0000720005rjf:AccountAndServiceFeeRevenueMemberus-gaap:OperatingSegmentsMemberrjf:RjBankMember2019-04-012019-06-30InvestmentBankingRevenueDebtUnderwritingMember2020-04-012020-06-30

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark one)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
 THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 20202021
or
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, Florida 33716
(Address of principal executive offices)    (Zip Code)
(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 classTrading Symbol(s)Name of each exchange on which registered
Common Stock, $.01 par valueRJFNew 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 filerxAccelerated filer
Non-accelerated filerSmaller 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.
137,159,781137,192,121 shares of common stock as of August 6, 20204, 2021


RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

INDEX
  PAGE
PART IFINANCIAL INFORMATION 
Item 1.
 Condensed Consolidated Statements of Financial Condition as of June 30, 2020 and September 30, 2019 (Unaudited)
 Condensed Consolidated Statements of Income and Comprehensive Income for the three and nine months ended June 30, 2020 and June 30, 2019 (Unaudited)
 Condensed Consolidated Statements of Changes in Shareholders’ Equity for the three and nine months ended June 30, 2020 and June 30, 2019 (Unaudited)
 Condensed Consolidated Statements of Cash Flows for the nine months ended June 30, 2020 and June 30, 2019 (Unaudited)
 
Note 1 - Organization and basis of presentation
Note 2 - Update of significant accounting policies
Note 3 - Fair valueAcquisitions
Note 4 - Available-for-sale securitiesFair value
Note 5 - Available-for-sale securities
Note 6 - Derivative assets and derivative liabilities
Note 6 - Collateralized agreements and financings
Note 7 - Bank loans, net
Note 87 - Variable interest entitiesCollateralized agreements and financings
Note 98 - Goodwill and identifiable intangible assets,Bank loans, net
Note 109 - Leases
Note 11 - Bank depositsLoans to financial advisors, net
Note 1210 - Other borrowingsVariable interest entities
Note 11 - Goodwill and identifiable intangible assets, net
Note 1312 - Senior notes payableLeases
Note 1413 - Income taxes
Note 15 - Commitments, contingencies and guaranteesBank deposits
Note 14 - Senior notes payable
Note 15 - Income taxes
Note 16 - Commitments, contingencies and guarantees
Note 17 - Accumulated other comprehensive income/(loss)
Note 1718 - Revenues
Note 1819 - Interest income and interest expense
Note 1920 - Share-based compensation
Note 2021 - Regulatory capital requirements
Note 2122 - Earnings per share
Note 2223 - Segment information
Item 2.
Item 3.
Item 4.
PART II
Item 1.
Item 1A.
Item 2.Unregistered Sales of Equity Securities and Use of Proceeds
Item 3.
Item 4.Mine Safety Disclosures
Item 5.
Item 6.
2


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$ in millions, except per share amountsJune 30, 2020September 30, 2019$ in millions, except per share amountsJune 30, 2021September 30, 2020
Assets:Assets:Assets:
Cash and cash equivalentsCash and cash equivalents$5,632  $3,957  Cash and cash equivalents$5,982 $5,390 
Cash and cash equivalents segregated pursuant to regulations3,205  2,014  
Securities purchased under agreements to resell193  343  
Securities borrowed300  248  
Assets segregated pursuant to regulations ($3,000 and $0 at fair value)
Assets segregated pursuant to regulations ($3,000 and $0 at fair value)
8,882 4,244 
Collateralized agreementsCollateralized agreements639 422 
Financial instruments, at fair value:Financial instruments, at fair value:Financial instruments, at fair value:
Trading instruments ($270 and $535 pledged as collateral)
361  708  
Available-for-sale securities ($24 and $24 pledged as collateral)
5,630  3,093  
Trading assets ($352 and $265 pledged as collateral)
Trading assets ($352 and $265 pledged as collateral)
488 513 
Available-for-sale securities ($21 and $23 pledged as collateral)
Available-for-sale securities ($21 and $23 pledged as collateral)
8,191 7,650 
Derivative assetsDerivative assets452  338  Derivative assets291 438 
Other investments ($40 and $32 pledged as collateral)
327  365  
Other investments ($6 and $37 pledged as collateral)
Other investments ($6 and $37 pledged as collateral)
583 334 
Brokerage client receivables, netBrokerage client receivables, net2,346  2,671  Brokerage client receivables, net2,683 2,435 
Receivables from brokers, dealers and clearing organizations472  281  
Other receivables616  549  
Other receivables, netOther receivables, net1,144 927 
Bank loans, netBank loans, net21,223  20,891  Bank loans, net23,896 21,195 
Loans to financial advisors, netLoans to financial advisors, net992  983  Loans to financial advisors, net1,042 1,012 
Property and equipment, netProperty and equipment, net537  527  Property and equipment, net552 535 
Deferred income taxes, netDeferred income taxes, net222  231  Deferred income taxes, net289 262 
Goodwill and identifiable intangible assets, netGoodwill and identifiable intangible assets, net602  611  Goodwill and identifiable intangible assets, net862 600 
Other assetsOther assets1,572  1,020  Other assets1,637 1,525 
Total assetsTotal assets$44,682  $38,830  Total assets$57,161 $47,482 
Liabilities and shareholders’ equity:Liabilities and shareholders’ equity:Liabilities and shareholders’ equity:
Bank depositsBank deposits$25,372  $22,281  Bank deposits$30,340 $26,801 
Securities sold under agreements to repurchase228  150  
Securities loaned88  323  
Financial instruments sold but not yet purchased, at fair value:
Trading instruments154  296  
Collateralized financingsCollateralized financings285 250 
Financial instrument liabilities, at fair value:Financial instrument liabilities, at fair value:
Trading liabilitiesTrading liabilities258 240 
Derivative liabilitiesDerivative liabilities394  313  Derivative liabilities263 393 
Brokerage client payablesBrokerage client payables5,955  4,361  Brokerage client payables11,843 6,792 
Payables to brokers, dealers and clearing organizations190  229  
Accrued compensation, commissions and benefitsAccrued compensation, commissions and benefits1,109  1,272  Accrued compensation, commissions and benefits1,557 1,384 
Other payablesOther payables1,243  518  Other payables1,801 1,513 
Other borrowingsOther borrowings890  894  Other borrowings859 888 
Senior notes payableSenior notes payable2,044  1,550  Senior notes payable2,037 2,045 
Total liabilitiesTotal liabilities37,667  32,187  Total liabilities49,243 40,306 
Commitments and contingencies (see Note 15)
Commitments and contingencies (see Note 16)Commitments and contingencies (see Note 16)00
Shareholders’ equityShareholders’ equityShareholders’ equity
Preferred stock; $.10 par value; 10,000,000 shares authorized; -0- shares issued and outstandingPreferred stock; $.10 par value; 10,000,000 shares authorized; -0- shares issued and outstanding—  —  Preferred stock; $.10 par value; 10,000,000 shares authorized; -0- shares issued and outstanding0 
Common stock; $.01 par value; 350,000,000 shares authorized; 158,909,194 and 158,435,030 shares issued as of June 30, 2020 and September 30, 2019, respectively, and 137,025,724 and 137,841,952 shares outstanding as of June 30, 2020 and September 30, 2019, respectively
  
Common stock; $.01 par value; 350,000,000 shares authorized; 159,303,913 and 159,007,158 shares issued as of June 30, 2021 and September 30, 2020, respectively, and 136,948,422 and 136,556,559 shares outstanding as of June 30, 2021 and September 30, 2020, respectively
Common stock; $.01 par value; 350,000,000 shares authorized; 159,303,913 and 159,007,158 shares issued as of June 30, 2021 and September 30, 2020, respectively, and 136,948,422 and 136,556,559 shares outstanding as of June 30, 2021 and September 30, 2020, respectively
2 
Additional paid-in capitalAdditional paid-in capital1,984  1,938  Additional paid-in capital2,060 2,007 
Retained earningsRetained earnings6,326  5,874  Retained earnings7,257 6,484 
Treasury stock, at cost; 21,883,470 and 20,593,078 common shares as of June 30, 2020 and September 30, 2019, respectively
(1,348) (1,210) 
Treasury stock, at cost; 22,355,491 and 22,450,599 common shares as of June 30, 2021 and September 30, 2020, respectively
Treasury stock, at cost; 22,355,491 and 22,450,599 common shares as of June 30, 2021 and September 30, 2020, respectively
(1,446)(1,390)
Accumulated other comprehensive income/(loss)Accumulated other comprehensive income/(loss) (23) Accumulated other comprehensive income/(loss)(10)11 
Total equity attributable to Raymond James Financial, Inc.Total equity attributable to Raymond James Financial, Inc.6,965  6,581  Total equity attributable to Raymond James Financial, Inc.7,863 7,114 
Noncontrolling interestsNoncontrolling interests50  62  Noncontrolling interests55 62 
Total shareholders’ equityTotal shareholders’ equity7,015  6,643  Total shareholders’ equity7,918 7,176 
Total liabilities and shareholders’ equityTotal liabilities and shareholders’ equity$44,682  $38,830  Total liabilities and shareholders’ equity$57,161 $47,482 
See accompanying Notes to Condensed Consolidated Financial Statements (Unaudited).
3


RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(Unaudited)
Three months ended June 30,Nine months ended June 30, Three months ended June 30,Nine months ended June 30,
in millions, except per share amountsin millions, except per share amounts2020201920202019in millions, except per share amounts2021202020212020
Revenues:Revenues:  Revenues:  
Asset management and related administrative feesAsset management and related administrative fees$867  $879  $2,828  $2,527  Asset management and related administrative fees$1,262 $867 $3,502 $2,828 
Brokerage revenues:Brokerage revenues:Brokerage revenues:
Securities commissionsSecurities commissions343  358  1,116  1,095  Securities commissions415 343 1,239 1,116 
Principal transactionsPrincipal transactions143  93  345  262  Principal transactions137 143 432 345 
Total brokerage revenuesTotal brokerage revenues486  451  1,461  1,357  Total brokerage revenues552 486 1,671 1,461 
Account and service feesAccount and service fees134  183  484  559  Account and service fees161 134 465 484 
Investment bankingInvestment banking139  139  428  439  Investment banking276 139 779 428 
Interest incomeInterest income217  321  799  961  Interest income205 217 608 799 
OtherOther33  27  47  95  Other55 33 155 47 
Total revenuesTotal revenues1,876  2,000  6,047  5,938  Total revenues2,511 1,876 7,180 6,047 
Interest expenseInterest expense(42) (73) (136) (221) Interest expense(40)(42)(115)(136)
Net revenuesNet revenues1,834  1,927  5,911  5,717  Net revenues2,471 1,834 7,065 5,911 
Non-interest expenses:Non-interest expenses:  Non-interest expenses:  
Compensation, commissions and benefitsCompensation, commissions and benefits1,277  1,277  4,050  3,767  Compensation, commissions and benefits1,661 1,277 4,809 4,050 
Non-compensation expenses:Non-compensation expenses:Non-compensation expenses:
Communications and information processingCommunications and information processing100  92  293  278  Communications and information processing109 100 315 293 
Occupancy and equipmentOccupancy and equipment55  55  168  159  Occupancy and equipment58 55 172 168 
Business developmentBusiness development21  57  106  141  Business development31 21 75 106 
Investment sub-advisory feesInvestment sub-advisory fees23  24  75  70  Investment sub-advisory fees34 23 93 75 
Professional feesProfessional fees24  22  68  61  Professional fees26 24 80 68 
Bank loan loss provision/(benefit)81  (5) 188  16  
Acquisition and disposition-related expenses—  —  —  15  
Bank loan provision/(benefit) for credit lossesBank loan provision/(benefit) for credit losses(19)81 (37)188 
Losses on extinguishment of debtLosses on extinguishment of debt98 98 
Acquisition-related expensesAcquisition-related expenses7 9 
OtherOther55  63  167  189  Other81 55 220 167 
Total non-compensation expensesTotal non-compensation expenses359  308  1,065  929  Total non-compensation expenses425 359 1,025 1,065 
Total non-interest expensesTotal non-interest expenses1,636  1,585  5,115  4,696  Total non-interest expenses2,086 1,636 5,834 5,115 
Pre-tax incomePre-tax income198  342  796  1,021  Pre-tax income385 198 1,231 796 
Provision for income taxesProvision for income taxes26  83  187  252  Provision for income taxes78 26 257 187 
Net incomeNet income$172  $259  609  769  Net income$307 $172 $974 $609 
Earnings per common share – basicEarnings per common share – basic$1.25  $1.84  $4.41  $5.42  Earnings per common share – basic$2.24 $1.25 $7.09 $4.41 
Earnings per common share – dilutedEarnings per common share – diluted$1.23  $1.80  $4.33  $5.30  Earnings per common share – diluted$2.18 $1.23 $6.92 $4.33 
Weighted-average common shares outstanding – basicWeighted-average common shares outstanding – basic137.1140.4137.9141.8Weighted-average common shares outstanding – basic137.2 137.1137.2137.9
Weighted-average common and common equivalent shares outstanding – dilutedWeighted-average common and common equivalent shares outstanding – diluted139.4143.6140.5144.8Weighted-average common and common equivalent shares outstanding – diluted141.1139.4140.6140.5
Net incomeNet income$172  $259  $609  $769  Net income$307 $172 $974 $609 
Other comprehensive income/(loss), net of tax:Other comprehensive income/(loss), net of tax:  Other comprehensive income/(loss), net of tax:  
Available-for-sale securitiesAvailable-for-sale securities 24  67  65  Available-for-sale securities25 (68)67 
Currency translations, net of the impact of net investment hedgesCurrency translations, net of the impact of net investment hedges11   (6)  Currency translations, net of the impact of net investment hedges5 11 25 (6)
Cash flow hedgesCash flow hedges(4) (19) (37) (49) Cash flow hedges(2)(4)22 (37)
Total other comprehensive income, net of tax12  11  24  17  
Total other comprehensive income/(loss), net of taxTotal other comprehensive income/(loss), net of tax28 12 (21)24 
Total comprehensive incomeTotal comprehensive income$184  $270  $633  $786  Total comprehensive income$335 $184 $953 $633 
See accompanying Notes to Condensed Consolidated Financial Statements (Unaudited).
4


RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
(Unaudited)
Three months ended June 30,Nine months ended June 30, Three months ended June 30,Nine months ended June 30,
$ in millions, except per share amounts$ in millions, except per share amounts2020201920202019$ in millions, except per share amounts2021202020212020
Common stock, par value $.01 per share:Common stock, par value $.01 per share:  Common stock, par value $.01 per share:  
Balance beginning of periodBalance beginning of period$ $ $ $ Balance beginning of period$2 $$2 $
Share issuancesShare issuances—  

—  —  —  Share issuances0 

0 
Balance end of periodBalance end of period    Balance end of period2 2 
Additional paid-in capital:Additional paid-in capital:  Additional paid-in capital:  
Balance beginning of periodBalance beginning of period1,953  

1,917  1,938  1,808  Balance beginning of period2,028 

1,953 2,007 1,938 
Employee stock purchasesEmployee stock purchases12  

 29  27  Employee stock purchases8 

12 23 29 
Exercise of stock options and vesting of restricted stock units, net of forfeituresExercise of stock options and vesting of restricted stock units, net of forfeitures(3) 

 (74) 27  Exercise of stock options and vesting of restricted stock units, net of forfeitures(4)

(3)(70)(74)
Restricted stock, stock option and restricted stock unit expenseRestricted stock, stock option and restricted stock unit expense22  

21  91  85  Restricted stock, stock option and restricted stock unit expense28 

22 100 91 
Acquisition of noncontrolling interest and other—  (32) —  (32) 
Balance end of periodBalance end of period1,984  1,915  1,984  1,915  Balance end of period2,060 1,984 2,060 1,984 
Retained earnings:Retained earnings:  Retained earnings:  
Balance beginning of periodBalance beginning of period6,205  

5,448  5,874  5,032  Balance beginning of period7,004 

6,205 6,484 5,874 
Cumulative adjustments for changes in accounting principlesCumulative adjustments for changes in accounting principles0 (35)
Net income attributable to Raymond James Financial, Inc.Net income attributable to Raymond James Financial, Inc.172  

259  609  769  Net income attributable to Raymond James Financial, Inc.307 

172 974 609 
Cash dividends declared (see Note 21)(51) (47) (157) (146) 
Other—  (1) —   
Cash dividends declared (see Note 22)Cash dividends declared (see Note 22)(54)(51)(166)(157)
Balance end of periodBalance end of period6,326  5,659  6,326  5,659  Balance end of period7,257 6,326 7,257 6,326 
Treasury stock:Treasury stock:  Treasury stock:  
Balance beginning of periodBalance beginning of period(1,351) (976) (1,210) (447) Balance beginning of period(1,404)(1,351)(1,390)(1,210)
Purchases/surrendersPurchases/surrenders—  (86) (222) (598) Purchases/surrenders(48)(127)(222)
Exercise of stock options and vesting of restricted stock units, net of forfeituresExercise of stock options and vesting of restricted stock units, net of forfeitures  84  (15) Exercise of stock options and vesting of restricted stock units, net of forfeitures6 71 84 
Balance end of periodBalance end of period(1,348) (1,060) (1,348) (1,060) Balance end of period(1,446)(1,348)(1,446)(1,348)
Accumulated other comprehensive income/(loss):Accumulated other comprehensive income/(loss):  Accumulated other comprehensive income/(loss):  
Balance beginning of periodBalance beginning of period(11) (25) (23) (27) Balance beginning of period(38)(11)11 (23)
Other comprehensive income, net of tax12  11  24  17  
Other—  —  —  (4) 
Other comprehensive income/(loss), net of taxOther comprehensive income/(loss), net of tax28 12 (21)24 
Balance end of periodBalance end of period (14)  (14) Balance end of period(10)(10)
Total equity attributable to Raymond James Financial, Inc.Total equity attributable to Raymond James Financial, Inc.$6,965  $6,502  $6,965  $6,502  Total equity attributable to Raymond James Financial, Inc.$7,863 $6,965 $7,863 $6,965 
Noncontrolling interests:Noncontrolling interests:Noncontrolling interests:
Balance beginning of periodBalance beginning of period$36  $69  $62  $84  Balance beginning of period$45 $36 $62 $62 
Net loss attributable to noncontrolling interests(2) (2) (26) (16) 
Capital contributions—  —  —   
Distributions and other16  (5) 14  (8) 
Net income/(loss) attributable to noncontrolling interestsNet income/(loss) attributable to noncontrolling interests12 (2)24 (26)
OtherOther(2)16 (31)14 
Balance end of periodBalance end of period50  62  50  62  Balance end of period55 50 55 50 
Total shareholders’ equityTotal shareholders’ equity$7,015  $6,564  $7,015  $6,564  Total shareholders’ equity$7,918 $7,015 $7,918 $7,015 
See accompanying Notes to Condensed Consolidated Financial Statements (Unaudited).
5


RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine months ended June 30,Nine months ended June 30,
$ in millions$ in millions20202019$ in millions20212020
Cash flows from operating activities:Cash flows from operating activities:  Cash flows from operating activities:  
Net incomeNet income$609  $769  Net income$974 $609 
Adjustments to reconcile net income to net cash provided by operating activities:Adjustments to reconcile net income to net cash provided by operating activities:  Adjustments to reconcile net income to net cash provided by operating activities:  
Depreciation and amortizationDepreciation and amortization88  81  Depreciation and amortization97 88 
Deferred income taxesDeferred income taxes(13) (22) Deferred income taxes(24)(13)
Premium and discount amortization on available-for-sale securities and loss on other investmentsPremium and discount amortization on available-for-sale securities and loss on other investments53  14  Premium and discount amortization on available-for-sale securities and loss on other investments12 53 
Provisions for loan losses, legal and regulatory proceedings and bad debts209  45  
Provisions/(benefits) for credit losses and legal and regulatory proceedingsProvisions/(benefits) for credit losses and legal and regulatory proceedings(29)209 
Share-based compensation expenseShare-based compensation expense97  88  Share-based compensation expense103 97 
Unrealized gain on company-owned life insurance policies, net of expensesUnrealized gain on company-owned life insurance policies, net of expenses(10) (9) Unrealized gain on company-owned life insurance policies, net of expenses(159)(10)
Losses on extinguishment of debtLosses on extinguishment of debt98 
OtherOther 31  Other47 
Net change in:Net change in:  Net change in:  
Securities purchased under agreements to resell, net of securities sold under agreements to repurchase226  (61) 
Securities loaned, net of securities borrowed(287) (44) 
Assets segregated pursuant to regulations excluding cash and cash equivalentsAssets segregated pursuant to regulations excluding cash and cash equivalents(3,000)
Collateralized agreements, net of collateralized financingsCollateralized agreements, net of collateralized financings(178)(61)
Loans provided to financial advisors, net of repaymentsLoans provided to financial advisors, net of repayments(23) (28) Loans provided to financial advisors, net of repayments(69)(23)
Brokerage client receivables and other accounts receivable, netBrokerage client receivables and other accounts receivable, net126  679  Brokerage client receivables and other accounts receivable, net(425)126 
Trading instruments, netTrading instruments, net216  (52) Trading instruments, net42 216 
Derivative instruments, netDerivative instruments, net(68) (137) Derivative instruments, net41 (68)
Other assetsOther assets(64) (83) Other assets(238)(64)
Brokerage client payables and other accounts payableBrokerage client payables and other accounts payable1,621  (1,300) Brokerage client payables and other accounts payable4,673 1,621 
Accrued compensation, commissions and benefitsAccrued compensation, commissions and benefits(161) (99) Accrued compensation, commissions and benefits160 (161)
Proceeds from sales of securitizations and loans held for sale, net of purchases and originations of loans held for sale32  27  
Net cash provided by/(used in) operating activities2,655  (101) 
Purchases and originations of loans held for sale, net of proceeds from sales of securitizations and loans held for salePurchases and originations of loans held for sale, net of proceeds from sales of securitizations and loans held for sale(1)32 
Net cash provided by operating activitiesNet cash provided by operating activities2,124 2,655 
Cash flows from investing activities:Cash flows from investing activities:  Cash flows from investing activities:  
Additions to property and equipmentAdditions to property and equipment(97) (102) Additions to property and equipment(99)(97)
Increase in bank loans, netIncrease in bank loans, net(978) (1,226) Increase in bank loans, net(2,620)(978)
Proceeds from sales of loans held for investmentProceeds from sales of loans held for investment272  210  Proceeds from sales of loans held for investment248 272 
Purchases of available-for-sale securitiesPurchases of available-for-sale securities(3,147) (689) Purchases of available-for-sale securities(3,081)(3,147)
Available-for-sale securities maturations, repayments and redemptionsAvailable-for-sale securities maturations, repayments and redemptions744  456  Available-for-sale securities maturations, repayments and redemptions1,658 744 
Proceeds from sales of available-for-sale securitiesProceeds from sales of available-for-sale securities222  —  Proceeds from sales of available-for-sale securities969 222 
Business acquisition, net of cash acquired(5) (5) 
Business acquisitions, net of cash acquiredBusiness acquisitions, net of cash acquired(245)(5)
Other investing activities, netOther investing activities, net(31) (30) Other investing activities, net13 (31)
Net cash used in investing activitiesNet cash used in investing activities(3,020) (1,386) Net cash used in investing activities(3,157)(3,020)
See accompanying Notes to Condensed Consolidated Financial Statements (Unaudited).
6


RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine months ended June 30,Nine months ended June 30,
$ in millions$ in millions20202019$ in millions20212020
Cash flows from financing activities:Cash flows from financing activities:Cash flows from financing activities:
Proceeds from borrowings on the RJF Credit Facility—  300  
Repayments of borrowings on the RJF Credit Facility—  (300) 
Proceeds from short-term borrowings, net—  50  
Proceeds from Federal Home Loan Bank advancesProceeds from Federal Home Loan Bank advances850  850  Proceeds from Federal Home Loan Bank advances0 850 
Repayments of Federal Home Loan Bank advances and other borrowed fundsRepayments of Federal Home Loan Bank advances and other borrowed funds(854) (854) Repayments of Federal Home Loan Bank advances and other borrowed funds(29)(854)
Proceeds from senior notes issuances, net of debt issuance costs paidProceeds from senior notes issuances, net of debt issuance costs paid494  —  Proceeds from senior notes issuances, net of debt issuance costs paid737 494 
Extinguishment of senior notes payableExtinguishment of senior notes payable(844)
Exercise of stock options and employee stock purchasesExercise of stock options and employee stock purchases55  53  Exercise of stock options and employee stock purchases42 55 
Increase in bank depositsIncrease in bank deposits3,091  2,224  Increase in bank deposits3,539 3,091 
Purchases of treasury stockPurchases of treasury stock(222) (616) Purchases of treasury stock(127)(222)
Dividends on common stockDividends on common stock(154) (143) Dividends on common stock(163)(154)
Acquisitions of and distributions to noncontrolling interests, net(2) (54) 
Other financing, netOther financing, net(6)(2)
Net cash provided by financing activitiesNet cash provided by financing activities3,258  1,510  Net cash provided by financing activities3,149 3,258 
Currency adjustment:Currency adjustment:  Currency adjustment:  
Effect of exchange rate changes on cashEffect of exchange rate changes on cash(27) (12) Effect of exchange rate changes on cash114 (27)
Net increase in cash and cash equivalents and cash and cash equivalents segregated pursuant to regulations2,866  11  
Cash and cash equivalents and cash and cash equivalents segregated pursuant to regulations at beginning of year5,971  5,941  
Cash and cash equivalents and cash and cash equivalents segregated pursuant to regulations at end of period$8,837  $5,952  
Net increase in cash and cash equivalents, including those segregated pursuant to regulationsNet increase in cash and cash equivalents, including those segregated pursuant to regulations2,230 2,866 
Cash and cash equivalents, including those segregated pursuant to regulations at beginning of yearCash and cash equivalents, including those segregated pursuant to regulations at beginning of year9,634 5,971 
Cash and cash equivalents, including those segregated pursuant to regulations at end of periodCash and cash equivalents, including those segregated pursuant to regulations at end of period$11,864 $8,837 
Cash and cash equivalentsCash and cash equivalents$5,632  $3,596  Cash and cash equivalents$5,982 $5,632 
Cash and cash equivalents segregated pursuant to regulationsCash and cash equivalents segregated pursuant to regulations3,205  2,356  Cash and cash equivalents segregated pursuant to regulations5,882 3,205 
Total cash and cash equivalents and cash and cash equivalents segregated pursuant to regulations at end of period$8,837  $5,952  
Total cash and cash equivalents, including those segregated pursuant to regulations at end of periodTotal cash and cash equivalents, including those segregated pursuant to regulations at end of period$11,864 $8,837 
Supplemental disclosures of cash flow information:Supplemental disclosures of cash flow information:  Supplemental disclosures of cash flow information:  
Cash paid for interestCash paid for interest$118  $208  Cash paid for interest$113 $118 
Cash paid for income taxes, netCash paid for income taxes, net$202  $295  Cash paid for income taxes, net$335 $202 
Cash outflows for lease liabilitiesCash outflows for lease liabilities$84 $73 
Non-cash right-of-use (“ROU”) assets recorded for new and modified leasesNon-cash right-of-use (“ROU”) assets recorded for new and modified leases$101 $60 

See accompanying Notes to Condensed Consolidated Financial Statements (Unaudited).
7


RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
June 30, 20202021

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 forto 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-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 (“20192020 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 20192020 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 periodprior-period amounts have been reclassified to conform to the current period’s presentation.


8

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 20192020 Form 10-K. During the nine months ended June 30, 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 developmentsAccounting guidance adopted in fiscal 2021

Accounting guidance recently adoptedCredit losses

Lease accounting - In FebruaryJune 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 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 expedients elected did not impact our financial position or results of operations.

Accounting guidance not yet adopted as of June 30, 2020

Credit losses - In June 2016, the FASB issued new guidance related to the measurement of credit losses on financial instruments (ASU 2016-13)., 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 includein-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 firstwas effective for our fiscal year beginning on October 1, 2020 and will bewas adopted under a modified retrospective approach. Although permitted, we do not plan to early adopt. Our cross-functional team continues with the implementation efforts. We are in the processThe impact of validating our credit loss models and establishing formal procedures and control documentation related to this new guidance. In addition, we are finalizing required disclosures and policies. We continue to evaluate the impact the adoption of this new guidance willstandard 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 $35 million, net of tax. Prior-period amounts were calculated under the incurred loss model and have on ournot been restated. See Notes 8 and 9 for further information related to bank loans and loans to financial position and results of operations. The impact will ultimately depend on, among other things, our methodologies, management judgments, current and expected macroeconomic conditions,advisors and the nature and characteristicsrelated allowances for credit losses.

The following sections highlight changes to our accounting policies as a result of financial assetsthis adoption.

Available-for-sale securities

Available-for-sale securities are generally held by us onRaymond James Bank and are classified at the date of adoption.purchase. They are comprised primarily of agency mortgage-backed securities (“MBS”) and agency collateralized mortgage obligations (“CMOs”), which are guaranteed by the U.S. government or its agencies. Available-for-sale securities owned by Raymond James Bank are used as part of its interest rate risk and liquidity management strategies and may be sold in response to changes in interest rates, changes in prepayment risks, or other factors. As a result of 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 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 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 the short-term nature of 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.

9

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
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 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.



Internal use software (cloud computing) - In August 2018,We present the FASB issued guidanceoutstanding balance of loans to financial advisors on the accounting for implementation costs incurred by customers in cloud computing arrangements (ASU 2018-15). This guidance requires implementation costs incurred by customers in cloud computing arrangements to be deferred and recognized over the non-cancelable termour Condensed Consolidated Statements of Financial Condition, net of the cloud computing arrangements plus any optional renewal periods (1)allowance for credit losses. Refer to the allowance for credit losses section that are reasonably certainfollows for further information related to be exercised by the customer or (2)our allowance for which exercise of the renewal option is controlled by the cloud service provider. This amended guidance is first effectivecredit losses on our loans to financial advisors. See Note 9 for additional information on our fiscal year beginning on October 1, 2020, with early adoption permitted, and may be adopted using either a prospective or retrospective approach. We planloans to adopt this standard prospectively effective for annual periods beginning October 1, 2020. The impact of this amended guidance is dependent on implementation costs incurred subsequent to adoption.financial advisors.

Consolidation (decision making fees) - In October 2018,Loans to financial advisors are considered past due once they are 30 days or more delinquent as to the FASB issued guidancepayment of contractual interest or principal. Loans are placed on how all entities evaluate decision-making fees undernonaccrual status when we determine that full payment of contractual principal and interest is in doubt, or the VIE guidance (ASU 2018-17). Underloan is past due 180 days or more as to contractual interest or principal. When a loan is placed on nonaccrual status, the new guidance, to determine whether decision-making fees represent a variableaccrued and unpaid interest an entity considers indirect interests held through related parties under common controlreceivable is written-off against interest income. Interest is recognized on a proportionatecash basis rather than in their entirety. This guidance is first effectiveuntil the loan qualifies for our fiscal year beginningreturn 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 October 1, 2020. Although permitted, we do not plan to early adopt. We are evaluating the impact the adoption of this new guidance will have on our financial position and results of operations.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.
10

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.

11

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
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.

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.



NOTE 3 – ACQUISITIONS

Acquisitions announced and completed during the nine months ended June 30, 2021

NWPS

In December 2020, we 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 expands our retirement services offerings, which now include 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.

During the nine months ended June 30, 2021, the NWPS acquisition resulted in the addition of $139 million of goodwill and $96 million of identifiable intangible assets. 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.

Financo

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 expands 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.
12

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)

During the nine months ended June 30, 2021, the Financo acquisition resulted in the addition of $30 million of goodwill and $9 million of identifiable intangible assets. The goodwill associated with this acquisition primarily represents synergies from combining Financo with our existing businesses and 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.

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 announcements

Cebile

On May 25, 2021, we announced we had entered into a definitive agreement to acquire all of the outstanding shares of Cebile Capital (“Cebile”), a leading private fund placement agent and secondary market advisor to private equity firms. The addition of Cebile deepens our investment banking relationships with the private equity community and expands our related service offerings. For purposes of certain acquisition-related financial reporting requirements, the Cebile acquisition will not be considered a material acquisition. Cebile will operate within our Capital Markets segment upon closing of the acquisition, which we expect to occur during our fiscal fourth quarter of 2021 once all regulatory and other closing conditions are satisfactorily resolved.

Charles Stanley

On July 29, 2021, we announced our firm intention to make an offer for the entire issued and to be issued share capital of United Kingdom (“U.K.”)-based Charles Stanley Group PLC (“Charles Stanley”) at a price of £5.15 per share, or approximately £279 million. The combination would provide us the opportunity to accelerate growth in the U.K.; and, through Charles Stanley’s multiple affiliation options, give us the ability to offer wealth management affiliation choices consistent with our model in Canada and the U.S. For purposes of certain acquisition-related financial reporting requirements, the Charles Stanley acquisition will not be considered a material acquisition. The transaction, subject to U.K. Financial Conduct Authority and Charles Stanley shareholder approval, is expected to close in our fiscal first quarter of 2022. Charles Stanley will operate within our PCG segment upon completion of the acquisition.

Acquisition-related expenses

Certain acquisition and integration costs associated with these acquisitions were included in “Acquisition-related expenses” during fiscal 2021 on our Condensed Consolidated Statements of Income and Comprehensive Income. Such costs primarily included legal and other professional fees and, with respect to Financo, amortization expense related to intangible assets with short useful lives.


13

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 NoteNotes 2 and Note 43 of our 20192020 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$ in millionsLevel 1Level 2Level 3 Netting
adjustments
Balance as of
June 30, 2020
$ in millionsLevel 1Level 2Level 3 Netting
adjustments
Balance as of June 30, 2021
Assets at fair value on a recurring basis:Assets at fair value on a recurring basis:    Assets at fair value on a recurring basis:    
Trading instruments     
Assets segregated pursuant to regulationsAssets segregated pursuant to regulations$3,000 $0 $0 $ $3,000 
Trading assets:Trading assets:     
Municipal and provincial obligationsMunicipal and provincial obligations$ $77  $—  $—  $82  Municipal and provincial obligations1 139 0  140 
Corporate obligationsCorporate obligations 46  —  —  52  Corporate obligations13 40 0  53 
Government and agency obligationsGovernment and agency obligations16  66  —  —  82  Government and agency obligations16 81 0  97 
Agency mortgage-backed securities (“MBS”) and collateralized mortgage obligations (“CMOs”)—  102  —  —  102  
Agency MBS and agency CMOsAgency MBS and agency CMOs0 122 0  122 
Non-agency CMOs and asset-backed securities (“ABS”)Non-agency CMOs and asset-backed securities (“ABS”)—   —  —   Non-agency CMOs and asset-backed securities (“ABS”)0 17 0  17 
Total debt securitiesTotal debt securities27  298  —  —  325  Total debt securities30 399 0  429 
Equity securitiesEquity securities —  —  —   Equity securities14 3 0  17 
Brokered certificates of depositBrokered certificates of deposit—  12  —  —  12  Brokered certificates of deposit0 32 0  32 
OtherOther—  —  15  —  15  Other0 0 10  10 
Total trading instruments36  310  15  —  361  
Total trading assetsTotal trading assets44 434 10  488 
Available-for-sale securities (1)
Available-for-sale securities (1)
16  5,614  —  —  5,630  
Available-for-sale securities (1)
15 8,176 0  8,191 
Derivative assets
Derivative assets:Derivative assets:
Interest rate - matched bookInterest rate - matched book—  351  —  —  351  Interest rate - matched book0 221 0  221 
Interest rate - otherInterest rate - other15  239  —  (153) 101  Interest rate - other7 150 0 (95)62 
Foreign exchangeForeign exchange0 7 0  7 
OtherOther0 0 1  1 
Total derivative assetsTotal derivative assets15  590  —  (153) 452  Total derivative assets7 378 1 (95)291 
Other investments - private equity - not measured at net asset value (“NAV”)Other investments - private equity - not measured at net asset value (“NAV”)—  —  30  —  30  Other investments - private equity - not measured at net asset value (“NAV”)  66  66 
All other investments201   22  —  224  
All other investments:All other investments:
Government and agency obligations (2)
Government and agency obligations (2)
321 0 0  321 
OtherOther78 2 23  103 
Total all other investmentsTotal all other investments399 2 23  424 
SubtotalSubtotal268  6,515  67  (153) 6,697  Subtotal3,465 8,990 100 (95)12,460 
Other investments - private equity - measured at NAVOther investments - private equity - measured at NAV73  Other investments - private equity - measured at NAV93 
Total assets at fair value on a recurring basisTotal assets at fair value on a recurring basis$268  $6,515  $67  $(153) $6,770  Total assets at fair value on a recurring basis$3,465 $8,990 $100 $(95)$12,553 
Liabilities at fair value on a recurring basis:Liabilities at fair value on a recurring basis:Liabilities at fair value on a recurring basis:
Trading instruments sold but not yet purchased
Trading liabilities:Trading liabilities:
Municipal and provincial obligationsMunicipal and provincial obligations$ $—  $—  $—  $ Municipal and provincial obligations$2 $0 $0 $ $2 
Corporate obligationsCorporate obligations—   —  —   Corporate obligations0 20 0  20 
Government and agency obligationsGovernment and agency obligations105  —  —  —  105  Government and agency obligations163 0 0  163 
Non-agency CMOs and ABS—   —  —   
Total debt securitiesTotal debt securities106   —  —  112  Total debt securities165 20 0  185 
Equity securitiesEquity securities42  —  —  —  42  Equity securities73 0 0  73 
Total trading instruments sold but not yet purchased148   —  —  154  
Derivative liabilities
Total trading liabilitiesTotal trading liabilities238 20 0  258 
Derivative liabilities:Derivative liabilities:
Interest rate - matched bookInterest rate - matched book—  351  —  —  351  Interest rate - matched book0 221 0  221 
Interest rate - otherInterest rate - other17  154  —  (141) 30  Interest rate - other6 115 0 (83)38 
Foreign exchange—  12  —  —  12  
OtherOther—   —  —   Other0 0 4  4 
Total derivative liabilitiesTotal derivative liabilities17  518  —  (141) 394  Total derivative liabilities6 336 4 (83)263 
Total liabilities at fair value on a recurring basisTotal liabilities at fair value on a recurring basis$165  $524  $—  $(141) $548  Total liabilities at fair value on a recurring basis$244 $356 $4 $(83)$521 

(1) Substantially all of our available-for-sale securities consist of agency MBS and CMOs. See Note 4 for further information.
1114

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)




$ in millions$ in millionsLevel 1Level 2Level 3 Netting
adjustments
Balance as of
September 30, 2019
$ in millionsLevel 1Level 2Level 3 Netting
adjustments
Balance as of September 30, 2020
Assets at fair value on a recurring basis:Assets at fair value on a recurring basis:    Assets at fair value on a recurring basis:    
Trading instruments     
Trading assets:Trading assets:    
Municipal and provincial obligationsMunicipal and provincial obligations$—  $267  $—  $—  $267  Municipal and provincial obligations$$120 $$— $125 
Corporate obligationsCorporate obligations 95  —  —  103  Corporate obligations11 45 — 56 
Government and agency obligationsGovernment and agency obligations12  67  —  —  79  Government and agency obligations13 131 — 144 
Agency MBS and CMOs—  147  —  —  147  
Agency MBS and agency CMOsAgency MBS and agency CMOs130 — 130 
Non-agency CMOs and ABSNon-agency CMOs and ABS—  51  —  —  51  Non-agency CMOs and ABS13 — 13 
Total debt securitiesTotal debt securities20  627  —  —  647  Total debt securities29 439 — 468 
Equity securitiesEquity securities12   —  —  13  Equity securities11 — 16 
Brokered certificates of depositBrokered certificates of deposit—  45  —  —  45  Brokered certificates of deposit17 — 17 
OtherOther—  —   —   Other12 — 12 
Total trading instruments32  673   —  708  
Total trading assetsTotal trading assets40 461 12 — 513 
Available-for-sale securities (1)
Available-for-sale securities (1)
10  3,083  —  —  3,093  
Available-for-sale securities (1)
16 7,634 — 7,650 
Derivative assets
Derivative assets:Derivative assets:
Interest rate - matched bookInterest rate - matched book—  280  —  

—  280  Interest rate - matched book333 

— 333 
Interest rate - otherInterest rate - other 182  —  (127) 58  Interest rate - other16 224 (135)105 
Total derivative assetsTotal derivative assets 462  —  (127) 338  Total derivative assets16 557 (135)438 
Other investments - private equity - not measured at NAVOther investments - private equity - not measured at NAV—  —  63  —  63  Other investments - private equity - not measured at NAV— — 37 — 37 
All other investments194   24  —  219  
All other investments:All other investments:
Government and agency obligations (2)
Government and agency obligations (2)
103 — 103 
OtherOther92 22 — 115 
Total all other investmentsTotal all other investments195 22 — 218 
SubtotalSubtotal239  4,219  90  (127) 4,421  Subtotal267 8,653 71 (135)8,856 
Other investments - private equity - measured at NAVOther investments - private equity - measured at NAV83  Other investments - private equity - measured at NAV79 
Total assets at fair value on a recurring basisTotal assets at fair value on a recurring basis$239  $4,219  $90  $(127) $4,504  Total assets at fair value on a recurring basis$267 $8,653 $71 $(135)$8,935 
Liabilities at fair value on a recurring basis:Liabilities at fair value on a recurring basis:Liabilities at fair value on a recurring basis:
Trading instruments sold but not yet purchased
Trading liabilities:Trading liabilities:
Municipal and provincial obligationsMunicipal and provincial obligations$$$$— $
Corporate obligationsCorporate obligations$ $20  $—  $—  $22  Corporate obligations— 
Government and agency obligationsGovernment and agency obligations269  —  —  —  269  Government and agency obligations136 — 136 
Non-agency CMOs and ABSNon-agency CMOs and ABS— 
Total debt securitiesTotal debt securities271  20  —  —  291  Total debt securities137 — 144 
Equity securitiesEquity securities —  —  —   Equity securities96 — 96 
Other—  —   —   
Total trading instruments sold but not yet purchased275  20   —  296  
Derivative liabilities
Total trading liabilitiesTotal trading liabilities233 — 240 
Derivative liabilities:Derivative liabilities:
Interest rate - matched bookInterest rate - matched book—  280  —  —  280  Interest rate - matched book333 — 333 
Interest rate - otherInterest rate - other 142  —  (121) 25  Interest rate - other16 145 (112)49 
Foreign exchangeForeign exchange—   —  —   Foreign exchange— 
OtherOther—   —  —   Other— 
Total derivative liabilitiesTotal derivative liabilities 430  —  (121) 313  Total derivative liabilities16 484 (112)393 
Total liabilities at fair value on a recurring basisTotal liabilities at fair value on a recurring basis$279  $450  $ $(121) $609  Total liabilities at fair value on a recurring basis$249 $491 $$(112)$633 

(1)    Substantially all of our available-for-sale securities consist of agency MBS and agency CMOs. See Note 45 for further information.


(2)    These assets are comprised of U.S. Treasuries purchased to meet certain deposit requirements with clearing organizations or to meet future customer reserve requirements.
1215

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)




Level 3 recurring fair value measurements

The following tables present the changes in fair value for Level 3 assets and liabilities measured at fair value on a recurring basis. The realized and unrealized gains and losses in the tables may include changes in fair value that were attributable to both observable and unobservable inputs. In the following tables, gains/(losses) on trading instruments are reported in “Principal transactions” and gains/(losses) on other investments are reported in “Other” revenues.
Three months ended June 30, 2020
Level 3 instruments at fair value
Three months ended June 30, 2021
Level 3 instruments at fair value
Three months ended June 30, 2021
Level 3 instruments at fair value
Financial assetsFinancial liabilitiesFinancial assetsFinancial liabilities
Trading instrumentsOther investmentsTrading instrumentsTrading assetsDerivative assetsOther investmentsTrading liabilitiesDerivative liabilities
$ in millions$ in millionsOtherPrivate equity investmentsAll otherOther$ in millionsOtherOtherPrivate equity investmentsAll otherOtherOther
Fair value beginning of periodFair value beginning of period$21  $30  $22  $—  Fair value beginning of period$5 $0 $52 $23 $(1)$(4)
Total gains/(losses) included in earningsTotal gains/(losses) included in earnings(5) —  —  —  Total gains/(losses) included in earnings0 1 14 0 1 0 
Purchases and contributionsPurchases and contributions11  —  —  —  Purchases and contributions10 0 0 0 0 0 
Sales and distributionsSales and distributions(12) —  —  —  Sales and distributions(5)0 0 0 0 0 
Transfers:Transfers:    Transfers:    
Into Level 3Into Level 3—  —  —  —  Into Level 30 0 0 0 0 0 
Out of Level 3Out of Level 3—  —  —  —  Out of Level 30 0 0 0 0 0 
Fair value end of periodFair value end of period$15  $30  $22  $—  Fair value end of period$10 $1 $66 $23 $0 $(4)
Unrealized gains/(losses) for the period included in earnings for instruments held at the end of the reporting periodUnrealized gains/(losses) for the period included in earnings for instruments held at the end of the reporting period$ $—  $—  $—  Unrealized gains/(losses) for the period included in earnings for instruments held at the end of the reporting period$0 $1 $14 $0 $0 $0 
Nine Months Ended June 30, 2020
Level 3 instruments at fair value
Nine Months Ended June 30, 2021
Level 3 instruments at fair value
Nine Months Ended June 30, 2021
Level 3 instruments at fair value
Financial assetsFinancial liabilitiesFinancial assetsFinancial liabilities
Trading instrumentsOther investmentsTrading instrumentsTrading assetsDerivative assetsOther investmentsTrading liabilitiesDerivative liabilities
$ in millions$ in millionsOtherPrivate equity investmentsAll otherOther$ in millionsOtherOtherPrivate equity investmentsAll otherOtherOther
Fair value beginning of periodFair value beginning of period$ $63  $24  $(1) Fair value beginning of period$12 $0 $37 $22 $0 $(5)
Total gains/(losses) included in earningsTotal gains/(losses) included in earnings(2) (32) (2) —  Total gains/(losses) included in earnings0 1 29 1 0 1 
Purchases and contributionsPurchases and contributions64  —  —   Purchases and contributions26 0 0 0 0 0 
Sales and distributionsSales and distributions(50) (1) —  (1) Sales and distributions(28)0 0 0 0 0 
Transfers:Transfers:    Transfers:
Into Level 3Into Level 3—  —  —  —  Into Level 30 0 0 0 0 0 
Out of Level 3Out of Level 3—  —  —  —  Out of Level 30 0 0 0 0 0 
Fair value end of periodFair value end of period$15  $30  $22  $—  Fair value end of period$10 $1 $66 $23 $0 $(4)
Unrealized gains/(losses) for the period included in earnings for instruments held at the end of the reporting periodUnrealized gains/(losses) for the period included in earnings for instruments held at the end of the reporting period$ $(32) $(2) $—  Unrealized gains/(losses) for the period included in earnings for instruments held at the end of the reporting period$0 $1 $29 $0 $0 $1 
Three months ended June 30, 2019
Level 3 instruments at fair value
Financial assetsFinancial liabilities
 Trading instrumentsOther investmentsTrading instruments
$ in millionsOtherPrivate equity investmentsAll otherOther
Fair value beginning of period$ $59  $67  $(7) 
Total gains/(losses) included in earnings(1) —  (2) —  
Purchases and contributions26  —  —   
Sales and distributions(26) —  —  (3) 
Transfers:
Into Level 3—  —  —  —  
Out of Level 3—  —  —  —  
Fair value end of period$ $59  $65  $(3) 
Unrealized gains/(losses) for the period included in earnings for instruments held at the end of the reporting period$ $—  $(2) $—  

The net unrealized gains included in earnings on our Level 3 private equity investments for the three and nine months ended June 30, 2021 primarily reflected the impact of continued improvement in market conditions and an improved outlook for certain of our investments. Of these gains, $9 million and $18 million were attributable to noncontrolling interests, which are reflected as an offset in “Other” expenses on our Condensed Consolidated Statements of Income and Comprehensive Income.


1316

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)


Three months ended June 30, 2020
Level 3 instruments at fair value
Financial assetsFinancial liabilities
 Trading assetsOther investmentsTrading liabilities
$ in millionsOtherPrivate equity investmentsAll otherOther
Fair value beginning of period$21 $30 $22 $
Total gains/(losses) included in earnings(5)
Purchases and contributions11 
Sales and distributions(12)
Transfers:
Into Level 3
Out of Level 3
Fair value end of period$15 $30 $22 $
Unrealized gains/(losses) for the period included in earnings for instruments held at the end of the reporting period$$$$


Nine Months Ended June 30, 2019
Level 3 instruments at fair value
Nine Months Ended June 30, 2020
Level 3 instruments at fair value
Nine Months Ended June 30, 2020
Level 3 instruments at fair value
Financial assetsFinancial liabilitiesFinancial assetsFinancial liabilities
Trading instrumentsOther investmentsTrading instrumentsTrading assetsOther investmentsTrading liabilities
$ in millions$ in millionsOtherPrivate equity investmentsAll otherOther$ in millionsOtherPrivate equity investmentsAll otherOther
Fair value beginning of periodFair value beginning of period$ $56  $67  $(7) Fair value beginning of period$$63 $24 $(1)
Total gains/(losses) included in earningsTotal gains/(losses) included in earnings(1) —  (2)  Total gains/(losses) included in earnings(2)(32)(2)
Purchases and contributionsPurchases and contributions86   —  16  Purchases and contributions64 
Sales and distributionsSales and distributions(85) —  —  (14) Sales and distributions(50)(1)(1)
Transfers:Transfers:Transfers:
Into Level 3Into Level 3—  —  —  —  Into Level 3
Out of Level 3Out of Level 3—  —  —  —  Out of Level 3
Fair value end of periodFair value end of period$ $59  $65  $(3) Fair value end of period$15 $30 $22 $
Unrealized gains/(losses) for the period included in earnings for instruments held at the end of the reporting periodUnrealized gains/(losses) for the period included in earnings for instruments held at the end of the reporting period$ $—  $(2) $—  Unrealized gains/(losses) for the period included in earnings for instruments held at the end of the reporting period$$(32)$(2)$

The net unrealized losses on our Level 3 private equity investments for the nine months ended June 30, 2020 were primarily driven by the then anticipated negative impact of the coronavirus (“COVID-19”) pandemic on certain of our investments. Of these losses, $20 million 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 June 30, 2020, 15%2021, 22% 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 June 30, 2020 and September 30, 2019, instrumentsThe 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 June 30, 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.

17

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
Quantitative information about level 3 fair value measurements

The following tables presenttable 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
Recurring measurements
$ in millions
Fair value at June 30, 2020Valuation technique(s)Unobservable inputRange
(weighted-average)
Recurring measurements
$ in millions
Fair value at June 30, 2021Valuation technique(s)Unobservable inputRange
(weighted-average)
Other investments - private equity investments (not measured at NAV)Other investments - private equity investments (not measured at NAV)$30  Discounted cash flow, transaction price or other investment-specific eventsDiscount rate25%Other investments - private equity investments (not measured at NAV)$66 Discounted cash flow, transaction price or other investment-specific eventsDiscount rate25%
 Terminal earnings before interest, tax, depreciation and amortization (“EBITDA”) multiple9.0x Terminal year2034 - 2034 (2034)
 Terminal year2021 - 2042 (2024)Fair value at September 30, 2020
Fair value at September 30, 2019
Other investments - private equity investments (not measured at NAV)Other investments - private equity investments (not measured at NAV)$63  Discounted cash flow, transaction price or other investment-specific eventsDiscount rate25%Other investments - private equity investments (not measured at NAV)$37 Discounted cash flow, transaction price or other investment-specific eventsDiscount rate25%
 Terminal EBITDA multiple12.5x Terminal earnings before interest, tax, depreciation and amortization (“EBITDA”) multiple9.0x
 Terminal year2021 - 2042 (2022) Terminal year2021 - 2042 (2023)

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.


14

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)




Private equity investments

The significant unobservable inputs used in the fair value measurement of private equity investments generally relate to the financial performance of the investment entity and the market’s required return on investments from entities in industries in which we hold investments. Increases in the discount rate would have resulted in a lower fair value measurement. Increases in the terminal EBITDA multiple would have resulted in a higher fair value measurement. Increases in the terminal year are dependent upon each investment’s strategy, but generally result in a lower fair value measurement.

Investments in private equity measured at net asset value per share

As more fully described in Note 2 of our 20192020 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 June 30, 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 industriesstrategies 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.

18

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$ in millionsRecorded valueUnfunded commitment$ in millionsRecorded valueUnfunded commitment
June 30, 2020
June 30, 2021June 30, 2021
Private equity investments measured at NAVPrivate equity investments measured at NAV$73  $ Private equity investments measured at NAV$93 $8 
Private equity investments not measured at NAVPrivate equity investments not measured at NAV30  Private equity investments not measured at NAV66 
Total private equity investments
Total private equity investments
$103  
Total private equity investments
$159 
September 30, 2019
September 30, 2020September 30, 2020
Private equity investments measured at NAVPrivate equity investments measured at NAV$83  $15  Private equity investments measured at NAV$79 $
Private equity investments not measured at NAVPrivate equity investments not measured at NAV63  Private equity investments not measured at NAV37 
Total private equity investmentsTotal private equity investments$146  Total private equity investments$116 

Of the total private equity investments, the portions we owned were $81$115 million and $99$90 million as of June 30, 20202021 and September 30, 2019,2020, respectively. The portions of the private equity investments we did not own were $22$44 million and $47$26 million as of June 30, 20202021 and September 30, 2019,2020, respectively, and were included as a component of noncontrolling interests on our Condensed Consolidated Statements of Financial Condition.

ManyAs 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 theseour 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 2010.2010 (“Dodd-Frank Act”). We have received approval from the Board of Governors of the Federal Reserve System (the “Fed”(“the Fed”) to continue to hold the majority of our covered fund investments until July 2022. However, our current focus is on the divestiture of this portfolio.


15

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 millionsLevel 2Level 3Total fair valueValuation technique(s)Unobservable inputRange
(weighted-average)
June 30, 2020
Bank loans, net:
Impaired loans: residential$ $13  $18  Discounted cash flowPrepayment rate7 yrs. - 12 yrs. (10.4 yrs.)
Impaired loans: corporate$—  $ $ 
Collateral or discounted cash flow (1)
Not meaningful (1)
Not meaningful (1)
Loan held for sale$21  $—  $21  N/AN/AN/A
Other assets: other real estate owned$ $—  $ N/AN/AN/A
September 30, 2019
Bank loans, net:
Impaired loans: residential$ $14  $21  Discounted cash flowPrepayment rate7 yrs. - 12 yrs. (10.4 yrs.)
Impaired loans: corporate$—  $21  $21  
Collateral or discounted cash flow (1)
Not meaningful (1)
Not meaningful (1)
Loan held for sale$66  $—  $66  N/AN/AN/A
Other assets: other real estate owned$ $—  $ N/AN/AN/A
$ in millionsLevel 2Level 3Total fair valueValuation technique(s)Unobservable inputRange
(weighted-average)
June 30, 2021
Bank loans:
Residential mortgage loans$4 $11 $15 
Collateral or discounted cash flow (1)
Prepayment rate7 yrs. - 12 yrs. (10.6 yrs.)
Corporate loans$0 $25 $25 
Collateral or discounted cash flow (1)
Not meaningful (1)
Not meaningful (1)
Loans held for sale$68 $0 $68 N/AN/AN/A
September 30, 2020
Bank loans:
Residential mortgage loans$$13 $17 
Collateral or discounted cash flow (1)
Prepayment rate7 yrs. - 12 yrs. (10.6 yrs.)
Corporate loans$$15 $15 
Collateral or discounted cash flow (1)
Not meaningful (1)
Not meaningful (1)
Loans held for sale$38 $$38 N/AN/AN/A
Other assets: other real estate owned$$$N/AN/AN/A

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

19

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
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 June 30, 20202021 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 20192020 Form 10-K for a discussion of the fair value hierarchy classificationclassifications of our financial instruments that are not recorded at fair value.
$ in millions$ in millionsLevel 2Level 3Total estimated fair valueCarrying amount$ in millionsLevel 2Level 3Total estimated fair valueCarrying amount
June 30, 2020
June 30, 2021June 30, 2021
Financial assets:Financial assets:    Financial assets:    
Bank loans, netBank loans, net$65  $21,278  $21,343  $21,177  Bank loans, net$69 $23,614 $23,683 $23,788 
Financial liabilities:Financial liabilities: Financial liabilities: 
Bank deposits - certificates of depositBank deposits - certificates of deposit$—  $1,126  $1,126  $1,088  Bank deposits - certificates of deposit$0 $904 $904 $880 
Senior notes payableSenior notes payable$2,413  $—  $2,413  $2,044  Senior notes payable$2,457 $0 $2,457 $2,037 
September 30, 2019
September 30, 2020September 30, 2020
Financial assets:Financial assets:Financial assets:
Bank loans, netBank loans, net$75  $20,710  $20,785  $20,783  Bank loans, net$72 $21,119 $21,191 $21,125 
Financial liabilities:Financial liabilities: Financial liabilities: 
Bank deposits - certificates of depositBank deposits - certificates of deposit$—  $617  $617  $605  Bank deposits - certificates of deposit$$1,056 $1,056 $1,017 
Senior notes payableSenior notes payable$1,760  $—  $1,760  $1,550  Senior notes payable$2,504 $$2,504 $2,045 


NOTE 5 – AVAILABLE-FOR-SALE SECURITIES

Available-for-sale securities are primarily comprised of agency MBS and agency CMOs owned by Raymond James 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 Note 2 for further information about this guidance and a discussion of our available-for-sale securities.

The following table details the amortized costs and fair values of our available-for-sale securities.
$ in millionsCost basisGross
unrealized gains
Gross
unrealized losses
Fair value
June 30, 2021    
Agency residential MBS$4,958 $53 $(16)$4,995 
Agency commercial MBS1,263 10 (18)1,255 
Agency CMOs1,928 11 (13)1,926 
Other securities15 0 0 15 
Total available-for-sale securities$8,164 $74 $(47)$8,191 
September 30, 2020    
Agency residential MBS$4,064 $74 $(3)$4,135 
Agency commercial MBS948 22 (1)969 
Agency CMOs2,504 27 (1)2,530 
Other securities15 16 
Total available-for-sale securities$7,531 $124 $(5)$7,650 

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 June 30, 2021 and September 30, 2020, respectively, which was included in “Other receivables, net” on our Condensed Consolidated Statements of Financial Condition.

See Note 4 for additional information regarding the fair value of available-for-sale securities.


1620

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)




NOTE 4 – AVAILABLE-FOR-SALE SECURITIES

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

The following table details the amortized cost and fair values of our available-for-sale securities.
$ in millionsCost basisGross
unrealized gains
Gross
unrealized losses
Fair value
June 30, 2020    
Agency residential MBS$2,895  $69  $(1) $2,963  
Agency commercial MBS570  20  —  590  
Agency CMOs2,032  29  —  2,061  
Other securities15   —  16  
Total available-for-sale securities$5,512  $119  $(1) $5,630  
September 30, 2019    
Agency residential MBS$1,555  $20  $(1) $1,574  
Agency commercial MBS305   —  310  
Agency CMOs1,195   (3) 1,199  
Other securities10  —  —  10  
Total available-for-sale securities$3,065  $32  $(4) $3,093  

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

The following table details the contractual maturities, amortized costs, carrying values and current yields for our available-for-sale securities.  Since our MBS and CMO available-for-sale securities are backed by mortgages, actual maturities may differ from contractual maturities because borrowers may have the right to prepay obligations without prepayment penalties. As a result, as of June 30, 2020,2021, the durationweighted-average life of our available-for-sale securities portfolio was approximately three4 years.
June 30, 2020 June 30, 2021
$ in millions$ in millionsWithin one yearAfter one but
within five years
After five but
within ten years
After ten yearsTotal$ in millionsWithin one yearAfter one but
within five years
After five but
within ten years
After ten yearsTotal
Agency residential MBSAgency residential MBS     Agency residential MBS     
Amortized costAmortized cost$—  $27  $1,130  $1,738  $2,895  Amortized cost$0 $49 $2,160 $2,749 $4,958 
Carrying valueCarrying value$—  $28  $1,160  $1,775  $2,963  Carrying value$0 $51 $2,187 $2,757 $4,995 
Agency commercial MBSAgency commercial MBSAgency commercial MBS
Amortized costAmortized cost$12  $170  $285  $103  $570  Amortized cost$19 $297 $814 $133 $1,263 
Carrying valueCarrying value$12  $175  $298  $105  $590  Carrying value$19 $301 $803 $132 $1,255 
Agency CMOsAgency CMOs   Agency CMOs   
Amortized costAmortized cost$—  $11  $81  $1,940  $2,032  Amortized cost$0 $1 $44 $1,883 $1,928 
Carrying valueCarrying value$—  $11  $82  $1,968  $2,061  Carrying value$0 $1 $45 $1,880 $1,926 
Other securitiesOther securitiesOther securities
Amortized costAmortized cost$—  $ $12  $—  $15  Amortized cost$0 $7 $8 $0 $15 
Carrying valueCarrying value$—  $ $12  $—  $16  Carrying value$0 $7 $8 $0 $15 
Total available-for-sale securitiesTotal available-for-sale securitiesTotal available-for-sale securities
Amortized costAmortized cost$12  $211  $1,508  $3,781  $5,512  Amortized cost$19 $354 $3,026 $4,765 $8,164 
Carrying valueCarrying value$12  $218  $1,552  $3,848  $5,630  Carrying value$19 $360 $3,043 $4,769 $8,191 
Weighted-average yieldWeighted-average yield1.99 %2.29 %2.05 %1.82 %1.90 %Weighted-average yield2.10 %1.67 %1.22 %1.09 %1.17 %

17

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 months12 months or moreTotal Less than 12 months12 months or moreTotal
$ in millions$ in millionsEstimated
fair value
Unrealized
losses
Estimated
fair value
Unrealized
losses
Estimated
fair value
Unrealized
losses
$ in millionsEstimated
fair value
Unrealized
losses
Estimated
fair value
Unrealized
losses
Estimated
fair value
Unrealized
losses
June 30, 2020
Agency residential MBS$284  $(1) $—  $—  $284  $(1) 
Agency CMOs149  —  —  —  149  —  
Total$433  $(1) $—  $—  $433  $(1) 
September 30, 2019
June 30, 2021June 30, 2021
Agency residential MBSAgency residential MBS$166  $—  $114  $(1) $280  $(1) Agency residential MBS$2,294 $(16)$0 $0 $2,294 $(16)
Agency commercial MBSAgency commercial MBS—  —  44  —  44  —  Agency commercial MBS851 (18)0 0 851 (18)
Agency CMOsAgency CMOs145  (1) 351  (2) 496  (3) Agency CMOs968 (13)44 0 1,012 (13)
Other securitiesOther securities —  —  —   —  Other securities3 0 0 0 3 0 
TotalTotal$313  $(1) $509  $(3) $822  $(4)  Total$4,116 $(47)$44 $0 $4,160 $(47)
September 30, 2020September 30, 2020
Agency residential MBSAgency residential MBS$966 $(3)$$$966 $(3)
Agency commercial MBSAgency commercial MBS177 (1)177 (1)
Agency CMOsAgency CMOs410 (1)410 (1)
TotalTotal$1,553 $(5)$$$1,553 $(5)

The contractual cash flows of our available-for-sale securities are guaranteed by the U.S. government or its agencies. At June 30, 2020,2021, of the 26208 available-for-sale securities in an unrealized loss position, all205 were in a continuous unrealized loss position for less than 12 months and 3 securities were in a continuous unrealized loss position for greater than 12 months. We do not consider unrealized losses associated with these securities to be credit losses due to the guarantee of the full payment of principal and interest, and the fact that we have the ability and intent to hold these securities. In addition, unrealized losses related to these available-for-sale securities are generally due to changes in market interest rates. At June 30, 2020,2021, based on our assessment of this portfolio, we did not recognize an allowance for credit losses on our available-for-sale securities. At June 30, 2021, debt securities we held in excess of ten percent of our equity included those issued by the Federal National Home Mortgage Association (“FNMA”) and Federal Home Loan Mortgage Corporation (“FHLMC”) which had anwith amortized costcosts of $3.78$4.84 billion and $1.44$2.79 billion, respectively, and awhich also approximated the fair valuevalues of $3.86 billion and $1.47 billion, respectively.the securities.

During the three and nine months ended June 30, 2021, we received proceeds of $450 million and $969 million, respectively, from the sales of agency MBS and agency CMO available-for-sale securities. During the three and nine months ended June 30, 2020, we received proceeds of $222 million resulting in an insignificant gain, from sales of available-for-sale securities. The gain from theThese sales was includedresulted in “Other” revenues on our Condensed Consolidated Statements of Income and Comprehensive Income. During the three and nine months ended June 30, 2019, there were 0 sales of available-for-sale securities.


insignificant
1821

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)

gains in each period, which were included in “Other” revenues on our Condensed Consolidated Statements of Income and Comprehensive Income.



NOTE 56 – DERIVATIVE ASSETS AND DERIVATIVE LIABILITIES

Our derivative assets and derivative liabilities are recorded at fair value and are included in “Derivative assets” and “Derivative liabilities” on our Condensed Consolidated Statements of Financial Condition. Cash flows related to our derivatives are included within operating activities on the Condensed Consolidated Statements of Cash Flows. The significant accounting policies governing our derivatives, including our methodologies for determining fair value, are described in Note 2 of our 20192020 Form 10-K.

Derivative balances included on our financial statements

The following table presents the gross fair valuevalues and notional amountamounts of derivatives by product type, the amounts of counterparty and cash collateral netting on our Condensed Consolidated Statements of Financial Condition, as well as collateral posted and received under credit support agreements that do not meet the criteria for netting under GAAP.
June 30, 2020September 30, 2019June 30, 2021September 30, 2020
$ in millions$ in millionsDerivative assetsDerivative liabilitiesNotional amountDerivative assetsDerivative liabilitiesNotional amount$ in millionsDerivative assetsDerivative liabilitiesNotional amountDerivative assetsDerivative liabilitiesNotional amount
Derivatives not designated as hedging instrumentsDerivatives not designated as hedging instrumentsDerivatives not designated as hedging instruments
Interest rate - matched bookInterest rate - matched book$351  $351  $2,182  $280  $280  $2,296  Interest rate - matched book$221 $221 $1,862 $333 $333 $2,174 
Interest rate - other (1)
Interest rate - other (1)
254  171  15,443  184  146  10,690  
Interest rate - other (1)
157 121 14,977 240 161 19,206 
Foreign exchangeForeign exchange—   623  —   573  Foreign exchange3 0 755 605 
OtherOther—   516  —   272  Other1 4 578 608 
SubtotalSubtotal605  528  18,764  464  433  13,831  Subtotal382 346 18,172 573 502 22,593 
Derivatives designated as hedging instrumentsDerivatives designated as hedging instrumentsDerivatives designated as hedging instruments
Interest rateInterest rate—  —  850   —  850  Interest rate0 0 850 850 
Foreign exchangeForeign exchange—   842  —   856  Foreign exchange4 0 918 866 
SubtotalSubtotal—   1,692    1,706  Subtotal4 0 1,768 1,716 
Total gross fair value/notional amountTotal gross fair value/notional amount605  535  $20,456  465  434  $15,537  Total gross fair value/notional amount386 346 $19,940 573 505 $24,309 
Offset on the Condensed Consolidated Statements of Financial ConditionOffset on the Condensed Consolidated Statements of Financial ConditionOffset on the Condensed Consolidated Statements of Financial Condition
Counterparty nettingCounterparty netting(41) (41) (24) (24) Counterparty netting(45)(45)(40)(40)
Cash collateral nettingCash collateral netting(112) (100) (103) (97) Cash collateral netting(50)(38)(95)(72)
Total amounts offsetTotal amounts offset(153) (141) (127) (121) Total amounts offset(95)(83)(135)(112)
Net amounts presented on the Condensed Consolidated Statements of Financial ConditionNet amounts presented on the Condensed Consolidated Statements of Financial Condition452  394  338  313  Net amounts presented on the Condensed Consolidated Statements of Financial Condition291 263 438 393 
Gross amounts not offset on the Condensed Consolidated Statements of Financial ConditionGross amounts not offset on the Condensed Consolidated Statements of Financial ConditionGross amounts not offset on the Condensed Consolidated Statements of Financial Condition
Financial instruments (2)
Financial instruments (2)
(373) (351) (297) (280) 
Financial instruments (2)
(233)(221)(349)(333)
TotalTotal$79  $43  $41  $33  Total$58 $42 $89 $60 

(1)    Substantially all relates to interest rate derivatives entered into as part of our fixed income business operations, including to be announcedto-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.

The following table details the gains/(losses) included in accumulated other comprehensive income (“AOCI”), net of income taxes, on derivatives designated as hedging instruments. These gains/(losses) included any amounts reclassified from AOCI to net income during the period. See Note 1617 for additional information.
Three months ended June 30,Nine months ended June 30, Three months ended June 30,Nine months ended June 30,
$ in millions$ in millions2020201920202019$ in millions2021202020212020
Interest rate (cash flow hedges)Interest rate (cash flow hedges)$(4) $(19) $(37) $(49) Interest rate (cash flow hedges)$(2)$(4)$22 $(37)
Foreign exchange (net investment hedges)Foreign exchange (net investment hedges)(21) (12) 18  14  Foreign exchange (net investment hedges)(9)(21)(48)18 
Total gains/(losses) in AOCI, net of taxesTotal gains/(losses) in AOCI, net of taxes$(25) $(31) $(19) $(35) Total gains/(losses) in AOCI, net of taxes$(11)$(25)$(26)$(19)

22

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
There were 0 components of derivative gains or losses excluded from the assessment of hedge effectiveness for each of the three and nine months ended June 30, 20202021 and 2019.2020. We expect to reclassify $15$16 million of interest expense out of AOCI and into earnings within the next 12 months. The maximum length of time over which forecasted transactions are or will be hedged is 76 years.
19

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)




The following table details the gains/(losses) on derivatives not designated as hedging instruments recognized on the Condensed Consolidated Statements of Income and Comprehensive Income.
$ in millions$ in millionsThree months ended June 30,Nine months ended June 30,$ in millionsThree months ended June 30,Nine months ended June 30,
Location of gain/(loss)2020201920202019$ in millionsLocation of gain/(loss)2021202020212020
Interest rateInterest ratePrincipal transactions/other revenues$—  $ $ $ Interest ratePrincipal transactions/other revenues$2 $$12 $
Foreign exchangeForeign exchangeOther revenues$(19) $(8) $13  $14  Foreign exchangeOther revenues$(9)$(19)$(39)$13 
OtherOtherCompensation, commissions and benefits expense$—  $—  $(1) $ OtherPrincipal transactions$1 $$3 $
OtherOtherCompensation, commissions and benefits expense$0 $$0 $(1)

Risks associated with our derivatives and related risk mitigation

Credit risk

We are exposed to credit losses in the event of nonperformance by the counterparties to derivatives that are not cleared through a clearing organization. Where we are subject to credit exposure, we perform a credit evaluation of counterparties prior to entering into derivative transactions and we monitor their credit standings.  We may require initial margin or collateral from counterparties in the form of cash deposits or other marketable securities to support certain of these obligations as established by the credit threshold specified by the agreement and/or as a result of monitoring the credit standing of the counterparties.

Our only exposure to credit risk in theon matched book derivatives operations is related to our uncollected derivative transaction fee revenues, which were insignificant as of both June 30, 20202021 and September 30, 2019.2020. We are not exposed to market risk on these derivatives due to the pass-through transaction structure described in Note 2 of our 20192020 Form 10-K.

Interest rate and foreign exchange risk

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

Derivatives with credit-risk-related contingent features

Certain of our derivative contracts contain provisions that require our debt to maintain an investment-grade rating from 1 or more of the major credit rating agencies. If our debt were to fall below investment-grade, the counterparties to the derivative instruments could terminate and request immediate payment or demand immediate and ongoing overnight collateralization on our derivative instruments in liability positions. The aggregate fair value of all derivative instruments with such credit-risk-related contingent features that were in a liability position was insignificant as of both June 30, 2020 and September 30, 2019.


2023

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)




NOTE 67 – COLLATERALIZED AGREEMENTS AND FINANCINGS

Collateralized agreements are comprised of securities purchased under agreements to resell (“reverse repurchase agreements”) and securities borrowed. Collateralized financings are comprised of securities sold under agreements to repurchase (“repurchase agreements”) and securities loaned. We enter into these transactions in order to facilitate client activities, invest excess cash, acquire securities to cover short positions and finance certain firm activities. The significant accounting policies governing our collateralized agreements and financings are described in Note 2 of our 20192020 Form 10-K.

For financial statement purposes, we do not offset our reverse repurchase agreements, repurchase agreements, securities borrowing and securities lending transactions because the conditions for netting as specified by GAAP are not met. Our reverse repurchase agreements, repurchase agreements, securities borrowing and securities lending transactions are governed by master agreements that are widely used by counterparties and that may allow for net settlements of payments in the normal course, as well as offsetting of all contracts with a given counterparty in the event of bankruptcy or default of one of the parties to the transaction. For financial statement purposes, we do not offset our reverse repurchase agreements, repurchase agreements, securities borrowed and securities loaned because the conditions for netting as specified by GAAP are not met. Although not offset on the Condensed Consolidated Statements of Financial Condition, these transactions are included in the following table.
AssetsLiabilitiesCollateralized agreementsCollateralized financings
$ in millions$ in millionsReverse repurchase agreementsSecurities borrowedRepurchase agreementsSecurities loaned$ in millionsReverse repurchase agreementsSecurities borrowedTotalRepurchase agreementsSecurities loanedTotal
June 30, 2020
June 30, 2021June 30, 2021
Gross amounts of recognized assets/liabilitiesGross amounts of recognized assets/liabilities$193  $300  $228  $88  Gross amounts of recognized assets/liabilities$289 $350 $639 $185 $100 $285 
Gross amounts offset on the Condensed Consolidated Statements of Financial ConditionGross amounts offset on the Condensed Consolidated Statements of Financial Condition—  —  —  —  Gross amounts offset on the Condensed Consolidated Statements of Financial Condition0 0 0 0 0 0 
Net amounts presented on the Condensed Consolidated Statements of Financial ConditionNet amounts presented on the Condensed Consolidated Statements of Financial Condition193  300  228  88  Net amounts presented on the Condensed Consolidated Statements of Financial Condition289 350 639 185 100 285 
Gross amounts not offset on the Condensed Consolidated Statements of Financial ConditionGross amounts not offset on the Condensed Consolidated Statements of Financial Condition(193) (293) (228) (78) Gross amounts not offset on the Condensed Consolidated Statements of Financial Condition(289)(339)(628)(185)(96)(281)
Net amountsNet amounts$—  $ $—  $10  Net amounts$0 $11 $11 $0 $4 $4 
September 30, 2019
September 30, 2020September 30, 2020
Gross amounts of recognized assets/liabilitiesGross amounts of recognized assets/liabilities$343  $248  $150  $323  Gross amounts of recognized assets/liabilities$207 $215 $422 $165 $85 $250 
Gross amounts offset on the Condensed Consolidated Statements of Financial ConditionGross amounts offset on the Condensed Consolidated Statements of Financial Condition—  —  —  —  Gross amounts offset on the Condensed Consolidated Statements of Financial Condition
Net amounts presented on the Condensed Consolidated Statements of Financial ConditionNet amounts presented on the Condensed Consolidated Statements of Financial Condition343  248  150  323  Net amounts presented on the Condensed Consolidated Statements of Financial Condition207 215 422 165 85 250 
Gross amounts not offset on the Condensed Consolidated Statements of Financial ConditionGross amounts not offset on the Condensed Consolidated Statements of Financial Condition(343) (243) (150) (311) Gross amounts not offset on the Condensed Consolidated Statements of Financial Condition(207)(209)(416)(165)(79)(244)
Net amountsNet amounts$—  $ $—  $12  Net amounts$$$$$$

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

Collateral received and pledged

We receive cash and securities as collateral, primarily in connection with reverse repurchase agreements, securities borrowed, derivative transactions and client margin loans. The collateral we receive reduces our credit exposure to individual counterparties.

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


24

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
The following table presents financial instruments at fair value that we received as collateral, were not included on our Condensed Consolidated Statements of Financial Condition, and that were available to be delivered or repledged, along with the balances of such instruments that were delivered or repledged, to satisfy one of our purposes previously described.
$ in millions$ in millionsJune 30,
2020
September 30,
2019
$ in millionsJune 30, 2021September 30, 2020
Collateral we received that was available to be delivered or repledgedCollateral we received that was available to be delivered or repledged$2,516  $2,931  Collateral we received that was available to be delivered or repledged$3,515 $2,869 
Collateral that we delivered or repledgedCollateral that we delivered or repledged$723  $897  Collateral that we delivered or repledged$973 $788 


21

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)




Encumbered assets

We pledge certain of our assets to collateralize either repurchase agreements or other secured borrowings, maintain lines of credit, or to satisfy our collateral or settlement requirements with counterparties or clearing organizations who may or may not have the right to deliver or repledge such instruments. The following table presents information about our assets that have been pledged for one of the purposes previously described.
$ in millions$ in millionsJune 30,
2020
September 30,
2019
$ in millionsJune 30, 2021September 30, 2020
Had the right to deliver or repledgeHad the right to deliver or repledge$334  $591  Had the right to deliver or repledge$379 $325 
Did not have the right to deliver or repledgeDid not have the right to deliver or repledge$65  $65  Did not have the right to deliver or repledge$65 $65 
Bank loans, net pledged at Federal Home Loan Bank (“FHLB”) and the Federal Reserve Bank (“FRB”)$5,352  $4,653  
Bank loans, net pledged at the Federal Home Loan Bank (“FHLB”) and the Federal Reserve Bank of AtlantaBank loans, net pledged at the Federal Home Loan Bank (“FHLB”) and the Federal Reserve Bank of Atlanta$5,581 $5,367 

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

The following table presents the remaining contractual maturity of repurchase agreements and securities lending transactions accounted for as secured borrowings.
$ in millions$ in millionsOvernight and continuousUp to 30 days30-90 daysGreater than 90 daysTotal$ in millionsOvernight and continuousUp to 30 days30-90 daysGreater than 90 daysTotal
June 30, 2020
June 30, 2021June 30, 2021
Repurchase agreements:Repurchase agreements:Repurchase agreements:
Government and agency obligationsGovernment and agency obligations$104  $—  $—  $—  $104  Government and agency obligations$88 $0 $0 $0 $88 
Agency MBS and CMOs124  —  —  —  124  
Agency MBS and agency CMOsAgency MBS and agency CMOs97 0 0 0 97 
Total repurchase agreementsTotal repurchase agreements228  —  —  —  228  Total repurchase agreements185 0 0 0 185 
Securities loaned:Securities loaned:Securities loaned:
Equity securitiesEquity securities88  —  —  —  88  Equity securities100 0 0 0 100 
Total$316  

$—  

$—  

$—  

$316  
September 30, 2019
Total collateralized financingsTotal collateralized financings$285 

$0 

$0 

$0 

$285 
September 30, 2020September 30, 2020
Repurchase agreements:Repurchase agreements:Repurchase agreements:
Government and agency obligationsGovernment and agency obligations$70  $—  $—  $—  $70  Government and agency obligations$87 $$$$87 
Agency MBS and CMOs80  —  —  —  80  
Agency MBS and agency CMOsAgency MBS and agency CMOs78 78 
Total repurchase agreementsTotal repurchase agreements150  —  —  —  150  Total repurchase agreements165 165 
Securities loaned:Securities loaned:Securities loaned:
Equity securitiesEquity securities323  —  —  —  323  Equity securities85 85 
Total$473  $—  $—  $—  $473  
Total collateralized financingsTotal collateralized financings$250 $$$$250 

As of both June 30, 20202021 and September 30, 2019,2020, we did 0tnot have any “repurchase-to-maturity” agreements, which are repurchase agreements where a security is transferred under an agreement to repurchase and the maturity date of the repurchase agreement matches the maturity date of the underlying security.


25

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)

NOTE 78 – BANK LOANS, NET

Bank client receivables are comprised of loans originated or purchased by RJRaymond James Bank and include commercial and industrial (“C&I”)&I loans, REIT loans, tax-exempt loans, commercial and residential real estate loans, securities-based loans (“SBL”)and SBL and other loans. These receivables are collateralized by first and, to a lesser extent, second mortgages on residential or other real property, other assets of the borrower, a pledge of revenue, securities or are unsecured. See Note 2 of our 20192020 Form 10-K for a discussion of accounting policies related to bank loans and allowances for losses.loans.

As of October 1, 2020, we adopted new accounting guidance related to the measurement of credit losses on financial instruments. See Note 2 for further information about this guidance and a discussion of our accounting policies related to our allowance for credit losses. We segregate our loan portfolio into 6 loan portfolio segments: C&I, commercial real estate (“CRE”), CRE, construction,REIT, tax-exempt, residential mortgage, and SBL and other. TheseUpon adoption, we redefined certain of our portfolio segments also serve asto align with the new methodology applied in determining the allowance for credit losses. Prior-period loan portfolio loan classes for purposessegment balances have been revised to conform to the current presentation. Loan balances in the following tables are presented at amortized cost (outstanding principal balance net of credit analysis,unearned income and deferred expenses, which include purchase premiums, purchase discounts and net deferred origination fees and costs), except for residential mortgagecertain held for sale loans whichrecorded at fair value. Bank loans are further disaggregated into residential first mortgage and residential home equity classes.presented on our Condensed Consolidated Statements of Financial Condition at amortized cost (or fair value where applicable) less the allowance for credit losses.


22

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)




The following table presents the balances for both the held for sale and held for investment loan portfolios, as well as the associated percentage of each portfolio segment in RJRaymond James Bank’s total loan portfolio. “Loans held
 June 30, 2021September 30, 2020
$ in millionsBalance%Balance%
C&I loans$8,011 33 %$7,421 34 %
CRE loans2,728 11 %2,489 12 %
REIT loans1,270 5 %1,210 %
Tax-exempt loans1,320 6 %1,259 %
Residential mortgage loans5,170 21 %4,973 23 %
SBL and other5,582 23 %4,087 19 %
Total loans held for investment24,081 99 %21,439 99 %
Held for sale loans137 1 %110 %
Total loans held for sale and investment24,218 100 %21,549 100 %
Allowance for credit losses(322) (354) 
Bank loans, net$23,896  $21,195  
Accrued interest receivable on bank loans$47 $45 

The allowance for sale, net”credit losses as of June 30, 2021 was determined using the new CECL methodology, which was adopted on October 1, 2020. Prior periods have not been restated and “Total loans held for investment, net”were calculated under the incurred loss methodology.

Accrued interest receivables presented in the followingpreceding table are presented netreported in “Other receivables, net” on our Condensed Consolidated Statements of unearned income and deferred expenses, which include purchase premiums, purchase discounts and net deferred origination fees and costs.
 June 30, 2020September 30, 2019
$ in millionsBalance%Balance%
Loans held for investment:    
C&I loans$7,731  36 %$8,098  38 %
CRE construction loans219  %185  %
CRE loans3,695  17 %3,652  17 %
Tax-exempt loans1,290  %1,241  %
Residential mortgage loans4,917  23 %4,454  21 %
SBL and other3,631  17 %3,349  16 %
Total loans held for investment21,483   20,979   
Net unearned income and deferred expenses(12)  (12)  
Total loans held for investment, net21,471   20,967   
Loans held for sale, net86  —  142  %
Total loans held for sale and investment21,557  100 %21,109  100 %
Allowance for loan losses(334)  (218)  
Bank loans, net$21,223   $20,891   
Financial Condition.

At June 30, 2020,2021, the FHLB had a blanket lien on RJRaymond James Bank’s residential mortgage loan portfolio as security for the repayment of certain borrowings. See Note 1214 of our 2020 Form 10-K for more information regarding borrowings from the FHLB.

Loans heldHeld for sale loans

RJRaymond James Bank originated or purchased $185$385 million and $1.33$1.50 billion of loans held for sale during the three and nine months ended June 30, 2020,2021, respectively, and $522$185 million and $1.79$1.33 billion during the three and nine months ended June 30, 2019,2020, respectively. Proceeds from the sale of these held for sale loans amounted to $230 million and $625 million during the three and nine months ended June 30, 2021, respectively, and $130 million and $564 million during the three and nine months ended June 30, 2020, respectively, and $159 million and $516 million during the three and nine months ended June 30, 2019, respectively. Net gains resulting from such sales were insignificant in all periods during the three and nine months ended June 30, 20202021 and 2019.2020.

26

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
Purchases and sales of loans held for investment

The following table presents purchases and sales of any loans held for investment by portfolio segment.
$ in millions$ in millionsC&I loansCRE loansResidential mortgage loansTotal$ in millionsC&I loansCRE loansResidential mortgage loansTotal
Three months ended June 30, 2021Three months ended June 30, 2021
PurchasesPurchases$381 $0 $190 $571 
SalesSales$116 $0 $0 $116 
Nine months ended June 30, 2021Nine months ended June 30, 2021
PurchasesPurchases$1,041 $0 $350 $1,391 
SalesSales$216 $0 $0 $216 
Three months ended June 30, 2020Three months ended June 30, 2020Three months ended June 30, 2020
PurchasesPurchases$—  $—  $113  $113  Purchases$$$113 $113 
SalesSales$265  $27  $—  $292  Sales$265 $27 $$292 
Nine months ended June 30, 2020Nine months ended June 30, 2020Nine months ended June 30, 2020
PurchasesPurchases$363  $ $371  $739  Purchases$363 $$371 $739 
SalesSales$285  $27  $—  $312  Sales$285 $27 $$312 
Three months ended June 30, 2019
Purchases$247  $10  $132  $389  
Sales$ $—  $—  $ 
Nine months ended June 30, 2019
Purchases$937  $35  $254  $1,226  
Sales$100  $—  $—  $100  

Sales in the preceding table represent the recorded investment (i.e., net of charge-offs and discounts or premiums) of loans held for investment that were transferred to loans held for sale and subsequently sold to a third party during the respective period. As more fully described in Note 2 of our 20192020 Form 10-K, corporate loan (C&I, CRE and CRE construction) sales generally occur as part of our credit management activities.


23

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)




Aging analysis of loans held for investment

The following table presents an analysisinformation on delinquency status of the payment status ofour loans held for investment. Amounts in the table exclude any net unearned income and deferred expenses.
$ in millions$ in millions30-89
days and accruing
90 days or more and accruingTotal past due and accruingNonaccrualCurrent and accruingTotal loans held for investment$ in millions30-89 days and accruing90 days or more and accruingTotal past due and accruingNonaccrual with allowanceNonaccrual with no allowanceCurrent and accruingTotal loans held for investment
June 30, 2020      
June 30, 2021June 30, 2021      
C&I loansC&I loans$—  $—  $—  $ $7,730  $7,731  C&I loans$1 $0 $1 $0 $0 $8,010 $8,011 
CRE construction loans—  —  —  —  219  219  
CRE loansCRE loans—  —  —   3,689  3,695  CRE loans0 0 0 14 13 2,701 2,728 
REIT loansREIT loans0 0 0 0 0 1,270 1,270 
Tax-exempt loansTax-exempt loans—  —  —  —  1,290  1,290  Tax-exempt loans0 0 0 0 0 1,320 1,320 
Residential mortgage loans:   
First mortgage loans —   14  4,875  4,893  
Home equity loans/lines—  —  —  —  24  24  
Residential mortgage loansResidential mortgage loans2 0 2 1 14 5,153 5,170 
SBL and otherSBL and other—  —  —  —  3,631  3,631  SBL and other0 0 0 0 0 5,582 5,582 
Total loans held for investmentTotal loans held for investment$ $—  $ $21  $21,458  $21,483  Total loans held for investment$3 $0 $3 $15 $27 $24,036 $24,081 
September 30, 2019      
September 30, 2020September 30, 2020      
C&I loansC&I loans$—  $—  $—  $19  $8,079  $8,098  C&I loans$$$$$$7,419 $7,421 
CRE construction loans—  —  —  —  185  185  
CRE loansCRE loans—  —  —   3,644  3,652  CRE loans14 2,475 2,489 
REIT loansREIT loans1,210 1,210 
Tax-exempt loansTax-exempt loans—  —  —  —  1,241  1,241  Tax-exempt loans1,259 1,259 
Residential mortgage loans:   
First mortgage loans —   16  4,409  4,427  
Home equity loans/lines—  —  —  —  27  27  
Residential mortgage loansResidential mortgage loans11 4,959 4,973 
SBL and otherSBL and other—  —  —  —  3,349  3,349  SBL and other4,087 4,087 
Total loans held for investmentTotal loans held for investment$ $—  $ $43  $20,934  $20,979  Total loans held for investment$$$$$25 $21,409 $21,439 

The preceding table includes $6$28 million and $32$15 million at June 30, 20202021 and September 30, 2019,2020, respectively, of nonaccrual loans which were current pursuant to their contractual terms. The table also includes TDRs of $13 million for both CRE and residential first mortgage loans at June 30, 2021, and $6 million and $15 million, respectively, at September 30, 2020.

Other real estate owned, included in “Other assets” on our Condensed Consolidated Statements of Financial Condition, was $2 million and $3 millioninsignificant at both June 30, 20202021 and September 30, 2019, respectively.2020.


27

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
Collateral-dependent loans

A loan is considered collateral-dependent when the borrower is experiencing financial difficulty and repayment is expected to be provided substantially through the sale of the underlying collateral. At June 30, 2021, we had $27 million of collateral-dependent CRE loans, which were fully collateralized by retail and industrial real estate, and $8 million of collateral-dependent residential loans, which were fully collateralized by single family homes. Collateral-dependent loans do not include loans to borrowers who have been granted forbearance as result of the COVID-19 pandemic or loans for which the borrower had requested a loan modification, where the request had been initiated but had not been approved or completed as of the end of the quarter. Such loans may be considered collateral-dependent after the forbearance period expires. The recorded investment in mortgage loans secured by one-to-four family residential properties for which formal foreclosure proceedings were in process was $6$4 million and $7$6 million at June 30, 20202021 and September 30, 2019,2020, respectively.

Impaired loans and troubled debt restructurings

The following table provides a summary of RJ Bank’s impaired loans.
 June 30, 2020September 30, 2019
$ in millionsGross
recorded
investment
Unpaid
principal
balance
Allowance
for losses
Gross
recorded
investment
Unpaid
principal
balance
Allowance
for losses
Impaired loans with allowance for loan losses:     
C&I loans$ $ $ $19  $20  $ 
Residential - first mortgage loans 10   11  13   
Total 11   30  33   
Impaired loans without allowance for loan losses:     
CRE loans 12  —   13  —  
Residential - first mortgage loans11  16  —  11  17  —  
Total18  28  —  19  30  —  
Total impaired loans$27  $39  $ $49  $63  $ 

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

24

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)




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

The average balance of the total impaired loans was as follows.
 Three months ended June 30,Nine months ended June 30,
$ in millions2020201920202019
C&I loans$ $26  $10  $19  
CRE loans 10    
Residential - first mortgage loans19  24  20  25  
Total average impaired loan balance$27  $60  $37  $48  

Credit quality indicators

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

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

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

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

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

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


25
28

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)




The following table presents the credit quality of RJ Bank’stables present our held for investment bank loan portfolio.portfolio by year of origination and credit quality indicator as of June 30, 2021.
$ in millionsPassSpecial mentionSubstandardDoubtfulTotal
June 30, 2020
C&I loans$7,384  $281  $66  $—  $7,731  
CRE construction loans219  —  —  —  219  
CRE loans3,341  262  92  —  3,695  
Tax-exempt loans1,290  —  —  —  1,290  
Residential mortgage loans:
First mortgage loans4,861   23  —  4,893  
Home equity loans/lines24  —  —  —  24  
SBL and other3,631  —  —  —  3,631  
Total loans held for investment$20,750  $552  $181  $—  $21,483  
September 30, 2019
C&I loans$7,870  $152  $76  $—  $8,098  
CRE construction loans185  —  —  —  185  
CRE loans3,630  —  22  —  3,652  
Tax-exempt loans1,241  —  —  —  1,241  
Residential mortgage loans:
First mortgage loans4,392  10  25  —  4,427  
Home equity loans/lines27  —  —  —  27  
SBL and other3,349  —  —  —  3,349  
Total loans held for investment$20,694  $162  $123  $—  $20,979  
$ in millions20212020201920182017PriorRevolving loansTotal
C&I loans
Risk rating:
Pass$593$1,332$1,167$1,325$1,004$1,582$635$7,638
Special mention0042920880222
Substandard0039840280151
Doubtful00000000
Total C&I loans$593$1,332$1,248$1,501$1,004$1,698$635$8,011
CRE loans
Risk rating:
Pass$330$432$477$653$227$177$63$2,359
Special mention0458627000158
Substandard00321138580211
Doubtful00000000
Total CRE loans$330$477$595$793$235$235$63$2,728
REIT loans
Risk rating:
Pass$214$124$87$87$46$171$331$1,060
Special mention002311351068183
Substandard0021040227
Doubtful00000000
Total REIT loans$214$124$131$98$85$277$341$1,270
Tax-exempt loans
Risk rating:
Pass$125$59$121$209$272$534$0$1,320
Special mention00000000
Substandard00000000
Doubtful00000000
Total tax-exempt loans$125$59$121$209$272$534$0$1,320
Residential mortgage loans
Risk rating:
Pass$1,381$1,363$712$447$489$733$17$5,142
Special mention00000505
Substandard0001220023
Doubtful00000000
Total residential mortgage loans$1,381$1,363$712$448$491$758$17$5,170
SBL and other
Risk rating:
Pass$0$45$12$0$0$0$5,525$5,582
Special mention00000000
Substandard00000000
Doubtful00000000
Total SBL and other$0$45$12$0$0$0$5,525$5,582

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


2629

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)




Allowance forWe also monitor the credit quality of the residential mortgage loan lossesportfolio utilizing FICO scores and reserve for unfunded lending commitmentsLTV ratios. A FICO score measures a borrower’s creditworthiness by considering factors such as payment and credit history. LTV measures the carrying value of the loan as a percentage of the value of the property securing the loan.

The following table presents changes in the allowanceheld for investment residential mortgage loan losses of RJ Bankportfolio by portfolio segment.FICO score and by LTV ratio at origination.
Loans held for investment
$ in millionsC&I loansCRE construction loansCRE loansTax-exempt loansResidential mortgage loansSBL and otherTotal
Three months ended June 30, 2020     
Balance at beginning of period$197  $ $88  $11  $18  $ $324  
Provision/(benefit) for loan losses59   20    (2) 81  
Net (charge-offs)/recoveries:      
Charge-offs (1)
(71) —  (2) —  —  —  (73) 
Recoveries—  —  —  —   —   
Net (charge-offs)/recoveries(71) —  (2) —   —  (72) 
Foreign exchange translation adjustment —  —  —  —  —   
Balance at end of period$186  $ $106  $13  $20  $ $334  
Nine months ended June 30, 2020
Balance at beginning of period$139  $ $46  $ $16  $ $218  
Provision for loan losses118   62    —  188  
Net (charge-offs)/recoveries:     
Charge-offs (1)
(71) —  (2) —  —  —  (73) 
Recoveries—  —  —  —   —   
Net (charge-offs)/recoveries(71) —  (2) —   —  (72) 
Foreign exchange translation adjustment—  —  —  —  —  —  —  
Balance at end of period$186  $ $106  $13  $20  $ $334  
Three months ended June 30, 2019
Balance at beginning of period$140  $ $45  $ $17  $ $218  
Provision/(benefit) for loan losses(8)    (1)  (5) 
Net (charge-offs)/recoveries:     
Charge-offs (1)
—  —  —  —  —  —  —  
Recoveries —  —  —  —  —   
Net recoveries —  —  —  —  —   
Foreign exchange translation adjustment —  —  —  —  —   
Balance at end of period$134  $ $46  $ $16  $ $215  
Nine months ended June 30, 2019
Balance at beginning of period$123  $ $47  $ $17  $ $203  
Provision/(benefit) for loan losses13    —  (2)  16  
Net (charge-offs)/recoveries:     
Charge-offs (1)
(3) —  (3) —  —  —  (6) 
Recoveries —  —  —   —   
Net (charge-offs)/recoveries(2) —  (3) —   —  (4) 
Foreign exchange translation adjustment—  —  —  —  —  —  —  
Balance at end of period$134  $ $46  $ $16  $ $215  
$ in millionsJune 30, 2021September 30, 2020
FICO score:
Below 600$66 $67 
600 - 699398 363 
700 - 7993,665 3,463 
800 +1,036 1,076 
FICO score not available5 
Total$5,170 $4,973 
LTV ratio:
Below 80%$4,044 $3,852 
80%+1,126 1,121 
Total$5,170 $4,973 

(1) Charge-offs related to loan sales amounted $61 million for both the three and nine months ended June 30, 2020 and $2 million for the nine months ended June 30, 2019.
2730

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)

Allowance for credit losses



The following table presents by loan portfolio segment, RJ Bank’s recorded investment (excluding any net unearned income and deferred expenses) andchanges in the related allowance for loan losses.credit losses on held for investment bank loans by portfolio segment.
Loans held for investment
Allowance for loan lossesRecorded investment
$ in millionsIndividually evaluated for impairmentCollectively evaluated for impairmentTotalIndividually evaluated for impairmentCollectively evaluated for impairmentTotal
June 30, 2020
C&I loans$ $185  $186  $ $7,730  $7,731  
CRE construction loans—    —  219  219  
CRE loans—  106  106   3,689  3,695  
Tax-exempt loans—  13  13  —  1,290  1,290  
Residential mortgage loans 19  20  25  4,892  4,917  
SBL and other—    —  3,631  3,631  
Total$ $332  $334  $32  $21,451  $21,483  
September 30, 2019
C&I loans$ $133  $139  $19  $8,079  $8,098  
CRE construction loans—    —  185  185  
CRE loans—  46  46   3,644  3,652  
Tax-exempt loans—    —  1,241  1,241  
Residential mortgage loans 15  16  28  4,426  4,454  
SBL and other—    —  3,349  3,349  
Total$ $211  $218  $55  $20,924  $20,979  
$ in millionsC&I loansCRE loansREIT loansTax-exempt loansResidential mortgage loansSBL and otherTotal
Three months ended June 30, 2021     
Balance at beginning of period$203 $74 $36 $2 $26 $4 $345 
Provision/(benefit) for credit losses(14)2 (10)0 3 0 (19)
Net (charge-offs)/recoveries:      
Charge-offs(1)(3)0 0 0 0 (4)
Recoveries0 0 0 0 0 0 0 
Net (charge-offs)/recoveries(1)(3)0 0 0 0 (4)
Foreign exchange translation adjustment0 0 0 0 0 0 0 
Balance at end of period$188 $73 $26 $2 $29 $4 $322 
Nine months ended June 30, 2021
Balance at beginning of period$200 $81 $36 $14 $18 $5 $354 
Impact of CECL adoption19 (11)(9)(12)24 (2)9 
Provision/(benefit) for credit losses(29)5 (1)0 (13)1 (37)
Net (charge-offs)/recoveries:     
Charge-offs(3)(3)0 0 0 0 (6)
Recoveries0 0 0 0 0 0 0 
Net (charge-offs)/recoveries(3)(3)0 0 0 0 (6)
Foreign exchange translation adjustment1 1 0 0 0 0 2 
Balance at end of period$188 $73 $26 $2 $29 $4 $322 
Three months ended June 30, 2020
Balance at beginning of period$196 $54 $38 $11 $18 $$324 
Provision/(benefit) for credit losses59 24 (3)(2)81 
Net (charge-offs)/recoveries:     
Charge-offs(71)(2)(73)
Recoveries
Net (charge-offs)/recoveries(71)(2)(72)
Foreign exchange translation adjustment
Balance at end of period$185 $76 $35 $13 $20 $$334 
Nine months ended June 30, 2020
Balance at beginning of period$139 $34 $15 $$16 $$218 
Provision/(benefit) for credit losses117 44 20 188 
Net (charge-offs)/recoveries:    
Charge-offs(71)(2)(73)
Recoveries
Net (charge-offs)/recoveries(71)(2)(72)
Foreign exchange translation adjustment
Balance at end of period$185 $76 $35 $13 $20 $$334 

The reserveallowance for credit losses on held for investment bank loans decreased $23 million to $322 million during three months ended June 30, 2021, primarily due to an improved forecast for macroeconomic inputs, including unemployment and gross domestic product, and improved credit ratings within the corporate loan portfolio. The allowance for credit losses decreased $41 million to $322 million since the adoption of CECL on October 1, 2020, largely attributable to improved forecasts for certain macroeconomic inputs to our CECL model since our adoption date, including improved outlooks on unemployment and gross domestic product, which favorably impact most of our loan portfolios, as well as improved credit ratings within our corporate loan portfolio.

31

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
The allowance for credit losses on unfunded lending commitments, which is included in “Other payables” on our Condensed Consolidated Statements of Financial Condition, was $11$15 million, $17 million and $9$12 million at June 30, 20202021, March 31, 2021 and September 30, 2019,2020, respectively. The decrease in the allowance for credit losses on unfunded lending commitments during the three months ended June 30, 2021 was primarily due to an improved outlook for commercial real estate compared with March 31, 2021. The increase in the allowance for credit losses on unfunded lending commitments as of June 30, 2021 compared with September 30, 2020 was predominantly due to the adoption impact of CECL.

See Note 2 for further information about the adoption of CECL and the impact to the allowance for credit losses.


28

RAYMOND JAMESNOTE 9 – LOANS TO FINANCIAL INC. AND SUBSIDIARIESADVISORS, NET
Notes
Loans to financial advisors are primarily comprised of loans originated as a part of our recruiting activities. See Note 2 for a discussion of our accounting policies related to loans to financial advisors and the related allowance for credit losses. The following table presents the balances for our loans to financial advisors and the related accrued interest receivable.
$ in millionsJune 30, 2021September 30, 2020
Currently affiliated with the firm (1)
$1,059 $1,001 
No longer affiliated with the firm (2)
12 15 
Total loans to financial advisors1,071 1,016 
Allowance for credit losses(29)(4)
Loans to financial advisors, net$1,042 $1,012 
Accrued interest receivable on loans to financial advisors$4 $
(1) These loans were predominately current.
(2) These loans were predominately past due for a period of 180 days or more and on nonaccrual status.

The allowance for credit losses as of June 30, 2021 was determined using the CECL methodology, which we adopted on October 1, 2020. Prior periods calculated under the incurred loss methodology have not been restated. The increase in the allowance from September 30, 2020 to June 30, 2021 was primarily due to the October 1, 2020 CECL adoption, which resulted in an increase in our allowance for credit losses of $25 million. See Note 2 for further information on the CECL adoption.

Accrued interest receivables presented in the preceding table are reported in “Other receivables, net” on the Condensed Consolidated Statements of Financial Statements (Unaudited)Condition.




NOTE 810 – VARIABLE INTEREST ENTITIES

A VIE requires consolidation by the entity’s primary beneficiary.  We evaluate all of the entities in which we are involved to determine if the entity is a VIE and if so, whether we hold a variable interest and are the primary beneficiary. Refer to Note 2 of our 20192020 Form 10-K for a discussion of our principal involvement with VIEs and the accounting policies regarding determination of whether we are deemed to be the primary beneficiary of VIEs.

VIEs where we are the primary beneficiary

Of the VIEs in which we hold an interest, we have determined that certain limited partnerships which are part of our private equity portfolio (“Private Equity Interests”), certain Low-Income Housing Tax Credit (“LIHTC”) funds and the trust we utilize in connection with restricted stock unit (“RSU”) awards granted to certain employees of one of our Canadian subsidiaries (the “Restricted Stock Trust Fund”) require consolidation in our financial statements, as we are deemed the primary beneficiary of such VIEs.  The aggregate assets and liabilities of the VIEs we consolidate are provided in the following table. Aggregate assets and aggregate liabilities may differ from the consolidated carrying value of assets and liabilities due to the elimination of intercompany assets and liabilities held by the consolidated VIE.
$ in millionsAggregate assetsAggregate liabilities
June 30, 2020  
Private Equity Interests$33  $ 
LIHTC funds246  159  
Restricted Stock Trust Fund19  19  
Total$298  $182  
September 30, 2019  
Private Equity Interests$65  $ 
LIHTC funds80   
Restricted Stock Trust Fund14  14  
Total$159  $23  
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RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
$ in millionsAggregate assetsAggregate liabilities
June 30, 2021  
Private Equity Interests$57 $4 
LIHTC funds66 6 
Restricted Stock Trust Fund21 21 
Total$144 $31 
September 30, 2020  
Private Equity Interests$39 $
LIHTC funds168 76 
Restricted Stock Trust Fund14 14 
Total$221 $94 

The following table presents information about the carrying value of the assets and liabilities of the VIEs which we consolidate and which are included on our Condensed Consolidated Statements of Financial Condition. Intercompany balances are eliminated in consolidation and not reflected in the following table.
$ in millions$ in millionsJune 30, 2020September 30, 2019$ in millionsJune 30, 2021September 30, 2020
Assets:Assets:  Assets:  
Cash, cash equivalents and cash segregated pursuant to regulations$ $ 
Cash and cash equivalents and assets segregated pursuant to regulationsCash and cash equivalents and assets segregated pursuant to regulations$7 $
Other investmentsOther investments56 37 
Other investments32  63  
Other assetsOther assets240  75  Other assets65 164 
Total assetsTotal assets$279  $145  Total assets$128 $210 
Liabilities:Liabilities:  Liabilities:  
Other payablesOther payables$156  $ Other payables$7 $76 
Total liabilitiesTotal liabilities$156  $ Total liabilities$7 $76 
Noncontrolling interestsNoncontrolling interests$50  $60  Noncontrolling interests$55 $62 

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

As discussed in Note 2 of our 20192020 Form 10-K, we have concluded that for certain VIEs we are not the primary beneficiary and therefore do not consolidate these VIEs. Such VIEs include certain Private Equity Interests, certain LIHTC funds, and other limited partnerships. Our risk of loss for these VIEs is limited to our investments in, advances to, and/or receivables due from these VIEs.


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RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)




Aggregate assets, liabilities and risk of loss

The aggregate assets, liabilities, and our exposure to loss from those VIEs in which we hold a variable interest, but as to which we have concluded we are not the primary beneficiary, are provided in the following table.
June 30, 2020September 30, 2019 June 30, 2021September 30, 2020
$ in millions$ in millionsAggregate
assets
Aggregate
liabilities
Our risk
of loss
Aggregate
assets
Aggregate
liabilities
Our risk
of loss
$ in millionsAggregate
assets
Aggregate
liabilities
Our risk
of loss
Aggregate
assets
Aggregate
liabilities
Our risk
of loss
Private Equity InterestsPrivate Equity Interests$4,404  $107  $61  $6,317  $117  $63  Private Equity Interests$7,398 $43 $81 $7,738 $96 $67 
LIHTC fundsLIHTC funds6,218  1,977  25  6,001  2,221  64  LIHTC funds6,771 2,174 34 6,516 1,993 66 
OtherOther216  130   205  115   Other457 137 9 227 136 
TotalTotal$10,838  $2,214  $91  $12,523  $2,453  $131  Total$14,626 $2,354 $124 $14,481 $2,225 $139 


NOTE 911 - GOODWILL AND IDENTIFIABLE INTANGIBLE ASSETS, NET

Our goodwill and identifiedidentifiable intangible assets result from various acquisitions. During the nine months ended June 30, 2021, we acquired NWPS and Financo, both of which resulted in goodwill and identifiable intangible assets. See Note 3 for additional information on these acquisitions and the related goodwill and identifiable intangible assets. See Notes 2 and 1110 of our 20192020 Form 10-K for additional information about our goodwill and intangible assets, including the related accounting policies.

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RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
We perform goodwill and indefinite-lived intangible asset impairment testing on an annual basis or when an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying value or indicate that the asset is impaired.  We performed our latest annual impairment testing for our goodwill and indefinite-lived intangible asset as of our January 1, 20202021, our annual evaluation date, evaluating balances as of December 31, 2019. We2020. In this annual evaluation, we performed a qualitative impairment assessment for each of our reporting units that had goodwill, as well as for our indefinite-lived intangible asset.  Based upon the outcome of our qualitative assessments, 0 impairment was identified.

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

Subsequent to our annual Based upon the outcome of these qualitative assessments, 0 impairment testing, as a result of a deterioration in market conditions due to the COVID-19 pandemic, we performed an evaluation to determine whether the economic impacts resulting from the pandemic were indicators requiringwas identified. No events have occurred since such assessments that would cause us to perform anupdate this impairment test as of June 30, 2020. Multiple factors, including performance, macroeconomic, and fair value indicators, were assessed with respect to each of our reporting units to determine whether it was more likely than not that the estimated fair value of any of these reporting units was less than its estimated carrying value. As a result of our review, we concluded that the fair value of our reporting units had not more likely than not been reduced below their respective carrying values and that the impact of the COVID-19 pandemic through the end of our fiscal third quarter of 2020 was not a triggering event to perform a quantitative test. We will continue to monitor the effects of the COVID-19 pandemic, including market declines, unfavorable economic conditions, declining financial performance, and other factors that could increase the risk of impairment of our goodwill and indefinite-lived intangible asset in future periods.testing.


NOTE 1012 – LEASES

We have operatingThe following table presents the balances related to our leases for the premises we occupy in many of our U.S. and foreign locations, including our employee-based branch office operations. We also lease certain office and technology equipment. At inception, we determine if an arrangement to utilize a building or piece of equipment is a lease and, if so, the appropriate lease classification. If the arrangement is determined to be a lease, we recognize a ROU asset and a corresponding lease liability on our balance sheet. ROU assets represent our right to use an underlying asset for the lease term, and lease liabilities represent our obligation to make lease payments arising from the lease. We have elected the practical expedient, where leases with an initial term of 12 months or less are not recorded as an ROU asset or lease liability. Our lease terms include any noncancelable periods and may reflect periods covered by options to extend or terminate when it is reasonably certain that we will exercise those options. As of June 30, 2020, the weighted-average remaining lease term for our operating leases was five years.

We record our operating lease ROU assets at the amount of the lease liability plus any prepaid rent and initial direct costs, less any lease incentives and accrued rent. We record lease liabilities at commencement date based on the present value of lease payments over the lease term, which is discounted using our commencement date incremental borrowing rate. Our incremental borrowing rate considers the weighted-average yields on our senior notes payable, adjusted for collateralization and tenor. As of June 30, 2020, the
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RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)




weighted-average discount rate for our operating leases was 3.84%. Payments that vary because of changes in facts or circumstances occurring after the commencement date are considered variable and are expensed in the period incurred. For our real estate leases, we elected the practical expedient to account for the lease and non-lease components as a single lease. We have not elected the practical expedient for our equipment leases and account for lease and non-lease components separately. As of June 30, 2020, ROU assets of $326 million and lease liabilities of $351 million were included as components of “Other assets” and “Other payables,” respectively, on our Condensed Consolidated Statements of Financial Condition. The weighted-average remaining lease term and discount rate for our leases was 5.8 years and 3.70%, respectively, as of June 30, 2021. See Note 2 of our 2020 Form 10-K for a discussion of our accounting policies related to leases.
$ in millionsJune 30, 2021September 30, 2020
ROU assets (included in Other assets)$344 $321 
Lease liabilities (included in Other payables)$372 $345 

Lease expense

The following table details the components of lease expense, which is included in “Occupancy and equipment” expense on our Condensed Consolidated Statements of Income and Comprehensive Income. Lease expense for operating lease payments is recognized on a straight-line basis over the lease term if the ROU asset has not been impaired or abandoned.

The components of lease expense were as follows.
$ in millionThree months ended June 30, 2020Nine months ended June 30, 2020
Operating lease costs$25  $71  
Variable lease costs$ $18  
Three months ended June 30,Nine months ended June 30,
$ in millions2021202020212020
Lease costs$27 25 $81 71 
Variable lease costs$7 $20 18 

Variable lease costs in the preceding table includesinclude payments for common area maintenance charges and other variable costs that are not reflected in the measurement of ROU assets and lease liabilities.

Finance leases and sublease income were immaterial for all periods presented. Short-term lease expenses for the three and nine months ended June 30, 2020 were immaterial.

Lease liabilities

MaturitiesThe maturities by fiscal year of our lease liabilities as of June 30, 2020 were as follows.2021 are presented in the following table.
Maturity of lease liabilities for fiscal year ended September 30,$ in millions
Remainder of 2020$18  
2021102  
$ in millions
Remainder of 2021Remainder of 2021$18 
2022202279  202298 
2023202363  202381 
2024202446  202460 
After 202485  
Total lease payments393  
2025202546 
ThereafterThereafter114 
Gross lease paymentsGross lease payments417 
Less: interestLess: interest42  Less: interest(45)
Present value of lease liabilitiesPresent value of lease liabilities$351  Present value of lease liabilities$372 

Operating leaseLease payments in the preceding table exclude $188$136 million of legally binding minimum lease payments for leases signed but not yet commenced. These leases are estimated to commence between fiscal year 20202021 and 20212022 with lease terms ranging from five yearsone year to 11 years.

Statement of cash flows supplemental information
$ in millionsThree months ended June 30, 2020Nine months ended June 30, 2020
Cash outflows - lease liabilities$26  $73  
Non-cash - ROU assets recorded for new and modified leases$21  $60  


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Notes to Condensed Consolidated Financial Statements (Unaudited)




Minimum future lease commitments (under previous GAAP)

As of the date of adoption, our undiscounted minimum annual rental commitments under operating leases were materially unchanged from the disclosure in Note 17 of our 2019 Form 10-K, which is included in the following table.
Fiscal year ended September 30,$ in millions
2020$103  
202195  
202279  
202366  
202449  
Thereafter127  
Total$519  


NOTE 1113 – BANK DEPOSITS

Bank deposits include savings and money market accounts, certificates of deposit with RJRaymond James Bank, Negotiable Order of Withdrawal (“NOW”) accounts and demand deposits. The following table presents a summary of bank deposits, includingas well as the weighted-average rate, theinterest rates on such deposits. The calculation of which wasthe weighted-average rates were based on the actual deposit balances and rates at each respective period.period end.
June 30, 2020September 30, 2019June 30, 2021September 30, 2020
$ in millions$ in millionsBalanceWeighted-average rateBalanceWeighted-average rate$ in millionsBalanceWeighted-average rateBalanceWeighted-average rate
Savings and money market accountsSavings and money market accounts$24,106  0.01 %$21,654  0.25 %Savings and money market accounts$29,257 0.01 %$25,604 0.01 %
Certificates of depositCertificates of deposit1,088  1.98 %605  2.33 %Certificates of deposit880 1.91 %1,017 1.94 %
NOW accountsNOW accounts156  1.92 % 0.01 %NOW accounts171 1.76 %156 1.92 %
Demand deposits (non-interest-bearing)Demand deposits (non-interest-bearing)22  —  16  —  Demand deposits (non-interest-bearing)32 0 24 
Total$25,372  0.11 %$22,281  0.31 %
Total bank depositsTotal bank deposits$30,340 0.07 %$26,801 0.09 %

Total bank deposits in the preceding table exclude affiliate deposits of $185 million at both June 30, 20202021 and $163 million at September 30, 2019,2020, all of which were held in a deposit account at RJRaymond James Bank on behalf of RJF.

Savings and money market accounts in the preceding table consist primarily of deposits that are cash balances swept to Raymond James Bank from the client investment accounts maintained at Raymond James & Associates, Inc. (“RJ&A”) to RJ Bank.. These balances are held in Federal Deposit Insurance Corporation (“FDIC”)-insured bank accounts through the Raymond James Bank Deposit Program (“RJBDP”). The aggregate amount of individual time deposit account balances that exceeded the FDIC insurance limit at June 30, 20202021 was approximately $47$23 million.

The following table sets forth the scheduled maturities of certificates of deposit.
June 30, 2020September 30, 2019
$ in millionsDenominations
greater than or
equal to $100,000
Denominations
less than $100,000
Denominations
greater than or
equal to $100,000
Denominations
less than $100,000
Three months or less$71  $30  $24  $19  
Over three through six months55  73  26  21  
Over six through twelve months28  22  75  37  
Over one through two years36  198  32  36  
Over two through three years58  149  40  93  
Over three through four years56  156  66  47  
Over four through five years 149  38  51  
Total certificates of deposit$311  $777  $301  $304  
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Notes to Condensed Consolidated Financial Statements (Unaudited)
June 30, 2021September 30, 2020
$ in millionsDenominations
greater than or
equal to $100,000
Denominations
less than $100,000
Denominations
greater than or
equal to $100,000
Denominations
less than $100,000
Three months or less$29 $26 $59 $76 
Over three through six months11 85 26 18 
Over six through twelve months33 104 19 26 
Over one through two years61 149 43 206 
Over two through three years55 157 67 170 
Over three through four years6 149 37 165 
Over four through five years8 7 98 
Total certificates of deposit$203 $677 $258 $759 




Interest expense on deposits, excluding interest expense related to affiliate deposits, is summarized in the following table.
Three months ended June 30,Nine months ended June 30,
$ in millions2020201920202019
Savings, money market, and NOW accounts$ $29  $20  $96  
Certificates of deposit  15   
Total interest expense on deposits$ $33  $35  $105  


NOTE 12 – OTHER BORROWINGS
The following table details the components of other borrowings.
$ in millionsJune 30, 2020September 30, 2019
FHLB advances$875  $875  
Mortgage notes payable and other15  19  
Total other borrowings$890  $894  

FHLB advances

Borrowings from the FHLB as of June 30, 2020 and September 30, 2019, were comprised of both floating and fixed-rate advances. As of June 30, 2020 and September 30, 2019, the floating-rate advances totaled $850 million. The interest rates on the floating-rate advances, which mature in December 2022, reset quarterly and are generally based on LIBOR. We use interest rate swaps to manage the risk of increases in interest rates associated with these floating-rate advances by converting the balances subject to variable interest rates to a fixed interest rate. Refer to Note 2 of our 2019 Form 10-K for information regarding these interest rate swaps, which are accounted for as hedging instruments. As of both June 30, 2020 and September 30, 2019, the fixed-rate advance totaled $25 million and bears interest at a fixed rate of 3.4%. This advance matures in October 2020. All of the advances were secured by a blanket lien granted to the FHLB on our residential mortgage loan portfolio. The weighted-average interest rate on these FHLB advances as of June 30, 2020 and September 30, 2019 was 0.50% and 2.17%, respectively.

Secured and unsecured financing arrangements

On February 19, 2019, RJF and RJ&A entered into an unsecured revolving credit facility agreement (the “Credit Facility”). The Credit Facility has a maturity date of February 2024 and the lenders include a number of financial institutions. This committed unsecured borrowing facility provides for maximum borrowings of up to $500 million, with a sublimit of $300 million for RJF. RJ&A may borrow up to $500 million under the Credit Facility, depending on the amount of outstanding borrowings of RJF. The interest rates on borrowings under the Credit Facility are variable and based on LIBOR, as adjusted for RJF’s credit rating. There were 0 borrowings outstanding on the Credit Facility as of June 30, 2020. There is a facility fee associated with the Credit Facility, which also varies with RJF’s credit rating. Based upon RJF’s credit rating as of June 30, 2020, the variable rate facility fee, which is applied to the committed amount, was 0.175% per annum.

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

We also have other collateralized financings included in “Securities sold under agreements to repurchase” and “Securities loaned” on our Condensed Consolidated Statements of Financial Condition. See Note 6 for information regarding our other collateralized financing arrangements.

Mortgage notes payable and other

Mortgage notes payable pertain to mortgage loans on certain of our corporate headquarters offices located in St. Petersburg, Florida. These mortgage loans are secured by land, buildings, and improvements.  These mortgage loans bear a fixed interest rate of 5.7% with repayment terms of monthly interest and principal debt service and have a January 2023 maturity.
Three months ended June 30,Nine months ended June 30,
$ in millions2021202020212020
Savings, money market, and NOW accounts$1 $$4 $20 
Certificates of deposit4 13 15 
Total interest expense on deposits$5 $$17 $35 


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RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)




NOTE 1314 – SENIOR NOTES PAYABLE

The following table summarizes our senior notes payable.
$ in millionsJune 30, 2020September 30, 2019
5.625% senior notes, due 2024$250  $250  
3.625% senior notes, due 2026500  500  
4.65% senior notes, due 2030500  —  
4.95% senior notes, due 2046800  800  
Total principal amount2,050  1,550  
Unaccreted premium/(discount) 11  
Unamortized debt issuance costs(15) (11) 
Total senior notes payable$2,044  $1,550  

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

In July 2016, we sold in a registered underwritten public offering $500 million in aggregate principal amount of 3.625% senior notes due September 2026. Interest on these senior notes is payable semi-annually. We may redeem some or all of these senior notes at any time prior to their maturity, at a redemption price equal to the greater of (i) 100% of the principal amount of the notes redeemed, or (ii) the sum of the present values of the remaining scheduled payments of principal and interest thereon, discounted to the redemption date at a discount rate equal to a designated U.S. Treasury rate, plus 35 basis points, plus accrued and unpaid interest thereon to the redemption date.
$ in millionsJune 30, 2021September 30, 2020
4.65% senior notes, due 2030$500 $500 
4.95% senior notes, due 2046800 800 
3.750% senior notes, due 2051750 
5.625% senior notes, due 20240 250 
3.625% senior notes, due 20260 500 
Total principal amount2,050 2,050 
Unaccreted premium5 10 
Unamortized debt issuance costs(18)(15)
Total senior notes payable$2,037 $2,045 

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

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

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. Interest on these senior notes is payable semi-annually. We may redeem some or all of these senior notes at any time prior to October 1, 2050, at a redemption price equal to the greater of (i) 100% of the principal amount of the notes redeemed, or (ii) the sum of the present values of the remaining scheduled payments of principal and interest thereon, discounted to the redemption date at a discount rate equal to a designated U.S. Treasury rate, plus 20 basis points; and on or after October 1, 2050, at 100% of the principal amount of the notes redeemed; plus, in each case, accrued and unpaid interest thereon to the redemption date.

Tender offers and redemptions of certain senior notes

Concurrently with the launch of our offering of $750 million in aggregate principal amount of 3.75% senior notes due April 2051 described above, we commenced cash tender offers (the “Tender Offers”) for any and all of our then outstanding 5.625% senior notes due 2024 and 3.625% senior notes due 2026 (the “Pre-existing Notes”). Pursuant to the Tender Offers, in April 2021 we repurchased an aggregate of $332 million outstanding Pre-existing Notes for an aggregate purchase price of $373 million.

In addition, in April 2021 we issued notices of redemption to holders of the Pre-existing Notes pursuant to the indentures governing such notes, to redeem any Pre-existing Notes that remained outstanding following the closing of the Tender Offers. In May 2021 we redeemed the remaining outstanding balance of the Pre-existing Notes of $418 million for an aggregate redemption price of $473 million.

These repurchases and redemptions of the Pre-existing Notes were funded with the net proceeds from our 3.75% senior notes due April 2051 and cash on hand, and resulted in a loss of $98 million which is comprised of make-whole premiums, unamortized debt issuance costs which were accelerated, and certain legal and professional fees. This loss was presented in
36

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
“Losses on extinguishment of debt” on our Condensed Consolidated Statements of Income and Comprehensive Income in our third fiscal quarter of 2021.


NOTE 1415 – INCOME TAXES

The income tax provision for interim periods is comprised of tax on ordinary income provided at the most recent estimated annual effective tax rate, adjusted for the tax effect of discrete items.  We estimate the annual effective tax rate quarterly based on the forecasted pretaxpre-tax results of our U.S. and non-U.S. operations. Items unrelated to current year ordinary income are recognized entirely in the period identified as a discrete item of tax.  These discrete items generally relate to changes in tax laws, adjustments to the actual liability determined upon filing tax returns, excess tax benefits related to share-based compensation and adjustments to previously recorded reserves for uncertain tax positions. For discussion of income tax accounting policies and other income tax related information, see Notes 2 and 16 of our 20192020 Form 10-K.


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Notes to Condensed Consolidated Financial Statements (Unaudited)




Effective tax rate

Our effective income tax rate was 23.5%20.9% for the nine months ended June 30, 2020,2021, which was lower than the 24.8%22.2% effective tax rate for fiscal year 2019.2020. The decrease in the effective tax rate compared to the prior year effectiveincome tax rate was primarily due to the favorable impact of permanent tax benefits on lower pre-tax earnings during the nine months ended June 30, 2020.an increase in valuation gains associated with our company-owned life insurance policies which are not subject to tax.

Uncertain tax positions

We anticipateAlthough management cannot predict with any degree of certainty the timing of ultimate resolution of matters under review by various taxing jurisdictions, it is reasonably possible that theour uncertain tax position liability balance will not change significantly overmay decrease within the next twelve months.12 months by up to $4 million as a result of the expiration of statutes of limitations and the completion of tax authorities’ examinations.


NOTE 1516 – COMMITMENTS, CONTINGENCIES AND GUARANTEES

Commitments and contingencies

Loan and underwritingUnderwriting commitments

In the normal course of business, we enter into commitments for debt and equity underwritings. As of June 30, 2020,2021, we had 113 such open underwriting commitments, which were subsequently settled in open market transactions and none of which resulteddid not result in a significant loss.losses.

We offer loans to prospective financial advisors and certain key revenue producers primarily for recruiting, transitional cost assistance, and retention purposes (see Note 2 of our 2019 Form 10-K for a discussion of our accounting policies governing these transactions). These offers are contingent upon certain events occurring, including the individuals joining us and meeting certain conditions outlined in their offer. Our unfunded loanLending commitments related to such offers were insignificant as of June 30, 2020.

Commitments to extend credit and other credit-related financial instruments

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

The following table presents RJRaymond James Bank’s commitments to extend credit and other credit-related off-balance sheet financial instruments outstanding.
$ in millions$ in millionsJune 30, 2020September 30, 2019$ in millionsJune 30, 2021September 30, 2020
Open-end consumer lines of credit (primarily SBL)Open-end consumer lines of credit (primarily SBL)$11,397  $9,328  Open-end consumer lines of credit (primarily SBL)$15,866 $12,148 
Commercial lines of creditCommercial lines of credit$1,373  $1,527  Commercial lines of credit$1,813 $1,482 
Unfunded loan commitments$592  $599  
Unfunded lending commitmentsUnfunded lending commitments$502 $532 
Standby letters of creditStandby letters of credit$30  $40  Standby letters of credit$24 $33 

Open-end consumer lines of credit primarily represent the unfunded amounts of RJ Bankbank loans to consumers that are secured by marketable securities at advance rates consistent with industry standards. The proceeds from repayment or, if necessary, the liquidation of collateral, which is monitored daily, are expected to satisfy the amounts drawn against these existing lines of
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RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
credit. These lines of credit are primarily uncommitted, as we reserve the right to not make any advances or may terminate these lines at any time.

Because many of ourRaymond James Bank’s lending commitments expire without being funded in whole or in part, the contractual amounts are not estimates of our actual future credit exposure or future liquidity requirements. We maintain a reserve to provideThe allowance for credit losses calculated under CECL provides for potential losses related to the unfunded lending commitments. See Note 7Notes 2 and 8 for further discussion of this reserveallowance for credit losses related to unfunded lending commitments.

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


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RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
We offer loans to prospective financial advisors for recruiting and retention purposes (see Notes 2 and 9 for further discussion of our loans to Condensed Consolidated Financial Statements (Unaudited)financial advisors). These offers are contingent upon certain events occurring, including the individuals joining us and meeting certain conditions outlined in their offer.




Investment commitments

We had unfunded commitments to various investments, including private equity investments and certain RJRaymond James Bank investments, of $38$37 million as of June 30, 2020.2021.

Other commitments

Raymond James Tax Credit Funds, Inc. (“RJTCF”) sells investments in project partnerships to various LIHTC funds, which have third-party investors, and for which RJTCF serves as the managing member or general partner. RJTCF typically sells investments in project partnerships to LIHTC funds within 90 days of their acquisition. Until such investments are sold to LIHTC funds, RJTCF is responsible for funding investment commitments to such partnerships. As of June 30, 2020,2021, RJTCF had committed approximately $130$167 million to project partnerships that had not yet been sold to LIHTC funds. Because we expect to sell these project partnerships to LIHTC funds and the equity funding events arise over future periods, the contractual commitments are not expected to materially impact our future liquidity requirements. RJTCF may also make short-term loans or advances to project partnerships and LIHTC funds.

As a part of our fixed income public finance operations, we enter into forward commitments to purchase agency MBS (see the discussion of these activities withinMBS. See Note 2 of our 20192020 Form 10-K).10-K for further discussion of these activities.  At June 30, 2020,2021, we had $426$222 million of principal amount of outstanding forward MBS purchase commitments, which were expected to be purchased within 90 days following commitment.  In order to hedge the market interest rate risk to which we would otherwise be exposed between the date of the commitment and the date of sale of the MBS, we enter into TBA security contracts with investors for generic MBS at specific rates and prices to be delivered on settlement dates in the future. We may be subject to loss if the timing of, or the actual amount of, the MBS differs significantly from the term and notional amount of the TBA security contract to which we entered.  These TBA securities and related purchase commitments are accounted for at fair value. As of June 30, 2020,2021, the fair value of the TBA securities and the estimated fair value of the purchase commitments were insignificant.

For information regarding our lease commitments, including the maturities of our lease liabilities, see Note 12.

Guarantees

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

We guarantee the debt of one of our private equity investments. The amount of such debt, including the undrawn portion of a revolving credit facility, was $13 million as of June 30, 2020.2021. The debt, which matures in 2022, is secured by substantially all of the assets of the borrower.

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RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
Legal and regulatory matter contingencies

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

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

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

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RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)




For many legal and regulatory matters, we are unable to estimate a range of reasonably possible loss as we cannot predict if, how or when such proceedings or investigations will be resolved or what the eventual settlement, fine, penalty or other relief, if any, may be. A large number of factors may contribute to this inherent unpredictability: the proceeding is in its early stages; the damages sought are unspecified, unsupported or uncertain; it is unclear whether a case brought as a class action will be allowed to proceed on that basis; the other party is seeking relief other than or in addition to compensatory damages (including, in the case of regulatory and governmental proceedings, potential fines and penalties); the matters present significant legal uncertainties; we have not engaged in settlement discussions; discovery is not complete; there are significant facts in dispute; and numerous parties are named as defendants (including where it is uncertain how liability might be shared among defendants). Subject to the foregoing, after consultation with counsel, we believe that the outcome of such litigation and regulatory proceedings will not have a material adverse effect on our consolidated financial condition. However, the outcome of such litigation and regulatory proceedings could be material to our operating results and cash flows for a particular future period, depending on, among other things, our revenues or income for such period.

There are certain matters for which we are unable to estimate the upper end of the range of reasonably possible loss. With respect to legal and regulatory matters for which management has been able to estimate a range of reasonably possible loss as of June 30, 2020,2021, we estimated the upper end of the range of reasonably possible aggregate loss to be approximately $125$175 million in excess of the aggregate accruals for such matters.  Refer to Note 2 of our 20192020 Form 10-K for a discussion of our criteria for recognizing liabilities for contingencies.

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


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Notes to Condensed Consolidated Financial Statements (Unaudited)




NOTE 1617 – ACCUMULATED OTHER COMPREHENSIVE INCOME/(LOSS)

All of the components of other comprehensive income (“OCI”), net of tax, were attributable to RJF. The following table presents the net change in AOCI as well as the changes, and the related tax effects, of each component of AOCI.
$ in millionsNet investment hedgesCurrency translationsSubtotal: net investment hedges and currency translationsAvailable- for-sale securitiesCash flow hedgesTotal
Three months ended June 30, 2020
AOCI as of beginning of period$149  $(191) $(42) $83  $(52) $(11) 
OCI:
OCI before reclassifications and taxes(29) 32    (7)  
Amounts reclassified from AOCI, before tax—  —  —  —    
Pre-tax net OCI(29) 32    (5)  
Income tax effect —   (2)   
OCI for the period, net of tax(21) 32  11   (4) 12  
AOCI as of end of period$128  $(159) $(31) $88  $(56) $ 
Nine months ended June 30, 2020
AOCI as of beginning of period$110  $(135) $(25) $21  $(19) $(23) 
OCI:
OCI before reclassifications and taxes23  (24) (1) 90  (51) 38  
Amounts reclassified from AOCI, before tax—  —  —  —    
Pre-tax net OCI23  (24) (1) 90  (49) 40  
Income tax effect(5) —  (5) (23) 12  (16) 
OCI for the period, net of tax18  (24) (6) 67  (37) 24  
AOCI as of end of period$128  $(159) $(31) $88  $(56) $ 
Three months ended June 30, 2019
AOCI as of beginning of period$114  $(142) $(28) $(9) $12  $(25) 
OCI:
OCI before reclassifications and taxes(16) 18   32  (24) 10  
Amounts reclassified from AOCI, before tax—  —  —  —  (1) (1) 
Pre-tax net OCI(16) 18   32  (25)  
Income tax effect —   (8)   
OCI for the period, net of tax(12) 18   24  (19) 11  
AOCI as of end of period$102  $(124) $(22) $15  $(7) $(14) 
Nine months ended June 30, 2019
AOCI as of beginning of period$88  $(111) $(23) $(46) $42  $(27) 
Cumulative effect of adoption of ASU 2016-01—  —  —  (4) —  (4) 
OCI:
OCI before reclassifications and taxes18  (13)  90  (64) 31  
Amounts reclassified from AOCI, before tax—  —  —  —  (4) (4) 
Pre-tax net OCI18  (13)  90  (68) 27  
Income tax effect(4) —  (4) (25) 19  (10) 
OCI for the period, net of tax14  (13)  65  (49) 17  
AOCI as of end of period$102  $(124) $(22) $15  $(7) $(14) 

As of October 1, 2018, we adopted accounting guidance (ASU 2016-01) that generally requires changes in the fair value of equity securities to be recorded in net income. Accordingly, as of the date of adoption, we reclassified a cumulative unrealized gain on such securities, net of tax, from AOCI to retained earnings.
$ in millionsNet investment hedgesCurrency translationsSubtotal: net investment hedges and currency translationsAvailable- for-sale securitiesCash flow hedgesTotal
Three months ended June 30, 2021
AOCI as of beginning of period$76 $(81)$(5)$(4)$(29)$(38)
OCI:
OCI before reclassifications and taxes(12)14 2 36 (7)31 
Amounts reclassified from AOCI, before tax0 0 0 (2)3 1 
Pre-tax net OCI(12)14 2 34 (4)32 
Income tax effect3 0 3 (9)2 (4)
OCI for the period, net of tax(9)14 5 25 (2)28 
AOCI as of end of period$67 $(67)$0 $21 $(31)$(10)
Nine months ended June 30, 2021
AOCI as of beginning of period$115 $(140)$(25)$89 $(53)$11 
OCI:
OCI before reclassifications and taxes(63)71 8 (84)18 (58)
Amounts reclassified from AOCI, before tax0 2 2 (7)11 6 
Pre-tax net OCI(63)73 10 (91)29 (52)
Income tax effect15 0 15 23 (7)31 
OCI for the period, net of tax(48)73 25 (68)22 (21)
AOCI as of end of period$67 $(67)$0 $21 $(31)$(10)
Three months ended June 30, 2020
AOCI as of beginning of period$149 $(191)$(42)$83 $(52)$(11)
OCI:
OCI before reclassifications and taxes(29)32 (7)
Amounts reclassified from AOCI, before tax
Pre-tax net OCI(29)32 (5)
Income tax effect(2)
OCI for the period, net of tax(21)32 11 (4)12 
AOCI as of end of period$128 $(159)$(31)$88 $(56)$
Nine months ended June 30, 2020
AOCI as of beginning of period$110 $(135)$(25)$21 $(19)$(23)
OCI:
OCI before reclassifications and taxes23 (24)(1)90 (51)38 
Amounts reclassified from AOCI, before tax
Pre-tax net OCI23 (24)(1)90 (49)40 
Income tax effect(5)(5)(23)12 (16)
OCI for the period, net of tax18 (24)(6)67 (37)24 
AOCI as of end of period$128 $(159)$(31)$88 $(56)$

Reclassifications from AOCI to net income, excluding taxes, for the three and nine months ended June 30, 2020 and 20192021 were primarily recorded in “Other” revenue and “Interest expense” on the Condensed Consolidated Statements of Income and Comprehensive Income.

Our net investment hedges and cash flow hedges relate to our derivatives associated with RJRaymond James Bank’s business operations. SeeFor further information about our significant accounting policies related to derivatives, see Note 2 of our 20192020 Form 10-K and10-K. See Note 56 of this Form 10-Q for additional information on these derivatives.

38
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RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)




NOTE 1718 – REVENUES

The following tables present our sources of revenues by segment. For further information about our significant accounting policies related to revenue recognition, see Note 2 of our 20192020 Form 10-K. See Note 2223 of this Form 10-Q for additional information on our segment results.
Three months ended June 30, 2020Three months ended June 30, 2021
$ in millions$ in millionsPrivate Client GroupCapital MarketsAsset ManagementRJ BankOther and intersegment eliminationsTotal$ in millionsPrivate Client GroupCapital MarketsAsset ManagementRaymond James BankOther and intersegment eliminationsTotal
Revenues:Revenues:Revenues:
Asset management and related administrative feesAsset management and related administrative fees$715  $ $157  $—  $(6) $867  Asset management and related administrative fees$1,050 $1 $218 $0 $(7)$1,262 
Brokerage revenues:Brokerage revenues:Brokerage revenues:
Securities commissions:Securities commissions:Securities commissions:
Mutual and other fund productsMutual and other fund products131    —  (1) 134  Mutual and other fund products167 2 2 0 0 171 
Insurance and annuity productsInsurance and annuity products88  —  —  —  —  88  Insurance and annuity products113 0 0 0 0 113 
Equities, ETFs and fixed income products84  37  —  —  —  121  
Equities, exchange-traded funds (“ETFs”) and fixed income productsEquities, exchange-traded funds (“ETFs”) and fixed income products97 33 0 0 1 131 
Subtotal securities commissionsSubtotal securities commissions303  39   —  (1) 343  Subtotal securities commissions377 35 2 0 1 415 
Principal transactions (1)
Principal transactions (1)
16  127  —  —  —  143  
Principal transactions (1)
13 125 0 0 (1)137 
Total brokerage revenuesTotal brokerage revenues319  166   —  (1) 486  Total brokerage revenues390 160 2 0 0 552 
Account and services fees:Account and services fees:Account and services fees:
Mutual fund and annuity service feesMutual fund and annuity service fees82  —   —  —  83  Mutual fund and annuity service fees105 0 0 0 (1)104 
RJBDP feesRJBDP fees63   —  —  (44) 20  RJBDP fees65 0 0 0 (47)18 
Client account and other feesClient account and other fees32    —  (4) 31  Client account and other fees39 1 4 0 (5)39 
Total account and service feesTotal account and service fees177    —  (48) 134  Total account and service fees209 1 4 0 (53)161 
Investment banking:Investment banking:Investment banking:
Merger & acquisition and advisoryMerger & acquisition and advisory—  60  —  —  —  60  Merger & acquisition and advisory0 153 0 0 0 153 
Equity underwritingEquity underwriting 35  —  —  —  42  Equity underwriting11 69 0 0 0 80 
Debt underwritingDebt underwriting—  37  —  —  —  37  Debt underwriting0 43 0 0 0 43 
Total investment bankingTotal investment banking 132  —  —  —  139  Total investment banking11 265 0 0 0 276 
Other:Other:Other:
Tax credit fund revenuesTax credit fund revenues—  20  —  —  —  20  Tax credit fund revenues0 17 0 0 0 17 
All other (1)
All other (1)
 —    (1) 13  
All other (1)
7 1 1 8 21 38 
Total otherTotal other 20    (1) 33  Total other7 18 1 8 21 55 
Total non-interest revenuesTotal non-interest revenues1,222  321  163   (56) 1,659  Total non-interest revenues1,667 445 225 8 (39)2,306 
Interest income (1)
Interest income (1)
31   —  181   217  
Interest income (1)
31 4 0 172 (2)205 
Total revenuesTotal revenues1,253  325  163  190  (55) 1,876  Total revenues1,698 449 225 180 (41)2,511 
Interest expenseInterest expense(4) (2) —  (12) (24) (42) Interest expense(2)(3)0 (11)(24)(40)
Net revenuesNet revenues$1,249  $323  $163  $178  $(79) $1,834  Net revenues$1,696 $446 $225 $169 $(65)$2,471 

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


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Notes to Condensed Consolidated Financial Statements (Unaudited)
Three months ended June 30, 2020
$ in millionsPrivate Client GroupCapital MarketsAsset ManagementRaymond James BankOther and intersegment eliminationsTotal
Revenues:
Asset management and related administrative fees$715 $$157 $$(6)$867 
Brokerage revenues:
Securities commissions:
Mutual and other fund products131 (1)134 
Insurance and annuity products88 88 
Equities, ETFs and fixed income products84 37 121 
Subtotal securities commissions303 39 (1)343 
Principal transactions (1)
16 127 143 
Total brokerage revenues319 166 (1)486 
Account and services fees:
Mutual fund and annuity service fees82 83 
RJBDP fees63 (44)20 
Client account and other fees32 (4)31 
Total account and service fees177 (48)134 
Investment banking:
Merger & acquisition and advisory60 60 
Equity underwriting35 42 
Debt underwriting37 37 
Total investment banking132 139 
Other:
Tax credit fund revenues20 20 
All other (1)
(1)13 
Total other20 (1)33 
Total non-interest revenues1,222 321 163 (56)1,659 
Interest income (1)
31 181 217 
Total revenues1,253 325 163 190 (55)1,876 
Interest expense(4)(2)(12)(24)(42)
Net revenues$1,249 $323 $163 $178 $(79)$1,834 

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




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RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
Three months ended June 30, 2019Nine Months Ended June 30, 2021
$ in millions$ in millionsPrivate Client GroupCapital MarketsAsset ManagementRJ BankOther and intersegment eliminationsTotal$ in millionsPrivate Client GroupCapital MarketsAsset ManagementRaymond James BankOther and intersegment eliminationsTotal
Revenues:Revenues:Revenues:
Asset management and related administrative feesAsset management and related administrative fees$718  $ $165  $—  $(6) $879  Asset management and related administrative fees$2,914 $3 $607 $0 $(22)$3,502 
Brokerage revenues:Brokerage revenues:Brokerage revenues:
Securities commissions:Securities commissions:Securities commissions:
Mutual and other fund productsMutual and other fund products147    —  —  150  Mutual and other fund products498 5 7 0 (2)508 
Insurance and annuity productsInsurance and annuity products105  —  —  —  —  105  Insurance and annuity products320 0 0 0 0 320 
Equities, ETFs and fixed income productsEquities, ETFs and fixed income products74  29  —  —  —  103  Equities, ETFs and fixed income products300 110 0 0 1 411 
Subtotal securities commissionsSubtotal securities commissions326  30   —  —  358  Subtotal securities commissions1,118 115 7 0 (1)1,239 
Principal transactions (1)
Principal transactions (1)
20  74  —  —  (1) 93  
Principal transactions (1)
38 394 0 1 (1)432 
Total brokerage revenuesTotal brokerage revenues346  104   —  (1) 451  Total brokerage revenues1,156 509 7 1 (2)1,671 
Account and services fees:Account and services fees:Account and services fees:
Mutual fund and annuity service feesMutual fund and annuity service fees85  —  —  —  (1) 84  Mutual fund and annuity service fees298 0 0 0 (1)297 
RJBDP feesRJBDP fees111  —   —  (46) 66  RJBDP fees192 1 0 0 (135)58 
Client account and other feesClient account and other fees32    —  (7) 33  Client account and other fees113 5 13 0 (21)110 
Total account and service feesTotal account and service fees228    —  (54) 183  Total account and service fees603 6 13 0 (157)465 
Investment banking:Investment banking:Investment banking:
Merger & acquisition and advisoryMerger & acquisition and advisory—  80  —  —  —  80  Merger & acquisition and advisory0 424 0 0 0 424 
Equity underwritingEquity underwriting10  27  —  —  —  37  Equity underwriting33 196 0 0 0 229 
Debt underwritingDebt underwriting—  22  —  —  —  22  Debt underwriting0 126 0 0 0 126 
Total investment bankingTotal investment banking10  129  —  —  —  139  Total investment banking33 746 0 0 0 779 
Other:Other:Other:
Tax credit fund revenuesTax credit fund revenues—  16  —  —  —  16  Tax credit fund revenues0 57 0 0 0 57 
All other (1)
All other (1)
 (1)    11  
All other (1)
20 5 2 22 49 98 
Total otherTotal other 15     27  Total other20 62 2 22 49 155 
Total non-interest revenuesTotal non-interest revenues1,305  251  176   (60) 1,679  Total non-interest revenues4,726 1,326 629 23 (132)6,572 
Interest income (1)
Interest income (1)
56  10   246   321  
Interest income (1)
91 12 0 505 0 608 
Total revenuesTotal revenues1,361  261  177  253  (52) 2,000  Total revenues4,817 1,338 629 528 (132)7,180 
Interest expenseInterest expense(10) (10) —  (38) (15) (73) Interest expense(7)(7)0 (32)(69)(115)
Net revenuesNet revenues$1,351  $251  $177  $215  $(67) $1,927  Net revenues$4,810 $1,331 $629 $496 $(201)7,065 

(1)    These revenues are generally not in scope of the accounting guidance for revenue from contracts with customers.
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RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)




Nine Months Ended June 30, 2020
$ in millionsPrivate Client GroupCapital MarketsAsset ManagementRJ BankOther and intersegment eliminationsTotal
Revenues:
Asset management and related administrative fees$2,330  $ $510  $—  $(16) $2,828  
Brokerage revenues:
Securities commissions:
Mutual and other fund products438    —  (2) 448  
Insurance and annuity products288  —  —  —  —  288  
Equities, ETFs and fixed income products274  107  —  —  (1) 380  
Subtotal securities commissions1,000  113   —  (3) 1,116  
Principal transactions (1)
50  298  —  —  (3) 345  
Total brokerage revenues1,050  411   —  (6) 1,461  
Account and services fees:
Mutual fund and annuity service fees260  —   —  (1) 261  
RJBDP fees267   —  —  (139) 129  
Client account and other fees96   10  —  (16) 94  
Total account and service fees623   12  —  (156) 484  
Investment banking:
Merger & acquisition and advisory—  192  —  —  —  192  
Equity underwriting29  117  —  —  —  146  
Debt underwriting—  90  —  —  —  90  
Total investment banking29  399  —  —  —  428  
Other:
Tax credit fund revenues—  50  —  —  —  50  
All other (1)
20    20  (49) (3) 
Total other20  54   20  (49) 47  
Total non-interest revenues4,052  873  530  20  (227) 5,248  
Interest income (1)
125  22   635  16  799  
Total revenues4,177  895  531  655  (211) 6,047  
Interest expense(19) (14) —  (51) (52) (136) 
Net revenues$4,158  $881  $531  $604  $(263) $5,911  

(1) These revenues are generally not in scope of the accounting guidance for revenue from contracts with customers.
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RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)




Nine Months Ended June 30, 2019Nine Months Ended June 30, 2020
$ in millions$ in millionsPrivate Client GroupCapital MarketsAsset ManagementRJ BankOther and intersegment eliminationsTotal$ in millionsPrivate Client GroupCapital MarketsAsset ManagementRaymond James BankOther and intersegment eliminationsTotal
Revenues:Revenues:Revenues:
Asset management and related administrative feesAsset management and related administrative fees$2,063  $ $475  $—  $(16) $2,527  Asset management and related administrative fees$2,330 $$510 $$(16)$2,828 
Brokerage revenues:Brokerage revenues:Brokerage revenues:
Securities commissions:Securities commissions:Securities commissions:
Mutual and other fund productsMutual and other fund products449    —  (2) 458  Mutual and other fund products438 (2)448 
Insurance and annuity productsInsurance and annuity products308  —  —  —  —  308  Insurance and annuity products288 288 
Equities, ETFs and fixed income productsEquities, ETFs and fixed income products232  99  —  —  (2) 329  Equities, ETFs and fixed income products274 107 (1)380 
Subtotal securities commissionsSubtotal securities commissions989  103   —  (4) 1,095  Subtotal securities commissions1,000 113 (3)1,116 
Principal transactions (1)
Principal transactions (1)
59  203  —   (1) 262  
Principal transactions (1)
50 298 (3)345 
Total brokerage revenuesTotal brokerage revenues1,048  306    (5) 1,357  Total brokerage revenues1,050 411 (6)1,461 
Account and services fees:Account and services fees:Account and services fees:
Mutual fund and annuity service feesMutual fund and annuity service fees250  —   —  (9) 243  Mutual fund and annuity service fees260 (1)261 
RJBDP feesRJBDP fees342  —   —  (131) 214  RJBDP fees267 (139)129 
Client account and other feesClient account and other fees92   22  —  (15) 102  Client account and other fees96 10 (16)94 
Total account and service feesTotal account and service fees684   27  —  (155) 559  Total account and service fees623 12 (156)484 
Investment banking:Investment banking:Investment banking:
Merger & acquisition and advisoryMerger & acquisition and advisory—  286  —  —  —  286  Merger & acquisition and advisory192 192 
Equity underwritingEquity underwriting25  72  —  —  —  97  Equity underwriting29 117 146 
Debt underwritingDebt underwriting—  56  —  —  —  56  Debt underwriting90 90 
Total investment bankingTotal investment banking25  414  —  —  —  439  Total investment banking29 399 428 
Other:Other:Other:
Tax credit fund revenuesTax credit fund revenues—  49  —  —  —  49  Tax credit fund revenues50 50 
All other (1)
All other (1)
19    19   46  
All other (1)
20 20 (49)(3)
Total otherTotal other19  50   19   95  Total other20 54 20 (49)47 
Total non-interest revenuesTotal non-interest revenues3,839  778  510  20  (170) 4,977  Total non-interest revenues4,052 873 530 20 (227)5,248 
Interest income (1)
Interest income (1)
170  29   732  27  961  
Interest income (1)
125 22 635 16 799 
Total revenuesTotal revenues4,009  807  513  752  (143) 5,938  Total revenues4,177 895 531 655 (211)6,047 
Interest expenseInterest expense(31) (26) —  (122) (42) (221) Interest expense(19)(14)(51)(52)(136)
Net revenuesNet revenues$3,978  $781  $513  $630  $(185) $5,717  Net revenues$4,158 $881 $531 $604 $(263)$5,911 

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

At June 30, 20202021 and September 30, 2019,2020, net receivables related to contracts with customers were $320$359 million and $347$342 million, respectively.

We record deferred revenue from contracts with customers when payment is received prior to the performance of our obligation to the customer. Deferred revenue balances were not material as of June 30, 2020 and September 30, 2019.

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


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RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)




NOTE 1819 – INTEREST INCOME AND INTEREST EXPENSE

The following table details the components of interest income and interest expense.
Three months ended June 30,Nine months ended June 30, Three months ended June 30,Nine months ended June 30,
$ in millions$ in millions2020201920202019$ in millions2021202020212020
Interest income:Interest income:  Interest income:  
Cash and cash equivalentsCash and cash equivalents$3 $$9 $37 
Assets segregated pursuant to regulationsAssets segregated pursuant to regulations$ $14  $25  $46  Assets segregated pursuant to regulations3 11 25 
Trading instruments  17  20  
Available-for-sale securitiesAvailable-for-sale securities23  18  60  51  Available-for-sale securities20 23 64 60 
Margin loans18  30  66  93  
Brokerage client receivablesBrokerage client receivables19 18 56 66 
Bank loans, net of unearned income and deferred expensesBank loans, net of unearned income and deferred expenses157  221  561  655  Bank loans, net of unearned income and deferred expenses150 157 437 561 
Loans to financial advisors  15  14  
Corporate cash and all other 26  55  82  
All otherAll other10 12 31 50 
Total interest incomeTotal interest income$217  $321  $799  $961  Total interest income$205 $217 $608 $799 
Interest expense:Interest expense:  Interest expense:  
Bank depositsBank deposits$ $33  $35  $105  Bank deposits$5 $$17 $35 
Trading instruments sold but not yet purchased    
Brokerage client payablesBrokerage client payables   16  Brokerage client payables1 3 
Other borrowingsOther borrowings  15  16  Other borrowings4 14 15 
Senior notes payableSenior notes payable24  19  61  55  Senior notes payable25 24 73 61 
Other  13  23  
All otherAll other5 8 16 
Total interest expenseTotal interest expense42  73  136  221  Total interest expense40 42 115 136 
Net interest incomeNet interest income175  248  663  740  Net interest income165 175 493 663 
Bank loan loss (provision)/benefit(81)  (188) (16) 
Net interest income after bank loan loss (provision)/benefit$94  $253  $475  $724  
Bank loan (provision)/benefit for credit lossesBank loan (provision)/benefit for credit losses19 (81)37 (188)
Net interest income after bank loan (provision)/benefit for credit lossesNet interest income after bank loan (provision)/benefit for credit losses$184 $94 $530 $475 

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


NOTE 1920 – SHARE-BASED COMPENSATION

We have 1 share-based compensation plan for our employees, Board of Directors and non-employees (independentindependent contractor financial advisors).advisors. Generally, we reissue our treasury shares under The Amended and Restated 2012 Stock Incentive Plan; however, we are also permitted to issue new shares. Annual share-based compensation awards are primarily issued during theour fiscal first quarter of each year.  Our share-based compensation accounting policies are described in Note 2 of our 20192020 Form 10-K.  Other information related to our share-based awards is presented in Note 21 of our 20192020 Form 10-K.

During the three and nine months ended June 30, 2020,2021, we granted approximately 10050 thousand and 1.71.5 million RSUs, respectively, to employees and outside members of our Board of Directors with a weighted-average grant-date fair value of $64.98$131.81 and $87.76,$94.75, respectively. For the three and nine months ended June 30, 2020,2021, total compensation expense for RSUs granted to our employees and members of our Board of Directors was $27 million and $98 million, respectively, compared with $22 million and $89 million respectively, compared with $20 million and $81 million, respectively, for the three and nine months ended June 30, 2019.2020, respectively.

As of June 30, 2020,2021, there were $196$209 million of total pre-tax compensation costs not yet recognized (net of estimated forfeitures) related to RSUs granted to employees and members of our Board of Directors, including those granted during the nine months ended June 30, 2020.2021. These costs are expected to be recognized over a weighted-average period of 3.23.1 years.


43

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)




NOTE 2021 – REGULATORY CAPITAL REQUIREMENTS

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

45

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
As a bank holding company under the Bank Holding Company Act of 1956, as amended (the “BHC Act”) that has made an election to be a financial holding company (“FHC”), RJF is subject to supervision, examination and regulation by the risk-basedFed.We are subject to the Fed’s capital requirementsrules which establish an integrated regulatory capital framework and implement, in the U.S., the Basel III regulatory capital reforms from the Basel Committee on Banking Supervision and certain changes required by the Dodd-Frank Act. We apply the standardized approach for calculating risk-weighted assets and are also subject to the market risk provisions of the Fed. These risk-basedFed’s capital rules (“market risk rule”).

Under these rules, minimum requirements are expressed asestablished for both the quantity and quality of capital held by banking organizations. RJF and Raymond James Bank are required to maintain minimum ratios that compare measures of regulatorycommon equity tier 1 (“CET1”), tier 1 and total capital to risk-weighted assets, which involveas well as minimum leverage ratios (defined as tier 1 capital divided by adjusted average assets).These capital ratios incorporate quantitative measures of our assets, liabilities, and certain off-balance-sheetoff-balance sheet items as calculated under the regulatory guidelines. RJF’scapital rules and RJ Bank’s capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk-weightings, and other factors.

RJF and RJ Bank are required to maintain minimum amounts and ratios of Total and Tier 1 capital (as defined in the regulations) to risk-weighted assets (as defined), Tier 1 capital to average assets (as defined), and under rules defined under the Basel III capital framework, Common equity Tier 1 capital (“CET1”) to risk-weighted assets. RJF and RJRaymond James Bank each calculate these ratios under the Basel III standardized approach in order to assess compliance with both regulatory requirements and their internal capital policies. In order to maintain our ability to take certain capital actions, including dividends and common equity repurchases, and to make bonus payments, we must hold a capital conservation buffer above our minimum risk-based capital requirements.As of June 30, 2020,2021, both RJF’s and RJRaymond James Bank’s capital levels exceeded the capital conservation buffer requirement and were each categorized as “well-capitalized.”

For further discussion of regulatory capital requirements applicable to certain of our businesses and subsidiaries, see Note 22 of our 20192020 Form 10-K.

To meet requirements for capital adequacy purposes or to be categorized as “well-capitalized,” RJF must maintain minimum CET1, Tier 1 capital, Total capital and Tier 1 leverage amounts and ratios as set forth in the following table.
ActualRequirement for capital
adequacy purposes
To be well-capitalized
under regulatory provisions
ActualRequirement for capital
adequacy purposes
To be well-capitalized
under regulatory provisions
$ in millions$ in millionsAmountRatioAmountRatioAmountRatio$ in millionsAmountRatioAmountRatioAmountRatio
RJF as of June 30, 2020:      
RJF as of June 30, 2021:RJF as of June 30, 2021:      
CET1CET1$6,351  24.8 %$1,152  4.5 %$1,664  6.5 %CET1$7,040 24.4 %$1,297 4.5 %$1,874 6.5 %
Tier 1 capitalTier 1 capital$6,351  24.8 %$1,536  6.0 %$2,047  8.0 %Tier 1 capital$7,040 24.4 %$1,730 6.0 %$2,306 8.0 %
Total capitalTotal capital$6,661  26.0 %$2,047  8.0 %$2,559  10.0 %Total capital$7,382 25.6 %$2,306 8.0 %$2,883 10.0 %
Tier 1 leverageTier 1 leverage$6,351  14.5 %$1,749  4.0 %$2,187  5.0 %Tier 1 leverage$7,040 12.6 %$2,240 4.0 %$2,800 5.0 %
RJF as of September 30, 2019:
RJF as of September 30, 2020:RJF as of September 30, 2020:
CET1CET1$5,971  24.8 %$1,085  4.5 %$1,567  6.5 %CET1$6,490 24.2 %$1,208 4.5 %$1,744 6.5 %
Tier 1 capitalTier 1 capital$5,971  24.8 %$1,446  6.0 %$1,928  8.0 %Tier 1 capital$6,490 24.2 %$1,610 6.0 %$2,147 8.0 %
Total capitalTotal capital$6,207  25.8 %$1,928  8.0 %$2,410  10.0 %Total capital$6,804 25.4 %$2,147 8.0 %$2,684 10.0 %
Tier 1 leverageTier 1 leverage$5,971  15.7 %$1,525  4.0 %$1,906  5.0 %Tier 1 leverage$6,490 14.2 %$1,824 4.0 %$2,280 5.0 %

As of June 30, 2020,2021, RJF’s regulatory capital increase was driven by positive earnings, partially offset by dividends and share repurchases, as well as an increase in goodwill and identifiable intangible assets arising from the NWPS and Financo acquisitions. See Note 3 for additional information. RJF’s Tier 1 capital ratio was unchanged and our Total capital ratioratios increased slightly compared to September 30, 2019, due to positive earnings, net of share repurchases and dividends,2020, resulting from the increase in regulatory capital, partially offset by the impacts of an increase in cashrisk-weighted assets. The increase in risk-weighted assets was driven by increases in our loan portfolio and cash equivalents segregated pursuant to regulations and growth in available-for-sale securities held at RJ Bank.securities. RJF’s Tier 1 leverage ratio at June 30, 20202021 decreased compared to September 30, 2019,2020 due to the growth ofincreased average assets, primarily related to cash, cash and cash equivalentsdriven by higher assets segregated pursuant to regulations due to an increase in client cash in the Client Interest Program (“CIP”), as well as growth in loans and available-for-sale securities held at RJ Bank,securities. The impact of higher average assets was partially offset by the aforementioned changeincrease in equity.regulatory capital.

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RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)




To meet the requirements for capital adequacy or to be categorized as “well-capitalized,” RJRaymond James Bank must maintain CET1, Tier 1 capital, Total capital and Tier 1 leverage amounts and ratios as set forth in the following table.
ActualRequirement for capital
adequacy purposes
To be well-capitalized
under regulatory provisions
ActualRequirement for capital
adequacy purposes
To be well-capitalized
under regulatory provisions
$ in millions$ in millionsAmountRatioAmountRatioAmountRatio$ in millionsAmountRatioAmountRatioAmountRatio
RJ Bank as of June 30, 2020:      
Raymond James Bank as of June 30, 2021:Raymond James Bank as of June 30, 2021:      
CET1CET1$2,247  12.8 %$790  4.5 %$1,141  6.5 %CET1$2,542 13.5 %$848 4.5 %$1,225 6.5 %
Tier 1 capitalTier 1 capital$2,247  12.8 %$1,053  6.0 %$1,404  8.0 %Tier 1 capital$2,542 13.5 %$1,131 6.0 %$1,508 8.0 %
Total capitalTotal capital$2,468  14.1 %$1,404  8.0 %$1,755  10.0 %Total capital$2,779 14.7 %$1,508 8.0 %$1,885 10.0 %
Tier 1 leverageTier 1 leverage$2,247  7.6 %$1,187  4.0 %$1,484  5.0 %Tier 1 leverage$2,542 7.5 %$1,355 4.0 %$1,693 5.0 %
RJ Bank as of September 30, 2019:      
Raymond James Bank as of September 30, 2020:Raymond James Bank as of September 30, 2020:      
CET1CET1$2,246  13.2 %$764  4.5 %$1,103  6.5 %CET1$2,279 13.0 %$788 4.5 %$1,138 6.5 %
Tier 1 capitalTier 1 capital$2,246  13.2 %$1,018  6.0 %$1,358  8.0 %Tier 1 capital$2,279 13.0 %$1,051 6.0 %$1,401 8.0 %
Total capitalTotal capital$2,458  14.5 %$1,358  8.0 %$1,697  10.0 %Total capital$2,500 14.3 %$1,401 8.0 %$1,751 10.0 %
Tier 1 leverageTier 1 leverage$2,246  8.8 %$1,021  4.0 %$1,276  5.0 %Tier 1 leverage$2,279 7.7 %$1,183 4.0 %$1,479 5.0 %

RJAs of June 30, 2021, Raymond James Bank’s regulatory capital increase was driven by positive earnings. Raymond James Bank’s Tier 1 capital and Total capital ratios at June 30, 2020 decreased2021 increased compared to September 30, 2019,2020, due to dividends paid during the period exceeding earnings and growthincrease in regulatory capital, partially offset by the impact of higher risk-weighted assets, primarily resulting from increases in our loan portfolio and available-for-sale securities. RJRaymond James Bank’s Tier 1 leverage ratio at June 30, 20202021 decreased compared to September 30, 2019,2020, due to increased average assets, driven by the growth in average assets, primarily related to cash,loans and available-for-sale securities, and bank loans, as well aswhich was partially offset by the aforementioned changeimpact of the increase in equity.regulatory capital.

Certain of our broker-dealer subsidiaries are subject to the requirements of the Uniform Net Capital Rule (Rule 15c3-1) under the Securities Exchange Act of 1934. The following table presents the net capital position of RJ&A.
$ in millions$ in millionsJune 30, 2020September 30, 2019$ in millionsJune 30, 2021September 30, 2020
Raymond James & Associates, Inc.:
Raymond James & Associates, Inc.:
  
Raymond James & Associates, Inc.:
  
(Alternative Method elected)(Alternative Method elected)  (Alternative Method elected)  
Net capital as a percent of aggregate debit itemsNet capital as a percent of aggregate debit items46.1 %39.7 %Net capital as a percent of aggregate debit items62.1 %48.0 %
Net capitalNet capital$1,183  $1,056  Net capital$1,811 $1,245 
Less: required net capitalLess: required net capital(51) (53) Less: required net capital(58)(52)
Excess net capitalExcess net capital$1,132  $1,003  Excess net capital$1,753 $1,193 

As of June 30, 2020, RJFS, 2021, Raymond James Financial Services, Inc. (“RJFS”), Raymond James Ltd. (“RJ Ltd.”), RJ Trust, and all of our other active regulated domestic and international subsidiaries were in compliance with and exceeded all applicable capital requirements.


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RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)




NOTE 2122 – EARNINGS PER SHARE

The following table presents the computation of basic and diluted earnings per common share.
Three months ended June 30,Nine months ended June 30, Three months ended June 30,Nine months ended June 30,
in millions, except per share amountsin millions, except per share amounts2020201920202019in millions, except per share amounts2021202020212020
Income for basic earnings per common share:Income for basic earnings per common share:  Income for basic earnings per common share:  
Net incomeNet income$172  $259  $609  $769  Net income$307 $172 $974 $609 
Less allocation of earnings and dividends to participating securitiesLess allocation of earnings and dividends to participating securities—  (1) (1) (1) Less allocation of earnings and dividends to participating securities0 (1)(1)
Net income attributable to RJF common shareholdersNet income attributable to RJF common shareholders$172  $258  $608  $768  Net income attributable to RJF common shareholders$307 $172 $973 $608 
Income for diluted earnings per common share:Income for diluted earnings per common share:  Income for diluted earnings per common share:  
Net incomeNet income$172  $259  $609  $769  Net income$307 $172 $974 $609 
Less allocation of earnings and dividends to participating securitiesLess allocation of earnings and dividends to participating securities—  (1) (1) (1) Less allocation of earnings and dividends to participating securities0 (1)(1)
Net income attributable to RJF common shareholdersNet income attributable to RJF common shareholders$172  $258  $608  $768  Net income attributable to RJF common shareholders$307 $172 $973 $608 
Common shares:Common shares:  Common shares:  
Average common shares in basic computationAverage common shares in basic computation137.1  140.4  137.9  141.8  Average common shares in basic computation137.2 137.1 137.2 137.9 
Dilutive effect of outstanding stock options and certain RSUsDilutive effect of outstanding stock options and certain RSUs2.3  3.2  2.6  3.0  Dilutive effect of outstanding stock options and certain RSUs3.9 2.3 3.4 2.6 
Average common shares used in diluted computation139.4  143.6  140.5  144.8  
Average common and common equivalent shares used in diluted computationAverage common and common equivalent shares used in diluted computation141.1 139.4 140.6 140.5 
Earnings per common share:Earnings per common share:  Earnings per common share:  
BasicBasic$1.25  $1.84  $4.41  $5.42  Basic$2.24 $1.25 $7.09 $4.41 
DilutedDiluted$1.23  $1.80  $4.33  $5.30  Diluted$2.18 $1.23 $6.92 $4.33 
Stock options and certain RSUs excluded from weighted-average diluted common shares because their effect would be antidilutiveStock options and certain RSUs excluded from weighted-average diluted common shares because their effect would be antidilutive1.8  0.2  1.6  0.5  Stock options and certain RSUs excluded from weighted-average diluted common shares because their effect would be antidilutive0 1.8 0.1 1.6 

The allocation of earnings and dividends to participating securities in the preceding table represents dividends paid during the period to participating securities, consisting of certain RSUs, plus an allocation of undistributed earnings to such participating securities.  Participating securities represent unvested restricted stock and certain RSUs. Participating securities and related dividends paid on these participating securities were insignificant for the three and nine months ended June 30, 20202021 and 2019.2020.  Undistributed earnings are allocated to participating securities based upon their right to share in earnings if all earnings for the period had been distributed.

Dividends per common share declared and paid are detailed in the following table for each respective period.
Three months ended June 30,Nine months ended June 30, Three months ended June 30,Nine months ended June 30,
2020201920202019 2021202020212020
Dividends per common share - declaredDividends per common share - declared$0.37  $0.34  $1.11  $1.02  Dividends per common share - declared$0.39 $0.37 $1.17 $1.11 
Dividends per common share - paidDividends per common share - paid$0.37  $0.34  $1.08  $0.98  Dividends per common share - paid$0.39 $0.37 $1.15 $1.08 


NOTE 2223 – SEGMENT INFORMATION

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

The segments are determined based upon factors such as the services provided and the distribution channels served and are consistent with how we assess performance and determine how to allocate our resources throughout our subsidiaries.resources. For a further discussion of our segments, see Note 24 of our 20192020 Form 10-K.

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RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)




The following table presents information concerning operations in these segments.
Three months ended June 30,Nine months ended June 30, Three months ended June 30,Nine months ended June 30,
$ in millions$ in millions2020201920202019$ in millions2021202020212020
Net revenues:Net revenues:  Net revenues:  
Private Client GroupPrivate Client Group$1,249  $1,351  $4,158  $3,978  Private Client Group$1,696 $1,249 $4,810 $4,158 
Capital MarketsCapital Markets323  251  881  781  Capital Markets446 323 1,331 881 
Asset ManagementAsset Management163  177  531  513  Asset Management225 163 629 531 
RJ Bank178  215  604  630  
Raymond James BankRaymond James Bank169 178 496 604 
OtherOther(20) (4) (72) (2) Other2 (20)(6)(72)
Intersegment eliminationsIntersegment eliminations(59) (63) (191) (183) Intersegment eliminations(67)(59)(195)(191)
Total net revenuesTotal net revenues$1,834  $1,927  $5,911  $5,717  Total net revenues$2,471 $1,834 $7,065 $5,911 
Pre-tax income/(loss):Pre-tax income/(loss):Pre-tax income/(loss):
Private Client GroupPrivate Client Group$91  $140  $414  $436  Private Client Group$195 $91 $527 $414 
Capital MarketsCapital Markets62  24  119  77  Capital Markets115 62 349 119 
Asset ManagementAsset Management60  65  206  184  Asset Management105 60 275 206 
RJ Bank14  138  163  384  
Raymond James BankRaymond James Bank104 14 286 163 
OtherOther(29) (25) (106) (60) Other(134)(29)(206)(106)
Total pre-tax incomeTotal pre-tax income$198  $342  $796  $1,021  Total pre-tax income$385 $198 $1,231 $796 

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

The following table presents our net interest income on a segment basis.
Three months ended June 30,Nine months ended June 30,Three months ended June 30,Nine months ended June 30,
$ in millions$ in millions2020201920202019$ in millions2021202020212020
Net interest income/(expense):Net interest income/(expense):  Net interest income/(expense):  
Private Client GroupPrivate Client Group$27  $46  $106  $139  Private Client Group$29 $27 $84 $106 
Capital MarketsCapital Markets —    Capital Markets1 5 
Asset ManagementAsset Management—     Asset Management0 0 
RJ Bank169  208  584  610  
Other and intersegment eliminations(23) (7) (36) (15) 
Raymond James BankRaymond James Bank161 169 473 584 
OtherOther(26)(23)(69)(36)
Net interest incomeNet interest income$175  $248  $663  $740  Net interest income$165 $175 $493 $663 

The following table presents our total assets on a segment basis.
$ in millions$ in millionsJune 30, 2020September 30, 2019$ in millionsJune 30, 2021September 30, 2020
Total assets:Total assets:Total assets:
Private Client GroupPrivate Client Group$11,655  $9,042  Private Client Group$17,949 $12,574 
Capital MarketsCapital Markets2,301  2,287  Capital Markets2,359 2,336 
Asset ManagementAsset Management367  401  Asset Management389 380 
RJ Bank28,830  25,516  
Raymond James BankRaymond James Bank34,363 30,356 
OtherOther1,529  1,584  Other2,101 1,836 
TotalTotal$44,682  $38,830  Total$57,161 $47,482 

The following table presents goodwill, which was included in our total assets, on a segment basis.
$ in millions$ in millionsJune 30, 2020September 30, 2019$ in millionsJune 30, 2021September 30, 2020
Goodwill:Goodwill:Goodwill:
Private Client Group(1)Private Client Group(1)$276  $275  Private Client Group(1)$418 $277 
Capital Markets(2)Capital Markets(2)120  120  Capital Markets(2)150 120 
Asset ManagementAsset Management69  69  Asset Management69 69 
TotalTotal$465  $464  Total$637 $466 

(1)    The balance includes $139 million of goodwill arising from our acquisition of NWPS in December 2020.
(2)    The balance includes $30 million of goodwill arising from our acquisition of Financo in March 2021.


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Notes to Condensed Consolidated Financial Statements (Unaudited)




We have operations in the U.S., Canada and Europe. Substantially all long-lived assets are located in the U.S.  The following table presents our net revenues and pre-tax income classified by major geographic area in which they were earned.
 Three months ended June 30,Nine months ended June 30,
$ in millions2020201920202019
Net revenues:  
U.S.$1,706  $1,793  $5,501  $5,318  
Canada86  101  293  290  
Europe42  33  117  109  
Total$1,834  $1,927  $5,911  $5,717  
Pre-tax income/(loss): 
U.S.$191  $330  $770  $994  
Canada 12  26  35  
Europe (1)
 —  —  (8) 
Total$198  $342  $796  $1,021  

(1)  The pre-tax loss in Europe for the nine months ended June 30, 2019 reflects a $15 million loss on the sale of our operations related to research, sales and trading of European equities incurred during the fiscal first quarter of 2019.
 Three months ended June 30,Nine months ended June 30,
$ in millions2021202020212020
Net revenues:  
U.S.$2,275 $1,706 $6,548 $5,501 
Canada128 86 363 293 
Europe68 42 154 117 
Total$2,471 $1,834 $7,065 $5,911 
Pre-tax income: 
U.S.$353 $191 $1,165 $770 
Canada15 41 26 
Europe17 25 
Total$385 $198 $1,231 $796 

The following table presents our total assets by major geographic area in which they were held.
$ in millions$ in millionsJune 30, 2020September 30, 2019$ in millionsJune 30, 2021September 30, 2020
Total assets:Total assets:Total assets:
U.S.U.S.$41,459  $35,978  U.S.$53,361 $44,090 
CanadaCanada3,099  2,754  Canada3,627 3,260 
EuropeEurope124  98  Europe173 132 
TotalTotal$44,682  $38,830  Total$57,161 $47,482 

The following table presents goodwill, which was included in our total assets, classified by major geographic area in which it was held.
$ in millions$ in millionsJune 30, 2020September 30, 2019$ in millionsJune 30, 2021September 30, 2020
Goodwill:Goodwill:Goodwill:
U.S.(1)U.S.(1)$433  $433  U.S.(1)$602 $433 
CanadaCanada24  23  Canada26 24 
EuropeEurope  Europe9 
TotalTotal$465  $464  Total$637 $466 

(1)    The balance includes $139 million of goodwill arising from our acquisition of NWPS in December 2020 and $30 million of goodwill arising from our acquisition of Financo in March 2021.
48
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RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
INDEX
 PAGE
Factors affecting “forward-looking statements”
Introduction
Executive overview
Reconciliation of non-GAAP financial measures to GAAP financial measures
Segments
Reconciliation of GAAP measures to non-GAAP financial measures
Net interest analysis
Results of Operations
Private Client Group
Capital Markets
Asset Management
RJRaymond James Bank
Other
Certain statistical disclosures by bank holding companies
Liquidity and capital resources
Statement of financial condition analysis
Contractual obligations
Regulatory
Critical accounting estimates
Recent accounting developments
Off-balance sheet arrangements
Effects of inflation
Risk management
4951

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
Management’s Discussion and Analysis

FACTORS AFFECTING “FORWARD-LOOKING STATEMENTS”

Certain statements made in this Quarterly Report on Form 10-Q may constitute “forward-looking statements” under the Private Securities Litigation Reform Act of 1995. Forward-looking statements include information concerning future strategic objectives, business prospects, anticipated savings, financial results (including expenses, earnings, liquidity, cash flow and capital expenditures), anticipated timing and benefits of our acquisitions and our level of success in integrating acquired businesses, industry or market conditions, demand for and pricing of our products, acquisitions and divestitures, anticipated results of litigation, our effective tax rate, regulatory developments, impacts of the COVID-19 pandemic, effects of accounting pronouncements, and general economic conditions.  In addition, words such as “believes,” “expects,” “anticipates,” “plans,“intends,” “estimates,” “projects,” and future or conditional verbs such as “will,” “may,” “could,” “should,” and “would,” as well as any other statement that necessarily depends on future events, are intended to identify forward-looking statements. Forward-looking statements are not guarantees, and they involve risks, uncertainties and assumptions.  Although we make such statements based on assumptions that we believe to be reasonable, there can be no assurance that actual results will not differ materially from those expressed in the forward-looking statements.  We caution investors not to rely unduly on any forward-looking statements and urge you to carefully consider the risks described in our filings with the SEC from time to time, including our most recent Annual Report on Form 10-K and subsequent Quarterly Reports on Form 10-Q, which are available at www.raymondjames.com and the SEC’s website at www.sec.gov. We expressly disclaim any obligation to update any forward-looking statement in the event it later turns out to be inaccurate, whether as a result of new information, future events or otherwise.

INTRODUCTION

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

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

EXECUTIVE OVERVIEW

Quarter ended June 30, 20202021 compared with the quarter ended June 30, 20192020

In March 2020,Net revenues of $2.47 billion increased $637 million, or 35%, and pre-tax income of $385 million increased $187 million, or 94%, compared with the World Health Organization declared COVID-19 a pandemic andprior-year quarter, which was negatively impacted by uncertainty resulting from the United States declared a national emergency due to the impactonset of the COVID-19 pandemic. AsNet income of $307 million increased $135 million, or 78%, and our earnings per diluted share were $2.18, reflecting a result of77% increase. Our annualized return on equity (“ROE”) for the spread of COVID-19, governmentsquarter was 15.9%, compared with 10.0% in the prior-year quarter, and other authorities aroundannualized return on tangible common equity (“ROTCE”)was 17.7% (1), compared with 10.9% (1) for the world imposed measures intended to control the spread of the disease, including restrictions on travel and the conduct of business, such as stay-at-home orders, quarantines, travel bans, border closings, business closures and other similar measures. In response, we activated our business continuity plan endeavoring to safeguard our associates, and nearly all of our associates transitioned to working remotely, while still maintaining our standard of client service. Although economies began to reopen during our fiscal third quarter, a substantial portion of our associates continued to work remotely. Our systems and infrastructure have continued to support increased volumes of activity without any significant operational or technology disruptions.prior-year quarter.

The economic uncertainty that has resultedDuring the quarter, we completed a $750 million, 30-year senior notes offering at 3.75%, utilizing the proceeds from the COVID-19 pandemic continued duringoffering and cash on hand to early-redeem our fiscal third quarter$250 million of 5.625% senior notes due 2024 and market volatility remained elevated; however, market sentiment improved, reflected in the recoveryour $500 million of U.S. equity markets during the quarter. Certain of our businesses benefited from the equity market appreciation, and PCG assets in fee-based accounts recovered, increasing 16%, which will have a positive impact on our fiscal fourth quarter results. However, our results continued to be negatively affected by the significant reduction in interest rates implemented by The Federal Reserve toward the end of our fiscal second quarter and an elevated bank loan loss provision3.625% senior notes due to the economic impact and uncertainty attributable to the pandemic. Uncertainty remains with regard to the extent and duration of the disruptions related to the COVID-19 pandemic as well as its continuing impacts2026. We recognized losses on the global economy. We expect the COVID-19 pandemic and the measures taken to prevent its spread and to support the economy to continue to have an impact on our business during the remainder of fiscal 2020, although the extentextinguishment of such effects will depend on future developments which are highly uncertainnotes of $98 million. Excluding these losses and cannot be predicted.acquisition-related expenses of $7 million, our adjusted net income was $386 million (1) and our adjusted earnings per diluted share were $2.74 (1).Adjusted annualized ROE for the quarter was 19.9% (1) and adjusted annualized ROTCEwas 22.2% (1). Client assets under administration increased to $1.17 trillion as of June 30, 2021, a 33% increase over June 30, 2020.



(1)    ROTCE, adjusted net income, adjusted earnings per diluted share, adjusted annualized ROE and adjusted annualized ROTCE are non-GAAP financial measures. Please see the “Reconciliation of non-GAAP financial measures to GAAP financial measures” in this MD&A for a reconciliation of these non-GAAP financial measures to the most directly comparable GAAP measure, and for other important disclosures.
50
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RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
Management’s Discussion and Analysis

During the quarter ended June 30, 2020, net revenues of $1.83 billion decreased $93The $637 million, or 5%35%, compared with the prior-year quarter. Pre-tax income of $198 million decreased $144 million, or 42%, and net income of $172 million decreased $87 million, or 34%, both primarily due to a significant increase in the bank loan loss provision in response to the economic deterioration caused by the COVID-19 pandemic. Our earnings per diluted share were $1.23, reflecting a 32% decrease. Our annualized return on equity (“ROE”) for the quarter was 10.0%, compared with 16.1% in the prior-year quarter, and our annualized return on tangible common equity (“ROTCE”) (1) was 10.9%, compared with 17.8% for the prior-year quarter.

The $93 million decrease in net revenues compared with the prior-year quarter was primarily reflected the impact of lower short-term interest rates on both net interest incomedriven by significantly higher asset management and RJBDPrelated administrative fees, from third-party banks. These declines were partially offset by an increase in brokerage revenues, as the fixed income business generated strong results duelargely attributable to higher client activity levels.PCG assets in fee-based accounts, and strong investment banking revenues, also significantly higher than the prior-year quarter. Brokerage revenues were also strong and increased compared with the prior-year quarter. Revenues in the current-year quarter included $24 million of private equity valuation gains, of which $10 million were attributable to noncontrolling interests and were offset in other expenses, compared with insignificant gains in the prior-year quarter.

Compensation, commissions and benefits expenses were flat versusexpense increased $384 million, or 30%, primarily resulting from the growth in revenues and pre-tax income compared with the prior-year quarter. Our compensation ratio, or the ratio of compensation, commissions and benefits expense to net revenues, decreased to 67.2%, compared with 69.6% for the prior-year quarter, primarily due to a change in the composition of net revenues compared with the prior-year quarter. Our current quarter compensation ratio reflected the impact of strong net revenues in the Capital Markets segment, which had a 57% compensation ratio for the quarter, and from the private equity valuation gains, which do not have direct compensation associated with them.

Non-compensation expenses increased $51$66 million, or 17%18%, primarily due to the losses on extinguishment of debt of $98 million described above, the aforementioned private equity valuation gains attributable to noncontrolling interests in the current quarter that were offset within other expenses, acquisition-related expenses, and increased investment sub-advisory fees. Business development expenses also increased from the very low prior-year quarter level, primarily due to higher recruiting-related expenses and an $86increase in travel, meal and event-related expenses. These increases were offset by a $100 million increasedecrease in the bank loan loss provision for credit losses, which was $81a benefit of $19 million in the current-year quarter computed under the CECL methodology compared with a $5provision of $81 million benefit in the prior-year quarter partially offset by a decrease in business development expenses, as travel and conferences were halted as a result ofcomputed under the COVID-19 pandemic.incurred loss methodology.

Our effective income tax rate of 13.1%was 20.3% for our fiscal third quarter of 2020 primarily reflected2021, an increase compared with a 13.1% effective income tax rate for the prior-year quarter. Our tax rate in the prior-year quarter was unusually low due to a significant change in the projected impact of significant non-taxable gains on our corporate-owned life insurance portfolio on lower pre-tax earnings forour effective tax rate during that quarter, from a large non-deductible loss projected at March 31, 2020, to a relatively small non-taxable gain projected as of June 30, 2020 resulting from a significant rebound in equity markets during our fiscal third quarter of 2020. We expect our effective tax rate to be approximately 21% in the quarter.fiscal fourth quarter of 2021.

The firm ended theour fiscal third quarter of 2021 with capital ratios well in excess of regulatory requirements and substantial liquidity, with over $2.1approximately $1.6 billion (2)(1) of cash at the parent company, which included the proceedscompany. Pursuant to our Board of a $500 million 10-year senior notes issuance at the endDirectors’ share repurchase authorization, we repurchased 375,000 shares of common stock during our fiscal secondthird quarter for $48 million at an average price of 2020.$128.55 per share, leaving $632 million of availability remaining under the authorization as of June 30, 2021. We expect to continue to be opportunistic in deploying our capital in future quarters, through a combination of organic growth, additional share repurchases and acquisitions, as evidenced by the NWPS and Financo acquisitions, which were announced and completed during fiscal 2021, and the announced acquisitions of Charles Stanley and Cebile.

CertainOur results for our fiscal third quarter of 2021 were strong and we remain well-positioned entering our fiscal fourth quarter, with strong capital ratios, over $1 trillion of client assets under administration, a 9% increase in PCG fee-based assets from March 31, 2021 to June 30, 2021, and a strong investment banking backlog. However, we expect to continue to face headwinds from near-zero short-term interest rates and continued economic uncertainty resulting from the ongoing COVID-19 pandemic, which continues to evolve as recently experienced with the rapid spread of the impacts of the COVID-19 pandemic will likely continue to affect our results in future quarters. Our net interest income and RJBDP fees from third-party banks will continue to be negatively affected by the 225 basis point reduction by the Federal Reserve of its benchmark short-term interest rate since August 2019. In Capital Markets, the high degree of market uncertainty will likelyDelta variant. As a result, in morewe may experience volatility of both brokerage revenues and investment banking revenues, duringwhich may negatively impact our ability to sustain the pandemic. Whilelevel of revenues in future periods which were achieved in the current quarter. Although our results during the third quarter were negativelypositively impacted by elevateda benefit for credit losses related to our bank loan loss provisions, including losses on certain corporate loans that were sold during the quarter, furtherportfolio, net loan growth and/or future market deterioration could result in additionalincreased provisions in future quarters. DueIn addition, we expect that expenses may continue to increase over the uncertainty caused by the COVID-19 pandemic,next several quarters as business and related negative impact onevent-related travel increase and as we continue to make investments in our results, we are evaluating ways to reduce coststechnology and find efficiencies to remain well-positioned for future growth and success. To that end, we are currently engaged in a firm-wide process of evaluating both compensation and non-compensation expenses.growth.

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

Our PCG segment net revenues of $1.25$1.70 billion decreased 8%, whileincreased 36% and pre-tax income of $91$195 million decreased 35%increased 114%.  The $102$447 million decreaseincrease in net revenues was primarily attributable to the decreasea significant increase in short-term interest rates, which negatively impacted both net interest income and RJBDPasset management fees from third party banks. Brokerage revenues also declined compared with the prior-year quarter, primarily due to a declinehigher assets in revenues from annuity productsfee-based accounts at the beginning of the current-year quarter, and mutual fund products.higher brokerage and account and service fee revenues. Non-interest expenses decreased $53increased $343 million, or 4%30%, primarily resulting from a decrease in travel and conference-related expenses as a result of the COVID-19 pandemic, as well as lower compensation expenses due to a decrease in compensable net revenues, which primarily include asset management and related administrative fees, brokerage revenues and investment banking revenues.

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

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

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

(2)    For additional information, please see the “Liquidity and capital resources - Sources of liquidity” section in this MD&A.
5153

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
Management’s Discussion and Analysis

RJ BankCapital Markets net revenues of $178$446 million decreased 17%increased 38% and pre-tax income of $14$115 million decreased 90%increased 85%. NetThe $123 million increase in net revenues decreased $37 millionwas due to a significant increase in investment banking revenues from both mergers & acquisition activity and equity underwriting activity compared with the negative impact from lower short-term interest rates, partially offsetprior-year quarter, which was negatively impacted by the benefit from higher interest-earning assets.COVID-19 pandemic. Non-interest expenses increased $87$70 million, or 113%27%, as RJ Bank recorded a loan loss provision of $81 million comparedprimarily due to a benefit of $5 millionhigher compensation expenses resulting from the increase in the prior-year quarter.revenues.

OurAsset Management segment net revenues of $225 million increased 38% and pre-tax income of $105 million increased 75%. The $62 million increase in net revenues was primarily driven by higher financial assets under management. Non-interest expenses increased $17 million, or 17%, primarily due to higher investment sub-advisory fees.

Raymond James Bank net revenues of $169 million decreased 5%, while pre-tax income of $104 million increased 643%. The $9 million decrease in net revenues primarily reflected the negative impact of lower short-term interest rates and a shift in the composition of interest-earning assets, which more than offset the growth in interest-earning assets. Non-interest expenses decreased $99 million, or 60%, primarily due to the $100 million decrease in the bank loan provision for credit losses.

The Other segment reflected a pre-tax loss that was $4$105 million larger compared tothan the loss in the prior-year quarter, primarily the result of lower interest income on corporate cash balances due to the negativeaforementioned losses on extinguishment of debt of $98 million and acquisition-related expenses of $4 million, partially offset by the impact of lower short-term interest rates, as well as increased interest expense due to the issuance of $500 million of senior notes atprivate equity gains in the end of the fiscal secondcurrent-year quarter.

Nine months ended June 30, 20202021 compared with the nine months ended June 30, 20192020

Net revenues of $5.91$7.07 billion increased $194$1.15 billion, or 20%, and pre-tax income of $1.23 billion increased $435 million, or 3%55%. Pre-taxNet income of $796$974 million decreased $225increased $365 million, or 22%. Our net income of $609 million decreased $160 million, or 21%,60% and our earnings per diluted share were $4.33,$6.92, also reflecting an 18% decrease.a 60% increase. Our annualized ROE duringfor the nine months ended June 30, 20202021 was 11.9%17.4%, compared with 16.2%11.9% for the prior-year period, and annualized ROTCE (1)was 13.1%19.3% (1), compared with 17.9%13.1% (1) for the prior-year period. Excluding the impact of losses on extinguishment of debt and acquisition-related expenses, adjusted net income was $1.06 billion and adjusted earnings per diluted share were $7.50 (1). Adjusted annualized ROE was 18.7% (1) and adjusted annualized ROTCE was 20.8% (1).

The $194 million$1.15 billion increase in net revenues compared with the prior-year period includedwas primarily driven by higher asset management and related administrative fees, primarilylargely attributable to higher average PCG assets in fee-based accounts, at the beginning of the current-year periodsas well as strong investment banking and higher brokerage revenues, largely due to higher market volatility and a significant increase in institutional fixed income client activitywhich also increased compared with the prior-year period. Revenues in the current-year period.current year also included private equity gains of $56 million ($20 million attributable to noncontrolling interests), compared with $40 million of losses in the prior-year period ($23 million attributable to noncontrolling interests). Offsetting these increases werewas the negative impactsimpact of lower short-term interest rates on our net interest income and RJBDP fees from third-party banks, and valuation losses on private equity investments, a portion of which was attributable to noncontrolling interests (reflected as an offset in other expenses).banks.

Compensation, commissions and benefits expense increased $283$759 million, or 8%19%, mostly due to an increaseprimarily resulting from the growth in compensable net revenues.revenues and pre-tax income compared with the prior-year period. Our compensation ratio was 68.1%, compared with 68.5% for the prior-year period.

Non-compensation expenses increased $136decreased $40 million, or 15%4%, primarily due to a $188$225 million decrease in the bank loan loss provision for credit losses, which was a benefit of $37 million in the current year computed under the CECL methodology compared with a $16provision of $188 million bank loan loss provision duringin the prior-year period. This increase was partially offset byperiod computed under the incurred loss methodology. Business development expenses also declined, due to lower travel and conference-relatedevent-related expenses as a result of the COVID-19 pandemic, andpartially offset by an increase in recruiting-related expenses. Offsetting these decreases was the aforementioned losses on extinguishment of debt of $98 million in the current-year period and an increase in other expenses, primarily due to the change in private equity valuation lossesvaluations attributable to noncontrolling interests which is an offset in other expenses.compared with the prior-year period.

Our effective income tax rate was 23.5%20.9% for the nine months ended June 30, 2020,2021, a decrease compared withfrom 23.5% for the 24.8% effective tax rate for fiscal year 2019,prior-year period, primarily due to the favorable impact of permanent tax benefitslarger non-taxable gains on lower pre-tax earningsour corporate-owned life insurance portfolio in the current-year period.

Pursuant to the Board of Directors’ repurchase authorization, we repurchased 982,750 shares of common stock during the nine months ended June 30, 2020.

Pursuant to our Board of Directors’ share repurchase authorization, we repurchased2021 for approximately 2.7 million shares of common stock during the first six months of our current fiscal year for $213$118 million at an average price of approximately $80$120 per share. Due to heightened market uncertainty as a result of the COVID-19 crisis, share buybacks were suspended from mid-March through the end of our fiscal third quarter. As of June 30, 2020, we had $537 million of availability remaining under the previously-announced authorization. We resumed share repurchases to offset dilution in our fiscal fourth quarter.


(1)    ROTCE, adjusted net income, adjusted earnings per diluted share, adjusted annualized ROE and adjusted annualized ROTCE are non-GAAP financial measures. Please see the “Reconciliation of non-GAAP financial measures to GAAP financial measures” in this MD&A for a reconciliation of these non-GAAP financial measures to the most directly comparable GAAP measure, and for other important disclosures.
54

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
Management’s Discussion and Analysis

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

PCG segment net revenues of $4.16$4.81 billion increased 5%, while16% and pre-tax income of $414$527 million decreased 5%increased 27%. The $180$652 million increase in net revenues was primarily attributable to an increase in asset management and related administrative fees largely due to higher average assets in fee-based accounts at the beginning of each ofquarterly billing period within the current-year periods. Offsetting this increase wereperiod, and higher brokerage revenues, partially offset by decreases in RJBDP fees from third-party banks and net interest income due to lower short-term interest rates. Non-interest expenses increased $202$539 million, or 6%14%, primarily resulting from an increase in compensation expenses largely due to the growth in compensable net revenues.

Capital Markets net revenues of $881 million$1.33 billion increased 13%51% and pre-tax income of $119$349 million increased 55%193%. The $100$450 million increase in net revenues was primarily due to ana significant increase in investment banking revenues from both mergers & acquisition activity and underwriting activity, as well as growth in fixed income brokerage revenues, due to higher client activity, as well as increases in equity and debt underwriting revenues. These increases were partially offset by a decline in merger & acquisition and advisory revenues, which were negatively impacted by the market uncertainty caused by the COVID-19 pandemic. Non-interest expenses increased $58$220 million, or 8%29%, due to higher compensation expenses primarily as a result ofattributable to the increase in revenues.revenues, partially offset by a decrease in business development expenses.

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

52

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
Management’s Discussion and Analysis

Our Asset Management segment net revenues of $531$629 million increased 4%18% and pre-tax income of $206$275 million increased 12%33%. The $98 million increase in net revenues was primarily driven by higher average beginning-of-quarter assets in programs offered to PCG clients for which the segment provides administrative support, as well as higher average financial assets under management during the current-year period.management. Non-interest expenses increased $29 million, or 9%, primarily due to higher investment sub-advisory fees.

RJRaymond James Bank segment net revenues of $604$496 million decreased 4% and18%, while pre-tax income of $163$286 million decreased 58%increased 75%. The $26$108 million decrease in net revenues reflected the negative impact of lower short-term interest rates, which more than offset the growth in interest-earning assets. Non-interest expenses increased $195decreased $231 million, or 79%52%, primarily due to a $172$225 million increasedecrease in the bank loan loss provision.provision for credit losses.

OurThe Other segment reflected a pre-tax loss that was $46$100 million larger compared togreater than the loss in the prior-year period, primarily due to the losses on extinguishment of debt of $98 million and acquisition-related expenses of $6 million in the current-year period. These negative impacts were partially offset by the aforementioned private equity valuationgains compared with losses as compared to gains in the prior-year period, lower interest income on corporate cash balances due to lower short-term interest rates, and increased interest expense, due to the issuance of $500 million of senior notes at the end of the fiscal second quarter.period.



55

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
Management’s Discussion and Analysis


RECONCILIATION OF NON-GAAP FINANCIAL MEASURES TO GAAP FINANCIAL MEASURES

We utilize certain non-GAAP financial measures as additional measures to aid in, and enhance, the understanding of our financial results and related measures. These non-GAAP financial measures include adjusted net income, adjusted earnings per diluted share, adjusted ROE, ROTCE, and adjusted ROTCE. We believe certain of these non-GAAP financial measures provides useful information to management and investors by excluding certain material items that may not be indicative of our core operating results. We utilize these non-GAAP financial measures in assessing the financial performance of the business, as they facilitate a meaningful comparison of current- and prior-period results. We believe that ROTCE is meaningful to investors as this measure facilitates comparison of our results to the results of other companies. In the following tables, the tax effect of non-GAAP adjustments reflects the statutory rate associated with each non-GAAP item. These non-GAAP financial measures should be considered in addition to, and not as a substitute for, measures of financial performance prepared in accordance with GAAP. In addition, our non-GAAP financial measures may not be comparable to similarly titled non-GAAP financial measures of other companies. The following tables provide a reconciliation of non-GAAP financial measures to the most directly comparable GAAP financial measures for the periods indicated.

Three months endedNine months ended
$ in millionsJune 30, 2021June 30, 2021
Net income$307 $974 
Non-GAAP adjustments:
Losses on extinguishment of debt98 98 
Acquisition-related expenses7 9 
Pre-tax impact of non-GAAP adjustments105 107 
Tax effect of non-GAAP adjustments(26)(26)
Total non-GAAP adjustments, net of tax79 81 
Adjusted net income$386 $1,055 
Earnings per common share - diluted$2.18 $6.92 
Non-GAAP adjustments:
Losses on extinguishment of debt0.69 0.70 
Acquisition-related expenses0.05 0.06 
Tax effect of non-GAAP adjustments(0.18)(0.18)
Total non-GAAP adjustments, net of tax0.56 0.58 
Adjusted earnings per common share - diluted$2.74 $7.50 
56

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
Management’s Discussion and Analysis

Three months ended June 30,Nine months ended June 30,
$ in millions2021202020212020
Annualized return on equity
Average equity$7,728 $6,882 $7,483 $6,797 
Impact on average equity of non-GAAP adjustments:
Losses on extinguishment of debt49 NA25 NA
Acquisition-related expenses4 NA2 NA
Tax effect of non-GAAP adjustments(13)NA(7)NA
Adjusted average equity$7,768 NA$7,503 NA
Average equity$7,728 $6,882 $7,483 $6,797 
Less:
Average goodwill and identifiable intangible assets, net865 603 791 606 
Average deferred tax liabilities, net(56)(32)(51)(30)
Average tangible common equity$6,919 $6,311 $6,743 $6,221 
Impact on average equity of non-GAAP adjustments:
Losses on extinguishment of debt49 NA25 NA
Acquisition-related expenses4 NA2 NA
Tax effect of non-GAAP adjustments(13)NA(7)NA
Adjusted average tangible common equity$6,959 NA$6,763 NA
Return on equity15.9 %10.0 %17.4 %11.9 %
Adjusted annualized return on equity19.9 %NA18.7 %NA
Return on tangible common equity17.7 %10.9 %19.3 %13.1 %
Adjusted annualized return on tangible common equity22.2 %NA20.8 %NA

Average equity for the quarterly periods is computed by adding the total equity attributable to 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. Tangible common equity is computed by subtracting goodwill and identifiable intangible assets, net, along with the associated deferred tax liabilities, from total equity attributable to RJF. Average equity for the year-to-date periods is computed by adding the total equity attributable to RJF as of each quarter-end date during the indicated year-to-date period to the beginning of the year total, and dividing by four, or in the case of average tangible common equity, computed by adding tangible common equity as of each quarter-end date during the indicated year-to-date period to the beginning of the year total, and dividing by four. Adjusted average equity is computed by adjusting for the impact on average equity of the non-GAAP adjustments, as applicable for each respective period. Adjusted average tangible common equity is computed by adjusting for the impact on average tangible common equity of the non-GAAP adjustments, as applicable for each respective period.

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

57

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
Management’s Discussion and Analysis


SEGMENTS

We currently operate through five segments. Our business segments are PCG, Capital Markets, Asset Management and RJRaymond James Bank. Our Other segment includes our private equity investments, interest income on certain corporate cash balances, certain acquisition-related expenses, and certain corporate overhead costs of RJF, including the interest costs on our public debt and any losses on extinguishment of such debt.

The following table presents our consolidated and segment net revenues and pre-tax income/(loss) for the periods indicated.
 Three months ended June 30,Nine months ended June 30,
$ in millions20202019% change20202019% change
Total company   
Net revenues$1,834  $1,927  (5)%$5,911  $5,717  %
Pre-tax income$198  $342  (42)%$796  $1,021  (22)%
Private Client Group  
Net revenues$1,249  $1,351  (8)%$4,158  $3,978  %
Pre-tax income$91  $140  (35)%$414  $436  (5)%
Capital Markets  
Net revenues$323  $251  29 %$881  $781  13 %
Pre-tax income$62  $24  158 %$119  $77  55 %
Asset Management  
Net revenues$163  $177  (8)%$531  $513  %
Pre-tax income$60  $65  (8)%$206  $184  12 %
RJ Bank  
Net revenues$178  $215  (17)%$604  $630  (4)%
Pre-tax income$14  $138  (90)%$163  $384  (58)%
Other  
Net revenues$(20) $(4) (400)%$(72) $(2) (3,500)%
Pre-tax loss$(29) $(25) (16)%$(106) $(60) (77)%
Intersegment eliminations  
Net revenues$(59) $(63) NM$(191) $(183) NM
53

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
Management’s Discussion and Analysis

RECONCILIATION OF GAAP MEASURES TO NON-GAAP FINANCIAL MEASURES

We utilize certain non-GAAP financial measures to aid in, and enhance, the understanding of our financial results and related measures. These non-GAAP financial measures have been separately identified in this document. We believe that annualized return on tangible common equity is meaningful to investors as this measure facilitates comparison of our results to the results of other companies. This non-GAAP financial measure should be considered in addition to, and not as a substitute for, measures of financial performance prepared in accordance with GAAP. In addition, this non-GAAP financial measure may not be comparable to similarly titled non-GAAP financial measures of other companies. The following table provides a reconciliation of this non-GAAP financial measure to the most directly comparable GAAP financial measure for the periods indicated.
Three months ended June 30,Nine months ended June 30,
$ in millions2020201920202019
Average equity$6,882  $6,434  $6,797  $6,345  
Less:
Average goodwill and identifiable intangible assets, net603  633  606  634  
Average deferred tax liabilities, net(32) (31) (30) (32) 
Average tangible common equity$6,311  $5,832  $6,221  $5,743  
Return on equity10.0 %16.1 %11.9 %16.2 %
Return on tangible common equity10.9 %17.8 %13.1 %17.9 %

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

Average equity for the quarter-to-date period is computed by adding the total equity attributable to 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 RJF as of each quarter-end date during the indicated year-to-date period to the beginning of the year total, and dividing by four, or in the case of average tangible common equity, computed by adding tangible common equity as of each quarter-end date during the indicated year-to-date period to the beginning of the year total, and dividing by four.
 Three months ended June 30,Nine months ended June 30,
$ in millions20212020% change20212020% change
Total company   
Net revenues$2,471 $1,834 35 %$7,065 $5,911 20 %
Pre-tax income$385 $198 94 %$1,231 $796 55 %
Private Client Group  
Net revenues$1,696 $1,249 36 %$4,810 $4,158 16 %
Pre-tax income$195 $91 114 %$527 $414 27 %
Capital Markets  
Net revenues$446 $323 38 %$1,331 $881 51 %
Pre-tax income$115 $62 85 %$349 $119 193 %
Asset Management  
Net revenues$225 $163 38 %$629 $531 18 %
Pre-tax income$105 $60 75 %$275 $206 33 %
Raymond James Bank  
Net revenues$169 $178 (5)%$496 $604 (18)%
Pre-tax income$104 $14 643 %$286 $163 75 %
Other  
Net revenues$2 $(20)NM$(6)$(72)92 %
Pre-tax loss$(134)$(29)(362)%$(206)$(106)(94)%
Intersegment eliminations  
Net revenues$(67)$(59)(14)%$(195)$(191)(2)%

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
LowHighEnd of period
Three months ended
June 30, 20210.00%0.25%0% - 0.25%
June 30, 20200.00%0.25%0% - 0.25%
Nine months ended
June 30, 20210.00%0.25%0% - 0.25%
June 30, 20200.00%2.00%0% - 0.25%

In response to macroeconomic concerns resulting from the COVID-19 pandemic, Thethe Federal Reserve decreased its benchmark short-term interest rate twice in March 2020 to a range of 0-0.25%, for a total decreasereduction of 150 basis points. These decreases, in short-termaddition 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 onnegatively 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. Feeswell 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. The 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, and weprior-year periods. We expect a continuation of this negative impactthe current near-zero interest rate environment to continue for the remainder of fiscal 2020.2021 and into fiscal 2022.
58

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
Management’s Discussion and Analysis


Given the relationship between our interest-sensitive assets and liabilities (primarily held in each of these segmentsour PCG, Raymond James 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 ourthe 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” offor our PCG, RJRaymond James 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.

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

54

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
Management’s Discussion and Analysis

Quarter ended June 30, 20202021 compared with the quarter ended June 30, 20192020
 Three months ended June 30,
 20202019
$ in millionsAverage
balance
Interest
inc./exp.
Average
yield/cost
Average
balance
Interest
inc./exp.
Average
yield/cost
Interest-earning assets:     
Assets segregated pursuant to regulations$3,411  $3�� 0.34 %$2,268  $14  2.62 %
Trading instruments313   4.59 %771   3.53 %
Available-for-sale securities4,437  23  2.01 %2,901  18  2.41 %
Margin loans2,068  18  3.44 %2,528  30  4.83 %
Bank loans, net of unearned income and deferred expenses:
Loans held for investment:
C&I loans7,994  59  2.93 %8,278  98  4.68 %
CRE construction loans212   3.60 %248   5.45 %
CRE loans3,773  25  2.66 %3,359  39  4.53 %
Tax-exempt loans1,272   3.34 %1,291   3.35 %
Residential mortgage loans4,983  37  2.97 %4,127  34  3.32 %
SBL and other3,576  24  2.59 %3,125  36  4.64 %
Loans held for sale111   3.22 %118   4.78 %
Total bank loans, net21,921  157  2.87 %20,546  221  4.30 %
Loans to financial advisors, net973   1.94 %912   2.06 %
Corporate cash and all other7,675   0.31 %4,272  26  2.45 %
Total interest-earning assets$40,798  $217  2.09 %$34,198  $321  3.76 %
Interest-bearing liabilities:     
Bank deposits:
Savings, money market and NOW accounts$25,060  $ 0.02 %$20,842  $29  0.57 %
Certificates of deposit1,104   2.00 %561   2.33 %
Trading instruments sold but not yet purchased71   0.83 %307   2.39 %
Brokerage client payables4,790   0.17 %3,054   0.61 %
Other borrowings891   2.25 %898   2.20 %
Senior notes payable2,045  24  4.74 %1,550  19  4.71 %
Other272   4.23 %791   4.81 %
Total interest-bearing liabilities$34,233  $42  0.48 %$28,003  $73  1.03 %
Net interest income$175  $248  
55

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
Management’s Discussion and Analysis

Nine months ended June 30, 2020 compared with the nine months ended June 30, 2019
Nine months ended June 30, Three months ended June 30,
20202019 20212020
$ in millions$ in millionsAverage
balance
Interest
inc./exp.
Average
yield/cost
Average
balance
Interest
inc./exp.
Average
yield/cost
$ in millionsAverage
daily
balance
InterestAnnualized
average
rate
Average
daily
balance
InterestAnnualized
average
rate
Interest-earning assets:Interest-earning assets:      Interest-earning assets:     
Cash and cash equivalentsCash and cash equivalents$5,644$3 0.20 %$6,605 $0.26 %
Assets segregated pursuant to regulationsAssets segregated pursuant to regulations$2,852  $25  1.16 %$2,472  $46  2.50 %Assets segregated pursuant to regulations9,0163 0.16 %3,408 0.36 %
Trading instruments596  17  3.77 %727  20  3.66 %
Available-for-sale securitiesAvailable-for-sale securities3,654  60  2.18 %2,831  51  2.39 %Available-for-sale securities8,04120 0.96 %4,437 23 2.01 %
Margin loans2,290  66  3.86 %2,620  93  4.75 %
Brokerage client receivablesBrokerage client receivables2,36319 3.33 %2,065 18 3.47 %
Bank loans, net of unearned income and deferred expenses:Bank loans, net of unearned income and deferred expenses:Bank loans, net of unearned income and deferred expenses:
Loans held for investment:Loans held for investment:Loans held for investment:
C&I loansC&I loans8,039  226  3.69 %8,065  286  4.67 %C&I loans7,936 50 2.51 %7,957 58 2.93 %
CRE construction loans209   4.36 %205   5.58 %
CRE loansCRE loans3,706  98  3.49 %3,433  120  4.60 %CRE loans2,748 18 2.59 %2,610 19 2.85 %
REIT loansREIT loans1,327 9 2.53 %1,412 2.45 %
Tax-exempt loansTax-exempt loans1,236  25  3.35 %1,285  26  3.34 %Tax-exempt loans1,294 9 3.33 %1,272 3.34 %
Residential mortgage loansResidential mortgage loans4,823  112  3.09 %3,999  100  3.32 %Residential mortgage loans5,126 34 2.70 %4,983 37 2.97 %
SBL and otherSBL and other3,460  89  3.37 %3,098  109  4.64 %SBL and other5,208 29 2.22 %3,576 24 2.59 %
Loans held for saleLoans held for sale138   3.77 %149   4.87 %Loans held for sale142 1 2.92 %111 3.22 %
Total bank loans, netTotal bank loans, net21,611  561  3.46 %20,234  655  4.32 %Total bank loans, net23,781 150 2.54 %21,921 157 2.87 %
Loans to financial advisors, net975  15  2.04 %909  14  2.00 %
Corporate cash and all other5,963  55  1.10 %4,651  82  2.33 %
All other interest-earning assetsAll other interest-earning assets2,288 10 1.51 %1,964 12 2.66 %
Total interest-earning assetsTotal interest-earning assets$37,941  $799  2.79 %$34,444  $961  3.71 %Total interest-earning assets$51,133 $205 1.60 %$40,400 $217 2.16 %
Interest-bearing liabilities:Interest-bearing liabilities:      Interest-bearing liabilities:     
Bank deposits:Bank deposits:Bank deposits:
Savings, money market and NOW accountsSavings, money market and NOW accounts$23,190  $20  0.11 %$20,689  $96  0.62 %Savings, money market and NOW accounts$28,908 $1 0.02 %$25,060 $0.02 %
Certificates of depositCertificates of deposit993  15  2.06 %527   2.20 %Certificates of deposit883 4 1.91 %1,104 2.00 %
Trading instruments sold but not yet purchased194   1.80 %297   2.63 %
Total bank depositsTotal bank deposits29,791 5 0.08 %26,164 0.10 %
Brokerage client payablesBrokerage client payables3,929   0.31 %3,395  16  0.62 %Brokerage client payables10,486 1 0.03 %4,751 0.18 %
Other borrowingsOther borrowings892  15  2.24 %936  16  2.33 %Other borrowings860 4 2.19 %891 2.23 %
Senior notes payableSenior notes payable1,716  61  4.73 %1,550  55  4.70 %Senior notes payable2,211 25 4.49 %2,067 24 4.69 %
Other473  13  3.55 %771  23  3.89 %
All other interest-bearing liabilitiesAll other interest-bearing liabilities602 5 1.12 %586 1.10 %
Total interest-bearing liabilitiesTotal interest-bearing liabilities$31,387  $136  0.57 %$28,165  $221  1.04 %Total interest-bearing liabilities$43,950 $40 0.34 %$34,459 $42 0.48 %
Net interest incomeNet interest income $663    $740   Net interest income$165 $175 
Firmwide net interest margin (net yield on interest-earning assets)Firmwide net interest margin (net yield on interest-earning assets)1.31 %1.75 %
Raymond James Bank net interest marginRaymond James Bank net interest margin1.92 %2.29 %

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 $1 million
59

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
Management’s Discussion and $10 million during three and nine months ended June 30, 2020, respectively, and $3 million and $14 million during three and nine months ended June 30, 2019, respectively.Analysis

The yield on tax-exempt loans in the preceding tablestable is presented on a taxable-equivalent basis utilizing the applicable federal statutory rates for each of the years presented.three months ended June 30, 2021 and 2020.

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.
Three months ended June 30,
2021 compared to 2020
 Increase/(decrease) due to
$ in millionsVolumeRateTotal
Interest income:   
Interest-earning assets:   
Cash and cash equivalents$ $(1)$(1)
Assets segregated pursuant to regulations5 (5) 
Available-for-sale securities18 (21)(3)
Brokerage client receivables2 (1)1 
Bank loans, net of unearned income and deferred expenses:
Loans held for investment:
C&I loans (8)(8)
CRE loans1 (2)(1)
REIT loans1 (1) 
Tax-exempt loans   
Residential mortgage loans1 (4)(3)
SBL and other9 (4)5 
Loans held for sale   
Total bank loans, net12 (19)(7)
All other interest-earning assets2 (4)(2)
Total interest-earning assets$39 $(51)$(12)
Interest expense:   
Interest-bearing liabilities:   
Bank deposits:   
Savings, money market and NOW accounts$ $(1)$(1)
Certificates of deposit(1) (1)
Total bank deposits(1)(1)(2)
Brokerage client payables2 (4)(2)
Other borrowings (1)(1)
Senior notes payable2 (1)1 
All other interest-bearing liabilities 2 2 
Total interest-bearing liabilities$3 $(5)$(2)
Change in net interest income$36 $(46)$(10)
56
60

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
Management’s Discussion and Analysis

Nine months ended June 30, 2021 compared with the nine months ended June 30, 2020
 Nine months ended June 30,
 20212020
$ in millionsAverage
daily
balance
InterestAnnualized
average
rate
Average
daily
balance
InterestAnnualized
average
rate
Interest-earning assets:      
Cash and cash equivalents$5,548 $9 0.22 %$5,013 $37 0.99 %
Assets segregated pursuant to regulations8,307 11 0.18 %2,853 25 1.20 %
Available-for-sale securities7,837 64 1.08 %3,654 60 2.18 %
Brokerage client receivables2,222 56 3.38 %2,290 66 3.87 %
Bank loans, net of unearned income and deferred expenses:
Loans held for investment:
C&I loans7,670 149 2.57 %8,012 225 3.70 %
CRE loans2,665 52 2.57 %2,593 72 3.63 %
REIT loans1,290 25 2.49 %1,349 34 3.33 %
Tax-exempt loans1,253 25 3.34 %1,236 25 3.35 %
Residential mortgage loans5,044 103 2.73 %4,823 112 3.09 %
SBL and other4,709 80 2.24 %3,460 89 3.37 %
Loans held for sale153 3 2.54 %138 3.77 %
Total bank loans, net22,784 437 2.57 %21,611 561 3.46 %
All other interest-earning assets2,264 31 1.79 %2,329 50 2.82 %
Total interest-earning assets$48,962 $608 1.66 %$37,750 $799 2.83 %
Interest-bearing liabilities:      
Bank deposits:
Savings, money market and NOW accounts$27,732 $4 0.02 %$23,190 $20 0.11 %
Certificates of deposit911 13 1.90 %993 15 2.06 %
Total bank deposits28,643 17 0.08 %24,183 35 0.19 %
Brokerage client payables9,765 3 0.03 %3,929 0.31 %
Other borrowings863 14 2.20 %893 15 2.23 %
Senior notes payable2,115 73 4.62 %1,742 61 4.66 %
All other interest-bearing liabilities591 8 1.05 %878 16 1.81 %
Total interest-bearing liabilities$41,977 $115 0.36 %$31,625 $136 0.56 %
Net interest income $493   $663  
Firmwide net interest margin (net yield on interest-earning assets)1.35 %2.36 %
Raymond James Bank net interest margin1.96 %2.82 %

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 the nine months ended June 30, 2021 and 2020.

61

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.
Nine months ended June 30,
2021 compared to 2020
 Increase/(decrease) due to
$ in millionsVolumeRateTotal
Interest income:   
Interest-earning assets:   
Cash and cash equivalents$10 $(38)$(28)
Assets segregated pursuant to regulations52 (66)(14)
Available-for-sale securities69 (65)4 
Brokerage client receivables(3)(7)(10)
Bank loans, net of unearned income and deferred expenses:
Loans held for investment:
C&I loans(11)(65)(76)
CRE loans1 (21)(20)
REIT loans (9)(9)
Tax-exempt loans2 (2) 
Residential mortgage loans5 (14)(9)
SBL and other27 (36)(9)
Loans held for sale1 (2)(1)
Total bank loans, net25 (149)(124)
All other interest-earning assets(4)(15)(19)
Total interest-earning assets$149 $(340)$(191)
Interest expense:   
Interest-bearing liabilities:   
Bank deposits:   
Savings, money market and NOW accounts$4 $(20)$(16)
Certificates of deposit(1)(1)(2)
Total bank deposits3 (21)(18)
Brokerage client payables15 (21)(6)
Other borrowings (1)(1)
Senior notes payable13 (1)12 
All other interest-bearing liabilities(7)(1)(8)
Total interest-bearing liabilities$24 $(45)$(21)
Change in net interest income$125 $(295)$(170)


62

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
Management’s Discussion and Analysis


RESULTS OF OPERATIONS – PRIVATE CLIENT GROUP

For an overview of our PCG segment operations, as well as a description of the key factors impacting our PCG results of operations, refer to the information presented in “Item 1 - Business” and “Item 7 - Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our 20192020 Form 10-K.

Operating results
Three months ended June 30,Nine months ended June 30, Three months ended June 30,Nine months ended June 30,
$ in millions$ in millions20202019% change20202019% change$ in millions20212020% change20212020% change
Revenues:Revenues:   Revenues:   
Asset management and related administrative feesAsset management and related administrative fees$715  $718  —  $2,330  $2,063  13 %Asset management and related administrative fees$1,050 $715 47 %$2,914 $2,330 25 %
Brokerage revenues:Brokerage revenues:Brokerage revenues:
Mutual and other fund productsMutual and other fund products131  147  (11)%438  449  (2)%Mutual and other fund products167 131 27 %498 438 14 %
Insurance and annuity productsInsurance and annuity products88  105  (16)%288  308  (6)%Insurance and annuity products113 88 28 %320 288 11 %
Equities, ETFs and fixed income productsEquities, ETFs and fixed income products100  94  %324  291  11 %Equities, ETFs and fixed income products110 100 10 %338 324 %
Total brokerage revenuesTotal brokerage revenues319  346  (8)%1,050  1,048  —  Total brokerage revenues390 319 22 %1,156 1,050 10 %
Account and service fees:Account and service fees:Account and service fees:
Mutual fund and annuity service feesMutual fund and annuity service fees82  85  (4)%260  250  %Mutual fund and annuity service fees105 82 28 %298 260 15 %
RJBDP fees:RJBDP fees:RJBDP fees:
Third-party banksThird-party banks20  67  (70)%129  215  (40)%Third-party banks18 20 (10)%58 129 (55)%
RJ Bank43  44  (2)%138  127  %
Raymond James BankRaymond James Bank47 43 %134 138 (3)%
Client account and other feesClient account and other fees32  32  —  96  92  %Client account and other fees39 32 22 %113 96 18 %
Total account and service feesTotal account and service fees177  228  (22)%623  684  (9)%Total account and service fees209 177 18 %603 623 (3)%
Investment bankingInvestment banking 10  (30)%29  25  16 %Investment banking11 57 %33 29 14 %
Interest incomeInterest income31  56  (45)%125  170  (26)%Interest income31 31 — 91 125 (27)%
All otherAll other  33 %20  19  %All other7 75 %20 20 — 
Total revenuesTotal revenues1,253  1,361  (8)%4,177  4,009  %Total revenues1,698 1,253 36 %4,817 4,177 15 %
Interest expenseInterest expense(4) (10) (60)%(19) (31) (39)%Interest expense(2)(4)(50)%(7)(19)(63)%
Net revenuesNet revenues1,249  1,351  (8)%4,158  3,978  %Net revenues1,696 1,249 36 %4,810 4,158 16 %
Non-interest expenses:Non-interest expenses:    Non-interest expenses:    
Financial advisor compensation and benefitsFinancial advisor compensation and benefits783  805  (3)%2,555  2,358  %Financial advisor compensation and benefits1,082 783 38 %3,053 2,555 19 %
Administrative compensation and benefitsAdministrative compensation and benefits235  237  (1)%727  700  %Administrative compensation and benefits251 235 %760 727 %
Total compensation, commissions and benefitsTotal compensation, commissions and benefits1,018  1,042  (2)%3,282  3,058  %Total compensation, commissions and benefits1,333 1,018 31 %3,813 3,282 16 %
Non-compensation expenses:Non-compensation expenses:Non-compensation expenses:
Communications and information processingCommunications and information processing66  57  16 %187  174  %Communications and information processing70 66 %201 187 %
Occupancy and equipmentOccupancy and equipment42  43  (2)%130  122  %Occupancy and equipment45 42 %133 130 %
Business developmentBusiness development12  37  (68)%63  90  (30)%Business development19 12 58 %50 63 (21)%
Professional feesProfessional fees  —  25  24  %Professional fees10 25 %33 25 32 %
All otherAll other12  24  (50)%57  74  (23)%All other24 12 100 %53 57 (7)%
Total non-compensation expensesTotal non-compensation expenses140  169  (17)%462  484  (5)%Total non-compensation expenses168 140 20 %470 462 %
Total non-interest expensesTotal non-interest expenses1,158  1,211  (4)%3,744  3,542  %Total non-interest expenses1,501 1,158 30 %4,283 3,744 14 %
Pre-tax incomePre-tax income$91  $140  (35)%$414  $436  (5)%Pre-tax income$195 $91 114 %$527 $414 27 %


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RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
Management’s Discussion and Analysis

Selected key metrics

PCG client asset balances
As of
$ in billionsJune 30,
2020
March 31,
2020
September 30,
2019
June 30,
2019
March 31,
2019
September 30,
2018
Assets under administration (“AUA”)$833.1  $734.0  $798.4  $787.4  $760.0  $755.7  
Assets in fee-based accounts (1)
$443.0  $383.5  $409.1  $398.0  $378.4  $366.3  
Percent of AUA in fee-based accounts53.2 %52.2 %51.2 %50.5 %49.8 %48.5 %

As of
$ in billionsJune 30,
2021
March 31,
2021
September 30,
2020
June 30,
2020
March 31,
2020
September 30,
2019
Assets under administration (“AUA”)$1,102.9 $1,028.1 $883.3 $833.1 $734.0 $798.4 
Assets in fee-based accounts (1)
$616.7 $567.6 $475.3 $443.0 $383.5 $409.1 
Percent of AUA in fee-based accounts55.9 %55.2 %53.8 %53.2 %52.2 %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.”

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 participatesinvests 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.

PCG assets under administration increased during the three months ended June 30, 2021, primarily due to the net addition of financial advisors and equity market appreciation.appreciation, as well as net inflows of 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.

Financial advisors
June 30,
2020
March 31,
2020
September 30,
2019
June 30,
2019
June 30,
2021
March 31,
2021
September 30,
2020
June 30,
2020
EmployeesEmployees3,379  3,376  3,301  3,228  Employees3,423 3,375 3,404 3,379 
Independent contractorsIndependent contractors4,776  4,772  4,710  4,676  Independent contractors4,990 4,952 4,835 4,776 
Total advisorsTotal advisors8,155  8,148  8,011  7,904  Total advisors8,413 8,327 8,239 8,155 

AlthoughThe number of financial advisors increased compared with the prior quarter and September 30, 2020 due to strong 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 increased from prior periods,has been impacted by the net additiontransfer of financial advisors was low relativewho were previously affiliated with the firm as independent contractors or employees to recent quarters asour RIA & Custody Services (“RCS”) division. Advisors in RCS are not included in the COVID-19 pandemic impacted experienced financial advisor transitions, particularlycount, although their assets are still included in the employee channel due to office closures, and slowed the transitions of new trainees. While financial advisorclient assets under administration. The recruiting activity has started to recover and the pipeline remains solid, the impact of the COVID-19 pandemic on futurestrong across our affiliation options despite an increasingly competitive recruiting is uncertain.environment.


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RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
Management’s Discussion and Analysis

Clients’ domestic cash sweep balances
As ofAs of
$ in millions$ in millionsJune 30,
2020
March 31,
2020
December 31,
2019
September 30,
2019
June 30,
2019
$ in millionsJune 30,
2021
March 31,
2021
December 31,
2020
September 30,
2020
June 30,
2020
RJBDPRJBDPRJBDP
RJ Bank$24,101  $28,711  $21,891  $21,649  $21,600  
Raymond James BankRaymond James Bank$29,253 $28,174 $26,697 $25,599 $24,101 
Third-party banksThird-party banks24,661  20,379  15,061  14,043  14,425  Third-party banks25,080 25,110 26,142 25,998 24,661 
Subtotal RJBDPSubtotal RJBDP48,762  49,090  36,952  35,692  36,025  Subtotal RJBDP54,333 53,284 52,839 51,597 48,762 
Client Interest Program (“CIP”)3,157  3,782  2,528  2,022  2,130  
CIPCIP8,610 9,517 8,769 3,999 3,157 
Total clients’ domestic cash sweep balancesTotal clients’ domestic cash sweep balances$51,919  $52,872  $39,480  $37,714  $38,155  Total clients’ domestic cash sweep balances$62,943 $62,801 $61,608 $55,596 $51,919 
 Three months ended June 30,Nine months ended June 30,
2020201920202019
Average yield on RJBDP - third-party banks0.33 %1.95 %0.97 %1.90 %
 Three months ended June 30,Nine months ended June 30,
2021202020212020
Average yield on RJBDP - third-party banks0.29 %0.33 %0.30 %0.97 %

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 RJRaymond James 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 RJthe Raymond James Bank segment, which are based on the number of accounts that are swept to RJRaymond James Bank. The fees from RJthe Raymond James Bank segment are eliminated in consolidation.

RJBDP fees from third-party banks and the average yield on RJBDP (third-party banks) were negatively impacted by the significant decrease in short-term interest rates. The Federal Reserve decreased its benchmark short-term interest rate twice toward the end of our fiscal second 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 during 2019 (225 basis points in total). 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 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 RJRaymond James Bank and third-party banks. PCG segment results are also impacted by changes in the allocation of cash balances between RJBDP and CIP, as the net yield to the 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.

Although lower compared with March 31, 2020, clientClient cash balances remained elevated as of June 30, 20202021 compared to prior year balances as a result of a number of factors, including the marketcontinuing economic uncertainty caused by the COVID-19 pandemic.pandemic, as well as uncertainty related to the nature and timing of policy changes that may be put forth by the new federal government administration. The average yield on RJBDP - third-party banks decreased compared with the prior-year periods due to a decline in short-term interest rates. We expect the average yield on RJBDP balances at third-party banks to remain approximately 0.29% for the remainder of our 2021 fiscal year; however, this projected yield could decline in fiscal 2022 if demand for deposits from third-party banks does not improve from current levels.

Quarter ended June 30, 20202021 compared with the quarter ended June 30, 20192020

Net revenues of $1.25$1.70 billion decreased $102increased $447 million, or 8%36%, and pre-tax income of $91$195 million decreased $49increased $104 million, or 35%114%.

Asset management and related administrative fees were largely unchanged, asincreased $335 million, or 47%, primarily due to higher assets in fee-based accounts at the beginning of the quarter were relatively flat compared with the beginning of the prior-yearcurrent quarter. As assets in fee-basedthese accounts are billed primarily on balances atas of the beginning of the quarter, the 16%9% increase in fee-based assets during the current quarter willas of June 30, 2021 compared to March 31, 2021, should positively impact asset management fees in our fiscal fourth quarter.quarter of 2021.

Brokerage revenues decreased $27increased $71 million, or 8%22%, reflecting lowerdue to higher trailing revenues from mutual and other fund products and annuity products, and lower mutual fundresulting from higher asset values in the current quarter, as well as higher transactional revenues. Offsetting these decreases was an increase in revenues from equities, ETFs, and fixed income products due to an increase in client activity.

Account and service fees decreased $51increased $32 million, or 22%18%, primarily due to the decline in RJBDP fees from third-party banks, driven by lower short-term interest rates compared with the prior-year quarter, which more than offset the impact of the significantan increase in cash balances swept to such banks.mutual fund service fees, primarily resulting from higher average mutual fund assets, as well as incremental client account and other fees resulting from our acquisition of NWPS at the end of our fiscal first quarter of 2021.

Net interest income decreased $19Compensation-related expenses increased $315 million, or 41%31%, driven by a decline in short-term interest rates, reducing the interest income earned on assets segregated pursuant to regulations and client margin loans, and a decline in average client margin loan balances. Partially offsetting the decrease in interest income, interest expense also decreasedprimarily due to the impact of lower deposit rates paid on client cash balances in CIP.higher compensable net revenues.

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RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
Management’s Discussion and Analysis

Compensation-relatedNon-compensation expenses decreased $24increased $28 million, or 2%20%, in part due to lower compensable net revenues. Compensation-relatedincreased recruiting costs and other business development expenses, did not decrease at the same rate as net revenues, as a significant portion of the decline in net revenues related to net interest income and RJBDP fees from third-party banks, which have no associated direct payout expense.

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

Nine months ended June 30, 20202021 compared with the nine months ended June 30, 20192020

Net revenues of $4.16$4.81 billion increased $180$652 million, or 5%16%, and pre-tax income of $414$527 million decreased $22increased $113 million, or 5%27%.

Asset management and related administrative fees increased $267$584 million, or 13%25%, primarily due to higher average assets in fee-based accounts at the beginning of each of the current-year quarterly billing periods compared with the prior-year quarterly billing periods.

Brokerage revenues were flat as the impact of increased trading activity$106 million, or 10%, primarily due to higher trailing revenues from mutual and other fund products and annuity products, resulting from higher levels of market volatility in the current-year period, was offset by a decrease in mutual fund trails and loweraverage asset values, as well as higher transactional revenues from annuity products.due to increased client activity.

Account and service fees decreased $61$20 million, or 9%3%, driven byprimarily due to a decline in RJBDP fees from third-party banks as a result of lower short-term interest rates, which more than offset the impact of the increase in cash balances swept to such banks.rates. Partially offsetting this decrease was an increase in mutual fund service fees, resulting from higher average mutual fund assets, as well as incremental client account and higher RJBDPother fees resulting from RJ Bank due to an increase inour acquisition of NWPS at the numberend of accounts at RJ Bank.our fiscal first quarter of 2021.

Net interest income decreased $33$22 million, or 24%21%, primarily driven by a decline in interest income due to lower short-term interest rates reducingapplicable to both cash and segregated asset balances, which more than offset the impact of higher segregated asset balances. Our CIP balances increased significantly compared with the prior-year period resulting in the increase in segregated assets, and a majority of the increase was held in segregated short-term U.S. Treasury securities at very low interest income earned on assets segregated pursuant to regulations and client margin loans.rates. 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 $224$531 million, or 7%16%, primarily due to higher compensable net revenues.

Non-compensation expenses decreased $22increased $8 million, or 5%2%, primarily as a result of decreases in conferencelargely due to higher communications and travel-relatedinformation processing expenses, as a result ofpartially offset by lower business development expenses due to limited travel and event-related expenses during the COVID-19 pandemic, as well as lower legal reserves. Partially offsetting these decreases were increases in costs to support our growth.pandemic.

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RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
Management’s Discussion and Analysis


RESULTS OF OPERATIONS – CAPITAL MARKETS

For an overview of our Capital Markets segment operations, as well as 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 20192020 Form 10-K.

Operating results
Three months ended June 30,Nine months ended June 30, Three months ended June 30,Nine months ended June 30,
$ in millions$ in millions20202019% change20202019% change$ in millions20212020% change20212020% change
Revenues:Revenues:  Revenues:  
Brokerage revenues:Brokerage revenues:  Brokerage revenues:  
Fixed incomeFixed income$125  $73  71 %$296  $201  47 %Fixed income$124 $125 (1)%$397 $296 34 %
EquityEquity41  31  32 %115  105  10 %Equity36 41 (12)%112 115 (3)%
Total brokerage revenuesTotal brokerage revenues166  104  60 %411  306  34 %Total brokerage revenues160 166 (4)%509 411 24 %
Investment banking:Investment banking:Investment banking:
Merger & acquisition and advisoryMerger & acquisition and advisory60  80  (25)%192  286  (33)%Merger & acquisition and advisory153 60 155 %424 192 121 %
Equity underwritingEquity underwriting35  27  30 %117  72  63 %Equity underwriting69 35 97 %196 117 68 %
Debt underwritingDebt underwriting37  22  68 %90  56  61 %Debt underwriting43 37 16 %126 90 40 %
Total investment bankingTotal investment banking132  129  %399  414  (4)%Total investment banking265 132 101 %746 399 87 %
Interest incomeInterest income 10  (60)%22  29  (24)%Interest income4 — 12 22 (45)%
Tax credit fund revenuesTax credit fund revenues20  16  25 %50  49  %Tax credit fund revenues17 20 (15)%57 50 14 %
All otherAll other  50 %13   44 %All other3 — 14 13 %
Total revenuesTotal revenues325  261  25 %895  807  11 %Total revenues449 325 38 %1,338 895 49 %
Interest expenseInterest expense(2) (10) (80)%(14) (26) (46)%Interest expense(3)(2)50 %(7)(14)(50)%
Net revenuesNet revenues323  251  29 %881  781  13 %Net revenues446 323 38 %1,331 881 51 %
Non-interest expenses:Non-interest expenses:  Non-interest expenses:  
Compensation, commissions and benefitsCompensation, commissions and benefits195  160  22 %545  486  12 %Compensation, commissions and benefits256 195 31 %767 545 41 %
Non-compensation expenses:Non-compensation expenses:Non-compensation expenses:
Communications and information processingCommunications and information processing19  18  %58  56  %Communications and information processing22 19 16 %61 58 %
Occupancy and equipmentOccupancy and equipment  13 %27  26  %Occupancy and equipment9 — 27 27 — 
Business developmentBusiness development 12  (42)%38  37  %Business development8 14 %23 38 (39)%
Professional feesProfessional fees12  11  %35  31  13 %Professional fees12 12 — 38 35 %
Acquisition and disposition-related expenses—  —  —  —  15  (100)%
Acquisition-related expensesAcquisition-related expenses3 — NM3 — NM
All otherAll other19  18  %59  53  11 %All other21 19 11 %63 59 %
Total non-compensation expensesTotal non-compensation expenses66  67  (1)%217  218  —  Total non-compensation expenses75 66 14 %215 217 (1)%
Total non-interest expensesTotal non-interest expenses261  227  15 %762  704  %Total non-interest expenses331 261 27 %982 762 29 %
Pre-tax incomePre-tax income$62  $24  158 %$119  $77  55 %Pre-tax income$115 $62 85 %$349 $119 193 %

Quarter ended June 30, 20202021 compared with the quarter ended June 30, 20192020

Net revenues of $323$446 million increased $72$123 million, or 29%38%, and pre-tax income of $62$115 million increased $38$53 million, or 158%85%.

Brokerage revenues increased $62decreased $6 million, or 60%4%, primarily due to an increasea decrease in equity brokerage revenues, as uncertainty related to the onset of the COVID-19 pandemic drove high levels of client activity in the prior-year quarter. Similarly, fixed income and, to a lesser extent, equity brokerage revenues. The increase in brokerage revenues reflected an increase in client activity duringcontinued to be strong but were slightly lower than the current-year quarter. Our trading inventory levels remain relatively low due to our risk mitigation efforts.prior-year quarter.

Investment banking revenues increased $3$133 million, or 2%101%, due to an increase in both debt and equity underwriting revenues, as a result of increased market activity, particularly for debt underwritings. Offsetting the increase in underwriting revenues was a decline in the number of merger & acquisition transactions compared with the prior-year quarter, due to market uncertainty as a resultcombination of strong results in the current quarter, and a prior-year quarter which had been negatively impacted by a slowdown in activity during the onset of the COVID-19 pandemic. Merger & acquisition and advisory revenues increased significantly compared with the prior-year quarter, due to an increase in both the number and size of transactions, and reflected strong activity in both the U.S. and U.K. Equity underwriting activity may be negatively impacted in future quarters if market uncertainty continues.

Compensation-related expensesrevenues increased $35 million, or 22%,significantly, primarily due to higher levels of client activity and larger transactions in the increasecurrent quarter. Debt underwriting revenues also increased, due to higher revenues from corporate underwritings, partially offset by lower revenues from public finance and asset-backed transactions. In addition to the strong results during the quarter, our investment banking pipelines remain strong and, in revenues.

part, reflect the investments we have made
6167

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
Management’s Discussion and Analysis

Non-compensation expenses decreased $1 million, or 1%, as lower business development costs as a resultover the past several years, which has positioned us to enhance our services to our clients. The most recent example of less travel and conference-related expenses due to the COVID-19 pandemic were partially offset by smaller increases across various expense categories.

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

Net revenuessuch investments is our acquisition of $881 million increased $100 million, or 13%, and pre-tax income of $119 million increased $42 million, or 55%.

Brokerage revenues increased $105 million, or 34%, due to a significant increase in fixed income brokerage revenues, as well as an increase in equity brokerage revenues. The increase in fixed income brokerage revenues was primarily due to an increase in client activity during the current-year period, particularly towardFinanco which closed at the end of our fiscal second quarter and into our fiscal third quarter. Equity brokerage revenues were challenged earlier in the year, but increased during our fiscal second and third quarters due to strong client activity driven by market volatility as a result of the COVID-19 pandemic.

Investment banking revenues decreased $15 million, or 4%, due to a significant decline in merger & acquisition activity compared with a strong period-year period. This activity was negatively impacted by the uncertainty caused by COVID-19 during the current-year period. Offsetting the decrease was an increase in both equity and debt underwriting net revenues, with an increase in the number of deals, as well as larger individual transactions.2021.

Compensation-related expenses increased $59$61 million, or 12%31%, primarily due to the increase in revenues.

Non-compensation expenses were unchangedincreased $9 million, or 14%, and included $3 million of acquisition-related expenses, comprised of the amortization expense related to intangible assets with short useful lives which arose in our acquisition of Financo.

Nine months ended June 30, 2021 compared with the prior-yearnine months ended June 30, 2020

Net revenues of $1.33 billion increased $450 million, or 51%, and pre-tax income of $349 million increased $230 million, or 193%.

Brokerage revenues increased $98 million, or 24%, due to a significant increase in fixed income brokerage revenues as a result of an increase in client activity levels throughout the current-year period. The significant increase in client activity levels, particularly with depository clients, began toward the end of our fiscal second quarter of fiscal 2020.

Investment banking revenues increased $347 million, or 87%, due to a significant increase in merger & acquisition and advisory revenues and underwriting revenues. The significant increase in merger & acquisition and advisory revenues reflected larger individual transactions and an increase in the number of transactions, as the current-year period as increases in professional fees and other expenses were offset by a loss inreflected high levels of client activity, while the prior-year period was impacted by low levels of $15client activity during the onset of the pandemic. Equity underwriting revenues also increased significantly, primarily due to an increase in market activity in both the U.S. and Canada. An increase in debt underwriting primarily reflected higher revenues from corporate and asset-backed underwritings, partially offset by lower revenues from public finance transactions.

Compensation-related expenses increased $222 million, or 41%, primarily due to the increase in net revenues.

Non-compensation expenses decreased $2 million, or 1%, primarily due to lower travel and event-related expenses as a result of the COVID-19 pandemic, partially offset by smaller increases across various expense categories, including the aforementioned acquisition-related expenses associated with the sale of our operations related to research, salesFinanco acquisition.

68

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
Management’s Discussion and trading of European equities.Analysis


RESULTS OF OPERATIONS – 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 20192020 Form 10-K.

Operating results
Three months ended June 30,Nine months ended June 30, Three months ended June 30,Nine months ended June 30,
$ in millions$ in millions20202019% change20202019% change$ in millions20212020% change20212020% change
Revenues:Revenues:  Revenues:  
Asset management and related administrative fees:Asset management and related administrative fees:Asset management and related administrative fees:
Managed programsManaged programs$109  $120  (9)%$358  $346  %Managed programs$148 $109 36 %$414 $358 16 %
Administration and otherAdministration and other48  45  %152  129  18 %Administration and other70 48 46 %193 152 27 %
Total asset management and related administrative feesTotal asset management and related administrative fees157  165  (5)%510  475  %Total asset management and related administrative fees218 157 39 %607 510 19 %
Account and service feesAccount and service fees  (63)%12  27  (56)%Account and service fees4 33 %13 12 %
All otherAll other  (25)% 11  (18)%All other3 — 9 — 
Net revenuesNet revenues163  177  (8)%531  513  %Net revenues225 163 38 %629 531 18 %
Non-interest expenses:Non-interest expenses:    Non-interest expenses:    
Compensation, commissions and benefitsCompensation, commissions and benefits44  47  (6)%134  135  (1)%Compensation, commissions and benefits43 44 (2)%138 134 %
Non-compensation expenses:Non-compensation expenses:Non-compensation expenses:
Communications and information processingCommunications and information processing10  12  (17)%33  33  —  Communications and information processing12 10 20 %35 33 %
Investment sub-advisory feesInvestment sub-advisory fees23  23  —  74  68  %Investment sub-advisory fees33 23 43 %91 74 23 %
All otherAll other26  30  (13)%84  93  (10)%All other32 26 23 %90 84 %
Total non-compensation expensesTotal non-compensation expenses59  65  (9)%191  194  (2)%Total non-compensation expenses77 59 31 %216 191 13 %
Total non-interest expensesTotal non-interest expenses103  112  (8)%325  329  (1)%Total non-interest expenses120 103 17 %354 325 %
Pre-tax incomePre-tax income$60  $65  (8)%$206  $184  12 %Pre-tax income$105 $60 75 %$275 $206 33 %


62

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 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, includingas 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 60%65% of these fees are based on balances as of the beginning of the quarter, approximately 15%10% are based on balances as of the end of the quarter, and approximately 25% are based on average daily balances throughout the quarter.


69

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
Management’s Discussion and Analysis

Financial assets under management
$ in millionsJune 30,
2020
March 31,
2020
September 30,
2019
June 30,
2019
March 31,
2019
September 30,
2018
$ in billions$ in billionsJune 30,
2021
March 31,
2021
September 30,
2020
June 30,
2020
March 31,
2020
September 30,
2019
AMS (1)
AMS (1)
$96,048  $83,971  $91,802  $89,106  $84,906  $83,289  
AMS (1)
$131.8 $121.2 $102.2 $96.0 $84.0 $91.8 
Carillon Tower AdvisersCarillon Tower Advisers57,457  51,674  58,521  60,737  59,852  63,330  Carillon Tower Advisers69.2 66.6 59.5 57.5 51.7 58.5 
Subtotal financial assets under managementSubtotal financial assets under management153,505  135,645  150,323  149,843  144,758  146,619  Subtotal financial assets under management201.0 187.8 161.7 153.5 135.7 150.3 
Less: Assets managed for affiliated entitiesLess: Assets managed for affiliated entities(8,094) (7,456) (7,221) (6,712) (6,220) (5,702) Less: Assets managed for affiliated entities(10.0)(9.6)(8.6)(8.1)(7.5)(7.2)
Total financial assets under managementTotal financial assets under management$145,411  $128,189  $143,102  $143,131  $138,538  $140,917  Total financial assets under management$191.0 $178.2 $153.1 $145.4 $128.2 $143.1 

(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 managed for affiliated entities)
Three months ended June 30,Nine months ended June 30,
$ in millions2020201920202019
Financial assets under management at beginning of period$135,645  $144,758  $150,323  $146,619  
Carillon Tower Advisers - net outflows(1,968) (910) (4,356) (3,584) 
AMS - net inflows1,534  1,751  4,806  4,138  
Net market appreciation/(depreciation) in asset values18,294  4,244  2,732  2,670  
Financial assets under management at end of period$153,505  $149,843  $153,505  $149,843  

AMS division of RJ&A

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


63

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIESActivity (including activity in assets managed for affiliated entities)
Management’s Discussion and Analysis
Three months ended June 30,Nine months ended June 30,
$ in billions2021202020212020
Financial assets under management at beginning of period$187.8 $135.7 $161.7 $150.3 
Carillon Tower Advisers - net inflows/(outflows)(0.3)(2.0)0.8 (4.4)
AMS - net inflows4.5 1.5 9.8 4.8 
Net market appreciation in asset values9.0 18.3 28.7 2.8 
Financial assets under management at end of period$201.0 $153.5 $201.0 $153.5 

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 periodsperiod presented.
$ in millionsJune 30, 2020Average fee rate for the three months ended June 30, 2020
$ in billions$ in billionsJune 30, 2021Average fee rate for the three months ended June 30, 2021
EquityEquity$25,431  0.54 %Equity$31.6 0.52 %
Fixed incomeFixed income27,066  0.18 %Fixed income31.6 0.18 %
BalancedBalanced4,960  0.37 %Balanced6.0 0.35 %
Total financial assets under managementTotal financial assets under management$57,457  0.35 %Total financial assets under management$69.2 0.35 %

Non-discretionary asset-based programs
$ in millionsJune 30,
2020
March 31,
2020
September 30,
2019
June 30,
2019
March 31,
2019
September 30,
2018
Total assets$253,686  $217,284  $229,735  $220,128  $206,953  $200,140  

The precedingfollowing 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 increasevast majority of these assets are also included in assets over the prior-year level was primarily due to clients moving toour PCG segment fee-based accounts from transaction-based accounts, successful financial advisor recruiting and retention, and equity market appreciation. The increaseAUA (as disclosed in assets during our fiscal third quarter was primarily due to the recovery of equity markets from the decline“Assets in fee-based accounts” in the fiscal second quarter caused by the COVID-19 pandemic. As administrative“Selected key metrics - PCG client asset balances” section of our “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 17% increase in assets during the fiscal third quarter will positively impact our fiscal fourth quarter revenues.quarter.
$ in billionsJune 30,
2021
March 31,
2021
September 30,
2020
June 30,
2020
March 31,
2020
September 30,
2019
Total assets$361.5 $334.2 $280.6 $253.7 $217.3 $229.7 

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

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

Quarter ended June 30, 2020 compared with the quarter ended June 30, 2019

Net revenues of $163 million decreased $14 million, or 8%, and pre-tax income of $60 million decreased $5 million, or 8%.

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

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

Compensation expenses decreased $3 million, or 6%, and non-compensation expenses decreased $6 million, or 9%. The decrease in non-compensation expenses was primarily due to a decline in travel-related expenses in response to the COVID-19 pandemic and a decline in fees paid to PCG related to the aforementioned discontinuance of the money market sweep program.
$ in billionsJune 30,
2021
March 31,
2021
September 30,
2020
June 30,
2020
March 31,
2020
September 30,
2019
Total assets$8.1 $7.8 $7.1 $7.1 $6.4 $6.6 

6470

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
Management’s Discussion and Analysis

Nine monthsQuarter ended June 30, 20202021 compared with the nine monthsquarter ended June 30, 20192020

Net revenues of $531$225 million increased $18$62 million, or 4%38%, and pre-tax income of $206$105 million increased $22$45 million, or 12%75%.

Asset management and related administrative fees increased $35$61 million, or 7%39%, driven by higher AUM and higher assets in non-discretionary asset-based programs.

Compensation expenses decreased $1 million, or 2%, and non-compensation expenses increased $18 million, or 31%. The increase in non-compensation expenses was primarily due to investment sub-advisory fees, which resulted from the increase in AUM in sub-advised programs.

Nine months ended June 30, 2021 compared with the nine months ended June 30, 2020

Net revenues of $629 million increased $98 million, or 18%, and pre-tax income of $275 million increased $69 million, or 33%.

Asset management and related administrative fees increased $97 million, or 19%, driven by higher AUM and higher assets in non-discretionary asset-based programs, at the beginning of each of the current-year quarterly billing periods compared with the prior-year period, as well as higher average financial assets under managementresulting from both equity market appreciation and net inflows. Carillon Tower Advisers generated net inflows during the current-year period.period, despite the structural headwinds for active asset managers resulting from the industry shift from actively managed investment strategies to passive investment strategies.

Account and service fees declined $15Compensation expenses increased $4 million, or 56%3%, primarilyand included the impact of higher net revenues. Non-compensation expenses increased $25 million, or 13%, largely due to a decline in servicing fees related to the money market sweep program, which was discontinued in June 2019.

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

RESULTS OF OPERATIONS – RJRAYMOND JAMES BANK

For an overview of our RJRaymond James Bank segment operations, as well as a description of the key factors impacting our RJRaymond James Bank segment 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 20192020 Form 10-K.

Operating results
Three months ended June 30,Nine months ended June 30,Three months ended June 30,Nine months ended June 30,
$ in millions$ in millions20202019% change20202019% change$ in millions20212020% change20212020% change
Revenues:Revenues:  Revenues:  
Interest incomeInterest income$181  $246  (26)%$635  $732  (13)%Interest income$172 $181 (5)%$505 $635 (20)%
Interest expenseInterest expense(12) (38) (68)%(51) (122) (58)%Interest expense(11)(12)(8)%(32)(51)(37)%
Net interest incomeNet interest income169  208  (19)%584  610  (4)%Net interest income161 169 (5)%473 584 (19)%
All otherAll other  29 %20  20  —  All other8 (11)%23 20 15 %
Net revenuesNet revenues178  215  (17)%604  630  (4)%Net revenues169 178 (5)%496 604 (18)%
Non-interest expenses:Non-interest expenses:    Non-interest expenses:    
Compensation and benefitsCompensation and benefits13  13  —  38  36  %Compensation and benefits13 13 — 38 38 — 
Non-compensation expenses:Non-compensation expenses:Non-compensation expenses:
Loan loss provision/(benefit)81  (5) NM188  16  1,075 %
Bank loan provision/(benefit) for credit lossesBank loan provision/(benefit) for credit losses(19)81 NM(37)188 NM
RJBDP fees to PCGRJBDP fees to PCG43  44  (2)%138  127  %RJBDP fees to PCG47 43 %134 138 (3)%
All otherAll other27  25  %77  67  15 %All other24 27 (11)%75 77 (3)%
Total non-compensation expensesTotal non-compensation expenses151  64  136 %403  210  92 %Total non-compensation expenses52 151 (66)%172 403 (57)%
Total non-interest expensesTotal non-interest expenses164  77  113 %441  246  79 %Total non-interest expenses65 164 (60)%210 441 (52)%
Pre-tax incomePre-tax income$14  $138  (90)%$163  $384  (58)%Pre-tax income$104 $14 643 %$286 $163 75 %

Quarter ended June 30, 20202021 compared with the quarter ended June 30, 20192020

Net revenues of $178$169 million decreased $37$9 million, or 17%5%, and pre-tax income of $14$104 million decreased $124increased $90 million, or 90%643%.

Net interest income decreased $39$8 million, or 19%5%, as the negative impactimpacts from lower short-term ratesaverage LIBOR and a shift in the composition of interest-earning assets compared with the prior-year quarter more than offset the impact of higher average interest-earning assets. The increase in average interest-earning assets was driven by growth in average cash balances of $1.99 billion, average available-for-sale securities portfolio of $1.54 billion, and average loans of $1.38 billion. The net interest margin decreased to 1.92% from 2.29% from 3.37%for the prior-year quarter, primarily due to the significant decline in short-term interest rates and the corresponding decline inaverage LIBOR, the rate onas well as a higher concentration of agency-backed available-for-sale securities, which the pricing for most of RJ Bank’s assets is based. Based on current LIBOR rates, we expect our net interest margin to further decline to 2.1% - 2.2% over the next two quarters.

The loan loss provision was $81 million compared tohave a $5 million benefit in the prior-year quarter. The increase in the provision in the current-year quarter was in response to continued deterioration of macroeconomic conditions caused by the COVID-19 pandemic and included write-downs on certain corporate loans sold during the quarter. Continued deterioration of macroeconomic conditions will likely require us to increase our allowance for loan losses in the future or to experience loan losses in excess oflower
6571

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
Management’s Discussion and Analysis

yield on average than loans. Based on current reserves. Additional salesrates, as well as the elevated prepayment of certain corporate loans are also expected in thehigher-yielding securities and mortgages, we project our net interest margin to decline to approximately 1.90% for our fiscal fourth quarter to further reduce credit risk in certain sectors.

Compensation expenses were flat compared with the prior-year quarter, while non-compensation expenses (excluding the provision for loan losses) increased $1 million.of 2021.

The following table presents average balances, interest income and expense, the related yields and rates, and interest spreads and marginsbank loan benefit for RJ Bank.
 Three months ended June 30,
 20202019
$ in millionsAverage
balance
Interest
inc./exp.
Average
yield/
cost
Average
balance
Interest
inc./exp.
Average
yield/
cost
Interest-earning assets:      
Cash$2,990  $—  0.11 %$998  $ 2.36 %
Available-for-sale securities4,437  23  2.01 %2,901  18  2.41 %
Bank loans, net of unearned income and deferred expenses:
Loans held for investment:
C&I loans7,994  59  2.93 %8,278  98  4.68 %
CRE construction loans212   3.60 %248   5.45 %
CRE loans3,773  25  2.66 %3,359  39  4.53 %
Tax-exempt loans1,272   3.34 %1,291   3.35 %
Residential mortgage loans4,983  37  2.97 %4,127  34  3.32 %
SBL and other3,576  24  2.59 %3,125  36  4.64 %
Loans held for sale111   3.22 %118   4.78 %
Total bank loans, net21,921  157  2.87 %20,546  221  4.30 %
FHLB stock, FRB stock and other217   1.50 %168   4.42 %
Total interest-earning assets29,565  $181  2.45 %24,613  $246  4.00 %
Non-interest-earning assets:      
Unrealized gain/(loss) on available-for-sale securities116    (6)   
Allowance for loan losses(319)   (218) 
Other assets407    390    
Total non-interest-earning assets204    166    
Total assets$29,769    $24,779    
Interest-bearing liabilities:      
Bank deposits:      
Savings, money market and NOW accounts$25,241  $ 0.02 %$20,989  $30  0.59 %
Certificates of deposit1,104   2.00 %561   2.33 %
FHLB advances and other888   2.23 %895   2.08 %
Total interest-bearing liabilities27,233  $12  0.17 %22,445  $38  0.69 %
Non-interest-bearing liabilities253    156    
Total liabilities27,486    22,601    
Total shareholder’s equity2,283    2,178    
Total liabilities and shareholder’s equity$29,769    $24,779    
Excess of interest-earning assets over interest-bearing liabilities/net interest income$2,332  $169   $2,168  $208   
Bank net interest:      
Spread  2.28 %  3.31 %
Margin (net yield on interest-earning banking assets)  2.29 %  3.37 %
Ratio of interest-earning assets to interest-bearing liabilities  108.56 % 109.66 %

Nonaccrual loans are includedcredit losses was $19 million in the average loan balancescurrent quarter, which was calculated under the CECL model, compared with an $81 million provision in the preceding table. Any payments received for corporate nonaccrual loans are applied entirely to principal. Interest income on residential mortgage nonaccrual loans is recognized on a cash basis.

Fee income on bank loans included in interest income forprior-year quarter, which was calculated under the three months ended June 30, 2020 and 2019 was $1 million and $3 million, respectively.

incurred loss model. 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 June 30, 2020 and 2019.
66

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,current quarter benefit reflected an improved economic forecast, as well as changesimproved credit ratings within our corporate loan portfolio. The provision for credit losses in average interest rates. The following table shows the effect that these factors had onprior-year quarter reflected the interest earned on our interest-earning assetsrapid and widespread economic deterioration and uncertainty at the interest incurred on our interest-bearing liabilities. The effectonset of changes in volume is determined by multiplying the change in volume by the previous period’s average yield/cost. Similarly, the effect of rate changes is calculated by multiplying the change in average yield/cost by the previous year’s volume. Changes attributable to both volume and rate have been allocated proportionately.
Three months ended June 30,
2020 compared to 2019
 Increase/(decrease) due to
$ in millionsVolumeRateTotal
Interest income:   
Interest-earning assets:   
Cash$12  $(17) $(5) 
Available-for-sale securities10  (5)  
Bank loans, net of unearned income and deferred expenses:   
Loans held for investment: 
C&I loans(3) (36) (39) 
CRE construction loans(1) (1) (2) 
CRE loans (19) (14) 
Residential mortgage loans (5)  
SBL and other (17) (12) 
Total bank loans, net14  (78) (64) 
FHLB stock, FRB stock, and other (2) (1) 
Total interest-earning assets37  (102) (65) 
Interest expense:  
Interest-bearing liabilities:   
Bank deposits:   
Savings, money market, and NOW accounts (34) (28) 
Certificates of deposit —   
FHLB advances and other—    
Total interest-bearing liabilities (33) (26) 
Change in net interest income$30  $(69) $(39) 
COVID-19 pandemic.

Nine months ended June 30, 20202021 compared with the nine months ended June 30, 20192020

Net revenues of $604$496 million decreased $26$108 million, or 4%18%, and pre-tax income of $163$286 million decreased $221increased $123 million, or 58%75%.

Net interest income decreased $26$111 million, or 4%19%, as the negative impact from lower short-term interest rates more than offset the impact of higher average interest-earning assets. The increase in average interest-earning assets was primarily driven by significant growth in average loans of $1.38 billion, average cash balances of $847 million, and an $823 million increase in our averagethe available-for-sale securities portfolio.portfolio and securities-based loans to PCG clients. The net interest margin for the current-year period decreased to 2.82%1.96% from 3.32%2.82% for the prior-year period.period, primarily due to the significant decline in short-term interest rates, as well as a higher concentration of agency-backed available-for-sale securities, which on average have a lower yield than loans.

TheWe had a bank loan loss provisionbenefit for credit losses of $37 million, which was calculated under the CECL model, compared with a $188 million compared to $16 millionprovision in the prior-year period.period, which was calculated under the incurred loss model. The increasecurrent period benefit was largely attributable to improved economic forecasts utilized in our CECL model since our October 1, 2020 adoption date, including improved outlooks on unemployment and gross domestic product, which favorably impact most of our loan portfolios, as well as improved credit ratings within our corporate loan portfolio. The provision for credit losses in the provision inprior-year period reflected the current-year period was primarily attributable torapid and widespread economic deterioration and uncertainty caused by the economic impactsonset of the COVID-19 pandemic during the current-year period as well as the aforementioned corporate loan sales.

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

Non-compensation expenses (excluding the provision for loan losses) increased $21 million, including an $11 million, or 9%, increase in fees for RJBDP paid to PCG, primarily driven by an increase in the number of accounts. These fees are eliminated in consolidation.

67

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
Management’s Discussion and Analysis

The following table presents average balances, interest income and expense, the related yields and rates, and interest spreads and margins for RJ Bank.
 Nine months ended June 30,
 20202019
$ in millionsAverage
balance
Interest
inc./exp.
Average
yield/
cost
Average
balance
Interest
inc./exp.
Average
yield/
cost
Interest-earning assets:      
Cash$2,078  $10  0.66 %$1,231  $21  2.33 %
Available-for-sale securities3,654  60  2.18 %2,831  51  2.39 %
Bank loans, net of unearned income and deferred expenses:      
Loans held for investment:
C&I loans8,039  226  3.69 %8,065  286  4.67 %
CRE construction loans209   4.36 %205   5.58 %
CRE loans3,706  98  3.49 %3,433  120  4.60 %
Tax-exempt loans1,236  25  3.35 %1,285  26  3.34 %
Residential mortgage loans4,823  112  3.09 %3,999  100  3.32 %
SBL and other3,460  89  3.37 %3,098  109  4.64 %
Loans held for sale138   3.77 %149   4.87 %
Total bank loans, net21,611  561  3.46 %20,234  655  4.32 %
FHLB stock, FRB stock and other220   2.33 %163   4.27 %
Total interest-earning assets27,563  $635  3.07 %24,459  $732  3.99 %
Non-interest-earning assets:      
Unrealized gain/(loss) on available-for-sale securities66    (37)   
Allowance for loan losses(251)   (214)   
Other assets388    404    
Total non-interest-earning assets203    153    
Total assets$27,766    $24,612    
Interest-bearing liabilities:      
Bank deposits:      
Savings, money market and NOW accounts$23,364  $21  0.12 %$20,861  $99  0.64 %
Certificates of deposit993  15  2.06 %527   2.20 %
FHLB advances and other889  15  2.23 %919  14  2.13 %
Total interest-bearing liabilities25,246  $51  0.27 %22,307  $122  0.73 %
Non-interest-bearing liabilities225    191    
Total liabilities25,471    22,498    
Total shareholder’s equity2,295    2,114    
Total liabilities and shareholder’s equity$27,766    $24,612    
Excess of interest-earning assets over interest-bearing liabilities/net interest income$2,317  $584   $2,152  $610   
Bank net interest:      
Spread  2.80 %  3.26 %
Margin (net yield on interest-earning banking assets)  2.82 %  3.32 %
Ratio of interest-earning assets to interest-bearing liabilities  109.18 % 109.65 %

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

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

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

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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.
Nine months ended June 30,
2020 compared to 2019
 Increase/(decrease) due to
$ in millionsVolumeRateTotal
Interest income:   
Interest-earning assets:   
Cash$15  $(26) $(11) 
Available-for-sale securities15  (6)  
Bank loans, net of unearned income and deferred expenses:   
Loans held for investment: 
C&I loans(1) (59) (60) 
CRE construction loans—  (2) (2) 
CRE loans10  (32) (22) 
Tax-exempt loans(1) —  (1) 
Residential mortgage loans20  (8) 12  
SBL and other13  (33) (20) 
Loans held for sale—  (1) (1) 
Total bank loans, net41  (135) (94) 
FHLB stock, FRB stock, and other (2) (1) 
Total interest-earning assets72  (169) (97) 
Interest expense:   
Interest-bearing liabilities:   
Bank deposits:   
Savings, money market, and NOW accounts12  (90) (78) 
Certificates of deposit (1)  
FHLB advances and other(2)   
Total interest-bearing liabilities17  (88) (71) 
Change in net interest income$55  $(81) $(26) 
pandemic.

RESULTS OF OPERATIONS – OTHER

This segment includes our private equity investments, interest income on certain corporate cash balances, certain acquisition-related expenses, and certain corporate overhead costs of RJF that are not allocated to other segments, including the interest costs on our public debt and any losses on extinguishment of such debt. For an overview of our Other segment operations, refer to the information presented in “Item 1 - Business” of our 20192020 Form 10-K.

Operating results
Three months ended June 30,Nine months ended June 30,Three months ended June 30,Nine months ended June 30,
$ in millions$ in millions20202019% change20202019% change$ in millions20212020% change20212020% change
Revenues:Revenues:  Revenues:
Interest incomeInterest income$ $12  (75)%$27  $42  (36)%Interest income$ $(100)%$6 $27 (78)%
Gains/(losses) on private equity investmentsGains/(losses) on private equity investments  (50)%(40)  NMGains/(losses) on private equity investments24 2,300 %56 (40)NM
All otherAll other  100 %  (20)%All other4 100 %7 75 %
Total revenuesTotal revenues 15  (60)%(9) 55  NMTotal revenues28 367 %69 (9)NM
Interest expenseInterest expense(26) (19) 37 %(63) (57) 11 %Interest expense(26)(26)— (75)(63)19 %
Net revenuesNet revenues(20) (4) (400)%(72) (2) (3,500)%Net revenues2 (20)NM(6)(72)92 %
Non-interest expenses:Non-interest expenses:
Compensation and all otherCompensation and all other34 278 %96 34 182 %
Losses on extinguishment of debtLosses on extinguishment of debt98 — NM98 — NM
Acquisition-related expensesAcquisition-related expenses4 — NM6 — NM
Total non-interest expensesTotal non-interest expenses 21  (57)%34  58  (41)%Total non-interest expenses136 1,411 %200 34 488 %
Pre-tax lossPre-tax loss$(29) $(25) (16)%$(106) $(60) (77)%Pre-tax loss$(134)$(29)(362)%$(206)$(106)(94)%

Quarter ended June 30, 2021 compared with the quarter ended June 30, 2020

The pre-tax loss of $134 million was $105 million larger than the loss in the prior-year quarter.

6972

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
Management’s Discussion and Analysis

Quarter ended June 30, 2020Net revenues increased $22 million, as the current quarter included $24 million of private equity valuation gains, of which $10 million were attributable to noncontrolling interests and were offset within other expenses, compared with the quarter ended June 30, 2019

The pre-tax loss$1 million of $29 million was $4 million larger than the loss generatedgains in the prior-year quarter.

Net revenues for the The current quarter decreased $16 million due to a $9 million decreasevaluation gains primarily reflected the impact of continued improvement in interest income earned on corporate cash balances due to lower short-term interest rates, which more than offset the increase in average balances, as well as a $7 million increase in interest expense due to the issuancemarket conditions and an improved outlook for certain of $500 million of senior notes in March 2020.our investments.

Non-interest expenses decreased $12increased $127 million, or 57%, primarily due to a decreaselosses on the extinguishment of debt of $98 million (see Note 14 for further information), as well as the aforementioned $10 million offset of private equity valuation losses attributable to noncontrolling interests in compensationthe current quarter. The $4 million of acquisition-related expenses due to lower earnings.in the current quarter primarily included professional expenses associated with our acquisitions of Cebile Capital, which was announced in our fiscal third quarter of 2021, and Charles Stanley, which was announced in July 2021.

Nine months ended June 30, 20202021 compared with the nine months ended June 30, 20192020

The pre-tax loss of $106$206 million was $46$100 million larger than the loss generated in the prior-year period.

Net revenues decreased $70increased $66 million, from a loss of $2 millionprimarily due to private equity valuation gains in the current period, compared with losses in the prior-year period, which reflected the impact of challenging market conditions at the onset of the COVID-19 pandemic. The current period included $56 million of private equity valuation gains, of which $20 million were attributable to a lossnoncontrolling interests and were offset within other expenses. These valuation gains were primarily the result of $72 million, primarily due tocontinued improvement in market conditions and an improved outlook for certain of our investments. The prior-year period included $40 million of private equity valuation losses, compared with gains of $8 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 are reflected as anand were offset within other expenses. These valuation losses were primarily the result of the negative impact of the COVID-19 pandemic on certain of our investments. Interest income earned on corporate cash balances also decreased compared with the prior-year period due to lower short-term interest rates, partially offset by the impact of higher average balances, and interest expense increased primarily as a result of the aforementioned issuance of $500 million of senior notes.notes in March 2020.

Non-interest expenses decreased $24increased $166 million, or 41%488%, primarily due to the aforementioned $23losses on extinguishment of debt of $98 million, offset of private equity valuation lossesas well as the aforementioned $20 million in gains attributable to noncontrolling interests.interests, compared with $23 million in losses in the prior-year period. The $6 million of acquisition-related expenses in the current year primarily included professional and integration expenses associated with our acquisitions of NWPS and Financo during fiscal 2021, as well as our announced acquisitions of Cebile Capital and Charles Stanley.

CERTAIN STATISTICAL DISCLOSURES BY BANK HOLDING COMPANIES

We are required to provide certain statistical disclosures as a bank holding company under the SEC’s Industry Guide 3.  The following table provides certain of those disclosures.
Three months ended June 30,Nine months ended June 30,Three months ended June 30,Nine months ended June 30,
2020201920202019 2021202020212020
Return on assetsReturn on assets1.5%2.7%1.9%2.7%Return on assets2.2%1.5%2.4%1.9%
Return on equityReturn on equity10.0%16.1%11.9%16.2%Return on equity15.9%10.0%17.4%11.9%
Average equity to average assetsAverage equity to average assets14.6%16.7%15.7%16.6%Average equity to average assets13.6%14.6%14.0%15.7%
Dividend payout ratioDividend payout ratio30.1%18.9%25.6%19.2%Dividend payout ratio17.9%30.1%16.9%25.6%

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 four.

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

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

Dividend payout ratio is computed by dividing dividends declared per common share during the period by earnings per diluted common share for the period.
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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 Operationsthis MD&A and to the Notes to Condensed Consolidated Financial Statements of this Form 10-Q for the other required disclosures.

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RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
Management’s Discussion and Analysis

LIQUIDITY AND CAPITAL RESOURCES

Liquidity is essential to our business.  The primary goal of our liquidity management activities is to ensure adequate funding to conduct our business over a range of economic and market environments.

Senior management establishes our liquidity and capital management framework. This framework includes senior management’s review of short- and long-term cash flow forecasts, review of monthly capital expenditures, monitoring of the availability of alternative sources of financing, and daily monitoring of liquidity in our significant subsidiaries. Our decisions on the allocation of capital to our business units consider, among other factors, projected profitability, and cash flow, risk, and impact on future liquidity needs. Our treasury department assists in evaluating, monitoring and controlling the impact that our business activities have on our financial condition, liquidity and capital structure, and maintains our relationships with various lenders. The objective of this framework is to support the successful execution of our business strategies while ensuring ongoing and sufficient liquidity.

Liquidity is provided primarily through our business operations and financing activities.  Financing activities could include bank borrowings, repurchase agreement transactionscollateralized financing arrangements or additional capital raising activities under our “universal” shelf registration statement.

Cash and cash equivalents increased $1.68 billion to $5.63 billion$592 million during the nine months ended June 30, 2020, primarily due2021 to $3.26 billion of$5.98 billion. During the nine months ended June 30, 2021, cash provided by financing activitiesour operations (including significant net income) and $2.66 billionproceeds from our $750 million of cash provided by operating activities,3.75% senior notes offering (net of debt issuance costs), were offset by cash used for the early-redemption of $750 million of our pre-existing senior notes and the related make-whole premiums, dividend payments, share repurchases, and investments in investing activitiesfuture growth with our acquisitions of $3.02 billionNWPS and anFinanco. We also had significant increases in client cash balances, which increased both our brokerage client payables and our bank deposits. However, this cash was largely used to increase in the amount of cash required to beour assets segregated pursuant to regulations, primarily through the purchase of $1.19 billion. Cash provided by financingU.S. Treasuries, as part of our brokerage activities, primarily relatedand to an increase inour bank deposits, as client cash balances increased due to the impact of the COVID-19 pandemic,loan portfolio and proceeds from our senior notes issuance in March 2020, partially offset by our open-market share repurchases and dividends on our common stock. Cash used in investing activities primarily related to a net increase in our available-for-sale securities portfolio due toas part of our growth strategy for this portfolio, and a net increase in bank loans.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

Over $2.1Approximately $1.6 billion of our total June 30, 20202021 cash and cash equivalents included cash on handheld directly at the parent, as well asor parent cash loaned to RJ&A. As of June 30, 2021, RJF had loaned $1.09 billion to RJ&A (such amount is included in the RJ&A cash balance in the following table), which RJ&A has invested on behalf of RJF in cash and cash equivalents or otherwise deployed in its normal business activities. The following table presents our holdings of cash and cash equivalents.
$ in millionsJune 30, 20202021
RJF$479480 
RJ&A2,6032,262 
RJRaymond James Bank1,5191,847 
RJ Ltd.662869 
RJFS123 
Carillon Tower Advisers6982 
Other subsidiaries177319 
Total cash and cash equivalents$5,6325,982 

RJF maintained depository accounts at RJRaymond James Bank with a balance of $185 million as of June 30, 2020.2021. The portion of this total that was available on demand without restrictions, which amounted to $108 million as of June 30, 2020,2021, is reflected in the RJF total (and is excluded from the RJRaymond James Bank cash balance in the preceding table).

RJF had loaned $1.66 billion toA large portion of the RJ&A Ltd. cash and cash equivalents balance as of June 30, 2020 (such amount is included in2021 was held to meet regulatory requirements and was not available for use by the RJ&A cash balance in the preceding table), which RJ&A has invested on behalf of RJF in cash and cash equivalents or otherwise deployed in its normal business activities.parent.

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RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
Management’s Discussion and Analysis

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


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RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
Management’s Discussion and Analysis

Liquidity available from subsidiaries

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

Certain of our broker-dealer subsidiaries are subject to the requirements of the Uniform Net Capital Rule (Rule 15c3-1) under the Securities and Exchange Act of 1934. As a member firm of FINRA,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 June 30, 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”) regulations in order to accept new IRAIRAs and plan accountsqualified 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 haveneed to grow to continue to satisfy this requirement. As a 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.

RJRaymond James Bank may pay dividends to RJF without prior approval of its regulator as long as the dividend doesdividends do not exceed the sum of RJRaymond James Bank’s current calendar year and the previous two calendar years’ retained net income, and RJRaymond James Bank maintains its targeted regulatory capital ratios. At June 30, 2020, RJDividends from Raymond James Bank had $274 million ofmay be limited to the extent that capital in excess of the amount it would need at that dateis needed to maintainsupport 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 consist of a tri-party repurchase agreement or,(i.e., securities sold under agreements 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 facilitytri-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, and the outstanding balances related thereto.
June 30, 2020
$ in millionsRJ&ARJFTotalTotal number of arrangements
Financing arrangement:
Committed secured$100  $—  $100   
Committed unsecured (1)
200  300  500   
Total committed financing arrangements$300  $300  $600   
Outstanding borrowing amount:
Committed secured$—  $—  $—  
Committed unsecured—  —  —  
Total outstanding borrowing amount$—  $—  $—  

June 30, 2021
$ in millionsRJ&ARJFTotalTotal number of arrangements
Financing arrangement:
Committed secured$100 $ $100 1 
Committed unsecured200 300 500 1 
Total committed financing arrangements$300 $300 $600 2 
Outstanding borrowing amount:
Committed secured$ $ $ 
Committed unsecured   
Total outstanding borrowing amount$ $ $ 
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RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
Management’s Discussion and Analysis


(1)  TheOur 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 1214 of the Notes to Condensed Consolidated Financial Statements of thisour 2020 Form 10-Q.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.


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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 RJ&A-owned securities or by securities that we have received as collateral under reverse repurchase agreements. As of June 30, 2020,2021, we had outstanding borrowings under twothree uncommitted secured borrowing arrangements with lenders out of a total of 11 uncommitted financing arrangements (seven uncommitted secured and four uncommitted unsecured). However, lenders are under no contractual obligation to lend to us under uncommitted credit facilities.

The following table presents our borrowings on uncommitted financing arrangements, all of which were in the form of repurchase agreements in RJ&A.&A and were included in “Collateralized financings” on our Condensed Consolidated Statements of Financial Condition.
$ in millionsJune 30, 20202021
Outstanding borrowing amount:
Uncommitted secured$228185 
Uncommitted unsecured 
Total outstanding borrowing amount$228185 

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 transactionsReverse repurchase transactions
For the quarter ended:
($ in millions)
Average daily
balance
outstanding
Maximum month-end
balance outstanding
during the quarter
End of period
balance
outstanding
Average daily
balance
outstanding
Maximum month-end
balance outstanding
during the quarter
End of period
balance
outstanding
June 30, 2021$194 $185 $185 $283 $339 $289 
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 

Other borrowings and collateralized financings

RJ BankWe had $875$850 million in FHLB borrowings outstanding at June 30, 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 RJRaymond James Bank’s residential mortgage loan portfolio (see Note 1214 of the Notes to Condensed Consolidated Financial Statements of thisour 2020 Form 10-Q10-K for additional information regarding these borrowings). RJRaymond James Bank had an additional $2.96$3.11 billion in immediate credit available from the FHLB as of June 30, 20202021 and, with the pledge of additional eligible collateral to the FHLB, total available credit of 30% of total assets.

RJRaymond James Bank is eligible to participate in the FRB’s discount-windowFederal Reserve’s discount window program; however, we do not view borrowings from the FRBFederal 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
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RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
Management’s Discussion and Analysis

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 balancesbalance of $100 million as of June 30, 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 $88 million as of June 30, 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 $228 million as of June 30, 2020. These balances are reflected in the preceding table of uncommitted financing arrangements. Such financings are generally collateralized by non-customer, RJ&A-owned securities or by securities that we have received as collateral under reverse repurchase agreements.


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RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
Management’s Discussion and Analysis

The average daily balance outstanding during the five most recent quarters, the maximum month-end balance outstanding during the quarter and the period-end balances for repurchase agreements and reverse repurchase agreements are detailed in the following table.
 Repurchase transactionsReverse repurchase transactions
For the quarter ended:
($ in millions)
Average daily
balance
outstanding
Maximum month-end
balance outstanding
during the quarter
End of period
balance
outstanding
Average daily
balance
outstanding
Maximum month-end
balance outstanding
during the quarter
End of period
balance
outstanding
June 30, 2020$222  $278  $228  $168  $193  $193  
March 31, 2020$218  $238  $215  $283  $388  $130  
December 31, 2019$184  $200  $200  $355  $351  $326  
September 30, 2019$170  $158  $150  $334  $343  $343  
June 30, 2019$211  $212  $165  $442  $479  $411  
financings.

At June 30, 2020,2021, in addition to the financing arrangements previously described, we had $15$9 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.

AtSenior notes payable

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 $250 million par 5.625% senior notes due 2024 and our $500 million par 3.625% senior notes due 2026, which had been outstanding as of March 31, 2021. See Note 14 of the Notes to Condensed Consolidated Financial Statements of this Form 10-Q for additional information.

After the issuance of the 3.75% senior notes due April 2051 and repurchase and redemption of the 5.625% senior notes due 2024 and 3.625% senior notes due 2026, at June 30, 2020,2021, we had aggregate outstanding senior notes payable of $2.04 billion. Our senior notes payable,billion, which, exclusive of any unaccreted premiums or discounts and debt issuance costs, was comprised of $250 million par 5.625% senior notes due 2024, $500 million par 3.625% senior notes due 2026, $500 million par 4.65% senior notes due 2030, which were issued during our fiscal second quarter of 2020, and $800 million par 4.95% senior notes due 2046. See Note 13 of the Notes to Condensed Consolidated Financial Statements of this Form 10-Q for additional information.2046, and $750 million par 3.75% senior notes due 2051.

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 AgencyRatingOutlook
Standard & Poor’sFitch Ratings, ServicesInc.BBB+A-Stable
Moody’s Investors ServicesBaa1Stable
Standard & Poor’s Ratings ServicesBBB+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. DeteriorationsDeterioration 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 investorinvestors’ 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 $610$828 million as of June 30, 2020,2021, comprised of $363$509 million related to employee-directed plans and $247$319 million related to company-directed plans, and we were able to borrow up to 90%, or $549$745 million, of the June 30, 20202021 total
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RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
Management’s Discussion and Analysis

without restriction.  To effect any such borrowing, the underlying investments would be converted to money market investments, therefore requiring us to
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RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
Management’s Discussion and Analysis

take market risk related to the employee-directed plans. There were no borrowings outstanding against any of these policies as of June 30, 2020.2021.

On May 18, 2018,12, 2021, 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 18,12, 2024.

On May 25, 2021, we announced we had entered into a definitive agreement to acquire all of the outstanding shares of Cebile. We expect the closing date of the transaction to occur in our fiscal fourth quarter of 2021.
We currently have the ability to utilize our cash on hand to fund the purchase. See Note 3 of the Contractual obligations sectionNotes to Condensed Consolidated Financial Statements of this MD&AForm 10-Q for information regardingadditional information.

On July 29, 2021, we announced our contractual obligations.intention to make an offer for the entire issued and to be issued share capital of U.K.-based Charles Stanley at a price of £5.15 per share, or approximately £279 million ($387 million as of July 28, 2021). The transaction, subject to U.K. Financial Conduct Authority and Charles Stanley shareholder approval, is expected to close in our fiscal first quarter of 2022. We currently have the ability to utilize our cash on hand to fund the purchase. Under the terms of the intended offer, a loan note alternative will be available to Charles Stanley shareholders which will enable eligible Charles Stanley shareholders to elect to receive a loan note in lieu of part or all of the cash consideration to which they would otherwise be entitled under the terms of the offer. The initial interest rate for the loan note alternative for the first year is 0.1%. The note bears interest at a variable rate reset annually, calculated as the Bank of England’s base rate, plus a differential defined in the loan note, with the interest rate not to exceed 1.5% in any period. See Note 3 of the Notes to Condensed Consolidated Financial Statements of this Form 10-Q for additional information.

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 isassets 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 wereare liquid in nature, providing us with flexibility in financing our business.

Total assets of $44.68$57.16 billion as of June 30, 20202021 were $5.85$9.68 billion, or 15%20%, greater than our total assets as of September 30, 2019.2020. The increase in assets was primarily due to a $2.87$4.64 billion increase in cash and cash and cash equivalents, including cash and cash equivalentsassets segregated pursuant to regulations, primarily due to a significant increase in client cash balancesbalances. Bank loans, net increased by $2.70 billion, primarily due to an increase in securities-based loans to PCG clients and corporate loans. In addition, cash and cash equivalents increased $592 million and available-for-sale securities increased $541 million. Goodwill and identifiable intangible assets, net increased $262 million due to the market volatility as a resultacquisitions of NWPS and Financo during the COVID-19 pandemic, as well as proceeds from our $500 million senior notes issuance in March 2020. In addition, available-for-sale securities increased $2.54 billion, other assets increased $552 million, primarily due to ROU assets recorded as a result of the adoption of new guidance related to the accounting for leases, and bank loans, net increased $332 million. Offsetting these increases, trading instruments and brokerage client receivables, net decreased $347 million and $325 million, respectively.nine months ended June 30, 2021.

As of June 30, 2020,2021, our total liabilities of $37.67$49.24 billion were $5.48$8.94 billion, or 17%22%, 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 comprisedas of June 30, 2021, including a $3.09 billion increase in bank deposits, reflecting higher RJBDP balances held at RJ Bank and certificate of deposit issuances during the period, and a $1.59$5.05 billion increase in brokerage client payables, primarily due to an increase in client cash held in our CIP, as of June 30, 2020. In addition, other payables increased $725 million, primarily due to operating lease liabilities recorded asand a result of the adoption of new guidance related to the accounting for leases and an$3.54 billion increase in payables resulting from unsettled securities purchases. In addition, senior notes payable increased $494 million due to the issuance of $500 million of 4.65% senior notes due April 2030.

See Notes 2 and 10 of the Notes to Condensed Consolidated Financial Statements of this Form 10-Q for further information on our adoption of the new leasing guidance.

CONTRACTUAL OBLIGATIONS

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 June 30, 2020.bank deposits, reflecting higher RJBDP balances held at Raymond James Bank.

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 20192020 Form 10-K.

RJF and many of its subsidiaries are each subject to various regulatory capital requirements. As of June 30, 2020,2021, all of our active regulated domestic and international subsidiaries had net capital in excess of minimum requirements. In addition, RJF and RJRaymond James Bank were categorized as “well-capitalized” as of June 30, 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
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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.


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Legislative and regulatory changes in connection with the COVID-19 pandemic

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.

Theas 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 institutionswere permitted to temporarily suspend any determination of a loan modifiedmodification 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 CARESextension for relief under the Consolidated Appropriations Act, relief2021 to certain loan modifications that primarily relate to short-term payment deferralsdeferral and have not classified such modifications as TDRs. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Risk management - Credit risk” for further information on the impact of such loan modifications. The act also permits financial institutions to temporarily delay the implementation of CECL for estimating allowances for credit losses. Given our later adoption date of October 1, 2020, we do not anticipate delaying our adoption. In addition, the Federal Reserve, the FDIC and the OCC issued a joint statement providing banking organizations optional temporary relief by delaying the initial adoption impact of CECL on regulatory capital for two years, followed by a three-year transition period to phase out the aggregate amount of the capital benefit provided during 2020 and 2021 (i.e., a five-year transition period). As we do not adopt CECL until October 1, 2020, we are currently evaluating whether we intend to avail ourselves of such relief.loans.

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

The CARES Act further providesOn February 2, 2021, Raymond James Bank filed an application with the Florida Office of Financial Regulation (“OFR”) to convert from a number of consumer finance protections. The act 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 affectednational bank primarily supervised by the outbreak in a safe and sound manner. We have modified our processes to ensure full compliance and are working as appropriate to support affected businesses and individuals during this time.

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

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

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


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Management’s Discussion and Analysis

The Volcker Rule

In June 2020, the Fed, Commodity Futures Trading Commission, FDIC, Office of the Comptroller of the Currency (“OCC”(the “OCC”) to a Florida-chartered state bank. Raymond James Bank also filed an application with the Federal Reserve Bank of Atlanta to retain its membership in the Federal Reserve System. Effective June 1, 2021, upon conversion to a state member bank following approval by the Florida OFR, Raymond James Bank is no longer supervised by the OCC and is jointly supervised by the OFR and the SEC finalized amendmentsFed. As a state member bank, Raymond James Bank will also continue to be supervised by the rules implementingFDIC and the Volcker Rule. The final rule includes new exclusions from the Volcker Rule’s general prohibition on banking entities investing in and sponsoring private equity funds, hedge funds, and certain other investment vehicles (collectively, “covered funds”) for credit funds, venture capital funds, family wealth management vehicles, and customer facilitation vehicles. The final rule also revisesConsumer Financial Protection Bureau. As a state member bank, we do not anticipate that there will be any material changes to Raymond James Bank’s existing exclusions for foreign public funds, loan securitizations, and public welfare and small business funds. In addition, the final rule modifies the “Super 23” provisions of the Volcker Rule, which prohibit banking entities from extending credit to and entering into certain transactions with advised or sponsored covered funds, by exempting certain short-term extensions of credit, among several other previously prohibited transactions.operations.

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

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

Community Reinvestment Act regulations

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

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

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

Fiduciary duty

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

See Note 20 of the Notes to Condensed Consolidated Financial Statements of this Form 10-Q for further information on regulatory capital requirements.Community Reinvestment Act (“CRA”) regulations

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RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
Management’s DiscussionOn July 20, 2021, the Fed, the FDIC and Analysisthe OCC issued a joint statement in which they committed to work together to jointly modernize the CRA regulations. Until such new regulations are implemented, Raymond James Bank will continue to operate under the Fed’s CRA regulations currently in effect. At this time it is uncertain what impact, if any, the impending CRA regulations will have on Raymond James Bank and other depositories with respect to their CRA activities.

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 December 31, 2021. The U.S. federal banking agencies have issued guidance strongly encouraging banking organizations to cease using the U.S. dollar LIBOR as a reference rate in new contracts as soon as practicable and in any event by December 31, 2021. Our enterprise-wide initiative is continuing to assess and implement necessary changes to our contracts pursuant to the Alternative Reference Rate Committee’s (“ARRC”) fallback recommendations, as well as updating systems, processes, documentation, and models. We also began offering Secured Overnight Financing Rate (“SOFR”)-linked derivatives.

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 20192020 Form 10-K.10-K and Note 2 of the Notes to Condensed Consolidated Financial Statements of this Form 10-Q.

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Management’s Discussion and Analysis

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 disruptionsEconomic uncertainty as a result of the COVID-19 pandemic havehas made it more challenging for us to determine the amount of our allowance for loancredit losses and the fair value of certain of our assets, particularly our private equity investments. The current circumstances havehas required a greater reliance on judgment than in recent periods in determining these amounts as of June 30, 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 the Notes to Consolidated Financial Statements of our 20192020 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 20192020 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 June 30, 2020.2021.

Loan loss provisions arising from operations of RJ BankAllowance for credit losses

We provideevaluate our held for investment bank loans, unfunded lending commitments, loans to financial advisors and certain other financial assets to estimate an allowance for loan lossescredit losses. Effective October 1, 2020, we adopted the CECL accounting guidance which reflects our continuing evaluation ofchanged the probable losses inherent in RJ Bank’s loan portfolio. See the discussion regarding our methodology in estimatingused to measure the allowance for loancredit 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 2estimating 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 ofportfolio, the Notes to Condensed Consolidated Financial Statements of this Form 10-Qrelated credit risk characteristics, and the overall economic and environmental conditions affecting the financial assets. Our process for additional information on our bank loans.

At June 30, 2020, the amortized cost of all RJ Bank loans was $21.56 billion anddetermining the allowance for loan losses was $334 million, which was 1.56% of the held for investment loan portfolio.

Our process of evaluating probable loancredit 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 loancredit 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. See the discussion regarding our methodology in estimating the allowance for credit losses in Note 2 of the 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 for additional information on our bank loan and financial advisor loan portfolios.

Our allowance for credit losses at June 30, 2021 was primarily related to bank loans and loans to financial advisors. At June 30, 2021, the amortized cost of all bank loans was $24.22 billion and the related allowance for credit losses was $322 million, or 1.34% of the held for investment loan portfolio. At June 30, 2021, the amortized cost of loans to financial advisors was $1.07 billion and the related allowance for credit losses was $29 million, which was 2.71% of the loan portfolio.

RECENT ACCOUNTING DEVELOPMENTS

The FASB has issued certain accounting updates which were assessed and either determined to be not applicable or are not expected to have a significant impact on our financial statements.

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RECENT ACCOUNTING DEVELOPMENTS

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

OFF-BALANCE SHEET ARRANGEMENTS

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

EFFECTS OF INFLATION

Our assets are primarily liquid in nature and are not significantly affected by inflation. However, the rate of inflation affects our expenses, including employee compensation, communications and information processing, and occupancy costs, which may not be readily recoverable through charges for services we provide to our clients. In addition, to the extent inflation results in rising interest rates and has adverse effects upon the securities markets, it may adversely affect our financial position and results of operations.

RISK MANAGEMENT

Risks are an inherent part of our business and activities. Management of these risksrisk 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.

Governance

Our Board of Directors oversees the firm’s management and mitigation of risk, settingreinforcing 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 20192020 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. In response to
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the significant market uncertainty caused by the COVID-19 pandemic, we took steps to proactively manage our market risk exposures, including enhanced review and monitoring of exposures and risk mitigation efforts. As a result, we reduced our trading inventory levels to reduce risk.

We monitor the Value-at-Risk (“VaR”) for all of our trading portfolios on a daily basis. VaR is an appropriate statistical technique for estimating potential losses in trading portfolios due to typical adverse market movements over a specified time horizon with a suitable confidence level. We apply the Fed’s Market Risk Rule (“MRR”) for the purpose of calculating our capital ratios. The MRR, also known as the “Risk-Based Capital Guidelines: Market Risk” rule released by the Fed, the 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
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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 postpost” 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 threenine months ended June 30, 2020,2021, our regulatory-defined daily losslosses in our trading portfolios did not exceed our predicted VaR. During the nine months ended June 30, 2020, our regulatory-defined daily loss in our trading portfolios exceeded our predicted VaR on eleven occasions due to significantly higher levels of market volatility during our fiscal second quarter as a result of the COVID-19 pandemic.

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 derivativeequity instruments, for the period and dates indicated.
Nine months ended June 30, 2020Period-end VaRThree months ended June 30,Nine months ended June 30, Nine months ended June 30, 2021Period-end VaRThree months ended June 30,Nine months ended June 30,
$ in millions$ in millionsHighLowJune 30,
2020
September 30,
2019
$ in millions2020201920202019$ in millionsHighLowJune 30,
2021
September 30,
2020
$ in millions2021202020212020
Daily VaRDaily VaR$ $ $ $ Daily average VaR$ $ $ $ Daily VaR$11 $1 $1 $Average daily VaR$2 $$5 $

Average daily VaR was higher during the current year-to-date period compared with the prior year-to-date period, as a result of the impact of increased volatility from the COVID-19 pandemic on our VaR model during the first half of fiscal 2021. However, during our third fiscal quarter of 2021, the remaining COVID-19 pandemic-related scenarios fell outside of the VaR model’s twelve-month historical simulation period, resulting in period-end VaR decreasing to $1 million as of June 30, 2021.

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 ruleMRR 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 fiscal second quarter of 2020, actual trading losses may exceed VaR results presented on a single day and might accumulate over a longer time horizon, such as a number of consecutive trading days. Accordingly, management applies additional controls including position limits, a daily review of trading results, review of the status of aged inventory, independent controls on pricing, monitoring of concentration risk, review of issuer ratings and stress testing. We utilize stress testing to complement our VaR analysis so as to measure risk under historical and hypothetical adverse scenarios. During volatile markets, we may choose to pare our trading inventories to reduce risk, as we did during our fiscal second quarter of 2020.risk.

Banking operations

RJRaymond James Bank maintains an earninginterest-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 earninginterest-earning assets are primarily funded by client deposits.  Based on its
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current earning asset portfolio, RJRaymond James Bank is subject to interest rate risk.  RJRaymond James 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 RJRaymond James 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 20192020 Form 10-K.

We utilize a hedging strategy using interest rate swaps as a result of RJRaymond James 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 20192020 Form 10-K.


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Management’s Discussion and Analysis

The following table is an analysis of RJRaymond James 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 ownour asset/liability model.model, which assumes that interest rates do not decline below zero.
Instantaneous changes in rateInstantaneous changes in rate
Net interest income
($ in millions)
Projected change in
net interest income
Instantaneous
changes in rate
Net interest income
($ in millions)
Projected change in
net interest income
+200+200$84832.5%+200$91538.0%
+100+100$79624.4%+100$85529.0%
00$6400$663
-25-25$606(5.3)%-25$637(3.9)%

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.

The following table shows the contractual maturities of RJ Bank’sour bank loan portfolio at June 30, 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 Due in
$ in millions$ in millionsOne year or less> One year – five years> five yearsTotal$ in millionsOne year or less> One year – five years> Five yearsTotal
Loans held for investment:   
C&I loansC&I loans$208  $4,425  $3,098  $7,731  C&I loans$204 $4,300 $3,507 $8,011 
CRE construction loans25  153  41  219  
CRE loansCRE loans559  2,466  670  3,695  CRE loans699 1,535 494 2,728 
REIT loansREIT loans112 1,148 10 1,270 
Tax-exempt loansTax-exempt loans—  76  1,214  1,290  Tax-exempt loans1 69 1,250 1,320 
Residential mortgage loansResidential mortgage loans—   4,912  4,917  Residential mortgage loans 4 5,166 5,170 
SBL and otherSBL and other3,610  21  —  3,631  SBL and other5,545 37  5,582 
Total loans held for investmentTotal loans held for investment4,402  7,146  9,935  21,483  Total loans held for investment6,561 7,093 10,427 24,081 
Loans held for sale—  —  83  83  
Held for sale loansHeld for sale loans  137 137 
Total loansTotal loans$4,402  $7,146  $10,018  $21,566  Total loans$6,561 $7,093 $10,564 $24,218 


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The following table shows the distribution of the recorded investment of those RJ Bankbank loans that mature in more than one year between fixed and adjustable interest rate loans at June 30, 2020. Loan amounts in the table exclude unearned income and deferred expenses.2021.
Interest rate type Interest rate type
$ in millions$ in millionsFixedAdjustableTotal$ in millionsFixedAdjustableTotal
Loans held for investment:   
C&I loansC&I loans$126  $7,397  $7,523  C&I loans$301 $7,506 $7,807 
CRE construction loans 193  194  
CRE loansCRE loans72  3,064  3,136  CRE loans91 1,938 2,029 
REIT loansREIT loans 1,158 1,158 
Tax-exempt loansTax-exempt loans1,290  —  1,290  Tax-exempt loans1,319  1,319 
Residential mortgage loansResidential mortgage loans210  4,707  

4,917  Residential mortgage loans191 4,979 

5,170 
SBL and otherSBL and other—  21  21  SBL and other 37 37 
Total loans held for investmentTotal loans held for investment1,699  15,382  17,081  Total loans held for investment1,902 15,618 17,520 
Loans held for sale 79  83  
Held for sale loansHeld for sale loans1 136 137 
Total loansTotal loans$1,703  $15,461  $17,164  Total loans$1,903 $15,754 $17,657 

Contractual loan terms for C&I, CRE, CRE constructionREIT 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 RJRaymond James 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 wereare carried at fair value on our Condensed Consolidated Statements of Financial Condition, at June 30, 2020, with changes in the fair value of the portfolio recorded through OCI inon our Condensed Consolidated Statements of Income and Comprehensive Income. At June 30, 2020,2021, our RJ Bank available-for-sale securities portfolio had a fair value of $5.63$8.19 billion with a weighted-average yield of 1.90%1.17% and a durationweighted-average life of threeapproximately 4 years. See Note 45 of the Notes to Condensed Consolidated Financial Statements of this Form 10-Q for additional information.

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Equity price risk

We are exposed to equity price risk as a result of our capital markets activities. Our broker-dealer activities are primarilygenerally client-driven, withand 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 carryingamounts 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 June 30, 2021 of $159 million, the portion we owned was $115 million. See Note 4 of the Notes to Condensed Consolidated Financial Statements of this Form 10-Q for additional information on this portfolio.

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$1.21 billion and $1.10$1.05 billion at June 30, 20202021 and September 30, 2019, respectively.2020, respectively, when converted to the U.S. dollar. A portionmajority of such loans are held by RJRaymond James Bank’s Canadian subsidiary, which is discussed in the following sections.

Investments in foreign subsidiaries

RJRaymond James Bank has an investment in a Canadian subsidiary, resulting in foreign exchange risk. To mitigate its foreign exchange risk, RJRaymond James 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 346393 million at June 30, 2020,2021, which was not hedged. Foreign exchange gains/losses related to this investment are primarily reflected in OCI on our Condensed Consolidated Statements of Income and Comprehensive Income. See Note 1617 of the Notes to Condensed Consolidated Financial Statements of this Form 10-Q for further information regarding our components of OCI.

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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 havehad material foreign exchange risk either individually, or in the aggregate, pertaining to these subsidiaries.subsidiaries as of June 30, 2021. As previous noted, on July 29, 2021 we announced our intention to make an offer for the entire issued and to be issued share capital of U.K.-based Charles Stanley at a price of £5.15 per share, or approximately £279 million. Upon closing, this transaction would increase our foreign exchange exposure associated with investments in subsidiaries located in Europe.

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 uponagreed-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
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risk, in “Item 7 - Management’s Discussion and Analysis of Financial Condition and Results of Operations - Risk management - Credit risk” of our 20192020 Form 10-K.

The initial decline in economic activity as a result of the COVID-19 haspandemic caused increased credit risk in general and particularly with regard to companies in sectors that have beenwere most significantly impacted by the economic disruption, including 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, Raymond James Bank has enacted risk mitigation strategies including, but not limited to, the risk that trades may not settlesale 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.

RJBrokerage 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 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

Raymond James Bank has a substantial loan portfolio.  While RJ Bank’sour bank 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 COVID-19 pandemic, deterioration in real estate values or a significant issue within any sector or sectors where RJ Bank haswe have a concentration will generally result in large provisions for loancredit losses and/or charge-offs. RJ Bank determinesConversely, 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. We determine the allowance required for specific loan grades based on relative risk characteristics of the loan portfolio. On an ongoing basis, RJ Bank evaluates itswe evaluate our methods for determining the allowance for each class of loans and makesmake enhancements it considerswe consider appropriate.

Our 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 our bank 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
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RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
Management’s Discussion and Analysis

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 the 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 our 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).  We do 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.

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, we consider 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 credit losses as of June 30, 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 loancredit losses at June 30, 2020,2021, including loan and borrower characteristics, such as internal risk ratings, delinquency status, collateral type and the risk profileremaining 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 BankWe also 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 Bankwe 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 elevated loan loss provisions during our fiscal second and third quarters. In addition, we sold approximately $355 million, before charge-offs and discounts or premiums, of corporate loans in industries that we believe to be most vulnerable to the COVID-19 pandemic. We will continue to assess the impact of both the COVID-19 pandemic and the economic recovery therefrom, as morenew information becomes available regarding the financial repercussions to our borrowers, the risk ratings for individual loans will be updated and the allowance will be adjusted accordingly. Additional sales of corporate loans are also expected in the fiscal fourth quarter to further reduce credit risk in certain sectors.

RJ Bank’sOur allowance for loancredit losses as a percentage of bank loans held for investment was 1.56%1.34%, 1.69% and 1.04%1.65% at June 30, 2021, October 1, 2020 (our CECL adoption date) and September 30, 2019,2020, respectively. See Note 7 inDuring the Notes to the Condensed Consolidated Financial Statements of this Form 10-Q for detail on the changes in RJ Bank’s allowance for loan losses.

The bank loan loss provision for thethree and nine months ended June 30, 2020 was $1882021, we had a benefit for credit losses on our bank loan portfolio of $19 million compared to a loan loss provision of $16and $37 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.respectively,
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compared to a provision for credit losses of $81 million and $188 million for the three and nine months ended June 30, 2020, respectively. See further explanation of the credit loss provision increase in “Management’s Discussion and Analysis - Results of Operations - Raymond James Bank” of this Form 10-Q and Note 8 in the Notes to Condensed Consolidated Financial Statements of this Form 10-Q for detail on the changes in our allowance for credit losses.

The level of charge-off activity is a factor that is considered in evaluating the potential for severity of future credit losses. The following table presents net loan (charge-offs)/recoveries and the percentage of net loan (charge-offs)/recoveries to the average outstanding loan balances by loan portfolio segment.
 Three months ended June 30,Nine months ended June 30,
 2020201920202019
$ in millions
Net loan
(charge-off)/recovery
amount (1)
% of avg.
outstanding
loans
Net loan
(charge-off)/recovery
amount (1)
% of avg.
outstanding
loans
Net loan
(charge-off)/recovery
amount (1)
% of avg.
outstanding
loans
Net loan
(charge-off)/recovery
amount (1)
% of avg.
outstanding
loans
C&I loans$(71) 3.55 %$ 0.06 %$(71) 1.18 %$(2) 0.02 %
CRE loans(2) 0.21 %—  —  (2) 0.07 %(3) 0.13 %
Residential mortgage loans 0.08 %—  —   0.03 % 0.02 %
Total$(72) 1.31 %$ 0.02 %$(72) 0.44 %$(4) 0.03 %

 Three Months Ended June 30Nine Months Ended June 30
 2021202020212020
$ in millions
Net loan
(charge-off)/recovery
amount (1)
% of avg.
outstanding
loans
Net loan
(charge-off)/recovery
amount (1)
% of avg.
outstanding
loans
Net loan
(charge-off)/recovery
amount (1)
% of avg.
outstanding
loans
Net loan
(charge-off)/recovery
amount (1)
% of avg.
outstanding
loans
C&I loans$(1)0.05 %$(71)3.55 %$(3)0.05 %$(71)1.18 %
CRE loans(3)0.44 %(2)0.21 %(3)0.15 %(2)0.07 %
Residential mortgage loans  %0.08 %  %0.03 %
Total$(4)0.07 %$(72)1.31 %$(6)0.04 %$(72)0.44 %
(1)    Charge-offs related to loan sales amountedduring the period were $1 million and $3 million for the three and nine months ended June 30, 2021, respectively, and $61 million for both the three and nine months ended June 30, 2020 and $2 million for the nine months ended June 30, 2019.2020.

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 loancredit losses for the periods presented.
June 30, 2020September 30, 2019 June 30, 2021September 30, 2020
$ in millions$ in millionsNonperforming
loan balance
Allowance for
loan losses
balance
Nonperforming
loan balance
Allowance for
loan losses
balance
$ in millionsNonperforming
loan balance
Allowance for
credit losses
balance
Nonperforming
loan balance
Allowance for
credit losses
balance
Loans held for investment:    
C&I loansC&I loans$ $186  $19  $139  C&I loans$ $188 $$200 
CRE construction loans—   —   
CRE loansCRE loans 106   46  CRE loans27 73 14 81 
REIT loansREIT loans 26 — 36 
Tax-exempt loansTax-exempt loans—  13  —   Tax-exempt loans 2 — 14 
Residential mortgage loansResidential mortgage loans14  20  16  16  Residential mortgage loans15 29 14 18 
SBL and otherSBL and other—   —   SBL and other 4 — 
Total$21  $334  $43  $218  
Total nonperforming loans as a % of RJ Bank total loans0.07 %0.21 %
Total nonperforming loans held for investmentTotal nonperforming loans held for investment$42 $322 $30 $354 
Total nonperforming loans as a % of total bank loansTotal nonperforming loans as a % of total bank loans0.17 %0.14 %

Included in nonperforming residential mortgage loans were $7 million in loans for which $4 million in charge-offs were previously recorded, resulting in less exposure within the remaining balance. See Note 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$8 million and $12$10 million as of June 30, 20202021 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 $23$43 million and $46$32 million at June 30, 20202021 and September 30, 2019,2020, respectively. Total nonperforming assets as a percentage of RJ BankRaymond James Bank’s total assets were 0.08%0.12% and 0.18%0.10% at June 30, 20202021 and September 30, 2019,2020, respectively. Although our nonperforming assets as a percentage of RJ BankRaymond James Bank’s assets remained low as of June 30, 2020,2021, prolonged or further market deterioration could result in an increase in our nonperforming assets, an increase in our allowance for loancredit losses and/or an increase 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 clientsborrowers 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-19 pandemic. Certain clientsBased on the amortized costs, approximately $34 million and $8 million of our corporate and residential loans, respectively, were in active forbearance as of June 30, 2021. As certain borrowers exit forbearance we have also requestedreceived requests for loan modifications, of covenant terms.including repayment plans. In accordance with the CARES Act and the Consolidated Appropriations Act, 2021, we have elected toare not applyapplying TDR classification to any COVID-19 related loan modifications that were performed afterfrom March 1, 2020 through December 31, 2021, to borrowers who were current as of December 31, 2019. Based on the outstanding principal balance as of the endAs of June 30, 2020,2021, we have active short-term payment deferrals on approximately $364 million and $126 million of our corporate andhad residential loans respectively. The borrower’s past due and nonaccrualof $12 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 willis not be impacted during the deferral period.

affected for loans that are in active forbearance or for loan
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modifications that have not yet been approved, the recognition of charge-offs, delinquencies, and nonaccrual status could be delayed for those 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’sOur underwriting policies for the major types of bank loans are described in “Item 7 - Management’s Discussion and Analysis of Financial Condition and Results of Operations - Risk management - Credit risk” of our 20192020 Form 10-K. There were no material changes in RJ Bank’sour bank loan underwriting policies during the nine months ended June 30, 2020.2021.

Risk monitoring process

Another component of credit risk strategy at RJ Bankfor our bank loan portfolio 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 nine months ended June 30, 2020.2021.

Residential mortgage and SBL and other loan portfolios

The collateral securing RJ Bank’sour 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’sour 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’sour 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 and reviewedSee Note 8 in establishing the allowanceNotes to the Condensed Consolidated Financial Statements of this Form 10-Q for loan losses, have not resulted in any material adjustments to RJ Bank’s historical loss rates.additional information.

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 loansDelinquent residential loans as a percentage of outstanding loan balances
$ in millions30-89 days90 days or moreTotal30-89 days90 days or moreTotal
June 30, 2020$ $ $12  0.10 %0.14 %0.24 %
September 30, 2019$ $10  $12  0.04 %0.22 %0.26 %
 Amount of delinquent residential loansDelinquent residential loans as a percentage of outstanding loan balances
$ in millions30-89 days90 days or moreTotal30-89 days90 days or moreTotal
June 30, 2021$5 $6 $11 0.10 %0.12 %0.22 %
September 30, 2020$$$10 0.06 %0.14 %0.20 %

Our June 30, 20202021 percentage continues to compare favorably to the national average for over 30 day delinquencies of 2.51%2.92%, as most recently reported by the Fed.

Credit risk is also managed by diversifying the residential mortgage portfolio. Most of the loans in our residential loan portfolio are to Private Client GroupPCG clients across the country. The following table details the geographic concentrations (top five states) of RJ Bank’sour one-to-four family residential mortgage loans.
June 30, 2020June 30, 2021
Loans outstanding as a % of RJ Bank total residential mortgage loansLoans outstanding as a % of RJ Bank total loansLoans outstanding as a % of total residential mortgage loansLoans outstanding as a % of total bank loans
CACA25.8%5.9%CA25.3%5.4%
FLFL16.4%3.8%FL17.5%3.7%
TXTX8.2%1.9%TX8.9%1.9%
NYNY7.1%1.6%NY7.5%1.6%
COCO4.1%0.9%CO4.1%0.9%

Loans where borrowers may be subject to payment increases include adjustable rate mortgageARM 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
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Management’s Discussion and Analysis

amortize.  At June 30, 20202021 and September 30, 2019,2020, these loans totaled $1.57$1.92 billion and $1.29$1.67 billion, respectively, or approximately 32%37% and 30%34% of the residential mortgage portfolio, respectively.  The weighted-average number of years before the remainder of the loans, which were still in their interest-only period at June 30, 2020,2021, begins amortizing is 6 years.

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Management’s Discussion and Analysis

A component of credit risk management for the residential portfolio is the LTV ratio and borrower credit score at origination or purchase. The 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’sour corporate and tax-exempt bank loan portfolios areis monitored on an individual loan basis. The majority of RJ Bank’sour tax-exempt bank loan portfolio is comprised of loans to investment-grade borrowers.

Credit risk is managed by diversifying the corporate bank loan portfolio. RJ Bank’sOur corporate bank 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’sour corporate bank loans.
June 30, 2020June 30, 2021
Loans outstanding as a % of RJ Bank total corporate loansLoans outstanding as a % of RJ Bank total loansLoans outstanding as a % of total corporate bank loansLoans outstanding as a % of total bank loans
Office real estateOffice real estate7.4%4.0%Office real estate7.7%3.8%
Business systems and servicesBusiness systems and services6.9%3.4%
Automotive/transportationAutomotive/transportation7.2%3.9%Automotive/transportation6.3%3.1%
Business systems and services6.6%3.6%
Hospitality6.6%3.6%
Multi-familyMulti-family5.2%2.8%Multi-family6.1%3.0%
Consumer products and servicesConsumer products and services5.8%2.9%

RJ Bank’sThe COVID-19 pandemic negatively impacted our corporate loan portfolio in fiscal 2020. Although we 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, airlines, entertainment and leisure, restaurant and gaming sectors, those most affected bywe may experience further losses on our remaining loans to borrowers in these sectors, particularly if economic conditions do not continue to improve in the economic disruption fromfuture. 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 June 30, 2020.pandemic, including on our CRE loans secured by retail and hospitality properties.

Although we saw deterioration in oil prices for much of fiscal year 2020 due to the pandemic, oil prices continued to improve during the currentfirst nine months of fiscal year our2021 and have now surpassed pre-pandemic levels as of the end of the fiscal third quarter of 2021. Our energy portfolio primarilyhas 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 aevent 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 Analysis of Financial Condition and Results of Operations - Risk management - Operational risk” of our 20192020 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 crisispandemic under such protocols. We have endeavored to safeguardprotect our associates and our clients and to ensure continuity of business operations for our clients. As a result, mosta substantial portion of our associates are workingcontinue to work remotely. Our systems and infrastructure have continued to support the increased volumes of activity, without any significant operational or technology disruptions. We did not incur any material losses related to our operational risks during the nine months ended June 30, 2020. The firm continues to monitor the situationconditions and has developed a phased approach to reopening our offices based on regional indicators and in compliancewhich complies with all applicable laws, regulations, and regulations.Centers for Disease Control guidelines. As of June 30, 2020,2021, we havehad reopened certainmost of our offices in a limited capacity and are workinghave been operating under strict precautions.

Aspublic health and safety protocols in such locations. We continue to monitor reports from health officials and had hoped for a full return to office in September 2021, which would include more fully describedflexibility for our associates. However, the recent disruptions in the discussionU.S. caused by the Delta variant may impact the timing 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 ourthe 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.these plans.
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Management’s Discussion and Analysis


Periods of severe market volatility, such as those that arose most notably in fiscal 2020 in response to the onset of the COVID-19 pandemic, can result in a significantly higher level of transactions on specific days and other activity 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 interruptions to our system processing. We did not incur any significant losses related to such operational challenges during the nine months ended June 30, 2021.

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 20192020 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 20192020 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 nine months ended June 30, 2020.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

See “Item 2 - Management’s Discussion and Analysis of Financial Condition and Results of Operations - Risk management” of this Form 10-Q for our quantitative and qualitative disclosures about market risk.

ITEM 4. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

Disclosure controls are procedures designed to ensure that information required to be disclosed in our reports filed under the Securities Exchange Act of 1934, such as this report, are recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls are also designed to ensure that such information is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable, not absolute, assurance of achieving the desired control objectives, as ours are designed to do, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we have evaluated the effectiveness of our disclosure controls and procedures pursuant to Securities Exchange Act of 1934 Rule 13a-15(b) as of the end of the period covered by this report. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that these disclosure controls and procedures are effective.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting during the quarterthree and nine months ended June 30, 20202021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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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.

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

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

The COVID-19 pandemic has caused, and is likely to continue to cause, 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 during our fiscal second quarter had 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. Although equity markets recovered during our fiscal third quarter, any future declines in equity markets will likely have a greater negative affect on revenues and profitability than would have been experienced in prior years due to the increased proportion of our asset-based revenues. Market volatility, such as that seen in our fiscal second quarter, could also cause clients to move their investments to lower margin products, or withdraw them, which could have an adverse impact on our profitability. We could also experience a material reduction in trading volume and lower securities prices in times of market uncertainty, which would result in lower brokerage revenues, including losses on firm inventory. The fair values of certain of our investments could also continue to be negatively impacted, resulting in additional unrealized or realized losses on such investments. In addition, the market uncertainty related to the COVID-19 pandemic has caused a slowdown in merger & acquisition activity and may cause our institutional clients to abandon announced transactions and/or cease exploration of potential transactions, which could negatively impact our Capital Markets revenues.

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. TheNot applicable.
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Fed significantly lowered interest rates in response to COVID-19 pandemic concerns in March. These decreases in short-term interest rates, in addition to those in late 2019, have had a negative impact on our results, as we have certain assets and liabilities, primarily held in our PCG, RJ Bank and Other segments, which are sensitive to changes in interest rates. Fees we earn from third-party banks on client cash balances swept to such banks as part of RJBDP are also sensitive to changes in interest rates. These market interest rate declines will continue to negatively impact results in future quarters.

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

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

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

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

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

We also rely on numerous third-party service providers to conduct other aspects of our business operations, and we face similar risks relating to them. While we regularly conduct security assessments on these third-party vendors, we cannot be certain that their information security protocols are sufficient to withstand a cyber-attack or other security breach. In addition, in order to access our products and services, our customers may use computers and other devices that are beyond our security control systems.

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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, 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.

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ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

We did not have any sales of unregistered securities for the nine months ended June 30, 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 nine months ended June 30, 2020.2021.
 Total number of shares
purchased
Average price
per share
Number of shares purchased as part of publicly announced plans or programsApproximate 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, 20195,582  $84.80  —  $750
November 1, 2019 – November 30, 201986,720  $89.35  —  $750
December 1, 2019 – December 31, 2019132,723  $89.33  125,567  $739
First quarter225,025  $89.23  125,567  
January 1, 2020 – January 31, 202040,106  $89.74  32,988  $736
February 1, 2020 – February 29, 2020721,432  $89.47  719,250  $672
March 1, 2020 – March 31, 20201,800,682  $74.94  1,795,764  $537
Second quarter2,562,220  $79.26  2,548,002  
April 1, 2020 – April 30, 2020—  $—  —  $537
May 1, 2020 – May 31, 2020—  $—  —  $537
June 1, 2020 – June 30, 2020—  $—  —  $537
Third quarter—  $—  —  
Fiscal year-to-date total2,787,245  $80.06  2,673,569  
 Total number of shares
purchased
Average price
per share
Number of shares purchased as part of publicly announced plans or programsApproximate 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, 20201,204 $80.04  $487
November 1, 2020 – November 30, 202093,225 $90.50  $487
December 1, 2020 – December 31, 2020116,759 $93.02 107,750 $740
First quarter211,188 $91.84 107,750 
January 1, 2021 – January 31, 20212,401 $100.06  $740
February 1, 2021 – February 28, 20216,941 $99.93  $740
March 1, 2021 – March 31, 2021501,760 $120.05 500,000 $680
Second quarter511,102 $119.69 500,000 
April 1, 2021 – April 30, 2021887 $128.91  $680
May 1, 2021 – May 31, 2021 $  $680
June 1, 2021 – June 30, 2021375,000 $128.55 375,000 $632
Third quarter375,887 $128.55 375,000 
Fiscal year-to-date total1,098,177 $117.36 982,750 

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 ourthe 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 ownedwholly-owned Canadian subsidiaries. For more information on this trust fund, see Note 2 of the Notes to Consolidated Financial Statements of our 20192020 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 suspended our share repurchases from mid-March 2020 through the end of our fiscal third quarter. We resumed share repurchases to offset dilution in our fiscal fourth quarter.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

Not applicable.None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

Not applicable.None.

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ITEM 6. EXHIBITS

Exhibit NumberDescription
3.1
3.2
4.1
10.1
31.1
31.2
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101.DEFInline XBRL Taxonomy Extension Definition Linkbase Document.
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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:August 7, 20209, 2021 /s/ Paul C. Reilly
  Paul C. Reilly
  Chairman and Chief Executive Officer
   
Date:August 7, 20209, 2021 /s/ Paul M. Shoukry
  Paul M. Shoukry
  Chief Financial Officer and Treasurer
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