24)

Other	(29)		(2)		(29)		(2)


Balance end of period	45		36		45		36
Total shareholders’ equity	$	7,637	$	6,834	$	7,637	$	6,834

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)


	Six months ended March 31,
$ in millions	2021		2020
Cash flows from operating activities:
Net income	$	667	$	437
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	64		58
Deferred income taxes	27		(14)
Premium and discount amortization on available-for-sale securities and loss on other investments	14		43
Provisions/(benefits) for credit losses and legal and regulatory proceedings	(14)		124
Share-based compensation expense	74		74
Unrealized (gain)/loss on company-owned life insurance policies, net of expenses	(117)		76
Other	31		(4)
Net change in:
Assets segregated pursuant to regulations excluding cash and cash equivalents	(5,250)		0
Collateralized agreements, net of collateralized financings	1		(24)
Loans provided to financial advisors, net of repayments	(11)		(11)
Brokerage client receivables and other accounts receivable, net	(123)		(203)
Trading instruments, net	(90)		0
Derivative instruments, net	91		(25)
Other assets	(23)		(176)
Brokerage client payables and other accounts payable	5,471		2,937
Accrued compensation, commissions and benefits	(29)		(340)
Purchases and originations of loans held for sale, net of proceeds from sales of securitizations and loans held for sale	(67)		(9)
Net cash provided by operating activities	716		2,943

Cash flows from investing activities:
Additions to property and equipment	(62)		(71)
Increase in bank loans, net	(1,522)		(1,066)
Proceeds from sales of loans held for investment	90		25

Purchases of available-for-sale securities	(2,273)		(1,403)
Available-for-sale securities maturations, repayments and redemptions	1,067		435
Proceeds from sales of available-for-sale securities	519		0
Business acquisitions, net of cash acquired	(245)		0
Other investing activities, net	(11)		(10)
Net cash used in investing activities	(2,437)		(2,090)

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	2021		2020
Cash flows from financing activities:



Proceeds from Federal Home Loan Bank advances	0		850
Repayments of Federal Home Loan Bank advances and other borrowed funds	(28)		(853)
Proceeds from senior notes issuances, net of debt issuance costs paid	0		495
Exercise of stock options and employee stock purchases	32		43
Increase in bank deposits	2,453		7,742
Purchases of treasury stock	(79)		(222)
Dividends on common stock	(109)		(103)
Acquisitions of and distributions to noncontrolling interests, net	0		(1)
Net cash provided by financing activities	2,269		7,951

Currency adjustment:
Effect of exchange rate changes on cash	93		(82)
Net increase in cash and cash equivalents, including those segregated pursuant to regulations	641		8,722
Cash and cash equivalents, including those segregated pursuant to regulations at beginning of year	9,634		5,971
Cash and cash equivalents, including those segregated pursuant to regulations at end of period	$	10,275	$	14,693

Cash and cash equivalents	$	5,851	$	10,648
Cash and cash equivalents segregated pursuant to regulations	4,424		4,045
Total cash and cash equivalents, including those segregated pursuant to regulations at end of period	$	10,275	$	14,693

Supplemental disclosures of cash flow information:
Cash paid for interest	$	76	$	92
Cash paid for income taxes, net	$	248	$	176
Cash outflows for lease liabilities	$	56	$	47
Non-cash right-of-use (“ROU”) assets recorded for new and modified leases	$	81	$	39

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

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

March 31, ~~2020~~2021

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~~to 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 2223 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~~2020 Form 10-K”) for the year ended September 30, ~~2019,~~2020, as filed with the United States (“U.S.”) Securities and Exchange Commission (“SEC”) and in Note 810 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~~2020 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 and 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~~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~~2020 Form 10-K. During the six months ended March 31, ~~2020,~~2021, 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

in fiscal 2021

~~Lease accounting -~~

Credit losses

In ~~February~~June 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 elected did not impact our financial position or results of operations.

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

~~Credit losses -~~ ~~In June 2016, the FASB issued new guidance related to the~~ measurement of credit losses on financial instruments (ASU 2016-13)., which replaces the incurred credit loss and other models with the Current Expected Credit Losses (“CECL”) model. 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~~in-scope financial assets. The measurement of expected credit losses includes 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. economic forecasts.

This new guidance ~~is first~~was effective for our fiscal year beginning on October 1, 2020 and ~~will be~~was adopted under a modified retrospective approach. ~~Although permitted, we do not plan to early adopt. Our cross-functional team has continued our implementation efforts.~~ ~~We are in the process~~The impact of validating our credit loss models, as well as establishing formal policies and procedures, including control documentation related to this new guidance. In addition we are developing the new disclosures required by this new guidance. ~~We continue to evaluate the impact the~~ adoption of this new ~~guidance will~~standard resulted in an increase in our allowance for credit losses of $42 million (including $25 million related to loans to financial advisors, $9 million related to funded bank loans and $8 million related to unfunded lending commitments) and a corresponding reduction in the beginning balance of retained earnings of approximately $35 million, net of tax. Prior-period amounts were calculated under the incurred loss model and have ~~on our~~not been restated. See Notes 8 and 9 for further information related to bank loans and loans to financial ~~position~~advisors and ~~results of operations.~~ the related allowances for credit losses.

The ~~impact will ultimately depend on, among other things,~~following sections highlight changes to our ~~methodologies, management judgments, current and expected macroeconomic conditions, and the nature and characteristics~~accounting policies as a result of ~~financial assets~~this adoption.

Available-for-sale securities

Available-for-sale securities are generally held by ~~us on~~Raymond James Bank, N.A. (“RJ Bank, N.A.”) and are classified at the date of ~~adoption.~~

~~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 over the non-cancelable termpurchase. They are comprised primarily of ~~the cloud computing arrangements plus any optional renewal periods (1) that~~agency mortgage-backed securities (“MBS”) and agency collateralized mortgage obligations (“CMOs”), which are ~~reasonably certain to be exercised~~guaranteed by the ~~customer~~U.S. government or ~~(2) for which exercise~~its agencies. Available-for-sale securities owned by RJ Bank, N.A. are used as part 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 guidanceits interest rate risk and liquidity management strategies and may be ~~adopted either using the prospective~~sold in response to changes in interest rates, changes in prepayment risks, or ~~retrospective approach. We are currently evaluating the impact~~other factors. As a result of ~~this new guidance on our financial position and results of operations.~~

~~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 the new CECL guidance, credit losses on available-for-sale securities are limited to the difference between the security’s amortized cost basis and its fair value and should be recognized through an allowance for credit losses rather than as a direct reduction in amortized cost basis. Given that our available-for-sale securities portfolio is comprised of government agency securities for which payments of both principal and interest are guaranteed, and based on the lack of historical credit losses, we expect zero credit losses on this ~~new guidance will~~portfolio and the related accrued interest receivable. On a quarterly basis, we reassess our expectation of zero credit losses to consider changes in the available-for-sale securities portfolio.

Other receivables, net

Other receivables primarily include receivables from brokers, dealers and clearing organizations, accrued interest receivables and accrued fees from product sponsors. Receivables from brokers, dealers and clearing organizations primarily consist of deposits placed with clearing organizations, which includes initial margin and receivables related to sales of securities which have traded, but not yet settled including amounts receivable for securities failed to deliver. We present “Other receivables, net” on our ~~financial position~~Condensed Consolidated Statements of Financial Condition, net of any allowance for credit losses. However, these receivables generally have minimal credit risk due to the low probability of clearing organization default and ~~results~~the short-term nature of ~~operations.~~receivables related to securities settlements and therefore, the allowance for credit losses on such receivables is not significant. Any allowance for credit losses for other receivables is estimated using assumptions based on historical experience, current facts and other factors. We update these estimates through periodic evaluations against actual trends experienced.

As permitted under the CECL guidance, we include accrued interest receivables related to our financial assets in “Other receivables, net” on the Condensed Consolidated Statements of Financial Condition instead of with the related financial instrument. We reverse any uncollectible accrued interest into interest income generally when the related financial asset is

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited)

moved to nonaccrual status. As we write off uncollectible amounts in a timely manner, we do not recognize an allowance for credit losses against accrued interest receivable.

Loans to financial advisors, net

We offer loans to financial advisors for recruiting and retention purposes. The decision to extend credit to a financial advisor or other key revenue producer is generally based on their ability to generate future revenues. Loans offered are generally repaid over a five to 10 year period, with interest recognized as earned, and are contingent upon affiliation with us. These loans are not assignable by the financial advisor and may only be assigned by us to a successor in interest. There is no fee income associated with these loans. In the event that the financial advisor is no longer affiliated with us, any unpaid balance of such loan becomes immediately due and payable to us. Based upon the nature of these financing receivables, affiliation status is the primary credit risk factor within this portfolio.

We present the outstanding balance of loans to financial advisors on our Condensed Consolidated Statements of Financial Condition, net of the allowance for credit losses. Refer to the allowance for credit losses section that follows for further information related to our allowance for credit losses on our loans to financial advisors. See Note 9 for additional information on our loans to financial advisors.

Loans to financial advisors are considered past due once they are 30 days or more delinquent as to the payment of contractual interest or principal. Loans are placed on nonaccrual status when we determine that full payment of contractual principal and interest is in doubt, or the loan is past due 180 days or more as to contractual interest or principal. When a loan is placed on nonaccrual status, the accrued and unpaid interest receivable is written-off against interest income. Interest is recognized on a cash basis until the loan qualifies for return to accrual status. Loans are returned to an accrual status when the loans have been brought contractually current with the original terms and have been maintained on a current basis for a reasonable period, generally six months.

When we determine that it is likely a loan will not be collected in full, the loan is evaluated for a potential write down of the carrying value. After consideration of the borrower’s ability to restructure the loan, sources of repayment, and other factors affecting the borrower’s ability to repay the debt, the portion of the loan deemed a confirmed loss, if any, is charged-off. A charge-off is taken against the allowance for credit losses for the difference between the amortized cost and the amount we estimate will ultimately be collected. Additional charge-offs are taken if there is an adverse change in the expected cash flows.

Allowance for credit losses

We evaluate our held for investment bank loans, unfunded lending commitments, loans to financial advisors and certain other financial assets to estimate an allowance for credit losses over the remaining life of the financial instrument. The remaining life of our financial assets is determined by considering contractual terms and expected prepayments, among other factors.

We employ multiple methodologies in estimating an allowance for credit losses and our approaches differ by type of financial asset and the risk characteristics within each financial asset type. Our estimates are based on ongoing evaluations of the portfolio, the related credit risk characteristics, and the overall economic and environmental conditions affecting the financial assets. For certain of our financial assets with collateral maintenance provisions (e.g., collateralized agreements, margin loans and securities-based loans), we apply the practical expedient allowed under the CECL model in estimating an allowance for credit losses. We reasonably expect that borrowers (or counterparties, as applicable) will replenish the collateral as required. As a result, we estimate zero credit losses to the extent that the fair value equals or exceeds the related carrying value of the financial asset. When the fair value of the collateral securing the financial asset is less than the carrying value, qualitative factors such as historical experience (adjusted for current risk characteristics and economic conditions) as well as reasonable and supportable forecasts are considered in estimating the allowance for credit losses on the unsecured portion of the financial asset.

Credit losses are charged-off against the allowance when we believe the uncollectibility of the financial asset is confirmed. Subsequent recoveries, if any, are credited to the allowance once received. A credit loss expense, or benefit, is recorded in earnings in an amount necessary to adjust the allowance for credit losses to our estimate as of the end of each reporting period. Our provision or benefit for credit losses for outstanding bank loans is included in “Bank loan provision/(benefit) for credit losses” on our Condensed Consolidated Statements of Income and Comprehensive Income and our provision or benefit for credit losses for all other financing receivables and unfunded lending commitments is included in “Other” expense.

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited)

Loans

We generally estimate the allowance for credit losses on our loan portfolios using credit risk models which incorporate relevant available information from internal and external sources relating to past events, current conditions, and reasonable and supportable economic forecasts. After testing the reasonableness of a variety of economic forecast scenarios, we select a single forecast scenario for use in our models. Our forecasts incorporate assumptions related to macroeconomic indicators including, but not limited to, U.S. gross domestic product, equity market indices, unemployment rates, and commercial real estate and residential home price indices. At the conclusion of our reasonable and supportable forecast period, which currently ranges from two to three years depending on the model and macroeconomic variables, we use a straight-line reversion approach over a one-year period to revert to historical loss information for commercial and industrial (“C&I”), real estate investment trust (“REIT”) and tax-exempt loans. For commercial real estate (“CRE”) and residential mortgage loans, we incorporate a reasonable and supportable forecast of various macroeconomic variables over the remaining life of the assets. The development of the forecast used for CRE and residential mortgage loans incorporates an assumption that each macroeconomic variable will revert to a long-term expectation starting in years two to three of the forecast and largely completing within the first five years of the forecast. We assess the length of the reasonable and supportable forecast period and the reversion period, our reversion approach, our economic forecasts and our methodology for estimating the historical loss information on a quarterly basis.

The allowance for credit losses on loans is generally evaluated and measured on a collective basis, typically by loan portfolio segment, due to similar risk characteristics. When a loan does not share similar risk characteristics with other loans, the loan is evaluated for credit losses on an individual basis. Various risk characteristics are considered when determining whether the loan should be collectively evaluated including, but not limited to, financial asset type, internal risk ratings, collateral type, industry of the borrower, and historical or expected credit loss patterns.

The allowance for credit losses on collectively evaluated loans is comprised of two components: (a) a quantitative allowance; and (b) a qualitative allowance, which is based on an analysis of model limitations and other factors not considered by the quantitative models. There are several factors considered in estimating the quantitative allowance for credit losses on collectively evaluated loans which generally include, but are not limited to, the internal risk rating, historical loss experience (including adjustments due to current risk characteristics and economic conditions), prepayments, borrower-controlled extensions, and expected recoveries. We use third-party data for historical information on collectively evaluated corporate loans (C&I, CRE and REIT loans) and residential mortgage loans.

The qualitative portion of our allowance for credit losses includes certain factors that are not incorporated into the quantitative estimate and would generally require adjustments to the allowance for credit losses. These qualitative factors are intended to address developing trends related to each portfolio segment and would generally include, but are not limited to: changes in lending policies and procedures, including changes in underwriting standards and collection; our loan review process; volume and severity of delinquent loans; changes in the nature, volume and terms of loans; credit concentrations; changes in the value of underlying collateral; changes in legal and regulatory environments; and local, regional, national and international economic conditions.

Held for investment bank loans

The allowance for credit losses for the C&I, CRE (primarily loans that are secured by income-producing properties and commercial real estate construction loans), REIT (loans made to businesses that own or finance income-producing real estate), tax-exempt and residential mortgage portfolio segments is estimated using credit risk models that project a probability of default (“PD”), which is then multiplied by the loss given default (“LGD”) and the estimated exposure at default (“EAD”) at the loan-level for every period remaining in the loan’s expected life, including the maturity period. Historical data, combined with macroeconomic variables, are used in estimating the PD, LGD and EAD. Our credit risk models consider several factors when estimating the expected credit losses which may include, but are not limited to, financial performance and position, estimated prepayments, geographic location, industry or sector type, debt type, loan size, capital structure, initial risk levels and the economic outlook. Additional factors considered by the residential mortgage model include Fair Isaac Corporation (“FICO”) scores and loan-to-value (“LTV”) ratios.

We generally use one of two methods to measure the allowance for credit losses on individually evaluated loans. A discounted cash flow approach is used to estimate the allowance for credit losses on certain nonaccrual corporate loans and all troubled debt restructurings (“TDRs”) that are not collateral-dependent. For collateral-dependent loans and for instances where foreclosure is probable, we use an approach that considers the fair value of the collateral less selling costs when measuring the allowance for credit losses. A loan is collateral-dependent when the borrower is experiencing financial difficulty and repayment is expected to be provided substantially through the sale of the collateral.

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited)

See Note 8 for further information about our bank loans, including credit quality indicators considered in developing the allowance for credit losses.

Unfunded lending commitments

We estimate credit losses on unfunded lending commitments using a methodology consistent with that used in the corresponding bank loan portfolio segment and also based on the expected funding probabilities for fully binding commitments. As a result, the allowance for credit losses for unfunded lending commitments will vary depending upon the mix of lending commitments and future funding expectations. All classes of individually evaluated unfunded lending commitments are analyzed in conjunction with the specific allowance process previously described.

The allowance for credit losses related to unfunded lending commitments is included in “Other payables” on our Condensed Consolidated Statements of Financial Condition.

Loans to financial advisors

The allowance for credit losses on loans to financial advisors is estimated using credit risk models that incorporate average annual loan-level loss rates and estimated prepayments based on historical data. The qualitative component of our estimate considers internal and external factors that are not incorporated into the quantitative estimate such as the reasonable and supportable forecast period. In estimating an allowance for credit losses on our individually-evaluated loans to financial advisors, we generally take into account the affiliation status of the financial advisor (i.e., whether the advisor is actively affiliated with us or has terminated affiliation with us), the borrower’s ability to restructure the loan, sources of repayment, and other factors affecting the borrower’s ability to repay the debt.

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited)

NOTE 3 – ACQUISITIONS

Acquisitions announced and completed during the six months ended March 31, 2021

In December 2020, we announced and completed our acquisition of all of the outstanding shares of NWPS Holdings, Inc. and its wholly-owned subsidiaries (collectively “NWPS”), doing business as NWPS and Northwest Plan Services. As an independent provider of retirement plan administration, consulting, actuarial and administration services, the addition of NWPS allows us to expand our retirement services offerings, including retirement plan administration services, to advisors and clients. For purposes of certain acquisition-related financial reporting requirements, the NWPS acquisition was not considered a material acquisition. NWPS has been integrated into our Private Client Group (“PCG”) segment and its results of operations have been included in our results prospectively from the closing date of December 24, 2020.

The NWPS acquisition resulted in the addition of $139 million of goodwill and $96 million of identifiable intangible assets during the six months ended March 31, 2021. The goodwill associated with this acquisition primarily represents synergies from combining NWPS with our existing businesses. The identifiable intangible assets primarily relate to client relationships and have a weighted-average useful life of 24.8 years.

In March 2021, we completed our acquisition of all of the outstanding ownership interests of Financo, LLC and its subsidiaries (collectively “Financo”), an investment bank focused on the consumer sector. The addition of Financo allows us to further grow our investment banking capabilities in the consumer and retail space, both domestically and internationally. For purposes of certain acquisition-related financial reporting requirements, the Financo acquisition was not considered a material acquisition. Financo has been integrated into our Capital Markets segment and its results of operations have been included in our results prospectively from the closing date of March 30, 2021.

The Financo acquisition resulted in the addition of $30 million of goodwill and $9 million of identifiable intangible assets during the six months ended March 31, 2021. The goodwill associated with this acquisition primarily represents synergies from combining Financo with our existing businesses. The goodwill associated with Financo is generally deductible for tax purposes over 15 years. The identifiable intangible assets primarily relate to client relationships and have a weighted-average useful life of 9 months. Due to the timing of the close of this acquisition, certain information is not yet available and the amounts of goodwill and intangible assets are considered provisional. We believe the information currently available provides a reasonable basis for estimating the fair value of these assets. However, these provisional estimates may be adjusted upon the availability of new information regarding facts and circumstances which existed at the acquisition date. We expect to finalize this valuation by the end of our 2021 fiscal year.

See Notes 2 and 10 of our 2020 Form 10-K and Note 11 of this Form 10-Q for additional information about our goodwill and identifiable intangible assets, including the related accounting policies.

Acquisition-related expenses

Certain acquisition and integration costs associated with these acquisitions were included in “Acquisition and disposition-related expenses” during fiscal 2021 on our Condensed Consolidated Statements of Income and Comprehensive Income. Such costs primarily included legal and other professional fees.

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited)

NOTE 4 – FAIR VALUE

Our “Financial ~~instruments owned”~~instruments” and “Financial ~~instruments sold but not yet purchased”~~instrument liabilities” 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~~Notes 2 and ~~Note 4~~3 of our ~~2019~~2020 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 56 for additional information.


$ in millions	Level 1		Level 2		Level 3		Netting adjustments		Balance as of March 31, 2021
Assets at fair value on a recurring basis:
Assets segregated pursuant to regulations	$	5,250	$	0	$	0	$	—	$	5,250
Trading assets
Municipal and provincial obligations	1		159		0		—		160
Corporate obligations	9		31		0		—		40
Government and agency obligations	13		94		0		—		107
Agency MBS and agency CMOs	0		193		0		—		193
Non-agency CMOs and asset-backed securities (“ABS”)	0		6		0		—		6
Total debt securities	23		483		0		—		506
Equity securities	13		1		0		—		14
Brokered certificates of deposit	0		42		0		—		42
Other	0		0		5		—		5
Total trading assets	36		526		5		—		567
Available-for-sale securities (1)	15		8,143		0		—		8,158
Derivative assets
Interest rate - matched book	0		201		0		—		201
Interest rate - other	70		143		0		(111)		102
Foreign exchange	0		1		0		—		1
Total derivative assets	70		345		0		(111)		304
Other investments - private equity - not measured at net asset value (“NAV”)	—		—		52		—		52
All other investments:
Government and agency obligations (2)	105		0		0		—		105
Other	100		2		23		—		125
Total all other investments	205		2		23		—		230
Subtotal	5,576		9,016		80		(111)		14,561
Other investments - private equity - measured at NAV									88
Total assets at fair value on a recurring basis	$	5,576	$	9,016	$	80	$	(111)	$	14,649

Liabilities at fair value on a recurring basis:
Trading liabilities
Municipal and provincial obligations	$	1	$	0	$	0	$	—	$	1
Corporate obligations	0		22		0		—		22
Government and agency obligations	122		0		0		—		122
Agency MBS and agency CMOs	0		22		0		—		22

Total debt securities	123		44		0		—		167
Equity securities	44		0		0		—		44
Other	0		0		1		—		1
Total trading liabilities	167		44		1		—		212
Derivative liabilities
Interest rate - matched book	0		201		0		—		201
Interest rate - other	64		121		0		(69)		116
Foreign exchange	0		3		0		—		3
Other	0		0		4		—		4
Total derivative liabilities	64		325		4		(69)		324
Total liabilities at fair value on a recurring basis	$	231	$	369	$	5	$	(69)	$	536

$ 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.~~

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


$ in millions	Level 1		Level 2		Level 3		Netting adjustments		Balance as of September 30, 2020
Assets at fair value on a recurring basis:

Trading assets
Municipal and provincial obligations	$	5	$	120	$	0	$	—	$	125
Corporate obligations	11		45		0		—		56
Government and agency obligations	13		131		0		—		144
Agency MBS and agency CMOs	0		130		0		—		130
Non-agency CMOs and ABS	0		13		0		—		13
Total debt securities	29		439		0		—		468
Equity securities	11		5		0		—		16
Brokered certificates of deposit	0		17		0		—		17
Other	0		0		12		—		12
Total trading assets	40		461		12		—		513
Available-for-sale securities (1)	16		7,634		0		—		7,650
Derivative assets
Interest rate - matched book	0		333		0		—		333
Interest rate - other	16		224		0		(135)		105

Total derivative assets	16		557		0		(135)		438
Other investments - private equity - not measured at NAV	—		—		37		—		37
All other investments:
Government and agency obligations (2)	103		0		0		—		103
Other	92		1		22		—		115
Total all other investments	195		1		22		—		218
Subtotal	267		8,653		71		(135)		8,856
Other investments - private equity - measured at NAV									79
Total assets at fair value on a recurring basis	$	267	$	8,653	$	71	$	(135)	$	8,935

Liabilities at fair value on a recurring basis:
Trading liabilities
Municipal and provincial obligations	$	1	$	0	$	0	$	—	$	1
Corporate obligations	0		5		0		—		5
Government and agency obligations	136		0		0		—		136
Non-agency CMOs and ABS	0		2		0		—		2
Total debt securities	137		7		0		—		144
Equity securities	96		0		0		—		96

Total trading liabilities	233		7		0		—		240
Derivative liabilities
Interest rate - matched book	0		333		0		—		333
Interest rate - other	16		145		0		(112)		49
Foreign exchange	0		5		0		—		5
Other	0		1		5		—		6
Total derivative liabilities	16		484		5		(112)		393
Total liabilities at fair value on a recurring basis	$	249	$	491	$	5	$	(112)	$	633


~~(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 agency CMOs. See Note 5 for further information.

(2) These assets are comprised of U.S. Treasuries purchased to meet certain deposit requirements with clearing organizations.

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 March 31, 2021 Level 3 instruments at fair value
	Financial assets						Financial liabilities
	Trading assets		Other investments				Trading liabilities		Derivative liabilities
$ in millions	Other		Private equity investments		All other		Other		Other
Fair value beginning of period	$	3	$	52	$	22	$	0	$	(1)
Total gains/(losses) included in earnings	(2)		0		1		(1)		(3)
Purchases and contributions	10		0		0		0		0
Sales and distributions	(6)		0		0		0		0
Transfers:
Into Level 3	0		0		0		0		0
Out of Level 3	0		0		0		0		0
Fair value end of period	$	5	$	52	$	23	$	(1)	$	(4)
Unrealized gains/(losses) for the period included in earnings for instruments held at the end of the reporting period	$	0	$	0	$	1	$	(1)	$	(3)


Three months ended March 31, 2020 Level 3 instruments at fair value
Six months ended March 31, 2021 Level 3 instruments at fair value													Six months ended March 31, 2021 Level 3 instruments at fair value
	Financial assets									Financial liabilities				Financial assets						Financial liabilities
	Trading instruments			Other investments						Trading instruments				Trading assets		Other investments				Trading liabilities		Derivative liabilities
$ in millions	Other			Private equity investments			All other			Other			$ in millions	Other		Private equity investments		All other		Other		Other
Fair value beginning of period	$	19		$	62		$	24		$	(1	)	Fair value beginning of period	$	12	$	37	$	22	$	0	$	(5)
Total gains/(losses) included in earnings	3			(32		)	(2		)	—			Total gains/(losses) included in earnings	0		15		1		(1)		1
Purchases and contributions	22			—			—			1			Purchases and contributions	16		0		0		0		0
Sales and distributions	(23		)	—			—			—			Sales and distributions	(23)		0		0		0		0
Transfers:													Transfers:
Into Level 3	—			—			—			—			Into Level 3	0		0		0		0		0
Out of Level 3	—			—			—			—			Out of Level 3	0		0		0		0		0
Fair value end of period	$	21		$	30		$	22		$	—		Fair value end of period	$	5	$	52	$	23	$	(1)	$	(4)
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	$	0	$	15	$	1	$	(1)	$	1

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)


Three months ended March 31, 2020 Level 3 instruments at fair value
	Financial assets						Financial liabilities
	Trading assets		Other investments				Trading liabilities
$ in millions	Other		Private equity investments		All other		Other
Fair value beginning of period	$	19	$	62	$	24	$	(1)
Total gains/(losses) included in earnings	3		(32)		(2)		0
Purchases and contributions	22		0		0		1
Sales and distributions	(23)		0		0		0
Transfers:
Into Level 3	0		0		0		0
Out of Level 3	0		0		0		0
Fair value end of period	$	21	$	30	$	22	$	0
Unrealized gains/(losses) for the period included in earnings for instruments held at the end of the reporting period	$	5	$	(32)	$	(2)	$	0


Six months ended March 31, 2020 Level 3 instruments at fair value
	Financial assets						Financial liabilities
	Trading assets		Other investments				Trading liabilities
$ 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)		0
Purchases and contributions	53		0		0		2
Sales and distributions	(38)		(1)		0		(1)
Transfers:
Into Level 3	0		0		0		0
Out of Level 3	0		0		0		0
Fair value end of period	$	21	$	30	$	22	$	0
Unrealized gains/(losses) for the period included in earnings for instruments held at the end of the reporting period	$	5	$	(32)	$	(2)	$	0

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 $ —
$ —
$ —
$ —

The net unrealized losses on our Level 3 private equity investments for the three and six months ended March 31, 2020 were primarily driven by the then anticipated negative impact of the coronavirus (“COVID-19”) pandemic on certain of our investments. Of these losses, approximately $20 million for both the three and six months ended March 31, 2020 were attributable to noncontrolling interests, which are reflected as an offset in “Other” expenses on our Condensed Consolidated Statements of Income and Comprehensive Income.

As of March 31, ~~2020, 11%~~2021, 26% 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%~~2020, 19% of our assets and 2% of our liabilities were measured at fair value on a recurring basis. ~~As of March 31, 2020 and September 30, 2019, instruments~~The increase in assets measured at fair value on a recurring basis ~~categorized~~ as a percentage of total assets was primarily due to a significant increase in assets segregated pursuant to regulations at fair value during fiscal 2021, driven by a significant increase in client cash balances. As of both March 31, 2021 and September 30, 2020, Level 3 assets represented less than 1% ~~and 2%, respectively,~~ of our assets measured at fair ~~value.~~value on a recurring basis.

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited)

Quantitative information about level 3 fair value measurements

The following ~~tables present~~table presents 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 March 31, 2021

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 - 2034 (2022)

Fair value at September 30, 2020

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

9.0x

Terminal year

2021 - 2042 (2023)

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.

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~~2020 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 as of March 31, 2021 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~~strategies 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.

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited)

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


$ in millions	Recorded value		Unfunded commitment
March 31, 2021
Private equity investments measured at NAV	$	88	$	9
Private equity investments not measured at NAV	52
Total private equity investments	$	140

September 30, 2020
Private equity investments measured at NAV	$	79	$	9
Private equity investments not measured at NAV	37
Total private equity investments	$	116

$ 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~~$105 million and ~~$99~~$90 million as of March 31, ~~2020~~2021 and September 30, ~~2019,~~2020, respectively. The portions of the private equity investments we did not own were ~~$22~~$35 million and ~~$47~~$26 million as of March 31, ~~2020~~2021 and September 30, ~~2019,~~2020, respectively, and were included as a component of noncontrolling interests on our Condensed Consolidated Statements of Financial Condition.

~~Many~~As a financial holding company, we are subject to holding period limitations for our merchant banking activities. As a result, we will be required to exit certain of ~~these~~our private equity investments by February 2022. Additionally, many of our private equity 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”~~(“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)
March 31, 2021
Bank loans:
Residential mortgage loans	$	4	$	11	$	15	Collateral or discounted cash flow (1)	Prepayment rate	7 yrs. - 12 yrs. (10.5 yrs.)
Corporate loans	$	0	$	13	$	13	Collateral or discounted cash flow (1)	Not meaningful (1)	Not meaningful (1)
Loans held for sale	$	151	$	0	$	151	N/A	N/A	N/A


September 30, 2020
Bank loans:
Residential mortgage loans	$	4	$	13	$	17	Collateral or discounted cash flow (1)	Prepayment rate	7 yrs. - 12 yrs. (10.6 yrs.)
Corporate loans	$	0	$	15	$	15	Collateral or discounted cash flow (1)	Not meaningful (1)	Not meaningful (1)
Loans held for sale	$	38	$	0	$	38	N/A	N/A	N/A
Other assets: other real estate owned	$	1	$	0	$	1	N/A	N/A	N/A

(1) The valuation techniques used to estimate the fair values are based on collateral value less selling costs for the collateral-dependent loans and discounted cash flows for loans that are not collateral-dependent.

$ 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

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited)


~~(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, ~~2020~~2021 and September 30, ~~2019.~~2020. This table excludes financial instruments that are carried at amounts which approximate fair value. Refer to Note 43 of our ~~2019~~2020 Form 10-K for a discussion of the fair value hierarchy ~~classification~~classifications of our financial instruments that are not recorded at fair value.


$ in millions	Level 2		Level 3		Total estimated fair value		Carrying amount
March 31, 2021
Financial assets:
Bank loans, net	$	52	$	22,518	$	22,570	$	22,700
Financial liabilities:
Bank deposits - certificates of deposit	$	0	$	917	$	917	$	889
Senior notes payable (1)	$	2,400	$	0	$	2,400	$	2,045

September 30, 2020
Financial assets:
Bank loans, net	$	72	$	21,119	$	21,191	$	21,125
Financial liabilities:
Bank deposits - certificates of deposit	$	0	$	1,056	$	1,056	$	1,017
Senior notes payable	$	2,504	$	0	$	2,504	$	2,045

$ 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
(1) In April and May 2021, we repurchased or redeemed, as applicable, a portion of our Senior notes payable. See Note 14 for further information.

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

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

NOTE 45 – AVAILABLE-FOR-SALE SECURITIES

Available-for-sale securities are primarily comprised of agency MBS and agency CMOs owned by ~~Raymond James Bank (“~~RJ ~~Bank”).~~Bank. As of October 1, 2020, we adopted new accounting guidance related to the measurement of credit losses on financial instruments, including available-for-sale securities. Refer to ~~the~~Note 2 for further information about this guidance and a discussion of our available-for-sale ~~securities accounting policies, including the fair value determination process, in Note 2 of our 2019 Form 10-K.~~securities.

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


$ in millions	Cost basis		Gross unrealized gains		Gross unrealized losses		Fair value
March 31, 2021
Agency residential MBS	$	4,762	$	53	$	(31)	$	4,784
Agency commercial MBS	1,194		10		(36)		1,168
Agency CMOs	2,193		15		(17)		2,191
Other securities	15		0		0		15
Total available-for-sale securities	$	8,164	$	78	$	(84)	$	8,158

September 30, 2020
Agency residential MBS	$	4,064	$	74	$	(3)	$	4,135
Agency commercial MBS	948		22		(1)		969
Agency CMOs	2,504		27		(1)		2,530
Other securities	15		1		0		16
Total available-for-sale securities	$	7,531	$	124	$	(5)	$	7,650

$ 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

The amortized costs and fair values in the preceding table exclude $14 million and $15 million of accrued interest on available-for-sale securities as of March 31, 2021 and September 30, 2020, respectively, which was included in “Other receivables, net” on our Condensed Consolidated Statements of Financial Condition.

See Note 34 for additional information regarding the fair value of available-for-sale securities.

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited)

The following table details the contractual maturities, amortized 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 a result, as of March 31, ~~2020,~~2021, the ~~duration~~weighted-average life of our available-for-sale securities portfolio was approximately ~~three~~4 years.


	March 31, 2021
$ 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	$	0		$	45		$	1,811		$	2,906		$	4,762
Carrying value	$	0		$	47		$	1,834		$	2,903		$	4,784
Agency commercial MBS
Amortized cost	$	42		$	191		$	856		$	105		$	1,194
Carrying value	$	42		$	195		$	827		$	104		$	1,168
Agency CMOs
Amortized cost	$	0		$	1		$	55		$	2,137		$	2,193
Carrying value	$	0		$	1		$	56		$	2,134		$	2,191
Other securities
Amortized cost	$	0		$	7		$	8		$	0		$	15
Carrying value	$	0		$	7		$	8		$	0		$	15
Total available-for-sale securities
Amortized cost	$	42		$	244		$	2,730		$	5,148		$	8,164
Carrying value	$	42		$	250		$	2,725		$	5,141		$	8,158
Weighted-average yield	2.10		%	2.14		%	1.27		%	1.03		%	1.15		%

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
March 31, 2021
Agency residential MBS	$	2,772	$	(31)	$	0	$	0	$	2,772	$	(31)
Agency commercial MBS	756		(36)		0		0		756		(36)
Agency CMOs	1,210		(17)		25		0		1,235		(17)
Other securities	3		0		0		0		3		0
Total	$	4,741	$	(84)	$	25	$	0	$	4,766	$	(84)
September 30, 2020
Agency residential MBS	$	966	$	(3)	$	0	$	0	$	966	$	(3)
Agency commercial MBS	177		(1)		0		0		177		(1)
Agency CMOs	410		(1)		0		0		410		(1)

Total	$	1,553	$	(5)	$	0	$	0	$	1,553	$	(5)

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 )

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 %

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

Management’s Discussion and Analysis

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, 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.

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

~~Net~~

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 ~~analysis~~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 March 31,						Six months ended March 31,
$ in millions	2021		2020		% change		2021		2020		% change
Total company
Net revenues	$	2,372	$	2,068	15	%	$	4,594	$	4,077	13	%
Pre-tax income	$	447	$	239	87	%	$	846	$	598	41	%

Private Client Group
Net revenues	$	1,647	$	1,495	10	%	$	3,114	$	2,909	7	%
Pre-tax income	$	192	$	170	13	%	$	332	$	323	3	%

Capital Markets
Net revenues	$	433	$	290	49	%	$	885	$	558	59	%
Pre-tax income	$	105	$	28	275	%	$	234	$	57	311	%

Asset Management
Net revenues	$	209	$	184	14	%	$	404	$	368	10	%
Pre-tax income	$	87	$	73	19	%	$	170	$	146	16	%

RJ Bank
Net revenues	$	160	$	210	(24)	%	$	327	$	426	(23)	%
Pre-tax income	$	111	$	14	693	%	$	182	$	149	22	%

Other
Net revenues	$	(12)	$	(44)	73	%	$	(8)	$	(52)	85	%
Pre-tax loss	$	(48)	$	(46)	(4)	%	$	(72)	$	(77)	6	%

Intersegment eliminations
Net revenues	$	(65)	$	(67)	NM		$	(128)	$	(132)	NM

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

Management’s Discussion and Analysis

NET INTEREST ANALYSIS

The following table presents the high, low and end of period target federal funds rates for the periods presented.


	Target federal funds rate
	Low	High	End of period
Three months ended
March 31, 2021	0.00%	0.25%	0% - 0.25%
March 31, 2020	0.00%	1.75%	0% - 0.25%
Six months ended
March 31, 2021	0.00%	0.25%	0% - 0.25%
March 31, 2020	0.00%	2.00%	0% - 0.25%

In response to macroeconomic concerns resulting from the COVID-19 pandemic, ~~The~~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~~reduction of 150 basis ~~points during the quarter.~~points. These decreases, in ~~short-term~~addition to other interest ~~rates, as well as the three~~ rate cuts implemented induring calendar 2019 (225 basis points in total), have ~~had a negative impact on~~negatively impacted our ~~fiscal year 2020 results,~~net interest income, 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~~well as the fees we earn from third-party banks on client cash balances swept to such banks as part of the RJBDP which are also sensitive to changes in interest rates. AsThe negative impact of the decline in short-term interest rates has outweighed the growth in interest-earning assets and RJBDP balances swept to third-party banks compared with the prior-year periods. We expect the current near-zero interest rate ~~decreases during our second fiscal quarter occurred in March, we expect that these decreases will have a more significant negative impact on our results~~environment to continue 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.2021.

Given the relationship between our interest-sensitive assets and liabilities (primarily held in ~~each of these segments~~our PCG, RJ Bank and Other 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 interest-earning asset and interest-bearing liability balances, interest income and expense and the related ~~yields~~rates.

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

Management’s Discussion 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.Analysis

Quarter ended March 31, ~~2020~~2021 compared with the quarter ended March 31, ~~2019~~2020


	Three months ended March 31,
	2021						2020
$ in millions	Average daily balance		Interest		Annualized average rate		Average daily balance		Interest		Annualized average rate
Interest-earning assets:
Cash and cash equivalents	$	5,284	$	2	0.20	%	$	4,601	$	16	1.40	%
Assets segregated pursuant to regulations	10,087		5		0.18	%	2,820		11		1.64	%
Available-for-sale securities	7,997		21		1.08	%	3,443		19		2.28	%
Brokerage client receivables	2,222		19		3.36	%	2,366		21		3.57	%
Bank loans, net of unearned income and deferred expenses:
Loans held for investment:
C&I loans	7,540		48		2.56	%	8,017		81		3.99	%
CRE loans	2,665		17		2.54	%	2,620		26		3.93	%
REIT loans	1,309		8		2.50	%	1,322		12		3.69	%
Tax-exempt loans	1,227		8		3.35	%	1,212		8		3.36	%
Residential mortgage loans	5,005		34		2.72	%	4,847		38		3.13	%
SBL and other	4,638		26		2.23	%	3,469		31		3.60	%
Loans held for sale	177		1		1.89	%	142		2		3.85	%
Total bank loans, net	22,561		142		2.56	%	21,629		198		3.67	%
All other interest-earning assets	2,201		11		1.87	%	2,487		20		2.96	%
Total interest-earning assets	$	50,352	$	200	1.61	%	$	37,346	$	285	3.06	%
Interest-bearing liabilities:
Bank deposits:
Savings, money market and NOW accounts	$	27,662	$	2	0.02	%	$	22,877	$	6	0.12	%
Certificates of deposit	898		4		1.88	%	1,094		6		2.03	%
Total bank deposits	28,560		6		0.08	%	23,971		12		0.24	%
Brokerage client payables	11,485		1		0.02	%	3,827		3		0.35	%
Other borrowings	862		5		2.18	%	895		5		2.23	%
Senior notes payable	2,045		24		4.74	%	1,556		19		4.71	%
All other interest-bearing liabilities	600		1		0.88	%	911		4		1.82	%
Total interest-bearing liabilities	$	43,552	$	37	0.34	%	$	31,160	$	43	0.56	%
Net interest income			$	163					$	242
Firmwide net interest margin (net yield on interest-earning assets)					1.32	%					2.60	%
RJ Bank net interest margin					1.94	%					3.02	%

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

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.~~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 was $5 million and $9 million during three and six months ended March 31, 2020, respectively, and $6 million and $11 million during three and six months ended March 31, 2019, respectively.

The yield on tax-exempt loans in the preceding ~~tables~~table is presented on a taxable-equivalent basis utilizing the applicable federal statutory rates for each of the ~~years presented.~~three months ended March 31, 2021 and 2020.

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 period’s volume. Changes attributable to both volume and rate have been allocated proportionately.

~~Results~~


	Three months ended March 31,
	2021 compared to 2020
	Increase/(decrease) due to
$ in millions	Volume		Rate		Total
Interest income:
Interest-earning assets:
Cash and cash equivalents	$	2	$	(16)	$	(14)
Assets segregated pursuant to regulations	30		(36)		(6)
Available-for-sale securities	26		(24)		2
Brokerage client receivables	(2)		—		(2)
Bank loans, net of unearned income and deferred expenses:
Loans held for investment:
C&I loans	(5)		(28)		(33)
CRE loans	—		(9)		(9)
REIT loans	—		(4)		(4)
Tax-exempt loans	—		—		—
Residential mortgage loans	1		(5)		(4)
SBL and other	9		(14)		(5)
Loans held for sale	1		(2)		(1)
Total bank loans, net	6		(62)		(56)
All other interest-earning assets	(4)		(5)		(9)
Total interest-earning assets	58		(143)		(85)
Interest expense:
Interest-bearing liabilities:
Bank deposits:
Savings, money market and NOW accounts	2		(6)		(4)
Certificates of deposit	(1)		(1)		(2)
Total bank deposits	1		(7)		(6)
Brokerage client payables	7		(9)		(2)
Other borrowings	—		—		—
Senior notes payable	5		—		5
All other interest-bearing liabilities	(1)		(2)		(3)
Total interest-bearing liabilities	12		(18)		(6)
Change in net interest income	$	46	$	(125)	$	(79)

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

Management’s Discussion and Analysis

Six months ended March 31, 2021 compared with the six months ended March 31, 2020


	Six months ended March 31,
	2021						2020
$ in millions	Average daily balance		Interest		Annualized average rate		Average daily balance		Interest		Annualized average rate
Interest-earning assets:
Cash and cash equivalents	$	5,500	$	6	0.23	%	$	4,227	$	33	1.55	%
Assets segregated pursuant to regulations	7,954		8		0.19	%	2,583		22		1.75	%
Available-for-sale securities	7,735		44		1.14	%	3,265		37		2.29	%
Brokerage client receivables	2,152		37		3.42	%	2,402		48		4.04	%
Bank loans, net of unearned income and deferred expenses:
Loans held for investment:
C&I loans	7,537		99		2.60	%	8,039		167		4.07	%
CRE loans	2,623		34		2.56	%	2,572		53		4.04	%
REIT loans	1,272		16		2.47	%	1,330		25		3.77	%
Tax-exempt loans	1,232		16		3.35	%	1,218		16		3.36	%
Residential mortgage loans	5,003		69		2.75	%	4,743		75		3.16	%
SBL and other	4,460		51		2.26	%	3,403		65		3.78	%
Loans held for sale	159		2		2.36	%	151		3		3.97	%
Total bank loans, net	22,286		287		2.59	%	21,456		404		3.76	%
All other interest-earning assets	2,247		21		1.93	%	2,511		38		2.89	%
Total interest-earning assets	$	47,874	$	403	1.69	%	$	36,444	$	582	3.19	%
Interest-bearing liabilities:
Bank deposits:
Savings, money market and NOW accounts	$	27,144	$	3	0.02	%	$	22,260	$	18	0.16	%
Certificates of deposit	925		9		1.90	%	937		10		2.10	%
Total bank deposits	28,069		12		0.08	%	23,197		28		0.24	%
Brokerage client payables	9,403		2		0.04	%	3,513		6		0.40	%
Other borrowings	864		10		2.21	%	894		10		2.23	%
Senior notes payable	2,045		48		4.74	%	1,553		37		4.71	%
All other interest-bearing liabilities	587		3		1.01	%	1,023		13		2.02	%
Total interest-bearing liabilities	$	40,968	$	75	0.36	%	$	30,180	$	94	0.61	%
Net interest income			$	328					$	488
Firmwide net interest margin (net yield on interest-earning assets)					1.38	%					2.69	%
RJ Bank net interest margin					1.98	%					3.12	%

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.

The yield on tax-exempt loans in the preceding table is presented on a taxable-equivalent basis utilizing the applicable federal statutory rates for each of ~~Operations~~the six months ended March 31, 2021 and 2020.

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

Management’s Discussion and Analysis


	Six months ended March 31,
	2021 compared to 2020
	Increase/(decrease) due to
$ in millions	Volume		Rate		Total
Interest income:
Interest-earning assets:
Cash and cash equivalents	$	9	$	(36)	$	(27)
Assets segregated pursuant to regulations	47		(61)		(14)
Available-for-sale securities	52		(45)		7
Brokerage client receivables	(5)		(6)		(11)
Bank loans, net of unearned income and deferred expenses:
Loans held for investment:
C&I loans	(10)		(58)		(68)
CRE loans	1		(20)		(19)
REIT loans	(1)		(8)		(9)
Tax-exempt loans	—		—		—
Residential mortgage loans	4		(10)		(6)
SBL and other	20		(34)		(14)
Loans held for sale	—		(1)		(1)
Total bank loans, net	14		(131)		(117)
All other interest-earning assets	(6)		(11)		(17)
Total interest-earning assets	111		(290)		(179)
Interest expense:
Interest-bearing liabilities:
Bank deposits:
Savings, money market and NOW accounts	4		(19)		(15)
Certificates of deposit	—		(1)		(1)
Total bank deposits	4		(20)		(16)
Brokerage client payables	13		(17)		(4)
Other borrowings	—		—		—
Senior notes payable	11		—		11
All other interest-bearing liabilities	(7)		(3)		(10)
Total interest-bearing liabilities	21		(40)		(19)
Change in net interest income	$	90	$	(250)	$	(160)

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

Management’s Discussion and Analysis

RESULTS OF OPERATIONS – ~~Private Client Group~~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~~2020 Form 10-K.

Operating results


	Three months ended March 31,						Six months ended March 31,
$ in millions	2021		2020		% change		2021		2020		% change
Revenues:
Asset management and related administrative fees	$	979	$	833	18	%	$	1,864	$	1,615	15	%
Brokerage revenues:
Mutual and other fund products	183		163		12	%	331		307		8	%
Insurance and annuity products	109		99		10	%	207		200		4	%
Equities, ETFs and fixed income products	121		122		(1)	%	228		224		2	%
Total brokerage revenues	413		384		8	%	766		731		5	%
Account and service fees:
Mutual fund and annuity service fees	99		88		13	%	193		178		8	%
RJBDP fees:
Third-party banks	19		51		(63)	%	40		109		(63)	%
RJ Bank	44		48		(8)	%	87		95		(8)	%
Client account and other fees	42		35		20	%	74		64		16	%
Total account and service fees	204		222		(8)	%	394		446		(12)	%
Investment banking	16		11		45	%	22		22		—
Interest income	30		45		(33)	%	60		94		(36)	%
All other	8		7		14	%	13		16		(19)	%
Total revenues	1,650		1,502		10	%	3,119		2,924		7	%
Interest expense	(3)		(7)		(57)	%	(5)		(15)		(67)	%
Net revenues	1,647		1,495		10	%	3,114		2,909		7	%
Non-interest expenses:
Financial advisor compensation and benefits	1,040		915		14	%	1,971		1,772		11	%
Administrative compensation and benefits	260		245		6	%	509		492		3	%
Total compensation, commissions and benefits	1,300		1,160		12	%	2,480		2,264		10	%
Non-compensation expenses:
Communications and information processing	69		62		11	%	131		121		8	%
Occupancy and equipment	45		44		2	%	88		88		—
Business development	15		24		(38)	%	31		51		(39)	%
Professional fees	10		9		11	%	23		17		35	%
All other	16		26		(38)	%	29		45		(36)	%
Total non-compensation expenses	155		165		(6)	%	302		322		(6)	%
Total non-interest expenses	1,455		1,325		10	%	2,782		2,586		8	%
Pre-tax income	$	192	$	170	13	%	$	332	$	323	3	%

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	March 31, 2021			December 31, 2020			September 30, 2020			March 31, 2020			December 31, 2019			September 30, 2019
Assets under administration (“AUA”)	$	734.0		$	855.2		$	798.4		$	760.0		$	690.7		$	755.7		Assets under administration (“AUA”)	$	1,028.1		$	974.2		$	883.3		$	734.0		$	855.2		$	798.4
Assets in fee-based accounts ⁽¹⁾	$	383.5		$	444.2		$	409.1		$	378.4		$	338.8		$	366.3		Assets in fee-based accounts (1)	$	567.6		$	532.7		$	475.3		$	383.5		$	444.2		$	409.1
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	55.2		%	54.7		%	53.8		%	52.2		%	51.9		%	51.2		%

(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~~invests 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 the net addition of financial advisors in the current quarter,~~ PCG assets under administration ~~decreased~~increased during the three months ended March 31, 2021 primarily due to ~~the decline in~~ equity ~~markets~~market appreciation, as ~~a result~~well as net inflows of ~~the COVID-19 pandemic.~~client assets. In addition, PCG assets in fee-based accounts continued to increase as a percentage of overall PCG assets under administration due to clients’ increased 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


	March 31, 2021	December 31, 2020	September 30, 2020	March 31, 2020
Employees	3,375	3,387	3,404	3,376
Independent contractors	4,952	4,846	4,835	4,772
Total advisors	8,327	8,233	8,239	8,148

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 number of financial advisors increased ~~primarily~~compared with the prior quarter and September 30, 2020 due to ~~continued~~recruiting of financial advisors and new trainees that were moved into production roles, partially offset by the impact of advisors who left the firm, including planned retirements, where assets are generally retained at the firm. The growth in the number of financial advisors has been impacted by a smaller training class in the current year, as well as the transfer of advisors who were previously affiliated with the firm as independent contractors or employees to our RIA & Custody Services (“RCS”) division. Advisors in RCS are not included in the financial advisor count, although their assets are still included in client assets under administration. While the recruiting ~~and high levels of retention. The impact of COVID-19 on future~~pipeline remains active across our affiliation options, the recruiting ~~is uncertain; however, we are likely~~environment has become increasingly competitive, particularly in the employee channel, which has caused us to ~~see a slowdown~~increase the value offered to prospects in our recruiting ~~until travel restrictions and other social distancing measures subside.~~packages for financial advisors.

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

Management’s Discussion and Analysis

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


	As of
$ in millions	March 31, 2021		December 31, 2020		September 30, 2020		March 31, 2020
RJBDP
RJ Bank	$	28,174	$	26,697	$	25,599	$	28,711
Third-party banks	25,110		26,142		25,998		20,379
Subtotal RJBDP	53,284		52,839		51,597		49,090
CIP	9,517		8,769		3,999		3,782
Total clients’ domestic cash sweep balances	$	62,801	$	61,608	$	55,596	$	52,872

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 March 31,				Six months ended March 31,
	2021		2020		2021		2020
Average yield on RJBDP - third-party banks	0.30	%	1.33	%	0.31	%	1.48	%

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 the RJ Bank segment, 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 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 in 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~~ PCG segment results are also impacted by changes in the allocation of cash balances between RJBDP and CIP, as ~~a sweep option in June 2019. Balances in those funds were converted~~the net yield to the ~~RJBDP or reinvested by the client.~~

~~The significant increase in clients’~~firm on cash balances in CIP (i.e., the spread between amounts earned on assets segregated for regulatory purposes and the interest paid to clients on CIP balances) is lower than the yield to the firm on RJBDP balances, on average.

Client cash balances remained elevated as of March 31, ~~2020 was~~2021 compared to prior year balances as a result of a number of factors, including the ~~market volatility~~continuing economic uncertainty caused by the COVID-19 pandemic, as well as uncertainty related to the nature and timing of policy changes that may be put forth by the ~~steep declines~~new federal government administration. The average yield on RJBDP - third party banks decreased compared with the prior-year periods due to the significant decline in short-term interest rates. We expect the ~~equity markets during~~average yield on RJBDP balances at third-party banks to remain approximately 0.30% for the ~~second~~remainder of our 2021 fiscal ~~quarter of 2020.~~year; however, this projected yield could decline if demand for deposits from third-party banks does not improve from current levels.

Quarter ended March 31, ~~2020~~2021 compared with the quarter ended March 31, ~~2019~~2020

Net revenues of ~~$1.50~~$1.65 billion increased ~~$224~~$152 million, or ~~18%~~10%, and pre-tax income of ~~$170~~$192 million increased ~~$38~~$22 million, or ~~29%~~13%.

Asset management and related administrative fees increased ~~$195~~$146 million, or 31%, due to higher asset balances in fee-based accounts at the beginning of the quarter. As assets in fee-based accounts are billed primarily on balances at the beginning of the quarter, the 14% decline in fee-based assets during the current quarter will negatively impact asset management fees in our third fiscal quarter.

~~Brokerage revenues increased $46 million, or 14%, primarily due to strong client activity driven by market volatility toward the end of the quarter as a result of the COVID-19 pandemic.~~

Account and service fees decreased $9 million, or 4%, 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 increase in RJBDP fees from RJ Bank, due 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.

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

~~Management’s Discussion and Analysis~~

Net interest income decreased $9 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.~~quarter. As assets in these accounts are billed primarily on balances as of the beginning of the quarter, the 7% increase in fee-based assets as of March 31, 2021 compared to December 31, 2020, should positively impact asset management fees in our fiscal third quarter of 2021.

Brokerage revenues increased $29 million, or 4%8%, 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~~higher trailing revenues from mutual and other fund ~~trails, which were impacted by the conversion of client assets into mutual fund share classes which pay lower rates,~~products and ~~the continued shift to fee-based accounts.~~annuity products, as well as higher transactional revenues.

Account and service fees decreased ~~$10~~$18 million, or 2%8%, ~~driven by~~primarily due to 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,~~as well as incremental client account and ~~higher RJBDP~~other fees resulting from ~~RJ Bank due to an increase in~~our acquisition of NWPS at the ~~number~~end of ~~accounts at RJ Bank.~~our fiscal first quarter of 2021.

Net interest income decreased ~~$14~~$11 million, or ~~15%~~29%, driven by a ~~decrease~~decline in interest income ~~from assets segregated pursuant~~due to ~~regulations, due a decline in~~lower short-term interest rates applicable to both cash and segregated asset balances, which more than offset the impact of significantly higher segregated asset balances. As reflected in the table above, our CIP balances increased significantly compared with the prior-year quarter resulting in the increase in segregated assets, and a ~~decrease in interest income from client margin loans, due~~significant portion of the increase was related to ~~the decline in~~ lower-yielding segregated

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

Management’s Discussion and Analysis

short-term ~~interest rates~~U.S. Treasury securities and, ~~a decline in average balances.~~where capacity allowed us, cash deposit accounts at various financial institutions to meet our reserve requirements. Partially offsetting the impact of a decrease in interest income, interest expense also decreased despite the significant increase in client cash balances in our CIP, due to the impact of lower deposit rates paid on ~~client cash balances in CIP.~~these balances.

Compensation-related expenses increased ~~$248~~$140 million, or 12%, primarily due to higher compensable net revenues. Compensation-related expenses increased at a higher rate than net revenues as ~~well as increased staffing levels in the current year to support our continued growth~~RJBDP fees from third-party banks and ~~regulatory compliance requirements.~~net interest income, which have no associated direct compensation expense, significantly declined.

Non-compensation expenses ~~increased $7~~decreased $10 million, or 2%6%, primarily due to lower provisions for legal matters, as well as lower travel and event-related expenses as a result of the COVID-19 pandemic. Partially offsetting these decreases was an increase in technology-related expenses reflecting ongoing upgrades to our technology platforms.

Six months ended March 31, 2021 compared with the six months ended March 31, 2020

Net revenues of $3.11 billion increased ~~costs~~$205 million, or 7%, and pre-tax income of $332 million increased $9 million, or 3%.

Asset management and related administrative fees increased $249 million, or 15%, primarily due to ~~support~~higher assets in fee-based accounts at the beginning of each of the current-year quarterly billing periods compared with the prior-year quarterly billing periods.

Brokerage revenues increased $35 million, or 5%, primarily due to higher trailing revenues from mutual and other fund products and annuity products, as well as higher transactional revenues due to increased client activity.

Account and service fees decreased $52 million, or 12%, primarily due to 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, as well as incremental client account and other fees resulting from our ~~growth.~~acquisition of NWPS at the end of our fiscal first quarter of 2021.

Net interest income decreased $24 million, or 30%, driven by a decline in interest income due to lower short-term interest rates applicable to both cash and segregated asset balances, which more than offset the impact of significantly higher segregated asset balances. As reflected in the table above, our CIP balances increased significantly compared with the prior-year period resulting in the increase in segregated assets, and a significant portion of the increase was related to segregated short-term U.S. Treasury securities and, where capacity allowed us, cash deposit accounts at various financial institutions. Partially offsetting the impact of a decrease in interest income, interest expense also decreased despite the significant increase in client cash balances in our CIP, due to the impact of lower deposit rates paid on these balances.

Compensation-related expenses increased $216 million, or 10%, primarily due to higher compensable net revenues.

Non-compensation expenses decreased $20 million, or 6%, primarily due to decreases in travel and event-related expenses as a result of the COVID-19 pandemic and lower provisions for legal matters, partially offset by higher technology-related expenses, reflecting ongoing upgrades to our technology platforms.

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

Management’s Discussion and Analysis

~~Results of Operations~~

RESULTS OF OPERATIONS – ~~Capital Markets~~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~~2020 Form 10-K.

Operating results


	Three months ended March 31,						Six months ended March 31,
$ in millions	2021		2020		% change		2021		2020		% change
Revenues:
Brokerage revenues:
Fixed income	$	142	$	90	58	%	$	273	$	171	60	%
Equity	34		40		(15)	%	76		74		3	%
Total brokerage revenues	176		130		35	%	349		245		42	%
Investment banking:
Merger & acquisition and advisory	122		72		69	%	271		132		105	%
Equity underwriting	67		43		56	%	127		82		55	%
Debt underwriting	37		22		68	%	83		53		57	%
Total investment banking	226		137		65	%	481		267		80	%
Interest income	5		10		(50)	%	8		18		(56)	%
Tax credit fund revenues	24		12		100	%	40		30		33	%
All other	4		7		(43)	%	11		10		10	%
Total revenues	435		296		47	%	889		570		56	%
Interest expense	(2)		(6)		(67)	%	(4)		(12)		(67)	%
Net revenues	433		290		49	%	885		558		59	%
Non-interest expenses:
Compensation, commissions and benefits	259		184		41	%	511		350		46	%
Non-compensation expenses:
Communications and information processing	20		20		—		39		39		—
Occupancy and equipment	9		9		—		18		18		—
Business development	6		15		(60)	%	15		31		(52)	%
Professional fees	13		13		—		26		23		13	%

All other	21		21		—		42		40		5	%
Total non-compensation expenses	69		78		(12)	%	140		151		(7)	%
Total non-interest expenses	328		262		25	%	651		501		30	%
Pre-tax income	$	105	$	28	275	%	$	234	$	57	311	%

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, ~~2020~~2021 compared with the quarter ended March 31, ~~2019~~2020

Net revenues of ~~$290~~$433 million increased ~~$13~~$143 million, or 5%49%, and pre-tax income of ~~$28~~$105 million ~~decreased $13~~increased $77 million, or ~~32%~~275%.

Brokerage revenues increased ~~$27~~$46 million, or 26%, due to an increase in both fixed income and 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 trading inventory, both due to the COVID-19 pandemic. We reduced our trading inventory toward the end of the quarter to reduce our risk.

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

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

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

~~Management’s Discussion and Analysis~~

Non-compensation expenses increased $10 million, or 15%, reflecting increases in professional fees and business development costs, primarily related to the increase in underwriting 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~~a significant increase in fixed income brokerage revenues. The increase in fixed income brokerage revenues was primarily due to ~~an increase in~~continued high levels of client activity during the ~~current-year period, largely~~current quarter, particularly with depository clients. Based on the current level of interest rates and economic conditions, we expect fixed income brokerage revenues to remain strong in the near-term.

Investment banking revenues increased $89 million, or 65%, due to a ~~result~~significant increase in merger & acquisition revenues, as well as continued strength in equity and debt underwriting, which also increased significantly compared with the prior-year quarter. The increase in merger & acquisition revenues reflected a higher number of transactions, as well as larger individual transactions. The increase in equity underwriting revenues was primarily due to higher levels of market ~~volatility, particularly toward~~activity and the increase in debt underwriting primarily reflected higher revenues from asset-backed and corporate underwritings. In addition to the strong results during the quarter, our investment banking pipelines are also strong and reflect the investments we have made in the business over the past several years, including the acquisition of Financo which closed at the end of our ~~second~~ fiscal ~~quarter. Equity brokerage revenues were challenged earlier in~~second

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

Management’s Discussion and Analysis

quarter of 2021. However, future activity may be negatively impacted by economic uncertainty or factors resulting from the ~~year, but~~ongoing COVID-19 pandemic.

Compensation-related expenses increased ~~during our second fiscal quarter~~$75 million, or 41%, primarily due to ~~strong client activity driven by market volatility~~the increase in compensable net revenues. Non-compensation expenses decreased $9 million, or 12%, primarily due to lower travel and event-related expenses as a result of the COVID-19 pandemic.

Six months ended March 31, 2021 compared with the six months ended March 31, 2020

Net revenues of $885 million increased $327 million, or 59%, and pre-tax income of $234 million increased $177 million, or 311%.

Brokerage revenues increased $104 million, or 42%, due to a significant increase in fixed income brokerage revenues due to the aforementioned increase in client activity levels during the current-year period, particularly with depository clients.

Investment banking revenues ~~decreased $18~~increased $214 million, or 6%80%, due to a significant ~~decline~~increase in merger & acquisition ~~activity compared with a strong first half of fiscal 2019. Offsetting the decrease was~~revenues, as well as an increase in ~~both equity~~ underwriting ~~and debt underwriting net~~revenues. The significant increase in merger & acquisition revenues ~~with~~reflected an increase in the number of ~~deals,~~transactions, as well as larger individual transactions. Equity underwriting revenues also increased significantly, primarily due to an increase in market activity. An increase in debt underwriting primarily reflected higher revenues from asset-backed and corporate underwritings.

Compensation-related expenses increased ~~$24~~$161 million, or 7%46%, primarily due to the increase in compensable net revenues.

Non-compensation expenses ~~were unchanged compared with~~decreased $11 million, or 7%, primarily due to lower travel and event-related expenses as a result of 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.COVID-19 pandemic.

~~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~~2020 Form 10-K.

Operating results


	Three months ended March 31,						Six months ended March 31,
$ in millions	2021		2020		% change		2021		2020		% change
Revenues:
Asset management and related administrative fees:
Managed programs	$	137	$	124	10	%	$	266	$	249	7	%
Administration and other	64		53		21	%	123		104		18	%
Total asset management and related administrative fees	201		177		14	%	389		353		10	%
Account and service fees	5		4		25	%	9		9		—
All other	3		3		—		6		6		—
Net revenues	209		184		14	%	404		368		10	%
Non-interest expenses:
Compensation, commissions and benefits	50		45		11	%	95		90		6	%
Non-compensation expenses:
Communications and information processing	12		12		—		23		23		—
Investment sub-advisory fees	30		26		15	%	58		51		14	%
All other	30		28		7	%	58		58		—
Total non-compensation expenses	72		66		9	%	139		132		5	%
Total non-interest expenses	122		111		10	%	234		222		5	%
Pre-tax income	$	87	$	73	19	%	$	170	$	146	16	%

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~~as well as 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 for our managed programs are generally collected quarterly. Approximately 65% of these fees are based on balances as of the beginning of the quarter, approximately 10% 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 billions	March 31, 2021		December 31, 2020		September 30, 2020		March 31, 2020		December 31, 2019		September 30, 2019
AMS (1)	$	121.2	$	113.9	$	102.2	$	84.0	$	98.7	$	91.8
Carillon Tower Advisers	66.6		64.9		59.5		51.7		60.6		58.5
Subtotal financial assets under management	187.8		178.8		161.7		135.7		159.3		150.3
Less: Assets managed for affiliated entities	(9.6)		(9.2)		(8.6)		(7.5)		(7.6)		(7.2)
Total financial assets under management	$	178.2	$	169.6	$	153.1	$	128.2	$	151.7	$	143.1

$ 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)~~	(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~~“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 ~~for affiliated entities):~~

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~~

programs overseen by the Asset Management segment. 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.

Activity (including activity in assets managed for affiliated entities)


	Three months ended March 31,				Six months ended March 31,
$ in billions	2021		2020		2021		2020
Financial assets under management at beginning of period	$	178.8	$	159.3	$	161.7	$	150.3
Carillon Tower Advisers - net inflows/(outflows)	1.4		(2.0)		1.1		(2.4)
AMS - net inflows	3.6		1.2		5.3		3.3
Net market appreciation/(depreciation) in asset values	4.0		(22.8)		19.7		(15.5)
Financial assets under management at end of period	$	187.8	$	135.7	$	187.8	$	135.7

Carillon Tower Advisers

Assets managed by Carillon Tower Advisers include assets managed by its subsidiaries and affiliates: Eagle Asset Management, Scout Investments, Reams Asset Management (a division of Scout Investments), ClariVest Asset Management and Cougar Global ~~Investments and the Scout Group.~~Investments. 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.~~period presented.

$ 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


$ in billions	March 31, 2021		Average fee rate for the three months ended March 31, 2021
Equity	$	30.4	0.52	%
Fixed income	30.5		0.18	%
Balanced	5.7		0.35	%
Total financial assets under management	$	66.6	0.35	%

Non-discretionary asset-based programs

$ 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~~following 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~~vast majority of these assets are also included in ~~assets over~~our PCG segment fee-based AUA (as disclosed in “Assets in fee-based accounts” in the prior-year level was primarily due to clients moving to fee-based accounts from transaction-based accounts and successful financial advisor recruiting. The decrease in assets during our second fiscal quarter was due to the decline in equity markets toward the end“Selected key metrics - PCG client asset balances” section of our ~~second fiscal quarter due to the COVID-19 pandemic. As administrative~~“Management’s Discussion and Analysis - Results of Operations - Private Client Group”). Administrative fees associated with these programs are predominantly based on balances at the beginning of the ~~quarter, the 14% decline in assets during the quarter will negatively impact our third fiscal quarter revenues.~~quarter.


$ in billions	March 31, 2021		December 31, 2020		September 30, 2020		March 31, 2020		December 31, 2019		September 30, 2019
Total assets	$	334.2	$	313.5	$	280.6	$	217.3	$	251.3	$	229.7

RJ Trust

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


$ in billions	March 31, 2021		December 31, 2020		September 30, 2020		March 31, 2020		December 31, 2019		September 30, 2019
Total assets	$	7.8	$	7.6	$	7.1	$	6.4	$	7.2	$	6.6

Quarter ended March 31, ~~2020~~2021 compared with the quarter ended March 31, ~~2019~~2020

Net revenues of ~~$184~~$209 million increased ~~$22~~$25 million, or 14%, and pre-tax income of ~~$73~~$87 million increased ~~$18~~$14 million, or ~~33%~~19%.

Asset management and related administrative ~~fee revenues~~fees increased ~~$28~~$24 million, or ~~19%~~14%, driven by higher ~~average financial assets under management~~AUM and higher ~~beginning assets in non-discretionary asset-based programs. Although financial assets under management and~~ assets in non-discretionary asset-based programs, atprimarily driven by equity market appreciation and net inflows into fee-based accounts in PCG. Carillon Tower Advisers generated net inflows during the ~~end~~current-year quarter, despite the structural headwinds for active asset managers resulting from the industry shift from actively managed investment strategies to passive investment strategies.

Compensation expenses increased $5 million, or 11%, and included the impact of higher net revenues. Non-compensation expenses increased $6 million, or 9%, largely due to an increase in investment sub-advisory fees resulting from an increase in AUM in sub-advised programs.

Six months ended March 31, 2021 compared with the ~~quarter were lower than the end~~six months ended March 31, 2020

Net revenues of ~~the prior-year quarter, revenues~~$404 million increased ~~as the majority~~$36 million, or 10%, and pre-tax income of $170 million increased $24 million, or 16%.

Asset management and related administrative fees increased $36 million, or 10%, driven by higher assets in ~~these~~non-discretionary asset-based programs ~~are billed based on balances as of the beginning of the quarter. The decline in these assets as of March 31, 2020,~~and higher AUM, primarily due to equity market appreciation and net inflows into fee-based accounts in PCG.

Compensation expenses increased $5 million, or 6%, and included the ~~negative market~~ impact of ~~the COVID-19 pandemic toward the end of the quarter, will negatively affect our third fiscal quarter results.~~

higher net revenues. Non-compensation expenses increased $4$7 million, or 6%5%, due to an increase in investment sub-advisory fees resulting from an increase in ~~assets under management~~AUM 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~~2020 Form 10-K.

Operating results


	Three months ended March 31,						Six months ended March 31,
$ in millions	2021		2020		% change		2021		2020		% change
Revenues:
Interest income	$	165	$	223	(26)	%	$	333	$	454	(27)	%
Interest expense	(10)		(18)		(44)	%	(21)		(39)		(46)	%
Net interest income	155		205		(24)	%	312		415		(25)	%
All other	5		5		—		15		11		36	%
Net revenues	160		210		(24)	%	327		426		(23)	%
Non-interest expenses:
Compensation and benefits	13		13		—		25		25		—
Non-compensation expenses:
Bank loan provision/(benefit) for credit losses	(32)		109		NM		(18)		107		NM
RJBDP fees to PCG	44		48		(8)	%	87		95		(8)	%
All other	24		26		(8)	%	51		50		2	%
Total non-compensation expenses	36		183		(80)	%	120		252		(52)	%
Total non-interest expenses	49		196		(75)	%	145		277		(48)	%
Pre-tax income	$	111	$	14	693	%	$	182	$	149	22	%

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, ~~2020~~2021 compared with the quarter ended March 31, ~~2019~~2020

Net revenues of ~~$210~~$160 million decreased $2$50 million, or 1%24%, and pre-tax income of ~~$14~~$111 million ~~decreased $122~~increased $97 million, or ~~90%, primarily due to a higher bank loan loss provision.~~ 693%.

Net interest income ~~was flat~~decreased $50 million, or 24%, as ~~the impacts of higher interest-earning banking assets offset~~ the negative impact from lower short-term interest ~~rates.~~rates more than offset the impact of higher average interest-earning assets. The increase in average interest-earning ~~banking~~ assets was primarily driven by significant growth in ~~average~~the available-for-sale securities portfolio and securities-based loans ~~of $1.42 billion, average cash balances of $661 million, and average available-for-sale portfolio of $567 million.~~to PCG clients. The net interest margin decreased to 1.94% from 3.02% ~~from 3.35%~~for the prior-year quarter, primarily due to the significant decline in short-term interest ~~rates. As the most recent rate cuts implemented by the Federal Reserve did not occur until late in our second fiscal quarter, we expect this decline to~~rates, as well as a higher concentration of agency-backed available-for-sale securities, which have a ~~more significant impact~~lower yield than loans, on ~~our net interest income and net interest margin in the third fiscal quarter. In addition, most of RJ Bank’s assets are priced based on LIBOR.~~average. Based on current ~~LIBOR~~ rates, as well as the elevated prepayment speeds of higher-yielding securities and mortgages, we expect our net interest margin to further decline to approximately ~~2.5% over~~1.9% throughout the ~~next two quarters.~~remainder of our current fiscal year.

~~The~~We had a $32 million bank loan ~~loss provision~~benefit for credit losses in the current quarter, which was calculated under the CECL model, compared with a $109 million ~~compared to $5 million~~provision in the prior-year ~~quarter.~~quarter, which was calculated under the incurred loss model. The current quarter benefit reflected changes in macroeconomic inputs to our CECL model during the quarter, including an improved outlook for the commercial real estate and residential mortgage bank loan portfolios, partially offset by the impact of weakened equity market forecasts on the C&I and REIT loan portfolios and an increase in ~~the~~criticized loans. The provision for credit losses in the ~~current-year~~prior-year quarter ~~was in response to~~reflected the rapid ~~and widespread~~ economic deterioration caused by ~~COVID-19. Continued deterioration of macroeconomic conditions may require us to increase our allowance for loan losses in~~ the ~~future or to experience loan losses in excess of current reserves.~~COVID-19 pandemic.

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

Non-compensation expenses (excluding the provision for loan losses) increased $15 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 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 %

~~Fee income on bank loans included in interest income for the three months ended March 31, 2020 and 2019 was $5 million and $6 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, 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 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 months ended March 31, ~~2020~~2021 compared with the six months ended March 31, ~~2019~~2020

Net revenues of ~~$426~~$327 million ~~increased $11~~decreased $99 million, or 3%23%, and pre-tax income of ~~$149~~$182 million ~~decreased $97~~increased $33 million, or ~~39%~~22%.

Net interest income ~~increased $13~~decreased $103 million, or 3%25%, as ~~higher interest-earning banking assets offset~~ the negative impact from lower short-term interest ~~rates.~~rates more than offset the impact of higher average interest-earning assets. The increase in average interest-earning ~~banking~~ assets was primarily driven by significant growth in ~~average loans of $1.38 billion and a $469 million increase in our average~~the available-for-sale securities ~~portfolio.~~portfolio and securities-based loans to PCG clients. The net interest margin decreased to 1.98% from 3.12% ~~from 3.30%.~~

~~The loan loss provision was $107 million, compared to $21 million in~~for the prior-year ~~period. The increase in the provision in the current-year~~ period, ~~was~~ primarily ~~attributable~~due to the ~~economic impacts~~significant decline in short-term interest rates, as well as a higher concentration of ~~COVID-19 during the second fiscal quarter.~~agency-backed available-for-sale securities, which have a lower yield than loans, on average.

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

Non-compensation expenses (excluding the provision for loan losses) increased $20 million, including a $12 million, or 14%, 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,~~We had a bank loan benefit for credit losses of $18 million, which was calculated under the ~~related yields and rates, and interest spreads and margins for RJ Bank.~~

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 %

~~Nonaccrual loans are included~~CECL model, compared with a $107 million provision in the ~~average loan balances in~~prior-year period, which was calculated under the ~~preceding table. Any payments received for corporate nonaccrual loans are applied entirely~~incurred loss model. The current period benefit was largely attributable 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 six months ended March 31, 2020 and 2019 was $9 million and $11 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 months ended March 31, 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~~inputs to our CECL model since our October 1, 2020 adoption date, reflecting improvements in certain forecasted macroeconomic inputs, including unemployment and ~~interest-bearing liabilities,~~gross domestic product, partially offset by forecasted declines in commercial real estate values since our CECL adoption date, as well as ~~changes~~an increase in ~~average interest rates.~~criticized loans. The ~~following table shows~~provision for credit losses in the ~~effect that these factors had on~~prior-year period reflected 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~~rapid economic deterioration caused by the ~~previous period’s average yield/cost. Similarly,~~COVID-19 pandemic.

RJBDP fees paid to PCG decreased compared with the ~~effect~~prior-year period due to a decrease in the number of ~~rate changes is calculated~~accounts swept to RJ Bank as part of the RJBDP. The fees paid by ~~multiplying the change~~RJ Bank to PCG are eliminated in ~~average yield/cost by the previous year’s volume. Changes attributable to both volume and rate have been allocated proportionately.~~consolidation.

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~~2020 Form 10-K.

Operating results


	Three months ended March 31,						Six months ended March 31,
$ in millions	2021		2020		% change		2021		2020		% change
Revenues:
Interest income	$	3	$	12	(75)	%	$	6	$	24	(75)	%
Gains/(losses) on private equity investments	8		(39)		NM		32		(41)		NM
All other	2		—		NM		3		2		50	%
Total revenues	13		(27)		NM		41		(15)		NM
Interest expense	(25)		(17)		47	%	(49)		(37)		32	%
Net revenues	(12)		(44)		73	%	(8)		(52)		85	%
Non-interest expenses:
Compensation and all other	36		2		1,700	%	62		25		148	%
Acquisition-related expenses	—		—		—		2		—		NM
Total non-interest expenses	36		2		1,700	%	64		25		156	%
Pre-tax loss	$	(48)	$	(46)	(4)	%	$	(72)	$	(77)	6	%

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, ~~2020~~2021 compared with the quarter ended March 31, ~~2019~~2020

The pre-tax loss of ~~$46~~$48 million was ~~$29~~$2 million larger than the loss ~~generated~~ in the prior-year quarter.

Net revenues ~~for~~increased $32 million, as the current quarter included $8 million of private equity valuation gains, compared with $39 million of private equity valuation losses ~~compared with gains of $2 million~~ in the prior-year ~~quarter. During the current~~ quarter, of which $22 million ~~of the losses on private equity~~ were attributable to noncontrolling interests ~~which~~and were ~~reflected as an~~ offset within other expenses. ~~These~~The current quarter valuation ~~losses were~~gains primarily reflected the ~~result of the negative~~ impact of ~~the COVID-19 pandemic~~continued improvement in market conditions on certain of our ~~investments. Although net~~fund investments, while the prior-year losses reflected the impact of challenging market conditions at the onset of the COVID-19 pandemic. Offsetting this increase, interest ~~was flat~~income earned on corporate cash balances decreased compared with the prior-year quarter ~~we expect the impact of the decline in~~due to lower short-term interest rates, ~~implemented toward the end~~and interest expense increased as a result of ~~the quarter, and~~ 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~~increased $34 million, ~~or 88%,~~ primarily due to the aforementioned $22 million offset of private equity valuation losses ~~related~~attributable to noncontrolling interests in ~~other expenses. Increases~~the prior-year quarter and an increase in ~~compensation-related expenses and advertising expenses partially offset the decrease in other expenses.~~compensation expense.

Six months ended March 31, ~~2020~~2021 compared with the six months ended March 31, ~~2019~~2020

The pre-tax loss of ~~$77~~$72 million was ~~$42~~$5 million ~~larger~~less than the loss ~~generated~~ in the prior-year period.

Net revenues ~~decreased $54 million from income of $2 million in the prior-year period to a loss of $52~~increased $44 million, primarily due to private equity valuation gains in the current period, compared with losses in the prior-year period. The current period included $32 million of private equity valuation gains, of which $10 million were attributable to noncontrolling interests, which are offset within other expenses. These valuation gains were primarily the result of continued improvement in market conditions on certain of our investments. The prior-year period included $41 million of private equity valuation losses, ~~compared with gains~~ of ~~$6 million in the prior-year period. In the current-year period,~~which $23 million ~~of the losses on private equity investments~~ were attributable to noncontrolling interests ~~which~~and were ~~reflected as an~~ offset within other

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

Management’s Discussion and Analysis

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 compared with the prior-year period 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 issuance of $500 million of senior notes in March 2020.

Non-interest expenses ~~decreased $12~~increased $39 million, or ~~32%~~156%, primarily due to the aforementioned ~~$23~~$10 million ~~offset of private equity valuation losses~~in gains attributable to noncontrolling ~~interests. Increases~~interests, compared with $23 million in ~~compensation-related~~losses in the prior-year period. The $2 million of acquisition-related expenses in the current-year period arose from our acquisitions of NWPS and ~~advertising expenses partially offset the decrease in other expenses.~~Financo during fiscal 2021.

~~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 March 31,		Six months ended March 31,
	2021	2020	2021	2020
Return on assets	2.6%	1.5%	2.5%	2.0%
Return on equity	19.0%	9.9%	18.1%	13.0%
Average equity to average assets	13.6%	15.2%	14.0%	15.7%
Dividend payout ratio	15.5%	30.8%	16.5%	23.9%

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.

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.

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”~~“Net interest analysis” and “Risk management - Credit risk” sections of ~~Management’s Discussion and Analysis of Financial Condition and Results of Operations~~this MD&A and to the Notes to Condensed Consolidated Financial Statements of this Form 10-Q for the other required disclosures.

~~Liquidity and capital resources~~

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~~collateralized financing arrangements or additional capital raising activities under our “universal” shelf registration statement.

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

Management’s Discussion and Analysis

Cash and cash equivalents increased ~~$6.69 billion to $10.65 billion~~$461 million during the six months ended March 31, ~~2020, primarily due~~2021 to ~~$7.95 billion of~~$5.85 billion. During the six months ended March 31, 2021, cash provided by ~~financing activities, partially~~our operations, including significant net income, was offset by ~~investing activities, which~~cash used ~~$2.09 billion. Cash provided by financing activities mainly related~~ to ~~an increase~~fund dividend payments and share repurchases, and investments in ~~bank deposits, as~~future growth with our acquisitions of NWPS and Financo. We also had significant increases in client cash balances, which increased ~~significantly due~~both our brokerage client payables and our bank deposits. However, this cash was largely used to increase our assets segregated pursuant to regulations, primarily through the ~~impact~~purchase of ~~COVID-19,~~U.S. Treasuries, as part of our brokerage activities, and ~~proceeds from our senior notes issuance during the current period, partially offset by our open-market share repurchases and dividends on our common stock. Investing activities primarily related~~ to an increase ~~in bank loans and growth of~~ our available-for-sale securities and our bank loan portfolio ~~during the current period.~~as part of our banking activities.

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~~Approximately $1.7 billion of our total March 31, ~~2020~~2021 cash and cash equivalents included cash ~~on hand~~held directly at the parent, ~~as well as~~or parent cash loaned to RJ&A. ~~The following table presents our holdings of cash and cash equivalents.~~

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

2021, RJF had loaned ~~$1.50~~$1.24 billion to RJ&A ~~as of March 31, 2020~~ (such amount is included in the RJ&A cash balance in the ~~preceding~~following 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~~The following table presents our holdings of cash ~~into~~and cash equivalents.


$ in millions	March 31, 2021
RJF	$	480
RJ&A	2,560
RJ Bank, N.A.	1,491
RJ Ltd.	826
RJFS	131
Carillon Tower Advisers	64
Other subsidiaries	299
Total cash and cash equivalents	$	5,851

RJF maintained depository accounts at RJ~~&A’s segregated reserve accounts~~ Bank, N.A. with a balance of $185 million as ~~a result~~ of ~~our~~ March 31, ~~2020 reserve calculation.~~2021. The portion of this total that was available on demand without restrictions, which amounted to $108 million as of March 31, 2021, is reflected in the RJF total (and is excluded from the RJ Bank, N.A. cash balance in the preceding table).

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

~~Management’s Discussion~~A large portion of the RJ Ltd. cash and ~~Analysis~~cash equivalents balance as of March 31, 2021 was held to meet regulatory requirements and was not available for use by the parent.

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.

Liquidity available from subsidiaries

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

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,~~the Financial Industry Regulatory Authority (“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, ~~2020,~~2021, 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”)~~IRS regulations in order to accept new ~~IRA~~IRAs and ~~plan accounts~~qualified plans and retain the accounts for which it serves as nonbank custodian. ~~To maintain adequate net worth under these regulations,~~With growth in the value of client assets in such accounts, the capital of RJ&A may ~~have~~need to grow to continue to satisfy this requirement. As a

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

Management’s Discussion and Analysis

result, RJ&A may limit dividends it would otherwise remit 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, N.A. 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~~Bank, N.A.’s current calendar year and the previous two calendar years’ retained net income, and RJ Bank, N.A. maintains its targeted regulatory capital ratios. ~~At March 31, 2020,~~Dividends from RJ Bank, ~~had $253 million of~~N.A. may be limited to the extent that capital ~~in excess of the amount it would need at that date~~is needed to ~~maintain~~support its ~~targeted regulatory capital ratios, and could pay a dividend of such amount without requiring prior approval of its regulator.~~balance sheet growth.

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 agreement (i.e., securities sold under agreements ~~or,~~to repurchase) and, in the case of the ~~Credit Facility,~~$500 million revolving credit facility agreement (the “Credit Facility”), an unsecured line of credit. The required market value of the collateral associated with the ~~committed secured facilities~~tri-party repurchase agreement 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.


	March 31, 2021
$ in millions	RJ&A		RJF		Total		Total number of arrangements
Financing arrangement:
Committed secured	$	100	$	—	$	100	1
Committed unsecured	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.

Our committed unsecured financing arrangement in the preceding table represents our Credit Facility, which 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 14 of the Notes to Consolidated Financial Statements of our 2020 Form 10-K. In April 2021, we amended our Credit Facility, maintaining the $500 million maximum borrowing amount, but extending the term through April 2026 and incorporating a lower cost of borrowing under the facility and certain favorable covenant modifications.

~~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.~~borrowed and are generally collateralized by non-customer, RJ&A-owned securities or by securities that we have received as collateral under reverse repurchase agreements. As of March 31, ~~2020,~~2021, 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.

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

Management’s Discussion and Analysis

The following table presents our borrowings on uncommitted financing arrangements, all of which were in the form of repurchase agreements in RJ~~&A.~~&A and were included in “Collateralized financings” on our Condensed Consolidated Statements of Financial Condition.


$ in millions	March 31, 2021
Outstanding borrowing amount:
Uncommitted secured	$	222
Uncommitted unsecured	—
Total outstanding borrowing amount	$	222

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

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
March 31, 2021	$	226	$	260	$	222	$	242	$	280	$	224
December 31, 2020	$	211	$	236	$	233	$	204	$	259	$	162
September 30, 2020	$	140	$	165	$	165	$	199	$	260	$	207
June 30, 2020	$	222	$	278	$	228	$	168	$	193	$	193
March 31, 2020	$	218	$	238	$	215	$	283	$	388	$	130

Other borrowings and collateralized financings

RJ Bank had ~~$875~~$850 million in FHLB borrowings outstanding at March 31, ~~2020,~~2021, 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 1214 of the Notes to ~~Condensed~~ Consolidated Financial Statements of ~~this~~our 2020 Form ~~10-Q~~10-K for additional information regarding these borrowings). RJ Bank had an additional ~~$2.82~~$3.13 billion in immediate credit available from the FHLB as of March 31, ~~2020~~2021 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~~Federal Reserve’s discount window program; however, we do not view borrowings from the ~~FRB~~Federal Reserve 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,~~Federal Reserve, 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~~balance of $56 million as of March 31, 2021 related to the securities loaned included in ~~“Securities loaned”~~“Collateralized financings” on our Condensed Consolidated Statements of Financial Condition of this Form ~~10-Q, in the amount of $28 million as of March 31, 2020.~~10-Q. See Note 67 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 million as of March 31, 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.financings.

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, ~~2020,~~2021, in addition to the financing arrangements previously described, we had ~~$16~~$11 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.

Senior notes payable

At March 31, ~~2020,~~2021, we had aggregate outstanding senior notes payable of ~~$2.04~~$2.05 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 second fiscal quarter of 2020,~~ and $800 million par 4.95% senior notes due 2046.

In April 2021, we sold in a registered underwritten public offering $750 million in aggregate principal amount of 3.75% senior notes due April 2051. We utilized the proceeds from the offering and cash on hand to early-redeem our existing $250 million

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

Management’s Discussion and Analysis

par 5.625% senior notes due 2024 and our $500 million par 3.625% senior notes due 2026, which were outstanding as of March 31, 2021. See Note 1314 of the Notes to Condensed Consolidated Financial Statements of this Form 10-Q for additional information.

Credit ratings

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

In April 2021, Fitch Ratings, Inc. assigned its first issuer and senior long-term debt rating for Raymond James Financial, Inc.

Rating Agency

Rating

Outlook

Fitch Ratings, Inc.

A-

Stable

Moody’s Investors Services

Baa1

Stable

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~~Deterioration 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).~~positions. 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~~investors’ 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~~$789 million as of March 31, ~~2020,~~2021, comprised of ~~$298~~$484 million related to employee-directed plans and ~~$214~~$305 million related to company-directed plans, and we were able to borrow up to 90%, or ~~$461~~$710 million, of the March 31, ~~2020~~2021 total without restriction. To effect any such borrowing, the underlying investments would be converted to money market investments, therefore requiring us to take market risk related to the employee-directed plans. There were no borrowings outstanding against any of these policies as of March 31, ~~2020.~~2021.

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~~assets segregated pursuant to regulations (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~~are 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~~$56.07 billion as of March 31, ~~2020~~2021 were ~~$10.98~~$8.58 billion, or ~~28%~~18%, greater than our total assets as of September 30, ~~2019.~~2020. The increase in assets was primarily due to a ~~$8.72~~$5.43 billion increase in ~~cash and cash and cash equivalents, including cash and cash equivalents~~assets segregated pursuant to regulations, primarily due to a significant increase in client cash ~~balances~~balances. Bank loans, net increased by $1.68 billion, primarily due to ~~the market volatility as a result of the COVID-19 pandemic, as well as proceeds from our $500 million senior notes issuance~~an increase in ~~March 2020.~~

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

Management’s Discussion and Analysis

SBL and corporate loans. In addition, available-for-sale securities increased ~~$1.17 billion, bank loans,~~$508 million and cash and cash equivalents increased $461 million. Goodwill and identifiable intangible assets, net increased ~~$897~~$268 million ~~and other assets increased $321 million, primarily~~ due to ~~ROU assets recorded as a result~~the acquisitions of NWPS and Financo during the adoption of new guidance related to the accounting for leases. Offsetting these increases, securities purchased under agreements to resell and trading instruments decreased $213 million and $263 million, respectively.six months ended March 31, 2021.

As of March 31, ~~2020,~~2021, our total liabilities of ~~$42.98~~$48.43 billion were ~~$10.79~~$8.12 billion, or ~~34%~~20%, greater than our total liabilities as of September 30, ~~2019.~~2020. The increase in total liabilities was primarily related to the significant increase in client cash balances ~~and was comprised~~as of March 31, 2021, including a ~~$7.74 billion increase in bank deposits, reflecting higher RJBDP balances held at RJ Bank and certificates of deposit issuances during the period, and a $2.72~~$5.68 billion increase in brokerage client payables, primarily due to an increase in client cash held in our CIP, ~~as of March 31, 2020. In addition, other payables increased $516 million, primarily due to operating lease liabilities recorded as~~and a result of the adoption of new guidance related to the accounting for leases, and 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$2.45 billion increase 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.~~bank deposits, reflecting higher RJBDP balances held at RJ Bank.

~~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.~~

REGULATORY

~~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, 2020.

~~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~~2020 Form 10-K.

RJF and many of its subsidiaries are each subject to various regulatory capital requirements. As of March 31, ~~2020,~~2021, all of our active regulated domestic and international subsidiaries had net capital in excess of minimum requirements. In addition, RJF and RJ Bank, N.A. were categorized as “well-capitalized” as of March 31, ~~2020.~~2021. 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 capital position of RJF and its regulated subsidiaries, we do not anticipate these capital requirements will have a negative impact on our future business activities. See Note 21 of the Notes to Condensed Consolidated Financial Statements of this Form 10-Q for further information on regulatory capital requirements.

Legislative and regulatory changes in connection with ~~COVID-19~~

~~The~~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 enacted in March 2020, the U.S.~~, which aimed to provide economic~~ government enacted the Consolidated Appropriations Act, 2021 in December 2020. This additional stimulus bill provided further emergency COVID-19 relief, ~~to businesses and individuals.~~

~~The~~as well as extended certain provisions of the CARES Act. Under 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~~were permitted 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~~modification as a result of the effects of COVID-19 as being a TDR, including impairment for accounting purposes. The Consolidated Appropriations Act, 2021 extended such relief until the earlier of: (1) 60 days after the date on which the national emergency concerning COVID-19 terminates; or (2) January 1, 2022. We elected to apply the extension for relief under the Consolidated Appropriations Act, 2021 to certain loan modifications that primarily relate to short-term payment deferral 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~~loans.

RJ Bank, N.A.

On February 2, 2021, RJ Bank, N.A. filed an application with the Florida Office of Financial Regulation (“OFR”) to convert from a national bank primarily supervised by the Office of the Comptroller of the Currency (the “OCC”) to a Florida-chartered state bank. RJ Bank, N.A. also ~~permits financial institutions~~filed an application with the Federal Reserve Bank of Atlanta to ~~temporarily delay~~retain its membership in the ~~implementation of CECL for estimating allowances for credit losses. Given our later adoption date of October 1, 2020,~~Federal Reserve System. Upon conversion to a state member bank, RJ Bank, N.A. will cease to be supervised by the OCC and instead become jointly supervised by the OFR and the Fed. As a state member bank, RJ Bank, N.A. will also continue to be supervised by the FDIC and the Consumer Financial Protection Bureau. As a state member bank, we do not anticipate ~~delaying our adoption. In addition, the Federal Reserve, the FDIC~~that there will be any material changes to RJ Bank, N.A.’s existing business or operations.

Privacy 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 amountdata protection

The legislature of the ~~capital benefit provided during 2020~~State of Florida recently considered a proposed data privacy law which would have required companies to reveal the data they are gathering, required them to delete that data upon a consumer’s request and ~~2021 (i.e., a five-year transition period). As we do~~made them liable for selling this data when instructed 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~~to. If adopted, this legislation (as well as additional emerging state and ~~liquidity to businesses, including corporate tax provisions that: temporarily allow for the carryback of net operating losses~~international privacy laws) could increase compliance risk, client servicing costs, and ~~remove limitations on~~potentially result in additional litigation and regulatory fines. Personal data collection associated with the use of ~~loss carryforwards, increase interest expense deduction limitations,~~artificial intelligence, mobile applications, and ~~allow accelerated depreciation deductions~~remote connectivity solutions, generally increases the amount of personal data collected and processed about consumers and contributes to risks associated with unauthorized data disclosure and access.

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

Management’s Discussion and Analysis

Discontinuation of LIBOR

The administrator of LIBOR has proposed to extend publication of the most commonly used U.S. dollar LIBOR settings to June 30, 2023 and to cease publishing other LIBOR settings 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.~~

2021. 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 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,~~U.S. federal banking agencies have ~~also taken~~issued guidance strongly encouraging banking organizations to cease using the U.S. dollar LIBOR as 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~~reference rate in ~~an attempt~~new contracts as soon as practicable and in any event by December 31, 2021. Our enterprise-wide initiative is continuing to ~~stimulate the economy. As previously mentioned, this has~~assess and ~~will continue~~implement necessary changes 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~~contracts, systems, processes, documentation, 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.~~models.

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.

~~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

~~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~~2020 Form ~~10-K.~~10-K and Note 2 of the Notes to Condensed Consolidated Financial Statements of this Form 10-Q.

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

Valuation of financial instruments

The use of fair value to measure financial instruments, with related gains or losses recognized inon 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~~2020 Form 10-K for a discussion of our fair value accounting policies regarding financial instruments ~~owned~~ and financial ~~instruments sold but not yet purchased.~~instrument liabilities. See Note 34 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~~2020 Form 10-K. In addition, refer to Note 1516 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, ~~2020.~~2021.

~~Loan loss provisions arising from operations of RJ Bank~~Allowance for credit losses

We ~~provide~~evaluate our held for investment bank loans, unfunded lending commitments, loans to financial advisors and certain other financial assets to estimate an allowance for ~~loan losses~~credit losses. Effective October 1, 2020, we adopted the CECL accounting guidance which ~~reflects our continuing evaluation of~~changed the ~~probable losses inherent in RJ Bank’s loan portfolio. See the discussion regarding our~~ methodology ~~in estimating~~used to measure the allowance for ~~loan~~credit losses from an allowance based on incurred losses to an allowance based on expected credit losses over a financial asset’s lifetime. The remaining life of our financial assets is determined by considering contractual terms and expected prepayments, among other factors. We employ multiple methodologies in ~~Note 2~~estimating an allowance for credit losses and our approaches differ by type of financial asset and the risk characteristics within each financial asset type. Our estimates are based on ongoing evaluations of the ~~Notes to Consolidated Financial Statements of our 2019 Form 10-K. See Note 7 of~~portfolio, the ~~Notes to Condensed Consolidated Financial Statements of this Form 10-Q~~related credit risk characteristics, and the overall economic and environmental conditions affecting the financial assets. Our process for ~~additional information on our bank loans.~~

At ~~March 31, 2020, the amortized cost of all RJ Bank loans was $22.11 billion and~~determining the allowance for ~~loan losses was $324 million, which was 1.47% of the held for investment loan portfolio.~~

~~Our process of evaluating probable loan~~credit losses includes a complex analysis of several quantitative and qualitative factors, requiring significant management ~~judgment. As a result,~~judgment due to matters that are inherently uncertain. This uncertainty can produce volatility in our allowance for credit losses. In addition, the allowance for ~~loan~~credit 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~~

~~For information~~ See the discussion regarding our ~~recent accounting developments, see~~methodology in estimating the allowance for credit losses in Note 2 of the

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

Management’s Discussion and Analysis

Notes to Condensed Consolidated Financial Statements of this Form 10-Q. See Notes 8 and 9 of the Notes to Condensed Consolidated Financial Statements of this Form ~~10-Q.~~10-Q for additional information on our RJ Bank and financial advisor loan portfolios.

~~Off-balance sheet arrangements~~

~~For information regarding our off-balance sheet arrangements, see Note 2~~Our allowance for credit losses at March 31, 2021 was primarily related to bank loans held by RJ Bank and loans to financial advisors. At March 31, 2021, the amortized cost of all RJ Bank loans was $23.22 billion and the related allowance for credit losses was $345 million, or 1.50% of the ~~Notes~~held for investment loan portfolio. At March 31, 2021, the amortized cost of loans to ~~Consolidated Financial Statements of our 2019 Form 10-K~~financial advisors was $1.02 billion and ~~Note 15~~the related allowance for credit losses was $28 million, which was 2.76% of the ~~Notes~~loan portfolio.

RECENT ACCOUNTING DEVELOPMENTS

The FASB has issued certain accounting updates which were assessed and either determined to ~~Condensed Consolidated Financial Statements of this Form 10-Q.~~

~~Effects of inflation~~

~~Our assets are primarily liquid in nature and~~be not applicable or 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 provideexpected 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~~have a significant impact on our financial ~~position and results of operations.~~statements.

~~Risk management~~

RISK MANAGEMENT

Risks are an inherent part of our business and activities. Management of ~~these risks~~risk 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~~reinforcing 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~~2020 Form 10-K for a discussion of our market risk, including how we manage such risk. See Notes 3, 4, 5 and 56 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 response to the significant market volatility as a result of the COVID-19 pandemic, we took steps to proactively manage our market risk exposures, including enhanced review

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

Management’s Discussion and ~~monitoring of exposures and risk mitigation efforts. As a result, we reduced our trading inventory during the quarter to reduce risk.~~Analysis

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~~(including derivatives), which include fixed income, equity, and foreign exchange ~~and derivatives.~~instruments.

To calculate VaR, we use historical simulation. This approach assumes that historical changes in market conditions, such as in interest rates and equity prices, are representative of future changes. 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, ~~2020,~~2021, our regulatory-defined daily ~~loss~~losses in our trading portfolios ~~exceeded~~did not exceed our predicted ~~VaR on eleven occasions due to higher levels of market volatility as a result of the COVID-19 pandemic.~~VaR.

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

~~Management’s Discussion and Analysis~~

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


	Six months ended March 31, 2021				Period-end VaR					Three months ended March 31,				Six months ended March 31,
$ in millions	High		Low		March 31, 2021		September 30, 2020		$ in millions	2021		2020		2021		2020
Daily VaR	$	11	$	3	$	5	$	8	Average daily VaR	$	6	$	1	$	6	$	1

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

Average daily VaR was higher during the current-year period compared with the prior-year period, as a result of the impact of increased volatility from the COVID-19 pandemic on our VaR model. However, toward the end of the current-year quarter, COVID-19 pandemic related scenarios started to fall outside of the VaR model’s twelve-month historical simulation period, resulting in period-end VaR decreasing to $5 million as of March 31, 2021 from $8 million as of September 30, 2020.

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~~MRR which are available on the Investor Relations section of our website under ~~https://www.raymondjames.com/investor-relations/financial-information/filings-and-reports~~ ~~within “Other~~“SEC filings and Other Reports - Other Reports and Information.”

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

Banking operations

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

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

Management’s Discussion and Analysis

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 inacross 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~~2020 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~~2020 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.~~model, which assumes that interest rates do not decline below zero.


Instantaneous changes in rate	Net interest income ($ in millions)	Projected change in net interest income
+200	$907	36.6%
+100	$852	28.3%
0	$664	—
-25	$635	(4.4)%

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, ~~2020~~,2021, 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
C&I loans	$	233	$	4,366	$	3,217	$	7,816
CRE loans	823		1,395		492		2,710
REIT loans	231		1,129		20		1,380
Tax-exempt loans	1		69		1,153		1,223
Residential mortgage loans	—		4		4,997		5,001
SBL and other	4,856		35		—		4,891
Total loans held for investment	6,144		6,998		9,879		23,021
Held for sale loans	—		7		196		203
Total loans	$	6,144	$	7,005	$	10,075	$	23,224

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

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, ~~2020. Loan amounts in the table exclude unearned income~~2021.

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

Management’s Discussion and ~~deferred expenses.~~Analysis


	Interest rate type							Interest rate type
$ in millions	Fixed		Adjustable		Total		$ in millions	Fixed		Adjustable		Total
Loans held for investment:
C&I loans	$	140	$	8,011	$	8,151	C&I loans	$	315	$	7,268	$	7,583
CRE construction loans	2		168		170
CRE loans	70		3,133		3,203		CRE loans	90		1,797		1,887
REIT loans							REIT loans	—		1,149		1,149
Tax-exempt loans	1,266		—		1,266		Tax-exempt loans	1,222		—		1,222
Residential mortgage loans	222		4,642		4,864		Residential mortgage loans	185		4,816		5,001
SBL and other	—		20		20		SBL and other	—		35		35
Total loans held for investment	1,700		15,974		17,674		Total loans held for investment	1,812		15,065		16,877
Loans held for sale	2		113		115
Held for sale loans							Held for sale loans	8		195		203
Total loans	$	1,702	$	16,087	$	17,789	Total loans	$	1,820	$	15,260	$	17,080

Contractual loan terms for C&I, CRE, ~~CRE construction~~REIT 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 agency CMOs which ~~were~~are carried at fair value on our Condensed Consolidated Statements of Financial Condition, ~~at March 31, 2020,~~ with changes in the fair value of the portfolio recorded through OCI inon our Condensed Consolidated Statements of Income and Comprehensive Income. At March 31, ~~2020,~~2021, our RJ Bank available-for-sale securities portfolio had a fair value of ~~$4.27~~$8.16 billion with a weighted-average yield of ~~2.27%~~1.15% and a ~~duration~~weighted-average life of ~~three~~approximately 4 years. See Note 45 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~~generally client-driven, ~~with~~and we carry equity securities as part of our trading inventory to facilitate such activities, although the ~~objective of meeting clients’ needs while earning revenues to compensate for the risk associated with carrying~~amounts are not as significant as our fixed income trading 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. Equity securities held in our trading inventory are generally included in VaR.

In addition, we have a private equity portfolio, included in “Other investments” on our Condensed Consolidated Statements of Financial Condition, which is comprised of various direct investments, as well as investments in third-party private equity funds and various legacy private equity funds which we sponsor. Of the total private equity investments at March 31, 2021 of $140 million, the portion we owned was $105 million. See Note 4 of the Notes to Condensed Consolidated Financial Statements of this Form 10-Q for additional information on this portfolio.

~~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~~$1.14 billion and ~~$1.10~~$1.05 billion at March 31, ~~2020~~2021 and September 30, ~~2019, respectively.~~2020, respectively, when converted to the U.S. dollar. A portion of such loans are held by RJ ~~Bank’s~~Bank, N.A.’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 52 of the Notes to Consolidated Financial Statements of our 2020 Form 10-K and Note 6 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~~380 million at March 31, ~~2020,~~2021, which was not hedged. Foreign exchange gains/losses related to this investment are primarily reflected in OCI on our Condensed Consolidated

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

Management’s Discussion and Analysis

Statements of Income and Comprehensive Income. See Note 1617 of the Notes to Condensed Consolidated Financial Statements of this Form 10-Q for further information regarding our components of OCI.

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 56 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~~2020 Form 10-K.

The ~~sharp~~initial decline in economic activity as a result of the COVID-19 ~~has~~pandemic caused increased credit risk ~~in general and~~ particularly with regard to companies in sectors that ~~have been~~were most significantly impacted by the economic disruption, including ~~oil and gas,~~energy, airlines, entertainment and leisure, restaurants and gaming. The speed and magnitude in which various sectors have recovered since the onset of the pandemic has been continually evolving. Given the stresses on certain of our clients’ liquidity, we ~~have~~ enhanced our credit monitoring activities, with an increased focus on monitoring our credit exposures and counterparty credit risk. Since the onset of the pandemic, RJ Bank has enacted risk mitigation strategies including, but not limited to, the ~~risk that trades may not settle~~sale of loans in those sectors with a ~~given counterparty.~~high likelihood of adverse impact arising from the pandemic. We have also required collateral to be posted across our credit risk exposures in accordance with agreements with our borrowers and counterparties. Although economic conditions have generally improved, we have maintained our increased focus on monitoring our credit exposures and counterparty credit risk.

Brokerage activities

We are engaged in various trading and brokerage activities in which our counterparties primarily include broker-dealers, banks and other financial institutions. We are exposed to risk that these counterparties may not fulfill their obligations. The risk of default depends on the creditworthiness of the counterparty and/or the issuer of the instrument. We manage this risk by imposing and monitoring individual and aggregate position limits within each business segment for each counterparty, conducting regular credit reviews of financial counterparties, reviewing security and loan concentrations, holding and calculating the fair value of collateral on certain transactions and conducting business through clearing organizations, which may guarantee performance.

Our client activities involve the execution, settlement, and financing of various transactions on behalf of our clients. Client activities are transacted on either a cash or margin basis. Credit exposure results from client margin loans, which are monitored daily and are collateralized by the securities in the clients’ accounts. We monitor exposure to industry sectors and individual securities and perform analysis on a daily basis in connection with our margin lending activities. We adjust our margin requirements if we believe our risk exposure is not appropriate based on market conditions. In addition, when clients execute a purchase, we are at some risk that the client will default on their financial obligation associated with the trade. If this occurs, we may have to liquidate the position at a loss.

We offer loans to financial advisors and certain other key revenue producers primarily for recruiting, transitional cost assistance and retention purposes. We have credit risk and may incur a loss primarily in the event that such borrower is no longer

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

Management’s Discussion and Analysis

affiliated with us. See Notes 2 and 9 of the Notes to Condensed Consolidated Financial Statements of this Form 10-Q for further information about our loans to financial advisors.

Banking activities

RJ Bank has a substantial loan portfolio. While RJ Bank’s loan portfolio is diversified, a significant downturn in the overall economy, such as that experienced in our fiscal year 2020 as a result of the ~~downturn during our second fiscal quarter,~~COVID-19 pandemic, 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~~credit losses and/or charge-offs. Conversely, should the economy recover at a faster pace than initially forecasted, or the negative impact of the significant downtown event be less than originally projected, the timing and magnitude of any decreases in required reserves for credit losses can be uncertain. 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.

RJ Bank’s allowance for credit losses methodology is described in Note 2 of the Notes to the Condensed Consolidated Financial Statements of this Form 10-Q. As RJ Bank’s loan portfolio is segregated into six portfolio segments, likewise, the allowance for credit losses is segregated by these same segments. The risk characteristics relevant to each portfolio segment are as follows.

C&I: Loans in this segment are made to businesses and are generally secured by all assets of the business. Repayment is expected from the cash flows of the respective business. Unfavorable economic and political conditions, including the resultant decrease in consumer or business spending, may have an adverse effect on the credit quality of loans in this segment.

CRE: Loans in this segment are primarily secured by income-producing properties. For owner-occupied properties, the cash flows are derived from the operations of the business, and the underlying cash flows may be adversely affected by the deterioration in the financial condition of the operating business. The underlying cash flows generated by non-owner-occupied properties may be adversely affected by increased vacancy and rental rates, which are monitored on a quarterly basis. This portfolio segment includes CRE construction loans which also look at other risks such as project budget overruns and performance variables related to the contractor and subcontractors. With respect to commercial construction of residential developments, there is also the risk that the builder has a geographical concentration of developments. Adverse developments in any of these areas may have a negative effect on the credit quality of loans in this segment.

REIT: Loans in this segment are made to businesses that own or finance income-producing real estate across various property sectors. This portfolio segment may include extensions of credit to companies that engage in real estate development. Repayment of these loans is dependent on income generated from real estate properties or the sale of real estate. A portion of this segment may consist of loans secured by residential product types (single-family residential, including condominiums and land held for residential development) within a range of markets. Deterioration in the financial condition of the operating business, reductions in the value of real estate, as well as increased vacancy and rental rates may all adversely affect the loans in this segment.

Tax-exempt: Loans in this segment are made to governmental and nonprofit entities and are generally secured by a pledge of revenue and, in some cases, by a security interest in or a mortgage on the asset being financed. For loans to governmental entities, repayment is expected from a pledge of certain revenues or taxes. For nonprofit entities, repayment is expected from revenues which may include fundraising proceeds. These loans are subject to demographic risk, therefore much of the credit assessment of tax-exempt loans is driven by the entity’s revenue base and general economic environment. Adverse developments in either of these areas may have a negative effect on the credit quality of loans in this segment.

Residential mortgage (includes home equity loans/lines): All of RJ Bank’s residential mortgage loans adhere to stringent underwriting parameters pertaining to credit score and credit history, debt-to-income ratio of borrower, LTV, and combined LTV (including second mortgage/home equity loans). RJ Bank does not originate or purchase adjustable rate mortgage (“ARM”) loans with negative amortization, reverse mortgages, or loans to subprime borrowers. Loans with deeply discounted teaser rates are not originated or purchased. All loans in this segment are collateralized by residential real estate and repayment is primarily dependent on the credit quality of the individual borrower. A decline in the strength of the economy, particularly unemployment rates and housing prices, among other factors, could have a significant effect on the credit quality of loans in this segment.

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

Management’s Discussion and Analysis

SBL and other: Loans in this segment are collateralized generally by the borrower’s marketable securities at advance rates consistent with industry standards. These loans are monitored daily for adherence to LTV guidelines and when a loan exceeds the required LTV, a collateral call is issued. Past due loans are minimal as any past due amounts result in a notice to the client for payment or the potential sale of the collateral which will bring the loan to a current status.

In evaluating credit risk, RJ Bank considers trends in loan performance, the level of allowance coverage relative to similar banking institutions, industry or customer concentrations, the loan portfolio composition and macroeconomic factors (both current and forecasted). These factors have a potentially negative impact on loan performance and net charge-offs.

Our allowance for ~~loan~~credit losses isas of March 31, 2021 was determined under the CECL model due to our October 1, 2020 adoption of the new credit impairment standard. See Notes 2 and 8 of the Notes to Condensed Consolidated Financial Statements of this Form 10-Q for further information. Our allowance for credit losses, as well as our methodologies and assumptions used in estimating the allowance, are regularly evaluated to determine if our methods and estimates continue to be appropriate for each class of loans, with adjustments made on a quarterly basis. Several factors were taken into consideration in evaluating the allowance for ~~loan~~credit losses at March 31, ~~2020~~,2021, including loan and borrower characteristics, such as internal risk ratings, delinquency status, collateral type and the ~~risk profile~~remaining term of the ~~portfolios,~~loan adjusted for expected prepayments. In addition, the estimate of credit losses considered the relatively small amount of 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, including commercial real estate, 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 loan loss provision during the current quarter. We ~~will~~ continue to assess the impact of both the COVID-19 pandemic and the economic recovery therefrom, as ~~more~~new 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.

RJ Bank’s allowance for ~~loan~~credit losses as a percentage of bank loans ~~outstanding~~held for investment was ~~1.47%~~1.50%, 1.69% and ~~1.04%~~1.65% at March 31, 2021, October 1, 2020 (our CECL adoption date) and September 30, ~~2019,~~2020, respectively. During the three and six months ended March 31, 2021, we had a benefit for credit losses on our bank loan portfolio of $32 million and $18 million, respectively, compared to a provision for credit losses of $109 million and $107 million for the three and six months ended March 31, 2020, respectively. See further explanation of the credit loss provision increase in “Management’s Discussion and Analysis - Results of Operations - RJ Bank” of this Form 10-Q and Note 78 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~~credit losses.

The bank loan loss provision for the six months ended March 31, 2020 was $107 million compared to a loan loss provision of $21 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.

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 March 31								Six months ended March 31
	2021				2020				2021				2020
$ in millions	Net loan (charge-off)/recovery amount (1)		% of avg. outstanding loans		Net loan (charge-off)/recovery amount		% of avg. outstanding loans		Net loan (charge-off)/recovery amount (1)		% of avg. outstanding loans		Net loan (charge-off)/recovery amount		% of avg. outstanding loans
C&I loans	$	(2)	0.11	%	$	—	—	%	$	(2)	0.05	%	$	—	—	%





Total	$	(2)	0.04	%	$	—	—	%	$	(2)	0.02	%	$	—	—	%

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 for both the three and six months ended March 31, 2021 related to loan sales during the period.

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~~credit losses for the periods presented.


	March 31, 2021					September 30, 2020
$ in millions	Nonperforming loan balance			Allowance for credit losses balance		Nonperforming loan balance			Allowance for credit losses balance
C&I loans	$	—		$	203	$	2		$	200
CRE loans	13			74		14			81
REIT loans	—			36		—			36
Tax-exempt loans	—			2		—			14
Residential mortgage loans	18			26		14			18
SBL and other	—			4		—			5
Total nonperforming loans held for investment	$	31		$	345	$	30		$	354
Total nonperforming loans as a % of RJ Bank total loans	0.13		%			0.14		%

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 %

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

Management’s Discussion and Analysis

Included in nonperforming residential mortgage loans as of March 31, 2021 were $7$6 million in loans for which $4$3 million in charge-offs were previously recorded, resulting in less exposure within the remaining balance. See Note 78 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~~$9 million and ~~$12~~$10 million as of March 31, ~~2020~~2021 and September 30, ~~2019,~~2020, respectively, of residential TDRs which were returned to accrual status in accordance with our policy. Total nonperforming assets, including the nonperforming loans in the preceding table and other real estate acquired in the settlement of residential mortgages, amounted to ~~$27~~$31 million and ~~$46~~$32 million at March 31, ~~2020~~2021 and September 30, ~~2019,~~2020, respectively. Total nonperforming assets as a percentage of RJ Bank total assets were ~~0.08%~~0.09% and ~~0.18%~~0.10% at March 31, ~~2020~~2021 and September 30, ~~2019,~~2020, respectively. Although our nonperforming assets as a percentage of RJ Bank assets remained low as of March 31, ~~2020, and we had no charge-offs during our second fiscal quarter,~~2021, prolonged or further market deterioration could result in an increase in our nonperforming assets, an increase in our allowance for ~~loan~~credit 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.~~uncertain.

We have received requests from certain ~~clients~~borrowers for forbearance, orwhich is generally a short-term deferral of their loan payments, ~~to us,~~or modification of certain covenant terms, driven or exacerbated by the economic impacts of the ~~COVID~~COVID-19 pandemic. Certain clients have also requested modifications of covenant terms. The CARES Act permits, among other things, financial institutions to suspend requirements under GAAP for loan modifications to borrowers affected by 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 loan modifications that relate to short-term payment deferrals that are not considered TDRs. Based on the ~~outstanding principal balance as of the end of April 2020, we have received payment deferral requests on~~amortized costs, approximately 3%$52 million and 2%$5 million of our corporate and residential loans, ~~respectively.~~respectively, were in active forbearance as of March 31, 2021. As certain borrowers exit forbearance we have received requests for loan modifications, including repayment plans. In accordance with the CARES Act and the Consolidated Appropriations Act, 2021, we have elected to not apply TDR classification to any COVID-19 related loan modifications performed between March 1, 2020 and December 31, 2021, to borrowers who were current as of December 31, 2019. As of March 31, 2021, we had residential loans of $31 million for which the borrower had requested a loan modification, where the request had been initiated but not completed or approved. As the delinquency status is not affected for loans that are in active forbearance or for loan modifications that have not yet been approved, the recognition of charge-offs, delinquencies, and nonaccrual status could be delayed for these borrowers who would have otherwise moved into past due or nonaccrual status. Forbearance and modification requests have continued to decline and the majority of the borrowers that have exited forbearance, but have not requested loan modifications, have become current on their principal and interest payments.

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~~2020 Form 10-K. There were no material changes in RJ Bank’s underwriting policies during the six months ended March 31, ~~2020.~~2021.

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 months ended March 31, ~~2020.~~2021.

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, risk rating and LTV ratios. ~~These measures, while considered~~See Note 8 in the Notes to the Condensed Consolidated Financial Statements of this Form 10-Q for additional information.

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

Management’s Discussion and ~~reviewed in establishing the allowance for loan losses, have not resulted in any material adjustments to RJ Bank’s historical loss rates.~~Analysis

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. Amounts in the following table do not include residential loans to borrowers who were granted forbearance as a result of the COVID-19 pandemic and whose loans were not considered delinquent prior to the forbearance. Such loans may be considered delinquent after the forbearance period or completion of loss mitigation efforts, depending on their payment status. As a result, the amount of residential loans considered delinquent may increase significantly in the future.


	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, 2021	$	3	$	8	$	11	0.06	%	0.16	%	0.22	%
September 30, 2020	$	3	$	7	$	10	0.06	%	0.14	%	0.20	%

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, ~~2020~~2021 percentage continues to compare favorably to the national average for over 30 day delinquencies of ~~2.54%~~3.12%, 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~~PCG 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%


	March 31, 2021
	Loans outstanding as a % of RJ Bank total residential mortgage loans	Loans outstanding as a % of RJ Bank total loans
CA	25.2%	5.4%
FL	16.8%	3.6%
TX	8.9%	1.9%
NY	7.3%	1.6%
CO	4.3%	0.9%

Loans where borrowers may be subject to payment increases include ~~adjustable rate mortgage~~ARM 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, ~~2020~~2021 and September 30, ~~2019,~~2020, these loans totaled ~~$1.51~~$1.82 billion and ~~$1.29~~$1.67 billion, respectively, or approximately ~~30%~~36% and 34% 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, ~~2020~~,2021, begins amortizing is ~~5.9~~6 years.

A component of credit risk management for the residential portfolio is the LTV ratio and borrower credit score at origination or purchase. The most recent weighted-average LTV 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~~is 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.


	March 31, 2021
	Loans outstanding as a % of RJ Bank total corporate loans	Loans outstanding as a % of RJ Bank total loans
Office real estate	7.6%	3.9%
Business systems and services	6.8%	3.5%
Automotive/transportation	6.4%	3.3%
Multi-family	6.0%	3.1%
Hospitality	5.7%	2.9%

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~~The COVID-19 pandemic negatively impacted our corporate loan portfolio in fiscal 2020 and could do so again in the future. Although we have reduced our exposure and revised our credit limits related to sectors that we believe to be most vulnerable to the COVID-19 pandemic, such as the energy, ~~airline, entertainment/~~airlines, entertainment and leisure, restaurant and gaming sectors, ~~those most affected by the~~we may experience further losses on our remaining loans to borrowers in these sectors, particularly if economic ~~disruption from~~conditions deteriorate. In addition, we continue to monitor our exposure to office real estate, where trends have changed rapidly and possibly permanently as a result of the COVID-19 pandemic, ~~were each less than 2%~~and may experience additional losses on loans in this sector in the future. We may also experience further losses on corporate loans in other industries as a direct or indirect result of the ~~loan portfolio as of March 31, 2020.~~pandemic, including on our CRE loans secured by retail and hospitality properties.

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

Management’s Discussion and Analysis

Although we saw ~~significant~~ deterioration in oil prices for much of fiscal year 2020 due to the pandemic, oil prices returned to pre-pandemic levels during ~~our~~the second quarter of fiscal ~~quarter,~~2021. In addition, our energy portfolio ~~primarily~~has minimal direct commodity price exposure since it consists of loans to midstream distribution companies and convenience stores, with no loans to exploration and production enterprises. ~~As a result,~~However, in the ~~portfolio has minimal direct commodity price exposure. However, if we continue to see a~~event of significant deterioration in oil prices in the future, our ~~clients,~~borrowers, and ~~as a result~~ our loans to such ~~clients,~~borrowers, could be negatively ~~impacted in the future.~~impacted.

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~~2020 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~~pandemic under such protocols. We have endeavored to ~~safeguard~~protect our ~~employees~~associates and our clients and to ensure continuity of business operations for our clients. As a result, ~~nearly all~~a substantial portion of our ~~employees~~associates continue to work remotely. The firm continues to monitor conditions and has developed a phased approach to reopening our offices which complies with all applicable laws, regulations, and Centers for Disease Control guidelines. As of March 31, 2021, we had reopened most of our offices in a limited capacity and have been operating under strict public health and safety protocols in such locations. We are also closely monitoring the rollout of the COVID-19 vaccines as well as monitoring the ongoing infection positivity rates, to provide insight to the nature of our plans and their implementation timing. We are working ~~remotely. Our systems~~to develop and ~~infrastructure have continued~~finalize such plans for a post-pandemic return to ~~support~~a more normal, pre-pandemic type of operating environment that allows us to be efficient, but is also safe for both our associates and clients.

Periods of severe market volatility, such as those that arose most notably in fiscal 2020 in response to the ~~increased volumes~~onset of the COVID-19 pandemic, can result in a significantly higher level of transactions on specific days and other activity ~~without any significant~~which may present operational challenges from time to time that may result in losses. These losses can result from, but are not limited to, trade errors, failed transaction settlements, late collateral calls to borrowers and counterparties, or ~~technology disruptions.~~interruptions to our system processing. We did not incur any ~~material~~significant losses related to ~~our~~such operational ~~risks~~challenges during the six months ended March 31, ~~2020.~~2021.

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.

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~~2020 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~~2020 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 months ended March 31, 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.

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

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~~three and six months ended March 31, ~~2020~~2021 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.~~None.

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.Not applicable.

~~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 and 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 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 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 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 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 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 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, 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 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.

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 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 could lead to further additional loan loss provisions and/or charges-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 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.

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 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Risk management - Operational risk” of our 2019 Form 10-K and Item 2 “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 months ended March 31, ~~2020.~~2021.

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 months ended March 31, ~~2020.~~2021.


	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, 2020 – October 31, 2020	1,204	$	80.04	—	$487
November 1, 2020 – November 30, 2020	93,225	$	90.50	—	$487
December 1, 2020 – December 31, 2020	116,759	$	93.02	107,750	$740
First quarter	211,188	$	91.84	107,750

January 1, 2021 – January 31, 2021	2,401	$	100.06	—	$740
February 1, 2021 – February 28, 2021	6,941	$	99.93	—	$740
March 1, 2021 – March 31, 2021	501,760	$	120.05	500,000	$680
Second quarter	511,102	$	119.69	500,000






Fiscal year-to-date total	722,290	$	111.54	607,750

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 December 2020, the Board of Directors authorized repurchase of our common stock in an aggregate amount of up to $750 million, which replaced the previous authorization.

In the preceding table, the total number of shares purchased includes shares purchased pursuant to ~~our~~the 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~~wholly-owned Canadian subsidiaries. For more information on this trust fund, see Note 2 of the Notes to Consolidated Financial Statements of our ~~2019~~2020 Form 10-K and Note 810 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 mid-March 2020.~~

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

~~Not applicable.~~None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

~~Not applicable.~~None.

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,~~December 2, 2020, 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.~~8, 2020.
4.1	~~Seventh~~Eighth Supplemental Indenture, dated as of ~~March 31, 2020,~~April 1, 2021, for the ~~4.650%~~3.750% Senior Notes due ~~2030,~~2051, between Raymond James Financial, Inc. and The Bank of New York Mellon Trust Company, N.A., as trustee, incorporated by reference to Exhibit 4.2 to the ~~Company’s~~Company's Current Report on Form 8-K, filed with the Securities and Exchange Commission on ~~March 31, 2020.~~April 2, 2021.
10.1	Third Amendment to Credit Agreement, dated as of April 19, 2021, among Raymond James Financial, Inc. ~~Amended~~, Raymond James & Associates, Inc., the Lenders party thereto and ~~Restated 2012 Stock Incentive Plan (as amended through February 20, 2020)~~Bank of America, N.A., incorporated by reference to Exhibit 10.1 to the ~~Company’s~~Company's Current Report on Form 8-K, filed with the Securities and Exchange Commission on ~~February 24, 2020.~~April 22, 2021.
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)

Date:	May ~~8, 2020~~7, 2021	/s/ Paul C. Reilly
		Paul C. Reilly
		Chairman and Chief Executive Officer

Date:	May ~~8, 2020~~7, 2021	/s/ Paul M. Shoukry
		Paul M. Shoukry
		Chief Financial Officer and Treasurer

8991



$ 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



$ 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



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)


~~(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.



	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


$ in millions	Overnight and continuous		Up to 30 days		30-90 days		Greater than 90 days		Total
March 31, 2021
Repurchase agreements:
Government and agency obligations	$	121	$	0	$	0	$	0	$	121
Agency MBS and agency CMOs	101		—		0		0		101
Total repurchase agreements	222		0		0		0		222
Securities loaned:
Equity securities	56		0		0		0		56
Total collateralized financings	$	278	$	0	$	0	$	0	$	278
September 30, 2020
Repurchase agreements:
Government and agency obligations	$	87	$	0	$	0	$	0	$	87
Agency MBS and agency CMOs	78		0		0		0		78
Total repurchase agreements	165		0		0		0		165
Securities loaned:
Equity securities	85		0		0		0		85
Total collateralized financings	$	250	$	0	$	0	$	0	$	250


$ in millions	30-89 days and accruing		90 days or more and accruing		Total past due and accruing		Nonaccrual with allowance		Nonaccrual with no allowance		Current and accruing		Total loans held for investment
March 31, 2021
C&I loans	$	0	$	0	$	0	$	0	$	0	$	7,816	$	7,816
CRE loans	0		0		0		0		13		2,697		2,710
REIT loans	0		0		0		0		0		1,380		1,380
Tax-exempt loans	0		0		0		0		0		1,223		1,223
Residential mortgage loans	1		0		1		14		4		4,982		5,001
SBL and other	0		0		0		0		0		4,891		4,891
Total loans held for investment	$	1	$	0	$	1	$	14	$	17	$	22,989	$	23,021

September 30, 2020
C&I loans	$	0	$	0	$	0	$	2	$	0	$	7,419	$	7,421
CRE loans	0		0		0		0		14		2,475		2,489
REIT loans	0		0		0		0		0		1,210		1,210
Tax-exempt loans	0		0		0		0		0		1,259		1,259
Residential mortgage loans	0		0		0		3		11		4,959		4,973
SBL and other	0		0		0		0		0		4,087		4,087
Total loans held for investment	$	0	$	0	$	0	$	5	$	25	$	21,409	$	21,439



$ 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



$ 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



CRE loans
Risk rating:
Pass	$	194	$	435	$	572	$	645	$	226	$	209	$	61	$	2,342
Special mention	0		45		86		49		0		0		0		180
Substandard	0		0		32		86		8		62		0		188
Doubtful	0		0		0		0		0		0		0		0
Total CRE loans	$	194	$	480	$	690	$	780	$	234	$	271	$	61	$	2,710



	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



	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



$ 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



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


	$ in millions
Remainder of 2021	$	47
2022	96
2023	77
2024	58
2025	43
Thereafter	102
Gross lease payments	423
Less: interest	(47)
Present value of lease liabilities	$	376



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



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


$ 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, 2021
AOCI as of beginning of period	$	86	$	(93)	$	(7)	$	72	$	(48)	$	17
OCI:
OCI before reclassifications and taxes	(13)		12		(1)		(102)		22		(81)
Amounts reclassified from AOCI, before tax	0		0		0		0		4		4
Pre-tax net OCI	(13)		12		(1)		(102)		26		(77)
Income tax effect	3		0		3		26		(7)		22
OCI for the period, net of tax	(10)		12		2		(76)		19		(55)
AOCI as of end of period	$	76	$	(81)	$	(5)	$	(4)	$	(29)	$	(38)

Six months ended March 31, 2021
AOCI as of beginning of period	$	115	$	(140)	$	(25)	$	89	$	(53)	$	11
OCI:
OCI before reclassifications and taxes	(51)		57		6		(120)		25		(89)
Amounts reclassified from AOCI, before tax	0		2		2		(5)		8		5
Pre-tax net OCI	(51)		59		8		(125)		33		(84)
Income tax effect	12		0		12		32		(9)		35
OCI for the period, net of tax	(39)		59		20		(93)		24		(49)
AOCI as of end of period	$	76	$	(81)	$	(5)	$	(4)	$	(29)	$	(38)

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	0		0		0		0		0		0
Pre-tax net OCI	69		(78)		(9)		85		(58)		18
Income tax effect	(17)		0		(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	0		0		0		0		0		0
Pre-tax net OCI	52		(56)		(4)		83		(44)		35
Income tax effect	(13)		0		(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)


~~(1)~~	(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.~~


	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, 2021:
CET1	$	6,787	23.6	%	$	1,296	4.5	%	$	1,872	6.5	%
Tier 1 capital	$	6,787	23.6	%	$	1,728	6.0	%	$	2,304	8.0	%
Total capital	$	7,120	24.7	%	$	2,304	8.0	%	$	2,880	10.0	%
Tier 1 leverage	$	6,787	12.2	%	$	2,218	4.0	%	$	2,773	5.0	%

RJF as of September 30, 2020:
CET1	$	6,490	24.2	%	$	1,208	4.5	%	$	1,744	6.5	%
Tier 1 capital	$	6,490	24.2	%	$	1,610	6.0	%	$	2,147	8.0	%
Total capital	$	6,804	25.4	%	$	2,147	8.0	%	$	2,684	10.0	%
Tier 1 leverage	$	6,490	14.2	%	$	1,824	4.0	%	$	2,280	5.0	%


~~(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.


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


INDEX
~~INDEX~~		PAGE
		~~PAGE~~
Factors affecting “forward-looking statements”	4952
Introduction		4952
Executive overview		4952
~~Segments~~Reconciliation of non-GAAP financial measures to GAAP financial measures		5255
~~Reconciliation of GAAP measures to non-GAAP financial measures~~Segments		5356
Net interest analysis		5357
Results of Operations
Private Client Group		5662
Capital Markets		6066
Asset Management		6167
RJ Bank		6470
Other		6871
Certain statistical disclosures by bank holding companies		6972
Liquidity and capital resources		7072
Statement of financial condition analysis		7376
~~Contractual obligations~~Regulatory		7477
~~Regulatory~~Critical accounting estimates		7478
~~Critical~~Recent accounting ~~estimates~~developments		7579
~~Recent accounting developments~~Risk management		7679
~~Off-balance sheet arrangements~~	76
~~Effects of inflation~~	76
~~Risk management~~	76


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



	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



$ 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%



	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	)	$	—



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)%