Edgar Filing: RAYMOND JAMES FINANCIAL INC

q10123109.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 December 31, 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 x No o

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.

123,738,794 shares of Common Stock as of February 4, 2010

	RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

	Form 10-Q for the Quarter Ended December 31, 2009

	INDEX

		PAGE
PART I.	FINANCIAL INFORMATION

Item 1.	Financial Statements (unaudited)

	Condensed Consolidated Statements of Financial Condition as of December 31, 2009 and September 30, 2009 (unaudited)	3

	Condensed Consolidated Statements of Income and Comprehensive Income for the three months ended December 31, 2009 and December 31, 2008 (unaudited)	4

	Condensed Consolidated Statements of Cash Flows for the three months ended December 31, 2009 and December 31, 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	38

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	60

Item 4.	Controls and Procedures	66

PART II.	OTHER INFORMATION

Item 1.	Legal Proceedings	66

Item 1A.	Risk Factors	66

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	67
Item 3.	Defaults Upon Senior Securities	67
Item 5.	Other Information	67

Item 6.	Exhibits	68

	Signatures	69

PART I FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

(Unaudited)

	December 31,	September 30,
	2009	2009
	($ in 000’s)
Assets
Cash and Cash Equivalents	$ 1,018,585	$ 2,306,085
Assets Segregated Pursuant to Regulations and Other Segregated Assets	1,977,995	2,310,261
Securities Purchased under Agreements to Resell and Other Collateralized Financings	352,268	2,306,186
Financial Instruments, at Fair Value:
Trading Instruments	362,942	431,445
Available for Sale Securities	488,997	509,073
Private Equity and Other Investments	296,056	291,389
Receivables:
Brokerage Clients, Net	1,538,470	1,463,136
Stock Borrowed	635,670	416,964
Bank Loans, Net	6,452,530	6,593,973
Brokers-Dealers and Clearing Organizations	35,788	38,610
Other	436,283	540,035
Deposits with Clearing Organizations	79,668	83,799
Prepaid Expenses and Other Assets	322,998	260,427
Investments in Real Estate Partnerships - Held by Variable Interest Entities	276,335	270,139
Property and Equipment, Net	182,999	186,232
Deferred Income Taxes, Net	171,836	156,399
Goodwill	62,575	62,575

Total Assets	$ 14,691,995	$ 18,226,728

Liabilities And Equity
Trading Instruments Sold but Not Yet Purchased, at Fair Value	$ 91,493	$ 93,376
Securities Sold Under Agreements to Repurchase	22,733	102,758
Payables:
Brokerage Clients	3,143,549	3,789,870
Stock Loaned	1,009,278	490,240
Bank Deposits	7,007,069	9,423,387
Brokers-Dealers and Clearing Organizations	158,698	157,032
Trade and Other	229,067	177,769
Other Borrowings	51,027	980,000
Accrued Compensation, Commissions and Benefits	222,889	330,879
Loans Payable Related to Investments by Variable Interest Entities in Real Estate Partnerships	81,821	89,244
Corporate Debt	358,282	359,034

Total Liabilities	12,375,906	15,993,589

Commitments and Contingencies (See Note 12)

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 127,858,633 at
December 31, 2009 and 127,039,672 at September 30, 2009	1,229	1,227
Shares Exchangeable into Common Stock; 249,013
at December 31, 2009 and 249,168 at September 30, 2009	3,196	3,198
Additional Paid-In Capital	435,788	416,662
Retained Earnings	1,766,808	1,737,591
Treasury Stock, at Cost, 4,123,419 Common Shares at December 31, 2009 and
3,975,136 Common Shares at September 30, 2009	(88,235)	(84,412)
Accumulated Other Comprehensive Income	(25,607)	(41,803)
Total Equity Attributable to Raymond James Financial, Inc.	2,093,179	2,032,463
Noncontrolling Interests	222,910	200,676
Total Equity	2,316,089	2,233,139

Total Liabilities and Equity	$ 14,691,995	$ 18,226,728

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

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
	December 31,	December 31,
	2009	2008
Revenues:
Securities Commissions and Fees	$ 469,151	$ 418,225
Investment Banking	25,718	20,733
Investment Advisory Fees	43,975	44,435
Interest	91,372	143,612
Net Trading Profits	11,637	9,175
Financial Service Fees	36,782	33,135
Other	24,034	26,518
Total Revenues	702,669	695,833

Interest Expense	15,702	31,891
Net Revenues	686,967	663,942

Non-Interest Expenses:
Compensation, Commissions and Benefits	471,079	419,254
Communications and Information Processing	28,074	35,223
Occupancy and Equipment Costs	26,715	26,435
Clearance and Floor Brokerage	8,502	8,588
Business Development	19,881	24,724
Investment Advisory Fees	9,103	9,722
Bank Loan Loss Provision	22,835	24,870
Other	33,665	18,469
Total Non-Interest Expenses	619,854	567,285

Income Before Provision for Income Taxes and Noncontrolling Interests	67,113	96,657

Provision for Income Taxes	26,485	40,571

Net Income Before Noncontrolling Interests	40,628	56,086
Net Loss Attributable to Noncontrolling Interests	(2,275)	(5,007)
Net Income Attributable to Raymond James Financial, Inc.	$ 42,903	$ 61,093

Net Income per Common Share-Basic	$ 0.35	$ 0.50
Net Income per Common Share-Diluted	$ 0.35	$ 0.50
Weighted Average Common Shares
Outstanding-Basic	118,763	116,307
Weighted Average Common and Common
Equivalent Shares Outstanding-Diluted	118,983	116,559

Dividends Paid per Common Share	$ 0.11	$ 0.11

Net Income Attributable to Raymond James Financial, Inc.	$ 42,903	$ 61,093
Other Comprehensive Income, Net of Tax:
Change in Unrealized Loss on Available
for Sale Securities and Non-Credit Portion of Other-Than-Temporary Impairment Losses	13,223	(53,387)
Change in Currency Translations	2,973	(19,810)
Total Comprehensive Income (Loss)	$ 59,099	$ (12,104)

Other-Than-Temporary Impairment:
Total Other-than-Temporary Impairment Losses	$ (15,520)	$ (571)
Portion of Losses recognized in Other
Comprehensive Income (Before Taxes)	12,521	-
Net Impairment Losses Recognized in
Other Revenue	$ (2,999)	$ (571)

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

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(in 000’s)

(continued on next page)

	Three Months Ended
	December 31,	December 31,
	2009	2008
Cash Flows From Operating Activities:
Net Income Before Noncontrolling Interests	$ 40,628	$ 56,086
Adjustments to Reconcile Net Income to Net
Cash Provided by (Used in) Operating Activities:
Depreciation and Amortization	11,758	8,345
Deferred Income Taxes	(23,070)	(16,423)
Premium and Discount Amortization on Available for Sale Securities
and Unrealized/Realized Gain on Other Investments	360	(1,192)
Other-than-Temporary Impairment on Available for Sale Securities	2,999	571
Impairment of and Loss on Sale of Property and Equipment	(22)	6,197
Gain on Sale of Loans Held for Sale and Securitizations	(505)	(49)
Provision for Loan Loss, Legal Proceedings, Bad Debts and Other Accruals	37,635	30,153
Stock-Based Compensation Expense	12,901	2,769
(Gain) Loss on Company-Owned Life Insurance	(3,864)	13,505

(Increase) Decrease in Operating Assets:
Assets Segregated Pursuant to Regulations and Other Segregated Assets	332,266	(342,333)
Receivables:
Brokerage Clients, Net	(75,029)	539,995
Stock Borrowed	(218,706)	117,544
Brokers-Dealers and Clearing Organizations	2,822	113,650
Other	101,904	(16,320)
Securities Purchased Under Agreements to Resell and Other Collateralized
Financings, Net of Securities Sold Under Agreements to Repurchase	(126,107)	(68,953)
Trading Instruments, Net	29,808	13,243
Proceeds from Sale of Loans Held for Sale	13,039	3,540
Proceeds from Sale of SBA Loan Securitizations	93,913	-
Origination of Loans Held for Sale	(119,584)	(3,217)
Excess Tax Benefits from Stock-Based Payment Arrangements	457	(3,754)
Prepaid Expenses and Other Assets	(45,038)	97,614

Increase (Decrease) in Operating Liabilities:
Payables:
Brokerage Clients	(646,321)	144,496
Stock Loaned	519,038	(146,685)
Brokers-Dealers and Clearing Organizations	1,666	(198,043)
Trade and Other	(9,875)	(13,989)
Accrued Compensation, Commissions and Benefits	(107,096)	(115,086)
Income Taxes Payable	35,032	52,171

Net Cash (Used in) Provided by Operating Activities	(138,991)	273,835

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

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(in 000’s)

(continued)

	Three Months Ended
	December 31,	December 31,
	2009	2008

Cash Flows from Investing Activities:
Additions to Property and Equipment, Net	(5,827)	(15,138)
Decrease (Increase) in Loans, Net	177,759	(624,960)
Purchases of Private Equity and Other Investments, Net	(5,069)	(1,703)
Investments in Company-Owned Life Insurance	(8,819)	(8,836)
Investments in Real Estate Partnerships-Held by Variable Interest Entities	(6,196)	(24,761)
Repayments of Loans by Investor Members of Variable Interest Entities Related
to Investments in Real Estate Partnerships	251	783
Decrease (Increase) in Securities Purchased Under Agreements to Resell, Net	2,000,000	(345,000)
Available for Sale Securities Maturations and Repayments	37,975	24,907

Net Cash Provided by (Used in) Investing Activities	2,190,074	(994,708)

Cash Flows from Financing Activities:
Proceeds from Borrowed Funds, Net	1,027	-
Repayments of Borrowings, Net	(930,752)	(2,050,946)
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	1,090	1,260
Repayments of Borrowed Funds Related to Investments by Variable Interest
Entities in Real Estate Partnerships	(8,513)	(9,130)
Proceeds from Capital Contributed to Variable Interest Entities
Related to Investments in Real Estate Partnerships	25,917	10,685
Exercise of Stock Options and Employee Stock Purchases	5,309	4,135
(Decrease) Increase in Bank Deposits	(2,416,318)	18,525
Purchase of Treasury Stock	(3,321)	(4,462)
Dividends on Common Stock	(13,687)	(13,365)
Excess Tax Benefits from Stock-Based Payment Arrangements	(457)	3,754

Net Cash Used in Financing Activities	(3,339,705)	(2,001,424)

Currency Adjustment:
Effect of Exchange Rate Changes on Cash	1,122	(4,214)
Net Decrease in Cash and Cash Equivalents	(1,287,500)	(2,726,511)
Cash and Cash Equivalents at Beginning of Year	2,306,085	3,207,493

Cash and Cash Equivalents at End of Period	$ 1,018,585	$ 480,982

Supplemental Disclosures of Cash Flow Information:
Cash Paid for Interest	$ 6,472	$ 33,601
Cash Paid for Income Taxes	$ 8,972	$ 1,197
Loans Charged-off, Net	$ 23,943	$ 6,885

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

RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

December 31, 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 terms “our”, “we” or “us” refer to RJF and/or one or more of its subsidiaries. In addition, we consolidate any variable interest entities (“VIEs”) in which we are the primary beneficiary. Additional information on these VIEs is provided in Note 7 of these Notes to Condensed Consolidated Financial Statements. 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.

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 February 8, 2010, which is the date the unaudited condensed consolidated financial statements were issued.

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 Annual Report on Form 10-K for the year ended September 30, 2009, as filed with the United States of America (“U.S.”) Securities and Exchange Commission (the “2009 Form 10-K”). To prepare 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 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 consolidated financial statements.

Reclassifications and Update of Significant Accounting Policies

Prior to October 1, 2009, we reported minority interest within mezzanine equity on our consolidated statements of financial condition and in minority interest in earnings of subsidiaries in our computation of net income. As a result of the implementation of new Financial Accounting Standards Board (“FASB”) guidance, we now present noncontrolling interests within shareholders’ equity, separately from our equity. We have reclassified certain amounts previously reported in prior financial statements to retrospectively reflect noncontrolling interest within shareholders’ equity and to allocate net income (loss) between noncontrolling and our own interests.

We implemented new FASB guidance regarding the computation of earnings per share which impacted the prior period computations. See Note 17 of these Notes to Condensed Consolidated Financial Statements for discussion of the change in method and its impact on prior periods.

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

A summary of our significant accounting policies is included in Note 1 on pages 77 – 88 of our 2009 Form 10-K. New FASB guidance related to the valuation of Private Equity Investments and the application of certain pronouncements applicable to nonfinancial assets and liabilities that are not measured at fair value on a recurring basis are discussed in Note 3 of these Notes to Condensed Consolidated Financial Statements. These two changes, together with the changes in minority interests and earnings per share discussed previously, are the only changes in significant accounting policies implemented since the year-end September 30, 2009.

NOTE 2 - 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 not held for resale with original maturities of 90 days or less, other than those used for trading purposes. For further discussion of our accounting policies regarding assets segregated pursuant to regulations and other segregated assets, see Note 1 on page 78 of our 2009 Form 10-K.

The following are financial instruments that are cash and cash equivalents or other investment balances which are readily convertible into cash as of December 31, 2009 and September 30, 2009:

	December 31,	September 30,
	2009	2009
	(in 000's)
Cash and Cash Equivalents:
Cash in banks	$ 1,002,460	$ 1,085,202
U. S. Treasury securities(1)	236	1,206,914
Money market investments	15,889	13,969
Total cash and cash equivalents	1,018,585	2,306,085

Cash and securities segregated pursuant to federal regulations and other
segregated assets (2)	1,977,995	2,310,261
Deposits with clearing organizations(3)	79,668	83,799
	$ 3,076,248	$ 4,700,145

(1)

Consists of U.S. Treasury Securities with maturities of 90 days or less. The balance at September 30, 2009 included $1.2 billion in U.S. Treasury Securities purchased as part of the transactions associated with the point-in-time regulatory balance sheet composition requirements of RJ Bank. See Note 21 on page 127 of our 2009 Form 10-K for discussion of the September 30, 2009 point-in-time test.

(2)

Consists of cash and cash equivalents maintained in accordance with Rule 15c3-3 of the Securities Exchange Act of 1934. Raymond James and Associates, Inc. (“RJ&A”), as a broker-dealer carrying client accounts, is subject to requirements related to maintaining cash or qualified securities in a segregated reserve account for the exclusive benefit of its clients. Additionally, our Canadian broker-dealer subsidiary Raymond James Ltd. (“RJ Ltd”) is required to hold client Registered Retirement Savings Plan funds in trust. Raymond James Bank, FSB (“RJ Bank”) maintains interest-bearing bank deposits that are restricted for pre-funding letter of credit draws related to certain syndicated borrowing relationships in which it is involved. These RJ Bank deposits are occasionally pledged as collateral for Federal Home Loan Bank (“FHLB”) advances.

(3)	Consists of deposits of cash and cash equivalents or other short-term securities held by other clearing organizations or exchanges.

NOTE 3 - FAIR VALUE:

For a further discussion of our valuation methodologies for assets, liabilities measured at fair value, and the fair value hierarchy, see Note 1 pages 79 - 82 in our 2009 Form 10-K.

During the first quarter of fiscal year 2010, there were no material changes to our valuation models.

Effective October 1, 2009 we adopted new FASB accounting guidance regarding the method of determination of the fair value of certain of our investments within our Private Equity Investments. The application of the new accounting valuation guidance did not result in a significant change in the fair value determinations of our Private Equity Investments during the three months ended December 31, 2009.

Our Private Equity Investments include various direct and third-party private equity and merchant banking investments. Private Equity Investments include approximately 45 private equity funds and Raymond James Employee Investment Funds I and II (collectively, the “Private Funds”). See Note 7 of these Notes to Condensed Consolidated Financial Statements for further discussion of the consolidation of the employee investment funds I and II which are variable interest entities. These Private Funds invest primarily in new and developing companies. Our investments in these funds cannot be redeemed directly with the funds; our investment is monetized through distributions received through the liquidation of the underlying assets of these funds. We estimate that the underlying assets of these funds will be liquidated over the life of these funds (typically 10 to 15 years). Approval by the management of these funds is required for us to sell or transfer these investments. Merchant banking investments include ownership interests in private companies with long-term growth potential. See Note 12 of these Notes to Condensed Consolidated Financial Statements for information regarding our unfunded commitments to these funds.

Assets and liabilities measured at fair value on a recurring basis as of December 31, 2009 and September 30, 2009 are presented below:

	Quoted Prices in Active
	Markets for	Significant Other	Significant
	Identical	Observable	Unobservable		Balance as of
	Assets	Inputs	Inputs	Netting	December 31,
December 31, 2009 (in 000’s)	(Level 1)	(Level 2)	(Level 3)	Adjustments(1)	2009

Assets:
Trading Instruments:
Provincial and Municipal
Obligations	$ 88	$ 86,756	$ 5,323	$ -	$ 92,167
Corporate Obligations	5,072	47,930	-	-	53,002
Government and Agency Obligations	26,589	15,704	-	-	42,293
Agency Mortgage Backed Securities (“MBS”) and
Collateralized Mortgage Obligations (“CMOs”)	744	123,683	-	-	124,427
Non-Agency CMOs and ABS	-	1,017	9,176	-	10,193
Total Debt Securities	32,493	275,090	14,499	-	322,082
Derivative Contracts	-	87,423	-	(64,054)	23,369
Equity Securities	13,991	929	-	-	14,920
Other Securities	384	727	1,460	-	2,571
Total Trading Instruments	46,868	364,169	15,959	(64,054)	362,942

Available for Sale Securities:
Agency MBS and CMOs	-	250,806	-	-	250,806
Non-Agency CMOs	-	230,531	2,621	-	233,152
Other Securities	9	5,030	-	-	5,039
Total Available for Sale Securities	9	486,367	2,621	-	488,997

Private Equity and Other Investments:
Private Equity Investments	-	-	144,967(2)	-	144,967
Other Investments	145,241	5,625	223	-	151,089
Total Private Equity and Other
Investments	145,241	5,625	145,190	-	296,056

Other Assets	-	248	-	-	248
Total	$ 192,118	$ 856,409	$ 163,770	$ (64,054)	$ 1,148,243

Liabilities:
Trading Instruments Sold but
Not Yet Purchased:
Provincial and Municipal
Obligations	$ 110	$ 1,083	$ -	$ -	$ 1,193
Corporate Obligations	-	16	-	-	16
Government Obligations	81,563	-	-	-	81,563
Agency MBS and CMOs	10	-	-	-	10
Total Debt Securities	81,683	1,099	-	-	82,782
Derivative Contracts	-	66,838	117	(63,932)	3,023
Equity Securities	5,674	9	-	-	5,683
Other Securities	-	5	-	-	5
Total Trading Instruments Sold
but Not Yet Purchased	87,357	67,951	117	(63,932)	91,493

Other Liabilities	-	-	46	-	46
Total	$ 87,357	$ 67,951	$ 163	$ (63,932)	$ 91,539

(1)	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.

(2)

Includes $75.2 million in private equity investments of which the weighted average portion we own is approximately 20%. The portion of this investment we do not own becomes a component of Noncontrolling Interests on our Condensed Consolidated Statements of Financial Condition, and amounted to $60.4 million of that total as of December 31, 2009.

	Quoted Prices in Active
	Markets for	Significant Other	Significant
	Identical	Observable	Unobservable		Balance as of
	Assets	Inputs	Inputs	Netting	September 30,
September 30, 2009 (in 000’s)	(Level 1)	(Level 2)	(Level 3)	Adjustments(1)	2009

Assets:
Trading Instruments:
Provincial and Municipal
Obligations	$ 21	$ 129,897	$ 5,316	$ -	$ 135,234
Corporate Obligations	4,369	16,317	-	-	20,686
Government and Agency Obligations	39,365	7,660	-	-	47,025
Agency MBS and CMOs	10	95,336	-	-	95,346
Non-Agency CMOs and ABS	-	37,852	10,915	-	48,767
Total Debt Securities	43,765	287,062	16,231	-	347,058
Derivative Contracts	-	104,956	222	(74,255)	30,923
Equity Securities	49,006	1,337	-	-	50,343
Other Securities	37	2,165	919	-	3,121
Total Trading Instruments	92,808	395,520	17,372	(74,255)	431,445

Available for Sale Securities:
Agency MBS and CMOs	-	272,892	-	-	272,892
Non-Agency CMOs	-	228,567	2,596	-	231,163
Other Securities	8	5,010	-	-	5,018
Total Available for Sale Securities	8	506,469	2,596	-	509,073

Private Equity and Other Investments:
Private Equity Investments	-	-	142,671(2)	-	142,671
Other Investments	143,545	4,946	227	-	148,718
Total Private Equity and Other
Investments	143,545	4,946	142,898	-	291,389

Other Assets	-	322	-	-	322
Total	$ 236,361	$ 907,257	$ 162,866	$ (74,255)	$ 1,232,229

Liabilities:
Trading Instruments Sold but
Not Yet Purchased:
Provincial and Municipal
Obligations	$ -	$ 241	$ -	$ -	$ 241
Corporate Obligations	-	478	-	-	478
Government Obligations	55,327	-	-	-	55,327
Agency MBS and CMOs	302	360	-	-	662
Total Debt Securities	55,629	1,079	-	-	56,708
Derivative Contracts	-	85,375	-	(81,518)	3,857
Equity Securities	29,367	3,353	-	-	32,720
Other Securities	-	91	-	-	91
Total Trading Instruments Sold
but Not Yet Purchased	84,996	89,898	-	(81,518)	93,376

Other Liabilities	-	6	59	-	65
Total	$ 84,996	$ 89,904	$ 59	$ (81,518)	$ 93,441

(1)	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.

(2)

Includes $76.1 million in private equity investments of which the weighted average portion we own is approximately 19% as of September 30, 2009. The portion of this investment we do not own becomes a component of Noncontrolling Interests on our Condensed Consolidated Statements of Financial Condition, and amounted to $61.3 million of that total as of September 30, 2009.

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.

The following tables present additional information about Level 3 assets and liabilities measured at fair value on a recurring basis for the three months ended December 31, 2009 and 2008:


							Change in
							Unrealized
	Level 3 Financial Assets at Fair Value						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	September 30,	Included in	Comprehensive	Settlements,	or Out of	December 31,	December 31,
December 31, 2009 (in 000’s)	2009	Earnings	Income	Net	Level 3	2009	2009

Assets:
Trading Instruments:
Provincial and Municipal
Obligations	$ 5,316	$ 7	$ -	$ -	$ -	$ 5,323	$ 7
Non-Agency CMOs and ABS	10,915	(340)	-	(1,399)	-	9,176	(426)
Derivative Contracts	222	(222)	-	-	-	-	-
Other Securities	919	524	-	17	-	1,460	523

Available for Sale Securities:
Non-Agency CMOs	2,596	(552)	711	(134)	-	2,621	(552)

Private Equity and Other
Investments:
Private Equity Investments	142,671	(302)	-	2,598	-	144,967	(302)
Other Investments	227	(4)	-	-	-	223	(4)

Liabilities:
Derivative Contracts	$ -	$ (117)	$ -	$ -	$ -	$ (117)	$ (205)
Other Liabilities	(59)	13	-	-	-	(46)	(7)

							Change in
							Unrealized
	Level 3 Financial Assets at Fair Value						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	September 30,	Included in	Comprehensive	Settlements,	or Out of	December 31,	December 31,
December 31, 2008 (in 000’s)	2008	Earnings	Income	Net	Level 3	2008	2008

Assets:
Trading Instruments:
Provincial and Municipal
Obligations	$ 7,107	$ (350)	$ -	$ 1,271	$ -	$ 8,028	$ (350)
Non-Agency CMOs and ABS	20,220	(1,029)	-	384	-	19,575	(1,033)

Available for Sale Securities:
Non-Agency CMOs	8,710	(571)	(648)	(57)	-	7,434	(571)

Private Equity and Other
Investments:
Private Equity Investments	153,282	(330)	-	4,224	-	157,176	(247)
Other Investments	844	33	-	(163)	-	714	(130)

Liabilities:
Other Liabilities	$ (178)	$ (89)	$ -	$ -	$ -	$ (267)	$ (89)

As of December 31, 2009, 7.8% of our assets and 0.7% 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 December 31, 2009 represent 14.3% of our assets measured at fair value. As of December 31, 2008, 5.4% and 0.5% 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 December 31, 2008 represented 19.6% of our assets measured at fair value.

Gains and losses (realized and unrealized) included in net income for the three months ended December 31, 2009 and 2008 are reported in net trading profits and other revenues in our Condensed Consolidated Statements of Income as follows:

	Net Trading	Other
For the Three Months Ended December 31, 2009 (in 000’s)	Profits	Revenues

Total gains or (losses) included in earnings	$ 187	$ (1,180)

Change in unrealized gains or (losses) relating to assets still held at reporting date	$ 100	$ (1,066)

	Net Trading	Other
For the Three Months Ended December 31, 2008 (in 000’s)	Profits	Revenues

Total losses included in earnings	$ (1,379)	$ (957)

Change in unrealized losses relating to assets still held at reporting date	$ (1,383)	$ (1,037)

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 only in certain circumstances, for example, when there is evidence of impairment or in other situations where the lower of cost or fair value method of accounting is applied. Our financial instruments which are measured at fair value on a nonrecurring basis include certain RJ Bank loans that have been deemed impaired and certain loans classified as held for sale.

Effective October 1, 2009, we adopted new accounting guidance regarding the application of certain fair value accounting pronouncements applicable to nonfinancial assets (such as Other Real Estate Owned) and nonfinancial liabilities that are not measured at fair value on a recurring basis. Accordingly, the table below provides information, by level within the fair value hierarchy, for both financial and nonfinancial assets measured at fair value on a nonrecurring basis during the period and held at December 31, 2009.


	Fair Value Measurements
	Quoted Prices in	Significant Other	Significant
	Active Markets for	Observable	Unobservable	Balance as of
	Identical Assets	Inputs	Inputs	December 31,
December 31, 2009 (in 000’s)	(Level 1)	(Level 2)	(Level 3)	2009

Assets at fair value on a nonrecurring basis:
Bank Loans, Net(1)	$ -	$ 49,815	$ 51,348	$ 101,163
Other Real Estate Owned (2)	-	2,590	-	2,590

(1)	Includes individual loans classified as held for sale, which were measured at a fair value lower than cost at December 31, 2009.

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

The following table presents financial instruments by level within the fair value hierarchy at September 30, 2009, for which a nonrecurring charge in fair value was recorded.


	Fair Value Measurements
	Quoted Prices in	Significant Other	Significant
	Active Markets for	Observable	Unobservable	Balance as of
	Identical Assets	Inputs	Inputs	September 30,
September 30, 2009 (in 000’s)	(Level 1)	(Level 2)	(Level 3)	2009

Assets at fair value on a nonrecurring basis:
Bank Loans, Net	$ -	$ -	$ 69,193	$ 69,193

The adjustment to fair value of the nonrecurring fair value measures for the three months ended December 31, 2009 resulted in $8.7 million in additional loan loss provision expense and charge-offs as well as $309,000 in other losses during the quarter.

For a discussion of our accounting policies for impairment of loans held for investment, loans held for sale, and other real estate owned, see Note 1 on pages 83 - 85 of our 2009 Form 10-K.

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 December 31, 2009, 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 3 pages 92 - 93 of our 2009 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.

The carrying amounts and estimated fair values of our financial instruments that are not carried at fair value at December 31, 2009 and September 30, 2009, respectively, are as follows:


	December 31, 2009		September 30, 2009
	Carrying	Estimated	Carrying	Estimated
	Amount	Fair Value	Amount	Fair Value
	(in 000’s)

Financial Assets:
Bank Loans, Net(1)	$ 6,452,530	$ 6,480,904	$ 6,593,973	$ 6,597,496
Financial Liabilities:
Bank Deposits	7,007,069	7,012,034	9,423,387	9,428,892
Other Borrowings	51,027	53,284	980,000	982,741
Corporate Debt	358,282	388,546	359,034	398,108

(1)	Carrying amount and estimated fair value at December 31, 2009 excludes all loans recorded at fair value at the respective period-end.

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

	December 31, 2009		September 30, 2009
		Instruments		Instruments
		Sold but		Sold but
	Trading	Not Yet	Trading	Not Yet
	Instruments	Purchased	Instruments	Purchased
	(in 000's)
Provincial and Municipal Obligations	$ 92,167	$ 1,193	$ 135,234	$ 241
Corporate Obligations	53,002	16	20,686	478
Government and Agency Obligations	42,293	81,563	47,025	55,327
Agency MBS and CMOs	124,427	10	95,346	662
Non-Agency CMOs and ABS	10,193	-	48,767	-
Total Debt Securities	322,082	82,782	347,058	56,708

Derivative Contracts	23,369	3,023	30,923	3,857
Equity Securities	14,920	5,683	50,343	32,721
Other Securities	2,571	5	3,121	90
Total	$ 362,942	$ 91,493	$ 431,445	$ 93,376

Auction rate securities totaling $6 million and $5.8 million at December 31, 2009 and September 30, 2009, respectively, are predominately included within Provincial and Municipal Obligations presented in the table above. There were no auction rate securities in Trading Instruments Sold but Not Yet Purchased as of either December 31, 2009 or September 30, 2009.

See Note 3 of these Notes to Condensed Consolidated Financial Statements for additional 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 and other mortgage-related debt securities owned by RJ Bank, and certain equity securities owned by our non-broker-dealer subsidiaries. There were no proceeds from the sale of available for sale securities for either of the three month periods ended December 31, 2009 or 2008.

The amortized cost and fair values of securities available for sale at December 31, 2009 and September 30, 2009 are as follows:

	December 31, 2009
		Gross	Gross
		Unrealized	Unrealized
	Cost Basis	Gains	Losses	Fair Value
	(in 000's)
Available for Sale Securities:
Agency Mortgage Backed Securities and CMOs	$ 252,229	$ 298	$ (1,721)	$ 250,806
Non-Agency CMOs(1)	308,656	15	(75,519)	233,152
Other Securities	5,000	30	-	5,030

Total RJ Bank Available for Sale Securities	565,885	343	(77,240)	488,988

Other Securities	3	6	-	9

Total Available for Sale Securities	$ 565,888	$ 349	$ (77,240)	$ 488,997

(1)	As of December 31, 2009, the non-credit portion of other-than-temporary impairment (“OTTI”) recorded in Accumulated Other Comprehensive Income (“AOCI”) was $33 million (before taxes).

	September 30, 2009
		Gross	Gross
		Unrealized	Unrealized
	Cost Basis	Gains	Losses	Fair Value
	(in 000's)
Available for Sale Securities:
Agency Mortgage-Backed Securities and CMOs	$ 275,995	$ 213	$ (3,316)	$ 272,892
Non-Agency CMOs (1)	325,823	-	(94,660)	231,163
Other Securities	5,000	10	-	5,010

Total RJ Bank Available for Sale Securities	606,818	223	(97,976)	509,065

Other Securities	3	5	-	8

Total Available for Sale Securities	$ 606,821	$ 228	$ (97,976)	$ 509,073

(1)	As of September 30, 2009, the non-credit portion of OTTI recorded in AOCI was $20.5 million (before taxes).

See Note 3 of these Notes to Condensed Consolidated Financial Statements for additional information regarding the fair value of Available for Sale Securities.

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. The contractual maturities, carrying values, and current yields for RJ Bank's available for sale securities at December 31, 2009 are as follows:

			After One But		After Five But
	Within One Year		Within Five Years		Within 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	$ -	-	$ 6,397	0.92%	$ 100,380	0.93%	$ 144,029	0.99%	$ 250,806	0.96%

Non-Agency CMOs	-	-	-	-	-	-	233,152	7.63%	233,152	7.63%
Other Securities	-	-	5,030	0.35%	-	-	-	-	5,030	0.35%
	$ -		$ 11,427		$ 100,380		$ 377,181		$ 488,988

Impaired Securities

For a further discussion of our Available for Sale Securities’ accounting policies, including the fair value determination processes, see Note 1 pages 80 - 81 in our 2009 Form 10-K.

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 December 31, 2009 and September 30, 2009 are as follows:

	December 31, 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 CMOs	$ 65,037	$ (296)	$ 148,298	$ (1,425)	$ 213,335	$ (1,721)

Non-Agency CMOs	-	-	233,124	(75,519)	233,124	(75,519)


Total Impaired Securities	$ 65,037	$ (296)	$ 381,422	$ (76,944)	$ 446,459	$ (77,240)

	September 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 CMOs	$ 85,500	$ (873)	$ 167,952	$ (2,443)	$ 253,452	$ (3,316)

Non-Agency CMOs	-	-	231,163	(94,660)	231,163	(94,660)


Total Impaired Securities	$ 85,500	$ (873)	$ 399,115	$ (97,103)	$ 484,615	$ (97,976)

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 MBS and CMOs

The Federal National Mortgage Association (“FNMA”) or Federal Home Loan Mortgage Corporation (“FHLMC”), 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 (“GNMA”), guarantee the contractual cash flows of the agency mortgage-backed securities. At December 31, 2009, of the 92 U.S. government-sponsored enterprise mortgage-backed securities in a continuous unrealized loss position, 15 were in a continuous unrealized loss position for less than 12 months and 77 for 12 months or more. The unrealized losses at December 31, 2009 were primarily due to the continued illiquidity and uncertainty in the markets. 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

As of December 31, 2009 and including subsequent ratings changes, $18.5 million of the non-agency CMOs were rated AAA by two rating agencies, and $214.7 million were rated less than AAA by at least one rating agency. At December 31, 2009, of the 28 non-agency CMOs, 27 were in a continuous unrealized loss position 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 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. Only those non-agency CMOs whose entire amortized cost basis we do not expect to recover are considered to be other-than-temporarily impaired as we have the ability and intent to hold these securities to maturity.

Other-Than-Temporarily Impaired Securities

Based on the expected cash flows derived from our valuation model, we expect to recover the remaining unrealized losses on 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 securities losses. Significant assumptions used in the valuation of non-agency CMOs include default rates, loss severity, and prepayment rates.

The significant assumptions used in the valuation of non-agency CMOs for the period ended December 31, 2009 are as follows:

	December 31, 2009
	Range	Weighted Average (1)

Default Rate	1.6% - 36.3%	12.5%
Loss Severity	10.0% - 54.7%	31.8%
Prepayment Rate	7.9% - 27.6%	16.6%

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

Although there is no intent to sell our non-agency CMOs and it is not more likely than not that we will be required to sell these securities, we do not expect to recover the entire amortized cost basis of certain securities within this portfolio, and therefore, we recorded $3 million of OTTI in other revenue and recorded $12.5 million in AOCI for the three months ended December 31, 2009. We recognized $571,000 of OTTI in other revenue for the three months ended December 31, 2008 for certain securities which were identified as other-than-temporarily impaired during the first quarter of fiscal 2009.

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

	Three Months Ended
	December 31,	December 31,
	2009	2008
	(in 000’s)

Amount related to credit losses on securities we held
at the beginning of the period	$ 17,762	$ 4,869
Additions to the amount related to credit loss for
which an OTTI was not previously recognized	1,556	-
Additional increases to the amount related to credit loss for
which an OTTI was previously recognized	1,443	571
Decreases to the amount related to credit losses for
worthless securities	(3,331)	-
Amount related to credit losses on securities held
by us at the end of the period	$ 17,430	$ 5,440

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.

For a discussion of our accounting policies regarding bank loans, including the policies regarding the allowance for loan losses, nonaccrual and impaired loans, charge-offs and other real estate owned, see Note 1 pages 83 - 85 in our 2009 Form 10-K.

The following table presents the balance and associated percentage of each major loan category in RJ Bank's portfolio, including loans receivable and loans held for sale as of December 31, 2009 and September 30, 2009:


	December 31, 2009			September 30, 2009
	Balance		%	Balance		%
	($ in 000’s)

Commercial Loans	$ 857,792	13%		$ 851,657	13%
Real Estate Construction Loans	101,005	2%		163,951	3%
Commercial Real Estate Loans (1)	3,385,056	51%		3,343,989	49%
Residential Mortgage Loans	2,272,861	34%		2,398,822	35%
Consumer Loans	18,251	-		22,816	-

Total Loans	6,634,965	100%		6,781,235	100%

Net Unearned Income and Deferred Expenses (2)	(33,271)			(36,990)
Allowance for Loan Losses	(149,164)			(150,272)

	(182,435)			(187,262)

Loans, Net	$ 6,452,530			$ 6,593,973

(1)

Of this amount, $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 December 31, 2009 and September 30, 2009. The remainder is wholly or partially secured by real estate, the majority of which is also secured by other assets of the borrower.

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

At December 31, 2009 and September 30, 2009, RJ Bank had $50 million and $950 million, respectively, in FHLB advances outstanding which were secured by a blanket lien on RJ Bank's residential mortgage loan portfolio. See Note 9 of these Notes to Condensed Consolidated Financial Statements for more information regarding the FHLB advances.

At December 31, 2009 and September 30, 2009, RJ Bank had $100.4 million and $40.5 million in loans held for sale, respectively. RJ Bank's gain from the sale of these loans held for sale was $112,000 and $49,000, which was recorded in Other Revenues on our Condensed Consolidated Statements of Income for the three months ended December 31, 2009 and 2008, respectively.

The following table shows the contractual maturities of RJ Bank’s loan portfolio at December 31, 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	$ 42,533	$ 681,023	$ 134,236	$ 857,792
Real Estate Construction Loans	7,062	93,943	-	101,005
Commercial Real Estate Loans (1)	532,289	2,683,812	168,955	3,385,056
Residential Mortgage Loans	1,005	11,244	2,260,612	2,272,861
Consumer Loans	339	422	17,490	18,251

Total Loans	$ 583,228	$ 3,470,444	$ 2,581,293	$ 6,634,965

(1)

Of this amount, $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 December 31, 2009. The remainder is wholly or partially secured by real estate, the majority of which is also secured by other assets of the borrower.

The following table shows the comparative data for nonperforming loans and assets:

	December 31,	September 30,
	2009	2009
	($ in 000’s)
Nonaccrual Loans:
Corporate	$ 53,094	$ 73,961
Residential/Consumer(1)	65,911	55,097
Total	119,005	129,058

Accruing Loans Which are 90 Days
Past Due:
Corporate	-	12,461
Residential/Consumer	16,372	16,863
Total	16,372	29,324

Total Nonperforming Loans	135,377	158,382

Real Estate Owned and Other (2)
Repossessed Assets, Net:
Corporate	804	4,646
Residential/Consumer	7,568	4,045
Total	8,372	8,691

Total Nonperforming Assets, Net	$ 143,749	$ 167,073
Total Nonperforming Assets as a % of Total Loans, Net and Other Real Estate
Owned, Net	2.22%	2.53%

(1)	Of the total residential/consumer nonaccrual loans, there are residential mortgage loans totaling $54 million and $43.8 million as of December 31, 2009 and September 30, 2009, respectively, for which a charge-off had previously been recorded.

(2)	RJ Bank has two properties totaling $484,000 out of the 30 total properties it owns, which are still subject to redemption; however, no properties have ever been redeemed from RJ Bank.

As of December 31, 2009, RJ Bank did not have any commitments to lend to borrowers whose loans were classified as nonperforming.

The gross interest income related to the nonperforming loans reflected in the above table, which would have been recorded had these loans been current in accordance with their original terms, totaled $3.5 million for the three months ended December 31, 2009 or $11.6 million since origination. The interest income recognized on nonaccrual loans for the three months ended December 31, 2009 was $107,000.

The following table provides a summary of RJ Bank’s impaired loans, troubled debt restructurings included in these impaired loans, and commitments to lend additional funds as of December 31, 2009 and September 30, 2009:

	December 31, 2009		September 30, 2009
	Gross	Allowance	Gross	Allowance
	Recorded	For Loan	Recorded	For Loan
	Investment	Losses (1)	Investment	Losses (1)
	(in 000’s)
Impaired Loans with Allowance for Loan Losses:
Corporate	$ 26,884	$ 4,784	$ 68,549	$ 7,383
Residential/Consumer	3,320	1,178	2,879	1,507
Total	30,204	5,962	71,428	8,890

Impaired Loans without Allowance for Loan Losses: (2)
Corporate	$ 26,210	$ -	$ 5,411	$ -
Residential/Consumer	896	-	1,244	-
Total	27,106	-	6,655	-
Total Impaired Loans	$ 57,310	$ 5,962	$ 78,083	$ 8,890

Troubled Debt Restructurings:
Corporate	$ 9,204	$ 1,398	$ 3,479	$ 202
Residential/Consumer	3,584	711	1,325	186
Total	$12,788	$ 2,109	$ 4,804	$ 388

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

(2)	When the discounted cash flows, collateral value or market value equals or exceeds the carrying value of the loan, then the loan does not require an allowance.

As of December 31, 2009 and September 30, 2009, RJ Bank did not have any commitments to lend to borrowers whose existing loans were troubled debt restructurings.

The average balance of the impaired loans above and the related interest income recognized in the Condensed Consolidated Statements of Income for the three months ended December 31, 2009 and 2008 were as follows:

	December 31,	December 31,
	2009	2008
	(in 000’s)

Average Impaired Loan Balance:
Corporate	$ 60,548	$ 36,454
Residential/Consumer	3,646	474
Total	$ 64,194	$ 36,928

Interest Income Recognized:
Corporate	$ -	$ -
Residential/Consumer	28	-
Total	$ 28	$ -

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

	Three Months Ended
	December 31,	December 31,
	2009	2008
	($ in 000’s)
Allowance for Loan Losses, Beginning of Period	$ 150,272	$ 88,155
Provision For Loan Losses	22,835	24,870
Charge-Offs:
Commercial Real Estate Loans	(16,601)	(3,141)
Residential Mortgage Loans	(9,531)	(3,744)
Total Charge-Offs	(26,132)	(6,885)
Recoveries:
Commercial Real Estate Loans	2,004	-
Residential Mortgage Loans	185	-
Total Recoveries	2,189	-
Net Charge-Offs	(23,943)	(6,885)
Allowance for Loan Losses, End of Period	$ 149,164	$ 106,140

Net Charge-Offs to Average Bank Loans, Net Outstanding	0.37%	0.09%

The reserves for unfunded lending commitments, included in Trade and Other Payables on our Condensed Consolidated Statements of Financial Condition, were $10 million and $9.4 million at December 31, 2009 and September 30, 2009, respectively.

RJ Bank’s net interest income after provision for loan losses for the quarter ended December 31, 2009 and 2008 was $42.8 million and $69.6 million, respectively.

NOTE 7 - VARIABLE INTEREST ENTITIES:

A VIE requires consolidation by the entity’s primary beneficiary. Refer to Note 1 page 86 and Note 8 pages 102 - 105 in our 2009 Form 10-K for a further description of our policies regarding consolidation of VIEs and our principal involvement with VIEs.

We evaluate all of the entities in which we are involved to determine if the entity is a VIE and if so, whether we are the primary beneficiary. We hold variable interests in the following entities: Raymond James Employee Investment Funds I and II (the “EIF Funds”), a trust fund established for employee retention purposes, certain low income housing tax credit fund entities in which Raymond James Tax Credit Funds, Inc. (“RJTCF”) holds an interest, and various other partnerships involving real estate.

VIEs where we are the Primary Beneficiary

Of the VIEs in which we hold an interest, we have determined that the EIF Funds, the trust fund established for retention purposes, and certain of RJTCF’s low income housing tax credit fund entities are required to be consolidated in our financial statements as we are the primary beneficiary of those VIEs.

The following table presents information about the assets, liabilities, and equity of the VIEs which we consolidate and are included within our Condensed Consolidated Statements of Financial Condition. The Noncontrolling Interests presented in this table represents the portion of these net assets which is not ours:

	December 31,	September 30,
	2009	2009
	(in 000's)
Assets:
Cash and Cash Equivalents	$ 12,328	$ 12,393
Receivables, Other	2,505	2,803
Investments in Real Estate Partnerships – Held by Variable Interest Entities	276,335	270,139
Trust Fund Investment in Raymond James Financial, Inc. Common Stock(1)	15,362	12,120
Prepaid Expenses and Other Assets	16,379	17,195

Total Assets	$ 322,909	$ 314,650

Liabilities And Equity:
Loans Payable Related to Investments by Variable Interest Entities in Real
Estate Partnerships(2)	$ 81,821	$ 89,244
Trade and Other Payable	1,704	1,964
Intercompany Payable	15,368	20,033

Total Liabilities	98,893	111,241

RJF Equity	54,188	55,092
Noncontrolling Interests	169,828	148,317

Total Equity	224,016	203,409

Total Liabilities and Equity	$ 322,909	$ 314,650

(1)	Included in common shares in treasury 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 loss of the VIEs for the quarter ended December 31, 2009 and 2008, which we consolidate and are included within our Condensed Consolidated Statements of Income. The Noncontrolling Interests presented in this table represents the portion of the net loss from these VIEs which is not ours.

	Three Months Ended
	December 31,	December 31,
	2009	2008
	(in 000’s)
Revenues:
Interest	$ 6	$ 121
Other	1,043	1,421

Total Revenues	1,049	1,542

Interest Expense	1,113	1,397
Net (Expense) Revenues	(64)	145

Non-Interest Expenses	3,693	3,458

Net Loss Before Attribution of Noncontrolling Interests	(3,757)	(3,313)

Net Loss Attributable to Noncontrolling Interests	(2,853)	(3,069)

Net Loss Attributable to RJF	$ (904)	$ (244)

EIF Funds

We are deemed to be the primary beneficiary, and accordingly, we consolidate the EIF Funds, which have combined assets of approximately $18.1 million at December 31, 2009. None of those assets act as collateral for any obligations of the EIF Funds. Our exposure to loss is limited to our contributions and the non-recourse loans funded to the employee investors, for which their partnership interests serve as collateral. This exposure is approximately $800,000 at December 31, 2009.

Restricted Stock Trust Fund

We are deemed to be the primary beneficiary, and accordingly, consolidate this trust fund used in connection with one of our restricted stock plans. The trust fund has assets of approximately $15.4 million at December 31, 2009. None of those assets are specifically pledged as collateral for any obligations of the trust fund. Our exposure to loss is limited to our contributions to the trust fund and that exposure is approximately $15.4 million at December 31, 2009.

Low Income Housing Partnerships

RJTCF is the managing member or general partner in approximately 59 separate tax credit housing funds having one or more investor members or limited partners.

RJTCF has concluded that it is the primary beneficiary in approximately 12 of the 56 low income housing tax credit funds it has determined to be VIEs, and accordingly, consolidates these funds, which have combined assets of approximately $289.4 million at December 31, 2009. None of these assets act as collateral for any obligations of these funds. The investor member(s) or limited partner(s) of the VIEs bear the risk of loss on their investments. Our exposure to loss is limited to our investments in, advances to, and receivables due from these funds and that exposure is approximately $56.5 million at December 31, 2009.

VIEs where we hold a variable interest but we are not the Primary Beneficiary

Low Income Housing Partnerships

RJTCF is not the primary beneficiary of the remaining 44 low income housing tax credit funds it determined to be VIEs, and accordingly, we do not consolidate these funds. These funds have combined assets of approximately $1.15 billion at December 31, 2009. Our exposure to loss is limited to our investments in, advances to, and receivables due from these funds and that exposure is approximately $4.6 million at December 31, 2009.

Other Real Estate Limited Partnerships

As of December 31, 2009, we have a variable interest in several limited partnerships involved in various real estate activities in which one of our subsidiaries is the general partner. Given that we are not entitled to receive the majority of any residual returns and we do not have the ability to significantly influence the financial results of these partnerships, we have determined that we are not the primary beneficiary of these VIEs. Accordingly, we do not consolidate these partnerships which have assets of approximately $11 million at December 31, 2009. The carrying value of our investment in these partnerships, and therefore our exposure to any of their losses, is insignificant at December 31, 2009.

Entities evaluated but determined not to be VIEs

RJTCF has determined that three of its low income housing tax credit funds are not VIEs. These funds are held 99% by RJTCF. At December 31, 2009, only one of these funds had any material activity. These funds typically hold interests in certain tax credit limited partnerships for less than 90 days, or until beneficial interest in the fund is sold to third parties. These funds had assets of approximately $1.6 million, which are included in Other Assets in our Condensed Consolidated Statements of Financial Condition at December 31, 2009, which also represents our exposure to losses as of that date.

See Note 12 of the Notes to Condensed Consolidated Financial Statements for discussion of our commitments related to RJTCF.

NOTE 8 - BANK DEPOSITS:

For further discussion of bank deposits, see Note 10 pages 106 - 107 in our 2009 Form 10-K.

The following table presents a summary of bank deposits at December 31, 2009 and September 30, 2009:

	December 31, 2009		September 30, 2009
		Weighted		Weighted
		Average		Average
	Balance	Rate (1)	Balance	Rate (1)
	($ in 000's)

Bank Deposits:
Negotiable Order of Withdrawal (“NOW”) Accounts	$ 4,623	0.01%	$ 3,413	0.01%
Demand Deposits (Non-Interest Bearing)	2,576	-	3,672	-
Savings and Money Market Accounts (2)	6,796,616	0.15%	9,222,823	0.12%
Certificates of Deposit	203,254	3.30%	193,479	3.45%
Total Bank Deposits	$ 7,007,069	0.24%	$ 9,423,387	0.19%

(1)	Weighted average rate calculation is based on the actual deposit balances at December 31, 2009 and September 30, 2009, respectively.

(2)

The balance sheet at September 30, 2009 included additional deposits received through the Raymond James Bank Deposit Program (“RJBDP”) as part of the transactions associated with the point-in-time regulatory balance sheet composition requirements of RJ Bank. See Note 21 on page 127 of our 2009 Form 10-K for discussion of the September 30, 2009 point-in-time test.

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 the Federal Deposit Insurance Corporation (“FDIC”) insured bank accounts through the RJBDP administered by RJ&A.

RJ Bank had direct deposits from RJF executive officers and directors of $614,000 and $512,000 at December 31, 2009 and September 30, 2009, respectively.

Scheduled maturities of certificates of deposit at December 31, 2009 and September 30, 2009 were as follows:

	December 31, 2009		September 30, 2009
	Denominations		Denominations
	Greater than	Denominations	Greater than	Denominations
	or Equal	Less than	or Equal	Less than
	to $100,000	$100,000	to $100,000	$100,000
	(in 000's)

Three Months or Less	$ 12,965	$ 18,230	$ 13,061	$ 16,097
Over Three Through Six Months	6,046	14,741	6,886	17,454
Over Six Through Twelve Months	11,746	26,754	12,156	30,128
Over One Through Two Years	15,406	30,047	13,580	29,632
Over Two Through Three Years	3,017	10,136	2,720	10,226
Over Three Through Four Years	9,147	10,323	8,993	10,507
Over Four Years	15,764	18,932	8,742	13,297
Total	$ 74,091	$ 129,163	$ 66,138	$ 127,341

Interest expense on deposits is summarized as follows:

	Three Months Ended
	December 31,	December 31,
	2009	2008
	(in 000's)
Certificates of Deposit	$ 1,658	$ 2,448
Money Market, Savings and
NOW Accounts	2,603	12,635
Total Interest Expense on Deposits	$ 4,261	$ 15,083

NOTE 9 – OTHER BORROWINGS:

The following table details the components of Other Borrowings at December 31, 2009 and September 30, 2009:

	December 31,	September 30,
	2009	2009
	(in 000's)
Short-Term Other Borrowings:
Federal Home Loan Bank Advances (1)	$ 20,000	$ 905,000
Borrowings on Secured Lines of Credit (2)	-	30,000
Borrowings on Unsecured Lines of Credit (3)	1,027	-
Total Short-Term Other Borrowings	21,027	935,000

Long-Term Other Borrowings:
Federal Home Loan Bank Advances (1)	30,000	45,000

Total Other Borrowings	$ 51,027	$ 980,000

(1)

RJ Bank has $50 million and $950 million in FHLB advances outstanding at December 31, 2009 and September 30, 2009, respectively. These borrowings at December 31, 2009 are comprised of several short-term and long-term fixed rate advances. The September 30, 2009 FHLB advances included $900 million in overnight advances to meet point-in-time regulatory balance sheet composition requirements related to its qualifying as a thrift institution. These borrowed funds were invested in qualifying assets and the necessary qualification was met. The overnight advance was repaid on October 1, 2009. There were no overnight advances outstanding as of December 31, 2009.

All FHLB advances are secured by a blanket lien on RJ Bank's residential loan portfolio granted to FHLB. The FHLB has the right to convert advances totaling $35 million at December 31, 2009 to a floating rate at one or more future dates. RJ Bank has the right to prepay these advances without penalty if the FHLB exercises its right.

(2)	Secured borrowings are day-to-day and are generally utilized to finance fixed income securities. We had no secured bank loans outstanding at December 31, 2009. At September 30, 2009, there were $30 million in outstanding secured borrowings.

(3)

We maintain two unsecured settlement lines of credit available to our Argentina joint venture in the aggregate amount of $4.5 million. At December 31, 2009 there were $1 million in outstanding borrowings on these lines of credit. There were no borrowings outstanding on these lines of credit as of September 30, 2009.

As of December 31, 2009 and September 30, 2009, we maintained a $100 million committed unsecured revolving line of credit with no outstanding borrowings. This facility expired under its terms on February 4, 2010. We elected not to renew this revolving credit facility upon its expiration. There were no borrowings made under this facility since its inception on February 6, 2009.

The short-term borrowings as of December 31, 2009 all mature during the following 12 months. The long-term borrowings as of December 31, 2009, based on their contractual terms, mature in their entirety during fiscal year 2011.

As of December 31, 2009, there were collateralized financings outstanding in the amount of $23 million. These collateralized financings are included in Securities Sold Under Agreement to Repurchase on the Consolidated Statements of Financial Condition. As of September 30, 2009, in addition to the $30 million of secured borrowings which are described above, there were $74.3 million of collateralized financings outstanding which are included in Securities Sold Under Agreements to Repurchase on the Condensed Consolidated Statements of Financial Condition. These financings were collateralized by non-customer, RJ&A-owned securities and were repaid during the quarter ended December 31, 2009.

NOTE 10 – DERIVATIVE FINANCIAL INSTRUMENTS:

We enter into interest rate swaps and futures contracts as part of our fixed income business to facilitate customer transactions and to hedge a portion of our trading inventory. The majority of our derivative positions are executed in the over-the-counter market with financial institutions. These positions are recorded at fair value with the related gain or loss and interest recorded in earnings within the Condensed Consolidated Statements of Income. The revenue related to the interest rate contracts includes realized and unrealized gains and losses on derivative instruments. Cash flows related to these fixed income interest rate contracts are included as Operating Activities (the “Trading Instruments, Net” line) on the Condensed Consolidated Statements of Cash Flows for the period.

We elect to net-by-counterparty the fair value of interest rate swap contracts entered into by our Fixed Income Trading group. Certain of these contracts contain a legally enforceable master netting arrangement and therefore, the fair value of those swap contracts are netted by counterparty in the Condensed Consolidated Statements of Financial Condition. As we elect to net-by-counterparty the fair value of interest rate swap contracts, we also net-by-counterparty any collateral exchanged as part of the swap agreement. 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 at December 31, 2009 and September 30, 2009, is $1.9 million and $(2.2) million, respectively. The cash collateral included in the net fair value of all open derivative liability positions at December 31, 2009 and September 30, 2009, is $(1.3) million and $10.3 million, respectively. The master netting agreement referenced above allows for netting of all individual swap receivables and payables with each counterparty. The credit support annex allows parties to the master agreement to mitigate their credit risk by requiring the party which is out of the money to post collateral. Our maximum loss exposure under these interest rate swap contracts at December 31, 2009 is $24.5 million.

To mitigate interest rate risk in a significantly rising rate environment during the year ended September 30, 2008, RJ Bank purchased three-year term interest rate caps with high strike rates (more than 300 basis points higher than rates in effect as of their date of purchase). These interest rate caps will increase in value over time if interest rates rise and will entitle RJ Bank to cash flows if interest rates rise above their strike rates. In addition, RJ Bank, in the ordinary course of business, enters into commitments to sell originated fixed-rate mortgages as well as Small Business Administration (“SBA”) loans. These derivative instruments are recorded at fair value with any changes in fair value recorded in earnings within the Condensed Consolidated Statements of Income for the period. Cash flows related to these derivative instruments are included in Operating Activities on the Condensed Consolidated Statements of Cash Flows for the period. Our maximum loss exposure under these derivative instruments is $223,000 at December 31, 2009.

A subsidiary of RJTCF has made commitments to provide certain loans of a relatively long duration at a fixed rate of interest (“Permanent Loan Commitments”) directly to certain low income housing project partnerships subject only to those project partnerships meeting certain qualifying criteria within a prospective two-year period. These Permanent Loan Commitments meet the criteria of a derivative. As such, the Permanent Loan Commitments are recorded at fair value with any changes in fair value recorded in earnings within the Condensed Consolidated Statements of Income. Cash flows related to these commitments are reflected in Operating Activities on the Condensed Consolidated Statements of Cash Flows. Our maximum loss exposure under these Permanent Loan Commitments at December 31, 2009 is $3.7 million.

None of our derivatives meet the criteria for designation as a fair value or cash flow hedge.

See the table below for the notional and fair value amounts of both the asset and liability derivatives at December 31, 2009 and September 30, 2009:

	Asset Derivatives
	December 31, 2009			September 30, 2009
	Balance			Balance
	Sheet	Notional	Fair	Sheet	Notional	Fair
	Location	Amount	Value (1)	Location	Amount	Value (1)
	(in 000’s)
Derivatives Not Designated
As Hedging Instruments:

Interest rate contracts:	Trading Instruments	$1,319,739	$87,423	Trading Instruments	$1,311,262	$104,956
	Other Assets	1,500,000	191	Other Assets	1,500,000	297
Forward sale contracts:	Trading Instruments	-	-	Trading Instruments	5,861	222
	Other Assets	8,937	32	Other Assets	-	-

(1)	The fair value in this table is presented on a gross basis before netting of cash collateral and by counterparty according to our legally enforceable master netting arrangements. The fair value in the Condensed Consolidated Statements of Financial Condition is presented net.

	Liability Derivatives
	December 31, 2009				September 30, 2009