RJF 10-Q Quarterly Report March 31, 2016

RAYMOND JAMES FINANCIAL INC

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10-Q 1 a2016033110qrjf.htm 10-Q 10-Q

Index

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark one)



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

For the quarterly period ended March 31, 2016



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



For the transition period from		to

Commission File Number: 1-9109

RAYMOND JAMES FINANCIAL, INC.

(Exact name of registrant as specified in its charter)



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

880 Carillon Parkway, St. Petersburg, 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)

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

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

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



Large accelerated filer x		Accelerated filer o

Non-accelerated filer o		Smaller reporting company o

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.

141,531,601 shares of common stock as of May 4, 2016

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

Form 10-Q for the quarter ended March 31, 2016

INDEX



		PAGE
PART I.	FINANCIAL INFORMATION

Item 1.	Financial Statements (Unaudited)	3

	Condensed Consolidated Statements of Financial Condition as of March 31, 2016 and September 30, 2015 (Unaudited)	3

	Condensed Consolidated Statements of Income and Comprehensive Income for the three and six months ended March 31, 2016 and March 31, 2015 (Unaudited)	5

	Condensed Consolidated Statements of Changes in Shareholders’ Equity for the six months ended March 31, 2016 and March 31, 2015 (Unaudited)	6

	Condensed Consolidated Statements of Cash Flows for the six months ended March 31, 2016 and March 31, 2015 (Unaudited)	7

	Notes to Condensed Consolidated Financial Statements (Unaudited)	9

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	67

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	107

Item 4.	Controls and Procedures	116

PART II.	OTHER INFORMATION	116

Item 1.	Legal Proceedings	116

Item 1A.	Risk Factors	117

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	119

Item 3.	Defaults upon Senior Securities	119

Item 5.	Other Information	119

Item 6.	Exhibits	120

	Signatures	120

Index

PART I FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

(Unaudited)




	March 31, 2016		September 30, 2015
	(in thousands)
Assets:
Cash and cash equivalents	$	1,479,786	$	2,601,006
Assets segregated pursuant to regulations and other segregated assets	3,614,811		2,905,324
Securities purchased under agreements to resell and other collateralized financings	428,864		474,144
Financial instruments, at fair value:
Trading instruments	799,453		690,551
Available for sale securities	547,442		513,730
Private equity investments	204,398		209,088
Other investments	294,098		248,751
Derivative instruments associated with offsetting matched book positions	396,163		389,457
Receivables:
Brokerage clients, net	2,219,963		2,185,296
Stock borrowed	123,156		124,373
Bank loans, net	14,348,481		12,988,021
Brokers-dealers and clearing organizations	152,905		134,890
Loans to financial advisors, net	551,701		488,760
Other	602,873		514,000
Deposits with clearing organizations	205,057		207,488
Prepaid expenses and other assets	660,366		705,391
Investments in real estate partnerships held by consolidated variable interest entities	191,801		199,678
Property and equipment, net	282,285		255,875
Deferred income taxes, net	272,644		266,899
Goodwill and identifiable intangible assets, net	376,964		376,962
Total assets	$	27,753,211	$	26,479,684

(continued on next page)

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

Index

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

(Unaudited)

(continued from previous page)




	March 31, 2016			September 30, 2015
	($ in thousands)
Liabilities and equity:
Trading instruments sold but not yet purchased, at fair value	$	325,410		$	287,993
Securities sold under agreements to repurchase	190,679			332,536
Derivative instruments associated with offsetting matched book positions, at fair value	396,163			389,457
Payables:
Brokerage clients	5,031,276			4,671,073
Stock loaned	610,476			478,573
Bank deposits	12,729,457			11,919,881
Brokers-dealers and clearing organizations	575,855			164,054
Trade and other	563,891			729,245
Other borrowings	610,884			703,065
Accrued compensation, commissions and benefits	673,200			842,527
Loans payable of consolidated variable interest entities	19,365			25,960
Senior notes payable	1,149,316			1,149,222
Total liabilities	22,875,972			21,693,586
Commitments and contingencies (see Note 16)
Equity
Preferred stock; $.10 par value; authorized 10,000,000 shares; issued and outstanding -0- shares	—			—
Common stock; $.01 par value; authorized 350,000,000 shares; issued 150,853,426 at March 31, 2016 and 149,283,682 at September 30, 2015	1,507			1,491
Additional paid-in capital	1,452,786			1,344,779
Retained earnings	3,592,753			3,419,719
Treasury stock, at cost; 9,751,304 common shares at March 31, 2016 and 6,364,706 common shares at September 30, 2015	(361,456		)	(203,455		)
Accumulated other comprehensive loss	(50,300		)	(40,503		)
Total equity attributable to Raymond James Financial, Inc.	4,635,290			4,522,031
Noncontrolling interests	241,949			264,067
Total equity	4,877,239			4,786,098
Total liabilities and equity	$	27,753,211		$	26,479,684

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

Index

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

(Unaudited)



	Three months ended March 31,						Six months ended March 31,
	2016			2015			2016			2015
	(in thousands, except per share amounts)
Revenues:
Securities commissions and fees	$	853,330		$	860,214		$	1,702,992		$	1,694,223
Investment banking	68,704			74,240			126,257			151,778
Investment advisory and related administrative fees	93,877			91,016			192,418			189,777
Interest	161,567			134,413			304,038			266,522
Account and service fees	127,528			111,966			244,351			223,124
Net trading profit	14,415			17,060			36,584			25,941
Other	21,497			23,715			35,804			41,103
Total revenues	1,340,918			1,312,624			2,642,444			2,592,468
Interest expense	(29,424		)	(26,846		)	(56,433		)	(54,230		)
Net revenues	1,311,494			1,285,778			2,586,011			2,538,238
Non-interest expenses:
Compensation, commissions and benefits	887,945			882,234			1,754,355			1,720,488
Communications and information processing	68,482			67,635			140,620			126,747
Occupancy and equipment costs	40,891			41,604			82,680			80,831
Clearance and floor brokerage	10,517			13,588			20,513			23,086
Business development	35,417			42,490			76,041			79,480
Investment sub-advisory fees	14,282			14,987			28,836			29,242
Bank loan loss provision	9,629			3,937			23,539			13,302
Acquisition-related expenses	6,015			—			7,887			—
Other	48,112			43,670			99,161			90,780
Total non-interest expenses	1,121,290			1,110,145			2,233,632			2,163,956
Income including noncontrolling interests and before provision for income taxes	190,204			175,633			352,379			374,282
Provision for income taxes	72,271			66,857			134,280			143,469
Net income including noncontrolling interests	117,933			108,776			218,099			230,813
Net loss attributable to noncontrolling interests	(7,914		)	(4,687		)	(14,077		)	(8,946		)
Net income attributable to Raymond James Financial, Inc.	$	125,847		$	113,463		$	232,176		$	239,759

Net income per common share – basic	$	0.89		$	0.79		$	1.63		$	1.68
Net income per common share – diluted	$	0.87		$	0.77		$	1.60		$	1.64
Weighted-average common shares outstanding – basic	141,472			142,320			142,273			141,813
Weighted-average common and common equivalent shares outstanding – diluted	144,012			146,050			145,047			146,188

Net income attributable to Raymond James Financial, Inc.	$	125,847		$	113,463		$	232,176		$	239,759
Other comprehensive income (loss), net of tax: ⁽¹⁾
Unrealized gain (loss) on available for sale securities and non-credit portion of other-than-temporary impairment losses	1,099			2,337			(5,692		)	2,313
Unrealized gain (loss) on currency translations, net of the impact of net investment hedges	10,714			(15,279		)	4,099			(21,719		)
Unrealized loss on cash flow hedges	(11,469		)	(1,501		)	(8,204		)	(1,501		)
Total comprehensive income	$	126,191		$	99,020		$	222,379		$	218,852

Other-than-temporary impairment:
Total other-than-temporary impairment, net	$	(353	)	$	(627	)	$	21		$	1,124
Portion of pre-tax losses (recoveries) recognized in other comprehensive income	353			627			(21		)	(1,124		)
Net impairment losses recognized in other revenue	$	—		$	—		$	—		$	—


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

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

Index

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

(Unaudited)



	Six months ended March 31,
	2016			2015
	(in thousands, except per share amounts)
Common stock, par value $.01 per share:
Balance, beginning of year	$	1,491		$	1,444
Share issuances	16			32
Balance, end of period	1,507			1,476

Additional paid-in capital:
Balance, beginning of year	1,344,779			1,239,046
Employee stock purchases	18,938			11,116
Exercise of stock options and vesting of restricted stock units, net of forfeitures	13,954			22,286
Restricted stock, stock option and restricted stock unit expense	39,962			38,685
Excess tax benefit from share-based payments	34,791			7,577
Other	362			278
Balance, end of period	1,452,786			1,318,988

Retained earnings:
Balance, beginning of year	3,419,719			3,023,845
Net income attributable to Raymond James Financial, Inc.	232,176			239,759
Cash dividends declared	(59,142		)	(52,526		)
Other	—			5
Balance, end of period	3,592,753			3,211,083

Treasury stock:
Balance, beginning of year	(203,455		)	(121,211		)
Purchases/surrenders	(152,284		)	(7,100		)
Exercise of stock options and vesting of restricted stock units, net of forfeitures	(5,717		)	(5,016		)
Balance, end of period	(361,456		)	(133,327		)

Accumulated other comprehensive loss: ⁽¹⁾
Balance, beginning of year	(40,503		)	(1,888		)
Net change in unrealized gain/loss on available for sale securities and non-credit portion of other-than-temporary impairment losses, net of tax	(5,692		)	2,313
Net change in currency translations and net investment hedges, net of tax	4,099			(21,719		)
Net change in cash flow hedges, net of tax	(8,204		)	(1,501		)
Balance, end of period	(50,300		)	(22,795		)
Total equity attributable to Raymond James Financial, Inc.	$	4,635,290		$	4,375,425

Noncontrolling interests:
Balance, beginning of year	$	264,067		$	292,020
Net loss attributable to noncontrolling interests	(14,077		)	(8,946		)
Capital contributions	7,855			10,008
Distributions	(5,033		)	(10,860		)
Other	(10,863		)	(5,737		)
Balance, end of period	241,949			276,485
Total equity	$	4,877,239		$	4,651,910


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

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

Index

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

	Six months ended March 31,
	2016			2015
	(in thousands)
Cash flows from operating activities:
Net income attributable to Raymond James Financial, Inc.	$	232,176		$	239,759
Net loss attributable to noncontrolling interests	(14,077		)	(8,946		)
Net income including noncontrolling interests	218,099			230,813

Adjustments to reconcile net income including noncontrolling interests to net cash (used in) provided by operating activities:
Depreciation and amortization	35,652			33,929
Deferred income taxes	(13,295		)	(26,277		)
Premium and discount amortization on available for sale securities and unrealized/realized gain on other investments	(3,852		)	(21,278		)
Provisions for loan losses, legal proceedings, bad debts and other accruals	38,955			22,312
Share-based compensation expense	42,735			40,509
Other	20,227			16,137
Net change in:
Assets segregated pursuant to regulations and other segregated assets	(709,487		)	(71,185		)
Securities purchased under agreements to resell and other collateralized financings, net of securities sold under agreements to repurchase	(96,577		)	9,401
Stock loaned, net of stock borrowed	133,120			(30,124		)
Loans provided to financial advisors, net of repayments	(70,836		)	(47,438		)
Brokerage client receivables and other accounts receivable, net	(141,555		)	259,882
Trading instruments, net	(16,708		)	34,333
Prepaid expenses and other assets	130,031			28,802
Brokerage client payables and other accounts payable	632,508			51,800
Accrued compensation, commissions and benefits	(168,896		)	(125,006		)
Purchases and originations of loans held for sale, net of proceeds from sales of securitizations and loans held for sale	(63,180		)	(18,347		)
Excess tax benefits from share-based payment arrangements	(34,791		)	(7,577		)
Net cash (used in) provided by operating activities	(67,850		)	380,686

Cash flows from investing activities:
Additions to property and equipment	(58,180		)	(29,643		)
Increase in bank loans, net	(1,490,887		)	(1,279,233		)
Purchases of Federal Home Loan Bank/Federal Reserve Bank stock	(3,231		)	(4,446		)
Proceeds from sales of loans held for investment	65,443			42,255
Purchases, or contributions, to private equity or other investments, net of proceeds from sales of, or distributions received from, private equity and other investments	(60,639		)	(19,776		)
Purchases of available for sale securities	(87,676		)	—
Available for sale securities maturations, repayments and redemptions	42,729			33,855
Proceeds from sales of available for sale securities	1,530			47
Investments in real estate partnerships held by consolidated variable interest entities, net of other investing activity	(12,849		)	(8,705		)
Net cash used in investing activities	$	(1,603,760	)	$	(1,265,646	)






(continued on next page)



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

Index

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

	Six months ended March 31,
	2016			2015
	(in thousands)

Cash flows from financing activities:
(Repayments) proceeds of short-term borrowings, net	$	(115,000	)	$	16,900
Proceeds from Federal Home Loan Bank advances	25,000			300,000
Repayments of Federal Home Loan Bank advances and other borrowed funds	(2,181		)	(252,114		)
Repayments of borrowings by consolidated variable interest entities which are real estate partnerships	(7,159		)	(9,903		)
Proceeds from capital contributed to and borrowings of consolidated variable interest entities which are real estate partnerships	—			110
Exercise of stock options and employee stock purchases	31,240			34,526
Increase in bank deposits	809,576			1,243,089
Purchases of treasury stock	(159,175		)	(14,877		)
Dividends on common stock	(56,152		)	(49,405		)
Excess tax benefits from share-based payments	34,791			7,577
Net cash provided by financing activities	560,940			1,275,903

Currency adjustment:
Effect of exchange rate changes on cash	(10,550		)	(49,869		)
Net (decrease) increase in cash and cash equivalents	(1,121,220		)	341,074
Cash and cash equivalents at beginning of year	2,601,006			2,199,063
Cash and cash equivalents at end of period	$	1,479,786		$	2,540,137


Supplemental disclosures of cash flow information:
Cash paid for interest	$	55,609		$	53,080
Cash paid for income taxes	$	124,521		$	209,571
Non-cash transfers of loans to other real estate owned	$	1,942		$	3,653

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

Index

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

March 31, 2016

NOTE 1 – INTRODUCTION AND BASIS OF PRESENTATION

Description of business

Raymond James Financial, Inc. (“RJF” or the “Company”) is a financial holding company whose broker-dealer subsidiaries are engaged in various financial services businesses, including the underwriting, distribution, trading and brokerage of equity and debt securities and the sale of mutual funds and other investment products. In addition, other subsidiaries of RJF provide investment management services for retail and institutional clients, corporate and retail banking, and trust services. As used herein, the terms “we,” “our” or “us” refer to RJF and/or one or more of its subsidiaries.

Basis of presentation

The accompanying unaudited condensed consolidated financial statements include the accounts of RJF and its consolidated subsidiaries that are generally controlled through a majority voting interest. We consolidate all of our 100% owned subsidiaries. In addition we consolidate any variable interest entity (“VIE”) in which we are the primary beneficiary. Additional information on these VIEs is provided in Note 2 on pages 118 - 121 in the section titled, “Evaluation of VIEs to determine whether consolidation is required” as presented in our Annual Report on Form 10-K for the year ended September 30, 2015 , as filed with the United States (“U.S.”) Securities and Exchange Commission (the “2015 Form 10-K”) and in Note 9 herein. 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 not required for interim reporting purposes has been condensed or omitted. These unaudited condensed consolidated financial statements reflect, in the opinion of management, all adjustments necessary for a fair presentation of the consolidated financial position and results of operations for the interim 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 and the consolidated financial statements and notes thereto included in our 2015 Form 10-K. To prepare condensed consolidated financial statements in conformity with GAAP, we must make certain estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates and could have a material impact on the condensed consolidated financial statements.

Significant subsidiaries

As of March 31, 2016 , our significant subsidiaries, all wholly owned, include: Raymond James & Associates, Inc. (“RJ&A”) a domestic broker-dealer carrying client accounts, Raymond James Financial Services, Inc. (“RJFS”) an introducing domestic broker-dealer, Raymond James Financial Services Advisors, Inc. (“RJFSA”) a registered investment advisor, Raymond James Ltd. (“RJ Ltd.”) a broker-dealer headquartered in Canada, Eagle Asset Management, Inc. (“Eagle”) a registered investment advisor, and Raymond James Bank, N.A. (“RJ Bank”) a national bank.

Reclassifications

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

NOTE 2 – UPDATE OF SIGNIFICANT ACCOUNTING POLICIES

A summary of our significant accounting policies is included in Note 2 on pages 103 - 121 of our 2015 Form 10-K. There have been no significant changes in our significant accounting policies since September 30, 2015 .

Index

Brokerage client receivables, loans to financial advisors and allowance for doubtful accounts

As more fully described in Note 2 on page 110 - 111 of our 2015 Form 10-K, we have certain financing receivables that arise from businesses other than our banking business. Specifically, we offer loans to financial advisors and certain key revenue producers, primarily for recruiting, transitional cost assistance, and retention purposes. We present the outstanding balance of loans to financial advisors on our Condensed Consolidated Statements of Financial Condition, net of their applicable allowances for doubtful accounts. Of such balance, the portion associated with financial advisors who are no longer affiliated with us is approximately $10 million at both March 31, 2016 and September 30, 2015 , and our allowance for doubtful accounts associated with such loans is approximately $4 million in each respective period.

NOTE 3 – ACQUISITIONS

Acquisition announcements

On December 3, 2015 (the “Announcement Date”), we announced that we entered into a definitive asset purchase agreement to acquire the U.S. Private Client Services unit of Deutsche Bank Wealth Management (“Deutsche WM”). As of the Announcement Date, Deutsche WM had approximately 200 financial advisors with approximately $50 billion of client assets which generate approximately $300 million in total annual revenues. The Deutsche WM financial advisors are focused primarily on high net worth clients. Upon completion of the acquisition, which we expect to occur during the fourth quarter of this fiscal year 2016, we plan for the Deutsche WM financial advisors to operate within a newly formed “Alex. Brown” division of RJ&A.

See Note 16 for additional information regarding the commitments we have made that are associated with this acquisition.

The acquisition-related expenses presented on our Condensed Consolidated Statements of Income and Comprehensive income for the three and six months ended March 31, 2016 pertain to certain incremental expenses incurred in connection with the future acquisition of Deutsche WM. In the three and six months ended March 31, 2016 we incurred the following acquisition-related expenses:



	Three months ended March 31, 2016		Six months ended March 31, 2016
	(in thousands)
Unrealized loss in fair value of equity securities purchased to satisfy certain deferred compensation obligations to be assumed at closing	$	3,165	$	3,319
Legal	422		1,923
Information systems integration costs	1,655		1,655
Travel and all other	773		990
Total acquisition-related expenses	$	6,015	$	7,887

Acquisitions completed in the prior fiscal year

Cougar Global Investments Limited

On April 30, 2015 , we completed our acquisition of Cougar Global Investments Limited (“Cougar”), an asset management firm based in Toronto, Canada. Cougar’s global asset allocation strategies are now offered to our asset management clients worldwide through our Eagle subsidiary. Cougar’s results of operations have been included in our results prospectively since April 30, 2015 . See Note 3 on pages 121 - 122 of our 2015 Form 10-K for additional information regarding the Cougar acquisition.

The Producers Choice LLC

On July 31, 2015 (the “TPC Closing Date”), we completed our acquisition of The Producers Choice LLC (“TPC”), a Troy, Michigan based private insurance and annuity marketing organization. TPC brings additional life insurance and annuity specialists to our existing insurance product offerings. TPC’s results of operations have been included in our results prospectively since July 31, 2015 . See Note 3 on pages 121 - 122 of our 2015 Form 10-K for additional information regarding the TPC acquisition.

See Note 16 for information regarding the contingent consideration associated with this acquisition.

Index

NOTE 4 – CASH AND CASH EQUIVALENTS, ASSETS SEGREGATED PURSUANT TO REGULATIONS, AND DEPOSITS WITH CLEARING ORGANIZATIONS

Our cash equivalents include money market funds or highly liquid investments with original maturities of 90 days or less, other than those used for trading purposes. For discussion of our accounting policies regarding assets segregated pursuant to regulations and other segregated assets, see Note 2 on page 104 of our 2015 Form 10-K.

Our cash and cash equivalents, assets segregated pursuant to regulations or other segregated assets, and deposits with clearing organization balances are as follows:



	March 31, 2016		September 30, 2015
	(in thousands)
Cash and cash equivalents:
Cash in banks	$	1,477,197	$	2,597,568
Money market fund investments	2,589		3,438
Total cash and cash equivalents ⁽¹⁾	$	1,479,786	$	2,601,006

Assets segregated pursuant to federal regulations and other segregated assets ⁽²⁾	$	3,614,811	$	2,905,324

Deposits with clearing organizations:
Cash and cash equivalents	$	175,421	$	177,787
Government and agency obligations	29,636		29,701
Total deposits with clearing organizations	$	205,057	$	207,488

(1)

The total amounts presented include cash and cash equivalents of $929 million and $1.22 billion as of March 31, 2016 and September 30, 2015 , respectively, which are either held directly by RJF in depository accounts at third party financial institutions, held in a depository account at RJ Bank (computed as the lesser of RJ Bank’s cash balance or the amount of RJF’s depository account balance), or are otherwise invested by one of our subsidiaries on behalf of RJF, all of which are available without restrictions.

(2)

Consists of cash maintained in accordance with Rule 15c3-3 under the Securities Exchange Act of 1934. RJ&A, as a broker-dealer carrying client accounts, is subject to requirements related to maintaining cash or qualified securities in segregated reserve accounts for the exclusive benefit of its’ clients. Additionally, RJ Ltd. is required to hold client Registered Retirement Savings Plan funds in trust.

Index

NOTE 5 – FAIR VALUE

For a discussion of our valuation methodologies for assets, liabilities measured at fair value, and the fair value hierarchy, see Note 2 on pages 105 - 110 of our 2015 Form 10-K. There have been no material changes to our valuation methodologies since our year ended September 30, 2015 .

Assets and liabilities measured at fair value on a recurring and nonrecurring basis are presented below:



March 31, 2016	Quoted prices in active markets for identical assets (Level 1) ⁽¹⁾		Significant other observable inputs (Level 2) ⁽¹⁾		Significant unobservable inputs (Level 3)			Netting adjustments ⁽²⁾			Balance as of March 31, 2016
	(in thousands)
Assets at fair value on a recurring basis:
Trading instruments:
Municipal and provincial obligations	$	102	$	239,478	$	—		$	—		$	239,580
Corporate obligations	4,976		132,085		—			—			137,061
Government and agency obligations	7,897		125,590		—			—			133,487
Agency mortgage-backed securities (“MBS”) and collateralized mortgage obligations (“CMOs”)	433		98,144		—			—			98,577
Non-agency CMOs and asset-backed securities (“ABS”)	—		35,925		8			—			35,933
Total debt securities	13,408		631,222		8			—			644,638
Derivative contracts	—		147,905		—			(96,630		)	51,275
Equity securities	53,338		1,186		—			—			54,524
Brokered certificates of deposit	—		32,257		—			—			32,257
Other	534		1,929		14,296			—			16,759
Total trading instruments	67,280		814,499		14,304			(96,630		)	799,453
Available for sale securities:
Agency MBS and CMOs	—		354,430		—			—			354,430
Non-agency CMOs	—		63,694		—			—			63,694
Other securities	1,297		—		—			—			1,297
Auction rate securities (“ARS”):
Municipals	—		—		25,422			—			25,422
Preferred securities	—		—		102,599			—			102,599
Total available for sale securities	1,297		418,124		128,021			—			547,442
Private equity investments	—		—		204,398		⁽³⁾	—			204,398
Other investments ⁽⁴⁾	271,885		21,774		439			—			294,098
Derivative instruments associated with offsetting matched book positions	—		396,163		—			—			396,163
Deposits with clearing organizations:
Government and agency obligations	29,636		—		—			—			29,636
Other assets:
Derivative contracts ⁽⁵⁾	—		2,938		—			—			2,938
Other assets	—		—		3,112		⁽⁶⁾	—			3,112
Total other assets	—		2,938		3,112			—			6,050
Total assets at fair value on a recurring basis	$	370,098	$	1,653,498	$	350,274		$	(96,630	)	$	2,277,240

Assets at fair value on a nonrecurring basis:
Bank loans, net:
Impaired loans	$	—	$	26,228	$	35,720		$	—		$	61,948
Loans held for sale ⁽⁷⁾	—		78,297		—			—			78,297
Total bank loans, net	—		104,525		35,720			—			140,245
Other real estate owned (“OREO”) ⁽⁸⁾	—		238		—			—			238
Total assets at fair value on a nonrecurring basis	$	—	$	104,763	$	35,720		$	—		$	140,483

(continued on next page)

Index



March 31, 2016	Quoted prices in active markets for identical assets (Level 1) ⁽¹⁾		Significant other observable inputs (Level 2) ⁽¹⁾		Significant unobservable inputs (Level 3)		Netting adjustments ⁽²⁾			Balance as of March 31, 2016
	(in thousands)
	(continued from previous page)
Liabilities at fair value on a recurring basis:
Trading instruments sold but not yet purchased:
Municipal and provincial obligations	$	4	$	—	$	—	$	—		$	4
Corporate obligations	1,102		47,758		—		—			48,860
Government obligations	260,727		—		—		—			260,727
Agency MBS and CMOs	3,122		—		—		—			3,122
Total debt securities	264,955		47,758		—		—			312,713
Derivative contracts	—		135,641		—		(128,002		)	7,639
Equity securities	4,958		—		—		—			4,958
Other securities	—		100		—		—			100
Total trading instruments sold but not yet purchased	269,913		183,499		—		(128,002		)	325,410
Derivative instruments associated with offsetting matched book positions	—		396,163		—		—			396,163
Trade and other payables:
Derivative contracts ⁽⁵⁾	—		21,004		—		—			21,004
Other liabilities	—		—		67		—			67
Total trade and other payables	—		21,004		67		—			21,071
Total liabilities at fair value on a recurring basis	$	269,913	$	600,666	$	67	$	(128,002	)	$	742,644

(1)

We had $1.3 million in transfers of financial instruments from Level 1 to Level 2 during the six months ended March 31, 2016. These transfers were a result of a decrease in the availability and reliability of the observable inputs utilized in the respective instruments’ fair value measurement. There were no transfers of financial instruments from Level 1 to Level 2 during the three months ended March 31, 2016. We had $300 thousand and $700 thousand in transfers of financial instruments from Level 2 to Level 1 during the three and six months ended March 31, 2016 . These transfers were a result of an increase in the availability and reliability of the observable inputs utilized in the respective instruments’ fair value measurement. Our policy is that the end of each respective quarterly reporting period determines when transfers of financial instruments between levels are recognized.

(2)

For derivative transactions not cleared through an exchange, and where permitted, we have elected to net derivative receivables and derivative payables and the related cash collateral received and paid when a legally enforceable master netting agreement exists (see Note 14 for additional information regarding offsetting financial instruments). Deposits associated with derivative transactions cleared through an exchange are included in deposits with clearing organizations on our Condensed Consolidated Statements of Financial Condition.

(3)

The portion of these investments we do not own is approximately $50 million as of March 31, 2016 and are included as a component of noncontrolling interest in our Condensed Consolidated Statements of Financial Condition. The weighted average portion we own is approximately $154 million or 75% of the total private equity investments of $204 million included in our Condensed Consolidated Statements of Financial Condition.


(4)	Other investments include $103 million of financial instruments that are related to obligations to perform under certain deferred compensation plans (see Note 2 on pages 117 - 118, and Note 24 on page 176, of our 2015 Form 10-K for further information regarding these plans).


(5)	Consists of derivatives arising from RJ Bank’s business operations, see Note 13 for additional information.


(6)	Includes the fair value of forward commitments to purchase GNMA or FNMA (as hereinafter defined) MBS arising from our fixed income public finance operations. See Note 2 on page 107, and Note 21 on page 170 of our 2015 Form 10-K, as well as Note 16 in this report, for additional information regarding the GNMA or FNMA MBS commitments.


(7)	Includes individual loans classified as held for sale, which were recorded at a fair value lower than cost.


(8)	Represents the fair value of foreclosed properties which were measured at a fair value subsequent to their initial classification as OREO. The recorded value in the Condensed Consolidated Statements of Financial Condition is net of the estimated selling costs.

Index



September 30, 2015	Quoted prices in active markets for identical assets (Level 1) ⁽¹⁾		Significant other observable inputs (Level 2) ⁽¹⁾		Significant unobservable inputs (Level 3)			Netting adjustments ⁽²⁾			Balance as of September 30, 2015
	(in thousands)
Assets at fair value on a recurring basis:
Trading instruments:
Municipal and provincial obligations	$	17,318	$	188,745	$	—		$	—		$	206,063
Corporate obligations	2,254		92,907		156			—			95,317
Government and agency obligations	7,781		108,166		—			—			115,947
Agency MBS and CMOs	253		117,317		—			—			117,570
Non-agency CMOs and ABS	—		46,931		9			—			46,940
Total debt securities	27,606		554,066		165			—			581,837
Derivative contracts	—		132,707		—			(90,621		)	42,086
Equity securities	24,859		3,485		—			—			28,344
Brokered certificates of deposit	—		30,803		—			—			30,803
Other	679		4,816		1,986			—			7,481
Total trading instruments	53,144		725,877		2,151			(90,621		)	690,551
Available for sale securities:
Agency MBS and CMOs	—		302,195		—			—			302,195
Non-agency CMOs	—		71,369		—			—			71,369
Other securities	1,402		—		—			—			1,402
ARS:
Municipals	—		—		28,015			—			28,015
Preferred securities	—		—		110,749			—			110,749
Total available for sale securities	1,402		373,564		138,764			—			513,730
Private equity investments	—		—		209,088		⁽³⁾	—			209,088
Other investments ⁽⁴⁾	230,839		17,347		565			—			248,751
Derivative instruments associated with offsetting matched book positions	—		389,457		—			—			389,457
Deposits with clearing organizations: ⁽⁵⁾
Government and agency obligations	29,701		—		—			—			29,701
Other assets:
Derivative contracts ⁽⁶⁾	—		917		—			—			917
Other assets	—		—		4,975		⁽⁷⁾	—			4,975
Total other assets	—		917		4,975			—			5,892
Total assets at fair value on a recurring basis	$	315,086	$	1,507,162	$	355,543		$	(90,621	)	$	2,087,170

Assets at fair value on a nonrecurring basis:
Bank loans, net:
Impaired loans	$	—	$	28,082	$	37,830		$	—		$	65,912
Loans held for sale ⁽⁸⁾	—		14,334		—			—			14,334
Total bank loans, net	—		42,416		37,830			—			80,246
OREO ⁽⁹⁾	—		671		—			—			671
Total assets at fair value on a nonrecurring basis	$	—	$	43,087	$	37,830		$	—		$	80,917

(continued on next page)

Index



September 30, 2015	Quoted prices in active markets for identical assets (Level 1) ⁽¹⁾		Significant other observable inputs (Level 2) ⁽¹⁾		Significant unobservable inputs (Level 3)		Netting adjustments ⁽²⁾			Balance as of September 30, 2015
	(in thousands)
	(continued from previous page)
Liabilities at fair value on a recurring basis:
Trading instruments sold but not yet purchased:
Municipal and provincial obligations	$	17,966	$	347	$	—	$	—		$	18,313
Corporate obligations	167		33,017		—		—			33,184
Government obligations	205,658		—		—		—			205,658
Agency MBS and CMOs	5,007		—		—		—			5,007
Total debt securities	228,798		33,364		—		—			262,162
Derivative contracts	—		109,120		—		(88,881		)	20,239
Equity securities	3,098		—		—		—			3,098
Other securities	—		2,494		—		—			2,494
Total trading instruments sold but not yet purchased	231,896		144,978		—		(88,881		)	287,993
Derivative instruments associated with offsetting matched book positions	—		389,457		—		—			389,457
Trade and other payables:
Derivative contracts ⁽⁶⁾	—		7,545		—		—			7,545
Other liabilities	—		—		58		—			58
Total trade and other payables	—		7,545		58		—			7,603
Total liabilities at fair value on a recurring basis	$	231,896	$	541,980	$	58	$	(88,881	)	$	685,053

(1)

We had $1.1 million in transfers of financial instruments from Level 1 to Level 2 during the year ended September 30, 2015 . These transfers were a result of a decrease in the availability and reliability of the observable inputs utilized in the respective instruments’ fair value measurement. We had $1.8 million in transfers of financial instruments from Level 2 to Level 1 during the year ended September 30, 2015 . These transfers were a result of an increase in the availability and reliability of the observable inputs utilized in the respective instruments’ fair value measurement. Our policy is that the end of each respective quarterly reporting period determines when transfers of financial instruments between levels are recognized.

(2)

(3)

The portion of these investments we do not own is approximately $52 million as of September 30, 2015 and are included as a component of noncontrolling interest in our Condensed Consolidated Statements of Financial Condition. The weighted average portion we own is approximately $157 million or 75% of the total private equity investments of $209 million included in our Condensed Consolidated Statements of Financial Condition.


(4)	Other investments include $106 million of financial instruments that are related to obligations to perform under certain deferred compensation plans (see Note 2 on pages 117 - 118, and Note 24 on page 176, of our 2015 Form 10-K for further information regarding these plans).


(5)	Consists of deposits we provide to clearing organizations or exchanges that are in the form of marketable securities.


(6)	Consists of derivatives arising from RJ Bank’s business operations, see Note 13 for additional information.


(7)	Includes the fair value of forward commitments to purchase GNMA or FNMA (as hereinafter defined) MBS arising from our fixed income public finance operations. See Note 2 on page 107, and Note 21 on page 170 of our 2015 Form 10-K for additional information.


(8)	Includes individual loans classified as held for sale, which were recorded at a fair value lower than cost.


(9)	Represents the fair value of foreclosed properties which were measured at a fair value subsequent to their initial classification as OREO. The recorded value in the Condensed Consolidated Statements of Financial Condition is net of the estimated selling costs.

Index

The adjustment to fair value of the nonrecurring fair value measures for the six months ended March 31, 2016 resulted in a $2 million additional provision for loan losses relating to impaired loans and $200 thousand in other losses relating to loans held for sale and OREO. The adjustment to fair value of the nonrecurring fair value measures for the six months ended March 31, 2015 resulted in a $200 thousand additional provision for loan losses relating to impaired loans and $100 thousand in other losses relating to loans held for sale and OREO.

Changes in Level 3 recurring fair value measurements

The realized and unrealized gains and losses for assets and liabilities within the Level 3 category presented in the tables below may include changes in fair value that were attributable to both observable and unobservable inputs.

Additional information about Level 3 assets and liabilities measured at fair value on a recurring basis is presented below:



Three months ended March 31, 2016 Level 3 assets at fair value (in thousands)
	Financial assets																							Financial liabilities
	Trading instruments									Available for sale securities						Private equity, other investments and other assets								Payables- trade and other
	Corporate obligations			Non- agency CMOs & ABS			Other			ARS – municipals			ARS - preferred securities			Private equity investments			Other investments			Other assets		Other liabilities
Fair value December 31, 2015	$	189		$	9		$	1,964		$	27,480		$	102,899		$	207,523		$	493		$	1,526	$	(67	)
Total gains (losses) for the period:
Included in earnings	(97		)	—			(100		)	133			—			4,269			18			1,586		—
Included in other comprehensive income	—			—			—			(583		)	(300		)	—			—			—		—
Purchases and contributions	2			—			19,470			—			—			2,407			—			—		—
Sales	(94		)	—			(7,038		)	(1,583		)	—			—			—			—		—
Redemptions by issuer	—			—			—			(25		)	—			—			(5		)	—		—
Distributions	—			(1		)	—			—			—			(9,801		)	(67		)	—		—
Transfers: ⁽¹⁾
Into Level 3	—			—			—			—			—			—			—			—		—
Out of Level 3	—			—			—			—			—			—			—			—		—
Fair value March 31, 2016	$	—		$	8		$	14,296		$	25,422		$	102,599		$	204,398		$	439		$	3,112	$	(67	)

Change in unrealized gains (losses) for the period included in earnings (or changes in net assets) for assets held at the end of the reporting period	$	—		$	—		$	(60	)	$	—		$	—		$	4,269		$	18		$	1,586	$	—


(1)	Our policy is that the end of each respective quarterly reporting period determines when transfers of financial instruments between levels are recognized.

Index



Six months ended March 31, 2016 Level 3 assets at fair value (in thousands)
	Financial assets																								Financial liabilities
	Trading instruments									Available for sale securities						Private equity, other investments and other assets									Payables- trade and other
	Corporate obligations			Non- agency CMOs & ABS			Other			ARS – municipals			ARS - preferred securities			Private equity investments			Other investments			Other assets			Other liabilities
Fair value September 30, 2015	$	156		$	9		$	1,986		$	28,015		$	110,749		$	209,088		$	565		$	4,975		$	(58	)
Total gains (losses) for the period:
Included in earnings	(137		)	—			(349		)	133			—			4,440			11			(1,863		)	—
Included in other comprehensive income	—			—			—			(1,118		)	(8,150		)	—			—			—			—
Purchases and contributions	75			—			38,487			—			—			6,961			—			—			(9		)
Sales	(94		)	—			(25,828		)	(1,583		)	—			(18		)	—			—			—
Redemptions by issuer	—			—			—			(25		)	—			—			(14		)	—			—
Distributions	—			(1		)	—			—			—			(16,073		)	(123		)	—			—
Transfers: ⁽¹⁾
Into Level 3	—			—			—			—			—			—			—			—			—
Out of Level 3	—			—			—			—			—			—			—			—			—
Fair value March 31, 2016	$	—		$	8		$	14,296		$	25,422		$	102,599		$	204,398		$	439		$	3,112		$	(67	)

Change in unrealized gains (losses) for the period included in earnings (or changes in net assets) for assets held at the end of the reporting period	$	(40	)	$	1		$	(71	)	$	—		$	—		$	4,440		$	11		$	(1,863	)	$	—


(1)	Our policy is that the end of each respective quarterly reporting period determines when transfers of financial instruments between levels are recognized.

Index



Three months ended March 31, 2015 Level 3 assets at fair value (in thousands)
	Financial assets																								Financial liabilities
	Trading instruments								Available for sale securities						Private equity, other investments and other assets										Payables- trade and other
	Non- agency CMOs & ABS			Equity securities		Other			ARS – municipals			ARS - preferred securities			Private equity investments				Other investments			Other assets			Other liabilities
Fair value December 31, 2014	$	11		$	14	$	5,264		$	85,814		$	112,955		$	208,674			$	1,564		$	2,407		$	(58	)
Total gains (losses) for the period:
Included in earnings	—			—		(20		)	2			25			14,414			⁽¹⁾	41			(211		)	—
Included in other comprehensive income	—			—		—			3,843			(282		)	—				—			—			—
Purchases and contributions	—			—		11,358			—			—			2,241				—			—			—
Sales	—			—		(15,822		)	(45		)	—			—				—			—			—
Redemptions by issuer	—			—		—			—			(250		)	—				(663		)	—			—
Distributions	(1		)	—		—			—			—			(4,385		)		(26		)	—			—
Transfers: ⁽²⁾
Into Level 3	—			—		—			—			—			—				—			—			—
Out of Level 3	—			—		—			—			—			—				—			—			—
Fair value March 31, 2015	$	10		$	14	$	780		$	89,614		$	112,448		$	220,944			$	916		$	2,196		$	(58	)

Change in unrealized gains (losses) for the period included in earnings (or changes in net assets) for assets held at the end of the reporting period	$	—		$	—	$	—		$	—		$	—		$	14,414			$	41		$	(211	)	$	—

(1)

Primarily results from valuation adjustments of certain private equity investments. Since we only own a portion of these investments, our share of the net valuation adjustments resulted in a gain of $9.8 million which is included in net income attributable to RJF (after noncontrolling interests). The noncontrolling interests’ share of the net valuation adjustments was a gain of approximately $4.6 million .


(2)	Our policy is that the end of each respective quarterly reporting period determines when transfers of financial instruments between levels are recognized.

Index



Six months ended March 31, 2015 Level 3 assets at fair value (in thousands)
	Financial assets																								Financial liabilities
	Trading instruments									Available for sale securities						Private equity, other investments and other assets									Payables- trade and other
	Non- agency CMOs & ABS			Equity securities			Other			ARS – municipals			ARS - preferred securities			Private equity investments				Other investments			Other assets		Other liabilities
Fair value September 30, 2014	$	11		$	44		$	2,309		$	86,696		$	114,039		$	211,666			$	1,731		$	787	$	(58	)
Total gains (losses) for the period:
Included in earnings	—			5			(40		)	2			25			17,060			⁽¹⁾	81			1,409		—
Included in other comprehensive income	—			—			—			2,961			(1,366		)	—				—			—		—
Purchases and contributions	—			20			23,333			—			—			6,343				—			—		—
Sales	—			—			(24,822		)	(45		)	—			—				—			—		—
Redemptions by issuer	—			—			—			—			(250		)	—				(673		)	—		—
Distributions	(1		)	—			—			—			—			(14,125		)		(223		)	—		—
Transfers: ⁽²⁾
Into Level 3	—			—			—			—			—			—				—			—		—
Out of Level 3	—			(55		)	—			—			—			—				—			—		—
Fair value March 31, 2015	$	10		$	14		$	780		$	89,614		$	112,448		$	220,944			$	916		$	2,196	$	(58	)

Change in unrealized gains (losses) for the period included in earnings (or changes in net assets) for assets held at the end of the reporting period	$	—		$	5		$	—		$	—		$	—		$	17,060			$	81		$	1,409	$	—

(1)

Primarily results from valuation adjustments of certain private equity investments. Since we only own a portion of these investments, our share of the net valuation adjustments resulted in a gain of $12.2 million which is included in net income attributable to RJF (after noncontrolling interests). The noncontrolling interests’ share of the net valuation adjustments was a gain of approximately $4.9 million .


(2)	Our policy is that the end of each respective quarterly reporting period determines when transfers of financial instruments between levels are recognized.

As of March 31, 2016 , 8.2% of our assets and 3.2% of our liabilities are instruments measured at fair value on a recurring basis. Instruments measured at fair value on a recurring basis categorized as Level 3 as of March 31, 2016 represent 15.4% of our assets measured at fair value. In comparison, as of March 31, 2015 , 8.9% and 3.9% of our assets and liabilities, respectively, represented instruments measured at fair value on a recurring basis. Instruments measured at fair value on a recurring basis categorized as Level 3 as of March 31, 2015 represented 19% of our assets measured at fair value. Level 3 instruments as a percentage of total financial instruments decreased by 4% as compared to March 31, 2015 , primarily as a result of the sale or redemption of a portion of our ARS portfolio since March 31, 2015 .

Index

Gains and losses related to Level 3 recurring fair value measurements included in earnings are presented in net trading profit, other revenues and other comprehensive income in our Condensed Consolidated Statements of Income and Comprehensive Income as follows:



	Net trading profit			Other revenues		Other comprehensive income
	(in thousands)
For the three months ended March 31, 2016
Total (losses) gains included in revenues	$	(197	)	$	6,006	$	—
Change in unrealized (losses) gains for assets held at the end of the reporting period	$	(60	)	$	5,873	$	(883	)

For the six months ended March 31, 2016
Total (losses) gains included in revenues	$	(486	)	$	2,721	$	—
Change in unrealized (losses) gains for assets held at the end of the reporting period	$	(110	)	$	2,588	$	(9,268	)

For the three months ended March 31, 2015
Total (losses) gains included in revenues	$	(20	)	$	14,271	—
Change in unrealized gains for assets held at the end of the reporting period	$	—		$	14,244	$	3,561

For the six months ended March 31, 2015
Total (losses) gains included in revenues	$	(35	)	$	18,577	$	—
Change in unrealized gains for assets held at the end of the reporting period	$	5		$	18,550	$	1,595

Index

Quantitative information about level 3 fair value measurements

The significant assumptions used in the valuation of level 3 financial instruments are as follows (the table that follows includes the significant majority of the financial instruments we hold that are classified as level 3 measures):



Level 3 financial instrument	Fair value at March 31, 2016 (in thousands)		Valuation technique(s)	Unobservable input	Range (weighted-average)
Recurring measurements:
Available for sale securities:
ARS:
Municipals - issuer is a municipality	$	10,500	Discounted cash flow	Average discount rate ^(a)	5.37% - 6.61% (5.99%)
				Average interest rates applicable to future interest income on the securities ^(b)	1.29% - 2.31% (1.80%)
				Prepayment year ^(c)	2018 - 2025 (2022)
Municipals - tax-exempt preferred securities	$	14,922	Discounted cash flow	Average discount rate ^(a)	4.58% - 5.58% (5.08%)
				Average interest rates applicable to future interest income on the securities ^(b)	1.07% - 1.07% (1.07%)
				Prepayment year ^(c)	2016 - 2021 (2020)
Preferred securities - taxable	$	102,599	Discounted cash flow	Average discount rate ^(a)	4.58% - 6.38% (5.50%)
				Average interest rates applicable to future interest income on the securities ^(b)	1.07% - 2.83% (1.50%)
				Prepayment year ^(c)	2016 - 2021 (2020)
Private equity investments:	$	49,393	Income or market approach:
			Scenario 1 - income approach - discounted cash flow	Discount rate ^(a)	13% - 21% (17.8%)
				Terminal growth rate of cash flows	3% - 3% (3%)
				Terminal year	2017 - 2019 (2018)
			Scenario 2 - market approach - market multiple method	EBITDA Multiple ^(d)	4.75 - 7.5 (6.1)
				Weighting assigned to outcome of scenario 1/scenario 2	75%/25%
	$	155,005	Transaction price or other investment-specific events ^(e)	Not meaningful ^(e)	Not meaningful ^(e)
Nonrecurring measurements:
Impaired loans: residential	$	22,937	Discounted cash flow	Prepayment rate	7 yrs. - 12 yrs. (10.21 yrs.)
Impaired loans: corporate	$	12,783	Appraisal or discounted cash flow value ^(f)	Not meaningful ^(f)	Not meaningful ^(f)


(a)	Represents discount rates used when we have determined that market participants would take these discounts into account when pricing the investments.


(b)	Future interest rates are projected based upon a forward interest rate path, plus a spread over such projected base rate that is applicable to each future period for each security within this portfolio segment. The interest rates presented represent the average interest rate over all projected periods for securities within the portfolio segment.


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


(d)	Represents amounts used when we have determined that market participants would use such multiples when pricing the investments.


(e)	Certain private equity investments are valued initially at the transaction price until either our annual review, significant transactions occur, new developments become known, or we receive information from the fund manager that allows us to update our proportionate share of net assets, when any of which indicate that a change in the carrying values of these investments is appropriate.


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

Index

Qualitative disclosure about unobservable inputs

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

Auction rate securities:

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

The future interest rate and maturity assumptions impacting the valuation of the auction rate securities are directly related. As short-term interest rates rise, due to the variable nature of the penalty interest rate provisions embedded in most of these securities in the event auctions fail to set the security’s interest rate, then a penalty rate that is specified in the security increases. These penalty rates are based upon a stated interest rate spread over what is typically a short-term base interest rate index. Management estimates that at some level of increase in short-term interest rates, issuers of the securities will have the economic incentive to refinance (and thus prepay) the securities. Therefore, the short-term interest rate assumption directly impacts the input related to the timing of any projected prepayment. The faster and steeper short-term interest rates rise, the earlier prepayments will likely occur and the higher the fair value of the security.

Private equity investments:

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

Fair value option

The fair value option is an accounting election that allows the reporting entity to apply fair value accounting for certain financial assets and liabilities on an instrument by instrument basis. As of March 31, 2016 , we have elected not to choose the fair value option for any of our financial assets or liabilities not already recorded at fair value.

Other fair value disclosures

Many, but not all, of the financial instruments we hold are recorded at fair value in the Condensed Consolidated Statements of Financial Condition. Refer to Note 5 on pages 132 - 133 of our 2015 Form 10-K for discussion of the methods and assumptions we apply to the determination of fair value of our financial instruments that are not otherwise recorded at fair value.

Index

The estimated fair values by level within the fair value hierarchy and the carrying amounts of our financial instruments that are not carried at fair value are as follows:



	Quoted prices in active markets for identical assets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)		Total estimated fair value		Carrying amount
	(in thousands)
March 31, 2016
Financial assets:
Bank loans, net ⁽¹⁾	$	—	$	93,926	$	14,149,555	$	14,243,481	$	14,208,236

Financial liabilities:
Bank deposits	$	—	$	12,380,262	$	353,612	$	12,733,874	$	12,729,457
Other borrowings ⁽²⁾	$	—	$	36,549	$	—	$	36,549	$	35,584
Senior notes payable	$	367,080	$	875,288	$	—	$	1,242,368	$	1,149,316

September 30, 2015
Financial assets:
Bank loans, net ⁽¹⁾	$	—	$	105,199	$	12,799,065	$	12,904,264	$	12,907,776

Financial liabilities:
Bank deposits	$	—	$	11,564,963	$	358,981	$	11,923,944	$	11,919,881
Other borrowings ⁽²⁾	$	—	$	38,455	$	—	$	38,455	$	37,716
Senior notes payable	$	368,760	$	892,963	$	—	$	1,261,723	$	1,149,222


(1)	Excludes all impaired loans and loans held for sale which have been recorded at fair value in the Condensed Consolidated Statements of Financial Condition at March 31, 2016 and September 30, 2015 .


(2)	Excludes the components of other borrowings that are recorded at amounts that approximate their fair value in the Condensed Consolidated Statements of Financial Condition at March 31, 2016 and September 30, 2015 .

Index

NOTE 6 – TRADING INSTRUMENTS AND TRADING INSTRUMENTS SOLD BUT NOT YET PURCHASED



	March 31, 2016				September 30, 2015
	Trading instruments		Instruments sold but not yet purchased		Trading instruments		Instruments sold but not yet purchased
	(in thousands)
Municipal and provincial obligations	$	239,580	$	4	$	206,063	$	18,313
Corporate obligations	137,061		48,860		95,317		33,184
Government and agency obligations	133,487		260,727		115,947		205,658
Agency MBS and CMOs	98,577		3,122		117,570		5,007
Non-agency CMOs and ABS	35,933		—		46,940		—
Total debt securities	644,638		312,713		581,837		262,162

Derivative contracts ⁽¹⁾	51,275		7,639		42,086		20,239
Equity securities	54,524		4,958		28,344		3,098
Brokered certificates of deposit	32,257		—		30,803		—
Other	16,759		100		7,481		2,494
Total	$	799,453	$	325,410	$	690,551	$	287,993


(1)	Represents the derivative contracts held for trading purposes. These balances do not include all derivative instruments. See Note 13 for further information regarding all of our derivative transactions, and see Note 14 for additional information regarding offsetting financial instruments.

See Note 5 for additional information regarding the fair value of trading instruments and trading instruments sold but not yet purchased.

NOTE 7 – AVAILABLE FOR SALE SECURITIES

Available for sale securities are comprised of MBS and CMOs owned by RJ Bank and ARS owned by one of our non-broker-dealer subsidiaries. Refer to the discussion of our available for sale securities accounting policies, including the fair value determination process, in Note 2 on pages 107 - 108 of our 2015 Form 10-K.

There were no proceeds from the sale of available for sale securities held by RJ Bank during either of the three and six months ended March 31, 2016 or 2015 .

There were $1.6 million of proceeds, and a gain in the amount of $100 thousand which is included in other revenues on our Condensed Consolidated Statements of Income and Comprehensive Income arising from the sale or redemption of ARS in the three and six months ended March 31, 2016 . Sale or redemption activities within the ARS portion of the portfolio during the three and six months ended March 31, 2015 resulted in aggregate proceeds of $300 thousand and an insignificant gain which is included in other revenues on our Condensed Consolidated Statements of Income and Comprehensive Income.

Index

The amortized cost and fair values of available for sale securities are as follows:



	Cost basis		Gross unrealized gains		Gross unrealized losses			Fair value
	(in thousands)
March 31, 2016
Available for sale securities:
Agency MBS and CMOs	$	352,789	$	1,896	$	(255	)	$	354,430
Non-agency CMOs ⁽¹⁾	68,135		9		(4,450		)	63,694
Other securities	1,575		—		(278		)	1,297
Total RJ Bank available for sale securities	422,499		1,905		(4,983		)	419,421

Auction rate securities:
Municipal obligations	27,491		14		(2,083		)	25,422
Preferred securities	104,302		—		(1,703		)	102,599
Total auction rate securities	131,793		14		(3,786		)	128,021
Total available for sale securities	$	554,292	$	1,919	$	(8,769	)	$	547,442

September 30, 2015
Available for sale securities:
Agency MBS and CMOs	$	301,001	$	1,538	$	(344	)	$	302,195
Non-agency CMOs ⁽²⁾	75,678		18		(4,327		)	71,369
Other securities	1,575		—		(173		)	1,402
Total RJ Bank available for sale securities	378,254		1,556		(4,844		)	374,966

Auction rate securities:
Municipal obligations	28,966		576		(1,527		)	28,015
Preferred securities	104,302		6,447		—			110,749
Total auction rate securities	133,268		7,023		(1,527		)	138,764
Total available for sale securities	$	511,522	$	8,579	$	(6,371	)	$	513,730


(1)	As of March 31, 2016 , the non-credit portion of other-than-temporary impairment (“OTTI”) recorded in accumulated other comprehensive income (loss) (“AOCI”) was $3.6 million (before taxes). See Note 17 for additional information.


(2)	As of September 30, 2015 , the non-credit portion of OTTI recorded in AOCI was $3.6 million (before taxes).

See Note 5 for additional information regarding the fair value of available for sale securities.

Index

The contractual maturities, amortized cost, carrying values and current yields for our available for sale securities are as presented below. Since RJ Bank’s available for sale securities (MBS & CMOs) are backed by mortgages, actual maturities will differ from contractual maturities because borrowers may have the right to prepay obligations without prepayment penalties. Expected maturities of ARS may differ significantly from contractual maturities, as issuers may have the right to call or prepay obligations with or without call or prepayment penalties.



	March 31, 2016
	Within one year			After one but within five years			After five but within ten years			After ten years			Total
	($ in thousands)
Agency MBS & CMOs:
Amortized cost	$	5		$	24,179		$	77,073		$	251,532		$	352,789
Carrying value	5			24,456			77,361			252,608			354,430
Weighted-average yield	0.86		%	1.59		%	1.51		%	1.43		%	1.46		%

Non-agency CMOs:
Amortized cost	$	—		$	—		$	—		$	68,135		$	68,135
Carrying value	—			—			—			63,694			63,694
Weighted-average yield	—			—			—			2.52		%	2.52		%

Other securities:
Amortized cost	$	—		$	—		$	—		$	1,575		$	1,575
Carrying value	—			—			—			1,297			1,297
Weighted-average yield	—			—			—			—			—

Sub-total agency MBS & CMOs, non-agency CMOs, and other securities:
Amortized cost	$	5		$	24,179		$	77,073		$	321,242		$	422,499
Carrying value	5			24,456			77,361			317,599			419,421
Weighted-average yield	0.86		%	1.59		%	1.51		%	1.65		%	1.62		%

Auction rate securities:
Municipal obligations
Amortized cost	$	—		$	—		$	—		$	27,491		$	27,491
Carrying value	—			—			—			25,422			25,422
Weighted-average yield	—			—			—			0.55		%	0.55		%

Preferred securities:
Amortized cost	$	—		$	—		$	—		$	104,302		$	104,302
Carrying value	—			—			—			102,599			102,599
Weighted-average yield	—			—			—			0.80		%	0.80		%

Sub-total auction rate securities:
Amortized cost	$	—		$	—		$	—		$	131,793		$	131,793
Carrying value	—			—			—			128,021			128,021
Weighted-average yield	—			—			—			0.75		%	0.75		%

Total available for sale securities:
Amortized cost	$	5		$	24,179		$	77,073		$	453,035		$	554,292
Carrying value	5			24,456			77,361			445,620			547,442
Weighted-average yield	0.86		%	1.59		%	1.51		%	1.39		%	1.42		%

Index

The gross unrealized losses and fair value, aggregated by investment category and length of time the individual securities have been in a continuous unrealized loss position, are as follows:



	March 31, 2016
	Less than 12 months					12 months or more					Total
	Estimated fair value		Unrealized losses			Estimated fair value		Unrealized losses			Estimated fair value		Unrealized losses
	(in thousands)
Agency MBS and CMOs	$	27,073	$	(35	)	$	24,687	$	(220	)	$	51,760	$	(255	)
Non-agency CMOs	4,347		(37		)	58,720		(4,413		)	63,067		(4,450		)
Other securities	1,297		(278		)	—		—			1,297		(278		)
ARS municipal obligations	13,392		(508		)	11,782		(1,575		)	25,174		(2,083		)
ARS preferred securities	101,070		(1,703		)	—		—			101,070		(1,703		)
Total	$	147,179	$	(2,561	)	$	95,189	$	(6,208	)	$	242,368	$	(8,769	)



	September 30, 2015
	Less than 12 months					12 months or more					Total
	Estimated fair value		Unrealized losses			Estimated fair value		Unrealized losses			Estimated fair value		Unrealized losses
	(in thousands)
Agency MBS and CMOs	$	3,488	$	(37	)	$	29,524	$	(307	)	$	33,012	$	(344	)
Non-agency CMOs	—		—			65,854		(4,327		)	65,854		(4,327		)
Other securities	1,402		(173		)	—		—			1,402		(173		)
ARS municipal obligations	225		(3		)	11,627		(1,524		)	11,852		(1,527		)
Total	$	5,115	$	(213	)	$	107,005	$	(6,158	)	$	112,120	$	(6,371	)

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

Agency MBS and CMOs

The Federal National Mortgage Association (“FNMA”), the Federal Home Loan Mortgage Corporation (“FHLMC”), as well as the Government National Mortgage Association (“GNMA”), guarantee the contractual cash flows of the agency MBS and CMOs. At March 31, 2016 of the 10 U.S. government-sponsored enterprise MBS and CMOs in an unrealized loss position, seven were in a continuous unrealized loss position for less than 12 months and three were for 12 months or more. We do not consider these securities other-than-temporarily impaired due to the guarantee provided by FNMA, FHLMC, and GNMA as to the full payment of principal and interest, and the fact that we have the ability and intent to hold these securities to maturity.

Non-agency CMOs

All individual non-agency securities are evaluated for OTTI on a quarterly basis. Only those non-agency CMOs whose amortized cost basis we do not expect to recover in full are considered to be other than temporarily impaired, as we have the ability and intent to hold these securities to maturity. To assess whether the amortized cost basis of non-agency CMOs will be recovered, RJ Bank performs a cash flow analysis for each security. This comprehensive process considers borrower characteristics and the particular attributes of the loans underlying each security. Loan level analysis includes a review of historical default rates, loss severities, liquidations, prepayment speeds and delinquency trends. In addition to historical details, home prices and the economic outlook are considered to derive the assumptions utilized in the discounted cash flow model to project security-specific cash flows, which factors in the amount of credit enhancement specific to the security. The difference between the present value of the cash flows expected and the amortized cost basis is the credit loss, and it is recorded as OTTI.

The significant assumptions used in the cash flow analysis of non-agency CMOs are as follows:



	March 31, 2016
	Range	Weighted- average ⁽¹⁾
Default rate	0% - 6.6%	3.42%
Loss severity	0% - 69.2%	36.31%
Prepayment rate	5.6% - 32.0%	12.74%


(1)	Represents the expected activity for the next twelve months.

Index

At March 31, 2016 , 15 of the 16 non-agency CMOs were in a continuous unrealized loss position. Fourteen were in that position for 12 months or more and one was in a continuous unrealized loss position for less than 12 months. Based on the expected cash flows derived from the model utilized in our analysis, we expect to recover all unrealized losses not already recorded in earnings on our non-agency CMOs. However, it is possible that the underlying loan collateral of these securities will perform worse than current expectations, which may lead to adverse changes in the cash flows expected to be collected on these securities and potential future OTTI losses. As residential mortgage loans are the underlying collateral of these securities, the unrealized losses at March 31, 2016 reflect the uncertainty in the markets for these instruments.

ARS

Our cost basis in the ARS we hold is the fair value of the securities in the period in which we acquired them. The par value of the ARS we hold as of March 31, 2016 is $154.2 million . Only those ARS whose amortized cost basis we do not expect to recover in full are considered to be other-than-temporarily impaired, as we have the ability and intent to hold these securities to maturity. All of our ARS securities are evaluated for OTTI on a quarterly basis.

As of March 31, 2016 , there were 37 ARS preferred securities with a fair value less than their cost basis, indicating potential impairment. We analyzed the credit ratings associated with each of these securities as an indicator of potential credit impairment, and including subsequent ratings changes, determined that all of these securities maintained investment grade ratings by at least one rating agency. We have the ability and intent to hold these securities to maturity and expect to recover their entire cost basis and therefore concluded that none of the potential impairment within our ARS preferred securities portfolio is related to potential credit loss.

Within our municipal ARS holdings as of March 31, 2016 , there were nine municipal ARS with a fair value less than their cost basis, indicating potential impairment. We analyzed the credit ratings associated with these securities as an indicator of potential credit impairment, and including subsequent ratings changes, determined that all of these securities maintained investment grade ratings by at least one rating agency. We have the ability and intent to hold these securities to maturity and expect to recover their entire cost basis and therefore concluded that none of the potential impairment within our municipal ARS portfolio is related to potential credit loss.

Other-than-temporarily impaired securities

Although there is no intent to sell either our ARS or our non-agency CMOs, and it is not more likely than not that we will be required to sell these securities, as of March 31, 2016 we do not expect to recover the entire amortized cost basis of certain securities within the non-agency CMO available for sale security portfolio.

Changes in the amount of OTTI related to credit losses recognized in other revenues on available for sale securities are as follows:



	Three months ended March 31,				Six months ended March 31,
	2016		2015		2016		2015
	(in thousands)
Amount related to credit losses on securities we held at the beginning of the period	$	11,847	$	18,703	$	11,847	$	18,703
Additional increases to the amount related to credit loss for which an OTTI was previously recognized	—		—		—		—
Amount related to credit losses on securities we held at the end of the period	$	11,847	$	18,703	$	11,847	$	18,703

NOTE 8 – BANK LOANS, NET

Bank client receivables are comprised of loans originated or purchased by RJ Bank, and include commercial and industrial (“C&I”) loans, tax-exempt loans, securities based and other consumer loans (“SBL”), as well as commercial and residential real estate loans. These receivables are collateralized by first or second mortgages on residential or other real property, other assets of the borrower, a pledge of revenue, or are unsecured.

For a discussion of our accounting policies regarding bank loans and allowances for losses, including the policies regarding loans held for investment, loans held for sale, off-balance sheet loan commitments, nonperforming assets, troubled debt restructurings (“TDRs”), impaired loans, the allowance for loan losses and reserve for unfunded lending commitments, and loan charge-off policies, see Note 2 on pages 111 – 115 of our 2015 Form 10-K.

Index

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

The following table presents the balances for both the held for sale and held for investment loan portfolios, as well as the associated percentage of each portfolio segment in RJ Bank’s total loan portfolio:



	March 31, 2016					September 30, 2015
	Balance			%		Balance			%
	($ in thousands)
Loans held for sale, net ⁽¹⁾	$	172,222		1	%	$	119,519		1	%
Loans held for investment:
Domestic:
C&I loans	6,236,413			43	%	5,893,631			44	%
CRE construction loans	143,437			1	%	126,402			1	%
CRE loans	2,035,699			14	%	1,679,332			13	%
Tax-exempt loans	610,274			4	%	484,537			4	%
Residential mortgage loans	2,215,264			15	%	1,959,786			15	%
SBL	1,702,766			12	%	1,479,562			11	%
Foreign:
C&I loans	1,046,801			7	%	1,034,387			8	%
CRE construction loans	2,468			—		35,954			—
CRE loans	412,569			3	%	374,822			3	%
Residential mortgage loans	2,320			—		2,828			—
SBL	1,909			—		1,942			—
Total loans held for investment	14,409,920					13,073,183
Net unearned income and deferred expenses	(39,441		)			(32,424		)
Total loans held for investment, net ⁽¹⁾	14,370,479					13,040,759

Total loans held for sale and investment	14,542,701			100	%	13,160,278			100	%
Allowance for loan losses	(194,220		)			(172,257		)
Bank loans, net	$	14,348,481				$	12,988,021


(1)	Net of unearned income and deferred expenses, which includes purchase premiums, purchase discounts, and net deferred origination fees and costs.

At March 31, 2016 , the Federal Home Loan Bank of Atlanta (“FHLB”) had a blanket lien on RJ Bank’s residential mortgage loan portfolio as security for the repayment of certain borrowings. See Note 12 for more information regarding borrowings from the FHLB.

Loans held for sale

RJ Bank originated or purchased $397.5 million and $1.0 billion of loans held for sale during the three and six months ended March 31, 2016 , respectively, and $219.7 million and $617.6 million during the three and six months ended March 31, 2015 . Proceeds from the sale of held for sale loans amounted to $84.7 million and $170.9 million during the three and six months ended March 31, 2016 , and $60.2 million and $97.5 million during the three and six months ended March 31, 2015 . Net gains resulting from such sales amounted to $300 thousand and $600 thousand during the three and six months ended March 31, 2016 and were insignificant during both the three and six months ended March 31, 2015 . Unrealized losses recorded in the Condensed Consolidated Statements of Income and Comprehensive Income to reflect the loans held for sale at the lower of cost or market value were insignificant in each of the three and six months ended March 31, 2016 and 2015 .

Purchases and sales of loans held for investment

As more fully described in Note 2 of our 2015 Form 10-K, corporate loan sales generally occur as part of a loan workout situation.

Index

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



	C&I		CRE		Residential mortgage			Total
	(in thousands)
Three months ended March 31, 2016
Purchases	$	91,256	$	7,040	$	131,788	⁽²⁾	$	230,084
Sales ⁽¹⁾	$	36,569	$	—	$	—		$	36,569

Six months ended March 31, 2016
Purchases	$	149,107	$	7,040	210,823		⁽³⁾	$	366,970
Sales ⁽¹⁾	$	71,815	$	—	—			$	71,815

Three months ended March 31, 2015
Purchases	$	106,197	$	—	$	1,337		$	107,534
Sales ⁽¹⁾	$	25,500	$	—	$	—		$	25,500

Six months ended March 31, 2015
Purchases	$	260,281	$	—	$	213,309	⁽⁴⁾	$	473,590
Sales ⁽¹⁾	$	32,360	$	—	$	—		$	32,360


(1)	Represents the recorded investment of loans held for investment that were transferred to loans held for sale during the respective period and subsequently sold to a third party during the same period. Corporate loan sales generally occur as part of a loan workout situation.


(2)	Includes the purchase from another financial institution of residential mortgage loans totaling $107.1 million in principal loan balance.


(3)	Includes purchases from another financial institution of residential mortgage loans totaling $179.6 million in principal loan balance.


(4)	Includes the purchase from another financial institution of residential mortgage loans totaling $207.3 million in principal loan balance.

Index

Aging analysis of loans held for investment

The following table presents an analysis of the payment status of loans held for investment:



	30-89 days and accruing		90 days or more and accruing		Total past due and accruing		Nonaccrual ⁽¹⁾		Current and accruing		Total loans held for investment ⁽²⁾
	(in thousands)
As of March 31, 2016:
C&I loans	$	152	$	—	$	152	$	11,391	$	7,271,671	$	7,283,214
CRE construction loans	—		—		—		—		145,905		145,905
CRE loans	—		—		—		4,497		2,443,771		2,448,268
Tax-exempt loans	—		—		—		—		610,274		610,274
Residential mortgage loans:
First mortgage loans	1,504		—		1,504		43,365		2,153,501		2,198,370
Home equity loans/lines	—		—		—		172		19,042		19,214
SBL	—		—		—		—		1,704,675		1,704,675
Total loans held for investment, net	$	1,656	$	—	$	1,656	$	59,425	$	14,348,839	$	14,409,920

As of September 30, 2015:
C&I loans	163		$	—	$	163	$	—	6,927,855		$	6,928,018
CRE construction loans	—		—		—		—		162,356		162,356
CRE loans	—		—		—		4,796		2,049,358		2,054,154
Tax-exempt	—		—		—		—		484,537		484,537
Residential mortgage loans:
First mortgage loans	2,906		—		2,906		47,504		1,891,384		1,941,794
Home equity loans/lines	30		—		30		319		20,471		20,820
SBL	—		—		—		—		1,481,504		1,481,504
Total loans held for investment, net	$	3,099	$	—	$	3,099	$	52,619	$	13,017,465	$	13,073,183


(1)	Includes $31.2 million and $22.4 million of nonaccrual loans at March 31, 2016 and September 30, 2015 , respectively, which are performing pursuant to their contractual terms.


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

Nonperforming loans represent those loans on nonaccrual status, troubled debt restructurings, and accruing loans which are 90 days or more past due and in the process of collection. The gross interest income related to the nonperforming loans reflected in the previous table, which would have been recorded had these loans been current in accordance with their original terms, totaled $500 thousand and $800 thousand for the three and six months ended March 31, 2016 , respectively, and $500 thousand and $1.2 million for the three and six months ended March 31, 2015 , respectively. The interest income recognized on nonperforming loans was $200 thousand and $500 thousand for the three and six months ended March 31, 2016 , respectively and $400 thousand and $600 thousand for the three and six months ended March 31, 2015 , respectively.

Other real estate owned, included in other assets on our Condensed Consolidated Statements of Financial Condition, was $4.5 million at March 31, 2016 and $4.6 million at September 30, 2015 . The recorded investment of mortgage loans secured by one-to-four family residential properties for which formal foreclosure proceedings are in process was $21.6 million at March 31, 2016 and $24.6 million at September 30, 2015 .

Index

Impaired loans and troubled debt restructurings

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



	March 31, 2016						September 30, 2015
	Gross recorded investment		Unpaid principal balance		Allowance for losses		Gross recorded investment		Unpaid principal balance		Allowance for losses
	(in thousands)
Impaired loans with allowance for loan losses: ⁽¹⁾
C&I loans	$	11,391	$	11,535	$	3,105	$	10,599	$	11,204	$	1,132
Residential - first mortgage loans	33,437		45,090		2,804		35,442		48,828		4,014
Total	44,828		56,625		5,909		46,041		60,032		5,146

Impaired loans without allowance for loan losses: ⁽²⁾
CRE loans	4,497		11,611		—		4,796		11,611		—
Residential - first mortgage loans	18,532		27,189		—		20,221		29,598		—
Total	23,029		38,800		—		25,017		41,209		—
Total impaired loans	$	67,857	$	95,425	$	5,909	$	71,058	$	101,241	$	5,146


(1)	Impaired loan balances have had reserves established based upon management’s analysis.


(2)	When the discounted cash flow, collateral value or market value equals or exceeds the carrying value of the loan, then the loan does not require an allowance. These are generally loans in process of foreclosure that have already been adjusted to fair value.

The preceding table includes $4.5 million CRE, and $30.6 million residential first mortgage TDR’s at March 31, 2016 , and $4.8 million CRE, $10.6 million C&I, and $32.8 million residential first mortgage TDR’s at September 30, 2015 .

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



	Three months ended March 31,				Six months ended March 31,
	2016		2015		2016		2015
	(in thousands)
Average impaired loan balance:
C&I loans	$	7,258	$	11,613	$	8,882	$	11,732
CRE loans	4,540		17,257		4,606		17,394
Residential mortgage loans:
First mortgage loans	52,713		59,875		53,223		61,493
Total	$	64,511	$	88,745	$	66,711	$	90,619

Interest income recognized:
Residential mortgage loans:
First mortgage loans	$	334	$	426	$	707	$	741
Total	$	334	$	426	$	707	$	741

During the three and six months ended March 31, 2016 and 2015 , RJ Bank granted concessions to borrowers having financial difficulties, for which the resulting modification was deemed a TDR. These concessions granted for the respective first mortgage residential loans were interest rate reductions, maturity date extensions, capitalization of past due payments, or release of liability ordered under Chapter 7 bankruptcy not reaffirmed by the borrower.

Index

The table below presents the TDRs that occurred during the respective periods presented:



	Number of contracts	Pre-modification outstanding recorded investment		Post-modification outstanding recorded investment
	($ in thousands)
Three months ended March 31, 2016
Residential – first mortgage loans	1	$	236	$	236

Six months ended March 31, 2016
Residential – first mortgage loans	1	$	236	$	236

Three months ended March 31, 2015
Residential – first mortgage loans	1	$	133	$	134

Six months ended March 31, 2015
Residential – first mortgage loans	3	$	290	$	293

There were no TDRs for which there was a payment default and for which the respective loan was modified as a TDR within the 12 months prior to the default during the three and six months ended March 31, 2016 and 2015 . As of March 31, 2016 , RJ Bank had no outstanding commitments on TDRs and had one outstanding commitment on a C&I TDR at September 30, 2015 in the amount of $600 thousand .

Credit quality indicators

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

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

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

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

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

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

Index

The credit quality of RJ Bank’s held for investment loan portfolio is as follows:



	Pass		Special mention ⁽¹⁾		Substandard ⁽¹⁾		Doubtful ⁽¹⁾		Total
	(in thousands)
March 31, 2016
C&I	$	7,046,244	$	95,379	$	141,591	$	—	$	7,283,214
CRE construction	145,905		—		—		—		145,905
CRE	2,443,599		—		4,669		—		2,448,268
Tax-exempt	610,274		—		—		—		610,274
Residential mortgage:
First mortgage	2,130,729		13,073		54,568		—		2,198,370
Home equity	18,827		215		172		—		19,214
SBL	1,704,675		—		—		—		1,704,675
Total	$	14,100,253	$	108,667	$	201,000	$	—	$	14,409,920

September 30, 2015
C&I	$	6,739,179	$	97,623	$	91,216	$	—	$	6,928,018
CRE construction	162,356		—		—		—		162,356
CRE	2,034,692		39		19,423		—		2,054,154
Tax-exempt	484,537		—		—		—		484,537
Residential mortgage:
First mortgage	1,868,044		14,890		58,860		—		1,941,794
Home equity	20,372		128		320		—		20,820
SBL	1,481,504		—		—		—		1,481,504
Total	$	12,790,684	$	112,680	$	169,819	$	—	$	13,073,183


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

The credit quality of RJ Bank’s performing residential first mortgage loan portfolio is additionally assessed utilizing updated loan-to-value (“LTV”) ratios. RJ Bank segregates all of its performing residential first mortgage loan portfolio with higher reserve percentages allocated to the higher LTV loans. Current LTVs are updated using the most recently available information (generally on a one-quarter lag) and are estimated based on the initial appraisal obtained at the time of origination, adjusted using relevant market indices for housing price changes that have occurred since origination. The value of the homes could vary from actual market values due to changes in the condition of the underlying property, variations in housing price changes within current valuation indices, and other factors.

The table below presents the most recently available update of the performing residential first mortgage loan portfolio summarized by current LTV. The amounts in the table represent the entire loan balance:



	Balance ⁽¹⁾
	(in thousands)
LTV range:
LTV less than 50%	$	658,860
LTV greater than 50% but less than 80%	1,085,978
LTV greater than 80% but less than 100%	88,862
LTV greater than 100%, but less than 120%	13,466
LTV greater than 120%	1,681
Total	$	1,848,847


(1)	Excludes loans that have full repurchase recourse for any delinquent loans.

Index

Allowance for loan losses and reserve for unfunded lending commitments

Changes in the allowance for loan losses of RJ Bank by portfolio segment are as follows:



		Loans held for investment
		C&I			CRE construction			CRE			Tax-exempt			Residential mortgage			SBL			Total
	(in thousands)
Three months ended March 31, 2016
Balance at beginning of period		$	128,721		$	2,635		$	31,304		$	7,119		$	12,265		$	3,415		$	185,459
Provision (benefit) for loan losses		9,590			(100		)	1,149			(85		)	(902		)	(23		)	9,629
Net (charge-offs)/recoveries:
Charge-offs		(1,427		)	—			—			—			(369		)	—			(1,796		)
Recoveries		—			—			—			—			260			20			280
Net (charge-offs)/recoveries		(1,427		)	—			—			—			(109		)	20			(1,516		)
Foreign exchange translation adjustment		415			18			215			—			—			—			648
Balance at March 31, 2016		$	137,299		$	2,553		$	32,668		$	7,034		$	11,254		$	3,412		$	194,220

Six months ended March 31, 2016
Balance at beginning of period		$	117,623		$	2,707		$	30,486		$	5,949		$	12,526		$	2,966		$	172,257
Provision (benefit) for loan losses		21,175			(152		)	2,112			1,085			(1,106		)	425			23,539
Net (charge-offs)/recoveries:
Charge-offs		(1,694		)	—			—			—			(916		)	—			(2,610		)
Recoveries		—			—			—			—			750			21			771
Net (charge-offs)/recoveries		(1,694		)	—			—			—			(166		)	21			(1,839		)
Foreign exchange translation adjustment		195			(2		)	70			—			—			—			263
Balance at March 31, 2016		$	137,299		$	2,553		$	32,668		$	7,034		$	11,254		$	3,412		$	194,220

Three months ended March 31, 2015
Balance at beginning of period		$	109,582		$	1,709		$	25,095		$	2,738		$	15,319		$	2,324		$	156,767
Provision (benefit) for loan losses		1,530			(8		)	900			1,171			168			176			3,937
Net (charge-offs)/recoveries:
Charge-offs		—			—			—			—			(411		)	—			(411		)
Recoveries		536			—			—			—			—			6			542
Net (charge-offs)/recoveries		536			—			—			—			(411		)	6			131
Foreign exchange translation adjustment		(523		)	(26		)	(278		)	—			—			—			(827		)
Balance at March 31, 2015		$	111,125		$	1,675		$	25,717		$	3,909		$	15,076		$	2,506		$	160,008

Six months ended March 31, 2015
Balance at beginning of period		$	103,179		$	1,594		$	25,022		$	1,380		$	14,350		$	2,049		$	147,574
Provision for loan losses		8,364			117			1,062			2,529			787			443			13,302
Net (charge-offs)/recoveries:
Charge-offs		(238		)	—			—			—			(638		)	—			(876		)
Recoveries		536			—			—			—			577			14			1,127
Net recoveries/(charge-offs)		298			—			—			—			(61		)	14			251
Foreign exchange translation adjustment		(716		)	(36		)	(367		)	—			—			—			(1,119		)
Balance at March 31, 2015		$	111,125		$	1,675		$	25,717		$	3,909		$	15,076		$	2,506		$	160,008

Index

The following table presents, by loan portfolio segment, RJ Bank’s recorded investment and related allowance for loan losses:



	Loans held for investment
	Allowance for loan losses						Recorded investment ⁽¹⁾
	Individually evaluated for impairment		Collectively evaluated for impairment		Total		Individually evaluated for impairment		Collectively evaluated for impairment		Total
	(in thousands)
March 31, 2016
C&I	$	3,105	$	134,194	$	137,299	$	11,391	$	7,271,823	$	7,283,214
CRE construction	—		2,553		2,553		—		145,905		145,905
CRE	—		32,668		32,668		4,497		2,443,771		2,448,268
Tax-exempt	—		7,034		7,034		—		610,274		610,274
Residential mortgage	2,814		8,440		11,254		58,403		2,159,181		2,217,584
SBL	—		3,412		3,412		—		1,704,675		1,704,675
Total	$	5,919	$	188,301	$	194,220	$	74,291	$	14,335,629	$	14,409,920

September 30, 2015
C&I	$	1,132	116,491		$	117,623	$	10,599	$	6,917,419	$	6,928,018
CRE construction	—		2,707		2,707		—		162,356		162,356
CRE	—		30,486		30,486		4,796		2,049,358		2,054,154
Tax-exempt	—		5,949		5,949		—		484,537		484,537
Residential mortgage	4,046		8,480		12,526		62,706		1,899,908		1,962,614
SBL	—		2,966		2,966		—		1,481,504		1,481,504
Total	$	5,178	$	167,079	$	172,257	$	78,101	$	12,995,082	$	13,073,183


(1)	Excludes any net unearned income and deferred expenses.

The reserve for unfunded lending commitments, included in trade and other payables on our Condensed Consolidated Statements of Financial Condition, was $7.8 million and $9.7 million at March 31, 2016 and September 30, 2015 , respectively.

NOTE 9 – 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.

We hold variable interests in the following VIE’s: Raymond James Employee Investment Funds I and II (the “EIF Funds”), a trust fund established for employee retention purposes (“Restricted Stock Trust Fund”), certain low-income housing tax credit funds (“LIHTC Funds”), various other partnerships and limited liability companies (“LLCs”) involving real estate (“Other Real Estate Limited Partnerships and LLCs”), certain new market tax credit funds (“NMTC Funds”), and certain funds formed for the purpose of making and managing investments in securities of other entities (“Managed Funds”).

Refer to Note 2 on pages 118 - 121 of our 2015 Form 10-K for a description of our principal involvement with VIEs and the accounting policies regarding determination of whether we are deemed to be the primary beneficiary of any VIEs. Other than as described below, as of March 31, 2016 there have been no significant changes in either the nature of our involvement with, or the accounting policies associated with the analysis of, VIEs as described in the 2015 Form 10-K.

Raymond James Tax Credit Funds, Inc. (“RJTCF”), a wholly owned subsidiary of RJF, is the managing member or general partner in LIHTC Funds having one or more investor members or limited partners. These LIHTC Funds are organized as limited partnerships or LLCs for the purpose of investing in a number of project partnerships, which are limited partnerships or LLCs that in turn purchase and develop low-income housing properties qualifying for tax credits.

Index

VIEs where we are the primary beneficiary

Of the VIEs in which we hold an interest, we have determined that the EIF Funds, the Restricted Stock Trust Fund and certain LIHTC Funds require consolidation in our financial statements, as we are deemed the primary beneficiary of those VIEs. The aggregate assets and liabilities of the VIEs we consolidate are provided in the table below.



	Aggregate assets ⁽¹⁾		Aggregate liabilities ⁽¹⁾
	(in thousands)
March 31, 2016
LIHTC Funds	$	135,581	$	34,173
Guaranteed LIHTC Fund ⁽²⁾	64,715		2,427
Restricted Stock Trust Fund	11,186		11,186
EIF Funds	4,040		—
Total	$	215,522	$	47,786

September 30, 2015
LIHTC Funds	$	143,111	$	41,125
Guaranteed LIHTC Fund ⁽²⁾	71,231		2,263
Restricted Stock Trust Fund	6,405		6,405
EIF Funds	4,627		—
Total	$	225,374	$	49,793


(1)	Aggregate assets and aggregate liabilities differ from the consolidated carrying value of assets and liabilities due to the elimination of intercompany assets and liabilities held by the consolidated VIE.


(2)	In connection with one of the multi-investor tax credit funds in which RJTCF is the managing member, RJTCF has provided one investor member with a guaranteed return on their investment in the fund (the “Guaranteed LIHTC Fund”). See Note 16 for additional information regarding this commitment.

Index

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



	March 31, 2016		September 30, 2015
	(in thousands)
Assets:
Assets segregated pursuant to regulations and other segregated assets	$	8,019	$	8,525
Receivables, other	5,494		5,542
Investments in real estate partnerships held by consolidated variable interest entities	191,801		199,678
Trust fund investment in RJF common stock ⁽¹⁾	11,185		6,404
Prepaid expenses and other assets	3,944		4,297
Total assets	$	220,443	$	224,446

Liabilities and equity:
Trade and other payables	$	23,443	$	12,424
Intercompany payables	11,154		6,400
Loans payable of consolidated variable interest entities ⁽²⁾	19,365		25,960
Total liabilities	53,962		44,784
RJF equity	6,112		6,121
Noncontrolling interests	160,369		173,541
Total equity	166,481		179,662
Total liabilities and equity	$	220,443	$	224,446


(1)	Included in treasury stock in our Condensed Consolidated Statements of Financial Condition.


(2)	Comprised of several non-recourse loans. We are not contingently liable under any of these loans.

The following table presents information about the net income (loss) of the VIEs which we consolidate, and is included within our Condensed Consolidated Statements of Income and Comprehensive Income. The noncontrolling interests presented in this table represent the portion of the net loss from these VIEs which is not ours.



	Three months ended March 31,						Six months ended March 31,
	2016			2015			2016			2015
	(in thousands)
Revenues:
Interest	$	2		$	2		$	2		$	2
Other	(201		)	(382		)	414			292
Total revenues	(199		)	(380		)	416			294
Interest expense	(315		)	(537		)	(625		)	(1,066		)
Net revenues	(514		)	(917		)	(209		)	(772		)
Non-interest expenses ⁽¹⁾	9,398			11,085			18,419			19,099
Net loss including noncontrolling interests	(9,912		)	(12,002		)	(18,628		)	(19,871		)
Net loss attributable to noncontrolling interests	(9,905		)	(11,975		)	(18,619		)	(19,858		)
Net loss attributable to RJF	$	(7	)	$	(27	)	$	(9	)	$	(13	)


(1)	Primarily comprised of items reported in other expense on our Condensed Consolidated Statements of Income and Comprehensive Income.

Low-income housing tax credit funds

RJTCF is the managing member or general partner in 102 separate low-income housing tax credit funds having one or more investor members or limited partners, 88 of which are determined to be VIEs and 14 of which are determined not to be VIEs. RJTCF has concluded that it is the primary beneficiary of six non-guaranteed LIHTC Fund VIEs and, accordingly, consolidates these funds. In addition, RJTCF consolidates the one Guaranteed LIHTC Fund VIE it sponsors (see Note 16 for further discussion

Index

of the guarantee obligation as well as other RJTCF commitments). RJTCF also consolidates eight of the funds it determined not to be VIEs.

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

Low-income housing tax credit funds

RJTCF does not consolidate the LIHTC Fund VIEs that it determines it is not the primary beneficiary of. Our risk of loss is limited to our investments in, advances to, and receivables due from these funds.

New market tax credit funds

One of our affiliates is the managing member of six NMTC Funds, and, as discussed in Note 2 on page 120 of our 2015 Form 10-K, this affiliate is not deemed to be the primary beneficiary of these NMTC Funds. These NMTC Funds are therefore not consolidated. Our risk of loss is limited to our receivables due from these funds.

Other real estate limited partnerships and LLCs

We have a variable interest in several limited partnerships involved in various real estate activities in which a subsidiary is either the general partner or a limited partner. As discussed in Note 2 on page 120 of our 2015 Form 10-K, we have determined that we are not the primary beneficiary of these VIEs. Accordingly, we do not consolidate these partnerships or LLCs. The carrying value of our investment in these partnerships or LLCs represents our risk of loss.

Aggregate assets, liabilities and risk of loss

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



	March 31, 2016						September 30, 2015
	Aggregate assets		Aggregate liabilities		Our risk of loss		Aggregate assets		Aggregate liabilities		Our risk of loss
	(in thousands)
LIHTC Funds	$	3,727,454	$	1,114,185	$	73,959	$	3,317,594	$	951,465	$	42,244
NMTC Funds	65,468		67		12		65,388		40		12
Other Real Estate Limited Partnerships and LLCs	29,523		37,062		140		29,523		37,062		163
Total	$	3,822,445	$	1,151,314	$	74,111	$	3,412,505	$	988,567	$	42,419

VIEs where we hold a variable interest but are not required to consolidate

Managed Funds

As described in Note 2 on page 121 of our 2015 Form 10-K, we have subsidiaries which serve as the general partner of the Managed Funds. For the Managed Funds, the primary beneficiary assessment applies prior accounting guidance which assesses who will absorb a majority of the entity’s expected losses, receive a majority of the entity’s expected residual returns, or both. Based upon the outcome of our assessments, we have determined that we are not required to consolidate the Managed Funds.

The aggregate assets, liabilities, and our exposure to loss from Managed Funds in which we hold a variable interest as of the dates indicated are provided in the table below:



	March 31, 2016						September 30, 2015
	Aggregate assets		Aggregate liabilities		Our risk of loss		Aggregate assets		Aggregate liabilities		Our risk of loss
	(in thousands)
Managed Funds	$	98,168	$	577	$	5,005	$	83,132	$	22	$	53

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NOTE 10 - GOODWILL AND IDENTIFIABLE INTANGIBLE ASSETS

The following are our goodwill and net identifiable intangible asset balances as of the dates indicated:



	March 31, 2016		September 30, 2015
	(in thousands)
Goodwill	$	313,005	$	307,635
Identifiable intangible assets, net	63,959		69,327
Total goodwill and identifiable intangible assets, net	$	376,964	$	376,962

Our goodwill and identified intangible assets result from various acquisitions. As more fully described in Note 3 , in April 2015 we completed our acquisition of Cougar which included a number of identifiable intangible assets. See Note 13 on pages 152 - 155 of our 2015 Form 10-K for a discussion of the components of our goodwill balance and additional information regarding our identifiable intangible assets which arose from acquisitions completed in prior years. See the discussion of our intangible assets and goodwill accounting policies in Note 2 on pages 116 - 117 of our 2015 Form 10-K.

Goodwill

The following summarizes our goodwill by segment, along with the activity, as of the dates indicated:



	Three months ended March 31,						Six months ended March 31,
	Segment						Segment
	Private client group		Capital markets		Total		Private client group		Capital markets		Total
	(in thousands)
Fiscal year 2016
Goodwill as of beginning of period	$	186,733	$	120,902	$	307,635	$	186,733	$	120,902	$	307,635
Foreign currency translation	2,622		2,748		5,370		2,622		2,748		5,370
Impairment losses	—		—		—		—		—		—
Goodwill as of end of period	$	189,355	$	123,650	$	313,005	$	189,355	$	123,650	$	313,005

Fiscal year 2015
Goodwill as of beginning of period	$	174,584	$	120,902	$	295,486	$	174,584	$	120,902	$	295,486
Impairment losses	—		—		—		—		—		—
Goodwill as of end of period	$	174,584	$	120,902	$	295,486	$	174,584	$	120,902	$	295,486

We performed our annual goodwill impairment testing during the quarter ended March 31, 2016, evaluating the balances as of December 31, 2015. We assign goodwill to reporting units. Our reporting units include a Private Client Group reporting unit comprised of our RJ&A domestic retail brokerage operations and TPC (included in our Private Client Group segment), RJ&A Fixed Income (included in our Capital Markets segment) and RJ&A Equity Capital Markets (included in our Capital Markets segment). In addition, we have two RJ Ltd. reporting units (RJ Ltd. Private Client Group (included in our Private Client Group segment) and RJ Ltd. Capital Markets (included in our Capital Markets segment)), each associated with our Canadian operations, and we elected to perform a quantitative assessment for each of the Canadian reporting units.

Qualitative Assessments

For each reporting unit that we performed qualitative assessments on, we determined whether it is more likely than not that the carrying value of the reporting unit, including the recorded goodwill, is in excess of the fair value of the reporting unit. In any instance in which we are unable to qualitatively conclude that it is more likely than not that the fair value of the reporting unit exceeds the reporting unit carrying value including goodwill, a quantitative analysis of the fair value of the reporting unit would be performed. Based upon the outcome of our qualitative assessments, we determined that no quantitative analysis of the fair value of any of the reporting units we elected to qualitatively analyze as of December 31, 2015 was required, and we concluded that none of the goodwill allocated to any of those reporting units as of December 31, 2015 was impaired. No events have occurred since December 31, 2015 that would cause us to update this impairment testing.

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Quantitative Assessments

For our two RJ Ltd. reporting units, we elected not to perform a qualitative assessment but instead to perform quantitative assessments of the equity value of each RJ Ltd. reporting unit that includes an allocation of goodwill. In our determination of the reporting unit fair value of equity, we used a combination of the income approach and the market approach. Under the income approach, we used discounted cash flow models applied to each respective reporting unit. Under the market approach, we calculated an estimated fair value based on a combination of multiples of earnings of guideline companies in the brokerage and capital markets industry that are publicly traded on organized exchanges, and the book value of comparable transactions. The estimated fair value of the equity of the reporting unit resulting from each of these valuation approaches was dependent upon the estimates of future business unit revenues and costs, such estimates were subject to critical assumptions regarding the nature and health of financial markets in future years as well as the discount rate to apply to the projected future cash flows. In estimating future cash flows, a balance sheet as of the December 31, 2015 impairment test date and a statement of operations for the last twelve months of activity for each reporting unit were compiled. Future balance sheets and statements of operations were then projected, and estimated future cash flows were determined by the combination of these projections. The cash flows were discounted at the reporting units estimated cost of equity which was derived through application of the capital asset pricing model. The valuation result from the market approach was dependent upon the selection of the comparable guideline companies and transactions and the earnings multiple applied to each respective reporting units’ projected earnings. Finally, significant management judgment was applied in determining the weight assigned to the outcome of the market approach and the income approach, which resulted in one single estimate of the fair value of the equity of the reporting unit.

The following summarizes certain key assumptions utilized in our quantitative analysis as of December 31, 2015:



				Key assumptions
							Weight assigned to the outcome of:
Segment	Reporting unit	Goodwill as of the impairment testing date (in thousands)		Discount rate used in the income approach		Multiple applied to revenue/EPS in the market approach	Income approach		Market approach
Private client group:	RJ Ltd. Private Client Group	$	16,144	14	%	1.2x/12.4x	75	%	25	%

Capital markets:	RJ Ltd. Capital Markets	16,893		15	%	1.1x/14.4x	75	%	25	%
Total		$	33,037

The assumptions and estimates utilized in determining the fair value of reporting unit equity are sensitive to changes, including, but not limited to, a decline in overall market conditions, adverse business trends and changes in the regulations.

Based upon the outcome of our quantitative assessments as of December 31, 2015, we concluded that none of the goodwill associated with our two RJ Ltd. reporting units was impaired.

No events have occurred since December 31, 2015 that would cause us to update this impairment testing.

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Identifiable intangible assets, net

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



	Segment
	Private client group			Capital markets			Asset management			RJ Bank			Total
	(in thousands)
For the three months ended March 31, 2016
Net identifiable intangible assets as of beginning of period	$	17,799		$	31,211		$	16,301		$	1,461		$	66,772
Additions	—			—			—			87			87
Amortization expense	(384		)	(1,319		)	(565		)	(95		)	(2,363		)
Foreign currency translation	—			—			(537		)	—			(537		)
Impairment losses	—			—			—			—			—
Net identifiable intangible assets as of end of period	$	17,415		$	29,892		$	15,199		$	1,453		$	63,959

For the six months ended March 31, 2016
Net identifiable intangible assets as of beginning of period	$	18,182		$	32,532		$	17,137		$	1,476		$	69,327
Additions	—			—			—			160			160
Amortization expense	(767		)	(2,640		)	(1,181		)	(183		)	(4,771		)
Foreign currency translation	—			—			(537		)	—			(537		)
Impairment losses	—			—			—			—			—
Other	—			—			(220		)	—			(220		)
Net identifiable intangible assets as of end of period	$	17,415		$	29,892		$	15,199		$	1,453		$	63,959

For the three months ended March 31, 2015
Net identifiable intangible assets as of beginning of period	$	8,472		$	36,600		$	10,663		$	1,253		$	56,988
Additions	—			—			—			118			118
Amortization expense	(139		)	(1,375		)	(333		)	(72		)	(1,919		)
Impairment losses	—			—			—			—			—
Net identifiable intangible assets as of end of period	$	8,333		$	35,225		$	10,330		$	1,299		$	55,187

For the six months ended March 31, 2015
Net identifiable intangible assets as of beginning of period	$	8,611		$	37,975		$	10,996		$	1,193		$	58,775
Additions	—			—			—			233			233
Amortization expense	(278		)	(2,750		)	(666		)	(127		)	(3,821		)
Impairment losses	—			—			—			—			—
Net identifiable intangible assets as of end of period	$	8,333		$	35,225		$	10,330		$	1,299		$	55,187

Identifiable intangible assets by type are presented below:



	March 31, 2016					September 30, 2015
	Gross carrying value		Accumulated amortization			Gross carrying value		Accumulated amortization
	(in thousands)
Customer relationships	$	73,770	$	(19,545	)	$	75,217	$	(17,759	)
Trade name	3,928		(267		)	4,278		(111		)
Developed technology	12,630		(9,017		)	12,630		(7,754		)
Intellectual property	521		(48		)	561		(23		)
Non-compete agreements	987		(453		)	1,018		(206		)
Mortgage servicing rights	2,227		(774		)	2,067		(591		)
Total	$	94,063	$	(30,104	)	$	95,771	$	(26,444	)

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NOTE 11 – BANK DEPOSITS

Bank deposits include Negotiable Order of Withdrawal (“NOW”) accounts, demand deposits, savings and money market accounts and certificates of deposit of RJ Bank. The following table presents a summary of bank deposits including the weighted-average rate:



	March 31, 2016				September 30, 2015
	Balance		Weighted-average rate ⁽¹⁾		Balance		Weighted-average rate ⁽¹⁾
	($ in thousands)
Bank deposits:
NOW accounts	$	5,078	0.01	%	$	4,752	0.01	%
Demand deposits (non-interest-bearing)	1,890		—		9,295		—
Savings and money market accounts	12,373,294		0.05	%	11,550,917		0.02	%
Certificates of deposit	349,195		1.61	%	354,917		1.64	%
Total bank deposits ⁽²⁾	$	12,729,457	0.09	%	$	11,919,881	0.07	%


(1)	Weighted-average rate calculation is based on the actual deposit balances at March 31, 2016 and September 30, 2015 , respectively.


(2)	Bank deposits exclude affiliate deposits of approximately $949 million and $458 million at March 31, 2016 and September 30, 2015 , respectively. These affiliate deposits include $930 million and $451 million , held in a deposit account on behalf of RJF as of March 31, 2016 and September 30, 2015 , respectively.

RJ Bank’s savings and money market accounts in the table above consist primarily of deposits that are cash balances swept from the investment accounts maintained at RJ&A. These balances are held in Federal Deposit Insurance Corporation (“FDIC”) insured bank accounts through the Raymond James Bank Deposit Program (“RJBDP”) administered by RJ&A. The aggregate amount of time deposit account balances that exceed the FDIC insurance limit at March 31, 2016 is $23.5 million .

Scheduled maturities of certificates of deposit are as follows:



	March 31, 2016				September 30, 2015
	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
	(in thousands)
Three months or less	$	9,292	$	7,415	$	6,206	$	7,610
Over three through six months	10,135		7,920		11,731		7,304
Over six through twelve months	27,342		21,778		18,341		14,807
Over one through two years	17,199		13,719		43,133		33,163
Over two through three years	53,361		19,233		33,556		10,825
Over three through four years	56,871		25,473		51,140		23,616
Over four through five years	51,904		27,553		63,351		30,134
Total	$	226,104	$	123,091	$	227,458	$	127,459

Interest expense on deposits is summarized as follows:



	Three months ended March 31,				Six months ended March 31,
	2016		2015		2016		2015
	(in thousands)
Certificates of deposit	$	1,406	$	1,459	$	2,854	$	2,983
Money market, savings and NOW accounts ⁽¹⁾	1,346		631		1,917		1,244
Total interest expense on deposits	$	2,752	$	2,090	$	4,771	$	4,227


(1)	The balances for the three and six months ended March 31, 2016, respectively, are presented net of interest expense associated with affiliate deposits.

Index

NOTE 12 – OTHER BORROWINGS

The following table details the components of other borrowings:



	March 31, 2016			September 30, 2015
	(in thousands)
Other borrowings:
FHLB advances	$	575,000	⁽¹⁾	$	550,000	⁽²⁾
Borrowings on secured lines of credit ⁽³⁾	—			115,000
Mortgage notes payable ⁽⁴⁾	35,584			37,716
Borrowings on ClariVest revolving credit facility ⁽⁵⁾	300			349
Borrowings on unsecured lines of credit ⁽⁶⁾	—		⁽⁷⁾	—		⁽⁷⁾
Total other borrowings	$	610,884		$	703,065

(1)

Borrowings from the FHLB as of March 31, 2016 are comprised of three advances. One of the FHLB advances is in the amount of $250 million , and one is in the amount of $300 million , each of these advances mature in September 2017 and have interest rates which reset quarterly. We use interest rate swaps to manage the risk of increases in interest rates associated with these floating-rate advances by converting a substantial portion of these balances subject to variable interest rates to a fixed interest rate. Refer to Note 13 for information regarding these interest rate swaps which are accounted for as hedging instruments. The other FHLB advance, in the amount of $25 million , matures in October 2020 and bears interest at a fixed rate of 3.4% . All of the FHLB advances are secured by a blanket lien granted to the FHLB on RJ Bank’s residential mortgage loan portfolio. The weighted average interest rate on these advances as of March 31, 2016 is 0.78% .

(2)

Borrowings from the FHLB as of September 30, 2015 are comprised of two floating-rate advances, one in the amount of $250 million and the other in the amount of $300 million . Both FHLB advances mature in March 2017 and have an interest rate which resets quarterly. We use interest rate swaps to manage the risk of increases in interest rates associated with these floating-rate advances by converting a substantial portion of these balances subject to variable interest rates to a fixed interest rate. Refer to Note 13 for information regarding these interest rate swaps which are accounted for as hedging instruments. Both of these advances were restructured during December 2015 in order to extend their maturity date.


(3)	Any borrowings on secured lines of credit are day-to-day and are generally utilized to finance certain fixed income securities.


(4)	Mortgage notes payable pertain to mortgage loans on our corporate headquarters offices located in St. Petersburg, Florida. These mortgage loans are secured by land, buildings, and improvements with a net book value of $46.2 million at March 31, 2016 . These mortgage loans bear interest at 5.7% with repayment terms of monthly interest and principal debt service and have a January 2023 maturity.


(5)	ClariVest Asset Management, LLC (“ClariVest”), a subsidiary of Eagle, is a party to a revolving line of credit provided by a third party lender (the “ClariVest Facility”). The maximum amount available to borrow under the ClariVest Facility is $500 thousand , bearing interest at a variable rate which is 1% over the lenders prime rate. The ClariVest Facility expires on September 2018 .

(6)

In August 2015, RJF entered into a revolving credit facility agreement in which the lenders are a number of financial institutions (the “RJF Credit Facility”). This committed unsecured borrowing facility provides for maximum borrowings of up to $300 million , at variable rates, with a facility maturity in August 2020. There are no borrowings outstanding on the RJF Credit Facility as of either March 31, 2016 or September 30, 2015 .


(7)	Any borrowings on unsecured lines of credit, with the exception of the RJF Credit Facility, are day-to-day and are generally utilized for cash management purposes.

There were other collateralized financings outstanding in the amount of $191 million and $333 million as of March 31, 2016 and September 30, 2015 , respectively. These other collateralized financings are included in securities sold under agreements to repurchase on the Condensed Consolidated Statements of Financial Condition. These financings are collateralized by non-customer, RJ&A-owned securities. See Note 14 for additional information regarding offsetting asset and liability balances as well as additional information regarding the collateral.

NOTE 13 – DERIVATIVE FINANCIAL INSTRUMENTS

The significant accounting policies governing our derivative financial instruments, including our methodologies for determining fair value, are described in Note 2 on pages 108 - 109 of our 2015 Form 10-K.

Index

Derivatives arising from our fixed income business operations

We enter into derivatives contracts as part of our fixed income operations in either over-the-counter market activities, or through “matched book” activities. Each of these activities are described further below.

We enter into interest rate swaps, futures contracts and forward foreign exchange contracts either as part of our fixed income business to facilitate client transactions, to hedge a portion of our trading inventory, or to a limited extent for our own account. The majority of these derivative positions are executed in the over-the-counter market either directly with financial institutions or trades cleared through an exchange (together referred to as the “OTC Derivatives Operations”). Cash flows related to the interest rate contracts arising from the OTC Derivative Operations are included as operating activities (the “trading instruments, net” line) on the Condensed Consolidated Statements of Cash Flows.

Raymond James Financial Products, Inc. (“RJFP”), a wholly owned subsidiary, may enter into derivative transactions (primarily interest rate swaps) with clients. For every derivative transaction RJFP enters into with a customer, RJFP enters into an offsetting transaction, on terms that mirror the customer transaction, with a credit support provider which is a third party financial institution. Due to this “pass-through” transaction structure, RJFP has completely mitigated the market and credit risk related to these derivative contracts. Therefore, the ultimate credit and market risk resides with the third party financial institution. RJFP only has credit risk related to its uncollected derivative transaction fee revenues. In these activities, we do not use derivative instruments for trading or hedging purposes. As a result of the structure of these transactions, we refer to the derivative contracts we enter into as a result of these operations as our offsetting “matched book” derivative operations (the “Offsetting Matched Book Derivatives Operations”).

Any collateral required to be exchanged under the contracts arising from the Offsetting Matched Book Derivatives Operations is administered directly by the client and the third party financial institution. RJFP does not hold any collateral, or administer any collateral transactions, related to these instruments. We record the value of each derivative position arising from the Offsetting Matched Book Derivatives Operations at fair value, as either an asset or offsetting liability, presented as “derivative instruments associated with offsetting matched book positions,” as applicable, on our Condensed Consolidated Statements of Financial Condition.

The receivable for uncollected derivative transaction fee revenues of RJFP is $7 million at both March 31, 2016 and September 30, 2015 , and is included in other receivables on our Condensed Consolidated Statements of Financial Condition.

None of the derivatives described above arising from either our OTC Derivatives Operations or our Offsetting Matched Book Derivatives Operations are designated as fair value or cash flow hedges.

Derivatives arising from RJ Bank’s business operations

We enter into derivatives contracts as part of RJ Bank’s business operations through its hedging activities, which include forward foreign exchange contracts and interest rate swaps (see Note 2 on page 109 of the 2015 Form 10-K for the accounting policies associated with these transactions). Each of these activities is described further below.

A Canadian subsidiary of RJ Bank conducts operations directly related to RJ Bank’s Canadian dollar-denominated corporate loan portfolio. U.S. subsidiaries of RJ Bank utilize forward foreign exchange contracts to hedge RJ Bank’s foreign currency exposure due to its non-U.S. dollar net investment. Cash flows related to these derivative contracts are classified within operating activities in the Condensed Consolidated Statements of Cash Flows.

The cash flows associated with certain assets held by RJ Bank provide interest income at fixed interest rates. Therefore, the value of these assets, absent any risk mitigation, is subject to fluctuation based upon changes in market rates of interest over time. Beginning in February 2015, we entered into certain interest rate swap contracts (the “RJ Bank Interest Hedges”) which swap variable interest payments on certain debt for fixed interest payments. Through the RJ Bank Interest Hedges, RJ Bank is able to mitigate a portion of the market risk associated with certain fixed interest earning assets held by RJ Bank.

Description of the collateral we hold related to derivative contracts

Where permitted, we elect to net-by-counterparty certain derivative contracts entered into in our OTC Derivatives Operations. Certain of these contracts contain a legally enforceable master netting arrangement that allows for netting of all derivative transactions with each counterparty and, therefore, the fair value of those derivative contracts are netted by counterparty in the Condensed Consolidated Statements of Financial Condition. The credit support annex related to the interest rate swaps and certain

Index

forward foreign exchange contracts allows parties to the master agreement to mitigate their credit risk by requiring the party which is out of the money to post collateral. We accept collateral in the form of cash or other marketable securities. As we elect to net-by-counterparty the fair value of derivative contracts arising from our OTC Derivatives Operations, we also net-by-counterparty any cash collateral exchanged as part of those derivative agreements. Refer to Note 14 for additional information regarding offsetting asset and liability balances. This cash collateral is recorded net-by-counterparty at the related fair value. The cash collateral included in the net fair value of all open derivative asset positions arising from our OTC Derivatives Operations aggregates to a net liability of $59 million as of March 31, 2016 and $44 million as of September 30, 2015 . The cash collateral included in the net fair value of all open derivative liability positions from our OTC Derivatives Operations aggregates to a net asset of $26 million at both March 31, 2016 and September 30, 2015 . Our maximum loss exposure under the interest rate swap contracts arising from our OTC Derivatives Operations at March 31, 2016 is $52 million .

RJ Bank provides to counterparties for the benefit of its U.S. subsidiaries, a guarantee of payment in the event of the subsidiaries’ default under forward foreign exchange contracts. Due to this RJ Bank guarantee and the short-term nature of these derivatives, RJ Bank’s U.S. subsidiaries are not required to post collateral and do not receive collateral with respect to certain derivative contracts with the respective counterparties. Our maximum loss exposure under the forward foreign exchange contracts arising from RJ Bank’s business operations at March 31, 2016 is $200 thousand .

Derivative balances included in our financial statements

See the table below for the notional and fair value amounts of both the asset and liability derivatives.



	Asset derivatives
	March 31, 2016						September 30, 2015
	Balance sheet location	Notional amount			Fair value ⁽¹⁾		Balance sheet location	Notional amount			Fair value ⁽¹⁾
	(in thousands)
Derivatives designated as hedging instruments:
Forward foreign exchange contracts ⁽²⁾	Prepaid expenses and other assets	$	768,800	⁽³⁾	$	2,257	Prepaid expenses and other assets	$	752,600	⁽³⁾	$	613
Derivatives not designated as hedging instruments:
Interest rate contracts ⁽⁴⁾	Trading instruments	$	1,940,004		$	138,228	Trading instruments	$	2,473,946		$	130,095
Interest rate contracts ⁽⁵⁾	Derivative instruments associated with offsetting matched book positions	$	1,507,020		$	396,163	Derivative instruments associated with offsetting matched book positions	$	1,649,863		$	389,457
Forward foreign exchange contracts ⁽⁴⁾	Trading instruments	$	108,462	⁽³⁾	$	9,677	Trading instruments	$	74,873	⁽³⁾	$	2,612
Forward foreign exchange contracts ⁽²⁾	Prepaid expenses and other assets	$	181,000	⁽³⁾	$	681	Prepaid expenses and other assets	$	214,300	⁽³⁾	$	304
	Liability derivatives
Derivatives designated as hedging instruments:
Interest rate contracts ⁽⁶⁾	Trade and other payables	$	450,000		$	20,803	Trade and other payables	$	300,000		$	7,545
Forward foreign exchange contracts ⁽²⁾	Trade and other payables	$	100,400	⁽³⁾	$	84	Trade and other payables	$	—		$	—
Derivatives not designated as hedging instruments:
Interest rate contracts ⁽⁴⁾	Trading instruments sold	$	1,928,733		$	130,702	Trading instruments sold	$	1,906,766		$	104,255
Interest rate contracts ⁽⁵⁾	Derivative instruments associated with offsetting matched book positions	$	1,507,020		$	396,163	Derivative instruments associated with offsetting matched book positions	$	1,649,863		$	389,457
Forward foreign exchange contracts ⁽⁴⁾	Trading instruments sold	$	119,856	⁽³⁾	$	4,939	Trading instruments sold	$	136,710	⁽³⁾	$	4,865
Forward foreign exchange contracts ⁽²⁾	Trade and other payables	$	139,300	⁽³⁾	$	117	Trade and other payables	$	—		$	—


(1)	The fair value in this table is presented on a gross basis before netting of cash collateral and before any netting by counterparty according to our legally enforceable master netting arrangements. The fair value in the Condensed Consolidated Statements of Financial Condition is presented net. See Note 14 for additional information regarding offsetting asset and liability balances.


(2)	These contracts are associated with RJ Bank’s activities to hedge its foreign currency exposure.


(3)	The notional amount presented is denominated in Canadian currency.


(4)	These contracts arise from our OTC Derivatives Operations.


(5)	These contracts arise from our Offsetting Matched Book Derivatives Operations.


(6)	These contracts are associated with our RJ Bank Interest Hedges activities.

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Gains (losses) recognized in AOCI, net of income taxes on derivatives are as follows (see Note 17 for additional information):



	Three months ended March 31,						Six months ended March 31,
	2016			2015			2016			2015
	(in thousands)
Forward foreign exchange contracts	$	(23,411	)	$	30,519		$	(11,174	)	$	43,577
RJ Bank Interest Hedges	(11,469		)	(1,501		)	(8,204		)	(1,501		)
Total (losses) gains recognized in AOCI, net of taxes	$	(34,880	)	$	29,018		$	(19,378	)	$	42,076

There was no hedge ineffectiveness and no components of derivative gains or losses were excluded from the assessment of hedge effectiveness for the each of the three and six months ended March 31, 2016 and 2015 . We expect to reclassify an estimated $6.1 million as additional 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 ten years .

The table below sets forth the impact of the derivatives not designated as hedging instruments on the Condensed Consolidated Statements of Income and Comprehensive Income:



	Location of gain (loss) recognized on derivatives in the Condensed Consolidated Statements of Income and Comprehensive Income	Amount of gain (loss) on derivatives recognized in income
		Three months ended March 31,					Six months ended March 31,
		2016			2015		2016			2015
		(in thousands)
Derivatives not designated as hedging instruments:
Interest rate contracts and forward foreign exchange contracts ⁽¹⁾	Net trading profit	$	1,365		$	2,403	$	1,773		$	2,280
Interest rate contracts ⁽²⁾	Other revenues	$	23		$	44	$	46		$	66
Forward foreign exchange contracts ⁽³⁾	Other revenues	$	(12,970	)	$	8,683	$	(7,412	)	$	12,305


(1)	These contracts arise from our OTC Derivatives Operations.


(2)	These contracts arise from our Offsetting Matched Book Derivatives Operations.


(3)	These contracts are associated with RJ Bank’s activities to hedge its foreign currency exposure.

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

We are exposed to credit losses in the event of nonperformance by the counterparties to forward foreign exchange derivative agreements, futures contracts and the interest rate contracts associated with our OTC Derivatives Operations that are not cleared through an exchange. Where we are subject to credit exposure, we perform a credit evaluation of counterparties prior to entering into derivative transactions and we monitor their credit standings. Currently, we anticipate that all of the counterparties will be able to fully satisfy their obligations under those agreements. For our OTC Derivatives Operations that are not cleared through an exchange, we may require 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. We are required to maintain cash or marketable security deposits with the exchange we utilize to clear our OTC Derivatives transactions that are cleared through such exchanges. These deposits are a component of deposits with clearing organizations on our Condensed Consolidated Statements of Financial Condition.

We are exposed to interest rate risk related to the interest rate derivative agreements arising from certain of our OTC Derivatives Operations and RJ Bank Interest Hedges. We are also exposed to foreign exchange risk related to our futures contracts and forward foreign exchange derivative agreements. We monitor exposure in our derivative agreements which we have risk daily based on established limits with respect to a number of factors, including interest rate, foreign exchange spot and forward rates, spread, ratio, basis and volatility risks. These exposures are monitored both on a total portfolio basis and separately for each agreement for selected maturity periods.

Certain of the derivative instruments arising from our OTC Derivatives Operations and from RJ Bank’s forward foreign exchange contracts contain provisions that require our debt to maintain an investment grade rating from one or more of the major

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credit rating agencies. If our debt were to fall below investment grade, we would be in breach of these provisions, 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. The aggregate fair value of all derivative instruments with such credit-risk-related contingent features that are in a liability position at March 31, 2016 is $69.4 million , for which we have posted collateral of $67.9 million in the normal course of business. If the credit-risk-related contingent features underlying these agreements were triggered on March 31, 2016 , we would have been required to post an additional $1.5 million of collateral to our counterparties.

Our only exposure to credit risk in the Offsetting Matched Book Derivatives Operations is related to our uncollected derivative transaction fee revenues. We are not exposed to market risk as it relates to these derivative contracts due to the “pass-through” transaction structure previously described.

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NOTE 14 – DISCLOSURE OF OFFSETTING ASSETS AND LIABILITIES, COLLATERAL, ENCUMBERED ASSETS AND REPURCHASE AGREEMENTS

Offsetting assets and liabilities

The following table presents information about the financial and derivative instruments that are offset or subject to an enforceable master netting arrangement or other similar agreement as of the dates indicated:



										Gross amounts not offset in the Statements of Financial Condition
	Gross amounts of recognized assets (liabilities)			Gross amounts offset in the Statements of Financial Condition			Net amounts presented in the Statements of Financial Condition			Financial instruments				Cash (received) paid			Net amount
	(in thousands)
As of March 31, 2016:
Assets
Securities purchased under agreements to resell and other collateralized financings	$	428,864		$	—		$	428,864		$	(428,864	)	⁽¹⁾	$	—		$	—
Derivatives - interest rate contracts ⁽²⁾	138,228			(96,630		)	41,598			(17,378		)		—			24,220
Derivative instruments associated with offsetting matched book positions	396,163			—			396,163			(396,163		)	⁽³⁾	—			—
Derivatives - forward foreign exchange contracts ⁽⁴⁾	2,938			—			2,938			—				—			2,938
Derivatives - forward foreign exchange contracts ⁽⁵⁾	9,677			—			9,677			—				—			9,677
Stock borrowed	123,156			—			123,156			(119,957		)		—			3,199
Total assets	$	1,099,026		$	(96,630	)	$	1,002,396		$	(962,362	)		$	—		$	40,034
Liabilities
Securities sold under agreements to repurchase	$	(190,679	)	$	—		$	(190,679	)	$	190,679		⁽⁶⁾	$	—		$	—
Derivatives - interest rate contracts ⁽²⁾	(130,702		)	128,002			(2,700		)	—				2,700		⁽⁷⁾	—
Derivative instruments associated with offsetting matched book positions	(396,163		)	—			(396,163		)	396,163			⁽³⁾	—			—
Derivatives - forward foreign exchange contracts ⁽⁴⁾	(201		)	—			(201		)	—				—			(201		)
Derivatives - forward foreign exchange contracts ⁽⁵⁾	(4,939		)	—			(4,939		)	—				—			(4,939		)
Derivatives - RJ Bank Interest Hedges	(20,803		)	—			(20,803		)	—				20,803		⁽⁸⁾	—
Stock loaned	(610,476		)	—			(610,476		)	599,876				—			(10,600		)
Total liabilities	$	(1,353,963	)	$	128,002		$	(1,225,961	)	$	1,186,718			$	23,503		$	(15,740	)
As of September 30, 2015:
Assets
Securities purchased under agreements to resell and other collateralized financings	$	474,144		$	—		$	474,144		$	(474,144	)	⁽¹⁾	$	—		$	—
Derivatives - interest rate contracts ⁽²⁾	130,095			(90,621		)	39,474			(12,609		)		—			26,865
Derivative instruments associated with offsetting matched book positions	389,457			—			389,457			(389,457		)	⁽³⁾	—			—
Derivatives - forward foreign exchange contracts ⁽⁷⁾	917			—			917			—				—			917
Derivatives - forward foreign exchange contracts ⁽⁴⁾	2,612			—			2,612			—				—			2,612
Stock borrowed	124,373			—			124,373			(120,957		)		—			3,416
Total assets	$	1,121,598		$	(90,621	)	$	1,030,977		$	(997,167	)		$	—		$	33,810
Liabilities
Securities sold under agreements to repurchase	$	(332,536	)	$	—		$	(332,536	)	$	332,536		⁽⁶⁾	$	—		$	—
Derivatives - interest rate contracts ⁽²⁾	(104,255		)	88,881			(15,374		)	3,528			⁽⁷⁾	7,399		⁽⁷⁾	(4,447		)
Derivative instruments associated with offsetting matched book positions	(389,457		)	—			(389,457		)	389,457			⁽³⁾	—			—
Derivatives - forward foreign exchange contracts ⁽⁴⁾	(4,865		)	—			(4,865		)	—				—			(4,865		)
Derivatives - RJ Bank Interest Hedges	(7,545		)	—			(7,545		)	—				7,545		⁽⁸⁾	—
Stock loaned	(478,573		)	—			(478,573		)	472,379				—			(6,194		)
Total liabilities	$	(1,317,231	)	$	88,881		$	(1,228,350	)	$	1,197,900			$	14,944		$	(15,506	)

The text of the footnotes in the above table are on the following page.

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The text of the footnotes to the table on the previous page are as follows:


(1)	We are over-collateralized since the actual amount of financial instruments pledged as collateral for securities purchased under agreements to resell and other collateralized financings amounts to $446.7 million and $499.3 million as of March 31, 2016 and September 30, 2015 , respectively.


(2)	Derivatives - interest rate contracts are included in Trading instruments on our Condensed Consolidated Statements of Financial Condition. See Note 13 for additional information.

(3)

Although these derivative arrangements do not meet the definition of a master netting arrangement as specified by GAAP, the nature of the agreement with the third party intermediary include terms that are similar to a master netting agreement, thus we present the offsetting amounts net in this table. See Note 13 for further discussion of the “pass through” structure of the derivative instruments associated with Offsetting Matched Book Derivatives Operations.

(4)

These contracts are associated with RJ Bank’s activities to hedge its foreign currency exposure. As of March 31, 2016 , the fair value of the forward foreign exchange contract derivatives are in both an asset and a liability position and are included in prepaid expenses and other assets and trade and other payables, respectively, on our Condensed Consolidated Statements of Financial Condition. As of September 30, 2015 the fair value of the forward foreign exchange contract derivatives are in an asset position and are included in prepaid expenses and other assets on our Condensed Consolidated Statements of Financial Condition. See Note 13 for additional information.


(5)	See Note 13 for additional information on our forward foreign exchange contract derivatives associated with our OTC Derivatives Operations.


(6)	We are over-collateralized since the actual amount of financial instruments pledged as collateral for securities sold under agreements to repurchase amounts to $200 million and $346.1 million as of March 31, 2016 and September 30, 2015 , respectively.

(7)

For the portion of these derivative contracts that are transacted through an exchange, the nature of the agreement with the clearing member exchange include terms that are similar to a master netting agreement, thus we are over-collateralized as of March 31, 2016 and September 30, 2015 since the actual amount of cash and securities deposited with the exchange for these derivative contracts is $10.9 million and $17.6 million , respectively. These deposits are a component of deposits with clearing organizations on our Condensed Consolidated Statements of Financial Condition. See Note 13 for additional information.

(8)

Derivatives - RJ Bank Interest Hedges are included in trade and other payables on our Condensed Consolidated Statements of Financial Condition. See Note 13 for additional information. The RJ Bank Interest Hedges are transacted through an exchange. The nature of the agreement with the clearing member exchange includes terms that are similar to a master netting agreement, thus present offsetting deposits paid to the exchange associated with these contracts. These deposits are included in deposits with clearing organizations on our Condensed Consolidated Statements of Financial Condition.

For financial statement purposes, we do not offset our repurchase agreements or securities borrowing, securities lending transactions and certain of our derivative instruments including those transacted through an exchange because the conditions for netting as specified by GAAP are not met. Our repurchase agreements, securities borrowing and securities lending transactions, and certain of our derivative instruments transacted through an exchange, 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 two parties to the transaction. Although not offset on the Condensed Consolidated Statements of Financial Condition, these transactions are included in the preceding table.

Collateral and deposits with clearing organizations

We receive cash and securities as collateral, primarily in connection with Reverse Repurchase Agreements, securities borrowed, derivative transactions not transacted through an exchange, and client margin loans arising from our domestic operations. The cash collateral we receive is primarily associated with our OTC Derivative Operations (see Note 13 for additional information). The collateral we receive reduces our credit exposure to individual counterparties.

We also pay cash to the exchange, or receive cash from the exchange, related to derivative contracts transacted through an exchange. We account for such cash as a component of deposits with clearing organizations on our Condensed Consolidated Statements of Financial Condition.

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

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The table below presents financial instruments at fair value, that we received as collateral, are 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 used to deliver or repledge, to satisfy one of our purposes described above:



	March 31, 2016			September 30, 2015
	(in thousands)
Collateral we received that is available to be delivered or repledged	$	2,076,066		$	2,308,277
Collateral that we delivered or repledged	$	1,276,079	⁽¹⁾	$	1,122,540	⁽²⁾


(1)	The collateral delivered or repledged as of March 31, 2016 , includes client margin securities which we pledged with a clearing organization in the amount of $247.3 million which were applied against our requirement of $148.9 million .


(2)	The collateral delivered or repledged as of September 30, 2015 , includes client margin securities which we pledged with a clearing organization in the amount of $240.7 million which were applied against our requirement of $147.6 million .

Encumbered assets

We pledge certain of our trading instrument assets to collateralize either Repurchase Agreements, other secured borrowings, or to satisfy our settlement requirements, with counterparties who may or may not have the right to deliver or repledge such securities.

The table below presents information about the fair value of our assets that have been pledged for one of the purposes described above:



	March 31, 2016			September 30, 2015
	(in thousands)
Financial instruments owned, at fair value, pledged to counterparties that:
Had the right to deliver or repledge	$	326,901		$	424,668
Did not have the right to deliver or repledge	$	25,229	⁽¹⁾	$	94,006	⁽²⁾


(1)	Assets delivered or repledged as of March 31, 2016 , includes securities which we pledged with a clearing organization in the amount of $18.9 million which were applied against our requirement of $148.9 million (client margin securities we pledged which are described in the preceding table constitute the remainder of the assets pledged to meet the requirement).


(2)	Assets delivered or repledged as of September 30, 2015 , includes securities which we pledged with a clearing organization in the amount of $30.5 million which were applied against our requirement of $147.6 million (client margin securities we pledged which are described in the preceding table constitute the remainder of the assets pledged to meet the requirement).

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

We enter into Repurchase Agreements where we sell securities under agreements to repurchase (“Repurchase Agreements”) and also engage in securities lending transactions. These activities are accounted for as collateralized financings. Our Repurchase Agreements would include “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, if any, that we are a party to as of period-end. As of both March 31, 2016 and September 30, 2015 , we did not have any “repurchase-to-maturity” agreements. See Note 2 on pages 105 and 111, respectively, of our 2015 Form 10-K for a discussion of our respective Repurchase Agreement and securities borrowed and securities loaned accounting policies.

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



	Overnight and continuous		Up to 30 days		30-90 days		Greater than 90 days		Total
	(in thousands)
As of March 31, 2016:

Repurchase agreements
Government and agency obligations	$	96,363	$	4,775	$	—	$	—	$	101,138
Agency MBS and CMOs	86,316		3,225		—		—		89,541
Total Repurchase Agreements	182,679		8,000		—		—		190,679

Securities lending
Equity securities	610,476		—		—		—		610,476
Total	$	793,155	$	8,000	$	—	$	—	$	801,155
Gross amounts of recognized liabilities for repurchase agreements and securities lending transactions included in the Offsetting Assets and Liabilities table included within this footnote									$	801,155
Amounts related to repurchase agreements and securities lending transactions not included in the Offsetting Assets and Liabilities table included within this footnote									$	—

As of September 30, 2015:

Repurchase agreements
Government and agency obligations	$	211,594	$	5,250	$	—	$	—	$	216,844
Agency MBS and CMOs	112,941		2,751		—		—		115,692
Total Repurchase Agreements	324,535		8,001		—		—		332,536

Securities lending
Equity securities	478,573		—		—		—		478,573
Total	$	803,108	$	8,001	$	—	$	—	$	811,109
Gross amounts of recognized liabilities for repurchase agreements and securities lending transactions included in the Offsetting Assets and Liabilities table included within this footnote									$	811,109
Amounts related to repurchase agreements and securities lending transactions not included in the Offsetting Assets and Liabilities table included within this footnote									$	—

We enter into Repurchase Agreements and conduct securities lending activities as components of the financing of certain of our operating activities. In the event the market value of the securities we pledge as collateral in these activities declines, we may have to post additional collateral or reduce the borrowing amounts. We monitor such levels daily.

NOTE 15 – INCOME TAXES

For discussion of income tax accounting policies and other income tax related information, see Note 2 on page 118, and Note 20 on pages 166 - 168, of our 2015 Form 10-K.

For the three and six months ended March 31, 2016 , our effective income tax rate is 36.5% and 36.6% , respectively, each of which is slightly lower than the 37.1% effective tax rate for fiscal year 2015. The primary factor for the decrease in the current period effective tax rates compared to the prior year effective tax rate is the favorable impact in the current period of the income associated with our company-owned life insurance which is not subject to tax. In fiscal year 2015, such investments generated non-deductible losses.

As of March 31, 2016 , our uncertain tax position liability balance decreased by $2.4 million from the September 30, 2015 level, as a result of the resolution of certain state tax audits. We anticipate that the uncertain tax position liability balance may further decrease by $3.9 million over the next twelve months as a result of the resolution of other state tax audits.

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NOTE 16 – COMMITMENTS, CONTINGENCIES AND GUARANTEES

Commitments and contingencies

In the normal course of business we enter into underwriting commitments. As of March 31, 2016 , RJ&A had four open fixed income underwriting commitments, which were subsequently settled in open market transactions at amounts which approximate the carrying value of the commitments in our Condensed Consolidated Statements of Financial Condition as of March 31, 2016 . RJ Ltd. had four equity underwriting commitments, all of which are recorded in our Condensed Consolidated Statements of Financial Condition as of March 31, 2016 , and which aggregate to approximately $54 million in Canadian dollars (“CDN”).

As part of our recruiting efforts, we offer loans to prospective financial advisors and certain key revenue producers, primarily for recruiting, transitional cost assistance, and retention purposes (see Note 2 on pages 110 - 111 of our 2015 Form 10-K for a discussion of our accounting policies governing these transactions). These commitments are contingent upon certain events occurring including, but not limited to, the individual joining us. As of March 31, 2016 , we had made commitments through the extension of formal offers totaling $147 million that had not yet been funded (these commitments exclude all commitments made to financial advisors currently affiliated with Deutsche WM, those commitments are discussed separately in a following paragraph), however, it is possible that not all of our offers will be accepted and therefore we would not fund the total amount of the offers extended. As of March 31, 2016 , $62 million of the total amount extended are unfunded commitments to prospects that had accepted our offer, or recently hired producers.

On December 3, 2015 we announced that we entered into a definitive asset purchase agreement to acquire Deutsche WM. We expect the closing date of this purchase transaction to occur during the fourth quarter of this fiscal year 2016. The total investment associated with this transaction will depend upon how many of the current Deutsche WM financial advisors join us on the closing date, and is subject to further adjustment depending on financial advisor retention through periods as late as March 2017. However, based upon the number of Deutsche WM financial advisors as of the Announcement Date, our total investment including retention incentives provided directly to financial advisors, would approximate $420 million .

In April 2016, Raymond James Global Securities Limited, a wholly owned subsidiary, entered into an agreement to sell all of its ownership interest in two joint ventures, Raymond James Latin Advisors Limited, an entity incorporated in the British Virgin Islands, and Raymond James Uruguay, S.A., an entity incorporated in Uruguay. These joint venture entities each serve certain Latin America markets. The closing date of the sale transaction will occur once all the conditions to closing have been satisfied, including obtaining all necessary regulatory approvals, which we anticipate may occur prior to the end of our current fiscal year. The terms of sale include customary representations and provide for certain customary indemnities in favor of the purchaser. Once consummated, this sale is not anticipated to have any significant impact on our financial condition or results of operations as these Latin American operations do not have a major effect on RJF’s operations as a whole.

As of March 31, 2016 , RJ Bank had not settled purchases of $101 million in syndicated loans. These loan purchases are expected to be settled within 90 days .

A subsidiary of RJ Bank has committed $62 million as an investor member in a low-income housing tax credit fund in which a subsidiary of RJTCF is the managing member (see the discussion of “direct investments in LIHTC project partnerships” in Note 2 on page 120 of our 2015 Form 10-K for information regarding the accounting policies governing these investments). As of March 31, 2016 , the RJ Bank subsidiary has invested $37 million of the committed amount.

See Note 21 for additional information regarding RJ Bank’s commitments to extend credit and other credit-related off-balance sheet financial instruments, such as standby letters of credit and loan purchases.

We have unfunded commitments to various venture capital or private equity partnerships, which aggregate to approximately $45 million as of March 31, 2016 . Of the total, we have unfunded commitments to internally-sponsored private equity limited partnerships in which we control the general partner of approximately $18 million .

As part of the terms governing the TPC acquisition (see Note 3 on pages 121 - 122 of our 2015 Form 10-K, for additional information regarding this acquisition), on certain dates specified in the TPC purchase agreement, there are a number of “earn-out” computations to be performed. The result of these computations could result in additional cash paid to the sellers of TPC in the future. These elements of contingent consideration will be finally determined in the future based upon the outcome of either specific performance of defined tasks, or the achievement of specified revenue growth hurdles, over a measurement period ranging from 18 months to 3 years after the TPC Closing Date. Our initial estimate of the fair value of these elements of contingent consideration as of the TPC Closing Date are included in our determination of the goodwill arising from this acquisition. As of March 31, 2016 , we computed an estimate of the fair value of this contingent consideration based upon the latest information

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available to us, and the excess of this fair value determination over the initial estimate is included in other expense on our Condensed Consolidated Statements of Income and Comprehensive Income.

RJF has committed to lend to RJTCF, or to guarantee obligations in connection with RJTCF’s low-income housing development/rehabilitation and syndication activities, in amounts aggregating up to $250 million upon request, subject to certain limitations and to annual review and renewal. At March 31, 2016 , RJTCF has $87 million in outstanding cash borrowings and $92 million in unfunded commitments outstanding against this commitment. RJTCF borrows from RJF in order to make investments in, or fund loans or advances to, either partnerships that purchase and develop properties qualifying for tax credits (“Project Partnerships”) or LIHTC Funds. Investments in Project Partnerships are sold to various LIHTC Funds, which have third party 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, and the proceeds from the sales are used to repay RJTCF’s borrowings from RJF. 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, RJ&A enters into forward commitments to purchase GNMA or FNMA MBS (see the discussion of these activities within “financial instruments owned, financial instruments sold but not purchased and fair value” in Note 2 on page 107 of our 2015 Form 10-K). At March 31, 2016 , RJ&A had approximately $833 million principal amount of outstanding forward MBS purchase commitments which are expected to be purchased over the following 90 days days. In order to hedge the market interest rate risk to which RJ&A would otherwise be exposed between the date of the commitment and the date of sale of the MBS, RJ&A enters into to be announced (“TBA”) security contracts with investors for generic MBS securities at specific rates and prices to be delivered on settlement dates in the future. These TBA securities are accounted for at fair value and are included in Agency MBS securities in the table of assets and liabilities measured at fair value included in Note 5 , and at March 31, 2016 aggregate to a net liability having a fair value of $3.5 million . The estimated fair value of the purchase commitment is a $3.1 million asset balance as of March 31, 2016 .

As a result of extensive regulation of financial holding companies, banks, broker-dealers and investment advisory entities, RJF and certain of its subsidiaries are subject to regular reviews and inspections by regulatory authorities and self-regulatory organizations. The reviews can result in the imposition of sanctions for regulatory violations, ranging from non-monetary censure to fines and, in serious cases, temporary or permanent suspension from conducting business, or limitations on certain business activities. In addition, regulatory agencies and self-regulatory organizations institute investigations from time to time into industry practices, which can also result in the imposition of such sanctions. Refer to the “other matters” discussion within this footnote for information about related loss contingency reserves. See Note 20 for additional information regarding regulatory capital requirements applicable to RJF and certain of its subsidiaries.

Guarantees

RJ Bank provides to an affiliate, RJ Capital Services, Inc. (“RJ Cap Services”), on behalf of certain corporate borrowers, a guarantee of payment in the event of the borrower’s default for exposure under interest rate swaps entered into with RJ Cap Services. At March 31, 2016 , the exposure under these guarantees is $13.1 million , which was underwritten as part of RJ Bank’s corporate credit relationship with such borrowers. The outstanding interest rate swaps at March 31, 2016 have maturities ranging from June 2016 through September 2034 . RJ Bank records an estimated reserve for its credit risk associated with the guarantee of these client swaps, which was insignificant as of March 31, 2016 . The estimated total potential exposure under these guarantees is $51.1 million at March 31, 2016 .

RJ Bank guarantees the forward foreign exchange contract obligations of its U.S. subsidiaries. See Note 13 for additional information regarding these derivatives.

RJF guarantees interest rate swap obligations of RJ Cap Services. See Note 13 for additional information regarding interest rate swaps.

We have from time to time authorized performance guarantees for the completion of trades with counterparties in Argentina. At March 31, 2016 , there were no such outstanding performance guarantees.

In March 2008 , RJF guaranteed an $8 million letter of credit issued for settlement purposes that was requested by the Capital Markets Board (“CMB”) for a joint venture we were at one time affiliated with in the country of Turkey. While our Turkish joint venture ceased operations in December 2008 , the CMB has not released this letter of credit. The issuing bank has instituted an action seeking payment of its fees on the underlying letter of credit and to confirm that the guarantee remains in effect.

RJF guarantees the existing mortgage debt of RJ&A of approximately $36 million , see Note 12 for information regarding this borrowing.

Index

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

RJTCF issues certain guarantees to various third parties related to Project Partnerships whose interests have been sold to one or more of the funds in which RJTCF is the managing member or general partner. In some instances, RJTCF is not the primary guarantor of these obligations, which aggregate to approximately $2 million as of March 31, 2016 .

RJTCF has provided a guaranteed return on investment to a third party investor in one of its fund offerings (“Fund 34”), and RJF has guaranteed RJTCF’s performance under the arrangement. Under the terms of the performance guarantee, should the underlying LIHTC project partnerships held by Fund 34 fail to deliver a certain amount of tax credits and other tax benefits to this investor over the next six years , RJTCF is obligated to pay the investor an amount that results in the investor achieving a minimum specified return on their investment. A $24.5 million financing asset is included in prepaid expenses and other assets, and a related $24.5 million liability is included in trade and other payables on our Condensed Consolidated Statements of Financial Condition as of March 31, 2016 related to this obligation. The maximum exposure to loss under this guarantee is approximately $29 million at March 31, 2016 , which represents the undiscounted future payments due the investor.

Legal matter contingencies

Indemnification from Regions

On April 2, 2012 (the “MK Closing Date”), RJF completed its acquisition of all of the issued and outstanding shares of Morgan Keegan & Company, Inc. (a broker-dealer hereinafter referred to as “MK & Co.”) and MK Holding, Inc. and certain of its affiliates (collectively referred to hereinafter as “Morgan Keegan”) from Regions Financial Corporation (“Regions”). The terms of the stock purchase agreement provide that Regions will indemnify RJF for losses incurred in connection with legal proceedings pending as of the closing date or commenced after the closing date and related to pre-closing matters that are received prior to April 2, 2015, as well as any cost of defense pertaining thereto. All of the Morgan Keegan matters described below are subject to the indemnification provisions. Management estimates the range of potential liability of all such matters subject to indemnification, including the cost of defense, to be from $18 million to $69 million . Any loss arising from such matters, after consideration of the applicable annual deductible, if any, will be borne by Regions. As of March 31, 2016 our Condensed Consolidated Statements of Financial Condition include an indemnification asset of approximately $36 million which is included in other assets, and a liability for potential losses of approximately $36 million which is included within trade and other payables, pertaining to the matters described below and the related indemnification from Regions. The amount included within trade and other payables is the amount within the range of potential liability related to such matters which management estimates is more likely than any other amount within such range.

Morgan Keegan matters subject to indemnification

In July 2006, MK & Co. and a former MK & Co. analyst were named as defendants in a lawsuit filed by a Canadian insurance and financial services company, Fairfax Financial Holdings, and its American subsidiary in the Circuit Court of Morris County, New Jersey. Plaintiffs made claims under a civil Racketeer Influenced and Corrupt Organizations (“RICO”) statute, for commercial disparagement, tortious interference with contractual relationships, tortious interference with prospective economic advantage and common law conspiracy. Plaintiffs alleged that defendants engaged in a multi-year conspiracy to publish and disseminate false and defamatory information about plaintiffs to improperly drive down plaintiff’s stock price, so that others could profit from short positions. Plaintiffs alleged that defendants’ actions damaged their reputations and harmed their business relationships. Plaintiffs alleged a number of categories of damages they sustained, including lost insurance business, lost financings and increased financing costs, increased audit fees and directors and officers insurance premiums and lost acquisitions, and have requested monetary damages. On May 11, 2012, the trial court ruled that New York law applied to plaintiff’s RICO claims, therefore the claims were not subject to treble damages. On June 27, 2012, the trial court dismissed plaintiffs’ tortious interference with prospective relations claim, but allowed other claims to go forward. A jury trial was set to begin on September 10, 2012. Prior to its commencement the court dismissed the remaining claims with prejudice. Plaintiffs have appealed the court’s rulings.

Index

Certain of the Morgan Keegan entities, along with Regions, have been named in class-action lawsuits filed in federal and state courts on behalf of shareholders of Regions and investors who purchased shares of certain mutual funds in the Regions Morgan Keegan Fund complex (the “Regions Funds”). The Regions Funds were formerly managed by Morgan Asset Management (“MAM”), an entity which was at one time a subsidiary of one of the Morgan Keegan affiliates, but an entity which was not part of our Morgan Keegan acquisition. The complaints contain various allegations, including claims that the Regions Funds and the defendants misrepresented or failed to disclose material facts relating to the activities of the funds. In August 2013, the United States District Court for the Western District of Tennessee approved the settlement of the class action and the derivative action regarding the closed end funds for $62 million and $6 million , respectively, which have been paid. There is one pending class action pertaining to the open end funds. Certain of the shareholders in the funds and other interested parties have entered into arbitration proceedings and individual civil claims, in lieu of participating in the class action lawsuits.

Prior to the MK Closing Date, Morgan Keegan was involved in other litigation arising in the normal course of its business. On all such matters, RJF is subject to indemnification from Regions pursuant to the terms of the stock purchase agreement.

Other matters

We are a defendant or co-defendant in various lawsuits and arbitrations incidental to our securities business as well as other corporate litigation. We contest the allegations in the litigation and arbitration matters and believe that there are meritorious defenses in each. In view of the number and diversity of litigation claims against us, the number of jurisdictions in which litigation is pending and the inherent difficulty of predicting the outcome of litigation, we cannot state with certainty the eventual outcome of pending litigation.

We also are subject to regulatory investigations and proceedings, some of which may result in the imposition of fines, as well as require us to undertake certain remedial actions. In connection with such regulatory matters, as of March 31, 2016 management has a loss contingency reserve of $20 million included within trade and other payables, which includes $17 million for one matter.

Excluding any amounts subject to indemnification from Regions related to pre-MK Closing Date Morgan Keegan matters discussed above, as of March 31, 2016 , management currently estimates the aggregate range of possible loss is from $0 to an amount of up to $4 million in excess of the accrued liability (if any) related to litigation or regulatory matters. Refer to Note 2 on page 117 of our 2015 Form 10-K for a discussion of our criteria for establishing a range of possible loss related to such matters.

In the opinion of management, based on current available information, review with outside legal counsel, and consideration of the accrued liability amounts provided for in the accompanying condensed consolidated financial statements with respect to these litigation and regulatory matters, ultimate resolution of litigation and regulatory matters will not have a material adverse impact on our financial position or cumulative results of operations. However, resolution of one or more of these matters may have a material effect on the results of operations in any future period, depending upon the ultimate resolution of those matters and upon the level of income for such period.

NOTE 17 – ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

Other comprehensive income (loss)

The activity in other comprehensive income (loss), net of their respective tax effects, are as follows:



	Three months ended March 31,						Six months ended March 31,
	2016			2015			2016			2015
	(in thousands)
Unrealized gain (loss) on available for sale securities (net of tax)	$	1,099		$	2,337		$	(5,692	)	$	2,313
Unrealized gain (loss) on currency translations, net of the impact of net investment hedges (net of tax)	10,714			(15,279		)	4,099			(21,719		)
Unrealized loss on cash flow hedges (net of tax)	(11,469		)	(1,501		)	(8,204		)	(1,501		)
Net other comprehensive income (loss)	$	344		$	(14,443	)	$	(9,797	)	$	(20,907	)

Index

Accumulated other comprehensive income (loss)

The following table presents the changes, and the related tax effects, of each component of accumulated other comprehensive income (loss) for the three and six months ended March 31, 2016 and 2015 :



	Available for sale securities			Net investment hedges ⁽¹⁾			Currency translations			Sub-total: currency translations and net investment hedges			Cash flow hedges ⁽²⁾			Total
	(in thousands)
Three months ended March 31, 2016
Accumulated other comprehensive (loss) income as of the beginning of the period	$	(5,371	)	$	105,440		$	(149,328	)	$	(43,888	)	$	(1,385	)	$	(50,644	)
Other comprehensive income (loss) before reclassifications and taxes	1,740			(37,416		)	36,031			(1,385		)	(20,029		)	(19,674		)
Amounts reclassified from accumulated other comprehensive income (loss), before tax	53			—			—			—			1,531			1,584
Pre-tax net other comprehensive income (loss)	1,793			(37,416		)	36,031			(1,385		)	(18,498		)	(18,090		)
Income tax effect	(694		)	14,005			(1,906		)	12,099			7,029			18,434
Net other comprehensive income (loss) for the period, net of tax	1,099			(23,411		)	34,125			10,714			(11,469		)	344
Accumulated other comprehensive (loss) income as of March 31, 2016	$	(4,272	)	$	82,029		$	(115,203	)	$	(33,174	)	$	(12,854	)	$	(50,300	)

Six months ended March 31, 2016
Accumulated other comprehensive income (loss) as of the beginning of the period	$	1,420		$	93,203		$	(130,476	)	$	(37,273	)	$	(4,650	)	$	(40,503	)
Other comprehensive (loss) income before reclassifications and taxes	(9,112		)	(17,860		)	16,154			(1,706		)	(16,171		)	(26,989		)
Amounts reclassified from accumulated other comprehensive income (loss), before tax	53			—			—			—			2,939			2,992
Pre-tax net other comprehensive (loss) income	(9,059		)	(17,860		)	16,154			(1,706		)	(13,232		)	(23,997		)
Income tax effect	3,367			6,686			(881		)	5,805			5,028			14,200
Net other comprehensive (loss) income for the period, net of tax	(5,692		)	(11,174		)	15,273			4,099			(8,204		)	(9,797		)
Accumulated other comprehensive (loss) income as of March 31, 2016	$	(4,272	)	$	82,029		$	(115,203	)	$	(33,174	)	$	(12,854	)	$	(50,300	)

Three months ended March 31, 2015
Accumulated other comprehensive income (loss) as of the beginning of the period	$	4,721		$	45,930		$	(59,003	)	$	(13,073	)	$	—		$	(8,352	)
Other comprehensive income (loss) before reclassifications and taxes	3,801			48,815			(48,374		)	441			(2,481		)	1,761
Amounts reclassified from accumulated other comprehensive income (loss), before tax	(2		)	—			—			—			60			58
Pre-tax net other comprehensive income (loss)	3,799			48,815			(48,374		)	441			(2,421		)	1,819
Income tax effect	(1,462		)	(18,296		)	2,576			(15,720		)	920			(16,262		)
Net other comprehensive income (loss) for the period, net of tax	2,337			30,519			(45,798		)	(15,279		)	(1,501		)	(14,443		)
Accumulated other comprehensive income (loss) as of March 31, 2015	$	7,058		$	76,449		$	(104,801	)	$	(28,352	)	$	(1,501	)	$	(22,795	)

Six months ended March 31, 2015
Accumulated other comprehensive income (loss) as of the beginning of the period	$	4,745		$	32,872		$	(39,505	)	$	(6,633	)	$	—		$	(1,888	)
Other comprehensive income (loss) before reclassifications and taxes	3,745			69,701			(68,968		)	733			(2,481		)	1,997
Amounts reclassified from accumulated other comprehensive income (loss), before tax	(2		)	—			—			—			60			58
Pre-tax net other comprehensive income (loss)	3,743			69,701			(68,968		)	733			(2,421		)	2,055
Income tax effect	(1,430		)	(26,124		)	3,672			(22,452		)	920			(22,962		)
Net other comprehensive income (loss) for the period, net of tax	2,313			43,577			(65,296		)	(21,719		)	(1,501		)	(20,907		)
Accumulated other comprehensive income (loss) as of March 31, 2015	$	7,058		$	76,449		$	(104,801	)	$	(28,352	)	$	(1,501	)	$	(22,795	)


(1)	Comprised of net gains recognized on forward foreign exchange derivatives associated with hedges of RJ Bank’s foreign currency exposure due to its non-U.S. dollar net investments (see Note 13 for additional information on these derivatives).


(2)	Represents RJ Bank Interest Hedges (see Note 13 for additional information on these derivatives).

Index

Reclassifications out of accumulated other comprehensive income (loss)

The following table presents the income statement line items impacted by reclassifications out of accumulated other comprehensive income (loss), and the related tax effects, for the three and six months ended March 31, 2016 and 2015 :



Accumulated other comprehensive income (loss) components:	Increase (decrease) in amounts reclassified from accumulated other comprehensive income (loss)			Affected line items in income statement
	(in thousands)
Three months ended March 31, 2016
Available for sale securities: ⁽¹⁾
Auction rate securities	$	53		Other revenue
RJ Bank Interest Hedges ⁽²⁾	1,531			Interest expense
	1,584			Total before tax
Income tax effect	(602		)	Provision for income taxes
Total reclassifications for the period	$	982		Net of tax

Six months ended March 31, 2016
Available for sale securities: ⁽¹⁾
Auction rate securities	$	53		Other revenue
RJ Bank Interest Hedges ⁽²⁾	2,939			Interest expense
	2,992			Total before tax
Income tax effect	(1,137		)	Provision for income taxes
Total reclassifications for the period	$	1,855		Net of tax

Three months ended March 31, 2015
Available for sale securities: ⁽¹⁾
Auction rate securities	$	(2	)	Other revenue
RJ Bank Interest Hedges ⁽²⁾	60			Interest expense
	58			Total before tax
Income tax effect	(22		)	Provision for income taxes
Total reclassifications for the period	$	36		Net of tax

Six months ended March 31, 2015
Available for sale securities: ⁽¹⁾
Auction rate securities	$	(2	)	Other revenue
RJ Bank Interest Hedges ⁽²⁾	60			Interest expense
	58			Total before tax
Income tax effect	(22		)	Provision for income taxes
Total reclassifications for the period	$	36		Net of tax


(1)	See Note 7 for additional information regarding the available for sale securities, and Note 5 for additional fair value information regarding these securities.


(2)	See Note 13 for additional information regarding the RJ Bank Interest Hedges, and Note 5 for additional fair value information regarding these derivatives.

All of the components of other comprehensive income (loss) described above, net of tax, are attributable to RJF.

Index

NOTE 18 – INTEREST INCOME AND INTEREST EXPENSE

The components of interest income and interest expense are as follows:



	Three months ended March 31,						Six months ended March 31,
	2016			2015			2016			2015
	(in thousands)
Interest income:
Margin balances	$	17,068		$	16,237		$	34,502		$	33,513
Assets segregated pursuant to regulations and other segregated assets	6,686			3,179			10,658			6,789
Bank loans, net of unearned income	123,370			100,054			230,971			196,812
Available for sale securities	1,921			1,284			3,572			2,596
Trading instruments	5,145			4,925			9,426			9,425
Stock loan	2,212			3,699			4,127			7,210
Loans to financial advisors	2,011			1,687			3,910			3,437
Corporate cash and all other	3,154			3,348			6,872			6,740
Total interest income	$	161,567		$	134,413		$	304,038		$	266,522

Interest expense:
Brokerage client liabilities	$	635		$	241		$	862		$	524
Retail bank deposits ⁽¹⁾	2,752			2,090			4,771			4,227
Trading instruments sold but not yet purchased	1,371			1,133			2,562			2,218
Stock borrow	773			1,795			1,396			3,413
Borrowed funds	3,328			1,129			6,093			2,188
Senior notes	19,091			19,009			38,182			38,019
Interest expense of consolidated VIEs	315			537			625			1,066
Other	1,159			912			1,942			2,575
Total interest expense	29,424			26,846			56,433			54,230
Net interest income	132,143			107,567			247,605			212,292
Subtract: provision for loan losses	(9,629		)	(3,937		)	(23,539		)	(13,302		)
Net interest income after provision for loan losses	$	122,514		$	103,630		$	224,066		$	198,990


(1)	The balances for the three and six months ended March 31, 2016, respectively, are presented net of interest expense associated with affiliate deposits.

NOTE 19 – SHARE-BASED COMPENSATION

We maintain one share-based compensation plan for our employees, Board of Directors and non-employees (comprised of independent contractor financial advisors). The 2012 Stock Incentive Plan (the “2012 Plan”) permits us to grant share-based and cash-based awards designed to be exempt from the limitation on deductible compensation under Section 162(m) of the Internal Revenue Code. In our 2015 Form 10-K, our share-based compensation accounting policies are described in Note 2 on page 117. Other information relating to our employee and Board of Director share-based awards are outlined in our 2015 Form 10-K in Note 24, on pages 175 – 178, while Note 25 on pages 178 – 180 discusses our non-employee share-based awards. For purposes of this report, we have combined our presentation of both our employee and Board of Director share-based awards with our non-employee share-based awards.

Index

Stock option awards

Expense and income tax benefits related to our stock options awards granted to employees, members of our Board of Directors and independent contractor financial advisors are presented below:



	Three months ended March 31,				Six months ended March 31,
	2016		2015		2016		2015
	(in thousands)
Total share-based expense	$	1,360	$	2,571	$	5,072	$	5,688
Income tax benefit related to share-based expense	—		250		434		626

For the six months ended March 31, 2016 , we realized $2 million of cumulative excess tax benefits related to our stock option awards.

During the three months ended March 31, 2016 , we granted 13,100 stock options to employees and no stock options were granted to our independent contractor financial advisors. During the six months ended March 31, 2016 , we granted 345,823 stock options to employees and 47,000 stock options were granted to our independent contractor financial advisors.

Unrecognized pre-tax expense for stock option awards granted to employees, members of our Board of Directors, and independent contractor financial advisors, net of estimated forfeitures, and the remaining period over which the expense will be recognized as of March 31, 2016 , are presented below:



	Unrecognized pre-tax expense		Remaining weighted- average amortization period
	(in thousands)		(in years)
Employees and members of our Board of Directors	$	23,846	3.06
Independent contractor financial advisors	939		3.27

The weighted-average grant-date fair value of stock option awards granted to employees for the three and six months ended March 31, 2016 was $9.95 and $13.97 , respectively.

The fair value of each option awarded to our independent contractor financial advisors is estimated on the date of grant and periodically revalued using the Black-Scholes option pricing model. The weighted-average fair value for outstanding stock options granted to independent contractor financial advisors as of March 31, 2016 was $11.83 .

Restricted stock and restricted stock unit awards

Expense and income tax benefits related to our restricted equity awards (which include restricted stock and restricted stock units) granted to employees, members of our Board of Directors, and independent contractor financial advisors are presented below:



	Three months ended March 31,				Six months ended March 31,
	2016		2015		2016		2015
	(in thousands)
Total share-based expense	$	16,911	$	14,189	$	34,820	$	33,155
Income tax benefit related to share-based expense	6,006		5,038		12,375		11,900

For the six months ended March 31, 2016 , we realized $32.8 million of cumulative excess tax benefits related to our restricted equity awards.

During the three and six months ended March 31, 2016 , we granted 113,746 and 1,205,180 restricted stock units to employees, respectively. During the three and six months ended March 31, 2016 , we granted 24,292 and 24,840 restricted stock units to outside members of our Board of Directors, respectively. We did not grant any restricted stock units to our independent contractor financial advisors during the three and six months ended March 31, 2016 .

Index

Unrecognized pre-tax expense for restricted equity awards granted to employees, members of our Board of Directors and independent contractor financial advisors, net of estimated forfeitures, and the remaining period over which the expense will be recognized as of March 31, 2016 , are presented below:



	Unrecognized pre-tax expense		Remaining weighted- average amortization period
	(in thousands)		(in years)
Employees and members of our Board of Directors	$	117,729	3.00
Independent contractor financial advisors	15		0.62

The weighted-average grant-date fair value of restricted stock unit awards granted to employees and outside members of our Board of Directors for the three and six months ended March 31, 2016 were $45.70 and $56.28 , respectively.

The fair value of each restricted equity award to our independent contractor financial advisors is computed on the date of grant and periodically revalued at the current stock price. The fair value for unvested restricted equity awards granted to independent contractor financial advisors as of March 31, 2016 was $47.61 per unit.

NOTE 20 – REGULATORY CAPITAL REQUIREMENTS

RJF, as a financial holding company, RJ Bank, and our broker-dealer subsidiaries are subject to oversight by various regulatory authorities. Capital levels of each entity are monitored to assess the capital positions 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.

Under capital adequacy guidelines, RJF and RJ Bank must meet specific capital guidelines that involve quantitative measures of our assets, liabilities, and certain off-balance-sheet items as calculated under regulatory accounting practices. RJF’s and RJ Bank’s capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk-weightings, and other factors.

RJF and RJ Bank report regulatory capital under Basel III under the standardized approach. Various aspects of the Basel III rules are subject to multi-year transition periods through December 31, 2018.

RJF and RJ Bank are required to maintain minimum amounts and ratios of Total and Tier 1 capital (as defined in the regulations) to risk-weighted assets (as defined), Tier 1 capital to average assets (as defined), and under rules defined in Basel III, Common equity Tier 1 capital (“CET1”) to risk-weighted assets. RJF and RJ Bank each calculate these ratios in order to assess compliance with both regulatory requirements and their internal capital policies. Effective January 1, 2016, the minimum CET1, Tier 1 Capital, and Total Capital ratios of RJF and RJ Bank are supplemented by an incremental capital conservation buffer, consisting entirely of capital that qualifies as CET1, that phases in beginning on January 1, 2016 in increments of 0.625% per year until it reaches 2.5% of risk weighted assets on January 1, 2019. The capital conservation buffer is intended to be used to absorb potential losses in times of financial or economic stress. If not maintained, we could be limited in the amount of certain discretionary bonuses that may be paid and the amount of capital that may be distributed, including dividends and common equity repurchases. As of March 31, 2016, RJF’s and RJ Bank’s capital conservation buffers were 13.9% and 6.0% , respectively. The applicable required capital conservation buffer for each as of March 31, 2016 was 0.625% .

At current capital levels, RJF and RJ Bank are each categorized as “well capitalized.”

For further discussion of regulatory capital requirements applicable to certain of our businesses and subsidiaries, see Note 26 on pages 181 - 183 of our 2015 Form 10-K.

Index

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



	Actual				Requirement for capital adequacy purposes				To be well capitalized under regulatory provisions
	Amount		Ratio		Amount		Ratio		Amount		Ratio
	($ in thousands)
RJF as of March 31, 2016:
Common equity Tier 1 capital	$	4,230,105	20.9	%	$	909,661	4.5	%	$	1,313,954	6.5	%
Tier 1 capital	$	4,230,105	20.9	%	$	1,212,881	6.0	%	$	1,617,174	8.0	%
Total capital	$	4,437,111	21.9	%	$	1,617,174	8.0	%	$	2,021,468	10.0	%
Tier 1 leverage	$	4,230,105	15.3	%	$	1,107,051	4.0	%	$	1,383,814	5.0	%

RJF as of September 30, 2015:
Common equity Tier 1 capital	$	4,101,353	22.1	%	$	834,677	4.5	%	$	1,205,644	6.5	%
Tier 1 capital	$	4,101,353	22.1	%	$	1,112,902	6.0	%	$	1,483,869	8.0	%
Total capital	$	4,290,431	23.1	%	$	1,483,869	8.0	%	$	1,854,837	10.0	%
Tier 1 leverage	$	4,101,353	16.1	%	$	1,018,859	4.0	%	$	1,273,574	5.0	%

The decrease in RJF’s Total capital and Tier 1 capital ratios at March 31, 2016 compared to September 30, 2015 was primarily the result of the significant growth of RJ Bank’s corporate loan portfolio, and the repurchase of our common stock in open market transactions.

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



	Actual				Requirement for capital adequacy purposes				To be well capitalized under regulatory provisions
	Amount		Ratio		Amount		Ratio		Amount		Ratio
	($ in thousands)
RJ Bank as of March 31, 2016:
Common equity Tier 1 capital	$	1,601,813	12.7	%	$	567,873	4.5	%	$	820,260	6.5	%
Tier 1 capital	$	1,601,813	12.7	%	$	757,163	6.0	%	$	1,009,551	8.0	%
Total capital	$	1,760,104	14.0	%	$	1,009,551	8.0	%	$	1,261,939	10.0	%
Tier 1 leverage	$	1,601,813	10.1	%	$	636,870	4.0	%	$	796,088	5.0	%

RJ Bank as of September 30, 2015:
Common equity Tier 1 capital	$	1,525,942	13.0	%	$	526,577	4.5	%	$	760,611	6.5	%
Tier 1 capital	$	1,525,942	13.0	%	$	702,103	6.0	%	$	936,137	8.0	%
Total capital	$	1,672,577	14.3	%	$	936,137	8.0	%	$	1,170,171	10.0	%
Tier 1 leverage	$	1,525,942	10.9	%	$	558,829	4.0	%	$	698,536	5.0	%

The slight decrease in RJ Bank’s Total and Tier 1 capital ratios at March 31, 2016 compared to September 30, 2015 was primarily due to significant growth in corporate loans.

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.

Index

The net capital position of our wholly owned broker-dealer subsidiary RJ&A is as follows:



	As of
	March 31, 2016			September 30, 2015
	($ in thousands)
Raymond James & Associates, Inc.:
(Alternative Method elected)
Net capital as a percent of aggregate debit items	21.52		%	20.85		%
Net capital	$	383,995		$	411,222
Less: required net capital	(35,684		)	(39,452		)
Excess net capital	$	348,311		$	371,770

The net capital position of our wholly owned broker-dealer subsidiary RJFS is as follows:



	As of
	March 31, 2016			September 30, 2015
	(in thousands)
Raymond James Financial Services, Inc.:
(Alternative Method elected)
Net capital	$	24,783		$	25,828
Less: required net capital	(250		)	(250		)
Excess net capital	$	24,533		$	25,578

The risk adjusted capital of RJ Ltd. is as follows (in Canadian dollars):



	As of
	March 31, 2016			September 30, 2015
	(in thousands)
Raymond James Ltd.:
Risk adjusted capital before minimum	$	121,839		$	127,097
Less: required minimum capital	(250		)	(250		)
Risk adjusted capital	$	121,589		$	126,847

At March 31, 2016 , all of our other active regulated domestic and international subsidiaries are in compliance with and met all capital requirements.

NOTE 21 – FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK

For a discussion of our financial instruments with off-balance-sheet risk, see Note 27 on pages 183 - 185 of our 2015 Form 10-K.

As a part of our fixed income public finance operations, RJ&A enters into forward commitments to purchase GNMA or FNMA MBS. See Note 16 for information on these commitments. We utilize TBA security contracts to hedge our interest rate risk associated with these commitments. We are subject to loss if the timing of, or the actual amount of, the MBS securities differs significantly from the term and notional amount of the TBA security contracts we enter into.

RJ Ltd. is subject to foreign exchange risk primarily due to financial instruments denominated in U.S. dollars that may be impacted by fluctuation in foreign exchange rates. In order to mitigate this risk, RJ Ltd. enters into forward foreign exchange contracts. The fair value of these contracts is not significant. As of March 31, 2016 , forward contracts outstanding to buy and sell U.S. dollars totaled CDN $16.8 million and CDN $5.7 million , respectively. RJ Bank is also subject to foreign exchange risk related to its net investment in a Canadian subsidiary. See Note 13 for information regarding how RJ Bank utilizes net investment hedges to mitigate a significant portion of this risk.

RJ Bank has outstanding at any time a significant number of commitments to extend credit and other credit-related off-balance sheet financial instruments such as standby letters of credit and loan purchases, which then extend over varying periods of time. These arrangements are subject to strict credit control assessments and each customer’s credit worthiness is evaluated on a case-

Index

by-case basis. Fixed-rate commitments are also subject to market risk resulting from fluctuations in interest rates and RJ Bank’s exposure is limited to the replacement value of those commitments.

RJ Bank’s commitments to extend credit and other credit-related off-balance sheet financial instruments outstanding are as follows:



	March 31, 2016
	(in thousands)
Standby letters of credit	$	52,662
Open-end consumer lines of credit (primarily SBL)	2,994,399
Commercial lines of credit	1,346,864
Unfunded loan commitments	392,534

Because many of RJ Bank’s lending commitments expire without being funded in whole or part, the contract amounts are not estimates of RJ Bank’s actual future credit exposure or future liquidity requirements. RJ Bank maintains a reserve to provide for potential losses related to the unfunded lending commitments. See Note 8 for further discussion of this reserve for unfunded lending commitments.

NOTE 22 – EARNINGS PER SHARE

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



	Three months ended March 31,						Six months ended March 31,
	2016			2015			2016			2015
	(in thousands, except per share amounts)
Income for basic earnings per common share:
Net income attributable to RJF	$	125,847		$	113,463		$	232,176		$	239,759
Less allocation of earnings and dividends to participating securities ⁽¹⁾	(313		)	(371		)	(549		)	(823		)
Net income attributable to RJF common shareholders	$	125,534		$	113,092		$	231,627		$	238,936

Income for diluted earnings per common share:
Net income attributable to RJF	$	125,847		$	113,463		$	232,176		$	239,759
Less allocation of earnings and dividends to participating securities ⁽¹⁾	(309		)	(364		)	(541		)	(803		)
Net income attributable to RJF common shareholders	$	125,538		$	113,099		$	231,635		$	238,956

Common shares:
Average common shares in basic computation	141,472			142,320			142,273			141,813
Dilutive effect of outstanding stock options and certain restricted stock units	2,540			3,730			2,774			4,375
Average common shares used in diluted computation	144,012			146,050			145,047			146,188

Earnings per common share:
Basic	$	0.89		$	0.79		$	1.63		$	1.68
Diluted	$	0.87		$	0.77		$	1.60		$	1.64
Stock options and certain restricted stock units excluded from weighted-average diluted common shares because their effect would be antidilutive	3,234			2,062			3,270			2,294

(1)

Represents dividends paid during the period to participating securities plus an allocation of undistributed earnings to participating securities. Participating securities represent unvested restricted stock and certain restricted stock units and amounted to weighted-average shares of 362 thousand and 472 thousand for the three months ended March 31, 2016 and 2015 , respectively. Participating securities represent unvested restricted stock and certain restricted stock units and amounted to weighted-average shares of 350 thousand and 493 thousand for the six months ended March 31, 2016 and 2015 , respectively. Dividends paid to participating securities amounted to $65 thousand and $81 thousand for the three months ended March 31, 2016 and 2015 , respectively. Dividends paid to participating securities amounted to $114 thousand and $159 thousand for the six months ended March 31, 2016 and 2015 , respectively. Undistributed earnings are allocated to participating securities based upon their right to share in earnings if all earnings for the period had been distributed.

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Dividends per common share declared and paid are as follows:



	Three months ended March 31,				Six months ended March 31,
	2016		2015		2016		2015
Dividends per common share - declared	$	0.20	$	0.18	$	0.40	$	0.36
Dividends per common share - paid	$	0.20	$	0.18	$	0.38	$	0.34

NOTE 23 – SEGMENT INFORMATION

We currently operate through the following five business segments: “Private Client Group;” “Capital Markets;” “Asset Management;” RJ Bank; and our “Other” segment, which includes our principal capital and private equity activities as well as certain corporate costs of RJF that are not allocated to operating segments including the interest cost on our public debt and certain acquisition and integration costs (see Note 3 for additional information). The business segments are determined based upon factors such as the services provided and the distribution channels served and are consistent with how we assess performance and determine how to allocate our resources throughout our subsidiaries. For a further discussion of our business segments, see Note 29 on pages 186 - 189 of our 2015 Form 10-K.

Information concerning operations in these segments of business is as follows:



	Three months ended March 31,						Six months ended March 31,
	2016			2015			2016			2015
	(in thousands)
Revenues:
Private Client Group	$	883,019		$	873,634		$	1,757,464		$	1,722,877
Capital Markets	241,127			238,921			470,774			474,095
Asset Management	96,842			94,022			197,080			193,652
RJ Bank	131,312			105,390			244,038			208,346
Other	9,872			17,806			14,272			27,572
Intersegment eliminations	(21,254		)	(17,149		)	(41,184		)	(34,074		)
Total revenues ⁽¹⁾	$	1,340,918		$	1,312,624		$	2,642,444		$	2,592,468

Income (loss) excluding noncontrolling interests and before provision for income taxes:
Private Client Group	$	83,232		$	75,420		$	152,372		$	168,164
Capital Markets	28,087			20,848			53,255			48,501
Asset Management	31,123			31,095			64,489			70,891
RJ Bank	85,134			71,264			150,999			135,620
Other	(29,458		)	(18,307		)	(54,659		)	(39,948		)
Pre-tax income excluding noncontrolling interests	198,118			180,320			366,456			383,228
Add: net loss attributable to noncontrolling interests	(7,914		)	(4,687		)	(14,077		)	(8,946		)
Income including noncontrolling interests and before provision for income taxes	$	190,204		$	175,633		$	352,379		$	374,282


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



	Three months ended March 31,						Six months ended March 31,
	2016			2015			2016			2015
	(in thousands)
Net interest income (expense):
Private Client Group	$	24,572		$	21,696		$	47,498		$	43,759
Capital Markets	2,311			2,034			4,976			4,127
Asset Management	(12		)	24			88			91
RJ Bank	121,297			99,857			227,485			196,579
Other	(16,025		)	(16,044		)	(32,442		)	(32,264		)
Net interest income	$	132,143		$	107,567		$	247,605		$	212,292

Index

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



	March 31, 2016		September 30, 2015
	(in thousands)
Total assets:
Private Client Group ⁽¹⁾	$	7,531,421	$	6,870,379
Capital Markets ⁽²⁾	3,013,879		2,780,733
Asset Management	171,216		187,378
RJ Bank	15,012,816		14,191,566
Other	2,023,879		2,449,628
Total	$	27,753,211	$	26,479,684


(1)	Includes $189 million and $187 million of goodwill at March 31, 2016 and September 30, 2015 , respectively.


(2)	Includes $124 million and $121 million of goodwill at March 31, 2016 and September 30, 2015 , respectively.

We have operations in the United States, Canada, Europe and joint ventures in Latin America. Substantially all long-lived assets are located in the United States. Revenues and income before provision for income taxes and excluding noncontrolling interests, classified by major geographic areas in which they are earned, are as follows:



	Three months ended March 31,						Six months ended March 31,
	2016			2015			2016			2015
	(in thousands)
Revenues:
United States	$	1,244,610		$	1,214,397		$	2,449,529		$	2,395,705
Canada	62,466			69,581			124,315			137,293
Europe	21,382			21,211			44,915			45,125
Other	12,460			7,435			23,685			14,345
Total	$	1,340,918		$	1,312,624		$	2,642,444		$	2,592,468

Pre-tax income (loss) excluding noncontrolling interests:
United States	$	191,210		$	176,602		$	353,069		$	378,787
Canada	4,124			5,262			9,194			7,487
Europe	(897		)	(1,970		)	(1,343		)	(3,726		)
Other	3,681			426			5,536			680
Total	$	198,118		$	180,320		$	366,456		$	383,228

Our total assets, classified by major geographic area in which they are held, are presented below:



	March 31, 2016		September 30, 2015
	(in thousands)
Total assets:
United States ⁽¹⁾	$	25,437,969	$	24,543,645
Canada ⁽²⁾	2,235,058		1,814,178
Europe	29,967		36,669
Other	50,217		85,192
Total	$	27,753,211	$	26,479,684

(1) Includes $275 million of goodwill at March 31, 2016 and September 30, 2015 .

(2) Includes $38 million and $33 million of goodwill at March 31, 2016 and September 30, 2015 , respectively.

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

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

Factors Affecting “Forward-Looking Statements”

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

Executive overview

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

Quarter ended March 31, 2016 compared with the quarter ended March 31, 2015

We achieved net revenues of $1.31 billion for the quarter, a $26 million , or 2% , increase. Our pre-tax income amounted to $198 million , an increase of $18 million , or 10% . Our net income of $126 million reflects an increase of $12 million , or 11% , and our diluted earnings per share amounted to $0.87 , a 13% increase.

After excluding the acquisition-related expenses we have incurred during the current quarter associated with our announced acquisition of Deutsche WM, our adjusted pre-tax income amounted to $204 million, ⁽¹⁾ an increase of 13%, and our adjusted net income of $130 million ⁽¹⁾ reflects an increase of 14%. Adjusted diluted earnings per share (a non-GAAP measure) amounted to $0.90, ⁽¹⁾ a 17% increase.

Net revenues increased in each of our four operating segments, with the RJ Bank segment achieving a record level of quarterly net revenues and pre-tax income. The December 2015 increase in short-term interest rates triggered growth in various aspects of our revenues, most favorably impacting our Private Client Group and RJ Bank segment results. Total client assets under administration were a quarter-end record $513.7 billion at March 31, 2016 , a 4% increase over the prior year level. The increase in assets under administration is attributable to strong financial advisor recruiting results and a high level of retention of our existing advisors. Non-interest expenses increased $11 million , or 1% . The increase primarily results from an increase in the bank loan


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

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loss provision resulting from loan growth and increases in the provision associated with loans in the energy sector. In addition, other expense increased in part due to a $2 million charge to reserves for legal and regulatory matters, resulting in a $5 million increase in such expenses compared to the prior year period. As a result of heightened management of discretionary expenses during the quarter, we were able to realize a decrease in business development expenses and to moderate the increases in certain other non-interest expense categories.

A summary of the most significant items impacting our financial results as compared to the prior year quarter, are as follows:

•

Our Private Client Group segment generated net revenues of $880 million , a 1% increase, while pre-tax income increased 10% to $83 million . The increase in revenues is primarily attributable to an increase in account and service fee income, most notably an increase in fees associated with our multi-bank client cash sweep program resulting from both the increase in short-term interest rates, and an increase in client cash balances resulting from clients’ reaction to market volatility and uncertainty during the period. While securities commissions and fee revenues declined slightly, such fees arising from fee-based accounts increased substantially and offset declines in commissions on equity securities and new issue sales credits. Client assets under administration of the Private Client Group increased 3% over the prior year, to $485.6 billion at March 31, 2016 . Net inflows of client assets have been positively impacted by successful retention and recruiting of financial advisors. Non-interest expenses approximated the prior year quarter level, resulting in an improvement in the segment’s margin on net revenues to 9.5% from 8.7% in the comparable prior year quarter.

•

The Capital Markets segment generated net revenues of $237 million , a 1% increase, while pre-tax income increased $7 million , or 35% , to $28 million . Pre-tax income benefited from both the revenue increase and, to a larger extent, decreases in nearly all categories of non-interest expenses. Equity underwriting fee revenues decreased $9 million , or 57% , and merger and acquisition and advisory fee revenues decreased $6 million , or 14% , both due to the challenging equity market environment in the current period. Further, the difficult equity market environment in Canada continues to negatively impact the revenues and profitability of this segment. Institutional commissions on fixed income products increased $5 million , or 7% , partially offset by a decrease in institutional commissions on equity products of $3 million , or 5% . Tax credit fund syndication fees increased $7 million , or 88% , reflecting increased volume of partnership interests sold. Finally, fixed income investment banking revenues increased $2 million , or 21% .

•

Our Asset Management segment generated a 3% increase in net revenues to $97 million , while pre-tax income of $31 million approximated the prior year quarter. Non-discretionary asset-based administration fee revenues increased, driven by a 10% increase in assets held in non-discretionary asset-based programs over the prior year level to $100.0 billion as of March 31, 2016. Advisory fee revenues from managed programs approximated the prior year quarter amount as the financial assets under management in managed programs declined slightly from the prior year level, to $73.1 billion as of March 31, 2016 .

•

RJ Bank generated a 22% increase in net revenues to a record $125 million , while pre-tax income increased $14 million , or 19% , to $85 million . The increase in pre-tax income resulted primarily from an increase in net interest income, offset by an increase in the provision for loan losses. Net interest income increased due to growth in the average loans outstanding. The net interest margin approximated the prior year period level. The increase in the provision for loan losses as compared to the prior year was primarily due to the charges during the current period resulting from loans outstanding within the energy sector, the impact of the Shared National Credit exam results during the current quarter, and higher corporate loan growth.


•	Activities in our Other segment reflect a pre-tax loss that is $11 million , or 61% , more than the prior year period. Net revenues in the segment decreased $8 million , primarily resulting from lower gains on our private equity investments.


•	Our effective income tax rate for the current period of 36.5% differs from the prior year period rate of 37.1% , due primarily to our projection of an increase in the amount of tax-exempt interest income for fiscal year 2016, as compared to the prior year.


•	During the quarter we repurchased approximately 3.2 million shares of our common stock in open market transactions, for a total purchase price of approximately $144.5 million, reflecting an average per share repurchase price of $45.69 (see Part II, Item 2 in this Form 10-Q, for additional information on these share repurchases).

The volume of possible regulatory changes that impact the businesses in which we operate continues to grow and evolve. On April 8, 2016, the Department of Labor (“DOL”) issued its final regulation expanding the definition of who is deemed an “investment advice fiduciary” under ERISA as a result of giving investment advice to a plan, plan participant or beneficiary, as well as under

Index

the Internal Revenue Code for individual retirement accounts and non-ERISA plans. Refer to Part II, Item 1A Risk Factors in this Form 10-Q for further discussion of the new regulation, its effective dates, and its potential impact on our operations.

Six months ended March 31, 2016 compared with the six months ended March 31, 2015

We achieved net revenues of $2.59 billion , a $48 million , or 2% , increase. Our net income of $232 million reflects a decrease of nearly $8 million , or 3% , and our diluted earnings per share for the current period amount to $1.60 , a 2% decrease. The current period earnings per share benefited from our repurchase of common stock in open market transactions which is discussed in the quarterly results above.

After excluding the acquisition-related expenses we have incurred during the current period associated with our announced acquisition of Deutsche WM, our adjusted pre-tax income amounts to $374 million, ⁽¹⁾ a decrease of 2%, and our adjusted net income of $237 million ⁽¹⁾ reflects a decrease of 1%. Adjusted diluted earnings per share (a non-GAAP measure) amounts to $1.63, ⁽¹⁾ nearly equivalent to the $1.64 diluted earnings per share in the prior year period.

Net revenues increased in three of our four operating segments, with the exception being our Capital Markets segment, where unfavorable equity market conditions in the current period have negatively impacted our underwriting and merger and acquisition advisory revenues. Our non-operating Other segment reflects a decline in net revenues as the prior year period experienced higher gains from our private equity investments than the current year. Non-interest expenses have increased $70 million , or 3% . The increase primarily results from: increases in compensation, commissions and benefits due to annual raises and increases in benefits expenses; increases in communications and information processing expenses resulting from our continued investment in our platform; and an increase in the bank loan loss provision resulting from loan growth and increases in the provision associated with loans in the energy sector. In addition, other expense increased in part due to $12 million of additions to reserves relating to legal and regulatory matters.

Our segment results during the six month period were most significantly impacted by the factors described above for the quarter, unless otherwise noted:

•

Our Private Client Group segment generated net revenues of $1.75 billion , a 2% increase, while pre-tax income decreased 9% to $152 million . The increase in revenues is primarily attributable to an increase in account and service fee income, most notably an increase in fees associated with our multi-bank client cash sweep program resulting from both the increase in short-term interest rates, and an increase in client cash balances resulting from clients’ reaction to market volatility and uncertainty during the period. While securities commissions and fee revenues increased modestly, such fees arising from fee-based accounts increased substantially and offset declines in commissions on equity securities and new issue sales credits. Non-interest expenses increased compared to the prior year level, most significantly due to higher administrative expenses to support our continued growth and higher communications and information technology expenses resulting from our continued investments in our platform. The segment’s margin on net revenues decreased to 8.7% from 9.8% in the comparable prior year period.


•	The Capital Markets segment generated revenues of $471 million , a 1% decrease, while pre-tax income increased $5 million , or 10% , to $53 million . Although revenues declined slightly, decreases in nearly all categories of non-interest expenses have resulted in an increase in pre-tax income.

•

Our Asset Management segment generated revenues of $197 million , a 2% increase, while pre-tax income decreased $6 million , or 9% , to $64 million . Non-discretionary asset-based administration fee revenues increased, driven by an increase in assets held in non-discretionary asset-based programs over the prior year level. Advisory fee revenues from managed programs decreased as the balances of financial assets under management in managed programs have declined. Expenses have increased over the prior year period level, due in large part to a prior year reversal of certain incentive compensation expense accruals for associates who left the firm during the prior year, which did not recur in the current year.


•	RJ Bank generated net revenues of $234 million , a 15% increase, while pre-tax income increased $15 million , or 11% , to $151 million .


•	Activities in our Other segment reflect a pre-tax loss that is $15 million , or 37% , more than the prior year period.


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

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Segments

We currently operate through the following five business segments: Private Client Group (or “PCG”); Capital Markets; Asset Management; RJ Bank; and Other (which consists of our principal capital and private equity activities as well as certain corporate overhead costs of RJF including the interest cost on our public debt, and the acquisition costs associated with our material acquisitions including, for the current period, non-recurring acquisition costs associated with our pending acquisition of Deutsche WM (see Note 3 of the Notes to Condensed Consolidated Financial Statements in this Form 10-Q for additional information).

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



	Three months ended March 31,								Six months ended March 31,
	2016			2015			% change		2016			2015			% change
	($ in thousands)
Total company
Revenues	$	1,340,918		$	1,312,624		2	%	$	2,642,444		$	2,592,468		2	%
Net revenues	$	1,311,494		$	1,285,778		2	%	$	2,586,011		$	2,538,238		2	%
Pre-tax income excluding noncontrolling interests	$	198,118		$	180,320		10	%	$	366,456		$	383,228		(4	)%

Private Client Group
Revenues	$	883,019		$	873,634		1	%	$	1,757,464		$	1,722,877		2	%
Net revenues	$	880,257		$	870,552		1	%	$	1,752,603		$	1,715,767		2	%
Pre-tax income	$	83,232		$	75,420		10	%	$	152,372		$	168,164		(9	)%

Capital Markets
Revenues	$	241,127		$	238,921		1	%	$	470,774		$	474,095		(1	)%
Net revenues	$	237,153		$	235,245		1	%	$	463,679		$	467,047		(1	)%
Pre-tax income	$	28,087		$	20,848		35	%	$	53,255		$	48,501		10	%

Asset Management
Revenues	$	96,842		$	94,022		3	%	$	197,080		$	193,652		2	%
Net revenues	$	96,824		$	94,016		3	%	$	197,038		$	193,640		2	%
Pre-tax income	$	31,123		$	31,095		—		$	64,489		$	70,891		(9	)%

RJ Bank
Revenues	$	131,312		$	105,390		25	%	$	244,038		$	208,346		17	%
Net revenues	$	125,260		$	102,910		22	%	$	233,656		$	203,428		15	%
Pre-tax income	$	85,134		$	71,264		19	%	$	150,999		$	135,620		11	%

Other
Revenues	$	9,872		$	17,806		(45	)%	$	14,272		$	27,572		(48	)%
Net revenues	$	(9,629	)	$	(1,698	)	(467	)%	$	(24,407	)	$	(11,310	)	(116	)%
Pre-tax loss	$	(29,458	)	$	(18,307	)	(61	)%	$	(54,659	)	$	(39,948	)	(37	)%

Intersegment eliminations
Revenues	$	(21,254	)	$	(17,149	)	(24	)%	$	(41,184	)	$	(34,074	)	(21	)%
Net revenues	$	(18,371	)	$	(15,247	)	(20	)%	$	(36,558	)	$	(30,334	)	(21	)%

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Reconciliation of the GAAP results to the non-GAAP measures

We believe that the non-GAAP measures provide useful information by excluding material items that may not be indicative of our core operating results and that the GAAP and the non-GAAP measures should be considered together. The non-GAAP adjustments include one-time acquisition-related expenses (associated with our acquisition of the US Private Client Services unit of Deutsche WM) net of applicable taxes. There are no non-GAAP adjustments to net income in the three months, or any quarterly period during the six months, ended March 31, 2015. See the footnotes below for further explanation of each non-recurring item.

The following table provides a reconciliation of the GAAP measures to the non-GAAP measures for the periods that include non-GAAP adjustments:



	Three months ended March 31, 2016			Six months ended March 31, 2016
	($ in thousands, except per share amounts)
Net income attributable to RJF - GAAP	$	125,847		$	232,176

Non-GAAP adjustments :
Acquisition-related expenses ⁽¹⁾	6,015			7,887
Tax effect of non-GAAP adjustment ⁽²⁾	(2,200		)	(2,890		)
Non-GAAP adjustments, net of tax	3,815			4,997
Adjusted net income attributable to RJF - Non-GAAP	$	129,662		$	237,173

Non-GAAP earnings per common share :
Non-GAAP basic	$	0.91		$	1.66
Non-GAAP diluted	$	0.90		$	1.63

Average equity - GAAP ⁽³⁾	$	4,641,052		$	4,601,378
Average equity - non-GAAP ⁽³⁾ ⁽⁴⁾	$	4,644,142		$	4,603,438

Return on equity for the quarter (annualized)	10.8		%	N/A
Return on equity for the quarter - non-GAAP (annualized) ⁽⁴⁾	11.2		%	N/A

Return on equity - year to date	N/A			10.1		%
Return on equity year to date - non-GAAP ⁽⁵⁾	N/A			10.3		%

Pre-tax income attributable to RJF - GAAP	$	198,118		$	366,456
Total pre-tax non-GAAP adjustments (as detailed above)	6,015			7,887
Adjusted pre-tax income attributable to RJF non-GAAP	$	204,133		$	374,343

Pre-tax margin on net revenues - GAAP	15.1		%	14.2		%
Pre-tax margin on net revenues - non-GAAP ⁽⁶⁾	15.6		%	14.5		%


(1)	The non-GAAP adjustment adds back to pre-tax income acquisition-related expenses associated with the announced acquisition of Deutsche WM incurred during each respective period.


(2)	The non-GAAP adjustment reduces net income for the income tax effect of all the pre-tax non-GAAP adjustments, utilizing the year-to-date effective tax rate in such period to determine the current tax expense.


(3)	For the quarter, computed by adding the total equity attributable to RJF as of the date indicated plus the prior quarter-end total, divided by two. For the year-to-date period, computed by adding the total equity attributable to RJF as of each quarter-end date during the indicated year-to-date period, plus the beginning of the year total, divided by three.


(4)	The calculation of non-GAAP average equity includes the impact on equity of the non-GAAP adjustments described in the table above, as applicable for each respective period.


(5)	Computed by utilizing the adjusted net income attributable to RJF non-GAAP and the average equity non-GAAP, for each respective period. See footnotes (3) and (4) above for the calculation of average equity-non-GAAP.


(6)	Computed by dividing the adjusted pre-tax income attributable to RJF by net revenues (GAAP basis), for each respective period.

Index

Net interest analysis

In December 2015, the Federal Reserve Bank announced an increase in its benchmark short-term interest rate by 25 basis points. Changes in short-term interest rates are likely to have a meaningful impact on our overall financial performance, as we have certain assets and liabilities, primarily held in our PCG and RJ Bank segments, which are subject to changes in interest rates. Given the relationship of our interest sensitive assets to liabilities held in each of these segments, increases in short-term interest rates, including the mid-December 2015 rate increase, should result in an overall increase in our net earnings. Gradual increases in short-term interest rates would have the most significant favorable impact on our PCG and RJ Bank segments (refer to the table in Item 3 - Interest Rate Risk in this Form 10-Q, which presents an analysis of RJ Bank’s estimated net interest income over a 12 month period based on instantaneous shifts in interest rates using the asset/liability model applied by RJ Bank).

As of the beginning of this fiscal year 2016, and in anticipation of a potential increase in short-term interest rates, our analysis and initial quantification of the potential positive impacts on our results of operations arising from increases in short-term interest rates resulted in our estimate that we expected to generate approximately $150 million to $160 million of incremental annual pre-tax income from the first 100 basis point increase in short-term interest rates. This estimate was based on several assumptions. One of those assumptions is the amount and timing of increases in the earning/deposit rates on our clients’ cash balances, which is dependent on several factors including, but not limited to, the competitive environment. This range continues to be our projected annual impact on pre-tax income from a 100 basis point rise in short-term interest rates, inclusive of the impact we actually realized in the current quarter ended March 31, 2016 from the first 25 basis points of such increase that occurred in December 2015.

We estimate that the December 2015 short-term interest rate increase of 25 basis points has had a favorable impact on pre-tax income in our three months ended March 31, 2016 of an amount approximating $16 million to $20 million (or approximately $64 million to $80 million on an annualized basis). Thus, we project that an additional 75 basis point instantaneous rise in short-term interest rates would result in a further increase in our annual pre-tax income of approximately $80 million over a twelve month period. The realization of such amounts, whether from the continued incremental impact on our results arising from the first 25 basis point increase that occurred in December 2015, or the impact from the next 75 basis point increase, if any, is dependent upon the realization of certain key assumptions in our analysis. Such assumptions include our estimates of the timing and amounts of: earning/deposit rates paid on our clients’ cash balances; client cash balance levels; the level of earning assets; and RJ Bank’s net interest margin.

Approximately 55% of any future increases would be reflected in account and service fee revenues (resulting from an increase in the fees generated in lieu of interest income from our multi-bank sweep program with unaffiliated banks and the discontinuance of money market fund fee waivers) which are reported in the PCG segment, and the remaining portion of the increase would be reflected in net interest income reported primarily in our PCG and RJ Bank segments.

If the Federal Reserve Bank was to reverse its December 2015 action and decrease the benchmark short-term interest rate, the impact on our net interest income would be an unfavorable reversal of the positive impacts described above.

Index

Quarter ended March 31, 2016 compared with the quarter ended March 31, 2015 – Net interest

The following table presents our consolidated average interest-earning asset and liability balances, interest income and expense balances, and the average yield/cost, for the periods indicated:



	Three months ended March 31,
	2016								2015
	Average balance ⁽¹⁾			Interest inc./exp.			Average yield/cost		Average balance ⁽¹⁾		Interest inc./exp.		Average yield/cost
	($ in thousands)
Interest-earning assets:
Margin balances	$	1,744,198		$	17,068		3.91	%	$	1,760,040	$	16,237	3.69	%
Assets segregated pursuant to regulations and other segregated assets	3,736,169			6,686			0.72	%	2,425,236		3,179		0.52	%
Bank loans, net of unearned income ⁽²⁾	14,071,170			123,370			3.54	%	12,066,343		100,054		3.35	%
Available for sale securities	556,013			1,921			1.38	%	542,078		1,284		0.95	%
Trading instruments ⁽³⁾	775,090			5,145			2.66	%	799,314		4,925		2.46	%
Stock loan	555,528			2,212			1.59	%	398,802		3,699		3.71	%
Loans to financial advisors ⁽³⁾	533,696			2,011			1.51	%	452,132		1,687		1.49	%
Corporate cash and all other ⁽³⁾	2,720,215			3,154			0.46	%	2,744,092		3,348		0.49	%
Total	$	24,692,079		$	161,567		2.62	%	$	21,188,037	$	134,413	2.54	%

Interest-bearing liabilities:
Brokerage client liabilities	$	4,444,219		$	635		0.06	%	$	3,662,588	$	241	0.03	%
Bank deposits ⁽²⁾	12,903,660		⁽⁴⁾	2,752		⁽⁴⁾	0.09	%	11,178,417		2,090		0.08	%
Trading instruments sold but not yet purchased ⁽³⁾	327,537			1,371			1.67	%	347,127		1,133		1.31	%
Stock borrow	66,284			773			4.66	%	161,891		1,795		4.44	%
Other borrowings	777,106			3,328			1.71	%	765,036		1,129		0.59	%
Senior notes	1,149,300			19,091			6.64	%	1,149,112		19,009		6.62	%
Loans payable of consolidated variable interest entities ⁽³⁾	19,175			315			6.57	%	34,639		537		6.20	%
Other ⁽³⁾	235,903			1,159			1.97	%	278,336		912		1.31	%
Total	$	19,923,184		$	29,424		0.59	%	$	17,577,146	$	26,846	0.61	%
Net interest income				$	132,143						$	107,567


(1)	Represents average daily balance, unless otherwise noted.


(2)	See Results of Operations – RJ Bank in this MD&A for further information.


(3)	Average balance is calculated based on the average of the end of month balances for each month within the period.


(4)	Net of affiliate deposit balances and interest expense associated with affiliate deposits.

Net interest income increased $25 million , or 23% . Net interest income is earned primarily by our RJ Bank and PCG segments, which are discussed separately below.

The RJ Bank segment’s net interest income increased $21 million , or 21% , resulting from an increase in average loans outstanding. Refer to the discussion of the specific components of RJ Bank’s net interest income in the RJ Bank section of this MD&A.

Net interest income in the PCG segment increased $3 million , or 13% . Average customer cash balances and the related segregated asset balances increased compared to the prior year quarter as many clients reacted to uncertainties in the equity markets during the current quarter by increasing the cash balances in their brokerage accounts. In addition, as a result of the December 2015 Federal Reserve Bank increase in short-term interest rates, the net interest earned on these segregated asset balances also increased. Average client margin interest rates increased compared to the prior year quarter but the favorable impact on net interest was partially offset by a decrease in average balances outstanding.

Index

Interest income earned on the available for sale securities portfolio increased slightly due to increased yields and balances. See Note 7 of our Notes to Condensed Consolidated Financial Statements in this Form 10-Q for additional information on our available for sale securities.

Interest expense incurred on our other borrowings increased by $2 million. These borrowings are in large part comprised of RJ Bank’s borrowings from the FHLB and the related interest rate hedges. See Note 12 for additional information regarding all of our borrowings other than our senior notes payable.

Six months ended March 31, 2016 compared with the six months ended March 31, 2015 – Net interest

The following table presents our consolidated average interest-earning asset and liability balances, interest income and expense balances, and the average yield/cost, for the periods indicated:



	Six months ended March 31,
	2016								2015
	Average balance ⁽¹⁾			Interest inc./exp.			Average yield/cost		Average balance ⁽¹⁾		Interest inc./exp.		Average yield/cost
	($ in thousands)
Interest-earning assets:
Margin balances	$	1,795,074		$	34,502		3.84	%	$	1,790,170	$	33,513	3.74	%
Assets segregated pursuant to regulations and other segregated assets	3,384,722			10,658			0.63	%	2,399,853		6,789		0.57	%
Bank loans, net of unearned income ⁽²⁾	13,814,428			230,971			3.36	%	11,784,740		196,812		3.34	%
Available for sale securities	553,414			3,572			1.29	%	550,633		2,596		0.94	%
Trading instruments ⁽³⁾	702,431			9,426			2.68	%	709,521		9,425		2.66	%
Stock loan	557,295			4,127			1.48	%	420,415		7,210		3.43	%
Loans to financial advisors ⁽³⁾	520,356			3,910			1.50	%	441,996		3,437		1.56	%
Corporate cash and all other ⁽³⁾	2,814,408			6,872			0.49	%	2,862,721		6,740		0.47	%
Total	$	24,142,128		$	304,038		2.52	%	$	20,960,049	$	266,522	2.54	%

Interest-bearing liabilities:
Brokerage client liabilities	$	4,212,898		$	862		0.04	%	$	3,611,785	$	524	0.03	%
Bank deposits ⁽²⁾	12,478,301		⁽⁴⁾	4,771		⁽⁴⁾	0.08	%	10,897,986		4,227		0.08	%
Trading instruments sold but not yet purchased ⁽³⁾	296,706			2,562			1.73	%	287,446		2,218		1.54	%
Stock borrow	81,374			1,396			3.43	%	153,277		3,413		4.45	%
Other borrowings	760,857			6,093			1.60	%	737,056		2,188		0.59	%
Senior notes	1,149,277			38,182			6.64	%	1,149,089		38,019		6.62	%
Loans payable of consolidated variable interest entities ⁽³⁾	21,421			625			5.84	%	37,690		1,066		5.66	%
Other ⁽³⁾	238,178			1,942			1.63	%	274,346		2,575		1.88	%
Total	$	19,239,012		$	56,433		0.59	%	$	17,148,675	$	54,230	0.63	%
Net interest income				$	247,605						$	212,292


(1)	Represents average daily balance, unless otherwise noted.


(2)	See Results of Operations – RJ Bank in this MD&A for further information.


(3)	Average balance is calculated based on the average of the end of month balances for each month within the period.


(4)	Net of affiliate deposit balances and interest expense associated with affiliate deposits.

Index

Net interest income increased $35 million , or 17% . Net interest income is earned primarily by our RJ Bank and PCG segments, which are discussed separately below.

The RJ Bank segment’s net interest income increased $31 million , or 16% , resulting from an increase in average loans outstanding offset by a decrease in net interest margin. Refer to the discussion of the specific components of RJ Bank’s net interest income in the RJ Bank section of this MD&A.

Net interest income in the PCG segment increased $4 million , or 9% . Average customer cash balances and the related segregated asset balances increased compared to the prior year as many clients reacted to uncertainties in the equity markets that occurred during portions of the current period by increasing the cash balances in their brokerage accounts. In addition, as a result of the December 2015 Federal Reserve Bank short-term interest rate increase, the net interest earned on these segregated asset balances also increased. Average margin balances outstanding increased slightly as well as the interest rates associated with such balances.

Net interest income arising from our securities lending activities decreased $1 million, or 28%. Revenues associated with hard-to-borrow securities in our Box lending program (this program is described in Item 1, Private Client Group, on page 5 of our 2015 Form 10-K) decreased $3 million, while the expense associated with our stock borrow activities decreased $2 million.

Interest income earned on the available for sale securities portfolio increased $1 million, or 38%, due to increased yields and balances. See Note 7 of our Notes to Condensed Consolidated Financial Statements in this Form 10-Q for additional information on our available for sale securities.

Interest expense incurred on our other borrowings increased by nearly $4 million. These borrowings are in large part comprised of RJ Bank’s borrowings from the FHLB and the related interest rate hedges. See Note 12 for additional information regarding all of our borrowings other than our senior notes payable.

Index

Results of Operations – Private Client Group

The following table presents consolidated financial information for our PCG segment for the periods indicated:



	Three months ended March 31,								Six months ended March 31,
	2016			% change		2015			2016			% change		2015
	($ in thousands)
Revenues:
Securities commissions and fees:
Equities	$	57,197		(14	)%	$	66,714		$	118,947		(17	)%	$	143,568
Fixed income products	26,448			46	%	18,170			49,551			47	%	33,726
Mutual funds	152,072			(16	)%	181,539			313,332			(8	)%	339,293
Fee-based accounts	386,699			8	%	357,571			758,875			7	%	705,934
Insurance and annuity products	92,607			8	%	86,113			188,276			7	%	175,557
New issue sales credits	7,076			(66	)%	20,829			17,600			(55	)%	39,542
Sub-total securities commissions and fees	722,099			(1	)%	730,936			1,446,581			1	%	1,437,620
Interest	27,334			10	%	24,778			52,359			3	%	50,869
Account and service fees:
Client account and service fees	58,364			34	%	43,614			106,142			22	%	86,826
Mutual fund and annuity service fees	61,272			2	%	59,899			123,300			4	%	118,801
Client transaction fees	5,734			27	%	4,523			10,804			10	%	9,833
Correspondent clearing fees	699			28	%	545			1,337			11	%	1,202
Account and service fees – all other	93			31	%	71			166			14	%	146
Sub-total account and service fees	126,162			16	%	108,652			241,749			12	%	216,808
Other	7,424			(20	)%	9,268			16,775			(5	)%	17,580
Total revenues	883,019			1	%	873,634			1,757,464			2	%	1,722,877

Interest expense	(2,762		)	(10	)%	(3,082		)	(4,861		)	(32	)%	(7,110		)
Net revenues	880,257			1	%	870,552			1,752,603			2	%	1,715,767

Non-interest expenses:
Sales commissions	538,584			(2	)%	548,028			1,070,509			1	%	1,065,019
Admin & incentive compensation and benefit costs	146,742			7	%	137,563			290,730			9	%	267,558
Communications and information processing	39,798			—		39,836			84,445			15	%	73,132
Occupancy and equipment	30,481			(2	)%	31,158			61,906			3	%	60,007
Business development	23,143			(4	)%	24,042			49,313			6	%	46,442
Clearance and other	18,277			26	%	14,505			43,328			22	%	35,445
Total non-interest expenses	797,025			—		795,132			1,600,231			3	%	1,547,603
Pre-tax income	$	83,232		10	%	$	75,420		$	152,372		(9	)%	$	168,164

Margin on net revenues	9.5		%			8.7		%	8.7		%			9.8		%

For an overview of our PCG segment operations, refer to the information presented in Item 1, Business, on pages 4 - 5 of our 2015 Form 10-K, as well as the description of the key factors impacting our PCG results of operations discussed on pages 43 - 44 of our 2015 Form 10-K.

Index

PCG client asset balances are as follows as of the dates indicated:



	March 31, 2016		December 31, 2015		September 30, 2015		June 30, 2015		March 31, 2015		December 31, 2014
	(in billions)
Total PCG assets under administration	$	485.6	$	473.1	$	453.3	$	475.4	$	471.1	$	459.1
PCG assets in fee-based accounts	$	196.1	$	190.0	$	179.4	$	186.2	$	182.1	$	173.9

Total PCG assets under administration increased 3% over March 31, 2015 , primarily as a result of net client inflows. Total PCG assets in fee-based accounts increased 8% compared to March 31, 2015 . Increased client assets under administration typically result in higher fee-based account revenues and mutual fund and annuity service fees. In periods where equity markets improve, assets under administration increase and generally client activity increases, thereby having a favorable impact on financial advisor productivity. Generally, assets under administration, client activity, and financial advisor productivity decline in periods where equity markets reflect downward trends. Higher client cash balances generally lead to increased interest income and account fee revenues, depending upon spreads realized in our client interest program and RJBDP.

The following table presents a summary of PCG financial advisors as of the dates indicated:



	Employees	Independent contractors	March 31, 2016 total	September 30, 2015 total	March 31, 2015 total
RJ&A	2,631	—	2,631	2,571	2,496
Raymond James Financial Services, Inc.	—	3,663	3,663	3,544	3,422
Raymond James Ltd.	156	215	371	383	380
Raymond James Investment Services Limited (“RJIS”)	—	100	100	98	86
Total financial advisors	2,787	3,978	6,765	6,596	6,384

Quarter ended March 31, 2016 compared with the quarter ended March 31, 2015 – Private Client Group

Net revenues increased $10 million , or 1% , to $880 million . Pre-tax income increased $8 million , or 10% , to $83 million . PCG’s pre-tax margin on net revenues increased to 9.5% as compared to the prior year quarter’s 8.7% .

Securities commissions and fees decreased $9 million , or 1% . Commissions on mutual funds decreased $29 million , or 16% , commissions on equity products decreased $10 million , or 14% , and new issue sales credits declined $14 million , or 66% , all of which reflect the challenging equity market conditions during the current period. Client assets under administration increased to $485.6 billion , an increase of $14.5 billion , or 3% , compared to March 31, 2015 . The year over year increase in client assets was driven primarily by positive net inflows generated by a high level of financial advisor retention and successful recruiting results, despite the decline in the equity markets compared to the prior year. Revenues earned on fee-based accounts increased $29 million , or 8% , commissions earned on fixed income products increased $8 million , or 46% , and commission revenues on insurance and annuity products increased $6 million , or 8% . The increase in revenues on fee-based accounts is due to increased client asset balances. Commission earnings on fixed income securities increased as volatility of interest rates during the quarter provided favorable conditions for fixed income products, along with increased activity for such securities as an alternative to equities when equity markets decline. Commission earnings on insurance and annuity products increased primarily due to increases in fixed annuity commissions in part resulting from our acquisition of TPC in July 2015.

Total account and service fees increased $18 million , or 16% . The majority of this increase was due to client account and service fees, which increased $15 million , or 34% , primarily due to an increase in RJBDP fees resulting from increased average balances in the program as well as the December 2015 increase in rates applicable thereto.

Total segment revenues increased 1% . The portion of total segment revenues that we consider to be recurring is approximately 77% at March 31, 2016 , an increase from 74% at March 31, 2015 . Recurring commission and fee revenues include asset-based fees, trailing commissions from mutual funds and variable annuities/insurance products, mutual fund and annuity service fees, fees earned on funds in our multi-bank sweep program, and interest. Assets in fee-based accounts as of March 31, 2016 were $196.1 billion , an increase of 8% as compared to the $182.1 billion as of March 31, 2015 .

Index

increased. Average client margin interest rates increased compared to the prior year quarter but the favorable impact on net interest was partially offset by a decrease in average balances outstanding.

Non-interest expenses increased slightly, reflecting a $2 million net increase. Administrative and incentive compensation and benefits expense increased $9 million , or 7% , resulting in part from annual increases in salary expenses, increases in employee benefit plan costs and additional staffing levels, primarily in PCG operations and information technology functions, to support our continued growth. Clearance and other expense increased $4 million , or 26% , primarily resulting from an increase in other expense related to certain reserves for legal and regulatory matters of approximately $2 million. Offsetting the increases, sales commission expense decreased $9 million , or 2% , resulting from the 1% decrease in commission and fee revenues, and business development expense decreased $1 million , or 4% , due to decreased conference and other travel-related expense reflecting heightened management of discretionary expenditures.

Six months ended March 31, 2016 compared with the six months ended March 31, 2015 – Private Client Group

Net revenues increased $37 million , or 2% , to $1.75 billion . Pre-tax income decreased $16 million , or 9% , to $152 million . PCG’s pre-tax margin on net revenues decreased to 8.7% as compared to the prior year’s 9.8% .

Securities commissions and fees increased $9 million , or 1% . The increased commission and fee revenues were driven in large part from the increase in client assets under administration which is described in the discussion of the quarterly results above. The most significant increases in these revenues arose from revenues earned on fee-based accounts, which increased $53 million , or 7% , commissions earned on fixed income products which increased $16 million , or 47% , and commission revenues on insurance and annuity products which increased $13 million , or 7% . Offsetting the increases, commissions on mutual funds decreased $26 million , or 8% , commissions on equity products decreased $25 million , or 17% , and new issue sales credits declined $22 million , or 55% , reflecting the challenging equity market conditions during the current year.

Total account and service fees increased $25 million , or 12% . Client account and service fees increased $19 million , or 22% , primarily due to an increase in RJBDP fees resulting from increased average balances in the program as well as a December 2015 increase in rates applicable thereto. Mutual fund and annuity service fees increased $4 million , or 4% , primarily as a result of an increase in education and marketing support (“EMS”) fees and mutual fund omnibus fees, which are paid to us by the mutual fund companies whose products we distribute. The increase in EMS fees is primarily due to increased fees pursuant to schedules in existing contracts, new contracts for certain existing fund families, and new fund families joining the program. Omnibus fees are generally based on the number of positions held in our client portfolios. Increases in such revenues are a result of increases in the number of positions invested in existing fund families on the omnibus platform as well as new fund families joining the omnibus program.

Net interest income in the PCG segment increased $4 million , or 9% . Average customer cash balances and the related segregated asset balances increased compared to the prior year as many clients reacted to uncertainties in the equity markets that occurred during portions of the current period by increasing the cash balances in their brokerage accounts. In addition, as a result of the December 2015 Federal Reserve Bank short-term interest rate increase, the net interest earned on these segregated asset balances also increased. Average client margin balances outstanding increased slightly as well as the interest rates associated with such balances.

Non-interest expenses increased $53 million , or 3% . Administrative and incentive compensation and benefits expense increased $23 million , or 9% , resulting in part from annual increases in salary expenses, increases in employee benefit plan costs and additional staffing levels, primarily in PCG operations and information technology functions, to support our continuing growth. Communications and information processing expense increased $11 million , or 15% , due to increases in software consulting and other information technology expenses. Clearance and other expense increased $8 million , or 22% , primarily resulting from an increase in other expense related to certain reserves for legal and regulatory matters of approximately $12 million in the current year, a $7 million increase compared to the prior year period. Sales commission expense increased $5 million , or 1% , resulting from the 1% increase in commission and fee revenues. Business development expense increased $3 million , or 6% , primarily due to increased incoming account transfer fees and other recruiting-related expenses.

Index

Results of Operations – Capital Markets

The following table presents consolidated financial information for our Capital Markets segment for the periods indicated:



	Three months ended March 31,								Six months ended March 31,
	2016			% change		2015			2016			% change		2015
	($ in thousands)
Revenues:
Institutional sales commissions:
Equity	$	56,938		(5	)%	$	59,913		$	116,328		(11	)%	$	130,127
Fixed income	80,208			7	%	75,066			151,841			9	%	139,010
Sub-total institutional sales commissions	137,146			2	%	134,979			268,169			—		269,137
Equity underwriting fees	6,743			(57	)%	15,651			16,365			(52	)%	33,816
Merger & acquisition and advisory fees	35,218			(14	)%	41,086			66,008			(25	)%	88,497
Fixed income investment banking	11,084			21	%	9,135			19,683			12	%	17,510
Tax credit funds syndication fees	15,564			88	%	8,260			23,953			102	%	11,850
Investment advisory fees	6,777			20	%	5,659			14,701			19	%	12,383
Net trading profit	13,218			(16	)%	15,665			34,008			44	%	23,653
Interest	6,285			10	%	5,710			12,071			8	%	11,175
Other	9,092			228	%	2,776			15,816			160	%	6,074
Total revenues	241,127			1	%	238,921			470,774			(1	)%	474,095
Interest expense	(3,974		)	8	%	(3,676		)	(7,095		)	1	%	(7,048		)
Net revenues	237,153			1	%	235,245			463,679			(1	)%	467,047

Non-interest expenses:
Sales commissions	50,737			(4	)%	52,917			100,306			(4	)%	103,956
Admin & incentive compensation and benefit costs	102,581			(1	)%	103,347			198,857			(2	)%	202,802
Communications and information processing	18,119			(1	)%	18,385			35,505			—		35,476
Occupancy and equipment	8,538			1	%	8,447			16,913			1	%	16,807
Business development	9,665			(9	)%	10,592			20,521			(7	)%	21,986
Losses and non-interest expenses of real estate partnerships held by consolidated VIEs	9,400			(15	)%	11,080			18,426			(4	)%	19,106
Clearance and all other	19,075			(9	)%	20,941			37,132			(4	)%	38,583
Total non-interest expenses	218,115			(3	)%	225,709			427,660			(3	)%	438,716
Income before taxes and including noncontrolling interests	19,038			100	%	9,536			36,019			27	%	28,331
Noncontrolling interests	(9,049		)			(11,312		)	(17,236		)			(20,170		)
Pre-tax income excluding noncontrolling interests	$	28,087		35	%	$	20,848		$	53,255		10	%	$	48,501

For an overview of our Capital Markets segment operations, refer to the information presented in Item 1, Business, on pages 6 - 7 of our 2015 Form 10-K, as well as the description of the key factors impacting our Capital Markets segment results of operations discussed on pages 47 - 48 of our 2015 Form 10-K.

Quarter ended March 31, 2016 compared with the quarter ended March 31, 2015 – Capital Markets

Net revenues increased $2 million , or 1% , to $237 million . Pre-tax income increased $7 million , or 35% , to $28 million .

Commission revenues increased $2 million , or 2% . Institutional fixed income commissions increased $5 million , or 7% , benefiting from increased volatility in interest rates during the quarter. Offsetting this increase, institutional equity sales

Index

commissions decreased $3 million , or 5% , resulting from sluggish equity market conditions and global economic uncertainty during the current period.

Equity underwriting fees decreased $9 million , or 57% , with $8 million of the decrease occurring in our domestic operations and $1 million arising from our Canadian operations. The number of both lead-managed and co-managed underwritings in both our domestic and Canadian operations decreased during the current period compared to the prior year quarter as a result of the unfavorable equity market environment. The revenues from our Canadian operations decreased compared to the prior period as market conditions in Canada continued to be subdued as a result of the on-going challenges in the energy and natural resource sectors of the Canadian economy arising in part from low commodity prices. However, activity levels in our Canadian operations began to show indications of improvement late in the current quarter.

Merger and acquisition and advisory fees decreased $6 million , or 14% , largely resulting from an industry-wide slowdown in activity level during the current period.

We experienced solid performance in our public finance underwritings in the current period, which impact both our securities commissions and fees revenues and our investment banking revenues. The combined revenues resulting from these public finance business activities increased by $2 million, or 11%.

Tax credit fund syndication fee revenues increased $7 million , or 88% , due to a 66% increase in the volume of tax credit fund partnership interests sold during the current period and the current period recognition of $4 million in revenues that were associated with partnership interests sold in prior years which had been deferred in those years. Current year recognition of these previously deferred revenues result from the favorable resolution of certain conditions associated with the partnership interests which, once favorably resolved, result in the recognition of previously deferred revenues. As of March 31, 2016, approximately $11 million of previously deferred revenues remain to be recognized in future revenues, whenever such conditions for revenue recognition are fully satisfied.

Our net trading profit decreased $2 million , or 16% . Trading profits generated in our fixed income operations decreased approximately $3 million, however both the current and comparable prior year period reflect solid results. Within our equity capital markets operations, the prior year period included a $2 million loss on the final disposition of an equity position held in our Canadian subsidiary that did not recur in the current period.

Other revenues increased $6 million , or 228% , primarily as a result of foreign exchange gains associated with certain of our Latin American joint ventures.

Non-interest expenses decreased $8 million , or 3% . The losses and non-interest expenses of real estate partnerships held by consolidated VIEs decreased $2 million , or 15% . Since the majority of these losses are attributable to others, the offsetting noncontrolling interests discussed in the following paragraph reflects a similar decrease. Our business development expenses decreased $1 million , or 9% , reflecting the outcome of heightened expense management during the period.

Noncontrolling interests is primarily comprised of the net pre-tax impact (which are net losses) from the consolidation of certain low-income housing tax credit funds, with noncontrolling interests reflecting the portion of such losses that we do not own. Additionally, noncontrolling interests includes the net pre-tax impact associated with the results of operations of certain joint ventures in Argentina and Uruguay. Total segment expenses attributable to others decreased by $2 million as compared to the prior year as a result of a decrease in losses and non-interest expenses associated with the consolidated low-income housing tax credit funds.

Six months ended March 31, 2016 compared with the six months ended March 31, 2015 – Capital Markets

Net revenues decreased $3 million , or 1% , to $464 million . Pre-tax income increased $5 million , or 10% , to $53 million .

Commission revenues approximate the prior period level. Institutional fixed income commissions increased $13 million , or 9% , benefiting from increased activity during the current period in anticipation of the December 2015 Federal Reserve Bank action to increase short-term interest rates, and the interest rate volatility in the markets thereafter. Offsetting this increase, institutional equity sales commissions decreased $14 million , or 11% , resulting primarily from decreased equity underwriting activities during the current period.

Merger and acquisition and advisory fees decreased $22 million , or 25% , and underwriting revenues decreased by $17 million , or 52% . The late September 2015 decline in the equity markets, coupled with market uncertainty in advance of the December 2015 Federal Reserve Bank announcement and their related commentary on interest rates, combined to result in a less than favorable

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market environment for equity activities. In the current year we experienced relatively low volume in both our merger and acquisition advisory and underwriting activities. While merger and acquisition and advisory fees are a volatile revenue source in general, the number of merger and acquisition transactions in the six months ended March 31, 2016 , and especially in the first three months of the current year, was low due to the uncertainty in the market. The number of both lead-managed and co-managed underwritings in both our domestic and Canadian operations decreased during the current period compared to the prior year period as a result of the unfavorable equity market environment.

We have experienced solid performance in our public finance underwritings in the current year, which impact both our securities commissions and fees revenues and our investment banking revenues. The combined revenues resulting from these public finance business activities increased by $1 million, or 4%.

Tax credit fund syndication fee revenues increased $12 million , or 102% , due to a 41% increase in the volume of tax credit fund partnership interests sold during the current period and the current period recognition of $4 million in revenues that were associated with partnership interests sold in prior years which had been deferred in those years. Current year recognition of these previously deferred revenues result from the favorable resolution of certain conditions associated with the partnership interests which, once favorably resolved, result in the recognition of previously deferred revenues.

Our net trading profit increased $10 million , or 44% . Trading profits generated in our fixed income operations increased approximately $7 million, reflecting solid results in most product categories. Within our equity capital markets operations, the prior year period included a $5 million realized loss on two equity positions held in our Canadian subsidiary that did not recur in the current period.

Other revenues increased $10 million , or 160% . The most significant component of the increase is attributable to foreign exchange gains associated with certain of our Latin American joint ventures, which increased $5 million in the current period.

Non-interest expenses decreased $11 million , or 3% . Administrative and incentive compensation and benefit expense decreased $4 million , or 2% , and commission expenses decreased $4 million , or 4% , both are which are attributable to the declines in revenues as compared to the prior year period. Our business development expenses decreased $1 million , or 7% , reflecting the outcome of heightened expense management, especially prevalent during the most recent quarter.

Noncontrolling interests is primarily comprised of the net pre-tax impact (which are net losses) from the consolidation of certain low-income housing tax credit funds, with noncontrolling interests reflecting the portion of such losses that we do not own. Additionally, noncontrolling interests includes the net pre-tax impact associated with the results of operations of certain joint ventures in Argentina and Uruguay. Total segment expenses attributable to others decreased by $3 million as compared to the prior year as a result of decreases in the amount of losses and non-interest expenses of real estate partnerships held by VIEs and to a lesser extent, improved net operating results associated with our Latin America joint ventures.

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Results of Operations – Asset Management

The following table presents consolidated financial information for our Asset Management segment for the periods indicated:



	Three months ended March 31,						Six months ended March 31,
	2016		% change		2015		2016		% change		2015
	($ in thousands)
Revenues:
Investment advisory and related administrative fees:
Managed programs	$	64,759	—		$	64,613	$	133,272	(2	)%	$	135,511
Non-discretionary asset-based administration	18,177		13	%	16,040		35,736		12	%	31,800
Sub-total investment advisory and related administrative fees	82,936		3	%	80,653		169,008		1	%	167,311
Other	13,906		4	%	13,369		28,072		7	%	26,341
Total revenues	96,842		3	%	94,022		197,080		2	%	193,652

Expenses:
Admin & incentive compensation and benefit costs	27,372		7	%	25,507		54,988		15	%	47,963
Communications and information processing	6,868		5	%	6,516		13,527		8	%	12,573
Occupancy and equipment	1,107		(3	)%	1,143		2,235		(1	)%	2,256
Business development	2,593		11	%	2,335		5,322		14	%	4,688
Investment sub-advisory fees	13,453		(1	)%	13,577		27,191		2	%	26,701
Other	13,578		5	%	12,956		27,609		7	%	25,776
Total expenses	64,971		5	%	62,034		130,872		9	%	119,957
Income before taxes and including noncontrolling interests	31,871		—		31,988		66,208		(10	)%	73,695
Noncontrolling interests	748				893		1,719				2,804
Pre-tax income excluding noncontrolling interests	$	31,123	—		$	31,095	$	64,489	(9	)%	$	70,891

For an overview of our Asset Management segment operations, refer to the information presented in Item 1, Business, on page 8 of our 2015 Form 10-K, as well as the description of the key factors impacting our Asset Management segment results of operations discussed on page 50 of our 2015 Form 10-K.

Managed Programs

As of March 31, 2016 , approximately 80% of investment advisory fees recorded in this segment are earned from assets held in managed programs. Of these revenues, approximately 60% of our investment advisory fees recorded in each quarter are determined based on balances at the beginning of a quarter, approximately 25% are based on balances at the end of the quarter and the remaining 15% are computed based on average assets throughout the quarter.

On April 30, 2015, RJF acquired Cougar. Eagle now offers Cougar’s global asset allocation strategies to its clients worldwide. See Note 3 on page 121 of the Notes to Consolidated Financial Statements in our 2015 Form 10-K for additional information regarding the Cougar acquisition. Cougar has a substantial amount of assets under advisement, which are non-discretionary advised assets, thus the majority of the assets managed by Cougar are reflected in non-discretionary asset-based program balances.

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



	March 31, 2016			December 31, 2015			September 30, 2015			March 31, 2015			December 31, 2014			September 30, 2014
	(in millions)
Financial assets under management:
Eagle Asset Management, Inc.	$	25,767		$	26,220		$	25,692		$	29,010		$	28,234		$	28,752
Raymond James Consulting Services	15,064			14,201			13,484			13,957			13,511			13,085
Unified Managed Accounts (“UMA”)	9,378			9,070			8,613			8,861			8,171			7,587
Cougar Global Investments Limited	138			134			136			—			—			—
Freedom accounts & other managed programs	22,772			22,214			21,168			21,669			20,721			19,944
Sub-total financial assets under management	73,119			71,839			69,093			73,497			70,637			69,368
Less: Assets managed for affiliated entities	(4,316		)	(4,024		)	(3,916		)	(4,127		)	(3,925		)	(4,811		)
Total financial assets under management	$	68,803		$	67,815		$	65,177		$	69,370		$	66,712		$	64,557

The following table summarizes the activity impacting the total financial assets under management in managed programs (including activity in assets managed for affiliated entities) for the periods indicated:



	Three months ended March 31,					Six months ended March 31,
	2016		2015			2016		2015
	(in millions)
Financial assets under management at beginning of period	$	71,839	$	70,637		$	69,093	$	69,368
Net inflows of client assets	980		1,405		⁽¹⁾	1,718		1,856			⁽¹⁾
Net market appreciation in asset values	300		1,455		⁽¹⁾	2,308		3,325			⁽¹⁾
Other	—		—			—		(1,052		)	⁽²⁾
Financial assets under management at end of period	$	73,119	$	73,497		$	73,119	$	73,497


(1)	Revised from the amounts reported in the prior year periods in order to present on a basis consistent with the current period. In the prior year periods, the presentation of net inflows only included the asset flows associated with new clients, and cancellations associated with existing clients, to certain programs.


(2)	During the prior year, certain assets that were previously included in Eagle Asset Management, Inc. programs were transferred into non-discretionary asset-based programs. The assets balances in non-discretionary asset-based programs are discussed below.

Non-discretionary asset-based programs

As of March 31, 2016 , approximately 20% of investment advisory fee revenues recorded in this segment are earned for administrative services on assets held in certain non-discretionary asset-based programs. These assets totaled $100.0 billion , $96.4 billion , $91.0 billion , and $90.8 billion as of March 31, 2016 , December 31, 2015, September 30, 2015 and March 31, 2015, respectively. All administrative fees associated with these programs are determined based on balances at the beginning of the quarter, and are reflected within “non-discretionary asset-based administration” revenues in this segment’s results of operations.

Quarter ended March 31, 2016 compared with the quarter ended March 31, 2015 – Asset Management

Revenues increased $3 million , or 3% , to $97 million . Pre-tax income of $31 million approximates the amount earned in the prior year quarter.

Total investment advisory and related administrative fee revenues increased by $2 million , or 3% , almost entirely due to non-discretionary asset-based administration activities which increased $2 million , or 13% , resulting from the 10% increase in assets held by such programs over the prior year level. The increase in non-discretionary assets includes those arising from the Cougar acquisition. Advisory fee revenues arising from managed programs approximated the prior year quarter amount. A $1 million

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increase in performance fees, which are earned by managed funds for exceeding certain performance targets, offset a decrease resulting from the decline in assets under management compared to the prior year.

Other income increased $1 million , or 4% , primarily resulting from Raymond James Trust, N. A. (“RJ Trust”) which generated an increase in trust fee income arising from their 9% increase in trust assets from the prior year level to $3.88 billion as of March 31, 2016 .

Expenses increased by approximately $3 million , or 5% , primarily resulting from a $2 million , or 7% , increase in administrative and incentive compensation expenses, and a $1 million , or 5% increase in other expense. The increase in administrative and incentive compensation expenses results primarily from annual salary increases, increases in personnel to support the growth of the business as well as from the recently acquired Cougar operations, and increases in certain employee benefit plan costs. The increase in other expense is primarily the result of an increase in platform and omnibus fee expense incurred by the Eagle funds.

Six months ended March 31, 2016 compared with the six months ended March 31, 2015 – Asset Management

Revenues increased $3 million , or 2% , to $197 million . Pre-tax income decreased $6 million , or 9% , to $64 million .

Total investment advisory and related administrative fee revenues increased by $2 million , or 1% . Revenues from non-discretionary asset-based administration activities increased $4 million , or 12% , primarily resulting from the 10% increase in assets held by such programs, which includes those arising from the Cougar acquisition, over the prior year level. Offsetting this increase, advisory fee revenues from managed programs decreased by approximately $2 million , or 2% , primarily resulting from a decline in financial assets under management of $567 million , or nearly 1% , compared to the prior year level as Eagle lost a few large institutional accounts and, to a lesser extent, lower performance fees.

Other income increased $2 million , or 7% , primarily resulting from RJ Trust which generated an increase in trust fee income arising from their 9% increase in trust assets from the prior year level.

Expenses increased by approximately $11 million , or 9% , primarily resulting from a $7 million , or 15% , increase in administrative and incentive compensation expenses, and a $2 million , or 7% increase in other expense. The increase in administrative and incentive compensation expenses results primarily from the factors mentioned in the quarterly discussion above and, in addition, the prior year incentive compensation expense included a reversal of certain incentive compensation expense accruals for associates who left the firm during the prior year; such a reversal did not recur in the current year. The increase in other expense is primarily the result of an increase in platform and omnibus fee expense incurred by the Eagle funds as well as certain incremental costs associated with Cougar including amortization of intangible assets arising from the acquisition.

Noncontrolling interests includes the impact of the consolidation of certain subsidiary investment advisors and other subsidiaries. The portion of net income attributable to noncontrolling interests decreased $1 million compared to the prior year period as a result of the reduction in the amount of performance fee revenues earned in the current period that are attributable to others.

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Results of Operations – RJ Bank

The following table presents consolidated financial information for RJ Bank for the periods indicated:



	Three months ended March 31,								Six months ended March 31,
	2016			% change		2015			2016			% change		2015
	($ in thousands)
Revenues:
Interest income	$	127,349		24	%	$	102,337		$	237,867		18	%	$	201,497
Interest expense	(6,052		)	144	%	(2,480		)	(10,382		)	111	%	(4,918		)
Net interest income	121,297			21	%	99,857			227,485			16	%	196,579
Other income	3,963			30	%	3,053			6,171			(10	)%	6,849
Net revenues	125,260			22	%	102,910			233,656			15	%	203,428

Non-interest expenses:
Compensation and benefits	7,299			4	%	7,026			14,191			7	%	13,307
Communications and information processing	1,738			35	%	1,289			3,538			43	%	2,473
Occupancy and equipment	285			(5	)%	301			582			(7	)	623
Loan loss provision	9,629			145	%	3,937			23,539			77	%	13,302
FDIC insurance premiums	3,472			23	%	2,824			7,053			23	%	5,723
Affiliate deposit account servicing fees	9,862			19	%	8,281			19,902			20	%	16,597
Other	7,841			(2	)%	7,988			13,852			(12	)%	15,783
Total non-interest expenses	40,126			27	%	31,646			82,657			22	%	67,808
Pre-tax income	$	85,134		19	%	$	71,264		$	150,999		11	%	$	135,620

For an overview of our RJ Bank segment operations, refer to the information presented in Item 1, Business, on page 9 of our 2015 Form 10-K, as well as the description of the key factors impacting our RJ Bank segment results of operations discussed on page 53 of our 2015 Form 10-K.

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



	Three months ended March 31,						Six months ended March 31,
	2016			2015			2016			2015
	(in thousands)
Net loan (charge-offs)/recoveries:
C&I loans	$	(1,427	)	$	536		$	(1,694	)	$	298
Residential mortgage loans	(109		)	(411		)	(166		)	(61		)
SBL	20			6			21			14
Total	$	(1,516	)	$	131		$	(1,839	)	$	251



	March 31, 2016			September 30, 2015
	(in thousands)
Allowance for loan losses:
Loans held for investment:
C&I loans	$	137,299		$	117,623
CRE construction loans	2,553			2,707
CRE loans	32,668			30,486
Tax-exempt loans	7,034			5,949
Residential mortgage loans	11,254			12,526
SBL	3,412			2,966
Total	$	194,220		$	172,257

Nonperforming assets:
Nonperforming loans:
C&I loans	$	11,391		$	—
CRE loans	4,497			4,796
Residential mortgage loans:
Residential first mortgage	43,365			47,504
Home equity loans/lines	172			319
Total nonperforming loans	59,425			52,619
Other real estate owned:
Residential:
Residential first mortgage	4,409			4,631
Home equity	49			—
Total other real estate owned	4,458			4,631
Total nonperforming assets	$	63,883		$	57,250
Total nonperforming assets, net as a % of RJ Bank total assets	0.40		%	0.39		%

Total loans:
Loans held for sale, net ⁽¹⁾	$	172,222		$	119,519
Loans held for investment:
C&I loans	7,283,214			6,928,018
CRE construction loans	145,905			162,356
CRE loans	2,448,268			2,054,154
Tax-exempt loans	610,274			484,537
Residential mortgage loans	2,217,584			1,962,614
SBL	1,704,675			1,481,504
Net unearned income and deferred expenses	(39,441		)	(32,424		)
Total loans held for investment ⁽¹⁾	14,370,479			13,040,759
Total loans ⁽¹⁾	$	14,542,701		$	13,160,278


(1)	Net of unearned income and deferred expenses.

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The following table presents RJ Bank’s allowance for loan losses by loan category:



	March 31, 2016				September 30, 2015
	Allowance		Loan category as a % of total loans receivable		Allowance		Loan category as a % of total loans receivable
	($ in thousands)
Loans held for sale	$	—	1	%	$	—	1	%
C&I loans	115,196		43	%	98,447		44	%
CRE construction loans	2,520		1	%	2,148		1	%
CRE loans	27,306		14	%	24,064		13	%
Tax-exempt loans	7,034		4	%	5,949		4	%
Residential mortgage loans	11,247		15	%	12,513		15	%
SBL	3,408		12	%	2,962		11	%
Foreign loans	27,509		10	%	26,174		11	%
Total	$	194,220	100	%	$	172,257	100	%

Information on foreign assets held by RJ Bank:

Changes in the allowance for loan losses with respect to loans RJ Bank has made to borrowers who are not domiciled in the U.S. are as follows:



	Three months ended March 31,					Six months ended March 31,
	2016		2015			2016		2015
	(in thousands)
Allowance for loan losses attributable to foreign loans, beginning of period:	$	22,058	$	21,065		$	26,174	$	19,891
Provision for loan losses - foreign loans	4,803		1,006			1,072		2,472
Net charge-offs - foreign loans	—		—			—		—
Foreign currency translation adjustment	648		(827		)	263		(1,119		)
Allowance for loan losses attributable to foreign loans, end of period	$	27,509	$	21,244		$	27,509	$	21,244

Cross-border outstandings represent loans (including accrued interest), interest-bearing deposits with other banks, and any other monetary assets which are cross-border claims according to bank regulatory guidelines for the country exposure report. The following table sets forth the country where RJ Bank’s total cross-border outstandings exceeded 1% of total RJF assets as of each respective period:



	Deposits with other banks		C&I loans		CRE loans		Residential mortgage loans		SBL		Total cross-border outstandings ⁽¹⁾
	(in thousands)
March 31, 2016

Canada	$	2,916	$	429,755	$	183,447	$	548	$	320	$	616,986

September 30, 2015

Canada	$	122,810	$	456,602	$	178,230	$	557	$	328	$	758,527


(1)	Excludes any hedged, non-U.S. currency amounts.

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Quarter ended March 31, 2016 compared with the quarter ended March 31, 2015 – RJ Bank

Revenues increased $26 million , or 25% , to $131 million . Pre-tax income increased $14 million , or 19% , to $85 million .

The increase in pre-tax income was primarily attributable to a $22 million , or 22% , increase in net revenues, offset by an increase of $6 million , or 145% , in the provision for loan losses, and a $3 million , or 10% , increase in non-interest expenses (excluding provision for loan losses). The increase in net revenues was attributable to a $21 million increase in net interest income and a $1 million increase in other income.

The $21 million increase in net interest income was the result of a $2.8 billion increase in average interest-earning banking assets. The increase in average interest-earning banking assets was driven by a $2 billion increase in average loans, which was comprised of a $1.4 billion , or 15% , increase in average corporate loans, a $473 million , or 40% , increase in average SBL balances, and a $136 million , or 7% , increase in average residential mortgage loans. The net interest margin at 3.09% was relatively unchanged compared to the same quarter last year as an increase in the average interest-earning banking assets yield was offset by an increase in total cost of funds. The increase in the yield of the average interest-earning banking assets to 3.24% from 3.16% was the result of an increase in the loan portfolio yield to 3.54% from 3.35% due to the impact of rising short-term interest rates during the current period and higher corporate loan fee income. The total cost of funds increased to 0.17% from 0.09% due to an increase in deposit and borrowing costs, which includes additional expense from our interest rate hedging activities.

Corresponding to the increase in average interest-earning banking assets, average interest-bearing banking liabilities increased $2.5 billion to $14.3 billion .

The increase in the provision for loan losses as compared to the prior year was primarily due to the charges during the current period resulting from loans outstanding within the energy sector, the impact of Shared National Credits (“SNC”) exam results during the current quarter, and higher corporate loan growth. See further discussion of the SNC exam results in Item 3 - Credit Risk of this Form 10-Q. In contrast, the provision for loan losses also reflects improved credit characteristics such as the continued decline in residential mortgage loan delinquencies and nonperforming loans.

Non-interest expenses (excluding provision for loan losses) increased $3 million as compared to the prior year quarter. A significant portion of this increase was attributable to increased banking activities, which included a $1.6 million increase in affiliate deposit account servicing fees corresponding to the increase in deposit balances, a $600 thousand increase in FDIC insurance premiums, and a $600 thousand increase in SBL affiliate fees. Other increases in non-interest expense included a $400 thousand increase in communications and information processing expense, a $300 thousand increase in compensation and benefits, and a $200 thousand increase in foreclosure expenses. These increases in non-interest expenses were partially offset by a $1.6 million decrease in expense related to the reserve for unfunded lending commitments.

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The following table presents average balance, interest income and expense, the related interest yields and rates, and interest spreads for RJ Bank for the periods indicated:



	Three months ended March 31,
	2016							2015
	Average balance			Interest inc./exp.		Average yield/ cost		Average balance			Interest inc./exp.		Average yield/ cost
	($ in thousands)
Interest-earning banking assets:
Loans, net of unearned income ⁽¹⁾
Loans held for sale - all domestic	$	156,874		$	1,180	3.18	%	$	115,091		$	671	2.36	%
Loans held for investment:
Domestic:
C&I loans	6,148,708			60,911		3.93	%	5,744,902			51,765		3.60	%
CRE construction loans	152,642			2,132		5.52	%	83,442			853		4.09	%
CRE loans	1,833,965			14,823		3.20	%	1,438,888			10,613		2.95	%
Tax-exempt loans ⁽²⁾	590,032			4,058		4.23	%	253,702			1,871		4.54	%
Residential mortgage loans	2,109,933			15,493		2.91	%	1,973,743			14,209		2.88	%
SBL	1,664,752			12,581		2.99	%	1,191,228			8,187		2.75	%
Foreign:
C&I loans	993,307			8,729		3.48	%	1,034,536			9,760		3.77	%
CRE construction loans	18,217			451		9.80	%	19,259			208		4.33	%
CRE loans	398,566			2,978		2.96	%	206,722			1,878		3.63	%
Residential mortgage loans	2,263			16		2.88	%	2,875			22		2.62	%
SBL	1,911			18		3.76	%	1,955			17		3.45	%
Total loans, net	14,071,170			123,370		3.54	%	12,066,343			100,054		3.35	%
Agency MBS	356,507			1,252		1.40	%	247,587			571		0.92	%
Non-agency CMOs	70,386			451		2.56	%	94,699			572		2.41	%
Cash	1,160,665			1,421		0.49	%	562,620			289		0.21	%
FHLB stock, Federal Reserve Bank of Atlanta (“FRB”) stock, and other	180,799			855		1.90	%	95,878			851		3.60	%
Total interest-earning banking assets	15,839,527			$	127,349	3.24	%	13,067,127			$	102,337	3.16	%
Non-interest-earning banking assets:
Allowance for loan losses	(188,168		)					(157,154		)
Unrealized loss on available for sale securities	(4,082		)					(4,444		)
Other assets	271,956							343,642
Total non-interest-earning banking assets	79,706							182,044
Total banking assets	$	15,919,233						$	13,249,171
Interest-bearing banking liabilities:
Deposits:
Certificates of deposit	$	357,428		$	1,406	1.58	%	$	347,200		$	1,459	1.70	%
Money market, savings, and NOW accounts	13,230,714			2,008		0.06	%	10,831,217			631		0.02	%
FHLB advances and other	668,724			2,638		1.56	%	613,202			390		0.25	%
Total interest-bearing banking liabilities	14,256,866			$	6,052	0.17	%	11,791,619			$	2,480	0.09	%
Non-interest-bearing banking liabilities	75,218							41,558
Total banking liabilities	14,332,084							11,833,177
Total banking shareholders’ equity	1,587,149							1,415,994
Total banking liabilities and shareholders’ equity	$	15,919,233						$	13,249,171
Excess of interest-earning banking assets over interest-bearing banking liabilities/net interest income	$	1,582,661		$	121,297			$	1,275,508		$	99,857
Bank net interest:
Spread						3.07	%						3.07	%
Margin (net yield on interest-earning banking assets)						3.09	%						3.09	%
Ratio of interest-earning banking assets to interest-bearing banking liabilities						111.10	%						110.82	%
Annualized return on average:
Total banking assets						1.43	%						1.45	%
Total banking shareholders’ equity						14.36	%						13.52	%
Average equity to average total banking assets						9.97	%						10.69	%

The text of the footnotes in the above table are on the following page .

Index

Explanation of the footnotes to the table on the preceding page:


(1)	Nonaccrual loans are included in the average loan balances. Payment or income received on corporate nonaccrual loans are applied to principal. Income on other nonaccrual loans is recognized on a cash basis. Fee income on loans included in interest income for the three months ended March 31, 2016 and 2015 was $11 million and $7 million, respectively.


(2)	The yield is presented on a tax-equivalent basis utilizing the federal statutory tax rate of 35%.

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



	Three months ended March 31,
	2016 compared to 2015
	Increase (decrease) due to
	Volume			Rate			Total
	(in thousands)
Interest revenue:
Interest-earning banking assets:
Loans, net of unearned income:
Loans held for sale - all domestic	$	244		$	265		$	509
Loans held for investment:
Domestic:
C&I loans	3,639			5,507			9,146
CRE construction loans	708			571			1,279
CRE loans	2,914			1,296			4,210
Tax-exempt loans	2,480			(293		)	2,187
Residential mortgage loans	981			303			1,284
SBL	3,254			1,140			4,394
Foreign:
C&I loans	(389		)	(642		)	(1,031		)
CRE construction loans	(11		)	254			243
CRE loans	1,743			(643		)	1,100
Residential mortgage loans	(5		)	(1		)	(6		)
SBL	—			1			1
Agency MBS	251			430			681
Non-agency CMOs	(147		)	26			(121		)
Cash	307			825			1,132
FHLB stock, FRB stock, and other	754			(750		)	4
Total interest-earning banking assets	16,723			8,289			25,012

Interest expense:
Interest-bearing banking liabilities:
Deposits:
Certificates of deposit	42			(95		)	(53		)
Money market, savings and NOW accounts	140			1,237			1,377
FHLB advances and other	35			2,213			2,248
Total interest-bearing banking liabilities	217			3,355			3,572
Change in net interest income	$	16,506		$	4,934		$	21,440

Index

Six months ended March 31, 2016 compared with the six months ended March 31, 2015 – RJ Bank

Revenues increased $36 million , or 17% , to $244 million . Pre-tax income increased $15 million , or 11% , to $151 million .

The increase in pre-tax income was primarily attributable to a $30 million , or 15% , increase in net revenues, offset by an increase of $10 million , or 77% , in the provision for loan losses, and a $5 million , or 8% , increase in non-interest expenses (excluding provision for loan losses). The increase in net revenues was attributable to a $31 million increase in net interest income offset by a $1 million decrease in other income.

The $31 million increase in net interest income was the result of a $2.4 billion increase in average interest-earning banking assets partially offset by a small decline in net interest margin. The increase in average interest-earning banking assets was driven by a $2 billion increase in average loans, which was comprised of a $1.3 billion , or 16% , increase in average corporate loans, a $471 million , or 41% , increase in average SBL balances, and a $190 million , or 10% , increase in average residential mortgage loans. The net interest margin decreased to 3.00% from 3.06% due to an increase in total cost of funds to 0.15% from 0.09% primarily resulting from an increase in deposit and borrowing costs, which includes additional expense from our interest rate hedging activities. The average interest-earning banking assets yield at 3.14% was flat compared to the prior year.

Corresponding to the increase in average interest-earning banking assets, average interest-bearing banking liabilities increased $2.1 billion to $13.7 billion .

The increase in the provision for loan losses as compared to the prior year was primarily due to the charges during the current year resulting from loans outstanding within the energy sector, the impact of SNC exam results during the current quarter as well as higher corporate loan growth. See further discussion of the SNC exam results in Item 3 - Credit Risk of this Form 10-Q. In contrast, the provision for loan losses also reflects improved credit characteristics such as the continued decline in residential mortgage loan delinquencies and nonperforming loans.

Non-interest expenses (excluding provision for loan losses) increased $5 million as compared to the prior year quarter. A significant portion of this increase was attributable to increased banking activities, which included a $3.3 million increase in affiliate deposit account servicing fees corresponding to the increase in deposit balances, a $1.3 million increase in FDIC insurance premiums, and a $1.2 million increase in SBL affiliate fees. Other increases in non-interest expense included a $1.1 million increase in communications and information processing expense, a $900 thousand increase in losses related to RJ Bank’s investments in low-income housing tax credit fund projects, a $900 thousand increase in compensation and benefits, and a $200 thousand increase in business development expenses resulting from higher consulting costs. These increases in non-interest expenses were partially offset by a $5.2 million decrease in expense related to the reserve for unfunded lending commitments.

Index

The following table presents average balance, interest income and expense, the related interest yields and rates, and interest spreads for RJ Bank for the periods indicated:



	Six months ended March 31,
	2016							2015
	Average balance			Interest inc./exp.		Average yield/ cost		Average balance			Interest inc./exp.		Average yield/ cost
	($ in thousands)
Interest-earning banking assets:
Loans, net of unearned income ⁽¹⁾
Loans held for sale - all domestic	$	160,949		$	2,342	3.10	%	$	108,902		$	1,349	2.48	%
Loans held for investment:
Domestic:
C&I loans	6,114,480			113,840		3.67	%	5,649,554			101,639		3.57	%
CRE construction loans	140,620			3,554		4.97	%	86,658			1,809		4.13	%
CRE loans	1,803,603			26,304		2.87	%	1,436,091			21,119		2.91	%
Tax-exempt loans ⁽²⁾	553,124			7,492		4.17	%	195,624			2,987		4.70	%
Residential mortgage loans	2,074,801			30,462		2.89	%	1,884,878			26,990		2.83	%
SBL	1,608,855			23,816		2.91	%	1,137,784			15,754		2.74	%
Foreign:
C&I loans	964,806			17,026		3.47	%	1,041,034			20,476		3.89	%
CRE construction loans	29,917			777		5.11	%	17,864			428		4.73	%
CRE loans	359,149			5,290		2.90	%	221,803			4,187		3.73	%
Residential mortgage loans	2,207			32		2.88	%	2,550			39		3.01	%
SBL	1,917			36		3.73	%	1,998			35		3.48	%
Total loans, net	13,814,428			230,971		3.36	%	11,784,740			196,812		3.34	%
Agency MBS	348,393			2,347		1.35	%	254,603			1,160		0.91	%
Non-agency CMOs	72,477			915		2.52	%	96,094			1,148		2.39	%
Cash	834,268			1,757		0.42	%	579,684			609		0.21	%
FHLB stock, FRB stock, and other	159,085			1,877		2.35	%	100,296			1,768		3.53	%
Total interest-earning banking assets	15,228,651			$	237,867	3.14	%	12,815,417			$	201,497	3.14	%
Non-interest-earning banking assets:
Allowance for loan losses	(180,484		)					(153,891		)
Unrealized loss on available for sale securities	(3,993		)					(5,096		)
Other assets	262,796							327,894
Total non-interest-earning banking assets	78,319							168,907
Total banking assets	$	15,306,970						$	12,984,324
Interest-bearing banking liabilities:
Deposits:
Certificates of deposit	$	358,511		$	2,854	1.59	%	$	346,337		$	2,983	1.73	%
Money market, savings, and NOW accounts	12,603,622			2,759		0.04	%	10,551,649			1,244		0.02	%
FHLB advances and other	706,087			4,769		1.33	%	664,113			691		0.21	%
Total interest-bearing banking liabilities	13,668,220			$	10,382	0.15	%	11,562,099			$	4,918	0.09	%
Non-interest-bearing banking liabilities	72,415							46,416
Total banking liabilities	13,740,635							11,608,515
Total banking shareholders’ equity	1,566,335							1,375,809
Total banking liabilities and shareholders’ equity	$	15,306,970						$	12,984,324
Excess of interest-earning banking assets over interest-bearing banking liabilities/net interest income	$	1,560,431		$	227,485			$	1,253,318		$	196,579
Bank net interest:
Spread						2.99	%						3.05	%
Margin (net yield on interest-earning banking assets)						3.00	%						3.06	%
Ratio of interest-earning banking assets to interest-bearing banking liabilities						111.42	%						110.84	%
Annualized return on average:
Total banking assets						1.32	%						1.38	%
Total banking shareholders’ equity						12.89	%						13.04	%
Average equity to average total banking assets						10.23	%						10.60	%

The text of the footnotes in the above table are on the following page .

Index

Explanation of the footnotes to the table on the preceding page:


(1)	Nonaccrual loans are included in the average loan balances. Payment or income received on corporate nonaccrual loans are applied to principal. Income on other nonaccrual loans is recognized on a cash basis. Fee income on loans included in interest income for the six months ended March 31, 2016 and 2015 was $15 million for both periods, respectively.


(2)	The yield is presented on a tax-equivalent basis utilizing the federal statutory tax rate of 35%.



	Six months ended March 31,
	2016 compared to 2015
	Increase (decrease) due to
	Volume			Rate			Total
	(in thousands)
Interest revenue:
Interest-earning banking assets:
Loans, net of unearned income:
Loans held for sale - all domestic	$	645		$	348		$	993
Loans held for investment:
Domestic:
C&I loans	8,364			3,837			12,201
CRE construction loans	1,126			619			1,745
CRE loans	5,405			(220		)	5,185
Tax-exempt loans	5,458			(953		)	4,505
Residential mortgage loans	2,720			752			3,472
SBL	6,523			1,539			8,062
Foreign:
C&I loans	(1,499		)	(1,951		)	(3,450		)
CRE construction loans	288			61			349
CRE loans	2,593			(1,490		)	1,103
Residential mortgage loans	(6		)	(1		)	(7		)
SBL	(1		)	2			1
Agency MBS	427			760			1,187
Non-agency CMOs	(282		)	49			(233		)
Cash	268			880			1,148
FHLB stock, FRB stock, and other	1,036			(927		)	109
Total interest-earning banking assets	33,065			3,305			36,370

Interest expense:
Interest-bearing banking liabilities:
Deposits:
Certificates of deposit	104			(233		)	(129		)
Money market, savings and NOW accounts	242			1,273			1,515
FHLB advances and other	44			4,034			4,078
Total interest-bearing banking liabilities	390			5,074			5,464
Change in net interest income	$	32,675		$	(1,769	)	$	30,906

Index

Results of Operations – Other

The following table presents consolidated financial information for the Other segment for the periods indicated:



	Three months ended March 31,								Six months ended March 31,
	2016			% change		2015			2016			% change		2015
	($ in thousands)
Revenues:
Interest income	$	3,476		—		$	3,460		$	6,237		(6	)%	$	6,618
Investment advisory fees	89			(70	)%	292			594			1	%	586
Other	6,307			(55	)%	14,054			7,441			(63	)%	20,368
Total revenues	9,872			(45	)%	17,806			14,272			(48	)%	27,572

Interest expense	(19,501		)	—		(19,504		)	(38,679		)	(1	)%	(38,882		)
Net revenues	(9,629		)	(467	)%	(1,698		)	(24,407		)	(116	)%	(11,310		)

Non-interest expenses:
Compensation and other	13,426			23	%	10,878			20,925			3	%	20,218
Acquisition-related expenses	6,015			100	%	—			7,887			100	%	—
Total non-interest expenses	19,441			79		10,878			28,812			43	%	20,218
Loss before taxes and including noncontrolling interests	(29,070		)	(131	)%	(12,576		)	(53,219		)	(69	)%	(31,528		)
Noncontrolling interests	388					5,731			1,440					8,420
Pre-tax loss excluding noncontrolling interests	$	(29,458	)	(61	)%	$	(18,307	)	$	(54,659	)	(37	)%	$	(39,948	)

This segment includes our principal capital and private equity activities as well as certain corporate overhead costs of RJF including the interest cost on our public debt, and the acquisition costs associated with our material acquisitions including, for the current period, non-recurring acquisition costs associated with our pending acquisition of Deutsche WM (see Note 3 of the Notes to Condensed Consolidated Financial Statements in this Form 10-Q for additional information).

Quarter ended March 31, 2016 compared with the quarter ended March 31, 2015 – Other

The pre-tax loss generated by this segment increased by approximately $11 million , or 61% .

Net revenues in this segment decreased $8 million , most of which is comprised of a decrease in our other revenues of $8 million, or 55% . Other revenues include gains (both realized and unrealized) on our private equity portfolio, which decreased $13 million compared to the prior year period. This decrease in other revenues was offset by a $5 million increase resulting from net changes in foreign currency translation gains/losses in the respective periods. The current period includes a $2 million foreign currency exchange gain, primarily resulting from the translation of certain balances denominated in Canadian currency. The prior year period included a $3 million foreign currency exchange loss associated with such balances.

The acquisition-related expenses (including legal and travel-related expense) in the current period pertain to certain incremental expenses incurred in connection with the future acquisition of Deutsche WM. See Note 3 of the Notes to Condensed Consolidated Financial Statements in this Form 10-Q for information regarding the components of these expenses.

The portion of revenue attributable to noncontrolling interests decreased $5 million , as the decrease in gains generated in our private equity portfolio results in lower amounts of such gains that are attributable to others.

Six months ended March 31, 2016 compared with the six months ended March 31, 2015 – Other

The pre-tax loss generated by this segment increased by approximately $15 million , or 37% .

Net revenues in this segment decreased $13 million , or 116% , most of which is comprised of a decrease in our other revenues of $13 million, or 63% . Other revenues include gains (both realized and unrealized) on our private equity portfolio, which decreased $17 million compared to the prior year period. This decrease in other revenues was offset by a $5 million increase resulting from

Index

net changes in foreign currency translation gains/losses in the respective periods. The current period includes a $1 million foreign currency exchange gain primarily resulting from the translation of certain balances denominated in Canadian currency. The prior year period included a $4 million foreign currency exchange loss associated with such balances.

The acquisition-related expenses (including legal and travel-related expense) in the current period pertain to certain incremental expenses incurred in the current period in connection with the future acquisition of Deutsche WM. See Note 3 of the Notes to Condensed Consolidated Financial Statements in this Form 10-Q for information regarding the components of these expenses.

The portion of revenue attributable to noncontrolling interests decreased $7 million , as the decrease in gains generated in our private equity portfolio result in lower amounts of such gains that are attributable to others.

Certain statistical disclosures by bank holding companies

As a financial holding company, we are required to provide certain statistical disclosures by bank holding companies pursuant to the Securities and Exchange Commission’s Industry Guide 3. Certain of those disclosures are as follows for the periods indicated:



	For the three months ended March 31,		For the six months ended March 31,
	2016	2015	2016	2015

RJF return on assets ⁽¹⁾	1.8%	1.8%	1.7%	2.0%
RJF return on equity ⁽²⁾	10.8%	10.5%	10.1%	11.3%
Equity to assets ⁽³⁾	17.9%	18.7%	17.8%	18.8%
Dividend payout ratio ⁽⁴⁾	23.0%	23.4%	25.0%	22.0%


(1)	Computed as net income attributable to RJF for the period indicated, divided by average assets (the sum of total assets at the beginning and end of the period, divided by two) the product of which is then annualized.

(2)

Computed by utilizing the net income attributable to RJF for the period indicated, divided by the average equity attributable to RJF (for the quarter, computed by adding the total equity attributable to RJF as of the date indicated plus the prior quarter-end total, divided by two and for the year-to-date period, computed by adding the total equity attributable to RJF as of each quarter-end date during the indicated year-to-date period, plus the beginning of the year total, divided by three). The result is then annualized.


(3)	Computed as average equity (the sum of total equity at the beginning and end of the period, divided by two), divided by average assets (the sum of total assets at the beginning and end of the period, divided by two).


(4)	Computed as dividends declared per common share during the period as a percentage of diluted earnings per common share.

Refer to the RJ Bank section of this MD&A, various sections within Item 3 of this report, and the Notes to Condensed Consolidated Financial Statements in this Form 10-Q, for the other required disclosures.

Liquidity and Capital Resources

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

Senior management establishes our liquidity and capital policies. These policies include senior management’s review of short- and long-term cash flow forecasts, review of monthly capital expenditures, the monitoring of the availability of alternative sources of financing, and the 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 as well as maintains our relationships with various lenders. The objectives of these policies are to support the successful execution of our business strategies while ensuring ongoing and sufficient liquidity.

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

Cash used in operating activities during the six months ended March 31, 2016 was $68 million . Cash generated by successful operating results over the period resulted in a $339 million increase in cash. Significant changes in various other asset and liability balances which impact cash include: a $633 million increase in brokerage client payables as many clients have reacted to

Index

uncertainties in the equity markets during by increasing the cash balances in their brokerage accounts, which also results in an increase in assets segregated pursuant to regulations described below; and an increase in stock loaned, net of stock borrowed, of $133 million , which result in increases in cash. Offsetting these activities, decreases in cash resulted from the following activities: a $709 million increase in assets segregated pursuant to regulations and other segregated assets, primarily resulting from the increase in client cash balances previously described, resulted in a use of cash; we used $169 million in operating cash as the accrued compensation, commissions and benefits decreased, primarily resulting from the annual payment of certain incentive awards; a $142 million decrease in brokerage client receivables and other accounts receivable; in support of our strong recruiting results we used $71 million in cash to fund loans provided to financial advisors, net of repayments; and purchases and originations of loans held for sale, net of proceeds from sales and securitizations, resulted in a $63 million decrease in operating cash. All other components of operating activities combined to net a $19 million use of cash.

Investing activities resulted in the use of $1.60 billion of cash during the six months ended March 31, 2016 . The primary investing activity was the use of $1.43 billion in cash to fund an increase in bank loans. We used $61 million to fund other investments. We used $43 million to fund additional available for sale investments held at RJ Bank, net of proceeds from maturations and repayments within the portfolio. We used $58 million to fund equipment investments, predominately investments in information systems. All other components of investing activities combined to net a $16 million use of cash.

Financing activities provided $561 million of cash during the six months ended March 31, 2016 . Increases in cash resulted from: increases in RJ Bank deposit balances provided $810 million ; proceeds from the exercise of stock options and employee stock purchases provided $31 million ; proceeds from FHLB borrowings resulted in $25 million . Partially offsetting the increases, decreases in cash resulted from: a decrease in our short-term borrowings of $115 million ; our repurchase of RJF shares used $159 million , including $144.5 million used for repurchases pursuant to a share repurchase authorization (see Part II - Item 2 in this Form 10-Q, for additional information on our share repurchases); the payment of dividends to our shareholders used $56 million . All other components of financing activities combined to net a $25 million source of cash.

The effect of currency exchange rates on our cash balances has resulted in an $11 million decrease in our U. S. dollar denominated cash balance during the six months ended March 31, 2016 . This effect is primarily attributable to cash balances we have that are denominated in Canadian currency. While the Canadian dollar to U.S. dollar exchange rate increased 3.5% since September 30, 2015, which has a favorable impact on this measure, the amount of our cash balance denominated in Canadian currency has also increased, the effect of which more than offsets the favorable impact of the change in exchange rates.

We believe our existing assets, most of which are liquid in nature, together with funds generated from operations and committed and uncommitted financing facilities, should provide adequate funds for continuing operations at current levels of activity.

Sources of Liquidity

Approximately $929 million of our total March 31, 2016 cash and cash equivalents (most of which resides in a deposit account at RJ Bank) was available to us without restrictions. The cash and cash equivalents held were as follows:



Cash and cash equivalents:	March 31, 2016
	(in thousands)
RJF	$	964,291		^{(1) (2)}
RJ&A	175,650			⁽²⁾
RJ Bank	754,224			⁽³⁾
RJ Ltd.	247,733
RJFS	112,447
RJFSA	54,225
Other subsidiaries	100,811
Less: Consolidating eliminations	(929,595		)	⁽¹⁾
Total cash and cash equivalents	$	1,479,786


(1)	RJF maintains a depository account at RJ Bank which has a balance of $930 million as of March 31, 2016 , which is eliminated in consolidation.


(2)	RJF has loaned $162 million to RJ&A as of March 31, 2016 (such amount is included in the RJ&A cash balance presented in this table), which RJ&A has invested on behalf of RJF in cash and cash equivalents or otherwise deployed in its normal business activities.


(3)	RJ Bank’s cash balance as of March 31, 2016 is less than RJF’s deposit balance (see footnote (1) to the this table above). Were RJF to have demanded its entire cash balance from RJ Bank on such date, RJ Bank would have had to take one or more of several available actions to generate the additional cash required to fund such a request.

Index

In addition to the cash balances described above, we have other various potential sources of liquidity which are described as follows.

Liquidity Available from Subsidiaries

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

RJ&A is required to maintain net capital equal to the greater of $1 million or 2% of aggregate debit balances arising from client transactions. Covenants in RJ&A’s committed secured financing facilities require its net capital to be a minimum of 10% of aggregate debit items. At March 31, 2016 , RJ&A significantly exceeded both the minimum regulatory and its financing covenants net capital requirements. At that date, RJ&A had excess net capital of approximately $348 million , of which approximately $116 million is available for dividend while still maintaining the internally-imposed minimum net capital ratio of 15% of aggregate debit items. There are also limitations on the amount of dividends that may be declared by a broker-dealer without Financial Industry Regulatory Authority (“FINRA”) approval.

RJ Bank may pay dividends to the parent company without the prior approval of its regulator as long as the cumulative dividends do not exceed the sum of RJ Bank’s current calendar year and the previous two calendar years’ retained net income, and RJ Bank maintains its targeted capital to risk-weighted assets ratios. At March 31, 2016 , RJ Bank had approximately $183 million of capital in excess of the amount it would need at March 31, 2016 to maintain its targeted total capital to risk-weighted assets ratio of 12.5%.

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

Borrowings and Financing Arrangements

The following table presents our financing arrangements with third party lenders that we generally utilize to finance a portion of our fixed income securities trading instruments held, and the outstanding balances related thereto, as of March 31, 2016 :



	As of March 31, 2016
	RJ&A ⁽³⁾		RJ Ltd.			RJF		Total		Total number of counterparties
	($ in thousands)
Financing arrangement:
Committed secured ⁽¹⁾	$	300,000	$	—		$	—	$	300,000	3
Committed unsecured	—		—			300,000		300,000		1
Uncommitted secured ⁽¹⁾⁽²⁾	2,400,000		34,800		⁽⁴⁾	—		2,434,800		10
Uncommitted unsecured ⁽¹⁾⁽²⁾	375,000		—			50,000		425,000		7
Total financing arrangements	$	3,075,000	$	34,800		$	350,000	$	3,459,800	21

Outstanding borrowing amount:
Committed secured ⁽¹⁾	$	—	$	—		$	—	$	—
Committed unsecured	—		—			—		—
Uncommitted secured ⁽¹⁾⁽²⁾	182,678		—			—		182,678
Uncommitted unsecured ⁽¹⁾⁽²⁾	—		—			—		—
Total outstanding borrowing amount	$	182,678	$	—		$	—	$	182,678


(1)	Our ability to borrow is dependent upon compliance with the conditions in the various committed loan agreements and collateral eligibility requirements.


(2)	Lenders are under no contractual obligation to lend to us under uncommitted credit facilities.


(3)	We generally utilize the RJ&A facilities to finance a portion of our fixed income securities trading instruments.


(4)	This financing arrangement is primarily denominated in Canadian currency, amounts presented in the table have been converted to U.S. dollars at the currency exchange rate in effect as of March 31, 2016 .

The committed financing arrangements are in the form of either tri-party repurchase agreements or secured lines of credit. The uncommitted financing arrangements are in the form of secured lines of credit, secured bilateral or tri-party repurchase agreements, or unsecured lines of credit.

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We maintain three unsecured settlement lines of credit available to our Argentine joint venture in the aggregate amount of $10 million. Of the aggregate amount, one settlement line for $9 million is guaranteed by RJF. Borrowings outstanding on these lines of credit as of March 31, 2016 amounted to approximately $200 thousand.

RJ Bank had $575 million in FHLB borrowings outstanding at March 31, 2016 , comprised of two floating-rate advances totaling $550 million and a $25 million fixed-rate advance, all of which are secured by a blanket lien on RJ Bank’s residential loan portfolio (see Note 12 of the Notes to Condensed Consolidated Financial Statements in this Form 10-Q for additional information regarding these borrowings). RJ Bank has an additional $1 billion in immediate credit available from the FHLB as of March 31, 2016 and total available credit of 30% of total assets, with the pledge of additional collateral to the FHLB.

RJ Bank is eligible to participate in the Board of Governors of the Federal Reserve System (the “Fed”) discount-window program; however, RJ Bank does not view borrowings from the Fed as a primary source of funding. The credit available in this program is subject to periodic review, may be terminated or reduced at the discretion of the Fed, and would be secured by pledged C&I loans.

From time to time we purchase short-term securities under agreements to resell (“Reverse Repurchase Agreements”) and sell securities under agreements to repurchase (“Repurchase Agreements”). We account for each of these types of transactions as collateralized financings with the outstanding balances on the Repurchase Agreements included in securities sold under agreements to repurchase. At March 31, 2016 , collateralized financings outstanding in the amount of $191 million are included in securities sold under agreements to repurchase on the Condensed Consolidated Statements of Financial Condition. Of this total, outstanding balances on the uncommitted Repurchase Agreements (which are reflected in the table of domestic financing arrangements above) were $183 million as of March 31, 2016 . Such financings are generally collateralized by non-customer, RJ&A owned securities. The required market value of the collateral associated with the committed secured facilities ranges from 102% to 140% of the amount financed.

The average daily balance outstanding during the five most recent successive quarters, the maximum month-end balance outstanding during the quarter and the period end balances for Repurchase Agreements and Reverse Repurchase Agreements of RJF are as follows:



	Repurchase transactions						Reverse repurchase transactions
For the quarter ended:	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
	(in thousands)
March 31, 2016	$	268,150	$	266,761	$	190,679	$	419,112	$	471,925	$	428,864
December 31, 2015	270,586		247,730		245,554		423,059		415,346		405,507
September 30, 2015	280,934		332,536		332,536		432,131		498,871		474,144
June 30, 2015	233,451		255,870		251,769		425,342		445,591		416,516
March 31, 2015	253,328		351,168		277,383		446,965		537,919		469,503

At March 31, 2016 , in addition to the financing arrangements described above, we had $36 million outstanding on a mortgage loan for our St. Petersburg, Florida home-office complex, that we include in other borrowings on our Condensed Consolidated Statements of Financial Condition.

At March 31, 2016 , we have senior notes payable of $1.15 billion . The balance is comprised of $350 million outstanding on our 6.90% senior notes due 2042, $249 million outstanding on our 5.625% senior notes due 2024, $300 million outstanding on our 8.60% senior notes due August 2019, and $250 million outstanding on our 4.25% senior notes due April 2016 (subsequently repaid upon maturity on April 15, 2016).

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Our current senior long-term debt ratings are:



Rating Agency	Rating	Outlook
Standard & Poor’s Ratings Services (“S&P”)	BBB ⁽¹⁾	Positive ⁽¹⁾
Moody’s Investors Service (“Moody’s”)	Baa2 ⁽²⁾	Positive ⁽²⁾


(1)	The S&P rating and outlook are as presented in their December, 2015 report.


(2)	The Moody’s rating and outlook are as presented in their December, 2015 report.

Our current long-term debt ratings depend upon a number of factors including industry dynamics, operating and economic environment, operating results, operating margins, earnings trends and volatility, balance sheet composition, liquidity and liquidity management, our capital structure, our overall risk management, business diversification and our market share, and competitive position in the markets in which we operate. Deteriorations in any of these factors could impact our credit ratings. Any rating downgrades could increase our costs in the event we were to pursue obtaining 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 13 of our Notes to Condensed Consolidated Financial Statements in this Form 10-Q for additional information). A credit downgrade could create a reputational issue and could also result in certain counterparties limiting their business with us, result in negative comments by analysts and potentially impact investor perception of us, and resultantly impact our stock price and/or our clients’ perception of us. A credit downgrade would result in RJF incurring a higher commitment fee on any unused balance on one of its borrowing arrangements, the $300 million revolving 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 would have a favorable impact on the commitment fee as well as the interest rate applicable to any borrowings on such line. None of our credit agreements contain a condition or event of default related to our credit ratings.

Other sources of liquidity

We own life insurance policies which are utilized to fund certain non-qualified deferred compensation plans and other employee benefit plans. The policies which we could readily borrow against have a cash surrender value of approximately $291 million as of March 31, 2016 and we are able to borrow up to 90%, or $262 million of the March 31, 2016 total, without restriction. To effect any such borrowing, the underlying investments would be converted to money-market investments. Thus, a portion of any such borrowings could require us to take market risks as a component of our cost associated with the borrowing. There are no borrowings outstanding against any of these policies as of March 31, 2016 .

On May 22, 2015 we filed a “universal” shelf registration statement with the SEC to be in a position to access the capital markets if and when necessary or perceived by us to be opportune.

See the “contractual obligations” section below for information regarding our contractual obligations.

Potential impact of Morgan Keegan matters subject to indemnification by Regions on our liquidity

As more fully described in Note 21 on page 171 of our 2015 Form 10-K, on January 11, 2012, RJF entered into a Stock Purchase Agreement (“SPA”) to acquire all of the issued and outstanding shares of Morgan Keegan from Regions. On April 2, 2012, we completed the purchase transaction. Under the terms of the SPA, in addition to customary indemnity for breaches of representations and warranties and covenants, the SPA also provides that Regions will indemnify RJF for losses incurred in connection with any litigation or similar matter related to pre-closing activities. For matters that are received within three years from the closing date, or through April 2, 2015, the indemnifications survive until such matters are resolved. As a result of these indemnifications and after consideration of the expiration of certain of these indemnification provisions, we do not anticipate the resolution of any pre-MK Closing Date Morgan Keegan litigation matters to negatively impact our liquidity (see Note 16 of the Notes to Condensed Consolidated Financial Statements, and Part II Item 1 - Legal Proceedings, in this Form 10-Q for further information regarding the indemnifications and the nature of the pre-MK Closing Date matters).

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Impact on our liquidity from the scheduled maturity of senior notes payable

One of our senior note issuances, the 4.25% senior notes with an aggregate principal amount of $250 million, matured in April 2016 and was repaid in full from our existing liquidity.

Potential impact on our liquidity from an acquisition of Deutsche WM

On December 3, 2015, we entered into a definitive asset purchase agreement to acquire the U.S. Private Client Services unit of Deutsche Bank Wealth Management (see Note 3 of the Notes to Condensed Consolidated Financial Statements in this Form 10-Q for additional information). We expect the closing date of this purchase transaction to occur during the fourth quarter of this fiscal year. The total investment associated with this transaction will depend upon how many of the current Deutsche WM financial advisors join us on the closing date, and is subject to further adjustment depending on financial advisor retention through periods as late as March 2017. Based upon the number of Deutsche WM financial advisors as of December 3, 2015, our total investment including retention incentives provided directly to financial advisors would approximate $420 million. At the present time, we have the ability to utilize our cash on-hand as of the closing date to fund the purchase obligation and retention incentives.

Statement of financial condition analysis

The assets on our condensed consolidated statement of financial condition consist primarily of cash and cash equivalents (a large portion of which is segregated for the benefit of clients), receivables including bank loans, financial instruments held for either trading purposes or as investments, and other assets. A significant portion of our assets are liquid in nature, providing us with flexibility in financing our business.

Total assets of $27.8 billion at March 31, 2016 are approximately $1.27 billion , or 5% greater than our total assets as of September 30, 2015 . Net bank loans receivable increased $1.36 billion primarily due to the growth of RJ Bank’s corporate loan portfolio during the current period. Additionally, assets segregated pursuant to federal regulations (for the benefit of our clients) increased $709 million , corresponding with an increase in our brokerage client payable balances discussed in the following paragraph. Our inventories of trading instruments increased $109 million in support of increased activity levels in fixed income securities, which represents the largest component of our inventory balances. Offsetting the increases in assets, our cash and cash equivalents balance decreased $1.12 billion , refer to the discussion of the components of this decrease in the “Liquidity and Capital Resources” section within this Item 2.

As of March 31, 2016 , our liabilities of $22.9 billion were $1.18 billion , or 5% more than our liabilities as of September 30, 2015 . The increase in liabilities at March 31, 2016 compared to September 30, 2015 is primarily due to a $810 million increase in bank deposit liabilities as RJ Bank retained a higher portion of RJBDP balances to in part, fund a portion of their net loan growth. Payables to broker-dealers and clearing organizations have increased $412 million , primarily resulting from our Canadian operations where an institutional client placed large trades, approximating $260 million, which settled in April. Brokerage client payable balances increased $360 million , reflecting an increase in client cash balances as many clients have reacted to uncertainties in the equity markets since September 30, 2015 by increasing the cash balances in their brokerage accounts. Stock loaned balances have increased $132 million providing a financing source other than borrowings on lines of credit. Offsetting these increases, accrued compensation, commissions and benefits decreased by $169 million , primarily resulting from the annual payment of certain incentive compensation. Trade and other accounts payable have decreased $165 million . Other borrowings decreased by $92 million , and securities sold under agreements to repurchase decreased $142 million , both of these are indicative of decreases in our short-term borrowings outstanding.

Contractual obligations

As of March 31, 2016 and since September 30, 2015 , there have been no material changes in our contractual obligations presented on page 68 of our 2015 Form 10-K, other than in the ordinary course of business. See Note 16 of the Notes to Condensed Consolidated Financial Statements in this Form 10-Q, for additional information regarding certain commitments as of March 31, 2016 .

Regulatory

The following discussion should be read in conjunction with the description of the regulatory framework applicable to the financial services industry and relevant to us as described in the Regulation section of Item 1 on pages 10 - 14 of our 2015 Form 10-K, and the Regulatory section on pages 69 - 70 of our 2015 Form 10-K.

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In July 2013, the Office of the Comptroller of the Currency (“OCC”), the Fed, and the FDIC released final United States Basel III regulatory capital rules implementing the global regulatory capital reforms of Basel III and certain changes required by the Dodd-Frank Act. The rule became effective for RJF on January 1, 2015, subject to a phase-in period for several aspects of the rule, including the new minimum capital ratio requirements, the capital conservation buffer, and certain regulatory capital adjustments and deductions. Effective January 1, 2016, new rules governing a capital conservation buffer became effective for both RJF and RJ Bank. See Note 20 of the Notes to Condensed Consolidated Financial Statements in this Form 10-Q for information regarding RJF and RJ Bank regulatory capital levels and ratios, including information regarding the capital conservation buffer.

Under the provisions of the legislation known as the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”), Congress adopted the “Volcker Rule,” which generally prohibits, subject to exceptions, insured depository institutions, bank holding companies and their affiliates (together, “Banking Entities”) from engaging in “proprietary trading” or acquiring or retaining an ownership interest in a hedge fund or private equity fund (“covered funds”). In December 2013, the Commodity Futures Trading Commission (the “CFTC”), the OCC, the Fed, the FDIC, and the SEC adopted a final version of the Volcker Rule. Certain elements of the final rule provide for phasing-in over time. However, based upon our latest analysis and understandings of these regulations, we do not anticipate that the Volcker Rule will have a material impact on our results of operations.

We currently maintain a number of private equity investments, some of which meet the definition of “covered funds” and therefore are subject to certain limitations under the covered funds provisions of the Volcker Rule. The amount of future investments of this nature that we may make may be limited in order to maintain compliance levels specified by the Volcker Rule. Further, subsequent interpretations of what constitutes “covered funds” under the Volcker Rule may adversely impact our operations. The extension of the conformance deadline provides us additional time to realize the value of many of our investments in their due course and assess what we expect to remain in our portfolio at the conformance deadline in the context of the new regulations and execute appropriate strategies to be in conformance with the Volcker Rule at such time.

Other than the preceding paragraphs, there are no additional updates to any of the other applicable aspects of the Dodd-Frank Act, which are described on pages 11 - 13 of our 2015 Form 10-K.

RJ&A, RJFS, Eagle Fund Distributors, Inc. and Raymond James (USA) Ltd. all had net capital in excess of regulatory requirements as of March 31, 2016 .

RJ Ltd. is subject to the Minimum Capital Rule (Dealer Member Rule No. 17 of the Investment Industry Regulatory Organization of Canada (“IIROC”)). See the discussion in Note 26 on page 183 of our 2015 Form 10-K where these rules are described. RJ Ltd. is not, and has not been, in Early Warning Level 1 or Level 2 as of or during the six months ended March 31, 2016 .

RJF and RJ Bank are subject to various regulatory and capital requirements. RJF and RJ Bank met the requirements to be categorized as “well capitalized” as of March 31, 2016 . One of RJ Bank’s U.S. subsidiaries is an agreement corporation and is subject to regulation by the Fed. As of March 31, 2016 , this RJ Bank subsidiary met the capital adequacy guideline requirements.

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

Critical accounting estimates

The condensed consolidated financial statements are prepared in accordance with GAAP, which require us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the reported amounts of revenues and expenses during any reporting period in our condensed consolidated financial statements. For a description of our accounting policies, see Note 2 of the Notes to the Consolidated Financial Statements on pages 103 - 121 of our 2015 Form 10-K, as well as Note 2 of the Notes to Condensed Consolidated Financial Statements in this Form 10-Q.

We believe that of our significant accounting estimates and assumptions, those described below involve a high degree of judgment and complexity. Due to their nature, estimates involve judgment based upon available information. Actual results or

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amounts could differ from estimates and the difference could have a material impact on the condensed consolidated financial statements. Therefore, understanding these critical accounting estimates is important in understanding the reported results of our operations and our financial position.

Valuation of financial instruments, investments and other assets

The use of fair value to measure financial instruments, with related gains or losses recognized in our Condensed Consolidated Statements of Income and Comprehensive Income, is fundamental to our financial statements and our risk management processes. See Note 2 on pages 105 - 110 of our 2015 Form 10-K for a discussion of our fair value accounting policies regarding financial instruments owned and financial instruments sold but not yet purchased. Since September 30, 2015, we have not implemented any material changes in the accounting policies described therein during the period covered by this report.

“Trading instruments” and “available for sale securities” are reflected in the Condensed Consolidated Statements of Financial Condition at fair value or amounts that approximate fair value. Unrealized gains and losses related to these financial instruments are reflected in our net income or our total comprehensive income, depending on the underlying purpose of the instrument.

As of March 31, 2016 , 8.2% of our total assets and 3.2% of our total liabilities are instruments measured at fair value on a recurring basis.

Financial instruments measured at fair value on a recurring basis categorized as Level 3 amount to $350 million as of March 31, 2016 and represent 15.4% of our assets measured at fair value. Our private equity investments comprise $204 million , or 58% , and our ARS positions comprise $128 million , or 37% , of the Level 3 assets as of March 31, 2016 , respectively. Level 3 assets represent 7% of total equity as of March 31, 2016 .

Financial instruments which are liabilities categorized as Level 3 amount to less than $100 thousand as of March 31, 2016 and represent less than 1% of liabilities measured at fair value.

See Notes 5 , 6 , 7 and 13 of the Notes to Condensed Consolidated Financial Statements in this Form 10-Q for additional information on our financial instruments.

Goodwill impairment

Goodwill, under GAAP, must be allocated to reporting units and tested for impairment at least annually. The annual goodwill impairment testing involves the application of significant management judgment, especially when estimating the fair value of its reporting units. For a discussion of our goodwill accounting policies, see Note 2 on pages 116 - 117 of our 2015 Form 10-K.

We perform goodwill testing on an annual basis or when an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying value. We have elected December 31 as our annual goodwill impairment evaluation date. During the quarter ended March 31, 2016 we performed a qualitative impairment assessment for certain of our reporting units and a quantitative impairment assessment for our two RJ Ltd. reporting units operating in Canada.

For each reporting unit that we performed qualitative assessments, we determined whether it is more likely than not that the carrying value of such reporting unit, including the recorded goodwill, is in excess of the fair value of the reporting unit. In any instance in which we are unable to qualitatively conclude that it is more likely than not that the fair value of the reporting unit exceeds the reporting unit carrying value including goodwill, a quantitative analysis of the fair value of the reporting unit would be performed. Based upon the outcome of our qualitative assessments, we determined that no quantitative analysis of the fair value of any of the reporting units we elected to qualitatively analyze for impairment as of December 31, 2015 was required, and we concluded that none of the goodwill allocated to any of those reporting units as of December 31, 2015 was impaired. No events have occurred since December 31, 2015 that would cause us to update this impairment testing.

In the RJ Ltd. reporting unit testing, we elected to perform quantitative assessments for the two reporting units within RJ Ltd. that include an allocation of goodwill. Although GAAP provides the option to perform a qualitative analysis which may result in a conclusion that no quantitative analysis of the reporting unit equity value is required, for this years annual goodwill testing of our two RJ Ltd. reporting units, we elected to perform a quantitative analysis. In these analyses, we make significant assumptions and estimates about the extent and timing of future cash flows and discount rates, as well as utilize data from peer group companies to assess the equity value of each RJ Ltd. reporting unit. Based upon the outcome of our quantitative assessments, we concluded there was no impairment of goodwill. The fair value of the equity of the RJ Ltd. PCG reporting unit was substantially in excess of its book carrying value, which includes goodwill. However, primarily as a result of the unfavorable impacts of the prolonged commodity recession in Canada on our business, most specifically impacting the natural resources sector of that economy, the fair

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value of the equity of the RJ Ltd. ECM reporting unit is not substantially in excess of its book carrying value, which includes goodwill. The RJ Ltd. ECM reporting unit goodwill balance was $16.9 million as of December 31, 2015, and we estimate that the excess of the fair value of the reporting unit over its carrying value including goodwill approximates 10%. Should the equity market conditions in Canada fail to improve, or we otherwise fail to perform as we have projected, an impairment charge of some portion, or perhaps all, of such goodwill could occur. Refer to Note 10 in our Notes to Condensed Consolidated Financial Statements in this Form 10-Q for a discussion of the valuation methodologies and a summary of the key assumptions we applied in determining the fair value of our two RJ Ltd. reporting units.

No events have occurred since December 31, 2015 that would cause us to update this impairment testing.

Loss provisions

Refer to the discussion of loss provisions in Item 7 on page 75 of our 2015 Form 10-K.

RJ Bank provides an allowance for loan losses which reflects our continuing evaluation of the probable losses inherent in the loan portfolio. See the discussion regarding RJ Bank’s methodology in estimating its allowance for loan losses in Item 7A - Credit Risk, on pages 84 - 92 of our 2015 Form 10-K.

At March 31, 2016 , the amortized cost of all RJ Bank loans was $14.5 billion and an allowance for loan losses of $194 million was recorded against that balance. The total allowance for loan losses is equal to 1.35% of the amortized cost of the loan portfolio.

RJ Bank’s process of evaluating its probable loan losses includes a complex analysis of several quantitative and qualitative factors, requiring a substantial amount of judgment. Due to the uncertainty associated with this subjectivity, our underlying assumptions and judgments could prove to be inaccurate, and the allowance for loan losses could then be insufficient to cover actual losses. In such an event, any losses would result in a decrease in our net income as well as a decrease in the level of regulatory capital at RJ Bank.

The provision for loan losses in the current year includes a provision resulting from an increase in the qualitative reserve related to loans in the energy sector.

Income taxes

For a description of the significant assumptions, judgments and interpretations associated with the accounting for income taxes, see the income taxes section of Item 7 on pages 75 - 76 of our 2015 Form 10-K.

Legal matter and regulatory proceeding liabilities

We recognize liabilities for contingencies when there is an exposure that, when fully analyzed, indicates it is both probable that a liability has been incurred and the amount of loss can be reasonably estimated. Whether a loss is probable, and if so, the estimated range of possible loss, is based upon currently available information and is subject to significant judgment, a variety of assumptions, and uncertainties. When a range of possible loss can be estimated, we accrue the most likely amount within that range; if the most likely amount of possible loss within that range is not determinable, we accrue a minimum based on the range of possible loss. No liability is recognized for those matters which, in managements judgment, the determination of a reasonable estimate of loss is not possible.

The determination of recorded liability amounts related to legal matters and regulatory proceedings requires significant judgment on the part of management. Management considers many factors including, but not limited to: the amount of the claim; the amount of the loss in the client’s account; the basis and validity of the claim; the possibility of wrongdoing on the part of one of our employees or financial advisors; previous results in similar cases; and legal precedents and case law. Each legal proceeding or significant regulatory matter is reviewed with counsel in each accounting period and the liability balance is adjusted as deemed appropriate by management. Any change in the liability amount is recorded in the consolidated financial statements and is recognized as either a charge, or a credit, to net income in that period. The actual costs of resolving legal matters or regulatory proceedings may be substantially higher or lower than the recorded liability amount for such matters. We expense our cost of defense related to such matters in the period they are incurred.

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Effects of recently issued accounting standards, and accounting standards not yet adopted

In January 2014, the FASB issued new guidance which allows investors in Low Income Housing Tax Credit programs that meet specified conditions to present the net tax benefits (net of amortization of the cost of the investment) within income tax expense. The cost of the investments that meet the specified conditions will be amortized in proportion to (and over the same period as) the total expected tax benefits, including tax credits and other tax benefits as they are realized on the tax return. This new guidance first became effective for this financial report covering the quarter ending December 31, 2015. Based upon the nature of our investments in LIHTC structures, we do not meet the specified conditions which allow for election of this accounting treatment and thus the adoption of this guidance did not have any direct impact on our financial position or results of operations.

In January 2014, the FASB issued new guidance which clarifies when banks and similar institutions (creditors) should reclassify mortgage loans collateralized by residential real estate properties from the loan portfolio to OREO. This guidance defines when an in-substance repossession or foreclosure has occurred and when a creditor is considered to have received physical possession of residential real estate property collateralizing a consumer mortgage loan. This new guidance first became effective for this financial report covering the quarter ending December 31, 2015. This new guidance had no impact on our financial position and results of operations. Given the nature of our OREO balances as of December 31, 2015, its adoption did not materially impact our OREO disclosures.

In April 2014, the FASB issued new guidance which changes the prior guidance regarding the requirements for reporting discontinued operations. Under the new guidance, a disposal of a component of an entity or a group of components of an entity, are required to be reported in discontinued operations if the disposal represents a strategic shift that has (or will have) a major effect on an entity’s operations and financial results when any of the following occurs: 1) the component of an entity or group of components of an entity meets certain criteria to be classified as held for sale. 2) The component of an entity or group of components of an entity is disposed of by sale. 3) The component of an entity or group of components of an entity is disposed of other than by sale (for example by abandonment or in a distribution to owners in a spinoff). The new guidance requires additional disclosures about discontinued operations that meet the above criteria. This new guidance is first effective for this period ended December 31, 2015. We did not have any disposals of an entity or a group of components of an entity that fall within the scope of this clarifying guidance during such period, and therefore this new guidance did not have any impact on our financial position or results of operations.

In May 2014, the FASB issued new guidance regarding revenue recognition. In August 2015, the FASB amended this new guidance by deferring the initial required implementation date by one year. The new guidance is a comprehensive new revenue recognition model that requires a company to recognize revenue to depict the transfer of goods or services to a customer at an amount that reflects the consideration it expects to receive in exchange for those goods or services. The FASB is expected to amend the guidance as the work of various industry implementation working groups identify implementation issues and FASB provides clarifying guidance in response to such feedback. In March 2016, the FASB issued such a clarifying amendment regarding certain principal versus agent considerations. This new revenue recognition guidance, including clarifications, is first effective for our financial report covering the quarter ending December 31, 2018, early adoption is permitted in certain circumstances. Upon adoption, we may use either a full retrospective or a modified retrospective approach with respect to presentation of comparable periods prior to the effective date, we are still evaluating which transition approach to use. We are continuing our evaluation of the impact the adoption of this new guidance will have on our financial position and results of operations.

In June 2014, the FASB issued amended guidance for the accounting for share-based payments when the terms of an award provide that a performance target could be achieved after the requisite service period. The new guidance requires that a performance target that affects vesting of an award and that could be achieved after the requisite service period be treated as a performance condition. This new guidance is first effective for our interim financial report covering the quarter ending December 31, 2016, early adoption is permitted. We are currently evaluating the impact the adoption of this new guidance will have on our financial position and results of operations.

In August 2014, the FASB issued amended guidance that requires an entity’s management to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the entity’s ability to continue as a going concern. The new guidance: (1) provides for a definition of substantial doubt, (2) requires an evaluation every reporting period including interim periods, (3) provides principles for considering the mitigating effect of management’s plans, (4) requires certain disclosures when substantial doubt is alleviated as a result of consideration of managements plans, (5) requires an express statement and other disclosures when substantial doubt is not alleviated, and (6) requires an assessment for a period of one year after the date that the financial statements are issued (or available to be issued). This new guidance is first effective for our interim financial report covering the quarter ending after December 31, 2016, with early adoption permitted. The adoption of this guidance is not anticipated to have any impact on our consolidated financial statements or related disclosures.

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In November 2014, the FASB issued amended guidance regarding the accounting for hybrid financial instruments (which in this context would apply to any shares of RJF stock that include embedded derivative features such as conversion rights, redemption rights, voting rights, and liquidation and dividend payment preferences) issued in the form of a share. The new guidance clarifies how current GAAP should be interpreted in evaluating the economic characteristics and risks of a host contract in a hybrid financial instrument that is issued in the form of a share. This new guidance is first effective for our interim financial report covering the quarter ending December 31, 2016, early adoption is permitted. The adoption of this guidance is not anticipated to have any impact on our financial position and results of operations.

In January 2015, the FASB issued guidance that eliminates from GAAP the concept of extraordinary items. This new guidance is effective for us for our fiscal year commencing on October 1, 2016, however, early adoption is permitted provided that the guidance is applied from the beginning of the fiscal year of adoption. The adoption of this new guidance could impact certain presentations in our consolidated statements of income, depending upon the nature of future events and circumstances, but would not impact our determinations of net income presented in such statements.

In February 2015, the FASB issued amended guidance to the consolidation model. This amended guidance: 1) eliminates the deferral of the application of the new consolidation model, which had resulted in the application of prior accounting guidance to consolidation determinations of certain investment funds (see Note 2 on page 121 of our 2015 Form 10-K for a discussion of how this deferral is applicable to our Managed Funds). 2) Makes certain changes to the variable interest consolidation model. 3) Makes certain changes to the voting interest consolidation model. This amended guidance is effective for us for our fiscal year commencing on October 1, 2016, however, early adoption is permitted, including adoption in any interim period. The adoption of this new guidance is likely to impact our financial statements in the following manner: 1) will likely change certain historical conclusions that we are the primary beneficiary of certain LIHTC Funds. We currently anticipate that we will deconsolidate each of the non-guaranteed LIHTC Funds we currently consolidate. 2) We will apply this new guidance to our Managed Funds, but do not anticipate that we will conclude that we are the primary beneficiary of such Managed Funds. Accordingly, we believe that our historical practice of not consolidating the Managed Funds will continue after the adoption of this amended guidance. Given that we believe the application of this amended guidance will significantly improve the meaningfulness of our consolidated financial statements, we plan early adoption of this amended guidance in the first reporting period after which we have completed all the necessary analysis and documentation of all our investments that are within the scope of this guidance.

In April 2015, the FASB issued guidance governing the presentation of debt issuance costs in the consolidated financial statements. Under the new guidance, debt issuance costs related to a recognized debt liability are required to be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. This new guidance is effective for us for our fiscal year commencing on October 1, 2016, and early adoption is permitted. In August 2015, the FASB issued additional clarifying guidance indicating that for debt issuance costs related to line-of-credit arrangements, the SEC staff would not object to an entity deferring and presenting debt issuance costs ratably over the term of the line-of-credit arrangement, regardless of whether there are any outstanding borrowings on the line-of-credit arrangement. Although the new guidance is to be applied on a retrospective basis with the transition amount being reported as a change in accounting principle, given the costs and remaining term associated with our debt issuances to-date, we do not expect the adoption of this new guidance to have a material impact on our consolidated financial statements. In fiscal year 2015, we applied the clarified guidance discussed above by deferring and amortizing certain debt issuance costs we incurred associated with a line-of-credit we executed in August 2015.

In April 2015, the FASB issued guidance governing a customer’s accounting for fees paid in a cloud computing arrangement. Under the new guidance, if a cloud computing arrangement includes a software license, then the customer should account for the software license element of the arrangement consistent with the acquisition of other software licenses. If a cloud computing arrangement does not include a software license, the customer should account for the arrangement as a service contract. This new guidance is effective for us for our fiscal year commencing on October 1, 2016, and may be adopted either prospectively, or retrospectively, as of such date. Given that we have a limited number of cloud computing arrangements, we do not expect the adoption of this new guidance to have a material impact on our consolidated financial statements.

In May 2015, the FASB issued guidance governing disclosures for entities who elect to measure the fair value of certain investments in certain entities using the net asset value per share (or its equivalent) practical expedient. Under the new guidance, the requirement to categorize within the fair value hierarchy all investments for which fair value is measured using the net asset value practical expedient is eliminated. Additionally, the new guidance eliminates the requirement to make certain disclosures for all investments that are eligible to be measured at fair value using the net asset value per share practical expedient, rather, those disclosures are limited to investments for which the entity has elected to measure the fair value using that practical expedient. This new guidance is effective for us for our fiscal year commencing on October 1, 2016, and must be applied retrospectively upon adoption. Early adoption is permitted. We utilize the practical expedient in our fair value policies governing certain of our

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investments, most notably certain of our third party private equity investments. The adoption of this new guidance may impact certain of our fair value disclosures, however, it will not have an impact on our financial position.

In June 2015, the FASB issued amended guidance related to technical corrections and improvements. This amended guidance: 1) includes amendments related to differences between the original guidance and the codification. 2) Provides guidance clarification and reference corrections. 3) Streamlines or simplifies the codification through minor structural changes to headings or minor edits of text to improve the usefulness and understandability of the codification. 4) Makes minor improvements to the guidance. The amendments that require transition guidance are effective for our fiscal year commencing on October 1, 2016 and early adoption is permitted. All other amendments will be effective upon issuance of the amended guidance. We do not anticipate that the adoption of this new guidance will have any material impact on our consolidated financial statements.

In September 2015, the FASB issued guidance governing adjustments to the provisional amounts recognized at the acquisition date with a corresponding adjustment to goodwill. Such adjustments are required when new information is obtained about facts and circumstances that existed as of the acquisition date that, if known, would have affected the measurement amounts initially recognized or would have resulted in the recognition of additional assets and liabilities. This new guidance eliminates the requirement to retrospectively account for such adjustments. This new guidance is effective for our fiscal year commencing on October 1, 2016, and early adoption is permitted in certain circumstances. We do not expect the adoption of this new guidance to have a material impact on our consolidated financial statements. Where possible, we plan on adopting this simplifying guidance early. Given that this guidance applies to entity specific transactions and would only become relevant in certain circumstances, we are unable to estimate the impact, if any, this new guidance may have on our financial position.

In November 2015, the FASB issued guidance simplifying the presentation of deferred income taxes on the statement of financial position by eliminating the requirement to separately present current and noncurrent deferred tax liabilities and assets on such statements. Given that we do not present current and noncurrent balances separately on our condensed consolidated statements of financial position, this simplifying guidance will have no impact our condensed consolidated statements of financial position.

In January 2016, the FASB issued guidance related to the accounting for financial instruments. Among its provisions, this new guidance: 1) Requires equity investments (other than those accounted for under the equity method or those that result from the consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income. However, an entity may choose to measure equity investments that do not have readily determinable fair values at cost minus impairment, if any; 2) Simplifies the impairment assessment of equity investments without readily determinable fair values by requiring a qualitative assessment to identify impairment; 3) Eliminates the requirement to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost on the balance sheet; 4) Requires the use of the exit price notion when measuring the fair value of financial instruments for disclosure purposes; 5) Requires an entity to present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk when the entity has elected to measure the liability at fair value in accordance with the fair value option; 6) Requires separate presentation of financial assets and financial liabilities by measurement category and form of financial asset (that is, securities or loans and receivables) on the balance sheet or the accompanying notes to the financial statements; and 7) Clarifies that an entity should evaluate the need for a valuation allowance on a deferred tax asset related to available for sale securities in combination with the entity’s other deferred tax assets. This new guidance is effective for us for our fiscal year commencing on October 1, 2018. Early adoption is generally not permitted. We are evaluating the impact, if any, the adoption of this new guidance will have on our financial position and results of operations.

In February 2016, the FASB issued new guidance related to the accounting for leases. The new guidance requires the recognition of assets and liabilities on the balance sheet related to the rights and obligations created by lease agreements regardless of whether they are classified as finance or operating leases. Consistent with current guidance, the recognition, measurement and presentation of expenses and cash flows arising from a lease will primarily depend upon its classification as a finance or operating lease. The new guidance requires new disclosures to help financial statement users better understand the amount, timing, and cash flows arising from leases. The new guidance is first effective for our financial report covering the quarter ended December 31, 2019, early adoption is permitted. This new guidance will impact our financial position and results of operations, we are evaluating the magnitude of such impact.

In March 2016, the FASB issued new guidance related to derivatives and hedging, specifically the effect of derivative contract novations on existing hedge accounting relationships. The new guidance clarifies that a change in counterparty to a derivative instrument that has been designated as a hedging instrument under the current guidance does not, in and of itself, require re-designation of that hedging relationship provided that all other hedge accounting criteria continue to be met. The new guidance is first effective for our financial report covering the quarter ended December 31, 2017, early adoption is permitted. We are evaluating the impact the adoption of this new guidance will have on our financial position and results of operations.

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In March 2016, the FASB issued new guidance related to derivatives and hedging, specifically contingent put and call options in debt instruments. The new guidance clarifies the requirements for assessing whether contingent call (put) options that can accelerate the payment of principal on debt instruments are clearly and closely related to their debt hosts. An entity performing the assessment is required to assess the embedded call (put) options solely in accordance with the following four-step decision sequence; an entity must consider 1) whether the payoff is adjusted based on changes in an index, 2) whether the payoff is indexed to an underlying other than interest rates or credit risk, 3) whether the debt involves a substantial premium or discount and 4) whether the call (put) option is contingently exercisable. The new guidance is first effective for our financial report covering the quarter ended December 31, 2017, early adoption is permitted. We are evaluating the impact the adoption of this new guidance will have on our financial position and results of operations.

In March 2016, the FASB issued new guidance related to equity method investments and joint ventures. The new guidance eliminates the requirement that when an investment qualifies for use of the equity method as a result of an increase in the level of ownership interest or degree of influence, an investor must adjust the investment, results of operations, and retained earnings retroactively on a step-by-step basis as if the equity method had been in effect during all previous periods that the investment had been held. Additionally, the new guidance requires that the equity method investor add the cost of acquiring the additional interest in the investee to the current basis of the investor’s previously held interest and adopt the equity method of accounting as of the date the investment becomes qualified for equity method accounting and therefore upon qualifying for the equity method of accounting, no retroactive adjustment of the investment is required. The new guidance is first effective for our financial report covering the quarter ended December 31, 2017, early adoption is permitted. Given that this guidance applies to entity specific transactions and would only become relevant in certain circumstances, we are unable to estimate the impact, if any, this new guidance may have on our financial position.

In March 2016, the FASB issued amended guidance related to stock compensation. The amended guidance involves several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. The amended guidance is first effective for our financial report covering the quarter ended December 31, 2017, early adoption is permitted. We are evaluating the impact the adoption of this new guidance will have on our financial position and results of operations.

Off-Balance Sheet arrangements

For information regarding our off-balance sheet arrangements, see Note 21 of the Notes to Condensed Consolidated Financial Statements in this Form 10-Q, and Note 27 on pages 183 - 185 of the Notes to Consolidated Financial Statements in our 2015 Form 10-K.

Effects of inflation

For information regarding the effects of inflation on our business, see the Effects of Inflation section of Item 7 on page 79 of our 2015 Form 10-K.

Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

RISK MANAGEMENT

For a description of our risk management policies, including a discussion of our primary market risk exposures, which include market risk and interest rate risk, as well as a discussion of our equity price risk, foreign exchange risk, credit risk including a discussion of our loan underwriting policies and risk monitoring processes applicable to RJ Bank, liquidity risk, operational risk, and regulatory and legal risk and a discussion of how these exposures are managed, refer to Item 7A on pages 79 - 93 of our 2015 Form 10-K.

Market risk

Market risk is our risk of loss resulting from changes in market prices of our inventory, hedge, interest rate derivative 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 page 79 of our 2015 Form 10-K for a discussion of our market risk including how we manage it.

See Notes 5 , 6 and 7 of the Notes to the Condensed Consolidated Financial Statements in this Form 10-Q for fair value and other information regarding our trading inventories and available for sale securities.

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Interest rate risk

Trading activities

We are exposed to interest rate risk as a result of our trading inventories (primarily comprised of fixed income instruments) in our Capital Markets segment, as well as our RJ Bank operations. See pages 80 - 83 of our 2015 Form 10-K for discussion of how we manage our interest rate risk.

We actively manage the interest rate risk arising from our fixed income trading securities through the use of hedging techniques that involve U.S. Treasury securities and futures contracts, liquid spread products, and swaps.

We monitor daily, the Value-at-Risk (“VaR”) for all of our trading portfolios. VaR is an appropriate statistical technique for estimating potential losses in trading portfolios due to typical adverse market movements over a specified time horizon with a suitable confidence level.

We apply the Fed’s Market Risk Rule (“MRR”) for the purpose of calculating our capital ratios. The MRR, also known as the “Risk-Based Capital Guidelines: Market Risk” rule released by the Fed, OCC and FDIC, requires us to calculate VaR numbers for all of our trading portfolios, including fixed income, equity, foreign exchange, and derivative 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. The 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 excludes fees, commissions, reserves, net interest income, and intraday trading. Based on these daily “ex ante” versus “ex post ” comparisons, we verify that the number of times that regulatory-defined daily trading losses exceed VaR is consistent with our expectations at a 99% confidence level. During the six months ended March 31, 2016 , our regulatory-defined daily loss in our trading portfolios exceeded our predicted VaR once.

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



	Six months ended March 31, 2016						VaR at
	High		Low		Daily Average		March 31, 2016		September 30, 2015
	(in thousands)
Daily VaR	$	2,492	$	619	$	1,348	$	1,440	$	1,173

The modeling of the risk characteristics of trading positions involves a number of assumptions and approximations. While management believes that its assumptions and approximations are reasonable, there is no uniform industry methodology for estimating VaR, and different assumptions or approximations could produce materially different VaR estimates. As a result, VaR statistics are more reliable when used as indicators of risk levels and trends within a firm than as a basis for inferring differences in risk-taking across firms.

Separately, RJF provides additional market risk disclosures to comply with the MRR. The results of the application of this market risk capital rule are available on our website under “Our Company - Financial Reports - Market Risk Rule Disclosure” within 45 days after the end of each of our reporting periods (the information on our website is not incorporated by reference into this report).

Should markets suddenly become more volatile, actual trading losses may exceed VaR results presented on a single day and might accumulate over a longer time horizon, such as a number of consecutive trading days. Accordingly, management applies additional controls including position limits, a daily review of trading results, review of the status of aged inventory, independent controls on pricing, monitoring of concentration risk, and review of issuer ratings, as well as 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.

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As a part of our fixed income public finance operations, RJ&A enters into forward commitments to purchase GNMA or FNMA MBS which are issued on behalf of various state and local housing finance agencies (see the discussion of these activities within “financial instruments owned, financial instruments sold but not purchased and fair value” in Note 2 on page 107 of our 2015 Form 10-K). These activities result in exposure to interest rate risk. In order to hedge the interest rate risk to which RJ&A would otherwise be exposed between the date of the commitment and the date of sale of the MBS, RJ&A enters into TBA security contracts with investors for generic MBS securities at specific rates and prices to be delivered on settlement dates in the future. See Note 16 of the Notes to Condensed Consolidated Financial Statements in this Form 10-Q for additional information regarding these activities and the related balances outstanding as of March 31, 2016 .

Banking operations

RJ Bank maintains an earning asset portfolio that is comprised of C&I loans, tax-exempt loans, SBL, and commercial and residential real estate loans, as well as MBS, CMOs, Small Business Administration loan securitizations and a trading portfolio of corporate loans. Those earning assets are funded by RJ Bank’s obligations to customers (i.e. customer deposits). Based on its current earning asset portfolio, RJ Bank is subject to interest rate risk. The current economic environment has led to an extended period of low market interest rates. As a result, the majority of RJ Bank’s adjustable rate assets and liabilities have experienced a reduction in interest rate yields and costs that reflect these very low market interest rates. During the current period, RJ Bank has focused its interest rate risk analysis on the risk of market interest rates rising. RJ Bank analyzes interest rate risk based on forecasted net interest income, which is the net amount of interest received and interest paid, and the net portfolio valuation, both in a range of interest rate scenarios.

One of the objectives of RJ Bank’s Asset Liability Management Committee is to manage the sensitivity of net interest income to changes in market interest rates. The methods used to measure this sensitivity, including the economic value of equity (“EVE”) are described in Item 7A on page 81 of our 2015 Form 10-K. There were no material changes to these methods during the six months ended March 31, 2016 .

In February 2015, we implemented a hedging strategy using interest rate swaps as a result of RJ Bank’s asset and liability management process described above. For further information regarding this risk management objective, see the discussion of the RJ Bank Interest Hedges in the derivative contracts section of Note 2 of the Notes to Consolidated Financial Statements on page 109 of our 2015 Form 10-K and additional information in Note 12 of the Notes to Condensed Consolidated Financial Statements in this Form 10-Q.

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



Instantaneous changes in rate	Net interest income	Projected change in net interest income
	($ in thousands)
+300	$492,238	2.16%
+200	$493,859	2.49%
+100	$495,073	2.74%
0	$481,850	—
-50	$442,052	(8.26)%

Refer to the Net Interest section of MD&A, in Item 2 of this Form 10-Q, for a discussion and estimate of the potential favorable impact on RJF’s pre-tax income that could result from an increase in short-term interest rates applicable to RJF’s entire operations.

The EVE analysis is a point in time analysis of current interest-earning assets and interest-bearing liabilities, which incorporates all cash flows over their estimated remaining lives, discounted at current rates. The EVE approach is based on a static balance sheet and provides an indicator of future earnings and capital levels as the changes in EVE indicate the anticipated change in the value of future cash flows. RJ Bank monitors sensitivity to changes in EVE utilizing board approved limits. These limits set a risk tolerance to changing interest rates and assist RJ Bank in determining strategies for mitigating this risk as it approaches these limits.

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The following table presents an analysis of RJ Bank’s estimated EVE sensitivity based on instantaneous shifts in interest rates (expressed in basis points) using RJ Bank’s own asset/liability model:



Instantaneous changes in rate		Projected change in EVE

+300		(12.20)%
+200		(6.62)%
+100		(2.05)%
0		—
-50		(7.87)%

The following table shows the contractual maturities of RJ Bank’s loan portfolio at March 31, 2016 , including contractual principal repayments. This table does not, however, include any estimates of prepayments. These prepayments could shorten the average loan lives and cause the actual timing of the loan repayments to differ significantly from those shown in the following table:



	Due in
	One year or less		> One year – five years		> 5 years		Total ⁽¹⁾
	(in thousands)
Loans held for sale	$	—	$	43	$	156,603	$	156,646
Loans held for investment:
C&I loans	159,171		4,698,270		2,425,773		7,283,214
CRE construction loans	31,292		97,423		17,190		145,905
CRE loans	177,539		1,868,460		402,269		2,448,268
Tax-exempt loans	—		—		610,274		610,274
Residential mortgage loans	2,115		7,258		2,208,211		2,217,584
SBL	1,699,636		5,002		37		1,704,675
Total loans held for investment	2,069,753		6,676,413		5,663,754		14,409,920
Total loans	$	2,069,753	$	6,676,456	$	5,820,357	$	14,566,566


(1)	Excludes any net unearned income and deferred expenses.

The following table shows the distribution of the recorded investment of those RJ Bank loans that mature in more than one year between fixed and adjustable interest rate loans at March 31, 2016 :



	Interest rate type
	Fixed		Adjustable			Total ⁽¹⁾
	(in thousands)
Loans held for sale	$	3,500	$	153,146		$	156,646
Loans held for investment:
C&I loans	3,200		7,120,843		⁽²⁾	7,124,043
CRE construction loans	—		114,613		⁽²⁾	114,613
CRE loans	19,675		2,251,054		⁽²⁾	2,270,729
Tax-exempt loans	610,274		—			610,274
Residential mortgage loans	221,935		1,993,534		^{(2) (3)}	2,215,469
SBL	5,039		—			5,039
Total loans held for investment	860,123		11,480,044			12,340,167
Total loans	$	863,623	$	11,633,190		$	12,496,813


(1)	Excludes any net unearned income and deferred expenses.


(2)	Related contractual loan terms may include an interest rate floor 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.


(3)	See the discussion within the “Risk Monitoring process” section of Item 3 in this Form 10-Q, for additional information regarding RJ Bank’s interest-only loan portfolio and related repricing schedule.

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Equity price risk

We are exposed to equity price risk as a consequence of making markets in equity securities and the investment activities of RJ&A. RJ&A’s broker-dealer activities are primarily client-driven, with the objective of meeting clients’ needs while earning a trading profit to compensate for the risk associated with carrying inventory. We attempt to reduce the risk of loss inherent in our inventory of equity securities by monitoring those security positions constantly throughout each day and establishing position limits.

Foreign exchange risk

We are subject to foreign exchange risk due to our investments in foreign subsidiaries as well as transactions denominated in a currency other than the U.S. dollar.

RJ Bank has an investment in a Canadian subsidiary, resulting in foreign exchange risk. To mitigate this risk, RJ Bank utilizes short-term, forward foreign exchange contracts. These derivative agreements are primarily accounted for as net investment hedges in the condensed consolidated financial statements. See Note 13 of the Notes to Condensed Consolidated Financial Statements in this Form 10-Q for further information regarding these derivative contracts.

We have foreign exchange risk in our investment in RJ Ltd., of approximately CDN $265 million at March 31, 2016 , which is not hedged. Foreign exchange gains/losses related to this investment are primarily reflected in other comprehensive income (loss) (“OCI”) on our Condensed Consolidated Statements of Income and Comprehensive Income, see Note 17 of the Notes to Condensed Consolidated Financial Statements in this Form 10-Q for further information regarding all of our components of OCI.

We also have foreign exchange risk associated with our investments in subsidiaries located in the United Kingdom, France, and South America. These investments are not hedged and we do not believe we have material foreign exchange risk either individually, or in the aggregate, pertaining to these subsidiaries.

In addition, we are subject to foreign exchange risk due to our holdings of cash and certain other assets and liabilities, which result from transactions denominated in a currency other than the U.S. dollar. These foreign currency transactions are not hedged and the related gains/losses arising therefrom are reflected in other revenue on our Condensed Consolidated Statements of Income and Comprehensive Income.

Credit risk

Credit risk is the risk of loss due to adverse changes in a borrower’s, issuer’s or counterparty’s ability to meet its financial obligations under contractual or agreed upon terms. The nature and amount of credit risk depends on the type of transaction, the structure and duration of that transaction, and the parties involved. Credit risk is an integral component of the profit assessment of lending and other financing activities. See further discussion of our credit risk on pages 84 - 88 of our 2015 Form 10-K.

RJ Bank has substantial corporate, SBL, and residential mortgage loan portfolios. A significant downturn in the overall economy, deterioration in real estate values or a significant issue within any sector or sectors where RJ Bank has a concentration could result in large provisions for loan losses and/or charge-offs.

Several factors were taken into consideration in evaluating the allowance for loan losses at March 31, 2016 , including the risk profile of the portfolios, net charge-offs during the period, the level of nonperforming loans, and delinquency ratios. RJ Bank also considered the uncertainty related to certain industry sectors and the extent of credit exposure to specific borrowers within the portfolio. RJ Bank stratified the performing residential mortgage loan portfolio based upon updated LTV estimates with higher reserve percentages allocated to the higher LTV loans. Finally, RJ Bank considered current economic conditions that might impact the portfolio. RJ Bank determined the allowance that was required for specific loan grades based on relative risk characteristics of the loan portfolio. On an ongoing basis, RJ Bank evaluates its methods for determining the allowance for each class of loans and makes enhancements it considers appropriate. There was no material change in RJ Bank’s methodology for determining the allowance for loan losses during the six months ended March 31, 2016 .

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Changes in the allowance for loan losses of RJ Bank are as follows:



	Six months ended March 31,
	2016			2015
	($ in thousands)
Allowance for loan losses, beginning of year	$	172,257		$	147,574
Provision for loan losses	23,539			13,302
Charge-offs:
C&I loans	(1,694		)	(238		)
Residential mortgage loans	(916		)	(638		)
Total charge-offs	(2,610		)	(876		)
Recoveries:
C&I loans	—			536
Residential mortgage loans	750			577
SBL	21			14
Total recoveries	771			1,127
Net recoveries/(charge-offs)	(1,839		)	251
Foreign exchange translation adjustment	263			(1,119		)
Allowance for loan losses, end of period	$	194,220		$	160,008
Allowance for loan losses to bank loans outstanding	1.35		%	1.32		%

The primary factors influencing the provision for loan losses during the period as compared to the prior year period includes additional provision expense during the current year related to loans outstanding within the energy sector, the impact of SNC exam results, as well as higher loan growth in the current year. The provision for loan losses during the current quarter included $4 million of provision expense resulting from the impact of the semi-annual SNC review and examination. The prior year quarter did not include any impact from the SNC exam as this review was conducted annually in the prior year and distributed in June. The allowance for loan losses of $194 million as of March 31, 2016 increased as compared to March 31, 2015 due to significant loan portfolio growth over the last 12 months. The allowance for loan losses to total bank loans outstanding was consistent at 1.35% at March 31, 2016 as compared to 1.32% at March 31, 2015 .

The following table presents net loan (charge-offs)/recoveries and the percentage of net loan (charge-offs)/recoveries to the average outstanding loan balances by loan portfolio segment:



	Three months ended March 31,										Six months ended March 31,
	2016					2015					2016					2015
	Net loan (charge-off)/recovery amount			% of avg. outstanding loans		Net loan (charge-off)/recovery amount			% of avg. outstanding loans		Net loan (charge-off)/recovery amount			% of avg. outstanding loans		Net loan (charge-off)/recovery amount			% of avg. outstanding loans
	($ in thousands)
C&I loans	$	(1,427	)	0.08	%	$	536		(0.03	)%	$	(1,694	)	0.05	%	$	298		(0.01	)%
Residential mortgage loans	(109		)	0.02	%	(411		)	0.08	%	(166		)	0.02	%	(61		)	0.01	%
SBL	20			—		6			—		21			—		14			—
Total	$	(1,516	)	0.04	%	$	131		—		$	(1,839	)	0.03	%	$	251		—

The level of charge-off activity is a factor that is considered in evaluating the potential for and severity of future credit losses. Net loan charge-off activity during the current year quarter as compared to the prior year quarter increased $2 million primarily due to the charge-off of C&I loans. Net charge-offs for the current fiscal year were slightly less compared to the prior year, which reflects stable to improving credit characteristics within this loan portfolio.

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The table below presents nonperforming loans and total allowance for loan losses:



	March 31, 2016						September 30, 2015
	Nonperforming loan balance			Allowance for loan losses balance			Nonperforming loan balance			Allowance for loan losses balance
	(in thousands)
Loans held for investment:
C&I loans	$	11,391		$	(137,299	)	$	—		$	(117,623	)
CRE construction loans				(2,553		)	—			(2,707		)
CRE loans	4,497			(32,668		)	4,796			(30,486		)
Tax-exempt loans	—			(7,034		)	—			(5,949		)
Residential mortgage loans	43,537			(11,254		)	47,823			(12,526		)
SBL	—			(3,412		)	—			(2,966		)
Total	$	59,425		$	(194,220	)	$	52,619		$	(172,257	)
Total nonperforming loans as a % of RJ Bank total loans	0.41		%				0.40		%

The level of nonperforming loans is another indicator of potential future credit losses. The amount of nonperforming loans increased during the six months ended March 31, 2016 . This increase was due to an $11 million increase in nonperforming C&I loans partially offset by a $4 million decrease in residential mortgage loans. Included in nonperforming residential mortgage loans are $42 million in loans for which $20 million in charge-offs were previously recorded, resulting in less exposure within the remaining balance.

The nonperforming loan balances above excludes $15 million as of March 31, 2016 and as of September 30, 2015 , respectively, of residential TDRs which were returned to accrual status in accordance with our policy.

Loan underwriting policies

RJ Bank’s underwriting policies for the major types of loans are described on pages 88 - 89 of our 2015 Form 10-K. There was no material change in RJ Bank’s underwriting policies during the six months ended March 31, 2016 .

Risk monitoring process

The credit risk strategy component of ongoing risk monitoring and review processes at RJ Bank for all residential, SBL and corporate credit exposures, as well as our rigorous processes to manage and limit credit losses arising from loan delinquencies, are discussed on pages 89 - 92 of our 2015 Form 10-K. There were no material changes to those processes and policies during the six months ended March 31, 2016 .

SBL and residential mortgage loans

The marketable collateral securing RJ Bank’s SBL is monitored on a daily basis. Collateral adjustments are made by the borrower as necessary to ensure RJ Bank’s loans are adequately secured, resulting in minimizing its credit risk. Our SBL portfolio has not experienced high levels of delinquencies to date. At March 31, 2016 there were no delinquent SBL.

We track and review many factors to monitor credit risk in RJ Bank’s residential mortgage loan portfolio. The qualitative factors include, but are not limited to: loan performance trends, loan product parameters and qualification requirements, borrower credit scores, occupancy (i.e., owner occupied, second home or investment property), level of documentation, loan purpose, geographic concentrations, average loan size, and loan policy exceptions. These qualitative measures, while considered and reviewed in establishing the allowance for loan losses, have not resulted in any material quantitative adjustments to RJ Bank’s historical loss rates. In addition to historical loss rates, one other quantitative factor utilized for the performing residential mortgage loan portfolio is updated LTV ratios.

RJ Bank obtains the most recently available information (generally on a quarter lag) to estimate current LTV ratios on the individual loans in the performing residential mortgage loan portfolio. Current LTV ratios are estimated based on the initial appraisal obtained at the time of origination, adjusted using relevant market indices for housing price changes that have occurred since origination. The value of the homes could vary from actual market values due to change in the condition of the underlying property, variations in housing price changes within current valuation indices and other factors.

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The current average estimated LTV is approximately 55% for the total residential mortgage loan portfolio. Residential mortgage loans with estimated LTVs in excess of 100% represent slightly less than 1% of the residential mortgage loan portfolio. Credit risk management utilizes this data in conjunction with delinquency statistics, loss experience and economic circumstances to establish appropriate allowance for loan losses for the residential mortgage loan portfolio, which is based upon an estimate for the probability of default and loss given default for each homogeneous class of loans.

At March 31, 2016 , loans over 30 days delinquent (including nonperforming loans) decreased to 1.34% of residential mortgage loans outstanding, compared to 1.69% over 30 days delinquent at September 30, 2015 . Additionally, our March 31, 2016 percentage compares favorably to the national average for over 30 day delinquencies of 5.27% as most recently reported by the Fed. RJ Bank’s significantly lower delinquency rate as compared to its peers is the result of both our uniform underwriting policies and the lack of non-traditional loan products and subprime loans.

The following table presents a summary of delinquent residential mortgage loans:



	Delinquent residential loans (amount)						Delinquent residential loans as a percentage of outstanding loan balances
	30-89 days		90 days or more		Total ⁽¹⁾		30-89 days		90 days or more		Total ⁽¹⁾
	($ in thousands)
March 31, 2016
Residential mortgage loans:
First mortgage loans	$	4,461	$	25,116	$	29,577	0.20	%	1.14	%	1.34	%
Home equity loans/lines	—		172		172		—		0.87	%	0.87	%
Total residential mortgage loans	$	4,461	$	25,288	$	29,749	0.20	%	1.14	%	1.34	%

September 30, 2015
Residential mortgage loans:
First mortgage loans	$	4,849	$	28,036	$	32,885	0.25	%	1.44	%	1.69	%
Home equity loans/lines	30		231		261		0.14	%	1.09	%	1.23	%
Total residential mortgage loans	$	4,879	$	28,267	$	33,146	0.25	%	1.44	%	1.69	%


(1)	Comprised of loans which are two or more payments past due as well as loans in process of foreclosure.

Credit risk is also managed by diversifying the residential mortgage portfolio. The geographic concentrations (top five states) of RJ Bank’s one-to-four family residential mortgage loans are as follows:



March 31, 2016			September 30, 2015
($ outstanding as a % of RJ Bank total residential mortgage loans)
21.4	%	CA ⁽¹⁾	20.5	%	FL
19.7	%	FL	19.6	%	CA ⁽¹⁾
6.5	%	TX	5.9	%	NY
5.5	%	NY	5.8	%	TX
3.8	%	NJ	4.2	%	NJ


(1)	The concentration ratio for the state of California excludes 5.2% for March 31, 2016 , and 4.7% for September 30, 2015 , for loans purchased from a large investment grade institution that have full repurchase recourse for any delinquent loans.

Loans where borrowers may be subject to payment increases include adjustable rate mortgage loans with terms that initially require payment of interest only. Payments may increase significantly when the interest-only period ends and the loan principal begins to amortize. At March 31, 2016 and September 30, 2015 , these loans totaled $278 million and $264 million , respectively, or approximately 10% and 15% of the residential mortgage portfolio, respectively. At March 31, 2016 , the balance of amortizing, former interest-only, loans totaled $299 million. The weighted average number of years before the remainder of the loans, which were still in their interest-only period at March 31, 2016 , begins amortizing is 3.6 years.

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The outstanding balance of loans that were interest-only at origination and based on their contractual terms are scheduled to reprice are as follows:



	March 31, 2016
	(in thousands)
One year or less	$	96,829
Over one year through two years	6,997
Over two years through three years	16,657
Over three years through four years	31,007
Over four years through five years	31,137
Over five years	95,481
Total outstanding residential interest-only loan balance	$	278,108

A component of credit risk management for the residential portfolio is the LTV and borrower credit score at origination or purchase. The most recent LTV/FICO scores at origination of RJ Bank’s residential first mortgage loan portfolio are as follows:



	March 31, 2016	September 30, 2015
Residential first mortgage loan weighted-average LTV/FICO	66%/758	66%/757

Corporate loans

At March 31, 2016 , other than loans classified as nonperforming, there was one government-guaranteed loan totaling $150 thousand that was delinquent greater than 30 days.

Credit risk is also managed by diversifying the corporate loan portfolio. RJ Bank’s corporate loan portfolio does not contain a significant concentration in any single industry. The industry concentrations (top five categories) of RJ Bank’s corporate loans are as follows:



March 31, 2016			September 30, 2015
($ outstanding as a % of RJ Bank total corporate loans)
5.4	%	Retail real estate	5.8	%	Retail real estate
5.2	%	Office	5.7	%	Pharmaceuticals
5.1	%	Consumer products and services	5.5	%	Consumer products and services
4.5	%	Pharmaceuticals	5.4	%	Hospitality
4.3	%	Power and Infrastructure	4.5	%	Automotive/transportation

RJ Bank’s energy loan portfolio is primarily comprised of loans to mid-stream pipeline and other borrowers that are not directly exposed to the commodity. At March 31, 2016, the total commitment for these loans was $742 million, of which $452 million was outstanding, representing 4.3% of RJ Bank’s total corporate loan portfolio. There was $123 million of this outstanding balance rated as criticized loans. As of March 31, 2016, RJ Bank had provided an allowance for loan losses of $31 million for its energy loan portfolio, representing 7% of this loan portfolio.

Liquidity risk

See the section entitled “Liquidity and capital resources” in Item 2, Management’s Discussion and Analysis of Financial Condition and Results of Operations, in 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 cyber security incidents. See page 92 of our 2015 Form 10-K for a discussion of our operational risk and certain of our risk mitigation processes. There have been no material changes in such processes during the six months ended March 31, 2016 .

As more fully described in the discussion of our business technology risks included in Item 1A: Risk Factors on pages 23 - 24 of our 2015 Form 10-K, notwithstanding that we take protective measures and endeavor 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

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Index

that could have an impact on the security and stability of our operations. If one or more of these events were to occur, this could jeopardize the information we confidentially maintain, including that of our clients and counterparties, which is processed, stored in and transmitted through our computer systems and networks, or otherwise cause interruptions or malfunctions in our operations or the operations of our clients or counterparties. To-date, we have not experienced any material losses relating to cyberattacks or other information security breaches, however, there can be no assurances that we will not suffer such losses in the future.

Regulatory and legal risk

Our regulatory and legal risks are described on pages 92 - 93 of our 2015 Form 10-K.

As a result of the current regulatory environment and our growth in recent years, we have made and expect to continue to make significant investments in our Anti-Money laundering program, including the hiring of additional personnel and the purchase of related technology and systems enhancements.

Other than as described in the preceding paragraph, there have been no material changes in our risk mitigation processes during the six months ended March 31, 2016 .

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 Exchange Act, 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 Exchange Act Rule 13a-15(b) as of the end of the period covered by this report. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that these disclosure controls and procedures are effective.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting during the quarter ended March 31, 2016 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II

ITEM 1. LEGAL PROCEEDINGS

The following information supplements and amends the disclosure set forth under Part I, Item 3 “Legal Proceedings” on pages 30 - 31 of our 2015 Form 10-K.

Indemnification from Regions

As more fully described in Note 21 of the Notes to the Consolidated Financial Statements on page 171 of our 2015 Form 10-K, the stock purchase agreement governing our April 2, 2012 acquisition of Morgan Keegan from Regions, provides that Regions will indemnify RJF for losses incurred in connection with any legal proceedings pending as of the closing date or commenced after the closing date related to pre-closing matters that are received prior to April 2, 2015. See Note 16 of the Notes to the Condensed Consolidated Financial Statements in this Form 10-Q for additional information regarding Morgan Keegan’s pre-MK Closing Date legal matter contingencies.

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Pre-MK Closing Date Morgan Keegan matter resolved during the current year (the below matter was subject to indemnification by Regions)

The SEC and states of Missouri and Texas investigated alleged securities law violations by MK & Co. in the underwriting and sale of certain municipal bonds. An enforcement action brought by the Missouri Secretary of State in April 2013, seeking monetary penalties and other relief, was dismissed and refiled in November 2013 , and has been resolved. A civil action was brought by institutional investors of the bonds in March 2012, seeking a return of their investment and unspecified compensatory and punitive damages, which has been resolved. A class action was brought on behalf of retail purchasers of the bonds in September 2012, seeking unspecified compensatory and punitive damages. In September 2014, the District Court for the Western District of Missouri granted class certification. The matter was resolved and the settlement approved by the District Court in January 2015. Other individual investors and investor groups have also filed arbitration claims or separate civil claims, which have been resolved.

See Note 16 of the Notes to the Condensed Consolidated Financial Statements in this Form 10-Q for updated information regarding Morgan Keegan pre-MK Closing Date legal matter contingencies.

Other matters unrelated to Morgan Keegan

We also are subject to regulatory investigations and proceedings, some of which may result in the imposition of fines, as well as require us to undertake certain remedial actions.

See Note 16 of the Notes to the Condensed Consolidated Financial Statements in this Form 10-Q for additional information regarding legal and regulatory matter contingencies, and refer to the “Legal and regulatory reserves” section of Critical Accounting Estimates, in Part I - Item 2 of this Form 10-Q, for additional information on our criteria for establishing accruals and a range of possible loss related to such matters.

ITEM 1A. RISK FACTORS

See Item 1A: Risk Factors, on pages 16 - 29 of our 2015 Form 10-K for a discussion of risk factors that impact our operations and financial results. Other then the additional risk factor presented below, there have been no material changes in the risk factors as discussed therein.

New Department of Labor regulations will increase our regulatory compliance costs, limit our ability to provide certain products or services to retirement accounts, and expand potential liabilities for our business.

On April 8, 2016, the DOL issued its final regulation expanding the definition of who is deemed an “investment advice fiduciary” under ERISA as a result of giving investment advice to a plan, plan participant or beneficiary, as well as under the Internal Revenue Code for IRAs and non-ERISA plans (collectively, “qualified plans”). “Fiduciaries” under ERISA have strict duties to act solely in the interests of plan participants and beneficiaries and to act with the same skill and diligence that a prudent expert would use under similar circumstances. A fiduciary that breaches any of these duties is personally liable to the ERISA plan for resulting losses and may be sued by a variety of parties to recover such losses. Remedies under the Internal Revenue Code for IRAs are generally limited to the imposition of prohibited transaction excise taxes. The final rule extends fiduciary status to many investment professionals that have not been considered fiduciaries under current law. Under the final rule, for example, our financial advisors who provide investment advice or recommendations for a fee with respect to assets of ERISA plans or IRAs and non-ERISA plans will be treated as fiduciaries in a wider array of advice relationships.

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The final rule also contains certain exemptions designed to allow investment professionals that will become fiduciaries to continue operating under existing business models that would otherwise be prohibited. Specifically, two new exemptions, the Best Interest Contract Exemption (“BIC exemption”) and the exemption for Principal Transactions in Certain Assets (“Principal exemption”) will permit some current practices to continue, subject to compliance with numerous new conditions. Utilization of the BIC exemption and Principal exemption will require, in part, that we act under defined impartial conduct standards that are in the best interest of the client, adopt certain anti-conflict policies and procedures, provide disclosure of certain information relating to fees, compensation and defined “material conflicts of interest,” provide a written acknowledgment of fiduciary status, and for IRAs and non-ERISA plans (but not ERISA plans) enter into an enforceable contract with clients that contains extensive warranties and does not allow exculpatory provisions waiving the client’s rights and remedies, including the right to participate in a class action in court.

The final rule will be officially effective on June 7, 2016, with phase-in of the fiduciary definition not applicable until April 10, 2017, and further transition periods until January 1, 2018 applying to the exemptions discussed above.

We are in the process of evaluating the final rule and its likely impact on our business. Because qualified accounts, particularly IRA accounts, comprise a significant portion of our business, we expect that implementation of the DOL rule will result in significantly increased compliance, legal and information technology costs. In addition, we expect that our legal risks will increase due in part to the new contractual rights required to be given IRA and non-ERISA plan clients under the BIC and Principal exemptions.

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Index


ITEM 2.	MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED SHAREHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

We purchase our own stock from time to time in conjunction with a number of activities, each of which is described below. The following table presents information on our purchases of our own stock, on a monthly basis, for the six months ended March 31, 2016 :



	Total number of shares purchased ⁽¹⁾	Average price per share		Number of shares purchased as part of publicly announced plans or programs ⁽²⁾	Approximate dollar value (in thousands) at each month-end, of securities that may yet be purchased under the plans or programs ^{(3) (4)}
October 1, 2015 – October 31, 2015	4,699	$	51.71	—	$	93,112
November 1, 2015 – November 30, 2015	124,984	57.57		—	$	150,000
December 1, 2015 – December 31, 2015	80,836	58.15		—	$	150,000
First quarter	210,519	$	57.66	—

January 1, 2016 – January 31, 2016	2,273,592	$	47.44	2,234,366	$	44,231
February 1, 2016 – February 29, 2016	930,678	41.71		929,213	$	135,671
March 1, 2016 – March 31, 2016	7,622	45.43		—	$	135,671
Second quarter	3,211,892	$	45.78	3,163,579
Fiscal year-to-date total	3,422,411	$	46.51	3,163,579

(1)

Of the total for the six months ended March 31, 2016 , share purchases for the trust fund established to acquire our common stock in the open market and used to settle restricted stock units granted as a retention vehicle for certain employees of our wholly owned Canadian subsidiaries amounted to 82,464 shares, for a total consideration of $4.8 million (for more information on this trust fund, see Note 2 of the Notes to Consolidated Financial Statements on page 119 of our 2015 Form 10-K, and Note 9 of the Notes to Condensed Consolidated Financial Statements in this Form 10-Q). These activities do not utilize the repurchase authority discussed in footnote (2) below.

We also repurchase shares when employees surrender shares as payment for option exercises or withholding taxes. Of the total for the six months ended March 31, 2016 , shares surrendered to us by employees for such purposes amount to 176,368 shares, for a total consideration of $9.9 million. These activities do not utilize the repurchase authority discussed in footnote (2) below.

Of the total for the six months ended March 31, 2016 , we repurchased 3,163,579 shares pursuant to our securities repurchase authorization, see footnotes (2), (3) and (4) below for additional information.


(2)	During January and February 2016, we purchased shares of our common stock in open market transactions, for a total purchase price of $144.5 million, which reflects an average purchase price per share of $45.69. These share repurchases were made pursuant to the RJF securities repurchase authorizations described in footnotes (3) and (4) below.


(3)	On November 19, 2015, we announced an increase in the amount previously authorized by our Board of Directors to be used, at the discretion of our Securities Repurchase Committee, for open market repurchases of our common stock and certain senior notes, to $150 million subject to cash availability and other factors.

(4)

As a result of repurchases made during January 2016 and early February 2016, and to re-establish the prior authorization limit, on February 4, 2016, we announced an additional increase in the authorization limit. This February 4, 2016 action increased the amount previously authorized by our Board of Directors to be used back to $150 million (after consideration of the 2016 repurchases through such date) at the discretion of our Securities Repurchase Committee, for open market repurchases of our common stock and certain senior notes, subject to cash availability and other factors.


ITEM 3.	DEFAULTS UPON SENIOR SECURITIES

None.


ITEM 5.	OTHER INFORMATION

None.

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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 February 20, 2015, incorporated by reference to Exhibit 3.2 to the Company’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on February 24, 2015.
10.12.16		Raymond James Financial, Inc. Amended and Restated 2012 Stock Incentive Plan (as amended through February 18, 2016), incorporated by reference to Appendix A to the Company's Definitive Proxy Statement for the Annual Meeting of Shareholders held February 18, 2016, filed with the Securities and Exchange Commission on January 14, 2016.
11		Statement re Computation of per Share Earnings (the calculation of per share earnings is included in Part I, Item 1 in the Notes to Condensed Consolidated Financial Statements (Earnings Per Share) and is omitted here in accordance with Section (b)(11) of Item 601 of Regulation S-K).
12		Statement of Computation of Ratio of Earnings to Fixed Charges and Preferred Stock Dividends.
31.1		Certification of Paul C. Reilly pursuant to Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2		Certification of Jeffrey P. Julien pursuant to Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32		Certification of Paul C. Reilly and Jeffrey P. Julien 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.
101.SCH		XBRL Taxonomy Extension Schema Document.
101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF		XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB		XBRL Taxonomy Extension Label Linkbase Document.
101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document.

SIGNATURES

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



		RAYMOND JAMES FINANCIAL, INC.
		(Registrant)

Date:	May 6, 2016	/s/ Paul C. Reilly
		Paul C. Reilly
		Chief Executive Officer

Date:	May 6, 2016	/s/ Jeffrey P. Julien
		Jeffrey P. Julien
		Executive Vice President - Finance
		Chief Financial Officer and Treasurer

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TABLE OF CONTENTS

Part I Financial Information Item 1. Financial Statements Note 1 Introduction and Basis Of Presentation Note 2 Update Of Significant Accounting Policies Note 3 Acquisitions Note 4 Cash and Cash Equivalents, Assets Segregated Pursuant To Regulations, and Deposits with Clearing Organizations Note 5 Fair Value Note 6 Trading Instruments and Trading Instruments Sold But Not Yet Purchased Note 7 Available For Sale Securities Note 8 Bank Loans, Net Note 9 Variable Interest Entities Note 10 - Goodwill and Identifiable Intangible Assets Note 11 Bank Deposits Note 12 Other Borrowings Note 13 Derivative Financial Instruments Note 14 Disclosure Of Offsetting Assets and Liabilities, Collateral, Encumbered Assets and Repurchase Agreements Note 15 Income Taxes Note 16 Commitments, Contingencies and Guarantees Note 17 Accumulated Other Comprehensive Income (loss)Note 18 Interest Income and Interest Expense Note 19 Share-based Compensation Note 20 Regulatory Capital Requirements Note 21 Financial Instruments with Off-balance Sheet Risk Note 22 Earnings Per Share Note 23 Segment Information Item 2. Management S Discussion and Analysis Of Financial Condition and Results Of Operations Item 3. Quantitative and Qualitative Disclosures About Market Risk Item 4. Controls and Procedures Part II Item 1. Legal Proceedings Item 1A. Risk Factors Item 2. Market For Registrant S Common Equity, Related Shareholder Matters and Issuer Purchases Of Equity Securities Item 3. Defaults Upon Senior Securities Item 5. Other Information Item 6. Exhibits

Supplier name	Ticker
SPDR Gold Shares	GLD
CME Group Inc.	CME
Intercontinental Exchange, Inc.	ICE
Moody's Corporation	MCO
Nasdaq, Inc.	NDAQ
iShares Gold Trust	IAU
MarketAxess Holdings Inc.	MKTX

RJF 10-Q Quarter ended March 31, 2016