Edgar Filing: RAYMOND JAMES FINANCIAL INC

q10063009.htm

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 June 30, 2009

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

For the transition period from

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 o

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 o No x

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 o No x

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

123,232,700 shares of Common Stock as of August 5, 2009

	RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

	Form 10-Q for the Quarter Ended June 30, 2009

	INDEX

		PAGE
PART I.	FINANCIAL INFORMATION

Item 1.	Financial Statements (unaudited)

	Condensed Consolidated Statements of Financial Condition as of June 30, 2009 and September 30, 2008 (unaudited)	3

	Condensed Consolidated Statements of Income and Comprehensive Income for the three months ended June 30, 2009 and June 30, 2008 (unaudited)	4

	Condensed Consolidated Statements of Income and Comprehensive Income for the nine months ended June 30, 2009 and June 30, 2008 (unaudited)	4

	Condensed Consolidated Statements of Cash Flows for the nine months ended June 30, 2009 and June 30, 2008 (unaudited)	5

	Notes to Condensed Consolidated Financial Statements (unaudited)	7

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	48

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	81

Item 4.	Controls and Procedures	86

PART II.	OTHER INFORMATION

Item 1.	Legal Proceedings	87

Item 1A.	Risk Factors	88

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	88

Item 5.	Other Information	88

Item 6.	Exhibits	89

	Signatures	90

PART I FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

(Unaudited)

	June 30,	September 30,
	2009	2008
	(in 000’s)
Assets
Cash and Cash Equivalents	$ 539,346	$ 3,207,493
Assets Segregated Pursuant to Regulations and Other Segregated Assets	5,156,139	4,311,933
Securities Purchased under Agreements to Resell and Other Collateralized Financings	564,245	950,546
Financial Instruments, at Fair Value:
Trading Instruments	304,032	314,008
Available for Sale Securities	537,148	577,933
Private Equity and Other Investments	234,775	209,915
Receivables:
Brokerage Clients, Net	1,386,060	1,850,464
Stock Borrowed	559,307	675,080
Bank Loans, Net	7,075,572	7,095,227
Broker-Dealers and Clearing Organizations	126,681	186,841
Other	421,469	344,594
Investments in Real Estate Partnerships - Held by Variable Interest Entities	272,975	239,714
Property and Equipment, Net	187,569	192,450
Deferred Income Taxes, Net	148,949	108,765
Deposits With Clearing Organizations	84,222	94,242
Goodwill	62,575	62,575
Prepaid Expenses and Other Assets	169,766	287,836

	$ 17,830,830	$ 20,709,616

Liabilities And Shareholders' Equity
Loans Payable	$ 110,294	$ 2,212,224
Loans Payable Related to Investments by Variable Interest Entities in Real Estate Partnerships	88,055	102,564
Payables:
Brokerage Clients	6,549,238	5,789,952
Stock Loaned	577,906	695,739
Bank Deposits	7,637,558	8,774,457
Broker-Dealers and Clearing Organizations	62,790	266,272
Trade and Other	243,423	154,915
Trading Instruments Sold but Not Yet Purchased, at Fair Value	45,241	123,756
Securities Sold Under Agreements to Repurchase	84,081	122,728
Accrued Compensation, Commissions and Benefits	258,369	345,782
	15,656,955	18,588,389

Minority Interests	211,767	237,322
Commitments and Contingencies (See Note 12)
Shareholders' 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 126,695,580 at June 30, 2009 and 124,078,129
at September 30, 2008	1,222	1,202
Shares Exchangeable into Common Stock; 249,168
at June 30, 2009 and 273,042 at September 30, 2008	3,198	3,504
Additional Paid-In Capital	402,271	355,274
Retained Earnings	1,708,475	1,639,662
Accumulated Other Comprehensive Income	(67,174)	(33,976)
	2,047,992	1,965,666
Less: 4,020,603 and 3,825,619 Common Shares in Treasury, at Cost	(85,884)	(81,761)
	1,962,108	1,883,905

	$ 17,830,830	$ 20,709,616

See accompanying Notes to Condensed Consolidated Financial Statements.

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (Unaudited)

(in 000’s, except per share amounts)

	Three Months Ended		Nine Months Ended
	June 30,	June 30,	June 30,	June 30,
	2009	2008	2009	2008
Revenues:
Securities Commissions and Fees	$ 405,925	$ 483,225	$ 1,193,855	$ 1,437,327
Investment Banking	20,586	36,236	59,320	87,323
Investment Advisory Fees	27,558	51,492	110,954	161,416
Interest	98,037	156,935	349,722	561,199
Net Trading Profits	13,272	11,100	35,213	5,256
Financial Service Fees	30,909	31,774	94,849	97,512
Other	35,965	37,986	80,583	95,040
Total Revenues	632,252	808,748	1,924,496	2,445,073

Interest Expense	7,453	66,724	46,088	325,535
Net Revenues	624,799	742,024	1,878,408	2,119,538

Non-Interest Expenses:
Compensation, Commissions and Benefits	406,809	490,479	1,217,965	1,434,389
Communications and Information Processing	26,690	30,899	91,869	93,140
Occupancy and Equipment Costs	26,299	26,102	77,679	71,600
Clearance and Floor Brokerage	8,377	7,969	24,429	23,648
Business Development	18,652	24,527	62,193	70,130
Investment Advisory Fees	7,114	12,997	24,058	38,490
Bank Loan Loss Provision	29,790	12,366	129,639	36,299
Other	24,378	21,992	71,003	51,253
Total Non-Interest Expenses	548,109	627,331	1,698,835	1,818,949
Minority Interest in (Losses) Earnings of Subsidiaries	(4,381)	425	7,318	3,104
Income Before Provision for Income Taxes	72,309	115,118	186,891	303,693
Provision for Income Taxes	29,714	45,180	77,110	117,723

Net Income	$ 42,595	$ 69,938	$ 109,781	$ 185,970

Net Income per Share-Basic	$ 0.36	$ 0.60	$ 0.94	$ 1.59
Net Income per Share-Diluted	$ 0.36	$ 0.59	$ 0.93	$ 1.56
Weighted Average Common Shares
Outstanding-Basic	118,177	115,633	117,239	116,573
Weighted Average Common and Common
Equivalent Shares Outstanding-Diluted	119,460	118,272	118,411	119,212

Dividends Paid per Common Share	$ 0.11	$ 0.11	$ 0.33	$ 0. 33
Net Income	$ 42,595	$ 69,938	$ 109,781	$ 185,970
Other Comprehensive Income:
Change in Unrealized Gain/(Loss) on Available
for Sale Securities, Net of Tax	17,256	1,834	(19,399)	(35,383)
Change in Currency Translations	10,608	874	(13,800)	(3,503)
Total Comprehensive (Loss) Income	$ 70,459	$ 72,646	$ 76,582	$ 147,084

Other-Than-Temporary Impairment:
Total Other-Than-Temporary Impairment Losses	$ (12,057)	$ (2,823)	$ (23,582)	$ (2,823)
Portion of Losses Recognized in Other
Comprehensive Income (Before Taxes)	10,597	-	15,386	-
Net Impairment Losses Recognized in
Other Revenue	$ (1,460)	$ (2,823)	$ (8,196)	$ (2,823)

See accompanying Notes to Condensed Consolidated Financial Statements.

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(in 000’s)

(continued on next page)

	Nine Months Ended
	June 30,	June 30,
	2009	2008
Cash Flows From Operating Activities:
Net Income	$ 109,781	$ 185,970
Adjustments to Reconcile Net Income to Net
Cash Provided by (Used in) Operating Activities:
Depreciation and Amortization	25,339	20,240
Deferred Income Taxes	(28,977)	17,351
Premium and Discount Amortization on Available for Sale Securities
and Unrealized/Realized Gain on Other Investments	(9,680)	(17,290)
Other-than-Temporary Impairment on Available for Sale Securities	8,196	2,823
Impairment of and Loss on Sale of Property and Equipment	7,278	40
Gain on Sale of Loans Available for Sale	(637)	(304)
Provision for Loan Loss, Legal Proceedings, Bad Debts and Other Accruals	141,800	43,465
Stock-Based Compensation Expense	19,498	27,102
Loss on Company-Owned Life Insurance	11,807	9,199

(Increase) Decrease in Operating Assets:
Assets Segregated Pursuant to Regulations and Other Segregated Assets	(844,206)	6,407
Receivables:
Brokerage Clients, Net	462,877	(264,674)
Stock Borrowed	115,773	125,352
Broker-Dealers and Clearing Organizations	60,160	91,702
Other	(80,442)	(35,921)
Securities Purchased Under Agreements to Resell and Other Collateralized
Financings, Net of Securities Sold Under Agreements to Repurchase	(17,346)	(162,567)
Trading Instruments, Net	(68,539)	61,680
Proceeds from Sale of Loans Available for Sale	79,163	26,907
Origination of Loans Available for Sale	(102,888)	(26,111)
Excess Tax Benefits from Stock-Based Payment Arrangements	(2,693)	(392)
Prepaid Expenses and Other Assets	100,085	(63,469)
Minority Interest	7,318	(3,104)

Increase (Decrease) in Operating Liabilities:
Payables:
Brokerage Clients	759,286	149,579
Stock Loaned	(117,833)	(103,559)
Broker-Dealers and Clearing Organizations	(203,482)	71,282
Trade and Other	92,984	9,428
Accrued Compensation, Commissions and Benefits	(86,301)	(44,241)

Net Cash Provided by Operating Activities	438,321	126,895

See accompanying Notes to Condensed Consolidated Financial Statements.

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(in 000’s)

(continued)

	Nine Months Ended
	June 30,	June 30,
	2009	2008

Cash Flows from Investing Activities:
Additions to Property and Equipment, Net	(28,996)	(35,348)
Bank Loan Originations and Purchases	(2,173,221)	(4,342,767)
Bank Loan Repayments and Increase in Unearned Fees, net	2,066,685	2,006,563
Purchases of Private Equity and Other Investments, Net	(34,240)	(23,654)
Investments in Company-Owned Life Insurance	(12,000)	(47,818)
Investments in Real Estate Partnerships-Held by Variable Interest Entities	(33,261)	(1,545)
Repayments of Loans by Investor Members of Variable Interest Entities Related
to Investments in Real Estate Partnerships	1,661	6,112
Securities Purchased Under Agreements to Resell, Net	365,000	180,000
Purchases of Available for Sale Securities	(102,516)	(189,565)
Available for Sale Securities Maturations and Repayments	104,583	81,376

Net Cash Provided by (Used in) Investing Activities	153,695	(2,366,646)

Cash Flows from Financing Activities:
Proceeds from Borrowed Funds, Net	468	200,000
Repayments of Borrowings, Net	(2,102,398)	(9,736)
Proceeds from Borrowed Funds Related to Company-Owned Life Insurance	38,120	-
Proceeds from Borrowed Funds Related to Investments by Variable Interest
Entities in Real Estate Partnerships	3,712	4,237
Repayments of Borrowed Funds Related to Investments by Variable Interest
Entities in Real Estate Partnerships	(18,221)	(19,519)
Proceeds from Capital Contributed to Variable Interest Entities
Related to Investments in Real Estate Partnerships	28,266	28,264
Minority Interest	(34,020)	(15,336)
Exercise of Stock Options and Employee Stock Purchases	22,385	26,140
(Decrease) Increase in Bank Deposits	(1,136,899)	2,160,880
Purchase of Treasury Stock	(6,563)	(67,243)
Dividends on Common Stock	(40,464)	(40,227)
Excess Tax Benefits from Stock-Based Payment Arrangements	2,693	392

Net Cash (Used in) Provided by Financing Activities	(3,242,921)	2,267,852

Currency Adjustment:
Effect of Exchange Rate Changes on Cash	(11,025)	(3,503)
Net (Decrease) Increase in Cash and Cash Equivalents	(2,661,930)	24,598
Cash Reduced by Deconsolidation of Certain Internally Sponsored
Private Equity Limited Partnerships	(6,217)	-
Cash and Cash Equivalents at Beginning of Year	3,207,493	644,943

Cash and Cash Equivalents at End of Period	$ 539,346	$ 669,541

Supplemental Disclosures of Cash Flow Information:
Cash Paid for Interest	$ 47,914	$ 330,370
Cash Paid for Income Taxes	$ 98,078	$ 109,942

See accompanying Notes to Condensed Consolidated Financial Statements.

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

June 30, 2009

NOTE 1 - BASIS OF PRESENTATION:

The accompanying unaudited condensed consolidated financial statements include the accounts of Raymond James Financial, Inc. (“RJF”) and its consolidated subsidiaries that are generally controlled through a majority voting interest. RJF is a holding company headquartered in Florida whose subsidiaries are engaged in various financial service businesses; as used herein, the term “the Company” refers to RJF and/or one or more of its subsidiaries. In accordance with Financial Accounting Standards Board (“FASB”) Interpretation (“FIN”) No. 46R, “Consolidation of Variable Interest Entities” (“FIN 46R”), the Company also consolidates any variable interest entities (“VIEs”) for which it is the primary beneficiary. Additional information is provided in Note 7 below. When the Company does not have a controlling interest in an entity, but exerts significant influence over the entity, the Company applies the equity method of accounting. All material intercompany balances and transactions have been eliminated in consolidation.

During the three months ended March 31, 2009, the Company relinquished control over the general partners of certain internally sponsored private equity limited partnerships. As a result, the Company deconsolidated seven entities during the three months ended March 31, 2009, which had assets of approximately $47.6 million. No such deconsolidation of entities occurred during the most recent quarter ended June 30, 2009.

Certain financial information that is normally included in annual financial statements prepared in accordance with generally accepted accounting principles in the United States of America ("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. Subsequent events have been evaluated for either recognition in these interim financial statements, or for disclosure purposes herein as appropriate, through August 10, 2009 which is the date the unaudited condensed consolidated financial statements were issued, in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 165, “Subsequent Events”. The nature of the Company's 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 the Company's Annual Report on Form 10-K for the year ended September 30, 2008. To prepare consolidated financial statements in conformity with GAAP, management must estimate certain amounts that affect the reported assets and liabilities, disclosure of contingent assets and liabilities, and reported revenues and expenses. Actual results could differ from those estimates.

Certain revisions and reclassifications have been made to the unaudited condensed consolidated financial statements of the prior period to conform to the current period presentation. During the quarter ended December 31, 2008, the Company reclassified cash collateral related to interest rate swap contracts in accordance with FASB Staff Position (“FSP”) FIN No. 39-1, “Amendment of FASB Interpretation No. 39” (“FSP FIN No. 39-1”). See Note 2 below for further discussion of the Company’s adoption of this accounting pronouncement. The Condensed Consolidated Statements of Financial Condition were adjusted for the period ended September 30, 2008, which resulted in reclassifications between Broker-Dealers and Clearing Organizations Receivables and Payables, Trading Instruments, and Trading Instruments Sold but Not Yet Purchased, netting to a $22.2 million adjustment between total assets and total liabilities. This reclassification had an immaterial impact to the Condensed Consolidated Statements of Cash Flows for the nine months ended June 30, 2008. In the quarter ended December 31, 2008, a new intersegment component to the Company’s segment reporting was added to reflect total gross revenues by segment with the elimination of intersegment transactions in this new segment. In addition, the methodology for allocating the Company’s corporate bonus pool expense to individual segments was changed. Reclassifications have been made in the segment disclosure for the nine months ended June 30, 2008 to conform to this presentation. Additional information is provided in Note 18 below. In the quarter ended December 31, 2008, the Condensed Consolidated Statements of Financial Condition were adjusted to reflect the reclassification of certain other investments from Prepaid Expenses and Other Assets to Private Equity and Other Investments. This reclassification included the Company’s private equity investments and other miscellaneous investments recorded at fair value and totaled $157.2 million at September 30, 2008. The Condensed Consolidated Statements of Cash Flows for the nine months ended June 30, 2008 were adjusted for this reclassification, which resulted in a net increase of $26.1 million in cash flows provided by operating activities with the offset to cash flows used in investing activities. In addition, for the nine months ended June 30, 2008 the Condensed Consolidated Statements of Cash Flows were adjusted for a $47.8 million reclassification of investments in company-owned life insurance from an operating activity to an investing activity.

The Company’s quarters end on the last day of each calendar quarter.

NOTE 2 – EFFECTS OF RECENTLY ISSUED ACCOUNTING STANDARDS:

In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements” (“SFAS 157”). SFAS 157 defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements required under other accounting pronouncements, but does not change existing guidance as to whether or not an instrument is carried at fair value. The Company adopted SFAS 157 on October 1, 2008. See Note 3 below for the additional disclosure requirements of this pronouncement and for information regarding the impact the adoption of SFAS 157 had on the financial position and operating results of the Company.

In February 2008, the FASB issued FSP SFAS No. 157-2, “Effective Date of FASB Statement No. 157” (“FSP SFAS No. 157-2”). FSP SFAS No. 157-2 delays the effective date of SFAS No. 157 for nonfinancial assets and nonfinancial liabilities that are not remeasured at fair value on a recurring basis (at least annually) until fiscal years beginning after November 15, 2008 (October 1, 2009 for the Company), and interim periods within those fiscal years. The Company does not expect the adoption of FSP SFAS No. 157-2 to have a material impact on its consolidated financial statements.

In October 2008, the FASB issued FSP SFAS No. 157-3, “Determining the Fair Value of a Financial Asset When the Market for That Asset is Not Active” (“FSP SFAS No. 157-3”). FSP SFAS No. 157-3 clarifies the application of SFAS 157 in a market that is not active and provides an example to illustrate key considerations in determining the fair value of a financial asset when the market for that financial asset is not active. The Company adopted FSP SFAS No 157-3 on October 1, 2008. See Note 3 below for information regarding the impact the adoption of this interpretation had on the Company’s consolidated financial statements.

In April 2009, the FASB issued FSP SFAS No.157-4, “Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly” (“FSP SFAS No. 157-4”). FSP SFAS No. 157-4 provides additional guidance for estimating fair value in accordance with SFAS 157 when the volume and level of activity for the asset or liability have significantly decreased. This FSP also includes guidance on identifying circumstances that indicate a transaction is not orderly. FSP SFAS No. 157-4 emphasizes that even if there has been a significant decrease in the volume and level of activity for the asset or liability and regardless of the valuation technique used, the objective of a fair value measurement remains the same. Fair value is still the price that would be received to sell the asset in an orderly transaction between market participants as of the measurement date under current market conditions. Although this FSP is effective for the Company on April 1, 2009, the Company adopted FSP SFAS No. 157-4 on January 1, 2009 as early adoption is permitted. See Note 3 below for the impact the adoption of FSP SFAS No. 157-4 had on the Company’s consolidated financial statements.

In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities” (“SFAS 159”). SFAS 159 allows companies to elect to follow fair value accounting for certain financial assets and liabilities on an instrument by instrument basis. SFAS 159 is applicable only to certain financial instruments and was effective for the Company on October 1, 2008. The Company elected not to adopt the fair value option for any other financial assets and liabilities as permitted by SFAS 159. See Note 3 below for further discussion of the impact the provisions of this pronouncement had on the Company’s consolidated financial statements.

In April 2007, the FASB issued FSP FIN No. 39-1. FSP FIN No. 39-1 defines "right of setoff" and specifies what conditions must be met for a derivative contract to qualify for this right of setoff. FSP FIN No. 39-1 also addresses the applicability of a right of setoff to derivative instruments and clarifies the circumstances in which it is appropriate to offset amounts recognized for those instruments in the statement of financial position. In addition, this FSP permits offsetting of fair value amounts recognized for multiple derivative instruments executed with the same counterparty under a master netting arrangement and fair value amounts recognized for the right to reclaim cash collateral (a receivable) or the obligation to return cash collateral (a payable) arising from the same master netting arrangement as the derivative instruments. This interpretation was adopted by the Company on October 1, 2008. See Note 10 below for information regarding the impact the adoption of FSP FIN No. 39-1 had on the Company’s consolidated financial statements.

In March 2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities” (“SFAS 161”). SFAS 161 requires companies to expand its disclosures regarding derivative instruments and hedging activities to include how and why an entity is using a derivative instrument or hedging activity, an explanation of its accounting under SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities” (“SFAS 133”), and how this instrument affects the entity’s financial position and performance as well as cash flows. SFAS 161 also clarifies that derivative instruments are subject to concentration-of-credit-risk disclosures which amends SFAS No. 107, “Disclosures about Fair Value of Financial Instruments” (“SFAS 107”). The Company adopted SFAS 161 for the quarter ended March 31, 2009. See Note 10 below for information regarding the impact the adoption of SFAS 161 had on the Company’s consolidated financial statements.

In December 2007, the FASB issued SFAS No. 141R, “Business Combinations” (“SFAS 141R”). SFAS 141R provides new guidance on accounting for business combinations which includes the fundamental principle of recording the acquired business at fair value. In addition, this statement requires extensive disclosures about the acquisition’s quantitative and qualitative effects including validation of the fair value of goodwill. This statement is effective for all business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008 (October 1, 2009 for the Company). Earlier application is prohibited.

In April 2009, the FASB issued FSP SFAS No. 141R-1, “Accounting for Assets Acquired and Liabilities Assumed in a Business Combination That Arise from Contingencies” (“FSP SFAS No. 141R-1”). FSP SFAS No. 141R-1 amends the provisions in SFAS 141R for the initial recognition and measurement, subsequent measurement and accounting, and disclosures for assets and liabilities arising from contingencies in business combinations. This FSP eliminates the distinction between contractual and noncontractual contingencies, including the initial recognition and measurement criteria in SFAS 141R. FSP SFAS No. 141R-1 is effective for all business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008 (October 1, 2009 for the Company). Earlier application is prohibited.

In December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements” (“SFAS 160”). SFAS 160 requires noncontrolling interests to be treated as a separate component of equity, not as a liability or other item outside of permanent equity. This statement is applicable to the accounting for noncontrolling interests and transactions with noncontrolling interest holders in consolidated financial statements and is effective for fiscal years beginning on or after December 15, 2008 (October 1, 2009 for the Company). The Company is currently evaluating the impact the adoption of SFAS 160 will have on its consolidated financial statements.

In February 2008, the FASB issued FSP SFAS No. 140-3, “Accounting for Transfers of Financial Assets and Repurchase Financing Transactions” (“FSP SFAS No. 140-3”). FSP SFAS No. 140-3 addresses the issue of whether these transactions should be viewed as two separate transactions or as one "linked" transaction. The FSP includes a "rebuttable presumption" that presumes linkage of the two transactions unless the presumption can be overcome by meeting certain criteria. The FSP will be effective for fiscal years beginning after November 15, 2008 (October 1, 2009 for the Company) and will apply only to original transfers made after that date; early adoption will not be allowed. The Company is currently evaluating the impact the adoption of FSP SFAS No. 140-3 will have on its consolidated financial statements.

In December 2008, the FASB issued FSP SFAS No. 140-4 and FIN 46R-8, “Disclosures about Transfers of Financial Assets and Interest in Variable Interest Entities” (“FSP SFAS No 140-4 and FIN 46R-8”). FSP SFAS No. 140-4 and FIN 46R-8 require companies to provide additional disclosures about transfers of financial assets and their involvement with VIEs in addition to certain disclosures which apply to companies acting as the transferor, sponsor, servicer, primary beneficiary, or qualifying special purpose entity. These disclosures are intended to provide greater transparency to financial statement users regarding a company’s involvement with transferred financial assets and VIEs. The Company adopted this interpretation effective October 1, 2008. See Note 7 below for the required disclosures under FSP SFAS No. 140-4 and FIN 46R-8.

In June 2008, the FASB issued FSP Emerging Issues Task Force (“EITF”) No. 03-6-1, “Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities” (“FSP EITF 03-6-1”). FSP EITF 03-6-1 requires unvested share-based payment awards that contain nonforfeitable rights to dividends or dividend equivalents to be treated as participating securities as defined in EITF Issue No. 03-6, "Participating Securities and the Two-Class Method under FASB Statement No. 128," and, therefore, included in the earnings allocation in computing earnings per share under the two-class method described in FASB Statement No. 128, “Earnings per Share”. This FSP is effective for fiscal years beginning after December 15, 2008 (October 1, 2009 for the Company), and interim periods within those fiscal years. The Company is currently evaluating the impact the adoption of FSP EITF 03-6-1 will have on its consolidated financial statements.

In January 2009, the FASB issued FSP EITF No. 99-20-1, “Amendments to the Impairment Guidance of EITF Issue No. 99-20” (“FSP EITF No. 99-20-1”). FSP EITF No. 99-20-1 amends the impairment guidance in EITF No. 99-20, “Recognition of Interest Income and Impairment on Purchased Beneficial Interest That Continue to be Held by a Transferor in Securitized Financial Assets,” to achieve more consistent determination of whether an other-than-temporary impairment (“OTTI”) has occurred. In addition, this interpretation retains and emphasizes the objective of an OTTI assessment and the related disclosure requirements in SFAS No. 115 “Accounting for Certain Investments in Debt and Equity Securities”. The Company adopted this interpretation effective October 1, 2008. See Note 5 below for the impact the adoption of FSP EITF No. 99-20-1 had on the Company’s consolidated financial statements.

In April 2009, the FASB issued FSP SFAS No. 115-2 and SFAS 124-2, “Recognition and Presentation of Other-Than-Temporary Impairments” (“FSP SFAS No. 115-2 and SFAS 124-2”). FSP SFAS No. 115-2 and SFAS 124-2 amends the other-than-temporary impairment guidance for debt securities classified as available for sale and held-to-maturity to shift the focus from an entity’s intent to hold until recovery to its intent or requirement to sell. This guidance is to be applied to previously other-than-temporarily impaired debt securities existing as of the effective date by making a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. The cumulative-effect adjustment, if material, would reclassify the non-credit portion of a previously other-than-temporarily impaired debt security held as of the date of initial adoption from retained earnings to accumulated other comprehensive income. In addition, this interpretation includes expanded presentation and disclosure requirements. Although this FSP is effective for the Company on April 1, 2009, the Company adopted FSP SFAS No. 115-2 and SFAS 124-2 on January 1, 2009 as early adoption is permitted. See Note 5 below for the impact the adoption of FSP SFAS No. 115-2 and SFAS 124-2 had on the Company’s consolidated financial statements.

In April 2009, the FASB issued FSP SFAS No. 107-1 and APB 28-1, “Interim Disclosures about Fair Value of Financial Instruments” (“FSP SFAS No. 107-1 and APB 28-1”). FSP SFAS No. 107-1 and APB 28-1 expands the fair value disclosures required for all financial instruments within the scope of SFAS 107 to interim reporting periods. This FSP also amends APB Opinion No. 28, “Interim Financial Reporting” to require those disclosures in summarized financial information at interim reporting periods. This interpretation is effective for interim reporting periods ending after June 15, 2009 (April 1, 2009 for the Company). The Company adopted FSP SFAS No. 107-1 and APB 28-1 for the quarter ended June 30, 2009. See Note 3 below for the required disclosures under FSP SFAS No. 107-1 and APB 28-1.

In June 2009, the FASB issued SFAS No. 166, “Accounting for Transfers of Financial Assets, an Amendment of FASB Statement No. 140” (SFAS 166”). SFAS 166 eliminates the Qualified Special Purpose Entity (QSPE) concept, creates more stringent conditions for reporting a transfer of a portion of a financial asset as a sale, clarifies the derecognition criteria, revises how retained interests are initially measured, and removes the guaranteed mortgage securitization recharacterization provisions. SFAS 166 requires additional year-end and interim disclosures that are similar to the disclosures required by FSP SFAS No. 140-4 and FIN 46R-8. SFAS 166 is effective for the Company on October 1, 2010, and for subsequent interim and annual reporting periods. Early adoption is prohibited. SFAS 166’s disclosure requirements must be applied to transfers that occurred before and after its effective date. The Company is currently evaluating the impact the adoption of SFAS 166 will have on its consolidated financial statements.

In June 2009, the FASB issued SFAS No. 167, “Amendments to FASB Interpretation No 46(R)” (“SFAS 167”). SFAS 167 amends the guidance in FASB Interpretation 46R related to the consolidation of variable interest entities. SFAS 167 requires the reporting entities to evaluate former QSPE’s for consolidation, changes the approach to determine a variable interest entity’s primary beneficiary from a quantitative assessment to a qualitative assessment designed to identify a controlling financial interest, and increases the frequency of required assessments to determine whether a company is the primary beneficiary of a variable interest entity. SFAS 167 is effective for the Company on October 1, 2010 and earlier adoption is prohibited. The Company is currently evaluating the impact the adoption of SFAS 167 will have on its consolidated financial statements.

NOTE 3 - FAIR VALUE:

The Company adopted SFAS 157 and FSP SFAS No. 157-3 on October 1, 2008. The adoption of these pronouncements did not have any impact on the financial position or operating results of the Company. SFAS 157 defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements required under other accounting pronouncements, but does not change existing guidance as to whether or not an instrument is carried at fair value. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The Company determines the fair value of its financial instruments and assets and liabilities recognized at fair value in the financial statements on a recurring basis in accordance with SFAS 157. FSP SFAS No. 157-2 delays the effective date of SFAS 157 (until October 1, 2009 for the Company) for nonfinancial assets and nonfinancial liabilities, except for items recognized or disclosed at fair value on a recurring basis. As such, the Company has not applied SFAS 157 to the impairment tests or assessments under SFAS No. 142, “Goodwill and Other Intangible Assets (“SFAS 142”), real estate owned and nonfinancial long-lived assets measured at fair value for an impairment assessment under SFAS No.144, “Accounting for the Impairment or Disposal of Long-Lived Assets” (“SFAS 144”).

In April 2009, the FASB issued FSP SFAS No. 157-4. See Note 2 above for additional information. Although this FSP is effective for the Company on April 1, 2009, the Company elected to early adopt FSP SFAS No. 157-4 on January 1, 2009. As a result, the Company changed the valuation technique used for certain available for sale securities and redefined its major security types used in its trading instruments disclosure by separating mortgage backed securities (“MBS”) and collateralized mortgage obligations (“CMOs”) from corporate obligations and agency securities.

In determining fair value, the Company uses various valuation approaches, including market, income and/or cost approaches. Fair value is a market-based measure considered from the perspective of a market participant. As such, even when market assumptions are not readily available, the Company’s own assumptions reflect those that market participants would use in pricing the asset or liability at the measurement date. SFAS 157 describes the following three levels used to classify fair value measurements:

Level 1—Quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2— Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3—Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable.

SFAS 157 requires the Company to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The availability of observable inputs can vary from instrument to instrument and in certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, an instrument’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement of an instrument requires judgment and consideration of factors specific to the instrument.

Valuation Techniques

Notwithstanding the valuation approach utilized as discussed above, the fair value for certain financial instruments is derived using pricing models and other valuation techniques that involve significant management judgment. The price transparency of financial instruments is a key determinant of the degree of judgment involved in determining the fair value of the Company’s financial instruments. Financial instruments for which actively quoted prices or pricing parameters are available will generally have a higher degree of price transparency than financial instruments that are thinly traded or not quoted. In accordance with SFAS 157, the criteria used to determine whether the market for a financial instrument is active or inactive is based on the particular asset or liability. For equity securities, the Company’s definition of actively traded was based on average daily volume and other market trading statistics. The Company considered the market for other types of financial instruments, including certain CMOs, asset backed securities (“ABS”) and certain collateralized debt obligations, to be inactive as of June 30, 2009. As a result, the valuation of these financial instruments included significant management judgment in determining the relevance and reliability of market information available. The Company considered the inactivity of the market to be evidenced by several factors, including decreased price transparency caused by decreased volume of trades relative to historical levels, stale transaction prices and transaction prices that varied significantly either over time or among market makers. The specific valuation techniques utilized for the category of financial instruments presented in the unaudited Condensed Consolidated Statements of Financial Condition are described below.

Cash Equivalents

Cash equivalents consist of investments in U.S. Treasury bills and money market mutual funds. Such instruments are classified within Level 1 of the fair value hierarchy.

Trading Instruments and Trading Instruments Sold but Not Yet Purchased

Trading Securities

Trading securities are comprised primarily of the financial instruments held by the Company's broker-dealer subsidiaries (see Note 4 to the Condensed Consolidated Financial Statements for more information). When available, the Company uses quoted prices in active markets to determine the fair value of securities. Such instruments are classified within Level 1 of the fair value hierarchy. Examples include exchange traded equity securities and liquid government debt securities.

When instruments are traded in secondary markets and quoted market prices do not exist for such securities, the Company employs valuation techniques, including matrix pricing to estimate fair value. Matrix pricing generally utilizes spread-based models periodically re-calibrated to observable inputs such as market trades or to dealer price bids in similar securities in order to derive the fair value of the instruments. Valuation techniques may also rely on other observable inputs such as yield curves, interest rates and expected principal repayments, and default probabilities. Instruments valued using these inputs are typically classified within Level 2 of the fair value hierarchy. Examples include certain municipal debt securities, corporate debt securities, agency MBS, and restricted equity securities in public companies. Management utilizes prices from independent services to corroborate its estimate of fair value. Depending upon the type of security, the pricing service may provide a listed price, a matrix price, or use other methods including broker-dealer price quotations.

Positions in illiquid securities that do not have readily determinable fair values require significant management judgment or estimation. For these securities the Company uses pricing models, discounted cash flow methodologies, or similar techniques. Assumptions utilized by these techniques include estimates of future delinquencies, loss severities, defaults and prepayments. Securities valued using these techniques are classified within Level 3 of the fair value hierarchy. Examples include certain municipal debt securities, certain CMOs, ABS and equity securities in private companies. For certain CMOs, where there has been limited activity or less transparency around significant inputs to the valuation, such as assumptions regarding performance of the underlying mortgages, these securities are currently classified as Level 3 even though the Company believes that Level 2 inputs could likely be obtainable should markets for these securities become more active in the future.

Derivative Contracts

The Company enters into interest rate swaps and futures contracts as part of its fixed income business to facilitate customer transactions and to hedge a portion of the Company’s trading inventory. In addition, to mitigate interest rate risk should there be a significantly rising rate environment, Raymond James Bank (“RJ Bank”) purchases interest rate caps. See Note 10 of the Notes to the Condensed Consolidated Financial Statements for more information. Fair values for derivative contracts are obtained from counterparties, pricing models that consider current market trading levels and the contractual prices for the underlying financial instruments, as well as time value and yield curve or other volatility factors underlying the positions. Where model inputs can be observed in a liquid market and the model does not require significant judgment, such derivative contracts are typically classified within Level 2 of the fair value hierarchy.

Available for Sale Securities

Available for sale securities are comprised primarily of CMOs and other residential mortgage related debt securities. Debt and equity securities classified as available for sale are reported at fair value with unrealized gains and losses, net of deferred taxes, reported in shareholders' equity as a component of accumulated other comprehensive income (“OCI”) unless the loss is considered to be other-than-temporary, in which case, the related credit loss portion is recognized as a loss in other revenue. See Note 5 of the Notes to the Condensed Consolidated Financial Statements for more information.

The fair value of available for sale securities is determined by obtaining third party pricing service bid quotations and third party broker-dealer quotes. Third party pricing service bid quotations are based on current market data. The third party pricing service utilizes evaluated pricing models that vary by asset class and incorporate available trade, bid and other current market information as well as cash flow expectations and, when available, loan performance data. The market inputs the third party pricing service normally seeks for these price evaluations are based upon observable data including benchmark yields, reported trades, broker-dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids, offers, and reference data including market research publications. Securities valued using these valuation techniques are generally classified within Level 2 of the fair value hierarchy.

For all subordinated non-agency CMOs, the Company estimates fair value by utilizing discounted cash flow analyses, using observable market data where available as well as unobservable inputs provided by management. The unobservable inputs utilized in these valuation techniques reflect the Company’s own supposition about the assumptions that market participants would use in pricing a security, including those about future delinquencies, loss severities, defaults and prepayments. Securities valued using these valuation techniques are classified within Level 3 of the fair value hierarchy.

Upon adopting FSP SFAS No. 157-4 during the quarter ended March 31, 2009, the Company changed the valuation technique used for senior non-agency CMOs as a result of the significant decrease in the volume and level of activity for these securities. The Company utilizes a discounted cash flow analysis to determine which price quote is most representative of fair value under the current market conditions. In most cases (16 of 25 senior securities), third party pricing service bid quotations based upon observable data as described above was determined to be the most representative indication of fair value for these securities. For the remaining senior securities, the Company’s discounted cash flow analysis indicated third party broker-dealer quotes as more representative and accordingly, the Company gave correspondingly more weight to that indicator of fair value. In order to validate that the inputs used by the third party pricing service are observable, management requests on a quarterly basis, the inputs for a sample of senior securities and compares these inputs to those used in the Company’s discounted cash flow analysis. Securities measured using these valuation techniques are generally classified within Level 2 of the fair value hierarchy.

If these sources are not available or are deemed unreliable, then a security’s fair value is estimated using the Company’s discounted cash flow analyses as is used for the subordinated non-agency CMOs. In such instances, the securities measured are generally classified within Level 3 of the fair value hierarchy.

Private Equity Investments

Private equity investments, held primarily by the Company’s Proprietary Capital segment, consist of various direct and third party private equity and merchant banking investments. The valuation of these investments requires significant management judgment due to the absence of quoted market prices, inherent lack of liquidity and long-term nature of these assets. Direct private equity investments are valued initially at the transaction price until significant transactions or developments indicate that a change in the carrying values of these investments is appropriate. Generally, the carrying values of these investments will be adjusted based on financial performance, investment-specific events, financing and sales transactions with third parties and changes in market outlook. Investments in funds structured as limited partnerships are generally valued based on the financial statements of the partnerships which typically use similar methodologies. Investments valued using these valuation techniques are classified within Level 3 of the fair value hierarchy.

Other Investments

Other investments consist predominantly of Canadian government bonds. The fair value of these bonds is estimated using recent external market transactions. Such bonds are classified within Level 1 of the fair value hierarchy.

Recurring Fair Value Measurements

Assets and liabilities measured at fair value on a recurring basis as of June 30, 2009 are presented below:

				FIN 39
June 30, 2009 (in 000’s)	Level 1	Level 2	Level 3	Netting (1)	Total

Assets:
Cash Equivalents	$ 122,385	$ -	$ -	$ -	$ 122,385
Trading Instruments:
Provincial and Municipal
Obligations	350	53,646	7,772	-	61,768
Corporate Obligations	4,920	16,102	3,264	-	24,286
Government Obligations	27,741	-	-	-	27,741
Agency MBS and CMOs	18	93,745	-	-	93,763
Non-Agency CMOs and ABS	-	1,064	12,896	-	13,960
Total Debt Securities	33,029	164,557	23,932	-	221,518
Derivative Contracts	-	106,704	-	(80,519)	26,185
Equity Securities	52,463	1,046	-	-	53,509
Other Securities	174	2,625	21	-	2,820
Total Trading Instruments	85,666	274,932	23,953	(80,519)	304,032

Available for Sale Securities:
Agency MBS and CMOs	-	297,796	-	-	297,796
Non-Agency CMOs	-	229,485	4,853	-	234,338
Other Securities	5	5,009	-	-	5,014
Total Available for Sale Securities	5	532,290	4,853	-	537,148

Private Equity and Other Investments:
Private Equity Investments	-	-	140,108	-	140,108
Other Investments	89,284	5,157	226	-	94,667
Total Private Equity and Other
Investments	89,284	5,157	140,334	-	234,775

Other Assets	-	388	-	-	388
Total	$ 297,340	$ 812,767	$ 169,140	$ (80,519)	$ 1,198,728

Liabilities:
Trading Instruments Sold but
Not Yet Purchased:
Provincial and Municipal
Obligations	$ -	$ 254	$ -	$ -	$ 254
Corporate Obligations	-	399	-	-	399
Government Obligations	30,517	-	-	-	30,517
Agency MBS and CMOs	555	1	-	-	556
Total Debt Securities	31,072	654	-	-	31,726
Derivative Contracts	-	74,166	-	(70,181)	3,985
Equity Securities	9,392	20	-	-	9,412
Other Securities	-	118	-	-	118
Total Trading Instruments Sold
but Not Yet Purchased	40,464	74,958	-	(70,181)	45,241

Other Liabilities	-	-	184	-	184
Total	$ 40,464	$ 74,958	$ 184	$ (70,181)	$ 45,425

(1) As permitted under FSP FIN No. 39-1, the Company has elected to net derivative receivables and derivative payables and the related cash collateral received and paid when a legally enforceable master netting agreement exists.

Level 3 Items Measured at Fair Value on a Recurring Basis

Assets and liabilities are considered Level 3 in the fair value hierarchy when their value is determined using pricing models, discounted cash flow methodologies or similar techniques and at least one significant model assumption or input is unobservable. Level 3 instruments also include those for which the determination of fair value requires significant management judgment or estimation. As of June 30, 2009, 6.72% and 0.29% of the Company’s total assets and total liabilities, respectively, represented in the fair value hierarchy are measured at fair value on a recurring basis. Instruments measured at fair value on a recurring basis categorized as Level 3 as of June 30, 2009 represent 0.95% of the Company’s total assets.

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. The following tables present additional information about Level 3 assets and liabilities measured at fair value on a recurring basis for the three and nine months ended June 30, 2009:


	Level 3 Financial Assets at Fair Value						Change in
							Unrealized
							Gains/
			Total				(Losses)
			Unrealized				Related to
		Total Realized	Gains/(Losses)	Purchases,			Financial
		/Unrealized	Included in	Issuances,	Transfers		Instruments
	Fair Value,	Gains/(Losses)	Other	and	In and/	Fair Value,	Held at
Three Months Ended	March 31,	Included in	Comprehensive	Settlements,	or Out of	June 30,	June 30,
June 30, 2009 (in 000’s)	2009	Earnings	Income	Net	Level 3	2009	2009

Assets:
Trading Instruments:
Provincial and Municipal
Obligations	$ 7,962	$ (52)	$ -	$ (138)	$ -	$ 7,772	$ (80)
Corporate Obligations	3,834	(570)	-	-	-	3,264	(570)
Non-Agency CMOs and
ABS	15,484	(2,173)	-	(415)	-	12,896	-
Other Securities	-	-	-	21	-	21	-

Available for Sale Securities:
Non-Agency CMOs	5,323	(1,312)	997	(155)	-	4,853	(1,312)


Private Equity and Other
Investments:
Private Equity Investments	130,902	9,504 1	-	(298)	-	140,108	9,504
Other Investments	221	1	-	4	-	226	1

Liabilities:
Other Liabilities	$ 253	$ 69	$ -	$ -	$ -	$ 184	$ (2)

(1)	Includes $12.1 million of income from the write-up of a private equity investment. Since the Company only owns a portion of this investment, only $1.8 million of this gain is included in the Company’s income after minority interest eliminations.


	Level 3 Financial Assets at Fair Value						Change in
							Unrealized
							Gains/
			Total				(Losses)
			Unrealized				Related to
		Total Realized	Gains/(Losses)	Purchases,			Financial
		/Unrealized	Included in	Issuances,	Transfers		Instruments
	Fair Value,	Gains/(Losses)	Other	and	In and/	Fair Value,	Held at
Nine months ended	September 30,	Included in	Comprehensive	Settlements,	or Out of	June 30,	June 30,
June 30, 2009 (in 000’s)	2008	Earnings	Income	Net	Level 3	2009	2009

Assets:
Trading Instruments:
Provincial and Municipal
Obligations	$ 7,107	$ (468)	$ -	$ 1,133	$ -	$ 7,772	$ (496)
Corporate Obligations	-	(708)	-	138	3,8341	3,264	(708)
Non-Agency CMOs and					-
ABS	20,220	(4,786)	-	(2,538)	-	12,896	(2,996)
Other Securities	-	-	-	21	-	21	-

Available for Sale Securities:
Non-Agency CMOs	8,710	(7,279)	3,653	(231)	-	4,853	(7,279)

Private Equity and Other
Investments:
Private Equity Investments	153,282	9,1292	-	(22,303)3	-	140,108	9,257
Other Investments	844	133	-	(751)	-	226	(129)

Liabilities:
Other Liabilities	$ 178	$ (6)	$ -	$ -	$ -	$ 184	$ (111)

1)	The level classification transfer of a corporate obligation was driven by changes in the price transparency for the security. This classification transfer occurred as of March 31, 2009.

2)	Includes $12.1 million of income from the write-up of a private equity investment. Since the Company only owns a portion of this investment, only $1.8 million of this gain is included in the Company’s income after minority interest eliminations.

3)	Excluding the impact of the deconsolidation of certain internally sponsored private equity limited partnerships, the purchases of private equity investments net of any distributions received was $6.2 million for the period presented. See Note 1 above for additional information.

Gains and losses (realized and unrealized) included in earnings for the three and nine months ended June 30, 2009 are reported in net trading profits and other revenues in the Company’s statements of income as follows:

	Net Trading	Other
Three Months Ended June 30, 2009 (in 000’s)	Profits	Revenues

Total gains or losses included in earnings	$ (2,795)	$ 8,262

Change in unrealized gains or losses relating to assets
still held at reporting date	$ (650)	$ 8,191

	Net Trading	Other
Nine Months Ended June 30, 2009 (in 000’s)	Profits	Revenues

Total gains or losses included in earnings	$ (5,962)	$ 1,977

Change in unrealized gains or losses relating to assets
still held at reporting date	$ (4,200)	$ 1,738

Nonrecurring Fair Value Measurements

Certain assets and liabilities are not measured at fair value on an ongoing basis but are subject to fair value measurement in certain circumstances, for example, when there is evidence of impairment. These instruments are measured at fair value on a nonrecurring basis and include certain loans that have been deemed impaired.

When a loan held for investment is deemed impaired, a creditor measures impairment based on the present value of expected future cash flows discounted at the loan’s effective interest rate, except that as a practical expedient, impairment may be measured based on the fair value of the loan cash flow or on the fair value of the underlying collateral if the loan is collateral supported. As of June 30, 2009, loans deemed to be impaired were subsequently measured at fair value totaling $82.2 million, net of amounts charged off and a $13.0 million allowance for loan losses.

The following table presents financial instruments by level within the fair value hierarchy at June 30, 2009, for which a nonrecurring change in fair value was recorded during the year ended June 30, 2009.


	Fair Value Measurements
(in 000’s)	Level 1	Level 2	Level 3	Total

Assets:
Bank Loans	$ -	$ -	$ 82,185	$ 82,185

The adjustments to fair value of these loans outstanding at June 30, 2009 for the three and nine months ended June 30, 2009 resulted in $14.9 million and $55.8 million in losses, respectively.

Fair Value Option

Effective October 1, 2008, the Company adopted SFAS 159. SFAS 159 allows companies to elect to follow fair value accounting for certain financial assets and liabilities on an instrument by instrument basis. The Company elected not to adopt the fair value option for any other financial assets and liabilities as permitted by SFAS 159.

FAIR VALUE DISCLOSURES

Many but not all of the financial instruments held by the Company are recorded at fair value on the Condensed Consolidated Statements of Financial Condition. SFAS 107 requires the disclosure of the estimated fair value of certain financial instruments and significant assumptions used to estimate their fair value. Effective for the quarter ended June 30, 2009, the Company has adopted FSP SFAS No. 107-1 which requires fair value disclosures as detailed within SFAS 107 to be included in interim reporting periods.

The fair values of financial instruments for which the Company did not elect the fair value option or value in accordance with SFAS 157 have been derived, in part, by management’s assumptions, the estimated amount and timing of future cash flows and estimated discount rates. Different assumptions could significantly affect these estimated fair values. Accordingly, the net realizable values could be materially different from the estimates presented below. In addition, the estimates are only indicative of the value of individual financial instruments and should not be considered an indication of the fair value of the Company. The provisions of SFAS 107 do not require the disclosure of the fair value of non-financial instruments including property, equipment and leasehold improvements as well as goodwill.

The following disclosures represent financial instruments in which the ending balance at June 30, 2009 are not carried at fair value in accordance with SFAS 157 on the Company’s Consolidated Statements of Financial Condition:

Short-term Financial Instruments: The carrying value of short-term financial instruments, including cash and cash equivalents, assets segregated pursuant to federal regulations and other segregated assets, securities either purchased or sold under agreements to resell and other collateralized financings are recorded at amounts that approximate the fair value of these instruments. These financial instruments generally expose the Company to limited credit risk and have no stated maturities or have short-term maturities and carry interest rates that approximate market rates.

Bank Loans, Net: These financial instruments are primarily comprised of loans originated or purchased by RJ Bank and include commercial and residential real estate loans, as well as commercial and consumer loans intended to be held until maturity or payoff. In addition, these financial instruments consist of residential mortgage loans originated by RJ Bank for sale in the secondary market as well as corporate loans held for sale. The remainder of these balances includes the guaranteed portions of Small Business Administration (“SBA”) loans purchased by RJ Bank with the intention to pool for the securitization to the secondary market.

For variable-rate loans held for investment, which reprice frequently and have no significant change in credit risk, fair values approximate carrying values. Fair values for fixed-rate loans held for investment are estimated using discounted cash flow analyses, using interest rates currently being offered for loans with similar terms to borrowers of similar credit quality. Any loans held for investment which are deemed to be impaired are disclosed in the nonrecurring fair value measurements above. The fair value of loans held for sale and those purchased in the SBA market is estimated using current market prices for loans with similar terms and borrowers of similar credit quality.

Receivables and Other Assets: Brokerage client receivables, receivables from broker-dealers and clearing organizations, stock borrowed receivables, other receivables, and certain other assets are recorded at amounts that approximate fair value. RJ Bank holds stock in the Federal Home Loan Bank (“FHLB”) which is not publicly traded. Cost was used to estimate the fair value, since the FHLB will buy back at par any holdings of excess stock above that required for membership. In addition, RJ Bank holds a small Community Reinvestment Act investment for which cost approximates fair value.

Bank Deposits: The fair values for demand deposits are, by definition, equal to the amount payable on demand at the reporting date (that is, their carrying amounts). The carrying amounts of variable-rate money-market and savings accounts approximate their fair values at the reporting date as these are short-term in nature. Fair values for fixed-rate certificate accounts are estimated using a discounted cash flow calculation that applies interest rates currently being offered on certificates to a schedule of expected monthly maturities on time deposits.

Loans Payable: The fair value of the FHLB advances held at RJ Bank is based on the discounted value of contractual cash flows. The discount rate is estimated using the rates currently offered by creditors for advances of similar terms and remaining maturities. The fair value of the mortgage note payable associated with the financing of the Company’s home office complex is based upon an estimate of the current market rates for similar loans.

Payables: Brokerage client payables, payables due to broker-dealers and clearing organizations, stock loaned payables, and trade and other payables are recorded at amounts that approximate fair value.

The carrying amounts and estimated fair values of the Company’s financial instruments that are not carried at fair value at June 30, 2009 are as follows:

	June 30, 2009
	Carrying	Estimated
	Amount	Fair Value
	(in 000’s)

Financial Assets:
Bank Loans, Net	$ 7,075,572	$ 7,187,576
Financial Liabilities:
Loans Payable	110,294	111,175
Bank Deposits	7,637,558	7,644,081

NOTE 4 – TRADING INSTRUMENTS AND TRADING INSTRUMENTS SOLD BUT NOT YET PURCHASED:

	June 30, 2009		September 30, 2008
		Instruments		Instruments
		Sold but		Sold but
	Trading	Not Yet	Trading	Not Yet
	Instruments	Purchased	Instruments	Purchased
	(in 000's)

Provincial and Municipal Obligations	$ 61,768	$ 254	$ 101,748	$ 79
Corporate Obligations	24,286	399	34,617	-
Government Obligations	27,741	30,517	28,896	82,062
Agency MBS and CMOs	93,763	556	60,260	25
Non-Agency CMOs and ABS	13,960	-	9,811	-
Total Debt Securities	221,518	31,726	235,332	82,166

Derivative Contracts	26,185	3,985	35,315	19,302
Equity Securities	53,509	9,412	42,391	22,288
Other Securities	2,820	118	970	-
Total	$ 304,032	$ 45,241	$ 314,008	$ 123,756

Auction rate securities totaling $6.1 million and $16.8 million at June 30, 2009 and September 30, 2008, respectively, are predominately included in Municipal Obligations in the table above. At both June 30, 2009 and September 30, 2008 these securities were carried at par, which is management’s estimate of fair value. The Company believes most of the remainder of these securities will be redeemed at par, within a reasonable time period, by virtue of call provisions, as issuers refinance their bonds to reduce the higher levels of debt service resulting from recent failed auctions. There were no auction rate securities in Trading Instruments Sold but Not Yet Purchased as of June 30, 2009 or September 30, 2008.

See Note 3 above for information regarding the fair value of Trading Instruments and Trading Instruments Sold but Not Yet Purchased.

NOTE 5 - AVAILABLE FOR SALE SECURITIES:

Available for sale securities are comprised primarily of CMOs, other residential mortgage-related debt securities owned by RJ Bank, and certain equity securities owned by the Company's non-broker-dealer subsidiaries. There were no proceeds from the sale of available for sale securities for the three and nine months ended June 30, 2009 and 2008.

The amortized cost and fair values of securities available for sale at June 30, 2009 and September 30, 2008 are as follows:

	June 30, 2009
		Gross	Gross
		Unrealized	Unrealized
	Cost Basis	Gains	Losses	Fair Value
	(in 000's)
Agency Mortgage Backed Securities and Collateralized Mortgage
Obligations	$ 301,310	$ 160	$ (3,674)	$ 297,796
Non-Agency Collateralized Mortgage Obligations	350,373	3	(116,038)	234,338
Other Securities	5,000	9	-	5,009

Total RJ Bank Available for Sale Securities	656,683	172	(119,712)	537,143

Other Securities	3	2	-	5

Total Available for Sale Securities	$ 656,686	$ 174	$ (119,712)	$ 537,148

	September 30, 2008
		Gross	Gross
		Unrealized	Unrealized
	Cost Basis	Gains	Losses	Fair Value
	(in 000's)
Agency Mortgage Backed Securities and Collateralized Mortgage
Obligations	$ 262,823	$ 82	$ (3,907)	$ 258,998
Non-Agency Collateralized Mortgage Obligations	404,044	-	(85,116)	318,928

Total RJ Bank Available for Sale Securities	666,867	82	(89,023)	577,926

Other Securities	3	4	-	7

Total Available for Sale Securities	$ 666,870	$ 86	$ (89,023)	$ 577,933

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

The following table shows the contractual maturities, carrying values and current yields for RJ Bank's available for sale securities at June 30, 2009. Since RJ Bank’s available for sale securities are backed by mortgages, actual maturities will differ from contractual maturities because borrowers may have the right to prepay obligations without prepayment penalties.

			After One But			After Five But
	Within One Year		Withing Five Years			Withing Ten Years		After Ten Years		Total
		Weighted			Weighted		Weighted		Weighted		Weighted
	Balance	Average	Balance		Average	Balance	Average	Balance	Average	Balance	Average
	Due	Yield	Due		Yield	Due	Yield	Due	Yield	Due	Yield
	($ in 000’s)
Agency
Mortgage
Backed
Securities	$ -		$ 13,411	1.40%		$ 117,310	1.24%	$167,075	1.36%	$297,796	1.31%
Non-Agency
Collateralized
Mortgage
Obligations	-		-	-		-	-	234,338	8.56%	234,338	8.56%
Other Securities	-		5,009	0.74%		-	-	-	-	5,009	0.74%
	$ -		$ 18,420			$ 117,310		$401,413		$537,143

The following table shows RJ Bank’s investments’ 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 at June 30, 2009:

	Less than 12 Months		12 Months or More		Total
	Estimated		Estimated		Estimated
	Fair	Unrealized	Fair	Unrealized	Fair	Unrealized
	Value	Losses	Value	Losses	Value	Losses
	(in 000’s)
Agency Mortgage Backed Securities and
Collateralized Mortgage Obligations	$ 148,228	$ (1,342)	$ 140,806	$ (2,332)	$ 289,034	$ (3,674)

Non-Agency Collateralized Mortgage
Obligations	45	(13)	234,152	(116,025)	234,197	(116,038)


Total Temporarily Impaired Securities	$ 148,273	$ (1,355)	$ 374,958	$ (118,357)	$ 523,231	$ (119,712)

The reference point for determining when securities are in a loss position is quarter 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 Mortgage Backed Securities and Collateralized Mortgage Obligations

The Federal National Mortgage Association or Federal Home Loan Mortgage Corporation, both of which were placed under the conservatorship of the U.S. Government on September 7, 2008, as well as the Government National Mortgage Association, guarantee the contractual cash flows of the agency mortgage backed securities. At June 30, 2009, of the 94 U.S. government-sponsored enterprise mortgage backed securities in a continuous unrealized loss position, 20 were in a continuous unrealized loss position for less than 12 months and 74 for 12 months or more. The unrealized losses at June 30, 2009 were primarily due to the continued illiquidity and uncertainty in the markets. The Company does not consider these securities other-than-temporarily impaired due to the guarantee provided by the Federal National Mortgage Association, the Federal Home Loan Mortgage Corporation, and the Government National Mortgage Association as to the full payment of principal and interest, and the fact that the Company has the ability and intent to hold these securities to maturity.

Non-Agency Collateralized Mortgage Obligations

As of June 30, 2009 and including subsequent ratings changes, $31.4 million of the non-agency collateralized mortgage obligations were rated AAA by two rating agencies and $202.9 million were rated less than AAA by at least one rating agency. Of the 29 non-agency collateralized mortgage obligations in a continuous unrealized loss position, one was in a continuous unrealized loss position for less than 12 months and 28 for 12 months or more. All of the non-agency securities carry various amounts of credit enhancement, and none are collateralized with subprime loans. These securities were purchased based on the underlying loan characteristics such as loan to value (“LTV”) ratio, credit scores, property type, location and the current level of credit enhancement. Current characteristics of each security owned such as delinquency and foreclosure levels, credit enhancement, projected losses and coverage are reviewed monthly by management.

The Company adopted FSP SFAS No. 115-2 and SFAS 124-2 on January 1, 2009. See Note 2 above for additional information. The Company did not record a cumulative-effect adjustment upon adoption of this guidance as the adjustment was deemed to be immaterial.

For securities in an unrealized loss position at quarter end, the Company makes an assessment whether these securities are impaired on an other-than-temporary basis. In order to evaluate the Company’s risk exposure and any potential impairment of these securities, characteristics of each security owned such as collateral type, delinquency and foreclosure levels, credit enhancement, projected loan losses and collateral coverage are reviewed monthly by management. The following factors are considered to determine whether an impairment is other-than-temporary: the Company’s intention to hold the security, the Company’s assessment of whether it more likely than not will be required to sell the security before the recovery of its amortized cost basis, and whether the evidence indicating that the Company will recover the entire amortized cost basis of a security outweighs evidence to the contrary. Evidence considered in this assessment includes the reasons for the impairment, the severity and duration of the impairment, changes in value subsequent to period end, recent events specific to the issuer or industry, forecasted performance of the security, and any changes to the rating of the security by a rating agency.

In applying FSP SFAS No. 115-2 and SFAS 124-2 and FSP EITF 99-20-1, which amended EITF 99-20, the Company determines the cash flows expected to be collected for each security based upon its best estimate of future delinquencies, loss severity and prepayments to determine the probability of future losses resulting in other-than-temporary impairment (“OTTI”). Since the decline in fair value of the securities presented in the table above is not primarily attributable to credit quality but to a significant widening of interest rate spreads across market sectors related to the continued illiquidity and uncertainty in the markets, and because the Company does not intend to sell these securities and it is highly unlikely these securities will have to be sold, it does not consider these securities to be other-than-temporarily impaired as of June 30, 2009. Securities on which there is an unrealized loss that is deemed to be other-than-temporary are written down to fair value with the credit loss portion of the write-down recorded as a realized loss in other revenue and the non-credit portion of the write-down recorded in OCI. The credit loss portion of the write-down is the difference between the present value of the cash flows expected to be collected and the amortized cost basis of the security. The previous amortized cost basis of the security less the OTTI recognized in earnings establishes the new cost basis for the security.

As of June 30, 2009, those debt securities with other-than-temporary impairment in which only the amount of loss related to credit was recognized in earnings consisted entirely of non-agency collateralized mortgage obligations. The Company estimates the portion of loss attributable to credit using a discounted cash flow model. The Company’s discounted cash flow model utilizes relevant assumptions such as prepayment rate, default rate, and loss severity on a loan level basis. Assumptions used can vary widely from loan to loan, and are influenced by such factors as loan interest rate, geographical location of the borrower, borrower characteristics and collateral type. The Company then uses a third party vendor to obtain information about the structure of the security in order to determine how the underlying collateral cash flows will be distributed to each of the security’s tranches. Expected principal and interest cash flows on the impaired debt security are discounted using the effective interest rate implicit in the security at the time of acquisition or at the current yield used to accrete the beneficial interest for securities coming within the scope of EITF 99-20.

Based on the expected cash flows derived from the model, the Company expects to recover the remaining unrealized losses on non-agency collateralized mortgage obligations. 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. Significant assumptions used in the valuation of non-agency collateralized mortgage obligations include default rates from 1.4% to 29.8% with a weighted average of 11.7%, loss severity from 10.0% to 58.7% with a weighted average of 36.5% and prepayment rates of 18%. These assumptions are subject to change depending on a number of factors such as economic conditions, changes in home prices, delinquency and foreclosure statistics, among others. Events that may trigger material declines in fair values for these securities in the future would include but are not limited to deterioration of credit metrics, significantly higher levels of default and severity of loss on the underlying collateral, deteriorating credit enhancement and loss coverage ratios, or further illiquidity.

Seven non-agency CMOs were considered to be other-than-temporarily impaired as of June 30, 2009, including the addition of three non-agency CMOs that were not previously considered to be OTTI. Even though there is no intent to sell these securities and it is highly unlikely these securities will have to be sold, the Company does not expect to recover the entire amortized cost basis of these securities, and therefore, recorded $1.5 million of OTTI in other revenue and recognized a $10.6 million charge in accumulated OCI during the three months ended June 30, 2009. The Company recorded $8.2 million of OTTI charges in other revenue and recognized a charge of $15.4 million in accumulated OCI for the nine months ended June 30, 2009. The Company recognized $2.8 million of OTTI in other revenue for the three and nine months ended June 30, 2008 for one security which was identified as other-than-temporarily impaired during the third quarter in fiscal 2008.

Changes in the amount related to credit losses recognized in earnings on available for sale debt securities:

	Three Months Ended		Nine Months Ended
	June 30,	June 30,	June 30,	June 30,
	2009	2008	2009	2008
	($ in 000’s)

Amount related to credit losses on securities held
by the Company at the beginning of the period	$ 11,605	$ -	$ 4,869	$ -
Additions for the amount related to credit loss for
which an OTTI was not previously recognized (1)	1,430	2,823	6,806	2,823
Additional increases to the amount related to credit
loss for which an OTTI was previously
recognized (1)	30	-	1,390	-
Amount related to credit losses on securities held
by the Company at the end of the period	$ 13,065	$ 2,823	$ 13,065	$ 2,823

(1)	The Company does not intend to sell the securities and it is not more likely than not that the Company will be required to sell the securities before recovery of its amortized cost basis.

NOTE 6 – BANK LOANS, NET:

Bank client receivables are primarily comprised of loans originated or purchased by RJ Bank and include commercial and residential real estate loans, as well as commercial and consumer loans. These receivables are collateralized by first or second mortgages on residential or other real property, by other assets of the borrower, or are unsecured. The following table presents the balance and associated percentage of each major loan category in RJ Bank's portfolio, including loans receivable and loans available for sale:


	June 30,		September 30,
	2009		2008
	Balance	%	Balance	%
	($ in 000’s)

Commercial Loans	$ 862,499	12%	$ 725,997	10%
Real Estate Construction Loans	398,419	6%	346,691	5%
Commercial Real Estate Loans (1)	3,359,889	46%	3,528,732	49%
Residential Mortgage Loans	2,603,726	36%	2,599,567	36%
Consumer Loans	28,194	-	23,778	-

Total Loans	7,252,727	100%	7,224,765	100%

Net Unearned Income and Deferred Expenses (2)	(40,127)		(41,383)
Allowance for Loan Losses	(137,028)		(88,155)

	(177,155)		(129,538)

Loans, Net	$ 7,075,572		$ 7,095,227

(1)

Of this amount, $1.3 billion and $1.2 billion is secured by non-owner occupied commercial real estate properties or their repayment is dependent upon the operation or sale of commercial real estate properties as of June 30, 2009 and September 30, 2008, respectively. The remainder is wholly or partially secured by real estate, the majority of which are also secured by other assets of the borrower.

(2)	Includes purchase premiums, purchase discounts, and net deferred origination fees and costs.

At June 30, 2009 and September 30, 2008, RJ Bank had $50 million and $1.7 billion, respectively, in FHLB advances secured by a blanket lien on RJ Bank's residential mortgage loan portfolio. See Note 9 of the Notes to the Condensed Consolidated Financial Statements for more information regarding the FHLB advances.

At June 30, 2009 and September 30, 2008, RJ Bank had $4.0 million and $524,000 in residential mortgage loans available for sale, respectively. RJ Bank's gain from the sale of originated residential loans available for sale was $438,000 and $304,000 for the nine months ended June 30, 2009 and 2008, respectively.

During the March 31, 2009 quarter, RJ Bank became a participant in the SBA loan market by purchasing the guaranteed portions of SBA Section 7(a) loans. Most SBA 7(a) loans have adjustable rates and float at a spread over prime or LIBOR and reset monthly or quarterly. Once purchased, RJ Bank will typically hold the guaranteed loan for up to 180 days and classify them as held for sale. RJ Bank will aggregate like SBA loans by similar characteristics into pools for securitization to the secondary market. Occasionally, an individual loan may be sold prior to securitization. At June 30, 2009, RJ Bank had $21.5 million in SBA loans held for sale. There was one SBA loan securitization during the quarter ended June 30, 2009, which was subsequently sold during the same quarter. The proceeds from the sale of this SBA loan securitization were $18.8 million. See Note 16 of the Notes to the Condensed Consolidated Financial Statements for further information regarding RJ Bank’s committed sales of SBA loan securitizations. In addition to the SBA loan securitization mentioned above, RJ Bank had sales of individual SBA loans during the three months ended June 30, 2009 totaling $26.8 million. The gains from the sale of both the SBA loan securitization and the individual SBA loans were immaterial for the three and nine months ended June 30, 2009.

Certain officers, directors, and affiliates, and their related entities were indebted to RJ Bank for a total of $1.8 million and $1.9 million at June 30, 2009 and September 30, 2008, respectively. All such loans were made in the ordinary course of business.

Loan interest and fee income for the three months ended June 30, 2009 and 2008 was $73.2 million and $83.3 million, respectively. Loan interest and fee income for the nine months ended June 30, 2009 and 2008 was $253.9 million and $257.0 million, respectively.

The following table shows the contractual maturities of RJ Bank’s loan portfolio at June 30, 2009, including contractual principal repayments. This table does not, however, include any estimates of prepayments. These prepayments could significantly shorten the average loan lives and cause the actual timing of the loan repayments to differ from those shown in the following table:

	Due in
	1 Year or Less	1 Year – 5 Years	>5 Years	Total
	(in 000’s)

Commercial Loans	$ 11,650	$ 702,366	$ 148,483	$ 862,499
Real Estate Construction Loans	159,857	220,922	17,640	398,419
Commercial Real Estate Loans (1)	288,562	2,932,296	139,031	3,359,889
Residential Mortgage Loans	426	9,452	2,593,848	2,603,726
Consumer Loans	2,137	817	25,240	28,194

Total Loans	$ 462,632	$ 3,865,853	$ 2,924,242	$ 7,252,727

(1)

RJ Bank classifies loans as nonperforming when full and timely collection of interest or principal becomes uncertain or when they are 90 days past due. The following table shows the comparative data for nonperforming loans and assets:

	June 30,	September 30,
	2009	2008
	($ in 000’s)

Nonaccrual Loans	$ 134,305	$ 52,033
Accruing Loans Which are 90 Days or more
Past Due	16,091	6,131

Total Nonperforming Loans	150,396	58,164

Real Estate Owned and Other
Repossessed Assets, Net	9,300	4,144

Total Nonperforming Assets, Net	$ 159,696	$ 62,308

Total Nonperforming Assets as a % of
Total Loans, Net and Other Real Estate Owned, Net	2.25%	0.88%

The gross interest income related to nonperforming loans, which would have been recorded had these loans been current in accordance with their original terms, totaled $3.6 million for the quarter ended June 30, 2009 or $6.4 million since origination. The interest income recognized on nonaccrual loans for the quarter ended June 30, 2009 was $233,000.

RJ Bank considers a loan to be impaired when it is probable that it will be unable to collect the scheduled payments of principal or interest when due according to the terms of the loan agreement. At June 30, 2009, the gross recorded investment in impaired loans was $95.2 million with a related allowance for loan losses of $13.0 million. At September 30, 2008, the gross recorded investment in impaired loans was $37.5 million with a related allowance for loan losses of $5.0 million. All recorded impaired loan balances have had reserves established based upon management’s analysis.

The average impaired loan balance for the three and nine months ended June 30, 2009 was $85.9 million and $59.4 million, respectively. The average impaired loan balance for the three and nine months ended June 30, 2008 was $12.9 million and $6.3 million, respectively.

Nonaccrual loans at June 30, 2009 and September 30, 2008 include residential mortgage loans totaling $33.1 million and $7.4 million, respectively for which a charge-off had previously been recorded. A charge-off is generally recorded when a loan is 90 days past due and is based upon the difference between the loan amount and the estimated value of the loan collateral.

RJ Bank recognizes interest income on impaired loans using the cash or cost recovery method. Interest income recognized on impaired loans for the three and nine months ended June 30, 2009 was $17,000 and $27,000, respectively. No interest income was recognized on impaired loans for the three and nine months ended June 30, 2008.

As of June 30, 2009, three of these impaired corporate loans totaling $14.0 million were classified as troubled debt restructurings. The balance of corporate troubled debt restructurings was significantly reduced from the prior quarter-end, via the sale of one of the loans which totaled $27.2 million. As of June 30, 2009 RJ Bank had commitments to lend an additional $1.3 million to one borrower whose existing corporate loan was classified as a troubled debt restructuring. As of June 30, 2009 four of the impaired residential loans totaling $1.3 million were classified as troubled debt restructurings.

Changes in the allowance for loan losses at RJ Bank were as follows:

	Three Months Ended		Nine Months Ended
	June 30,	June 30,	June 30,	June 30,
	2009	2008	2009	2008
	($ in 000’s)

Allowance for Loan Losses,
Beginning of Period	$ 141,343	$ 70,219	$ 88,155	$ 47,022
Provision For Loan Losses	29,790	12,366	129,639	36,299
Charge-Offs:
Commercial Real Estate Loans	(27,166)	(3,492)	(64,460)	(3,864)
Residential Mortgage Loans	(7,220)	(1,509)	(16,898)	(1,939)

Total Charge-Offs	(34,386)	(5,001)	(81,358)	(5,803)

Total Recoveries	281	(2)	592	64

Net Charge-Offs	(34,105)	(5,003)	(80,766)	(5,739)

Allowance for Loan Losses,
End of Period	$ 137,028	$ 77,582	$ 137,028	$ 77,582

Net Charge-Offs to Average Bank
Loans, Net Outstanding (Annualized)	1.81%	0.31%	1.41%	0.13%

The calculation of the allowance reflects management’s continuing evaluation of the probable losses inherent in the loan portfolio. The allowance for loan losses is comprised of two components: allowances calculated based on formulas for homogeneous classes of loans and specific allowances assigned to certain classified loans individually evaluated for impairment. The calculation of the allowance based on formulas is subjective as management segregates the loan portfolio into homogeneous classes. Each class is then assigned an allowance percentage based on the perceived risk associated with that class of loans, which is then further segregated by loan grade. The factors taken into consideration when assigning the reserve percentage to each reserve category include: estimates of borrower default probabilities and collateral values; trends in delinquencies; volume and terms; changes in geographic distribution, lending policies, local, regional, and national economic conditions; concentrations of credit risk, past loss history and examination results from regulatory agencies. In addition, the Company provides for potential losses inherent in RJ Bank’s unfunded lending commitments using the criteria above, further adjusted for an estimated probability of funding.