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

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, ~~2020~~2021


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


For the transition period from						to

Commission File Number: 1-9109

RAYMOND JAMES FINANCIAL, INC.

(Exact name of registrant as specified in its charter)


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

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

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

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or such shorter period that the registrant was required to submit such files). Yes x No ☐

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


Large accelerated filer	x	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

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

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

Yes ☐ No x☒

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

~~137,159,781~~137,192,121 shares of common stock as of August ~~6, 2020~~4, 2021

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES


INDEX
		PAGE
PART I	FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)	3
	Condensed Consolidated Statements of Financial Condition ~~as of June 30, 2020 and September 30, 2019~~ (Unaudited)	3
	Condensed Consolidated Statements of Income and Comprehensive Income ~~for the three and nine months ended June 30, 2020 and June 30, 2019~~ (Unaudited)	4
	Condensed Consolidated Statements of Changes in Shareholders’ Equity ~~for the three and nine months ended June 30, 2020 and June 30, 2019~~ (Unaudited)	5
	Condensed Consolidated Statements of Cash Flows ~~for the nine months ended June 30, 2020 and June 30, 2019~~ (Unaudited)	6
	Notes to Condensed Consolidated Financial Statements (Unaudited)
	Note 1 - Organization and basis of presentation	8
	Note 2 - Update of significant accounting policies	9
	Note 3 - ~~Fair value~~Acquisitions	1112
	Note 4 - ~~Available-for-sale securities~~Fair value	1714
	Note 5 - Available-for-sale securities	20
	Note 6 - Derivative assets and derivative liabilities	19
	~~Note 6 - Collateralized agreements and financings~~	21
	~~Note 7 - Bank loans, net~~	22
	Note 87 - ~~Variable interest entities~~Collateralized agreements and financings	2924
	Note 98 - ~~Goodwill and identifiable intangible assets,~~Bank loans, net	3026
	Note 109 - ~~Leases~~	30
	~~Note 11 - Bank deposits~~Loans to financial advisors, net	32
	Note 1210 - ~~Other borrowings~~Variable interest entities	32
	Note 11 - Goodwill and identifiable intangible assets, net	33
	Note 1312 - ~~Senior notes payable~~Leases	34
	Note 1413 - ~~Income taxes~~	34
	~~Note 15 - Commitments, contingencies and guarantees~~Bank deposits	35
	Note 14 - Senior notes payable	36
	Note 15 - Income taxes	37
	Note 16 - Commitments, contingencies and guarantees	37
	Note 17 - Accumulated other comprehensive income/(loss)	3840
	Note 1718 - Revenues	3941
	Note 1819 - Interest income and interest expense	4345
	Note 1920 - Share-based compensation	4345
	Note 2021 - Regulatory capital requirements	4445
	Note 2122 - Earnings per share	4648
	Note 2223 - Segment information	4648
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	4951
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	8790
Item 4.	Controls and Procedures	8790
PART II	OTHER INFORMATION
Item 1.	Legal Proceedings	8890
Item 1A.	Risk Factors	8890
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	91
Item 3.	Defaults Upon Senior Securities	91
Item 4.	Mine Safety Disclosures	91
Item 5.	Other Information	91
Item 6.	Exhibits	92
	Signatures	92

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 amounts	June 30, 2020		September 30, 2019		$ in millions, except per share amounts	June 30, 2021		September 30, 2020
Assets:	Assets:					Assets:
Cash and cash equivalents	Cash and cash equivalents	$	5,632	$	3,957	Cash and cash equivalents	$	5,982	$	5,390
Cash and cash equivalents segregated pursuant to regulations		3,205		2,014
Securities purchased under agreements to resell		193		343
Securities borrowed		300		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 agreements						Collateralized agreements	639		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 assets	Derivative assets	452		338		Derivative assets	291		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, net	Brokerage client receivables, net	2,346		2,671		Brokerage client receivables, net	2,683		2,435
Receivables from brokers, dealers and clearing organizations		472		281
Other receivables		616		549
Other receivables, net						Other receivables, net	1,144		927
Bank loans, net	Bank loans, net	21,223		20,891		Bank loans, net	23,896		21,195
Loans to financial advisors, net	Loans to financial advisors, net	992		983		Loans to financial advisors, net	1,042		1,012
Property and equipment, net	Property and equipment, net	537		527		Property and equipment, net	552		535
Deferred income taxes, net	Deferred income taxes, net	222		231		Deferred income taxes, net	289		262
Goodwill and identifiable intangible assets, net	Goodwill and identifiable intangible assets, net	602		611		Goodwill and identifiable intangible assets, net	862		600
Other assets	Other assets	1,572		1,020		Other assets	1,637		1,525
Total assets	Total assets	$	44,682	$	38,830	Total assets	$	57,161	$	47,482

Liabilities and shareholders’ equity:	Liabilities and shareholders’ equity:					Liabilities and shareholders’ equity:
Bank deposits	Bank deposits	$	25,372	$	22,281	Bank deposits	$	30,340	$	26,801
Securities sold under agreements to repurchase		228		150
Securities loaned		88		323
Financial instruments sold but not yet purchased, at fair value:
Trading instruments		154		296
Collateralized financings						Collateralized financings	285		250
Financial instrument liabilities, at fair value:						Financial instrument liabilities, at fair value:
Trading liabilities						Trading liabilities	258		240
Derivative liabilities	Derivative liabilities	394		313		Derivative liabilities	263		393
Brokerage client payables	Brokerage client payables	5,955		4,361		Brokerage client payables	11,843		6,792
Payables to brokers, dealers and clearing organizations		190		229
Accrued compensation, commissions and benefits	Accrued compensation, commissions and benefits	1,109		1,272		Accrued compensation, commissions and benefits	1,557		1,384
Other payables	Other payables	1,243		518		Other payables	1,801		1,513
Other borrowings	Other borrowings	890		894		Other borrowings	859		888
Senior notes payable	Senior notes payable	2,044		1,550		Senior notes payable	2,037		2,045
Total liabilities	Total liabilities	37,667		32,187		Total liabilities	49,243		40,306
Commitments and contingencies (see Note 15)
Commitments and contingencies (see Note 16)						Commitments and contingencies (see Note 16)	0		0
Shareholders’ equity	Shareholders’ equity					Shareholders’ equity
Preferred 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 outstanding	—		—		Preferred stock; $.10 par value; 10,000,000 shares authorized; -0- shares issued and outstanding	0		0
Common stock; $.01 par value; 350,000,000 shares authorized; 158,909,194 and 158,435,030 shares issued as of June 30, 2020 and September 30, 2019, respectively, and 137,025,724 and 137,841,952 shares outstanding as of June 30, 2020 and September 30, 2019, respectively		2		2
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		2
Additional paid-in capital	Additional paid-in capital	1,984		1,938		Additional paid-in capital	2,060		2,007
Retained earnings	Retained earnings	6,326		5,874		Retained earnings	7,257		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)	1		(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 interests	Noncontrolling interests	50		62		Noncontrolling interests	55		62
Total shareholders’ equity	Total shareholders’ equity	7,015		6,643		Total shareholders’ equity	7,918		7,176
Total liabilities and shareholders’ equity	Total 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).

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 amounts	in millions, except per share amounts	2020		2019		2020		2019		in millions, except per share amounts	2021		2020		2021		2020
Revenues:	Revenues:									Revenues:
Asset management and related administrative fees	Asset 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 commissions	Securities commissions	343		358		1,116		1,095		Securities commissions	415		343		1,239		1,116
Principal transactions	Principal transactions	143		93		345		262		Principal transactions	137		143		432		345
Total brokerage revenues	Total brokerage revenues	486		451		1,461		1,357		Total brokerage revenues	552		486		1,671		1,461
Account and service fees	Account and service fees	134		183		484		559		Account and service fees	161		134		465		484
Investment banking	Investment banking	139		139		428		439		Investment banking	276		139		779		428
Interest income	Interest income	217		321		799		961		Interest income	205		217		608		799
Other	Other	33		27		47		95		Other	55		33		155		47
Total revenues	Total revenues	1,876		2,000		6,047		5,938		Total revenues	2,511		1,876		7,180		6,047
Interest expense	Interest expense	(42)		(73)		(136)		(221)		Interest expense	(40)		(42)		(115)		(136)
Net revenues	Net revenues	1,834		1,927		5,911		5,717		Net revenues	2,471		1,834		7,065		5,911
Non-interest expenses:	Non-interest expenses:									Non-interest expenses:
Compensation, commissions and benefits	Compensation, commissions and benefits	1,277		1,277		4,050		3,767		Compensation, commissions and benefits	1,661		1,277		4,809		4,050
Non-compensation expenses:	Non-compensation expenses:									Non-compensation expenses:
Communications and information processing	Communications and information processing	100		92		293		278		Communications and information processing	109		100		315		293
Occupancy and equipment	Occupancy and equipment	55		55		168		159		Occupancy and equipment	58		55		172		168
Business development	Business development	21		57		106		141		Business development	31		21		75		106
Investment sub-advisory fees	Investment sub-advisory fees	23		24		75		70		Investment sub-advisory fees	34		23		93		75
Professional fees	Professional fees	24		22		68		61		Professional fees	26		24		80		68
Bank loan loss provision/(benefit)		81		(5)		188		16
Acquisition and disposition-related expenses		—		—		—		15
Bank loan provision/(benefit) for credit losses										Bank loan provision/(benefit) for credit losses	(19)		81		(37)		188
Losses on extinguishment of debt										Losses on extinguishment of debt	98		0		98		0
Acquisition-related expenses										Acquisition-related expenses	7		0		9		0

Other	Other	55		63		167		189		Other	81		55		220		167
Total non-compensation expenses	Total non-compensation expenses	359		308		1,065		929		Total non-compensation expenses	425		359		1,025		1,065
Total non-interest expenses	Total non-interest expenses	1,636		1,585		5,115		4,696		Total non-interest expenses	2,086		1,636		5,834		5,115
Pre-tax income	Pre-tax income	198		342		796		1,021		Pre-tax income	385		198		1,231		796
Provision for income taxes	Provision for income taxes	26		83		187		252		Provision for income taxes	78		26		257		187
Net income	Net income	$	172	$	259	609		769		Net income	$	307	$	172	$	974	$	609

Earnings per common share – basic	Earnings 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 – diluted	Earnings 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 – basic	Weighted-average common shares outstanding – basic	137.1		140.4		137.9		141.8		Weighted-average common shares outstanding – basic	137.2		137.1		137.2		137.9
Weighted-average common and common equivalent shares outstanding – diluted	Weighted-average common and common equivalent shares outstanding – diluted	139.4		143.6		140.5		144.8		Weighted-average common and common equivalent shares outstanding – diluted	141.1		139.4		140.6		140.5

Net income	Net 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 securities	Available-for-sale securities	5		24		67		65		Available-for-sale securities	25		5		(68)		67
Currency translations, net of the impact of net investment hedges	Currency translations, net of the impact of net investment hedges	11		6		(6)		1		Currency translations, net of the impact of net investment hedges	5		11		25		(6)
Cash flow hedges	Cash flow hedges	(4)		(19)		(37)		(49)		Cash flow hedges	(2)		(4)		22		(37)
Total other comprehensive income, net of tax		12		11		24		17
Total other comprehensive income/(loss), net of tax										Total other comprehensive income/(loss), net of tax	28		12		(21)		24
Total comprehensive income	Total comprehensive income	$	184	$	270	$	633	$	786	Total comprehensive income	$	335	$	184	$	953	$	633

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

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

(Unaudited)


		Three months ended June 30,						Nine months ended June 30,							Three months ended June 30,				Nine months ended June 30,
$ in millions, except per share amounts	$ in millions, except per share amounts	2020		2019		2020		2019		$ in millions, except per share amounts	2021		2020		2021		2020
Common stock, par value $.01 per share:	Common stock, par value $.01 per share:									Common stock, par value $.01 per share:
Balance beginning of period	Balance beginning of period	$	2	$	2	$	2	$	2	Balance beginning of period	$	2	$	2	$	2	$	2
Share issuances	Share issuances	—		—		—		—		Share issuances	0		0		0		0
Balance end of period	Balance end of period	2		2		2		2		Balance end of period	2		2		2		2

Additional paid-in capital:	Additional paid-in capital:									Additional paid-in capital:
Balance beginning of period	Balance beginning of period	1,953		1,917		1,938		1,808		Balance beginning of period	2,028		1,953		2,007		1,938
Employee stock purchases	Employee stock purchases	12		7		29		27		Employee stock purchases	8		12		23		29
Exercise of stock options and vesting of restricted stock units, net of forfeitures	Exercise of stock options and vesting of restricted stock units, net of forfeitures	(3)		2		(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 expense	Restricted stock, stock option and restricted stock unit expense	22		21		91		85		Restricted stock, stock option and restricted stock unit expense	28		22		100		91
Acquisition of noncontrolling interest and other		—		(32)		—		(32)

Balance end of period	Balance end of period	1,984		1,915		1,984		1,915		Balance end of period	2,060		1,984		2,060		1,984

Retained earnings:	Retained earnings:									Retained earnings:
Balance beginning of period	Balance beginning of period	6,205		5,448		5,874		5,032		Balance beginning of period	7,004		6,205		6,484		5,874
Cumulative adjustments for changes in accounting principles										Cumulative adjustments for changes in accounting principles	0		0		(35)		0
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)		—		4
Cash dividends declared (see Note 22)										Cash dividends declared (see Note 22)	(54)		(51)		(166)		(157)
Balance end of period	Balance end of period	6,326		5,659		6,326		5,659		Balance end of period	7,257		6,326		7,257		6,326

Treasury stock:	Treasury stock:									Treasury stock:
Balance beginning of period	Balance beginning of period	(1,351)		(976)		(1,210)		(447)		Balance beginning of period	(1,404)		(1,351)		(1,390)		(1,210)
Purchases/surrenders	Purchases/surrenders	—		(86)		(222)		(598)		Purchases/surrenders	(48)		0		(127)		(222)
Exercise of stock options and vesting of restricted stock units, net of forfeitures	Exercise of stock options and vesting of restricted stock units, net of forfeitures	3		2		84		(15)		Exercise of stock options and vesting of restricted stock units, net of forfeitures	6		3		71		84
Balance end of period	Balance 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 period	Balance beginning of period	(11)		(25)		(23)		(27)		Balance beginning of period	(38)		(11)		11		(23)
Other comprehensive income, net of tax		12		11		24		17
Other		—		—		—		(4)
Other comprehensive income/(loss), net of tax										Other comprehensive income/(loss), net of tax	28		12		(21)		24

Balance end of period	Balance end of period	1		(14)		1		(14)		Balance end of period	(10)		1		(10)		1
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 period	Balance 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		—		—		—		2
Distributions and other		16		(5)		14		(8)
Net income/(loss) attributable to noncontrolling interests										Net income/(loss) attributable to noncontrolling interests	12		(2)		24		(26)

Other										Other	(2)		16		(31)		14

Balance end of period	Balance end of period	50		62		50		62		Balance end of period	55		50		55		50
Total shareholders’ equity	Total 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).

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 millions	2020		2019		$ in millions	2021		2020
Cash flows from operating activities:	Cash flows from operating activities:					Cash flows from operating activities:
Net income	Net 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 amortization	Depreciation and amortization	88		81		Depreciation and amortization	97		88
Deferred income taxes	Deferred income taxes	(13)		(22)		Deferred income taxes	(24)		(13)
Premium and discount amortization on available-for-sale securities and loss on other investments	Premium and discount amortization on available-for-sale securities and loss on other investments	53		14		Premium and discount amortization on available-for-sale securities and loss on other investments	12		53
Provisions for loan losses, legal and regulatory proceedings and bad debts		209		45
Provisions/(benefits) for credit losses and legal and regulatory proceedings						Provisions/(benefits) for credit losses and legal and regulatory proceedings	(29)		209
Share-based compensation expense	Share-based compensation expense	97		88		Share-based compensation expense	103		97
Unrealized gain on company-owned life insurance policies, net of expenses	Unrealized 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 debt						Losses on extinguishment of debt	98		0
Other	Other	4		31		Other	47		4
Net change in:	Net change in:					Net change in:
Securities purchased under agreements to resell, net of securities sold under agreements to repurchase		226		(61)
Securities loaned, net of securities borrowed		(287)		(44)
Assets segregated pursuant to regulations excluding cash and cash equivalents						Assets segregated pursuant to regulations excluding cash and cash equivalents	(3,000)		0
Collateralized agreements, net of collateralized financings						Collateralized agreements, net of collateralized financings	(178)		(61)
Loans provided to financial advisors, net of repayments	Loans 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, net	Brokerage client receivables and other accounts receivable, net	126		679		Brokerage client receivables and other accounts receivable, net	(425)		126
Trading instruments, net	Trading instruments, net	216		(52)		Trading instruments, net	42		216
Derivative instruments, net	Derivative instruments, net	(68)		(137)		Derivative instruments, net	41		(68)
Other assets	Other assets	(64)		(83)		Other assets	(238)		(64)
Brokerage client payables and other accounts payable	Brokerage client payables and other accounts payable	1,621		(1,300)		Brokerage client payables and other accounts payable	4,673		1,621
Accrued compensation, commissions and benefits	Accrued compensation, commissions and benefits	(161)		(99)		Accrued compensation, commissions and benefits	160		(161)
Proceeds from sales of securitizations and loans held for sale, net of purchases and originations of loans held for sale		32		27
Net cash provided by/(used in) operating activities		2,655		(101)
Purchases and originations of loans held for sale, net of proceeds from sales of securitizations and loans held for sale						Purchases 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 activities						Net cash provided by operating activities	2,124		2,655

Cash flows from investing activities:	Cash flows from investing activities:					Cash flows from investing activities:
Additions to property and equipment	Additions to property and equipment	(97)		(102)		Additions to property and equipment	(99)		(97)
Increase in bank loans, net	Increase in bank loans, net	(978)		(1,226)		Increase in bank loans, net	(2,620)		(978)
Proceeds from sales of loans held for investment	Proceeds from sales of loans held for investment	272		210		Proceeds from sales of loans held for investment	248		272

Purchases of available-for-sale securities	Purchases 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 redemptions	Available-for-sale securities maturations, repayments and redemptions	744		456		Available-for-sale securities maturations, repayments and redemptions	1,658		744
Proceeds from sales of available-for-sale securities	Proceeds from sales of available-for-sale securities	222		—		Proceeds from sales of available-for-sale securities	969		222
Business acquisition, net of cash acquired		(5)		(5)
Business acquisitions, net of cash acquired						Business acquisitions, net of cash acquired	(245)		(5)
Other investing activities, net	Other investing activities, net	(31)		(30)		Other investing activities, net	13		(31)
Net cash used in investing activities	Net 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).


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 millions	2020		2019		$ in millions	2021		2020
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 advances	Proceeds from Federal Home Loan Bank advances	850		850		Proceeds from Federal Home Loan Bank advances	0		850
Repayments of Federal Home Loan Bank advances and other borrowed funds	Repayments 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 paid	Proceeds from senior notes issuances, net of debt issuance costs paid	494		—		Proceeds from senior notes issuances, net of debt issuance costs paid	737		494
Extinguishment of senior notes payable						Extinguishment of senior notes payable	(844)		0

Exercise of stock options and employee stock purchases	Exercise of stock options and employee stock purchases	55		53		Exercise of stock options and employee stock purchases	42		55
Increase in bank deposits	Increase in bank deposits	3,091		2,224		Increase in bank deposits	3,539		3,091
Purchases of treasury stock	Purchases of treasury stock	(222)		(616)		Purchases of treasury stock	(127)		(222)
Dividends on common stock	Dividends on common stock	(154)		(143)		Dividends on common stock	(163)		(154)
Acquisitions of and distributions to noncontrolling interests, net		(2)		(54)
Other financing, net						Other financing, net	(6)		(2)
Net cash provided by financing activities	Net cash provided by financing activities	3,258		1,510		Net cash provided by financing activities	3,149		3,258

Currency adjustment:	Currency adjustment:					Currency adjustment:
Effect of exchange rate changes on cash	Effect of exchange rate changes on cash	(27)		(12)		Effect of exchange rate changes on cash	114		(27)
Net increase in cash and cash equivalents and cash and cash equivalents segregated pursuant to regulations		2,866		11
Cash and cash equivalents and cash and cash equivalents segregated pursuant to regulations at beginning of year		5,971		5,941
Cash and cash equivalents and cash and cash equivalents segregated pursuant to regulations at end of period		$	8,837	$	5,952
Net increase in cash and cash equivalents, including those segregated pursuant to regulations						Net increase in cash and cash equivalents, including those segregated pursuant to regulations	2,230		2,866
Cash and cash equivalents, including those segregated pursuant to regulations at beginning of year						Cash and cash equivalents, including those segregated pursuant to regulations at beginning of year	9,634		5,971
Cash and cash equivalents, including those segregated pursuant to regulations at end of period						Cash and cash equivalents, including those segregated pursuant to regulations at end of period	$	11,864	$	8,837

Cash and cash equivalents	Cash and cash equivalents	$	5,632	$	3,596	Cash and cash equivalents	$	5,982	$	5,632
Cash and cash equivalents segregated pursuant to regulations	Cash and cash equivalents segregated pursuant to regulations	3,205		2,356		Cash and cash equivalents segregated pursuant to regulations	5,882		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 period						Total 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 interest	Cash paid for interest	$	118	$	208	Cash paid for interest	$	113	$	118
Cash paid for income taxes, net	Cash paid for income taxes, net	$	202	$	295	Cash paid for income taxes, net	$	335	$	202
Cash outflows for lease liabilities						Cash outflows for lease liabilities	$	84	$	73
Non-cash right-of-use (“ROU”) assets recorded for new and modified leases						Non-cash right-of-use (“ROU”) assets recorded for new and modified leases	$	101	$	60

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

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

June 30, ~~2020~~2021

NOTE 1 – ORGANIZATION AND BASIS OF PRESENTATION

Organization

Raymond James Financial, Inc. (“RJF,” the “firm” or the “Company”) is a financial holding company which, together with its subsidiaries, is engaged in various financial services activities, including providing investment management services ~~for~~to retail and institutional clients, the underwriting, distribution, trading and brokerage of equity and debt securities, and the sale of mutual funds and other investment products. The firm also provides corporate and retail banking services, and trust services. For further information about our business segments, see Note 2223 of this Form 10-Q. As used herein, the terms “our,” “we,” or “us” refer to RJF and/or one or more of its subsidiaries.

Basis of presentation

The accompanying unaudited condensed consolidated financial statements include the accounts of RJF and its consolidated subsidiaries that are generally controlled through a majority voting interest. We consolidate all of our 100% ~~owned~~-owned subsidiaries. In addition, we consolidate any variable interest entity (“VIE”) in which we are the primary beneficiary. Additional information on these VIEs is provided in Note 2 of our Annual Report on Form 10-K (“~~2019~~2020 Form 10-K”) for the year ended September 30, ~~2019,~~2020, as filed with the United States (“U.S.”) Securities and Exchange Commission (“SEC”) and in Note 810 of this Form 10-Q. When we do not have a controlling interest in an entity, but we exert significant influence over the entity, we apply the equity method of accounting. All material intercompany balances and transactions have been eliminated in consolidation.

Accounting estimates and assumptions

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

The nature of our business is such that the results of any interim period are not necessarily indicative of results for a full year. These unaudited condensed consolidated financial statements should be read in conjunction with Management’s Discussion and Analysis of Financial Condition and Results of Operations and the Consolidated Financial Statements and Notes thereto included in our ~~2019~~2020 Form 10-K. To prepare condensed consolidated financial statements in accordance with GAAP, we must make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements, and the reported amounts of revenues and expenses for the reporting period. Actual results could differ from those estimates and could have a material impact on the condensed consolidated financial statements.

Reclassifications

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

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited)

NOTE 2 – UPDATE OF SIGNIFICANT ACCOUNTING POLICIES

A summary of our significant accounting policies is included in Note 2 of our ~~2019~~2020 Form 10-K. During the 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 developments~~Accounting guidance adopted in fiscal 2021

~~Accounting guidance recently adopted~~Credit losses

~~Lease accounting -~~ In ~~February~~June 2016, the Financial Accounting Standards Board (“FASB”) issued new guidance related to the accounting for leases (ASU 2016-02). The new guidance and subsequent amendments requires the recognition of assets and liabilities on the balance sheet related to the rights and obligations created by lease agreements with terms greater than twelve months, regardless 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 include~~in-scope financial assets. The measurement of expected credit losses includes historical experience, current conditions and reasonable and supportable forecasts, replacing the existing incurred credit loss model and other models with the Current Expected Credit Losses (“CECL”) model. The new guidance expands the disclosure requirements regarding an entity’s assumptions, models, and methods for estimating credit losses and requires new disclosures of the amortized cost balance for each class of financial asset by credit quality indicator, disaggregated by the year of origination. economic forecasts.

This new guidance ~~is first~~was effective for our fiscal year beginning on October 1, 2020 and ~~will be~~was adopted under a modified retrospective approach. ~~Although permitted, we do not plan to early adopt. Our cross-functional team continues with the implementation efforts.~~ ~~We are in the process~~The 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 will~~standard resulted in an increase in our allowance for credit losses of $42 million (including $25 million related to loans to financial advisors, $9 million related to funded bank loans and $8 million related to unfunded lending commitments) and a corresponding reduction in the beginning balance of retained earnings of $35 million, net of tax. Prior-period amounts were calculated under the incurred loss model and have ~~on our~~not been restated. See Notes 8 and 9 for further information related to bank loans and loans to financial ~~position 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 characteristics~~related allowances for credit losses.

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

Available-for-sale securities

Available-for-sale securities are generally held by ~~us on~~Raymond James Bank 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.

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 guidance~~outstanding 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 certain~~follows 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 effective~~credit 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 plan~~loans 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 guidance~~payment of contractual interest or principal. Loans are placed on ~~how all entities evaluate decision-making fees under~~nonaccrual status when we determine that full payment of contractual principal and interest is in doubt, or the ~~VIE guidance (ASU 2018-17). Under~~loan 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 variable~~accrued and unpaid interest ~~an entity considers indirect interests held through related parties under common control~~receivable is written-off against interest income. Interest is recognized on a ~~proportionate~~cash basis ~~rather than in their entirety. This guidance is first effective~~until the loan qualifies for ~~our fiscal year beginning~~return to accrual status. Loans are returned to an accrual status when the loans have been brought contractually current with the original terms and have been maintained on ~~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.

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.

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.

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.

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited)

NOTE 4 – FAIR VALUE

Our “Financial ~~instruments owned”~~instruments” and “Financial ~~instruments sold but not yet purchased”~~instrument liabilities” on our Condensed Consolidated Statements of Financial Condition are recorded at fair value under GAAP. For further information about such instruments and our significant accounting policies related to fair value, see ~~Note~~Notes 2 and ~~Note 4~~3 of our ~~2019~~2020 Form 10-K. The following tables present assets and liabilities measured at fair value on a recurring basis. Netting adjustments represent the impact of counterparty and collateral netting on our derivative balances included on our Condensed Consolidated Statements of Financial Condition. See Note 56 for additional information.


$ in millions	$ in millions	Level 1		Level 2		Level 3		Netting adjustments		Balance as of June 30, 2020		$ in millions	Level 1		Level 2		Level 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 regulations												Assets segregated pursuant to regulations	$	3,000	$	0	$	0	$	—	$	3,000
Trading assets:												Trading assets:
Municipal and provincial obligations	Municipal and provincial obligations	$	5	$	77	$	—	$	—	$	82	Municipal and provincial obligations	1		139		0		—		140
Corporate obligations	Corporate obligations	6		46		—		—		52		Corporate obligations	13		40		0		—		53
Government and agency obligations	Government and agency obligations	16		66		—		—		82		Government and agency obligations	16		81		0		—		97
Agency mortgage-backed securities (“MBS”) and collateralized mortgage obligations (“CMOs”)		—		102		—		—		102
Agency MBS and agency CMOs												Agency MBS and agency CMOs	0		122		0		—		122
Non-agency CMOs and asset-backed securities (“ABS”)	Non-agency CMOs and asset-backed securities (“ABS”)	—		7		—		—		7		Non-agency CMOs and asset-backed securities (“ABS”)	0		17		0		—		17
Total debt securities	Total debt securities	27		298		—		—		325		Total debt securities	30		399		0		—		429
Equity securities	Equity securities	9		—		—		—		9		Equity securities	14		3		0		—		17
Brokered certificates of deposit	Brokered certificates of deposit	—		12		—		—		12		Brokered certificates of deposit	0		32		0		—		32
Other	Other	—		—		15		—		15		Other	0		0		10		—		10
Total trading instruments		36		310		15		—		361
Total trading assets												Total trading assets	44		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 book	Interest rate - matched book	—		351		—		—		351		Interest rate - matched book	0		221		0		—		221
Interest rate - other	Interest rate - other	15		239		—		(153)		101		Interest rate - other	7		150		0		(95)		62

Foreign exchange												Foreign exchange	0		7		0		—		7
Other												Other	0		0		1		—		1
Total derivative assets	Total derivative assets	15		590		—		(153)		452		Total derivative assets	7		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 investments		201		1		22		—		224
All other investments:												All other investments:
Government and agency obligations (2)												Government and agency obligations (2)	321		0		0		—		321
Other												Other	78		2		23		—		103
Total all other investments												Total all other investments	399		2		23		—		424
Subtotal	Subtotal	268		6,515		67		(153)		6,697		Subtotal	3,465		8,990		100		(95)		12,460
Other investments - private equity - measured at NAV	Other investments - private equity - measured at NAV									73		Other investments - private equity - measured at NAV									93
Total assets at fair value on a recurring basis	Total 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 obligations	Municipal and provincial obligations	$	1	$	—	$	—	$	—	$	1	Municipal and provincial obligations	$	2	$	0	$	0	$	—	$	2
Corporate obligations	Corporate obligations	—		3		—		—		3		Corporate obligations	0		20		0		—		20
Government and agency obligations	Government and agency obligations	105		—		—		—		105		Government and agency obligations	163		0		0		—		163
Non-agency CMOs and ABS		—		3		—		—		3

Total debt securities	Total debt securities	106		6		—		—		112		Total debt securities	165		20		0		—		185
Equity securities	Equity securities	42		—		—		—		42		Equity securities	73		0		0		—		73

Total trading instruments sold but not yet purchased		148		6		—		—		154
Derivative liabilities
Total trading liabilities												Total trading liabilities	238		20		0		—		258
Derivative liabilities:												Derivative liabilities:
Interest rate - matched book	Interest rate - matched book	—		351		—		—		351		Interest rate - matched book	0		221		0		—		221
Interest rate - other	Interest rate - other	17		154		—		(141)		30		Interest rate - other	6		115		0		(83)		38
Foreign exchange		—		12		—		—		12

Other	Other	—		1		—		—		1		Other	0		0		4		—		4
Total derivative liabilities	Total derivative liabilities	17		518		—		(141)		394		Total derivative liabilities	6		336		4		(83)		263
Total liabilities at fair value on a recurring basis	Total 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.~~

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Notes to Condensed Consolidated Financial Statements (Unaudited)


$ in millions	$ in millions	Level 1		Level 2		Level 3		Netting adjustments		Balance as of September 30, 2019		$ in millions	Level 1		Level 2		Level 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 obligations	Municipal and provincial obligations	$	—	$	267	$	—	$	—	$	267	Municipal and provincial obligations	$	5	$	120	$	0	$	—	$	125
Corporate obligations	Corporate obligations	8		95		—		—		103		Corporate obligations	11		45		0		—		56
Government and agency obligations	Government and agency obligations	12		67		—		—		79		Government and agency obligations	13		131		0		—		144
Agency MBS and CMOs		—		147		—		—		147
Agency MBS and agency CMOs												Agency MBS and agency CMOs	0		130		0		—		130
Non-agency CMOs and ABS	Non-agency CMOs and ABS	—		51		—		—		51		Non-agency CMOs and ABS	0		13		0		—		13
Total debt securities	Total debt securities	20		627		—		—		647		Total debt securities	29		439		0		—		468
Equity securities	Equity securities	12		1		—		—		13		Equity securities	11		5		0		—		16
Brokered certificates of deposit	Brokered certificates of deposit	—		45		—		—		45		Brokered certificates of deposit	0		17		0		—		17
Other	Other	—		—		3		—		3		Other	0		0		12		—		12
Total trading instruments		32		673		3		—		708
Total trading assets												Total trading assets	40		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		0		—		7,650
Derivative assets
Derivative assets:												Derivative assets:
Interest rate - matched book	Interest rate - matched book	—		280		—		—		280		Interest rate - matched book	0		333		0		—		333
Interest rate - other	Interest rate - other	3		182		—		(127)		58		Interest rate - other	16		224		0		(135)		105

Total derivative assets	Total derivative assets	3		462		—		(127)		338		Total derivative assets	16		557		0		(135)		438
Other investments - private equity - not measured at NAV	Other investments - private equity - not measured at NAV	—		—		63		—		63		Other investments - private equity - not measured at NAV	—		—		37		—		37
All other investments		194		1		24		—		219
All other investments:												All other investments:
Government and agency obligations (2)												Government and agency obligations (2)	103		0		0		—		103
Other												Other	92		1		22		—		115
Total all other investments												Total all other investments	195		1		22		—		218
Subtotal	Subtotal	239		4,219		90		(127)		4,421		Subtotal	267		8,653		71		(135)		8,856
Other investments - private equity - measured at NAV	Other investments - private equity - measured at NAV									83		Other investments - private equity - measured at NAV									79
Total assets at fair value on a recurring basis	Total 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 obligations												Municipal and provincial obligations	$	1	$	0	$	0	$	—	$	1
Corporate obligations	Corporate obligations	$	2	$	20	$	—	$	—	$	22	Corporate obligations	0		5		0		—		5
Government and agency obligations	Government and agency obligations	269		—		—		—		269		Government and agency obligations	136		0		0		—		136

Non-agency CMOs and ABS												Non-agency CMOs and ABS	0		2		0		—		2
Total debt securities	Total debt securities	271		20		—		—		291		Total debt securities	137		7		0		—		144
Equity securities	Equity securities	4		—		—		—		4		Equity securities	96		0		0		—		96
Other		—		—		1		—		1
Total trading instruments sold but not yet purchased		275		20		1		—		296
Derivative liabilities

Total trading liabilities												Total trading liabilities	233		7		0		—		240
Derivative liabilities:												Derivative liabilities:
Interest rate - matched book	Interest rate - matched book	—		280		—		—		280		Interest rate - matched book	0		333		0		—		333
Interest rate - other	Interest rate - other	4		142		—		(121)		25		Interest rate - other	16		145		0		(112)		49
Foreign exchange	Foreign exchange	—		2		—		—		2		Foreign exchange	0		5		0		—		5
Other	Other	—		6		—		—		6		Other	0		1		5		—		6
Total derivative liabilities	Total derivative liabilities	4		430		—		(121)		313		Total derivative liabilities	16		484		5		(112)		393
Total liabilities at fair value on a recurring basis	Total liabilities at fair value on a recurring basis	$	279	$	450	$	1	$	(121)	$	609	Total liabilities at fair value on a recurring basis	$	249	$	491	$	5	$	(112)	$	633

(1) Substantially all of our available-for-sale securities consist of agency MBS and 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.

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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 assets												Financial liabilities			Financial assets								Financial liabilities
		Trading instruments		Other investments							Trading instruments				Trading assets		Derivative assets		Other investments				Trading liabilities		Derivative liabilities
$ in millions	$ in millions	Other		Private equity investments		All other		Other		$ in millions		Other			Other		Private equity investments		All other		Other		Other
Fair value beginning of period	Fair value beginning of period	$	21	$	30	$	22	$	—	Fair value beginning of period		$	5		$	0	$	52	$	23	$	(1)	$	(4)
Total gains/(losses) included in earnings	Total gains/(losses) included in earnings	(5)		—		—		—		Total gains/(losses) included in earnings		0			1		14		0		1		0
Purchases and contributions	Purchases and contributions	11		—		—		—		Purchases and contributions		10			0		0		0		0		0
Sales and distributions	Sales and distributions	(12)		—		—		—		Sales and distributions		(5)			0		0		0		0		0
Transfers:	Transfers:									Transfers:
Into Level 3	Into Level 3	—		—		—		—		Into Level 3		0			0		0		0		0		0
Out of Level 3	Out of Level 3	—		—		—		—		Out of Level 3		0			0		0		0		0		0
Fair value end of period	Fair 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 period	Unrealized 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		$	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 assets												Financial liabilities			Financial assets								Financial liabilities
		Trading instruments		Other investments							Trading instruments				Trading assets		Derivative assets		Other investments				Trading liabilities		Derivative liabilities
$ in millions	$ in millions	Other		Private equity investments		All other		Other		$ in millions		Other			Other		Private equity investments		All other		Other		Other
Fair value beginning of period	Fair value beginning of period	$	3	$	63	$	24	$	(1)	Fair value beginning of period		$	12		$	0	$	37	$	22	$	0	$	(5)
Total gains/(losses) included in earnings	Total gains/(losses) included in earnings	(2)		(32)		(2)		—		Total gains/(losses) included in earnings		0			1		29		1		0		1
Purchases and contributions	Purchases and contributions	64		—		—		2		Purchases and contributions		26			0		0		0		0		0
Sales and distributions	Sales and distributions	(50)		(1)		—		(1)		Sales and distributions		(28)			0		0		0		0		0
Transfers:	Transfers:									Transfers:
Into Level 3	Into Level 3	—		—		—		—		Into Level 3		0			0		0		0		0		0
Out of Level 3	Out of Level 3	—		—		—		—		Out of Level 3		0			0		0		0		0		0
Fair value end of period	Fair 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 period	Unrealized gains/(losses) for the period included in earnings for instruments held at the end of the reporting period	$	1	$	(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 assets Financial liabilities
Trading instruments Other investments Trading instruments
$ in millions Other Private equity investments All other Other
Fair value beginning of period $ 2 $ 59 $ 67 $ (7)
Total gains/(losses) included in earnings (1) — (2) —
Purchases and contributions 26 — — 7
Sales and distributions (26) — — (3)
Transfers:
Into Level 3 — — — —
Out of Level 3 — — — —
Fair value end of period $ 1 $ 59 $ 65 $ (3)
Unrealized gains/(losses) for the period included in earnings for instruments held at the end of the reporting period $ 1 $ — $ (2) $ —

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.

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Notes to Condensed Consolidated Financial Statements (Unaudited)


Three months ended June 30, 2020 Level 3 instruments at fair value
	Financial assets						Financial liabilities
	Trading assets		Other investments				Trading liabilities
$ in millions	Other		Private equity investments		All other		Other
Fair value beginning of period	$	21	$	30	$	22	$	0
Total gains/(losses) included in earnings	(5)		0		0		0
Purchases and contributions	11		0		0		0
Sales and distributions	(12)		0		0		0
Transfers:
Into Level 3	0		0		0		0
Out of Level 3	0		0		0		0
Fair value end of period	$	15	$	30	$	22	$	0
Unrealized gains/(losses) for the period included in earnings for instruments held at the end of the reporting period	$	2	$	0	$	0	$	0


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 assets												Financial liabilities			Financial assets					Financial liabilities
		Trading instruments		Other investments							Trading instruments				Trading assets		Other investments				Trading liabilities
$ in millions	$ in millions	Other		Private equity investments		All other		Other		$ in millions		Other			Private equity investments		All other		Other
Fair value beginning of period	Fair value beginning of period	$	1	$	56	$	67	$	(7)	Fair value beginning of period		$	3		$	63	$	24	$	(1)
Total gains/(losses) included in earnings	Total gains/(losses) included in earnings	(1)		—		(2)		2		Total gains/(losses) included in earnings		(2)			(32)		(2)		0
Purchases and contributions	Purchases and contributions	86		3		—		16		Purchases and contributions		64			0		0		2
Sales and distributions	Sales and distributions	(85)		—		—		(14)		Sales and distributions		(50)			(1)		0		(1)
Transfers:	Transfers:									Transfers:
Into Level 3	Into Level 3	—		—		—		—		Into Level 3		0			0		0		0
Out of Level 3	Out of Level 3	—		—		—		—		Out of Level 3		0			0		0		0
Fair value end of period	Fair value end of period	$	1	$	59	$	65	$	(3)	Fair value end of period		$	15		$	30	$	22	$	0
Unrealized 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	$	1	$	—	$	(2)	$	—	Unrealized gains/(losses) for the period included in earnings for instruments held at the end of the reporting period		$	1		$	(32)	$	(2)	$	0

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, instruments~~The increase in assets measured at fair value on a recurring basis ~~categorized~~ as a percentage of total assets was primarily due to a significant increase in assets segregated pursuant to regulations at fair value during fiscal 2021, driven by a significant increase in client cash balances. As of both 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.

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited)

Quantitative information about level 3 fair value measurements

The following ~~tables present~~table presents the valuation techniques and significant unobservable inputs used in the valuation of certain of our private equity investments classified as level 3. These inputs represent those that a market participant would take into account when pricing these instruments. Weighted averages are calculated by weighting each input by the relative fair value of the related financial instrument. Certain investments are valued initially at transaction price and updated as other investment-specific events take place which indicate that a change in the carrying values of these investments is appropriate. Other investment-specific events include such events as our periodic review, significant transactions occur or new developments become known.

Recurring measurements

$ in millions

Recurring measurements

$ in millions

Fair value at June 30, 2020

Valuation technique(s)

Unobservable input

Range
(weighted-average)

Recurring measurements

$ in millions

Fair value at June 30, 2021

Valuation technique(s)

Unobservable input

Range
(weighted-average)

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

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

Discount rate

25%

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

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

Discount rate

25%

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

9.0x

Terminal year

2034 - 2034 (2034)

Terminal year

2021 - 2042 (2024)

Fair value at September 30, 2020

Fair value at September 30, 2019

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

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

Discount rate

25%

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

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

Discount rate

25%

Terminal EBITDA multiple

12.5x

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

9.0x

Terminal year

2021 - 2042 (2022)

Terminal year

2021 - 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.

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

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

~~Private equity investments~~

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

Investments in private equity measured at net asset value per share

As more fully described in Note 2 of our ~~2019~~2020 Form 10-K, as a practical expedient, we utilize NAV or its equivalent to determine the recorded value of a portion of our private equity investments portfolio. We utilize NAV when the fund investment does not have a readily determinable fair value and the NAV of the fund is calculated in a manner consistent with the measurement principles of investment company accounting, including measurement of the investments at fair value.

Our private equity portfolio as of 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 ~~industries~~strategies including leveraged buyouts, growth capital, distressed capital, venture capital and mezzanine capital. Due to the closed-end nature of certain of our fund investments, such investments cannot be redeemed directly with the funds. Our investment is monetized by distributions received through the liquidation of the underlying assets of those funds, the timing of which is uncertain.

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited)

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


$ in millions	$ in millions	Recorded value		Unfunded commitment		$ in millions	Recorded value		Unfunded commitment
June 30, 2020
June 30, 2021						June 30, 2021
Private equity investments measured at NAV	Private equity investments measured at NAV	$	73	$	9	Private equity investments measured at NAV	$	93	$	8
Private equity investments not measured at NAV	Private equity investments not measured at NAV	30				Private equity investments not measured at NAV	66
Total private equity investments	Total private equity investments	$	103			Total private equity investments	$	159

September 30, 2019
September 30, 2020						September 30, 2020
Private equity investments measured at NAV	Private equity investments measured at NAV	$	83	$	15	Private equity investments measured at NAV	$	79	$	9
Private equity investments not measured at NAV	Private equity investments not measured at NAV	63				Private equity investments not measured at NAV	37
Total private equity investments	Total 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, ~~2020~~2021 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, ~~2020~~2021 and September 30, ~~2019,~~2020, respectively, and were included as a component of noncontrolling interests on our Condensed Consolidated Statements of Financial Condition.

~~Many~~As a financial holding company, we are subject to holding period limitations for our merchant banking activities. As a result, we will be required to exit certain of ~~these~~our private equity investments by February 2022. Additionally, many of our private equity fund investments meet the definition of prohibited covered funds as defined by the Volcker Rule enacted pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act of ~~2010.~~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.~~

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

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

Financial instruments measured at fair value on a nonrecurring basis

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

$ in millions Level 2 Level 3 Total fair value Valuation technique(s) Unobservable input Range
(weighted-average)
June 30, 2020
Bank loans, net:
Impaired loans: residential $ 5 $ 13 $ 18 Discounted cash flow Prepayment rate 7 yrs. - 12 yrs. (10.4 yrs.)
Impaired loans: corporate $ — $ 7 $ 7
Collateral or discounted cash flow ⁽¹⁾
Not meaningful ⁽¹⁾
Not meaningful ⁽¹⁾
Loan held for sale $ 21 $ — $ 21 N/A N/A N/A
Other assets: other real estate owned $ 1 $ — $ 1 N/A N/A N/A
September 30, 2019
Bank loans, net:
Impaired loans: residential $ 7 $ 14 $ 21 Discounted cash flow Prepayment rate 7 yrs. - 12 yrs. (10.4 yrs.)
Impaired loans: corporate $ — $ 21 $ 21
Collateral or discounted cash flow ⁽¹⁾
Not meaningful ⁽¹⁾
Not meaningful ⁽¹⁾
Loan held for sale $ 66 $ — $ 66 N/A N/A N/A
Other assets: other real estate owned $ 1 $ — $ 1 N/A N/A N/A


$ in millions	Level 2		Level 3		Total fair value		Valuation technique(s)	Unobservable input	Range (weighted-average)
June 30, 2021
Bank loans:
Residential mortgage loans	$	4	$	11	$	15	Collateral or discounted cash flow (1)	Prepayment rate	7 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/A	N/A	N/A


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

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

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


$ in millions	$ in millions	Level 2		Level 3		Total estimated fair value		Carrying amount		$ in millions	Level 2		Level 3		Total estimated fair value		Carrying amount
June 30, 2020
June 30, 2021										June 30, 2021
Financial assets:	Financial assets:									Financial assets:
Bank loans, net	Bank 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 deposit	Bank deposits - certificates of deposit	$	—	$	1,126	$	1,126	$	1,088	Bank deposits - certificates of deposit	$	0	$	904	$	904	$	880
Senior notes payable	Senior notes payable	$	2,413	$	—	$	2,413	$	2,044	Senior notes payable	$	2,457	$	0	$	2,457	$	2,037

September 30, 2019
September 30, 2020										September 30, 2020
Financial assets:	Financial assets:									Financial assets:
Bank loans, net	Bank 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 deposit	Bank deposits - certificates of deposit	$	—	$	617	$	617	$	605	Bank deposits - certificates of deposit	$	0	$	1,056	$	1,056	$	1,017
Senior notes payable	Senior notes payable	$	1,760	$	—	$	1,760	$	1,550	Senior notes payable	$	2,504	$	0	$	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 millions	Cost basis		Gross unrealized gains		Gross unrealized losses		Fair value
June 30, 2021
Agency residential MBS	$	4,958	$	53	$	(16)	$	4,995
Agency commercial MBS	1,263		10		(18)		1,255
Agency CMOs	1,928		11		(13)		1,926
Other securities	15		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 MBS	948		22		(1)		969
Agency CMOs	2,504		27		(1)		2,530
Other securities	15		1		0		16
Total available-for-sale securities	$	7,531	$	124	$	(5)	$	7,650

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 millions Cost basis Gross
unrealized gains Gross
unrealized losses Fair value
June 30, 2020
Agency residential MBS $ 2,895 $ 69 $ (1) $ 2,963
Agency commercial MBS 570 20 — 590
Agency CMOs 2,032 29 — 2,061
Other securities 15 1 — 16
Total available-for-sale securities $ 5,512 $ 119 $ (1) $ 5,630
September 30, 2019
Agency residential MBS $ 1,555 $ 20 $ (1) $ 1,574
Agency commercial MBS 305 5 — 310
Agency CMOs 1,195 7 (3) 1,199
Other securities 10 — — 10
Total available-for-sale securities $ 3,065 $ 32 $ (4) $ 3,093

~~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 ~~duration~~weighted-average life of our available-for-sale securities portfolio was approximately ~~three~~4 years.


		June 30, 2020																												June 30, 2021
$ in millions	$ in millions	Within one year			After one but within five years			After five but within ten years			After ten years			Total			$ in millions	Within one year			After one but within five years			After five but within ten years			After ten years			Total
Agency residential MBS	Agency residential MBS																Agency residential MBS
Amortized cost	Amortized cost	$	—		$	27		$	1,130		$	1,738		$	2,895		Amortized cost	$	0		$	49		$	2,160		$	2,749		$	4,958
Carrying value	Carrying value	$	—		$	28		$	1,160		$	1,775		$	2,963		Carrying value	$	0		$	51		$	2,187		$	2,757		$	4,995
Agency commercial MBS	Agency commercial MBS																Agency commercial MBS
Amortized cost	Amortized cost	$	12		$	170		$	285		$	103		$	570		Amortized cost	$	19		$	297		$	814		$	133		$	1,263
Carrying value	Carrying value	$	12		$	175		$	298		$	105		$	590		Carrying value	$	19		$	301		$	803		$	132		$	1,255
Agency CMOs	Agency CMOs																Agency CMOs
Amortized cost	Amortized cost	$	—		$	11		$	81		$	1,940		$	2,032		Amortized cost	$	0		$	1		$	44		$	1,883		$	1,928
Carrying value	Carrying value	$	—		$	11		$	82		$	1,968		$	2,061		Carrying value	$	0		$	1		$	45		$	1,880		$	1,926
Other securities	Other securities																Other securities
Amortized cost	Amortized cost	$	—		$	3		$	12		$	—		$	15		Amortized cost	$	0		$	7		$	8		$	0		$	15
Carrying value	Carrying value	$	—		$	4		$	12		$	—		$	16		Carrying value	$	0		$	7		$	8		$	0		$	15
Total available-for-sale securities	Total available-for-sale securities																Total available-for-sale securities
Amortized cost	Amortized cost	$	12		$	211		$	1,508		$	3,781		$	5,512		Amortized cost	$	19		$	354		$	3,026		$	4,765		$	8,164
Carrying value	Carrying value	$	12		$	218		$	1,552		$	3,848		$	5,630		Carrying value	$	19		$	360		$	3,043		$	4,769		$	8,191
Weighted-average yield	Weighted-average yield	1.99		%	2.29		%	2.05		%	1.82		%	1.90		%	Weighted-average yield	2.10		%	1.67		%	1.22		%	1.09		%	1.17		%

~~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 months						12 months or more							Total							Less than 12 months				12 months or more		Total
$ in millions	$ in millions	Estimated fair value		Unrealized losses		Estimated fair value		Unrealized losses		Estimated fair value		Unrealized losses		$ in millions		Estimated fair value		Unrealized losses		Estimated fair value		Unrealized losses		Estimated fair value		Unrealized losses
June 30, 2020
Agency residential MBS		$	284	$	(1)	$	—	$	—	$	284	$	(1)

Agency CMOs		149		—		—		—		149		—

Total		$	433	$	(1)	$	—	$	—	$	433	$	(1)

September 30, 2019
June 30, 2021														June 30, 2021
Agency residential MBS	Agency residential MBS	$	166	$	—	$	114	$	(1)	$	280	$	(1)	Agency residential MBS		$	2,294	$	(16)	$	0	$	0	$	2,294	$	(16)
Agency commercial MBS	Agency commercial MBS	—		—		44		—		44		—		Agency commercial MBS		851		(18)		0		0		851		(18)
Agency CMOs	Agency CMOs	145		(1)		351		(2)		496		(3)		Agency CMOs		968		(13)		44		0		1,012		(13)
Other securities	Other securities	2		—		—		—		2		—		Other securities		3		0		0		0		3		0
Total	Total	$	313	$	(1)	$	509	$	(3)	$	822	$	(4)	Total		$	4,116	$	(47)	$	44	$	0	$	4,160	$	(47)
September 30, 2020														September 30, 2020
Agency residential MBS														Agency residential MBS		$	966	$	(3)	$	0	$	0	$	966	$	(3)
Agency commercial MBS														Agency commercial MBS		177		(1)		0		0		177		(1)
Agency CMOs														Agency CMOs		410		(1)		0		0		410		(1)

Total														Total		$	1,553	$	(5)	$	0	$	0	$	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, ~~all~~205 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 an~~with amortized ~~cost~~costs of ~~$3.78~~$4.84 billion and ~~$1.44~~$2.79 billion, respectively, ~~and a~~which also approximated the fair ~~value~~values 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 the~~These sales ~~was included~~resulted 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 ~~2019~~2020 Form 10-K.

Derivative balances included on our financial statements

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


		June 30, 2020										September 30, 2019											June 30, 2021				September 30, 2020
$ in millions	$ in millions	Derivative assets		Derivative liabilities		Notional amount		Derivative assets		Derivative liabilities		Notional amount		$ in millions	Derivative assets		Derivative liabilities		Notional amount		Derivative assets		Derivative liabilities		Notional amount
Derivatives not designated as hedging instruments	Derivatives not designated as hedging instruments													Derivatives not designated as hedging instruments
Interest rate - matched book	Interest 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 exchange	Foreign exchange	—		5		623		—		1		573		Foreign exchange	3		0		755		0		2		605
Other	Other	—		1		516		—		6		272		Other	1		4		578		0		6		608
Subtotal	Subtotal	605		528		18,764		464		433		13,831		Subtotal	382		346		18,172		573		502		22,593
Derivatives designated as hedging instruments	Derivatives designated as hedging instruments													Derivatives designated as hedging instruments
Interest rate	Interest rate	—		—		850		1		—		850		Interest rate	0		0		850		0		0		850
Foreign exchange	Foreign exchange	—		7		842		—		1		856		Foreign exchange	4		0		918		0		3		866
Subtotal	Subtotal	—		7		1,692		1		1		1,706		Subtotal	4		0		1,768		0		3		1,716
Total gross fair value/notional amount	Total gross fair value/notional amount	605		535		$	20,456	465		434		$	15,537	Total gross fair value/notional amount	386		346		$	19,940	573		505		$	24,309
Offset on the Condensed Consolidated Statements of Financial Condition	Offset on the Condensed Consolidated Statements of Financial Condition													Offset on the Condensed Consolidated Statements of Financial Condition
Counterparty netting	Counterparty netting	(41)		(41)				(24)		(24)				Counterparty netting	(45)		(45)				(40)		(40)
Cash collateral netting	Cash collateral netting	(112)		(100)				(103)		(97)				Cash collateral netting	(50)		(38)				(95)		(72)
Total amounts offset	Total amounts offset	(153)		(141)				(127)		(121)				Total amounts offset	(95)		(83)				(135)		(112)
Net amounts presented on the Condensed Consolidated Statements of Financial Condition	Net amounts presented on the Condensed Consolidated Statements of Financial Condition	452		394				338		313				Net amounts presented on the Condensed Consolidated Statements of Financial Condition	291		263				438		393
Gross amounts not offset on the Condensed Consolidated Statements of Financial Condition	Gross amounts not offset on the Condensed Consolidated Statements of Financial Condition													Gross 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)
Total	Total	$	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 announced~~to-be-announced (“TBA”) security contracts that are accounted for as derivatives.

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

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 millions	2020		2019		2020		2019		$ in millions	2021		2020		2021		2020
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 taxes	Total gains/(losses) in AOCI, net of taxes	$	(25)	$	(31)	$	(19)	$	(35)	Total gains/(losses) in AOCI, net of taxes	$	(11)	$	(25)	$	(26)	$	(19)

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, ~~2020~~2021 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.

~~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 millions			Three months ended June 30,									Nine months ended June 30,							$ in millions					Three months ended June 30,						Nine months ended June 30,
			Location of gain/(loss)			2020			2019			2020			2019	$ in millions		Location of gain/(loss)			2021			2020			2021			2020
Interest rate	Interest rate	Principal transactions/other revenues		$	—		$	2		$	5		$	4	Interest rate		Principal transactions/other revenues		$	2		$	0		$	12		$	5
Foreign exchange	Foreign exchange	Other revenues		$	(19)		$	(8)		$	13		$	14	Foreign exchange		Other revenues		$	(9)		$	(19)		$	(39)		$	13
Other	Other	Compensation, commissions and benefits expense		$	—		$	—		$	(1)		$	5	Other		Principal transactions		$	1		$	0		$	3		$	0
Other															Other		Compensation, commissions and benefits expense		$	0		$	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 the~~on matched book derivatives ~~operations~~ is related to our uncollected derivative transaction fee revenues, which were insignificant as of both June 30, ~~2020~~2021 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 ~~2019~~2020 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 ~~2019~~2020 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.


		Assets						Liabilities							Collateralized agreements						Collateralized financings
$ in millions	$ in millions	Reverse repurchase agreements		Securities borrowed		Repurchase agreements		Securities loaned		$ in millions	Reverse repurchase agreements		Securities borrowed		Total		Repurchase agreements		Securities loaned		Total
June 30, 2020
June 30, 2021										June 30, 2021
Gross amounts of recognized assets/liabilities	Gross 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 Condition	Gross amounts offset on the Condensed Consolidated Statements of Financial Condition	—		—		—		—		Gross amounts offset on the Condensed Consolidated Statements of Financial Condition	0		0		0		0		0		0
Net amounts presented on the Condensed Consolidated Statements of Financial Condition	Net amounts presented on the Condensed Consolidated Statements of Financial Condition	193		300		228		88		Net amounts presented on the Condensed Consolidated Statements of Financial Condition	289		350		639		185		100		285
Gross amounts not offset on the Condensed Consolidated Statements of Financial Condition	Gross 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 amounts	Net amounts	$	—	$	7	$	—	$	10	Net amounts	$	0	$	11	$	11	$	0	$	4	$	4

September 30, 2019
September 30, 2020										September 30, 2020
Gross amounts of recognized assets/liabilities	Gross 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 Condition	Gross amounts offset on the Condensed Consolidated Statements of Financial Condition	—		—		—		—		Gross amounts offset on the Condensed Consolidated Statements of Financial Condition	0		0		0		0		0		0
Net amounts presented on the Condensed Consolidated Statements of Financial Condition	Net amounts presented on the Condensed Consolidated Statements of Financial Condition	343		248		150		323		Net amounts presented on the Condensed Consolidated Statements of Financial Condition	207		215		422		165		85		250
Gross amounts not offset on the Condensed Consolidated Statements of Financial Condition	Gross 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 amounts	Net amounts	$	—	$	5	$	—	$	12	Net amounts	$	0	$	6	$	6	$	0	$	6	$	6

~~Total~~The 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.

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 millions	June 30, 2020		September 30, 2019		$ in millions	June 30, 2021		September 30, 2020
Collateral we received that was available to be delivered or repledged	Collateral 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 repledged	Collateral that we delivered or repledged	$	723	$	897	Collateral that we delivered or repledged	$	973	$	788

~~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 millions	June 30, 2020		September 30, 2019		$ in millions	June 30, 2021		September 30, 2020
Had the right to deliver or repledge	Had 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 repledge	Did 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 Atlanta						Bank 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 millions	Overnight and continuous		Up to 30 days		30-90 days		Greater than 90 days		Total		$ in millions	Overnight and continuous		Up to 30 days		30-90 days		Greater than 90 days		Total
June 30, 2020
June 30, 2021												June 30, 2021
Repurchase agreements:	Repurchase agreements:											Repurchase agreements:
Government and agency obligations	Government and agency obligations	$	104	$	—	$	—	$	—	$	104	Government and agency obligations	$	88	$	0	$	0	$	0	$	88
Agency MBS and CMOs		124		—		—		—		124
Agency MBS and agency CMOs												Agency MBS and agency CMOs	97		0		0		0		97
Total repurchase agreements	Total repurchase agreements	228		—		—		—		228		Total repurchase agreements	185		0		0		0		185
Securities loaned:	Securities loaned:											Securities loaned:
Equity securities	Equity securities	88		—		—		—		88		Equity securities	100		0		0		0		100
Total		$	316	$	—	$	—	$	—	$	316

September 30, 2019
Total collateralized financings												Total collateralized financings	$	285	$	0	$	0	$	0	$	285
September 30, 2020												September 30, 2020
Repurchase agreements:	Repurchase agreements:											Repurchase agreements:
Government and agency obligations	Government and agency obligations	$	70	$	—	$	—	$	—	$	70	Government and agency obligations	$	87	$	0	$	0	$	0	$	87
Agency MBS and CMOs		80		—		—		—		80
Agency MBS and agency CMOs												Agency MBS and agency CMOs	78		0		0		0		78
Total repurchase agreements	Total repurchase agreements	150		—		—		—		150		Total repurchase agreements	165		0		0		0		165
Securities loaned:	Securities loaned:											Securities loaned:
Equity securities	Equity securities	323		—		—		—		323		Equity securities	85		0		0		0		85
Total		$	473	$	—	$	—	$	—	$	473

Total collateralized financings												Total collateralized financings	$	250	$	0	$	0	$	0	$	250

As of both June 30, ~~2020~~2021 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.

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 ~~2019~~2020 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. ~~These~~Upon adoption, we redefined certain of our portfolio segments ~~also serve as~~to align with the new methodology applied in determining the allowance for credit losses. Prior-period loan portfolio ~~loan classes for purposes~~segment 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 mortgage~~certain held for sale loans ~~which~~recorded 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.

~~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, 2021				September 30, 2020
$ in millions	Balance		%		Balance		%
C&I loans	$	8,011	33	%	$	7,421	34	%
CRE loans	2,728		11	%	2,489		12	%
REIT loans	1,270		5	%	1,210		5	%
Tax-exempt loans	1,320		6	%	1,259		6	%
Residential mortgage loans	5,170		21	%	4,973		23	%
SBL and other	5,582		23	%	4,087		19	%
Total loans held for investment	24,081		99	%	21,439		99	%
Held for sale loans	137		1	%	110		1	%
Total loans held for sale and investment	24,218		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 ~~following~~preceding table are ~~presented net~~reported 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, 2020 September 30, 2019
$ in millions Balance % Balance %
Loans held for investment:
C&I loans $ 7,731 36 % $ 8,098 38 %
CRE construction loans 219 1 % 185 1 %
CRE loans 3,695 17 % 3,652 17 %
Tax-exempt loans 1,290 6 % 1,241 6 %
Residential mortgage loans 4,917 23 % 4,454 21 %
SBL and other 3,631 17 % 3,349 16 %
Total loans held for investment 21,483 20,979
Net unearned income and deferred expenses (12) (12)
Total loans held for investment, net 21,471 20,967
Loans held for sale, net 86 — 142 1 %
Total loans held for sale and investment 21,557 100 % 21,109 100 %
Allowance for loan losses (334) (218)
Bank loans, net $ 21,223 $ 20,891
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 held~~Held 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, ~~2020~~2021 and ~~2019.~~2020.

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 millions	C&I loans		CRE loans		Residential mortgage loans		Total		$ in millions	C&I loans		CRE loans		Residential mortgage loans		Total
Three months ended June 30, 2021										Three months ended June 30, 2021
Purchases										Purchases	$	381	$	0	$	190	$	571
Sales										Sales	$	116	$	0	$	0	$	116
Nine months ended June 30, 2021										Nine months ended June 30, 2021
Purchases										Purchases	$	1,041	$	0	$	350	$	1,391
Sales										Sales	$	216	$	0	$	0	$	216
Three months ended June 30, 2020	Three months ended June 30, 2020									Three months ended June 30, 2020
Purchases	Purchases	$	—	$	—	$	113	$	113	Purchases	$	0	$	0	$	113	$	113
Sales	Sales	$	265	$	27	$	—	$	292	Sales	$	265	$	27	$	0	$	292
Nine months ended June 30, 2020	Nine months ended June 30, 2020									Nine months ended June 30, 2020
Purchases	Purchases	$	363	$	5	$	371	$	739	Purchases	$	363	$	5	$	371	$	739
Sales	Sales	$	285	$	27	$	—	$	312	Sales	$	285	$	27	$	0	$	312
Three months ended June 30, 2019
Purchases		$	247	$	10	$	132	$	389
Sales		$	7	$	—	$	—	$	7
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 ~~2019~~2020 Form 10-K, corporate loan ~~(C&I, CRE and CRE construction)~~ sales generally occur as part of our credit management activities.

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

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

Aging analysis of loans held for investment

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


$ in millions	$ in millions	30-89 days and accruing		90 days or more and accruing		Total past due and accruing		Nonaccrual		Current and accruing		Total loans held for investment		$ in millions	30-89 days and accruing		90 days or more and accruing		Total past due and accruing		Nonaccrual with allowance		Nonaccrual with no allowance		Current and accruing		Total loans held for investment
June 30, 2020
June 30, 2021														June 30, 2021
C&I loans	C&I loans	$	—	$	—	$	—	$	1	$	7,730	$	7,731	C&I loans	$	1	$	0	$	1	$	0	$	0	$	8,010	$	8,011
CRE construction loans		—		—		—		—		219		219
CRE loans	CRE loans	—		—		—		6		3,689		3,695		CRE loans	0		0		0		14		13		2,701		2,728
REIT loans														REIT loans	0		0		0		0		0		1,270		1,270
Tax-exempt loans	Tax-exempt loans	—		—		—		—		1,290		1,290		Tax-exempt loans	0		0		0		0		0		1,320		1,320
Residential mortgage loans:
First mortgage loans		4		—		4		14		4,875		4,893
Home equity loans/lines		—		—		—		—		24		24
Residential mortgage loans														Residential mortgage loans	2		0		2		1		14		5,153		5,170
SBL and other	SBL and other	—		—		—		—		3,631		3,631		SBL and other	0		0		0		0		0		5,582		5,582
Total loans held for investment	Total loans held for investment	$	4	$	—	$	4	$	21	$	21,458	$	21,483	Total loans held for investment	$	3	$	0	$	3	$	15	$	27	$	24,036	$	24,081

September 30, 2019
September 30, 2020														September 30, 2020
C&I loans	C&I loans	$	—	$	—	$	—	$	19	$	8,079	$	8,098	C&I loans	$	0	$	0	$	0	$	2	$	0	$	7,419	$	7,421
CRE construction loans		—		—		—		—		185		185
CRE loans	CRE loans	—		—		—		8		3,644		3,652		CRE loans	0		0		0		0		14		2,475		2,489
REIT loans														REIT loans	0		0		0		0		0		1,210		1,210
Tax-exempt loans	Tax-exempt loans	—		—		—		—		1,241		1,241		Tax-exempt loans	0		0		0		0		0		1,259		1,259
Residential mortgage loans:
First mortgage loans		2		—		2		16		4,409		4,427
Home equity loans/lines		—		—		—		—		27		27
Residential mortgage loans														Residential mortgage loans	0		0		0		3		11		4,959		4,973
SBL and other	SBL and other	—		—		—		—		3,349		3,349		SBL and other	0		0		0		0		0		4,087		4,087
Total loans held for investment	Total loans held for investment	$	2	$	—	$	2	$	43	$	20,934	$	20,979	Total loans held for investment	$	0	$	0	$	0	$	5	$	25	$	21,409	$	21,439

The preceding table includes $6$28 million and ~~$32~~$15 million at June 30, ~~2020~~2021 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 million~~insignificant at both June 30, ~~2020~~2021 and September 30, ~~2019, respectively.~~2020.

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, ~~2020~~2021 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, 2020 September 30, 2019
$ in millions Gross
recorded
investment Unpaid
principal
balance Allowance
for losses Gross
recorded
investment Unpaid
principal
balance Allowance
for losses
Impaired loans with allowance for loan losses:
C&I loans $ 1 $ 1 $ 1 $ 19 $ 20 $ 6
Residential - first mortgage loans 8 10 1 11 13 1
Total 9 11 2 30 33 7
Impaired loans without allowance for loan losses:
CRE loans 7 12 — 8 13 —
Residential - first mortgage loans 11 16 — 11 17 —
Total 18 28 — 19 30 —
Total impaired loans $ 27 $ 39 $ 2 $ 49 $ 63 $ 7

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

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

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

The preceding table includes CRE and residential first mortgage loans troubled debt restructurings (“TDRs”) of $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 millions 2020 2019 2020 2019
C&I loans $ 2 $ 26 $ 10 $ 19
CRE loans 6 10 7 4
Residential - first mortgage loans 19 24 20 25
Total average impaired loan balance $ 27 $ 60 $ 37 $ 48

Credit quality indicators

The credit quality of ~~RJ Bank’s~~our 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 Bank~~us to sufficient risk to warrant an adverse classification.

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

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

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

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited)

The following ~~table presents the credit quality of RJ Bank’s~~tables present our held for investment bank loan ~~portfolio.~~portfolio by year of origination and credit quality indicator as of June 30, 2021.

$ in millions Pass Special mention Substandard Doubtful Total
June 30, 2020
C&I loans $ 7,384 $ 281 $ 66 $ — $ 7,731
CRE construction loans 219 — — — 219
CRE loans 3,341 262 92 — 3,695
Tax-exempt loans 1,290 — — — 1,290
Residential mortgage loans:
First mortgage loans 4,861 9 23 — 4,893
Home equity loans/lines 24 — — — 24
SBL and other 3,631 — — — 3,631
Total loans held for investment $ 20,750 $ 552 $ 181 $ — $ 21,483
September 30, 2019
C&I loans $ 7,870 $ 152 $ 76 $ — $ 8,098
CRE construction loans 185 — — — 185
CRE loans 3,630 — 22 — 3,652
Tax-exempt loans 1,241 — — — 1,241
Residential mortgage loans:
First mortgage loans 4,392 10 25 — 4,427
Home equity loans/lines 27 — — — 27
SBL and other 3,349 — — — 3,349
Total loans held for investment $ 20,694 $ 162 $ 123 $ — $ 20,979


$ in millions	2021		2020		2019		2018		2017		Prior		Revolving loans		Total
C&I loans
Risk rating:
Pass	$	593	$	1,332	$	1,167	$	1,325	$	1,004	$	1,582	$	635	$	7,638
Special mention	0		0		42		92		0		88		0		222
Substandard	0		0		39		84		0		28		0		151
Doubtful	0		0		0		0		0		0		0		0
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 mention	0		45		86		27		0		0		0		158
Substandard	0		0		32		113		8		58		0		211
Doubtful	0		0		0		0		0		0		0		0
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 mention	0		0		23		11		35		106		8		183
Substandard	0		0		21		0		4		0		2		27
Doubtful	0		0		0		0		0		0		0		0
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 mention	0		0		0		0		0		0		0		0
Substandard	0		0		0		0		0		0		0		0
Doubtful	0		0		0		0		0		0		0		0
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 mention	0		0		0		0		0		5		0		5
Substandard	0		0		0		1		2		20		0		23
Doubtful	0		0		0		0		0		0		0		0
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 mention	0		0		0		0		0		0		0		0
Substandard	0		0		0		0		0		0		0		0
Doubtful	0		0		0		0		0		0		0		0
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 for~~We also monitor the credit quality of the residential mortgage loan ~~losses~~portfolio utilizing FICO scores and ~~reserve for unfunded lending commitments~~LTV 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 ~~allowance~~held for investment residential mortgage loan ~~losses of RJ Bank~~portfolio by ~~portfolio segment.~~FICO score and by LTV ratio at origination.

Loans held for investment
$ in millions C&I loans CRE construction loans CRE loans Tax-exempt loans Residential mortgage loans SBL and other Total
Three months ended June 30, 2020
Balance at beginning of period $ 197 $ 3 $ 88 $ 11 $ 18 $ 7 $ 324
Provision/(benefit) for loan losses 59 1 20 2 1 (2) 81
Net (charge-offs)/recoveries:
Charge-offs ⁽¹⁾
(71) — (2) — — — (73)
Recoveries — — — — 1 — 1
Net (charge-offs)/recoveries (71) — (2) — 1 — (72)
Foreign exchange translation adjustment 1 — — — — — 1
Balance at end of period $ 186 $ 4 $ 106 $ 13 $ 20 $ 5 $ 334
Nine months ended June 30, 2020
Balance at beginning of period $ 139 $ 3 $ 46 $ 9 $ 16 $ 5 $ 218
Provision for loan losses 118 1 62 4 3 — 188
Net (charge-offs)/recoveries:
Charge-offs ⁽¹⁾
(71) — (2) — — — (73)
Recoveries — — — — 1 — 1
Net (charge-offs)/recoveries (71) — (2) — 1 — (72)
Foreign exchange translation adjustment — — — — — — —
Balance at end of period $ 186 $ 4 $ 106 $ 13 $ 20 $ 5 $ 334
Three months ended June 30, 2019
Balance at beginning of period $ 140 $ 3 $ 45 $ 8 $ 17 $ 5 $ 218
Provision/(benefit) for loan losses (8) 1 1 1 (1) 1 (5)
Net (charge-offs)/recoveries:
Charge-offs ⁽¹⁾
— — — — — — —
Recoveries 1 — — — — — 1
Net recoveries 1 — — — — — 1
Foreign exchange translation adjustment 1 — — — — — 1
Balance at end of period $ 134 $ 4 $ 46 $ 9 $ 16 $ 6 $ 215
Nine months ended June 30, 2019
Balance at beginning of period $ 123 $ 3 $ 47 $ 9 $ 17 $ 4 $ 203
Provision/(benefit) for loan losses 13 1 2 — (2) 2 16
Net (charge-offs)/recoveries:
Charge-offs ⁽¹⁾
(3) — (3) — — — (6)
Recoveries 1 — — — 1 — 2
Net (charge-offs)/recoveries (2) — (3) — 1 — (4)
Foreign exchange translation adjustment — — — — — — —
Balance at end of period $ 134 $ 4 $ 46 $ 9 $ 16 $ 6 $ 215


$ in millions	June 30, 2021		September 30, 2020
FICO score:
Below 600	$	66	$	67
600 - 699	398		363
700 - 799	3,665		3,463
800 +	1,036		1,076
FICO score not available	5		4
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) and~~changes 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 losses Recorded investment
$ in millions Individually evaluated for impairment Collectively evaluated for impairment Total Individually evaluated for impairment Collectively evaluated for impairment Total
June 30, 2020
C&I loans $ 1 $ 185 $ 186 $ 1 $ 7,730 $ 7,731
CRE construction loans — 4 4 — 219 219
CRE loans — 106 106 6 3,689 3,695
Tax-exempt loans — 13 13 — 1,290 1,290
Residential mortgage loans 1 19 20 25 4,892 4,917
SBL and other — 5 5 — 3,631 3,631
Total $ 2 $ 332 $ 334 $ 32 $ 21,451 $ 21,483
September 30, 2019
C&I loans $ 6 $ 133 $ 139 $ 19 $ 8,079 $ 8,098
CRE construction loans — 3 3 — 185 185
CRE loans — 46 46 8 3,644 3,652
Tax-exempt loans — 9 9 — 1,241 1,241
Residential mortgage loans 1 15 16 28 4,426 4,454
SBL and other — 5 5 — 3,349 3,349
Total $ 7 $ 211 $ 218 $ 55 $ 20,924 $ 20,979


$ in millions	C&I loans		CRE loans		REIT loans		Tax-exempt loans		Residential mortgage loans		SBL and other		Total
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)
Recoveries	0		0		0		0		0		0		0
Net (charge-offs)/recoveries	(1)		(3)		0		0		0		0		(4)
Foreign exchange translation adjustment	0		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 adoption	19		(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)
Recoveries	0		0		0		0		0		0		0
Net (charge-offs)/recoveries	(3)		(3)		0		0		0		0		(6)
Foreign exchange translation adjustment	1		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	$	7	$	324
Provision/(benefit) for credit losses	59		24		(3)		2		1		(2)		81
Net (charge-offs)/recoveries:
Charge-offs	(71)		(2)		0		0		0		0		(73)
Recoveries	0		0		0		0		1		0		1
Net (charge-offs)/recoveries	(71)		(2)		0		0		1		0		(72)
Foreign exchange translation adjustment	1		0		0		0		0		0		1
Balance at end of period	$	185	$	76	$	35	$	13	$	20	$	5	$	334

Nine months ended June 30, 2020
Balance at beginning of period	$	139	$	34	$	15	$	9	$	16	$	5	$	218
Provision/(benefit) for credit losses	117		44		20		4		3		0		188
Net (charge-offs)/recoveries:
Charge-offs	(71)		(2)		0		0		0		0		(73)
Recoveries	0		0		0		0		1		0		1
Net (charge-offs)/recoveries	(71)		(2)		0		0		1		0		(72)
Foreign exchange translation adjustment	0		0		0		0		0		0		0
Balance at end of period	$	185	$	76	$	35	$	13	$	20	$	5	$	334

The ~~reserve~~allowance 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.

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, ~~2020~~2021, 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.

~~RAYMOND JAMES~~NOTE 9 – LOANS TO FINANCIAL ~~INC. AND SUBSIDIARIES~~ADVISORS, 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 millions	June 30, 2021		September 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 advisors	1,071		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	$	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 ~~2019~~2020 Form 10-K for a discussion of our principal involvement with VIEs and the accounting policies regarding determination of whether we are deemed to be the primary beneficiary of VIEs.

VIEs where we are the primary beneficiary

Of the VIEs in which we hold an interest, we have determined that certain limited partnerships which are part of our private equity portfolio (“Private Equity Interests”), certain Low-Income Housing Tax Credit (“LIHTC”) funds and the trust we utilize in connection with restricted stock unit (“RSU”) awards granted to certain employees of one of our Canadian subsidiaries (the “Restricted Stock Trust Fund”) require consolidation in our financial statements, as we are deemed the primary beneficiary of such VIEs. The aggregate assets and liabilities of the VIEs we consolidate are provided in the following table. Aggregate assets and aggregate liabilities may differ from the consolidated carrying value of assets and liabilities due to the elimination of intercompany assets and liabilities held by the consolidated VIE.

$ in millions Aggregate assets Aggregate liabilities
June 30, 2020
Private Equity Interests $ 33 $ 4
LIHTC funds 246 159
Restricted Stock Trust Fund 19 19
Total $ 298 $ 182
September 30, 2019
Private Equity Interests $ 65 $ 4
LIHTC funds 80 5
Restricted Stock Trust Fund 14 14
Total $ 159 $ 23

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited)


$ in millions	Aggregate assets		Aggregate liabilities
June 30, 2021
Private Equity Interests	$	57	$	4
LIHTC funds	66		6
Restricted Stock Trust Fund	21		21
Total	$	144	$	31

September 30, 2020
Private Equity Interests	$	39	$	4
LIHTC funds	168		76
Restricted Stock Trust Fund	14		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 millions	June 30, 2020		September 30, 2019		$ in millions	June 30, 2021		September 30, 2020
Assets:	Assets:					Assets:
Cash, cash equivalents and cash segregated pursuant to regulations		$	7	$	7
Cash and cash equivalents and assets segregated pursuant to regulations						Cash and cash equivalents and assets segregated pursuant to regulations	$	7	$	9
Other investments						Other investments	56		37

Other investments		32		63
Other assets	Other assets	240		75		Other assets	65		164
Total assets	Total assets	$	279	$	145	Total assets	$	128	$	210
Liabilities:	Liabilities:					Liabilities:
Other payables	Other payables	$	156	$	4	Other payables	$	7	$	76
Total liabilities	Total liabilities	$	156	$	4	Total liabilities	$	7	$	76
Noncontrolling interests	Noncontrolling 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 ~~2019~~2020 Form 10-K, we have concluded that for certain VIEs we are not the primary beneficiary and therefore do not consolidate these VIEs. Such VIEs include certain Private Equity Interests, certain LIHTC funds, and other limited partnerships. Our risk of loss for these VIEs is limited to our investments in, advances to, and/or receivables due from these VIEs.

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

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

Aggregate assets, liabilities and risk of loss

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


		June 30, 2020										September 30, 2019											June 30, 2021				September 30, 2020
$ in millions	$ in millions	Aggregate assets		Aggregate liabilities		Our risk of loss		Aggregate assets		Aggregate liabilities		Our risk of loss		$ in millions	Aggregate assets		Aggregate liabilities		Our risk of loss		Aggregate assets		Aggregate liabilities		Our risk of loss
Private Equity Interests	Private Equity Interests	$	4,404	$	107	$	61	$	6,317	$	117	$	63	Private Equity Interests	$	7,398	$	43	$	81	$	7,738	$	96	$	67
LIHTC funds	LIHTC funds	6,218		1,977		25		6,001		2,221		64		LIHTC funds	6,771		2,174		34		6,516		1,993		66
Other	Other	216		130		5		205		115		4		Other	457		137		9		227		136		6
Total	Total	$	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 ~~identified~~identifiable 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 ~~2019~~2020 Form 10-K for additional information about our goodwill and intangible assets, including the related accounting policies.

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, ~~2020~~2021, our annual evaluation date, evaluating balances as of December 31, ~~2019. We~~2020. 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 an~~update 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 operating~~The 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

~~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 millions	June 30, 2021		September 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 million Three months ended June 30, 2020 Nine months ended June 30, 2020
Operating lease costs $ 25 $ 71
Variable lease costs $ 6 $ 18


	Three months ended June 30,			Nine months ended June 30,
$ in millions	2021		2020	2021		2020
Lease costs	$	27	25	$	81	71
Variable lease costs	$	7	6	$	20	18

Variable lease costs in the preceding table ~~includes~~include 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

~~Maturities~~The 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
2021		102
					$ in millions
Remainder of 2021				Remainder of 2021	$	18
2022	2022	79		2022	98
2023	2023	63		2023	81
2024	2024	46		2024	60
After 2024		85
Total lease payments		393
2025				2025	46
Thereafter				Thereafter	114
Gross lease payments				Gross lease payments	417
Less: interest	Less: interest	42		Less: interest	(45)
Present value of lease liabilities	Present value of lease liabilities	$	351	Present value of lease liabilities	$	372

~~Operating lease~~Lease 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 ~~2020~~2021 and ~~2021~~2022 with lease terms ranging from ~~five years~~one year to 11 years.

~~Statement of cash flows supplemental information~~

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

3134

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited)

~~Minimum future lease commitments (under previous GAAP)~~

As of the date of adoption, our undiscounted minimum annual rental commitments under operating leases were materially unchanged from the disclosure in Note 17 of our 2019 Form 10-K, which is included in the following table.

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

NOTE 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, ~~including~~as well as the weighted-average ~~rate, the~~interest rates on such deposits. The calculation of ~~which was~~the weighted-average rates were based on the actual deposit balances and rates at each respective ~~period.~~period end.


		June 30, 2020						September 30, 2019							June 30, 2021				September 30, 2020
$ in millions	$ in millions	Balance		Weighted-average rate		Balance		Weighted-average rate		$ in millions	Balance		Weighted-average rate		Balance		Weighted-average rate
Savings and money market accounts	Savings 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 deposit	Certificates of deposit	1,088		1.98	%	605		2.33	%	Certificates of deposit	880		1.91	%	1,017		1.94	%
NOW accounts	NOW accounts	156		1.92	%	6		0.01	%	NOW accounts	171		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		0
Total		$	25,372	0.11	%	$	22,281	0.31	%
Total bank deposits										Total 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, ~~2020~~2021 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, ~~2020~~2021 was approximately ~~$47~~$23 million.

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

June 30, 2020 September 30, 2019
$ in millions Denominations
greater than or
equal to $100,000 Denominations
less than $100,000 Denominations
greater than or
equal to $100,000 Denominations
less than $100,000
Three months or less $ 71 $ 30 $ 24 $ 19
Over three through six months 55 73 26 21
Over six through twelve months 28 22 75 37
Over one through two years 36 198 32 36
Over two through three years 58 149 40 93
Over three through four years 56 156 66 47
Over four through five years 7 149 38 51
Total certificates of deposit $ 311 $ 777 $ 301 $ 304

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

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


	June 30, 2021				September 30, 2020
$ in millions	Denominations greater than or equal to $100,000		Denominations less than $100,000		Denominations greater than or equal to $100,000		Denominations less than $100,000
Three months or less	$	29	$	26	$	59	$	76
Over three through six months	11		85		26		18
Over six through twelve months	33		104		19		26
Over one through two years	61		149		43		206
Over two through three years	55		157		67		170
Over three through four years	6		149		37		165
Over four through five years	8		7		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 millions 2020 2019 2020 2019
Savings, money market, and NOW accounts $ 2 $ 29 $ 20 $ 96
Certificates of deposit 5 4 15 9
Total interest expense on deposits $ 7 $ 33 $ 35 $ 105

~~NOTE 12 – OTHER BORROWINGS~~

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

$ in millions June 30, 2020 September 30, 2019
FHLB advances $ 875 $ 875
Mortgage notes payable and other 15 19
Total other borrowings $ 890 $ 894

~~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 millions	2021		2020		2021		2020
Savings, money market, and NOW accounts	$	1	$	2	$	4	$	20
Certificates of deposit	4		5		13		15
Total interest expense on deposits	$	5	$	7	$	17	$	35

3335

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

In 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 millions	June 30, 2021		September 30, 2020
4.65% senior notes, due 2030	$	500	$	500
4.95% senior notes, due 2046	800		800
3.750% senior notes, due 2051	750		0
5.625% senior notes, due 2024	0		250
3.625% senior notes, due 2026	0		500
Total principal amount	2,050		2,050
Unaccreted premium	5		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

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 ~~pretax~~pre-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 ~~2019~~2020 Form 10-K.

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

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

Effective tax rate

Our effective income tax rate was ~~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 effective~~income 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 anticipate~~Although 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 ~~the~~our uncertain tax position liability balance ~~will not change significantly over~~may 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 underwriting~~Underwriting 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 resulted~~did 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 millions	June 30, 2020		September 30, 2019		$ in millions	June 30, 2021		September 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 credit	Commercial lines of credit	$	1,373	$	1,527	Commercial lines of credit	$	1,813	$	1,482
Unfunded loan commitments		$	592	$	599
Unfunded lending commitments						Unfunded lending commitments	$	502	$	532
Standby letters of credit	Standby letters of credit	$	30	$	40	Standby letters of credit	$	24	$	33

Open-end consumer lines of credit primarily represent the unfunded amounts of ~~RJ Bank~~bank loans to consumers that are secured by marketable securities at advance rates consistent with industry standards. The proceeds from repayment or, if necessary, the liquidation of collateral, which is monitored daily, are expected to satisfy the amounts drawn against these existing lines of

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 ~~our~~Raymond 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 provide~~The allowance for credit losses calculated under CECL provides for potential losses related to the unfunded lending commitments. See ~~Note 7~~Notes 2 and 8 for further discussion of this ~~reserve~~allowance 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.

~~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 within~~MBS. See Note 2 of our ~~2019~~2020 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.

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.

~~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 ~~2019~~2020 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.

3739

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

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 millions Net investment hedges Currency translations Subtotal: net investment hedges and currency translations Available- for-sale securities Cash flow hedges Total
Three months ended June 30, 2020
AOCI as of beginning of period $ 149 $ (191) $ (42) $ 83 $ (52) $ (11)
OCI:
OCI before reclassifications and taxes (29) 32 3 7 (7) 3
Amounts reclassified from AOCI, before tax — — — — 2 2
Pre-tax net OCI (29) 32 3 7 (5) 5
Income tax effect 8 — 8 (2) 1 7
OCI for the period, net of tax (21) 32 11 5 (4) 12
AOCI as of end of period $ 128 $ (159) $ (31) $ 88 $ (56) $ 1
Nine months ended June 30, 2020
AOCI as of beginning of period $ 110 $ (135) $ (25) $ 21 $ (19) $ (23)
OCI:
OCI before reclassifications and taxes 23 (24) (1) 90 (51) 38
Amounts reclassified from AOCI, before tax — — — — 2 2
Pre-tax net OCI 23 (24) (1) 90 (49) 40
Income tax effect (5) — (5) (23) 12 (16)
OCI for the period, net of tax 18 (24) (6) 67 (37) 24
AOCI as of end of period $ 128 $ (159) $ (31) $ 88 $ (56) $ 1
Three months ended June 30, 2019
AOCI as of beginning of period $ 114 $ (142) $ (28) $ (9) $ 12 $ (25)
OCI:
OCI before reclassifications and taxes (16) 18 2 32 (24) 10
Amounts reclassified from AOCI, before tax — — — — (1) (1)
Pre-tax net OCI (16) 18 2 32 (25) 9
Income tax effect 4 — 4 (8) 6 2
OCI for the period, net of tax (12) 18 6 24 (19) 11
AOCI as of end of period $ 102 $ (124) $ (22) $ 15 $ (7) $ (14)
Nine months ended June 30, 2019
AOCI as of beginning of period $ 88 $ (111) $ (23) $ (46) $ 42 $ (27)
Cumulative effect of adoption of ASU 2016-01 — — — (4) — (4)
OCI:
OCI before reclassifications and taxes 18 (13) 5 90 (64) 31
Amounts reclassified from AOCI, before tax — — — — (4) (4)
Pre-tax net OCI 18 (13) 5 90 (68) 27
Income tax effect (4) — (4) (25) 19 (10)
OCI for the period, net of tax 14 (13) 1 65 (49) 17
AOCI as of end of period $ 102 $ (124) $ (22) $ 15 $ (7) $ (14)

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 millions	Net investment hedges		Currency translations		Subtotal: net investment hedges and currency translations		Available- for-sale securities		Cash flow hedges		Total
Three months ended June 30, 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 tax	0		0		0		(2)		3		1
Pre-tax net OCI	(12)		14		2		34		(4)		32
Income tax effect	3		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 tax	0		2		2		(7)		11		6
Pre-tax net OCI	(63)		73		10		(91)		29		(52)
Income tax effect	15		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		3		7		(7)		3
Amounts reclassified from AOCI, before tax	0		0		0		0		2		2
Pre-tax net OCI	(29)		32		3		7		(5)		5
Income tax effect	8		0		8		(2)		1		7
OCI for the period, net of tax	(21)		32		11		5		(4)		12
AOCI as of end of period	$	128	$	(159)	$	(31)	$	88	$	(56)	$	1

Nine months ended June 30, 2020
AOCI as of beginning of period	$	110	$	(135)	$	(25)	$	21	$	(19)	$	(23)
OCI:
OCI before reclassifications and taxes	23		(24)		(1)		90		(51)		38
Amounts reclassified from AOCI, before tax	0		0		0		0		2		2
Pre-tax net OCI	23		(24)		(1)		90		(49)		40
Income tax effect	(5)		0		(5)		(23)		12		(16)
OCI for the period, net of tax	18		(24)		(6)		67		(37)		24
AOCI as of end of period	$	128	$	(159)	$	(31)	$	88	$	(56)	$	1

Reclassifications from AOCI to net income, excluding taxes, for the three and nine months ended June 30, ~~2020 and 2019~~2021 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. ~~See~~For further information about our significant accounting policies related to derivatives, see Note 2 of our ~~2019~~2020 Form ~~10-K and~~10-K. See Note 56 of this Form 10-Q for additional information on these derivatives.

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 ~~2019~~2020 Form 10-K. See Note 2223 of this Form 10-Q for additional information on our segment results.


		Three months ended June 30, 2020																							Three months ended June 30, 2021
$ in millions	$ in millions	Private Client Group		Capital Markets		Asset Management		RJ Bank		Other and intersegment eliminations		Total		$ in millions	Private Client Group		Capital Markets		Asset Management		Raymond James Bank		Other and intersegment eliminations		Total
Revenues:	Revenues:													Revenues:
Asset management and related administrative fees	Asset management and related administrative fees	$	715	$	1	$	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 products	Mutual and other fund products	131		2		2		—		(1)		134		Mutual and other fund products	167		2		2		0		0		171
Insurance and annuity products	Insurance and annuity products	88		—		—		—		—		88		Insurance and annuity products	113		0		0		0		0		113
Equities, ETFs and fixed income products		84		37		—		—		—		121
Equities, exchange-traded funds (“ETFs”) and fixed income products														Equities, exchange-traded funds (“ETFs”) and fixed income products	97		33		0		0		1		131
Subtotal securities commissions	Subtotal securities commissions	303		39		2		—		(1)		343		Subtotal securities commissions	377		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 revenues	Total brokerage revenues	319		166		2		—		(1)		486		Total brokerage revenues	390		160		2		0		0		552
Account and services fees:	Account and services fees:													Account and services fees:
Mutual fund and annuity service fees	Mutual fund and annuity service fees	82		—		1		—		—		83		Mutual fund and annuity service fees	105		0		0		0		(1)		104
RJBDP fees	RJBDP fees	63		1		—		—		(44)		20		RJBDP fees	65		0		0		0		(47)		18

Client account and other fees	Client account and other fees	32		1		2		—		(4)		31		Client account and other fees	39		1		4		0		(5)		39
Total account and service fees	Total account and service fees	177		2		3		—		(48)		134		Total account and service fees	209		1		4		0		(53)		161
Investment banking:	Investment banking:													Investment banking:
Merger & acquisition and advisory	Merger & acquisition and advisory	—		60		—		—		—		60		Merger & acquisition and advisory	0		153		0		0		0		153
Equity underwriting	Equity underwriting	7		35		—		—		—		42		Equity underwriting	11		69		0		0		0		80
Debt underwriting	Debt underwriting	—		37		—		—		—		37		Debt underwriting	0		43		0		0		0		43
Total investment banking	Total investment banking	7		132		—		—		—		139		Total investment banking	11		265		0		0		0		276
Other:	Other:													Other:
Tax credit fund revenues	Tax credit fund revenues	—		20		—		—		—		20		Tax credit fund revenues	0		17		0		0		0		17
All other ⁽¹⁾	All other ⁽¹⁾	4		—		1		9		(1)		13		All other (1)	7		1		1		8		21		38
Total other	Total other	4		20		1		9		(1)		33		Total other	7		18		1		8		21		55
Total non-interest revenues	Total non-interest revenues	1,222		321		163		9		(56)		1,659		Total non-interest revenues	1,667		445		225		8		(39)		2,306
Interest income ⁽¹⁾	Interest income ⁽¹⁾	31		4		—		181		1		217		Interest income (1)	31		4		0		172		(2)		205
Total revenues	Total revenues	1,253		325		163		190		(55)		1,876		Total revenues	1,698		449		225		180		(41)		2,511
Interest expense	Interest expense	(4)		(2)		—		(12)		(24)		(42)		Interest expense	(2)		(3)		0		(11)		(24)		(40)
Net revenues	Net 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.

3941

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited)


	Three months ended June 30, 2020
$ in millions	Private Client Group		Capital Markets		Asset Management		Raymond James Bank		Other and intersegment eliminations		Total
Revenues:
Asset management and related administrative fees	$	715	$	1	$	157	$	0	$	(6)	$	867
Brokerage revenues:
Securities commissions:
Mutual and other fund products	131		2		2		0		(1)		134
Insurance and annuity products	88		0		0		0		0		88
Equities, ETFs and fixed income products	84		37		0		0		0		121
Subtotal securities commissions	303		39		2		0		(1)		343
Principal transactions (1)	16		127		0		0		0		143
Total brokerage revenues	319		166		2		0		(1)		486
Account and services fees:
Mutual fund and annuity service fees	82		0		1		0		0		83
RJBDP fees	63		1		0		0		(44)		20
Client account and other fees	32		1		2		0		(4)		31
Total account and service fees	177		2		3		0		(48)		134
Investment banking:
Merger & acquisition and advisory	0		60		0		0		0		60
Equity underwriting	7		35		0		0		0		42
Debt underwriting	0		37		0		0		0		37
Total investment banking	7		132		0		0		0		139
Other:
Tax credit fund revenues	0		20		0		0		0		20
All other (1)	4		0		1		9		(1)		13
Total other	4		20		1		9		(1)		33
Total non-interest revenues	1,222		321		163		9		(56)		1,659
Interest income (1)	31		4		0		181		1		217
Total revenues	1,253		325		163		190		(55)		1,876
Interest expense	(4)		(2)		0		(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.

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited)


		Three months ended June 30, 2019																							Nine Months Ended June 30, 2021
$ in millions	$ in millions	Private Client Group		Capital Markets		Asset Management		RJ Bank		Other and intersegment eliminations		Total		$ in millions	Private Client Group		Capital Markets		Asset Management		Raymond James Bank		Other and intersegment eliminations		Total
Revenues:	Revenues:													Revenues:
Asset management and related administrative fees	Asset management and related administrative fees	$	718	$	2	$	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 products	Mutual and other fund products	147		1		2		—		—		150		Mutual and other fund products	498		5		7		0		(2)		508
Insurance and annuity products	Insurance and annuity products	105		—		—		—		—		105		Insurance and annuity products	320		0		0		0		0		320
Equities, ETFs and fixed income products	Equities, ETFs and fixed income products	74		29		—		—		—		103		Equities, ETFs and fixed income products	300		110		0		0		1		411
Subtotal securities commissions	Subtotal securities commissions	326		30		2		—		—		358		Subtotal securities commissions	1,118		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 revenues	Total brokerage revenues	346		104		2		—		(1)		451		Total brokerage revenues	1,156		509		7		1		(2)		1,671
Account and services fees:	Account and services fees:													Account and services fees:
Mutual fund and annuity service fees	Mutual fund and annuity service fees	85		—		—		—		(1)		84		Mutual fund and annuity service fees	298		0		0		0		(1)		297
RJBDP fees	RJBDP fees	111		—		1		—		(46)		66		RJBDP fees	192		1		0		0		(135)		58

Client account and other fees	Client account and other fees	32		1		7		—		(7)		33		Client account and other fees	113		5		13		0		(21)		110
Total account and service fees	Total account and service fees	228		1		8		—		(54)		183		Total account and service fees	603		6		13		0		(157)		465
Investment banking:	Investment banking:													Investment banking:
Merger & acquisition and advisory	Merger & acquisition and advisory	—		80		—		—		—		80		Merger & acquisition and advisory	0		424		0		0		0		424
Equity underwriting	Equity underwriting	10		27		—		—		—		37		Equity underwriting	33		196		0		0		0		229
Debt underwriting	Debt underwriting	—		22		—		—		—		22		Debt underwriting	0		126		0		0		0		126
Total investment banking	Total investment banking	10		129		—		—		—		139		Total investment banking	33		746		0		0		0		779
Other:	Other:													Other:
Tax credit fund revenues	Tax credit fund revenues	—		16		—		—		—		16		Tax credit fund revenues	0		57		0		0		0		57
All other ⁽¹⁾	All other ⁽¹⁾	3		(1)		1		7		1		11		All other (1)	20		5		2		22		49		98
Total other	Total other	3		15		1		7		1		27		Total other	20		62		2		22		49		155
Total non-interest revenues	Total non-interest revenues	1,305		251		176		7		(60)		1,679		Total non-interest revenues	4,726		1,326		629		23		(132)		6,572
Interest income ⁽¹⁾	Interest income ⁽¹⁾	56		10		1		246		8		321		Interest income (1)	91		12		0		505		0		608
Total revenues	Total revenues	1,361		261		177		253		(52)		2,000		Total revenues	4,817		1,338		629		528		(132)		7,180
Interest expense	Interest expense	(10)		(10)		—		(38)		(15)		(73)		Interest expense	(7)		(7)		0		(32)		(69)		(115)
Net revenues	Net 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.

4043

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited)

Nine Months Ended June 30, 2020
$ in millions Private Client Group Capital Markets Asset Management RJ Bank Other and intersegment eliminations Total
Revenues:
Asset management and related administrative fees $ 2,330 $ 4 $ 510 $ — $ (16) $ 2,828
Brokerage revenues:
Securities commissions:
Mutual and other fund products 438 6 6 — (2) 448
Insurance and annuity products 288 — — — — 288
Equities, ETFs and fixed income products 274 107 — — (1) 380
Subtotal securities commissions 1,000 113 6 — (3) 1,116
Principal transactions ⁽¹⁾
50 298 — — (3) 345
Total brokerage revenues 1,050 411 6 — (6) 1,461
Account and services fees:
Mutual fund and annuity service fees 260 — 2 — (1) 261
RJBDP fees 267 1 — — (139) 129
Client account and other fees 96 4 10 — (16) 94
Total account and service fees 623 5 12 — (156) 484
Investment banking:
Merger & acquisition and advisory — 192 — — — 192
Equity underwriting 29 117 — — — 146
Debt underwriting — 90 — — — 90
Total investment banking 29 399 — — — 428
Other:
Tax credit fund revenues — 50 — — — 50
All other ⁽¹⁾
20 4 2 20 (49) (3)
Total other 20 54 2 20 (49) 47
Total non-interest revenues 4,052 873 530 20 (227) 5,248
Interest income ⁽¹⁾
125 22 1 635 16 799
Total revenues 4,177 895 531 655 (211) 6,047
Interest expense (19) (14) — (51) (52) (136)
Net revenues $ 4,158 $ 881 $ 531 $ 604 $ (263) $ 5,911

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

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

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


		Nine Months Ended June 30, 2019																							Nine Months Ended June 30, 2020
$ in millions	$ in millions	Private Client Group		Capital Markets		Asset Management		RJ Bank		Other and intersegment eliminations		Total		$ in millions	Private Client Group		Capital Markets		Asset Management		Raymond James Bank		Other and intersegment eliminations		Total
Revenues:	Revenues:													Revenues:
Asset management and related administrative fees	Asset management and related administrative fees	$	2,063	$	5	$	475	$	—	$	(16)	$	2,527	Asset management and related administrative fees	$	2,330	$	4	$	510	$	0	$	(16)	$	2,828
Brokerage revenues:	Brokerage revenues:													Brokerage revenues:
Securities commissions:	Securities commissions:													Securities commissions:
Mutual and other fund products	Mutual and other fund products	449		4		7		—		(2)		458		Mutual and other fund products	438		6		6		0		(2)		448
Insurance and annuity products	Insurance and annuity products	308		—		—		—		—		308		Insurance and annuity products	288		0		0		0		0		288
Equities, ETFs and fixed income products	Equities, ETFs and fixed income products	232		99		—		—		(2)		329		Equities, ETFs and fixed income products	274		107		0		0		(1)		380
Subtotal securities commissions	Subtotal securities commissions	989		103		7		—		(4)		1,095		Subtotal securities commissions	1,000		113		6		0		(3)		1,116
Principal transactions ⁽¹⁾	Principal transactions ⁽¹⁾	59		203		—		1		(1)		262		Principal transactions (1)	50		298		0		0		(3)		345
Total brokerage revenues	Total brokerage revenues	1,048		306		7		1		(5)		1,357		Total brokerage revenues	1,050		411		6		0		(6)		1,461
Account and services fees:	Account and services fees:													Account and services fees:
Mutual fund and annuity service fees	Mutual fund and annuity service fees	250		—		2		—		(9)		243		Mutual fund and annuity service fees	260		0		2		0		(1)		261
RJBDP fees	RJBDP fees	342		—		3		—		(131)		214		RJBDP fees	267		1		0		0		(139)		129

Client account and other fees	Client account and other fees	92		3		22		—		(15)		102		Client account and other fees	96		4		10		0		(16)		94
Total account and service fees	Total account and service fees	684		3		27		—		(155)		559		Total account and service fees	623		5		12		0		(156)		484
Investment banking:	Investment banking:													Investment banking:
Merger & acquisition and advisory	Merger & acquisition and advisory	—		286		—		—		—		286		Merger & acquisition and advisory	0		192		0		0		0		192
Equity underwriting	Equity underwriting	25		72		—		—		—		97		Equity underwriting	29		117		0		0		0		146
Debt underwriting	Debt underwriting	—		56		—		—		—		56		Debt underwriting	0		90		0		0		0		90
Total investment banking	Total investment banking	25		414		—		—		—		439		Total investment banking	29		399		0		0		0		428
Other:	Other:													Other:
Tax credit fund revenues	Tax credit fund revenues	—		49		—		—		—		49		Tax credit fund revenues	0		50		0		0		0		50
All other ⁽¹⁾	All other ⁽¹⁾	19		1		1		19		6		46		All other (1)	20		4		2		20		(49)		(3)
Total other	Total other	19		50		1		19		6		95		Total other	20		54		2		20		(49)		47
Total non-interest revenues	Total non-interest revenues	3,839		778		510		20		(170)		4,977		Total non-interest revenues	4,052		873		530		20		(227)		5,248
Interest income ⁽¹⁾	Interest income ⁽¹⁾	170		29		3		732		27		961		Interest income (1)	125		22		1		635		16		799
Total revenues	Total revenues	4,009		807		513		752		(143)		5,938		Total revenues	4,177		895		531		655		(211)		6,047
Interest expense	Interest expense	(31)		(26)		—		(122)		(42)		(221)		Interest expense	(19)		(14)		0		(51)		(52)		(136)
Net revenues	Net 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, ~~2020~~2021 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.

4244

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 millions	2020		2019		2020		2019		$ in millions	2021		2020		2021		2020
Interest income:	Interest income:									Interest income:
Cash and cash equivalents										Cash and cash equivalents	$	3	$	4	$	9	$	37
Assets segregated pursuant to regulations	Assets segregated pursuant to regulations	$	3	$	14	$	25	$	46	Assets segregated pursuant to regulations	3		3		11		25
Trading instruments		4		7		17		20
Available-for-sale securities	Available-for-sale securities	23		18		60		51		Available-for-sale securities	20		23		64		60
Margin loans		18		30		66		93
Brokerage client receivables										Brokerage client receivables	19		18		56		66
Bank loans, net of unearned income and deferred expenses	Bank loans, net of unearned income and deferred expenses	157		221		561		655		Bank loans, net of unearned income and deferred expenses	150		157		437		561
Loans to financial advisors		5		5		15		14
Corporate cash and all other		7		26		55		82
All other										All other	10		12		31		50
Total interest income	Total interest income	$	217	$	321	$	799	$	961	Total interest income	$	205	$	217	$	608	$	799
Interest expense:	Interest expense:									Interest expense:
Bank deposits	Bank deposits	$	7	$	33	$	35	$	105	Bank deposits	$	5	$	7	$	17	$	35
Trading instruments sold but not yet purchased		1		2		3		6
Brokerage client payables	Brokerage client payables	3		5		9		16		Brokerage client payables	1		3		3		9
Other borrowings	Other borrowings	5		5		15		16		Other borrowings	4		5		14		15
Senior notes payable	Senior notes payable	24		19		61		55		Senior notes payable	25		24		73		61
Other		2		9		13		23
All other										All other	5		3		8		16
Total interest expense	Total interest expense	42		73		136		221		Total interest expense	40		42		115		136
Net interest income	Net interest income	175		248		663		740		Net interest income	165		175		493		663
Bank loan loss (provision)/benefit		(81)		5		(188)		(16)
Net interest income after bank loan loss (provision)/benefit		$	94	$	253	$	475	$	724
Bank loan (provision)/benefit for credit losses										Bank loan (provision)/benefit for credit losses	19		(81)		37		(188)
Net interest income after bank loan (provision)/benefit for credit losses										Net 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 (independent~~independent 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 ~~the~~our fiscal first quarter of each year. Our share-based compensation accounting policies are described in Note 2 of our ~~2019~~2020 Form 10-K. Other information related to our share-based awards is presented in Note 21 of our ~~2019~~2020 Form 10-K.

During the three and nine months ended June 30, ~~2020,~~2021, we granted approximately ~~100~~50 thousand and ~~1.7~~1.5 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 ~~3.2~~3.1 years.

~~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 and~~banking 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.

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-based~~Fed.We are subject to the Fed’s capital ~~requirements~~rules 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-based~~Fed’s capital rules (“market risk rule”).

Under these rules, minimum requirements are ~~expressed as~~established 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 ~~regulatory~~common equity tier 1 (“CET1”), tier 1 and total capital to risk-weighted assets, ~~which involve~~as 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-sheet~~off-balance sheet items as calculated under the regulatory ~~guidelines. RJF’s~~capital 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 ~~2019~~2020 Form 10-K.

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


		Actual						Requirement for capital adequacy purposes							To be well-capitalized under regulatory provisions							Actual				Requirement for capital adequacy purposes		To be well-capitalized under regulatory provisions
$ in millions	$ in millions	Amount		Ratio		Amount		Ratio		Amount		Ratio		$ in millions		Amount		Ratio		Amount		Ratio		Amount		Ratio
RJF as of June 30, 2020:
RJF as of June 30, 2021:														RJF as of June 30, 2021:
CET1	CET1	$	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 capital	Tier 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 capital	Total 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 leverage	Tier 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:
CET1	CET1	$	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 capital	Tier 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 capital	Total 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 leverage	Tier 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 ~~ratio~~ratios 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 ~~cash~~risk-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, ~~2020~~2021 decreased compared to September 30, ~~2019,~~2020 due to ~~the growth of~~increased average assets, ~~primarily related to cash, cash and cash equivalents~~driven 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 change~~increase in ~~equity.~~regulatory capital.

4446

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.


		Actual						Requirement for capital adequacy purposes							To be well-capitalized under regulatory provisions							Actual				Requirement for capital adequacy purposes		To be well-capitalized under regulatory provisions
$ in millions	$ in millions	Amount		Ratio		Amount		Ratio		Amount		Ratio		$ in millions		Amount		Ratio		Amount		Ratio		Amount		Ratio
RJ Bank as of June 30, 2020:
Raymond James Bank as of June 30, 2021:														Raymond James Bank as of June 30, 2021:
CET1	CET1	$	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 capital	Tier 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 capital	Total 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 leverage	Tier 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:
CET1	CET1	$	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 capital	Tier 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 capital	Total 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 leverage	Tier 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 decreased~~2021 increased compared to September 30, ~~2019,~~2020, due to ~~dividends paid during~~ the ~~period exceeding earnings and growth~~increase 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, ~~2020~~2021 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 as~~which was partially offset by the ~~aforementioned change~~impact 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 millions	June 30, 2020			September 30, 2019			$ in millions	June 30, 2021			September 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 items	Net capital as a percent of aggregate debit items	46.1		%	39.7		%	Net capital as a percent of aggregate debit items	62.1		%	48.0		%
Net capital	Net capital	$	1,183		$	1,056		Net capital	$	1,811		$	1,245
Less: required net capital	Less: required net capital	(51)			(53)			Less: required net capital	(58)			(52)
Excess net capital	Excess 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.

4547

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 amounts	in millions, except per share amounts	2020		2019		2020		2019		in millions, except per share amounts	2021		2020		2021		2020
Income for basic earnings per common share:	Income for basic earnings per common share:									Income for basic earnings per common share:
Net income	Net income	$	172	$	259	$	609	$	769	Net income	$	307	$	172	$	974	$	609
Less allocation of earnings and dividends to participating securities	Less allocation of earnings and dividends to participating securities	—		(1)		(1)		(1)		Less allocation of earnings and dividends to participating securities	0		0		(1)		(1)
Net income attributable to RJF common shareholders	Net 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 income	Net income	$	172	$	259	$	609	$	769	Net income	$	307	$	172	$	974	$	609
Less allocation of earnings and dividends to participating securities	Less allocation of earnings and dividends to participating securities	—		(1)		(1)		(1)		Less allocation of earnings and dividends to participating securities	0		0		(1)		(1)
Net income attributable to RJF common shareholders	Net 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 computation	Average common shares in basic computation	137.1		140.4		137.9		141.8		Average common shares in basic computation	137.2		137.1		137.2		137.9
Dilutive effect of outstanding stock options and certain RSUs	Dilutive effect of outstanding stock options and certain RSUs	2.3		3.2		2.6		3.0		Dilutive effect of outstanding stock options and certain RSUs	3.9		2.3		3.4		2.6
Average common shares used in diluted computation		139.4		143.6		140.5		144.8
Average common and common equivalent shares used in diluted computation										Average common and common equivalent shares used in diluted computation	141.1		139.4		140.6		140.5
Earnings per common share:	Earnings per common share:									Earnings per common share:
Basic	Basic	$	1.25	$	1.84	$	4.41	$	5.42	Basic	$	2.24	$	1.25	$	7.09	$	4.41
Diluted	Diluted	$	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 antidilutive	Stock options and certain RSUs excluded from weighted-average diluted common shares because their effect would be antidilutive	1.8		0.2		1.6		0.5		Stock options and certain RSUs excluded from weighted-average diluted common shares because their effect would be antidilutive	0		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, ~~2020~~2021 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,
		2020		2019		2020		2019			2021		2020		2021		2020
Dividends per common share - declared	Dividends 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 - paid	Dividends 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 ~~2019~~2020 Form 10-K.

4648

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 millions	2020		2019		2020		2019		$ in millions	2021		2020		2021		2020
Net revenues:	Net revenues:									Net revenues:
Private Client Group	Private Client Group	$	1,249	$	1,351	$	4,158	$	3,978	Private Client Group	$	1,696	$	1,249	$	4,810	$	4,158
Capital Markets	Capital Markets	323		251		881		781		Capital Markets	446		323		1,331		881
Asset Management	Asset Management	163		177		531		513		Asset Management	225		163		629		531
RJ Bank		178		215		604		630
Raymond James Bank										Raymond James Bank	169		178		496		604
Other	Other	(20)		(4)		(72)		(2)		Other	2		(20)		(6)		(72)
Intersegment eliminations	Intersegment eliminations	(59)		(63)		(191)		(183)		Intersegment eliminations	(67)		(59)		(195)		(191)
Total net revenues	Total 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 Group	Private Client Group	$	91	$	140	$	414	$	436	Private Client Group	$	195	$	91	$	527	$	414
Capital Markets	Capital Markets	62		24		119		77		Capital Markets	115		62		349		119
Asset Management	Asset Management	60		65		206		184		Asset Management	105		60		275		206
RJ Bank		14		138		163		384
Raymond James Bank										Raymond James Bank	104		14		286		163
Other	Other	(29)		(25)		(106)		(60)		Other	(134)		(29)		(206)		(106)
Total pre-tax income	Total 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 millions	2020		2019		2020		2019		$ in millions	2021		2020		2021		2020
Net interest income/(expense):	Net interest income/(expense):									Net interest income/(expense):
Private Client Group	Private Client Group	$	27	$	46	$	106	$	139	Private Client Group	$	29	$	27	$	84	$	106
Capital Markets	Capital Markets	2		—		8		3		Capital Markets	1		2		5		8
Asset Management	Asset Management	—		1		1		3		Asset Management	0		0		0		1
RJ Bank		169		208		584		610
Other and intersegment eliminations		(23)		(7)		(36)		(15)
Raymond James Bank										Raymond James Bank	161		169		473		584
Other										Other	(26)		(23)		(69)		(36)
Net interest income	Net 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 millions	June 30, 2020		September 30, 2019		$ in millions	June 30, 2021		September 30, 2020
Total assets:	Total assets:					Total assets:
Private Client Group	Private Client Group	$	11,655	$	9,042	Private Client Group	$	17,949	$	12,574
Capital Markets	Capital Markets	2,301		2,287		Capital Markets	2,359		2,336
Asset Management	Asset Management	367		401		Asset Management	389		380
RJ Bank		28,830		25,516
Raymond James Bank						Raymond James Bank	34,363		30,356
Other	Other	1,529		1,584		Other	2,101		1,836
Total	Total	$	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 millions	June 30, 2020		September 30, 2019		$ in millions	June 30, 2021		September 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 Management	Asset Management	69		69		Asset Management	69		69
Total	Total	$	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.

4749

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited)

We have operations in the U.S., Canada and Europe. Substantially all long-lived assets are located in the U.S. The following table presents our net revenues and pre-tax income classified by major geographic area in which they were earned.

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

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


	Three months ended June 30,				Nine months ended June 30,
$ in millions	2021		2020		2021		2020
Net revenues:
U.S.	$	2,275	$	1,706	$	6,548	$	5,501
Canada	128		86		363		293
Europe	68		42		154		117
Total	$	2,471	$	1,834	$	7,065	$	5,911
Pre-tax income:
U.S.	$	353	$	191	$	1,165	$	770
Canada	15		5		41		26
Europe	17		2		25		0
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 millions	June 30, 2020		September 30, 2019		$ in millions	June 30, 2021		September 30, 2020
Total assets:	Total assets:					Total assets:
U.S.	U.S.	$	41,459	$	35,978	U.S.	$	53,361	$	44,090
Canada	Canada	3,099		2,754		Canada	3,627		3,260
Europe	Europe	124		98		Europe	173		132
Total	Total	$	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 millions	June 30, 2020		September 30, 2019		$ in millions	June 30, 2021		September 30, 2020
Goodwill:	Goodwill:					Goodwill:
U.S.(1)	U.S.(1)	$	433	$	433	U.S.(1)	$	602	$	433
Canada	Canada	24		23		Canada	26		24
Europe	Europe	8		8		Europe	9		9
Total	Total	$	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.

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”			5052
Introduction			5052
Executive overview			5052
Reconciliation of non-GAAP financial measures to GAAP financial measures			56
Segments			53
~~Reconciliation of GAAP measures to non-GAAP financial measures~~			5458
Net interest analysis			5458
Results of Operations
Private Client Group			5763
Capital Markets			6167
Asset Management			6269
RJRaymond James Bank			6571
Other			6972
Certain statistical disclosures by bank holding companies			7073
Liquidity and capital resources			7174
Statement of financial condition analysis			75
~~Contractual obligations~~			7578
Regulatory			7578
Critical accounting estimates			7879
Recent accounting developments			79
~~Off-balance sheet arrangements~~			79
~~Effects of inflation~~			7980
Risk management			7981

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, ~~2020~~2021 compared with the quarter ended June 30, ~~2019~~2020

~~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 and~~prior-year quarter, which was negatively impacted by uncertainty resulting from the ~~United States declared a national emergency due to the impact~~onset 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 of~~77% increase. Our annualized return on equity (“ROE”) for the ~~spread of COVID-19, governments~~quarter was 15.9%, compared with 10.0% in the prior-year quarter, and ~~other authorities around~~annualized 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 resulted~~During the quarter, we completed a $750 million, 30-year senior notes offering at 3.75%, utilizing the proceeds from the ~~COVID-19 pandemic continued during~~offering 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 recovery~~our $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 uncertain~~notes 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.

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 $93~~The $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 income~~driven by significantly higher asset management and ~~RJBDP~~related 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 due~~largely 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 versus~~expense 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 ~~$86~~increase in travel, meal and event-related expenses. These increases were offset by a $100 million ~~increase~~decrease in the bank loan ~~loss~~ provision for credit losses, which was ~~$81~~a 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 of~~computed 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 reflected~~2021, 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 for~~our 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 ~~the~~our fiscal third quarter of 2021 with capital ratios well in excess of regulatory requirements and substantial liquidity, with ~~over $2.1~~approximately $1.6 billion ⁽²⁾(1) of cash at the parent ~~company, which included the proceeds~~company. Pursuant to our Board of ~~a $500 million 10-year senior notes issuance at the end~~Directors’ share repurchase authorization, we repurchased 375,000 shares of common stock during our fiscal ~~second~~third 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.

~~Certain~~Our 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 more~~we may experience volatility of ~~both~~ brokerage revenues and investment banking revenues, ~~during~~which may negatively impact our ability to sustain the ~~pandemic. While~~level of revenues in future periods which were achieved in the current quarter. Although our results during the ~~third~~ quarter were ~~negatively~~positively impacted by ~~elevated~~a benefit for credit losses related to our bank loan ~~loss provisions, including losses on certain corporate loans that were sold during the quarter, further~~portfolio, net loan growth and/or future market deterioration could result in ~~additional~~increased provisions in future quarters. ~~Due~~In 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 on~~event-related travel increase and as we continue to make investments in our ~~results, we are evaluating ways to reduce costs~~technology 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%, while~~increased 36% and pre-tax income of ~~$91~~$195 million ~~decreased 35%~~increased 114%. The ~~$102~~$447 million ~~decrease~~increase in net revenues was primarily attributable to ~~the decrease~~a significant increase in ~~short-term interest rates, which negatively impacted both net interest income and RJBDP~~asset management fees ~~from third party banks. Brokerage revenues also declined compared with the prior-year quarter, primarily~~ due to ~~a decline~~higher assets in ~~revenues from annuity products~~fee-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 $53~~increased $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 of~~expenses largely due to the ~~increase~~growth 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.

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RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

Management’s Discussion and Analysis

•~~RJ Bank~~Capital Markets net revenues of ~~$178~~$446 million ~~decreased 17%~~increased 38% and pre-tax income of ~~$14~~$115 million ~~decreased 90%~~increased 85%. ~~Net~~The $123 million increase in net revenues ~~decreased $37 million~~was 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 offset~~prior-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 compared~~primarily due to ~~a benefit of $5 million~~higher compensation expenses resulting from the increase in ~~the prior-year quarter.~~revenues.

•~~Our~~Asset 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 to~~than the loss in the prior-year quarter, ~~primarily the result of lower interest income on corporate cash balances~~ due to the ~~negative~~aforementioned 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 at~~private equity gains in the ~~end of the fiscal second~~current-year quarter.

Nine months ended June 30, ~~2020~~2021 compared with the nine months ended June 30, ~~2019~~2020

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-tax~~Net income of ~~$796~~$974 million ~~decreased $225~~increased $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 ~~during~~for the nine months ended June 30, ~~2020~~2021 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 ~~included~~was primarily driven by higher asset management and related administrative fees, ~~primarily~~largely attributable to higher ~~average~~ PCG assets in fee-based accounts, ~~at the beginning of the current-year periods~~as well as strong investment banking and ~~higher~~ brokerage revenues, ~~largely due to higher market volatility and a significant increase in institutional fixed income client activity~~which 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 ~~were~~was the negative ~~impacts~~impact 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 increase~~primarily 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 $136~~decreased $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 ~~$16~~provision of $188 million ~~bank loan loss provision during~~in the prior-year ~~period. This increase was partially offset by~~period computed under the incurred loss methodology. Business development expenses also declined, due to lower travel and ~~conference-related~~event-related expenses as a result of the COVID-19 pandemic, ~~and~~partially 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 losses~~valuations 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 with~~from 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 benefits~~larger non-taxable gains on ~~lower pre-tax earnings~~our 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 repurchased~~2021 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.

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%, while~~16% 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 were~~period, 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 of~~attributable to the increase in ~~revenues.~~revenues, partially offset by a decrease in business development expenses.

~~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% and~~18%, 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 $195~~decreased $231 million, or ~~79%~~52%, primarily due to a ~~$172~~$225 million ~~increase~~decrease in the bank loan ~~loss provision.~~provision for credit losses.

•~~Our~~The Other segment reflected a pre-tax loss that was ~~$46~~$100 million ~~larger compared to~~greater 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 ~~valuation~~gains 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.

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 ended		Nine months ended
$ in millions	June 30, 2021			June 30, 2021
Net income	$	307		$	974
Non-GAAP adjustments:
Losses on extinguishment of debt	98			98
Acquisition-related expenses	7			9
Pre-tax impact of non-GAAP adjustments	105			107
Tax effect of non-GAAP adjustments	(26)			(26)
Total non-GAAP adjustments, net of tax	79			81
Adjusted net income	$	386		$	1,055

Earnings per common share - diluted	$	2.18		$	6.92
Non-GAAP adjustments:
Losses on extinguishment of debt	0.69			0.70
Acquisition-related expenses	0.05			0.06
Tax effect of non-GAAP adjustments	(0.18)			(0.18)
Total non-GAAP adjustments, net of tax	0.56			0.58
Adjusted earnings per common share - diluted	$	2.74		$	7.50

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

Management’s Discussion and Analysis


	Three months ended June 30,						Nine months ended June 30,
$ in millions	2021			2020			2021			2020
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 debt	49			NA			25			NA
Acquisition-related expenses	4			NA			2			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, net	865			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 debt	49			NA			25			NA
Acquisition-related expenses	4			NA			2			NA
Tax effect of non-GAAP adjustments	(13)			NA			(7)			NA
Adjusted average tangible common equity	$	6,959		NA			$	6,763		NA

Return on equity	15.9		%	10.0		%	17.4		%	11.9		%
Adjusted annualized return on equity	19.9		%	NA			18.7		%	NA
Return on tangible common equity	17.7		%	10.9		%	19.3		%	13.1		%
Adjusted annualized return on tangible common equity	22.2		%	NA			20.8		%	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.

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 millions 2020 2019 % change 2020 2019 % change
Total company
Net revenues $ 1,834 $ 1,927 (5) % $ 5,911 $ 5,717 3 %
Pre-tax income $ 198 $ 342 (42) % $ 796 $ 1,021 (22) %
Private Client Group
Net revenues $ 1,249 $ 1,351 (8) % $ 4,158 $ 3,978 5 %
Pre-tax income $ 91 $ 140 (35) % $ 414 $ 436 (5) %
Capital Markets
Net revenues $ 323 $ 251 29 % $ 881 $ 781 13 %
Pre-tax income $ 62 $ 24 158 % $ 119 $ 77 55 %
Asset Management
Net revenues $ 163 $ 177 (8) % $ 531 $ 513 4 %
Pre-tax income $ 60 $ 65 (8) % $ 206 $ 184 12 %
RJ Bank
Net revenues $ 178 $ 215 (17) % $ 604 $ 630 (4) %
Pre-tax income $ 14 $ 138 (90) % $ 163 $ 384 (58) %
Other
Net revenues $ (20) $ (4) (400) % $ (72) $ (2) (3,500) %
Pre-tax loss $ (29) $ (25) (16) % $ (106) $ (60) (77) %
Intersegment eliminations
Net revenues $ (59) $ (63) NM $ (191) $ (183) NM

~~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 millions 2020 2019 2020 2019
Average equity $ 6,882 $ 6,434 $ 6,797 $ 6,345
Less:
Average goodwill and identifiable intangible assets, net 603 633 606 634
Average deferred tax liabilities, net (32) (31) (30) (32)
Average tangible common equity $ 6,311 $ 5,832 $ 6,221 $ 5,743
Return on equity 10.0 % 16.1 % 11.9 % 16.2 %
Return on tangible common equity 10.9 % 17.8 % 13.1 % 17.9 %

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 millions	2021		2020		% change		2021		2020		% 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
	Low	High	End of period
Three months ended
June 30, 2021	0.00%	0.25%	0% - 0.25%
June 30, 2020	0.00%	0.25%	0% - 0.25%
Nine months ended
June 30, 2021	0.00%	0.25%	0% - 0.25%
June 30, 2020	0.00%	2.00%	0% - 0.25%

In response to macroeconomic concerns resulting from the COVID-19 pandemic, ~~The~~the Federal Reserve decreased its benchmark short-term interest rate ~~twice~~ in March 2020 to a range of 0-0.25%, ~~for~~ a ~~total decrease~~reduction of 150 basis points. These decreases, in ~~short-term~~addition to other interest ~~rates, as well as the three~~ rate cuts implemented induring calendar 2019 (225 basis points in total), have ~~had a negative impact on~~negatively impacted our ~~fiscal year 2020 results,~~net interest income, as ~~we have certain assets and liabilities, primarily held in our PCG, RJ Bank and Other segments, which are sensitive to changes in interest rates. Fees~~well as the fees we earn from third-party banks on client cash balances swept to such banks as part of the RJBDP which are also sensitive to changes in interest rates. 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 we~~prior-year periods. We expect ~~a continuation of this negative impact~~the current near-zero interest rate environment to continue for the remainder of fiscal ~~2020.~~2021 and into fiscal 2022.

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 segments~~our 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 ~~our~~the 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.

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

~~Management’s Discussion and Analysis~~

Quarter ended June 30, ~~2020~~2021 compared with the quarter ended June 30, ~~2019~~2020

Three months ended June 30,
2020 2019
$ in millions Average
balance Interest
inc./exp. Average
yield/cost Average
balance Interest
inc./exp. Average
yield/cost
Interest-earning assets:
Assets segregated pursuant to regulations $ 3,411 $ 3�� 0.34 % $ 2,268 $ 14 2.62 %
Trading instruments 313 4 4.59 % 771 7 3.53 %
Available-for-sale securities 4,437 23 2.01 % 2,901 18 2.41 %
Margin loans 2,068 18 3.44 % 2,528 30 4.83 %
Bank loans, net of unearned income and deferred expenses:
Loans held for investment:
C&I loans 7,994 59 2.93 % 8,278 98 4.68 %
CRE construction loans 212 2 3.60 % 248 4 5.45 %
CRE loans 3,773 25 2.66 % 3,359 39 4.53 %
Tax-exempt loans 1,272 9 3.34 % 1,291 9 3.35 %
Residential mortgage loans 4,983 37 2.97 % 4,127 34 3.32 %
SBL and other 3,576 24 2.59 % 3,125 36 4.64 %
Loans held for sale 111 1 3.22 % 118 1 4.78 %
Total bank loans, net 21,921 157 2.87 % 20,546 221 4.30 %
Loans to financial advisors, net 973 5 1.94 % 912 5 2.06 %
Corporate cash and all other 7,675 7 0.31 % 4,272 26 2.45 %
Total interest-earning assets $ 40,798 $ 217 2.09 % $ 34,198 $ 321 3.76 %
Interest-bearing liabilities:
Bank deposits:
Savings, money market and NOW accounts $ 25,060 $ 2 0.02 % $ 20,842 $ 29 0.57 %
Certificates of deposit 1,104 5 2.00 % 561 4 2.33 %
Trading instruments sold but not yet purchased 71 1 0.83 % 307 2 2.39 %
Brokerage client payables 4,790 3 0.17 % 3,054 5 0.61 %
Other borrowings 891 5 2.25 % 898 5 2.20 %
Senior notes payable 2,045 24 4.74 % 1,550 19 4.71 %
Other 272 2 4.23 % 791 9 4.81 %
Total interest-bearing liabilities $ 34,233 $ 42 0.48 % $ 28,003 $ 73 1.03 %
Net interest income $ 175 $ 248

~~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,
		2020										2019											2021				2020
$ in millions	$ in millions	Average balance		Interest inc./exp.		Average yield/cost		Average balance		Interest inc./exp.		Average yield/cost		$ in millions	Average daily balance		Interest		Annualized average rate		Average daily balance		Interest		Annualized average rate
Interest-earning assets:	Interest-earning assets:													Interest-earning assets:
Cash and cash equivalents														Cash and cash equivalents	$	5,644	$	3	0.20	%	$	6,605	$	4	0.26	%
Assets segregated pursuant to regulations	Assets segregated pursuant to regulations	$	2,852	$	25	1.16	%	$	2,472	$	46	2.50	%	Assets segregated pursuant to regulations	9,016		3		0.16	%	3,408		3		0.36	%
Trading instruments		596		17		3.77	%	727		20		3.66	%
Available-for-sale securities	Available-for-sale securities	3,654		60		2.18	%	2,831		51		2.39	%	Available-for-sale securities	8,041		20		0.96	%	4,437		23		2.01	%
Margin loans		2,290		66		3.86	%	2,620		93		4.75	%
Brokerage client receivables														Brokerage client receivables	2,363		19		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 loans	C&I loans	8,039		226		3.69	%	8,065		286		4.67	%	C&I loans	7,936		50		2.51	%	7,957		58		2.93	%
CRE construction loans		209		7		4.36	%	205		9		5.58	%
CRE loans	CRE loans	3,706		98		3.49	%	3,433		120		4.60	%	CRE loans	2,748		18		2.59	%	2,610		19		2.85	%
REIT loans														REIT loans	1,327		9		2.53	%	1,412		9		2.45	%
Tax-exempt loans	Tax-exempt loans	1,236		25		3.35	%	1,285		26		3.34	%	Tax-exempt loans	1,294		9		3.33	%	1,272		9		3.34	%
Residential mortgage loans	Residential mortgage loans	4,823		112		3.09	%	3,999		100		3.32	%	Residential mortgage loans	5,126		34		2.70	%	4,983		37		2.97	%
SBL and other	SBL and other	3,460		89		3.37	%	3,098		109		4.64	%	SBL and other	5,208		29		2.22	%	3,576		24		2.59	%
Loans held for sale	Loans held for sale	138		4		3.77	%	149		5		4.87	%	Loans held for sale	142		1		2.92	%	111		1		3.22	%
Total bank loans, net	Total bank loans, net	21,611		561		3.46	%	20,234		655		4.32	%	Total bank loans, net	23,781		150		2.54	%	21,921		157		2.87	%
Loans to financial advisors, net		975		15		2.04	%	909		14		2.00	%
Corporate cash and all other		5,963		55		1.10	%	4,651		82		2.33	%
All other interest-earning assets														All other interest-earning assets	2,288		10		1.51	%	1,964		12		2.66	%
Total interest-earning assets	Total 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 accounts	Savings, 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	$	2	0.02	%
Certificates of deposit	Certificates of deposit	993		15		2.06	%	527		9		2.20	%	Certificates of deposit	883		4		1.91	%	1,104		5		2.00	%
Trading instruments sold but not yet purchased		194		3		1.80	%	297		6		2.63	%
Total bank deposits														Total bank deposits	29,791		5		0.08	%	26,164		7		0.10	%
Brokerage client payables	Brokerage client payables	3,929		9		0.31	%	3,395		16		0.62	%	Brokerage client payables	10,486		1		0.03	%	4,751		3		0.18	%
Other borrowings	Other borrowings	892		15		2.24	%	936		16		2.33	%	Other borrowings	860		4		2.19	%	891		5		2.23	%
Senior notes payable	Senior notes payable	1,716		61		4.73	%	1,550		55		4.70	%	Senior notes payable	2,211		25		4.49	%	2,067		24		4.69	%
Other		473		13		3.55	%	771		23		3.89	%
All other interest-bearing liabilities														All other interest-bearing liabilities	602		5		1.12	%	586		3		1.10	%
Total interest-bearing liabilities	Total 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 income	Net 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 margin														Raymond James Bank net interest margin					1.92	%					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~~

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 ~~tables~~table 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 millions	Volume		Rate		Total
Interest income:
Interest-earning assets:
Cash and cash equivalents	$	—	$	(1)	$	(1)
Assets segregated pursuant to regulations	5		(5)		—
Available-for-sale securities	18		(21)		(3)
Brokerage client receivables	2		(1)		1
Bank loans, net of unearned income and deferred expenses:
Loans held for investment:
C&I loans	—		(8)		(8)
CRE loans	1		(2)		(1)
REIT loans	1		(1)		—
Tax-exempt loans	—		—		—
Residential mortgage loans	1		(4)		(3)
SBL and other	9		(4)		5
Loans held for sale	—		—		—
Total bank loans, net	12		(19)		(7)
All other interest-earning assets	2		(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 payables	2		(4)		(2)
Other borrowings	—		(1)		(1)
Senior notes payable	2		(1)		1
All other interest-bearing liabilities	—		2		2
Total interest-bearing liabilities	$	3	$	(5)	$	(2)
Change in net interest income	$	36	$	(46)	$	(10)

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,
	2021						2020
$ in millions	Average daily balance		Interest		Annualized average rate		Average daily balance		Interest		Annualized average rate
Interest-earning assets:
Cash and cash equivalents	$	5,548	$	9	0.22	%	$	5,013	$	37	0.99	%
Assets segregated pursuant to regulations	8,307		11		0.18	%	2,853		25		1.20	%
Available-for-sale securities	7,837		64		1.08	%	3,654		60		2.18	%
Brokerage client receivables	2,222		56		3.38	%	2,290		66		3.87	%
Bank loans, net of unearned income and deferred expenses:
Loans held for investment:
C&I loans	7,670		149		2.57	%	8,012		225		3.70	%
CRE loans	2,665		52		2.57	%	2,593		72		3.63	%
REIT loans	1,290		25		2.49	%	1,349		34		3.33	%
Tax-exempt loans	1,253		25		3.34	%	1,236		25		3.35	%
Residential mortgage loans	5,044		103		2.73	%	4,823		112		3.09	%
SBL and other	4,709		80		2.24	%	3,460		89		3.37	%
Loans held for sale	153		3		2.54	%	138		4		3.77	%
Total bank loans, net	22,784		437		2.57	%	21,611		561		3.46	%
All other interest-earning assets	2,264		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 deposit	911		13		1.90	%	993		15		2.06	%
Total bank deposits	28,643		17		0.08	%	24,183		35		0.19	%
Brokerage client payables	9,765		3		0.03	%	3,929		9		0.31	%
Other borrowings	863		14		2.20	%	893		15		2.23	%
Senior notes payable	2,115		73		4.62	%	1,742		61		4.66	%
All other interest-bearing liabilities	591		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 margin					1.96	%					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.

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

Management’s Discussion and Analysis


	Nine months ended June 30,
	2021 compared to 2020
	Increase/(decrease) due to
$ in millions	Volume		Rate		Total
Interest income:
Interest-earning assets:
Cash and cash equivalents	$	10	$	(38)	$	(28)
Assets segregated pursuant to regulations	52		(66)		(14)
Available-for-sale securities	69		(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 loans	1		(21)		(20)
REIT loans	—		(9)		(9)
Tax-exempt loans	2		(2)		—
Residential mortgage loans	5		(14)		(9)
SBL and other	27		(36)		(9)
Loans held for sale	1		(2)		(1)
Total bank loans, net	25		(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 deposits	3		(21)		(18)
Brokerage client payables	15		(21)		(6)
Other borrowings	—		(1)		(1)
Senior notes payable	13		(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)

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 ~~2019~~2020 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 millions	2020		2019		% change		2020		2019		% change		$ in millions	2021		2020		% change		2021		2020		% change
Revenues:	Revenues:													Revenues:
Asset management and related administrative fees	Asset 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 products	Mutual and other fund products	131		147		(11)	%	438		449		(2)	%	Mutual and other fund products	167		131		27	%	498		438		14	%
Insurance and annuity products	Insurance and annuity products	88		105		(16)	%	288		308		(6)	%	Insurance and annuity products	113		88		28	%	320		288		11	%
Equities, ETFs and fixed income products	Equities, ETFs and fixed income products	100		94		6	%	324		291		11	%	Equities, ETFs and fixed income products	110		100		10	%	338		324		4	%
Total brokerage revenues	Total brokerage revenues	319		346		(8)	%	1,050		1,048		—		Total brokerage revenues	390		319		22	%	1,156		1,050		10	%
Account and service fees:	Account and service fees:													Account and service fees:
Mutual fund and annuity service fees	Mutual fund and annuity service fees	82		85		(4)	%	260		250		4	%	Mutual fund and annuity service fees	105		82		28	%	298		260		15	%
RJBDP fees:	RJBDP fees:													RJBDP fees:
Third-party banks	Third-party banks	20		67		(70)	%	129		215		(40)	%	Third-party banks	18		20		(10)	%	58		129		(55)	%
RJ Bank		43		44		(2)	%	138		127		9	%
Raymond James Bank														Raymond James Bank	47		43		9	%	134		138		(3)	%
Client account and other fees	Client account and other fees	32		32		—		96		92		4	%	Client account and other fees	39		32		22	%	113		96		18	%
Total account and service fees	Total account and service fees	177		228		(22)	%	623		684		(9)	%	Total account and service fees	209		177		18	%	603		623		(3)	%
Investment banking	Investment banking	7		10		(30)	%	29		25		16	%	Investment banking	11		7		57	%	33		29		14	%
Interest income	Interest income	31		56		(45)	%	125		170		(26)	%	Interest income	31		31		—		91		125		(27)	%
All other	All other	4		3		33	%	20		19		5	%	All other	7		4		75	%	20		20		—
Total revenues	Total revenues	1,253		1,361		(8)	%	4,177		4,009		4	%	Total revenues	1,698		1,253		36	%	4,817		4,177		15	%
Interest expense	Interest expense	(4)		(10)		(60)	%	(19)		(31)		(39)	%	Interest expense	(2)		(4)		(50)	%	(7)		(19)		(63)	%
Net revenues	Net revenues	1,249		1,351		(8)	%	4,158		3,978		5	%	Net revenues	1,696		1,249		36	%	4,810		4,158		16	%
Non-interest expenses:	Non-interest expenses:													Non-interest expenses:
Financial advisor compensation and benefits	Financial advisor compensation and benefits	783		805		(3)	%	2,555		2,358		8	%	Financial advisor compensation and benefits	1,082		783		38	%	3,053		2,555		19	%
Administrative compensation and benefits	Administrative compensation and benefits	235		237		(1)	%	727		700		4	%	Administrative compensation and benefits	251		235		7	%	760		727		5	%
Total compensation, commissions and benefits	Total compensation, commissions and benefits	1,018		1,042		(2)	%	3,282		3,058		7	%	Total compensation, commissions and benefits	1,333		1,018		31	%	3,813		3,282		16	%
Non-compensation expenses:	Non-compensation expenses:													Non-compensation expenses:
Communications and information processing	Communications and information processing	66		57		16	%	187		174		7	%	Communications and information processing	70		66		6	%	201		187		7	%
Occupancy and equipment	Occupancy and equipment	42		43		(2)	%	130		122		7	%	Occupancy and equipment	45		42		7	%	133		130		2	%
Business development	Business development	12		37		(68)	%	63		90		(30)	%	Business development	19		12		58	%	50		63		(21)	%
Professional fees	Professional fees	8		8		—		25		24		4	%	Professional fees	10		8		25	%	33		25		32	%
All other	All other	12		24		(50)	%	57		74		(23)	%	All other	24		12		100	%	53		57		(7)	%
Total non-compensation expenses	Total non-compensation expenses	140		169		(17)	%	462		484		(5)	%	Total non-compensation expenses	168		140		20	%	470		462		2	%
Total non-interest expenses	Total non-interest expenses	1,158		1,211		(4)	%	3,744		3,542		6	%	Total non-interest expenses	1,501		1,158		30	%	4,283		3,744		14	%
Pre-tax income	Pre-tax income	$	91	$	140	(35)	%	$	414	$	436	(5)	%	Pre-tax income	$	195	$	91	114	%	$	527	$	414	27	%

5763

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

Management’s Discussion and Analysis

Selected key metrics

PCG client asset balances

As of
$ in billions June 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 accounts 53.2 % 52.2 % 51.2 % 50.5 % 49.8 % 48.5 %


	As of
$ in billions	June 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 accounts	55.9		%	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 ~~participates~~invests and the level of assets in the client relationship. As fees for substantially all of such accounts are billed based on balances as of the beginning of the quarter, revenues from fee-based accounts may not be immediately affected by changes in asset values, but rather the impacts are seen in the following quarter.

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
Employees	Employees	3,379	3,376	3,301	3,228	Employees	3,423	3,375	3,404	3,379
Independent contractors	Independent contractors	4,776	4,772	4,710	4,676	Independent contractors	4,990	4,952	4,835	4,776
Total advisors	Total advisors	8,155	8,148	8,011	7,904	Total advisors	8,413	8,327	8,239	8,155

~~Although~~The 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 addition~~transfer of ~~financial~~ advisors ~~was low relative~~who were previously affiliated with the firm as independent contractors or employees to ~~recent quarters as~~our RIA & Custody Services (“RCS”) division. Advisors in RCS are not included in the ~~COVID-19 pandemic impacted experienced~~ financial advisor ~~transitions, particularly~~count, although their assets are still included in ~~the employee channel due to office closures, and slowed the transitions of new trainees. While financial advisor~~client assets under administration. The recruiting ~~activity has started to recover and the~~ pipeline remains ~~solid, the impact of the COVID-19 pandemic on future~~strong across our affiliation options despite an increasingly competitive recruiting ~~is uncertain.~~environment.

5864

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

Management’s Discussion and Analysis

Clients’ domestic cash sweep balances


		As of																			As of
$ in millions	$ in millions	June 30, 2020		March 31, 2020		December 31, 2019		September 30, 2019		June 30, 2019		$ in millions	June 30, 2021		March 31, 2021		December 31, 2020		September 30, 2020		June 30, 2020
RJBDP	RJBDP											RJBDP
RJ Bank		$	24,101	$	28,711	$	21,891	$	21,649	$	21,600
Raymond James Bank												Raymond James Bank	$	29,253	$	28,174	$	26,697	$	25,599	$	24,101
Third-party banks	Third-party banks	24,661		20,379		15,061		14,043		14,425		Third-party banks	25,080		25,110		26,142		25,998		24,661
Subtotal RJBDP	Subtotal RJBDP	48,762		49,090		36,952		35,692		36,025		Subtotal RJBDP	54,333		53,284		52,839		51,597		48,762

Client Interest Program (“CIP”)		3,157		3,782		2,528		2,022		2,130
CIP												CIP	8,610		9,517		8,769		3,999		3,157
Total clients’ domestic cash sweep balances	Total 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,
2020 2019 2020 2019
Average yield on RJBDP - third-party banks 0.33 % 1.95 % 0.97 % 1.90 %


	Three months ended June 30,				Nine months ended June 30,
	2021		2020		2021		2020
Average yield on RJBDP - third-party banks	0.29	%	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, client~~Client cash balances remained elevated as of June 30, ~~2020~~2021 compared to prior year balances as a result of a number of factors, including the ~~market~~continuing 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, ~~2020~~2021 compared with the quarter ended June 30, ~~2019~~2020

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

Asset management and related administrative fees ~~were largely unchanged, as~~increased $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-year~~current quarter. As assets in ~~fee-based~~these 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 will~~as 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 $27~~increased $71 million, or 8%22%, ~~reflecting lower~~due to higher trailing revenues from mutual and other fund products and annuity products, ~~and lower mutual fund~~resulting 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 $51~~increased $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 significant~~an 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 $19~~Compensation-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.

5965

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

Management’s Discussion and Analysis

~~Compensation-related~~Non-compensation expenses ~~decreased $24~~increased $28 million, or 2%20%, in part due to ~~lower compensable net revenues. Compensation-related~~increased 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, ~~2020~~2021 compared with the nine months ended June 30, ~~2019~~2020

Net revenues of ~~$4.16~~$4.81 billion increased ~~$180~~$652 million, or 5%16%, and pre-tax income of ~~$414~~$527 million ~~decreased $22~~increased $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 lower~~average 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 by~~primarily 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 RJBDP~~other fees resulting from ~~RJ Bank due to an increase in~~our acquisition of NWPS at the ~~number~~end of ~~accounts at RJ Bank.~~our fiscal first quarter of 2021.

Net interest income decreased ~~$33~~$22 million, or ~~24%~~21%, ~~primarily~~ driven by a decline in interest income due to lower short-term interest rates ~~reducing~~applicable 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 $22~~increased $8 million, or 5%2%, ~~primarily as a result of decreases in conference~~largely due to higher communications and ~~travel-related~~information processing expenses, ~~as a result of~~partially 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.

6066

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 ~~2019~~2020 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 millions	2020		2019		% change		2020		2019		% change		$ in millions	2021		2020		% change		2021		2020		% change
Revenues:	Revenues:													Revenues:
Brokerage revenues:	Brokerage revenues:													Brokerage revenues:
Fixed income	Fixed income	$	125	$	73	71	%	$	296	$	201	47	%	Fixed income	$	124	$	125	(1)	%	$	397	$	296	34	%
Equity	Equity	41		31		32	%	115		105		10	%	Equity	36		41		(12)	%	112		115		(3)	%
Total brokerage revenues	Total brokerage revenues	166		104		60	%	411		306		34	%	Total brokerage revenues	160		166		(4)	%	509		411		24	%
Investment banking:	Investment banking:													Investment banking:
Merger & acquisition and advisory	Merger & acquisition and advisory	60		80		(25)	%	192		286		(33)	%	Merger & acquisition and advisory	153		60		155	%	424		192		121	%
Equity underwriting	Equity underwriting	35		27		30	%	117		72		63	%	Equity underwriting	69		35		97	%	196		117		68	%
Debt underwriting	Debt underwriting	37		22		68	%	90		56		61	%	Debt underwriting	43		37		16	%	126		90		40	%
Total investment banking	Total investment banking	132		129		2	%	399		414		(4)	%	Total investment banking	265		132		101	%	746		399		87	%
Interest income	Interest income	4		10		(60)	%	22		29		(24)	%	Interest income	4		4		—		12		22		(45)	%
Tax credit fund revenues	Tax credit fund revenues	20		16		25	%	50		49		2	%	Tax credit fund revenues	17		20		(15)	%	57		50		14	%
All other	All other	3		2		50	%	13		9		44	%	All other	3		3		—		14		13		8	%
Total revenues	Total revenues	325		261		25	%	895		807		11	%	Total revenues	449		325		38	%	1,338		895		49	%
Interest expense	Interest expense	(2)		(10)		(80)	%	(14)		(26)		(46)	%	Interest expense	(3)		(2)		50	%	(7)		(14)		(50)	%
Net revenues	Net revenues	323		251		29	%	881		781		13	%	Net revenues	446		323		38	%	1,331		881		51	%
Non-interest expenses:	Non-interest expenses:													Non-interest expenses:
Compensation, commissions and benefits	Compensation, commissions and benefits	195		160		22	%	545		486		12	%	Compensation, commissions and benefits	256		195		31	%	767		545		41	%
Non-compensation expenses:	Non-compensation expenses:													Non-compensation expenses:
Communications and information processing	Communications and information processing	19		18		6	%	58		56		4	%	Communications and information processing	22		19		16	%	61		58		5	%
Occupancy and equipment	Occupancy and equipment	9		8		13	%	27		26		4	%	Occupancy and equipment	9		9		—		27		27		—
Business development	Business development	7		12		(42)	%	38		37		3	%	Business development	8		7		14	%	23		38		(39)	%
Professional fees	Professional fees	12		11		9	%	35		31		13	%	Professional fees	12		12		—		38		35		9	%
Acquisition and disposition-related expenses		—		—		—		—		15		(100)	%
Acquisition-related expenses														Acquisition-related expenses	3		—		NM		3		—		NM
All other	All other	19		18		6	%	59		53		11	%	All other	21		19		11	%	63		59		7	%
Total non-compensation expenses	Total non-compensation expenses	66		67		(1)	%	217		218		—		Total non-compensation expenses	75		66		14	%	215		217		(1)	%
Total non-interest expenses	Total non-interest expenses	261		227		15	%	762		704		8	%	Total non-interest expenses	331		261		27	%	982		762		29	%
Pre-tax income	Pre-tax income	$	62	$	24	158	%	$	119	$	77	55	%	Pre-tax income	$	115	$	62	85	%	$	349	$	119	193	%

Quarter ended June 30, ~~2020~~2021 compared with the quarter ended June 30, ~~2019~~2020

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 $62~~decreased $6 million, or ~~60%~~4%, primarily due to ~~an increase~~a 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 during~~continued 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 ~~result~~combination 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 expenses~~revenues increased ~~$35 million, or 22%,~~significantly, primarily due to higher levels of client activity and larger transactions in the ~~increase~~current 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 result~~over 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 revenues~~such 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 unchanged~~increased $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-year~~nine 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 in~~reflected high levels of client activity, while the prior-year period was impacted by low levels of ~~$15~~client 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, sales~~Financo acquisition.

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 ~~2019~~2020 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 millions	2020		2019		% change		2020		2019		% change		$ in millions	2021		2020		% change		2021		2020		% change
Revenues:	Revenues:													Revenues:
Asset management and related administrative fees:	Asset management and related administrative fees:													Asset management and related administrative fees:
Managed programs	Managed programs	$	109	$	120	(9)	%	$	358	$	346	3	%	Managed programs	$	148	$	109	36	%	$	414	$	358	16	%
Administration and other	Administration and other	48		45		7	%	152		129		18	%	Administration and other	70		48		46	%	193		152		27	%
Total asset management and related administrative fees	Total asset management and related administrative fees	157		165		(5)	%	510		475		7	%	Total asset management and related administrative fees	218		157		39	%	607		510		19	%
Account and service fees	Account and service fees	3		8		(63)	%	12		27		(56)	%	Account and service fees	4		3		33	%	13		12		8	%
All other	All other	3		4		(25)	%	9		11		(18)	%	All other	3		3		—		9		9		—
Net revenues	Net revenues	163		177		(8)	%	531		513		4	%	Net revenues	225		163		38	%	629		531		18	%
Non-interest expenses:	Non-interest expenses:													Non-interest expenses:
Compensation, commissions and benefits	Compensation, commissions and benefits	44		47		(6)	%	134		135		(1)	%	Compensation, commissions and benefits	43		44		(2)	%	138		134		3	%
Non-compensation expenses:	Non-compensation expenses:													Non-compensation expenses:
Communications and information processing	Communications and information processing	10		12		(17)	%	33		33		—		Communications and information processing	12		10		20	%	35		33		6	%
Investment sub-advisory fees	Investment sub-advisory fees	23		23		—		74		68		9	%	Investment sub-advisory fees	33		23		43	%	91		74		23	%
All other	All other	26		30		(13)	%	84		93		(10)	%	All other	32		26		23	%	90		84		7	%
Total non-compensation expenses	Total non-compensation expenses	59		65		(9)	%	191		194		(2)	%	Total non-compensation expenses	77		59		31	%	216		191		13	%
Total non-interest expenses	Total non-interest expenses	103		112		(8)	%	325		329		(1)	%	Total non-interest expenses	120		103		17	%	354		325		9	%
Pre-tax income	Pre-tax income	$	60	$	65	(8)	%	$	206	$	184	12	%	Pre-tax income	$	105	$	60	75	%	$	275	$	206	33	%

~~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, ~~including~~as well as transfers between fee-based accounts and transaction-based accounts within our PCG segment.

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

Fees for our managed programs are generally collected quarterly. Approximately ~~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.

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

Management’s Discussion and Analysis

Financial assets under management


$ in millions		June 30, 2020		March 31, 2020		September 30, 2019		June 30, 2019		March 31, 2019		September 30, 2018
$ in billions														$ in billions	June 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 Advisers	Carillon Tower Advisers	57,457		51,674		58,521		60,737		59,852		63,330		Carillon Tower Advisers	69.2		66.6		59.5		57.5		51.7		58.5
Subtotal financial assets under management	Subtotal financial assets under management	153,505		135,645		150,323		149,843		144,758		146,619		Subtotal financial assets under management	201.0		187.8		161.7		153.5		135.7		150.3
Less: Assets managed for affiliated entities	Less: 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 management	Total 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 millions 2020 2019 2020 2019
Financial assets under management at beginning of period $ 135,645 $ 144,758 $ 150,323 $ 146,619
Carillon Tower Advisers - net outflows (1,968) (910) (4,356) (3,584)
AMS - net inflows 1,534 1,751 4,806 4,138
Net market appreciation/(depreciation) in asset values 18,294 4,244 2,732 2,670
Financial assets under management at end of period $ 153,505 $ 149,843 $ 153,505 $ 149,843

~~AMS division of RJ&A~~

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

~~RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES~~Activity (including activity in assets managed for affiliated entities)

~~Management’s Discussion and Analysis~~


	Three months ended June 30,				Nine months ended June 30,
$ in billions	2021		2020		2021		2020
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 inflows	4.5		1.5		9.8		4.8
Net market appreciation in asset values	9.0		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 ~~periods~~period presented.


$ in millions		June 30, 2020		Average fee rate for the three months ended June 30, 2020
$ in billions						$ in billions	June 30, 2021		Average fee rate for the three months ended June 30, 2021
Equity	Equity	$	25,431	0.54	%	Equity	$	31.6	0.52	%
Fixed income	Fixed income	27,066		0.18	%	Fixed income	31.6		0.18	%
Balanced	Balanced	4,960		0.37	%	Balanced	6.0		0.35	%
Total financial assets under management	Total financial assets under management	$	57,457	0.35	%	Total financial assets under management	$	69.2	0.35	%

Non-discretionary asset-based programs

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

The ~~preceding~~following table includes assets held in certain non-discretionary asset-based programs for which the Asset Management segment does not exercise discretion but provides administrative support (including for affiliated entities). The ~~increase~~vast majority of these assets are also included in ~~assets over the prior-year level was primarily due to clients moving to~~our PCG segment fee-based ~~accounts from transaction-based accounts, successful financial advisor recruiting and retention, and equity market appreciation. The increase~~AUA (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 billions	June 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 billions June 30,
2020 March 31,
2020 September 30,
2019 June 30,
2019 March 31,
2019 September 30,
2018
Total assets $ 7.1 $ 6.4 $ 6.6 $ 6.4 $ 6.2 $ 6.1

The ~~preceding~~following 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 billions	June 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 months~~Quarter ended June 30, ~~2020~~2021 compared with the ~~nine months~~quarter ended June 30, ~~2019~~2020

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 management~~resulting 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 $15~~Compensation expenses increased $4 million, or ~~56%~~3%, ~~primarily~~and 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 ~~resulting~~which resulted from anthe increase in ~~assets under management~~AUM 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 ~~2019~~2020 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 millions	2020		2019		% change		2020		2019		% change		$ in millions	2021		2020		% change		2021		2020		% change
Revenues:	Revenues:													Revenues:
Interest income	Interest income	$	181	$	246	(26)	%	$	635	$	732	(13)	%	Interest income	$	172	$	181	(5)	%	$	505	$	635	(20)	%
Interest expense	Interest expense	(12)		(38)		(68)	%	(51)		(122)		(58)	%	Interest expense	(11)		(12)		(8)	%	(32)		(51)		(37)	%
Net interest income	Net interest income	169		208		(19)	%	584		610		(4)	%	Net interest income	161		169		(5)	%	473		584		(19)	%
All other	All other	9		7		29	%	20		20		—		All other	8		9		(11)	%	23		20		15	%
Net revenues	Net revenues	178		215		(17)	%	604		630		(4)	%	Net revenues	169		178		(5)	%	496		604		(18)	%
Non-interest expenses:	Non-interest expenses:													Non-interest expenses:
Compensation and benefits	Compensation and benefits	13		13		—		38		36		6	%	Compensation and benefits	13		13		—		38		38		—
Non-compensation expenses:	Non-compensation expenses:													Non-compensation expenses:
Loan loss provision/(benefit)		81		(5)		NM		188		16		1,075	%
Bank loan provision/(benefit) for credit losses														Bank loan provision/(benefit) for credit losses	(19)		81		NM		(37)		188		NM
RJBDP fees to PCG	RJBDP fees to PCG	43		44		(2)	%	138		127		9	%	RJBDP fees to PCG	47		43		9	%	134		138		(3)	%
All other	All other	27		25		8	%	77		67		15	%	All other	24		27		(11)	%	75		77		(3)	%
Total non-compensation expenses	Total non-compensation expenses	151		64		136	%	403		210		92	%	Total non-compensation expenses	52		151		(66)	%	172		403		(57)	%
Total non-interest expenses	Total non-interest expenses	164		77		113	%	441		246		79	%	Total non-interest expenses	65		164		(60)	%	210		441		(52)	%
Pre-tax income	Pre-tax income	$	14	$	138	(90)	%	$	163	$	384	(58)	%	Pre-tax income	$	104	$	14	643	%	$	286	$	163	75	%

Quarter ended June 30, ~~2020~~2021 compared with the quarter ended June 30, ~~2019~~2020

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

Net interest income decreased ~~$39~~$8 million, or ~~19%~~5%, as the negative ~~impact~~impacts from lower ~~short-term rates~~average 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 in~~average LIBOR, ~~the rate on~~as 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 to~~have 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 sales~~rates, as well as the elevated prepayment of ~~certain corporate loans are also expected in the~~higher-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 margins~~bank loan benefit for ~~RJ Bank.~~

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

~~Nonaccrual loans are included~~credit losses was $19 million in the ~~average loan balances~~current 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 for~~prior-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.~~

~~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 ~~changes~~improved 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 on~~prior-year quarter reflected the ~~interest earned on our interest-earning assets~~rapid and widespread economic deterioration and uncertainty at the ~~interest incurred on our interest-bearing liabilities. The effect~~onset of ~~changes in volume is determined by multiplying~~ the change in volume by the previous period’s average yield/cost. Similarly, the effect of rate changes is calculated by multiplying the change in average yield/cost by the previous year’s volume. Changes attributable to both volume and rate have been allocated proportionately.

Three months ended June 30,
2020 compared to 2019
Increase/(decrease) due to
$ in millions Volume Rate Total
Interest income:
Interest-earning assets:
Cash $ 12 $ (17) $ (5)
Available-for-sale securities 10 (5) 5
Bank loans, net of unearned income and deferred expenses:
Loans held for investment:
C&I loans (3) (36) (39)
CRE construction loans (1) (1) (2)
CRE loans 5 (19) (14)
Residential mortgage loans 8 (5) 3
SBL and other 5 (17) (12)
Total bank loans, net 14 (78) (64)
FHLB stock, FRB stock, and other 1 (2) (1)
Total interest-earning assets 37 (102) (65)
Interest expense:
Interest-bearing liabilities:
Bank deposits:
Savings, money market, and NOW accounts 6 (34) (28)
Certificates of deposit 1 — 1
FHLB advances and other — 1 1
Total interest-bearing liabilities 7 (33) (26)
Change in net interest income $ 30 $ (69) $ (39)
COVID-19 pandemic.

Nine months ended June 30, ~~2020~~2021 compared with the nine months ended June 30, ~~2019~~2020

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

~~The~~We had a bank loan ~~loss provision~~benefit for credit losses of $37 million, which was calculated under the CECL model, compared with a $188 million ~~compared to $16 million~~provision in the prior-year ~~period.~~period, which was calculated under the incurred loss model. The ~~increase~~current 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 in~~prior-year period reflected the ~~current-year period was primarily attributable to~~rapid and widespread economic deterioration and uncertainty caused by the ~~economic impacts~~onset 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.

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

~~Management’s Discussion and Analysis~~

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

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

~~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.

~~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 millions Volume Rate Total
Interest income:
Interest-earning assets:
Cash $ 15 $ (26) $ (11)
Available-for-sale securities 15 (6) 9
Bank loans, net of unearned income and deferred expenses:
Loans held for investment:
C&I loans (1) (59) (60)
CRE construction loans — (2) (2)
CRE loans 10 (32) (22)
Tax-exempt loans (1) — (1)
Residential mortgage loans 20 (8) 12
SBL and other 13 (33) (20)
Loans held for sale — (1) (1)
Total bank loans, net 41 (135) (94)
FHLB stock, FRB stock, and other 1 (2) (1)
Total interest-earning assets 72 (169) (97)
Interest expense:
Interest-bearing liabilities:
Bank deposits:
Savings, money market, and NOW accounts 12 (90) (78)
Certificates of deposit 7 (1) 6
FHLB advances and other (2) 3 1
Total interest-bearing liabilities 17 (88) (71)
Change in net interest income $ 55 $ (81) $ (26)
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 ~~2019~~2020 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 millions	2020		2019		% change		2020		2019		% change		$ in millions	2021		2020		% change		2021		2020		% change
Revenues:	Revenues:													Revenues:
Interest income	Interest income	$	3	$	12	(75)	%	$	27	$	42	(36)	%	Interest income	$	—	$	3	(100)	%	$	6	$	27	(78)	%
Gains/(losses) on private equity investments	Gains/(losses) on private equity investments	1		2		(50)	%	(40)		8		NM		Gains/(losses) on private equity investments	24		1		2,300	%	56		(40)		NM
All other	All other	2		1		100	%	4		5		(20)	%	All other	4		2		100	%	7		4		75	%
Total revenues	Total revenues	6		15		(60)	%	(9)		55		NM		Total revenues	28		6		367	%	69		(9)		NM
Interest expense	Interest expense	(26)		(19)		37	%	(63)		(57)		11	%	Interest expense	(26)		(26)		—		(75)		(63)		19	%
Net revenues	Net revenues	(20)		(4)		(400)	%	(72)		(2)		(3,500)	%	Net revenues	2		(20)		NM		(6)		(72)		92	%

Non-interest expenses:														Non-interest expenses:
Compensation and all other														Compensation and all other	34		9		278	%	96		34		182	%
Losses on extinguishment of debt														Losses on extinguishment of debt	98		—		NM		98		—		NM
Acquisition-related expenses														Acquisition-related expenses	4		—		NM		6		—		NM
Total non-interest expenses	Total non-interest expenses	9		21		(57)	%	34		58		(41)	%	Total non-interest expenses	136		9		1,411	%	200		34		488	%
Pre-tax loss	Pre-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, 2020~~Net 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 generated~~gains in the prior-year quarter.

~~Net revenues for the~~ The current quarter ~~decreased $16 million due to a $9 million decrease~~valuation 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 $12~~increased $127 million, ~~or 57%,~~ primarily due to ~~a decrease~~losses 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 ~~compensation~~the 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, ~~2020~~2021 compared with the nine months ended June 30, ~~2019~~2020

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 $70~~increased $66 million, ~~from a loss of $2 million~~primarily 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 loss~~noncontrolling interests and were offset within other expenses. These valuation gains were primarily the result of ~~$72 million, primarily due to~~continued 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 an~~and 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 $24~~increased $166 million, or ~~41%~~488%, primarily due to the aforementioned ~~$23~~losses on extinguishment of debt of $98 million, ~~offset of private equity valuation losses~~as 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,
		2020	2019	2020	2019		2021	2020	2021	2020
Return on assets	Return on assets	1.5%	2.7%	1.9%	2.7%	Return on assets	2.2%	1.5%	2.4%	1.9%
Return on equity	Return on equity	10.0%	16.1%	11.9%	16.2%	Return on equity	15.9%	10.0%	17.4%	11.9%
Average equity to average assets	Average equity to average assets	14.6%	16.7%	15.7%	16.6%	Average equity to average assets	13.6%	14.6%	14.0%	15.7%
Dividend payout ratio	Dividend payout ratio	30.1%	18.9%	25.6%	19.2%	Dividend payout ratio	17.9%	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.

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

Management’s Discussion and Analysis

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

~~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 transactions~~collateralized 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 due~~2021 to ~~$3.26 billion of~~$5.98 billion. During the nine months ended June 30, 2021, cash provided by ~~financing activities~~our operations (including significant net income) and ~~$2.66 billion~~proceeds 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 activities~~future growth with our acquisitions of ~~$3.02 billion~~NWPS 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 be~~our assets segregated pursuant to regulations, primarily through the purchase of ~~$1.19 billion. Cash provided by financing~~U.S. Treasuries, as part of our brokerage activities, ~~primarily related~~and 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 to~~as 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 $2.1~~Approximately $1.6 billion of our total June 30, ~~2020~~2021 cash and cash equivalents included cash ~~on hand~~held directly at the parent, ~~as well as~~or parent cash loaned to RJ&A. 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 millions	June 30, ~~2020~~2021
RJF	$	~~479~~480
RJ&A	~~2,603~~2,262
RJRaymond James Bank	~~1,519~~1,847
RJ Ltd.	~~662~~869
RJFS	123
Carillon Tower Advisers	6982
Other subsidiaries	~~177~~319
Total cash and cash equivalents	$	~~5,632~~5,982

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 to~~A large portion of the RJ&A Ltd. cash and cash equivalents balance as of June 30, ~~2020 (such amount is included in~~2021 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.

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

Management’s Discussion and Analysis

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

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

~~Management’s Discussion and Analysis~~

Liquidity available from subsidiaries

Liquidity is principally available to RJF, the parent company, from RJ&A and 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 ~~IRA~~IRAs and ~~plan accounts~~qualified plans and retain the accounts for which it serves as nonbank custodian. ~~To maintain adequate net worth under these regulations,~~With growth in the value of client assets in such accounts, the capital of RJ&A may ~~have~~need to grow to continue to satisfy this requirement. As a 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 does~~dividends 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, RJ~~Dividends from Raymond James Bank ~~had $274 million of~~may be limited to the extent that capital ~~in excess of the amount it would need at that date~~is needed to ~~maintain~~support its ~~targeted regulatory capital ratios, and could pay a dividend of such amount without requiring prior approval of its regulator.~~balance sheet growth.

Although we have liquidity available to us from our other subsidiaries, the available amounts are not as significant as those previously described and, in certain instances, may be subject to regulatory requirements.

Borrowings and financing arrangements

Committed financing arrangements

Our ability to borrow is dependent upon compliance with the conditions in our various loan agreements and, in the case of secured borrowings, collateral eligibility requirements. Our committed financing arrangements 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 facility~~tri-party repurchase agreement ranges from 105% to 125% of the amount financed.

The following table presents our committed financing arrangements with third-party lenders, which we generally utilize to finance a portion of our fixed income trading instruments, and the outstanding balances related thereto.

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


	June 30, 2021
$ in millions	RJ&A		RJF		Total		Total number of arrangements
Financing arrangement:
Committed secured	$	100	$	—	$	100	1
Committed unsecured	200		300		500		1
Total committed financing arrangements	$	300	$	300	$	600	2

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

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

Management’s Discussion and Analysis

~~(1) The~~Our committed unsecured financing arrangement in the preceding table represents our Credit Facility, which provides for maximum borrowings of up to $500 million, with a sublimit of $300 million for RJF. RJ&A may borrow up to $500 million under the Credit Facility, depending on the amount of outstanding borrowings by RJF. For additional details on our committed unsecured financing arrangement, see our discussion of the Credit Facility in Note 1214 of the Notes to ~~Condensed~~ Consolidated Financial Statements of ~~this~~our 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.

~~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 ~~two~~three 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 millions

June 30, ~~2020~~2021

Outstanding borrowing amount:

Uncommitted secured

~~228~~185

Uncommitted unsecured

—

Total outstanding borrowing amount

~~228~~185

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


	Repurchase transactions						Reverse repurchase transactions
For the quarter ended: ($ in millions)	Average daily balance outstanding		Maximum month-end balance outstanding during the quarter		End of period balance outstanding		Average daily balance outstanding		Maximum month-end balance outstanding during the quarter		End of period balance outstanding
June 30, 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 Bank~~We 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 ~~this~~our 2020 Form ~~10-Q~~10-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, ~~2020~~2021 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-window~~Federal Reserve’s discount window program; however, we do not view borrowings from the ~~FRB~~Federal Reserve as a primary source of funding. The credit available in this program is subject to periodic review, may be terminated or reduced at the discretion of the ~~FRB,~~Federal Reserve, and is secured by pledged C&I loans.

We act as an intermediary between broker-dealers and other financial institutions whereby we borrow securities from one broker-dealer and then lend them to another. Where permitted, we have also loaned, to broker-dealers and other financial

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 ~~balances~~balance 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.

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

~~Management’s Discussion and Analysis~~

Repurchase transactions Reverse repurchase transactions
For the quarter ended:
($ in millions)
Average daily
balance
outstanding Maximum month-end
balance outstanding
during the quarter End of period
balance
outstanding Average daily
balance
outstanding Maximum month-end
balance outstanding
during the quarter End of period
balance
outstanding
June 30, 2020 $ 222 $ 278 $ 228 $ 168 $ 193 $ 193
March 31, 2020 $ 218 $ 238 $ 215 $ 283 $ 388 $ 130
December 31, 2019 $ 184 $ 200 $ 200 $ 355 $ 351 $ 326
September 30, 2019 $ 170 $ 158 $ 150 $ 334 $ 343 $ 343
June 30, 2019 $ 211 $ 212 $ 165 $ 442 $ 479 $ 411
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 Agency

Rating

Outlook

~~Standard & Poor’s~~Fitch Ratings, ~~Services~~Inc.

~~BBB+~~A-

Stable

Moody’s Investors Services

Baa1

Stable

Standard & Poor’s Ratings Services

BBB+

Stable

Our current long-term debt ratings depend upon a number of factors, including industry dynamics, operating and economic environment, operating results, operating margins, earnings trends and volatility, balance sheet composition, liquidity and liquidity management, capital structure, overall risk management, business diversification and market share, and competitive position in the markets in which we operate. ~~Deteriorations~~Deterioration in any of these factors could impact our credit ratings. Any rating downgrades could increase our costs in the event we were to obtain additional financing.

Should our credit rating be downgraded prior to a public debt offering, it is probable that we would have to offer a higher rate of interest to bond holders. A downgrade to below investment grade may make a public debt offering difficult to execute on terms we would consider to be favorable. A downgrade below investment grade could result in the termination of certain derivative contracts and the counterparties to the derivative instruments could request immediate payment or demand immediate and ongoing overnight collateralization on our derivative instruments in liability ~~positions (see Note 5 of the Notes to Condensed Consolidated Financial Statements of this Form 10-Q for additional information).~~positions. A credit downgrade could damage our reputation and result in certain counterparties limiting their business with us, result in negative comments by analysts, potentially negatively impact ~~investor~~investors’ and/or clients’ perception of us, and cause a decline in our stock price. None of our borrowing arrangements contains a condition or event of default related to our credit ratings. However, a credit downgrade would result in the firm incurring a higher facility fee on the ~~$500 million~~ Credit Facility, in addition to triggering a higher interest rate applicable to any borrowings outstanding on that line as of and subsequent to such downgrade. Conversely, an improvement in RJF’s current credit rating could have a favorable impact on the facility fee, as well as the interest rate applicable to any borrowings on such line.

Other sources and uses of liquidity

We have company-owned life insurance policies which are utilized to fund certain non-qualified deferred compensation plans and other employee benefit plans. Certain of our non-qualified deferred compensation plans and other employee benefit plans are employee-directed while others are company-directed. Certain policies which we could readily borrow against had a cash surrender value of ~~$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, ~~2020~~2021 total

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

~~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 section~~Notes to Condensed Consolidated Financial Statements of this ~~MD&A~~Form 10-Q for ~~information regarding~~additional 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 is~~assets segregated pursuant to regulations (segregated for the benefit of clients), receivables including bank loans, financial instruments held either for trading purposes or as investments, and other assets. A significant portion of our assets ~~were~~are liquid in nature, providing us with flexibility in financing our business.

Total assets of ~~$44.68~~$57.16 billion as of June 30, ~~2020~~2021 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 equivalents~~assets segregated pursuant to regulations, primarily due to a significant increase in client cash ~~balances~~balances. 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 result~~acquisitions 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 comprised~~as 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 as~~and 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 ~~2019~~2020 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

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

~~Management’s Discussion and Analysis~~

capital position of RJF and its regulated subsidiaries, we do not anticipate these capital requirements will have a negative impact on our future business activities. See Note 21 of the Notes to Condensed Consolidated Financial Statements of this Form 10-Q for further information on regulatory capital requirements.

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

Management’s Discussion and Analysis

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.~~

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

~~The CARES Act also provides certain temporary regulatory relief for~~ financial institutions ~~including RJF and its subsidiaries. The act permits financial institutions~~were permitted to temporarily suspend any determination of a loan ~~modified~~modification as a result of the effects of COVID-19 as being a TDR, including impairment for accounting purposes. The Consolidated Appropriations Act, 2021 extended such relief until the earlier of: (1) 60 days after the date on which the national emergency concerning COVID-19 terminates; or (2) January 1, 2022. We elected to apply the ~~CARES~~extension for relief under the Consolidated Appropriations Act, ~~relief~~2021 to certain loan modifications that primarily relate to short-term payment ~~deferrals~~deferral and have not classified such modifications as TDRs. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Risk management - Credit risk” for further information on the impact of such loan modifications. The act 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 provides~~On 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.

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

~~Management’s Discussion and Analysis~~

~~The Volcker Rule~~

~~In June 2020, the Fed, Commodity Futures Trading Commission, FDIC,~~ Office of the Comptroller of the Currency ~~(“OCC”~~(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 amendments~~Fed. As a state member bank, Raymond James Bank will also continue to be supervised by the ~~rules implementing~~FDIC 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.

~~Many~~Standard 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 reinstated~~is expected to amend the ~~historical “five-part test” for determining who is~~rule that determines whether an investment ~~advice “fiduciary” when dealing with certain~~professional is a fiduciary to their clients’ retirement ~~plans~~accounts under the Employee Retirement Income Security Act and ~~accounts and proposed~~Internal 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 impact~~trades, imposing a new standard of ~~the DOL change~~care on ~~our business will not be fully known until the proposal is finalized and~~additional 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

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

~~Management’s Discussion~~On July 20, 2021, the Fed, the FDIC and ~~Analysis~~the 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 ~~2019~~2020 Form ~~10-K.~~10-K and Note 2 of the Notes to Condensed Consolidated Financial Statements of this Form 10-Q.

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

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 disruptions~~Economic uncertainty as a result of the COVID-19 pandemic ~~have~~has made it more challenging for us to determine the amount of our allowance for ~~loan~~credit losses and ~~the fair value of certain of our assets, particularly our private equity investments. The current circumstances have~~has required a greater reliance on judgment ~~than~~ in recent periods in determining ~~these amounts as of 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 ~~2019~~2020 Form 10-K for a discussion of our fair value accounting policies regarding financial instruments ~~owned~~ and financial ~~instruments sold but not yet purchased.~~instrument liabilities. See Note 34 of the Notes to Condensed Consolidated Financial Statements of this Form 10-Q for additional information on our financial instruments at fair value.

~~Loss provisions~~

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

Loss provisions for legal and regulatory matters

The recorded amount of liabilities related to legal and regulatory matters is subject to significant management judgment. For a description of the significant estimates and judgments associated with establishing such accruals, see the “Contingent liabilities” section of Note 2 of the Notes to Consolidated Financial Statements of our ~~2019~~2020 Form 10-K. In addition, refer to Note 1516 of the Notes to Condensed Consolidated Financial Statements of this Form 10-Q for information regarding legal and regulatory matter contingencies as of June 30, ~~2020.~~2021.

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

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

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

~~Our process of evaluating probable loan~~credit losses includes a complex analysis of several quantitative and qualitative factors, requiring significant management ~~judgment. As a result,~~judgment due to matters that are inherently uncertain. This uncertainty can produce volatility in our allowance for credit losses. In addition, the allowance for ~~loan~~credit losses could be insufficient to cover actual losses. In such an event, any losses in excess of our allowance would result in a decrease in our net income, as well as a decrease in the level of regulatory capital. 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.

7880

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

Management’s Discussion and Analysis

~~RECENT ACCOUNTING DEVELOPMENTS~~

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

~~OFF-BALANCE SHEET ARRANGEMENTS~~

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 risks~~risk is critical to our fiscal soundness and profitability. Our risk management processes are multi-faceted and require communication, judgment and knowledge of financial products and markets. We have a formal Enterprise Risk Management (“ERM”) program to assess and review aggregate risks across the firm. Our management takes an active role in the ERM process, which requires specific administrative and business functions to participate in the identification, assessment, monitoring and control of various risks.

The principal risks related to our business activities are market, credit, liquidity, operational, model, and compliance.

Governance

Our Board of Directors oversees the firm’s management and mitigation of risk, ~~setting~~reinforcing a culture that encourages ethical conduct and risk management throughout the firm. Senior management communicates and reinforces this culture through three lines of risk management and a number of senior-level management committees. Our first line of risk management, which includes all of our businesses, owns its risks and is responsible for helping to identify, escalate, and mitigate risks arising from its day-to-day activities. The second line of risk management, which includes the Compliance, Legal, and Risk Management departments, supports and provides guidance ~~advice,~~ and oversight to client-facing businesses and other first-line risk management functions in identifying and mitigating risk. The second line of risk management also tests and monitors the effectiveness of controls, escalates risks when appropriate, and reports on these risks. The third line of risk management, Internal Audit, independently reviews activities conducted by the previous lines of risk management to assess their management and mitigation of risk, providing additional assurance to the Board of Directors and senior management, with a view toward enhancing our oversight, management, and mitigation of risk.

Market risk

Market risk is our risk of loss resulting from the impact of changes in market prices on our trading inventory, derivatives and investment positions. We have exposure to market risk primarily through our broker-dealer trading operations and ~~to a lesser extent, through~~ our banking operations. See “Item 7 - Management’s Discussion and Analysis of Financial Condition and Results of Operations - Risk management - Market risk” of our ~~2019~~2020 Form 10-K for a discussion of our market risk, including how we manage such risk. See Notes 3, 4, 5 and 56 of the Notes to Condensed Consolidated Financial Statements of this Form 10-Q for fair value and other information regarding our trading inventories, available-for-sale securities and derivative instruments.

Interest rate risk

Trading activities

We are exposed to interest rate risk as a result of our trading inventory (primarily comprised of fixed income instruments) in our Capital Markets segment. We actively manage the interest rate risk arising from our fixed income trading securities through the use of hedging strategies that involve U.S. Treasury securities, futures contracts, liquid spread products and derivatives. ~~In response to~~

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

~~Management’s Discussion and Analysis~~

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

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

Management’s Discussion and Analysis

intraday trading. Regulatory-defined daily trading losses are used to evaluate the performance of our VaR model and are not comparable to our actual daily net revenues. Based on these daily “ex ante” versus “ex ~~post~~”post” comparisons, we determine whether the number of times that regulatory-defined daily trading losses exceed VaR is consistent with our expectations at a 99% confidence level. During the ~~three~~nine months ended June 30, ~~2020,~~2021, our regulatory-defined daily ~~loss~~losses 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 ~~derivative~~equity instruments, for the period and dates indicated.


		Nine months ended June 30, 2020						Period-end VaR							Three months ended June 30,							Nine months ended June 30,							Nine months ended June 30, 2021			Period-end VaR						Three months ended June 30,	Nine months ended June 30,
$ in millions	$ in millions	High		Low		June 30, 2020		September 30, 2019		$ in millions	2020		2019		2020		2019		$ in millions	High			Low		June 30, 2021		September 30, 2020		$ in millions	2021		2020		2021		2020
Daily VaR	Daily VaR	$	6	$	1	$	5	$	1	Daily average VaR	$	2	$	1	$	2	$	1	Daily VaR	$	11		$	1	$	1	$	8	Average daily VaR	$	2	$	2	$	5	$	2

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

Should markets suddenly become more volatile, ~~as they did in our 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 ~~earning~~interest-earning asset portfolio that is comprised of cash, C&I loans, ~~tax-exempt loans,~~ commercial and residential real estate loans, REIT loans, tax-exempt loans and SBL and other loans, as well as agency MBS and agency CMOs (held in the available-for-sale securities portfolio), SBA loan securitizations and a trading portfolio of corporate loans. These ~~earning~~interest-earning assets are primarily funded by client deposits. Based on its

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

~~Management’s Discussion and Analysis~~

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 ~~2019~~2020 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 ~~2019~~2020 Form 10-K.

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

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 own~~our asset/liability ~~model.~~model, which assumes that interest rates do not decline below zero.


Instantaneous changes in rate	Instantaneous 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	$848	32.5%	+200	$915	38.0%
+100	+100	$796	24.4%	+100	$855	29.0%
0	0	$640	—	0	$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’s~~our 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 millions	One year or less		> One year – five years		> five years		Total		$ in millions	One year or less		> One year – five years		> Five years		Total
Loans held for investment:
C&I loans	C&I loans	$	208	$	4,425	$	3,098	$	7,731	C&I loans	$	204	$	4,300	$	3,507	$	8,011
CRE construction loans		25		153		41		219
CRE loans	CRE loans	559		2,466		670		3,695		CRE loans	699		1,535		494		2,728
REIT loans										REIT loans	112		1,148		10		1,270
Tax-exempt loans	Tax-exempt loans	—		76		1,214		1,290		Tax-exempt loans	1		69		1,250		1,320
Residential mortgage loans	Residential mortgage loans	—		5		4,912		4,917		Residential mortgage loans	—		4		5,166		5,170
SBL and other	SBL and other	3,610		21		—		3,631		SBL and other	5,545		37		—		5,582
Total loans held for investment	Total loans held for investment	4,402		7,146		9,935		21,483		Total loans held for investment	6,561		7,093		10,427		24,081
Loans held for sale		—		—		83		83
Held for sale loans										Held for sale loans	—		—		137		137
Total loans	Total loans	$	4,402	$	7,146	$	10,018	$	21,566	Total loans	$	6,561	$	7,093	$	10,564	$	24,218

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

~~Management’s Discussion and Analysis~~

The following table shows the distribution of the recorded investment of those ~~RJ Bank~~bank 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 millions	Fixed		Adjustable		Total		$ in millions	Fixed		Adjustable		Total
Loans held for investment:
C&I loans	C&I loans	$	126	$	7,397	$	7,523	C&I loans	$	301	$	7,506	$	7,807
CRE construction loans		1		193		194
CRE loans	CRE loans	72		3,064		3,136		CRE loans	91		1,938		2,029
REIT loans								REIT loans	—		1,158		1,158
Tax-exempt loans	Tax-exempt loans	1,290		—		1,290		Tax-exempt loans	1,319		—		1,319
Residential mortgage loans	Residential mortgage loans	210		4,707		4,917		Residential mortgage loans	191		4,979		5,170
SBL and other	SBL and other	—		21		21		SBL and other	—		37		37
Total loans held for investment	Total loans held for investment	1,699		15,382		17,081		Total loans held for investment	1,902		15,618		17,520
Loans held for sale		4		79		83
Held for sale loans								Held for sale loans	1		136		137
Total loans	Total loans	$	1,703	$	15,461	$	17,164	Total loans	$	1,903	$	15,754	$	17,657

Contractual loan terms for C&I, CRE, ~~CRE construction~~REIT and residential mortgage loans may include an interest rate floor, cap and/or fixed interest rates for a certain period of time, which would impact the timing of the interest rate reset for the respective loan. See the discussion within the “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Risk management - Credit risk - Risk monitoring process” section of this Form 10-Q for additional information regarding 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 ~~were~~are 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 ~~duration~~weighted-average life of ~~three~~approximately 4 years. See Note 45 of the Notes to Condensed Consolidated Financial Statements of this Form 10-Q for additional information.

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

Management’s Discussion and Analysis

Equity price risk

We are exposed to equity price risk as a result of our capital markets activities. Our broker-dealer activities are ~~primarily~~generally client-driven, ~~with~~and we carry equity securities as part of our trading inventory to facilitate such activities, although the ~~objective of meeting clients’ needs while earning revenues to compensate for the risk associated with carrying~~amounts are not as significant as our fixed income trading inventory. We attempt to reduce the risk of loss inherent in our inventory of equity securities by monitoring those security positions ~~throughout~~ each day and establishing position limits. Equity securities held in our trading inventory are generally included in VaR.

In addition, we have a private equity portfolio, included in “Other investments” on our Condensed Consolidated Statements of Financial Condition, which is comprised of various direct investments, as well as investments in third-party private equity funds and various legacy private equity funds which we sponsor. Of the total private equity investments at 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, ~~2020~~2021 and September 30, ~~2019, respectively.~~2020, respectively, when converted to the U.S. dollar. A ~~portion~~majority 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 ~~346~~393 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.

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

~~Management’s Discussion and Analysis~~

We also have foreign exchange risk associated with our investments in subsidiaries located in Europe. These investments are not hedged and we do not believe we ~~have~~had 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 upon~~agreed-upon terms. The nature and amount of credit risk depends on the type of transaction, the structure and duration of that transaction, and the parties involved. Credit risk is an integral component of the profit assessment of lending and other financing activities. See further discussion of our credit risk, including how we manage such

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

Management’s Discussion and Analysis

risk, in “Item 7 - Management’s Discussion and Analysis of Financial Condition and Results of Operations - Risk management - Credit risk” of our ~~2019~~2020 Form 10-K.

The initial decline in economic activity as a result of the COVID-19 ~~has~~pandemic caused increased credit risk ~~in general and~~ particularly with regard to companies in sectors that ~~have been~~were most significantly impacted by the economic disruption, including 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 settle~~sale of loans in those sectors with a ~~given counterparty.~~high likelihood of adverse impact arising from the pandemic. We have also required collateral to be posted across our credit risk exposures in accordance with agreements with our borrowers and counterparties. Although economic conditions have generally improved, we have maintained our increased focus on monitoring our credit exposures and counterparty credit risk.

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’s~~our 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 has~~we have a concentration will generally result in large provisions for ~~loan~~credit losses and/or charge-offs. ~~RJ Bank determines~~Conversely, should the economy recover at a faster pace than initially forecasted, or the negative impact of the significant downtown event be less than originally projected, the timing and magnitude of any decreases in required reserves for credit losses can be uncertain. 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 its~~we evaluate our methods for determining the allowance for each class of loans and ~~makes~~make enhancements ~~it considers~~we 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

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 ~~loan~~credit losses at June 30, ~~2020,~~2021, including loan and borrower characteristics, such as internal risk ratings, delinquency status, collateral type and the ~~risk profile~~remaining term of the ~~portfolios,~~loan adjusted for expected prepayments. In addition, the estimate of credit losses considered the relatively small amount of net charge-offs during the period, the level of nonperforming loans ~~delinquency ratios~~ and the impact of the COVID-19 pandemic. ~~RJ Bank~~We 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 Bank~~we 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 ~~more~~new information becomes available regarding the financial repercussions to our borrowers, the risk ratings for individual loans will be updated and the allowance will be adjusted accordingly. ~~Additional sales of corporate loans are also expected in the fiscal fourth quarter to further reduce credit risk in certain sectors.~~

~~RJ Bank’s~~Our allowance for ~~loan~~credit 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 in~~During the ~~Notes to the Condensed Consolidated Financial Statements of this Form 10-Q for detail on the changes in RJ Bank’s allowance for loan losses.~~

~~The bank loan loss provision for the~~three and nine months ended June 30, ~~2020 was $188~~2021, we had a benefit for credit losses on our bank loan portfolio of $19 million ~~compared to a loan loss provision of $16~~and $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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RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

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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,
2020 2019 2020 2019
$ in millions
Net loan
(charge-off)/recovery
amount ⁽¹⁾
% of avg.
outstanding
loans
Net loan
(charge-off)/recovery
amount ⁽¹⁾
% of avg.
outstanding
loans
Net loan
(charge-off)/recovery
amount ⁽¹⁾
% of avg.
outstanding
loans
Net loan
(charge-off)/recovery
amount ⁽¹⁾
% of avg.
outstanding
loans
C&I loans $ (71) 3.55 % $ 1 0.06 % $ (71) 1.18 % $ (2) 0.02 %
CRE loans (2) 0.21 % — — (2) 0.07 % (3) 0.13 %
Residential mortgage loans 1 0.08 % — — 1 0.03 % 1 0.02 %
Total $ (72) 1.31 % $ 1 0.02 % $ (72) 0.44 % $ (4) 0.03 %


	Three Months Ended June 30								Nine Months Ended June 30
	2021				2020				2021				2020
$ 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	—		—	%	1		0.08	%	—		—	%	1		0.03	%


Total	$	(4)	0.07	%	$	(72)	1.31	%	$	(6)	0.04	%	$	(72)	0.44	%

(1) Charge-offs related to loan sales ~~amounted~~during 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 ~~loan~~credit losses for the periods presented.


		June 30, 2020								September 30, 2019								June 30, 2021					September 30, 2020
$ in millions	$ in millions	Nonperforming loan balance			Allowance for loan losses balance		Nonperforming loan balance			Allowance for loan losses balance		$ in millions	Nonperforming loan balance			Allowance for credit losses balance		Nonperforming loan balance			Allowance for credit losses balance
Loans held for investment:
C&I loans	C&I loans	$	1		$	186	$	19		$	139	C&I loans	$	—		$	188	$	2		$	200
CRE construction loans		—			4		—			3
CRE loans	CRE loans	6			106		8			46		CRE loans	27			73		14			81
REIT loans												REIT loans	—			26		—			36
Tax-exempt loans	Tax-exempt loans	—			13		—			9		Tax-exempt loans	—			2		—			14
Residential mortgage loans	Residential mortgage loans	14			20		16			16		Residential mortgage loans	15			29		14			18
SBL and other	SBL and other	—			5		—			5		SBL and other	—			4		—			5

Total		$	21		$	334	$	43		$	218
Total nonperforming loans as a % of RJ Bank total loans		0.07		%			0.21		%
Total nonperforming loans held for investment												Total nonperforming loans held for investment	$	42		$	322	$	30		$	354
Total nonperforming loans as a % of total bank loans												Total nonperforming loans as a % of total bank loans	0.17		%			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, ~~2020~~2021 and September 30, ~~2019,~~2020, respectively, of residential TDRs which were returned to accrual status in accordance with our policy. Total nonperforming assets, including the nonperforming loans in the preceding table and other real estate acquired in the settlement of residential mortgages, amounted to ~~$23~~$43 million and ~~$46~~$32 million at June 30, ~~2020~~2021 and September 30, ~~2019,~~2020, respectively. Total nonperforming assets as a percentage of ~~RJ Bank~~Raymond James Bank’s total assets were ~~0.08%~~0.12% and ~~0.18%~~0.10% at June 30, ~~2020~~2021 and September 30, ~~2019,~~2020, respectively. Although our nonperforming assets as a percentage of ~~RJ Bank~~Raymond 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 ~~loan~~credit 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 ~~clients~~borrowers for forbearance, orwhich is generally a short-term deferral of their loan payments, ~~to us,~~or modification of certain covenant terms, driven or exacerbated by the economic impacts of the COVID-19 pandemic. ~~Certain clients~~Based 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 requested~~received 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 to~~are not ~~apply~~applying TDR classification to any COVID-19 related loan modifications ~~that were~~ performed ~~after~~from 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 end~~As of June 30, ~~2020,~~2021, we ~~have active short-term payment deferrals on approximately $364 million and $126 million of our corporate and~~had residential loans ~~respectively. The borrower’s past due and nonaccrual~~of $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 ~~will~~is not ~~be impacted during the deferral period.~~

affected for loans that are in active forbearance or for loan

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RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

Management’s Discussion and Analysis

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’s~~Our 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 ~~2019~~2020 Form 10-K. There were no material changes in ~~RJ Bank’s~~our bank loan underwriting policies during the nine months ended June 30, ~~2020.~~2021.

Risk monitoring process

Another component of credit risk strategy ~~at RJ Bank~~for 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’s~~our SBL and other portfolio is monitored on a recurring basis, with marketable collateral monitored on a daily basis. Collateral adjustments are made by the borrower as necessary to ensure ~~RJ Bank’s~~our loans are adequately secured, resulting in minimizing its credit risk. Collateral calls have been minimal relative to our SBL and other portfolio with no losses incurred to date.

We track and review many factors to monitor credit risk in ~~RJ Bank’s~~our 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 reviewed~~See Note 8 in ~~establishing~~ the ~~allowance~~Notes 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 loans Delinquent residential loans as a percentage of outstanding loan balances
$ in millions 30-89 days 90 days or more Total 30-89 days 90 days or more Total
June 30, 2020 $ 5 $ 7 $ 12 0.10 % 0.14 % 0.24 %
September 30, 2019 $ 2 $ 10 $ 12 0.04 % 0.22 % 0.26 %


	Amount of delinquent residential loans						Delinquent residential loans as a percentage of outstanding loan balances
$ in millions	30-89 days		90 days or more		Total		30-89 days		90 days or more		Total
June 30, 2021	$	5	$	6	$	11	0.10	%	0.12	%	0.22	%
September 30, 2020	$	3	$	7	$	10	0.06	%	0.14	%	0.20	%

Our June 30, ~~2020~~2021 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 Group~~PCG clients across the country. The following table details the geographic concentrations (top five states) of ~~RJ Bank’s~~our one-to-four family residential mortgage loans.


		June 30, 2020				June 30, 2021
		Loans outstanding as a % of RJ Bank total residential mortgage loans	Loans outstanding as a % of RJ Bank total loans		Loans outstanding as a % of total residential mortgage loans	Loans outstanding as a % of total bank loans
CA	CA	25.8%	5.9%	CA	25.3%	5.4%
FL	FL	16.4%	3.8%	FL	17.5%	3.7%
TX	TX	8.2%	1.9%	TX	8.9%	1.9%
NY	NY	7.1%	1.6%	NY	7.5%	1.6%
CO	CO	4.1%	0.9%	CO	4.1%	0.9%

Loans where borrowers may be subject to payment increases include ~~adjustable rate mortgage~~ARM loans with terms that initially require payment of interest only. Payments may increase significantly when the interest-only period ends and the loan principal begins to

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

Management’s Discussion and Analysis

amortize. At June 30, ~~2020~~2021 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.

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

~~Management’s Discussion and Analysis~~

A component of credit risk management for the residential portfolio is the LTV ratio and borrower credit score at origination or purchase. The weighted-average LTV ratios and FICO scores at origination of RJ Bank’s residential first mortgage loan portfolio were 64% and 762, respectively.

Corporate and tax-exempt loans

Credit risk in ~~RJ Bank’s~~our corporate and tax-exempt bank loan portfolios ~~are~~is monitored on an individual loan basis. The majority of ~~RJ Bank’s~~our 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’s~~Our 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’s~~our corporate bank loans.


		June 30, 2020				June 30, 2021
		Loans outstanding as a % of RJ Bank total corporate loans	Loans outstanding as a % of RJ Bank total loans		Loans outstanding as a % of total corporate bank loans	Loans outstanding as a % of total bank loans
Office real estate	Office real estate	7.4%	4.0%	Office real estate	7.7%	3.8%
Business systems and services				Business systems and services	6.9%	3.4%
Automotive/transportation	Automotive/transportation	7.2%	3.9%	Automotive/transportation	6.3%	3.1%
Business systems and services		6.6%	3.6%
Hospitality		6.6%	3.6%
Multi-family	Multi-family	5.2%	2.8%	Multi-family	6.1%	3.0%
Consumer products and services				Consumer products and services	5.8%	2.9%

~~RJ Bank’s~~The 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 by~~we 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 from~~future. 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 ~~current~~first nine months of fiscal year ~~our~~2021 and have now surpassed pre-pandemic levels as of the end of the fiscal third quarter of 2021. Our energy portfolio ~~primarily~~has minimal direct commodity price exposure since it consists of loans to midstream distribution companies and convenience stores, with no loans to exploration and production enterprises. ~~As a result,~~However, in the ~~portfolio has minimal direct commodity price exposure. However, if we continue to see a~~event of significant deterioration in oil prices in the future, our ~~clients,~~borrowers, and ~~as a result~~ our loans to such ~~clients,~~borrowers, could be negatively ~~impacted in the future.~~impacted.

Liquidity risk

See the section “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and capital resources” of this Form 10-Q for information regarding our liquidity and how we manage liquidity risk.

Operational risk

Operational risk generally refers to the risk of loss resulting from our operations, including, but not limited to, business disruptions, improper or unauthorized execution and processing of transactions, deficiencies in our technology or financial operating systems and inadequacies or breaches in our control processes, including cybersecurity incidents. See “Item 7 - Management’s Discussion and Analysis of Financial Condition and Results of Operations - Risk management - Operational risk” of our ~~2019~~2020 Form 10-K for a discussion of our operational risk and certain of our risk mitigation processes.

In response to the COVID-19 pandemic, we activated and successfully executed on our business continuity protocols and continue to monitor the COVID-19 ~~crisis~~pandemic under such protocols. We have endeavored to ~~safeguard~~protect our associates and our clients and to ensure continuity of business operations for our clients. As a result, ~~most~~a substantial portion of our associates ~~are working~~continue 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 situation~~conditions and has developed a phased approach to reopening our offices ~~based on regional indicators and in compliance~~which complies with all applicable laws, regulations, and ~~regulations.~~Centers for Disease Control guidelines. As of June 30, ~~2020,~~2021, we ~~have~~had reopened ~~certain~~most of our offices in a limited capacity and ~~are working~~have 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 described~~flexibility for our associates. However, the recent disruptions in the ~~discussion~~U.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 ~~2019~~2020 Form 10-K for information regarding how we utilize models throughout the firm and how we manage model risk.

Compliance risk

Compliance risk is the risk of legal or regulatory sanctions, financial loss, or reputational damage that the firm may suffer from a failure to comply with applicable laws, external standards, or internal requirements. See “Item 7 - Management’s Discussion and Analysis of Financial Condition and Results of Operations - Risk management - Compliance risk” of our ~~2019~~2020 Form 10-K for information on our compliance risks, including how we manage such risks. ~~There have been no material changes in our compliance risk mitigation processes during the 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 ~~quarter~~three and nine months ended June 30, ~~2020~~2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

~~Not applicable.~~None.

ITEM 1A. RISK FACTORS

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

~~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.

8890

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

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

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

Notwithstanding the precautions we take, if a cyber-attack or other information security breach were to occur, this could jeopardize the information we confidentially maintain, or otherwise cause interruptions in our operations or those of our clients and counterparties, exposing us to liability. As attempted attacks continue to evolve in scope and sophistication, we may be required to expend substantial additional resources to modify or enhance our protective measures, to investigate and remediate vulnerabilities or other exposures or to communicate about cyber-attacks to our customers. Though we have insurance against some cyber-risks and attacks, we may be subject to litigation and financial losses that exceed our policy limits or are not covered under any of our current insurance policies. A technological breakdown could also interfere with our ability to comply with financial reporting and other regulatory requirements, exposing us to potential disciplinary action by regulators. Additionally, the SEC issued guidance in February 2018 stating that, as a public company, we are expected to have controls and procedures that relate to cybersecurity disclosure, and are required to disclose information relating to certain cyber-attacks or other information security breaches in disclosures required to be made under the federal securities laws. Further, successful cyber-attacks at other large financial institutions or other market participants, whether or not we are affected, could lead to a general loss of customer confidence in financial institutions that could negatively affect us, including harming the market perception of the effectiveness of our security measures or the financial system in general, which could result in reduced use of our financial products and services.

Further, in light of the high volume of transactions we process, the large number of our clients, partners and counterparties, the increasing sophistication of malicious actors, and the COVID-19 pandemic response, a cyber-attack could occur and persist for an extended period of time without detection. We expect that any investigation of a cyber-attack would take substantial amounts of time, and that there may be extensive delays before we obtain full and reliable information. During such time we would not necessarily know the extent of the harm or how best to remediate it, and certain errors or actions could be repeated or compounded before they are discovered and remediated, all of which would further increase the costs and consequences of such an attack.

We may also be subject to liability under various data protection laws. In providing services to clients, we manage, utilize and store sensitive or confidential client or employee data, including personal data. As a result, we are subject to numerous laws and regulations designed to protect this information, such as U.S. federal, state and international laws governing the protection of personally identifiable information. These laws and regulations are increasing in complexity and number. If any person, including any of our associates, negligently disregards or intentionally breaches our established controls with respect to client or employee data, or otherwise mismanages or misappropriates such data, we could be subject to significant monetary damages, regulatory enforcement actions, fines and/or criminal prosecution. In addition, unauthorized disclosure of sensitive or confidential client or employee data, whether through system failure, employee negligence, fraud or misappropriation, could damage our reputation and cause us to lose clients and related revenue. Potential liability in the event of a security breach of client data could be significant. Depending on the circumstances giving rise to the breach, this liability may not be subject to a contractual limit or an exclusion of consequential or indirect damages.

See “Item 7 - Management’s Discussion and Analysis of Financial Condition and Results of Operations - Risk management - Operational risk” of our 2019 Form 10-K and “Item 2 - Management’s Discussion and Analysis of Financial Condition and Results of Operations - Risk management - Operational risk” of this Form 10-Q for additional information regarding our exposure to and approaches for managing operational risks.

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

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

We did not have any sales of unregistered securities for the 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 programs Approximate dollar value (in millions) at each month-end, of securities that may yet be purchased under the plans or programs
October 1, 2019 – October 31, 2019 5,582 $ 84.80 — $750
November 1, 2019 – November 30, 2019 86,720 $ 89.35 — $750
December 1, 2019 – December 31, 2019 132,723 $ 89.33 125,567 $739
First quarter 225,025 $ 89.23 125,567
January 1, 2020 – January 31, 2020 40,106 $ 89.74 32,988 $736
February 1, 2020 – February 29, 2020 721,432 $ 89.47 719,250 $672
March 1, 2020 – March 31, 2020 1,800,682 $ 74.94 1,795,764 $537
Second quarter 2,562,220 $ 79.26 2,548,002
April 1, 2020 – April 30, 2020 — $ — — $537
May 1, 2020 – May 31, 2020 — $ — — $537
June 1, 2020 – June 30, 2020 — $ — — $537
Third quarter — $ — —
Fiscal year-to-date total 2,787,245 $ 80.06 2,673,569


	Total number of shares purchased	Average price per share		Number of shares purchased as part of publicly announced plans or programs	Approximate dollar value (in millions) at each month-end of securities that may yet be purchased under the plans or programs
October 1, 2020 – October 31, 2020	1,204	$	80.04	—	$487
November 1, 2020 – November 30, 2020	93,225	$	90.50	—	$487
December 1, 2020 – December 31, 2020	116,759	$	93.02	107,750	$740
First quarter	211,188	$	91.84	107,750

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

April 1, 2021 – April 30, 2021	887	$	128.91	—	$680
May 1, 2021 – May 31, 2021	—	$	—	—	$680
June 1, 2021 – June 30, 2021	375,000	$	128.55	375,000	$632
Third quarter	375,887	$	128.55	375,000

Fiscal year-to-date total	1,098,177	$	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 ~~our~~the Restricted Stock Trust Fund, which was established to acquire our common stock in the open market and used to settle RSUs granted as a retention vehicle for certain employees of our ~~wholly owned~~wholly-owned Canadian subsidiaries. For more information on this trust fund, see Note 2 of the Notes to Consolidated Financial Statements of our ~~2019~~2020 Form 10-K and Note 810 of the Notes to Condensed Consolidated Financial Statements of this Form 10-Q. These activities do not utilize the repurchase authorization presented in the preceding table.

The total number of shares purchased also includes shares repurchased as a result of employees surrendering shares as payment for option exercises or withholding taxes. These activities do not utilize the repurchase authorization presented in the preceding table.

In response to the heightened market volatility as a result of the COVID-19 pandemic, we 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.

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

ITEM 6. EXHIBITS


Exhibit Number	Description
3.1		Restated Articles of Incorporation of Raymond James Financial, Inc. as filed with the Secretary of State of Florida on November 25, 2008, incorporated by reference to Exhibit 3(i).1 to the Company’s Annual Report on Form 10-K, filed with the Securities and Exchange Commission on November 28, 2008.
3.2		Amended and Restated By-Laws of Raymond James Financial, Inc., reflecting amendments adopted by the Board of Directors on ~~November 30, 2017,~~December 2, 2020, incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on December ~~5, 2017.~~8, 2020.
4.1	Eighth Supplemental Indenture, dated as of April 1, 2021, for the 3.750% Senior Notes due 2051, between Raymond James Financial, Inc. and The Bank of New York Mellon Trust Company, N.A., as trustee, incorporated by reference to Exhibit 4.2 to the Company ’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on April 2, 2021.
10.1		~~Second~~Third Amendment to Credit Agreement, dated as of April 19, 2021, among Raymond James Financial, Inc., Raymond James & Associates, Inc., the Lenders party thereto and Bank of America, N.A., incorporated by reference to Exhibit 10.1 to the Company ’~~Amendment~~to ~~CreditAgreement,dated~~as of ~~May27,2020,amongRaymondJamesFinancial,Inc.,RaymondJames~~&~~Associates,Inc.,~~s Current Report on Form 8-K, filed with the ~~Lenderspartythereto~~Securities and ~~Bank~~of ~~America,~~.~~N.A.~~Exchange Commission on April 22, 2021.
31.1		Certification of Paul C. Reilly pursuant to Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2		Certification of Paul M. Shoukry pursuant to Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32		Certification of Paul C. Reilly and Paul M. Shoukry pursuant to Rule 13a-14(b) and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS	XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH	Inline XBRL Taxonomy Extension Schema Document.
101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB	Inline XBRL Taxonomy Extension Label Linkbase Document.
101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document.
104		Cover Page Interactive Data File - the cover page interactive data file does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


		RAYMOND JAMES FINANCIAL, INC.
		(Registrant)




Date:	August ~~7, 2020~~9, 2021	/s/ Paul C. Reilly
		Paul C. Reilly
		Chairman and Chief Executive Officer





Date:	August ~~7, 2020~~9, 2021	/s/ Paul M. Shoukry
		Paul M. Shoukry
		Chief Financial Officer and Treasurer


	Loans held for investment
$ in millions	C&I loans		CRE construction loans		CRE loans		Tax-exempt loans		Residential mortgage loans		SBL and other		Total
Three months ended June 30, 2020
Balance at beginning of period	$	197	$	3	$	88	$	11	$	18	$	7	$	324
Provision/(benefit) for loan losses	59		1		20		2		1		(2)		81
Net (charge-offs)/recoveries:
Charge-offs ⁽¹⁾	(71)		—		(2)		—		—		—		(73)
Recoveries	—		—		—		—		1		—		1
Net (charge-offs)/recoveries	(71)		—		(2)		—		1		—		(72)
Foreign exchange translation adjustment	1		—		—		—		—		—		1
Balance at end of period	$	186	$	4	$	106	$	13	$	20	$	5	$	334

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

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

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


	Loans held for investment
	Allowance for loan losses										Recorded investment
$ in millions	Individually evaluated for impairment		Collectively evaluated for impairment		Total		Individually evaluated for impairment		Collectively evaluated for impairment		Total
June 30, 2020
C&I loans	$	1	$	185	$	186	$	1	$	7,730	$	7,731
CRE construction loans	—		4		4		—		219		219
CRE loans	—		106		106		6		3,689		3,695
Tax-exempt loans	—		13		13		—		1,290		1,290
Residential mortgage loans	1		19		20		25		4,892		4,917
SBL and other	—		5		5		—		3,631		3,631
Total	$	2	$	332	$	334	$	32	$	21,451	$	21,483

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


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


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


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

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

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