INVESTING WISELY
MOBILITY
2015
A N N U A L R E P O R T
CHANGE
REGULATION
HEADWINDS
OPPORTUNITY
5
1
2
EXPLORATION
UNPREDICTABILITY
LIVING WELL
GROWTH
CONTENTS
5
8
MESSAGE FROM THE CEO
AND THE CHAIRMAN
PRIVATE CLIENT
GROUP
12
18
CAPITAL MARKETS
ASSET MANAGEMENT
20
SOCIAL
RESPONSIBILITY
22
24
26
RAYMOND JAMES
FINANCIAL, INC.
EXECUTIVE COMMITTEE
10-YEAR FINANCIAL
SUMMARY
CORPORATE AND
SHAREHOLDER
INFORMATION
19
RAYMOND JAMES
BANK
27
FINANCIAL REPORT
47146.indd 2
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RAYMOND JAMES ANNUAL REPORT 2015
Some say, “You can’t plan for everything.” They may see
this as conventional wisdom. It may just be an excuse.
At Raymond James, we like to think of it as a challenge –
a call to keep going even after we think we’ve thought
of everything, to expand the ways we plan and the things
we plan for, while continually enhancing execution.
plan ON
5
1
2
Raymond James was a financial planning pioneer from the beginning, taking an individualized,
comprehensive approach with every client, from families to corporations to institutions. And that
approach – grounded in time-tested values and consistent principles – has also served us well in
the management of our firm. Putting our clients’ best interests first and foremost is the foundation
on which our leaders and associates have built our businesses.
Faced with the uncertainty of a volatile market, industrywide questions about the future of the
advisory profession and increasing regulatory pressures in 2015, we kept doing what we always
have – strategizing, executing and helping our clients prepare for their families’ and companies’ futures.
Maybe you can’t plan for everything. But you can always keep on planning. Our commitment to
this approach has allowed us to adapt and grow for the benefit of our clients, our associates and
our shareholders.
47146.indd 3
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1/7/16 1:52 PM
1%
8%
8%
18%
35%
17%
13%
66%
43%
2015 TOTAL REVENUE $5,308,164,000
PRIVATE CLIENT GROUP $3,519,558,000
CAPITAL MARKETS
$975,064,000
ASSET MANAGEMENT
$392,378,000
RAYMOND JAMES BANK $425,988,000
OTHER
INTERSEGMENT
$66,967,000
($71,791,000)
66%
18%
8%
8%
1%
(1%)
2015 TOTAL PRE-TAX INCOME* $798,174,000
PRIVATE CLIENT GROUP $342,243,000
CAPITAL MARKETS
$107,009,000
ASSET MANAGEMENT
$135,050,000
RAYMOND JAMES BANK $278,721,000
OTHER
($64,849,000)
43%
13%
17%
35%
(8%)
*PRE-TAX INCOME EXCLUDING NONCONTROLLING INTERESTS
0
2
5
.
6
8
4
.
9
4
4
.
1
8
3
.
3
3
3
.
2
0
5
0
8
4
.
3
2
51
.
1
1
3
.
1
1
.
6
0
1
.
7
9
7
6
3
6
9
2
8
7
2
6
7
.
1
.
7
8
5
.
0
5
.
3
3
.
1
1
0
2
2
1
0
2
3
1
0
2
4
1
0
2
5
1
0
2
1
1
0
2
2
1
0
2
3
1
0
2
4
1
0
2
5
1
0
2
1
1
0
2
2
1
0
2
3
1
0
2
4
1
0
2
5
1
0
2
1
1
0
2
2
1
0
2
3
1
0
2
4
1
0
2
5
1
0
2
NET REVENUE
$Billions
NET INCOME
$Millions
ALL DATA AS OF FISCAL YEAR ENDED SEPTEMBER 30, 2015
RETURN ON AVERAGE EQUITY
MARKET CAPITALIZATION
% Percent
$Billions
FISCAL YEAR FINANCIAL HIGHLIGHTS
2015
2014 CHANGE
Total Revenue
Net Revenue
Net Income
$5,308,164,000
$4,965,460,000
$5,200,210,000
$4,861,369,000
$502,140,000
$480,248,000
Earnings per Share (Diluted)
$3.43
$3.32
Total Equity Attributable to RJF
$4,522,031,000
$4,141,236,000
Shares Outstanding
(1)
Book Value per Share
142,751,000
140,836,000
$31.68
$29.40
7%
7%
5%
3%
9%
1%
8%
COMPARISON OF FIVE-YEAR CUMULATIVE
TOTAL RETURN SEPTEMBER 2015
Assumes initial investment of $100. Assumes reinvestment of dividends.
Prepared by Zacks Investment Research.
$250
$200
$150
$100
$50
$0
(1) Excludes non-vested shares
2010
2011
2012
2013
2014
2015
Raymond James Financial, Inc.
S&P 500
Dow Jones U.S. Investment Services Index
44
47146.indd 4
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MESSAGE FROM THE CEO AND THE CHAIRMAN
RAYMOND JAMES ANNUAL REPORT 2015
Dear Fellow Shareholders,
At year-end, many of us engage in thoughtful reflection on what
happened during the year and, more importantly, attempt to identify
processes, practices, objectives and time allocations for modifications
to improve personal or corporate performance in light of future
challenges and opportunities. In the financial services industry, those
challenges and opportunities include changes in economic conditions,
financial market outlooks, new regulations, new competitors or
competitive practices, political risks and planned governmental actions,
among numerous other factors. This annual report is dedicated to
the planning process – for our clients and for our business. Through a
discussion of each of our major business segments, you will be able to
discern a great deal about our evergreen values, like our commitment to
our clients, the functions that are performed and what our recent business
tactics have been to improve our products and services in each of our
segments. At the end of this shareholder letter, we will discuss the future
outlook and planned responses to the challenges that are presented.
Before proceeding, let’s discuss what occurred in fiscal 2015 and how
those events impacted 2015 results. We forecasted continued growth in
the economy and further reductions in unemployment. Both occurred
although unemployment dropped further than we anticipated to 5.0%
and GDP growth in the 2% range was somewhat more anemic than
anticipated, even though housing activity has accelerated and the
government retained its low interest rates. Corporate earnings growth
in the calendar year to date is just above breakeven, which was below
our expectations. The increase in employment and lower-than-expected
energy prices should have driven higher levels of consumer spending
than it did. Furthermore, business capital expenditures were low,
particularly in light of good corporate cash flows. In combination, these
strangely uncorrelated, but cumulatively weak, economic factors didn’t
provide a favorable environment for good growth in the financial
services sector.
Nonetheless, our results for fiscal 2015 were excellent under the
circumstances described above, although we had hoped for more
growth at this time last year. Net revenues achieved a new record level
of $5.2 billion, surpassing 2014 results by 7%. Record net income of
$502 million exceeded last year’s comparable results by 5%. Net income
per diluted common share was $3.43, up 3% over last year. The annual
after-tax margin on net revenues was down by 20 basis points from last
year to 9.7%. The after-tax return on average equity for the 2015
fiscal year was 11.5%, down 80 basis points from last year, which was
acceptable in the more challenging environment. Shareholders’ equity
attributed to Raymond James Financial increased to a healthy $4.52
billion on September 30, 2015, or $31.68 per share, and the tangible
book value per share (a non-GAAP measure) was $29.17.
All four core business segments increased net revenue results and
three – Private Client Group, Asset Management and Raymond James
Bank – attained new record pre-tax income.
The Private Client Group (PCG) net revenues grew 7% to $3.51 billion.
PCG’s pre-tax income increased 4% to a record $342 million. Financial
advisor recruiting recorded the second best year in history as our total
advisor count grew by a net 331 to 6,596. As reported later in the
PCG section, we recruited some of the most significant additions
in history in terms of the level of client assets per financial advisor,
which reflects our growing reputation for IT support and client service.
Private Client Group assets under administration were $453 billion,
nominally ahead of last year due to a decline in the equity markets
late in the year.
Capital Markets (CM) net revenues of $960 million exceeded last
year’s by 1%. Pre-tax income of $107 million was down by 18%
but still represented its second best year. While underwriting revenues
declined by 26% due to negative market conditions, M&A advisory
fees and Raymond James Tax Credit Funds revenues attained new
records. Expenses in Equity Capital Markets were up as a result
of new additions in investment banking and research to populate
the new Life Sciences team in our Health Care group as well as
to supplement the Security, Defense & Government Services team.
Given low interest rates, Fixed Income had a good year, producing
substantial increases in net revenues and net income. Public Finance
had an outstanding year.
The Asset Management (AM) segment achieved $392 million in
net revenues in fiscal 2015, which established a new record and
represented a 6% increase over 2014. Pre-tax income also reached
a new high of $135 million, 5% above the results in fiscal 2014.
Despite a difficult market environment and some asset outflows
in our Eagle Asset Management subsidiary, financial assets under
management grew 1% to $65.2 billion on September 30, 2015, as a
result of strong total net sales by AM of fee-based assets and growth
in our PCG sales force. We are confident that very good results in our
Freedom product line and by our RJCS equity managers over the
last five years, in conjunction with the continuing shift to fee-based
management, presage future growth of this segment.
In fiscal 2015, Raymond James Bank (RJB) set new records in net
revenues and pre-tax income. Net revenues grew by 18% to $414
million, which drove RJB’s pre-tax income up by 15% over last year
to $279 million, despite the loan loss provision associated with 18%
net growth over the prior year in total loans to $13 billion. The major
contributors to loan growth were corporate loans, residential
mortgage loans, securities-based lending, and tax-exempt lending
to governments, large nonprofits, and higher education as well as
better collaboration with PCG Investment Banking, Research,
Public Finance and Fixed Income. The net interest margin for 2015
was 3.07%, up 9 basis points from last year. At fiscal year-end,
the percentage of non-performing assets to total assets declined
to 39 basis points from 69 basis points at the end of 2014.
Although there is considerable concern about non-investment-grade
loans currently, we believe the outlook for Raymond James Bank is
bright because of healthy loan growth from quality borrowers in
conjunction with the advent of higher interest rates in the United States,
which will increase returns on short-term cash investments.
The “Other” segment’s gross fiscal 2015 revenues were $67 million,
up 59% over 2014 gross revenues, reflecting higher realizations and
47146.indd 5
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MESSAGE FROM THE CEO AND THE CHAIRMAN
revaluations of private equity investments and the sale of auction rate
securities. As we haven’t made any substantial additional investments
in private equity securities in recent years, we expect that revenues in
this segment will decline materially in 2016 and thereafter. Hence, the
“Other” category will be comprised mainly of miscellaneous expenses
in the future.
One of our favorite sections of the annual report each year is the
inclusion of a list of accomplishments and accolades received by our
associates and the firm over the last year. We also include significant
events to ensure that we record them for posterity. Those significant
achievements follow:
• According to Thomson Reuters, our outstanding and growing
Public Finance team earned a ninth place ranking nationally
among underwriters of municipal bonds.
• In October, the Network for Women Advisors celebrated its 21st
anniversary. The network reflects Raymond James’ commitment
to increasing gender diversity in our workforce, while promoting best
practices through idea exchange. We also promote diversity through
other similar groups at the firm.
• Two Raymond James advisors, Colleen Schon and Tyson Ray,
were named to REP. magazine’s Wealth Advisors with Heart list.
• In November, a long-time premier Raymond James advisor,
Margaret Starner, was named to the Financial Times’ Top 100
Women Financial Advisors list.
• Raymond James-affiliated advisor Sally Law was one of five financial
advisors named to Research magazine’s 2014 Advisor Hall of Fame
in November, one of 12 other Raymond James advisors who have
earned this recognition since 2006.
• In December 2014, Raymond James was named the Benefactor
of the Year in the large company category at the 2014 Tampa Bay
Business Journal’s Corporate Philanthropy Awards.
• Also, in December, seven advisors affiliated with the Raymond James
Financial Institutions Division were named to Bank Investment
Consultant’s list of the Top 50 Bank Advisors.
• During the March quarter, a number of our financial advisors
were recognized for outstanding achievements. In January,
12 Raymond James-affiliated advisors were named to REP. magazine’s
list of Top 50 NextGen IBD Advisors (under 40). In February,
31 Raymond James-affiliated advisors were recognized by Barron’s
as top advisors. In the state rankings, four were ranked number one.
In March, 24 Raymond James-affiliated advisors were named to
the Financial Times’ FT 400 list of top financial advisors.
• In March, eight Raymond James branch managers were named
to On Wall Street’s list of the Top 100 Branch Managers.
• During the June quarter, a number of our financial advisors received
recognition. In April, two Raymond James-affiliated advisors, Kalita
Blessing and Mary Durie, were named to REP. magazine’s 2015 list
of the top women-owned RIA firms. In May, 11 Raymond James
financial advisors were named to the Financial Times list of Top 40
Retirement Advisors. Also in May, Bank Investment Consultant named
its Top 20 Program Managers, six of whom are affiliated with the
Raymond James Financial Institutions Division, up from four last
year. Lyn Phillips-Gaines, a Raymond James-affiliated advisor, was
named to WealthManagement.com’s list of Advisors with Heart.
In June, Raymond James & Associates branch manager Joel Burstein
and Raymond James-affiliated advisor Sean Deviney were named to
Investment News’ Top 40 under 40 list. Last, but certainly not least,
three Raymond James-affiliated advisors, Kalita Blessing (RJFS),
Judith McGee (RJFS) and Margaret Starner (RJA), were named to
Barron’s Top 100 Women Financial Advisors for the second year in a row.
• The Equity Research department team received 15 awards in the
StarMine Analysts Awards, which ranked our firm third among all
broker/dealers in cumulative StarMine awards over the past
three- and five-year periods.
• Raymond James & Associates branch manager Frank Amigo was
recognized as one of the top 10 branch managers in the industry
by On Wall Street.
• At the end of May, we announced an agreement to acquire
The Producers Choice LLC, a private insurance annuity marketing
organization, to improve service to our advisors as well as to provide
similar service to external broker/dealers.
• In late June, J.D. Power announced the results of its U.S. Financial
Advisor Satisfaction Study. Raymond James ranked second in both
the employee advisor and the independent advisor rankings.
• The board elected Charles von Arentschildt to the Raymond James
Financial board of directors in the fourth quarter. He is already
demonstrating the benefits of his Williams College education and
his vast experience at Deutsche Bank Securities and Morgan Stanley.
• We repurchased 1.1 million shares at an average price of $51 per
share. As described in our fourth quarter report, we have adopted
a somewhat more aggressive approach to repurchasing shares to
offset some or all of future compensation paid in common shares
or equivalents to mitigate future dilution, after appropriate
consideration of factors such as liquidity, business and market
outlook, and prospective capital requirements.
• In August, we entered into a five-year $300 million committed line
of credit from a syndicate of nine banks led by Bank of America and
Regions Bank to enhance our financial flexibility.
• In August, four Raymond James-affiliated financial advisors, Gerry
Klingman, Van Pearcy, Mal Makin and Randy Carver, were named
to Barron’s Top 100 Independent Wealth Advisors list.
• Throughout the year, our Investment Banking department and its
bankers received numerous awards for their merger and acquisition
transactions, including winning top honors in four deal-of-the-year
categories in the 2015 M&A Advisor Awards and earning membership
in the organization’s Hall of Fame.
6
47146.indd 6
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As we projected in the fourth quarter’s report, the Federal Reserve
adopted a 25 basis point increase in the federal funds target rate at
its last meeting. While the increase was telegraphed well, the stock
market has experienced a lot of volatility since, which is probably
more related to other factors such as the slowdown in corporate
earnings growth to a virtual standstill for the year and weakness in
the high-yield market, which signifies more risk in corporate balance
sheets, conjoined with a high price-earnings multiple of the S&P 500
earnings of approximately 18 times. In any case, the effective short-term
rate has gone up accordingly to 36 basis points. The important part of
the announcement should be that it’s an inflection point to higher rates,
not the actual impact of the expected slow rise in short-term rates.
However, the change should benefit savers, who possess substantial
cash positions. Furthermore, it will be a positive factor for the financial
industry and Raymond James Financial because regulations and
liquidity concerns dictate large short-term cash balances.
We are always reminded about some of those liquidity rationales at
this time of year as we fund year-end bonuses, contributions to qualified
plans, our quarterly dividend and various taxes. Consequently, our
cash balances will be near their quarterly lows at the end of the first
quarter of fiscal 2016 on December 31, 2015. Furthermore, we have
recently contracted to purchase Deutsche Bank’s high-net-worth
financial advisors in the United States, which, while scheduled to
close around the close of the 2016 fiscal year, will require up to a
$420 million total investment. Finally, we will retire a $250 million note
in April. At the same time, it is likely that organic growth may require
in April. At the same time, it is likely that organic growth may require
RAYMOND JAMES ANNUAL REPORT 2015
a majority of our cash flow generation in fiscal 2016 because of
expected financial advisor recruiting investments, the requirement
of additional equity capital to fund Raymond James Bank growth
and investments to support the future growth of other segments.
Needless to say, we will self-fund and/or source additional debt
or equity as necessary. You should now understand why we have
counseled patience related to stock buybacks, with the possible
exception of those required to offset dilution related to equity
compensation programs.
As you can tell by the volatility in the stock market, professional
investors are concerned about downside risk given its current valuations.
The interruption in corporate earnings growth, which has been the
most consistent driver of market values, is a real concern and could
derail improvements in equity valuations during the first half of fiscal
2016. However, continuing growth in employment, an uplift in wages
due to shortages of certain skills, low energy prices, vibrant housing
sales and 2% GDP growth should soon be joined by a resumption of
consumer spending, which will lift corporate earnings and the stock
market out of the doldrums. As a result, on November 19, 2015,
encouraged by 2015 earnings, the board raised our dividend by $0.02
per quarter to $0.20, effective on the January 15, 2016, payment date,
which represents an 11% increase. Our annual increase was crafted to
correspond with our 20-25% targeted ratio of dividend payout to
earnings per share.
In the meantime, the lack
In the meantime, the lackluster market will be a drag on our
Capital Markets and Asset
Capital Markets and Asset Management results as well as dampen
PCG activity. Furthermore
PCG activity. Furthermore, new regulations, preparatory costs for the
addition of the Deutsche Ba
addition of the Deutsche Bank financial advisors (which will be branded
as our Alex. Brown division
as our Alex. Brown division) and the full year expenses of personnel
additions will exacerbate th
additions will exacerbate the challenges presented by the absence of
revenue growth. Thus, resul
revenue growth. Thus, results could be negatively impacted for a couple
of quarters before higher n
of quarters before higher net interest earnings, continued record
recruiting, cost control effor
recruiting, cost control efforts and the growth of Raymond James Bank
lead to a resumption of gro
lead to a resumption of growth in net revenues and net income. As we
have consistently forecast, w
have consistently forecast, we still expect the longer-term outlook for
the financial services indust
the financial services industry to be favorable.
Best wishes for a happy
Best wishes for a happy, healthy and prosperous New Year!
Thomas A. James
Executive Chairman
Raymond James Financial
Paul C. Reilly
Chief Executive Offi cer
Raymond James Financial
December 20, 2015
Left to right: Paul C. Reilly,
Thomas A. James
47146.indd 7
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1/7/16 1:52 PM
PRIVATE CLIENT GROUP
From the beginning, Raymond James has been a fi rm focused on helping clients
reach their individual fi nancial goals. Today, the Private Client Group continues
to represent approximately two-thirds of total company revenue while driving
revenues in other segments of the fi rm – particularly Asset Management and
Raymond James Bank.
This year, the influence of the Private Client Group was significant,
as remarkable recruiting success and continued growth of existing
advisors’ businesses resulted in client assets of $453 billion, in spite
of a late-year decline in the equity markets.
We experienced the second-best year in our recruiting history during
2015 – only behind 2009, when advisors were escaping from firms at
risk as a result of the financial crisis. Then and now, recruited advisors
cite our client-first, advisor-focused culture that supports their
individual businesses, versus the product quotas or specific client
profiles emphasized at other firms, as a key reason for choosing
Raymond James. That increasingly unique value proposition – a
combination of large-firm resources and small-firm culture – has
helped the Private Client Group add more than 330 net advisors
to our independent and employee divisions this year. Each division
has recruited more than $110 million in trailing 12-month advisor
production, and our registered investment advisor arm has more
than doubled its advisor numbers over the previous year.
Our Financial Institutions Division continued our track record of
affiliating sophisticated banks and credit unions that desire a partner
to provide brokerage services to clients. In 2015, we added institutions
across the country, including significant additions in Nebraska, Oregon
and Texas. Further, FID-affiliated advisors continue to outpace the
industry, with close to double the industry average in annual
production and three times the average in revenues from advisory
fees, both important metrics for depository institutions with
investment programs.
For our employee division, recruiting success was also represented
by several sizable groups joining the firm, including the largest in
our history, The Americas Group in South Florida, which manages
approximately $2.4 billion in assets for clients. Also significant was the
addition of Quattuor Capital Partners in New York, which manages
$900 million in assets and represents the first foray into Manhattan for
our employee broker/dealer, in support of our expansion into markets
historically under-penetrated by this division in the West and
Northeast. As further proof that this expansion strategy is working,
15 of the 20 branches opened by our employee division in 2015 were
located in these target geographies.
In support of our westward expansion, Raymond James also extended
its support services beyond our traditional borders. In addition to a new
data center that opened in Denver in 2013 to modernize processing
and protect client information, this year we added a supervision,
transitions and compliance office in Phoenix to serve our independent
contractors, and added a new office of Raymond James Trust in
Los Angeles.
Of course, recruiting new advisors means little if retention and support
of current advisors is not industry leading. In an environment where
many firms offer huge upfront payouts to entice advisors away from
their current firms, very few have chosen to leave Raymond James.
Regrettable attrition remains well below 1%. Further, more than 90%
of Raymond James advisors say they are willing to recommend the firm
to their peers, and the firm ranks second among all competitors in the
2015 J.D. Power Financial Advisor Satisfaction survey for both the
independent and employee channels.
8
47146.indd 8
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RAYMOND JAMES ANNUAL REPORT 2015
Contributing to our strong recruiting and envious retention is our highly
regarded technology offering, which is benefiting from significant
multi-year investments under the leadership of Executive Vice President
of Technology and Operations Bella Allaire. In addition to continuing
to enhance our best-in-class advisor desktop, which integrates multiple
systems into an easy-to-use customizable interface, we’ve expanded
mobile capabilities and continued to focus on data security. In fact,
our Cyber Threat Center (CTC) capabilities were recognized in a
study conducted by Deloitte Consulting and the Securities Industry
and Financial Markets Association as being among the top 20% of
firms in our industry.
Importantly, 2015 was also a year of looking forward. With the
advent of robo-advisors offering online asset allocation and investment
selection, and shifting client preferences due to technology and
demographic changes, the financial services landscape is evolving.
Meanwhile, regulatory changes will continue to challenge us. Against
that backdrop, however, we believe individualized, holistic advice is
as important as ever and, more importantly, that it is a differentiator
for professional advisors.
To this end, we’ve continued to focus on practice management
support, with a specific focus on helping advisors evolve their practices
to serve the client of the future, today. Our efforts include resources
such as Practice Intelligence, an online compilation of insight,
materials and tools from internal experts, external partners and
advisors themselves, that was recognized with the award for practice
management at the WealthManagement.com Industry Awards in
2015. We also are focusing on specific topics such as longevity
planning, to help advisors expand their expertise into areas such as
housing concerns, social needs and medical expenses and address the
new challenges related to extended life spans and, often, much longer
retirements. This effort is consistent with our founder Bob James’
philosophy that financial planning includes solving all of the client’s
financial needs. The Private Client Group continues to encourage
advisors to evolve their practices to new realities, for example by
providing industry-leading social media support, which helps advisors
connect with current clients and their next generations, an
increasingly important segment of our client base.
As we face a future that is always uncertain due to shifting global
economic and market forces, our Private Client Group is well-
positioned to best serve clients, support advisors and grow our
business. We are confident that the client-first, advisor-centric,
values-based culture that Raymond James was founded upon will
continue to guide us for many years to come.
LEFT TO RIGHT:
Scott A. Curtis
President, Raymond James
Financial Services
Tash Elwyn
President, Raymond James
& Associates Private Client Group
i W Z
Dennis W. Zank
D
i W Z k
D
Chief Operating Offi cer
Raymond James Financial
9
1/7/16 1:52 PM
47146.indd 9
To plan on the next generation, we plan for a changing guard.
Serving the client of the future by creating the advisors of the future – today
NEW GENERATIONS OF INVESTORS ARE EMERGING.
TO ADAPT TO A CHANGING INDUSTRY AND MEET THE
NEEDS OF TODAY’S CLIENTS, FINANCIAL ADVISORS
HAVE TO BECOME LIFE ADVISORS – HELPING CLIENTS
CONNECT THE DOTS BETWEEN NEEDS AND GOALS,
ACROSS GEOGRAPHIES AND GENERATIONS.
“We’re leveraging the exceptional advisors we have today to create
the advisor of tomorrow,” Matt shared. Through a combination of
distance learning, sessions at the fi rm’s international headquarters
and mentorship with seasoned pros and senior leaders, the blend of
classroom structure and real-world experience supports long-term
development, whether the up-and-coming want to be standalone
advisors or join an existing team.
That’s exactly how Matt Ransom, CFP®, vice president of new advisor
development, coaches advisors in the Raymond James Advisor Mastery
Program (AMP). “We don’t talk about the advisor of the future without
fi rst considering the client of the future,” he stressed. The 24-month
development program is a commitment to the educational upbringing
of the next generation of Raymond James fi nancial advisors.
Even with shifting client demographics and evolving preferences, one
vital need remains the same: understanding clients and helping them
reach their goals through collaborative relationships. Drawing on the
fi rm’s planning heritage, new advisors are coached to ask the right
questions to uncover complexities and help meet challenges in clients’
lives they may not even know they have.
10
47146.indd 10
1/7/16 1:52 PM
RAYMOND JAMES ANNUAL REPORT 2015
Our competitive advantage
is changing.
THE EVOLVING ADVANTAGE OF
WORKING WITH AN ADVISOR
then: Access to information
and quotes
now: Access to expert asset allocation
and investment selection
next: Access to professionals who can harness
data and technology advancements to help
clients plan beyond investing
In that regard, Raymond James gives fi nancial advisors the power
to select their successor, understanding the deep relationships and
vested interest they have with their clients.
Sometimes the best fi t is family, such as with Bob and Charlie Kreitler
in New Haven, Connecticut. After 10 years working alongside his
father at Kreitler Financial to help elevate the practice strategically,
Charlie formally became president of the family fi rm.
“Allowing advisors to choose the best successor for their clients is
a genuine part of the Raymond James culture,” Charlie refl ected.
“At our fi rm, some of our relationships span more than 30 years, so
clients feel they’re part of the Kreitler family,” he continued. “Being
able to preserve that is important.”
Bob continues to work with clients and is proud of the practice he
grew with the help of the next generation. “It’s obviously very
rewarding to not only have my son come into the fi rm, but to have him
take a relatively successful practice and use that as a launching board
to make it something even better.”
“Our willingness to embrace change with new tools and talent lives
alongside the established values that our clients came to us for in the
fi rst place,” Charlie refl ected.
In Rachel’s case, she found a team that felt like family. Making the
transition from AMP mentee to partner, she remembers a moment
when her other half in business, Bob Hilton, managing director and
senior vice president of investments, shared that their partnership is
almost like a business marriage. “Our clients need someone to be
there for them that they feel comfortable with, who they have been
developing a relationship with over time,” Bob emphasized. “A strong
partnership ensures we’re providing a continuum of care for our clients.”
Matt agrees that it’s not about transitioning a practice, it’s about
advisors considering who will be able to take care of their clients
when they can’t: “If you think about what the next generation wants
to accomplish – making an impact on the world, helping people and
working with a purpose – I can’t think of a better industry to have that
kind of impact than this one.”
11
1/7/16 1:52 PM
From left to right: Matt Harring, fi nancial advisor;
Rachel McNeil, fi nancial advisor; Matt Ransom,
vice president, new fi nancial advisor development;
Miranda Reiter, fi nancial advisor trainee.
“Client fi rst is still the only way to do things,” Matt said. “The advisor
we support and foster has a shared commitment in getting to the
client’s goals.”
As investors are an increasingly diverse, complex group, defying
simple categories and generalizations, the face of advisors is also
changing. Reaching beyond traditional efforts in recruiting and
professional development, Raymond James is intentional about who
will be representing the fi rm in 15 to 20 years. Those efforts include
growing and supporting groups such as the Network for Women
Advisors – an integral part of the fi rm for more than two decades –
and the newly formed Black Financial Advisors Network. Both
organizations work to foster success within demographic groups that
are under-represented in the industry.
Rachel McNeil, CFP®, Chartered Retirement Planning Counselor and
fi nancial advisor with Mustard Seed Advisors of Raymond James in
St. Petersburg, Florida, strongly believes that a team functions best
when it’s diverse. “With different opinions and experiences, you can
connect to your clients on a deeper level. Financial advisors now …
and the next generation advisors in 10, 20, 30 years … have to be able
to connect with clients.”
47146.indd 11
CAPITAL MARKETS
EQUITY CAPITAL MARKETS
Equity Capital Markets advanced a number of growth initiatives in 2015,
while navigating challenging market conditions in several sectors where
the fi rm has historically been strong.
Fiscal 2015 represented another record year for merger and
acquisitions/advisory fees with revenues of $162.3 million, continuing
a string of record years that has resulted in fees nearly tripling over
the last five years. In addition, we posted a total of 66 deals with
$1 million-plus in M&A/advisory fees, an increase of more than 40%
over last year, with representation from each of our industry practices.
Raymond James is now positioned as one of the most prominent
middle-market M&A/advisory firms in the industry and continues to
enjoy numerous awards for the quality of its work and the success of
our practice, including winning top honors in four deal-of-the-year
categories in the 2015 M&A Advisor Awards, and claiming a spot in
the organization’s Hall of Fame.
Consistent with our commitment to expanding this business in
both North America and Europe through steady hiring, lift-outs and
acquisitions of advisory boutiques, in 2015 we added eight managing
directors in Investment Banking in North America and continued
to focus on establishing an on-the-ground European M&A/advisory
presence to supplement our current activities in the region. Our
Canadian subsidiary also added a new senior managing director
and head of M&A business.
Investment Banking underwriting activity in 2015 was more
challenging as the volatility in commodity markets and rising interest
rate fears significantly dampened our activity in traditionally strong
sectors including energy, natural resources and real estate. As a result,
underwriting activity declined in 2015. This decreased underwriting
activity was also largely responsible for a decrease of approximately
5% in institutional equity sales commissions in 2015.
To plan on growth, we plan for an untapped resource.
With breadth and depth, Equity Capital Markets expands coverage of sectors
FOR MORE THAN 40 YEARS, RAYMOND JAMES EQUITY CAPITAL MARKETS HAS COMBINED FOCUSED RESEARCH,
POWERFUL DISTRIBUTION, AND SOLID INVESTMENT BANKING ADVICE TO SERVE GROWTH COMPANIES AND
INVESTORS. THIS YEAR, THE GROUP DEEPENED COVERAGE OF EXISTING SECTORS AND EXPANDED INTO NEW
ONES TO TAKE ADVANTAGE OF SUBSTANTIAL MARKET OPPORTUNITY.
Expansion into the Life Sciences sector, a significant strategic
Setting the stage included anchor hires of three senior investment
growth initiative for the firm, began in January 2015 and continues to
bankers who collectively brought more than 34 years of investment
develop with impactful team additions. The establishment of this
banking experience to the firm, largely specialized in life sciences.
practice, housed within the Health Care Investment Banking group,
A few months later, the team further expanded with two additional
empowers the firm to provide a full range of solutions primarily in the
managing directors joining Investment Banking and Equity Capital
biopharmaceuticals, biotechnology and pharmaceutical sectors.
Markets. By July, the firm had a comprehensive team of life sciences
“This key addition enables us to offer comprehensive advisory
and financing capabilities to clients across the entire health care
continuum,” said Riley Sweat, head of Health Care Investment Banking.
“Dynamic growth in this sector provides the opportunity to further
position the firm and our health care practice as an industry leader.”
professionals including 10 investment banking professionals and
three senior research analysts, as well as equity origination and
specialized institutional sales professionals.
12
47146.indd 12
1/7/16 1:52 PM
RAYMOND JAMES ANNUAL REPORT 2015
The cash equities business throughout North America and Europe faces ongoing headwinds due to a
T
number of factors, including the pressure on active money managers to reduce trading and other third-party
nu
costs, the growth of passive versus active money management, relatively low overall market volatility and
co
the proliferation of electronic trading venues. Nonetheless, Raymond James has established itself as a leader
th
in the provision of equity research, as well as sales and trading services to institutional investors, and has
in
consistently garnered profitable market share in a relatively mature market. Today, we have 81 equity
co
research analysts covering over 1,345 public companies globally and have earned a reputation for market-
re
leading industry expertise and a focus on growth companies and sectors.
lea
E T
E T i
ff
J ff
Jeffrey E. Trocin
President
Global Equities
and Investment Banking
Raymond James & Associates
The firm’s equity research reputation also extends to the support
of our Private Client Group clients with unique and differentiated
investment insights and products. In 2015, PCG raised over
$1.2 billion in investment products tied to our research team’s
recommended and thematic stock lists.
A significant initiative that will serve to generate future growth in each
of our institutional/Private Client Group commission, underwriting
and M&A/advisory businesses was the successful establishment of our
Life Sciences practice in 2015. We enjoyed some immediate success
but anticipate considerably more traction going forward in what is
projected to be one of the most active sectors in capital markets for
years to come.
“The life sciences industry is one of the largest and most vibrant
capital markets sectors,” said Jim Bunn, head of Investment Banking
at Raymond James. “Adding knowledgeable senior professionals
allows us to build an industry-leading practice while our clients get
access to a well-rounded team with strong connections in a dynamic
industry.” Currently, practice offices include San Francisco, Atlanta,
Chicago and New York City.
Also, the firm continued to grow its Security, Defense & Government
Services practice last summer and through the fall with the addition of
five highly regarded senior bankers. Along with establishing a presence
in the strategically important Washington, D.C., market, they broaden
the group’s coverage in high-growth segments such as cybersecurity,
defense and government services. In addition to the new location, the
practice has offices in Memphis, New York City and St. Petersburg.
2009: Acquired 21 Investment Banking professionals
(Lane Berry)
2011: Acquired 13 Investment Banking professionals
(Howe Barnes), added 6 senior Investment Banking
professionals, and more senior hires in technology practice
2012: Acquired 33 Investment Banking professionals
(Morgan Keegan)
2014: Expanded consumer and fi nancial sponsor practices
with senior Investment Banking hires
2015: Added life sciences practice with senior hires,
expanded Security, Defense & Government Services practice
47146.indd 13
1/7/16 1:52 PM
CAPITAL MARKETS
FIXED INCOME CAPITAL MARKETS
a
In Fixed Income, 2015 continued to be a
tale of two businesses, both aff ected by the
the
stly
low interest rate environment, but in vastly
diff erent ways.
For Fixed Income Capital Markets, low rates meant that demand
for high-grade fixed income securities remained subdued as investors
were attracted to riskier corners of the investment universe.
Meanwhile, trading conditions characterized by long stretches of
abnormally low volatility interrupted by brief episodes of panic
were especially difficult to navigate.
Even against this backdrop, our team delivered solid financial results.
The vigilant risk management discipline demonstrated by our trading
staff protected the firm against the sizable losses that saddled many of
our peers during those episodes of panic, while our client-first operating
philosophy enabled us to capture additional market share in key segments.
In particular, our municipal and whole loan sales and trading operations
performed exceedingly well this year.
We are also pleased with the progress achieved in 2015 related to our
support of banks and credit unions, an important client segment for
our Fixed Income division and Raymond James as a whole. First, our
asset/liability consulting team, which was reorganized in 2014, was
challenged to supplement the securities transactions we conduct for
these key clients with best-in-class consultative capabilities to address
their entire balance sheet needs. The team clearly delivered. Since
that time, total assets under consultancy have increased by an impressive
49.6%. In addition, we established a fee-based investment advisory
operation designed to outsource these clients’ portfolio management
functions. This operation fills a void that has long existed in our product
lineup and will help us more comprehensively serve our clients.
Industry disruption also enabled us to launch several new initiatives
during 2015, including the establishment of a Fixed Income Origination
and Syndication department in partnership with Equity Capital
Markets. While this is a nascent focus, we believe our colleagues’
issuer relationships and our distribution capabilities will produce
significant synergies for growth in both divisions.
John C. Carson Jr.
President
Raymond James Financial
Fixed Income Capital Markets
Finally, as we look forward, the succession of regulatory requirements
imposed in the wake of the credit crisis are already resulting in
structural changes to the fixed income sales and trading marketplace
and will continue to impact our business and, more importantly, the
clients we serve.
While it is tempting to bemoan this environment, we choose to focus
instead on the opportunities that will likely manifest from them.
Upstream competitors on Wall Street have been effectively required
to allocate less capital to their fixed income operations, while our
downstream competitors are having an increasingly difficult time
generating sufficient economic results given the drag of regulatory
costs, which we believe will result in continued industry consolidation.
This will present a unique opportunity to attract talented associates to
our team, who can help support our clients, many of whom also
operate under intensifying regulatory conditions and need expert
counsel more than ever.
14
47146.indd 14
1/7/16 1:52 PM
Empowering East Harlem artists to stay in the community they call home
RAYMOND JAMES ANNUAL REPORT 2015
SUPPORTING AFFORDABLE HOUSING ISN’T A NEW
CONCEPT FOR RAYMOND JAMES. IN 1969, TOM JAMES
COMPLETED THE COMPANY’S FIRST DEAL OF THIS
KIND IN MARIN COUNTY, CALIFORNIA. FAST FORWARD
TO TODAY, AND RAYMOND JAMES-SPONSORED
FUNDS HAVE PROVIDED MORE THAN $5.74 BILLION
OF EQUITY TO REVITALIZE COMMUNITIES ACROSS
THE UNITED STATES.
Tax Credit Funds participated in different sources of fi nancing, which
included investing $37 million in the Low-Income Housing Tax Credit,
as well as federal and state historic tax credits. Darryl Seavey, vice
president and managing director of acquisitions for the Northeast
region said, “Preservation of the more-than-a-century-old school is
an example of restoring an iconic neighborhood landmark that had
fallen into disrepair, while providing much needed affordable housing
for artists who had been priced out of an important New York cultural
community.”
Through Tax Credit Funds, Raymond James’ industry-leading
affordable housing division, the company is ultimately helping
provide clean, safe, reasonably priced housing for deserving
residents. By syndicating limited partnership investments in real
estate project entities, the division helps banks and other institutions
meet their Community Reinvestment Act obligations, as well as
stimulate the development of low-income housing.
Through the historic rehabilitation and adaptive reuse, the multi-
year, neighborhood-driven project not only provided affordable
housing, but an art-focused cultural touchstone for the vibrant
community. The fi ve-story building, with hardwood fl oors and 14-foot
ceilings, also includes a 2,805-square-foot residential recreation room
and 9,010 square feet for a gallery, offi ces and community space for
arts and cultural organizations.
In New York City, one such development is in East Harlem, which
has seen signifi cant gentrifi cation, making it diffi cult for low-income
residents to stay in the community in which they grew up.
Recognized for fi ve preservation awards in one year, the El Barrio’s
Artspace PS109 project transformed an 1800s-era, Gothic-style
abandoned public school building into 89 studio, one- and two-
bedroom units of affordable work and living space for artists and
their families, as well as one superintendent’s unit.
Indicating enthusiasm for the project: PS109 received 50,000
applications from would-be residents, including actors, painters,
writers and dancers. By September 2015, those accepted were all
moved in and celebrating the creative and culturally rich atmosphere –
an optimal environment for doing what they love.
Steve Kropf, president and chief executive offi cer of Tax Credit Funds,
said, “Affordable housing encompasses a lot of things, including a
signifi cant social impact. We’re just doing our jobs here, but there’s a
feel-good component that’s important to remember.”
AWARD-WINNING: CROWN
JEWEL OF PRESERVATION
IN NYC, GARNERING SIX
PRESERVATION AWARDS
• 2015 J. Timothy Anderson Award for Excellence in Historic
Rehabilitation from the National Housing & Rehabilitation
Association in the category of Best Historic Rehab Utilizing
LIHTCs – Large Development
• 2015 Renaissance Award from Friends of the Upper East Side
Historic Districts
• The Lucy G. Moses 2015 Preservation Award from The New York
Landmarks Conservancy
• 2015 Excellence in Historic Preservation Award from the
Preservation League of New York State
• 2015 Preservation Award from the Victorian Society of New York
• 2014 State Preservation award from New York State
Office of Parks, Recreation & Historic Preservation
El Barrio’s Artspace PS109
James Shank Photography
47146.indd 15
15
1/7/16 1:52 PM
CAPITAL MARKETS
PUBLIC FINANCE
Public Finance
In contrast to the diffi culties presented to our Fixed Income Capital
Markets business, the low interest rate environment and growing
economy drove strong performance for our Public Finance team,
which is consistently ranked as a top-10 municipal underwriter
nationally.
We increased the number of $100 million+ senior managed bond
issues by 32%, with a total of 33 for the year including the fi rm’s
largest in history, a $731 million transaction for the State of
Connecticut.
Overall issuance of negotiated new issues was up 41% in 2015 and
despite regulatory hurdles and tightening underwriting spreads, our
bankers capitalized on the increase. National market share for senior
managed negotiated transactions increased 15% over last year, with
market share for senior managed new issues increasing in 11 core
states, including a 200% increase in California.
In addition to public fi nance banking and fi nancial advisory services,
our bankers are emphasizing other services to issuers, including
derivative advisory services and a process for the reinvestment of
bond proceeds.
Finally, as the industry undergoes consolidation, Raymond James’
strong reputation has allowed us to attract high-quality senior bankers
who are established producers in specifi c sectors and geographies. We
expanded our specialty practices of Healthcare M&A and Healthcare
Real Estate, and added bankers into Georgia and California.
These hires round out a team of more than 180 public fi nance
professionals, with a strong outlook for additional recruiting. Paired
with signifi cant momentum in terms of new issue pipeline and issuer
acceptance, we are well-positioned for growth in 2016 and beyond.
16
47146.indd 16
Helping The Texas A&M System
expand young minds with an
expansive housing project
WITH JUST 12,000 BEDS AND AN ANNUAL NEW
STUDENT GROWTH RATE OF 1.5% TO 2%, STUDENT
HOUSING WAS AT A PREMIUM ON THE 55,000-STUDENT
CAMPUS OF TEXAS A&M UNIVERSITY. FORTUNATELY,
THE UNIVERSITY OWNED 48 ACRES THAT WERE PRIMED
FOR BUILDING AND, WORKING WITH RAYMOND JAMES,
THEY WERE ABLE TO FINANCE A CONSTRUCTION
PROJECT THAT WILL PROVIDE STUDENTS AND THE
SCHOOL NOT ONLY NEW HOUSING BUT POTENTIALLY
SO MUCH MORE.
1/7/16 1:52 PM
RAYMOND JAMES ANNUAL REPORT 2015
y
h
p
a
r
g
o
t
o
h
P
t
t
e
l
l
e
K
l
e
a
h
c
i
M
From left to right – John Sharp, chancellor, Texas A&M University;
Hugh Tanner, senior public fi nance banker, Raymond James;
Rafael Figueroa, president, Servitas Group.
To plan on new opportunities, we plan for deepening relationships.
The housing project will not only provide for the construction of
new student housing (amounting to 3,400 additional beds) but is also
designed to funnel future revenues back into the university system,
which can then use those dollars to fund academics and research.
“The way it’s structured, this project is self-supporting,” said Nashville-
based lead banker Hugh Tanner. “All surplus funds generated by
operations will be paid to the university.”
The system ultimately chose the proposal created by Servitas,
LLC in collaboration with Raymond James based not only on the
proposal’s quality and creativity, but on the team’s reputation and
deep relationships in the student housing space.
According to Hugh it was a “good fi t” that brought together several
groups for the benefi t of the project.
The Raymond James Public Finance team – including Chad Myers in
Memphis, Casy O’Brien and Steven Julian in Chicago, Chris Boudreau
and Ted Hynes in Atlanta, and David Sutton and Joseph Birdsong in
Nashville – served as sole underwriter and oversaw the fi nancing
process, working with bond issuer New Hope Cultural Education
Facilities Finance Corporation. Servitas is handling development and
construction and not-for-profi t NCCD-College Station will operate
the properties, with all surplus funds going back to Texas A&M.
The $361 million development, scheduled to open in the fall of 2017,
will be one of the largest ever public-private projects completed in
the student housing space. It also is one of 73 student housing projects
Raymond James has fi nanced over the past 15 years, generating in
excess of $3.3 billion for similar projects across the country. And Hugh
is confi dent the team’s momentum will continue, both with Texas A&M
and other universities nationwide.
“It’s funny,” said Hugh, “The day before the deal was scheduled to
go to market, Casy O’Brien in Chicago was out having lunch and sees
a guy wearing a Texas A&M shirt. Casy had a picture taken with him,
which we shared with the team members. It turned out to be a good
omen – the project was extremely well-received by a diverse group
of investors.”
47146.indd 17
17
1/7/16 1:52 PM
ASSET MANAGEMENT
Our Asset Management segment includes Asset
Management Services (AMS), which provides
a single source for managed accounts and fee-based
platforms for Raymond James fi nancial advisors, and
Eagle Asset Management, which serves as a
discretionary manager for institutional equity and
fi xed income portfolios and our internally sponsored
mutual funds. Together, these groups represent
approximately one-fi fth of Raymond James’ pre-tax
income. AMS is supported by growth in the Private
Client Group, and Eagle contributes to overall growth
through the products it off ers both internally and on
external platforms.
Asset Management Services
The Asset Management Services (AMS) division generated strong
fee-based business growth in 2015, with a record year in sales for
accounts directed by the firm’s institutional managers, as well as those
administered by financial advisors in the Raymond James Private
Client Group. Sales reached $9.2 billion and $17.5 billion respectively,
with $5.7 billion and $13.1 billion in net inflows for each account type.
These results were supported by record recruiting in the Private Client
Group, use of fee-based accounts by more than 87% of the firm’s
financial advisors, and progress with several key initiatives:
• AMS launched two new investment solutions:
– Freedom Hybrid, comprised of mutual funds and exchange
traded funds (ETFs) within existing asset allocation models
to provide active management and greater expense control
– Multiple discipline account (MDA) strategies, which enable
approved managers to run asset allocation models composed
of multiple separately managed account disciplines from
that manager.
• Institutional Consulting Services – a business added with the 2012
addition of Morgan Keegan to provide consulting and investment
selection and oversight to financial advisors working with foundations,
family offices and other large institutions – posted record investments
of $2.2 billion in 2015.
Looking forward, we expect several macro-trends, such as changes in
investor demographics, to challenge our existing offerings, as well as
offer new avenues for growth. For example, there is significant focus on
developing relationships with the next generation of potential clients
as those near or in retirement prepare to pass wealth to their heirs.
In support of that, AMS recently launched Freedom Foundation
portfolios for clients who have a minimum of $5,000 to invest.
This account solution offers advisors an efficient way to diversify
smaller accounts with high-quality, professional managers, while
building the framework for ongoing, multigenerational relationships.
We are also actively exploring synergies between AMS and other areas
of the firm, continuing to leverage the success of the Private Client
Group, while expanding our offerings for future growth.
Eagle Asset Management & Affiliates
Eagle Asset Management provides institutional and individual investors
with a broad array of separately managed account and mutual fund
products under the Asset Management Group umbrella. We delivered
strong investment performance in 2015, while continuing to build our
presence on investment platforms throughout the industry.
At fiscal year-end, 73% of investment portfolios outperformed their
benchmark indices for the five-year period, with Eagle products
available through the distribution networks of multiple firms. This
strong performance and broad distribution resulted in record sales
of $8 billion while producing five-year cumulative growth in assets
under advisement of greater than 80%. Five-year annualized revenue
growth approached 10%, with annualized profits for the same period
increasing 20%.
Among the initiatives supporting these results were the launch of our
first closed-end offering, the Eagle Growth & Income Opportunities
Fund, and the introduction of a dedicated registered investment
advisor sales team to gain traction in an underserved and growing
portion of the financial services marketplace.
Further, recent additions, including our significant
investment in ClariVest Asset Management in 2013
and this year’s acquisition of Eagle affiliate
Cougar Global, helped round out Eagle’s
offerings. ClariVest offers domestic, international
and emerging market equity strategies, while
Cougar provides access to the growing discipline
of tactical-allocation investing.
Jeffrey A. Dowdle
President
Asset Management Services
Executive Vice President
Raymond James Financial
18
47146.indd 18
1/7/16 1:52 PM
RAYMOND JAMES BANK
RAYMOND JAMES ANNUAL REPORT 2015
James established
It has been a little more than two decades since Raymond James established
a depository institution. In that time, Raymond James Bank has become a
nk has become a
vital part of the organization, with approximately one-third of the fi rm’s
d of the fi rm’s
capital and a similar amount of cash balances from clients in the Private
in the Private
Client Group deployed through lending to corporations and individuals,
nd individuals,
largely through existing relationships with the fi rm’s Capital Markets
al Markets
and Private Client Group businesses.
In 2015, these relationships resulted in a record year of loan production,
even as our lenders adhered to conservative credit standards in a highly
competitive lending environment. Net loan balances grew by 18% over
the previous year to $13 billion, and the bank turned in its most profitable
year, with pre-tax income of $279 million, an increase of close to 15%
over fiscal year 2014.
A combination of additional lending and deepening ties with other
Raymond James business units drove this performance.
For example, corporate lending – which represents close to two-thirds
of overall loans at Raymond James Bank – benefits from working
with clients of our Public Finance, Investment Banking and Equity
Research colleagues. In fact, almost half of all corporate loans are with
these clients. This provides more in-depth understanding of those to
whom we offer loans, while helping to solidify relationships with a broader
range of services. One initiative supporting this effort is our tax-exempt
lending business, in which the bank makes loans to governments, large
nonprofits, and higher education and municipal entities. Launched in
2014, this business has already grown to $485 million in outstanding
loans, with 100% generated through collaborations between Raymond
James Bank and Public Finance.
The bank’s partnership with the Private Client Group in support of
individual wealth management clients also expanded this year, with the
introduction of banking consultants in offices across the United States to
build deeper relationships with regional Private Client Group financial
advisors. These consultants partner with advisors, educating them on
banking products and working directly with clients on lending needs.
As a result of this investment, the number of advisors closing loans
through Raymond James Bank for their clients increased 76% in just
the last two years. Further, advisors who are using lending are doing
so more frequently, increasing the number of loans they closed with the
bank by more than 60% in that same time period, evidence that lending
is becoming a more consistent part of the services they provide clients.
Steven M. Raneeyey
Steven M. Raney
Steven M. Rane
President and CEO
Raymond James Bank
Similarly, Raymond James Bank benefits from the Private Client
Group’s strong retention and recruiting of financial advisors, which
positions us well for future growth. For example, many recent recruits
have joined Raymond James from large bank-owned firms where they
were accustomed to providing cash management solutions as a service
to their clients. While we have had a cash management account and
related services for many years, this greater demand has helped drive
more robust investment in features and functionality – such as easier
mobile access – to enhance this service. Considering that the majority
of Private Client Group clients are in or near retirement – a time when
many people consolidate assets with fewer providers – these investments
are critical to providing advisors with tools to bind them more closely
to clients and ensure they are the advisor of choice.
As Raymond James Bank plans for the future, we will continue to
strengthen these types of partnerships to support our focus on a
high-quality loan portfolio that reflects the firm’s overall long-term
conservative management philosophy. The bank’s objective has been
and will continue to be straightforward: We will provide a stable,
low-cost source of deposits and synergies with the firm’s other business
units to grow the bank at the same rate as Raymond James overall,
limiting our balance sheet equity to roughly one-third of the firm’s
total equity.
47146.indd 19
19
1/7/16 1:52 PM
SOCIAL RESPONSIBILITY
Raymond James associates give back to their communities in countless ways,
supporting the arts, United Way and Junior Achievement, as well as a host
of educational, civic, social and philanthropic endeavors. We’re proud of the
work they do, and we thank them for their boundless generosity.
RAYMOND JAMES
Cares Month 2015
5,628
HOURS
2,586
PARTICIPANTS
6,921
CHILDREN AIDED
39,867
MEALS PREPARED
11,032
NONPERISHABLE GOODS DONATED
20
47146.indd 20
Donations
$2,712,292
ASSOCIATE GIFTS
$5,579,891
CORPORATE GIFTS
$8,291,183
TOTAL IMPACT FISCAL YEAR 2015
1/7/16 1:52 PM
RAYMOND JAMES ANNUAL REPORT 2015
Our business is people and their
fi nancial well-being. Therefore,
in the pursuit of our goals, we will
conduct ourselves in accordance
with the following precepts:
• Our clients always come fi rst. We must provide the highest
level of service with integrity.
• Assisting our clients in the attainment of their fi nancial
objectives is our most worthy enterprise.
• We must communicate with our clients clearly and frequently.
• Our investments and services must be of superior quality.
• Teamwork – cooperating with and providing assistance
and support to our fellow associates – is fundamental
to sustaining a quality work environment that nurtures
opportunities for unparalleled service, personal growth and
job satisfaction.
• Continuing education is necessary to maintain the timeliness
of investment knowledge, tax law information and fi nancial
planning techniques.
• Innovation is requisite to our survival in a changing world.
• To emulate other members of our industry requires us to
continue to work hard; to excel beyond our peers requires us
to provide an even higher caliber of service to our clients.
• We must give something back to the communities
in which we live and work.
47146.indd 21
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1/7/16 1:52 PM
RAYMOND JAMES FINANCIAL, INC. EXECUTIVE COMMITTEE
Bella Loykhter Allaire
Executive Vice President
of Technology and Operations
Raymond James & Associates
Paul D. Allison
Chairman and CEO
Raymond James Ltd.
John C. Carson Jr.
President
Raymond James Financial
Fixed Income Capital Markets
Scott A. Curtis
President
Raymond James Financial Services
Jeffrey A. Dowdle
President, Asset Management Services
Executive Vice President
Raymond James Financial
Tash Elwyn
President
Raymond James & Associates
Private Client Group
RAYMOND JAMES FINANCIAL, INC. BOARD OF DIRECTORS
Charles G. von Arentschildt
Retired
Former Chairman and CEO, Global
Markets, North America
Deutsche Bank Securities Inc.
Shelley G. Broader
Director, President and CEO
Chico’s FAS, Inc.
Jeffrey N. Edwards
COO, New Vernon Advisers, LP
A registered investment advisor
Francis S. Godbold
Vice Chairman
Raymond James Financial
Benjamin C. Esty
Professor of Business Administration
Harvard Graduate School of Business
Administration
Thomas A. James
Executive Chairman of the Board
Raymond James Financial
22
47146.indd 22
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RAYMOND JAMES ANNUAL REPORT 2015
Jeffrey P. Julien
Executive Vice President,
Finance
Chief Financial Offi cer
and Treasurer
Raymond James Financial
Steven M. Raney
President and CEO
Raymond James Bank
Paul C. Reilly
Chief Executive Offi cer
Raymond James Financial
Jeffrey E. Trocin
President
Global Equities
and Investment Banking
Raymond James & Associates
Dennis W. Zank
Chief Operating Offi cer
Raymond James Financial
Chief Executive Offi cer
Raymond James & Associates
OTHER EXECUTIVE OFFICERS
Paul L. Matecki
Senior Vice President
General Counsel
Corporate Secretary
Raymond James Financial
Jennifer C. Ackart
Senior Vice President
Controller
Raymond James Financial
George Catanese
Senior Vice President
Chief Risk Offi cer
Raymond James Financial
Gordon L. Johnson
President
Highway Safety Devices, Inc.
A specialty contractor for municipal
roadway projects
Roderick C. McGeary
Retired accounting executive
Paul C. Reilly
Chief Executive Offi cer
Raymond James Financial
Robert P. Saltzman
Retired
Former President and CEO
Jackson National Life Insurance Company
Wick Simmons
Retired securities industry executive
Susan N. Story
Director, President and CEO
American Water Works Company, Inc.
A publicly traded water and wastewater
utility holding company.
47146.indd 23
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0
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FINANCIAL ADVISORS
PRIVATE CLIENT GROUP
BRANCH LOCATIONS
PRIVATE CLIENT GROUP
CLIENT ASSETS
PRIVATE CLIENT GROUP
FINANCIAL ASSETS
UNDER MANAGEMENT
$Billions
$Billions
10-YEAR FINANCIAL SUMMARY YEAR ENDED SEPTEMBER 30
2006
2007
2008
2009
RESULTS
Total Revenues
$ 2,645,578,000
$ 3,109,579,000
$ 3,204,932,000
$ 2,602,519,000
Net Revenues
Net Income
Net Income per Share (a)
Basic
Diluted
2,348,908,000
2,609,915,000
2,812,703,000
2,545,566,000
214,342,000
250,430,000
235,078,000
152,750,000
1.86
(b)
1.83
(b)
2.10
(b)
2.07
(b)
1.95
(b)
1.93
(b)
1.25
(b)
1.25
(b)
Weighted Average Common Shares
Outstanding – Basic (a)
Weighted Average Common and Common Equivalent Shares
Outstanding – Diluted (a)
112,211,000
(b)
115,268,000
(b)
116,110,000
(b)
117,188,000
(b)
114,238,000
(b)
117,011,000
(b)
117,140,000
(b)
117,288,000
(b)
Cash Dividends Declared per Common Share (a)
0.32
0.40
0.44
0.44
FINANCIAL
CONDITION
Total Assets
11,505,415,000
(c)
16,228,797,000
(c)
20,709,616,000
(c,d)
18,226,728,000
(e)
Equity Attributable to RJF
1,463,869,000
1,757,814,000
1,883,905,000
2,032,463,000
Shares Outstanding (a)
114,064,000
116,649,000
116,434,000
118,799,000
Shareholders’ Equity per Share at End of Period (a)
12.83
15.07
16.18
17.11
(a) Excludes non-vested shares and gives effect to the three-for-two stock split paid on March 22, 2006.
(b) Effective October 1, 2009, we implemented new accounting guidance that changes the manner in which earnings per share is computed. The new
guidance requires unvested share-based payment awards that contain nonforfeitable rights to dividends or dividend equivalents (whether paid or unpaid)
to be considered participating securities and, therefore, included in the earnings allocation in computing earnings per share under the two-class method.
Our unvested restricted shares and restricted stock units granted as part of our share-based compensation are considered participating securities.
Footnoted periods presented have been restated to reflect this change.
(c) We elect to net-by-counterparty the fair value of certain interest rate swap contracts. See the Notes to the Consolidated Financial Statements
for additional information. As of October 1, 2008, we adopted new accounting guidance. Footnoted periods presented have been restated to reflect
this change.
(d) Total assets include $1.9 billion in cash, offset by an equal amount in overnight borrowings (repaid October 1, 2008) to meet point-in-time regulatory
balance sheet composition requirements related to Raymond James Bank qualifying as a thrift institution.
244
47146.indd 24
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YMOND JAMES ANNUAL REPOR 2015
RAYMOND JAMES ANNUAL REPORT 2015
.
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TOTAL CAPITAL
MARKETS REVENUE
TOTAL INVESTMENT
BANKING REVENUE
TOTAL BANK LOANS
TOTAL BANK ASSETS
(1)
$Billions
$Billions
$Millions
$Millions
(1) Includes affi liate deposits
2010
2011
2012
2013
2014
2015
$ 2,979,516,000
$ 3,399,886,000
$ 3,897,900,000
$ 4,595,798,000
$ 4,965,460,000
$ 5,308,164,000
2,916,665,000
3,334,056,000
3,806,531,000
4,485,427,000
4,861,369,000
5,200,210,000
228,283,000
278,353,000
295,869,000
367,154,000
480,248,000
502,140,000
1.83
1.83
2.20
2.19
2.22
2.20
2.64
2.58
3.41
3.32
3.51
3.43
119,335,000
122,448,000
130,806,000
137,732,000
139,935,000
142,548,000
119,592,000
122,836,000
131,791,000
140,541,000
143,589,000
145,939,000
0.44
0.52
0.52
0.56
0.64
0.72
17,883,081,000
(f)
18,006,995,000
21,160,265,000
23,186,122,000
23,325,652,000
26,479,684,000
2,032,816,000
2,587,619,000
3,268,940,000
3,662,924,000
4,141,236,000
4,522,031,000
121,041,000
123,273,000
136,076,000
138,750,000
140,836,000
142,751,000
19.03
20.99
24.02
26.40
29.40
31.68
(e) Total assets include $3.2 billion invested in qualifying assets comprised of $2 billion in reverse repurchase agreements (collateralized by
GNMA and U.S. Treasury securities) and $1.2 billion in U.S. Treasury securities, offset by $900 million in overnight borrowings (repaid October 1,
2009) and $2.3 billion in customer deposits (redirected to third party banks participating in the Raymond James Bank Deposit Program in
October 2009), to meet point-in-time regulatory balance sheet composition requirements related to Raymond James Bank qualifying as a thrift
institution.
(f) Total assets include $3.1 billion in qualifying assets, offset by $2.4 billion in overnight borrowings (repaid October 1, 2010) and $700 million in
additional Raymond James Bank Deposit Program deposits (redirected to third party banks participating in the Raymond James Bank Deposit
Program in early October 2010) to meet point-in-time regulatory balance sheet composition requirements related to Raymond James Bank
qualifying as a thrift institution.
47146.indd 25
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1/7/16 1:52 PM
CORPORATE AND SHAREHOLDER INFORMATION
NUMBER OF SHAREHOLDERS
ELECTRONIC DELIVERY
PRINCIPAL SUBSIDIARIES
At December 11, 2015, there were
If you are interested in electronic delivery
Raymond James & Associates, Inc.
approximately 63,822 benefi cial and
of future copies of this report, please see
Securities broker/dealer
registered shareholders.
the proxy voting instructions.
Member New York Stock Exchange
10-K; CERTIFICATIONS
TRANSFER AGENT AND REGISTRAR
A copy of the annual report to the Securities
Computershare Inc.
Member Financial Industry Regulatory
Authority
and Exchange Commission on Form 10-K
P.O. Box 30170
Raymond James Financial Services, Inc.
is available, without charge, at sec.gov,
College Station, TX 77842-3170
Securities broker/dealer
upon request in writing to Corporate
800.837.7596
Member Financial Industry Regulatory
Secretary, Raymond James Financial, Inc.,
computershare.com/investor
Authority
880 Carillon Parkway, St. Petersburg,
Florida 33716, or by emailing
investorrelations@raymondjames.com.
Raymond James has included, as exhibits
to its 2015 Annual Report on Form 10-K,
certifi cations of its chief executive offi cer
and chief fi nancial offi cer as to the quality
of the company’s public disclosure.
Raymond James’ chief executive offi cer
has also submitted to the New York Stock
Exchange a certifi cation that he is not
aware of any violations by the company
INDEPENDENT AUDITORS
Raymond James Financial Services
KPMG LLP
NEW YORK STOCK EXCHANGE
SYMBOL
RJF
COVERING ANALYSTS
Christopher Allen
Evercore
Christian Bolu
Credit Suisse
Advisors, Inc.
Registered Investment Advisor
Raymond James Ltd.
Canadian securities broker/dealer
Member Toronto Stock Exchange
Eagle Asset Management, Inc.
Asset and mutual fund management
Raymond James Bank, N.A.
Member Federal Deposit Insurance
of the NYSE corporate listing standards.
Steven J. Chubak, CFA
Corporation
ANNUAL MEETING
Nomura
The annual meeting of shareholders will
be conducted at Raymond James Financial’s
Christopher Harris
Wells Fargo Securities, LLC
headquarters in The Raymond James
Joel Jeffrey
Financial Center, 880 Carillon Parkway,
Keefe, Bruyette and Woods
St. Petersburg, Florida, on February 18,
2016, at 4:30 p.m.
William R. Katz
Citigroup Global Markets, Inc.
The meeting will be broadcast live via
Andrew Del Medico, CFA
streaming audio on raymondjames.com
Autonomous Research US LP
under “Our Company – Investor Relations –
Shareholders’ Meeting.”
Hugh Miller
Macquarie Capital (USA) Inc.
Notice of the annual meeting, proxy
James Mitchell
statement and proxy voting instructions
The Buckingham Research Group
accompany this report to shareholders.
Quarterly reports are made available to
shareholders in February, May, August
and November.
Daniel Paris
Goldman Sachs & Co.
Devin Ryan
JMP Securities
Douglas Sipkin
Susquehanna Financial Group, LLLP
266
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ON FORM 10-K FOR FISCAL YEAR ENDED SEPTEMBER 30, 2015
Annual REPORT
5
1
2
7146_10K.pdf December 22, 2015 pg 1
29
RAYMOND JAMES ANNUAL REPORT 2015
7146_10K.pdf December 22, 2015 pg 2
Index
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended September 30, 2015
Or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 1-9109
RAYMOND JAMES FINANCIAL, INC.
(Exact name of registrant as specified in its charter)
Florida
(State or other jurisdiction of
incorporation or organization)
880 Carillon Parkway, St. Petersburg, Florida
(Address of principal executive offices)
Registrant’s telephone number, including area code
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Common Stock, $.01 Par Value
6.90% Senior Notes Due 2042
No. 59-1517485
(I.R.S. Employer
Identification No.)
33716
(Zip Code)
(727) 567-1000
Name of each exchange on which registered
New York Stock Exchange
New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes
No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act.Yes
No
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 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
No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data
File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Section 232.405) during the preceding 12 months (or for such
shorter period that the registrant was required to submit and post such files). Yes
No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (Section 229.405) is not contained herein, and
will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III
of this Form 10-K or any amendment to this Form 10-K.
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 definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Non-accelerated filer
Accelerated filer
Smaller reporting company
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
No
As of March 31, 2015, the aggregate market value of the registrant’s common stock held by non-affiliates of the registrant computed by reference
to the price at which the common stock was last sold was $7,216,031,146.
The number of shares outstanding of the registrant’s common stock as of November 20, 2015 was 143,148,705.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the definitive Proxy Statement to be delivered to shareholders in connection with the Annual Meeting of Shareholders to be held
February 18, 2016 are incorporated by reference into Part III.
7146_10K.pdf December 22, 2015 pg 3
7146_10K.pdf December 22, 2015 pg 4
RAYMOND JAMES FINANCIAL, INC.
TABLE OF CONTENTS
PART I.
Item 1.
Item 1A.
Item 1B.
Item 2.
Item 3.
PART II.
Business
Risk factors
Unresolved staff comments
Properties
Legal proceedings
Item 5.
Market for registrant’s common equity, related shareholder matters and issuer purchases of equity
Item 6.
Item 7.
securities
Selected financial data
Management’s discussion and analysis of financial condition and results of operations
Item 7A.
Quantitative and qualitative disclosures about market risk
Item 8.
Item 9.
Item 9A.
Item 9B.
PART III.
Item 10.
Item 11.
Item 12.
Item 13.
Item 14.
PART IV.
Item 15.
Financial statements and supplementary data
Changes in and disagreements with accountants on accounting and financial disclosure
Controls and procedures
Other information
Directors, executive officers and corporate governance
Executive compensation
Security ownership of certain beneficial owners and management and related shareholder matters
Certain relationships and related transactions, and director independence
Principal accountant fees and services
Exhibits and financial statement schedules
Signatures
PAGE
3
16
29
30
30
32
34
35
79
94
193
193
196
196
196
196
196
196
196
200
2
7146_10K.pdf December 22, 2015 pg 5
Index
Item 1. BUSINESS
PART I
Raymond James Financial, Inc. (“RJF” or the “Company”) is a financial holding company whose broker-dealer subsidiaries
are engaged in various financial services businesses, including the underwriting, distribution, trading and brokerage of equity and
debt securities and the sale of mutual funds and other investment products. In addition, other subsidiaries of RJF provide investment
management services for retail and institutional clients, corporate and retail banking, and trust services.
Established in 1962 and public since 1983, RJF has been listed on the New York Stock Exchange (the “NYSE”) since 1986
under the symbol “RJF”. As a financial holding company, RJF is subject to the oversight and periodic examination of the Board
of Governors of the Federal Reserve System (the “Fed”).
Through its operations which are predominately conducted in the United States of America (the “U.S.”) and Canada, RJF’s
principal subsidiaries include Raymond James & Associates, Inc. (“RJ&A”), Raymond James Financial Services, Inc. (“RJFS”),
Raymond James Financial Services Advisors, Inc. (“RJFSA”), Raymond James Ltd. (“RJ Ltd.”), Eagle Asset Management, Inc.
(“Eagle”), and Raymond James Bank, N.A. (“RJ Bank”). All of these subsidiaries are wholly owned by RJF. RJF and its subsidiaries
are hereinafter collectively referred to as “our,” “we” or “us.”
Among the keys to our historical and continued success, our emphasis on putting the client first is at the core of our corporate
values. We also believe in maintaining a conservative, long-term focus in our decision making. We believe that this disciplined
decision-making approach translates to a strong, stable financial services firm for clients, advisors, associates and shareholders.
REPORTABLE SEGMENTS
We currently operate through four operating segments and our “Other” segment. The four operating segments include “Private
Client Group” (or “PCG”), “Capital Markets,” “Asset Management,” and RJ Bank. The Other segment captures principal capital
and private equity activities as well as certain corporate overhead costs of RJF.
The graphic below provides an indication of the relative net revenue contribution associated with each of our operating
segments in the most recent fiscal year.
*Chart above does not include intersegment eliminations or the Other segment.
3
7146_10K.pdf December 22, 2015 pg 6
Index
PRIVATE CLIENT GROUP
We provide financial planning and securities transaction services to more than 2.7 million client accounts through the branch
office systems of RJ&A, RJFS, RJFSA, RJ Ltd. and in the United Kingdom (“UK”) through Raymond James Investment Services
Limited (“RJIS”). Financial advisors have multiple affiliation options, which we refer to as AdvisorChoice.
Experienced financial advisors are recruited from a wide variety of competitors. As a part of their agreement to join us, we
may make loans to financial advisors and to certain key revenue producers, primarily for recruiting, transitional cost assistance,
and retention purposes.
Our two primary affiliation options are either the employee or an independent contractor financial advisor option.
Total assets under administration in the PCG segment as of September 30, 2015 amount to $453.3 billion. We have 6,596
financial advisors affiliated with us as of September 30, 2015.
Employee Financial Advisors
Traditional employee financial advisors work in a traditional branch setting supported by local management and administrative
staff. They provide services predominately to individual clients. These financial advisors are employees and their compensation
primarily includes commission payments and participation in the firm’s benefit plans.
Independent Contractors
Independent contractors are responsible for all of their direct costs and, accordingly, are paid a larger percentage of commissions
and fees than employee financial advisors. Our independent contractor financial advisor option is designed to help our advisors
build their businesses with as much or as little of our support as they determine they need. With specific approval, they are
permitted to conduct, on a limited basis, certain other approved business activities such as offering insurance products, independent
registered investment advisory services, and accounting and tax services.
Over the past several fiscal years, the mix of securities commissions and fees revenues originating from the employee versus
the independent contractor affiliation option has become more balanced, partially due to our fiscal year 2012 acquisition of Morgan
Keegan (as hereinafter defined) which operated an employee financial advisor business model. Irrespective of the affiliation
choice, our financial advisors offer a broad range of investments and services, including both third party and proprietary products,
and a variety of financial planning services. Revenues of this segment are typically driven by total client assets under administration,
and are generally either recurring fee-based or transactional in nature.
Securities commissions and fees revenues by affiliation, as well as the portion of total segment revenues that are recurring
versus transactional in nature, for the twelve months ended September 30, 2015, respectively, are presented below:
4
7146_10K.pdf December 22, 2015 pg 7
Index
A summary of the services we provide that are captured in this segment include the following:
• We provide investment services for which we charge sales commissions or asset-based fees based on established
schedules.
• We offer investment advisory services under various financial advisor affiliation options. Fee revenues for such
services are computed as either a percentage of the assets in the client account, or a flat periodic fee charged to the
client for investment advice.
• The majority of our U.S. financial advisors are licensed to sell insurance and annuity products through our general
insurance agency, Raymond James Insurance Group, Inc. (“RJIG”).
• Our U.S. financial advisors offer a number of professionally managed load mutual funds, as well as a selection of
no-load mutual funds.
• Clients’ transactions in securities are affected on either a cash or margin basis. These margin loans to clients are
collateralized by the securities purchased or by other securities owned by the client. Interest is charged to clients on
the amount borrowed. The interest rate charged to a client on a margin loan is based on current interest rates and on
the outstanding amount of the loan.
• We provide certain custodial, trading, research and other back office support and services (including access to clients’
account information and the services of the Asset Management segment) to the independent contractor registered
investment advisors with whom we are affiliated.
• We conduct securities lending activities through our RJ&A subsidiary, where we borrow and lend securities from
and to other broker-dealers, financial institutions, and other counterparties. Generally, we conduct these activities
as an intermediary (referred to as “Matched Book”). However, RJ&A will also loan client marginable securities
held in a margin account containing a debit (referred to as lending from the “Box”) to counterparties. The borrower
of the securities puts up a cash deposit on which interest is earned. The lender in turn receives cash and pays interest.
The net revenues of the securities lending business are the interest spreads generated on these activities.
• Through our Alternative Investments Group, we provide diversification strategies and products to qualified clients
of our affiliated financial advisors. The Alternative Investments Group provides strategies and products for portfolio
investment allocation opportunities where a selective addition of alternative investments that have historically
demonstrated lower correlation to traditional market indices may reduce overall portfolio volatility through
diversification and increase long-term portfolio performance through a variety of market conditions.
.
5
7146_10K.pdf December 22, 2015 pg 8
Index
CAPITAL MARKETS
Activities conducted in our capital markets segment include: institutional sales, securities trading, equity research, investment
banking, syndicate, and the syndication of investments that qualify for tax credits under Section 42 of the Internal Revenue Code.
Within our management structure, we distinguish between activities that support equity and fixed income products and services.
We primarily conduct these activities in the U.S., Canada, and Europe.
The graphic below provides an indication of the relative portion of this segment’s revenues that are associated with equity
securities and products, fixed income securities and products, and our tax credit fund syndication activities.
A summary of the services we provide that are captured in this segment include the following:
Equity Capital Markets activities
•
Institutional sales commissions are earned on equity products fueled by a combination of general market activity and the
Capital Markets group’s ability to identify and promote attractive investment opportunities for our institutional clients.
Commission amounts on equity transactions are based on trade size and the amount of business conducted annually with
each institution.
• We provide various investment banking services through activities including public and private equity financing for
corporate clients, and merger and acquisition advisory services. Our investment banking activities provide a
comprehensive range of strategic and financial advisory services tailored to our clients’ business life cycles and backed
by our strategic industry focus.
•
In our syndicate operations, professionals coordinate the marketing, distribution, pricing and stabilization of lead and co-
managed equity underwritings. In addition to lead and co-managed offerings, this department coordinates the firm’s
syndicate and selling group activities in transactions managed by other investment banking firms.
• Analysts in our domestic research department support our institutional and retail sales efforts and publish research on
certain companies. This research primarily focuses on U.S. and Canadian companies in specific industries including
agricultural, consumer, energy, clean energy, energy services, financial services, healthcare, industrial, mining and natural
resources, forest products, real estate, technology, and communication and transportation. Proprietary industry studies
and company-specific research reports are made available to both institutional and individual clients.
6
7146_10K.pdf December 22, 2015 pg 9
Index
Fixed Income activities
•
Institutional sales commissions are earned on fixed income products from institutional clients who purchase both taxable
and tax-exempt fixed income products, primarily municipal, corporate, government agency and mortgage-backed bonds.
Commission amounts on fixed income products are based on trade size and the characteristics of the specific security
involved.
• We carry inventories of taxable and tax-exempt securities to facilitate institutional sales activities. We trade both taxable
and tax-exempt fixed income securities primarily for the purpose of facilitating such sales. The taxable and tax-exempt
fixed income traders purchase and sell corporate, municipal, government, government agency, and mortgage-backed
bonds, asset-backed securities, preferred stock, and certificates of deposit from and to our clients or other dealers.
• Our fixed income investment banking services include public finance and debt underwriting activities where we serve
as a financial advisor, placement agent or underwriter to various issuers who include municipal agencies (including
political subdivisions), housing developers, and non-profit health care institutions. We may also act as a consultant,
underwriter, or selling group member for corporate bonds, mortgage-backed securities (“MBS”), whole loans, agency
bonds, preferred stock and unit investment trusts. When underwriting new issue securities, we may agree to purchase the
issue through a negotiated sale or submit a competitive bid.
• To facilitate client transactions, hedge a portion of our fixed income securities inventories, or to a limited extent for our
own account, we enter into interest rate swaps, futures contracts, and forward foreign exchange contracts as part of our
fixed income business activities. In addition, we conduct a “matched book” derivatives business where we may enter
into derivative transactions, including interest rate swaps, options, and combinations of those instruments, primarily with
government entities and not-for-profit counterparties. In this matched book business, for every derivative transaction we
enter into with a client, we enter into an offsetting derivative transaction with a credit support provider who is a third
party financial institution.
• Through our fixed income public finance operations, we enter into forward commitments to purchase Government
National Mortgage Association (“GNMA”), or Federal National Mortgage Association (“FNMA”), MBS. The MBS
securities are issued on behalf of various state and local housing finance agencies (“HFA”) clients and consist of the
mortgages originated through their lending programs.
Tax Credit Fund investment syndication activities
•
In our syndication of tax credit investments, one of our subsidiaries is the general partner or managing member in
partnerships and limited liability companies that invest in real estate project entities which qualify for tax credits under
Section 42 of the Internal Revenue Code. We earn fees for the origination and sale of these investment products to investors
as well as for oversight and management of the investments over the statutory tax credit compliance period.
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Index
ASSET MANAGEMENT
Our Asset Management segment operations include Eagle, the Eagle Family of Funds (“Eagle Funds”), asset management
operations conducted within our asset management services division for the benefit of our PCG clients (referred to as “AMS”),
Raymond James Trust, National Association (“RJ Trust”) a wholly owned subsidiary of RJF, and other fee-based programs. We
generate revenues in this segment by providing investment advisory and asset management services to either individual or
institutional investment portfolios, along with mutual funds. Investment advisory fee revenues are earned on the assets held in
either managed or non-discretionary asset-based programs. As of September 30, 2015, there were $65.2 billion in financial assets
held in managed programs and $91.0 billion in financial assets held in non-discretionary asset-based programs.
In managed programs, we are making decisions, in accordance with such programs objectives, about how to invest the assets
held in such programs. In non-discretionary asset-based programs, we are providing administrative support to each plan, providing
as an example, trade execution, record-keeping, and periodic investor reporting, for assets held in such programs. We generally
earn higher fees for managed programs than we do for non-discretionary asset-based programs, which is to be expected given that
additional services are provided to managed programs, most notably investment advice.
The graphic below provides the financial assets under management in managed programs by objective.
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RJ BANK
RJ Bank provides corporate, securities based loans (“SBL”) and residential loans, as well as Federal Deposit Insurance
Corporation (“FDIC”) insured deposit accounts, to clients of our broker-dealer subsidiaries and to the general public. RJ Bank is
active in corporate loan syndications and participations. RJ Bank generates net interest revenue principally through the interest
income earned on loans and investments, which is offset by the interest expense it pays on client deposits and on its borrowings.
RJ Bank operates primarily from a branch location adjacent to RJF’s corporate office complex in St. Petersburg, Florida.
Access to RJ Bank’s products and services is available nationwide through the offices of our affiliated broker-dealers as well as
through electronic banking services. RJ Bank’s assets include commercial and industrial (“C&I”) loans, commercial and residential
real estate loans, tax-exempt loans, as well as loans fully collateralized by marketable securities. Corporate loans represent
approximately 75% of RJ Bank’s loan portfolio of which 90% are U.S. and Canadian syndicated loans. Residential mortgage loans
are originated and held for investment or sold in the secondary market. RJ Bank’s liabilities primarily consist of deposits that are
cash balances swept from the investment accounts of PCG clients.
RJ Bank has total assets of $14.2 billion at September 30, 2015, which are comprised of the following:
OTHER
Our other segment includes our principal capital and private equity activities as well as certain corporate overhead costs of
RJF including the interest cost on our public debt, and the acquisition and integration costs associated with our material acquisitions
including, most significantly in fiscal years 2013 and 2012, Morgan Keegan (as hereinafter defined).
Our principal capital and private equity activities include various direct and third party private equity investments; employee
investment funds (the “Employee Funds”); and various private equity funds which we sponsor.
On April 2, 2012 (the “Closing Date”), RJF completed its acquisition of all of the issued and outstanding shares of Morgan
Keegan & Company, Inc. (“MK & Co.”), and MK Holding, Inc. and certain of its affiliates (collectively referred to hereinafter as
“Morgan Keegan”) from Regions Financial Corporation (“Regions”). In mid-February 2013, we completed the transfer of all of
the active businesses of MK & Co. to RJ&A.
EMPLOYEES AND INDEPENDENT CONTRACTORS
Our employees and independent contractors (collectively referred to hereinafter as “associates”), are vital to our success in
the financial services industry. As of September 30, 2015, we had approximately 11,000 employees, and more than 3,850
independent contractor financial advisors with whom we are affiliated.
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OPERATIONS AND INFORMATION PROCESSING
We have operations personnel who are responsible for the processing of securities transactions, custody of client securities,
support of client accounts, receipt, identification and delivery of funds and securities, and compliance with certain regulatory and
legal requirements for most of our U.S. securities brokerage operations through locations throughout the United States. RJ Ltd.
operations personnel have similar responsibilities at our Canadian brokerage operations located in Vancouver, British Columbia.
The information technology department develops and supports the integrated solutions that provide a differentiated platform
for our business. This platform is designed to allow our financial advisors to spend more time with their clients and enhance and
grow their business.
In the area of information security, we have developed and implemented a framework of principles, policies and technology
to protect both our own information assets as well as those we have pertaining to our clients. Safeguards are applied to maintain
the confidentiality, integrity and availability of both client and Company information.
Our business continuity program has been developed to provide reasonable assurance of business continuity in the event of
disruptions at our critical facilities. Business departments have developed operational plans for such disruptions, and we have a
staff which devotes their full time to monitoring and facilitating those plans. Our business continuity plan continues to be enhanced
and tested to allow for continuous business processing in the event of weather-related or other interruptions of operations at our
corporate headquarters in Florida, or one of our operations processing or data center sites in Florida, Colorado, Tennessee and
Michigan.
We have also developed a business continuity plan for each of our PCG retail branches in the event any of these branches are
impacted by severe weather.
COMPETITION
We are engaged in intensely competitive businesses. We compete with many financial services firms, including a number of
larger securities firms, most of which are affiliated with major financial services companies, insurance companies, banking
institutions and other organizations. We also compete with a number of firms offering web-based financial services and discount
brokerage services, usually with lower levels of service, to individual clients. We compete principally on the basis of the quality
of our associates, service, product selection, location and reputation in local markets.
In the financial services industry, there is significant competition for qualified associates. Our ability to compete effectively
in these businesses is substantially dependent on our continuing ability to attract, retain and motivate qualified associates, including
successful financial advisors, investment bankers, trading professionals, portfolio managers and other revenue producing or
specialized personnel.
REGULATION
RJF is subject to the oversight and periodic examination of the Fed. RJ Bank is a national bank regulated by the Office of the
Comptroller of the Currency (“OCC”), the Fed, the FDIC, and the Consumer Financial Protection Bureau (“CFPB”). Our broker-
dealer subsidiaries are subject to various regulatory authorities which are discussed in the “other regulations applicable to our
operations” portion of this section.
The following discussion sets forth some of the material elements of the regulatory framework applicable to the financial
services industry and provides some specific information relevant to us. The regulatory framework is intended primarily for the
protection of our clients, customers, the securities markets, our depositors and the Federal Deposit Insurance Fund and not for the
protection of our creditors or shareholders. Under certain circumstances, these rules may limit our ability to make capital
withdrawals from RJ Bank or our broker-dealer subsidiaries.
To the extent that the following information describes statutory and regulatory provisions, it is qualified in its entirety by
reference to the particular statutory and regulatory provisions. A change in applicable statutes, regulations or regulatory policy
may have a material effect on our business.
The financial services industry in the United States is subject to extensive regulation under U.S. federal and state laws.
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New rules and regulations resulting from the Dodd-Frank Act
In July 2010, the U.S. government enacted financial services reform legislation known as the Dodd-Frank Wall Street Reform
and Consumer Protection Act (the “Dodd-Frank Act”). The Dodd-Frank Act enacted sweeping changes in the supervision and
regulation of the financial industry designed to provide for greater oversight of financial industry participants, reduce risk in
banking practices and in securities and derivatives trading, enhance public company corporate governance practices and executive
compensation disclosures, and provide greater protections to individual consumers and investors. Certain elements of the Dodd-
Frank Act became effective immediately; however, the details of some provisions remain subject to implementing regulations that
are yet to be adopted by various applicable regulatory agencies. Furthermore, many provisions of the Dodd-Frank Act are still
subject to further rule making procedures and studies and will take effect over several years.
The Dodd-Frank Act instructs U.S. federal banking and other regulatory agencies to conduct hundreds of rule-makings, studies
and reports. These regulatory agencies include: the Commodity Futures Trading Commission (the “CFTC”); the Securities and
Exchange Commission (the “SEC”); the Fed; the OCC; the FDIC; the CFPB; and the Financial Stability Oversight Council (the
“FSOC”). As a result of Dodd-Frank Act rule-making and other regulatory reforms, we are currently experiencing a period of
unprecedented change in financial regulation and these changes could have a significant impact on how we conduct certain aspects
of our business. Given that much of this regulatory development remains in a state of flux, we cannot specifically quantify the
potential impact that such regulations will have on our business and operations (see Item 1A, “Risk Factors,” within this report
for further discussion of the potential future impact on our operations). Some of the changes that have been enacted under the
Dodd-Frank Act thus far include the following:
•
•
Since RJ Bank provides deposits covered by FDIC insurance, generally up to $250,000 per account ownership type, RJ
Bank is subject to the Federal Deposit Insurance Act. In February 2011, under the provisions of the Dodd-Frank Act, the
FDIC issued a final rule changing its assessment base in addition to other minor adjustments. For banks with more than
$10 billion in assets, the FDIC’s new rule changed the assessment rate calculation, which relies on a scorecard designed
to measure financial performance and ability to withstand stress in addition to measuring the FDIC’s exposure should
the bank fail. This new rule became effective for RJ Bank beginning with the December 2013 assessment period.
In July 2011, pursuant to the Dodd-Frank Act, the CFPB began operations and was given rulemaking authority for a wide
range of consumer protection laws that would apply to all banks and provide broad powers to supervise and enforce
federal consumer protection laws. The CFPB has supervisory and enforcement powers under the following consumer
protection laws: the Equal Credit Opportunity Act; the Truth in Lending Act; Real Estate Settlement Procedures Act; Fair
Credit Reporting Act; Fair Debt Collection Act; the Consumer Financial Privacy provisions of the Gramm-Leach-Bliley
Act and certain other statutes. At the beginning of fiscal year 2014, the CFPB assumed regulatory authority over RJ Bank
for its compliance with various federal consumer protection laws. The CFPB has proposed and finalized many rules
since its establishment; the majority of those became effective in early fiscal year 2014. The CFPB has authority to
promulgate regulations, issue orders, draft policy statements, conduct examinations, and bring enforcement actions. The
creation of the CFPB has led to enhanced enforcement of consumer protection laws. Although the ultimate impact of
this heightened scrutiny is uncertain, it could result in changes to pricing, practices, products and procedures. It could
also result in increased costs related to regulatory oversight, supervision and examination, remediation efforts and possible
penalties.
• Moreover, in October 2012, under the provisions of the Dodd-Frank Act, the Fed, FDIC and OCC jointly issued final
rules requiring certain bank holding companies, state member banks, and savings and loan companies with total assets
between $10 billion and $50 billion to conduct annual company-prepared stress tests, report the results to their primary
regulator and the Fed, and publish a summary of the results. Under the rules, stress tests must be conducted using certain
scenarios (baseline, adverse, and severely adverse), which the Fed provides each year. RJF was required to conduct its
first stress test by March 31, 2014. We submitted our initial stress testing results, utilizing data as of September 30, 2013,
to the Fed on March 31, 2014. The Dodd-Frank Act also required that RJF begin publicly disclosing a summary of certain
stress test results no later than June 30, 2015 for the stress test cycle beginning on October 1, 2014. RJF publicly disclosed
the required summary of its stress test results on June 29, 2015, in accordance with the abovementioned stress testing
requirements.
• The Volcker Rule:
Under the provisions of the Dodd-Frank Act, Congress adopted the “Volcker Rule,” which generally prohibits, subject
to exceptions, insured depository institutions, bank holding companies and their affiliates (together, “Banking Entities”)
from engaging in “proprietary trading” or acquiring or retaining an ownership interest in a hedge fund or private equity
fund (“covered funds”). In December 2013, the CFTC, the OCC, the Fed, the FDIC, and the SEC adopted a final version
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of the Volcker Rule. Certain elements of the final rule provide for phasing-in over time. However, based upon our latest
analysis and understandings of these regulations, we do not anticipate that the Volcker Rule will have a material impact
on our results of operations. Nevertheless, due to its complexity and scope, we continue to review the details contained
in the Volcker Rule to assess its impact on our operations.
The Volcker Rule prohibits Banking Entities from engaging in proprietary trading, and imposes limitations on the extent
to which Banking Entities are permitted to invest in certain “covered funds” (e.g., hedge funds and private equity funds,
among others) and requires that such investments be fully deducted from Tier 1 capital. “Proprietary trading” is defined
as engaging as principal for the trading account of the banking entity in the purchase or sale of a financial instrument.
Under the Volcker Rule’s per-fund limits, a Banking Entity’s aggregate ownership in hedge funds and private equity funds
cannot exceed three percent of Tier 1 capital, although the impact of such limit to RJF’s investment portfolio is subject
to further analysis. Additionally, Banking Entities engaged in proprietary trading and/or covered fund investments must
establish a Volcker Rule-specific compliance program. Congress provided an exemption for certain permitted activities
of Banking Entities, such as underwriting, market making, hedging, and risk management.
The Volcker Rule became effective as of April 1, 2014 and all covered entities, including RJF, were required to conform
to the Volcker Rule’s provisions on July 21, 2015 (the “conformance period”). However, on December 18, 2014, the Fed
issued an order extending for an additional year the Volcker Rule conformance period for Banking Entities to conform
their investments in and relationships with covered funds that may be subject to the Volcker Rule, and were in place prior
to December 31, 2014 (“Legacy Funds”). The order also announced the Fed’s intention to grant an additional one-year
extension of the conformance period until July 21, 2017. This extension, however, only applies to Legacy Funds. No
extension was granted for the conformance period for proprietary trading activities. Banking Entities may still apply for
an additional five-year extension for continued investments with respect to an illiquid fund. Such an extension will only
be granted after a demonstration that the investment is necessary to fulfill a contractual commitment effective on May 1,
2010.
We currently maintain a number of private equity investments, some of which meet the definition of “covered funds”
and therefore are subject to certain limitations under the covered funds provisions of the Volcker Rule. The amount of
future investments of this nature that we may make may be limited in order to maintain compliance levels specified by
the Volcker Rule. Further, subsequent interpretations of what constitutes “covered funds” under the final Volcker Rule
may adversely impact our operations. The recent extension of the conformance deadline provides us additional time to
assess our holdings in the context of the new regulations and execute appropriate strategies to be in conformance with
the Volcker Rule.
•
•
•
In July 2013, the OCC, the Fed and the FDIC released final United States Basel III regulatory capital rules implementing
the global regulatory capital reforms of Basel III and certain changes required by the Dodd-Frank Act. The rule increases
the quantity and quality of regulatory capital, establishes a capital conservation buffer, and makes selected changes to
the calculation of risk-weighted assets. The rule became effective for RJF on January 1, 2015, subject to a phase-in period
for several aspects of the rule, including the new minimum capital ratio requirements, the capital conservation buffer,
and certain regulatory capital adjustments and deductions. While we continue to evaluate the impact of these rules on
both RJF and RJ Bank, based on our current analyses, we believe that both RJF and RJ Bank meet all capital adequacy
requirements under the final rules. However, the increased capital requirements could restrict our ability to grow during
favorable market conditions or require us to raise additional capital. As a result, our business, results of operations,
financial condition and prospects could be adversely affected. See Item 1A, “Risk Factors,” within this report for more
information.
In July 2014, the SEC adopted amendments to the rules that govern money market mutual funds. The amendments make
structural and operational reforms to address risks of excessive withdrawals over relatively short time frames by investors
from money market funds, while preserving the benefits of the funds. We do not sponsor any money market funds. We
utilize such funds in limited circumstances for our own investment purposes, and offer to our clients money market funds
that are sponsored by third parties as one of several cash sweep alternatives.
In September 2013, the SEC issued final rules regarding the mandatory registration of “municipal advisors” as required
under the Dodd-Frank Act. These rules, which became effective on July 1, 2014 impose a fiduciary duty on municipal
advisors when advising municipal entities, may result in the need for new written representations by issuers, and may
limit the manner in which we, in our capacity as an underwriter or in our other professional roles, interact with municipal
issuers. We registered as a municipal advisor with the SEC in 2014; by virtue of such registration our municipal finance
business is now subject to additional regulation and oversight by the SEC. In August 2014, the SEC also announced that
it will undertake a two-year review of municipal advisors as part of an exam initiative. Moreover, forthcoming rulemaking
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by the Municipal Securities Rulemaking Board may cause further changes to the manner in which state and local
government are able to interact with outside finance professionals. These new rules may impact the nature of our
interactions with public finance clients, and may also have a negative short-term impact on the volume of public finance
financing transactions while the industry attempts to adapt to the new regulatory landscape. However, we do not expect
these new rules to have a materially adverse impact on our public finance results of operations (which are included in
our Capital Markets segment).
Other regulations applicable to our operations
The SEC is the federal agency charged with administration of the federal securities laws. Financial services firms are also
subject to regulation by state securities commissions in those states in which they conduct business. RJ&A and RJFS are currently
registered as broker-dealers in all 50 states. The SEC recently adopted amendments, most of which were effective October 2013,
to its financial responsibility rules, including changes to the net capital rule, the customer protection rule, the record-keeping rules
and the notification rules applicable to our broker-dealer subsidiaries. We are currently evaluating the impact of these amendments
on our broker-dealer subsidiaries; however, based on our current analyses, we do not believe they will have a material adverse
effect on any of our broker-dealer subsidiaries. Pursuant to the Dodd-Frank Act, the SEC was charged with considering whether
broker-dealers should be subject to a standard of care similar to the fiduciary standard applicable to registered investment advisors.
It is not clear whether the SEC will determine that a heightened standard of conduct should be applicable to broker-dealers.
Financial services firms are subject to regulation by various foreign governments, securities exchanges, central banks and regulatory
bodies, particularly in those countries where they have established offices. Outside of the United States, we have additional offices
in Europe, Canada and Latin America that are subject to local regulatory bodies in these territories.
Much of the regulation of broker-dealers in the United States and Canada, however, has been delegated to self-regulatory
organizations (“SROs”), the Financial Industry Regulatory Authority (“FINRA”), the Investment Industry Regulatory Organization
of Canada (“IIROC”) and securities exchanges. These SROs adopt and amend rules for regulating the industry, subject to the
approval of government agencies. These SROs also conduct periodic examinations of member broker-dealers.
The SEC, SROs and state securities commissions may conduct administrative proceedings that can result in censure, fine,
suspension or expulsion of a broker-dealer, its officers or employees. Such administrative proceedings, whether or not resulting
in adverse findings, can require substantial expenditures and may adversely impact the reputation of a broker-dealer.
Our U.S. broker-dealer subsidiaries are required by federal law to be members of the Securities Investors Protection Corporation
(“SIPC”). The SIPC was established under the Securities Investor Protection Act, and oversees the liquidation of broker-dealers
during liquidation or financial distress. The SIPC fund provides protection for cash and securities held in client accounts up to
$500,000 per client, with a limitation of $250,000 on claims for cash balances. We have purchased excess SIPC coverage through
various syndicates of Lloyd’s, a London-based firm that holds an “A+” rating from Standard and Poor’s, and an “AA-” rating from
Fitch Ratings. Excess SIPC insurance is fully protected by the Lloyd’s trust funds and Lloyd’s Central Fund (the “Excess SIPC
Insurer”). For RJ&A, the additional protection currently provided has an aggregate firm limit of $750 million for cash and securities,
including a sub-limit of $1.9 million per client for cash above basic SIPC coverage. Account protection applies when a SIPC
member fails financially and is unable to meet obligations to clients. This coverage does not protect against market fluctuations.
RJF has provided an indemnity to the Excess SIPC Insurer against any and all losses they may incur associated with the excess
SIPC insurance policies.
During fiscal year 2015, the Department of Labor (the “DOL”) proposed a new rule enhancing standards for individuals
providing investment advice to retirement plans, their participants, or beneficiaries. We are continuing our study and evaluation
of the proposal. The total impact of the standard, once finalized and implemented, on our business is unknown at this time.
RJ Ltd. is currently registered in all provinces and territories in Canada. The financial services industry in Canada is subject
to comprehensive regulation under both federal and provincial laws. Securities commissions have been established in all provinces
and territorial jurisdictions, which are charged with the administration of securities laws. Investment dealers in Canada are also
subject to regulation by SROs, which are responsible for the enforcement of, and conformity with, securities legislation for their
members and have been granted the powers to prescribe their own rules of conduct and financial requirements of members. RJ
Ltd. is regulated by each of the securities commissions in the jurisdictions of registration, as well as by the SROs and IIROC.
IIROC requires that RJ Ltd. be a member of the Canadian Investors Protection Fund (the “CIPF”). The primary role of the
CIPF is investor protection. The CIPF Board of Directors determines the fund size required to meet its coverage obligations and
sets a quarterly assessment rate. Dealer members are assessed the lesser of 1% of revenue or a risk-based assessment. The CIPF
provides protection for securities and cash held in client accounts up to $1 million Canadian currency (“CDN”) per client, with
separate coverage of CDN $1 million for certain types of accounts. This coverage does not protect against market fluctuations.
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See Note 26 of the Notes to Consolidated Financial Statements in this Form 10-K for further information on SEC, FINRA
and IIROC regulations pertaining to broker-dealer regulatory minimum net capital requirements.
Our investment advisory operations, including the mutual funds that we sponsor, are also subject to extensive regulation in
the United States. Our U.S. asset managers are registered as investment advisors with the SEC under the Investment Advisers Act
of 1940, and are also required to make notice filings in certain states. Virtually all aspects of our asset management business are
subject to various federal and state laws and regulations. These laws and regulations are primarily intended to benefit the asset
management clients.
RJF is under the supervision of, and subject to the rules, regulations, and periodic examination by the Fed. Additionally, RJ
Bank is subject to the rules and regulations of the OCC, the Fed, the FDIC and the CFPB. Collectively, these rules and regulations
cover all aspects of the banking business, including lending practices, safeguarding deposits, capital structure, transactions with
affiliates, and conduct and qualifications of personnel.
RJ Bank is also subject to the Community Reinvestment Act (the “CRA”). The CRA is intended to encourage banks to help
meet the credit needs of their communities, including low and moderate income neighborhoods, consistent with safe and sound
bank operations. Under the CRA, the federal banking agencies (i.e., the Fed, the FDIC and the OCC) are required to periodically
examine and assign to each bank a public CRA rating (“outstanding,” “satisfactory,” “needs to improve,” or “substantial
noncompliance”). Members of the public may submit comments on a bank’s performance, which will be considered as part of its
performance evaluation. The results of the evaluation, together with the bank’s CRA rating, are also taken into consideration when
evaluating mergers, acquisitions, and applications to open a branch or facility. RJ Bank could face additional requirements and
limitations should it fail to adequately meet the criteria stipulated under the CRA.
Both RJF as a financial holding company, and RJ Bank, are subject to various capital requirements. Failure to meet minimum
capital requirements can initiate certain mandatory (and possibly additional discretionary) actions by regulators that, if undertaken,
could have a direct material effect on the financial results of RJF and RJ Bank. Under capital adequacy guidelines, RJF and RJ
Bank must meet specific capital guidelines that involve quantitative measures of assets, liabilities, and certain off-balance sheet
items as calculated under regulatory accounting practices. The capital amounts and classification for RJF and RJ Bank are also
subject to the qualitative judgments of U.S. regulators based on components of capital, risk-weightings of assets, off-balance sheet
transactions, and other factors. Quantitative measures established by regulation to ensure capital adequacy require RJF, as a financial
holding company, and RJ Bank, to maintain minimum amounts and ratios of Common equity Tier 1, Tier 1 and Total capital to
risk-weighted assets, and Tier 1 capital to average assets (as defined in the regulations). See Item 7, “Regulatory” in this report
and Note 26 of the Notes to Consolidated Financial Statements in this Form 10-K, for further information.
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Index
EXECUTIVE OFFICERS OF THE REGISTRANT
Executive officers of the registrant (which includes officers of certain significant subsidiaries) are as follows:
Jennifer C. Ackart
51
Senior Vice President since August, 2009 and Controller since February,
1995
Bella Loykhter Allaire
62 Executive Vice President - Technology and Operations - Raymond James
& Associates, Inc. since June, 2011; Managing Director and Chief
Information Officer, UBS Wealth Management Americas, November,
2006 - January, 2011
Paul D. Allison
John C. Carson, Jr.
George Catanese
Scott A. Curtis
Jeffrey A. Dowdle
59 Chairman, President and CEO - Raymond James Ltd. since January,
2009; Co-President and Co-CEO - Raymond James Ltd., August, 2008 -
January, 2009
59
56
53
President since April, 2012; President - Morgan Keegan & Company,
LLC, formerly known as Morgan Keegan & Company, Inc., since July,
2013; Chief Executive Officer and Executive Managing Director -
Morgan Keegan & Company, Inc., March, 2008 - July, 2013
Senior Vice President since October, 2005 and Chief Risk Officer since
February, 2006
President - Raymond James Financial Services, Inc., since January, 2012;
Senior Vice President - Private Client Group - Raymond James &
Associates, Inc., July, 2005 - December 2011
51 Executive Vice President - Asset Management Group, since February,
2014; President - Asset Management Services - Raymond James &
Associates, Inc., January, 2005 - February 2014; Senior Vice President -
Raymond James & Associates, Inc., January, 2005 - February, 2014
Tashtego S. Elwyn
44
President - Private Client Group - Raymond James & Associates, Inc.,
since January, 2012; Regional Director - Raymond James & Associates,
Inc., October, 2006 - December, 2011
Jeffrey P. Julien
59 Executive Vice President - Finance since August, 2009, Chief Financial
Officer since April, 1987 and Treasurer since February, 2011; Director
and/or officer of several RJF subsidiaries
Paul L. Matecki
59
Senior Vice President since February, 2000, General Counsel since
February, 2005 and Secretary since February, 2006
Steven M. Raney
50
President and CEO - Raymond James Bank, N.A. since January, 2006
Paul C. Reilly
61 Chief Executive Officer since May, 2010; Director since January, 2006;
President, May, 2009 - April, 2010
Jeffrey E. Trocin
56
President - Global Equities and Investment Banking - Raymond James &
Associates, Inc. since July, 2013; Executive Vice President - Equity
Capital Markets - Raymond James & Associates, Inc., February 2001 -
July, 2013
Dennis W. Zank
61 Chief Operating Officer since January, 2012; Chief Executive Officer -
Raymond James & Associates, Inc. since January, 2012; President -
Raymond James & Associates, Inc., December, 2002 - December, 2011
Except where otherwise indicated, the executive officer has held his or her current position for more than five years.
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OTHER INFORMATION
Our Internet address is www.raymondjames.com. We make available on our website, free of charge and in printer-friendly
format including “.pdf” file extensions, our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on
Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act
of 1934, as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC.
Factors affecting “forward-looking statements”
Certain statements made in this report on Form 10-K may constitute “forward-looking statements” under the Private Securities
Litigation Reform Act of 1995. Forward-looking statements include information concerning future strategic objectives, business
prospects, anticipated savings, financial results (including expenses, earnings, liquidity, cash flow and capital expenditures),
industry or market conditions, demand for and pricing of our products, acquisitions and divestitures, anticipated results of litigation
and regulatory developments or general economic conditions. In addition, words such as “believes,” “expects,” “anticipates,”
“intends,” “plans,” “estimates,” “projects,” “forecasts,” and future or conditional verbs such as “will,” “may,” “could,” “should,”
and “would,” as well as any other statement that necessarily depends on future events, are intended to identify forward-looking
statements. Forward-looking statements are not guarantees, and they involve risks, uncertainties and assumptions. Although we
make such statements based on assumptions that we believe to be reasonable, there can be no assurance that actual results will
not differ materially from those expressed in the forward-looking statements. We caution investors not to rely unduly on any
forward-looking statements and urge you to carefully consider the risks described in Item 1A, “Risk Factors,” in this report. We
expressly disclaim any obligation to update any forward-looking statement in the event it later turns out to be inaccurate, whether
as a result of new information, future events or otherwise.
Item 1A. RISK FACTORS
Our operations and financial results are subject to various risks and uncertainties, including those described below, that could
adversely affect our business, financial condition, results of operations, liquidity and the trading price of our common stock or
our senior notes which are listed on the NYSE. The list of risk factors provided below is not exhaustive; there may be factors not
discussed below or in this Form 10-K that adversely impact our results of operations, harm our reputation or inhibit our ability to
generate new business prospects.
RISKS RELATED TO OUR BUSINESS AND INDUSTRY
Damage to our reputation could damage our businesses.
Maintaining our reputation is critical to attracting and maintaining clients, customers, investors and associates. If we fail to
deal with, or appear to fail to deal with, issues that may give rise to reputational risk, we could significantly harm our business
prospects. These issues include, but are not limited to, any of the risks discussed in this Item 1A, appropriately dealing with
potential conflicts of interest, legal and regulatory requirements, ethical issues, money laundering, cybersecurity and privacy,
recordkeeping, sales and trading practices, failure to sell securities we have underwritten at the anticipated price levels, and the
proper identification of the legal, reputational, credit, liquidity, and market risks inherent in our products. A failure to maintain
appropriate standards of service and quality, or a failure or perceived failure to treat customers and clients fairly, can result in
client dissatisfaction, litigation and heightened regulatory scrutiny, all of which can lead to lost revenue, higher operating costs
and harm to our reputation. Further, negative publicity regarding us, whether or not true, may also harm our future business
prospects.
We are affected by domestic and international macroeconomic conditions that impact the global financial markets.
We are engaged in various financial services businesses. As such, we are generally affected by domestic and international
macroeconomic and political conditions, including levels of economic output, interest and inflation rates, employment levels,
consumer confidence levels, and fiscal and monetary policy. These conditions may directly and indirectly impact a number of
factors in the global financial markets that may be detrimental to our operating results, including trading levels, investing, and
origination activity in the securities markets, security valuations, the absolute and relative level and volatility of interest and
currency rates, real estate values, the actual and perceived quality of issuers and borrowers, and the supply of and demand for
loans and deposits.
At times over the last several years we have experienced operating cycles during weak and uncertain U.S. and global economic
conditions, including low levels of economic output, artificially maintained levels of historically low interest rates, relatively high
rates of unemployment, and significant uncertainty with regards to fiscal and monetary policy both domestically and abroad. These
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conditions led to several changes in the global financial markets that from time to time negatively impacted our net revenue and
profitability. While the global financial markets have showed general signs of improvement, uncertainty remains. A period of
sustained downturns and/or volatility in the securities markets, prolonged continuation of the artificially low level of short term
interest rates, a return to increased dislocations in the credit markets, reductions in the value of real estate, and other negative
market factors could significantly impair our revenues and profitability. We could experience a decline in commission revenue
from a lower volume of trades we execute for our clients, a decline in fees from reduced portfolio values of securities managed
on behalf of our clients, a reduction in revenue from the number and size of transactions in which we provide underwriting,
financial advisory and other services, increased credit provisions and charge-offs, losses sustained from our customers’ and market
participants’ failure to fulfill their settlement obligations, reduced net interest earnings, and other losses. These periods of reduced
revenue and other losses could be accompanied by periods of reduced profitability because certain of our expenses including but
not limited to our interest expense on debt, rent, facilities and salary expenses are fixed and, our ability to reduce them over short
periods of time is limited.
U.S. markets may also be impacted by political and civil unrest occurring in the Middle East and in Eastern Europe and Russia.
Concerns about the European Union’s (“EU”) sovereign debt in recent years, including the Greek government bailout, has caused
uncertainty and disruption for financial markets globally. Continued uncertainties loom over the outcome of the EU’s financial
support programs and the possibility exists that other EU member states may experience similar financial troubles in the future.
Any negative impact on economic conditions and global markets from these matters could adversely affect our business, financial
condition and liquidity.
Our businesses and earnings are affected by the fiscal and other policies adopted by various regulatory authorities of the
United States, foreign governments, and domestic and international agencies. The Fed regulates the supply of money and credit
in the United States. Fed policies determine in large part the cost of funds for lending and investing and the return earned on those
loans and investments. The market impact from such policies can also materially decrease the value of certain of our financial
assets, most notably debt securities. Changes in Fed policies are beyond our control and, consequently, the impact of these changes
on our activities and results of our operations are difficult to predict. We may also be indirectly impacted by fiscal and monetary
policy enacted in various global markets.
U.S. state and local governments also continue to struggle with budget pressures caused by the ongoing less than optimal
economic environment and ongoing concerns regarding municipal issuer credit quality. If these trends continue or worsen, investor
concerns could potentially reduce the number and size of transactions in which we participate and, in turn, reduce investment
banking revenues. In addition, such factors could adversely affect the value of the municipal securities we hold in our trading
securities portfolio.
RJ Bank is particularly affected by economic conditions in North America. Market conditions in the United States and Canada
can be assessed through the following metrics: the level and volatility of interest rates; the rates of unemployment and under-
employment; real estate prices; the level of consumer confidence; changes in consumer spending; and the number of personal
bankruptcies, among others. The deterioration of these factors can diminish loan demand, lead to an increase in mortgage and
other loan delinquencies, affect loan repayment performance and result in higher reserves and net charge-offs, which can adversely
affect our earnings.
Lack of liquidity or access to capital could impair our business and financial condition.
Maintaining an appropriate level of liquidity, or the amount of capital that is readily available for investment, spending, or to
meet our contractual obligations, is essential to our business. Our inability to maintain adequate levels of capital in the form of
cash and readily available access to the credit and capital markets could have a significant negative effect on our financial condition.
If liquidity from our brokerage or banking operations is inadequate or unavailable, we may be required to scale back or curtail
our operations, including limiting our efforts to recruit additional financial advisors, selling assets at prices that may be less
favorable to us, and cutting or eliminating the dividends we pay to our shareholders. Some potential conditions that could negatively
affect our liquidity include the inability of our subsidiaries to generate cash in the form of dividends from earnings, changes
imposed by regulators to our liquidity or capital requirements in our subsidiaries that may prevent the upstream of dividends in
the form of cash to the parent company, limited or no accessibility to credit markets for secured and unsecured borrowings by our
subsidiaries, diminished access to the capital markets for our company, and other commitments or restrictions on capital as a result
of adverse legal settlements, judgments, or regulatory sanctions.
The availability of outside financing, including access to the credit and capital markets, depends on a variety of factors, such
as conditions in the debt and equity markets, the general availability of credit, the volume of securities trading activity, the overall
availability of credit to the financial services sector, and our credit ratings. Our cost and availability of funding may be adversely
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affected by illiquid credit markets and wider credit spreads. Additionally, lenders may from time to time curtail, or even cease to
provide, funding to borrowers as a result of future concerns over the strength of specific counterparties, as well as the stability of
markets generally.
If our credit ratings were downgraded, or if rating agencies indicate that a downgrade may occur, our business, financial
position, and results of operations could be adversely affected, perceptions of our financial strength could be damaged, and as a
result, adversely affect our relationships with clients. Such a reduction in our credit ratings could also adversely affect our liquidity
and competitive position, increase our incremental borrowing costs, limit our access to the capital markets, trigger obligations
under certain financial agreements, or decrease the number of investors, clients and counterparties willing or permitted to do
business with or lend to us, thereby curtailing our business operations and reducing profitability.
We may not be able to successfully obtain additional outside financing to fund our operations on favorable terms, or at all.
The impact of a credit rating downgrade to a level below investment grade would result in our breaching provisions in certain of
our derivative instruments, and may result in a request for immediate payment and/or ongoing overnight collateralization on our
derivative instruments in liability positions (see Note 18 of the Notes to Consolidated Financial Statements in this Form 10-K for
such information as of September 30, 2015). A credit downgrade would also result in RJF incurring a higher commitment fee on
any unused balance on its $300 million revolving credit facility executed on August 6, 2015, in addition to triggering a higher
interest rate applicable to any borrowings outstanding on the line as of and subsequent to such downgrade (see Item 7,
“Management’s Discussion and Analysis of Financial Condition and Results of Operations - Sources of Liquidity” for information
on this revolving credit facility).
Furthermore, as a bank holding company, we may become subject to a prohibition or to limitations on our ability to pay
dividends or repurchase our stock. The OCC, the Fed, the FDIC, and the SEC (through FINRA) have the authority, and under
certain circumstances the duty, to prohibit or to limit the payment of dividends by the subsidiaries to their parent, for the subsidiaries
they supervise.
See Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital
Resources” in this report for additional information on liquidity and how we manage our liquidity risk.
We are exposed to market risk.
We are, directly and indirectly, affected by changes in market conditions. Market risk generally represents the risk that values
of assets and liabilities or revenues will be adversely affected by changes in market conditions. For example, changes in interest
rates could adversely affect our net interest spread, the difference between the yield we earn on our assets and the interest rate we
pay for deposits and other sources of funding, which in turn impacts our net interest income and earnings. Changes in interest
rates could affect the interest earned on assets differently than interest paid on liabilities. In our brokerage operations, a rising
interest rate environment generally results in our earning a larger net interest spread. Conversely in those operations, a falling
interest rate environment generally results in our earning a smaller net interest spread. If we are unable to effectively manage our
interest rate risk, changes in interest rates could have a material adverse effect on our profitability.
Market risk is inherent in the financial instruments associated with our operations and activities, including loans, deposits,
securities, short-term borrowings, long-term debt, trading account assets and liabilities, derivatives, and venture capital and private
equity investments. Market conditions that change from time to time, thereby exposing us to market risk, include fluctuations in
interest rates, equity prices, relative exchange rates, and price deterioration or changes in value due to changes in market perception
or actual credit quality of an issuer.
In addition, disruptions in the liquidity or transparency of the financial markets may result in our inability to sell, syndicate
or realize the value of security positions, thereby leading to increased concentrations. The inability to reduce our positions in
specific securities may not only increase the market and credit risks associated with such positions, but also increase the level of
risk-weighted assets on our balance sheet, thereby increasing capital requirements, which could have an adverse effect on our
business results, financial condition and liquidity.
Our venture capital and private equity investments are carried at fair value with unrealized gains and losses reflected in
earnings. The value of our private equity portfolios can fluctuate and earnings from our venture capital investments can be volatile
and difficult to predict. When, and if, we recognize gains can depend on a number of factors, including general economic conditions,
the prospects of the companies in which we invest, when these companies go public, the size of our position relative to the public
float and whether we are subject to any resale restrictions. Further, our investments could incur significant mark-to-market losses,
especially if they have been written up in prior periods because of higher market prices.
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See Item 7A, “Quantitative and Qualitative Disclosures about Market Risk,” in this report for additional information regarding
our exposure to and approaches to managing market risk.
We are exposed to credit risk.
We are generally exposed to the risk that third parties that owe us money, securities or other assets will fail to meet their
performance obligations due to numerous causes, including bankruptcy, lack of liquidity, or operational failure, among others.
We actively buy and sell securities from and to clients and counterparties in the normal course of our broker-dealers market
making and underwriting businesses, which exposes us to credit risk. Although generally collateralized by the underlying security
to the transaction, we still face the risk associated with changes in the market value of collateral through settlement date. We also
hold certain securities, loans and derivatives in our trading accounts. Deterioration in the actual or perceived credit quality of the
underlying issuers of securities or loans, or the non-performance of issuers and counterparties to certain derivative contracts could
result in trading losses.
We borrow securities from, and lend securities to, other broker-dealers, and may also enter into agreements to repurchase
and/or resell securities as part of investing and financing activities. A sharp change in the security market values utilized in these
transactions may result in losses if counterparties to these transactions fail to honor their commitments.
We manage the risk associated with these transactions by establishing and monitoring credit limits, as well as by monitoring
collateral and transaction levels on a daily basis. A significant deterioration in the credit quality of one of our counterparties could
lead to concerns in the market about the credit quality of other counterparties in the same industry, thereby exacerbating our credit
risk exposure. We may require counterparties to deposit additional collateral or substitute collateral pledged. In the case of aged
securities failed to receive, we may, under industry regulations, purchase the underlying securities in the market and seek
reimbursement for any losses from the counterparty.
Also, we permit our clients to purchase securities on margin. During periods of steep declines in securities prices, the value
of the collateral securing client margin loans may fall below the amount of the purchaser’s indebtedness. If the clients are unable
to provide additional collateral for these margin loans, we may incur losses on those margin transactions. This may cause us to
incur additional expenses defending or pursuing claims or litigation related to counterparty or client defaults.
We deposit our cash in depository institutions as a means of maintaining the liquidity necessary to meet our operating needs,
and we also facilitate the deposit of cash awaiting investment in depository institutions on behalf of our clients. A failure of a
depository institution to return these deposits could severely impact our operating liquidity, result in significant reputational
damage, and adversely impact our financial performance.
We also incur credit risk by lending to businesses and individuals through the offering of: C&I loans, commercial and residential
mortgage loans, tax-exempt loans, home equity lines of credit, and margin and non-purpose loans collateralized by securities,
among others. We incur credit risk through our investments, which include MBS, collateralized mortgage obligations, auction
rate securities, and other municipal securities.
Our credit risk and credit losses can increase if our loans or investments are concentrated among borrowers or issuers engaged
in the same or similar activities, industries, geographies, or to borrowers or issuers who as a group may be uniquely or
disproportionately affected by economic or market conditions. The deterioration of an individually large exposure, for example
due to natural disasters, health emergencies or pandemics, acts of terrorism, severe weather events or other adverse economic
events, could lead to additional loan loss provisions and/or charges-offs, or credit impairment of our investments, and subsequently
have a material impact on our net income and regulatory capital.
Declines in the real estate market or sustained economic downturns may cause us to write down the value of some of the loans
in RJ Bank’s portfolio, foreclose on certain real estate properties or write down the value of some of our available for sale securities
portfolio. Credit quality generally may also be affected by adverse changes in the financial performance or condition of our debtors
or deterioration in the strength of the U.S. economy. Our policies also can adversely affect borrowers, potentially increasing the
risk that they may fail to repay their loans or satisfy their obligations to us.
See Item 7A, “Quantitative and Qualitative Disclosures about Market Risk,” in this report for additional information regarding
our exposure to and approaches to managing credit risk.
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Our business depends on fees generated from the distribution of financial products, fees earned from the management of
client accounts by our asset management subsidiaries, and on advisory fees.
A large portion of our revenues are derived from fees generated from the distribution of financial products, such as mutual
funds and variable annuities. Changes in the structure or amount of the fees paid by the sponsors of these products could directly
affect our revenues, business and financial condition. In addition, if these products experience losses or increased investor
redemptions, we may receive lower fee revenue from the investment management and distribution services we provide on behalf
of the mutual funds and annuities. The investment management fees we are paid may also decline over time due to factors such
as increased competition, renegotiation of contracts and the introduction of new, lower-priced investment products and services.
Changes in market values or in the fee structure of asset management accounts would affect our revenues, business and financial
condition. Asset management fees often are primarily comprised of base management and incentive fees. Management fees are
primarily based on assets under management (“AUM”). AUM balances are impacted by net inflow/outflow of client assets and
market values. Below-market investment performance by our funds and portfolio managers could result in a loss of managed
accounts and could result in reputational damage that might make it more difficult to attract new investors and thus further impact
our business and financial condition. If we were to experience the loss of managed accounts, our fee revenue would decline. In
addition, in periods of declining market values, our asset values under management may resultantly decline, which would negatively
impact our fee revenues.
Our underwriting, market-making, trading, and other business activities place our capital at risk.
We may incur losses and be subject to reputational harm to the extent that, for any reason, we are unable to sell securities
which we have underwritten at the anticipated price levels. As an underwriter, we also are subject to heightened standards regarding
liability for material misstatements or omissions in prospectuses and other offering documents relating to offerings we underwrite.
As a market maker, we may own positions in specific securities, and these undiversified holdings concentrate the risk of market
fluctuations and may result in greater losses than would be the case if our holdings were more diversified. In addition, we may
incur losses as a result of proprietary positions we hold in connection with our market making or underwriting activities.
From time to time and as part of our underwriting processes, we may carry significant positions in securities of a single issuer
or issuers engaged in a specific industry. Sudden changes in the value of these positions could impact our financial results.
We have made and may continue to make principal investments in private equity funds and other illiquid investments, which
are typically private limited partnership interests and securities that are not publicly traded. There is risk that we may be unable
to realize our investment objectives by sale or other disposition at attractive prices or that we may otherwise be unable to complete
a desirable exit strategy. In particular, these risks could arise from changes in the financial condition or prospects of the portfolio
companies in which investments are made, changes in economic conditions or changes in laws, regulations, fiscal policies or
political conditions. It could take a substantial period of time to identify attractive investment opportunities and then to realize
the cash value of such investments through resale. Even if a private equity investment proves to be profitable, it may be several
years or longer before any profits can be realized in cash.
The soundness of other financial institutions and intermediaries affects us.
We face the risk of operational failure, termination or capacity constraints of any of the clearing agents, exchanges, clearing
houses or other financial intermediaries that we use to facilitate our securities transactions. As a result of the consolidation over
the years among clearing agents, exchanges and clearing houses, our exposure to certain financial intermediaries has increased
and could affect our ability to find adequate and cost-effective alternatives should the need arise. Any failure, termination or
constraint of these intermediaries could adversely affect our ability to execute transactions, service our clients and manage our
exposure to risk.
Our ability to engage in routine trading and funding transactions could be adversely affected by the actions and commercial
soundness of other financial institutions. Financial services institutions are interrelated as a result of trading, clearing, funding,
counterparty or other relationships. We have exposure to many different industries and counterparties, and we routinely execute
transactions with counterparties in the financial industry, including brokers and dealers, commercial banks, investment banks,
mutual and hedge funds and other institutional clients. Furthermore, although we do not hold any EU sovereign debt, we may do
business with and be exposed to financial institutions that have been affected by the EU sovereign debt circumstances. Defaults
by, or even rumors or questions about the financial condition of, one or more financial services institutions, or the financial services
industry generally, have historically led to market-wide liquidity problems and could lead to losses or defaults by us or by other
institutions. Many of these transactions expose us to credit risk in the event of default of our counterparty or client. In addition,
our credit risk may be exacerbated when the collateral held by us cannot be realized or is liquidated at prices not sufficient to
recover the full amount of the loan or derivative exposure due us. Although we have not suffered any material or significant losses
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as a result of the failure of any financial counterparty, any such losses in the future may have a material adverse effect on our
results of operations.
We have experienced increased pricing pressures in areas of our business which may impair our future revenue and
profitability.
Our business continues to experience increased pricing pressures on trading margins and commissions in fixed income and
equity trading. In the fixed income market, regulatory requirements have resulted in greater price transparency, leading to increased
price competition and decreased trading margins. In the equity market, we have experienced increased pricing pressure from
institutional clients to reduce commissions, and this pressure has been augmented by the increased use of electronic and direct
market access trading, which has created additional competitive downward pressure on trading margins. We believe that price
competition and pricing pressures in these and other areas will continue as institutional investors continue to reduce the amounts
they are willing to pay, including by reducing the number of brokerage firms they use, and some of our competitors seek to obtain
market share by reducing fees, commissions or margins.
Regions may fail to honor its indemnification obligations associated with Morgan Keegan matters.
Under the definitive stock purchase agreement, dated January 11, 2012, entered into by RJF and Regions, governing our
acquisition of Morgan Keegan (the “SPA”), Regions has ongoing obligations to continue to indemnify RJF with respect to certain
litigation as well as other matters. Specifically, the terms of the SPA provide that Regions will indemnify RJF for losses incurred
in connection with legal proceedings pending as of the closing date, April 2, 2012, or commenced thereafter and related to pre-
closing matters that are received prior to April 2, 2015, as well as any cost of defense pertaining thereto. RJF is relying on Regions
to continue fulfilling its indemnification obligations under the SPA with respect to such matters. Our inability to enforce these
indemnification provisions, or our failure to recover losses for which we are entitled to be indemnified, could result in our incurring
significant costs for defense, settlement, and any adverse judgments, and resultantly have an adverse effect on our results of
operations, financial condition, and our regulatory capital levels.
See Note 21 of the Notes to Consolidated Financial Statements in this Form 10-K for further information regarding the
indemnification from Regions.
Growth of our business could increase costs and regulatory and integration risks.
Integrating acquired businesses, providing a platform for new businesses and partnering with other firms involve a number
of risks and present financial, managerial and operational challenges. We may incur significant expenses in connection with further
expansion of our existing businesses, or recruitment of financial advisors, or in connection with strategic acquisitions or investments,
if and to the extent they arise from time to time. Our overall profitability would be negatively affected if investments and expenses
associated with such growth are not matched or exceeded by the revenues that are derived from such investment or growth.
Expansion may also create a need for additional compliance, documentation, risk management and internal control procedures,
and often involves the hiring of additional personnel to monitor such procedures. To the extent such procedures are not adequate
to appropriately monitor any new or expanded business, we could be exposed to a material loss or regulatory sanction.
Moreover, to the extent we pursue strategic acquisitions, we may be unable to complete such acquisitions on acceptable terms,
or be unable to successfully integrate the operations of any acquired business into our existing business. Such acquisitions could
be of significant size and/or complexity. This effort, together with difficulties we may encounter in integrating an acquired business,
could have an adverse effect on our business, financial condition, and results of operations. In addition, we may need to raise
equity capital or borrow to finance such acquisitions, which could dilute our shareholders or increase our leverage. Any such
borrowings might not be available on terms as favorable to us as our current borrowings, or perhaps at all.
We face intense competition.
We are engaged in intensely competitive businesses. We compete on the basis of a number of factors, including the quality
of our financial advisors and associates, our products and services, pricing (such as execution pricing and fee levels), location and
reputation in relevant markets. Over time there has been substantial consolidation and convergence among companies in the
financial services industry which has significantly increased the capital base and geographic reach of our competitors. See the
section entitled “Competition” of Item 1 of this report for additional information about our competitors.
We compete directly with national full service broker-dealers, investment banking firms, and commercial banks, and to a
lesser extent, with discount brokers and dealers and investment advisors. In addition, we face competition from more recent
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entrants into the market and increased use of alternative sales channels by other firms. We also compete indirectly for investment
assets with insurance companies, real estate firms and hedge funds, among others. This competition could cause our business to
suffer.
To remain competitive, our future success also depends in part on our ability to develop and enhance our products and services.
The inability to develop new products and services, or enhance existing offerings, could have a material adverse effect on our
profitability. In addition, we may incur substantial expenditures to keep pace with the constant changes and enhancements being
made in technology, including improvements made to internet connectivity, networking and telecommunications systems.
Our ability to attract and retain senior professionals, qualified financial advisors and other associates is critical to the
continued success of our business.
Our ability to develop and retain our client base depends on the reputation, judgment, business generation capabilities and
skills of our senior professionals, particularly our managing directors, and the members of our executive committees, as well as
employees and financial advisors. To compete effectively we must attract, retain and motivate qualified professionals, including
successful financial advisors, investment bankers, trading professionals, portfolio managers and other revenue producing or
specialized personnel. The reputations and relationships of our senior professionals with our clients are a critical element in
obtaining and executing client engagement. Competitive pressures we experience could have an adverse effect on our business,
results of operations, financial condition and liquidity.
Turnover in the financial services industry is high. The cost of retaining skilled professionals in the financial services industry
has escalated considerably. Employers in the industry are increasingly offering guaranteed contracts, upfront payments, and
increased compensation. These can be important factors in a current employee’s decision to leave us as well as a prospective
employee’s decision to join us. As competition for skilled professionals in the industry remains intense, we may have to devote
significant resources to attracting and retaining qualified personnel. To the extent we have compensation targets, we may not be
able to retain our employees which could result in increased recruiting expense or result in our recruiting additional employees at
compensation levels that are not within our target range. In particular, our financial results may be adversely affected by the costs
we incur in connection with any upfront loans or other incentives we may offer to newly recruited financial advisors and other
key personnel. If we were to lose the services of any of our investment bankers, senior equity research, sales and trading
professionals, asset managers, or executive officers to a new or existing competitor or otherwise, we may not be able to retain
valuable relationships and some of our clients could choose to use the services of a competitor instead of our services. If we are
unable to retain our senior professionals or recruit additional professionals, our reputation, business, results of operations and
financial condition will be adversely affected. Further, new business initiatives and efforts to expand existing businesses generally
require that we incur compensation and benefits expense before generating additional revenues.
Moreover, companies in our industry whose employees accept positions with competitors frequently claim that those
competitors have engaged in unfair hiring practices. We have been subject to several such claims in the past and may be subject
to additional claims in the future as we seek to hire qualified personnel, some of whom may currently be working for our competitors.
Some of these claims may result in material litigation. We could incur substantial costs in defending ourselves against these claims,
regardless of their merits. Such claims could also discourage potential employees who currently work for our competitors from
joining us.
We are exposed to operational risk.
Our diverse operations expose us to risk of loss resulting from inadequate or failed internal processes, people and systems,
external events, including technological or connectivity failures either at the exchanges in which we do business or between our
data center, operations processing sites or our branches. Our businesses depend on our ability to process and monitor, on a daily
basis, a large number of complex transactions across numerous and diverse markets. The inability of our systems to accommodate
an increasing volume of transactions could also constrain our ability to expand our businesses. Our financial, accounting, data
processing or other operating systems and facilities may fail to operate properly or become disabled as a result of events that are
wholly or partially beyond our control, adversely affecting our ability to process these transactions or provide these services.
Operational risk exists in every activity, function or unit of our business, and can take the form of internal or external fraud,
employment and hiring practices, an error in meeting a professional obligation, or failure to meet corporate fiduciary standards.
It is not always possible to deter employee misconduct, and the precautions we take to detect and prevent this activity may not be
effective in all cases. If our employees engage in misconduct, our businesses would be adversely affected. Operational risk also
exists in the event of business disruption, system failures or failed transaction processing. Third parties with which we do business
could also be a source of operational risk, including with respect to breakdowns or failures of the systems or misconduct by the
employees of such parties. In addition as we change processes or introduce new products and services, we may not fully appreciate
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or identify new operational risks that may arise from such changes. Increasing use of automated technology has the potential to
amplify risks from manual or system processing errors, including outsourced operations.
Our existing business contingency plan is intended to ensure that we have the ability to recover our critical business functions
and supporting assets, including staff and technology, in the event of a systemic business interruption. Despite the diligence we
have applied to the development and testing of our plans, due to unforeseen factors, our ability to conduct business may in any
case be adversely affected by a disruption involving physical site access, catastrophic events including weather related events,
events involving electrical, environmental or communications malfunctions, as well as events impacting services provided by
others that we rely upon which could impact our employees or third parties with whom we conduct business.
See Item 7A, “Quantitative and Qualitative Disclosures about Market Risk,” in this report for additional information regarding
our exposure to and approaches to managing operational risk.
Associate misconduct, which is difficult to detect and deter, could harm us by impairing our ability to attract and retain
clients and subject us to significant legal liability and reputational harm.
There have been a number of highly-publicized cases involving fraud or other misconduct by associates in the financial
services industry, and there is a risk that our associates could engage in misconduct that adversely affects our business. For
example, our banking business often requires that we deal with confidential matters of great significance to our clients. If our
associates were to improperly use or disclose confidential information provided by our clients, we could be subject to regulatory
sanctions and suffer serious harm to our reputation, financial position, current client relationships and ability to attract future
clients. We are also subject to a number of obligations and standards arising from our asset management business and our authority
over the assets managed by our asset management business. In addition our financial advisors may act in a fiduciary capacity,
providing financial planning, investment advice and discretionary asset management. The violation of these obligations and
standards by any of our associates would adversely affect our clients and us. It is not always possible to deter associate misconduct,
and the precautions we take to detect and prevent this activity may not be effective in all cases. If our associates engage in
misconduct, our business would be adversely affected.
Our businesses depend on technology.
Our businesses rely extensively on electronic data processing and communications systems. In addition to better serving
clients, the effective use of technology increases efficiency and enables us to reduce costs. Adapting or developing our technology
systems to meet new regulatory requirements, client needs, and competitive demands is critical for our business. Introduction of
new technology presents challenges on a regular basis. There are significant technical and financial costs and risks in the
development of new or enhanced applications, including the risk that we might be unable to effectively use new technologies or
adapt our applications to emerging industry standards.
Our continued success depends, in part, upon our ability to: successfully maintain and upgrade the capability of our technology
systems; address the needs of our clients by using technology to provide products and services that satisfy their demands; and
retain skilled information technology employees. Failure of our technology systems, which could result from events beyond our
control, or an inability to effectively upgrade those systems or implement new technology-driven products or services, could result
in financial losses, liability to clients, violations of applicable privacy and other applicable laws and regulatory sanctions.
The expectations of sound operational and informational security practices have risen among our clients and customers, the
public at large and regulators. Thus, our operational systems and infrastructure must continue to be safeguarded and monitored
for potential failures, disruptions, cyberattacks and breakdowns. Our operations rely on the secure processing, storage and
transmission of confidential and other information in our computer systems and networks. Although cyber security incidents
among financial services firms are on the rise, we have not experienced any material losses relating to cyberattacks or other
information security breaches. However, there can be no assurances that we will not suffer such losses in the future. Despite our
implementation of protective measures and endeavoring to modify them as circumstances warrant, our computer systems, software
and networks may be vulnerable to human error, natural disasters, power loss, spam attacks, unauthorized access, distributed denial
of service attacks, computer viruses and other malicious code and other events that could have an impact on the security and
stability of our operations.
Notwithstanding the precautions taken by us and measures put in place, if one or more of these events were to occur, this
could jeopardize the information we confidentially maintain, including that of our clients and counterparties, which is processed,
stored in and transmitted through our computer systems and networks, or otherwise cause interruptions or malfunctions in our
operations or the operations of our clients and counterparties. We may be required to expend significant additional resources to
modify our protective measures, to investigate and remediate vulnerabilities or other exposures or to make required notifications.
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We may also be subject to litigation and financial losses that are neither insured nor covered under any of our current insurance
policies. A technological breakdown could also interfere with our ability to comply with financial reporting and other regulatory
requirements, exposing us to potential disciplinary action by regulators.
Extraordinary trading volumes beyond reasonably foreseeable spikes could cause our computer systems to operate at an
unacceptably slow speed or even fail entirely. While we have invested resources to maintain the reliability and scalability of our
systems and maintain hardware to address extraordinary volumes, there can be no assurance that our systems will be sufficient to
handle truly extraordinary and unforeseen circumstances. Systems failures and delays could occur and could cause, among other
things, unanticipated disruptions in service to our clients or slower system response times, resulting in client dissatisfaction due
to transactions not being processed as quickly as desired.
In providing services to clients, we may manage, utilize and store sensitive or confidential client or employee data, including
personal data. As a result, we may be subject to numerous laws and regulations designed to protect this information, such as U.S.
federal and state laws governing the protection of personally identifiable information and international laws. These laws and
regulations are increasing in complexity and number. If any person, including any of our associates, negligently disregards or
intentionally breaches our established controls with respect to client or employee data, or otherwise mismanages or misappropriates
such data, we could be subject to significant monetary damages, regulatory enforcement actions, fines and/or criminal prosecution.
In addition, unauthorized disclosure of sensitive or confidential client or employee data, whether through system failure, employee
negligence, fraud or misappropriation, could damage our reputation and cause us to lose clients and related revenue. Potential
liability in the event of a security breach of client data could be significant. Depending on the circumstances giving rise to the
breach, this liability may not be subject to a contractual limit or an exclusion of consequential or indirect damages.
See Item 7A, “Quantitative and Qualitative Disclosures about Market Risk,” in this report for additional information regarding
our exposure to and approaches for managing these types of operational risks.
Our operations could be adversely affected by serious weather conditions.
Certain of our principal operations are located in St. Petersburg, Florida. While we have a business continuity plan that permits
significant operations to be conducted out of our Southfield, Michigan and Memphis, Tennessee locations and our information
systems processing to be conducted out of our information technology data center in the Denver, Colorado area, our operations
could be adversely affected by hurricanes or other serious weather conditions that could affect the processing of transactions,
communications, and the ability of our associates to get to our offices, or work from home. Refer to the “we are exposed to credit
risk” risk factor in this Item 1A for a discussion of how events, including weather events, could adversely impact RJ Bank’s loan
portfolio. Refer to the “we are exposed to operational risk” risk factor in this Item 1A for a discussion of how weather-related
events could impact our ability to conduct business.
We are exposed to litigation risks, which could materially and adversely impact our business operations and prospects.
Many aspects of our business involve substantial risks of liability arising out of the normal course of business. We have been
named as a defendant or co-defendant in lawsuits and arbitrations involving primarily claims for damages. The risks associated
with potential litigation often may be difficult to assess or quantify and the existence and magnitude of potential claims often
remain unknown for substantial periods of time. Unauthorized or illegal acts of our associates could result in substantial liability.
The failure of our advisors to fully understand investor needs or risk tolerances may result in the recommendation or purchase of
a portfolio of assets that may not be suitable for the investor. To the extent we fail to fully understand our clients or improperly
advise them, we could be found liable for losses suffered by such clients, which could harm our business. Our Private Client
Group business segment has historically been more susceptible to litigation than our institutional businesses.
In highly volatile markets, the volume of claims and amount of damages sought in litigation and regulatory proceedings
against financial institutions has historically increased. These risks include potential liability under securities laws or other laws
for: alleged materially false or misleading statements made in connection with securities offerings and other transactions; issues
related to the suitability of our investment advice based on our clients’ investment objectives; the inability to sell or redeem
securities in a timely manner during adverse market conditions; contractual issues; employment claims; and potential liability for
other advice we provide to participants in strategic transactions. Substantial legal liability could have a material adverse financial
impact or cause us significant reputational harm, which in turn could seriously harm our business and future business prospects.
In addition to the foregoing financial costs and risks associated with potential liability, the costs of defending individual
litigation and claims continue to increase over time. The amount of outside attorneys’ fees incurred in connection with the defense
of litigation and claims could be substantial and might materially and adversely affect our results of operations.
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With regard to Morgan Keegan, a number of the types of claims and matters described above arising prior to our acquisition,
that are received prior to April 2, 2015, are subject to indemnification from Regions. Refer to the separate risk factor in this section
entitled “Regions may fail to honor its indemnification obligations associated with Morgan Keegan matters” for a discussion of
the risks associated with these indemnifications.
See Item 3, “Legal Proceedings” in this report for a discussion of our legal matters and Item 7A, “Quantitative and Qualitative
Disclosures about Market Risk,” in this report for a discussion regarding our approach to managing legal risk.
The preparation of the consolidated financial statements requires the use of estimates that may vary from actual results
and new accounting standards could adversely affect future reported results.
The preparation of the consolidated financial statements in conformity with U.S. generally accepted accounting principles
(“GAAP”) requires management to make 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. Such estimates and assumptions may require management to make difficult,
subjective and complex judgments about matters that are inherently uncertain. One of our most critical estimates is RJ Bank’s
allowance for loan losses. At any given point in time, conditions in the real estate and credit markets may increase the complexity
and uncertainty involved in estimating the losses inherent in RJ Bank’s loan portfolio. If management’s underlying assumptions
and judgments prove to be inaccurate, one outcome could be that the allowance for loan losses could be insufficient to cover actual
losses. Our financial condition, including our liquidity and capital, and results of operations could be materially and adversely
impacted. See Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations-Critical
Accounting Estimates,” in this report for additional information on the nature of these estimates.
Our financial instruments, including certain trading assets and liabilities, available for sale securities including Auction Rate
Securities (“ARS”), certain loans, intangible assets and private equity investments, among other items, require management to
make a determination of their fair value in order to prepare our consolidated financial statements. Where quoted market prices are
not available, we may make fair value determinations based on internally developed models or other means, which ultimately rely
to some degree on our subjective judgment. Some of these instruments and other assets and liabilities may have no direct observable
inputs, making their valuation particularly subjective and, consequently, based on significant estimation and judgment. In addition,
sudden illiquidity in markets or declines in prices of certain securities may make it more difficult to value certain items, which
may lead to the possibility that such valuations will be subject to further change or adjustment, as well as declines in our earnings
in subsequent periods.
Our accounting policies and methods are fundamental to how we record and report our financial condition and results of
operations. The Financial Accounting Standards Board (the “FASB”) and the SEC have at times revised the financial accounting
and reporting standards that govern the preparation of our financial statements. In addition, accounting standard setters and those
who interpret the accounting standards may change or even reverse their previous interpretations or positions on how these standards
should be applied. These changes can be hard to predict and can materially impact how we record and report our financial condition
and results of operations. In some cases, we could be required to apply a new or revised standard retroactively, resulting in our
restating prior period financial statements. For further discussion of some of our significant accounting policies and standards,
see the “Critical Accounting Estimates” discussion within Item 7 in this report, and Note 2 of the Notes to Consolidated Financial
Statements in this Form 10-K.
In December 2012, the FASB issued a proposed standard on accounting for credit losses. The standard would replace multiple
existing impairment models, including the replacement of the “incurred loss” model for loans with an “expected loss” model. The
FASB announced it will establish the effective date when it issues the final standard. We cannot predict when a final standard
will be issued, when it will be made effective, what its final provisions will encompass, or the potential impact its eventual adoption
may have on our retained earnings.
Our risk management and conflicts of interest policies and procedures may leave us exposed to unidentified or unanticipated
risk.
We seek to manage, monitor and control our operational, legal and regulatory risk through operational and compliance reporting
systems, internal controls, management review processes and other mechanisms; however, there can be no assurance that our
procedures will be fully effective. Our banking and trading processes seek to balance our ability to profit from banking and trading
positions with our exposure to potential losses. While we utilize limits and other risk mitigation techniques, those techniques and
the judgments that accompany their application cannot anticipate unforeseen economic and financial outcomes or the specifics
and timing of such outcomes.
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Further, our risk management methods may not effectively predict future risk exposures, which could be significantly greater
than the historical measures indicate. In addition, some of our risk management methods are based on an evaluation of information
regarding markets, clients and other matters that are based on assumptions that may no longer be accurate. A failure to adequately
manage our growth, or to effectively manage our risk, could materially and adversely affect our business and financial condition.
Financial services firms are subject to numerous conflicts of interest or perceived conflicts, all of which are under growing
scrutiny by federal and state regulators in the United States. Our risk management processes include addressing potential conflicts
of interest that arise in our business. We have procedures and controls in place to address conflicts of interest. Management of
potential conflicts of interest has become increasingly complex as we expand our business activities through numerous transactions,
obligations and interests with and among our clients. The actual or perceived failure to adequately address conflicts of interest
could affect our reputation, the willingness of clients to transact business with us or give rise to litigation or regulatory actions.
Therefore, there can be no assurance that conflicts of interest will not arise in the future that could cause material harm to us.
For more information on how we monitor and manage market and certain other risks, see Item 7A, “Quantitative and Qualitative
Disclosures about Market Risk,” in this report.
We are exposed to risk from international markets.
We do business in other parts of the world, including a few developing regions commonly known as emerging markets, and
as a result, are exposed to a number of risks, including economic, market, litigation and regulatory risks. Our businesses and
revenues derived from non-U.S. operations are subject to risk of loss from currency fluctuations, social or political instability, less
established regulatory regimes, changes in governmental policies or policies of central banks, downgrades in the credit ratings of
sovereign countries, expropriation, nationalization, confiscation of assets and unfavorable legislative, economic and political
developments. Action or inaction in any of these operations, including failure to follow proper practices with respect to regulatory
compliance and/or corporate governance, could harm our operations and our reputation. We also invest or trade in the securities
of corporations located in non-U.S. jurisdictions. Revenues from the trading of non-U.S. securities also may be subject to negative
fluctuations as a result of the abovementioned factors. The impact of these fluctuations could be magnified because non-U.S.
trading markets, particularly in emerging market countries, are generally smaller and less developed, less liquid and more volatile
than U.S. trading markets. Additionally, a political, economic or financial disruption in a country or region could adversely impact
our business and increase volatility in financial markets generally.
We have risks related to our insurance programs.
Our operations and financial results are subject to risks and uncertainties related to our use of a combination of insurance,
self-insured retention and self-insurance for a number of risks, including most significantly: property and casualty, workers’
compensation, errors and omissions liability, general liability and the portion of employee-related health care benefits plans we
fund, among others.
While we endeavor to purchase insurance coverage that is appropriate to our assessment of risk, we are unable to predict with
certainty the frequency, nature or magnitude of claims for direct or consequential damages. Our business may be negatively
affected if in the future our insurance proves to be inadequate or unavailable. In addition, insurance claims may divert management
resources away from operating our business.
RISKS RELATED TO OUR REGULATORY ENVIRONMENT
Financial services firms have been subject to increased regulatory scrutiny over the last several years, increasing the risk
of financial liability and reputational harm resulting from adverse regulatory actions.
Firms in the financial services industry have been operating in an onerous regulatory environment, which will become even
more stringent in light of recent well-publicized failures of regulators to detect and prevent fraud. The industry has experienced
increased scrutiny from a variety of regulators, including the SEC, the Fed, the OCC and the CFPB, in addition to stock exchanges,
FINRA and state attorneys general. Penalties and fines sought by regulatory authorities have increased substantially over the last
several years. We may be adversely affected by changes in the interpretation or enforcement of existing laws and rules by these
governmental authorities and SROs. Each of the regulatory bodies with jurisdiction over us has regulatory powers dealing with
many different aspects of financial services, including, but not limited to, the authority to fine us and to grant, cancel, restrict or
otherwise impose conditions on the right to continue operating particular businesses. For example, the failure to comply with the
obligations imposed by the Exchange Act on broker-dealers and the Investment Advisers Act of 1940 on investment advisers,
including recordkeeping, advertising and operating requirements, disclosure obligations and prohibitions on fraudulent activities,
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or by the Investment Company Act of 1940 (the “1940 Act”), could result in investigations, sanctions and reputational damage.
We also may be adversely affected as a result of new or revised legislation or regulations imposed by the SEC, other U.S. or foreign
governmental regulatory authorities or SROs (e.g., FINRA) that supervise the financial markets. Substantial legal liability or
significant regulatory action taken against us could harm our business prospects through adverse financial effects and reputational
harm.
Changes in regulations resulting from either the Dodd-Frank Act or any new regulations or laws may affect our businesses.
The market and economic conditions over the past several years have directly led to a demand by the public for changes in
the way the financial services industry is regulated, including a call for more stringent legislation and regulation in the United
States and abroad. The Dodd-Frank Act enacted sweeping changes and an unprecedented increase in the supervision and regulation
of the financial services industry (see Item 1, “Regulation,” in this report for a discussion of such changes, including the Volcker
Rule). The ultimate impact that the Dodd-Frank Act will have on us, the financial industry and the economy at large cannot be
specifically ascertained until all of the implementing regulations called for under the legislation have been finalized and fully
implemented. Nevertheless, it is apparent that these legislative and regulatory changes could affect our revenue, limit our ability
to pursue business opportunities, impact the value of our assets, require us to alter at least some of our business practices, impose
additional costs, and otherwise adversely affect our businesses.
The Dodd-Frank Act impacts the manner in which we market our products and services, manage our business and operations,
and interact with regulators, all of which could materially impact our results of operations, financial condition and liquidity. Certain
provisions of the Dodd-Frank Act that have or may impact our businesses include: the establishment of a fiduciary standard for
broker-dealers; regulatory oversight of incentive compensation; the imposition of capital requirements on financial holding
companies and to a lesser extent, greater oversight over derivatives trading; and restrictions on proprietary trading. There is also
increased regulatory scrutiny (and related compliance costs) as we continue to grow and surpass certain thresholds established
under the Dodd-Frank Act. These include, but are not limited to, RJ Bank’s oversight by the CFPB. The CFPB has been active
in investigating products, services, and operations of credit providers, including banks, for compliance with various consumer
protection laws, such as the Truth in Lending Act, the Equal Credit Opportunity Act, the Fair Credit Reporting Act, and the Real
Estate Settlement Procedures Act. Any actions taken by the CFPB could result in requirements to alter or cease offering affected
products and services, make them less attractive, and restrict our ability to offer them, in addition to increasing our regulatory and
compliance costs. To the extent the Dodd-Frank Act impacts the operations, financial condition, liquidity and capital requirements
of unaffiliated financial institutions with whom we transact business, those institutions may seek to pass on increased costs, reduce
their capacity to transact, or otherwise present inefficiencies in their interactions with us.
In December 2013, the final version of the Volcker Rule was adopted (see Item 1, “Regulation,” in this report for discussion
of the Volcker Rule) and became effective April 1, 2014. We were required to comply with the Volcker Rule’s provisions starting
on July 21, 2015. Although we have not historically engaged in significant levels of proprietary trading for our own trading
account, due to our underwriting and market making activities, the Volcker Rule will likely adversely affect our results of operations
through increased operational and compliance costs, possible reductions in our trading revenues, and changes to our principal
capital private equity investments.
The Basel III capital standards will impose additional capital and other requirements on us that could decrease our
competitiveness and profitability.
In July 2013, the Fed, the OCC and the FDIC released final U.S. Basel III regulatory capital rules, which implemented the
global regulatory capital reforms of Basel III and certain changes required by the Dodd-Frank Act. These rules increase the quantity
and quality of regulatory capital, establish a capital conservation buffer, and make selected changes to the calculation of risk-
weighted assets. The regulatory capital rule became effective for us January 1, 2015, subject to a phase-in period for several of
its provisions, including the new minimum capital ratio requirements, the capital conservation buffer, and the regulatory capital
adjustments and deductions. The increased capital requirements could restrict our ability to grow during favorable market conditions
or require us to raise additional capital. As a result, our business, results of operations, financial condition or prospects could be
adversely affected. We continue to evaluate the impact of the capital rules on both RJ Bank and RJF.
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Failure to comply with regulatory capital requirements primarily applicable to RJF, RJ Bank or our broker-dealer
subsidiaries would significantly harm our business.
RJF and RJ Bank are subject to various regulatory and capital requirements administered by various federal regulators, and,
accordingly, must meet specific capital guidelines that involve quantitative measures of RJF and RJ Bank’s assets, liabilities, and
certain off-balance sheet items as calculated under regulatory accounting practices. The capital amounts and classification for
both RJF and RJ Bank are also subject to qualitative judgments by U. S. federal regulators based on components of our capital,
risk-weightings of assets, off-balance sheet transactions, and other factors. Quantitative measures established by regulation to
ensure capital adequacy require RJF and RJ Bank to maintain minimum amounts and ratios of Total and Tier 1 capital to risk-
weighted assets, Tier 1 capital to average assets (as defined in the regulations), and under rules defined in Basel III, Common
equity Tier 1 capital to risk-weighted assets. Failure to meet minimum capital requirements can trigger certain mandatory and
possibly additional discretionary, actions by regulators that, if undertaken, could harm either RJF or RJ Bank’s operations and our
financial condition.
As more fully discussed in Item 1, “Regulation,” in this report, RJF is required to perform annual stress tests using certain
scenarios provided by the Fed. While we believe that both the quality and magnitude of our capital base is sufficient to support
our current operations given our risk profile, the results of the stress testing process may affect our approach to managing and
deploying capital.
Additionally, as RJF is a holding company, it depends on dividends, distributions and other payments from its subsidiaries to
fund payments of its obligations, including debt service. We are subject to the SEC’s uniform net capital rule (Rule 15c3-1) and
FINRA’s net capital rule, which may limit our ability to make withdrawals of capital from our broker-dealer subsidiaries. The
uniform net capital rule sets the minimum level of net capital that a broker-dealer must maintain and also requires that a portion
of its assets be relatively liquid. FINRA may prohibit a member firm from expanding its business or paying cash dividends if
resulting net capital falls below its requirements. In addition, our Canada-based broker-dealer subsidiary is subject to similar
limitations under applicable regulation in that jurisdiction by IIROC. Regulatory capital requirements applicable to some of our
significant subsidiaries may impede access to funds the holding company needs to make payments on any such obligations.
See Note 26 of the Notes to Consolidated Financial Statements in this Form 10-K for further information on regulations and
capital requirements.
We operate in a highly regulated industry in which future developments could adversely affect our business and financial
condition.
The securities industry is subject to extensive and constantly changing regulation, and broker-dealers and investment advisors
are subject to regulations covering all aspects of the securities business, including, but not limited to, sales and trading methods,
trade practices among broker-dealers, use and safekeeping of clients’ funds and securities, capital structure of securities firms,
anti-money laundering efforts, recordkeeping, and the conduct of directors, officers and employees. A violation of any of these
laws or regulations could subject us to: civil and criminal liability; sanctions, which could include the revocation of our subsidiaries’
registrations as investment advisors or broker-dealers; the revocation of the licenses of our financial advisors; censures; fines; or
a temporary suspension or permanent bar from conducting business. Any of those events could have a material adverse effect on
our business, financial condition and prospects.
The majority of our affiliated financial advisors are independent contractors. Legislative or regulatory action that redefines
the criteria for determining whether a person is an employee or an independent contractor could materially impact our relationships
with our advisors and our business, resulting in an adverse effect on our results of operations.
We are subject to financial holding company regulatory reporting requirements, including the maintenance of certain risk-
based regulatory capital levels that could impact various capital allocation decisions of one or more of our businesses. A failure
to satisfy the risk-based regulatory capital levels could require us to halt certain activities permitted under the Bank Holding
Company Act of 1956. However, due to our strong current capital position, we do not anticipate that these capital level requirements
will have any negative impact on our future business activities. See the section entitled “Business - Regulation” of Item 1 in this
report for additional information.
As a financial holding company, we are regulated by the Fed. RJ Bank is regulated by the OCC, the Fed, the CFPB, and the
FDIC. This oversight includes, but is not limited to, scrutiny with respect to affiliate transactions and compliance with consumer
regulations. The economic and political environment over the past several years has caused increased attention on the regulation
of the financial services industry, including many proposals for new rules. Any new rules issued by U.S. regulators that oversee
the financial services industry could affect us in substantial and unpredictable ways and could have an adverse effect on our
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business, financial condition, and results of operations. We also may be adversely affected as a result of changes in federal, state,
or foreign tax laws, or by changes in the interpretation or enforcement of existing laws and regulations.
The SEC has proposed certain measures that would establish a new framework to replace the requirements of Rule 12b-1
under the 1940 Act, with respect to how mutual funds pay fees to cover the costs of selling and marketing their shares. The staff
of the SEC’s Office of Compliance, Inspections and Examinations has indicated that it is reviewing the use of fund assets to pay
for fees to sub-transfer agents and sub-administrators for services that may be deemed to be distribution-related. Any adoption
of such measures would be phased in over a number of years. As these measures are neither final nor undergoing implementation
throughout the financial services industry, their impact cannot be predicted at this time. As this regulatory trend continues, it could
adversely affect our operations and, in turn, our financial results.
Asset management businesses have experienced a number of highly publicized regulatory inquiries, which have resulted in
increased scrutiny within the industry and new rules and regulations for mutual funds, investment advisors, and broker-dealers.
As some of our wholly owned subsidiaries are registered as investment advisors with the SEC, increased regulatory scrutiny and
rulemaking initiatives may result in augmented operational and compliance costs, or the assessment of significant fines or penalties
against our asset management business, and may otherwise limit our ability to engage in certain activities. It is not possible to
determine the extent of the impact of any new laws, regulations, or initiatives that may be proposed, or whether any of the proposals
will become law. Conformance with any new laws or regulations could make compliance more difficult and expensive and affect
the manner in which we conduct business. For example, pursuant to the Dodd-Frank Act, the SEC was charged with considering
whether broker-dealers should be subject to a standard of care similar to the fiduciary standard applicable to registered investment
advisors. It is not clear whether the SEC will determine that a heightened standard of conduct is appropriate for broker-dealers;
however, any such standard, if mandated, would likely require us to review our product and service offerings and implement
certain changes, as well as require that we incur additional regulatory costs in order to ensure compliance.
In addition, the U.S. and foreign governments have recently taken regulatory actions impacting the investment management
industry, and may continue to take further actions, including expanding current or enacting new standards, requirements and rules
that may be applicable to us and our subsidiaries. For example, several states and municipalities in the United States have recently
adopted “pay-to-play” rules, which could limit our ability to charge advisory fees. Such “pay-to-play” rules could affect the
profitability of that portion of our business. Additionally, the use of “soft dollars,” where a portion of commissions paid to broker-
dealers in connection with the execution of trades also pays for research and other services provided to advisors, is periodically
reexamined and may in the future be limited or modified. A substantial portion of the research relied on by our investment
management business in the investment decision making process is generated internally by our investment analysts and external
research, including external research paid for with soft dollars. This external research generally is used for information gathering
or verification purposes, and includes broker-provided research, as well as third party provided databases and research services.
If the use of soft dollars is limited, we may have to bear some of these additional costs. Furthermore, new regulations regarding
the management of hedge funds and the use of certain investment products may impact our investment management business and
result in increased costs. For example, many regulators around the world adopted disclosure and reporting requirements relating
to the hedge fund businesses or other businesses, and changes to the laws, rules and regulations in the United States related to the
over-the-counter swaps and derivatives markets require additional registration, recordkeeping and reporting obligations.
See the section entitled “Business - Regulation” within Item 1 in this report for additional information regarding our regulatory
environment and Item 7A, “Quantitative and Qualitative Disclosures about Market Risk,” in this report regarding our approaches
to managing regulatory risk. Regulatory actions brought against us may result in judgments, settlements, fines, penalties or other
results adverse to us, which could have a material adverse effect on our business, financial condition or results of operations.
RJ Bank is subject to the Community Reinvestment Act and fair lending laws, and failure to comply with these laws could
lead to penalties.
The CRA, the Equal Credit Opportunity Act, the Fair Housing Act and other U.S. federal fair lending laws and regulations
impose nondiscriminatory lending requirements on financial institutions. The U.S. Department of Justice and other federal agencies,
including the CFPB, are responsible for enforcing these laws and regulations. A successful challenge to an institution’s performance
under the CRA or fair lending laws and regulations could result in a wide variety of sanctions, including the required payment of
damages and civil monetary penalties, injunctive relief, imposition of restrictions on mergers and acquisitions activity and
restrictions on expansion activity. Private parties may also have the ability to challenge an institution’s performance under fair
lending laws by bringing private class action litigation.
Item 1B. UNRESOLVED STAFF COMMENTS
Not applicable.
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Item 2. PROPERTIES
The RJF and RJ Bank corporate headquarters are located on land we own that is located within the Carillon Office Park in
St. Petersburg, Florida. This office complex currently includes buildings which provide approximately 920,000 square feet of
office space. At this location, we also have the necessary rights to add approximately 440,000 square feet of new office space on
our existing parcel. To facilitate certain storage needs, we lease approximately 30,000 square feet of warehouse space near this
headquarters complex.
We conduct employee-based branch office operations in various locations throughout the U.S. and in certain foreign countries.
With the exception of one company-owned RJ&A branch located in Crystal River, Florida, and certain interests in real estate
holdings held under Morgan Properties, LLC which are insignificant in the aggregate, RJ&A branches are leased from third parties
under leases that contain various expiration dates through 2026. Leases for branch offices of RJFS, the independent contractors
of RJ Ltd., and RJIS, are the responsibility of the respective independent contractor financial advisors.
We conduct certain operations from our 88,000 square foot office building located on land we own in Southfield, Michigan.
We operate a 40,000 square foot information technology data center on land we own in the Denver, Colorado area. We also conduct
certain operations in approximately 240,000 square feet of leased office space in the Raymond James Tower located in downtown
Memphis, Tennessee.
RJ Ltd. leases its main office premises in Vancouver, Calgary and Toronto, as well as certain branch offices located throughout
Canada. These leases have various expiration dates through 2026. RJ Ltd. does not own any land or buildings.
During fiscal year 2011, we entered into an agreement to purchase land located in Pasco County, Florida. As of September
30, 2015, the completion of this purchase transaction is subject to the satisfactory resolution of certain permitting matters.
See Note 21 of the Notes to Consolidated Financial Statements in this Form 10-K for further information on our lease
commitments.
Item 3. LEGAL PROCEEDINGS
Pre-Closing Date Morgan Keegan matters (all of which are subject to indemnification by Regions)
In July 2006, MK & Co. and a former MK & Co. analyst were named as defendants in a lawsuit filed by a Canadian insurance
and financial services company, Fairfax Financial Holdings, and its American subsidiary in the Circuit Court of Morris County,
New Jersey. Plaintiffs made claims under a civil Racketeer Influenced and Corrupt Organizations (“RICO”) statute, for commercial
disparagement, tortious interference with contractual relationships, tortious interference with prospective economic advantage
and common law conspiracy. Plaintiffs alleged that defendants engaged in a multi-year conspiracy to publish and disseminate
false and defamatory information about plaintiffs to improperly drive down plaintiff’s stock price, so that others could profit from
short positions. Plaintiffs alleged that defendants’ actions damaged their reputations and harmed their business relationships.
Plaintiffs alleged a number of categories of damages they sustained, including lost insurance business, lost financings and increased
financing costs, increased audit fees and directors and officers insurance premiums and lost acquisitions, and have requested
monetary damages. On May 11, 2012, the trial court ruled that New York law applied to plaintiff’s RICO claims, therefore the
claims were not subject to treble damages. On June 27, 2012, the trial court dismissed plaintiffs’ tortious interference with
prospective relations claim, but allowed other claims to go forward. A jury trial was set to begin on September 10, 2012. Prior to
its commencement the court dismissed the remaining claims with prejudice. Plaintiffs have appealed the court’s rulings.
Certain of the Morgan Keegan entities, along with Regions, have been named in class-action lawsuits filed in federal and
state courts on behalf of shareholders of Regions and investors who purchased shares of certain mutual funds in the Regions
Morgan Keegan Fund complex (the “Regions Funds”). The Regions Funds were formerly managed by Morgan Asset Management
(“MAM”), an entity which was at one time a subsidiary of one of the Morgan Keegan affiliates, but an entity which was not part
of our April 2, 2012 acquisition of Morgan Keegan. The complaints contain various allegations, including claims that the Regions
Funds and the defendants misrepresented or failed to disclose material facts relating to the activities of the funds. In August 2013,
the United States District Court for the Western District of Tennessee approved the settlement of the class action and the derivative
action regarding the closed end funds for $62 million and $6 million, respectively. No class has been certified. Certain of the
shareholders in the funds and other interested parties have entered into arbitration proceedings and individual civil claims, in lieu
of participating in the class action lawsuits.
The SEC and the states of Missouri and Texas are investigating alleged securities law violations by MK & Co. in the
underwriting and sale of certain municipal bonds. An enforcement action was brought by the Missouri Secretary of State in April
30
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Index
2013, seeking monetary penalties and other relief, was dismissed and refiled in November 2013. A Civil action was brought by
institutional investors of the bonds in March 2012, seeking a return of their investment and unspecified compensatory and punitive
damages, which has been resolved. A class action was brought on behalf of retail purchasers of the bonds in September 2012,
seeking unspecified compensatory and punitive damages. In September 2014, the District Court for the Western District of Missouri
granted class certification. The matter was resolved and the settlement approved by the District Court in January 2015. Other
individual investors and investor groups have also filed arbitration claims or separate civil claims, which have been resolved.
Prior to the Closing Date, Morgan Keegan was involved in other litigation arising in the normal course of its business. On
all such matters, RJF is subject to indemnification from Regions pursuant to the terms of the stock purchase agreement.
Indemnification from Regions
Under the terms of RJF’s April 2, 2012 acquisition of Morgan Keegan, Regions has provided indemnification to RJF for losses
it may incur in connection with any legal proceedings pending as of the closing date or commenced after the closing date related
to pre-closing matters. The indemnification for legal proceedings related to pre-closing date activities of Morgan Keegan that
commenced after the closing date and for a three year period that ended on April 2, 2015, are subject to an annual $2 million
indemnification deductible, after which RJF is entitled to receive the full amount of all such losses incurred in excess of $2 million.
All of the pre-Closing Date Morgan Keegan matters described above are subject to such indemnification provisions. See Note 21
of the Notes to Consolidated Financial Statements in this Form 10-K for additional information regarding Morgan Keegan’s pre-
Closing Date legal matter contingencies.
Other matters unrelated to Morgan Keegan
We are a defendant or co-defendant in various lawsuits and arbitrations incidental to our securities business as well as regulatory
investigations and other corporate litigation, matters which are unrelated to the pre-Closing Date activities of Morgan Keegan.
We are contesting the allegations in these matters and believe that there are meritorious defenses in each. In view of the number
and diversity of claims against us, the number of jurisdictions in which litigation is pending and the inherent difficulty of predicting
the outcome of litigation and other claims, we cannot state with certainty what the eventual outcome of pending litigation or other
claims will be. In the opinion of management, based on current available information, review with outside legal counsel, and
consideration of amounts provided for in the accompanying consolidated financial statements with respect to these matters, ultimate
resolution of these matters will not have a material adverse impact on our financial position or cumulative results of operations.
However, resolution of one or more of these matters may have a material effect on the results of operations in any future period,
depending upon the ultimate resolution of those matters and upon the level of income for such period.
See Note 21 of the Notes to Consolidated Financial Statements in this Form 10-K for additional information regarding legal
matter contingencies.
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Index
PART II
Item 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED SHAREHOLDER MATTERS AND ISSUER
PURCHASES OF EQUITY SECURITIES
Our common stock is traded on the NYSE under the symbol “RJF.” As of November 12, 2015, we had 362 holders of record
of our common stock. A substantially greater number of shares of our common stock is held by beneficial owners, whose shares
are held of record by banks, brokers, and other financial institutions. Our transfer agent is Computershare Inc. whose address is
P.O. Box 30170, College Station, TX 77842-3170.
The following table sets forth for the periods indicated the high and low trades for our common stock:
First quarter
Second quarter
Third quarter
Fourth quarter
Fiscal year
2015
2014
High
Low
High
Low
$
$
$
$
58.18
59.77
61.46
61.82
$
$
$
$
48.06
50.97
54.99
48.24
$
$
$
$
52.47
56.31
56.32
56.61
$
$
$
$
40.01
48.13
47.49
48.91
Cash dividends per share of common stock paid during the quarter are reflected below. The dividends were declared during
the quarter preceding their payment.
First quarter
Second quarter
Third quarter
Fourth quarter
Fiscal year
2015
2014
$
$
$
$
0.16
0.18
0.18
0.18
$
$
$
$
0.14
0.16
0.16
0.16
On August 19, 2015, our Board of Directors declared a quarterly dividend of $0.18 in cash per share of common stock which
was paid on October 15, 2015. Additionally, on November 19, 2015, our Board of Directors declared a quarterly dividend of
$0.20 in cash per share of common stock, to be paid January 15, 2016 to shareholders of record on January 4, 2016.
See Note 26 of the Notes to Consolidated Financial Statements in this Form 10-K for information regarding our intentions
for paying cash dividends and the related capital restrictions.
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Index
We purchase our own stock from time to time in conjunction with a number of activities, each of which is described below.
The following table presents information on our purchases of our own stock, on a monthly basis, for the twelve month period
ended September 30, 2015:
Total number of
shares
purchased (1)
Average price
per share
Number of shares
purchased as part
of publicly
announced plans or
programs(2)
Approximate dollar
value (in thousands) at
each month-end, of
securities that may yet
be purchased under the
plans or programs (3)(4)
October 1, 2014 – October 31, 2014
November 1, 2014 – November 30, 2014
December 1, 2014 – December 31, 2014
First quarter
January 1, 2015 – January 31, 2015
February 1, 2015 – February 28, 2015
March 1, 2015 – March 31, 2015
Second quarter
April 1, 2015 – April 30, 2015
May 1, 2015 – May 31, 2015
June 1, 2015 – June 30, 2015
Third quarter
July 1, 2015 – July 31, 2015
August 1, 2015 – August 31, 2015
September 1, 2015 – September 30, 2015
Fourth quarter
Fiscal year total
8,894
107,431
110,756
227,081
26,254
9,789
3,498
39,541
274,000
4,895
3,930
282,825
127
975,315
153,534
1,128,976
1,678,423
$
$
$
$
$
$
$
$
$
53.75
56.23
55.89
55.97
53.90
56.46
57.29
54.84
56.56
58.44
58.12
56.61
59.60
51.08
50.96
51.07
52.75
— $
— $
— $
—
— $
— $
— $
—
— $
— $
— $
—
— $
$
$
962,167
152,338
1,114,505
1,114,505
49,357
49,357
49,357
49,357
49,357
49,357
49,357
150,000
150,000
150,000
100,877
93,112
(1) Of the total for the year ended September 30, 2015, share purchases for the trust fund established to acquire our common stock in the
open market and used to settle restricted stock units granted as a retention vehicle for certain employees of our wholly owned Canadian
subsidiaries amounted to 86,933 shares, for a total consideration of $4.9 million (for more information on this trust fund, see Note 2
and Note 11 of the Notes to Consolidated Financial Statements in this Form 10-K). These activities do not utilize the repurchase
authority discussed in footnotes (3) and (4) below.
We also repurchase shares when employees surrender shares as payment for option exercises or withholding taxes. Of the total for
the year ended September 30, 2015, 476,985 shares were surrendered to us by employees for such purposes, for a total consideration
of $27 million. These activities do not utilize the repurchase authority discussed in footnotes (3) and (4) below.
Of the total for the year ended September 30, 2015, 1,114,505 shares were repurchased pursuant to our securities repurchase
authorization, see footnotes (2) and (3) below for additional information.
(2) During August and September 2015, we purchased shares of our common stock in open market transactions, for a total purchase price
of $56.9 million, which reflects an average purchase price per share of $51.04. These share repurchases were made pursuant to the
RJF securities repurchase authorization described in footnote (3) below.
(3) On May 21, 2015, we announced an increase in the amount previously authorized by our Board of Directors to be used, at the discretion
of our Securities Repurchase Committee, for open market repurchases of our common stock and certain senior notes. Such action
increased the effective available authorization for such repurchases to $150 million subject to cash availability and other factors. After
the effect of the August and September 2015 open market purchases of our common stock described in footnote (2) above, as of
September 30, 2015, $93.1 million remained available for such purpose under the May 21, 2015 authorization.
(4) Subsequent to year-end, on November 19, 2015, we announced an increase in the amount previously authorized by our Board of
Directors to be used, at the discretion of our Securities Repurchase Committee, for open market repurchases of our common stock and
certain senior notes, to $150 million subject to cash availability and other factors.
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Index
Item 6. SELECTED FINANCIAL DATA
2015
Year ended September 30,
2014
(in thousands, except per share data)
2013
2012
2011
Operating results:
Total revenues
Net revenues
Net income attributable to RJF
Net income per share - basic
Net income per share - diluted
Weighted-average common shares outstanding - basic
Weighted-average common and common equivalent
shares outstanding - diluted
Cash dividends per common share - declared
Financial condition:
Total assets
Senior notes maturing within twelve months
Long-term obligations:
Non-current portion of other borrowings
Non-current portion of loans payable of consolidated
variable interest entities (2)
Non-current portion of senior notes payable
Total long-term debt
Equity attributable to Raymond James Financial, Inc.
Shares outstanding (3)
Book value per share at end of year
Tangible book value per share at end of year (a non-
GAAP measure) (4)
$ 5,308,164
$ 5,200,210
502,140
$
3.51
$
3.43
$
142,548
$ 4,965,460
$ 4,861,369
480,248
$
3.41
$
3.32
$
139,935
$ 4,595,798
$ 4,485,427
367,154
$
2.64
$
2.58
$
137,732
$ 3,897,900
$ 3,806,531
295,869
$
2.22
$
2.20
$
130,806
$ 3,399,886
$ 3,334,056
278,353
$
2.20
$
2.19
$
122,448
145,939
0.72
$
143,589
0.64
$
140,541
0.56
$
131,791
0.52
$
122,836
0.52
$
$ 26,479,684
249,946
$
$ 23,325,652
—
$
$ 23,186,122
$
— $
$ 21,160,265
$ 18,006,995
—
— $
$
583,740
(1)
$
537,932
(1)
$
47,132
$
173,918
$
12,597
899,276
$
$ 1,495,613
$ 4,522,031
142,751
31.68
$
$
25,928
$ 1,149,034
$ 1,712,894
$ 4,141,236
140,836
29.40
$
$
43,877
$ 1,148,846
$ 1,239,855
$ 3,662,924
138,750
26.40
$
$
62,938
$ 1,148,658
$ 1,385,514
$ 3,268,940
136,076
24.02
$
$
$
$
$
52,622
78,650
549,505
680,777
$ 2,587,619
123,273
20.99
$
$
29.17
$
26.98
$
23.86
$
21.42
$
20.45
(1) At September 30, 2015 and 2014, the outstanding balances were primarily comprised of borrowings from the Federal Home Loan
Bank (“FHLB”) by RJ Bank and mortgage notes payable on our corporate headquarters offices.
(2) Loans payable of consolidated variable interest entities (“VIE”) are non-recourse to us.
(3) Excludes non-vested shares.
(4) This non-GAAP measure is computed by dividing equity attributable to Raymond James Financial, Inc., less goodwill and net
identifiable intangible assets, offset by their related deferred tax balances (which are $19 million, $13 million, $9 million, $8 million
and $6 million as of September 30, 2015, 2014, 2013, 2012 and 2011 respectively), by the number of shares outstanding. Management
believes tangible book value per share is a measure that is useful to assess capital strength and that the GAAP and non-GAAP measures
should be considered together.
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Index
Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The following Management’s Discussion and Analysis (“MD&A”) is intended to help the reader understand the results of
our operations and financial condition. MD&A is provided as a supplement to, and should be read in conjunction with, our
consolidated financial statements and accompanying notes to consolidated financial statements. Where “NM” is used in various
percentage change computations, the computed percentage change has been determined not to be meaningful.
Executive overview
We operate as a financial services and bank holding company. Results in the businesses in which we operate are highly
correlated to the general overall strength of economic conditions and, more specifically, to the direction of the U.S. equity and
fixed income markets, the corporate and mortgage lending markets and commercial and residential credit trends. Overall market
conditions, interest rates, economic, political and regulatory trends, and industry competition are among the factors which could
affect us and which are unpredictable and beyond our control. These factors affect the financial decisions made by market
participants which include investors, borrowers, and competitors, impacting their level of participation in the financial markets.
These factors also impact the level of public offerings, trading profits, interest rate volatility and asset valuations, or a combination
thereof. In turn, these decisions and factors affect our business results.
Year ended September 30, 2015 compared with the year ended September 30, 2014
For the sixth consecutive year we achieved record net revenues for the fiscal year, $5.2 billion in fiscal year 2015, a $339
million, or 7%, increase compared to the prior year. All four operating segments achieved record levels of net revenues. Total
client assets under administration increased to $480 billion at September 30, 2015, a 1% increase over the prior year level. The
increase in assets under administration is attributable to strong financial advisor recruiting results and high levels of retention of
our existing financial advisors, which more than offset the decline in the U.S. equity markets for the year (primarily occurring in
our fourth fiscal quarter).
We also achieved a record level of net income of $502 million, an increase of $22 million, or 5%, compared to the prior year.
Three of our four operating segments achieved record levels of profitability. Fully diluted earnings per share of $3.43 increased
$0.11, or 3%, over the prior year amount.
Non-interest expenses increased $278 million, or 7%, compared to the prior year. The increase is primarily due to the increase
in compensation, commissions and benefits expenses associated with the increased revenues. In addition, as a result of various
growth strategies across our businesses, we experienced an increase in our business development expenses. Our strategic efforts
during the year to continually improve the technology available to our financial advisors, as well as the additional costs of compliance
with various new rules and regulations impacting our industry, are factors impacting an increase in our communications and
information processing expenses. The provision for loan losses increased significantly year over year, as the prior year benefited
to a greater extent than the current year, from improved credit characteristics of the loan portfolio. The combination of the above
noted factors, even after consideration of the incremental expenses resulting from activities associated with the strategic growth
initiatives that should favorably impact future revenues, resulted in a pre-tax margin on net revenues of 15.3%, a level that is
nearly equivalent to the 15.4% pre-tax margin on net revenues in the prior year.
A summary of the most significant items impacting our financial results as compared to the prior year are as follows:
• Our Private Client Group segment generated record net revenues of $3.5 billion, a $228 million, or 7%, increase over
the prior year. Pre-tax income also established a record at $342 million, a $12 million, or 4%, increase over the prior
year. The increase in revenues is primarily attributable to increased securities commissions and fee revenues,
predominately arising from fee-based accounts, as well as an increase in mutual fund and annuity service fee revenues.
Client assets under administration of the Private Client Group increased 1% over the prior year level, to $453.3 billion
at September 30, 2015. The increase in commission revenues and client assets have resulted primarily from successful
recruiting of financial advisors, and high levels of financial advisor retention. We had our second best financial advisor
recruiting year ever in fiscal year 2015 with a net increase of 331 financial advisors over the year to 6,596 affiliated
financial advisors as of September 30, 2015. There was an overall net increase in client assets despite the impact of the
decline in the market value of assets that occurred during the fourth quarter of fiscal year 2015 as a result of declining
equity market conditions. Commission expenses increased in proportion to the increase in commission revenues while
all other components of non-interest expense increased 5% as we incurred increases in certain costs associated with the
successful recruiting efforts and continued information system improvements. On July 31, 2015, we completed our
35
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Index
acquisition of The Producers Choice, LLC (“TPC”), a private insurance and annuity marketing organization based in
Troy, Michigan. Our acquisition of TPC brings more life insurance and annuity experts to the firm to support financial
advisors and their clients.
• The Capital Markets segment generated record net revenues of $960 million, a $7 million, or 1%, increase over the prior
year. Pre-tax income was $107 million, a decrease of $24 million, or 18%, compared to the prior year. Fiscal year 2015
reflected new record levels of merger and acquisition fees and tax credit fund syndication fees. Commission revenues
from fixed income institutional sales increased over the prior year level, resulting in part from growth in our public finance
activities. However, equity underwriting revenues declined compared to the prior year as a result of weakness in both
the energy and real estate sectors, which also led to a decline in commission revenues on equity products. The net profit
generated by this segment was negatively impacted by increased costs, some of which result from our efforts during the
year to broadly build out certain sector capabilities and to increase investment banking coverage in certain sectors, which
we believe present solid long-term opportunities for future revenue growth. The continued difficult market environment
in Canada negatively impacted this segment’s revenues and profitability.
• Our Asset Management segment generated record net revenues of $392 million, a $23 million, or 6%, increase over the
prior year. Pre-tax income was a record $135 million, a $7 million, or 5%, increase over the prior year. Financial assets
under management increased 1% from the prior year, to $65.2 billion as of September 30, 2015. The increase resulted
from net inflows of client assets, which more than offset the unfavorable impact of the decline in the market value of
assets that occurred during the fourth quarter of fiscal year 2015 as a result of declining equity market conditions. On
April 30, 2015, we completed our acquisition of Cougar Global Investments Limited (“Cougar”), an asset management
firm based in Toronto, Canada that markets its investment services to high net worth individuals, families, foundations,
trusts and institutions in Canada and the United States.
• RJ Bank generated record net revenues of $414 million, a $63 million, or 18%, increase over the prior year. Pre-tax
income was a record $279 million, a $36 million, or 15% increase, over the prior year. Net interest income increased
due to growth in average loans outstanding, coupled with a modest increase in net interest margin. Our provision for
loan losses increased $10 million, or 74% compared to the prior year. We incurred substantial provision for loan losses
associated with loan growth in both years, however the majority of the year-over-year increase resulted from the prior
year benefiting to a greater extent than the current year, from improved credit characteristics of the loan portfolio. The
credit characteristics of the loan portfolio generally improved over the year, reflecting the positive impact of improved
economic conditions.
• Activities in our Other segment resulted in a pre-tax loss that was $19 million less than the prior year. Net revenues in
this segment increased $25 million, resulting from increases in revenues associated with our private equity portfolio
investments, and an increase in gains resulting from our auction rate securities portfolio sales and redemption activities.
As a result of the increase in private equity investment revenues, the portion of this segment’s pre-tax income that is
attributable to noncontrolling interests also increased.
• Our fiscal year 2015 effective tax rate was 37.1%, up from the 35.8% in the prior year. As a result of the fiscal year 2015
decline in equity market values compared to positive markets in fiscal year 2014, the change in the amount of our non-
taxable gains/losses arising from the value of our company-owned life insurance portfolio had the effect of increasing
our effective tax rate by 1.2% compared to the prior year effective tax rate.
Consistent with our growth strategies, we completed two acquisitions during the year, Cougar and TPC. We continue to
evaluate future opportunities, but remain committed to our strategy that our acquisitions must meet our strategic growth objectives,
involve entities that share our culture of conservatism and “client-first” values, and be executed at purchase prices that provide
us opportunities to increase our shareholders’ value.
During the year we implemented the new Basel III regulatory capital rules, a change which did not have a significant impact
on our regulatory capital ratios. We have published the results of the 2015 Dodd-Frank Act mandated Stress Test, the results of
which indicated that both RJF and RJ Bank have sufficient capital to successfully navigate a severe and prolonged economic
downturn while still maintaining capital levels that exceed both regulatory requirements and higher management thresholds
throughout the course of the Severely Adverse Scenario.
The volume of possible regulatory changes that impact the businesses in which we operate continues to grow and evolve.
Regulatory rule-making activities that have arisen during the year include the DOL proposed rule enhancing standards for
individuals providing investment advice to retirement plans, their participants, or beneficiaries. We are continuing our study and
evaluation of the proposal. The total impact of the standard, once finalized and implemented, on our business is unknown at this
36
7146_10K.pdf December 22, 2015 pg 39
Index
time. We continue to monitor the impact of proposed future legislation while implementing new regulations. We presently do
not expect currently enacted legislation to have a significant adverse direct impact on our operations as a whole, however, we
continue to evaluate the specific impacts of each.
Year ended September 30, 2014 compared with the year ended September 30, 2013
We achieved record net revenues of $4.9 billion in fiscal year 2014, a $376 million or 8%, increase compared to the prior
year. The increase generated by our on-going operations is even greater than that amount after factoring in the $74 million of
revenue reflected in fiscal year 2013 that was associated with a private equity investment we sold in that year. All four operating
segments achieved record levels of net revenues. Total client assets under administration increased to $475 billion at September 30,
2014, a 12% increase over the prior year level.
We also achieved a record level of net income in fiscal year 2014, to $480 million, an increase of $113 million, or 31%,
compared to the prior year. Three of our four operating segments achieved record levels of profitability. Fully diluted earnings
per share of $3.32 in fiscal year 2014 increased $0.74, or 29%, over the fiscal year 2013 amount. After excluding the acquisition
related and other non-recurring expenses we incurred in fiscal year 2013, our adjusted net income in fiscal year 2014 increased
$61 million, or 15%, compared to fiscal year 2013 (a non-GAAP measure).(1) The increase in net income in fiscal year 2014 over
the prior year level is even more significant given that the fiscal year 2013 net income included $14 million (after the attribution
to noncontrolling interests) arising from our indirect investment in Albion Medical Holdings, Inc. (“Albion”), a private equity
holding which was sold during fiscal year 2013.
Non-interest expenses increased $254 million in fiscal year 2014, or 7%, compared to the prior year. The increase in fiscal
year 2014 is primarily due to the increase in compensation, commissions and benefits expenses which were partially offset by the
decrease in acquisition related expenses. Acquisition and integration related expenses in fiscal year 2014 were no longer material
for separate reporting since our integration of Morgan Keegan was substantially complete as of September 30, 2013. The
combination of increasing net revenues and overall expense control in fiscal year 2014 helped us achieve a 15.4% pre-tax margin
on net revenues.
A summary of the most significant items impacting our financial results in fiscal year 2014 as compared to the prior year are
as follows:
• Our Private Client Group segment generated record net revenues of $3.3 billion in fiscal year 2014, a 12% increase, while
pre-tax income increased $100 million, or 43%, to a record $330 million. The increase in revenues is primarily attributable
to increased securities commissions and fee revenues, predominately arising from fee-based accounts, as well as an
increase in mutual fund and annuity service fee revenues. Commission expenses increased in proportion to the increase
in corresponding commission revenues while all other components of non-interest expense increased by 3%. Client
assets under administration of the Private Client Group increased 12% over the prior year level, to $450.6 billion at
September 30, 2014. Net inflows of client assets in fiscal year 2014 were positively impacted by successful recruiting
of financial advisors, among other favorable factors.
• The Capital Markets segment generated record net revenues of $953 million in fiscal year 2014, a 3% increase, while
pre-tax income increased $28 million, or 28%, to a record $131 million. Increases in trading profits, merger and acquisition
fee revenues, equity underwriting fee revenues and institutional sales commissions on equity products more than offset
a decline in institutional sales commissions on fixed income products. The decline in institutional fixed income commission
revenues results from challenging fixed income market conditions during fiscal year 2014 due to economic uncertainty,
historically low interest rates, relatively low volatility of benchmark interest rates, and decreased customer trading
volumes.
• Our Asset Management segment generated record net revenues of $370 million in fiscal year 2014, a 26% increase, while
pre-tax income increased $32 million, or 33%, to a record $128 million. Financial assets under management increased
15% from the prior year, to $64.6 billion as of September 30, 2014. Both strong net inflows of client assets and market
appreciation contributed to the increase. We also earned nearly $10 million in performance fees in fiscal year 2014
(compared to nearly $2 million in the prior year) as a result of positive net performance from certain of our managed
funds (a portion of which are attributable to noncontrolling interests), which contributed to the increase in revenues and
pre-tax income.
(1) Refer to the discussion and reconciliation of the GAAP results to the non-GAAP results in the “Reconciliation of the GAAP results to
the non-GAAP measures” section of this MD&A.
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Index
• RJ Bank generated record net revenues of $352 million in fiscal year 2014, a 1% increase, while pre-tax income decreased
$25 million, or 9%, to $243 million. Net interest income increased due to growth in average loans outstanding, offset in
large part by a lower net interest margin. The provision for loan losses increased in fiscal year 2014 primarily as the
result of significant loan portfolio growth, partially offset by decreases resulting from improved credit characteristics of
the loan portfolio reflecting the positive impact from improved economic conditions. Non-interest expenses (excluding
the provision for loan losses) increased $19 million.
• Activities in our Other segment resulted in a pre-tax loss that is $48 million less in fiscal year 2014 than the prior year.
Our non-interest expenses decreased substantially as we are no longer incurring acquisition and integration related costs
since our integration of Morgan Keegan was substantially complete as of September 30, 2013. In addition, fiscal year
2013 included significant revenues and pre-tax income associated with our indirect investment in Albion, which was sold
in April 2013, thus having a significant impact on comparisons to the prior year.
• Our fiscal year 2014 effective tax rate was 35.8%, up from the 34.9% in fiscal year 2013. Our fiscal year 2013 effective
tax rate included a nonrecurring tax benefit resulting from a change in management’s repatriation strategy of certain
foreign earnings. Both years included significant non-taxable gains in the value of our company-owned life insurance
portfolio.
Segments
The following table presents our consolidated and segment gross revenues, net revenues and pre-tax income (loss), the latter
excluding noncontrolling interests, for the years indicated:
2015
2014
Year ended September 30,
% change
($ in thousands)
2013
% change
Total company
Revenues
Net revenues
Pre-tax income excluding noncontrolling interests
$
$
5,308,164
5,200,210
798,174
4,965,460
4,861,369
748,045
7 % $
7 %
7 %
4,595,798
4,485,427
564,187
Private Client Group
Revenues
Net revenues
Pre-tax income
Capital Markets
Revenues
Net revenues
Pre-tax income
Asset Management
Revenues
Net revenues
Pre-tax income
RJ Bank
Revenues
Net revenues
Pre-tax income
Other
Revenues
Net revenues
Pre-tax loss
Intersegment eliminations
Revenues
Net revenues
7146_10K.pdf December 22, 2015 pg 41
3,519,558
3,507,806
342,243
3,289,503
3,279,883
330,278
975,064
960,035
107,009
392,378
392,301
135,050
425,988
414,295
278,721
968,635
953,215
130,565
369,690
369,666
128,286
360,317
351,770
242,834
66,967
(10,198)
(64,849)
42,203
(35,253)
(83,918)
7 %
7 %
4 %
1 %
1 %
(18)%
6 %
6 %
5 %
18 %
18 %
15 %
59 %
71 %
23 %
2,930,603
2,918,978
230,315
945,477
927,408
102,171
292,817
292,809
96,300
356,130
346,906
267,714
126,401
45,923
(132,313)
(71,791)
(64,029)
(64,888)
(57,912)
(11)%
(11)%
(55,630)
(46,597)
38
8 %
8 %
33 %
12 %
12 %
43 %
2 %
3 %
28 %
26 %
26 %
33 %
1 %
1 %
(9)%
(67)%
(177)%
37 %
(17)%
(24)%
Index
Reconciliation of the GAAP results to the non-GAAP measures
We believe that the non-GAAP measures provide useful information by excluding material items that may not be indicative
of our core operating results and that the GAAP and the non-GAAP measures should be considered together. There are no non-
GAAP adjustments in either of the fiscal years ended September 30, 2015 or 2014, as we do not separately report acquisition and
integration related costs in those years given that our integration of Morgan Keegan was substantially complete as of September
30, 2013. The non-GAAP adjustments in fiscal year 2013 were comprised of the acquisition and integration costs incurred during
that fiscal year (primarily associated with the Morgan Keegan acquisition) as well as certain other non-recurring expenses, net of
applicable taxes. Refer to the footnotes to the following table for further explanation of each fiscal year 2013 non-recurring item.
The following table provides a reconciliation of the fiscal year 2013 GAAP basis to the non-GAAP measures:
Net income attributable to RJF, Inc. - GAAP basis
Non-GAAP adjustments:
Acquisition related expenses (1)
RJF’s share of RJES goodwill impairment expense (2)
RJES restructuring expense (3)
Pre-tax non-GAAP adjustments
Tax effect of non-GAAP adjustments (4)
Adjusted net income attributable to RJF, Inc. - Non-GAAP basis
Non-GAAP earnings per common share:
Non-GAAP basic
Non-GAAP diluted
Average equity - GAAP basis (5)
Average equity - non-GAAP basis (6)
Return on equity
Return on equity - non-GAAP basis (7)
Year ended
September 30, 2013
($ in thousands,
except per share
amounts)
$
$
$
$
$
$
367,154
73,454
4,564
1,902
79,920
(27,908)
419,166
3.01
2.95
3,465,323
3,483,531
10.6%
12.0%
(1) The non-GAAP adjustment adds back to pre-tax income acquisition and integration expenses that were incurred during the fiscal year.
(2) The non-GAAP adjustment adds back to pre-tax income RJF’s share of the total goodwill impairment expense associated with our
Raymond James European Securities, Inc. (“RJES”) reporting unit.
(3) The non-GAAP adjustment adds back to pre-tax income restructuring expenses associated with our RJES operations.
(4) The non-GAAP adjustment reduces net income for the income tax effect of all the pre-tax non-GAAP adjustments, utilizing the effective
tax rate applicable in the fiscal year.
(5) Computed by adding the total equity attributable to RJF, Inc. as of each quarter-end date during the fiscal year, plus the beginning of
the year total, divided by five.
(6) The calculation of non-GAAP average equity includes the impact on equity of the non-GAAP adjustments described in the table above.
(7) Computed by utilizing the adjusted net income attributable to RJF, Inc.-non-GAAP basis and the average equity-non-GAAP basis.
See footnotes (5) and (6) above for the calculation of average equity-non-GAAP basis.
39
7146_10K.pdf December 22, 2015 pg 42
Index
Net interest analysis
We have certain assets and liabilities, primarily held in our PCG and RJ Bank segments, which are subject to changes in
interest rates, and would have a meaningful impact on our overall financial performance in the event of a change in short-term
interest rates. A gradual increase in short-term interest rates would have the most significant favorable impact on our PCG and RJ
Bank segments (refer to the table in Item 7A - Interest Rate Risk in this report, which presents an analysis of RJ Bank’s estimated
net interest income over a 12 month period based on instantaneous shifts in interest rates using the asset/liability model applied
by RJ Bank).
Based upon our analysis performed as of September 30, 2015, we estimate that a 100 basis point instantaneous rise in short-
term interest rates would result in an increase in our pre-tax income of approximately $150 million over the subsequent twelve
month period. Approximately 55% of such an increase would be reflected in account and service fee revenues (resulting from an
increase in the fees generated from unaffiliated banks in lieu of interest income from client cash balances in our multi-bank sweep
program and the discontinuance of money market fund fee waivers) which are reported in the PCG segment, and the remaining
portion of the increase would be reflected in net interest income reported primarily in our PCG and RJ Bank segments. This
estimate is based on static balances as of September 30, 2015 and a conservative assumption related to interest credited to our
clients on their cash balances in such an interest rate environment. The actual amount of any increase we would realize in the
future will ultimately be based on a number of factors including, but not limited to, the actual change in balances, the rapidity and
magnitude of the increase in interest rates, the competitive landscape at such time, and the returns on comparable investments, all
of which will factor into the interest rates we pay on client cash balances. The great majority of the benefit to pre-tax income
from an increase in short-term interest rates would be expected to arise from the first 100 basis point increase, as we presume any
further increases in short-term interest rates would be passed along to clients through our various cash sweep programs, and thus
such additional interest revenues and interest sensitive fees would be offset by increases of similar amounts in our interest expense.
40
7146_10K.pdf December 22, 2015 pg 43
Index
The following table presents our consolidated average interest-earning asset and liability balances, interest income and expense
balances, and the average yield/cost, for the years indicated:
2015
Average
balance(1)
Interest
inc./exp.
Average
yield/
cost
Year ended September 30,
2014
2013
Average
balance(1)
Interest
inc./exp.
($ in thousands)
Average
yield/
cost
Average
balance(1)
Interest
inc./exp.
Average
yield/
cost
Interest-earning assets:
Margin balances
$ 1,805,312
$ 67,573
3.74% $ 1,764,305
$ 68,454
3.88% $ 1,775,251
$ 60,931
3.43%
Assets segregated
pursuant to
regulations and
other segregated
assets
Bank loans, net of
unearned income (2)
Available for sale
securities
Trading
instruments(3)
Stock loan
Loans to financial
advisors (3)
Corporate cash and
all other (3)
Total
2,498,357
13,792
0.55%
2,783,598
15,441
0.55%
3,554,917
17,251
0.49%
12,129,531
405,578
3.34% 10,048,719
343,942
3.39%
8,605,013
335,964
3.86%
508,223
5,100
1.00%
648,515
6,560
1.01%
739,976
8,005
1.08%
716,409
433,642
19,450
12,036
2.71%
2.78%
630,295
423,466
17,883
8,731
2.84%
2.06%
742,991
349,285
20,089
8,271
2.70%
2.37%
457,797
7,056
1.54%
413,600
6,427
1.55%
421,645
6,510
1.54%
2,917,208
12,622
0.43%
3,396,796
13,448
0.40%
3,178,925
16,578
$ 21,466,479
$543,207
2.53% $ 20,109,294
$480,886
2.39% $ 19,368,003
$473,599
0.52%
2.45%
0.04%
0.10%
1.49%
1.72%
1.31%
6.63%
5.63%
2.60%
0.68%
Interest-bearing liabilities:
Brokerage client
liabilities
Bank deposits (2)
Trading instruments
sold but not yet
purchased (3)
Stock borrow
Borrowed funds
Senior notes
Loans payable of
consolidated
variable interest
entities (3)
Other (3)
Total
$ 3,693,928
11,199,242
294,256
135,027
721,296
940
8,382
4,503
5,237
6,079
1,149,136
76,088
0.03% $ 3,967,811
$
1,269
0.03% $ 4,866,091
$
2,049
0.08% 10,119,433
7,959
0.09%
9,133,260
9,032
1.53%
3.88%
0.84%
6.62%
243,737
114,404
485,594
4,327
2,869
3,939
1,148,947
76,038
1.78%
2.51%
0.81%
6.62%
241,334
125,507
361,317
3,595
2,158
4,724
1,148,759
76,113
33,225
271,476
1,879
4,846
5.66%
1.79%
51,518
319,328
2,900
4,790
5.63%
1.50%
70,325
336,226
3,959
8,741
$ 17,497,586
$107,954
0.62% $ 16,450,772
$104,091
0.63% $ 16,282,819
$110,371
Net interest income
$435,253
$376,795
$363,228
(1) Represents average daily balance, unless otherwise noted.
(2) See Results of Operations – RJ Bank in this MD&A for further information.
(3) Average balance is calculated based on the average of the end of month balances for each month within the period.
41
7146_10K.pdf December 22, 2015 pg 44
Index
Year ended September 30, 2015 compared with the year ended September 30, 2014 – Net Interest Analysis
Net interest income increased $58 million, or 16%, compared to the prior year. Net interest income is earned primarily by our
RJ Bank and PCG segments, which are discussed separately below.
The RJ Bank segment’s net interest income increased $57 million, or 16%, primarily as a result of an increase in average
loans outstanding as well as a modest increase in net interest margin. Refer to the discussion of the specific components of RJ
Bank’s net interest income in the RJ Bank section of this MD&A.
Net interest income in the PCG segment was nearly unchanged compared to the prior year. A decrease in net interest income
arising from our broker-dealer margin lending activities, where a decline in margin interest rates more than offset the impact of
slightly higher average client margin balances outstanding, was nearly offset by an increase in net interest revenue arising from
our securities lending activities.
Net interest income arising from our securities lending activities increased $1 million, or 16%, due primarily to an increase
in interest income associated with hard-to-borrow securities in our Box lending program. These revenues increased $3 million
due to our ability to lend these securities at a premium. The increase in revenues was offset by a $2 million increase in interest
expense associated with our stock borrow activities, as a result of additional expense associated with borrowing hard-to-borrow
securities.
Interest income earned on the available for sale securities portfolio held in our RJ Bank and Other segments decreased $1
million, or 22%, due to lower average investment balances and a slight decrease in yields on the portfolio. The decrease in average
balances outstanding is the result of sales and redemptions within the portfolio during the year (see Note 7 of our Notes to
Consolidated Financial Statements in this Form 10-K for additional information on our available for sale securities).
Interest income earned on our trading instruments held in the Capital Markets segment increased $2 million, or 9%, due to
slightly higher average trading security inventory levels, partially offset by the impact of lower yields (see Note 6 of our Notes to
Consolidated Financial Statements in this Form 10-K for additional information on our trading instruments).
Year ended September 30, 2014 compared with the year ended September 30, 2013 – Net Interest Analysis
Net interest income increased $14 million, or 4%, in fiscal year 2014 compared to the prior year.
Net interest income in the PCG segment in fiscal year 2014 increased $4 million, or 5%, compared to the prior year primarily
resulting from the increase in margin interest rates we implemented as of October 1, 2013, offset by a slight decrease in average
client margin balances outstanding.
The RJ Bank segment’s net interest income in fiscal year 2014 increased $8 million, or 2%, compared to the prior year primarily
as a result of an increase in loans outstanding offset by a decrease in net interest margin. Refer to the discussion of the specific
components of RJ Bank’s net interest income in the RJ Bank section of this MD&A.
Interest income earned on the available for sale securities portfolio in fiscal year 2014 decreased $1 million, or 18%, from
the prior year due to lower investment balances primarily resulting from sales and redemptions within the portfolio, and a slight
decrease in yields (see Note 7 of our Notes to Consolidated Financial Statements in this Form 10-K for additional information on
our available for sale securities).
Interest income earned on our trading instruments in fiscal year 2014 decreased $2 million, or 11%, compared to the prior
year due to lower average trading security inventory levels (see Note 6 of our Notes to Consolidated Financial Statements in this
Form 10-K for additional information on our trading instruments).
42
7146_10K.pdf December 22, 2015 pg 45
Index
Results of Operations – Private Client Group
The following table presents consolidated financial information for our PCG segment for the years indicated:
Revenues:
Securities commissions and fees:
Equities
Fixed income products
Mutual funds
Fee-based accounts
Insurance and annuity products
New issue sales credits
Sub-total securities commissions and fees
Interest
Account and service fees:
Client account and service fees
Mutual fund and annuity service fees
Client transaction fees
Correspondent clearing fees
Account and service fees – all other
Sub-total account and service fees
Other
Total revenues
Interest expense
Net revenues
$
2015
270,435
74,448
680,375
1,472,877
363,352
75,015
2,936,502
100,594
176,175
249,232
18,971
2,401
284
447,063
35,399
3,519,558
% change
Year ended September 30,
2014
($ in thousands)
% change
(9)% $
(5)%
—
17 %
2 %
(15)%
6 %
1 %
9 %
17 %
11 %
(21)%
(3)%
13 %
(5)%
7 %
297,535
78,082
678,577
1,261,267
354,629
88,341
2,758,431
99,147
162,057
212,342
17,124
3,022
293
394,838
37,087
3,289,503
3 % $
(21)%
9 %
24 %
5 %
(3)%
12 %
2 %
—
26 %
1 %
(1)%
4 %
13 %
35 %
12 %
2013
289,395
98,994
621,459
1,016,340
338,666
90,747
2,455,601
96,926
162,283
168,055
16,932
3,059
282
350,611
27,465
2,930,603
(11,752)
3,507,806
22 %
7 %
(9,620)
3,279,883
(17)%
12 %
(11,625)
2,918,978
Non-interest expenses:
Sales commissions
Admin & incentive compensation and benefit costs
Communications and information processing
Occupancy and equipment
Business development
Clearance and other
Total non-interest expenses
Pre-tax income
2,169,823
552,762
157,729
121,115
92,473
71,661
3,165,563
342,243
$
8 %
7 %
3 %
2 %
14 %
(5)%
7 %
4 % $
2,002,831
518,489
153,076
118,503
80,950
75,756
2,949,605
330,278
13 %
2 %
(6)%
4 %
23 %
4 %
10 %
43 % $
1,765,933
507,629
163,125
113,573
65,679
72,724
2,688,663
230,315
Margin on net revenues
9.8%
10.1%
7.9%
The success of the PCG segment is dependent upon the quality of our products, services, financial advisors and support
personnel including our ability to attract, retain and motivate a sufficient number of these associates. We face competition for
qualified associates from major financial services companies, including other brokerage firms, insurance companies, banking
institutions and discount brokerage firms.
Revenues of the PCG segment are correlated with total PCG client assets under administration, which include assets in fee-
based accounts, and the overall U.S. equities markets. RJ&A advisors operate under the RJ&A registered investment advisor
(“RIA”) license while independent contractors affiliated with RJFS may operate either under their own RIA license, or the RIA
license of RJFSA. The investment advisory fee revenues associated with these activities are recorded within securities commissions
and fee revenues on our consolidated financial statements. Refer to the securities commissions and fees section of our summary
of significant accounting policies in Note 2 of the Notes to Consolidated Financial Statements in this Form 10-K for our accounting
policies on presenting these revenues in our consolidated financial statements.
Net interest revenue in the Private Client Group is generated by client balances, predominantly the earnings on margin loans
and assets segregated pursuant to regulations, less interest paid on client cash balances (the “Client Interest Program”). We also
utilize a multi-bank sweep program which generates fee revenue from unaffiliated banks in lieu of interest revenue. The cash
sweep program, known as the Raymond James Bank Deposit Program (“RJBDP”), is a multi-bank (RJ Bank and several non-
43
7146_10K.pdf December 22, 2015 pg 46
Index
affiliated banks) program under which clients’ cash deposits in their brokerage accounts are re-deposited into interest-bearing
deposit accounts (up to $250,000 per bank for individual accounts and up to $500,000 per bank for joint accounts) at various third
party banks. This program enables clients to obtain up to $2.5 million in individual FDIC deposit insurance coverage ($5 million
for joint accounts) while earning competitive rates for their cash balances.
Clients’ transactions in securities are affected on either a cash or margin basis. Margin loans to clients are collateralized by
the securities purchased or by other securities owned by the client. Interest is charged to clients on the amount borrowed. The
interest rate charged to a client on a margin loan is based on current interest rates and on the outstanding amount of the loan.
Typically, broker-dealers utilize bank borrowings and equity capital as the primary sources of funds to finance clients’ margin
account borrowings. RJ&A’s source of funds to finance clients’ margin account balances has been cash balances in brokerage
clients’ accounts, which are funds awaiting investment. In addition, pursuant to written agreements with clients, broker-dealers
are permitted by the SEC and FINRA rules to lend client securities in margin accounts to other financial institutions. SEC regulations,
however, restrict the use of clients’ funds derived from pledging and lending clients’ securities, as well as funds awaiting investment,
to the financing of margin account balances; to the extent not so used, such funds are required to be deposited in a special segregated
account for the benefit of clients. The regulations also require broker-dealers, within designated periods of time, to obtain possession
or control of, and to segregate, clients’ fully paid and excess margin securities.
No single client accounts for a material percentage of this segment’s total business.
PCG client asset balances are as follows as of the dates indicated:
As of September 30,
Total PCG assets under administration
PCG assets in fee-based accounts
$
$
453.3
179.4
2015
% change
2014
($ in billions)
450.6
167.7
1% $
7% $
% change
2013
12% $
20% $
402.6
139.9
Total PCG assets under administration increased 1% over September 30, 2014 as a result of net client inflows as equity markets
reflect a slight decline at September 30, 2015 compared to the prior year. Total PCG assets in fee-based accounts increased 7%
compared to September 30, 2014. Increased client assets under administration typically result in higher fee-based account revenues
and mutual fund and annuity service fees. In periods where equity markets improve, assets under administration increase and
generally, client activity increases, thereby having a favorable impact on financial advisor productivity. Generally, assets under
administration, client activity, and financial advisor productivity decline in periods where equity markets reflect downward trends.
Higher client cash balances generally lead to increased interest income and account fee revenues, depending upon spreads realized
in our Client Interest Program and RJBDP.
The following table presents a summary of PCG financial advisors and the total number of PCG branch locations as of the
periods indicated:
RJ&A
RJFS
RJ Ltd.
RJIS
Total financial advisors
Total branch locations
Employees
Independent
contractors
September 30, 2015
total
September 30, 2014
total
September 30, 2013
total
2,571
—
167
—
2,738
—
3,544
216
98
3,858
2,571
3,544
383
98
6,596
2,702
2,462
3,329
391
83
6,265
2,569
2,443
3,275
406
73
6,197
2,518
The number of financial advisors as of September 30, 2015 reflects a net increase of 331 individuals, or a 5% net increase,
over the number of financial advisors as of September 30, 2014. Importantly, the client asset levels and productivity measures
associated with those financial advisors recruited during the fiscal year exceed our historical benchmark averages.
Nothwithstanding the future impact of changes in the overall economy and more specifically their impact on future equity markets
and fixed income markets, factors which we have no control, we believe that this increase in productive financial advisors is a
positive indication of potential future revenue growth in this segment.
44
7146_10K.pdf December 22, 2015 pg 47
Index
Year ended September 30, 2015 compared with the year ended September 30, 2014 – Private Client Group
Net revenues increased $228 million, or 7%, to a record $3.5 billion while pre-tax income increased $12 million, or 4%, to
a record $342 million. PCG’s pre-tax margin on net revenues decreased slightly to 9.8% as compared to 10.1% in fiscal year
2014.
Securities commissions and fees increased $178 million, or 6%. Client assets under administration increased to $453.3 billion,
an increase of $2.7 billion, or 1%, compared to September 30, 2014. The year over year increase in client assets was driven by
positive net inflows generated by financial advisor retention and recruiting results, as the equity markets in the U.S. were down
compared to the prior year. The most significant increase in these revenues arose from revenues earned on fee-based accounts,
which increased $212 million, or 17%, and was partially offset by a $27 million, or 9%, decrease in commissions on equity
products, a $13 million, or 15%, decrease in new issue sales credits due to a decrease in equity underwritings, and a $4 million,
or 5%, decrease in commissions on fixed income products. Fiscal year 2015 includes a $7 million decrease in mutual fund
commission revenues due to the resolution of a mutual fund share class issue that resulted in refunds of commissions being paid
during the year to certain of our clients. Despite this unusual item, mutual fund commission revenues still increased $2 million.
Commission revenues on equity products have decreased in our Canadian broker-dealer subsidiary as a result of the weaker
Canadian currency compared to the U.S. dollar, as well as the overall challenging Canadian market conditions that existed
throughout the fiscal year. Commission earnings on fixed income products decreased primarily due to the continuation of
historically low interest rates which continue to result in challenging fixed income market conditions.
Total account and service fee revenues increased $52 million, or 13%. Mutual fund and annuity service fees increased $37
million, or 17%, primarily as a result of an increase in education and marketing support (“EMS”) fees (which include no-transaction-
fee (“NTF”) program revenues), and mutual fund omnibus fees, all of which are paid to us by the mutual fund companies whose
products we distribute. During fiscal year 2014, we implemented technology changes in our EMS program and standardized tiered
service levels provided to many mutual fund companies, resulting in increased fees earned from EMS arrangements. Omnibus
fees are generally based on the number of positions held in our client portfolios. Increases in such revenues are a result of increases
in the number of positions for existing fund families on the omnibus platform as well as new fund families joining the omnibus
program. Client account and service fees increased $14 million, or 9%, as a result of the changes made in many of our fee schedules
implemented since December 2013. In addition, transaction handling fees in fee-based accounts increased due to the increased
number of transactions, fees generated in lieu of interest income from our multi-bank sweep program with unaffiliated banks
increased due to higher average balances in the program, and SBL affiliate servicing fees increased (refer to the RJ Bank results
of operations in this report for additional information on SBL activities) as SBL balances have continued to grow.
PCG net interest is relatively unchanged compared to the prior year. Net interest income arising from our broker-dealer margin
lending activities decreased slightly compared to the prior year level, a slight decline in margin interest rates more than offset the
impact of slightly higher average margin loan balances outstanding. The rate of growth in margin loan balances in fiscal year
2015 has been negatively impacted by the popularity of our SBL product offered by RJ Bank. As a result of the extremely low
rate interest rate environment that existed during fiscal year 2015 and the related low net interest spreads earned, there was only
a nominal impact on our net interest revenues resulting from changes in client cash balances. Refer to the discussion of how the
pre-tax income of this segment could be favorably impacted by a 100 basis point instantaneous rise in short-term interest rates,
in the net interest section of this MD&A.
Total segment revenues increased 7%. The portion of total segment revenues that we consider to be recurring is approximately
75% at September 30, 2015, an increase from 72% at September 30, 2014. Recurring commission and fee revenues include asset-
based fees, trailing commissions from mutual funds and variable annuities/insurance products, mutual fund service fees, fees
earned on funds in our multi-bank sweep program, and interest. Assets in fee-based accounts increased more than average PCG
client assets as clients continue to elect fee-based alternatives versus traditional transaction-based accounts. At September 30,
2015, such assets were $179.4 billion, an increase of 7% compared to the $167.7 billion as of September 30, 2014.
Non-interest expenses increased $216 million, or 7%. Sales commission expense increased $167 million, or 8%, largely
consistent with the 6% increase in commission and fee revenues, coupled with increased hiring bonuses resulting from the high
level of recruiting activity. Administrative and incentive compensation and benefits expense increased $34 million, or 7%, in part
from annual increases in salary expenses, increases in employee benefit plan costs, and additional staffing levels, primarily in
information technology functions, to support our continuing growth. Business development expenses increased $12 million, or
14%, due to increased recruiting activity and the related incoming account transfer fee expenses, and conference and travel related
expenses.
45
7146_10K.pdf December 22, 2015 pg 48
Index
Year ended September 30, 2014 compared with the year ended September 30, 2013 – Private Client Group
Net revenues in fiscal year 2014 increased $361 million, or 12%, to $3.3 billion while pre-tax income increased $100 million,
or 43%, to $330 million. PCG’s pre-tax margin on net revenues in fiscal year 2014 increased to 10.1% as compared to 7.9% in
fiscal year 2013.
Securities commissions and fees in fiscal year 2014 increased $303 million, or 12%. The increase results predominately from
growth in client assets under administration. The year over year increase in client assets in fiscal year 2014 was driven by the
equity market conditions in the U.S., which were generally improved as compared to fiscal year 2013, and increased financial
advisor productivity. The most significant increases in these revenues in fiscal year 2014 arose from revenues earned on fee-based
accounts, which increased $245 million, or 24%, and commission revenues on mutual fund products which increased $57 million,
or 9% (primarily due to increases in trailing commissions on mutual fund products), partially offset by a $21 million, or 21%,
decrease in commissions on fixed income products. Commission earnings on fixed income products in fiscal year 2014 decreased
primarily due to historically low interest rates and a general lack of volatility of benchmark interest rates. Securities commissions
and fee revenues generated by our Canadian operations in fiscal year 2014 increased 5% over fiscal year 2013.
Total account and service fee revenues in fiscal year 2014 increased $44 million, or 13%, over fiscal year 2013. Mutual fund
and annuity service fees increased $44 million, or 26%, primarily as a result of an increase in mutual fund omnibus fees and EMS
fees (which include NTF program revenues), all of which are paid to us by the mutual fund companies whose products we
distribute. In fiscal year 2014 we continued to implement changes in the data sharing arrangements with many mutual fund
companies, converting from a networking to an omnibus arrangement. The fees earned from omnibus arrangements are greater
than those under networking arrangements in order to compensate us for the additional reporting requirements performed by the
broker-dealer under omnibus arrangements. During fiscal year 2014, we implemented technology changes in our EMS program
and standardized tiered service levels provided to many mutual fund companies, resulting in increased fees earned from EMS
arrangements. In addition, effective with our mid-February 2013 platform integration, the former Morgan Keegan client mutual
fund investments became eligible for our omnibus and EMS programs resulting in an increase in this fee revenue.
PCG net interest in fiscal year 2014 increased $4 million, or 5%, primarily resulting from an increase in margin interest rates
despite a slight decrease in average margin balances. Growth in margin loans in fiscal year 2014 was negatively impacted by the
popularity of our SBL product offered by RJ Bank. As a result of the extremely low rate interest environment that existed during
fiscal year 2014 and the related low net interest spreads earned, there was only a nominal impact on our net interest revenues
resulting from changes in client cash balances.
Total segment revenues in fiscal year 2014 increased 12%. The portion of total segment revenues that we consider to be
recurring was approximately 72% at September 30, 2014, as contrasted to 68% at September 30, 2013.
Non-interest expenses in fiscal year 2014 increased $261 million, or 10%, over fiscal year 2013. Sales commission expense
increased $237 million, or 13%, consistent with the 12% increase in commission and fee revenues. Business development expenses
in fiscal year 2014 increased $15 million, or 23%, due to increases in advertising, recruiting, incoming account transfer fee expenses,
and conference costs.
46
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Index
Results of Operations – Capital Markets
The following table presents consolidated financial information for our Capital Markets segment for the years indicated:
$
Revenues:
Institutional sales commissions:
Equity
Fixed income
Sub-total institutional sales commissions
Equity underwriting fees
Merger and acquisitions fees
Fixed income investment banking revenues
Tax credit funds syndication fees
Investment advisory fees
Net trading profit
Interest
Other
Total revenues
Interest expense
Net revenues
Non-interest expenses:
Sales commissions
Admin & incentive compensation and benefit costs
Communications and information processing
Occupancy and equipment
Business development
Losses and non-interest expenses of real estate
partnerships held by consolidated VIEs
Impairment of goodwill associated with RJES
Clearance and all other
Total non-interest expenses
Income before taxes and including noncontrolling
interests
Noncontrolling interests
Pre-tax income excluding noncontrolling interests $
2015
247,414
283,828
531,242
74,229
162,270
42,149
44,608
26,766
55,021
22,663
16,116
975,064
(15,029)
960,035
198,691
428,501
71,630
34,006
44,058
38,553
—
77,801
893,240
66,795
(40,214)
107,009
% change
Year ended September 30,
2014
($ in thousands)
% change
(5)% $
15 %
5 %
(26)%
7 %
(24)%
29 %
17 %
(8)%
9 %
(7)%
1 %
(3)%
1 %
3 %
1 %
6 %
(2)%
9 %
(6)%
—
19 %
3 %
260,934
246,131
507,065
100,091
151,000
55,275
34,473
22,966
59,701
20,746
17,318
968,635
(15,420)
953,215
192,774
425,153
67,835
34,859
40,409
41,072
—
65,160
867,262
(22)%
(18)% $
85,953
(44,612)
130,565
6 % $
(25)%
(12)%
14 %
19 %
15 %
40 %
20 %
112 %
(6)%
12 %
2 %
(15)%
3 %
(13)%
6 %
3 %
(4)%
3 %
57 %
(100)%
7 %
1 %
26 %
28 % $
2013
246,588
326,792
573,380
87,466
126,864
48,133
24,656
19,202
28,117
22,145
15,514
945,477
(18,069)
927,408
222,424
401,838
65,728
36,435
39,308
26,083
6,933
60,673
859,422
67,986
(34,185)
102,171
The Capital Markets segment consists primarily of equity and fixed income products and services. The activities include
institutional sales and trading in the U.S., Canada and Europe; management of and participation in public offerings; financial
advisory services, including private placements and merger and acquisition services; public finance activities; and the syndication
and related management of investment partnerships designed to yield returns in the form of low-income housing tax credits to
institutions. We provide securities brokerage services to institutions with an emphasis on the sale of U.S. and Canadian equities
and fixed income products. Institutional sales commissions for both equity and fixed income products are driven primarily through
trade volume, resulting from a combination of participation in public offerings, general market activity, and by the Capital Markets
group’s ability to find attractive investment opportunities and promote those opportunities to potential and existing
clients. Revenues from investment banking activities are driven principally by our role in the offering and the number and dollar
value of the transactions with which we are involved. This segment also includes trading of taxable and tax-exempt fixed income
products, as well as equity securities in the over-the-counter (“OTC”) and Canadian markets. This trading involves the purchase
of securities from, and the sale of securities to, our clients as well as other dealers who may be purchasing or selling securities for
their own account or acting as agent for their clients. Profits and losses related to this trading activity are primarily derived from
the spreads between bid and ask prices, as well as market trends for the individual securities during the period we hold them. This
segment also includes the results of the operations we conduct in Latin American countries including Argentina and Uruguay.
47
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Index
During fiscal year 2015, we made investments in our domestic equity capital markets business through successful recruiting
of experienced professionals to broadly build out our life sciences sector capabilities and to increase investment banking coverage
in the financial services, energy and government services sectors. While the immediate impact of these hires results in an increase
in compensation expense, we believe the long-term result of these efforts will have a favorable impact on both revenues and net
profits of the segment.
No single client accounts for a material percentage of this segment’s total business.
Year ended September 30, 2015 compared with the year ended September 30, 2014 – Capital Markets
Net revenues increased $7 million, or 1%, while pre-tax income decreased $24 million, or 18%.
Institutional fixed income sales commissions increased $38 million, or 15%, benefiting from increased interest rate volatility
and public finance activities during the year. Offsetting this increase, institutional equity sales commissions decreased $14 million,
or 5%, resulting primarily from decreased equity underwriting activities throughout fiscal year 2015, particularly in the energy
and real estate sectors.
Merger and acquisitions and advisory fee revenues increased $11 million, or 7%, reaching a record $162 million. We
experienced significant increases in these revenues in fiscal year 2015 arising from our U.S. operations, led by our technology
services sector and reflecting the benefit of prior years’ investments in other business sectors. The portion of these revenues arising
from our Canadian operations decreased significantly due to the difficult Canadian equity market conditions throughout fiscal
year 2015, especially in the natural resources sector.
Our net trading profits decreased $5 million, or 8%. Typically, our trading profits are generated primarily from fixed income
securities. However, in fiscal year 2015, the primary reason for the decrease is $5 million of realized trading losses arising in our
Canadian operations, primarily attributable to a loss on an equity underwriting position. Despite the continuation of the challenging
fixed income market conditions throughout fiscal year 2015, fixed income trading results were solid and steady throughout the
year, assisted by the trading profits generated on GNMA and FNMA MBS.
Underwriting fee revenues decreased $26 million, or 26%. Equity underwriting activities related to both initial public offerings
and follow-on offerings declined significantly in the fiscal year. The market sectors that historically represent our areas of strength
had relatively lower activity levels.
We experienced growth in our public finance underwritings with a 63% increase in the par value of lead managed new issues
compared to the prior year. This increase favorably impacts both our securities commissions and fees revenues and our investment
banking revenues. The combined revenues resulting from our public finance business activities increased $11 million, or 17%.
Tax credit fund syndication fee revenues increased by $10 million, or 29%, due to a 17% increase in the volume of tax credit
fund partnership interests sold during the current year. Our continued growth in this business over the past several years has
resulted in our ascension to a market leading position amongst syndicators of Low-Income Housing Tax Credit Fund (“LIHTC”)
investments.
Non-interest expenses increased $26 million, or 3%. Sales commissions expense increased $6 million, or 3%, which is
correlated with the 5% increase in overall institutional sales commission revenues. Business development expenses increased $4
million, or 9%, predominately in our equity capital markets operations, representing recruiting and other costs as they pursue
opportunities for future growth and revenues. Clearance and other expense increased $13 million, or 19%, primarily due to a
higher volume of trades, as reflected by the increase in institutional sales commission revenues, and $3 million of expense related
to historical European trading activities.
Losses of real estate partnerships held by consolidated VIEs result directly from the consolidation of certain low-income
housing tax credit funds, and decreased $3 million, or 6%, compared to the prior year. Since we only hold an insignificant interest
in these consolidated funds, nearly all of these losses are attributable to others and are therefore included in the offsetting
noncontrolling interests. Refer to Note 11 of the Notes to Consolidated Financial Statements in this Form 10-K for further
information on the consolidation of VIEs.
Noncontrolling interests includes the impact of consolidating certain low-income housing tax credit funds, which impacts
other revenue, interest expense, and the losses of real estate partnerships held by consolidated VIEs (as described in the preceding
paragraph), and reflects the portion of these consolidated entities which we do not own. Total segment expenses attributable to
48
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Index
others decreased by $4 million, corresponding with the reduction in losses of real estate partnerships held by consolidated VIEs
discussed in the preceding paragraph.
Year ended September 30, 2014 compared with the year ended September 30, 2013 – Capital Markets
Net revenues in fiscal year 2014 increased $26 million, or 3%, while pre-tax income increased $28 million, or 28%.
Institutional equity sales commissions in fiscal year 2014 increased $14 million, or 6%, resulting from both favorable equity
markets throughout the year, and an active new issue market environment at certain times during fiscal year 2014. The active new
issue market resulted in a 14% increase in equity underwriting fee revenues to $100 million. Underwriting fee revenues increased
in both our domestic as well as our Canadian equity capital markets operations. The sectors in which we generated the most
significant amounts of underwriting fee revenues in fiscal year 2014 were real estate, financial services and energy.
Institutional fixed income sales commissions in fiscal year 2014 decreased $81 million, or 25%, primarily due to the challenging
fixed income market conditions throughout fiscal year 2014 resulting from economic uncertainty, the continuation of historically
low interest rates, periods of relatively low volatility of benchmark interest rates, and the resulting decreased customer trading
volumes. Despite such conditions, trading results were solid and steady during fiscal year 2014, resulting in a $32 million, or
112%, improvement over fiscal year 2013, which included a quarter (the third quarter of fiscal year 2013) which was particularly
negative. These trading profits were generated primarily from fixed income securities. These favorable trading results in fiscal
year 2014 were achieved even as we continued to maintain relatively lower average balances of trading securities in response to
the market uncertainty (refer to the table of average interest earning asset and liability balances in the net interest section of this
MD&A for information on our average levels of trading instruments held during each respective fiscal year).
Merger and acquisitions and advisory fee revenues in fiscal year 2014 increased $24 million, or 19%, compared to fiscal year
2013. Fiscal year 2014 includes increases in revenues in both our domestic and Canadian operations. The sectors in which we
generated the most significant amounts of such fee revenues in fiscal year 2014 were technology services, healthcare, energy,
financial services, technology, and general industrials.
Tax credit fund syndication fee revenues in fiscal year 2014 increased by $10 million, or 40%, due to a 16% increase in the
volume of tax credit fund partnership interests sold during fiscal year 2014 and the recognition of certain revenues in fiscal year
2014 that were associated with partnership interests sold in prior years which had been deferred in those years. Fiscal year 2014
recognition of these previously deferred revenues result from the favorable resolution of certain conditions associated with the
partnership interests which, once favorably resolved, result in the recognition of previously deferred revenues.
Non-interest expenses in fiscal year 2014 increased $8 million, or 1%, compared to fiscal year 2013. Administrative and
incentive compensation and benefit expense in fiscal year 2014 increased $23 million, or 6%, compared to fiscal year 2013 offset
by a decrease in sales commission expense of $30 million, or 13%, which is directly correlated with the 12% decrease in overall
institutional sales commission revenues. Incentive compensation expense increases in fiscal year 2014 were primarily the result
of higher volumes of underwriting, mergers & acquisitions and advisory fees, investment banking and tax credit fund syndication
fee revenues, as well as to a lesser extent, annual salary increases applicable to all of our operations. Fiscal year 2013 included
goodwill impairment expense of $7 million related to our RJES operations which did not recur in fiscal year 2014.
Losses of real estate partnerships held by consolidated VIEs result directly from the consolidation of certain low-income
housing tax credit funds, and in fiscal year 2014 reflect an increase of $15 million, or 57%, over fiscal year 2013. Since we only
hold an insignificant interest in these consolidated funds, nearly all of these losses are attributable to others and are therefore
included in the offsetting noncontrolling interests. Refer to Note 11 of the Notes to Consolidated Financial Statements in this
Form 10-K for further information on the consolidation of VIEs.
Noncontrolling interests includes the impact of consolidating certain low-income housing tax credit funds, which impacts
other revenue, interest expense, and the losses of real estate partnerships held by consolidated VIEs (as described in the preceding
paragraph), and RJES for the first six months of the fiscal year 2013 period (thereafter, we acquired the interests previously held
by others), and reflects the portion of these consolidated entities which we do not own. Total segment expenses attributable to
others in fiscal year 2014 increased by $10 million compared to fiscal year 2013. The increase in expenses associated with
noncontrolling interests resulting from losses of real estate partnerships held by consolidated VIEs discussed above, are offset by
the impact of the fiscal year 2013 consolidation of RJES. As a result of our April 2013 acquisition of the RJES interest previously
held by others, there is no comparable noncontrolling interest impact from the consolidation of RJES in fiscal year 2014.
49
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Index
Results of Operations – Asset Management
The following table presents consolidated financial information for our Asset Management segment for the years indicated:
Revenues:
Investment advisory fees
Other
Total revenues
Expenses:
$
Admin & incentive compensation and benefit costs
Communications and information processing
Occupancy and equipment
Business development
Investment sub-advisory fees
Other
Total expenses
Income before taxes and including noncontrolling
interests
Noncontrolling interests
Pre-tax income excluding noncontrolling interests
$
2015
338,895
53,483
392,378
101,723
25,286
4,564
9,911
54,938
56,254
252,676
139,702
4,652
135,050
% change
Year ended September 30,
2014
($ in thousands)
% change
6 % $
4 %
6 %
(1)%
16 %
(1)%
8 %
18 %
14 %
8 %
3 %
5 % $
318,244
51,446
369,690
102,674
21,861
4,587
9,208
46,674
49,495
234,499
135,191
6,905
128,286
29% $
13%
26%
12%
15%
5%
11%
41%
33%
21%
37%
33% $
2013
247,162
45,655
292,817
91,994
19,056
4,364
8,288
33,183
37,342
194,227
98,590
2,290
96,300
The Asset Management segment includes the operations of Eagle, the Eagle Funds, AMS, RJ Trust, and other fee-based
programs. Revenues for this segment are primarily generated by the investment advisory fees related to asset management services
provided for individual and institutional investment portfolios, along with mutual funds. We generate revenues in this segment
by providing investment advisory and asset management services to either individual or institutional investment portfolios, along
with mutual funds. Investment advisory fee revenues are earned on the assets held in either managed or non-discretionary asset-
based programs. These fees are computed based on balances either at the beginning of the quarter, the end of the quarter, or average
daily assets. Asset balances are impacted by both the performance of the market and the new sales and redemptions of client
accounts/funds. Rising markets have historically had a positive impact on investment advisory fee revenues as existing accounts
increase in value, and individuals and institutions may commit incremental funds in rising markets.
No single client accounts for a material percentage of this segment’s total business.
Managed Programs
As of September 30, 2015, approximately 80% of investment advisory fees recorded in this segment are earned from assets
held in managed programs. Of these revenues, approximately 60% of our investment advisory fees recorded each quarter are
determined based on balances at the beginning of a quarter, approximately 25% are based on balances at the end of the quarter
and the remaining 15% are computed based on average assets throughout the quarter.
On April 30, 2015, RJF acquired Cougar. Eagle now offers Cougar’s global asset allocation strategies to its clients worldwide.
Cougar has a substantial amount of assets under advisement, which are non-discretionary advised assets. See Note 3 of the Notes
to Consolidated Financial Statements in this Form 10-K for additional information regarding the Cougar acquisition. The majority
of the assets managed by Cougar are reflected in non-discretionary asset-based program balances.
On December 24, 2012, Eagle acquired a 45% interest in ClariVest Asset Management, LLC (“ClariVest”), an acquisition
that bolstered our platform in the large-cap investment objective. See Note 3 of the Notes to Consolidated Financial Statements
in this Form 10-K for additional information regarding the ClariVest acquisition.
50
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Index
The following table reflects fee-billable financial assets under management in managed programs at the dates indicated:
Assets under management:
Eagle Asset Management, Inc.
Raymond James Consulting Services
Unified Managed Accounts (“UMA”)
Cougar Global Investments Limited
Freedom Accounts & other managed programs
Sub-total assets under management
Less: Assets managed for affiliated entities
Total financial assets under management
2015
September 30,
2014
(in millions)
2013
$
$
25,692
13,484
8,613
136
21,168
69,093
(3,916)
65,177
$
$
28,752
13,085
7,587
—
19,944
69,368
(4,811)
64,557
$
$
27,886
11,385
4,962
—
16,555
60,788
(4,799)
55,989
The following table summarizes the activity impacting the total financial assets under management in managed programs
(excluding activity in assets managed for affiliated entities and MK & Co. managed fee-based assets for the periods prior to the
conversion of MK & Co. accounts to the RJ&A platform) for the years indicated:
Assets under management at beginning of year
Net inflows of client assets
Net market (depreciation) appreciation in asset values
Inflows resulting from the Cougar acquisition (2)
Inflow resulting from the ClariVest acquisition (3)
Inflows resulting from the conversion of MK & Co. accounts to the RJ&A
platform (4)
Other
Assets under management at end of year
$
$
2015
Year ended September 30,
2014
(in millions)
60,788
$
3,865
4,715
—
—
$
(1)
(1)
69,368
2,797
(2,170)
150
—
—
(1,052)
69,093
(5)
$
—
—
69,368
$
2013
(1)
(1)
44,168
4,032
7,074
—
3,113
2,401
—
60,788
(1) Revised from the amounts reported in the prior year in order to present on a basis consistent with the current year. In the prior years,
the presentation of net inflows only included the asset flows associated with new clients, and cancellations associated with existing
clients, to certain programs.
(2) See Note 3 of the Notes to the Consolidated Financial Statements in this Form 10-K for additional information on this acquisition.
(3) Eagle acquired a 45% interest in ClariVest on December 24, 2012.
(4) In mid-February 2013, the client accounts of MK & Co. were converted onto the RJ&A platform.
(5) During fiscal year 2015, certain assets that were previously included in Eagle’s programs were transferred into non-discretionary asset-
based programs. The inflow of assets into the non-discretionary asset-based programs is discussed below.
Non-discretionary asset-based programs
As of September 30, 2015, approximately 20% of investment advisory fees revenue recorded in this segment are earned for
administrative services on assets held in non-discretionary asset-based programs. Nearly all investment advisory fees associated
with these programs are determined based on balances at the beginning of the quarter.
Fee-billable assets in non-discretionary asset-based programs as of September 30, 2015 were $91.0 billion, an increase of
$9.7 billion, or 12%, over the $81.3 billion total as of September 30, 2014. The increase during the current year is attributable to:
net inflows which out-paced market depreciation (most of the market depreciation occurred during the fourth quarter of fiscal year
2015 as a result of declining equity markets); inflows resulting from our acquisition of Cougar (see Note 3 of the Notes to the
Consolidated Financial Statements in this Form 10-K for additional information on this acquisition); and the movement of certain
assets during the year that were previously included in Eagle managed programs which were transferred into non-discretionary
asset-based programs (the offsetting outflows are reflected in the assets under management table above).
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Index
Fee-billable assets in non-discretionary asset-based programs as of September 30, 2014 were $81.3 billion, an increase of
$16.6 billion, or 26%, over the $64.7 billion total as of September 30, 2013. The increase in the prior year was primarily driven
by both net inflows and market appreciation during fiscal year 2014.
Year ended September 30, 2015 compared with the year ended September 30, 2014 – Asset Management
Pre-tax income in the Asset Management segment increased $7 million, or 5%.
Investment advisory fee revenue increased by $21 million, or 6%, generated by an increase in assets under management that
resulted from net inflows of client assets. Market values depreciated primarily as a result of the equity market decline that occurred
during the fourth quarter of fiscal year 2015. Performance fees, which are earned by managed funds for exceeding certain
performance targets, amounted to $5 million, a decrease of $5 million from the amount earned in the prior year. Refer to the
information presented above regarding the increases in the balances of assets held in our programs.
Other revenue increased by $2 million, or 4%, primarily resulting from an increase in fee income generated by RJ Trust,
reflecting a 4% increase in RJ Trust client assets compared to the prior year, to $3.51 billion as of September 30, 2015.
Expenses increased by approximately $18 million, or 8%, primarily resulting from a $8 million, or 18%, increase in investment
sub-advisory fees, a $3 million, or 16%, increase in communications and information support processing expense, and a $7 million,
or 14%, increase in other expenses. The increase in investment sub-advisory fee expense is primarily attributable to increased
fees paid to external managers for Raymond James Consulting Services and UMA programs, which have both experienced increases
in asset levels compared to the prior year. The increase in communications and information processing expense result from
additional costs associated with supporting the steadily increasing levels of assets under management as well as the growth in
asset levels in our non-discretionary asset-based programs. The increase in other expense is primarily due to Eagle’s share of
certain costs incurred in the organization and start-up of a new fund in which Eagle serves as the sub-advisor.
Noncontrolling interests includes the impact of the consolidation of certain subsidiary investment advisors and other
subsidiaries (including ClariVest). Total segment net income attributable to others decreased $2 million compared to the prior year
primarily as a result of a reduction in the amount of performance fee revenues earned in the current year that were attributable to
others.
Year ended September 30, 2014 compared to the year ended September 30, 2013 – Asset Management
Pre-tax income in the Asset Management segment in fiscal year 2014 increased $32 million, or 33%, over the prior year.
Investment advisory fee revenue in fiscal year 2014 increased by $71 million, or 29%, primarily generated by an increase in
assets under management and increased performance fees from certain managed funds. Performance fees, which are earned by
managed funds for exceeding certain performance targets, increased $8 million over the amount earned in fiscal year 2013. Assets
in both managed and non-discretionary asset-based programs in fiscal year 2014 increased substantially since the prior year. Refer
to the information presented above regarding the increases in the balances of assets held in our programs.
Other revenue in fiscal year 2014 increased by $6 million, or 13%, primarily resulting from an increase in fee income generated
by our RJ Trust subsidiary reflecting a 16% increase in RJ Trust client assets compared to the prior year, to $3.38 billion as of
September 30, 2014.
Expenses in fiscal year 2014 increased by approximately $40 million, or 21%, primarily resulting from a $13 million, or 41%,
increase in investment sub-advisory fees, a $12 million, or 33%, increase in other expenses, and an $11 million, or 12%, increase
in administrative and performance based incentive compensation. The increase in investment sub-advisory fee expense in fiscal
year 2014 is directly related to the increase in assets in programs managed by external managers. Such assets are included within
the UMA and Raymond James Consulting Services program asset under management balances. The increase in other expense in
fiscal year 2014 is primarily due to increases in the costs incurred so that certain funds sponsored by Eagle are available as
investment choices on the platforms of other broker-dealers and increases in expenses of RJ Trust resulting from the increase in
client assets. The increase in administrative and performance based incentive compensation in fiscal year 2014 is a result of: the
combination of increases in performance compensation which is directly related to the increase in investment advisory fee revenues
and the performance fees earned during the year; increases in salary and related expenses resulting from the addition of ClariVest
on December 24, 2012; and annual salary increases and certain additions to staff associated with our operations.
Noncontrolling interests includes the impact of the consolidation of certain subsidiary investment advisors and other
subsidiaries (including ClariVest). Total segment net income attributable to others in fiscal year 2014 increased by $5 million as
52
7146_10K.pdf December 22, 2015 pg 55
Index
compared to fiscal year 2013 since certain of the current year performance fees were earned by certain of these subsidiaries, and
therefore a portion is attributable to others.
Results of Operations – RJ Bank
The following table presents consolidated financial information for RJ Bank for the years indicated:
Revenues:
Interest income
Interest expense
Net interest income
Other income
Net revenues
Non-interest expenses:
Compensation and benefits
Communications and information processing
Occupancy and equipment
Loan loss provision
FDIC insurance premiums
Affiliate deposit account servicing fees
Other
Total non-interest expenses
Pre-tax income
2015
415,271
(11,693)
403,578
10,717
414,295
27,843
5,186
1,256
23,570
11,746
35,429
30,544
135,574
278,721
$
$
% change
Year ended September 30,
2014
($ in thousands)
% change
17 % $
37 %
16 %
114 %
18 %
9 %
22 %
(1)%
74 %
17 %
5 %
48 %
24 %
15 % $
355,304
(8,547)
346,757
5,013
351,770
25,430
4,234
1,274
13,565
10,026
33,758
20,649
108,936
242,834
2 % $
(7)%
2 %
(38)%
1 %
16 %
39 %
9 %
429 %
75 %
14 %
36 %
38 %
(9)% $
2013
348,068
(9,224)
338,844
8,062
346,906
21,835
3,043
1,168
2,565
5,716
29,650
15,215
79,192
267,714
RJ Bank provides corporate loans, residential loans and securities based loans, as well as FDIC-insured deposit accounts, to
clients of our broker-dealer subsidiaries and to the general public. RJ Bank is active in corporate loan syndications and
participations. RJ Bank generates net interest revenue principally through the interest income earned on loans and investments,
which is offset by the interest expense it pays on client deposits and on its borrowings.
No single client accounts for a material percentage of this segment’s total business.
53
7146_10K.pdf December 22, 2015 pg 56
Index
The tables below present certain credit quality trends for loans held by RJ Bank:
2015
Year ended September 30,
2014
(in thousands)
2013
(580) $
3,773
(461)
25
2,757
$
(1,829) $
64
(17)
35
(1,747) $
(696)
(7,919)
(4,472)
(222)
(13,309)
2015
As of September 30,
2014
(in thousands)
2013
117,623
2,707
30,486
5,949
12,526
2,966
172,257
$
$
103,179
1,594
25,022
1,380
14,350
2,049
147,574
$
$
— $
— $
4,796
47,504
319
52,619
4,631
4,631
57,250
$
18,876
61,391
398
80,665
5,380
5,380
86,045
$
95,994
1,000
19,266
—
19,126
1,115
136,501
89
25,512
75,889
468
101,958
2,434
2,434
104,392
0.39%
0.69%
0.99%
119,519
$
45,988
$
110,292
6,928,018
162,356
2,054,154
484,537
1,962,614
1,481,504
(32,424)
13,040,759
13,160,278
6,422,347
94,195
1,689,163
122,218
1,751,747
1,023,748
(37,533)
11,065,885
11,111,873
$
$
5,246,005
60,840
1,283,046
—
1,745,650
555,805
(43,936)
8,847,410
8,957,702
$
$
$
$
$
$
$
$
Net loan recoveries/(charge-offs):
C&I loans
Commercial real estate (“CRE”) loans
Residential mortgage loans
SBL
Total
Allowance for loan losses:
Loans held for investment:
C&I loans
CRE construction loans
CRE loans
Tax-exempt loans
Residential mortgage loans
SBL
Total
Nonperforming assets:
Nonperforming loans:
C&I loans
CRE loans
Residential mortgage loans:
Residential mortgage loans
Home equity loans/lines
Total nonperforming loans
Other real estate owned:
Residential first mortgage
Total other real estate owned
Total nonperforming assets
Total nonperforming assets as a % of RJ Bank total assets
Total loans:
Loans held for sale, net(1)
Loans held for investment:
C&I loans
CRE construction loans
CRE loans
Tax-exempt loans
Residential mortgage loans
SBL
Net unearned income and deferred expenses
Total loans held for investment(1)
Total loans(1)
(1) Net of unearned income and deferred expenses.
54
7146_10K.pdf December 22, 2015 pg 57
Index
The following table presents RJ Bank’s allowance for loan losses by loan category:
2015
Loan
category as
a % of total
loans
receivable
Allowance
As of September 30,
2014
Loan
category as
a % of total
loans
receivable
Allowance
($ in thousands)
2013
Loan
category as
a % of total
loans
receivable
Allowance
$
$
—
98,447
2,148
24,064
5,949
12,513
2,962
26,174
172,257
1% $
44%
1%
13%
4%
15%
11%
11%
100% $
—
87,551
1,307
21,061
1,380
14,340
2,044
19,891
147,574
— $
49%
1%
13%
1%
16%
9%
11%
100% $
—
81,733
674
16,566
—
19,117
1,112
17,299
136,501
1%
50%
—
12%
—
20%
6%
11%
100%
As of September 30,
2012
2011
Loan
category as
a % of total
loans
receivable
Loan
category as
a % of total
loans
receivable
Allowance
($ in thousands)
2% $
56%
—
10%
21%
4%
7%
100% $
5
79,687
490
30,752
33,194
20
1,596
145,744
2%
59%
—
11%
26%
—
2%
100%
Allowance
$
$
—
85,916
458
26,381
26,126
705
7,955
147,541
Loans held for sale
C&I loans
CRE construction loans
CRE loans
Tax-exempt loans
Residential mortgage loans
SBL
Foreign loans
Total
Loans held for sale
C&I loans
CRE construction loans
CRE loans
Residential mortgage loans
SBL
Foreign loans
Total
Information on foreign assets held by RJ Bank:
Changes in the allowance for loan losses with respect to loans RJ Bank has made to borrowers who are not domiciled in the
U.S. are as follows:
Allowance for loan losses attributable to foreign loans,
beginning of year:
Provision for loan losses - foreign loans
Foreign loan charge-offs:
C&I loans
Foreign exchange translation adjustment
Allowance for loan losses attributable to foreign loans, end of
year
2015
2014
Year ended September 30,
2013
(in thousands)
2012
$
$
19,891
7,927
$
17,299
3,337
$
7,955
9,696
$
1,596
6,242
—
(1,644)
—
(745)
(56)
(296)
—
117
2011
734
862
—
—
$
26,174
$
19,891
$
17,299
$
7,955
$
1,596
55
7146_10K.pdf December 22, 2015 pg 58
Index
Cross-border outstandings represent loans (including accrued interest), interest-bearing deposits with other banks, and any
other monetary assets which are cross-border claims according to bank regulatory guidelines for the country exposure report. The
following table sets forth the country where RJ Bank’s total cross-border outstandings exceeded 1% of total RJF assets as of each
respective period:
Deposits
with other
banks
C&I loans
CRE
construction
loans
Residential
mortgage
loans
SBL
Total cross-
border
outstandings (1)
CRE loans
(in thousands)
September 30, 2015
Canada
$
122,810
$
456,602
$
— $
178,230
$
557
$
328
$
758,527
September 30, 2014
Canada
September 30, 2013
Canada
$
$
64,363
$
397,743
$
— $
112,325
$
586
$
37
$
575,054
44,196
$
352,221
$
8,093
$
63,456
$
1,013
$
48
$
469,027
(1) Excludes any hedged, non-U.S. currency amounts.
Year ended September 30, 2015 compared with the year ended September 30, 2014 – RJ Bank
Pre-tax income in the RJ Bank segment increased $36 million, or 15%. The increase in pre-tax income was primarily
attributable to a $63 million, or 18%, increase in net revenues, offset by an increase of $10 million, or 74%, in the provision for
loan losses and a $17 million, or 17%, increase in non-interest expenses (excluding the provision for loan losses). The increase
in net revenues was attributable to a $57 million increase in net interest income and a $6 million increase in other income.
The $57 million increase in net interest income was the result of a $1.6 billion increase in average interest-earning banking
assets and an increase in the net interest margin. The increase in average interest-earning banking assets was primarily driven by
a $2.1 billion increase in average loans offset by a $440 million decrease in average cash and investments. Average corporate
loans increased $1.4 billion, or 19%, average SBL balances increased $488 million, or 62%, and average residential mortgage
loans increased $173 million, or 10%. The yield on interest-earning banking assets increased to 3.15% from 3.04% due to an
improvement in the earning-asset composition from lower-yielding cash and investments to a larger percentage of higher yielding
loans. The loan portfolio yield decreased slightly to 3.34% from 3.39%. Primarily as a result of the increase in the yield of the
average interest-earning banking assets, the net interest margin increased to 3.07% from 2.98%.
Corresponding to the increase in average interest-earning banking assets, average interest-bearing banking liabilities increased
$1.4 billion to $11.9 billion.
The increase in other income was due to a decrease of $4 million in foreign currency losses, a $1 million increase resulting
from held for sale loan activities, and a $1 million increase in gains from the sale of foreclosed properties.
A significant portion of the provision for loan losses in both fiscal year 2015 and 2014 resulted from loan portfolio growth
in each year. The primary factors impacting the year over year increase in provision for loan losses in the current year results
from the varying impact of credit characteristics which were particular to each respective year. The current year provision for
loan losses was impacted by an increase in corporate criticized loans, which was partially offset by the impact of improved credit
characteristics of the residential mortgage loan portfolio. Fiscal year 2014 benefited to a greater extent than the current year from
the improved credit characteristics of the loan portfolio including a decrease in corporate criticized loans.
The $17 million increase in non-interest expenses (excluding the provision for loan losses) was primarily attributable to a $3
million, or 68%, increase in SBL affiliate fees due to increases in SBL balances; a $2 million, or 5%, increase in affiliate deposit
account servicing fees related to increased deposit balances; a $2 million increase in expenses related to the reserve for unfunded
lending commitments; a $2 million or 17% increase in FDIC insurance premiums; a $2 million, or 9%, increase in compensation
and benefits resulting from annual raises and increases in the costs of certain employee benefit programs coupled with increases
in the number of personnel; a $1 million, or 22%, increase in communications and information processing expense; and a $1
million increase of expense related to other taxes.
56
7146_10K.pdf December 22, 2015 pg 59
Index
Year ended September 30, 2014 compared to the year ended September 30, 2013 – RJ Bank
Pre-tax income in the RJ Bank segment in fiscal year 2014 decreased $25 million, or 9%, compared to fiscal year 2013. The
decrease in pre-tax income in fiscal year 2014 was primarily attributable to a $19 million, or 24%, increase in non-interest expenses
(excluding the provision for loan losses) and an increase of $11 million, or 429%, in the provision for loan losses, offset by a $5
million increase in net revenues. The increase in net revenues in fiscal year 2014 was attributable to an $8 million increase in net
interest income offset by a $3 million decrease in other income.
Net interest income in fiscal year 2014 increased $8 million as a result of a $1.2 billion increase in average interest-earning
banking assets offset by a decrease in the net interest margin. The increase in average interest-earning banking assets was driven
by a $1.4 billion increase in average loans with average corporate loans increasing $1.1 billion, or 17%, and average SBL increasing
$337 million, or 76%. The net interest margin decreased to 2.98% from 3.25% primarily as a result of the decrease in the yield
of the average interest-earning assets. The yield on interest-earning banking assets decreased to 3.04% from 3.34% due to a decline
in the loan portfolio yield. The loan portfolio yield decreased primarily due to a reduction in the corporate loan portfolio yield
resulting from lower yields on new loans and refinancings as well as lower corporate loan fee income. The residential mortgage
loan portfolio yield declined due to adjustable rate loans resetting at lower rates.
Corresponding to the increase in average interest-earning banking assets in fiscal year 2014, average interest-bearing banking
liabilities increased $1.2 billion to $10.5 billion.
The decrease in other income in fiscal year 2014 compared to fiscal year 2013 was primarily due to a $3 million decline in
gains from the sale of held for sale loans due to lower residential mortgage loan originations, and a $2 million increase in foreign
currency losses, which were partially offset by a $2 million increase in bank-owned life insurance valuation gains.
The increase in provision for loan losses in fiscal year 2014 resulted from significant loan portfolio growth, which was partially
offset by a decrease in corporate criticized loans, the favorable resolution of corporate problem loans, lower loan-to-value (“LTV”)
ratios in the residential mortgage loan portfolio, and a reduction in delinquent residential mortgage loans. These credit
characteristics reflected the positive impact from improved economic conditions in fiscal year 2014, which resulted in a decline
in the criticized loan balance and nonperforming assets as a percentage of total assets. In addition, net loan charge-offs decreased
$12 million, or 87%, to $2 million, which was primarily attributable to improved credit characteristics within both the CRE and
residential mortgage loan portfolios.
The $19 million increase in non-interest expenses in fiscal year 2014 (excluding the provision for loan losses) compared to
fiscal year 2013 was primarily attributable to a $4 million, or 14%, increase in affiliate deposit account servicing fees related to
increased deposit balances, a $4 million or 75% increase in FDIC insurance premiums due to higher deposit balances and assessment
rates, a $4 million, or 16%, increase in compensation and benefits related to staff additions, a $2 million increase in SBL affiliate
fees, and a $1 million, or 39%, increase in communications and information processing expense.
57
7146_10K.pdf December 22, 2015 pg 60
Index
The following table presents average balance, interest income and expense, the related interest yields and rates, and interest
spreads for RJ Bank for the years indicated:
2015
Average
balance
Interest
inc./exp.
Average
yield/
cost
Year ended September 30,
2014
2013
Average
balance
Interest
inc./exp.
($ in thousands)
Average
yield/
cost
Average
balance
Interest
inc./exp.
Average
yield/
cost
Interest-earning banking assets:
Loans, net of unearned income (1)
Loans held for sale -
all domestic
$
Loans held for investment:
Domestic:
107,255
$ 2,686
2.64% $
107,898
$
2,705
2.51% $
155,901
$
3,519
2.26%
C&I loans
5,672,456
205,673
3.59%
4,854,911
176,820
3.61%
4,520,070
190,910
4.19%
CRE construction
loans
CRE loans
Tax-exempt
loans (2)
Residential
mortgage loans
SBL
Foreign:
95,609
1,462,690
4,105
44,367
4.23%
2.99%
51,361
1,249,124
2,346
37,156
4.50%
2.93%
41,928
935,058
2,140
30,515
5.03%
3.22%
301,767
8,812
4.49%
44,150
1,454
5.07%
—
—
—
1,924,408
1,267,401
55,286
35,242
2.83%
2.74%
1,751,584
779,872
51,409
21,843
2.90%
2.76%
1,711,968
443,042
52,285
13,143
3.01%
2.93%
C&I loans
1,004,661
39,313
3.86%
945,799
38,778
4.04%
623,554
31,799
5.01%
CRE construction
loans
CRE loans
Residential
mortgage loans
SBL
23,017
265,634
937
9,002
2,697
1,936
84
71
4.01%
3.34%
3.06%
3.60%
42,594
217,461
2,099
1,866
2,763
8,537
64
67
Total loans, net
12,129,531
405,578
3.34% 10,048,719
343,942
248,408
2,446
0.98%
297,933
2,622
6.40%
3.87%
3.00%
3.57%
3.39%
0.88%
21,240
148,768
1,488
10,036
1,869
1,615
66
63
8,605,013
335,964
346,665
2,902
6.91%
6.65%
3.49%
3.88%
3.86%
0.84%
Agency MBS
Non-agency
collateralized
mortgage obligations
Cash
FHLB stock, Federal
Reserve Bank of
Atlanta (“FRB”)
stock, and other
Total interest-
earning banking
assets
Non-interest-earning
banking assets:
Allowance for loan
losses
Unrealized loss on
available for sale
securities
Other assets
Total non-interest-
earning banking
assets
Total banking
assets
89,336
611,375
2,178
1,344
2.44%
0.22%
127,022
979,978
3,164
2,558
2.49%
0.28%
154,933
1,109,857
4,155
2,812
2.68%
0.25%
111,891
3,725
3.33%
95,806
3,018
3.15%
85,811
2,235
2.60%
13,190,541
$415,271
3.15% 11,549,458
$355,304
3.04% 10,302,279
$348,068
3.34%
(158,373)
(140,544)
(146,474)
(4,666)
321,919
158,880
(9,338)
289,322
139,440
(11,723)
268,471
110,274
$13,349,421
$11,688,898
$10,412,553
(continued on next page)
58
7146_10K.pdf December 22, 2015 pg 61
Index
2015
Year ended September 30,
2014
2013
Average
balance
Interest
inc./exp.
Average
yield/
cost
Average
balance
Interest
inc./exp.
Average
yield/
cost
Average
balance
Interest
inc./exp.
Average
yield/
cost
($ in thousands)
(continued from previous page)
Interest-bearing banking liabilities:
Deposits:
Certificates of
deposit
Money market,
savings, and
NOW
accounts (3)
FHLB advances and
other
Total interest-
bearing banking
liabilities
Non-interest-bearing
banking liabilities
Total banking
liabilities
Total banking
shareholder’s
equity
Total banking
liabilities and
shareholders’
equity
Excess of interest-
earning banking
assets over interest-
bearing banking
liabilities/net interest
income
Bank net interest:
Spread
Margin (net yield on
interest-earning
banking assets)
Ratio of interest-
earning banking
assets to interest-
bearing banking
liabilities
Return on average:
Total banking assets
Total banking
shareholder’s
equity
Average equity to
average total banking
assets
$
347,748
$
5,839
1.68% $
329,176
$
6,126
1.86% $
305,293
$
6,239
2.04%
10,851,494
2,543
0.02%
9,790,257
1,833
0.02%
8,827,966
2,793
0.03%
664,387
3,311
0.49%
337,603
588
0.17%
129,144
192
0.15%
11,863,629
$ 11,693
0.10% 10,457,036
$
8,547
0.08%
9,262,403
$
9,224
0.10%
52,933
11,916,562
1,432,859
36,827
10,493,863
1,195,035
57,604
9,320,007
1,092,546
$13,349,421
$11,688,898
$10,412,553
$ 1,326,912
$403,578
$ 1,092,422
$346,757
$ 1,039,876
$338,844
3.05%
3.07%
111.18%
1.34%
12.52%
10.73%
2.97%
2.98%
110.45%
1.35%
13.21%
10.22%
3.24%
3.25%
111.23%
1.63%
15.49%
10.49%
(1) Nonaccrual loans are included in the average loan balances. Payment or income received on impaired nonaccrual loans are applied to
principal. Income on other nonaccrual loans is recognized on a cash basis. Fee income on loans included in interest income for the
years ended September 30, 2015, 2014 and 2013 was $30 million, $34 million, and $48 million, respectively.
(2) The yield is presented on a tax-equivalent basis utilizing the federal statutory tax rate of 35%.
(3) Negotiable Order of Withdrawal (“NOW”) account.
59
7146_10K.pdf December 22, 2015 pg 62
Index
Increases and decreases in interest income and interest expense result from changes in average balances (volume) of interest-
earning banking assets and liabilities, as well as changes in average interest rates. The following table shows the effect that these
factors had on the interest earned on RJ Bank’s interest-earning assets and the interest incurred on its interest-bearing liabilities.
The effect of changes in volume is determined by multiplying the change in volume by the previous period’s average yield/cost.
Similarly, the effect of rate changes is calculated by multiplying the change in average yield/cost by the previous year’s volume.
Changes applicable to both volume and rate have been allocated proportionately.
Year ended September 30,
2015 compared to 2014
Increase (decrease) due to
Rate
Total
Volume
2014 compared to 2013
Increase (decrease) due to
Rate
Total
Volume
(in thousands)
$
(16) $
(3) $
(19) $
(1,084) $
270
$
(814)
29,775
2,021
6,353
8,484
5,073
13,655
2,414
(1,269)
1,891
18
3
(436)
(939)
(962)
507
66,572
(922)
(262)
858
(1,126)
(1,196)
(256)
(1,879)
(557)
(1,426)
2
1
260
(47)
(252)
200
(6,605)
28,853
1,759
7,211
7,358
3,877
13,399
535
(1,826)
465
20
4
(176)
(986)
(1,214)
707
59,967
14,142
482
10,249
1,454
1,210
9,992
16,433
1,496
4,634
8
9
(408)
(748)
(329)
260
57,800
(28,232)
(276)
(3,608)
—
(2,086)
(1,292)
(9,454)
(221)
(6,133)
(10)
(5)
128
(243)
75
523
(50,564)
(14,090)
206
6,641
1,454
(876)
8,700
6,979
1,275
(1,499)
(2)
4
(280)
(991)
(254)
783
7,236
Interest revenue:
Interest-earning banking assets:
Loans, net of unearned income:
Loans held for sale - all domestic
Loans held for investment:
Domestic:
C&I loans
CRE construction loans
CRE loans
Tax-exempt loans
Residential mortgage loans
SBL
Foreign:
C&I loans
CRE construction loans
CRE loans
Residential mortgage loans
SBL
Agency MBS
Non-agency collateralized mortgage obligations
Cash
FHLB stock, FRB stock, and other
Total interest-earning banking assets
Interest expense:
Interest-bearing banking liabilities:
Deposits:
Certificates of deposit
Money market, savings and NOW accounts
FHLB advances and other
Total interest-bearing banking liabilities
Change in net interest income
$
346
199
569
1,114
65,458
$
(633)
511
2,154
2,032
(8,637) $
(287)
710
2,723
3,146
56,821
$
488
304
310
1,102
56,698
(601)
(1,264)
86
(1,779)
$ (48,785) $
(113)
(960)
396
(677)
7,913
60
7146_10K.pdf December 22, 2015 pg 63
Index
Results of Operations – Other
The following table presents consolidated financial information for the Other segment for the years indicated:
$
Revenues:
Interest income
Investment banking
Investment advisory fees
Other
Total revenues
Interest expense
Net revenues
Non-interest expenses:
Compensation and other expenses
Acquisition related expenses
Total non-interest expenses
Loss before taxes and including noncontrolling
interests:
Noncontrolling interests
Pre-tax loss excluding noncontrolling interests
$
2015
12,237
—
1,644
53,086
66,967
(77,165)
(10,198)
40,551
—
40,551
(50,749)
14,100
(64,849)
% change
Year ended September 30,
2014
($ in thousands)
% change
(2)% $
—
23 %
87 %
59 %
12,549
—
1,340
28,314
42,203
(19)% $
(100)%
6 %
(73)%
(67)%
—
71 %
(6)%
—
(6)%
35 %
23 % $
(77,456)
(35,253)
(4)%
(177)%
43,055
—
43,055
(78,308)
5,610
(83,918)
—
(100)%
(63)%
(11)%
37 % $
2013
15,404
3,000
1,262
106,735
126,401
(80,478)
45,923
43,164
73,454
116,618
(70,695)
61,618
(132,313)
This segment results include our principal capital and private equity activities, certain corporate overhead costs of RJF including
the interest cost on our public debt, and the acquisition and integration costs associated with our material acquisitions including,
most significantly in fiscal year 2013, the costs associated with our integration of Morgan Keegan.
Year ended September 30, 2015 compared to the year ended September 30, 2014 – Other
The pre-tax loss generated by this segment decreased by approximately $19 million, or 23%.
Net revenues in this segment increased $25 million, or 71%. The increase results from a $25 million increase in revenues
arising from our principal capital and private equity portfolio investments. We also realized an increase in revenues arising from
the sale or redemption activities in our ARS portfolio of $4 million, which were offset by certain foreign currency translation
losses that primarily result from the weakened Canadian dollar, and decreases in the valuation of other investments (primarily in
managed equities). The current year ARS portfolio gain is primarily the result of an $11 million gain on the sale of all of our
Jefferson County, Alabama Limited Obligation School Warrants ARS. In the prior year, gains resulting from sales and redemption
activities in our ARS portfolio were primarily comprised of a $5.5 million gain on the redemption of Jefferson County Alabama
Sewer Revenue Refunding Warrants ARS.
The portion of revenue attributable to noncontrolling interests increased $8 million, as the increase in revenues generated by
our private equity portfolio resulted in higher amounts of such revenues that are attributable to others.
Year ended September 30, 2014 compared to the year ended September 30, 2013 – Other
The pre-tax loss generated by this segment in fiscal year 2014 decreased by approximately $48 million, or 37%, compared
to fiscal year 2013.
Net revenues in this segment in fiscal year 2014 decreased $81 million, or 177%. The decrease is primarily attributable to a
decrease in revenues in fiscal year 2014 arising from our private equity portfolio investments. Approximately $74 million of fiscal
year 2013 revenues were associated with our indirect investment in Albion, an investment which was sold in April 2013 and
therefore such revenues did not recur in fiscal year 2014. Revenues associated with the remainder of our private equity portfolio
in fiscal year 2014 decreased $6 million compared to fiscal year 2013. Offsetting these decreases, in fiscal year 2014 we realized
a $6 million increase from gains on redemptions or sales of ARS, most notably arising from the fiscal year 2014 redemption of
Jefferson County Alabama Sewer Revenue Refunding Warrants ARS.
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Non-interest expenses in fiscal year 2014 decreased $74 million, or 63%. The decrease is primarily a result of a decrease in
acquisition related expenses since our integration of Morgan Keegan was substantially complete as of September 30, 2013. The
acquisition related expenses incurred in fiscal year 2013 were primarily comprised of expenses associated with the integration of
Morgan Keegan’s operations into our own (see Note 3 of our Notes to Consolidated Financial Statements in this Form 10-K for
additional information on the components of the fiscal year 2013 expense).
The portion of revenue attributable to noncontrolling interests decreased in fiscal year 2014 by nearly $56 million compared
to fiscal year 2013. Of the fiscal year 2013 Albion revenues received, approximately $51 million related to the portion of that
investment which we did not own.
Certain statistical disclosures by bank holding companies
As a financial holding company, we are required to provide certain statistical disclosures by bank holding companies pursuant
to the SEC’s Industry Guide 3. Certain of those disclosures are as follows for the fiscal year indicated:
RJF return on average assets (1)
RJF return on average equity (2)
Average equity to average assets (3)
Dividend payout ratio(4)
2015
2.0%
11.5%
18.5%
21.0%
Year ended September 30,
2014
2.1%
12.3%
18.1%
19.3%
2013
1.7%
10.6%
17.3%
21.7%
(1) Computed as net income attributable to RJF for the year indicated, divided by average assets (the sum of total assets at the beginning
and end of the year, divided by two).
(2) Computed by utilizing the net income attributable to RJF and the average equity for each respective fiscal year. Average equity is
computed by adding the total equity attributable to RJF as of each quarter-end date during the indicated fiscal year, plus the beginning
of the year total, divided by five.
(3) Computed as average equity (the sum of total equity at the beginning and end of the fiscal year, divided by two), divided by average
assets (the sum of total assets at the beginning and end of the fiscal year, divided by two).
(4) Computed as dividends declared per common share during the fiscal year as a percentage of diluted earnings per common share.
Refer to the RJ Bank section of this MD&A and the Notes to Consolidated Financial Statements in this Form 10-K for the
other required disclosures.
Liquidity and Capital Resources
Liquidity is essential to our business. The primary goal of our liquidity management activities is to ensure adequate funding
to conduct our business over a range of market environments.
Senior management establishes our liquidity and capital policies. These policies include senior management’s review of short-
and long-term cash flow forecasts, review of monthly capital expenditures, the monitoring of the availability of alternative sources
of financing, and the daily monitoring of liquidity in our significant subsidiaries. Our decisions on the allocation of capital to our
business units consider, among other factors, projected profitability and cash flow, risk and impact on future liquidity needs. Our
treasury operations assist in evaluating, monitoring and controlling the impact that our business activities have on our financial
condition, liquidity and capital structure as well as maintain our relationships with various lenders. The objectives of these policies
are to support the successful execution of our business strategies while ensuring ongoing and sufficient liquidity.
Liquidity is provided primarily through our business operations and financing activities. Financing activities could include
bank borrowings, repurchase agreement transactions or additional capital raising activities under our “universal” shelf registration
statement.
Cash provided by operating activities during the year ended September 30, 2015 was $899 million. Cash generated by
successful operating results over the year resulted in a $638 million increase in cash. Significant changes in various other asset
and liability balances which increased cash include: brokerage client payables and other accounts payable increased $594 million,
which results in an increase in cash; an increase in the stock loaned, net of stock borrowed balances resulted in a $96 million
increase in cash; a decrease in securities purchased under agreements to resell, net of securities sold under agreements to repurchase,
resulted in a $60 million increase in cash; the decrease in the prepaid expenses and other asset balance generated by cash transactions
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Index
resulted in a $47 million increase in cash; a decrease in our net trading instruments resulted in a $41 million increase in cash;
accrued compensation, commissions and benefits balances increased resulting in a $29 million increase in cash. The increased
accrual primarily results from the increase in both revenues and profits over the prior year. Partially offsetting these activities
which resulted in increases of cash, decreases in cash resulted from the following activities: a $416 million increase in assets
segregated pursuant to regulations and other segregated assets, primarily resulting from the increase in brokerage client payables
previously described above; in support of our strong recruiting results, we used $82 million in cash to fund loans provided to
financial advisors, net of repayments; purchases of loans held for sale, net of sales, resulted in a $60 million decrease; and brokerage
client receivables increased $56 million. All other components of operating activities combined to net a $8 million source of cash.
Investing activities resulted in the use of $2.17 billion of cash during the year ended September 30, 2015. The primary
investing activity was the use of $2.09 billion in cash to fund an increase in bank loans, net of the proceeds from sales of loans
held for investment. RJ Bank made purchases of available for sale securities of $92 million. We used $74 million to fund
investments in technology and equipment, primarily comprised of computer software enhancements. We used $45 million to fund
other investments, primarily comprised of investments in company owned life insurance. Offsetting the impact of these investments
on cash, we received proceeds from the maturation, repayment, redemption or sale of securities in our available for sale security
portfolio of $155 million, nearly $64 million of which arose from the sale of all of our Jefferson County, Alabama Limited Obligation
School Warrants ARS. All other components of investing activities combined to net a $22 million use of cash.
Financing activities provided $1.73 billion of cash during the year ended September 30, 2015. Increases in RJ Bank deposits
provided $1.89 billion. We used $103 million in payment of dividends to our shareholders. We used $89 million to repurchase
shares of our stock, $57 million of this total resulting from the fourth quarter fiscal year 2015 open market repurchases (refer to
Item 5, “Issuers Purchases of Equity Securities” in this report, for additional information on our share repurchases). Proceeds
from all of our sources of borrowed funds, net of repayments, resulted in a $6 million increase in cash. A $50 million net increase
in RJ Bank’s advances from the FHLB during the year is the primary source of these borrowings, as the amount of our short-term
borrowings outstanding on our domestic financing facilities decreased compared to September 30, 2014 (see Note 15 of the Notes
to Consolidated Financial Statements in this Form 10-K for additional information regarding these borrowings). All other
components of financing activities combined to net a $20 million source of cash.
The effect of currency exchange rates on our cash balances resulted in a $55 million decrease in our U.S. dollar denominated
cash balance. The most significant component of this decrease results from the substantial cash balances held by RJ Ltd. as part
of their Canadian brokerage operations, which are denominated in Canadian currency (this cash is utilized to fund Canadian
currency denominated liabilities), and the 16% decrease in the value of the Canadian dollar to the U.S. dollar since September 30,
2014.
We believe our existing assets, most of which are liquid in nature, together with funds generated from operations and committed
and uncommitted financing facilities, should provide adequate funds for continuing operations at current levels of activity.
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Sources of Liquidity
Approximately $1.22 billion of our total September 30, 2015 cash and cash equivalents (a portion of which is invested on
behalf of the parent company by RJ&A, and a portion of which is maintained in a deposit account at RJ Bank) was available to
us without restrictions. The cash and cash equivalents held were as follows:
Cash and cash equivalents:
September 30, 2015
(in thousands)
$
RJF (1)
RJ&A(2)
RJ Bank
RJ Ltd.
RJFS
RJFSA
Other subsidiaries
Total cash and cash equivalents
$
746,042
830,887
464,462
246,992
111,682
48,569
152,372
2,601,006
(1) RJF maintains a depository account at RJ Bank which has a balance of $451 million as of September 30, 2015. This cash balance is
reflected in the RJF total, and is excluded from the RJ Bank total, since this balance is available to RJF on-demand and without
restriction.
(2) RJF has loaned $494 million to RJ&A as of September 30, 2015, which RJ&A has invested on behalf of RJF in cash and cash equivalents
or otherwise deployed in its normal business activities.
In addition to the liquidity on hand described above, we have other various potential sources of liquidity which are described
below.
Liquidity Available from Subsidiaries
Liquidity is principally available to the parent company from RJ&A and RJ Bank.
RJ&A is required to maintain net capital equal to the greater of $1 million or 2% of aggregate debit items arising from client
transactions. Covenants in RJ&A’s committed secured financing facilities require its net capital to be a minimum of 10% of
aggregate debit items. At September 30, 2015, RJ&A significantly exceeded both the minimum regulatory and its financing
covenants net capital requirements. At that date, RJ&A had excess net capital of approximately $372 million, of which
approximately $115 million is available for dividend while still maintaining the internally-imposed net capital ratio of 15% of
aggregate debit items. There are also limitations on the amount of dividends that may be declared by a broker-dealer without
FINRA approval.
RJ Bank may pay dividends to the parent company without prior approval by its regulator as long as the dividend does not
exceed the sum of RJ Bank’s current calendar year and the previous two calendar years’ retained net income, and RJ Bank maintains
its targeted capital to risk-weighted assets ratios. At September 30, 2015, RJ Bank had approximately $210 million of capital in
excess of the amount it would need at September 30, 2015 to maintain its targeted risk-weighted assets ratio of 12.5%.
Although we have liquidity available to us from our other subsidiaries, the available amounts are not as significant as the
amounts described above, and in certain instances may be subject to regulatory requirements.
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Index
Borrowings and Financing Arrangements
The following table presents our committed and uncommitted financing arrangements with third party lenders and the
outstanding balances related thereto, as of September 30, 2015.
As of September 30, 2015
RJ&A(3)
RJ Ltd.
RJF
Total
($ in thousands)
$
$
$
$
$
$
$
300,000
—
2,400,000
375,000
3,075,000
65,000
—
374,535
—
439,535
$
(4)
—
—
33,974
—
33,974
—
—
—
—
—
$
$
$
$
(5)
—
300,000
—
50,000
350,000
—
—
—
—
—
$
$
$
$
300,000
300,000
2,433,974
425,000
3,458,974
65,000
—
374,535
—
439,535
Total number
of
counterparties
3
1
10
7
21
Financing arrangement:
Committed secured (1)
Committed unsecured
Uncommitted secured(1)(2)
Uncommitted unsecured(1)(2)
Total financing arrangements
Outstanding borrowing amount:
Committed secured (1)
Committed unsecured
Uncommitted secured(1)(2)
Uncommitted unsecured(1)(2)
Total outstanding borrowing
amount
(1) Our ability to borrow is dependent upon compliance with the conditions in the various committed loan agreements and collateral
eligibility requirements.
(2) Lenders are under no contractual obligation to lend to us under uncommitted credit facilities.
(3) We generally utilize the RJ&A facilities to finance a portion of our fixed income securities trading instruments.
(4) This financing arrangement is primarily denominated in Canadian currency, amounts presented in the table have been converted to
U.S. dollars at the currency exchange rate in effect as of September 30, 2015.
(5) On August 6, 2015, RJF entered into a revolving credit facility agreement in which the lenders are a number of financial institutions.
This unsecured borrowing facility provides for maximum borrowings of up to $300 million, at variable rates, with a facility maturity
date of August 6, 2020 (see Note 15 of our Notes to Consolidated Financial Statements in this Form 10-K for additional information
regarding this borrowing arrangement).
The committed financing arrangements are in the form of either tri-party repurchase agreements or secured lines of credit. The
uncommitted financing arrangements are in the form of secured lines of credit, secured bilateral or tri-party repurchase agreements,
or unsecured lines of credit.
We maintain three unsecured settlement lines of credit available to our Argentine joint venture in the aggregate amount of
$11.3 million. Of the aggregate amount, one settlement line for $9 million is guaranteed by RJF. There were no borrowings
outstanding on these lines of credit as of September 30, 2015.
RJ Bank had $550 million in FHLB advances outstanding at September 30, 2015, comprised of two floating-rate advances,
one in the amount of $250 million and the second in the amount of $300 million. Both FHLB advances are secured by a blanket
lien on RJ Bank’s residential loan portfolio (see Note 15 of the Notes to Consolidated Financial Statements in this Form 10-K for
additional information regarding these borrowings). RJ Bank has an additional $878 million in immediate credit available from
the FHLB as of September 30, 2015 and total available credit of 30% of total assets with the pledge of additional collateral to the
FHLB. On October 9, 2013, RJ Bank entered into a forward-starting advance transaction with the FHLB to borrow $25 million
on October 13, 2015. This borrowing was funded subsequent to our year-end, bears interest at the rate of 3.4%, and matures on
October 13, 2020.
RJ Bank is eligible to participate in the Fed’s discount-window program; however, RJ Bank does not view borrowings from
the Fed as a primary means of funding. The credit available in this program is subject to periodic review, may be terminated or
reduced at the discretion of the Fed, and would be secured by pledged C&I loans.
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From time to time we purchase short-term securities under agreements to resell (“Reverse Repurchase Agreements”) and sell
securities under agreements to repurchase (“Repurchase Agreements”). We account for each of these types of transactions as
collateralized financings with the outstanding balances on the Repurchase Agreements included in securities sold under agreements
to repurchase. At September 30, 2015, collateralized financings outstanding in the amount of $333 million are included in securities
sold under agreements to repurchase on the Consolidated Statements of Financial Condition. Of this total, outstanding balances
on the committed and uncommitted Repurchase Agreements (which are reflected in the table of financing arrangements above)
were $65 million and $260 million, respectively, as of September 30, 2015. Such financings are generally collateralized by non-
customer, RJ&A owned securities. The required market value of the collateral associated with the committed secured facilities
ranges from 102% to 140% of the amount financed.
The average daily balance outstanding during the five most recent successive quarters, the maximum month-end balance
outstanding during the quarter and the period end balances for Repurchase Agreements and Reverse Repurchase Agreements of
RJF are as follows:
Repurchase transactions
Maximum
month-end
balance
outstanding
during the
quarter
Average daily
balance
outstanding
Reverse repurchase transactions
Maximum
month-end
balance
outstanding
during the
quarter
End of period
balance
outstanding
End of period
balance
outstanding
Average daily
balance
outstanding
For the quarter ended:
$
September 30, 2015
June 30, 2015
March 31, 2015
December 31, 2014
September 30, 2014
$
280,934
233,451
253,328
252,981
238,841
$
332,536
255,870
351,168
337,107
260,323
(in thousands)
$
332,536
251,769
277,383
337,107
244,495
$
432,131
425,342
446,965
479,851
458,158
$
498,871
445,591
537,919
576,249
495,286
474,144
416,516
469,503
384,129
446,016
At September 30, 2015, in addition to the financing arrangements described above, we had $38 million outstanding on a
mortgage loan for our St. Petersburg, Florida home-office complex, that we include in other borrowings on our Consolidated
Statements of Financial Condition.
At September 30, 2015 we have senior notes payable of $1.15 billion. The balance is comprised of $350 million outstanding
on our 6.90% senior notes due 2042, $249 million outstanding on our 5.625% senior notes due 2024, $300 million outstanding
on our 8.60% senior notes due August 2019, and $250 million outstanding on our 4.25% senior notes due April 2016.
Our current senior long-term debt ratings are:
Rating Agency
Standard & Poor’s Ratings Services (“S&P”)
Moody’s Investors Services (“Moody’s”)
Rating
BBB
Baa2
Outlook
Positive
Positive
The S&P rating and outlook reflected above are as presented in their December, 2014 report.
The Moody’s rating and outlook reflected above are as presented in their June, 2015 report.
Our current long-term debt ratings depend upon a number of factors including industry dynamics, operating and economic
environment, operating results, operating margins, earnings trends and volatility, balance sheet composition, liquidity and liquidity
management, our capital structure, our overall risk management, business diversification and our market share, and competitive
position in the markets in which we operate. Deteriorations in any of these factors could impact our credit ratings. Any rating
downgrades could increase our costs in the event we were to pursue obtaining additional financing.
Should our credit rating be downgraded prior to a public debt offering it is probable that we would have to offer a higher rate
of interest to bond holders. A downgrade to below investment grade may make a public debt offering difficult to execute on terms
we would consider to be favorable. A downgrade below investment grade could also result in the termination of certain derivative
contracts and the counterparties to the derivative instruments could request immediate payment or demand immediate and ongoing
overnight collateralization on our derivative instruments in liability positions (see Note 18 of our Notes to Consolidated Financial
Statements in this Form 10-K for additional information). A credit downgrade could create a reputational issue and could also
result in certain counterparties limiting their business with us, result in negative comments by analysts and potentially impact
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Index
investor perception of us, and resultantly impact our stock price and/or our clients’ perception of us. A credit downgrade would
result in RJF incurring a higher commitment fee on any unused balance on its $300 million revolving credit facility executed on
August 6, 2015, in addition to triggering a higher interest rate applicable to any borrowings outstanding on the line as of and
subsequent to such downgrade. Conversely, an improvement in RJF’s current credit rating would have a favorable impact on the
commitment fee as well as the interest rate applicable to any borrowings on such line. None of our credit agreements contain a
condition or event of default related to our credit ratings.
Other sources of liquidity
We own life insurance policies which are utilized to fund certain non-qualified deferred compensation plans and other employee
benefit plans. The policies which we could readily borrow against have a cash surrender value of approximately $252 million as
of September 30, 2015 and we are able to borrow up to 90%, or $226 million of the total, without restriction. There are no
borrowings outstanding against any of these policies as of September 30, 2015.
On May 22, 2015 we filed a “universal” shelf registration statement with the SEC to be in a position to access the capital
markets if and when necessary or perceived by us to be opportune.
See the “contractual obligations” section below for information regarding our contractual obligations.
Potential impact of Morgan Keegan matters subject to indemnification by Regions on our liquidity
As more fully described in Note 21 in the Notes to Consolidated Financial Statements in this Form 10-K, the Stock Purchase
Agreement effective on the Closing Date between RJF and Regions regarding our acquisition of all of the issued and outstanding
shares of Morgan Keegan provides that in addition to customary indemnity for breaches of representations and warranties and
covenants, Regions will indemnify RJF for losses incurred in connection with any litigation or similar matter related to pre-closing
activities. For matters that are received within three years from the closing date, or through April 2, 2015, the indemnifications
survive until such matters are resolved. As a result of these indemnifications and after consideration of the expiration of certain
of these indemnification provisions, we do not anticipate the resolution of any pre-Closing Date Morgan Keegan litigation matters
to negatively impact our liquidity (see Note 21 of the Notes to Consolidated Financial Statements in this Form 10-K, and Part I
Item 3 - Legal Proceedings, in this report, for further information regarding the nature of the pre-Closing Date matters).
Potential impact of on our liquidity from the scheduled maturity of senior notes payable
One of our senior note issuances, the 4.25% senior notes with an aggregate principal amount of $250 million, matures in
April, 2016. Should we ultimately elect not to refinance, the repayment of the principal on the maturity date would reduce our
liquidity.
Statement of financial condition analysis
The assets on our consolidated statement of financial condition consist primarily of cash and cash equivalents (a large portion
of which is segregated for the benefit of clients), receivables including bank loans, financial instruments held for either trading
purposes or as investments, and other assets. A significant portion of our assets are liquid in nature, providing us with flexibility
in financing our business.
Total assets of $26.5 billion at September 30, 2015 are approximately $3.15 billion, or 14%, more than our total assets as of
September 30, 2014. Net bank loans receivable increased $2.02 billion due to significant growth of RJ Bank’s net loan portfolio
during the year. Assets segregated pursuant to regulations and other segregated assets, which are primarily comprised of cash or
qualified securities in segregated reserve accounts for the exclusive benefit of clients, increased $416 million at September 30,
2015 compared to September 30, 2014, resulting from an increase brokerage client payables (refer to the discussion of the increase
in the related payable balance in the following paragraph). Cash and cash equivalents increased $402 million, refer to the discussion
of the various sources and uses of cash during the period in the preceding liquidity and capital resources section of this MD&A.
Loans to financial advisors increased $64 million, net of repayments, reflecting successful recruiting results over the year. The
investment balance associated with our available for sale securities portfolio decreased $49 million primarily as a result of
redemptions, maturations, or sales of certain securities in the portfolio offset by additional investments made in such securities
by RJ Bank during the year.
Our liabilities at September 30, 2015 of $21.7 billion are $2.80 billion, or 15%, more than our liabilities as of September 30,
2014. The increase in liabilities is primarily due to the following: an increase in bank deposit liabilities of $1.89 billion, reflecting
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Index
increased deposits at RJ Bank, a $715 million increase in brokerage client payables (refer to the related increase in assets segregated
pursuant to regulations and other segregated assets discussed in the preceding paragraph).
Contractual obligations
The following table sets forth our contractual obligations:
Total
2016
2017
2018
2019
2020
Thereafter
Year ended September 30,
(in thousands)
Long-term debt obligations:
Senior notes payable (1)
Loans payable of consolidated variable
interest entities(2)
Long-term portion of other borrowings(3)
Committed borrowing by RJ Bank (4)
Sub-total long-term debt obligations
Estimated interest on long-term debt (5)
Operating lease obligations (6)
Purchase obligations (7)
Other long-term liabilities:(8)
Time deposits (9)
Deferred compensation programs (10)
Legal liabilities associated with matters
subject to indemnification (11)
Low income housing tax credit
guarantee obligation (12)
Sub-total long-term liabilities
$ 1,149,222
$ 249,946
$
— $
— $ 299,980
$
— $
599,296
25,960
588,065
13,363
4,325
—
(25,000)
8,240
554,578
—
3,668
5,195
—
689
5,130
—
1,763,247
242,634
562,818
8,863
305,799
907,957
369,198
222,496
85,794
79,758
122,762
354,917
329,588
65,999
52,131
71,076
69,834
47,427
76,296
55,239
67,151
57,851
29,662
44,381
51,387
66,868
49,003
19,190
74,756
53,996
—
5,430
—
5,430
40,655
40,027
2,033
93,485
47,175
—
13,407
25,000
637,703
576,413
72,725
1,422
—
69,660
142,856
64,285
64,285
14,286
—
—
—
24,452
3,910
4,757
5,247
5,388
2,372
851,813
186,325
200,577
115,301
134,140
143,032
2,778
72,438
Total contractual obligations
$ 4,114,711
$ 717,273
$ 951,732
$ 278,828
$ 575,000
$ 231,177
$ 1,360,701
(1) See Note 17 of the Notes to Consolidated Financial Statements in this Form 10-K for additional information.
(2) Loans which are non-recourse to us. See further discussion in Note 16 of the Notes to Consolidated Financial Statements in this Form
10-K.
(3) See Note 15 of the Notes to Consolidated Financial Statements in this Form 10-K for additional information.
(4) RJ Bank entered into a forward-starting advance transaction with the FHLB to borrow $25 million on October 13, 2015, this borrowing
matures on October 13, 2020.
(5) Interest computation includes scheduled interest on our senior notes, the mortgage note payable, RJ Bank’s FHLB advances (assuming
no change in the variable interest rate from that as of September 30, 2015, but factoring into the computation the effect of certain
interest rate swap contracts that swap variable interest rate payments to fixed interest payments), and RJ Bank’s committed borrowing
from the FHLB, see Note 15 and Note 17 of the Notes to Consolidated Financial Statements in this Form 10-K for information regarding
the borrowings.
(6) Primarily comprised of outstanding obligations on long-term leases for office space.
(7) In the normal course of our business, we enter into contractual arrangements whereby we commit to future purchases of products or
services from unaffiliated parties. Purchase obligations for purposes of this table, include amounts associated with agreements to
purchase goods or services that are enforceable and legally binding and that specify all significant terms including: minimum quantities
to be purchased, fixed, minimum or variable price provisions, and the approximate timing of the transaction. Our most significant
purchase obligations are vendor contracts for data services, communication services, processing services and computer software
contracts. Most of our contracts have provisions for early termination, for purposes of this table we have assumed we would not pursue
early termination of such contracts.
See the following page for the continuation of the explanations to the footnotes in the above table.
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7146_10K.pdf December 22, 2015 pg 71
Index
Continuation of the footnote explanations pertaining to the table on the previous page.
(8) The table does not include any amounts for uncertain tax positions because we are unable to reasonably predict the timing of future
payments, if any, to respective taxing authorities. We have recorded a liability of $22.5 million as of September 30, 2015 which is
included in trade and other payables on our Consolidated Statements of Financial Condition related to such positions (see Note 20 of
the Notes to Consolidated Financial Statements in this Form 10-K for additional information).
(9) See Note 14 of the Notes to Consolidated Financial Statements in this Form 10-K for additional information.
(10) Includes obligations, presented on a gross basis, of our Long-Term Incentive Plan, our Wealth Accumulation Plan, our Voluntary
Deferred Compensation Program, and certain historic deferred compensation plans of MK & Co. See Notes 24 and 25 of the Notes
to Consolidated Financial Statements in this Form 10-K for additional information regarding such plans. We own life insurance policies
that are not presented in this table which are utilized to fund certain of these obligations. See Note 10 of the Notes to Consolidated
Financial Statements in this Form 10-K for information regarding our investments in company-owned life insurance. We also hold
other investments that are not presented in this table to fund obligations of the historic deferred compensation plans of MK & Co., see
Note 5 of the Notes to Consolidated Financial Statements in this Form 10-K for information regarding the fair value of such investments.
(11) Regions has provided an indemnification to RJF for losses incurred in connection with Morgan Keegan legal proceedings pending as
of the closing date of our Morgan Keegan acquisition, or commenced after the closing date and related to pre-closing date matters.
See Note 21 of the Notes to Consolidated Financial Statements in this Form 10-K for further discussion. Amounts presented in this
table represent the gross liabilities for such matters, and do not reflect the related and offsetting indemnification asset. See Note 10
of the Notes to Consolidated Financial Statements in this Form 10-K for information regarding the indemnification asset. These
liabilities do not have defined maturity dates, however we expect that all such matters will be resolved within three years. We have
estimated the timing associated with the resolution of such matters.
(12) RJTCF has provided a guaranteed return on investment to a third party investor in one of its fund offerings, see Note 21 of the Notes
to Consolidated Financial Statements in this Form 10-K for further discussion. Amounts presented in this table represent the gross
liability associated with this guarantee obligation, and do not reflect the related and offsetting financing asset. See Note 10 of the
Notes to Consolidated Financial Statements in this Form 10-K for information regarding the offsetting financing asset.
We have made a number of investment commitments, either as commitments to fund LIHTC project partnerships, or to venture
capital or private equity partnerships. We have also made commitments to provide loans to prospective financial advisors who
have either accepted our offer, or recently recruited advisors, which have not yet been funded. See Note 21 of the Notes to
Consolidated Financial Statements in this Form 10-K for further information on these and other commitments.
RJ Bank has entered into commitments to extend credit such as unfunded loan commitments, standby letters of credit, open
end consumer and commercial lines of credit. See Note 27 of the Notes to Consolidated Financial Statements in this Form 10-K
for further information on these and other outstanding off-balance credit-related commitments.
We are authorized by the Board of Directors to execute open market purchases of our common stock and certain of our senior
notes, at the discretion of the Securities Repurchase Committee. See Item 5 in this Form 10-K for additional information regarding
this authorization.
In the normal course of business, certain of our subsidiaries act as general partner and may be contingently liable for activities
of various limited partnerships. These partnerships engage primarily in real estate activities. In our opinion, such liabilities, if
any, for the obligations of the partnerships will not in the aggregate have a material adverse effect on our consolidated financial
position.
Regulatory
Refer to the discussion of the regulatory environment in which RJF and its subsidiaries operate, and the impact on our operations
of certain new rules and regulations arising from the Dodd-Frank Act which have been implemented to-date, as well as a discussion
of the potential impact that certain proposed rules may have on our business, in the Item 1 Business, Regulation section in this
report.
RJ&A, RJFS, Eagle Fund Distributors, Inc. and Raymond James (USA) Ltd. all had net capital in excess of minimum
requirements as of September 30, 2015.
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RJ Ltd. is subject to the Minimum Capital Rule (Dealer Member Rule No. 17 of IIROC and the Early Warning System (Dealer
Member Rule No. 30 of IIROC)). See the discussion in Note 26 of the Notes to Consolidated Financial Statements in this Form
10-K, where each of these rules is described. RJ Ltd. is not in Early Warning Level 1 or Level 2 at September 30, 2015.
RJF and RJ Bank are subject to various regulatory and capital requirements. RJF and RJ Bank met the requirements to be
categorized as “well capitalized” as of September 30, 2015. One of RJ Bank’s U.S. subsidiaries is an agreement corporation and
is also subject to regulation by the Fed. As of September 30, 2015, this RJ Bank subsidiary met the capital adequacy guideline
requirements.
The maintenance of certain risk-based regulatory capital levels could impact various capital allocation decisions impacting
one or more of our businesses. However, due to the strong capital position of RJF and its regulated subsidiaries, we do not anticipate
these capital requirements will have any negative impact on our future business activities.
See Note 26 of the Notes to Consolidated Financial Statements in this Form 10-K for further information on regulatory and
capital requirements.
Critical accounting estimates
The consolidated financial statements are prepared in accordance with GAAP, which require us to make estimates and
assumptions that affect the reported amounts of assets and liabilities and the reported amounts of revenues and expenses during
any reporting period in our consolidated financial statements. Management has established detailed policies and control procedures
intended to ensure the appropriateness of such estimates and assumptions and their consistent application from period to period.
For a description of our significant accounting policies, see Note 2 of the Notes to Consolidated Financial Statements in this Form
10-K.
We believe that of our accounting estimates and assumptions, those described below involve a high degree of judgment and
complexity. Due to their nature, estimates involve judgment based upon available information. Actual results or amounts could
differ from estimates and the difference could have a material impact on the consolidated financial statements. Therefore,
understanding these critical accounting estimates is important in understanding the reported results of our operations and our
financial position.
Valuation of certain financial instruments, investments and other assets
The use of fair value to measure financial instruments, with related gains or losses recognized in our Consolidated Statements
of Income and Comprehensive Income, is fundamental to our financial statements and our risk management processes.
“Trading instruments” and “available for sale securities” are reflected in the Consolidated Statements of Financial Condition
at fair value or amounts that approximate fair value. Unrealized gains and losses related to these financial instruments are reflected
in our net income or our total comprehensive income, depending on the underlying purpose of the instrument.
We measure the fair value of our financial instruments in accordance with GAAP, which defines fair value, establishes a
framework that we use to measure fair value and provides for certain disclosures we provide about our fair value measurements
included in our financial statements. Refer to Notes 5 and 6 in our Notes to Consolidated Financial Statements in this Form 10-
K for these disclosures.
Fair value is defined by GAAP 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 willing market
participants on the measurement date. We determine the fair values of our financial instruments and any other assets and liabilities
required by GAAP to be recognized at fair value in the financial statements as of the close of business of each financial statement
reporting period. These fair value determination processes also apply to any of our impairment tests or assessments performed for
nonfinancial instruments such as goodwill, identifiable intangible assets, certain real estate owned and other long-lived assets.
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In determining the fair value of our financial instruments in accordance with GAAP, we use various valuation approaches,
including market and/or income approaches. Fair value is a market-based measure considered from the perspective of a market
participant. As such, even when assumptions from market participants are not readily available, our own assumptions reflect those
that we believe market participants would use in pricing the asset or liability at the measurement date. GAAP provides for the
following three levels to be used to classify our fair value measurements:
Level 1-Financial instruments included in Level 1 are highly liquid instruments with quoted prices in active markets for
identical assets or liabilities. These include equity securities traded in active markets and certain U. S. Treasury securities,
other governmental obligations, or publicly traded corporate debt securities.
Level 2-Financial instruments reported in Level 2 include those that have pricing inputs that are other than quoted prices in
active markets, but which are either directly or indirectly observable as of the reporting date (i.e. prices for similar instruments).
Instruments that are generally included in this category are equity securities that are not actively traded, corporate obligations
infrequently traded, certain government and municipal obligations, interest rate swaps, certain asset-backed securities (“ABS”),
certain collateralized mortgage obligations (“CMOs”), certain MBS, our derivative instruments, corporate loans and
nonrecurring fair value measurements for certain loans held for sale, impaired loans and other real estate owned (“OREO”).
Level 3-Financial instruments reported in Level 3 have little, if any, market activity and are measured using our best estimate
of fair value, where the inputs into the determination of fair value are both significant to the fair value measurement and
unobservable. These valuations require significant judgment or estimation. Instruments in this category generally include:
equity securities with unobservable inputs such as those investments made in our principal capital activities, certain non-
agency ABS, pools of interest-only Small Business Administration (“SBA”) loan strips (“I/O Strips”), certain municipal and
corporate obligations which include ARS, and nonrecurring fair value measurements for certain impaired loans.
GAAP requires that we maximize the use of observable inputs and minimize the use of unobservable inputs when performing
our fair value measurements. 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. Our 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.
See Notes 5, 6, 7 and 18 of the Notes to Consolidated Financial Statements in this Form 10-K for additional information on
our financial instruments.
Level 3 assets and liabilities
As of September 30, 2015, 7.9% of our total assets and 3.2% of our total liabilities are financial instruments measured at fair
value on a recurring basis. As of September 30, 2014, financial instruments measured at fair value on a recurring basis represented
8.6% of our total assets and 3% of our total liabilities.
Financial instruments measured at fair value on a recurring basis categorized as Level 3 amount to $356 million as of
September 30, 2015 and represent 17% of our assets measured at fair value. Of the Level 3 assets as of September 30, 2015, our
private equity investments comprise $209 million, or 59%, of the total, and our ARS positions comprise $139 million, or 39%, of
the total. Our Level 3 assets decreased $62 million, or 15%, as compared to the September 30, 2014 level, primarily as a result
of sales and redemptions of ARS which generated proceeds of $64 million and a gain of $11 million in the year ended September
30, 2015 (see Note 7 of the Notes to Consolidated Financial Statements in this Form 10-K for additional information). Level 3
assets represent 7.4% of total equity as of September 30, 2015, reflecting a decrease from the 9.4% of total equity measure as of
September 30, 2014.
Financial instruments which are liabilities categorized as Level 3 amount to $58 thousand as of September 30, 2015 and
represent less than 1% of liabilities measured at fair value, which is unchanged from such measure at September 30, 2014.
Valuation techniques
The fair value for certain of our 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 our 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 GAAP, the criteria used to determine whether the market for a financial
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instrument is active or inactive is based on the particular asset or liability. For equity securities, our definition of actively traded
is based on average daily volume and other market trading statistics. We have determined the market for certain other types of
financial instruments, including certain CMOs, ABS, certain collateralized debt obligations and ARS, to be volatile, uncertain or
inactive as of both September 30, 2015 and 2014. As a result, the valuation of these financial instruments included significant
management judgment in determining the relevance and reliability of market information available. We considered the inactivity
of the market to be evidenced by several factors, including a continued 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 categorization of certain financial instruments with the most significant
carrying values that are presented in our Consolidated Statements of Financial Condition as of September 30, 2015 are described
below.
Trading instruments and trading instruments sold but not yet purchased
Trading securities are comprised primarily of the financial instruments held by our broker-dealer subsidiaries (see Note 6 of
the Notes to Consolidated Financial Statements in this Form 10-K for more information). When available, we use quoted prices
in active markets to determine the fair value of these securities. Such instruments are classified within Level 1 of the fair value
hierarchy. Examples include exchange traded equity securities and liquid government debt securities. As of September 30, 2015,
7% of our gross trading security assets and 62% of our gross trading securities sold but not yet purchased, are classified as Level
1 of the fair value hierarchy.
When instruments are traded in secondary markets and quoted market prices do not exist for such securities, we utilize 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. We utilize prices from independent services to corroborate our 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. As of September 30, 2015, 93% of our gross trading security assets and 38% of our gross trading
securities sold but not yet purchased, are classified as Level 2 of the fair value hierarchy.
Positions in illiquid trading securities that do not have readily determinable fair values require significant judgment or
estimation. For these securities, we use pricing models, discounted cash flow methodologies, or similar techniques. Assumptions
utilized by these techniques include estimates of future delinquencies, loss severities, defaults and prepayments, or redemptions.
Securities valued using these techniques are classified within Level 3 of the fair value hierarchy. 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 within Level 3 of the fair value hierarchy. As of September 30,
2015, less than 1% of our gross trading security assets, and none of our trading instruments sold but not yet purchased, are classified
as Level 3 of the fair value hierarchy.
We enter into derivatives contracts as part of our fixed income operations in either over-the-counter market activities, or
through “matched book” activities. See Note 18 of the Notes to Consolidated Financial Statements in this Form 10-K for more
information.
Fair values for the interest rate derivative contracts arising from our over-the-counter market activities are obtained from
internal pricing models that consider current market trading levels and the contractual prices for the underlying financial instruments,
as well as time value, yield curve and other volatility factors underlying the positions. Since our model inputs can be observed
in a liquid market and the models do not require significant judgment, such derivative contracts are classified within Level 2 of
the fair value hierarchy. We utilize values obtained from third party counterparty derivatives dealers to corroborate the output of
our internal pricing models. The fair value of any cash collateral exchanged as part of the interest rate swap contract is netted, by
counterparty, against the fair value of the derivative instrument.
Fair value for our matched book derivatives are determined using an internal model which includes inputs from independent
pricing sources to project future cash flows under each underlying derivative contract. The cash flows are discounted to determine
the present value. Since any changes in fair value are completely offset by an opposite change in the offsetting transaction position,
there is no net impact on our Consolidated Statements of Income and Comprehensive Income from changes in the fair value of
these derivative instruments. We record the value of each matched book derivative position held at fair value, as either an asset
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or an offsetting liability, presented as “derivative instruments associated with offsetting matched book positions” as applicable,
on our Consolidated Statements of Financial Condition.
RJ Bank enters into three month forward foreign exchange contracts to hedge the risk related to their investment in their
Canadian subsidiary. These derivatives are recorded at fair value on the Consolidated Statements of Financial Condition, the
majority of which are designated as net investment hedges. The fair value of RJ Bank’s forward foreign exchange contracts is
determined by obtaining valuations from a third party pricing service. These third party valuations are based on observable inputs
such as spot rates, foreign exchange rates and both U.S. and Canadian interest rate curves. We validate the observable inputs
utilized in the third party valuation model by preparing an independent calculation using a secondary, third party valuation model.
These forward foreign exchange contracts are classified within Level 2 of the fair value hierarchy.
We enter into certain interest rate swap contracts (the “RJ Bank Interest Hedges”) which swap variable interest payments on
debt for fixed interest payments. Through the RJ Bank Interest Hedges, RJ Bank is able to mitigate a portion of the market risk
associated with certain fixed rate interest earning assets held by RJ Bank. The RJ Bank Interest Hedges are recorded at fair value
on the Consolidated Statements of Financial Condition and are designated as cash flow hedges. The fair value of RJ Bank Interest
Hedges is obtained from internal pricing models that consider current market trading levels and the contractual prices for the
underlying financial instruments, as well as time value, yield curve and other volatility factors underlying the positions. Since our
model inputs can be observed in a liquid market and the models do not require significant judgment, such derivative contracts are
classified within Level 2 of the fair value hierarchy. We utilize values obtained from a third party to corroborate the output of our
internal pricing models.
Available for sale securities
Available for sale securities are comprised primarily of MBS, CMOs, and other equity securities held predominately by RJ
Bank (the “RJ Bank AFS Securities”), and ARS held by a non-broker-dealer subsidiary of RJF (collectively referred to as the “RJF
AFS Securities”). Of the RJF AFS Securities, 73% of the portfolio is classified as Level 2 and 27% is classified as Level 3, of
the fair value hierarchy.
Debt and equity securities classified as available for sale are reported at fair value with unrealized gains and losses, net of
deferred taxes, recorded through other comprehensive (loss) income and thereafter presented in shareholders’ equity as a component
of accumulated other comprehensive (loss) income (“AOCI”) 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. Realized gains and losses on sales of such securities
are recognized using the specific identification method and reflected in other revenue in the period they are sold.
The fair value of agency and non-agency securities included within the RJ Bank AFS Securities is determined by obtaining
third party pricing service bid quotations from two independent pricing services. Third party pricing service bid quotations are
based on either current market data, or for any securities traded in markets where the trading activity has slowed such as the CMO
market, the most recently available market data. The third party pricing services provide comparable price evaluations utilizing
available market data for similar securities. The market data the third party pricing services utilize for these price evaluations
includes observable data comprised of benchmark yields, reported trades, broker-dealer quotes, issuer spreads, two-sided markets,
benchmark securities, bids, offers, reference data including market research publications, and loan performance experience. In
order to validate that the pricing information used by the primary third party pricing service is observable, we request, on a quarterly
basis, some of the key market data available for a sample of securities and compare this data to that which we observed in our
independent accumulation of market information. Securities valued using these valuation techniques are classified within Level
2 of the fair value hierarchy.
For non-agency securities within the RJ Bank AFS Securities where a significant difference exists between the primary third
party pricing service bid quotation and the secondary third party pricing service, we utilize a discounted cash flow analysis to
determine which third party price quote is more representative of fair value under the current market conditions. The fair values
for most non-agency securities at September 30, 2015 were based on the respective primary third party pricing service bid quotation.
Securities measured using these valuation techniques are generally classified within Level 2 of the fair value hierarchy.
ARS are long-term variable rate securities tied to short-term interest rates that were intended to be reset through a “Dutch
auction” process, which generally occurs every seven to 35 days. Holders of ARS were previously able to liquidate their holdings
to prospective buyers by participating in the auctions. During 2008, the Dutch auction process failed and holders were no longer
able to liquidate their holdings through the auction process. The fair value of the ARS holdings is estimated based on internal
pricing models. The pricing model takes into consideration the characteristics of the underlying securities, as well as multiple
inputs including the issuer and its credit quality, data from any recent trades, the expected timing of redemptions and an estimated
yield premium that a market participant would require over otherwise comparable securities to compensate for the illiquidity of
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the ARS. These inputs require significant management judgment and, accordingly, these securities are classified within Level 3
of the fair value hierarchy.
For any RJF AFS Securities in an unrealized loss position at the reporting period end, we make an assessment whether these
securities are impaired on an other-than-temporary basis. In order to evaluate our risk exposure and any potential impairment of
these securities, on at least a quarterly basis, we review the characteristics of each security owned such as, where applicable,
collateral type, delinquency and foreclosure levels, credit enhancement, projected loan losses, collateral coverage, the presence
of U.S. government or government agency guarantees, and issuer credit rating. The following factors are considered to determine
whether an impairment is other-than-temporary: our intention to sell the security, our assessment of whether it is more likely than
not that we will be required to sell the security before the recovery of its amortized cost basis, and whether the evidence indicating
that we will recover the amortized cost basis of a security in full 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, and forecasted performance of the security. 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 net of deferred taxes
in other comprehensive (loss) income and are thereafter presented in equity as a component of AOCI. 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 other-than-temporary impairment recognized in earnings
establishes the new cost basis for the security.
For any RJF AFS Securities, we estimate the portion of loss attributable to credit using a discounted cash flow model. For RJ
Bank AFS Securities, our discounted cash flow model utilizes relevant assumptions such as prepayment rate, default rate, and loss
severity on a loan level basis. These assumptions are subject to change depending on a number of factors such as economic
conditions, changes in home prices, and delinquency and foreclosure statistics, among others. Events that may trigger material
declines in fair values or additional credit losses 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.
Private equity investments
Private equity investments, held in our Other segment, consist of various direct and third party private equity investments and
comprise 59% of all of our Level 3 assets as of September 30, 2015. 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.
As a result, these values cannot be determined with precision and the calculated fair value estimates may not be realizable in a
current sale or immediate settlement of the instrument.
Private equity investments are carried at estimated fair value. They 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. The carrying values
of these investments are adjusted based on financial performance, investment-specific events, financing and sales transactions
with third parties and/or discounted cash flow models incorporating changes in market outlook. Investments in funds structured
as limited partnerships are generally valued based on our proportionate share of the net assets of the partnership as provided by
the fund manager. Investments valued using these valuation techniques are classified within Level 3 of the fair value hierarchy.
Goodwill impairment
Goodwill, under GAAP, must be allocated to reporting units and tested for impairment at least annually. The annual goodwill
impairment testing involves the application of significant management judgment, especially when estimating the fair value of its
reporting units.
We perform goodwill testing on an annual basis or when an event occurs or circumstances change that would more likely
than not reduce the fair value of a reporting unit below its carrying value. We have elected December 31 as our annual goodwill
impairment evaluation date. During the quarter ended March 31, 2015, we performed a qualitative assessment evaluating the
balances as of December 31, 2014 for each reporting unit that includes an allocation of goodwill to determine whether it is more
likely than not that the carrying value of such reporting unit, including the recorded goodwill, is in excess of the fair value of the
reporting unit. In any instance in which we are unable to qualitatively conclude that it is more likely than not that the fair value
of the reporting unit exceeds the reporting unit carrying value including goodwill, a quantitative analysis of the fair value of the
reporting unit would be performed. Based upon the outcome of our qualitative assessment, we determined that no quantitative
analysis of the fair value of any reporting unit as of December 31, 2014 was required, and we concluded that none of the goodwill
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allocated to any of our reporting units as of December 31, 2014 was impaired. No events have occurred since December 31, 2014
that would cause us to update our latest annual impairment testing.
Of our total September 30, 2015 goodwill balance of $308 million: $230 million arose from our fiscal year 2012 acquisition
of Morgan Keegan, $33 million arose from our fiscal year 2001 acquisition of Goepel McDermid, Inc. (now RJ Ltd.), $30 million
arose from our fiscal year 1999 acquisition of Roney & Co. (now part of RJ&A), $2 million arose from our fiscal year 2011
acquisition of Howe Barnes Hoefer & Arnett, and $12 million arose from our fiscal year 2015 acquisition of TPC (refer to Note
13 of the Notes to Consolidated Financial Statements in this Form 10-K for more information). This goodwill was allocated to
reporting units; $187 million is included in the PCG segment and $121 million is included in the Capital Markets segment.
Deterioration in economic market conditions, especially those impacting revenues reported in our PCG and Capital Markets
segments, as well as increased costs arising from the effects of recent regulatory or legislative changes, may result in declines in
reporting unit performance beyond management’s current expectations. Declines in reporting unit performance, increases in equity
capital requirements, or increases in the estimated cost of equity, could cause the estimated fair values of our reporting units or
their associated goodwill to decline, which could result in a material impairment charge to earnings in a future period related to
some portion of the associated goodwill.
Loss provisions
Loss provisions arising from legal proceedings
The recorded amount of liabilities related to legal proceedings is subject to significant management judgment. For a description
of the significant estimates and judgments associated with establishing legal liabilities, see the “Legal liabilities” section of Note
2 of the Notes to Consolidated Financial Statements in this Form 10-K.
Loss provisions arising from operations of our Broker-Dealers
The recorded amount of liabilities associated with brokerage client receivables and loans to financial advisors and certain key
revenue producers, is subject to significant management judgment. For a description of the significant estimates and judgments
associated with establishing these broker-dealer related liabilities, see the “Brokerage client receivables, loans to financial advisors
and allowance for doubtful accounts” section of Note 2 of the Notes to Consolidated Financial Statements in this Form 10-K.
Loan loss provisions arising from operations of RJ Bank
RJ Bank provides an allowance for loan losses which reflects our continuing evaluation of the probable losses inherent in the
loan portfolio. Refer to Note 2 of the Notes to Consolidated Financial Statements in this Form 10-K for discussion of RJ Bank’s
policies regarding the allowance for loan losses, and refer to Note 9 of the Notes to Consolidated Financial Statements in this
Form 10-K for quantitative information regarding the allowance balances as of September 30, 2015.
At September 30, 2015, the amortized cost of all RJ Bank loans was $13.2 billion and an allowance for loan losses of $172.3
million was recorded against that balance. The total allowance for loan losses is equal to 1.32% of the amortized cost of the loan
portfolio.
The uncertainty of the real estate and credit markets continues to influence the complexity involved in estimating the losses
inherent in RJ Bank’s loan portfolio. If our underlying assumptions and judgments prove to be inaccurate, the allowance for loan
losses could be insufficient to cover actual losses. In such an event, any losses would result in a decrease in our net income as well
as a decrease in the level of regulatory capital at RJ Bank.
Income taxes
The objectives of accounting for income taxes are to recognize the amount of taxes payable or refundable for the current year.
We utilize the asset and liability method to provide income taxes on all transactions recorded in the consolidated financial statements.
This method requires that income taxes reflect the expected future tax consequences of temporary differences between the carrying
amounts of assets or liabilities for book and tax purposes. Accordingly, a deferred tax asset or liability for each temporary difference
is determined based on the tax rates that we expect to be in effect when the underlying items of income and expense are realized.
Judgment is required in assessing the future tax consequences of events that have been recognized in our financial statements or
tax returns, including the repatriation of undistributed earnings of foreign subsidiaries. Variations in the actual outcome of these
future tax consequences could materially impact our financial position, results of operations, or liquidity.
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We have provided for U.S. deferred income taxes on undistributed earnings not considered permanently reinvested in our
non-U.S. subsidiaries. To the extent that the cumulative undistributed earnings of non-U.S. subsidiaries are considered to be
permanently invested, no deferred U.S. federal income taxes have been provided. Because the time or manner of repatriation is
uncertain, we cannot determine the impact of local taxes, withholding taxes and foreign tax credits associated with the future
repatriation of such earnings, and therefore cannot quantify the tax liability that would be payable in the event all such foreign
earnings are repatriated. At the present time, we have no plans or intentions to repatriate funds for which no U.S. income tax has
been provided.
See Note 20 of the Notes to Consolidated Financial Statements in this Form 10-K for further information.
Effects of recently issued accounting standards, and accounting standards not yet adopted
In March 2013, the FASB issued new guidance intended to clarify the applicable guidance for the release of the cumulative
translation adjustment when either an entity ceases to have a controlling financial interest in a subsidiary or involving an equity
method investment that is a foreign entity. The new guidance is intended to resolve the diversity in current practice in the accounting
for the release of the cumulative translation adjustment into net income for sales or transfers of a controlling financial interest that
is in a foreign entity. This new guidance first became effective for our financial report covering the quarter ended December 31,
2014. Given that this guidance applies to entity specific transactions and we have had no transactions during fiscal year 2015
which it applies, this guidance has had no impact on our financial position or results of operations.
In June 2013, the FASB issued new guidance intended to amend the scope, measurement and disclosure requirements for
investment companies. The new guidance is intended to change the approach to the investment company assessment, clarify the
characteristics of an investment company, require an investment company to measure noncontrolling ownership interests in other
investment companies at fair value and requires additional disclosures about the investment company. This new guidance became
effective for our financial report covering the quarter ending December 31, 2014. The adoption of this new guidance did not have
any material impact on our financial position, results of operations or disclosures.
In January 2014, the FASB issued new guidance which allows investors in Low Income Housing Tax Credit programs that
meet specified conditions to present the net tax benefits (net of amortization of the cost of the investment) within income tax
expense. The cost of the investments that meet the specified conditions will be amortized in proportion to (and over the same
period as) the total expected tax benefits, including tax credits and other tax benefits as they are realized on the tax return. This
new guidance is first effective for our financial report covering the quarter ending December 31, 2015, early adoption is permitted.
Based upon the nature of our current investments in LIHTC structures, we do not meet the specified conditions which allow for
election of this accounting treatment and thus this new guidance will not have any direct impact on our financial position or results
of operations.
In January 2014, the FASB issued new guidance which clarifies when banks and similar institutions (creditors) should reclassify
mortgage loans collateralized by residential real estate properties from the loan portfolio to OREO. This guidance defines when
an in-substance repossession or foreclosure has occurred and when a creditor is considered to have received physical possession
of residential real estate property collateralizing a consumer mortgage loan. This new guidance is first effective for our financial
report covering the quarter ending December 31, 2015, early adoption is permitted. We do not anticipate that this new guidance
will have any material impact on our financial position and results of operations, however, depending on the materiality upon the
adoption of this new guidance, it may impact certain of our OREO disclosures.
In April 2014, the FASB issued new guidance which changes the prior guidance regarding the requirements for reporting
discontinued operations. Under the new guidance, a disposal of a component of an entity or a group of components of an entity,
are required to be reported in discontinued operations if the disposal represents a strategic shift that has (or will have) a major
effect on an entity’s operations and financial results when any of the following occurs: 1) the component of an entity or group of
components of an entity meets certain criteria to be classified as held for sale. 2) The component of an entity or group of components
of an entity is disposed of by sale. 3) The component of an entity or group of components of an entity is disposed of other than
by sale (for example by abandonment or in a distribution to owners in a spinoff). The new guidance requires additional disclosures
about discontinued operations that meet the above criteria. This new guidance is first effective prospectively, for all disposals of
components of an entity that occur commencing with the beginning of our fiscal year 2016, however early adoption is permitted
in certain circumstances. We have not had any disposals of an entity or a group of components of an entity that fall within the
scope of this clarifying guidance, that would have provided us the opportunity to consider adopting this guidance early. Given
that this guidance applies to entity specific transactions, we are unable to estimate the impact, if any, this new guidance may have
on our financial position or results of operations.
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In May 2014, the FASB issued new guidance regarding revenue recognition. In August 2015, the FASB amended this new
guidance by deferring the initial required implementation date by one year. The new guidance is a comprehensive new revenue
recognition model that requires a company to recognize revenue to depict the transfer of goods or services to a customer at an
amount that reflects the consideration it expects to receive in exchange for those goods or services. This new guidance is first
effective, after the effect of the August 2015 one-year deferral, for our financial report covering the quarter ending December 31,
2018, early adoption is permitted in certain circumstances. Upon adoption, we may use either a full retrospective or a modified
retrospective approach with respect to presentation of comparable periods prior to the effective date, we are still evaluating which
transition approach to use. In addition, we are continuing our evaluation of the impact the adoption of this new guidance will
have on our financial position and results of operations.
In June 2014, the FASB issued amended guidance regarding “repo-to-maturity” transactions, as well as repurchase agreements
and securities lending agreements accounted for as secured borrowings. The amended guidance requires a transferor to account
for repo-to-maturity transactions as secured borrowings. This element of the new guidance was first effective for our interim
report covering the period ended March 31, 2015, and based upon the nature of the terms of our repurchase agreements, the
amended guidance had no impact on our financial position or results of operations as we have historically accounted for our
repurchase transactions as secured borrowings. In addition to the accounting aspects of the amended guidance, there are also
additional disclosures of certain information regarding repurchase and securities lending transactions required by the amended
guidance. The new disclosures required under the guidance were first effective for our interim report covering the period ended
June 30, 2015. See Note 19 of the Notes to Consolidated Financial Statements in this Form 10-K for the required disclosures.
In June 2014, the FASB issued amended guidance for the accounting for share-based payments when the terms of an award
provide that a performance target could be achieved after the requisite service period. The new guidance requires that a performance
target that affects vesting of an award and that could be achieved after the requisite service period be treated as a performance
condition. This new guidance is first effective for our interim financial report covering the quarter ending December 31, 2016,
early adoption is permitted. We are currently evaluating the impact the adoption of this new guidance will have on our financial
position and results of operations.
In August 2014, the FASB issued amended guidance that requires an entity’s management to evaluate whether there are
conditions or events, considered in the aggregate, that raise substantial doubt about the entity’s ability to continue as a going
concern. The new guidance: (1) provides for a definition of substantial doubt, (2) requires an evaluation every reporting period
including interim periods, (3) provides principles for considering the mitigating effect of management’s plans, (4) require certain
disclosures when substantial doubt is alleviated as a result of consideration of managements plans, (5) require an express statement
and other disclosures when substantial doubt is not alleviated, and (6) require an assessment for a period of one year after the date
that the financial statements are issued (or available to be issued). This new guidance is first effective for our interim financial
report covering the quarter ending after December 31, 2016, with early adoption permitted. The adoption of this guidance is not
anticipated to have any impact on our consolidated financial statements or related disclosures.
In November 2014, the FASB issued amended guidance regarding the accounting for hybrid financial instruments (which in
this context would apply to any shares of RJF stock that include embedded derivative features such as conversion rights, redemption
rights, voting rights, and liquidation and dividend payment preferences) issued in the form of a share. The new guidance clarifies
how current GAAP should be interpreted in evaluating the economic characteristics and risks of a host contract in a hybrid financial
instrument that is issued in the form of a share. This new guidance is first effective for our interim financial report covering the
quarter ending December 31, 2016, early adoption is permitted. The adoption of this guidance is not anticipated to have any impact
on our financial position and results of operations.
In November 2014, the FASB issued guidance that provides an acquired entity with an option to apply pushdown accounting
in its separate financial statements in the reporting period in which a change-in-control event occurs. This new guidance is now
effective and requires an acquired entity to make an election to apply the guidance to future change-in-control events. The adoption
of this guidance has had no impact on our consolidated financial statements or related disclosures.
In January 2015, the FASB issued guidance that eliminates from GAAP the concept of extraordinary items. This new guidance
is effective for us for our fiscal year commencing on October 1, 2016, however, early adoption is permitted provided that the
guidance is applied from the beginning of the fiscal year of adoption. The adoption of this new guidance could impact certain
presentations in our consolidated statements of income, depending upon the nature of future events and circumstances, but would
not impact our determinations of net income presented in such statements.
In February 2015, the FASB issued amended guidance to the consolidation model. This amended guidance: 1) eliminates the
deferral of the application of the new consolidation model, which had resulted in the application of prior accounting guidance to
consolidation determinations of certain investment funds (see Note 2 of the Notes to Consolidated Financial Statements in this
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Form 10-K for a discussion of how this deferral is applicable to our Managed Funds). 2) Makes certain changes to the variable
interest consolidation model. 3) Makes certain changes to the voting interest consolidation model. This amended guidance is
effective for us for our fiscal year commencing on October 1, 2016, however, early adoption is permitted, including adoption in
any interim period. The adoption of this new guidance is likely to impact our financial statements in the following manner: 1)
will likely change certain historical conclusions that we are the primary beneficiary of certain LIHTC Funds. We currently
anticipate that we will deconsolidate each of the non-guaranteed LIHTC Funds we currently consolidate. 2) We will apply this
new guidance to our Managed Funds, but do not anticipate that we will conclude that we are the primary beneficiary of such
Managed Funds. Accordingly, we believe that our historical practice of not consolidating the Managed Funds will continue after
the adoption of this amended guidance. Given that we believe the application of this amended guidance will significantly improve
the meaningfulness of our consolidated financial statements, we plan early adoption of this amended guidance in the first reporting
period after which we have completed all the necessary analysis and documentation of all our investments that are within the scope
of this guidance.
In April 2015, the FASB issued guidance governing the presentation of debt issuance costs in the consolidated financial
statements. Under the new guidance, debt issuance costs related to a recognized debt liability are required to be presented in the
balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. This new
guidance is effective for us for our fiscal year commencing on October 1, 2016, and early adoption is permitted. In August 2015,
the FASB issued additional clarifying guidance indicating that for debt issuance costs related to line-of-credit arrangements, the
SEC staff would not object to an entity deferring and presenting debt issuance costs ratably over the term of the line-of-credit
arrangement, regardless of whether there are any outstanding borrowings on the line-of-credit arrangement. Although the new
guidance is to be applied on a retrospective basis with the transition amount being reported as a change in accounting principle,
given the costs and remaining term associated with our debt issuances to-date, we do not expect the adoption of this new guidance
to have a material impact on our consolidated financial statements. With respect to the debt issuance costs associated with our
August 2015 line-of-credit (see Note 15 of the Notes to Consolidated Financial Statements in this Form 10-K for information on
this arrangement), we have applied the clarified guidance discussed above by deferring and amortizing the debt issuance costs
associated with this line-of-credit over its term.
In April 2015, the FASB issued guidance governing a customer’s accounting for fees paid in a cloud computing arrangement.
Under the new guidance, if a cloud computing arrangement includes a software license, then the customer should account for the
software license element of the arrangement consistent with the acquisition of other software licenses. If a cloud computing
arrangement does not include a software license, the customer should account for the arrangement as a service contract. This new
guidance is effective for us for our fiscal year commencing on October 1, 2016, and may be adopted either prospectively, or
retrospectively, as of such date. Given that we have a limited number of cloud computing arrangements, we do not expect the
adoption of this new guidance to have a material impact on our consolidated financial statements.
In June 2015, the FASB issued amended guidance related to technical corrections and improvements. This amended guidance:
1) includes amendments related to differences between the original guidance and the codification. 2) Provides guidance clarification
and reference corrections. 3) Streamlines or simplifies the codification through minor structural changes to headings or minor
edits of text to improve the usefulness and understandability of the codification. 4) Makes minor improvements to the guidance.
The amendments that require transition guidance are effective for our fiscal year commencing on October 1, 2016 and early
adoption is permitted. All other amendments will be effective upon issuance of the amended guidance. We are currently evaluating
the impact, if any, the adoption of this new guidance will have on our consolidated financial statements.
In September 2015, the FASB issued guidance governing adjustments to the provisional amounts recognized at the acquisition
date with a corresponding adjustment to goodwill. Such adjustments are required when new information is obtained about facts
and circumstances that existed as of the acquisition date that, if known, would have affected the measurement amounts initially
recognized or would have resulted in the recognition of additional assets and liabilities. This new guidance eliminates the
requirement to retrospectively account for such adjustments. This new guidance is effective for our fiscal year commencing on
October 1, 2016, and early adoption is permitted in certain circumstances. We do not expect the adoption of this new guidance
to have a material impact on our consolidated financial statements. Where possible, we plan on adopting this simplifying guidance
early. Given that this guidance applies to entity specific transactions and would only become relevant in certain circumstances,
we are unable to estimate the impact, if any, this new guidance may have on our financial position.
Off-Balance Sheet arrangements
Information concerning our off-balance sheet arrangements is included in Note 27 of the Notes to Consolidated Financial
Statements in this Form 10-K.
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Effects of inflation
Our assets are primarily liquid in nature and are not significantly affected by inflation. However, the rate of inflation affects
our expenses, including employee compensation, communications and occupancy, which may not be readily recoverable through
charges for services we provide to our clients.
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
RISK MANAGEMENT
Risks are an inherent part of our business and activities. Management of these risks is critical to our fiscal soundness and
profitability. Our risk management processes are multi-faceted and require communication, judgment and knowledge of financial
products and markets. We have a formal Enterprise Risk Management (“ERM”) program to assess and review aggregate risks
across the firm. Our management takes an active role in the ERM process which requires specific administrative and business
functions to participate in the identification, assessment, monitoring and control of various risks. The results of this process are
extensively documented and reported to executive management and the RJF Audit and Risk Committee of the Board of Directors.
The principal risks involved in our business activities are market, credit, liquidity, operational, and regulatory and legal.
Market risk
Market risk is our risk of loss resulting from changes in market prices of our inventory, hedge, interest-rate derivative and
investment positions. We have exposure to market risk primarily through our broker-dealer trading operations and, to a lesser
extent, through our banking operations. Our broker-dealer subsidiaries, primarily RJ&A, trade taxable and tax-exempt debt
obligations and act as an active market maker in over-the-counter equity securities. In connection with these activities, we maintain
inventories in order to ensure availability of securities and to facilitate client transactions. RJ Bank holds investments in MBS,
residential mortgage-backed securities, CMOs and equity securities within its available for sale securities portfolio, and also from
time-to-time may hold SBA loan securitizations not yet transferred. Additionally, we hold certain ARS in a non-broker-dealer
subsidiary of RJF.
See Notes 2, 5, 6 and 7 of the Notes to Consolidated Financial Statements in this Form 10-K for fair value and other information
regarding our trading inventories and available for sale securities.
Changes in value of our trading inventory may result from fluctuations in interest rates, obligor creditworthiness equity prices,
macroeconomic factors, risk aversion, investor expectations, asset liquidity, and dynamic relationships among these factors. We
manage our trading inventory by product type and have established trading divisions with responsibility for particular product
types. Our primary method of controlling risk in our trading inventory is through the establishment and monitoring of risk-based
limits and limits on the dollar amount of securities positions held overnight in inventory. A hierarchy of limits exists at levels
including firm, division, asset type (organized as trading desks, e.g., for OTC equities, corporate bonds, municipal bonds) asset
sub-type (e.g. below-investment grade positions), and individual trader. Position limits in trading inventory accounts are monitored
on a daily basis. Consolidated position and exposure reports are prepared and distributed daily to senior management. Trading
positions are carefully monitored for potential limit violations. Management likewise monitors inventory levels and trading results,
as well as inventory aging, pricing, concentration and securities ratings. For our derivatives positions, which are composed primarily
of interest rate swaps but include futures contracts and forward foreign exchange contracts, we monitor daily their exposure in
our derivatives subsidiary against established limits with respect to a number of factors, including interest rate, spread, ratio, basis,
and volatility risk. These derivative exposures are monitored both on a total portfolio basis and separately for selected maturity
periods.
In the normal course of business, we enter into underwriting commitments. RJ&A and RJ Ltd., as a lead, co-lead or syndicate
member in the underwriting deal, may be subject to market risk on any unsold shares issued in the offering to which we are
committed. Risk exposure is controlled by limiting participation, the deal size or through the syndication process.
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Interest rate risk
Trading activities
We are exposed to interest rate risk as a result of our trading inventories (primarily comprised of fixed income instruments)
in our Capital Markets segment, as well as our RJ Bank operations.
We actively manage the interest rate risk arising from our fixed income trading securities through the use of hedging techniques
that involve U.S. Treasury securities and futures contracts, liquid spread products, and swaps.
We monitor daily, the Value-at-Risk (“VaR”) for all of our trading portfolios. VaR is an appropriate statistical technique for
estimating potential losses in trading portfolios due to typical adverse market movements over a specified time horizon with a
suitable confidence level.
We apply the Fed’s Market Risk Rule (“MRR”) for the purpose of calculating our capital ratios. The MRR, also known as
the “Risk-Based Capital Guidelines: Market Risk” rule released by the Fed, OCC and FDIC, requires us to calculate VaR numbers
for all of our trading portfolios, including fixed income, equity, foreign exchange, and derivative instruments.
To calculate VaR, we use historical simulation. This approach assumes that historical changes in market conditions, such as
in interest rates and equity prices, are representative of future changes. The simulation is based on daily market data for the
previous twelve months. VaR is reported at a 99% confidence level for a one-day time horizon. Assuming that future market
conditions change as they have in the past twelve months, we would expect to incur losses greater than those predicted by our
one-day VaR estimates about once every 100 trading days, or about three times per year on average. For regulatory capital
calculation purposes, we also report VaR numbers for a ten-day time horizon.
We continually monitor our VaR computational model to ensure its calculated results accurately portray risks within our
trading portfolios. During the quarter ended March 31, 2015, after independent validation and regulatory approval, we implemented
a new VaR model for measuring the market risk of all of our trading portfolios. In comparing VaR results from the old model
versus the new one, all else equal, the VaR from the new model is higher than that from the old model because the new model
incorporates an expanded set of risk factors, including those captured previously within stress testing.
The Fed’s MRR requires us to perform daily back testing procedures of our VaR model, whereby we compare each day’s
projected VaR to its regulatory-defined daily trading losses, which excludes fees, commissions, reserves, net interest income, and
intraday trading. Based on these daily “ex ante” versus “ex post” comparisons, we verify that the number of times that regulatory-
defined daily trading losses exceed VaR is consistent with our expectations at a 99% confidence level. During the twelve months
ended September 30, 2015, our regulatory-defined daily loss in our trading portfolios exceeded our predicted VaR four times.
The following table sets forth the high, low, and daily average VaR for all of our trading portfolios, including fixed income,
equity, and derivative instruments, as of the period and dates indicated:
Year ended September 30, 2015
VaR at September 30,
High
Low
Daily
Average
(in thousands)
2015
2014
Daily VaR
$
2,040
$
253
$
946
$
1,173
$
(1) As more fully discussed above, VaR at this date was computed under a previous historical computational model.
(1)
565
The modeling of the risk characteristics of trading positions involves a number of assumptions and approximations. While
management believes that its assumptions and approximations are reasonable, there is no uniform industry methodology for
estimating VaR, and different assumptions or approximations could produce materially different VaR estimates. As a result, VaR
statistics are more reliable when used as indicators of risk levels and trends within a firm than as a basis for inferring differences
in risk-taking across firms.
Separately, RJF provides additional market risk disclosures to comply with the MRR. The results of the application of this
market risk capital rule are available on our website under “Our Company - Financial Reports - Market Risk Rule Disclosure”
within 45 days after the end of each of our reporting periods (the information on our website is not incorporated by reference into
this report).
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Should markets suddenly become more volatile, actual trading losses may exceed VaR results presented on a single day and
might accumulate over a longer time horizon, such as a number of consecutive trading days. Accordingly, management applies
additional controls including position limits, a daily review of trading results, review of the status of aged inventory, independent
controls on pricing, monitoring of concentration risk, and review of issuer ratings, as well as stress testing. We utilize stress testing
to complement our VaR analysis so as to measure risk under historical and hypothetical adverse scenarios. During volatile markets
we may choose to pare our trading inventories to reduce risk.
As a part of our fixed income public finance operations, RJ&A enters into forward commitments to purchase GNMA or FNMA
MBS which are issued on behalf of various state and local HFA (see further description of these activities in the Item 1 Business,
Capital Markets section in this report). These activities result in exposure to interest rate risk. In order to hedge the interest rate
risk to which RJ&A would otherwise be exposed between the date of the commitment and the date of sale of the MBS, RJ&A
enters into to be announced (“TBA”) security contracts with investors for generic MBS securities at specific rates and prices to
be delivered on settlement dates in the future. See Notes 2 and 21 of the Notes to Consolidated Financial Statements in this Form
10-K for additional information regarding these activities and the related balances outstanding as of September 30, 2015.
See Note 18 of the Notes to Consolidated Financial Statements in this Form 10-K for additional information regarding our
derivative financial instruments.
Banking operations
RJ Bank maintains an earning asset portfolio that is comprised of C&I loans, tax-exempt loans, SBL, and commercial and
residential real estate loans, as well as MBS, CMO’s, SBA loan securitizations and a trading portfolio of corporate loans. Those
earning assets are primarily funded by RJ Bank’s obligations to customers (i.e. customer deposits). Based on its current earning
asset portfolio, RJ Bank is subject to interest rate risk. The current economic environment has led to an extended period of low
market interest rates. As a result, the majority of RJ Bank’s adjustable rate assets and liabilities have experienced a reduction in
interest rate yields and costs that reflect these very low market interest rates. During the year, RJ Bank has focused its interest
rate risk analysis on the risk of market interest rates rising. RJ Bank analyzes interest rate risk based on forecasted net interest
income, which is the net amount of interest received and interest paid, and the net portfolio valuation, both in a range of interest
rate scenarios.
One of the objectives of RJ Bank’s Asset Liability Management Committee is to manage the sensitivity of net interest income
to changes in market interest rates. This committee uses several measures to monitor and limit RJ Bank’s interest rate risk including
scenario analysis and economic value of equity (“EVE”).
Simulation models and estimation techniques are used to assess the sensitivity of the net interest income stream to movements
in interest rates. Assumptions about consumer behavior play an important role in these calculations; this is particularly relevant
for loans such as mortgages where the client has the right, but not the obligation, to repay before the scheduled maturity. To ensure
that RJ Bank is within its limits established for net interest income, a sensitivity analysis of net interest income to interest rate
conditions is estimated for a variety of scenarios. RJ Bank utilizes an internally developed asset/liability model using standard
industry software to analyze the available data. The model estimates changes in net interest income by calculating interest income
and interest expense from existing assets and liabilities using current repricing, prepayment, and volume assumptions. Various
interest rate scenarios are modeled in order to determine the effect those scenarios may have on net interest income.
In February 2015, we implemented a hedging strategy using interest rate swaps as a result of RJ Bank’s asset and liability
management process described above. For further information regarding this risk management objective, see the discussion of
the RJ Bank Interest Hedges in the derivative contracts section of Note 2 of the Notes to Consolidated Financial Statements in
this Form 10-K, and additional information in Note 18 of the Notes to Consolidated Financial Statements in this Form 10-K.
The following table is an analysis of RJ Bank’s estimated net interest income over a 12 month period based on instantaneous
shifts in interest rates (expressed in basis points) using RJ Bank’s own internal asset/liability model:
Instantaneous changes in rate
+300
+200
+100
0
-25
Net interest income
($ in thousands)
$476,122
$474,199
$474,138
$442,836
$427,767
81
Projected change in
net interest income
7.52%
7.08%
7.07%
—
(3.40)%
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Index
Refer to the Net Interest section of MD&A, in Item 7 of this report, for a discussion and estimate of the potential favorable
impact on RJF’s pre-tax income that could result from a 100 basis point instantaneous rise in short-term interest rates applicable
to RJF’s entire operations.
The EVE analysis is a point in time analysis of current interest-earning assets and interest-bearing liabilities, which incorporates
all cash flows over their estimated remaining lives, discounted at current rates. The EVE approach is based on a static balance
sheet and provides an indicator of future earnings and capital levels as the changes in EVE indicate the anticipated change in the
value of future cash flows. RJ Bank monitors sensitivity to changes in EVE utilizing board approved limits. These limits set a
risk tolerance to changing interest rates and assist RJ Bank in determining strategies for mitigating this risk as it approaches these
limits.
The following table presents an analysis of RJ Bank’s estimated EVE sensitivity based on instantaneous shifts in interest rates
(expressed in basis points) using RJ Bank’s own internal asset/liability model:
Instantaneous changes in rate
Projected change in EVE
+300
+200
+100
0
-25
(5.85)%
(1.76)%
3.45%
—
(3.40)%
The following table shows the contractual maturities of RJ Bank’s loan portfolio at September 30, 2015, including contractual
principal repayments. This table does not, however, include any estimates of prepayments. These prepayments could shorten the
average loan lives and cause the actual timing of the loan repayments to differ significantly from those shown in the following
table:
Loans held for sale
Loans held for investment:
C&I loans
CRE construction loans
CRE loans
Tax-exempt loans
Residential mortgage loans
SBL
Total loans held for investment
Total loans
One year or less
>One year – five
years
> 5 years
Total(1)
Due in
— $
(in thousands)
— $
108,872
$
108,872
112,772
35,634
192,588
—
2,365
1,475,361
1,818,720
1,818,720
$
3,866,299
80,211
1,543,623
—
17,669
6,103
5,513,905
5,513,905
$
2,948,947
46,511
317,943
484,537
1,942,580
40
5,740,558
5,849,430
$
6,928,018
162,356
2,054,154
484,537
1,962,614
1,481,504
13,073,183
13,182,055
$
$
(1) Excludes any net unearned income and deferred expenses.
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The following table shows the distribution of the recorded investment of those RJ Bank loans that mature in more than one
year between fixed and adjustable interest rate loans at September 30, 2015:
Loans held for sale
Loans held for investment:
C&I loans
CRE construction loans
CRE loans
Tax-exempt loans
Residential mortgage loans
SBL
Total loans held for investment
Total loans
$
(1) Excludes any net unearned income and deferred expenses.
Interest rate type
Fixed
Adjustable
Total(1)
(in thousands)
$
4,186
$
104,686
$
108,872
—
—
85,941
484,537
235,076
6,044
811,598
815,784
6,815,246
126,722
1,775,625
—
1,725,173
(2)
99
10,442,865
10,547,551
$
$
6,815,246
126,722
1,861,566
484,537
1,960,249
6,143
11,254,463
11,363,335
(2) See the discussion within the “Risk Monitoring process” section in Item 7A of this report for additional information regarding RJ
Bank’s interest-only loan portfolio and related repricing schedule.
Equity price risk
We are exposed to equity price risk as a consequence of making markets in equity securities and the investment activities of
RJ&A and RJ Ltd. RJ&A’s broker-dealer activities are primarily client-driven, with the objective of meeting clients’ needs while
earning a trading profit to compensate for the risk associated with carrying inventory. We attempt to reduce the risk of loss inherent
in our inventory of equity securities by monitoring those security positions constantly throughout each day and establishing position
limits.
Foreign exchange risk
We are subject to foreign exchange risk due to our investments in foreign subsidiaries as well as transactions denominated in
a currency other than the U.S. dollar.
RJ Bank has an investment in a Canadian subsidiary, resulting in foreign exchange risk. To mitigate this risk, RJ Bank utilizes
short-term, forward foreign exchange contracts. These derivative agreements are primarily accounted for as net investment hedges
in the consolidated financial statements. See Notes 2 and 18 of the Notes to Consolidated Financial Statements in this Form 10-
K for further information regarding these derivative contracts.
We have foreign exchange risk in our investment in RJ Ltd., of approximately CDN $261 million at September 30, 2015,
which is not hedged. Foreign exchange gains/losses related to this investment are primarily reflected in other comprehensive
(loss) income (“OCI”) on our Consolidated Statements of Income and Comprehensive Income, see Note 22 of the Notes to
Consolidated Financial Statements in this Form 10-K for further information regarding all of our components of OCI.
We also have foreign exchange risk associated with our investments in subsidiaries located in the United Kingdom, France,
and South America. These investments are not hedged and we do not believe we have material foreign exchange risk either
individually, or in the aggregate, pertaining to these subsidiaries.
In addition, we are subject to foreign exchange risk due to our holdings of cash and certain other assets and liabilities, which
result from transactions denominated in a currency other than the U.S. dollar. These foreign currency transactions are not hedged
and the related gains/losses arising therefrom are reflected in other revenue on our Consolidated Statements of Income and
Comprehensive Income.
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Credit risk
Credit risk is the risk of loss due to adverse changes in a borrower’s, issuer’s or counterparty’s ability to meet its financial
obligations under contractual or agreed upon terms. The nature and amount of credit risk depends on the type of transaction, the
structure and duration of that transaction, and the parties involved. Credit risk is an integral component of the profit assessment
of lending and other financing activities.
We are engaged in various trading and brokerage activities whose counterparties primarily include broker-dealers, banks and
other financial institutions. We are exposed to risk that these counterparties may not fulfill their obligations. The risk of default
depends on the creditworthiness of the counterparty and/or the issuer of the instrument. We manage this risk by imposing and
monitoring individual and aggregate position limits within each business segment for each counterparty, conducting regular credit
reviews of financial counterparties, reviewing security and loan concentrations, holding and marking to market collateral on certain
transactions and conducting business through clearing organizations, which may guarantee performance.
Our client activities involve the execution, settlement, and financing of various transactions on behalf of our clients. Client
activities are transacted on either a cash or margin basis. Credit exposure results from client margin accounts, which are monitored
daily and are collateralized. We monitor exposure to industry sectors and individual securities and perform analysis on a regular
basis in connection with our margin lending activities. We adjust our margin requirements if we believe our risk exposure is not
appropriate based on market conditions. In addition, when clients execute a purchase, we are at some risk that the client will
renege on the trade. If this occurs, we may have to liquidate the position at a loss. However, most private clients have available
funds in the account before the trade is executed.
We offer loans to financial advisors and certain key revenue producers, primarily for recruiting, transitional cost assistance,
and retention purposes. We have credit risk and may incur a loss in the event that such borrower declares bankruptcy or is no
longer affiliated with us. Historically, such losses have not been significant due to our strong advisor retention and successful
collection efforts.
We are subject to concentration risk if we hold large positions, extend large loans to, or have large commitments with a single
counterparty, borrower, or group of similar counterparties or borrowers (e.g. in the same industry). Securities purchased under
agreements to resell consist primarily of securities issued by the U.S. government or its agencies. Receivables from and payables
to clients and stock borrow and lending activities are conducted with a large number of clients and counterparties and potential
concentration is carefully monitored. Inventory and investment positions taken and commitments made, including underwritings,
may involve exposure to individual issuers and businesses. We seek to limit this risk through careful review of the underlying
business and the use of limits established by senior management, taking into consideration factors including the financial strength
of the counterparty, the size of the position or commitment, the expected duration of the position or commitment and other positions
or commitments outstanding.
The valuation of the non-agency CMOs held as available for sale securities by RJ Bank is impacted by the credit risk associated
with the underlying residential loans. Underlying loan characteristics associated with this risk are considered in valuing these
securities. ARS held by a non-broker-dealer subsidiary of RJF is impacted by the credit worthiness of the ARS issuer. See Note
7 of the Notes to Consolidated Financial Statements in this Form 10-K for more information.
RJ Bank has substantial corporate, SBL and residential mortgage loan portfolios. A significant downturn in the overall
economy, deterioration in real estate values or a significant issue within any sector or sectors where RJ Bank has a concentration
could result in large provisions for loan losses and/or charge-offs.
RJ Bank’s strategy for credit risk management includes well-defined credit policies, uniform underwriting criteria, and ongoing
risk monitoring and review processes for all corporate, residential and SBL credit exposures. The strategy also includes
diversification on a geographic, industry and customer level, regular credit examinations and management reviews of all corporate
loans and individual delinquent residential loans. The credit risk management process also includes an annual independent review
of the credit risk monitoring process that performs assessments of compliance with corporate and residential mortgage credit
policies, risk ratings, and other critical credit information. RJ Bank seeks to identify potential problem loans early, record any
necessary risk rating changes and charge-offs promptly and maintain appropriate reserve levels for probable incurred loan losses.
RJ Bank utilizes a comprehensive credit risk rating system to measure the credit quality of individual corporate loans and related
unfunded lending commitments, including the probability of default and/or loss given default of each corporate loan and
commitment outstanding. For its SBL and residential mortgage loans, RJ Bank utilizes the credit risk rating system used by bank
regulators in measuring the credit quality of each homogeneous class of loans.
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RJ Bank’s allowance for loan losses methodology are described in the Critical Accounting Estimates section of this Item 7
and Note 2 of the Notes to Consolidated Financial Statements in this Form 10-K. As RJ Bank’s loan portfolio is segregated into
six portfolio segments, likewise, the allowance for loan losses is segregated by these same segments. The risk characteristics
relevant to each portfolio segment are as follows:
C&I: Loans in this segment are made to businesses and are generally secured by all assets of the business. Repayment is
expected from the cash flows of the respective business. Unfavorable economic and political conditions, including the resultant
decrease in consumer or business spending, may have an adverse effect on the credit quality of loans in this segment.
CRE: Loans in this segment are primarily secured by income-producing properties. For owner-occupied properties, the cash
flows are derived from the operations of the business, and the underlying cash flows may be adversely affected by the
deterioration in the financial condition of the operating business. The underlying cash flows generated by non-owner-occupied
properties may be adversely affected by increased vacancy and rental rates, which are monitored on a quarterly basis. Adverse
developments in either of these areas may have a negative effect on the credit quality of loans in this segment.
CRE construction: Loans in this segment have similar risk characteristics of loans in the CRE segment as described above.
In addition, project budget overruns and performance variables related to the contractor and subcontractors may affect the
credit quality of loans in this segment. With respect to commercial construction of residential developments, there is also the
risk that the builder has a geographical concentration of developments. Adverse developments in all of these areas may
significantly affect the credit quality of the loans in this segment.
Tax-exempt: Loans in this segment are made to governmental and nonprofit entities and are generally secured by a pledge
of revenue, and in some cases, by a security interest in or a mortgage on the asset being financed. For loans to governmental
entities, repayment is expected from a pledge of certain revenues or taxes. For nonprofit entities, repayment is expected from
revenues which may include fundraising proceeds. These loans are subject to demographic risk therefore, much of the credit
assessment of tax-exempt loans is driven by the entity’s revenue base and general economic environment. Adverse
developments in either of these areas may have a negative effect on the credit quality of loans in this segment.
Residential mortgage (includes home equity loans/lines): All of RJ Bank’s residential mortgage loans adhere to stringent
underwriting parameters pertaining to credit score and credit history, debt-to-income ratio of borrower, LTV, and combined
LTV (including second mortgage/home equity loans). RJ Bank does not originate or purchase option adjustable rate mortgage
(“ARM”) loans with negative amortization, reverse mortgages, or other types of non-traditional loan products. Loans with
deeply discounted teaser rates are not originated or purchased. All loans in this segment are collateralized by residential real
estate and repayment is primarily dependent on the credit quality of the individual borrower. A decline in the strength of the
economy, particularly unemployment rates and housing prices, among other factors, could have a significant effect on the
credit quality of loans in this segment.
SBL: Loans in this segment are secured by marketable securities at advance rates consistent with industry standards. These
loans are monitored daily for adherence to LTV guidelines and when a loan exceeds the required LTV, a collateral call is
issued. Past due loans are minimal as any past due amounts result in a notice to the client for payment or the potential sale of
securities which will bring the loan current and may bring the loan within the prescribed LTV guidelines.
In evaluating credit risk, RJ Bank considers trends in loan performance, the level of allowance coverage relative to similar
banking institutions, industry or customer concentrations, the loan portfolio composition and macroeconomic factors. During
fiscal year 2015 corporate profit levels continued to improve but have remained weak as compared to historic levels. Unemployment
rates have declined. Retail sales continue to be sluggish and credit quality trends, while improved in some sectors, remain somewhat
tenuous. The volatility in residential home values in certain geographies has continued to have an impact on residential mortgage
loan performance. All of these factors have a potentially negative impact on loan performance and net charge-offs. However,
during fiscal year 2015, corporate borrowers have continued to access the markets for new equity and debt.
Several factors were taken into consideration in evaluating the allowance for loan losses at September 30, 2015, including
the risk profile of the portfolios, net charge-offs during the period, the level of nonperforming loans, and delinquency ratios. RJ
Bank also considered the uncertainty related to certain industry sectors and the extent of credit exposure to specific borrowers
within the portfolio. RJ Bank further stratified the performing residential mortgage loan portfolio based upon updated LTV
estimates with higher reserve percentages allocated to the higher LTV loans. Finally, RJ Bank considered current economic
conditions that might impact the portfolio. RJ Bank determined the allowance that was required for specific loan grades based
on relative risk characteristics of the loan portfolio. On an ongoing basis, RJ Bank evaluates its methods for determining the
allowance for each class of loans and makes enhancements it considers appropriate.
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Changes in the allowance for loan losses of RJ Bank are as follows:
Allowance for loan losses, beginning of year
Provision for loan losses
Charge-offs:
C&I loans
CRE loans
Residential mortgage loans
SBL
Total charge-offs
Recoveries:
C&I loans
CRE loans
Residential mortgage loans
SBL
Total recoveries
Net recoveries (charge-offs)
Foreign exchange translation adjustment
Allowance for loan losses, end of year
2015
$
147,574
23,570
(1,191)
—
(1,667)
—
(2,858)
611
3,773
1,206
25
5,615
2,757
(1,644)
172,257
$
For the year ended September 30,
2012
2013
2014
($ in thousands)
$ 147,541
2,565
$ 136,501
13,565
$
145,744
25,894
2011
$
147,084
33,655
(1,845)
(16)
(2,015)
—
(3,876)
(813)
(9,599)
(6,771)
(254)
(17,437)
16
80
1,998
35
2,129
(1,747)
(745)
$ 147,574
117
1,680
2,299
32
4,128
(13,309)
(296)
$ 136,501
$
(10,486)
(2,000)
(15,270)
(96)
(27,852)
—
1,074
2,543
21
3,638
(24,214)
117
147,541
$
(458)
(15,204)
(22,501)
(255)
(38,418)
—
1,670
1,744
9
3,423
(34,995)
—
145,744
Allowance for loan losses to total bank loans
outstanding
1.32%
1.33%
1.52%
1.81%
2.18%
The primary factors impacting the provision for loan losses during the year were significant loan growth offset by the favorable
impact of generally improved credit characteristics of the loan portfolio. Although we incurred substantial provision for loan
losses associated with loan growth in both fiscal years 2015 and 2014, the majority of the year-over-year increase in the provision
for loan losses resulted from the prior year benefiting to a greater extent than the current year, from improved credit characteristics
of the loan portfolio. The allowance for loan losses of $172.3 million as of September 30, 2015 increased $24.7 million from the
prior year due to additional loan portfolio growth, yet reflected the relatively stable credit characteristics of the loan portfolio as
the allowance for loan losses to total bank loans outstanding declined to 1.32% at September 30, 2015 from 1.33% at September 30,
2014.
The current year’s provision for loan loss also includes $1.6 million resulting from the impact of the banking regulators’
annual Shared National Credit (“SNC”) exam. The SNC exam included a review which represented 85% of the total held for
investment corporate loan portfolio at such time. The prior year’s provision for loan losses also included $1.6 million resulting
from the impact of the respective period’s annual SNC exam. The prior year exam included a review which represented 83% of
the total held for investment corporate loan portfolio at such time (see the “corporate loans” discussion within the Risk Monitoring
Process section of Item 7A in this report, for additional information regarding how the annual SNC exam impacts RJ Bank’s credit
review process).
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The following table presents net loan (charge-offs)/recoveries and the percentage of net loan (charge-offs)/recoveries to the
average outstanding loan balances by loan portfolio segment:
2015
For the year ended September 30,
2014
2013
Net loan
(charge-off)/
recovery
amount
% of avg.
outstanding
loans
Net loan
(charge-off)/
recovery
amount
% of avg.
outstanding
loans
Net loan
(charge-off)
amount
% of avg.
outstanding
loans
$
$
(580)
3,773
(461)
25
2,757
0.01% $
0.22%
0.02%
—
0.02% $
($ in thousands)
(1,829)
64
(17)
35
(1,747)
0.03% $
—
—
—
0.02% $
(696)
(7,919)
(4,472)
(222)
(13,309)
0.01%
0.73%
0.26%
0.05%
0.15%
For the year ended September 30,
2011
2012
Net loan
(charge-off)
amount
% of avg.
outstanding
loans
Net loan
(charge-off)
amount
% of avg.
outstanding
loans
$
$
(10,486)
(926)
(12,727)
(75)
(24,214)
($ in thousands)
0.22% $
0.11%
0.73%
0.08%
0.32% $
(458)
(13,534)
(20,757)
(246)
(34,995)
0.01%
1.70%
1.12%
3.55%
0.56%
C&I loans
CRE loans
Residential mortgage loans
SBL
Total
C&I loans
CRE loans
Residential mortgage loans
SBL
Total
The level of charge-off activity is a factor that is considered in evaluating the potential for and severity of future credit losses.
Total net recoveries during fiscal year 2015 compared to total net charge-offs during the prior year reflect improved credit
characteristics. Charge-offs declined in both the C&I and CRE loan portfolios.
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The table below presents nonperforming loans and total allowance for loan losses:
2015
September 30,
2014
2013
Nonperforming
loan balance
Allowance
for
loan losses
balance
Nonperforming
loan balance
Allowance
for
loan losses
balance
Nonperforming
loan balance
Allowance
for
loan losses
balance
( $ in thousands)
Loans held for investment:
C&I loans
CRE construction loans
CRE loans
Tax-exempt loans
Residential mortgage loans
SBL
Total
Total nonperforming loans
as a % of RJ Bank total
loans
$
$
— $
—
4,796
—
47,823
—
52,619
$
(117,623) $
(2,707)
(30,486)
(5,949)
(12,526)
(2,966)
(172,257) $
— $
—
18,876
—
61,789
—
80,665
$
(103,179)
(1,594)
(25,022)
(1,380)
(14,350)
(2,049)
(147,574)
$
$
89
—
25,512
—
76,357
—
101,958
$
$
(95,994)
(1,000)
(19,266)
—
(19,126)
(1,115)
(136,501)
0.40%
0.73%
1.14%
September 30,
2012
2011
Nonperforming
loan balance
Allowance
for
loan losses
balance
Nonperforming
loan balance
Allowance
for
loan losses
balance
Loans held for sale
Loans held for investment:
C&I loans
CRE construction loans
CRE loans
Residential mortgage loans
SBL
Total
$
$
Total nonperforming loans as a % of RJ Bank total loans
1.31%
— $
($ in thousands)
— $
— $
(5)
19,517
—
8,404
78,739
—
106,660
(92,409)
(739)
(27,546)
(26,138)
(709)
(147,541) $
$
25,685
—
15,842
91,796
—
133,323
1.99%
$
(81,267)
(490)
(30,752)
(33,210)
(20)
(145,744)
The level of nonperforming loans is another indicator of potential future credit losses. The amount of nonperforming loans
decreased 35% during the year ended September 30, 2015. This decrease was due to a $14 million decrease in nonperforming
residential mortgage loans and a $14 million decrease in nonperforming CRE loans. Included in nonperforming residential mortgage
loans are $39 million in loans for which $21 million in charge-offs were previously recorded, resulting in less exposure within
the remaining balance.
The nonperfoming loans above excludes $15 million, $14 million, $10 million, $13 million, and $10 million as of September
30, 2015, 2014, 2013, 2012 and 2011 respectively, of residential troubled debt restructurings (“TDR”) which were returned to
accrual status in accordance with our policy.
Loan underwriting policies
A component of RJ Bank’s credit risk management strategy is conservative, well-defined policies and procedures. RJ Bank’s
underwriting policies for the major types of loans are:
SBL and residential mortgage loan portfolio
RJ Bank’s residential mortgage loan portfolio consists of first mortgage loans originated by RJ Bank via referrals from our
PCG financial advisors and the general public as well as first mortgage loans purchased by RJ Bank. All of RJ Bank’s residential
mortgage loans adhere to strict underwriting parameters pertaining to credit score and credit history, debt-to-income ratio of the
borrower, LTV, and combined LTV (including second mortgage/home equity loans). Approximately 90% of the residential loans
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Index
are fully documented loans and 98% of the residential mortgage loan portfolio is owner-occupant borrowers for their primary or
second home residences, of which approximately 85% is for their primary residences. Approximately 15% of the first lien residential
mortgage loans are ARMs with interest-only payments based on a fixed rate for an initial period of the loan, typically five to seven
years, then become fully amortizing, subject to annual and lifetime interest rate caps. A high percentage of our originated 15 or
30-year fixed-rate mortgage loans are sold in the secondary market. RJ Bank’s SBL portfolio is comprised of loans fully
collateralized by client’s marketable securities and represents 11% of RJ Bank’s total loan portfolio. The underwriting policy for
RJ Bank’s SBL primarily includes a review of collateral, including LTV, with a limited review of repayment history.
While RJ Bank has chosen not to participate in any government-sponsored loan modification programs, its loan modification
policy does take into consideration some of the programs’ parameters and supports every effort to assist borrowers within the
guidelines of safety and soundness. In general, RJ Bank considers the qualification terms outlined in the government-sponsored
programs as well as the affordability test and other factors. RJ Bank retains flexibility to determine the appropriate modification
structure and required documentation to support the borrower’s current financial situation before approving a modification. Short
sales are also used by RJ Bank to mitigate credit losses.
Corporate loan portfolio
RJ Bank’s corporate loan portfolio is comprised of approximately 430 borrowers, the majority of which are underwritten,
managed and reviewed at RJ Bank’s corporate headquarters location, which facilitates close monitoring of the portfolio by credit
risk personnel, relationship officers and senior RJ Bank executives. RJ Bank’s corporate loan portfolio is diversified among a
number of industries in both the U.S. and Canada and comprised of project finance real estate loans, commercial lines of credit
and term loans, the majority of which are participations in SNC or other large syndicated loans, and tax-exempt loans. RJ Bank
is sometimes involved in the syndication of the loan at inception and some of these loans have been purchased in the secondary
trading markets. As the process for evaluating the SNCs or other large syndications is consistent with the process for the other
C&I, CRE and CRE construction loans in the portfolio, there is no additional credit risk with syndicated loans as compared to any
other C&I, CRE and CRE construction loan in RJ Bank’s corporate loan portfolio. RJ Bank’s tax-exempt loans are long-term
loans to governmental and nonprofit entities. These loans generally have lower overall credit risk, but are subject to other risks
that are not usually present with corporate clients including the risk associated with the constituency served by a local government
and the risk in ensuring an obligation has appropriate tax treatment. The remainder of the corporate loan portfolio is comprised
of smaller participations and direct loans. There are no subordinated loans or mezzanine financings in the corporate loan portfolio.
Regardless of the source, all corporate loans are independently underwritten to RJ Bank credit policies and are subject to loan
committee approval, and credit quality is monitored on an on-going basis by RJ Bank’s corporate lending staff. RJ Bank credit
policies include criteria related to LTV limits based upon property type, single borrower loan limits, loan term and structure
parameters (including guidance on leverage, debt service coverage ratios and debt repayment ability), industry concentration
limits, secondary sources of repayment, municipality demographics, and other criteria. A large portion of RJ Bank’s corporate
loans are to borrowers in industries in which we have expertise, through coverage provided by our Capital Markets research
analysts. More than half of RJ Bank’s corporate borrowers are public companies. RJ Bank’s corporate loans are generally secured
by all assets of the borrower, in some instances are secured by mortgages on specific real estate, and with respect to tax-exempt
loans, are generally secured by a pledge of revenue. In a limited number of transactions, loans in the portfolio are extended on
an unsecured basis. In addition, all corporate loans are subject to RJ Bank’s regulatory review.
Risk monitoring process
Another component of the credit risk strategy at RJ Bank is the ongoing risk monitoring and review processes for all residential,
SBL and corporate credit exposures. There are various other factors included in these processes, depending on the loan portfolio.
SBL and residential mortgage loans
We track and review many factors to monitor credit risk in RJ Bank’s SBL and residential mortgage loan portfolios. The
qualitative factors include, but are not limited to: loan performance trends, loan product parameters and qualification requirements,
borrower credit scores, occupancy (i.e., owner occupied, second home or investment property), level of documentation, loan
purpose, geographic concentrations, average loan size, and loan policy exceptions. These qualitative measures, while considered
and reviewed in establishing the allowance for loan losses, have not resulted in any material quantitative adjustments to RJ Bank’s
historical loss rates. In addition to historical loss rates, one other quantitative factor utilized for the performing residential mortgage
loan portfolio is updated LTV ratios.
RJ Bank obtains the most recently available information (generally on a quarter lag) to estimate current LTV ratios on the
individual loans in the performing residential mortgage loan portfolio. Current LTV ratios are estimated based on the initial
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Index
appraisal obtained at the time of origination, adjusted using relevant market indices for housing price changes that have occurred
since origination. The value of the homes could vary from actual market values due to change in the condition of the underlying
property, variations in housing price changes within current valuation indices and other factors.
The current average estimated LTV is approximately 55% for the total residential mortgage loan portfolio. Residential
mortgage loans with estimated LTVs in excess of 100% represent less than 2% of the residential mortgage loan portfolio. Credit
risk management utilizes this data in conjunction with delinquency statistics, loss experience and economic circumstances to
establish appropriate allowance for loan losses for the residential mortgage loan portfolio, which is based upon an estimate for
the probability of default and loss given default for each homogeneous class of loans.
The marketable collateral securing RJ Bank’s SBL is monitored on a daily basis. Collateral adjustments are made by the
borrower as necessary to ensure RJ Bank’s loans are adequately secured, resulting in minimizing its credit risk. Our SBL portfolio
has not experienced high levels of delinquencies to date. As of both September 30, 2015 and 2014, there were no delinquent SBL.
At September 30, 2015, loans over 30 days delinquent (including nonperforming loans) decreased to 1.69% of residential
mortgage loans outstanding, compared to 2.34% over 30 days delinquent at September 30, 2014. Additionally, our September 30,
2015 percentage compares favorably to the national average for over 30 day delinquencies of 5.71% as most recently reported by
the Fed. RJ Bank’s significantly lower delinquency rate as compared to its peers is the result of both our uniform underwriting
policies and the lack of non-traditional loan products and subprime loans.
The following table presents a summary of delinquent residential mortgage loans:
Delinquent residential loans (amount)
90 days or
more
Total(1)
30-89 days
Delinquent residential loans as a percentage
of outstanding loan balances
90 days or
more
30-89 days
Total(1)
($ in thousands)
September 30, 2015
Residential mortgage loans:
First mortgage loans
Home equity loans/lines
$
Total residential mortgage loans $
September 30, 2014
Residential mortgage loans:
First mortgage loans
Home equity loans/lines
$
Total residential mortgage loans $
4,849
30
4,879
4,756
57
4,813
$
$
$
$
28,036
231
28,267
35,803
398
36,201
$
$
$
$
32,885
261
33,146
40,559
455
41,014
0.25%
0.14%
0.25%
0.27%
0.28%
0.27%
1.44%
1.09%
1.44%
2.07%
1.96%
2.06%
1.69%
1.23%
1.69%
2.34%
2.24%
2.34%
(1) Comprised of loans which are two or more payments past due as well as loans in process of foreclosure.
To manage and limit credit losses, we maintain a rigorous process to manage our loan delinquencies. With all whole loans
purchased generally on a servicing-retained basis and all originated first mortgages serviced by a third party, the primary collection
effort resides with the servicer. RJ Bank personnel direct and actively monitor the servicers’ efforts through extensive
communications regarding individual loan status changes and requirements of timely and appropriate collection or property
management actions and reporting, including management of third parties used in the collection process (appraisers, attorneys,
etc.). Additionally, every residential mortgage loan over 60 days past due is reviewed by RJ Bank personnel monthly and
documented in a written report detailing delinquency information, balances, collection status, appraised value, and other data
points. RJ Bank senior management meets monthly to discuss the status, collection strategy and charge-off/write-down
recommendations on every residential mortgage loan over 60 days past due. Updated collateral valuations are obtained for loans
over 90 days past due and charge-offs are taken on individual loans based on these valuations.
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Credit risk is also managed by diversifying the residential mortgage loan portfolio. The geographic concentrations (top five
states) of RJ Bank’s one-to-four family residential mortgage loans are as follows:
September 30, 2015
September 30, 2014 (1)
($ outstanding as a % of RJ Bank total residential mortgage loans)
20.5%
19.6%
5.9%
5.8%
4.2%
FL
CA (2)
NY
TX
NJ
22.5%
15.7%
6.9%
5.2%
4.7%
FL
CA (2)
NY
NJ
TX
(1) In the prior year, the loan concentrations were presented as a percentage of RJ Bank total assets. In order to enhance comparability
with the current year, the percentage concentrations have been revised from those presented in the prior year to reflect the percentage
of total residential mortgage loans outstanding at such time.
(2) The concentration ratio for the state of California excludes 4.7% for September 30, 2015 and 6.2% for September 30, 2014, for loans
purchased from a large investment grade institution that have full repurchase recourse for any delinquent loans.
Loans where borrowers may be subject to payment increases include adjustable rate mortgage loans with terms that initially
require payment of interest only. Payments may increase significantly when the interest-only period ends and the loan principal
begins to amortize. At September 30, 2015 and 2014, these loans totaled $264 million and $307 million, respectively, or
approximately 15% and 20% of the residential mortgage loan portfolio, respectively. At September 30, 2015, the balance of
amortizing, former interest-only, loans totaled $302 million. The weighted average number of years before the remainder of the
loans, which were still in their interest-only period at September 30, 2015, begins amortizing is 2.8 years. The outstanding balance
of interest-only loans that based on their contractual terms are scheduled to reprice, are as follows:
One year or less
Over one year through two years
Over two years through three years
Over three years through four years
Over four years through five years
Over five years
Total outstanding residential interest-only loan balance
September 30, 2015
(in thousands)
$
$
130,807
5,407
16,136
20,267
42,807
48,223
263,647
A component of credit risk management for the residential portfolio is the LTV and borrower credit score at origination or
purchase. The most recent LTV/FICO scores at origination of RJ Bank’s residential first mortgage loan portfolio are as follows:
Residential first mortgage loan weighted-average LTV/FICO
September 30, 2015
66%/757
September 30, 2014
66%/754
Corporate loans
Credit risk in RJ Bank’s corporate loan portfolio is monitored on an individual loan basis for trends in borrower operating
performance, payment history, credit ratings, collateral performance, loan covenant compliance, annual SNC exam results,
municipality demographics, and other factors including industry performance and concentrations. As part of the credit review
process the loan grade is reviewed at least quarterly to confirm the appropriate risk rating for each credit. The individual loan
ratings resulting from the SNC exam are incorporated in RJ Bank’s internal loan ratings when the ratings are received and if the
SNC rating is lower on an individual loan than RJ Bank’s internal rating, the loan is downgraded. While RJ Bank considers
historical SNC exam results in its loan ratings methodology, differences between the SNC exam and internal ratings on individual
loans typically arise due to subjectivity of the loan classification process. These differences may result in additional provision for
loan losses in periods when SNC exam results are received. See Note 2 of the Notes to Consolidated Financial Statements in this
Form 10-K, specifically the bank loans and allowances for losses section, for additional information on RJ Bank’s allowance for
loan loss policies. See the Credit Risk section in Item 7A of this report for additional information on RJ Bank’s corporate loan
portfolio, including the impact of the most recent SNC exam on the current year’s provision for loan losses.
At September 30, 2015, other than loans classified as nonperforming, there was one government-guaranteed loan totaling
$200 thousand that was delinquent greater than 30 days.
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Index
Credit risk is also managed by diversifying the corporate loan portfolio. RJ Bank’s corporate loan portfolio does not contain
a significant concentration in any single industry. The industry concentrations (top five categories) of RJ Bank’s corporate loans
are as follows:
September 30, 2015
September 30, 2014 (1)
($ outstanding as a % of RJ Bank total corporate loans)
5.8% Retail real estate
5.7% Pharmaceuticals
5.5% Consumer products and services
5.4% Hospitality
4.5% Automotive/transportation
5.9% Pharmaceuticals
5.5% Office
4.8% Automotive/transportation
4.8% Retail real estate
4.6% Hospitality
(1) In the prior year, the loan concentrations were presented as a percentage of RJ Bank total assets. In order to enhance comparability
with the current year, the percentage concentrations have been revised from those presented in the prior year to reflect the percentage
of total corporate loans outstanding at such time.
Liquidity risk
See the section entitled “Liquidity and capital resources” in Item 7, Management’s Discussion and Analysis of Financial
Condition and Results of Operations, in this report for more information regarding our liquidity and how we manage liquidity
risk.
Operational risk
Operational risk generally refers to the risk of loss resulting from our operations, including, but not limited to, business
disruptions, improper or unauthorized execution and processing of transactions, deficiencies in our technology or financial operating
systems and inadequacies or breaches in our control processes including cyber security incidents (see the section entitled “Our
businesses depend on technology” in Item 1A, Risk Factors in this report for a discussion of certain cyber security risks). We
operate different businesses in diverse markets and are reliant on the ability of our employees and systems to process a large
number of transactions. These risks are less direct than credit and market risk, but managing them is critical, particularly in a
rapidly changing environment with increasing transaction volumes and complexity. In the event of a breakdown or improper
operation of systems or improper action by employees, we could suffer financial loss, regulatory sanctions and damage to our
reputation. In order to mitigate and control operational risk, we have developed and continue to enhance specific policies and
procedures that are designed to identify and manage operational risk at appropriate levels throughout the organization and within
such departments as Accounting, Operations, Information Technology, Legal, Compliance, Risk Management and Internal Audit.
These control mechanisms attempt to ensure that operational policies and procedures are being followed and that our various
businesses are operating within established corporate policies and limits. Business continuity plans exist for critical systems, and
redundancies are built into the systems as deemed appropriate.
We have established an Operational Risk Management Committee, which is chaired by our Chief Operating Officer and is
comprised of senior managers, to review and address operational risks across our businesses. The committee establishes risk
appetite levels for major operational risks, monitors operating unit performance for adherence to defined risk tolerances, and
establishes policies for risk management at the enterprise level.
Regulatory and legal risk
We have comprehensive procedures addressing regulatory capital requirements, sales and trading practices, use of and
safekeeping of client funds, extension of credit, collection activities, money laundering and record keeping. We have designated
Anti-money Laundering Officers in each of our subsidiaries who monitor compliance with regulations adopted under the Bank
Secrecy Act and the USA PATRIOT Act.
We act as an underwriter or selling group member in both equity and fixed income product offerings. Particularly when acting
as lead or co-lead manager, we have financial and legal exposure. To manage this exposure, a committee of senior executives
reviews proposed underwriting commitments to assess the quality of the offering and the adequacy of due diligence investigation.
A Compliance and Standards Committee comprised of senior executives meets monthly to consider policy issues. The
committee reviews material client or customer complaints and litigation, as well as issues in operating departments, for the purpose
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Index
of identifying issues that present risk exposure to either us or our customers. The committee adopts policies to deal with these
issues, which are then disseminated throughout our operations.
A Quality of Markets Committee meets regularly to monitor the best execution activities of our trading departments as they
relate to customer orders. This committee is comprised of representatives from the OTC Trading, Listed Trading, Options, Municipal
Trading, Taxable Trading, Compliance and Legal Departments and is under the direction of one of our senior officers. This
committee reviews reports from the respective departments listed above and recommends action for improvement when necessary.
Our major business units have compliance departments that are responsible for regularly reviewing and revising compliance
and supervisory procedures to conform to changes in applicable regulations.
Our banking activities are highly regulated and subject to impact from changes in banking laws and regulations, including
unanticipated rulings. Present economic conditions have led to rapid introduction of significant regulatory programs or changes
affecting consumer protection and disclosure requirements, financial reporting, and regulatory restructuring. Regulatory
requirements including recent changes to consumer and mortgage lending regulations, as well as new regulatory or government
programs, are closely monitored and acted upon to ensure a timely response. See further discussion of our risks associated with
new regulations, including the Dodd-Frank Act, in Item 1A, “Risk Factors” within this report.
The nature of the periodic examinations of our operations by our various regulators, applicable to not only our banking
activities but also to our broker-dealer operational activities, have been active, expanding in some respects as it pertains to the
scope of their annual reviews, and reflective of a heightened level of scrutiny of the operations and activities of financial services
entities. We continue to incur costs to support these reviews, and evaluate and implement changes in our processes and procedures
to improve and continue to comply with all of the various regulations to which we are subject. Given this environment, we cannot
predict the impact that the ultimate outcome resulting from the periodic examinations by one or more of our regulators could have
on our future costs or results of operations.
Legal risk includes the risk of PCG client claims, the possibility of sizable adverse legal judgments, exposure to pre-Closing
Date litigation matters of Morgan Keegan should Regions fail to honor its indemnification obligations (see Item 3 Legal Proceedings
in this report and Note 21 of the Notes to Consolidated Financial Statements in this Form 10-K for further discussion of the Regions
indemnification for such matters) and non-compliance with applicable legal and regulatory requirements. We are generally subject
to extensive regulation in the different jurisdictions in which we conduct business. Regulatory oversight of the financial services
industry has become increasingly demanding over the past several years and we, as well as others in the industry, have been directly
affected by this increased regulatory scrutiny.
We have a number of outstanding claims resulting from, among other reasons, market conditions. While these claims may
not be the result of any wrongdoing, we do, at a minimum, incur costs associated with investigating and defending against such
claims. See further discussion of our accounting policy regarding such matters in the loss provisions arising from legal proceedings
section of “Critical Accounting Estimates” contained within Item 7, “Management’s Discussion of Analysis of Financial Condition
and Results of Operations” in this report and in Note 2 of our Notes to Consolidated Financial Statements within this Form 10-
K.
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Index
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Table of Contents
Report of Independent Registered Public Accounting Firm
Consolidated Statements of Financial Condition
Consolidated Statements of Income and Comprehensive Income
Consolidated Statements of Changes in Shareholders’ Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
Note 1 - Introduction and basis of presentation
Note 2 - Summary of significant accounting policies
Note 3 - Acquisitions
Note 4 - Cash and cash equivalents, assets segregated pursuant to regulations, and deposits with clearing
organizations
Note 5 - Fair value
Note 6 - Trading instruments and trading instruments sold but not yet purchased
Note 7 - Available for sale securities
Note 8 - Receivables from and payables to brokerage clients
Note 9 - Bank loans, net
Note 10 - Prepaid expenses and other assets
Note 11 - Variable interest entities
Note 12 - Property and equipment
Note 13 - Goodwill and identifiable intangible assets
Note 14 - Bank deposits
Note 15 - Other borrowings
Note 16 - Loans payable of consolidated variable interest entities
Note 17 - Senior notes payable
Note 18 - Derivative financial instruments
Note 19 - Disclosure of offsetting assets and liabilities, collateral, encumbered assets and repurchase
agreements
Note 20 - Income taxes
Note 21 - Commitments, contingencies and guarantees
Note 22 - Other comprehensive (loss) income
Note 23 - Interest income and interest expense
Note 24 - Employee share-based and other compensation
Note 25 - Non-employee share-based and other compensation
Note 26 - Regulations and capital requirements
Note 27 - Financial instruments with off-balance sheet risk
Note 28 - Earnings per share
Note 29 - Segment information
Note 30 - Condensed financial information (parent company only)
Supplementary data
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PAGE
95
96
98
99
100
102
103
121
122
123
135
135
140
140
149
149
152
152
155
156
157
158
159
163
166
169
172
175
175
178
181
183
186
186
189
193
Index
Report of Independent Registered Public Accounting Firm
The Board of Directors and Shareholders
Raymond James Financial, Inc.:
We have audited the accompanying consolidated statements of financial condition of Raymond James Financial, Inc. and
subsidiaries (the “Company” or “Raymond James”) as of September 30, 2015 and 2014, and the related consolidated statements
of income and comprehensive income, changes in shareholders’ equity, and cash flows for each of the years in the three-year
period ended September 30, 2015. These consolidated financial statements are the responsibility of the Company’s management.
Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).
Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable
basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position
of Raymond James as of September 30, 2015 and 2014, and the results of its operations and its cash flows for each of the years
in the three-year period ended September 30, 2015, in conformity with U.S. generally accepted accounting principles.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States),
Raymond James’ internal control over financial reporting as of September 30, 2015, based on criteria established in Internal
Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and
our report dated November 25, 2015 expressed an unqualified opinion on the effectiveness of the Company’s internal control over
financial reporting.
/s/ KPMG LLP
Tampa, Florida
November 25, 2015
Certified Public Accountants
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Index
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
Assets:
Cash and cash equivalents
Assets segregated pursuant to regulations and other segregated assets
Securities purchased under agreements to resell and other collateralized financings
Financial instruments, at fair value:
Trading instruments
Available for sale securities
Private equity investments
Other investments
Derivative instruments associated with offsetting matched book positions
Receivables:
Brokerage clients, net
Stock borrowed
Bank loans, net
Brokers-dealers and clearing organizations
Loans to financial advisors, net
Other
Deposits with clearing organizations
Prepaid expenses and other assets
Investments in real estate partnerships held by consolidated variable interest entities
Property and equipment, net
Deferred income taxes, net
Goodwill and identifiable intangible assets, net
Total assets
(continued on next page)
September 30,
2015
2014
(in thousands)
$
2,601,006
$
2,199,063
2,905,324
474,144
2,489,264
446,016
690,551
513,730
209,088
248,751
389,457
679,393
562,289
211,666
215,751
323,337
2,185,296
124,373
2,126,804
158,988
12,988,021
10,964,299
134,890
488,760
514,000
207,488
705,391
199,678
255,875
266,899
376,962
107,116
424,928
544,180
150,457
655,256
235,858
245,401
231,325
354,261
$
26,479,684
$
23,325,652
See accompanying Notes to Consolidated Financial Statements.
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Index
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(continued from previous page)
Liabilities and equity:
Trading instruments sold but not yet purchased, at fair value
Securities sold under agreements to repurchase
Derivative instruments associated with offsetting matched book positions, at fair value
Payables:
Brokerage clients
Stock loaned
Bank deposits
Brokers-dealers and clearing organizations
Trade and other
Other borrowings
Accrued compensation, commissions and benefits
Loans payable of consolidated variable interest entities
Senior notes payable
Total liabilities
Commitments and contingencies (see Note 21)
Equity
September 30,
2015
2014
($ in thousands)
$
287,993
$
332,536
389,457
238,400
244,495
323,337
4,671,073
478,573
3,956,104
417,383
11,919,881
10,028,924
164,054
729,245
703,065
842,527
25,960
216,530
763,235
696,718
814,359
43,877
1,149,222
1,149,034
21,693,586
18,892,396
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 149,283,682 at September 30, 2015
and 146,103,658 at September 30, 2014
Additional paid-in capital
Retained earnings
Treasury stock, at cost; 6,364,706 common shares at September 30, 2015 and 4,900,266 common shares
at September 30, 2014
Accumulated other comprehensive loss
Total equity attributable to Raymond James Financial, Inc.
Noncontrolling interests
Total equity
Total liabilities and equity
1,491
1,344,779
3,419,719
(203,455)
(40,503)
4,522,031
264,067
4,786,098
1,444
1,239,046
3,023,845
(121,211)
(1,888)
4,141,236
292,020
4,433,256
$
26,479,684
$
23,325,652
See accompanying Notes to Consolidated Financial Statements.
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Index
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
Year ended September 30,
2014
(in thousands, except per share amounts)
2013
2015
Revenues:
Securities commissions and fees
Investment banking
Investment advisory fees
Interest
Account and service fees
Net trading profit
Other
Total revenues
Interest expense
Net revenues
Non-interest expenses:
Compensation, commissions and benefits
Communications and information processing
Occupancy and equipment costs
Clearance and floor brokerage
Business development
Investment sub-advisory fees
Bank loan loss provision
Acquisition related expenses
Other
Total non-interest expenses
Income including noncontrolling interests and before provision for income taxes
Provision for income taxes
Net income including noncontrolling interests
Net (loss) income attributable to noncontrolling interests
Net income attributable to Raymond James Financial, Inc.
Net income per common share – basic
Net income per common share – diluted
Weighted-average common shares outstanding – basic
Weighted-average common and common equivalent shares outstanding – diluted
Net income attributable to Raymond James Financial, Inc.
Other comprehensive (loss) income, net of tax:(1)
Unrealized (losses) gains on available for sale securities and non-credit portion of other-
than-temporary impairment losses
Unrealized losses on currency translations, net of the impact of net investment hedges
Unrealized loss on cash flow hedges
Total comprehensive income
Other-than-temporary impairment:
Total other-than-temporary impairment, net
Portion of pre-tax recoveries recognized in other comprehensive income
Net impairment losses recognized in other revenue
$
$
$
$
$
$
$
$
3,443,038
323,660
385,238
543,207
457,913
58,512
96,596
5,308,164
(107,954)
5,200,210
3,525,378
266,396
163,229
42,748
158,966
59,569
23,570
—
183,642
4,423,498
776,712
296,034
480,678
(21,462)
502,140
3.51
3.43
142,548
145,939
$
$
$
$
3,241,525
340,821
362,362
480,886
407,707
64,643
67,516
4,965,460
(104,091)
4,861,369
3,312,635
252,694
161,683
39,875
139,672
52,412
13,565
—
172,885
4,145,421
715,948
267,797
448,151
(32,097)
480,248
3.41
3.32
139,935
143,589
3,007,711
288,251
282,755
473,599
363,531
34,069
145,882
4,595,798
(110,371)
4,485,427
3,054,027
257,366
157,449
40,253
124,387
37,112
2,565
73,454
144,904
3,891,517
593,910
197,033
396,877
29,723
367,154
2.64
2.58
137,732
140,541
$
502,140
$
480,248
$
367,154
(3,325)
(30,640)
(4,650)
463,525
2,489
(2,489)
$
$
6,021
(18,635)
—
467,634
4,966
(4,993)
$
$
— $
(27) $
15,042
(13,763)
—
368,433
3,755
(4,391)
(636)
$
$
$
(1) All components of other comprehensive (loss) income, net of tax, are attributable to Raymond James Financial, Inc.
See accompanying Notes to Consolidated Financial Statements.
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Index
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
Common stock, par value $.01 per share:
Balance, beginning of year
Share issuances
Balance, end of year
Additional paid-in capital:
Balance, beginning of year
Employee stock purchases
Exercise of stock options and vesting of restricted stock units, net of forfeitures
Restricted stock, stock option and restricted stock unit expense
Excess tax benefit (reduction of prior tax benefits) from share-based payments
Purchase of additional equity interest in subsidiary
Other
Balance, end of year
Retained earnings:
Balance, beginning of year
Net income attributable to Raymond James Financial, Inc.
Cash dividends declared
Other
Balance, end of year
Treasury stock:
Balance, beginning of year
Purchases/surrenders
Exercise of stock options and vesting of restricted stock units, net of forfeitures
Balance, end of year
Accumulated other comprehensive loss: (1)
Balance, beginning of year
Net change in unrealized losses on available for sale securities and non-credit portion of
other-than-temporary impairment losses, net of tax
Net change in currency translations and net investment hedges, net of tax
Net change in cash flow hedges, net of tax
Balance, end of year
Total equity attributable to Raymond James Financial, Inc.
Noncontrolling interests:
Balance, beginning of year
Net (loss) income attributable to noncontrolling interests
Capital contributions
Distributions
Consolidation of acquired entity
Derecognition resulting from acquisition of additional interests
Other
Balance, end of year
Total equity
Year ended September 30,
2015
2014
2013
(in thousands, except per share amounts)
$
1,444 $
47
1,491
1,429 $
15
1,444
1,404
25
1,429
1,239,046
23,847
21,351
68,196
(8,115)
—
454
1,344,779
3,023,845
502,140
(106,271)
5
3,419,719
1,136,298
20,234
8,780
65,410
7,437
—
887
1,239,046
2,635,026
480,248
(91,133)
(296)
3,023,845
1,030,288
18,319
30,640
58,689
2,590
(4,531)
303
1,136,298
2,346,563
367,154
(78,208)
(483)
2,635,026
(121,211)
(64,780)
(17,464)
(203,455)
(120,555)
(2,173)
1,517
(121,211)
(118,762)
(8,214)
6,421
(120,555)
(1,888)
10,726
9,447
(3,325)
(30,640)
(4,650)
(40,503)
4,522,031
$
6,021
(18,635)
—
(1,888)
4,141,236
$
15,042
(13,763)
—
10,726
3,662,924
$
292,020
(21,462)
19,530
(23,570)
—
—
(2,451)
264,067
4,786,098 $
$
335,413
(32,097)
22,565
(27,093)
—
—
(6,768)
292,020
4,433,256 $
411,342
29,723
30,052
(148,871)
7,592 (2)
4,126
1,449
335,413
3,998,337
$
$
$
(1) All components of other comprehensive (loss) income are attributable to Raymond James Financial, Inc.
(2) On December 24, 2012, we acquired a 45% interest in ClariVest Asset Management, LLC, see Notes 1 and 3 for discussion.
See accompanying Notes to Consolidated Financial Statements.
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Index
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Cash flows from operating activities:
Net income attributable to Raymond James Financial, Inc.
Net (loss) income attributable to noncontrolling interests
Net income including noncontrolling interests
Adjustments to reconcile net income including noncontrolling interests to net cash provided by
operating activities:
Depreciation and amortization
Deferred income taxes
Premium and discount amortization on available for sale securities and unrealized/realized gain
on other investments
Provisions for loan losses, legal proceedings, bad debts and other accruals
Share-based compensation expense
Goodwill impairment expense
Other
Net change in:
Year ended September 30,
2015
2014
2013
(in thousands)
$
502,140
$
480,248
$
367,154
(21,462)
480,678
(32,097)
448,151
29,723
396,877
68,315
(23,462)
64,163
(35,171)
66,359
(31,789)
(42,544)
(22,804)
(80,631)
29,277
71,488
—
54,527
26,414
69,609
—
35,343
13,944
61,862
6,933
32,013
Assets segregated pursuant to regulations and other segregated assets
(416,060)
1,575,563
(1,280,628)
Securities purchased under agreements to resell and other collateralized financings, net of
securities sold under agreements to repurchase
Stock loaned, net of stock borrowed
(Loans provided to) repayment of loans, to financial advisors, net
Brokerage client receivables and other accounts receivable, net
Trading instruments, net
Prepaid expenses and other assets
Brokerage client payables and other accounts payable
Accrued compensation, commissions and benefits
(Purchases and originations of loans held for sale)/proceeds from sales of securitizations and loans
held for sale, net
Reduction of prior tax benefits/(excess tax benefits) from share-based payment arrangements
Net cash provided by operating activities
Cash flows from investing activities:
Additions to property and equipment
Increase in bank loans, net
Proceeds from sales of loans held for investment
(Purchases or contributions to private equity or other investments)/proceeds from sales of or
distributions received from private equity and other investments, net
Purchases of available for sale securities
Available for sale securities maturations, repayments and redemptions
Proceeds from sales of available for sale securities
Other investing activities, net of proceeds received
Net cash used in investing activities
(continued on next page)
59,913
95,805
(81,617)
(56,394)
40,656
46,896
206,666
50,767
(34,067)
(159,562)
(46,526)
19,330
(191,207)
(15,731)
11,486
88,162
252,101
(66,448)
594,464
(1,800,957)
1,307,607
28,758
72,294
50,318
(59,638)
8,115
899,177
45,811
(7,437)
41,167
(2,590)
507,587
659,805
(74,111)
(60,149)
(72,879)
(2,200,861)
(2,391,311)
(1,063,301)
111,731
183,279
198,676
(44,574)
(92,485)
69,757
84,785
(22,201)
42,832
(1,305)
104,407
49,937
(24,454)
229,136
(62,102)
117,435
4,793
(3,732)
$ (2,167,959) $ (2,096,764) $
(651,974)
See accompanying Notes to Consolidated Financial Statements.
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Index
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(continued from previous page)
Year ended September 30,
2015
2014
2013
(in thousands)
79,076
5,000
Cash flows from financing activities:
(Repayments of)/proceeds from short-term borrowings, net
$
(34,700) $
70,624
$
Proceeds from Federal Home Loan Bank advances and other borrowed funds
Repayments of Federal Home Loan Bank advances and other borrowed funds
550,299
(509,252)
500,367
(4,011)
(134,897)
Repayments of borrowings by consolidated variable interest entities which are real estate
partnerships
Proceeds from capital contributed to and borrowings of consolidated variable interest entities which
(19,673)
(21,839)
(22,613)
are real estate partnerships
Purchase of additional equity interest in subsidiary
Exercise of stock options and employee stock purchases
Increase in bank deposits
Purchases of treasury stock
Dividends on common stock
(Reduction of prior tax benefits)/excess tax benefits, from share-based payments
110
—
47,964
1,890,957
(88,542)
(103,143)
(8,115)
726
—
33,633
733,553
(8,427)
(88,102)
7,437
Net cash provided by financing activities
1,725,905
1,223,961
23,485
(553)
55,997
695,658
(11,718)
(76,593)
2,590
615,432
Currency adjustment:
Effect of exchange rate changes on cash
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
Supplemental disclosures of cash flow information:
Cash paid for interest
Cash paid for income taxes
Non-cash transfers of loans to other real estate owned
(55,180)
401,943
(32,337)
(397,553)
(6,667)
616,596
2,199,063
2,596,616
1,980,020
$ 2,601,006
$ 2,199,063
$
2,596,616
$
$
$
106,313
378,928
5,870
$
$
$
101,090
319,279
6,213
$
$
$
106,818
189,730
3,072
See accompanying Notes to Consolidated Financial Statements
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RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2015
NOTE 1 – INTRODUCTION AND BASIS OF PRESENTATION
Description of business
Raymond James Financial, Inc. (“RJF”) is a financial holding company whose broker-dealer subsidiaries are engaged in
various financial services businesses, including the underwriting, distribution, trading and brokerage of equity and debt securities
and the sale of mutual funds and other investment products. In addition, other subsidiaries of RJF provide investment management
services for retail and institutional clients, corporate and retail banking, and trust services. As used herein, the terms “we,” “our”
or “us” refer to RJF and/or one or more of its subsidiaries.
Basis of presentation
The accompanying consolidated financial statements include the accounts of RJF and its consolidated subsidiaries that are
generally controlled through a majority voting interest. We consolidate all of our 100% owned subsidiaries. In addition we
consolidate any variable interest entity (“VIE”) in which we are the primary beneficiary. Additional information on these VIEs is
provided in Note 2 in the section titled, “Evaluation of VIEs to determine whether consolidation is required” and in Note 11. When
we do not have a controlling interest in an entity, but we exert significant influence over the entity, we apply the equity method
of accounting. All material intercompany balances and transactions have been eliminated in consolidation.
Accounting estimates and assumptions
The preparation of consolidated financial statements in conformity with United States of America (“U.S.”) generally accepted
accounting principles (“GAAP”) requires us to 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.
Reporting period
Our quarters end on the last day of each calendar quarter.
Fiscal year 2015 acquisitions
On April 30, 2015, we completed our acquisition of Cougar Global Investments Limited (“Cougar”), an asset management
firm based in Toronto, Canada. Cougar’s global asset allocation strategies are now offered to our asset management clients
worldwide through our our Eagle Asset Management, Inc. (“Eagle”) subsidiary. See Note 3 for additional information.
On July 31, 2015, we completed our acquisition of The Producers Choice LLC (“TPC”), a Troy, Michigan based private
insurance and annuity marketing organization. TPC brings additional life insurance and annuity specialists to our existing insurance
product offerings. See Note 3 for additional information.
Fiscal year 2013 acquisition
On December 24, 2012, we completed our acquisition of a 45% interest in ClariVest Asset Management, LLC (“ClariVest”),
an acquisition that bolstered our platform in the large-cap investment objective. See Note 3 for additional information.
Significant subsidiaries
As of September 30, 2015, our significant subsidiaries, all wholly owned, include: Raymond James & Associates, Inc.
(“RJ&A”) a domestic broker-dealer carrying client accounts, Raymond James Financial Services, Inc. (“RJFS”) an introducing
domestic broker-dealer, Raymond James Financial Services Advisors, Inc. (“RJFSA”) a registered investment advisor, Raymond
James Ltd. (“RJ Ltd.”) a broker-dealer headquartered in Canada, Eagle, a registered investment advisor, and Raymond James
Bank, N.A. (“RJ Bank”) a national bank.
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Reclassifications
Certain prior period amounts have been reclassified to conform to the current year’s presentation.
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Recognition of revenues
Securities commissions & fees
The significant components of our securities commissions and fees revenue include the following:
a. Commission revenues and related expenses from securities transactions are recorded on a trade date basis. Commission
revenues are recorded at the amount charged to clients which, in certain cases, may include varying discounts.
b. Trailing commissions from mutual funds and variable annuities/insurance products, which are recorded ratably over the
period earned.
c. Fee revenues include certain asset-based fees, which are recorded ratably over the period earned.
d. Fee revenues include the fees earned by financial advisors who provide investment advisory services under various
manners of affiliation with us. These fee revenues are computed as either a percentage of the assets in the client account,
or a flat periodic fee charged to the client for investment advice. Such fees are earned from the services provided by
investment advisor representatives (“IARs”) and registered investment advisors (“RIAs”) who affiliate with us.
Financial advisors may choose to affiliate with us as either an employee of RJ&A, and thus operate under the RJ&A
registered investment advisor (“RIA”) license, or as an independent contractor affiliated with RJFS. If affiliated with
RJFS, the financial advisor may choose to provide such advisory services either under their own RIA license, or under
the RIA license of RJFSA, a wholly owned RIA that exclusively supports the investment advisory activities of financial
advisors affiliated with RJFS.
The revenue recognition and related expense policies associated with the generation of advisory fees from each of these
affiliation alternatives are as follows:
i.
ii.
Investment advisory service fee revenues earned by employee financial advisors (IARs of RJ&A) are presented in
securities commissions and fees revenue on a gross basis. The RJ&A IARs are paid compensation which is computed
as a percentage of the revenues generated and which is recorded as a component of compensation, commissions and
benefits expense.
Investment advisory service fee revenues earned by independent contractors who are registered representatives
(“RR”) with RJFS are also registered with RJFSA and offer investment advisory services under RJFSA’s RIA license
as an IAR of RJFSA are presented in securities fees and commissions revenue on a gross basis. These financial
advisors are paid a portion of the revenues generated which is recorded as a component of compensation, commissions
and benefits expense.
iii. Independent RIA firms that are owned and operated by a financial advisor who is an independent contractor registered
as a RR with RJFS, may receive administrative and custodial services provided by RJFS as introducing broker-dealer
firm to RJ&A. These independent RIA firms operate under their own RIA license and pay a fee for services provided
to the RIA and its clients. These fees are recorded in securities commissions and fees revenue, net of the portion of
the fees that are remitted to the independent RIA firm.
iv. We may earn fees as a result of providing a custodial platform for unaffiliated independent RIA firms. These
independent RIA firms operate under their own RIA license and pay for administrative and other services provided
through RJFS. These fees are recorded in securities commissions and fees revenue, net of the portion of the fees
that are remitted to the independent RIA firm.
e.
Insurance commission revenues and related expenses are recognized when the delivery of the insurance contract is
confirmed by the carrier, the premium is remitted to the insurance company and the contract requirements are met.
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f. Annuity commission revenues and related expenses are recognized when the signed annuity contract and premium is
submitted to the annuity carrier.
Investment banking
Investment banking revenues are recorded at the time a transaction is completed and the related income is reasonably
determinable. Investment banking revenues include management fees and underwriting fees, net of reimbursable expenses, earned
in connection with the distribution of the underwritten securities, merger and acquisition fees, private placement fees, syndication
fees on the sale of low-income housing tax credit fund interests, and limited partnership distributions. Securities received in
connection with investment banking transactions are carried at fair value.
We distribute our proprietary equity research products to certain institutional investor clients at no charge.
Investment advisory fees
We provide advice, research and administrative services for clients participating in both our managed and non-discretionary
asset-based investment programs. These revenues are generated by our asset management businesses for administering and
managing portfolios, funds and separate accounts. These asset management services are provided to individual investment
portfolios, mutual funds and managed programs. We earn investment advisory fees based on the value of clients’ portfolios which
are held in either managed or non-discretionary asset-based programs. Fees are computed based on balances either at the beginning
of the quarter, the end of the quarter, or average assets. These fees are recorded ratably over the period earned.
We may earn performance fees from various funds and separate accounts we manage, when their performance exceeds certain
specified rates of return. We record performance fee revenues in the period they are specifically quantifiable and are earned. Once
realized, such fees are not subject to clawback or reversal.
Account and service fees
Account and service fees primarily include transaction fees, annual account fees, service charges, exit fees, servicing fees,
fees generated in lieu of interest income from a multi-bank sweep program with unaffiliated banks, money market processing and
distribution fees and correspondent clearing fees. The annual account fees such as IRA fees and distribution fees are recognized
as earned over the term of the contract. The transaction fees are earned and collected from clients as trades are executed. Servicing
fees such as omnibus, education and marketing support fees, and no-transaction fee program revenues are paid to us for marketing
and administrative services and are recognized as earned. Under clearing agreements, we clear trades for unaffiliated correspondent
brokers and retain a portion of commissions as a fee for our services. Correspondent clearing revenues are recorded net of
commissions remitted. Total commissions generated by correspondents were $39.9 million, $39.6 million, and $35.5 million and
commissions remitted totaled $37.7 million, $36.9 million, and $32.6 million for the years ended September 30, 2015, 2014, and
2013 respectively.
Cash and cash equivalents
Our cash equivalents include money market funds or highly liquid investments with original maturities of 90 days or less,
other than those used for trading purposes.
Assets segregated pursuant to regulations and other segregated assets
In accordance with Rule 15c3-3 of the Securities Exchange Act of 1934, RJ&A, as a broker-dealer carrying client accounts,
is subject to requirements related to maintaining cash or qualified securities in a segregated reserve account for the exclusive
benefit of its clients. In addition, RJ Ltd. is required to hold client Registered Retirement Savings Plan funds in trust. Segregated
assets consist of cash and cash equivalents.
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 RJ Bank is involved. In addition, RJ Bank maintains cash in an interest-bearing pass-
through account at the Federal Reserve Bank in accordance with Regulation D of the Federal Reserve Act, which requires depository
institutions to maintain minimum average reserve balances against its deposits.
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Repurchase agreements and other collateralized financings
We purchase securities under short-term agreements to resell (“Reverse Repurchase Agreements”). Additionally, we sell
securities under agreements to repurchase (“Repurchase Agreements”). Both Reverse Repurchase Agreements and Repurchase
Agreements are accounted for as collateralized financings and are carried at contractual amounts plus accrued interest. Our policy
is to obtain possession of collateral with a market value equal to or in excess of the principal amount loaned under the Reverse
Repurchase Agreements. To ensure that the market value of the underlying collateral remains sufficient, the securities are valued
daily, and collateral is obtained from or returned to the counterparty when contractually required. These Reverse Repurchase
Agreements may result in credit exposure in the event the counterparty to the transaction is unable to fulfill its contractual
obligations. Other collateralized financings may include secured call loans receivable held by RJ Ltd. When executed, these
financings represent loans of excess cash to financial institutions which are fully collateralized by Canadian treasury bills or
provincial obligations and bear interest at call loan rates.
Financial instruments owned, financial instruments sold but not yet purchased and fair value
Financial instruments owned and financial instruments sold, but not yet purchased are recorded at fair value. Fair value is
defined by GAAP 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 willing market participants on
the measurement date.
In determining the fair value of our financial instruments in accordance with GAAP, we use various valuation approaches,
including market and/or income approaches. Fair value is a market-based measure considered from the perspective of a market
participant. As such, even when assumptions from market participants are not readily available, our own assumptions reflect those
that we believe market participants would use in pricing the asset or liability at the measurement date. GAAP provides for the
following three levels to be used to classify our fair value measurements:
Level 1-Financial instruments included in Level 1 are highly liquid instruments with quoted prices in active markets for
identical assets or liabilities. These include equity securities traded in active markets and certain U. S. Treasury securities,
other governmental obligations, or publicly traded corporate debt securities.
Level 2-Financial instruments reported in Level 2 include those that have pricing inputs that are other than quoted prices in
active markets, but which are either directly or indirectly observable as of the reporting date (i.e., prices for similar instruments).
Instruments that are generally included in this category are equity securities that are not actively traded, corporate obligations
infrequently traded, certain government and municipal obligations, interest rate swaps, certain asset-backed securities (“ABS”),
certain collateralized mortgage obligations (“CMOs”), certain mortgage-backed securities (“MBS”), our derivative
instruments, corporate loans and nonrecurring fair value measurements for certain loans held for sale, impaired loans and
other real estate owned (“OREO”).
Level 3-Financial instruments reported in Level 3 have little, if any, market activity and are measured using our best estimate
of fair value, where the inputs into the determination of fair value are both significant to the fair value measurement and
unobservable. These valuations require significant judgment or estimation. Instruments in this category generally include:
equity securities with unobservable inputs such as those investments made in our principal capital activities, certain non-
agency ABS, pools of interest-only Small Business Administration (“SBA”) loan strips (“I/O Strips”), certain municipal and
corporate obligations which include auction rate securities (“ARS”) and nonrecurring fair value measurements for certain
impaired loans.
GAAP requires that we maximize the use of observable inputs and minimize the use of unobservable inputs when performing
our fair value measurements. 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. Our 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.
We offset our long and short positions for a particular security recorded at fair value as part of our trading instruments (long
positions) and trading instruments sold but not yet purchased (short positions), when the long and short positions have identical
Committee on Uniform Security Identification Procedures numbers (“CUSIPs”).
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Valuation techniques
The fair value for certain of our 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 our 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 GAAP, 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, our definition of actively traded
is based on average daily volume and other market trading statistics. We have determined the market for certain other types of
financial instruments, including certain CMOs, ABS, certain collateralized debt obligations and ARS, to be volatile, uncertain or
inactive as of both September 30, 2015 and 2014. As a result, the valuation of these financial instruments included significant
management judgment in determining the relevance and reliability of market information available. We considered the inactivity
of the market to be evidenced by several factors, including a continued 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 categorization of financial instruments presented in our Consolidated
Statements of Financial Condition are described as follows:
Trading instruments and trading instruments sold but not yet purchased
Trading securities are comprised primarily of the financial instruments held by our broker-dealer subsidiaries. These
instruments are recorded at fair value with realized and unrealized gains and losses reflected in current period net income.
When available, we use quoted prices in active markets to determine the fair value of our trading 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, we utilize 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. We utilize prices from independent services to corroborate our 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.
The fair value for SBA loan securitizations is determined by utilizing observable prices obtained from a third party pricing
service. The third party pricing service provides comparable price evaluations utilizing observable market data for similar securities.
We substantiate the prices obtained from the third party pricing service by comparing such prices for a sample of securities to
observable market trades obtained from external sources. The instruments valued using these observable inputs are typically
classified within Level 2 of the fair value hierarchy.
RJ Bank maintains a trading portfolio of certain corporate loans, that it originates through the primary syndication market.
These trading instruments are recognized as of the trade date and are carried at fair value with the related unrealized and realized
gains and losses reflected in net trading profit. These trading instruments are valued using quotes from a third party pricing service.
These third party pricing service quotes are based on current market data provided by multiple dealers. The instruments are
classified within Level 2 of the fair value hierarchy as the market inputs utilized by the third party pricing service are based upon
observable inputs. We validate the third party pricing service quotes by comparing such prices to those provided by another
external source.
Positions in illiquid securities that do not have readily determinable fair values require significant judgment or estimation.
For these securities we use pricing models, discounted cash flow methodologies or similar techniques. Assumptions utilized by
these techniques include estimates of future delinquencies, loss severities, defaults and prepayments or redemptions. Securities
valued using these techniques are classified within Level 3 of the fair value hierarchy. 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 within Level 3 of the fair value hierarchy.
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I/O Strip securities do not trade in an active market with readily observable prices. Accordingly, we use valuation techniques
that consider a number of factors including: (a) the original cost of the pooled underlying SBA loans from which the I/O Strip
securities were created, and any changes from the original to the hypothetical cost of buying similar loans under current market
conditions; (b) seasoning of the underlying SBA loans in the pool that back the I/O strip securities; (c) the type and nature of the
pooled SBA loans backing the I/O Strip securities; (d) actual and assumed prepayment rates on the underlying pools of SBA loans;
and (e) market data for past trades in comparable I/O Strip securities. Prices from independent sources are used to corroborate
our estimates of fair value. Our I/O Strip securities are recorded in “other securities” within our trading instruments on our
Consolidated Statements of Financial Condition. These fair value measurements use significant unobservable inputs and
accordingly, we classify them as Level 3 of the fair value hierarchy.
Included within trading instruments (or trading instruments sold but not yet purchased) are to be announced (“TBA”) security
contracts with investors for generic MBS securities at specific rates and prices to be delivered on settlement dates in the future. These
TBA’s are entered into by RJ&A as a component of a hedging strategy, to hedge interest rate risk that it would otherwise be exposed
to as part of a program its fixed income public finance operations offers to certain state and local housing finance agencies (“HFA”).
Under this program, RJ&A enters into forward commitments to purchase Government National Mortgage Association (“GNMA”)
or Federal National Home Mortgage Association (“FNMA”) MBS. The MBS securities are issued on behalf of various HFA
clients and consist of the mortgages originated through their lending programs. RJ&A’s forward GNMA or FNMA MBS purchase
commitments arise at the time of the loan reservation for a borrower in the HFA lending program (these loan reservations fix the
terms of the mortgage, including the interest rate and maximum principal amount). The underlying terms of the GNMA or FNMA
MBS purchase, including the price for the MBS security (which is dependent upon the interest rates associated with the underlying
mortgages) are also fixed at loan reservation. Upon acquisition of the MBS security, RJ&A typically sells such security in open
market transactions as part of its fixed income operations. Given that the actual principal amount of the MBS security is not fixed
and determinable at the date of RJ&A’s commitment to purchase, these forward MBS purchase commitments do not meet the
definition of a “derivative instrument.” These TBA securities are accounted for at fair value and are classified within Level 1 of
the fair value hierarchy. The TBA securities may aggregate to either a net asset or net liability at any reporting date, depending
upon market conditions. The offsetting purchase commitment is accounted for at fair value and is included in either other assets,
or other liabilities, depending upon whether the TBA securities aggregate to a net asset or net liability. The fair value of the
purchase commitment is classified within Level 3 of the fair value hierarchy.
Available for sale securities
Available for sale securities are comprised primarily of MBS, CMOs and other equity securities held predominately by RJ
Bank (the “RJ Bank AFS Securities”) and ARS held by a non-broker-dealer subsidiary of RJF (collectively referred to as the “RJF
AFS Securities”).
Interest on the RJF AFS Securities is recognized in interest income on an accrual basis. For the RJ Bank AFS Securities,
discounts are accreted and premiums are amortized as an adjustment to yield over the estimated average life of the security.
Realized gains and losses on sales of any RJF AFS Securities are recognized using the specific identification method and
reflected in other revenue in the period they are sold.
Unrealized gains or losses on any RJF AFS Securities, except for those that are deemed to be other-than-temporary, are
recorded through other comprehensive (loss) income and are thereafter presented in equity as a component of accumulated other
comprehensive income (“AOCI”) on our Consolidated Statements of Financial Condition.
For any RJF AFS Securities in an unrealized loss position at a reporting period end, we make an assessment whether such
securities are impaired on an other-than-temporary basis. In order to evaluate our risk exposure and any potential impairment of
these securities, on at least a quarterly basis, we review the characteristics of each security owned such as, where applicable,
collateral type, delinquency and foreclosure levels, credit enhancement, projected loan losses, collateral coverage, the presence
of U.S. government or government agency guarantees, and issuer credit rating. The following factors are considered in order to
determine whether an impairment is other-than-temporary: our intention to sell the security, our assessment of whether it is more
likely than not that we will be required to sell the security before the recovery of its amortized cost basis, and whether the evidence
indicating that we will recover the amortized cost basis of a security in full 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 and forecasted performance of the security.
We intend and have the ability to hold the RJF AFS Securities to maturity. We have concluded that it is not more likely than
not that we will be required to sell these available for sale securities before the recovery of their amortized cost basis. Those
securities whose amortized cost basis we do not expect to recover in full are deemed to be other-than-temporarily impaired and
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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, net of deferred taxes, in shareholders’ equity as a component of AOCI. 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.
For any RJF AFS Securities, we estimate the portion of loss attributable to credit using a discounted cash flow model. For
RJ Bank AFS Securities, our discounted cash flow model utilizes relevant assumptions such as prepayment rate, default rate, and
loss severity on a loan level basis. 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 or additional credit losses 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. 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. The previous amortized
cost basis of the security less the other-than-temporary impairment (“OTTI”) recognized in earnings establishes the new cost basis
for the security.
The fair value of agency and non-agency securities included within the RJ Bank AFS Securities is determined by obtaining
third party pricing service bid quotations from two independent pricing services. Third party pricing service bid quotations are
based on either current market data, or for any securities traded in markets where the trading activity has slowed such as the CMO
market, the most recently available market data. The third party pricing services provide comparable price evaluations utilizing
available market data for similar securities. The market data the third party pricing services utilize for these price evaluations
includes observable data comprised of benchmark yields, reported trades, broker-dealer quotes, issuer spreads, two-sided markets,
benchmark securities, bids, offers, reference data including market research publications, and loan performance experience. In
order to validate that the pricing information used by the primary third party pricing service is observable, we request, on a quarterly
basis, some of the key market data available for a sample of securities and compare this data to that which we observed in our
independent accumulation of market information. Securities valued using these valuation techniques are classified within Level
2 of the fair value hierarchy.
For non-agency securities within the RJ Bank AFS Securities where a significant difference exists between the primary third
party pricing service bid quotation and the secondary third party pricing service, we utilize a discounted cash flow analysis to
determine which third party price quote is more representative of fair value under the current market conditions. Securities measured
using these valuation techniques are generally classified within Level 2 of the fair value hierarchy.
ARS are long-term variable rate securities tied to short-term interest rates that were intended to be reset through a “Dutch
auction” process, which generally occurs every seven to 35 days. Holders of ARS were at one time able to liquidate their holdings
to prospective buyers by participating in the auctions. During 2008, the Dutch auction process failed and holders were no longer
able to liquidate their holdings through the auction process. The fair value of the ARS holdings is estimated based on internal
pricing models. The pricing model takes into consideration the characteristics of the underlying securities, as well as multiple
inputs including the issuer and its credit quality, data from any recent trades, the expected timing of redemptions and an estimated
yield premium that a market participant would require over otherwise comparable securities to compensate for the illiquidity of
the ARS. These inputs require significant management judgment and accordingly, these securities are classified within Level 3
of the fair value hierarchy.
Derivative contracts
We enter into interest rate swaps, futures contracts, and forward foreign exchange contracts either as part of our fixed income
business to facilitate client transactions, to hedge a portion of our trading inventory, or to a limited extent for our own account.
These derivatives are accounted for as trading account assets or liabilities and recorded at fair value in the Consolidated Statements
of Financial Condition. Any realized or unrealized gains or losses are recorded in net trading profits within the Consolidated
Statements of Income and Comprehensive Income with any interest earned thereon recorded in interest income. The fair value
of any cash collateral exchanged as part of the interest rate swap contract is netted, by-counterparty, against the fair value of the
derivative instrument. The fair value of these interest rate derivative contracts is obtained from internal pricing models that consider
current market trading levels and the contractual prices for the underlying financial instruments, as well as time value, yield curve
and other volatility factors underlying the positions. Since our model inputs can be observed in a liquid market and the models
do not require significant judgment, such derivative contracts are classified within Level 2 of the fair value hierarchy. We utilize
values obtained from third party derivatives dealers to corroborate the output of our internal pricing models.
We also facilitate matched book derivative transactions through non-broker-dealer subsidiaries, either Raymond James
Financial Products, LLC or Raymond James Capital Services, LLC (collectively referred to as the Raymond James matched book
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swap subsidiaries or “RJSS”). The only difference in the swap businesses conducted by these two subsidiary entities is that they
utilize different third party financial institutions to facilitate the offsetting transaction. RJSS enters into derivative transactions
(primarily interest rate swaps) with clients. For every derivative transaction RJSS enters into with a client, it enters into an offsetting
transaction with terms that mirror the client transaction, with a credit support provider who is a third party financial institution.
Any collateral required to be exchanged under these derivative contracts is administered directly by the client and the third party
financial institution. RJSS does not hold any collateral, or administer any collateral transactions, related to these instruments. We
record the value of each derivative position held at fair value, as either an asset or an offsetting liability, presented as “derivative
instruments associated with offsetting matched book positions,” as applicable, on our Consolidated Statements of Financial
Condition. Fair value is determined using an internal model which includes inputs from independent pricing sources to project
future cash flows under each underlying derivative contract. The cash flows are discounted to determine the present value. Since
any changes in fair value are completely offset by an opposite change in the offsetting transaction position, there is no net impact
on our Consolidated Statements of Income and Comprehensive Income from changes in the fair value of these derivative
instruments. RJSS recognizes revenue on derivative transactions on the transaction date, computed as the present value of the
expected cash flows RJSS expects to receive from the third party financial institution over the life of the derivative contract. The
difference between the present value of these cash flows at the date of inception and the gross amount potentially received is
accreted to revenue over the term of the contract. The revenue from these transactions is included within other revenues on our
Consolidated Statements of Income and Comprehensive Income.
RJ Bank enters into three-month forward foreign exchange contracts to hedge the risk related to their investment in their
Canadian subsidiary. These derivatives are recorded at fair value on the Consolidated Statements of Financial Condition, the
majority of which are designated as net investment hedges. The effective portion of the related gain or loss is recorded, net of
tax, in shareholders’ equity as part of the cumulative translation adjustment component of AOCI with such balance impacting
earnings in the event the net investment is sold or substantially liquidated. Gains and losses on the undesignated derivative
instruments as well as amounts representing hedge ineffectiveness are recorded in earnings in the Consolidated Statements of
Income and Comprehensive Income. Hedge effectiveness is assessed at each reporting period using a method that is based on
changes in forward rates. The measurement of hedge ineffectiveness is based on the beginning balance of the foreign net investment
at the inception of the hedging relationship and performed using the hypothetical derivative method. However, as the terms of
the hedging instrument and hypothetical derivative match at inception, there is no expected ineffectiveness to be recorded in
earnings. The fair value of any cash collateral exchanged as part of the forward exchange contracts is netted, by counterparty,
against the fair value of the derivative instrument.
The fair value of RJ Bank’s forward foreign exchange contracts is determined by obtaining valuations from a third party
pricing service. These third party valuations are based on observable inputs such as spot rates, foreign exchange rates and both
U.S. and Canadian interest rate curves. We validate the observable inputs utilized in the third party valuation model by preparing
an independent calculation using a secondary, third party valuation model. These forward foreign exchange contracts are classified
within Level 2 of the fair value hierarchy.
The cash flows associated with certain assets held by RJ Bank provide interest income at fixed interest rates. Therefore, the
value of these assets, absent any risk mitigation, is subject to fluctuation based upon changes in market rates of interest over time.
Beginning in February 2015, we entered into certain interest rate swap contracts (the “RJ Bank Interest Hedges”) which swap
variable interest payments on debt for fixed interest payments. Through the RJ Bank Interest Hedges, RJ Bank is able to mitigate
a portion of the market risk associated with certain fixed rate interest earning assets held by RJ Bank.
The RJ Bank Interest Hedges are recorded at fair value on the Consolidated Statements of Financial Condition and are
designated as cash flow hedges. The effective portion of the related gain or loss is recorded, net of tax, in shareholders’ equity as
part of the cash flow hedge component of AOCI and subsequently reclassified to earnings when the hedged transaction affects
earnings, specifically upon the incurrence of interest expense on certain borrowings. The ineffective portions of the related gain
and loss are immediately recognized into earnings in the Consolidated Statements of Income and Comprehensive Income. Hedge
effectiveness is assessed at inception and each reporting period utilizing regression analysis and performed using the hypothetical
derivative method. However, as the key terms of the hedging instrument and hedged transaction match at inception, management
expects there to be no ineffectiveness impacting earnings from this hedge while it is outstanding. As a result of these derivative
transactions being executed through a clearing exchange, the cash deposit associated with this transaction that we have provided
to the exchange, is included as a component of deposits with clearing organizations on our Consolidated Statements of Financial
Condition. The fair value of RJ Bank Interest Hedges is obtained from internal pricing models that consider current market trading
levels and the contractual prices for the underlying financial instruments, as well as time value, yield curve and other volatility
factors underlying the positions. Since our model inputs can be observed in a liquid market and the models do not require significant
judgment, such derivative contracts are classified within Level 2 of the fair value hierarchy. We utilize values obtained from a
third party to corroborate the output of our internal pricing models.
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Private equity investments
Private equity investments are held primarily in our Other segment and consist of various direct and third party private equity
investments, employee investment funds, and various private equity funds which we sponsor. Private equity investments include
various private equity fund investments, including the Raymond James Employee Investment Funds I and II (the “EIF Funds”)
(collectively, these private equity fund investments and the EIF Funds are referred to as the “Private Funds”). See Note 11 for
additional information regarding the consolidation of the EIF Funds, which are variable interest entities. These Private Funds
invest in new and developing companies. Our investments in these Private Funds cannot be redeemed directly with the funds;
our investment is monetized through distributions received through the liquidation of the underlying assets of those 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. Certain of our private equity investments
include ownership interests in private companies with long-term growth potential. These investments are measured at fair value
with any changes recognized in other revenue on our Consolidated Statements of Income and Comprehensive Income.
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. As a result, these values cannot be determined with precision and
the calculated fair value estimates may not be realizable in a current sale or immediate settlement of the instrument.
Private equity investments are carried at estimated fair value. They 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. The carrying values
of these investments are adjusted based on financial performance, investment-specific events, financing and sales transactions
with third parties and/or discounted cash flow models incorporating changes in market outlook. Investments in funds structured
as limited partnerships are generally valued based on our proportionate share of the net assets of the partnership as provided by
the fund manager. Investments valued using these valuation techniques are classified within Level 3 of the fair value hierarchy.
Other investments
Other investments consist primarily of marketable securities we hold that are associated with deferred compensation programs
of either Eagle or a plan that was formerly sponsored by MK & Co. (as hereinafter defined), term deposits with Canadian financial
institutions, and certain investments in limited partnerships (or funds) for which in a number of instances, one of our affiliates
serves as the managing member or general partner (see Note 11 for information regarding such funds).
Certain employees, of either Eagle or others who were at one-time associated with MK & Co. (as hereinafter defined),
participate in deferred compensation plans. The balances associated with these plans are invested in certain marketable securities
that we hold until the vesting date, typically five years from the date of the deferral. A liability associated with these deferrals is
reflected as a component of our accrued compensation, commissions and benefits on our Consolidated Statements of Financial
Condition. We use quoted prices in active markets to determine the fair value of these investments. Such instruments are classified
within Level 1 of the fair value hierarchy.
Canadian financial institution term deposits are recorded at cost which approximates market value. These investments are
classified within Level 1 of the fair value hierarchy.
The valuation of the investments in limited partnerships and funds requires significant management judgment due to the
absence of quoted market prices, inherent lack of liquidity and long-term nature of these assets. As a result, these values cannot
be determined with precision and the calculated fair value estimates may not be realizable in a current sale or immediate settlement
of the instrument. Such instruments are classified within Level 3 of the fair value hierarchy.
Brokerage client receivables, loans to financial advisors and allowance for doubtful accounts
Brokerage client receivables include receivables from the clients of our broker-dealer and asset management subsidiaries.
The receivables from broker-dealer clients are principally for amounts due on cash and margin transactions and are generally
collateralized by securities owned by the clients. The receivables from asset management clients are primarily for accrued
investment advisory fees. Both the receivables from the asset management and broker-dealer clients are reported at their outstanding
principal balance, adjusted for any allowance for doubtful accounts. When a receivable held by one of our broker-dealer subsidiaries
is considered to be impaired, the amount of the impairment is generally measured based on the fair value of the securities acting
as collateral, which is measured based on current prices from independent sources such as listed market prices or broker-dealer
price quotations. Securities beneficially owned by customers, including those that collateralize margin or other similar transactions,
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are not reflected in our Consolidated Statements of Financial Condition (see Note 19 for additional information regarding this
collateral).
We offer loans to financial advisors and certain key revenue producers, primarily for recruiting, transitional cost assistance,
and retention purposes. These loans are generally repaid over a five to eight year period with interest recognized as earned. There
is no fee income associated with these loans. We assess future recoverability of these loans through analysis of individual financial
advisor production or other performance standards. In the event that the financial advisor is no longer affiliated with us, any
unpaid balance of such loan becomes immediately due and payable to us. In determining the allowance for doubtful accounts
related to former employees or independent contractors, management primarily considers our historical collection experience as
well as other factors including: any amounts due at termination, the reasons for the terminated relationship, and the former financial
advisor’s overall financial position. When the review of these factors indicates that further collection activity is highly unlikely,
the outstanding balance of such loan is written-off and the corresponding allowance is reduced. Based upon the nature of these
financing receivables, we do not analyze this asset on a portfolio segment or class basis. Further, the aging of this receivable
balance is not a determinative factor in computing our allowance for doubtful accounts, as concerns regarding the recoverability
of these loans primarily arise in the event that the financial advisor is no longer affiliated with us. We present the outstanding
balance of loans to financial advisors on our Consolidated Statements of Financial Condition, net of their applicable allowances
for doubtful accounts. The allowance for doubtful accounts balance associated with all of our loans to financial advisors is $3.7
million and $2.5 million at September 30, 2015 and 2014, respectively. Of the September 30, 2015 loans to financial advisors,
the portion of the balance associated with financial advisors who are no longer affiliated with us, after consideration of the allowance
for doubtful accounts, is approximately $5.8 million.
Securities borrowed and securities loaned
Securities borrowed and securities loaned transactions are reported as collateralized financings and recorded at the amount
of collateral advanced or received. In securities borrowed transactions, we are generally required to deposit cash with the lender.
With respect to securities loaned, we generally receive collateral in the form of cash in an amount in excess of the market value
of securities loaned. We monitor the market value of securities borrowed and loaned on a daily basis, with additional collateral
obtained or refunded as necessary (see Note 19 for additional information regarding this collateral).
Bank loans and allowances for losses
Loans held for investment
Bank loans are comprised of loans originated or purchased by RJ Bank and include commercial and industrial (“C&I”) loans,
commercial and residential real estate loans, tax-exempt loans, as well as loans which are fully collateralized by the borrower’s
marketable securities. The loans which we have the intent and the ability to hold until maturity or payoff, are recorded at their
unpaid principal balance plus any premium paid in connection with the purchase of the loan, less the allowance for loan losses
and any discounts received in connection with the purchase of the loan and net of deferred fees and costs on originated loans.
Syndicated loans purchased in the secondary market are recognized as of the trade date. Interest income is recognized on an
accrual basis.
Loan origination fees and direct costs, as well as premiums and discounts on loans that are not revolving, are capitalized and
recognized in interest income using the interest method. For revolving loans, the straight-line method is used based on the
contractual term.
RJ Bank segregates its loan portfolio into six portfolio segments, C&I, commercial real estate (“CRE”), CRE construction,
tax-exempt, residential mortgage and securities based loans (“SBL”). These portfolio segments also serve as the portfolio loan
classes for purposes of credit analysis, except for residential mortgage loans which are further disaggregated into residential first
mortgage and residential home equity classes.
Loans held for sale
Certain residential mortgage loans originated and intended for sale in the secondary market due to their fixed-rate terms are
carried at the lower of cost or estimated fair value. The fair value of the residential mortgage loans held for sale are estimated
using observable prices obtained from counterparties for similar loans. These nonrecurring fair value measurements are classified
within Level 2 of the fair value hierarchy. Gains and losses on sales of these assets are included as a component of other revenue,
while interest collected on these assets is included in interest income. Net unrealized losses are recognized through a valuation
allowance by charges to income as a component of other revenue in the Consolidated Statements of Income and Comprehensive
Income. Corporate loans, which include C&I, CRE, CRE construction and tax-exempt, are designated as held for investment
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upon inception and recognized in loans receivable. If we subsequently designate a corporate loan as held for sale, which generally
occurs as part of a loan workout situation, we then write down the carrying value of the loan with a partial charge-off, if necessary,
to carry it at the lower of cost or estimated fair value.
RJ Bank purchases the guaranteed portions of SBA section 7(a) loans and accounts for these loans in accordance with the
policy for loans held for sale. RJ Bank then aggregates SBA loans with similar characteristics into pools for securitization and
sells these pools in the secondary market. Individual loans may be sold prior to securitization. The determination of the fair value
of the SBA loans depend upon their intended disposition. The fair value of the SBA loans to be individually sold are determined
based upon their committed sales price. The fair value of loans to be aggregated into pools for securitization which are committed
to be sold, are determined based upon third party price quotes. The fair value of all other SBA loans are determined using a third
party pricing service. The prices for the SBA loans, other than those committed to be individually sold, are validated by comparing
the third party price quote or the third party pricing service prices, as applicable, for a sample of loans to observable market trades
obtained from external sources. Once the loans are securitized into a pool, the respective securities are classified as trading
instruments and are carried at fair value based on RJ Bank’s intention to sell the securitizations within the near term. Any changes
in the fair value of the securitized pools as well as any realized gains or losses earned thereon are reflected in net trading profits.
Transfers of the securitizations are all accounted for as sales at settlement date when RJ Bank has surrendered control over the
transferred assets. RJ Bank does not retain any interest in the securitizations once they are sold.
Off-balance sheet loan commitments
RJ Bank has outstanding at any time a significant number of commitments to extend credit and other credit-related off-balance
sheet financial instruments such as standby letters of credit and loan purchases. RJ Bank’s policy is generally to require customers
to provide collateral at the time of closing. The amount of collateral obtained, if it is deemed necessary by RJ Bank upon extension
of credit, is based on RJ Bank’s credit evaluation of the borrower. Collateral held varies but may include assets such as: marketable
securities, accounts receivable, inventory, real estate, and income-producing commercial properties. The potential credit loss
associated with these off-balance sheet loan commitments is accrued and reflected in other liabilities within the Consolidated
Statements of Financial Condition. Refer to the allowance for loan losses and reserve for unfunded lending commitments section
that follows for a discussion of the reserve calculation methodology.
RJ Bank recognizes the revenue associated with corporate syndicated standby letters of credit, which is generally received
quarterly, on a cash basis, the effect of which does not differ materially from recognizing in the period the fee is earned. Unused
corporate line fees are accounted for on an accrual basis.
Nonperforming assets
Nonperforming assets are comprised of both nonperforming loans and OREO. Nonperforming loans represent those loans
which have been placed on nonaccrual status and loans which have been restructured in a manner that grant a concession to a
borrower experiencing financial difficulties; loans with such restructurings are discussed further below. Additionally, any accruing
loans which are 90 days or more past due and in the process of collection are considered nonperforming loans.
Loans of all classes are placed on nonaccrual status when we determine that full payment of all contractual principal and
interest is in doubt, or the loan is past due 90 days or more as to contractual interest or principal unless the loan, in our opinion,
is well-secured and in the process of collection. When a loan is placed on nonaccrual status, the accrued and unpaid interest
receivable is written off against interest income and accretion of the net deferred loan origination fees cease. Interest is recognized
using the cash method for SBL and residential (first mortgage and home equity) loans and the cost recovery method for corporate
loans thereafter until the loan qualifies for return to accrual status. Loans are returned to an accrual status when the loans have
been brought contractually current with the original or amended terms and have been maintained on a current basis for a reasonable
period, generally six months.
Other real estate acquired in the settlement of loans, including through, or in lieu of, loan foreclosure, is initially recorded at
the lower of cost or fair value less estimated selling costs through a charge to the allowance for loan losses, thus establishing a
new cost basis. Subsequent to foreclosure, valuations are periodically performed by RJ Bank and the assets are carried at the
lower of the carrying amount or fair value, as determined by a current appraisal, or valuation less estimated costs to sell and are
classified as other assets on the Consolidated Statements of Financial Condition. These nonrecurring fair value measurements
are classified within Level 2 of the fair value hierarchy. Costs relating to development and improvement of the property are
capitalized, whereas those relating to holding the property are charged to operations. Sales of OREO are recorded as of the
settlement date and any associated gains or losses are included in other revenue on our Consolidated Statements of Income and
Comprehensive Income.
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Troubled debt restructurings
A loan restructuring is deemed to be a troubled debt restructuring (“TDR”) if we, for economic or legal reasons related to the
borrowers’ financial difficulties, grant a concession we would not otherwise consider. In TDRs, for all classes of loans, the
concessions granted, such as interest rate reductions, generally do not reflect current market conditions for a new loan of similar
risk made to another borrower in similar financial circumstances. For those restructurings of first mortgage and home equity
residential mortgage loans which may reflect current market conditions, the concessions granted by RJ Bank are generally interest
capitalization, principal forbearance, release of liability ordered under Chapter 7 bankruptcy not reaffirmed by the borrower, or
an extension of the interest-only or maturity period. The concessions granted in restructurings of corporate loans are similar to
those for residential mortgage loans, and may also include the reduction of the guarantor’s liability. First mortgage and home
equity residential mortgage TDRs may be returned to accrual status when there has been a sustained period of six months of
satisfactory performance. Corporate TDRs have generally been partially charged-off and, therefore, remain on nonaccrual status
until the loan is fully resolved.
Impaired loans
Loans in all classes are considered to be impaired when, based on current information and events, it is probable that RJ Bank
will be unable to collect the scheduled payments of principal and interest on a loan when due according to the contractual terms
of the loan agreement. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as
impaired. RJ Bank determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into
consideration reasons for the delay, the borrower’s prior payment record and the amount of the shortfall in relation to the principal
and interest owed. For individual loans identified as impaired, impairment is measured based on the present value of expected
future cash flows discounted at the loan’s effective interest rate and taking into consideration the factors described below in relation
to the evaluation of the allowance for loan losses, except that as a practical expedient, RJ Bank measures impairment based on
the loan’s observable market price, or the fair value of the collateral if the loan is collateral dependent. Impaired loans include all
corporate nonaccrual loans, all residential mortgage nonaccrual loans for which a charge-off had previously been recorded, and
all loans which have been modified in TDRs. Interest income on impaired loans is recognized consistently with the recognition
policy of nonaccrual loans.
Allowance for loan losses and reserve for unfunded lending commitments
RJ Bank maintains an allowance for loan losses to provide for probable losses inherent in RJ Bank’s loan portfolio. Loan
losses are charged against the allowance when RJ Bank believes the uncollectibility of a loan balance is confirmed. Subsequent
recoveries, if any, are credited to the allowance.
RJ Bank has developed policies and procedures for assessing the adequacy of the allowance for loan losses that reflect the
assessment of risk considering all available information. In developing this assessment, RJ Bank relies on estimates and exercises
judgment in evaluating credit risk. The evaluation is inherently subjective as it requires estimates that are susceptible to significant
revision as more information becomes available. Depending on changes in circumstances, future assessments of credit risk may
yield materially different results from the prior estimates, which may require an increase or a decrease in the allowance for loan
losses.
This allowance for loan loss is comprised of three components: allowances calculated based on formulas for homogenous
classes of loans collectively evaluated for impairment, specific allowances assigned to certain classified loans individually evaluated
for impairment, and unallocated allowances resulting from our analysis of certain qualitative factors. These homogeneous classes
are a result of management’s disaggregation of the loan portfolio and are comprised of the previously mentioned classes: C&I,
CRE, CRE construction, tax-exempt, residential first mortgage, residential home equity, and SBL.
A quarterly analysis of the loss emergence period (the average length of time in calendar quarters between discovery of the
estimate of the loss event and confirmation of loss) is performed on all defaulted loans in the corporate, residential first mortgage
and residential home equity loan classes. Where deemed necessary, this analysis is utilized in establishing the allowance for each
of these classes of loans through the application of an adjustment to the calculated allowance percentage for the respective loan
grade.
The loans within the corporate loan classes are assigned to one of several internal loan grades based upon the respective loan’s
credit characteristics. The loans within the residential first mortgage, residential home equity, and SBL classes are assigned loan
grades equivalent to the loan classifications utilized by bank regulators, dependent on their respective likelihood of loss. We assign
each loan grade for all loan classes an allowance percentage based on the perceived risk associated with that grade. The allowance
for loan losses for all non-impaired loans is then calculated based on the allowance percentage assigned to the respective loan’s
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class and grade. The allowance for loan losses for all impaired loans and those nonaccrual residential mortgage loans that have
been evaluated for a charge-off are based on an individual evaluation of impairment as previously described in the “Impaired
loans” section.
The qualitative and quantitative factors taken into consideration when assigning the loan grades and allowance percentages
to the loans within the corporate loan classes include: estimates of borrower default probabilities and collateral values; trends in
delinquencies; loan growth; loan terms; changes in geographic distribution, updated loan-to-value (“LTV”) ratios, lending policies,
experience, ability and depth of lending management and other relevant staff, local, regional, national and international economic
conditions; concentrations of credit risk; past loss history, Shared National Credit (“SNC”) reviews and examination results from
bank regulators. Loan grades for individual corporate loans are derived from analyzing two aspects of the risk factors in a particular
loan, the obligor rating and the facility (collateral) rating. The obligor rating relates to a borrower’s probability of default and the
facility rating is utilized to estimate the anticipated loss given default. These two ratings, which are based on RJ Bank’s internal
historical loss data or historical long-term industry loss rates where RJ Bank has limited loss history, are considered in combination
with certain management adjustments to derive the final corporate loan grades and allowance percentages.
For SBL, residential first mortgage loan and residential home equity loan classes, the qualitative factors considered when
assigning allowance percentages include loan performance trends, loan product parameters and qualification requirements, whether
the loan is originated or purchased, borrower credit scores at origination, occupancy (i.e., owner occupied, second home or
investment property), documentation level, loan purpose, geographic concentrations, average loan size and loan policy exceptions.
These qualitative factors, while considered and reviewed in establishing the allowance for loan losses, have generally not resulted
in any quantitative adjustments to RJ Bank’s historical loss rates.
Historical loss rates, a quantitative factor, are utilized when assigning the allowance percentages for residential first mortgage
loans and residential home equity loans, and are derived from estimates of the probability of default and loss given default (severity).
These estimated loss rates are based on RJ Bank’s historical loss data, as adjusted by management, over a period of time. Prior
to the quarter ended September 30, 2015, the estimated loss rates were based on a two-year period. During the fourth quarter of
fiscal year 2015, this look-back period was revised to five years in order to encompass a full housing cycle. In addition to historical
loss rates, one other quantitative factor utilized for the performing residential mortgage loan portfolio is updated LTV ratios. RJ
Bank segregates the performing loans in the residential loan classes, on a quarterly basis, based upon updated LTV data. RJ Bank
obtains the most recently available information (generally on a quarter-lag) to estimate the current LTV ratios on the individual
loans in the residential mortgage loan portfolio. Current LTVs are estimated, on a loan by loan basis, utilizing the initial appraisal
obtained at the time of origination, adjusted for housing price changes that have occurred since origination using current valuation
indices. The value of the homes could vary from actual market values due to changes in the condition of the underlying property,
variations in housing price changes within current valuation indices and other factors. The product of the default and loss severity
percentages is then applied to the balance of residential first mortgages and residential home equity loan balances, which have
been further stratified by updated LTV in order to calculate the related allowance for loan losses.
As TDRs, regardless of the loan portfolio segment or accrual status, are impaired loans, RJ Bank evaluates its credit risk on
an individual loan basis. The amount of impairment recorded on these loans is measured based on the present value of the expected
future cash flows discounted at the loan’s effective interest rate, or if collateral dependent, based on the fair value of the collateral,
less costs to sell. In addition, all redefaults (60 or more days delinquent subsequent to the loan’s modification date) on TDRs are
factored into each portfolio segments’ allowance for loan losses. Qualitative information, such as geographic area and industry
for TDRs and redefaulted TDRs, is considered and reviewed in the determination of expected loss rates previously discussed.
RJ Bank reserves for losses inherent in its unfunded lending commitments using a methodology similar to that used for loans
in the respective portfolio segment, based upon loan grade and expected funding probabilities for fully binding commitments.
This will result in some reserve variability over different periods depending upon the mix of the loan portfolio at the time and
future funding expectations. All classes of impaired loans which have unfunded lending commitments are analyzed in conjunction
with the impaired reserve process previously described.
Loan charge-off policies
Corporate loans are monitored on an individual basis, and loan grades are reviewed at least quarterly to ensure they reflect
the loan’s current credit risk. When RJ Bank determines that it is likely a corporate loan will not be collected in full, the loan is
evaluated for potential impairment. After consideration of the borrower’s ability to restructure the loan, alternative sources of
repayment, and other factors affecting the borrower’s ability to repay the debt, the portion of the loan deemed to be a confirmed
loss, if any, is charged-off. For collateral-dependent loans secured by real estate, the amount of the loan considered a confirmed
loss and charged-off is generally equal to the difference between the recorded investment in the loan and the collateral’s appraised
value less estimated costs to sell. In instances where the individual loan under evaluation is agented by another bank, and where
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the agent bank has not ordered a timely update of an outdated appraisal, RJ Bank may make adjustments to previous appraised
values for purposes of calculating specific reserves or taking partial charge-offs. These impaired loans are then considered to be
in a workout status and we evaluate, on an ongoing basis, all factors relevant in determining the collectability and fair value of
the loan. Appraisals on these impaired loans are obtained early in the impairment process as part of determining fair value and are
updated as deemed necessary given the facts and circumstances of each individual situation. Certain factors such as guarantor
recourse, additional borrower cash contributions or stable operations will mitigate the need for more frequent than annual appraisals.
In its ongoing evaluation of each individual loan, RJ Bank may consider more frequent appraisals in locations where commercial
property values are known to be experiencing a greater amount of volatility. For C&I and tax-exempt loans, RJ Bank evaluates
all sources of repayment, including the estimated liquidation value of collateral, to arrive at the amount considered to be a loss
and charged-off. Corporate banking and credit risk managers also hold a monthly meeting to review criticized loans (loans that
are rated special mention or worse as defined by bank regulators, see Note 9 for further discussion). Additional charge-offs are
taken when the value of the collateral changes or there is an adverse change in the expected cash flows.
The majority of RJ Bank’s corporate loan portfolio is comprised of participations in either SNCs or other large syndicated
loans in the U.S. or Canada. The SNCs are U.S. loan syndications totaling over $20 million that are shared between three or more
regulated institutions. Most SNC loans are reviewed annually by the agent bank’s regulator, a process in which the other participating
banks have no involvement. Once the SNC regulatory review process is complete, RJ Bank receives a summary of the review of
these SNC credits from the Office of the Comptroller of the Currency (“OCC”). This summary includes a synopsis of each loan’s
regulatory classification, loans that are designated for nonaccrual status and directed charge-offs. RJ Bank must be at least as
critical with nonaccrual designations, directed charge-offs, and classifications as the OCC. This ensures that each bank participating
in a SNC loan rates the loan at least as critical. Any classification changes may impact RJ Bank’s reserves and charge-offs during
the quarter that the SNC information is received from the OCC, however, these differences in classifications are generally minimal
given the size of the SNC loan portfolio. The amount of such adjustments depend upon the classification and whether RJ Bank
had the loan classified differently (either more or less critically) than the SNC review findings and, therefore, could result in higher,
lower, or no change in loan loss provisions than previously recorded. RJ Bank incorporates into its ratings process any observed
regulatory trends in the annual SNC exam process, but there will inherently be differences of opinion on individual credits due to
the high degree of judgment involved. While the SNC review has historically been an annual process, regulators may increase
the frequency of such examinations in the future. With respect to its ongoing credit evaluation process of the SNC portfolio, RJ
Bank conforms to what it believes will be the regulators’ view of individual credits. Corporate loans are subject to RJ Bank’s
internal review procedures and regulatory review by the OCC as part of RJ Bank’s regulatory examination.
Every residential mortgage loan over 60 days past due is reviewed by RJ Bank personnel monthly and documented in a written
report detailing delinquency information, balances, collection status, appraised value and other data points. RJ Bank senior
management meets monthly to discuss the status, collection strategy and charge-off/write-down recommendations on every
residential mortgage loan over 60 days past due with charge-offs considered on residential mortgage loans once the loans are
delinquent 90 days or more and then generally taken before the loan is 120 days past due. A charge-off is taken against the
allowance for loan losses for the difference between the loan amount and the amount that RJ Bank estimates will ultimately be
collected, based on the value of the underlying collateral less estimated costs to sell. RJ Bank predominantly uses broker price
opinions (“BPO”) for these valuations as access to the property is restricted during the collection and foreclosure process and there
is insufficient data available for a full appraisal to be performed. BPOs contain relevant and timely sale comparisons and listings
in the marketplace and, therefore, we have found these BPOs to be reasonable determinants of market value in lieu of appraisals
and more reliable than an automated valuation tool or the use of tax assessed values. A full appraisal is obtained post-foreclosure.
RJ Bank takes further charge-offs against the owned asset if an appraisal has a lower valuation than the original BPO, but does
not reverse previously charged-off amounts if the appraisal is higher than the original BPO. If a loan remains in pre-foreclosure
status for more than nine months, an updated valuation is obtained and further charge-offs are taken against the allowance for loan
losses, if necessary.
Other assets
RJ Bank carries investments in stock of the Federal Home Loan Bank of Atlanta (“FHLB”) and the Federal Reserve Bank of
Atlanta (the “FRB”) at cost. These investments are held in accordance with certain membership requirements, are restricted, and
lack a market. FHLB and FRB stock can only be sold to the issuer or another member institution at its par value. RJ Bank annually
evaluates its holdings in FHLB and FRB stock for potential impairment based upon its assessment of the ultimate recoverability
of the par value of the stock. This annual evaluation is comprised of a review of the capital adequacy, liquidity position and the
overall financial condition of the FHLB and FRB to determine the impact these factors have on the ultimate recoverability of the
par value of the respective stock. Impairment evaluations are performed more frequently if events or circumstances indicate there
may be impairment. Any cash dividends received are recognized as interest income in the Consolidated Statements of Income
and Comprehensive Income.
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We maintain investments in a significant number of company-owned life insurance policies utilized to fund certain non-
qualified deferred compensation plans and other employee benefit plans (see Notes 24 and 25 for information on the non-qualified
deferred compensation plans). The life insurance policies are carried at cash surrender value as determined by the insurer. See
Note 10 for additional information.
Investments in real estate partnerships held by consolidated variable interest entities
Raymond James Tax Credit Funds, Inc., a wholly owned subsidiary of RJF (“RJTCF”), is the managing member or general
partner in low-income housing tax credit (“LIHTC”) funds, some of which require consolidation (refer to the separate discussion
of our policies regarding the evaluation of VIEs to determine if consolidation is required that follows). These funds invest in
housing project limited partnerships or limited liability companies (“LLCs”) which purchase and develop affordable housing
properties qualifying for federal and state low-income housing tax credits. The balance presented is the investment in project
partnership balance of all of the LIHTC fund VIEs which require consolidation. Additional information is presented in Note 11.
Property and equipment
Property, equipment and leasehold improvements are stated at cost less accumulated depreciation and amortization.
Depreciation of assets is primarily provided for using the straight-line method over the estimated useful lives of the assets, which
range from two to seven years for software, two to five years for furniture, fixtures and equipment and 10 to 31 years for buildings,
building components, building improvements and land improvements. Leasehold improvements are amortized using the straight-
line method over the shorter of the remaining lease term or the estimated useful lives of the assets.
Additions, improvements and expenditures that extend the useful life of an asset are capitalized. Expenditures for repairs and
maintenance are charged to operations in the period incurred. Gains and losses on disposals of property and equipment are reflected
in the Consolidated Statements of Income and Comprehensive Income in the period realized.
Intangible assets
Certain identifiable intangible assets we acquire such as customer relationships, trade names, developed technology, intellectual
property, and non-compete agreements, are amortized over their estimated useful lives on a straight-line method, and are evaluated
for potential impairment whenever events or changes in circumstances suggest that the carrying value of an asset or asset group
may not be fully recoverable.
The rights to service mortgage loans, known as mortgage servicing rights (“MSRs”), are an intangible asset. Our MSRs arise
when RJ Bank sells residential mortgage loans and retains the associated mortgage servicing rights. RJ Bank records the estimated
fair value of MSRs and amortizes MSRs in proportion to, and over the period of estimated net servicing revenue. MSRs are
assessed for impairment quarterly, based on their fair value, with any impairment recognized in our Consolidated Statements of
Income and Comprehensive Income.
Goodwill
Goodwill represents the cost of acquired businesses in excess of the fair value of the related net assets acquired. GAAP does
not provide for the amortization of indefinite-life intangible assets such as goodwill. Rather, these assets are subject to an evaluation
of potential impairment on an annual basis, or more often if events or circumstances indicate there may be impairment. Goodwill
impairment is determined by comparing the estimated fair value of a reporting unit with its respective carrying value. If the
estimated fair value exceeds the carrying value, goodwill at the reporting unit level is not deemed to be impaired. However, if
the estimated fair value is below carrying value, further analysis is required to determine the amount of the impairment. This
further analysis involves assigning tangible assets and liabilities, identified intangible assets and goodwill to reporting units and
comparing the fair value of each reporting unit to its carrying amount.
In the course of our evaluation of the potential impairment of goodwill, we may perform either a qualitative or a quantitative
assessment. Our qualitative assessment of potential impairment may result in the determination that a quantitative impairment
analysis is not necessary. Under this elective process, we assess qualitative factors to determine whether the existence of events
or circumstances leads us to a determination that it is more likely than not that the fair value of a reporting unit is less than its
carrying amount. If after assessing the totality of events or circumstances, we determine it is more likely than not that the fair
value of a reporting unit is greater than its carrying amount, then performing a quantitative analysis is not required. However, if
we conclude otherwise, then we perform a quantitative impairment analysis.
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If we either choose not to perform a qualitative assessment, or we choose to perform a qualitative assessment but are unable
to qualitatively conclude that no impairment has occurred, then we perform a quantitative evaluation. In the case of a quantitative
assessment, we estimate the fair value of the reporting unit which the goodwill that is subject to the quantitative analysis is associated
(generally defined as the businesses for which financial information is available and reviewed regularly by management) and
compare it to the carrying value. If the estimated fair value of a reporting unit is less than its carrying value, we estimate the fair
value of all assets and liabilities of the reporting unit, including goodwill. If the carrying value of the reporting unit’s goodwill is
greater than the estimated fair value, an impairment charge is recognized for the excess.
We have elected December 31 as our annual goodwill impairment evaluation date (see Note 13 for additional information
regarding the outcome of our goodwill impairment assessments).
Legal liabilities
We recognize liabilities for contingencies when there is an exposure that, when fully analyzed, indicates it is both probable
that a liability has been incurred and the amount of loss can be reasonably estimated. Whether a loss is probable, and if so, the
estimated range of possible loss, is based upon currently available information and is subject to significant judgment, a variety of
assumptions, and uncertainties. When a range of possible loss can be estimated, we accrue the most likely amount within that
range; if the most likely amount of possible loss within that range is not determinable, we accrue a minimum based on the range
of possible loss. No liability is recognized for those matters which, in managements judgment, the determination of a reasonable
estimate of loss is not possible.
We record liabilities related to legal proceedings in trade and other payables on our Consolidated Statements of Financial
Condition. The determination of these liability amounts requires significant judgment on the part of management. Management
considers many factors including, but not limited to: the amount of the claim; the amount of the loss in the client’s account; the
basis and validity of the claim; the possibility of wrongdoing on the part of one of our employees or financial advisors; previous
results in similar cases; and legal precedents and case law. Each legal proceeding is reviewed with counsel in each accounting
period and the liability balance is adjusted as deemed appropriate by management. Any change in the liability amount is recorded
in the consolidated financial statements and is recognized as either a charge, or a credit, to net income in that period. The actual
costs of resolving legal proceedings may be substantially higher or lower than the recorded liability amounts for those matters.
We expense our cost of defense related to such matters in the period they are incurred.
Share-based compensation
We account for share-based awards through the measurement and recognition of compensation expense for all share-based
payment awards made to employees and directors based on estimated fair values. The compensation cost is recognized over the
requisite service period of the awards and is calculated as the market value of the awards on the date of the grant. See Note 24
for additional information. In addition, we account for share-based awards to our independent contractor financial advisors in
accordance with guidance applicable to accounting for equity instruments that are issued to other than employees for acquiring,
or in conjunction with selling, goods or services and guidance applicable to accounting for derivative financial instruments indexed
to, and potentially settled in, a company’s own stock. Share-based awards granted to our independent contractor financial advisors
are measured at their vesting date fair value and their fair value estimated at reporting dates prior to that time. The compensation
expense recognized each period is based on the most recent estimated value. Further, we classify certain of these non-employee
awards as liabilities at fair value upon vesting, with changes in fair value reported in earnings until these awards are exercised or
forfeited. See Note 25 for additional information. Compensation expense is recognized for all share-based compensation with
future service requirements over the requisite service period using the straight-line method, and in certain instances, the graded
attribution method.
Deferred compensation plans
We maintain various deferred compensation plans for the benefit of certain employees and independent contractors that provide
a return to the participant based upon the performance of various referenced investments. For certain of these plans, we invest
directly, as a principal in such investments, related to our obligations to perform under the deferred compensation plans (see the
“Other Investments” discussion within the financial instruments owned, financial instruments sold but not yet purchased and fair
value section of this Note 2 for further discussion of these assets). For other such plans, including our Long Term Incentive Plan
(“LTIP”) and our Wealth Accumulation Plan, we purchase and hold life insurance on the lives of certain current and former
participants to earn a competitive rate of return for participants and to provide a source of funds available to satisfy our obligations
under the plan (see Note 10 for information regarding the carrying value of such policies). Compensation expense is recognized
for all awards made under such plans with future service requirements over the requisite service period using the straight-line
method. Changes in the value of the company-owned life insurance and other investments, as well as the expenses associated with
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the related deferred compensation plans, are recorded in compensation, commissions and benefits expense on our Consolidated
Statements of Income and Comprehensive Income. See Notes 24 and 25 for additional information.
Leases
We lease office space and equipment under operating leases. We recognize rent expense related to these operating leases on
a straight-line basis over the lease term. The lease term commences on the earlier of the date when we become legally obligated
for the rent payments or the date on which we take possession of the property. For tenant improvement allowances and rent
holidays, we record a deferred rent liability in other liabilities on our Consolidated Statements of Financial Condition and amortize
the deferred rent over the lease term as a reduction to rent expense in the Consolidated Statements of Income and Comprehensive
Income. In instances where the office space or equipment under an operating lease will be abandoned prior to the expiration of
the lease term (these instances primarily result from the effects of acquisitions), we accrue an estimate of any projected loss in the
Consolidated Statements of Income and Comprehensive Income at the time such abandonment is known and any loss is estimable.
Acquisition related expense
Acquisition related expenses associated with material acquisitions are separately reported in the Consolidated Statement of
Income and Comprehensive Income and include certain incremental expenses arising from our acquisitions. These costs do not
represent recurring costs within the fully integrated combined organization.
Our most recent material acquisition was our April 2, 2012 acquisition of Morgan Keegan & Company, Inc. (a broker-dealer
referred to as “MK & Co.”) and MK Holding, Inc. and certain of its affiliates (collectively referred to as “Morgan Keegan”) from
Regions Financial Corporation (“Regions”). Our integration of Morgan Keegan was substantially complete as of September 30,
2013.
Foreign currency translation
We consolidate our foreign subsidiaries and certain joint ventures in which we hold an interest. The statement of financial
condition of the subsidiaries and joint ventures we consolidate are translated at exchange rates as of the period end. The statements
of income are translated either at an average exchange rate for the period, or in the case of the foreign subsidiary of RJ Bank, at
the exchange rate in effect on the date which transactions occur. The gains or losses resulting from translating foreign currency
financial statements into U.S. dollars are included in other comprehensive (loss) income and are thereafter presented in equity as
a component of AOCI. The translation gains or losses related to RJ Bank’s U.S. subsidiaries’ net investment in their Canadian
subsidiary are tax affected to the extent the Canadian subsidiary’s earnings will be repatriated to the U.S.
Income taxes
The objectives of accounting for income taxes are to recognize the amount of taxes payable or refundable for the current year.
We utilize the asset and liability method to provide income taxes on all transactions recorded in the consolidated financial statements.
This method requires that income taxes reflect the expected future tax consequences of temporary differences between the carrying
amounts of assets or liabilities for book and tax purposes. Accordingly, a deferred tax asset or liability for each temporary difference
is determined based on the tax rates that we expect to be in effect when the underlying items of income and expense are realized.
Judgment is required in assessing the future tax consequences of events that have been recognized in our financial statements or
tax returns, including the repatriation of undistributed earnings of foreign subsidiaries. Variations in the actual outcome of these
future tax consequences could materially impact our financial position, results of operations, or liquidity. See Note 20 for further
information on our income taxes.
Earnings per share (“EPS”)
Basic EPS is calculated by dividing earnings available to common shareholders by the weighted-average number of common
shares outstanding. Earnings available to common shareholders’ represents Net Income Attributable to Raymond James Financial,
Inc. reduced by the allocation of earnings and dividends to participating securities. Diluted EPS is similar to basic EPS, but adjusts
for the dilutive effect of outstanding stock options and restricted stock units by application of the treasury stock method.
Evaluation of VIEs to determine whether consolidation is required
A VIE requires consolidation by the entity’s primary beneficiary. Examples of entities that may be VIEs include certain legal
entities structured as corporations, partnerships or limited liability companies.
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We evaluate all of the entities in which we are involved to determine if the entity is a VIE and if so, whether we hold a variable
interest and are the primary beneficiary. We hold variable interests in the following VIE’s: the EIF Funds, a trust fund established
for employee retention purposes (“Restricted Stock Trust Fund”), certain LIHTC funds (“LIHTC Funds”), various other
partnerships and LLCs involving real estate (“Other Real Estate Limited Partnerships and LLCs”), certain new market tax credit
funds (“NMTC Funds”), and certain funds formed for the purpose of making and managing investments in securities of other
entities (“Managed Funds”).
Determination of the primary beneficiary of a VIE
We assess VIEs for consolidation when we hold variable interests in the entity. We consolidate the VIEs that are subject to
assessment when we are deemed to be the primary beneficiary of the VIE. Other than for the Managed Funds whose process is
discussed separately, the process for determining whether we are the primary beneficiary of the VIE is to conclude whether we
are a party to the VIE holding a variable interest that meets both of the following criteria: (1) has the power to make decisions
that most significantly affect the economic performance of the VIE, and (2) has the obligations to absorb losses or the right to
receive benefits that in either case could potentially be significant to the VIE.
EIF Funds
The EIF Funds are limited partnerships for which we are the general partner. The EIF Funds invest in certain of our private
equity activities as well as other unaffiliated venture capital limited partnerships. The EIF Funds were established as compensation
and retention measures for certain of our key employees. We are deemed to be the primary beneficiary and, accordingly, we
consolidate the EIF Funds.
Restricted Stock Trust Fund
We utilize a trust in connection with certain of our restricted stock unit awards. This trust fund was established and funded
for the purpose of acquiring our common stock in the open market to be used to settle restricted stock units granted as a retention
vehicle for certain employees of our Canadian subsidiary. We are deemed to be the primary beneficiary and, accordingly, consolidate
this trust fund.
LIHTC Funds
RJTCF is the managing member or general partner in a number of LIHTC Funds having one or more investor members or
limited partners. These low-income housing tax credit funds are organized as LLCs or limited partnerships for the purpose of
investing in a number of project partnerships, which are limited partnerships or LLCs that in turn purchase and develop low-
income housing properties qualifying for tax credits.
Our determination of the primary beneficiary of each tax credit fund in which RJTCF has a variable interest requires judgment
and is based on an analysis of all relevant facts and circumstances, including: (1) an assessment of the characteristics of RJTCF’s
variable interest and other involvement it has with the tax credit fund, including involvement of related parties and any de facto
agents, as well as the involvement of other variable interest holders, namely, limited partners or investor members, and (2) the tax
credit funds’ purpose and design, including the risks that the tax credit fund was designed to create and pass through to its variable
interest holders. In the design of tax credit fund VIEs, the overriding premise is that the investor members invest solely for tax
attributes associated with the portfolio of low-income housing properties held by the fund, while RJTCF, as the managing member
or general partner of the fund, is responsible for overseeing the fund’s operations.
Non-guaranteed low-income housing tax credit funds
As the managing member or general partner of the fund, except for one guaranteed fund discussed below, RJTCF does not
provide guarantees related to the delivery or funding of tax credits or other tax attributes to the investor members or limited partners
of tax credit funds. The investor member(s) or limited partner(s) of the VIEs bear the risk of loss on their investment. Additionally,
under the tax credit funds’ designed structure, the investor member(s) or limited partner(s) receive nearly all of the tax credits and
tax-deductible loss benefits designed to be delivered by the fund entity, as well as a majority of any proceeds upon a sale of a
project partnership held by a tax credit fund (fund level residuals). RJTCF earns fees from the fund for its services in organizing
the fund, identifying and acquiring the project partnership investments, ongoing asset management fees, and a share of any residuals
arising from sale of project partnerships upon the termination of the fund.
The determination of whether RJTCF is the primary beneficiary of any of the non-guaranteed LIHTC Funds in which it holds
a variable interest is primarily dependent upon: (1) the analysis of whether the other variable interest holders in the tax credit fund
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hold significant participating rights over the activities that most significantly impact the tax credit funds’ economic performance,
and/or (2) whether RJTCF has an obligation to absorb losses of, or the right to receive benefits from, the tax credit fund VIE which
could potentially be significant to the fund.
RJTCF sponsors two general types of non-guaranteed tax credit funds: either non-guaranteed single investor funds, or non-
guaranteed multi-investor funds. In single investor funds, RJTCF has concluded that the one single investor member or limited
partner in such funds has significant participating rights over the activities that most significantly impact the economics of the
fund, resulting in a conclusion of shared power with the limited partner. Therefore RJTCF, as managing member or general partner
of such funds, is not the one party with power over such activities and resultantly is not deemed to be the primary beneficiary of
such single investor funds and these funds are not consolidated.
In multi-investor funds, RJTCF has concluded that since the participating rights over the activities that most significantly
impact the economics of the fund are not held by one single investor member or limited partner, RJTCF is deemed to have the
power over such activities. RJTCF then assesses whether its projected benefits to be received from the multi-investor funds,
primarily from ongoing asset management fees or its share of any residuals upon the termination of the fund, are potentially
significant to the fund. RJTCF is deemed to be the primary beneficiary, and therefore consolidates, any multi-investor fund for
which it concludes that such benefits are potentially significant to the fund.
Among the LIHTC Fund entities evaluated, RJTCF determined that some of the LIHTC Funds it sponsors are not VIEs. These
funds are either: (1) funds which RJTCF holds a significant interest (one of which typically holds interests in certain tax credit
limited partnerships for less than 90 days, or until beneficial interest in the limited partnership or fund is sold to third parties), or
(2) are single investor LIHTC Funds in which RJTCF holds an interest, but the LIHTC Fund does not meet the VIE determination
criteria.
Direct investments in LIHTC project partnerships
RJ Bank is the investor member of a LIHTC fund in which a subsidiary of RJTCF is the managing member. This LIHTC
fund is an investor member in certain LIHTC project partnerships. We evaluate the appropriate accounting for these investments
after aggregating RJ Bank and RJTCF’s interests and roles in the LIHTC fund. Since unrelated third parties are the managing
member of the investee project partnerships, we have determined that consolidation of these project partnerships is not required;
we account for these investments under the equity method. The carrying value of these project partnerships is included in other
assets on our Consolidated Statements of Financial Condition (see Note 10 for additional information).
Guaranteed LIHTC fund
In conjunction with one of the multi-investor tax credit funds in which RJTCF is the managing member, RJTCF has provided
the investor members with a guaranteed return on their investment in the fund (the “Guaranteed LIHTC Fund”). As a result of
this guarantee obligation, RJTCF has determined that it is the primary beneficiary of, and accordingly consolidates, this guaranteed
multi-investor fund.
Other real estate limited partnerships and LLCs
We have a variable interest in several limited partnerships involved in various real estate activities in which one of our
subsidiaries is either the general partner or a limited partner. Given that we do not have the power to direct the activities that most
significantly impact the economic performance of these partnerships or LLCs, we have determined that we are not the primary
beneficiary of these VIEs. Accordingly, we do not consolidate these partnerships or LLCs.
New market tax credit funds
An entity which was at one time an affiliate of Morgan Keegan is the managing member of a number of NMTC Funds. NMTC
Funds are organized as LLC’s for the purpose of investing in eligible projects in qualified low-income areas or that serve qualified
targeted populations. In return for making a qualified equity investment into the NMTC Fund, the Fund’s investor member receives
tax credits eligible to apply against their federal tax liability. These new market tax credits are taken by the investor member over
a seven year period.
Each of these NMTC Funds have one investor member. We have concluded that in each of the NMTC Funds, the investor
member of such funds has significant participating rights over the activities that most significantly impact the economics of the
NMTC Fund and, therefore, our affiliate as the managing member of the NMTC Fund does not have the power over such activities.
Accordingly, we are not deemed to be the primary beneficiary of these NMTC Funds and, therefore, they are not consolidated.
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Managed Funds
The Managed Funds are VIEs in which one of our subsidiaries serves as the general partner. The Managed Funds satisfy the
conditions for deferral of the determination of who is the primary beneficiary that is performed based upon the assessment of who
has the power to direct the activities of the entity that most significantly impact the entity’ s economic performance and the
obligation to absorb losses of the entity that could potentially be significant to the entity. The deferral criteria which the Managed
Funds meet are: 1) these funds’ primary business activity involves investment in the securities of other entities not under common
management for current income, appreciation or both; 2) ownership in the funds is represented by units of investments to which
proportionate shares of net assets can be attributed; 3) the assets of the funds are pooled to avail owners of professional management;
4) the funds are the primary reporting entities; and 5) the funds do not have an obligation (explicit or implicit) to fund losses of
the entities that could be potentially significant.
For the Managed Funds, our primary beneficiary assessment applies prior accounting guidance which assesses who will absorb
a majority of the entity’s expected losses, receive a majority of the entity’s expected residual returns, or both. Based upon the
outcome of our assessments, we have determined that we are not required to consolidate the Managed Funds.
NOTE 3 – ACQUISITIONS
Acquisitions during fiscal year 2015
Cougar Global Investments Limited
On April 30, 2015, we completed our acquisition of Cougar, which at such time had more than $1 billion in assets under
advisement. For purposes of certain acquisition related financial reporting requirements, the Cougar acquisition is not considered
to be a “material” acquisition as defined by Securities and Exchange Commission (“SEC”) rules. We accounted for this acquisition
under the acquisition method of accounting with the assets and liabilities of Cougar recorded as of the acquisition date at their
respective fair value and consolidated in our financial statements. Cougar’s results of operations have been included in our results
prospectively since April 30, 2015, in our asset management segment.
See Note 13 for information regarding the identifiable intangible assets which resulted from the Cougar acquisition.
The Producers Choice LLC
On May 28, 2015, RJF entered into a definitive agreement to acquire TPC (the “TPC Agreement”). On July 31, 2015 (the
“TPC Closing Date”), we completed our acquisition of TPC. For purposes of certain acquisition related financial reporting
requirements, the TPC acquisition is not considered to be a “material” acquisition as defined by SEC rules. We accounted for this
acquisition under the acquisition method of accounting with the assets and liabilities of TPC recorded as of the acquisition date
at their respective fair value and consolidated in our financial statements. TPC’s results of operations have been included in our
results prospectively since July 31, 2015, in our private client group segment.
See Note 13 for information regarding the identifiable intangible assets and goodwill which resulted from the TPC acquisition.
See Note 21 for additional information regarding the contingent consideration associated with this acquisition.
Acquisition during fiscal year 2013
On December 24, 2012, (the “ClariVest Acquisition Date”) we completed our acquisition of a 45% interest in ClariVest.
As a result of certain protective rights we have under the operating agreement with ClariVest, we are consolidating ClariVest
in our financial statements as of the ClariVest Acquisition Date. In addition, a put and call agreement was entered into on the
ClariVest Acquisition Date that provides our Eagle subsidiary with various paths to majority ownership in ClariVest, the timing
of which would depend upon the financial results of ClariVest’s business and the tenure of existing ClariVest management. For
purposes of certain acquisition related financial reporting requirements, the ClariVest acquisition is not considered to be a “material”
acquisition as defined by SEC rules. We accounted for this acquisition under the acquisition method of accounting with the assets
and liabilities of ClariVest recorded as of the ClariVest Acquisition Date at their respective fair value and consolidated in our
financial statements. The results of operations of ClariVest have been included in our results prospectively since the ClariVest
Acquisition Date, in our asset management segment.
See Note 13 for information regarding the identifiable intangible assets we recorded as a result of the ClariVest acquisition.
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Acquisition related expenses
Acquisition related expenses associated with material acquisitions are separately reported in the Consolidated Statement of
Income and Comprehensive Income and include certain incremental expenses arising from our acquisitions. Acquisition related
expenses in fiscal year 2015 and 2014 are not material for separate reporting. In fiscal year 2013, we substantially completed the
integration of Morgan Keegan, which we acquired during our fiscal year 2012, and we incurred the following acquisition related
expenses related thereto during fiscal year 2013:
Information systems integration and conversion costs (1)
Occupancy and equipment (2)
Severance (3)
Temporary services
Financial advisory fees
Legal
Other integration costs
Total acquisition related expenses
Year ended
September 30, 2013
(in thousands)
$
$
33,021
15,999
12,734
4,106
1,176
476
5,942
73,454
(1) Includes equipment costs related to the disposition of information systems equipment, and temporary services incurred specifically
related to the information systems conversion.
(2) Includes lease costs associated with the abandonment of certain facilities resulting from the Morgan Keegan acquisition.
(3) Represents all costs associated with eliminating positions as a result of the Morgan Keegan acquisition, partially offset by the favorable
impact arising from the forfeiture of any unvested accrued benefits.
NOTE 4 – CASH AND CASH EQUIVALENTS, ASSETS SEGREGATED PURSUANT TO REGULATIONS, AND
DEPOSITS WITH CLEARING ORGANIZATIONS
Our cash and cash equivalents, assets segregated pursuant to regulations and other segregated assets, and deposits with clearing
organization balances are as follows:
Cash and cash equivalents:
Cash in banks
Money market fund investments
Total cash and cash equivalents (1)
Cash segregated pursuant to federal regulations and other segregated assets (2)
Deposits with clearing organizations (3)
September 30,
2015
2014
(in thousands)
$
$
2,597,568
3,438
2,601,006
2,905,324
207,488
5,713,818
$
$
2,195,683
3,380
2,199,063
2,489,264
150,457
4,838,784
(1) The total amounts presented include cash and cash equivalents of $1.22 billion and $1.21 billion as of September 30, 2015 and 2014,
respectively, which are either held directly by RJF in depository accounts at third party financial institutions, held in a depository
account at RJ Bank, or are otherwise invested by one of our subsidiaries on behalf of RJF, all of which are available without restrictions.
(2) Consists of cash maintained in accordance with Rule 15c3-3 under the Securities Exchange Act of 1934. RJ&A as a broker-dealer
carrying client accounts, is subject to requirements related to maintaining cash or qualified securities in segregated reserve accounts
for the exclusive benefit of its’ clients. Additionally, RJ Ltd. is required to hold client Registered Retirement Savings Plan funds in
trust.
(3) Consists of deposits of cash and cash equivalents or other marketable securities held by other clearing organizations or exchanges.
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Index
NOTE 5 – FAIR VALUE
Assets and liabilities measured at fair value on a recurring and nonrecurring basis are presented below:
September 30, 2015
Assets at fair value on a recurring basis:
Trading instruments:
Quoted prices
in active
markets for
identical
assets
(Level 1) (1)
Significant
other
observable
inputs
(Level 2) (1)
Significant
unobservable
inputs
(Level 3)
(in thousands)
Netting
adjustments (2)
Balance as of
September 30,
2015
Municipal and provincial obligations
$
17,318
$
188,745
$
Corporate obligations
Government and agency obligations
Agency MBS and CMOs
Non-agency CMOs and ABS
Total debt securities
Derivative contracts
Equity securities
Corporate loans
Other
Total trading instruments
Available for sale securities:
Agency MBS and CMOs
Non-agency CMOs
Other securities
ARS:
Municipals
Preferred securities
Total available for sale securities
Private equity investments
Other investments (4)
Derivative instruments associated with offsetting matched
book positions
Deposits with clearing organizations(5)
Other assets:
Derivative contracts(6)
Other assets
Total other assets
Total assets at fair value on a recurring basis
Assets at fair value on a nonrecurring basis:
Bank loans, net:
Impaired loans
Loans held for sale (8)
Total bank loans, net
OREO (9)
Total assets at fair value on a nonrecurring basis
$
$
$
7146_10K.pdf December 22, 2015 pg 127
2,254
7,781
253
—
27,606
—
24,859
—
679
53,144
—
—
1,402
—
—
1,402
—
230,839
—
29,701
—
—
—
92,907
108,166
117,317
46,931
554,066
132,707
3,485
4,814
30,805
725,877
302,195
71,369
—
—
—
373,564
—
17,347
389,457
—
917
—
917
—
156
—
—
9
165
—
—
—
1,986
2,151
—
—
—
28,015
110,749
138,764
209,088 (3)
565
—
—
—
4,975 (7)
4,975
$
— $
—
—
—
—
—
(90,621)
—
—
—
(90,621)
—
—
—
—
—
—
—
—
—
—
—
—
—
206,063
95,317
115,947
117,570
46,940
581,837
42,086
28,344
4,814
33,470
690,551
302,195
71,369
1,402
28,015
110,749
513,730
209,088
248,751
389,457
29,701
917
4,975
5,892
315,086
$
1,507,162
$
355,543
$
(90,621) $
2,087,170
— $
28,082
$
37,830
$
— $
—
—
—
14,334
42,416
671
—
37,830
—
—
—
—
— $
43,087
$
37,830
$
— $
65,912
14,334
80,246
671
80,917
(continued on next page)
123
Index
September 30, 2015
Quoted prices
in active
markets for
identical
assets
(Level 1) (1)
Significant
other
observable
inputs
(Level 2) (1)
Significant
unobservable
inputs
(Level 3)
(in thousands)
Netting
adjustments (2)
Balance as of
September 30,
2015
(continued from previous page)
Liabilities at fair value on a recurring basis:
Trading instruments sold but not yet purchased:
Municipal and provincial obligations
$
17,966
$
347
$
Corporate obligations
Government obligations
Agency MBS and CMOs
Total debt securities
Derivative contracts
Equity securities
Other securities
167
205,658
5,007
228,798
—
3,098
—
Total trading instruments sold but not yet purchased
231,896
Derivative instruments associated with offsetting matched
book positions
Trade and other payables:
Derivative contracts (6)
Other liabilities
Total trade and other payables
—
—
—
—
33,017
—
—
33,364
109,120
—
2,494
144,978
389,457
7,545
—
7,545
Total liabilities at fair value on a recurring basis
$
231,896
$
541,980
$
—
—
—
—
—
—
—
—
—
—
—
58
58
58
$
— $
—
—
—
—
(88,881)
—
—
(88,881)
—
—
—
—
18,313
33,184
205,658
5,007
262,162
20,239
3,098
2,494
287,993
389,457
7,545
58
7,603
$
(88,881) $
685,053
(1) We had $1.1 million in transfers of financial instruments from Level 1 to Level 2 during the year ended September 30, 2015. These
transfers were a result of a decrease in availability and reliability of the observable inputs utilized in the respective instruments’ fair
value measurement. We had $1.8 million in transfers of financial instruments from Level 2 to Level 1 during the year ended September
30, 2015. These transfers were a result of an increase in availability and reliability of the observable inputs utilized in the respective
instruments’ fair value measurement. Our policy is that the end of each respective quarterly reporting period determines when transfers
of financial instruments between levels are recognized.
(2) For derivative transactions not cleared through an exchange, and where permitted, we have elected to net derivative receivables and
derivative payables and the related cash collateral received and paid when a legally enforceable master netting agreement exists (see
Note 19 for additional information regarding offsetting financial instruments). Deposits associated with derivative transactions cleared
through an exchange are included in deposits with clearing organizations on our Consolidated Statements of Financial Condition.
(3) The portion of these investments we do not own is approximately $52 million as of September 30, 2015 and are included as a component
of noncontrolling interest in our Consolidated Statements of Financial Condition. The weighted average portion we own is
approximately $157 million or 75% of the total private equity investments of $209 million included in our Consolidated Statements
of Financial Condition.
(4) Other investments include $106 million of financial instruments that are related to obligations to perform under certain deferred
compensation plans (see Note 2 and Note 24 for further information regarding these plans).
(5) Consists of deposits we provide to clearing organizations or exchanges that are in the form of marketable securities.
(6) Consists of derivatives arising from RJ Bank’s business operations, see Note 18 for additional information.
(7) Includes forward commitments to purchase GNMA or FNMA MBS arising from our fixed income public finance operations (see Note
21 for additional information regarding these commitments).
(8) Includes individual loans classified as held for sale, which were recorded at a fair value lower than cost.
(9) Represents the fair value of foreclosed properties which were measured at a fair value subsequent to their initial classification as OREO.
The recorded value in the Consolidated Statements of Financial Condition is net of the estimated selling costs.
124
7146_10K.pdf December 22, 2015 pg 128
Index
September 30, 2014
Assets at fair value on a recurring basis:
Trading instruments:
Quoted prices
in active
markets for
identical
assets
(Level 1) (1)
Significant
other
observable
inputs
(Level 2) (1)
Significant
unobservable
inputs
(Level 3)
(in thousands)
Netting
adjustments (2)
Balance as of
September 30,
2014
Municipal and provincial obligations
$
11,407
$
192,482
$
Corporate obligations
Government and agency obligations
Agency MBS and CMOs
Non-agency CMOs and ABS
Total debt securities
Derivative contracts
Equity securities
Corporate loans
Other
Total trading instruments
Available for sale securities:
Agency MBS and CMOs
Non-agency CMOs
Other securities
ARS:
Municipals
Preferred securities
Total available for sale securities
Private equity investments
Other investments (5)
Derivative instruments associated with offsetting matched
book positions
Other assets:
Derivative contracts(6)
Other assets
Total other assets
1,989
7,376
247
—
21,019
—
28,834
—
566
50,419
—
—
1,916
—
—
1,916
—
212,753
—
—
—
—
109,939
93,986
127,172
58,364
581,943
89,923
5,264
990
10,208
688,328
267,720
91,918
—
—
—
359,638
—
1,267
323,337
2,462
—
2,462
—
—
—
—
11
11
—
44
—
2,309
2,364
—
—
—
86,696 (3)
114,039
200,735
211,666 (4)
1,731
—
—
787 (7)
787
$
— $
—
—
—
—
—
(61,718)
—
—
—
(61,718)
—
—
—
—
—
—
—
—
—
—
—
—
203,889
111,928
101,362
127,419
58,375
602,973
28,205
34,142
990
13,083
679,393
267,720
91,918
1,916
86,696
114,039
562,289
211,666
215,751
323,337
2,462
787
3,249
Total assets at fair value on a recurring basis
$
265,088
$
1,375,032
$
417,283
$
(61,718) $
1,995,685
Assets at fair value on a nonrecurring basis:
Bank loans, net
Impaired loans
Loans held for sale (8)
Total bank loans, net
OREO (9)
Total assets at fair value on a nonrecurring basis
$
$
— $
34,799
$
55,528
$
— $
—
—
—
22,611
57,410
768
—
55,528
—
—
—
—
90,327
22,611
112,938
768
— $
58,178
$
55,528
$
— $
113,706
(continued on next page)
125
7146_10K.pdf December 22, 2015 pg 129
Index
September 30, 2014
Quoted prices
in active
markets for
identical
assets
(Level 1) (1)
Significant
other
observable
inputs
(Level 2) (1)
Significant
unobservable
inputs
(Level 3)
(in thousands)
Netting
adjustments (2)
Balance as of
September 30,
2014
(continued from previous page)
Liabilities at fair value on a recurring basis:
Trading instruments sold but not yet purchased:
Municipal and provincial obligations
$
11,093
$
554
$
Corporate obligations
Government obligations
Agency MBS and CMOs
Total debt securities
Derivative contracts
Equity securities
Total trading instruments sold but not yet purchased
Derivative instruments associated with offsetting matched
book positions
Other liabilities
Total liabilities at fair value on a recurring basis
29
187,424
738
199,284
—
10,884
210,168
15,304
—
—
15,858
75,668
2
91,528
—
—
210,168
$
323,337
—
414,865
$
$
—
—
—
—
—
—
—
—
—
58
58
$
— $
—
—
—
—
(63,296)
—
(63,296)
—
—
(63,296) $
$
11,647
15,333
187,424
738
215,142
12,372
10,886
238,400
323,337
58
561,795
(1) We had $800 thousand in transfers of financial instruments from Level 1 to Level 2 during the year ended September 30, 2014. These
transfers were a result of a decrease in availability and reliability of the observable inputs utilized in the respective instruments’ fair
value measurement. We had $1.3 million in transfers of financial instruments from Level 2 to Level 1 during the year ended September
30, 2014. These transfers were a result of an increase in availability and reliability of the observable inputs utilized in the respective
instruments’ fair value measurement. Our policy is that the end of each respective quarterly reporting period determines when transfers
of financial instruments between levels are recognized.
(2) For derivative transactions not cleared through an exchange, and where permitted, we have elected to net derivative receivables and
derivative payables and the related cash collateral received and paid when a legally enforceable master netting agreement exists (see
Note 19 for additional information regarding offsetting financial instruments). Deposits associated with derivative transactions cleared
through an exchange are included in deposits with clearing organizations on our Consolidated Statements of Financial Condition.
(3) Includes $58 million of Jefferson County, Alabama Limited Obligation School Warrants ARS.
(4) The portion of these investments we do not own is approximately $55 million as of September 30, 2014 and are included as a component
of noncontrolling interest in our Consolidated Statements of Financial Condition. The weighted average portion we own is
approximately $157 million or 74% of the total private equity investments of $212 million included in our Consolidated Statements
of Financial Condition.
(5) Other investments include $144 million of financial instruments that are related to obligations to perform under certain deferred
compensation plans (see Note 2 and Note 24 for further information regarding these plans).
(6) Consists of derivatives arising from RJ Bank’s business operations, see Note 18 for additional information.
(7) Primarily comprised of forward commitments to purchase GNMA or FNMA MBS arising from our fixed income public finance
operations (see Note 21 for additional information regarding these commitments) and to a much lesser extent, other certain commitments.
(8) Includes individual loans classified as held for sale, which were recorded at a fair value lower than cost.
(9) Represents the fair value of foreclosed properties which were measured at a fair value subsequent to their initial classification as OREO.
The recorded value in the Consolidated Statements of Financial Condition is net of the estimated selling costs.
The adjustment to fair value of the nonrecurring fair value measures for the year ended September 30, 2015 resulted in a
$900 thousand additional provision for loan losses relating to impaired loans and $300 thousand in other losses relating to loans
held for sale and OREO. The adjustment to fair value of the nonrecurring fair value measures for the year ended September 30,
2014 resulted in a $500 thousand additional provision for loan losses relating to impaired loans and $200 thousand in other losses
relating to loans held for sale and OREO.
126
7146_10K.pdf December 22, 2015 pg 130
Index
Changes in Level 3 recurring fair value measurements
The realized and unrealized gains and losses for assets and liabilities within the Level 3 category presented in the tables
below may include changes in fair value that were attributable to both observable and unobservable inputs.
Additional information about Level 3 assets and liabilities measured at fair value on a recurring basis is presented below:
Year ended September 30, 2015
Level 3 assets at fair value
(in thousands)
Financial assets
Trading instruments
Available for sale
securities
Private equity, other investments and
other assets
Financial
liabilities
Payables-
trade and
other
Non-
agency
CMOs
&
ABS
Corporate
Obligations
Equity
securities
Other
ARS –
municipals
ARS -
preferred
securities
Private
equity
investments
Other
investments
Other
assets
Other
liabilities
Fair value September 30, 2014
$
— $
11
$
44
$ 2,309
$
86,696
$
114,039
$
211,666
$
1,731
$
787
$
(58)
Total gains (losses) for the year:
Included in earnings
Included in other
comprehensive income
Purchases and contributions
Sales
Redemptions by issuer
Distributions
Transfers: (2)
Into Level 3
Out of Level 3
Fair value
September 30, 2015
Change in unrealized gains
(losses) for the year included
in earnings (or changes in
net assets) for assets held at
the end of the year
(40)
—
33
(31)
—
—
209
(15)
1
—
—
—
—
(3)
—
—
5
—
20
(180)
11,042
25
(1)
43,091
—
(6,112)
(3,065)
—
34,478
—
— (34,621)
(63,611)
—
—
—
(69)
—
—
—
—
—
—
—
—
—
—
(250)
—
—
—
7,831
(4,343)
—
(49,157)
—
—
57
—
—
—
(681)
(542)
—
—
4,188
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
$
156
$
9
$
— $ 1,986
$
28,015
$
110,749
$
209,088
$
565
$ 4,975
$
(58)
$
(40)
$
1
$
— $
11
$
(910)
$
(3,065)
$
41,625
$
57
$ 4,203
$
—
(1) Primarily results from valuation adjustments of certain private equity investments. Since we only own a portion of these investments,
our share of the net valuation adjustments resulted in a gain of $31.6 million which is included in net income attributable to RJF (after
noncontrolling interests). The noncontrolling interests’ share of the net valuation adjustments was a gain of approximately $11.5
million.
(2) Our policy is that the end of each respective quarterly reporting period determines when transfers of financial instruments between
levels are recognized.
127
7146_10K.pdf December 22, 2015 pg 131
Index
Fair value
September 30,
2013
Total gains (losses)
for the year:
Included in
earnings
Included in other
comprehensive
income
Purchases and
contributions
Sales
Redemptions by
issuer
Distributions
Transfers: (2)
Into Level 3
Out of Level 3
Fair value
September 30,
2014
Change in
unrealized gains
(losses) for the
year included in
earnings (or
changes in net
assets) for assets
held at the end of
the year
Year ended September 30, 2014
Level 3 assets at fair value
(in thousands)
Financial assets
Trading instruments
Available for sale securities
Private equity, other investments, other receivables and
other assets
Financial
liabilities
Payables-
trade
and other
Non-
agency
CMOs &
ABS
Equity
securities
Other
Non-
agency
CMOs
ARS –
municipals
ARS -
preferred
securities
Private
equity
investments
Other
investments
Other
receivables
Other
assets
Other
liabilities
$
14
$
35
$
3,956 $
78
$
130,934
$
110,784
$
216,391
$
4,607
$
2,778
$
15
$
(60)
(1)
—
—
—
—
(2)
—
—
6
—
103
(98)
—
—
—
(2)
(371)
(27)
7,046
44
15,883
(1)
174
(2,778)
772
—
18,628
(19,904)
—
—
—
—
22
—
(38)
—
(35)
—
—
(403)
3,536
—
—
(23,355)
—
—
(27,526)
(325)
—
—
—
—
—
—
16,192
(7,076)
—
(39,053)
11,924
(2,595)
(3)
(4)
—
63
(2,698)
(64)
(351)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
2
—
—
—
—
—
—
—
$
11
$
44
$
2,309 $
— $
86,696
$
114,039
$
211,666
$
1,731
$
— $
787
$
(58)
$
20
$
6
$
(7) $
— $
(403)
$
3,536
$
15,883
$
267
$
— $
772
$
—
(1) Primarily results from valuation adjustments of certain private equity investments. Since we only own a portion of these investments,
our share of the net valuation adjustments resulted in a gain of $12.2 million which is included in net income attributable to RJF (after
noncontrolling interests). The noncontrolling interests’ share of the net valuation adjustments was a gain of approximately $3.7 million.
(2) Our policy is that the end of each respective quarterly reporting period determines when transfers of financial instruments between
levels are recognized.
(3) The transfers into Level 3 were comprised of transfers of balances previously included in other receivables on our Consolidated
Statements of Financial Condition.
(4) The transfers out of Level 3 were comprised of transfers of cash and cash equivalent balances previously included in private equity
investments on our Consolidated Statements of Financial Condition.
128
7146_10K.pdf December 22, 2015 pg 132
Index
Fair value
September 30,
2012
Total gains (losses)
for the year:
Included in
earnings
Included in other
comprehensive
income
Purchases and
contributions
Sales
Redemptions by
issuer
Distributions
Transfers: (3)
Into Level 3
Out of Level 3
Fair value
September 30,
2013
Change in
unrealized
gains (losses)
for the year
included in
earnings (or
changes in net
assets) for
assets held at
the end of the
year
Year ended September 30, 2013
Level 3 assets at fair value
(in thousands)
Financial assets
Trading instruments
Available for sale securities
Private equity, other investments, other receivables and
other assets
Financial
liabilities
Payables-
trade
and other
Municipal
&
provincial
obligations
Non-
agency
CMOs
&
ABS
Equity
securities
Other
Non-
agency
CMOs
ARS –
municipals
ARS -
preferred
securities
Private
equity
investments
Other
investments
Other
receivables
Other
assets
Other
liabilities
$
553
$
29
$
6
$
5,850 $
249
$
123,559
$ 110,193
$
336,927
$
4,092
$
— $ — $
(98)
—
—
—
(553)
—
—
—
—
(4)
—
—
—
—
(11)
—
—
1
—
63
—
—
2
—
(140)
(396)
439
1,164
70,688
(1)
1,390
2,778
—
281
13,212
7,504
—
(37)
(9,234)
9,885
—
—
—
—
—
(4,971)
25
(90)
20,416
(165,878)
(2)
(1,305)
(8,012)
—
(2,390)
(56)
—
(15)
—
—
—
—
—
—
—
—
(45,762)
—
—
—
—
(691)
—
(315)
131
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
15
—
38
—
—
—
—
—
—
—
$
— $
14
$
35
$
3,956 $
78
$
130,934
$ 110,784
$
216,391
$
4,607
$
2,778
$
15
$
(60)
$
— $
38
$
(1)
$
(140) $
(396)
$
13,212
$
7,504
$
5,354
$
1,511
$
2,778
$ — $
—
(1) Results from valuation adjustments of certain private equity investments and the April 29, 2013 sale of our indirect investment in
Albion Medical Holdings, Inc. (“Albion”). Since we only own a portion of these investments, our share of the net valuation adjustments
and Albion sale resulted in a gain of $28.4 million which is included in net income attributable to RJF (after noncontrolling interests). The
noncontrolling interests’ share of the net gain is approximately $42.3 million.
(2) Results primarily from the April 29, 2013 sale of our indirect investment in Albion. The amount is presented gross, and therefore
includes amounts pertaining to interests held by others.
(3) Our policy is that the end of each respective quarterly reporting period determines when transfers of financial instruments between
levels are recognized.
As of September 30, 2015, 7.9% of our assets and 3.2% of our liabilities are instruments measured at fair value on a recurring
basis. Instruments measured at fair value on a recurring basis categorized as Level 3 as of September 30, 2015 represent 17% of
our assets measured at fair value. In comparison as of September 30, 2014, 8.6% and 3% 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 September 30, 2014 represented 21% of our assets measured at fair value. The balances of our level
3 assets have decreased compared to September 30, 2014, primarily as a result of the sale or redemption of a portion of our ARS
portfolio. Accordingly, Level 3 instruments as a percentage of total financial instruments have decreased by 4% as compared to
September 30, 2014.
129
7146_10K.pdf December 22, 2015 pg 133
Index
Gains and losses included in earnings are presented in net trading profit and other revenues in our Consolidated Statements
of Income and Comprehensive Income as follows:
For the year ended September 30, 2015
Total (losses) gains included in revenues
Change in unrealized (losses) gains for assets held at the end of the year
For the year ended September 30, 2014
Total (losses) gains included in revenues
Change in unrealized gains for assets held at the end of the year
For the year ended September 30, 2013
Total (losses) gains included in revenues
Change in unrealized (losses) gains for assets held at the end of the year
Net trading
profits
Other
revenues
(in thousands)
(214) $
(28) $
58,403
41,910
Net trading
profits
Other
revenues
(in thousands)
(366) $
$
19
21,116
20,055
Net trading
profits
Other
revenues
(in thousands)
(143) $
(103) $
76,101
29,963
$
$
$
$
$
$
130
7146_10K.pdf December 22, 2015 pg 134
Index
Quantitative information about level 3 fair value measurements
The significant assumptions used in the valuation of level 3 financial instruments are as follows (the table that follows
includes the significant majority of the financial instruments we hold that are classified as level 3 measures):
Level 3 financial instrument
Recurring measurements:
Available for sale securities:
ARS:
Municipals
Municipals
Preferred securities
Private equity investments:
Nonrecurring measurements:
Impaired loans: residential
Impaired loans: corporate
Fair value at
September 30,
2015
(in thousands)
Valuation technique(s)
Unobservable input
Range
(weighted-
average)
$
$
$
$
$
$
$
10,547
Discounted cash flow
Average discount rate(a)
Average interest rates applicable to future
interest income on the securities(b)
Prepayment year(c)
Average discount rate(a)
Average interest rates applicable to future
interest income on the securities(b)
Prepayment year(c)
Average discount rate(a)
Average interest rates applicable to future
interest income on the securities(b)
Prepayment year(c)
5.51% - 7.33%
(6.42%)
1.33% - 3.15%
(2.24%)
2018 - 2025 (2022)
3.39% - 4.39%
(3.89%)
1.25% - 1.25%
(1.25%)
2015 - 2020 (2020)
3.51% - 5.27%
(4.32%)
1.7% - 2.96%
(1.81%)
2015 - 2020 (2020)
Discount rate(a)
13% - 21%
(17.5%)
Terminal growth rate of cash flows
3% - 3% (3%)
Terminal year
EBITDA Multiple(d)
2017 - 2019 (2018)
4.75 - 7.5 (6.1)
Weighting assigned to outcome of
scenario 1/scenario 2
Not meaningful(e)
72%/28%
Not meaningful(e)
Prepayment rate
Not meaningful(f)
7 yrs. - 12 yrs.
(10.2 yrs.)
Not meaningful(f)
17,468
Discounted cash flow
110,749
Discounted cash flow
53,653
Income or market approach:
Scenario 1 - income approach -
discounted cash flow
Scenario 2 - market approach -
market multiple method
155,435
Transaction price or other
investment-specific events(e)
23,567
14,263
Discounted cash flow
Appraisal or discounted cash
flow value(f)
(a) Represents discount rates used when we have determined that market participants would take these discounts into account when pricing
the investments.
(b) Future interest rates are projected based upon a forward interest rate path, plus a spread over such projected base rate that is applicable
to each future period for each security within this portfolio segment. The interest rates presented represent the average interest rate
over all projected periods for securities within the portfolio segment.
(c) Assumed year of at least a partial redemption of the outstanding security by the issuer.
(d) Represents amounts used when we have determined that market participants would use such multiples when pricing the investments.
(e) Certain private equity investments are valued initially at the transaction price until either our annual review, significant transactions
occur, new developments become known, or we receive information from the fund manager that allows us to update our proportionate
share of net assets, when any of which indicate that a change in the carrying values of these investments is appropriate.
(f) The valuation techniques used for the impaired corporate loan portfolio as of September 30, 2015 were appraisals less selling costs
for the collateral dependent loans and discounted cash flows for the remaining impaired loans that are not collateral dependent.
131
7146_10K.pdf December 22, 2015 pg 135
Index
Qualitative disclosure about unobservable inputs
For our recurring fair value measurements categorized within Level 3 of the fair value hierarchy, the sensitivity of the fair
value measurement to changes in significant unobservable inputs and interrelationships between those unobservable inputs are
described below:
Auction rate securities:
One of the significant unobservable inputs used in the fair value measurement of auction rate securities presented within our
available for sale securities portfolio relates to judgments regarding whether the level of observable trading activity is sufficient
to conclude markets are active. Where insufficient levels of trading activity are determined to exist as of the reporting date, then
management’s assessment of how much weight to apply to trading prices in inactive markets versus management’s own valuation
models could significantly impact the valuation conclusion. The valuation of the securities impacted by changes in management’s
assessment of market activity levels could be either higher or lower, depending upon the relationship of the inactive trading prices
compared to the outcome of management’s internal valuation models.
The future interest rate and maturity assumptions impacting the valuation of the auction rate securities are directly related. As
short-term interest rates rise, due to the variable nature of the penalty interest rate provisions embedded in most of these securities
in the event auctions fail to set the security’s interest rate, then a penalty rate that is specified in the security increases. These
penalty rates are based upon a stated interest rate spread over what is typically a short-term base interest rate index. Management
estimates that at some level of increase in short-term interest rates, issuers of the securities will have the economic incentive to
refinance (and thus prepay) the securities. Therefore, the short-term interest rate assumption directly impacts the input related to
the timing of any projected prepayment. The faster and steeper short-term interest rates rise, the earlier prepayments will likely
occur and the higher the fair value of the security.
Private equity investments:
The significant unobservable inputs used in the fair value measurement of private equity investments relate to the financial
performance of the investment entity and the market’s required return on investments from entities in industries in which we hold
investments. Significant increases (or decreases) in our investment entities’ future economic performance will have a directly
proportional impact on the valuation results. The value of our investment moves inversely with the market’s expectation of returns
from such investments. Should the market require higher returns from industries in which we are invested, all other factors held
constant, our investments will decrease in value. Should the market accept lower returns from industries in which we are invested,
all other factors held constant, our investments will increase in value.
Fair value option
The fair value option is an accounting election that allows the reporting entity to apply fair value accounting for certain
financial assets and liabilities on an instrument by instrument basis. As of September 30, 2015 and 2014, we have elected not to
choose the fair value option for any of our financial assets or liabilities not already recorded at fair value.
Additional disclosures about the fair value of financial instruments that are not carried on the Consolidated Statements
of Financial Condition at fair value
Many, but not all, of the financial instruments we hold are recorded at fair value in the Consolidated Statements of Financial
Condition.
The following represent financial instruments in which the ending balance at September 30, 2015 and 2014 is not carried at
fair value, as computed in accordance with the GAAP definition of fair value (an exit price concept, refer to Note 2 for further
discussion), on our 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 us to limited credit risk and have no stated maturities or have short-term maturities and
carry interest rates that approximate market rates. Under the fair value hierarchy, cash and cash equivalents and assets segregated
pursuant to federal regulations and other segregated assets are classified as Level 1. Securities either purchased or sold under
agreements to resell and other collateralized financings are classified as Level 2 under the fair value hierarchy because they are
generally variable rate instruments collateralized by U.S. government or agency securities.
132
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Index
Bank loans, net: These financial instruments are primarily comprised of loans originated or purchased by RJ Bank and include
C&I loans, commercial and residential real estate loans, tax-exempt loans, as well as SBL intended to be held until maturity or
payoff, and are recorded at amounts that result from the application of the loans held for investment methodologies summarized
in Note 2. In addition, these financial instruments consist of loans held for sale, which are carried at the lower of cost or market
value. A portion of these loans held for sale are included in the nonrecurring fair value measurements in addition to any impaired
loans held for investment.
Fair values for both variable and fixed-rate loans held for investment are estimated using discounted cash flow analyses, based
on interest rates currently being offered for loans with similar terms to borrowers of similar credit quality. This methodology for
estimating the fair value of loans does not consider other market variables and, therefore, is not based on an exit price concept.
Refer to Note 2 for information regarding the fair value policies specific to loans held for sale.
Receivables and other assets: Brokerage client receivables, receivables from broker-dealers and clearing organizations, stock
borrowed receivables, loans to financial advisors, net, other receivables, and certain other assets are recorded at amounts that
approximate fair value and are classified as Level 2 and 3 under the fair value hierarchy. As specified under GAAP, the FHLB
and FRB stock are recorded at cost, which we have determined to approximate their estimated fair value, and are classified as
Level 2 under the fair value hierarchy.
Bank deposits: The fair values for demand deposits are 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. Due to their demand or short-term nature, the demand deposits and variable
rate money market and savings accounts are classified as Level 2 under the fair value hierarchy. 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. These fixed rate certificate accounts are classified as Level 3 under
the fair value hierarchy.
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 and are classified as Level 2 under the fair value
hierarchy.
Other borrowings: The fair value of the mortgage note payable associated with the financing of our Saint Petersburg, Florida
corporate offices is based upon an estimate of the current market rates for similar loans. The carrying amount of the remaining
components of our other borrowings approximate their fair value due to the relative short-term nature of such borrowings, some
of which are day-to-day. In addition to the mortgage note payable, the portion of other borrowings which are not “day-to-day”
are primarily comprised of RJ Bank’s borrowings from the FHLB which, by their nature, reflect terms that approximate current
market rates for similar loans. Under the fair value hierarchy, our other borrowings are classified as Level 2.
Senior notes payable: The fair value of our senior notes payable is based upon recent trades of those or other similar debt
securities in the market.
Off-balance sheet financial instruments: The fair value of unfunded commitments to extend credit is based on a methodology
similar to that described above for bank loans and further adjusted for the probability of funding. The fair value of these unfunded
lending commitments, in addition to the fair value of other off-balance sheet financial instruments, are classified as Level 3 under
the fair value hierarchy. See Note 27 for further discussion of off-balance sheet financial instruments.
133
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Index
The estimated fair values by level within the fair value hierarchy and the carrying amounts of certain of our financial instruments
not carried at fair value are as follows:
Quoted prices
in active
markets for
identical
assets
(Level 1)
Significant
other
observable
inputs
(Level 2)
Significant
unobservable
inputs
(Level 3)
(in thousands)
Total estimated
fair value
Carrying
amount
— $
105,199
$
12,799,065
$
12,904,264
$
12,907,776
— $
— $
$
368,760
11,564,963
38,455
892,963
$
$
$
358,981
$
— $
— $
11,923,944
38,455
1,261,723
$
$
$
11,919,881
37,716
1,149,222
— $
23,678
$
10,738,136
$
10,761,814
$
10,857,662
— $
— $
$
366,100
9,684,221
42,309
912,861
$
$
$
344,234
$
— $
— $
10,028,455
42,309
1,278,961
$
$
$
10,028,924
41,802
1,149,034
September 30, 2015
Financial assets:
Bank loans, net(1)
Financial liabilities:
Bank deposits
Other borrowings(2)
Senior notes payable
September 30, 2014
Financial assets:
Bank loans, net(1)
Financial liabilities:
Bank deposits
Other borrowings(2)
Senior notes payable
$
$
$
$
$
$
$
$
(1) Excludes all impaired loans and loans held for sale which have been recorded at fair value in the Consolidated Statements of Financial
Condition at September 30, 2015 and 2014.
(2) Excludes the components of other borrowings that are recorded at amounts that approximate their fair value in the Consolidated
Statements of Financial Condition at September 30, 2015 and 2014.
134
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Index
NOTE 6 – TRADING INSTRUMENTS AND TRADING INSTRUMENTS SOLD BUT NOT YET PURCHASED
Municipal and provincial obligations
Corporate obligations
Government and agency obligations
Agency MBS and CMOs
Non-agency CMOs and ABS
Total debt securities
Derivative contracts (1)
Equity securities
Corporate loans
Other (2)
Total
September 30, 2015
September 30, 2014
Trading
instruments
Instruments
sold but not
yet purchased
Trading
instruments
Instruments
sold but not
yet purchased
$
$
206,063
95,317
115,947
117,570
46,940
581,837
42,086
28,344
4,814
33,470
690,551
$
$
$
(in thousands)
18,313
33,184
205,658
5,007
—
262,162
20,239
3,098
—
2,494
287,993
$
203,889
111,928
101,362
127,419
58,375
602,973
28,205
34,142
990
13,083
679,393
$
$
11,647
15,333
187,424
738
—
215,142
12,372
10,886
—
—
238,400
(1) Represents the derivative contracts held for trading purposes. These balances do not include all derivative instruments. See Note 18
for further information regarding all of our derivative transactions, and see Note 19 for additional information regarding offsetting
financial instruments.
(2) Of the trading instruments balance as of September 30, 2015, $30.8 million is comprised of brokered certificates of deposit issued by
third party financial institutions. As of September 30, 2014, we held $10.2 million of such instruments.
See Note 5 for additional information regarding the fair value of trading instruments and trading instruments sold but not yet
purchased.
NOTE 7 – AVAILABLE FOR SALE SECURITIES
Available for sale securities are comprised of MBS and CMOs owned by RJ Bank and ARS owned by one of our non-broker-
dealer subsidiaries.
Certain available for sale securities owned by RJ Bank were sold during the year ended September 30, 2015. The sales resulted
in proceeds of $12.2 million, and a loss of $600 thousand which is included in other revenues on our Consolidated Statements of
Income and Comprehensive Income. During the year ended September 30, 2014, there were $26.6 million in proceeds, and a gain
of $300 thousand, from sales of available for sale securities owned by RJ Bank. There were no sales of available for sale securities
owned by RJ Bank during the year ended September 30, 2013.
Certain securities in the ARS portion of the available for sale securities portfolio have been redeemed by their issuer or sold
in market transactions. Sale or redemption activities within the ARS portion of the portfolio resulted in aggregate proceeds of
$63.9 million, and a gain of $11.1 million in the year ended September 30, 2015 which is included in other revenues on our
Consolidated Statements of Income and Comprehensive Income. Nearly all of the ARS proceeds as well as the gain on sale arising
during the year ended September 30, 2015, resulted from the sale of Jefferson County, Alabama Limited Obligation School Warrants
ARS. During the year ended September 30, 2014, sales or redemption activities within the ARS portion of the available for sale
securities portfolio resulted in proceeds of $51.2 million, and a gain of $7.1 million, which includes $26.5 million in proceeds,
and a gain of $5.5 million, from the redemption of Jefferson County, Alabama Sewer Revenue Refunding Warrants ARS. During
the year ended September 30, 2013, sales or redemption activities within the ARS portfolio resulted in proceeds of $14.4 million,
and a gain of $1.6 million.
135
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Index
The amortized cost and fair values of available for sale securities are as follows:
September 30, 2015
Available for sale securities:
Agency MBS and CMOs
Non-agency CMOs (1)
Other securities
Total RJ Bank available for sale securities
Auction rate securities:
Municipal obligations
Preferred securities
Total auction rate securities
Total available for sale securities
September 30, 2014
Available for sale securities:
Agency MBS and CMOs
Non-agency CMOs (2)
Other securities
Total RJ Bank available for sale securities
Auction rate securities:
Municipal obligations
Preferred securities
Total auction rate securities
Total available for sale securities
September 30, 2013
Available for sale securities:
Agency MBS and CMOs
Non-agency CMOs (3)
Other securities
Total RJ Bank available for sale securities
Auction rate securities:
Municipal obligations
Preferred securities
Total auction rate securities
Total available for sale securities
Cost basis
Gross
unrealized gains
Gross
unrealized
losses
Fair value
(in thousands)
$
$
$
$
$
$
301,001
75,678
1,575
378,254
28,966
104,302
133,268
511,522
267,927
98,946
1,575
368,448
81,535
104,526
186,061
554,509
326,858
142,169
1,575
470,602
125,371
104,808
230,179
700,781
$
$
$
$
$
$
1,538
18
—
1,556
576
6,447
7,023
8,579
822
56
341
1,219
6,240
9,513
15,753
16,972
707
4
501
1,212
6,831
5,976
12,807
14,019
$
(344) $
(4,327)
(173)
(4,844)
(1,527)
—
(1,527)
(6,371) $
(1,029) $
(7,084)
—
(8,113)
(1,079)
—
(1,079)
(9,192) $
(1,536) $
(13,152)
—
(14,688)
(1,268)
—
(1,268)
(15,956) $
$
$
$
$
$
302,195
71,369
1,402
374,966
28,015
110,749
138,764
513,730
267,720
91,918
1,916
361,554
86,696
114,039
200,735
562,289
326,029
129,021
2,076
457,126
130,934
110,784
241,718
698,844
(1) As of September 30, 2015, the non-credit portion of OTTI recorded in AOCI was $3.6 million (before taxes).
(2) As of September 30, 2014, the non-credit portion of OTTI recorded in AOCI was $6.1 million (before taxes).
(3) As of September 30, 2013, the non-credit portion of OTTI recorded in AOCI was $11.1 million (before taxes).
See Note 5 for additional information regarding the fair value of available for sale securities.
136
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Index
The contractual maturities, amortized cost, carrying values and current yields for our available for sale securities are as
presented below. Since RJ Bank’s available for sale securities are backed by mortgages, actual maturities will differ from
contractual maturities because borrowers may have the right to prepay obligations without prepayment penalties. Expected
maturities of ARS may differ significantly from contractual maturities, as issuers may have the right to call or prepay obligations
with or without call or prepayment penalties.
Within one year
After one but
within five
years
September 30, 2015
After five but
within ten
years
($ in thousands)
After ten years
Total
$
$
$
$
$
$
$
$
301,001
302,195
1.26%
75,678
71,369
2.44%
1,575
1,402
—
378,254
374,966
1.49%
28,966
28,015
0.13%
104,302
110,749
0.33%
133,268
138,764
0.29%
511,522
513,730
1.17%
Agency MBS & CMOs:
Amortized cost
Carrying value
Weighted-average yield
Non-agency CMOs:
Amortized cost
Carrying value
Weighted-average yield
Other securities:
Amortized cost
Carrying value
Weighted-average yield
$
$
$
— $
—
—
— $
—
—
— $
—
—
$
14,107
14,202
1.28%
$
30,989
31,145
1.51%
255,905
256,848
1.23%
— $
—
—
— $
—
—
— $
—
—
— $
—
—
75,678
71,369
2.44%
1,575
1,402
—
Sub-total agency MBS & CMOs, non-agency CMOs and other securities:
$
Amortized cost
Carrying value
Weighted-average yield
— $
—
—
14,107
14,202
1.28%
$
$
30,989
31,145
1.51%
333,158
329,619
1.49%
Auction rate securities
Municipal obligations:
Amortized cost
Carrying value
Weighted-average yield
Preferred securities:
Amortized cost
Carrying value
Weighted-average yield
Sub-total auction rate securities:
Amortized cost
Carrying value
Weighted-average yield
Total available for sale securities:
Amortized cost
Carrying value
Weighted-average yield
$
$
$
$
— $
—
—
— $
—
—
— $
—
—
— $
—
—
— $
—
—
— $
—
—
— $
—
—
— $
—
—
— $
—
—
— $
—
—
28,966
28,015
0.13%
104,302
110,749
0.33%
133,268
138,764
0.29%
$
14,107
14,202
1.28%
$
30,989
31,145
1.51%
466,426
468,383
1.13%
137
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Index
The gross unrealized losses and fair value, aggregated by investment category and length of time the individual securities
have been in a continuous unrealized loss position, are as follows:
Less than 12 months
September 30, 2015
12 months or more
Total
Estimated
fair value
Unrealized
losses
Estimated
fair value
Unrealized
losses
Estimated
fair value
Unrealized
losses
Agency MBS and CMOs
Non-agency CMOs
Other securities
ARS municipal obligations
Total
Agency MBS and CMOs
Non-agency CMOs
ARS municipal obligations
Total
$
$
$
$
3,488
—
1,402
225
5,115
$
$
(37) $
—
(173)
(3)
(213) $
$
(in thousands)
29,524
65,854
—
11,627
107,005
$
(307) $
(4,327)
—
(1,524)
(6,158) $
33,012
65,854
1,402
11,852
112,120
$
$
(344)
(4,327)
(173)
(1,527)
(6,371)
Less than 12 months
September 30, 2014
12 months or more
Total
Estimated
fair value
Unrealized
losses
Estimated
fair value
Unrealized
losses
Estimated
fair value
Unrealized
losses
18,062
5,506
—
23,568
$
$
(53) $
(357)
—
(410) $
$
(in thousands)
71,688
69,970
12,072
153,730
$
(976) $
(6,727)
(1,079)
(8,782) $
89,750
75,476
12,072
177,298
$
$
(1,029)
(7,084)
(1,079)
(9,192)
The reference point for determining when securities are in a loss position is the reporting period end. As such, it is possible
that a security had a fair value that exceeded its amortized cost on other days during the period.
Agency MBS and CMOs
The FNMA, the Federal Home Loan Mortgage Corporation (“FHLMC”), as well the GNMA, guarantee the contractual cash
flows of the agency MBS and CMOs. At September 30, 2015, of the six U.S. government-sponsored enterprise MBS and CMOs
in an unrealized loss position, two were in a continuous unrealized loss position for less than 12 months and four were for 12
months or more. We do not consider these securities other-than-temporarily impaired due to the guarantee provided by FNMA,
FHLMC, and GNMA as to the full payment of principal and interest, and the fact that we have the ability and intent to hold these
securities to maturity.
Non-agency CMOs
All individual non-agency securities are evaluated for OTTI on a quarterly basis. Only those non-agency CMOs whose
amortized cost basis we do not expect to recover in full are considered to be other than temporarily impaired as we have the ability
and intent to hold these securities to maturity. To assess whether the amortized cost basis of non-agency CMOs will be recovered,
RJ Bank performs a cash flow analysis for each security. This comprehensive process considers borrower characteristics and the
particular attributes of the loans underlying each security. Loan level analysis includes a review of historical default rates, loss
severities, liquidations, prepayment speeds and delinquency trends. In addition to historical details, home prices and the economic
outlook are considered to derive the assumptions utilized in the discounted cash flow model to project security specific cash flows,
which factors in the amount of credit enhancement specific to the security. The difference between the present value of the cash
flows expected and the amortized cost basis is the credit loss, and it is recorded as OTTI.
The significant assumptions used in the cash flow analysis of non-agency CMOs are as follows:
September 30, 2015
Range
0% - 5.4%
0% - 71.3%
5.9% - 32.1%
Weighted-
average (1)
3.4%
36.39%
8.69%
Default rate
Loss severity
Prepayment rate
(1) Represents the expected activity for the next twelve months.
138
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Index
At September 30, 2015, 14 of the 16 non-agency CMOs were in a continuous unrealized loss position. All of these securities
were in that position for 12 months or more. Based on the expected cash flows derived from the model utilized in our analysis,
we expect to recover all unrealized losses not already recorded in earnings on our non-agency CMOs. However, it is possible that
the underlying loan collateral of these securities will perform worse than current expectations, which may lead to adverse changes
in the cash flows expected to be collected on these securities and potential future OTTI losses. As residential mortgage loans are
the underlying collateral of these securities, the unrealized losses at September 30, 2015 reflect the uncertainty in the markets for
these instruments.
ARS
Our cost basis in the ARS we hold is the fair value of the securities in the period in which we acquired them. The par value
of the ARS we hold as of September 30, 2015 is $155.9 million. Only those ARS whose amortized cost basis we do not expect to
recover in full are considered to be other-than-temporarily impaired as we have the ability and intent to hold these securities to
maturity. All of our ARS securities are evaluated for OTTI on a quarterly basis.
Within our ARS preferred securities, we analyze the credit ratings associated with each security as an indicator of potential
credit impairment. As of September 30, 2015, and including subsequent ratings changes, all of the ARS preferred securities were
rated investment grade by at least one rating agency and there is no potential impairment since the fair values of these securities
exceed their cost basis.
Within our municipal ARS holdings as of September 30, 2015, there are three municipal ARS securities with a fair value less
than their cost basis, indicating potential impairment. We analyzed the credit ratings associated with these securities as an indicator
of potential credit impairment, and including subsequent ratings changes, determined that these securities maintained investment
grade ratings by at least one rating agency. We have the ability and intent to hold these securities to maturity and expect to recover
their entire cost basis and therefore concluded that none of the potential impairment within our municipal ARS portfolio is related
to potential credit loss.
Other-than-temporarily impaired securities
Although there is no intent to sell either our ARS or our non-agency CMOs and it is not more likely than not that we will be
required to sell these securities, as of September 30, 2015 we do not expect to recover the entire amortized cost basis of certain
securities within our non-agency CMO portfolio.
Changes in the amount of OTTI related to credit losses recognized in other revenues on available for sale securities are as
follows:
2015
Year ended September 30,
2014
(in thousands)
28,217
$
(9,541)
$
18,703
(6,856)
—
11,847
$
27
18,703
$
2013
27,581
—
636
28,217
Amount related to credit losses on securities we held at the beginning of the year
Decreases to the amount related to credit loss for securities sold during the year
Additional increases to the amount related to credit loss for which an OTTI was
previously recognized
Amount related to credit losses on securities we held at the end of the year
$
$
139
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Index
NOTE 8 - RECEIVABLES FROM AND PAYABLES TO BROKERAGE CLIENTS
The information presented below is exclusive of the transactions and balances that arise between RJ Bank and clients of our
broker-dealer subsidiaries. Such transactions include those arising from the RJBDP program (as hereinafter defined in Note 14)
and securities that serve as collateral under RJ Bank’s SBL program (see Note 9 for additional information).
Receivables from brokerage clients
Receivables from brokerage clients include amounts arising from normal cash and margin transactions and fees receivable.
Margin receivables are collateralized by securities owned by brokerage clients. Such collateral is not included within any balances
reflected on our Consolidated Statements of Financial Condition (see Note 19 for information regarding our use of a portion of
this collateral in certain borrowing transactions). The amount receivable from clients is as follows:
Brokerage client receivables
Allowance for doubtful accounts
Brokerage client receivables, net
Payables to brokerage clients
September 30,
2015
2014
(in thousands)
$
$
2,185,586
(290)
2,185,296
$
$
2,127,078
(274)
2,126,804
Payables to brokerage clients include brokerage client funds on deposit awaiting reinvestment. The following table presents
a summary of such payables:
Brokerage client payables:
Interest bearing
Non-interest bearing
Total brokerage client payables
September 30,
2015
2014
(in thousands)
$
$
4,148,952
522,121
4,671,073
$
$
(1)
(1)
3,447,720
508,384
3,956,104
(1) Revised from the amount reported in the prior year, as $130.4 million of the September 30, 2014 reported balance associated with our
Canadian operations has been reclassified from interest bearing, to non-interest bearing, in order to present both periods on a consistent
basis.
NOTE 9 – BANK LOANS, NET
Bank client receivables are comprised of loans originated or purchased by RJ Bank and include C&I loans, tax-exempt loans,
SBL, as well as commercial and residential real estate loans. These receivables are collateralized by first or second mortgages on
residential or other real property, other assets of the borrower, a pledge of revenue or are unsecured.
We segregate our loan portfolio into six loan portfolio segments: C&I, CRE, CRE construction, tax-exempt, residential
mortgage, and SBL. These portfolio segments also serve as the portfolio loan classes for purposes of credit analysis, except for
residential mortgage loans which are further disaggregated into residential first mortgage and residential home equity classes.
140
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Index
The following table presents the balances for both the held for sale and held for investment loan portfolios as well as the
associated percentage of each portfolio segment in RJ Bank’s total loan portfolio:
Loans held for sale, net(1)
Loans held for investment:
Domestic:
C&I loans
CRE construction loans
CRE loans
Tax-exempt loans
Residential mortgage loans
SBL
Foreign:
C&I loans
CRE construction loans
CRE loans
Residential mortgage loans
SBL
Total loans held for investment
Net unearned income and deferred expenses
Total loans held for investment, net(1)
2015
Balance
%
September 30,
2014
Balance
($ in thousands)
%
2013
Balance
%
$
119,519
1% $
45,988
— $
110,292
1%
5,893,631
126,402
1,679,332
484,537
1,959,786
1,479,562
1,034,387
35,954
374,822
2,828
1,942
13,073,183
(32,424)
13,040,759
44%
1%
13%
4%
15%
11%
8%
—
3%
—
—
5,378,592
76,733
1,415,093
122,218
1,749,513
1,021,358
1,043,755
17,462
274,070
2,234
2,390
11,103,418
(37,533)
11,065,885
49%
1%
13%
1%
16%
9%
9%
—
2%
—
—
50%
—
12%
—
20%
6%
9%
—
2%
—
—
100%
4,439,668
38,964
1,075,986
—
1,743,787
554,210
806,337
21,876
207,060
1,863
1,595
8,891,346
(43,936)
8,847,410
8,957,702
(136,501)
8,821,201
Total loans held for sale and investment
Allowance for loan losses
Bank loans, net
13,160,278
(172,257)
12,988,021
$
100%
11,111,873
(147,574)
$ 10,964,299
100%
$
Loans held for sale, net(1)
Loans held for investment:
Domestic:
C&I loans
CRE construction loans
CRE loans
Residential mortgage loans
SBL
Foreign:
C&I loans
CRE construction loans
CRE loans
Residential mortgage loans
SBL
Total loans held for investment
Net unearned income and deferred expenses
Total loans held for investment, net(1)
Total loans held for sale and investment
Allowance for loan losses
Bank loans, net
September 30,
2012
2011
Balance
%
Balance
%
$
160,515
($ in thousands)
2% $
102,236
55%
1%
10%
21%
4%
6%
—
1%
—
—
4,553,061
26,360
828,414
1,690,465
350,770
465,770
23,114
108,036
1,521
1,725
8,049,236
(70,698)
7,978,538
8,139,053
(147,541)
7,991,512
$
100%
$
3,987,122
29,087
742,889
1,754,925
7,438
113,817
—
—
1,561
—
6,636,839
(45,417)
6,591,422
6,693,658
(145,744)
6,547,914
2%
59%
—
11%
26%
—
2%
—
—
—
—
100%
(1) Net of unearned income and deferred expenses, which includes purchase premiums, purchase discounts, and net deferred origination
fees and costs.
141
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Index
At September 30, 2015, the FHLB had a blanket lien on RJ Bank’s residential mortgage loan portfolio as security for the
repayment of certain borrowings. See Note 15 for more information regarding borrowings from the FHLB.
Loans held for sale
RJ Bank originated or purchased $1.2 billion, $1.0 billion and $1.3 billion of loans held for sale during the years ended
September 30, 2015, 2014 and 2013, respectively. Proceeds from the sale of held for sale loans amounted to $213 million, $189
million and $300 million for the years ended September 30, 2015, 2014 and 2013, respectively. Net gains resulting from such
sales amounted to $1.7 million, $800 thousand and $3.6 million for the years ended September 30, 2015, 2014 and 2013,
respectively. Unrealized losses recorded in the Consolidated Statements of Income and Comprehensive Income to reflect the loans
held for sale at the lower of cost or market value were $400 thousand, $400 thousand and $2.9 million for the years ended
September 30, 2015, 2014 and 2013, respectively.
Purchases and sales of loans held for investment
The following table presents purchases and sales of any loans held for investment by portfolio segment:
Year ended September 30, 2015
Purchases
Sales(1)
Year ended September 30, 2014
Purchases
Sales(1)
Year ended September 30, 2013
Purchases
Sales(1)
C&I
CRE
Residential
mortgage
Total
$
$
$
$
$
$
792,921
108,983
536,167
219,914
358,309
176,186
$
$
$
$
$
$
(in thousands)
— $
— $
(2)
220,311
—
5,000
$
— $
5,048
$
— $
29,667
—
26,618
—
$
$
$
$
$
$
1,013,232
108,983
570,834
219,914
389,975
176,186
(1) Represents the recorded investment of loans held for investment that were transferred to loans held for sale during the respective period
and subsequently sold to a third party during the same period. Corporate loan sales generally occur as part of a loan workout situation.
(2) Includes the purchase from another financial institution of residential mortgage loans totaling $207.3 million in principal loan balance.
142
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Index
Aging analysis of loans held for investment
The following table presents an analysis of the payment status of loans held for investment by portfolio segment:
30-89
days and
accruing
90 days
or more and
accruing
Total
past due
and
accruing
Nonaccrual (1)
Current and
accruing
Total loans
held for
investment (2)
(in thousands)
$
163
$
— $
163
$
— $
6,927,855
$
6,928,018
—
—
—
2,906
30
—
—
—
—
—
—
—
—
—
—
2,906
30
—
—
4,796
—
162,356
2,049,358
484,537
162,356
2,054,154
484,537
47,504
1,891,384
1,941,794
319
—
20,471
20,820
1,481,504
1,481,504
$
$
3,099
$
— $
3,099
$
52,619
$
13,017,465
$
13,073,183
124
$
— $
124
$
— $
6,422,223
$
6,422,347
—
—
—
1,648
57
—
—
—
—
—
—
—
—
—
—
1,648
57
—
—
18,876
—
94,195
1,670,287
122,218
94,195
1,689,163
122,218
61,391
1,668,724
1,731,763
398
—
19,529
19,984
1,023,748
1,023,748
As of September 30, 2015:
C&I loans
CRE construction loans
CRE loans
Tax-exempt loans
Residential mortgage loans:
First mortgage loans
Home equity loans/lines
SBL
Total loans held for investment,
net
As of September 30, 2014:
C&I loans
CRE construction loans
CRE loans
Tax-exempt loans
Residential mortgage loans:
First mortgage loans
Home equity loans/lines
SBL
Total loans held for investment,
net
$
1,829
$
— $
1,829
$
80,665
$
11,020,924
$
11,103,418
(1) Includes $22.4 million and $41.4 million of nonaccrual loans at September 30, 2015 and 2014, respectively, which are performing
pursuant to their contractual terms.
(2) Excludes any net unearned income and deferred expenses.
Nonperforming loans represent those loans on nonaccrual status, troubled debt restructurings, and accruing loans which are
90 days or more past due and in the process of collection. The gross interest income related to these nonperforming loans reflected
in the previous table, which would have been recorded had these loans been current in accordance with their original terms, totaled
$1.3 million, $3.7 million and $3.2 million for the years ended September 30, 2015, 2014 and 2013, respectively. The interest
income recognized on nonperforming loans was $1 million, $1.3 million and $1.5 million for the years ended September 30, 2015,
2014 and 2013, respectively.
143
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Index
Impaired loans and troubled debt restructurings
The following table provides a summary of RJ Bank’s impaired loans:
Gross
recorded
investment
2015
Unpaid
principal
balance
September 30,
Allowance
for losses
Gross
recorded
investment
(in thousands)
2014
Unpaid
principal
balance
Allowance
for losses
Impaired loans with allowance for loan losses:(1)
C&I loans
Residential - first mortgage loans
$
Total
10,599
35,442
46,041
CRE loans
Residential - first mortgage loans
Impaired loans without allowance for loan losses:(2)
4,796
20,221
25,017
71,058
Total impaired loans
Total
$
$
$
11,204
48,828
60,032
11,611
29,598
41,209
101,241
$
$
1,132
4,014
5,146
—
—
—
5,146
$
$
11,959
43,806
55,765
18,876
21,987
40,863
96,628
$
$
12,563
61,372
73,935
39,717
32,949
72,666
146,601
$
$
1,289
5,012
6,301
—
—
—
6,301
(1) Impaired loan balances have had reserves established based upon management’s analysis.
(2) When the discounted cash flow, collateral value or market value equals or exceeds the carrying value of the loan, then the loan does
not require an allowance. These are generally loans in process of foreclosure that have already been adjusted to fair value.
The preceding table includes $4.8 million CRE, $10.6 million C&I, and $32.8 million residential first mortgage TDRs at
September 30, 2015 and $18.9 million CRE and $36.6 million residential first mortgage TDRs at September 30, 2014.
The average balance of the total impaired loans and the related interest income recognized in the Consolidated Statements of
Income and Comprehensive Income are as follows:
Average impaired loan balance:
C&I loans
CRE loans
Residential mortgage loans:
First mortgage loans
Home equity loans/lines
Total
Interest income recognized:
Residential mortgage loans:
First mortgage loans
Total
2015
Year ended September 30,
2014
(in thousands)
2013
$
$
$
$
11,311
14,694
59,049
—
85,054
1,426
1,426
$
$
$
$
6,183
23,416
70,370
21
99,990
1,592
1,592
$
$
$
$
15,398
13,352
77,511
93
106,354
1,644
1,644
During the years ended September 30, 2015, 2014, and 2013, RJ Bank granted concessions to borrowers having financial
difficulties, for which the resulting modification was deemed a TDR. The concessions granted for the respective first mortgage
residential loans were interest rate reductions, amortization and maturity date extensions, capitalization of past due payments, or
release of liability ordered under Chapter 7 bankruptcy not reaffirmed by the borrower. The concessions granted for the corporate
loans were amortization and maturity date extensions.
144
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Index
The table below presents the TDRs that occurred during the respective periods presented:
Year ended September 30, 2015
Residential – first mortgage loans
Year ended September 30, 2014
C&I loans
CRE loans
Residential – first mortgage loans
Total
Year ended September 30, 2013
Residential – first mortgage loans
Number of
contracts
Pre-
modification
outstanding
recorded
investment
($ in thousands)
Post-
modification
outstanding
recorded
investment
6
$
1,117
$
1,196
1
2
14
17
$
$
19,200
22,291
3,599
45,090
$
$
15,035
22,291
3,892
41,218
56
$
13,270
$
13,551
There were no TDRs for which there was a payment default and for which the respective loan was modified as a TDR during
the year ended September 30, 2015. During the years ended September 30, 2014, and 2013, there were three, and two residential
first mortgage TDRs, respectively, with recorded investments of $900 thousand and $300 thousand, respectively, for which there
was a payment default and for which the respective loan was modified as a TDR within the 12 months prior to the default.
As of September 30, 2015 and 2014 , RJ Bank had one outstanding commitment on a C&I TDR in the amount $600 thousand.
Credit quality indicators
The credit quality of RJ Bank’s loan portfolio is summarized monthly by management using the standard asset classification
system utilized by bank regulators for the SBL and residential mortgage loan portfolios and internal risk ratings, which correspond
to the same standard asset classifications for the corporate loan portfolios. These classifications are divided into three groups: Not
Classified (Pass), Special Mention, and Classified or Adverse Rating (Substandard, Doubtful and Loss). These terms are defined
as follows:
Pass – Loans which are well protected by the current net worth and paying capacity of the obligor (or guarantors, if any) or
by the fair value, less costs to acquire and sell, of any underlying collateral in a timely manner.
Special Mention – Loans which have potential weaknesses that deserve management’s close attention. These loans are not
adversely classified and do not expose RJ Bank to sufficient risk to warrant an adverse classification.
Substandard – Loans which are inadequately protected by the current sound worth and paying capacity of the obligor or by
the collateral pledged, if any. Loans with this classification are characterized by the distinct possibility that RJ Bank will
sustain some loss if the deficiencies are not corrected.
Doubtful – Loans which have all the weaknesses inherent in loans classified as substandard with the added characteristic that
the weaknesses make collection or liquidation in full highly questionable and improbable on the basis of currently known
facts, conditions and values.
Loss – Loans which are considered by management to be uncollectible and of such little value that their continuance on RJ
Bank’s books as an asset, without establishment of a specific valuation allowance or charge-off, is not warranted. RJ Bank
does not have any loan balances within this classification because, in accordance with its accounting policy, loans, or a portion
thereof considered to be uncollectible, are charged-off prior to the assignment of this classification.
145
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Index
The credit quality of RJ Bank’s held for investment loan portfolio is as follows:
Pass
Special mention(1)
Substandard(1)
Doubtful(1)
Total
(in thousands)
September 30, 2015
C&I
CRE construction
CRE
Tax-exempt
Residential mortgage
First mortgage
Home equity
SBL
Total
September 30, 2014
C&I
CRE construction
CRE
Tax-exempt
Residential mortgage
First mortgage
Home equity
SBL
Total
$
$
$
$
6,739,179
162,356
2,034,692
484,537
1,868,044
20,372
1,481,504
12,790,684
6,321,662
94,195
1,669,897
122,218
1,647,325
19,572
1,023,748
10,898,617
$
$
$
$
97,623
—
39
—
14,890
128
—
112,680
83,101
—
191
—
15,346
—
—
98,638
$
$
$
$
91,216
—
19,423
—
58,860
320
—
169,819
17,584
—
18,167
—
69,092
412
—
105,255
$
$
$
$
— $
—
—
—
6,928,018
162,356
2,054,154
484,537
—
—
1,941,794
—
20,820
1,481,504
—
— $ 13,073,183
— $
—
908
—
—
—
—
908
$
6,422,347
94,195
1,689,163
122,218
—
1,731,763
19,984
1,023,748
11,103,418
(1) Loans classified as special mention, substandard or doubtful are all considered to be “criticized” loans.
The credit quality of RJ Bank’s performing residential first mortgage loan portfolio is additionally assessed utilizing updated
LTV ratios. RJ Bank segregates all of its performing residential first mortgage loan portfolio with higher reserve percentages
allocated to the higher LTV loans. Current LTVs are updated using the most recently available information (generally on a one
quarter lag) and are estimated based on the initial appraisal obtained at the time of origination, adjusted using relevant market
indices for housing price changes that have occurred since origination. The value of the homes could vary from actual market
values due to changes in the condition of the underlying property, variations in housing price changes within current valuation
indices, and other factors.
The table below presents the most recently available update of the performing residential first mortgage loan portfolio
summarized by current LTV. The amounts in the table represent the entire loan balance:
LTV range:
LTV less than 50%
LTV greater than 50% but less than 80%
LTV greater than 80% but less than 100%
LTV greater than 100%, but less than 120%
LTV greater than 120%
Total
(1) Excludes loans that have full repurchase recourse for any delinquent loans.
Balance(1)
(in thousands)
$
$
606,093
984,470
110,388
17,595
2,282
1,720,828
146
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Index
Allowance for loan losses
Changes in the allowance for loan losses of RJ Bank by portfolio segment are as follows:
Year ended September 30, 2015
Balance at beginning of year:
Provision (benefit) for loan losses
Net (charge-offs)/recoveries:
Charge-offs
Recoveries
Net (charge-offs)/recoveries
Foreign currency translation
adjustment
Balance at September 30, 2015
Year ended September 30, 2014
Balance at beginning of year:
Provision (benefit) for loan losses
Net (charge-offs)/recoveries:
Charge-offs
Recoveries
Net (charge-offs)/recoveries
Foreign currency translation
adjustment
Balance at September 30, 2014
Year ended September 30, 2013
Balance at beginning of year:
Provision (benefit) for loan losses
Net (charge-offs)/recoveries:
Charge-offs
Recoveries
Net charge-offs
Foreign currency translation
adjustment
Loans held for investment
C&I
CRE
construction
CRE
Tax-
exempt
Residential
mortgage
SBL
Total
(in thousands)
$ 103,179
16,091
$
$
1,594
1,176
$
25,022
2,205
$
1,380
4,569
14,350
(1,363)
$ 2,049
892
$ 147,574
23,570
(1,191)
611
(580)
(1,067)
$ 117,623
$
95,994
9,560
(1,845)
16
(1,829)
(546)
$ 103,179
$
92,409
4,505
(813)
117
(696)
$
$
$
$
—
—
—
(63)
2,707
1,000
625
—
—
—
(31)
1,594
739
273
—
—
—
$
$
$
$
—
3,773
3,773
(514)
30,486
19,266
5,860
(16)
80
64
(168)
25,022
27,546
(301)
(9,599)
1,680
(7,919)
$
$
$
$
(224)
(12)
(60)
—
—
—
(1,667)
1,206
(461)
—
25
25
(2,858)
5,615
2,757
—
5,949
$
—
12,526
—
$ 2,966
(1,644)
$ 172,257
— $
1,380
19,126
(4,759)
$ 1,115
899
$ 136,501
13,565
—
—
—
(2,015)
1,998
(17)
—
35
35
(3,876)
2,129
(1,747)
—
1,380
$
—
14,350
—
$ 2,049
(745)
$ 147,574
— $
—
$
26,138
(2,540)
709
628
$ 147,541
2,565
—
—
—
(6,771)
2,299
(4,472)
(254)
32
(222)
(17,437)
4,128
(13,309)
—
— $
—
19,126
—
$ 1,115
(296)
$ 136,501
Balance at September 30, 2013
$
95,994
$
1,000
$
19,266
$
147
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Index
The following table presents, by loan portfolio segment, RJ Bank’s recorded investment and related allowance for loan losses:
Loans held for investment
Allowance for loan losses
Individually
evaluated for
impairment
Collectively
evaluated for
impairment
Total
Individually
evaluated for
impairment
Recorded investment(1)
Collectively
evaluated for
impairment
Total
$
$
$
$
1,132
—
—
—
4,046
—
5,178
1,289
—
—
—
5,012
—
6,301
$
$
$
116,491
2,707
30,486
5,949
8,480
2,966
167,079
101,890
1,594
25,022
1,380
9,338
2,049
141,273
$
$
$
$
(in thousands)
117,623
2,707
30,486
5,949
12,526
2,966
172,257
103,179
1,594
25,022
1,380
14,350
2,049
147,574
$
$
$
$
10,599
—
4,796
—
62,706
—
78,101
11,959
—
18,876
—
65,793
—
96,628
$
$
$
$
6,917,419
162,356
2,049,358
484,537
1,899,908
1,481,504
12,995,082
6,410,388
94,195
1,670,287
122,218
1,685,954
1,023,748
11,006,790
$
$
$
$
6,928,018
162,356
2,054,154
484,537
1,962,614
1,481,504
13,073,183
6,422,347
94,195
1,689,163
122,218
1,751,747
1,023,748
11,103,418
September 30, 2015
C&I
CRE construction
CRE
Tax-exempt
Residential mortgage
SBL
Total
September 30, 2014
C&I
CRE construction
CRE
Tax-exempt
Residential mortgage
SBL
Total
(1) Excludes any net unearned income and deferred expenses.
The reserve for unfunded lending commitments, included in trade and other payables on our Consolidated Statements of
Financial Condition, was $9.7 million and $10 million at September 30, 2015 and 2014, respectively.
148
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Index
NOTE 10 - PREPAID EXPENSES AND OTHER ASSETS
Prepaid expenses and other assets include the following:
Investments in company-owned life insurance (1)
Indemnification asset (2)
Prepaid expenses
Investment in FHLB stock
Direct investment in LIHTC project partnerships by RJ Bank (3)
Low-income housing tax credit fund financing asset (4)
Investment in FRB stock
OREO (5)
Other assets
Prepaid expenses and other assets
September 30,
2015
2014
(in thousands)
$
$
320,523
143,144
87,180
35,582
33,267
24,452
24,450
4,631
32,162
705,391
$
$
287,144
154,681
83,509
32,636
16,031
28,421
22,950
5,380
24,504
655,256
(1) As of September 30, 2015, we own life insurance policies with a cumulative face value of $794.7 million.
(2) The indemnification asset pertains to legal matters for which Regions has indemnified RJF in connection with our acquisition of
Morgan Keegan. The liabilities related to such matters are included in trade and other payables on our Consolidated Statements of
Financial Condition. See Note 21 for additional information.
(3) See the discussion of the accounting policies regarding these investments in the “direct investments in LIHTC project partnerships”
section of Note 2.
(4) In a prior year, we sold an investment in a low-income housing tax credit fund and we guaranteed the return on investment to the
purchaser. As a result of this guarantee obligation, we are the primary beneficiary of the fund (see Note 11 for further information
regarding the consolidation of this fund) and we have accounted for this transaction as a financing. As a financing transaction, we
continue to account for the asset transferred to the purchaser, and maintain a related liability corresponding to our obligations under
the guarantee. As the benefits are delivered to the purchaser of the investment, this financing asset and the related liability decrease.
A related financing liability in the amount of $24.5 million and $28.4 million is included in trade and other payables on our Consolidated
Statements of Financial Condition as of September 30, 2015 and 2014, respectively. See Note 21 for further discussion of our obligations
under the guarantee.
(5) See the discussion of the accounting policies regarding OREO in the “nonperforming assets” section of Note 2.
NOTE 11 – VARIABLE INTEREST ENTITIES
A VIE requires consolidation by the entity’s primary beneficiary. We evaluate all of the entities in which we are involved to
determine if the entity is a VIE and if so, whether we hold a variable interest and are the primary beneficiary. See the “Evaluation
of VIE’s to determine whether consolidation is required” section of Note 2 for a discussion of our principal involvement with the
VIE’s and a summary of our accounting policies regarding our evaluations of VIE’s to determine whether we hold a variable
interest and whether we are deemed to be the primary beneficiary of any VIE’s in which we hold an interest.
149
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Index
VIEs where we are the primary beneficiary
Of the VIEs in which we hold an interest, we have determined that the EIF Funds, the Restricted Stock Trust Fund and certain
LIHTC Funds require consolidation in our financial statements as we are deemed the primary beneficiary of those VIEs (see Note
2 for discussion of our accounting policies governing these determinations). The aggregate assets and liabilities of the VIEs we
consolidate are provided in the table below.
September 30, 2015
LIHTC Funds
Guaranteed LIHTC Fund (2)
Restricted Stock Trust Fund
EIF Funds
Total
September 30, 2014
LIHTC Funds
Guaranteed LIHTC Fund (2)
Restricted Stock Trust Fund
EIF Funds
Total
Aggregate
assets (1)
Aggregate
liabilities (1)
(in thousands)
$
$
$
$
143,111
71,231
6,405
4,627
225,374
179,050
74,798
6,608
6,041
266,497
$
$
$
$
41,125
2,263
6,405
—
49,793
60,180
—
6,608
—
66,788
(1) Aggregate assets and aggregate liabilities differ from the consolidated carrying value of assets and liabilities due to the elimination of
intercompany assets and liabilities held by the consolidated VIE.
(2) In connection with one of the multi-investor tax credit funds in which RJTCF is the managing member, RJTCF has provided one
investor member with a guaranteed return on their investment in the fund. See Note 10 for information regarding the financing asset
associated with this fund, and see Note 21 for additional information regarding this commitment.
The following table presents information about the carrying value of the assets, liabilities and equity of the VIEs which we
consolidate and which are included within our Consolidated Statements of Financial Condition. The noncontrolling interests
presented in this table represent the portion of these net assets which are not ours.
Assets:
Assets segregated pursuant to regulations and other segregated assets
Receivables, other
Investments in real estate partnerships held by consolidated variable interest entities
Trust fund investment in RJF common stock (1)
Prepaid expenses and other assets
Total assets
Liabilities and equity:
Trade and other payables
Intercompany payables
Loans payable of consolidated variable interest entities (2)
Total liabilities
RJF equity
Noncontrolling interests
Total equity
Total liabilities and equity
September 30,
2015
2014
(in thousands)
8,525
5,542
199,678
6,404
4,297
224,446
12,424
6,400
25,960
44,784
6,121
173,541
179,662
224,446
$
$
$
$
10,887
5,812
235,858
6,607
5,728
264,892
10,157
6,608
43,877
60,642
6,165
198,085
204,250
264,892
$
$
$
$
(1) Included in treasury stock in our Consolidated Statements of Financial Condition.
(2) Comprised of several non-recourse loans. We are not contingently liable under any of these loans (see Note 16 for additional
information).
150
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Index
The following table presents information about the net (loss) income of the VIEs which we consolidate, and is included within
our Consolidated Statements of Income and Comprehensive Income. The noncontrolling interests presented in this table represents
the portion of the net loss from these VIEs which is not ours.
Revenues:
Interest
Other
Total revenues
Interest expense
Net expense
Non-interest expenses (1)
Net loss including noncontrolling interests
Net loss attributable to noncontrolling interests
Net (loss) income attributable to RJF
2015
Year ended September 30,
2014
(in thousands)
2013
$
$
2
(817)
(815)
(1,879)
(2,694)
38,179
(40,873)
(40,829)
$
1
1,334
1,335
(2,900)
(1,565)
40,819
(42,384)
(42,374)
$
(44) $
(10) $
4
3,538
3,542
(3,959)
(417)
27,292
(27,709)
(27,779)
70
(1) Primarily comprised of items reported in other expense on our Consolidated Statements of Income and Comprehensive Income.
Low-income housing tax credit funds
As of September 30, 2015, RJTCF is the managing member or general partner in 101 separate low-income housing tax credit
funds having one or more investor members or limited partners, 90 of which are determined to be VIEs and 11 of which are
determined not to be VIEs. RJTCF has concluded that it is the primary beneficiary of seven non-guaranteed LIHTC Fund VIEs
and accordingly, consolidates these funds. In addition, RJTCF consolidates the one Guaranteed LIHTC Fund VIE it sponsors.
See Note 21 for further discussion of the guarantee obligation as well as other RJTCF commitments. RJTCF also consolidates
five of the funds it determined not to be VIEs.
VIEs where we hold a variable interest but are not the primary beneficiary
Low-income housing tax credit funds
RJTCF does not consolidate the LIHTC Fund VIEs that it determines it is not the primary beneficiary of. Our risk of loss is
limited to our investments in, advances to, and receivables due from these funds.
New market tax credit funds
As of September 30, 2015, one of our affiliates is the managing member of six NMTC Funds, and, as discussed in Note 2,
this affiliate is not deemed to be the primary beneficiary of these NMTC Funds. These NMTC Funds are therefore not consolidated.
Our risk of loss is limited to our receivables due from these funds.
Other real estate limited partnerships and LLCs
We have a variable interest in several limited partnerships involved in various real estate activities in which a subsidiary is
either the general partner or a limited partner. As discussed in Note 2, we have determined that we are not the primary beneficiary
of these VIEs. Accordingly, we do not consolidate these partnerships or LLCs. The carrying value of our investment in these
partnerships or LLCs represents our risk of loss.
151
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Index
Aggregate assets, liabilities and risk of loss
The aggregate assets, liabilities, and our exposure to loss from those VIEs in which we hold a variable interest, but as to which
we have concluded we are not the primary beneficiary, are provided in the table below.
LIHTC Funds
NMTC Funds
Other Real Estate Limited Partnerships and
LLCs
Total
Aggregate
assets
2015
Aggregate
liabilities
$ 3,317,594
65,388
29,523
$ 3,412,505
$
$
951,465
40
37,062
988,567
$
$
September 30,
Our risk
of loss
Aggregate
assets
(in thousands)
42,244
12
$ 2,988,224
83,474
163
42,419
30,202
$ 3,101,900
2014
Aggregate
liabilities
Our risk
of loss
$
$
899,586
2
36,262
935,850
$
$
48,915
13
183
49,111
VIEs where we hold a variable interest but we are not required to consolidate
Managed Funds
As described in Note 2, we have subsidiaries which serve as the general partner of the Managed Funds, which we have
concluded we are not required to consolidate.
The aggregate assets, liabilities, and our exposure to loss from Managed Funds are provided in the table below:
Aggregate
assets
2015
Aggregate
liabilities
September 30,
Our risk
of loss
Aggregate
assets
(in thousands)
2014
Aggregate
liabilities
Our risk
of loss
Managed Funds
$
83,132
$
22
$
53
$
103,618
$
11
$
94
NOTE 12 - PROPERTY AND EQUIPMENT
Land
Buildings, leasehold and land improvements
Furniture, fixtures, and equipment
Software
Construction in process
Less: Accumulated depreciation and amortization
Total property and equipment, net
$
$
September 30,
2015
2014
$
(in thousands)
20,104
241,457
179,952
189,227
5,973
636,713
(380,838)
255,875
$
20,104
234,104
176,564
151,590
3,295
585,657
(340,256)
245,401
NOTE 13 - GOODWILL AND IDENTIFIABLE INTANGIBLE ASSETS
The following are our goodwill and net identifiable intangible asset balances as of the dates indicated:
September 30,
2015
2014
(in thousands)
$
$
307,635
$
69,327
376,962
$
295,486
58,775
354,261
Goodwill
Identifiable intangible assets, net
Total goodwill and identifiable intangible assets, net
152
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Index
Goodwill
Our goodwill as of September 30, 2015 results from our fiscal year 1999 acquisition of Roney & Co. (now part of RJ&A),
our fiscal year 2001 acquisition of Goepel McDermid, Inc. (now RJ Ltd.), our April 1, 2011 acquisition of Howe Barnes Hoefer
& Arnett, our April 2, 2012 acquisition of Morgan Keegan, and our July 31, 2015 acquisition of TPC (see Note 3 for additional
information regarding this acquisition). The goodwill that arose from our April 4, 2011 acquisition of a controlling interest in
Raymond James European Securities, S.A.S (“RJES”) was determined to be completely impaired in fiscal year 2013.
The following summarizes our goodwill by segment, along with the balance and activity for the years indicated:
Segment
Goodwill at September 30, 2012
Additions(1)
Impairment losses
Goodwill at September 30, 2013
Additions
Impairment losses
Goodwill at September 30, 2014
Additions
Impairment losses
Goodwill at September 30, 2015
Private client
group
$
$
$
$
173,317
1,267
—
174,584
—
—
174,584
12,149
—
186,733
(3)
$
Capital
markets
(in thousands)
126,794
$
1,041
(6,933)
120,902
—
—
120,902
—
—
120,902
$
$
Total
300,111
2,308
(6,933)
295,486
—
—
295,486
12,149
—
307,635
(2)
$
$
$
$
(1) The goodwill additions in the fiscal year ended September 30, 2013 arose from an adjustment due to a change in a tax election pertaining
to whether assets acquired and liabilities assumed are written-up to fair value for tax purposes. This election is made on an entity-by-
entity basis, and during the year indicated, our assumption regarding whether we would make such election changed for one of the
Morgan Keegan entities we acquired in the prior fiscal year. The offsetting balance associated with this adjustment to goodwill was
the net deferred tax asset.
(2) The impairment expense in the fiscal year ended September 30, 2013 is associated with the RJES reporting unit. We concluded the
goodwill associated with this reporting unit to be completely impaired during fiscal year 2013. Since we did not own 100% of RJES
as of the goodwill impairment testing date, for the year ended September 30, 2013 the effect of this impairment expense on the pre-
tax income attributable to Raymond James Financial, Inc. is approximately $4.6 million and the portion of the impairment expense
attributable to the noncontrolling interests is approximately $2.3 million. RJES is an entity that provides research coverage on European
corporations as well as having sales and trading operations. The decline in value of RJES as of December 31, 2012 was primarily due
to the economic slowdown experienced in Europe at that time which was having a negative impact on the financial services entities
operating therein, as well as certain management decisions that were made during the quarter ended March 31, 2013 which impacted
RJES’ operating plans on a going forward basis. In April 2013, we purchased all of the outstanding equity in RJES that was held by
others, thus we now have sole control over RJES. There was no goodwill impairment in any other reporting unit in fiscal year 2013.
(3) The addition in fiscal year 2015 is directly attributable to the acquisition of TPC (see Notes 1 and 3 for additional information).
As described in Note 2, goodwill is subject to an evaluation of potential impairment on an annual basis, or more often if events
or circumstances indicate there may be impairment.
We performed our annual goodwill impairment testing during the quarter ended March 31, 2015, evaluating the balances as
of December 31, 2014. We performed a qualitative assessment for each reporting unit that includes an allocation of goodwill to
determine whether it is more likely than not that the carrying value of such reporting unit, including the recorded goodwill, is in
excess of the fair value of the reporting unit. In any instance in which we are unable to qualitatively conclude that it is more likely
than not that the fair value of the reporting unit exceeds the reporting unit carrying value including goodwill, a quantitative analysis
of the fair value of the reporting unit would be performed. Based upon the outcome of our qualitative assessment, we determined
that no quantitative analysis of the fair value of any reporting unit as of December 31, 2014 was required, and we concluded that
none of the goodwill allocated to any of our reporting units as of December 31, 2014 was impaired. No events have occurred
since December 31, 2014 that would cause us to update our latest annual impairment testing.
In fiscal year 2014, we performed our annual goodwill impairment testing during the quarter ended March 31, 2014, evaluating
the balances as of December 31, 2013. Similar to fiscal year 2015, we performed a qualitative assessment for each reporting unit
that includes an allocation of goodwill. Based upon the outcome of our qualitative assessment, we determined that no quantitative
analysis of the fair value of any reporting unit as of December 31, 2013 was required, and we concluded that none of the goodwill
allocated to any of our reporting units as of December 31, 2013 was impaired.
153
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Index
Identifiable intangible assets, net
The following table sets forth our identifiable intangible asset balances by segment, net of accumulated amortization, and
activity for the years indicated:
Private client
group
Capital
markets
Segment
Asset
management
(in thousands)
RJ Bank
Total
Net identifiable intangible assets as of
September 30, 2012
Additions
Amortization expense
Impairment losses
Net identifiable intangible assets as of
September 30, 2013
Additions
Amortization expense
Impairment losses
Net identifiable intangible assets as of
September 30, 2014
Additions
Amortization expense
Impairment losses
Net identifiable intangible assets as of
September 30, 2015
$
$
$
$
9,829
$
51,306
$
—
(638)
—
—
(7,832)
—
$
—
13,329 (1)
(1,000)
—
9,191
$
43,474
$
12,329
$
—
(580)
—
8,611
10,290 (3)
(719)
—
—
(5,499)
—
$
37,975
$
—
(5,443)
—
—
(1,333)
—
10,996
7,974 (4)
(1,833)
—
—
1,085 (2)
(101)
—
984
408 (2)
(199)
—
$
61,135
14,414
(9,571)
—
$
65,978
408
(7,611)
—
$
1,193
$
58,775
574 (2)
(291)
—
18,838
(8,286)
—
18,182
$
32,532
$
17,137
$
1,476
$
69,327
(1) This fiscal year 2013 addition is directly attributable to the customer list asset associated with our first quarter fiscal year 2013 acquisition
of a 45% interest in ClariVest (see Note 3 for additional information). Since we are consolidating ClariVest, the amount represents
the entire customer relationship intangible asset associated with the acquisition transaction; the amount shown is unadjusted by the
55% share of ClariVest attributable to others.
(2) The additions are the result of mortgage servicing rights held by RJ Bank. The estimated useful life associated with these additions
is approximately 10 years.
(3) The additions are directly attributable to the acquisition of identifiable intangible assets, which include customer relationships, a trade
name, developed technology, and non-compete agreements, arising from our July 31, 2015 acquisition of TPC (see Note 3 for additional
information). The weighted-average useful life associated with the additions is 12.9 years.
(4) The additions are directly attributable to the acquisition of identifiable intangible assets, which include customer relationships, a trade
name, intellectual property, and a non-compete agreement, arising from our April 30, 2015 acquisition of Cougar (see Note 3 for
additional information). The weighted-average useful life associated with the additions is 9.5 years.
Identifiable intangible assets by type are presented below:
September 30,
2015
2014
Gross
carrying
value
Accumulated
amortization
Gross
carrying
value
Accumulated
amortization
(in thousands)
$
$
75,217
4,278
12,630
561
1,018
2,067
95,771
$
$
(17,759) $
(111)
(7,754)
(23)
(206)
(591)
(26,444) $
65,957
2,000
11,000
—
1,000
1,493
81,450
$
$
(13,875)
(2,000)
(5,500)
—
(1,000)
(300)
(22,675)
154
Customer relationships
Trade name
Developed technology
Intellectual property
Non-compete agreements
Mortgage servicing rights
Total
7146_10K.pdf December 22, 2015 pg 158
Index
Projected amortization expense by fiscal year associated with the identifiable intangible assets as of September 30, 2015 is
as follows:
Fiscal year ended September 30,
2016
2017
2018
2019
2020
Thereafter
$
$
NOTE 14 – BANK DEPOSITS
(in thousands)
9,332
7,952
6,837
6,822
6,736
31,648
69,327
Bank deposits include Negotiable Order of Withdrawal (“NOW”) accounts, demand deposits, savings and money market
accounts and certificates of deposit of RJ Bank. The following table presents a summary of bank deposits including the weighted-
average rate:
September 30,
2015
2014
Balance
Weighted-
average rate (1)
Balance
Weighted-
average rate (1)
Bank deposits:
NOW accounts
Demand deposits (non-interest-bearing)
Savings and money market accounts
Certificates of deposit
Total bank deposits(2)
$
$
4,752
9,295
11,550,917
354,917
11,919,881
($ in thousands)
0.01% $
—
0.02%
1.64%
0.07% $
5,792
8,386
9,670,043
344,703
10,028,924
0.01%
—
0.02%
1.81%
0.09%
(1) Weighted-average rate calculation is based on the actual deposit balances at September 30, 2015 and 2014, respectively.
(2) Bank deposits exclude affiliate deposits of approximately $458 million and $509 million at September 30, 2015 and 2014, respectively.
These affiliate deposits include $451 million and $500 million at September 30, 2015 and 2014, respectively, which are held in a
deposit account at RJ Bank on behalf of RJF (see Note 30 for additional information).
RJ Bank’s savings and money market accounts in the table above consist primarily of deposits that are cash balances swept
from the investment accounts maintained at RJ&A. These balances are held in Federal Deposit Insurance Corporation (“FDIC”)
insured bank accounts through the Raymond James Bank Deposit Program (“RJBDP”) administered by RJ&A. The aggregate
amount of time deposit account balances that exceed the FDIC insurance limit at September 30, 2015 is $24.4 million.
Scheduled maturities of certificates of deposit are as follows:
September 30,
2015
2014
Denominations
greater than or
equal to $100,000
Denominations
less than $100,000
Denominations
greater than or
equal to $100,000
Denominations
less than $100,000
$
(in thousands)
7,610
7,304
14,807
33,163
10,825
23,616
30,134
127,459
$
11,761
9,067
15,809
33,366
45,842
35,362
55,556
206,763
$
$
9,482
10,317
21,002
27,722
33,529
11,301
24,587
137,940
Three months or less
Over three through six months
Over six through twelve months
Over one through two years
Over two through three years
Over three through four years
Over four through five years
Total
$
$
6,206
11,731
18,341
43,133
33,556
51,140
63,351
227,458
$
$
155
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Index
Interest expense on deposits is summarized as follows:
Certificates of deposit
Money market, savings and NOW accounts
Total interest expense on deposits
NOTE 15 – OTHER BORROWINGS
The following table details the components of other borrowings:
Other borrowings:
FHLB advances
Borrowings on secured lines of credit (3)
Mortgage notes payable (6)
Borrowings on ClariVest revolving credit facility (7)
Borrowings on unsecured lines of credit (8)
Total other borrowings
2015
Year ended September 30,
2014
(in thousands)
2013
$
$
5,839
2,543
8,382
$
$
6,126
1,833
7,959
$
$
6,239
2,793
9,032
September 30,
2015
2014
(in thousands)
$
$
550,000 (1) $
115,000 (4)
37,716
349
—
703,065
$
500,000 (2)
154,700 (5)
41,802
216
—
696,718
(1) Borrowings from the FHLB as of September 30, 2015 are comprised of two floating-rate advances, one in the amount of $250 million
and the other in the amount of $300 million. Both FHLB advances mature in March 2017 and have an interest rate which resets
quarterly. We use interest rate swaps to manage the risk of increases in interest rates associated with floating-rate advances by converting
a portion of the variable interest rate to a fixed interest rate. Refer to Note 18 for information regarding these interest rate swaps which
are accounted for as hedging instruments. Both of the FHLB advances are secured by a blanket lien granted to the FHLB on RJ Bank’s
residential mortgage loan portfolio. The weighted average interest rate on these advances is 0.36%.
(2) Borrowings from the FHLB at September 30, 2014 were comprised of two $250 million floating-rate advances. The weighted average
interest rate on these advances was 0.20%. These advances were secured by a blanket lien granted to the FHLB on RJ Bank’s residential
loan portfolio and were scheduled to mature in September 2017. The interest rate reset on a monthly basis for one of the advances,
and a quarterly basis for the other. RJ Bank had the option to prepay each advance without penalty on each interest reset date. Both
of these advances were prepaid during fiscal year 2015.
(3) Other than any borrowing outstanding on either the RJF Credit Facility (as hereinafter defined), or as of September 30, 2014, the ARS
Credit Facility (as hereinafter defined), any borrowings on secured lines of credit are day-to-day and are generally utilized to finance
certain fixed income securities.
(4) On August 6, 2015, RJF entered into a revolving credit facility agreement in which the lenders are a number of financial institutions
(the “RJF Credit Facility”). This committed unsecured borrowing facility provides for maximum borrowings of up to $300 million,
at variable rates, with a facility maturity date of August 6, 2020. There are no borrowings outstanding on the RJF Credit Facility as of
September 30, 2015. The interest rate associated with the RJF Credit Facility is a variable rate that, among other factors, varies
depending upon RJF’s credit rating. Based upon RJF’s credit rating as of September 30, 2015, the variable borrowing rate is 1.75%
per annum over LIBOR. There is a variable rate commitment fee associated with the RJF Credit Facility, such fee varying depending
upon RJF’s credit rating. Based upon RJF’s credit rating as of September 30, 2015, the variable rate commitment fee which applies
to any difference between the daily borrowed amount and the committed amount, is 0.25% per annum.
(5) As of September 30, 2014, a subsidiary of RJF was a party to a Revolving Credit Agreement (the “ARS Credit Facility”) with Regions
Bank. The ARS Credit Facility provided for a revolving line of credit and was subject to a guarantee in favor of Regions Bank provided
by RJF. The obligations under the ARS Credit Facility were secured by, subject to certain exceptions, all of the ARS owned by the
borrower. The interest rate associated with the ARS Credit Facility was a variable rate which was 2.75% over LIBOR. On April 2,
2015, the ARS Credit Facility expired, was not renewed, and a $5 million outstanding balance as of the expiration date was paid to
Regions Bank.
See the following page for the continuation of the explanations to the footnotes in the above table.
156
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Index
Continuation of the footnote explanations pertaining to the table on the previous page.
(6) Mortgage notes payable pertain to mortgage loans on our corporate headquarters offices located in St. Petersburg, Florida. These
mortgage loans are secured by land, buildings, and improvements with a net book value of $47.6 million at September 30, 2015. These
mortgage loans bear interest at 5.7% with repayment terms of monthly interest and principal debt service and have a January 2023
maturity.
(7) ClariVest, is a party to a revolving line of credit provided by a third party lender (the “ClariVest Facility”). The maximum amount
available to borrow under the ClariVest Facility is $500 thousand, bearing interest at a variable rate which is 1% over the lenders prime
rate. The ClariVest Facility expires on September 10, 2018.
(8) Any borrowings on unsecured lines of credit are day-to-day and are generally utilized for cash management purposes.
The interest rates for all of our U.S. and Canadian secured and unsecured financing facilities are variable and are based on
the Fed Funds rate, LIBOR, a lenders prime rate, or the Canadian prime rate, as applicable. For the fiscal year ended September 30,
2015, interest rates on the U.S. facilities that were utilized during the year, other than the ClariVest Facility, the ARS Credit Facility,
and the RJF Credit Facility which are each previously described, ranged from 0.19% to 2.25% (on a 360 days per year basis). The
interest rate on the ClariVest Facility during the fiscal year ended September 30, 2015 was 4.25% (on a 360 days per year basis).
The interest rate on the Canadian facility which was utilized from time-to-time throughout fiscal year 2015 ranged from 1.95%
to 2.25% (on a 360 days per year basis).
Our other borrowings as of September 30, 2015, mature as follows based on their contractual terms:
Fiscal year ended September 30,
2016
2017
2018
2019
2020
Thereafter
Total
$
$
(in thousands)
119,325
554,578
5,195
5,130
5,430
13,407
703,065
There were other collateralized financings outstanding in the amount of $333 million and $244 million as of September 30,
2015 and 2014, respectively. These other collateralized financings are included in securities sold under agreements to repurchase
on the Consolidated Statements of Financial Condition. These financings are collateralized by non-customer, RJ&A-owned
securities. See Note 19 for additional information regarding offsetting asset and liability balances as well as additional information
regarding the collateral.
NOTE 16 - LOANS PAYABLE OF CONSOLIDATED VARIABLE INTEREST ENTITIES
Certain of the VIEs that we consolidate have borrowings which are comprised of non-recourse loans. These loans have imputed
interest rates ranging from 5.17% to 6.38%. Payments on these loans are made semi-annually by the borrowing VIE directly to
the third party lender. These loans mature on dates ranging from January 4, 2016 through January 2, 2019. We are not contingently
obligated under any of these loans. See Note 11 for additional information regarding the entities determined to be VIEs, and which
of those entities we consolidate.
VIEs’ loans payable are presented below:
September 30,
2015
2014
$
(in thousands)
13,363
12,597
25,960
$
17,949
25,928
43,877
Current portion of loans payable
Long-term portion of loans payable
Total loans payable
$
$
157
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Index
The principal amount of the VIEs’ borrowings as of September 30, 2015, mature as follows based on their contractual terms:
Fiscal year ended September 30,
2016
2017
2018
2019
Total
$
$
(in thousands)
13,363
8,240
3,668
689
25,960
NOTE 17 – SENIOR NOTES PAYABLE
The following summarizes our senior notes payable:
4.25% senior notes, due 2016, net of unaccreted discount of $54 thousand and $154 thousand at
September 30, 2015 and 2014, respectively (1)
8.60% senior notes, due 2019, net of unaccreted discount of $20 thousand and $25 thousand at
September 30, 2015 and 2014, respectively (2)
5.625% senior notes, due 2024, net of unaccreted discount of $704 thousand and $787 thousand
at September 30, 2015 and 2014, respectively (3)
6.90% senior notes, due 2042 (4)
Total senior notes payable
September 30,
2015
2014
(in thousands)
$
$
249,946
$
249,846
299,980
299,975
249,296
350,000
1,149,222
$
249,213
350,000
1,149,034
(1) In April 2011, we sold in a registered underwritten public offering, $250 million in aggregate principal amount of 4.25% senior notes
due April 2016. Interest on these senior notes is payable semi-annually. We may redeem some or all of these senior notes at any time
prior to their maturity at a redemption price equal to the greater of (i) 100% of the principal amount of the notes to be redeemed, or
(ii) the sum of the present values of the remaining scheduled payments of principal and interest thereon, discounted to the redemption
date at a discount rate equal to a designated U.S. Treasury rate, plus 30 basis points, plus accrued and unpaid interest thereon to the
redemption date.
(2) In August 2009, we sold in a registered underwritten public offering, $300 million in aggregate principal amount of 8.60% senior notes
due August 2019. Interest on these senior notes is payable semi-annually. We may redeem some or all of these senior notes at any time
prior to their maturity, at a redemption price equal to the greater of (i) 100% of the principal amount of the notes redeemed, or (ii) the
sum of the present values of the remaining scheduled payments of principal and interest thereon, discounted to the redemption date
at a discount rate equal to a designated U.S. Treasury rate, plus 50 basis points, plus accrued and unpaid interest thereon to the redemption
date.
(3) In March 2012, we sold in a registered underwritten public offering, $250 million in aggregate principal amount of 5.625% senior
notes due April 2024. Interest on these senior notes is payable semi-annually. We may redeem some or all of these senior notes at any
time prior to their maturity, at a redemption price equal to the greater of (i) 100% of the principal amount of the notes redeemed, or
(ii) the sum of the present values of the remaining scheduled payments of principal and interest thereon, discounted to the redemption
date at a discount rate equal to a designated U.S. Treasury rate, plus 50 basis points, plus accrued and unpaid interest thereon to the
redemption date.
(4) In March 2012, we sold in a registered underwritten public offering, $350 million in aggregate principal amount of 6.90% senior notes
due March 2042. Interest on these senior notes is payable quarterly in arrears. On or after March 15, 2017, we may redeem some or
all of the senior notes at any time at the redemption price equal to 100% of the principal amount of the notes being redeemed plus
accrued interest thereon to the redemption date.
Our senior notes payable outstanding as of September 30, 2015, mature as follows based on their contractual terms:
Fiscal year ended September 30,
2016
2017
2018
2019
2020
Thereafter
Total
$
$
(in thousands)
249,946
—
—
299,980
—
599,296
1,149,222
158
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Index
NOTE 18 – DERIVATIVE FINANCIAL INSTRUMENTS
The significant accounting policies governing our derivative financial instruments, including our methodologies for
determining fair value, are described in Note 2.
Derivatives arising from our fixed income business operations
We enter into derivatives contracts as part of our fixed income operations in either over-the-counter market activities, or
through “matched book” activities. Each of these activities are described further below.
We enter into interest rate swaps, futures contracts, and forward foreign exchange contracts either as part of our fixed income
business to facilitate client transactions, to hedge a portion of our trading inventory, or to a limited extent for our own account. The
majority of these derivative positions are executed in the over-the-counter market either directly with financial institutions or
trades cleared through an exchange (together referred to as the “OTC Derivatives Operations”). Cash flows related to the interest
rate contracts arising from the OTC Derivative Operations, are included as operating activities (the “trading instruments, net” line)
on the Consolidated Statements of Cash Flows.
RJSS enters into derivative transactions (primarily interest rate swaps) with clients. For every derivative transaction RJSS
enters into with a customer, RJSS enters into an offsetting transaction, on terms that mirror the customer transaction, with a credit
support provider which is a third party financial institution. Due to this “pass-through” transaction structure, RJSS has completely
mitigated the market and credit risk related to these derivative contracts. Therefore, the ultimate credit and market risk resides
with the third party financial institution. RJSS only has credit risk related to its uncollected derivative transaction fee revenues.
In these activities, we do not use derivative instruments for trading or hedging purposes. As a result of the structure of these
transactions, we refer to the derivative contracts we enter into as a result of these operations as our offsetting “matched book”
derivative operations (the “Offsetting Matched Book Derivatives Operations”).
Any collateral required to be exchanged under the contracts arising from the Offsetting Matched Book Derivatives Operations
is administered directly by the client and the third party financial institution. RJSS does not hold any collateral, or administer any
collateral transactions, related to these instruments. We record the value of each derivative position arising from the Offsetting
Matched Book Derivatives Operations at fair value, as either an asset or offsetting liability, presented as “derivative instruments
associated with offsetting matched book positions,” as applicable, on our Consolidated Statements of Financial Condition.
The receivable for uncollected derivative transaction fee revenues of RJSS is $7 million at both September 30, 2015 and 2014,
and is included in other receivables on our Consolidated Statements of Financial Condition.
None of the derivatives described above arising from either our OTC Derivatives Operations or our Offsetting Matched Book
Derivatives Operations are designated as fair value or cash flow hedges.
Derivatives arising from RJ Bank’s business operations
We enter into derivatives contracts as part of RJ Bank’s business operations through its hedging activities, which include
forward foreign exchange contracts and interest rate swaps. Each of these activities is described in the “derivative contracts”
section of Note 2.
See Note 22 for additional information on the impact of these hedging activities on our Other Comprehensive (Loss) Income.
Description of the collateral we hold related to derivative contracts
Where permitted, we elect to net-by-counterparty certain derivative contracts entered into in our OTC Derivatives
Operations. Certain of these contracts contain a legally enforceable master netting arrangement that allows for netting of all
derivative transactions with each counterparty and, therefore, the fair value of those derivative contracts are netted by counterparty
in the Consolidated Statements of Financial Condition. The credit support annex related to the interest rate swaps and certain
forward foreign exchange contracts allows parties to the master agreement to mitigate their credit risk by requiring the party which
is out of the money to post collateral. We accept collateral in the form of cash or other marketable securities. As we elect to net-
by-counterparty the fair value of derivative contracts arising from our OTC Derivatives Operations, we also net-by-counterparty
any cash collateral exchanged as part of those derivative agreements. Refer to Note 19 for additional information regarding
offsetting asset and liability balances.
159
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Index
This cash collateral is recorded net-by-counterparty at the related fair value. The cash collateral included in the net fair value
of all open derivative asset positions arising from our OTC Derivatives Operations aggregates to a net liability of $44 million and
$21 million at September 30, 2015 and 2014, respectively. The cash collateral included in the net fair value of all open derivative
liability positions from our OTC Derivatives Operations aggregates to a net asset of $26 million and $23 million at September 30,
2015 and September 30, 2014, respectively. Our maximum loss exposure under the interest rate swap contracts arising from our
OTC Derivatives Operations at September 30, 2015 is $43 million.
RJ Bank provides to counterparties for the benefit of its U.S. subsidiaries, a guarantee of payment in the event of the subsidiaries’
default under forward foreign exchange contracts. Due to this RJ Bank guarantee and the short-term nature of these derivatives,
RJ Bank’s U.S. subsidiaries are not required to post collateral and do not receive collateral with respect to certain derivative
contracts with the respective counterparties. As of September 30, 2015, all of RJ Bank’s forward foreign exchange contracts are
assets, therefore we consider there to be no significant exposure to loss under these contracts.
160
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Index
Derivative balances included in our financial statements
The notional and fair value amounts of both the asset and liability derivatives are as reflected in the table below.
Balance sheet
location
September 30, 2015
Notional
amount
Fair
value(1)
Balance sheet
location
September 30, 2014
Notional
amount
Fair
value(1)
(in thousands)
Asset derivatives
Derivatives designated as hedging instruments:
Prepaid expenses and
Forward foreign exchange
other assets
contracts(2)
Derivatives not designated as hedging instruments:
Interest rate contracts(5)
Trading instruments
Interest rate contracts(6)
Forward foreign exchange
contracts(5)
Derivative instruments
associated with
offsetting matched
book positions
Trading instruments
Forward foreign exchange
contracts(2)
Prepaid expenses and
other assets
Derivatives designated as hedging instruments:
Interest rate contracts(4)
Prepaid expenses and
other assets
Derivatives not designated as hedging instruments:
Interest rate contracts(5)
Trading instruments
sold
Interest rate contracts(6)
Derivative instruments
associated with
offsetting matched
book positions
$
752,600 (3) $
613 Prepaid expenses and
$
682,100 (3) $
2,101
other assets
$ 2,473,946
$ 130,095 Trading instruments
$ 2,198,357
$ 89,923
$ 1,649,863
$ 389,457 Derivative instruments
$ 1,796,288
$ 323,337
associated with
offsetting matched
book positions
$
$
74,873 (3) $
2,612 Trading instruments
214,300 (3) $
304 Prepaid expenses and
other assets
Liability derivatives
$
300,000
$
7,545 Prepaid expenses and
other assets
$
$
$
—
$
—
117,800 (3) $
361
—
$
—
$ 1,906,766
$ 104,255 Trading instruments
$ 2,185,085
$ 75,668
sold
$ 1,649,863
$ 389,457 Derivative instruments
$ 1,796,288
$ 323,337
associated with
offsetting matched
book positions
Forward foreign exchange
contracts(5)
Trading instruments
sold
$
136,710 (6) $
4,865 Trading instruments
$
—
$
—
sold
(1) The fair value in this table is presented on a gross basis before netting of cash collateral and before any netting by counterparty according
to our legally enforceable master netting arrangements. The fair value in the Consolidated Statements of Financial Condition is
presented net. See Note 19 for additional information regarding offsetting asset and liability balances.
(2) These contracts are associated with RJ Bank’s activities to hedge its foreign currency exposure.
(3) The notional amount presented is denominated in Canadian currency.
(4) These contracts are associated with our RJ Bank Interest Hedges activities.
(5) These contracts arise from our OTC Derivatives Operations.
(6) These contracts arise from our Offsetting Matched Book Derivatives Operations.
Gains recognized on forward foreign exchange derivatives that are included in other comprehensive (loss) income presented
on our Consolidated Statements of Income and Comprehensive Income (“OCI”) totaled $60.3 million, $29.4 million and $14
million, net of income taxes, for the years ended September 30, 2015, 2014, and 2013 respectively (see Note 22 for additional
information). There was no hedge ineffectiveness and no components of derivative gains or losses were excluded from the
assessment of hedge effectiveness for any of the years ended September 30, 2015, 2014 or 2013.
A loss of $4.7 million on the RJ Bank Interest Hedges is included in OCI, net of income taxes, for the year ended September 30,
2015 (see Note 22 for additional information). There was no hedge ineffectiveness and no components of derivative gains or
losses were excluded from the assessment of hedge effectiveness for the year ended September 30, 2015. RJ Bank expects to
161
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Index
reclassify an estimated $5.2 million as additional interest expense out of AOCI and into earnings within the next 12 months. The
maximum length of time over which forecasted transactions are or will be hedged is 10 years.
The table below sets forth the impact of the derivatives not designated as hedging instruments on the Consolidated Statements
of Income and Comprehensive Income:
Location of gain (loss)
recognized on derivatives in the
Consolidated Statements of
Income and Comprehensive Income
Derivatives not designated as hedging instruments:
Interest rate contracts and forward foreign
exchange contracts (1)
Interest rate contracts (2)
Forward foreign exchange contracts (3)
Net trading profit
Other revenues
Other revenues
Amount of gain (loss) on derivatives
recognized in income
Year ended September 30,
2015
2014
(in thousands)
2013
$
$
$
3,107
901
20,459
$
$
$
1,554
712
5,694
$
$
$
993
225
1,577
(1) These contracts arise from our OTC Derivatives Operations.
(2) These contracts arise from our Offsetting Matched Book Derivatives Operations.
(3) These contracts are associated with RJ Bank’s activities to hedge its foreign currency exposure.
Risks associated with, and our risk mitigation related to, our derivative contracts
We are exposed to credit losses in the event of nonperformance by the counterparties to forward foreign exchange derivative
agreements, futures contracts, and the interest rate contracts associated with our OTC Derivatives Operations that are not cleared
through an exchange. Where we are subject to credit exposure, we perform a credit evaluation of counterparties prior to entering
into derivative transactions and we monitor their credit standings. Currently, we anticipate that all of the counterparties will be
able to fully satisfy their obligations under those agreements. For our OTC Derivatives Operations that are not cleared through
an exchange, we may require collateral from counterparties in the form of cash deposits or other marketable securities to support
certain of these obligations as established by the credit threshold specified by the agreement and/or as a result of monitoring the
credit standing of the counterparties. We are required to maintain cash or marketable security deposits with the exchange we
utilize to clear our OTC Derivatives transactions that are cleared through such exchanges. These deposits are a component of
deposits with clearing organizations on our Consolidated Statements of Financial Condition.
We are exposed to interest rate risk related to the interest rate derivative agreements arising from certain of our OTC Derivatives
Operations and RJ Bank Interest Hedges. We are also exposed to foreign exchange risk related to our futures contracts and forward
foreign exchange derivative agreements. We monitor exposure in our derivative agreements which we have risk daily based on
established limits with respect to a number of factors, including interest rate, foreign exchange spot and forward rates, spread,
ratio, basis and volatility risks. These exposures are monitored both on a total portfolio basis and separately for each agreement
for selected maturity periods.
Certain of the derivative instruments arising from our OTC Derivatives Operations and from RJ Bank’s forward foreign
exchange contracts contain provisions that require our debt to maintain an investment grade rating from one or more of the major
credit rating agencies. If our debt were to fall below investment grade, we would be in breach of these provisions, and the
counterparties to the derivative instruments could request immediate payment or demand immediate and ongoing overnight
collateralization on our derivative instruments in liability positions. The aggregate fair value of all derivative instruments with
such credit-risk-related contingent features that are in a liability position at September 30, 2015 is $39 million, for which we have
posted collateral of $37 million in the normal course of business. If the credit-risk-related contingent features underlying these
agreements were triggered on September 30, 2015, we would have been required to post an additional $2 million of collateral to
our counterparties.
Our only exposure to credit risk in the Offsetting Matched Book Derivatives Operations is related to our uncollected derivative
transaction fee revenues. We are not exposed to market risk as it relates to these derivative contracts due to the “pass-through”
transaction structure previously described.
162
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Index
NOTE 19 – DISCLOSURE OF OFFSETTING ASSETS AND LIABILITIES, COLLATERAL, ENCUMBERED ASSETS
AND REPURCHASE AGREEMENTS
Offsetting assets and liabilities
The following table presents information about the financial and derivative instruments that are offset or subject to an
enforceable master netting arrangement or other similar agreement as of the dates indicated:
Gross amounts not offset in the
Statements of Financial Condition
Gross amounts
of recognized
assets
(liabilities)
Gross amounts
offset in the
Statements of
Financial
Condition
Net amounts
presented in the
Statements of
Financial
Condition
Financial
instruments
Cash
(received)paid
Net amount
(in thousands)
As of September 30, 2015:
Assets
Securities purchased under agreements to
$
474,144
$
— $
474,144
$
(474,144)
(1)
$
—
$
—
resell and other collateralized
financings
Derivatives - interest rate contracts(2)
Derivative instruments associated with
offsetting matched book positions
Derivatives - forward foreign exchange
contracts(4)
Derivatives - forward foreign exchange
contracts(5)
Stock borrowed
Total assets
Liabilities
Securities sold under agreements to
repurchase
Derivatives - interest rate contracts(2)
Derivative instruments associated with
offsetting matched book positions
Derivatives - forward foreign exchange
contracts(5)
Derivatives - RJ Bank Interest Hedges
Stock loaned
$
$
resell and other collateralized
financings
Derivatives - interest rate contracts(2)
Derivative instruments associated with
offsetting matched book positions
Derivatives - forward foreign exchange
contracts(4)
Stock borrowed
Total assets
Liabilities
Securities sold under agreements to
repurchase
Derivatives - interest rate contracts(2)
Derivative instruments associated with
offsetting matched book positions
Stock loaned
$
$
130,095
389,457
917
2,612
124,373
(90,621)
—
—
—
—
39,474
389,457
917
2,612
124,373
1,121,598
$
(90,621) $
1,030,977
$
(12,609)
(389,457)
(3)
—
—
(120,957)
(997,167)
(332,536) $
— $
(332,536) $
332,536
(104,255)
(389,457)
(4,865)
(7,545)
(478,573)
88,881
—
—
—
—
(15,374)
(389,457)
(4,865)
(7,545)
(478,573)
3,528
389,457
—
—
472,379
—
—
—
—
—
—
—
$
$
(8)
7,399
—
—
(6)
7,545
—
26,865
—
917
2,612
3,416
33,810
—
(4,447)
—
(4,865)
—
(6,194)
14,944
$
(15,506)
—
$
—
$
$
$
$
(7)
(8)
(3)
(1)
89,923
323,337
2,462
158,988
(61,718)
—
—
—
28,205
323,337
2,462
(3,877)
(323,337)
(3)
—
158,988
(153,261)
1,020,726
$
(61,718) $
959,008
$
(926,491)
$
(244,495) $
— $
(244,495) $
244,495 (7) $
(75,668)
(323,337)
(417,383)
63,296
—
—
(12,372)
(323,337)
(417,383)
(8)
3,502
323,337 (3)
402,180
973,514
$
4,620
$
—
—
—
—
—
—
$
$
(8)
4,620
—
—
24,328
—
2,462
5,727
32,517
—
(4,250)
—
(15,203)
(19,453)
Total liabilities
$
(1,317,231) $
88,881
$
(1,228,350) $
1,197,900
As of September 30, 2014:
Assets
Securities purchased under agreements to
$
446,016
$
— $
446,016
$
(446,016)
Total liabilities
$
(1,060,883) $
63,296
$
(997,587) $
The text of the footnotes in the above table are on the following page.
163
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Index
The text of the footnotes to the table on the previous page are as follows:
(1) We are over-collateralized since the actual amount of financial instruments pledged as collateral for securities purchased under
agreements to resell and other collateralized financings amounts to $499.3 million and $463.7 million as of September 30, 2015 and
2014, respectively.
(2) Derivatives - interest rate contracts are included in Trading instruments on our Consolidated Statements of Financial Condition. See
Note 18 for additional information.
(3) Although these derivative arrangements do not meet the definition of a master netting arrangement as specified by GAAP, the nature
of the agreement with the third party intermediary includes terms that are similar to a master netting agreement, thus we present the
offsetting amounts net in the table above. See Note 18 for further discussion of the “pass through” structure of the derivative instruments
associated with Offsetting Matched Book Derivatives Operations.
(4) As of September 30, 2015 and 2014, the fair value of the forward foreign exchange contract derivatives are in an asset position, and
are included in prepaid expenses and other assets on our Consolidated Statements of Financial Condition. See Note 18 for additional
information.
(5) See Note 18 for additional information on our forward foreign exchange contract derivatives associated with our OTC Derivatives
Operations.
(6) Derivatives - RJ Bank Interest Hedges are included in prepaid expenses and other assets on our Consolidated Statements of Financial
Condition. See Note 18 for additional information. The RJ Bank Interest Hedges are transacted through an exchange. The nature of
the agreement with the clearing member exchange includes terms that are similar to a master netting agreement, thus we are over-
collateralized since the actual amount of cash deposited with the exchange for these RJ Bank Interest Hedges amounts to $17.6 million
as of September 30, 2015. This deposit is included in deposits with clearing organizations on our Consolidated Statements of Financial
Condition.
(7) We are over-collateralized since the actual amount of financial instruments pledged as collateral for securities sold under agreements
to repurchase amounts to $346.1 million and $253.7 million as of September 30, 2015 and 2014, respectively.
(8) For the portion of these derivative contracts that are transacted through an exchange, the nature of the agreement with the clearing
member exchange include terms that are similar to a master netting agreement, thus we present offsetting deposits paid to the exchange
associated with these contracts. These deposits are a component of deposits with clearing organizations on our Consolidated Statements
of Financial Condition. See Note 18 for additional information.
For financial statement purposes, we do not offset our repurchase agreements or securities borrowing, securities lending
transactions and certain of our derivative instruments including those transacted through an exchange, because the conditions for
netting as specified by GAAP are not met. Our repurchase agreements, securities borrowing and securities lending transactions,
and certain of our derivative instruments transacted through an exchange, are governed by master agreements that are widely used
by counterparties and that may allow for net settlements of payments in the normal course as well as offsetting of all contracts
with a given counterparty in the event of bankruptcy or default of one of the two parties to the transaction. Although not offset
on the Consolidated Statements of Financial Condition, these transactions are included in the preceding table.
Collateral and deposits with clearing organizations
We receive cash and securities as collateral, primarily in connection with Reverse Repurchase Agreements, securities borrowed,
derivative transactions not transacted through an exchange, client margin loans arising from our domestic operations (see Note 8
for additional information), and the secured call loans that are held by RJ Ltd, if any. The cash collateral we receive is primarily
associated with our OTC Derivative Operations (see Note 18 for additional information). The collateral we receive reduces our
credit exposure to individual counterparties.
We also pay cash to the exchange, or receive cash from the exchange, related to derivative contracts transacted through an
exchange. We account for such cash as a component of deposits with clearing organizations on our Consolidated Statements of
Financial Condition.
In many cases, we are permitted to deliver or repledge financial instruments we have received as collateral, for our own use
in our repurchase agreements, securities lending agreements, other secured borrowings, satisfaction of deposit requirements with
clearing organizations, or otherwise meeting either our, or our clients, settlement requirements.
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Index
The table below presents financial instruments at fair value, that we received as collateral, are not included on our Consolidated
Statements of Financial Condition, and that were available to be delivered or repledged, along with the balances of such instruments
that were used to deliver or repledge, to satisfy one of our purposes described above:
Collateral we received that is available to be delivered or repledged
Collateral that we delivered or repledged
September 30,
2015
2014
$
(in thousands)
2,308,277
1,122,540
$
(1)
2,178,868
879,071
(2)
(1) The collateral delivered or repledged as of September 30, 2015, includes client margin securities which we pledged with a clearing
organization in the amount of $240.7 million which were applied against our requirement of $147.6 million.
(2) The collateral delivered or repledged as of September 30, 2014, includes client margin securities which we pledged with a clearing
organization in the amount of $138.8 million which were applied against our requirement of $116.5 million.
Encumbered assets
We pledge certain of our trading instrument assets to collateralize either Repurchase Agreements, other secured borrowings,
or to satisfy our settlement requirements, with counterparties who may or may not have the right to deliver or repledge such
securities.
The table below presents information about the fair value of our assets that have been pledged for one of the purposes described
above:
September 30,
2015
2014
(in thousands)
Financial instruments owned, at fair value, pledged to counterparties that:
Had the right to deliver or repledge
Did not have the right to deliver or repledge
$
424,668
94,006
$
(1)
394,746
50,983
(2)
(1) Assets delivered or repledged as of September 30, 2015, includes securities which we pledged with a clearing organization in the
amount of $30.5 million which were applied against our requirement of $147.6 million (client margin securities we pledged which
are described in the preceding table constitute the remainder of the assets pledged to meet the requirement).
(2) Assets delivered or repledged as of September 30, 2014, includes securities which we pledged with a clearing organization in the
amount of $18.9 million which were applied against our requirement of $116.5 million (client margin securities we pledged which are
described in the preceding table constitute the remainder of the assets pledged to meet the requirement).
Repurchase agreements, repurchase-to-maturity transactions and securities lending transactions accounted for as secured
borrowings
We enter into Repurchase Agreements where we sell securities under agreements to repurchase, and also engage in securities
lending transactions. These activities are accounted for as collateralized financings. Our Repurchase Agreements would include
“repurchase-to-maturity” agreements, which are repurchase agreements where a security is transferred under an agreement to
repurchase and the maturity date of the repurchase agreement matches the maturity date of the underlying security, if any, that we
are a party to as of period-end. As of September 30, 2015, we did not have any “repurchase-to-maturity” agreements. See Note
2 for a discussion of our respective Repurchase Agreement and securities lending accounting policies.
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Index
The following table presents the remaining contractual maturity of securities under agreements to repurchase and securities
lending transactions accounted for as secured borrowings:
As of September 30, 2015:
Overnight and
continuous
Up to 30 days
30-90 days
(in thousands)
Greater than
90 days
Total
Repurchase agreements
Government and agency obligations
Agency MBS and CMOs
Total Repurchase Agreements
Securities lending
Corporate obligations
Equity securities
Total securities lending
Total
$
$
$
$
$
211,594
112,941
324,535
$
$
— $
478,573
478,573
803,108
$
$
5,250
2,751
8,001
$
$
— $
—
— $
$
8,001
— $
—
— $
— $
—
— $
— $
Gross amounts of recognized liabilities for repurchase agreements and securities lending transactions included in the
Offsetting Assets and Liabilities table included within this footnote
Amounts related to repurchase agreements and securities lending transactions not included in the Offsetting Assets and
Liabilities table included within this footnote
— $
—
— $
— $
—
— $
— $
$
$
216,844
115,692
332,536
—
478,573
478,573
811,109
811,109
—
We enter into Repurchase Agreements and conduct securities lending activities as components of the financing of certain of
our operating activities. In the event the market value of the securities we pledge as collateral in these activities declines, we may
have to post additional collateral or reduce the borrowing amounts. We monitor such levels daily.
NOTE 20 – INCOME TAXES
Total income taxes are allocated as follows:
Recorded in:
Income including noncontrolling interests
Equity, arising from compensation expense for tax purposes which is less
than (in excess of) amounts recognized for financial reporting purposes
Equity, arising from cumulative currency translation adjustments and net
investment hedges recorded through OCI
Equity, arising from available for sale securities recorded through OCI
Equity, arising from cash flow hedges recorded through OCI
Total
Our provision (benefit) for income taxes consists of the following:
Current:
Federal
State and local
Foreign
Deferred:
Federal
State and local
Foreign
Total provision for income tax
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2015
Year ended September 30,
2014
(in thousands)
2013
$
296,034
$
267,797
$
197,033
8,115
(7,437)
(2,590)
31,078
(2,246)
(2,850)
330,131
$
15,142
3,694
—
279,196
$
6,861
8,986
—
210,290
2015
Year ended September 30,
2014
(in thousands)
2013
266,359
48,130
5,007
319,496
(20,567)
(5,127)
2,232
(23,462)
296,034
$
$
260,504
29,904
12,560
302,968
(35,262)
(410)
501
(35,171)
267,797
$
$
182,862
37,491
8,469
228,822
(25,673)
(5,023)
(1,093)
(31,789)
197,033
$
$
$
Index
Our income tax expense differs from the amount computed by applying the statutory federal income tax rate of 35% due to
the following:
Year ended September 30,
2015
2014
2013
Amount
%
Amount
%
Amount
%
($ in thousands)
Provision calculated at statutory rate
State income tax, net of federal benefit
Tax-exempt interest income
Losses (income) associated with company-owned life
insurance which are not deductible (subject to) tax
General business tax credits
Reversal of deferred taxes provided on foreign earnings (1)
Other, net
Total provision for income tax
$
$
279,361
29,224
(4,335)
35 % $
3.6 %
(0.5)%
261,816
18,826
(2,146)
35 % $
2.5 %
(0.3)%
197,466
21,662
(2,074)
35 %
3.8 %
(0.4)%
3,040
0.4 %
(6,365)
(0.8)%
(7,809)
(1.3)%
(7,166)
—
(4,090)
296,034
(0.9)%
—
(0.5)%
37.1 % $
(3,910)
—
(424)
267,797
(0.5)%
—
(0.1)%
35.8 % $
(1,056)
(10,676)
(480)
197,033
(0.2)%
(1.9)%
(0.1)%
34.9 %
(1) Prior to fiscal year 2013, we had historically provided deferred taxes for the presumed repatriation to the U.S. of earnings from certain
foreign subsidiaries. In fiscal year 2013, management changed its assertion related to the earnings of one of our Canadian subsidiaries
resulting in a prior year decrease in deferred tax liabilities related to undistributed foreign earnings.
U.S. and foreign components of income excluding noncontrolling interests and before provision for income taxes are as
follows:
U.S.
Foreign
$
Income excluding noncontrolling interest and before provision for income taxes $
2015
Year ended September 30,
2014
(in thousands)
705,878
$
42,167
748,045
$
$
$
782,146
16,028
798,174
2013
550,113
14,074
564,187
The cumulative effects of temporary differences that give rise to significant portions of the deferred tax asset (liability) items
are as follows:
Deferred tax assets:
Deferred compensation
Allowances for loan losses and reserves for unfunded commitments
Unrealized loss associated with foreign currency translations
Unrealized loss associated with available for sale securities
Accrued expenses
Other
Total gross deferred tax assets
Less: valuation allowance
Total deferred tax assets
Deferred tax liabilities:
Partnership investments
Goodwill and other intangibles
Undistributed earnings of foreign subsidiaries
Other
Total deferred tax liabilities
Net deferred tax assets
September 30,
2015
2014
(in thousands)
$
$
$
150,949
68,445
22,892
7,764
40,075
27,008
317,133
(9)
317,124
(11,909)
(23,967)
(12,592)
(1,757)
(50,225)
266,899
$
150,392
59,078
8,133
9,230
38,100
16,234
281,167
(9)
281,158
(19,295)
(16,925)
(11,197)
(2,416)
(49,833)
231,325
We have a net deferred tax asset at September 30, 2015 and 2014. This asset includes net operating losses that will expire
between 2016 and 2030. A valuation allowance for the fiscal year ended September 30, 2015 has been established for certain state
net operating losses due to management’s belief that, based on our historical operating income, projection of future taxable income,
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Index
scheduled reversal of taxable temporary differences, and implemented tax planning strategies, it is more likely than not that the
tax carryforwards will expire unutilized. We believe that the realization of the remaining net deferred tax asset of $266.9 million
is more likely than not based on the ability to carry back losses against prior year taxable income and expectations of future taxable
income.
We have provided for U.S. deferred income taxes in the amount of $12.6 million on undistributed earnings not considered
permanently reinvested in our non-U.S. subsidiaries. To the extent that the cumulative undistributed earnings of non-U.S.
subsidiaries are considered to be permanently invested, no deferred U.S. federal income taxes have been provided. As of
September 30, 2015, we have approximately $185 million of cumulative undistributed earnings attributable to foreign subsidiaries
for which no provisions have been recorded for income taxes that could arise upon repatriation. Because the time or manner of
repatriation is uncertain, we cannot determine the impact of local taxes, withholding taxes and foreign tax credits associated with
the future repatriation of such earnings, and therefore cannot quantify the tax liability that would be payable in the event all such
foreign earnings are repatriated.
As of September 30, 2015, the current tax receivable included in other receivables is $35.7 million, and a current tax payable
of $46.9 million is included in trade and other payables on our Consolidated Statements of Financial Condition. As of September 30,
2014 the current tax receivable included in other receivables is $10.7 million and a current tax payable of $30.1 million is included
in trade and other payables on our Consolidated Statements of Financial Condition.
Balances associated with unrecognized tax benefits
We recognize the accrual of interest and penalties related to income tax matters in interest expense and other expense,
respectively. During the year ended September 30, 2015, accrued interest expense related to unrecognized tax benefits increased
by approximately $1 million. During the year ended September 30, 2015, penalty expense related to unrecognized tax benefits
decreased by approximately $300 thousand. As of September 30, 2015 and 2014, accrued interest and penalties were approximately
$5.7 million and $4.9 million, respectively.
The aggregate changes in the balances for uncertain tax positions are as follows:
Balance for uncertain tax positions at beginning of year
Increases for tax positions related to the current year
Increases for tax positions related to prior years (1)
Decreases for tax positions related to prior years
Decreases due to lapsed statute of limitations
Decreases related to settlements
Balance for uncertain tax positions at end of year
2015
Year ended September 30,
2014
(in thousands)
2013
$
$
15,804
4,954
3,466
(204)
(1,566)
—
22,454
$
$
13,663
3,228
2,455
(1,642)
(1,218)
(682)
15,804
$
$
9,473
2,020
3,107
(284)
(653)
—
13,663
(1) The increases are primarily due to tax positions taken in previously filed tax returns with certain states. We continue to evaluate these
positions and intend to contest any proposed adjustments made by taxing authorities.
The total amount of uncertain tax positions that, if recognized, would impact the effective tax rate (the items included in the
table above after considering the federal tax benefit associated with any state tax provisions) was $15 million, $10.3 million, and
$9.5 million at September 30, 2015, 2014, 2013, respectively. We anticipate that the uncertain tax position balance may decrease
by $6.2 million over the next twelve months as a result of the resolution of outstanding state tax audits.
We file U. S. federal income tax returns as well as returns with various state, local and foreign jurisdictions. With few exceptions,
we are generally no longer subject to U.S. federal, state and local, or foreign income tax examination by tax authorities for years
prior to fiscal year 2013 for federal tax returns, fiscal year 2011 for state and local tax returns and fiscal year 2010 for foreign tax
returns. Various state audits in process are expected to be completed in fiscal year 2016.
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NOTE 21 – COMMITMENTS, CONTINGENCIES AND GUARANTEES
Commitments and contingencies
In the normal course of business we enter into underwriting commitments. As of September 30, 2015, RJ&A had no open
underwriting commitments. As of September 30, 2015, RJ Ltd. had five open equity underwriting commitments that were recorded
on the Consolidated Statements of Financial Condition in the approximate amount of $18.9 million in Canadian currency (“CDN”).
Subsequent to September 30, 2015, these underwritings were successfully sold in the equity markets and RJ Ltd. incurred no
significant loss on the committed underwritings.
As part of our recruiting efforts, we offer loans to prospective financial advisors and certain key revenue producers primarily
for recruiting, transitional cost assistance, and retention purposes (see Note 2 for a discussion of our accounting policies governing
these transactions). These commitments are contingent upon certain events occurring, including, but not limited to, the individual
joining us. As of September 30, 2015 we had made commitments, to either prospects that had accepted our offer, or recently hired
producers, of approximately $63.9 million that had not yet been funded.
As of September 30, 2015, RJ Bank had not settled purchases of $156.1 million in syndicated loans. These loan purchases
are expected to be settled within 90 days.
A subsidiary of RJ Bank has committed $61.6 million as an investor member in a low-income housing tax credit fund in which
a subsidiary of RJTCF is the managing member (see the discussion of “direct investments in LIHTC project partnerships” in Note
2 for information regarding the accounting policies governing these investments). As of September 30, 2015, the RJ Bank subsidiary
has invested $34.3 million of the committed amount.
RJ Bank has a committed limited partner investment of $3 million to a limited partnership, $2 million of this committed
amount has been invested as of September 30, 2015.
As of September 30, 2015, RJ Bank is a party to a forward-starting advance transaction with the FHLB to borrow $25 million
on October 13, 2015. This borrowing was funded subsequent to our year-end, bears interest at the rate of 3.4%, and matures on
October 13, 2020.
See Note 27 for additional information regarding RJ Bank’s commitments to extend credit and other credit-related off-balance
sheet financial instruments such as standby letters of credit and loan purchases.
We have unfunded commitments to various venture capital or private equity partnerships, which aggregate to approximately
$54 million as of September 30, 2015. Of the total, we have unfunded commitments to internally-sponsored private equity limited
partnerships in which we control the general partner of approximately $20 million.
As part of the terms governing the TPC acquisition (see Note 3 for additional information regarding this acquisition), within
90 days of the TPC Closing Date, the value of certain net assets of TPC as of the TPC Closing Date is subject to determination,
as defined by the TPC Agreement, and additional consideration may be paid to the sellers, or a portion of the consideration paid
on the TPC Closing Date will be returned to us, depending upon the final determination of the parties. Our estimate of the outcome
of this final net asset determination is included in trade and other payables on our September 30, 2015 Consolidated Statements
of Financial Condition. On certain dates specified in the TPC Agreement, there are a number of “earn-out” computations to be
performed. The result of these computations could result in additional cash paid to the sellers of TPC in the future. These elements
of contingent consideration will be finally determined in the future based upon the outcome of either specific performance of
defined tasks, or the achievement of specified revenue growth hurdles, over a measurement period ranging from 18 months to 3
years after the TPC Closing Date. Our estimate of the fair value of these elements of contingent consideration as of the TPC
Closing Date are included in our determination of the goodwill arising from this acquisition (see Note 13 for additional information
regarding the goodwill and identifiable intangible assets which resulted from this acquisition).
RJF has committed to lend to RJTCF, or to guarantee obligations in connection with RJTCF’s low-income housing
development/rehabilitation and syndication activities, in amounts aggregating up to $250 million upon request, subject to certain
limitations and to annual review and renewal. At September 30, 2015, RJTCF has $35 million in outstanding cash borrowings and
$36 million in unfunded commitments outstanding. RJTCF borrows from RJF in order to make investments in, or fund loans or
advances to, either partnerships that purchase and develop properties qualifying for tax credits (“Project Partnerships”) or LIHTC
Funds. Investments in Project Partnerships are sold to various LIHTC Funds, which have third party investors, and for which
RJTCF serves as the managing member or general partner. RJTCF typically sells investments in Project Partnerships to LIHTC
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Index
Funds within 90 days of their acquisition, and the proceeds from the sales are used to repay RJTCF’s borrowings from RJF. RJTCF
may also make short-term loans or advances to Project Partnerships, and LIHTC Funds.
Long-term lease agreements expire at various times through fiscal year 2026. Minimum annual rental payments under such
agreements for the succeeding five fiscal years are approximately: $79.8 million in fiscal year 2016, $69.8 million in fiscal year
2017, $57.9 million in fiscal year 2018, $49 million in fiscal year 2019, $40 million in fiscal year 2020, and $72.7 million thereafter.
Certain leases contain rent holidays, leasehold improvement incentives, renewal options and/or escalation clauses. Rental expense
incurred under all leases, including equipment under short-term agreements, aggregated to $89.4 million, $90.8 million and $90.5
million in fiscal years 2015, 2014 and 2013, respectively.
As a part of our fixed income public finance operations, RJ&A enters into forward commitments to purchase GNMA or FNMA
MBS (see the discussion of these activities within “financial instruments owned, financial instruments sold but not purchased and
fair value” in Note 2). At September 30, 2015, RJ&A had approximately $847 million principal amount of outstanding forward
MBS purchase commitments which are expected to be purchased over the following 90 days. In order to hedge the market interest
rate risk to which RJ&A would otherwise be exposed between the date of the commitment and the date of sale of the MBS, RJ&A
enters into TBA security contracts with investors for generic MBS securities at specific rates and prices to be delivered on settlement
dates in the future. These TBA securities are accounted for at fair value and are included in Agency MBS securities in the table
of assets and liabilities measured at fair value included in Note 5, and at September 30, 2015 aggregate to a net liability having a
fair value of $5 million. The estimated fair value of the purchase commitment is a $5 million asset balance as of September 30,
2015.
As a result of extensive regulation of financial holding companies, banks, broker-dealers and investment advisory entities,
RJF and certain of its subsidiaries are subject to regular reviews and inspections by regulatory authorities and self-regulatory
organizations. The reviews can result in the imposition of sanctions for regulatory violations, ranging from non-monetary censure
to fines and, in serious cases, temporary or permanent suspension from conducting business. In addition, regulatory agencies and
self-regulatory organizations institute investigations from time to time into industry practices, which can also result in the imposition
of sanctions. See Note 26 for additional information regarding regulatory capital requirements applicable to RJF and certain of
its subsidiaries.
Guarantees
RJ Bank provides to its affiliate, Raymond James Capital Services, Inc. (“RJ Cap Services”), on behalf of certain corporate
borrowers, a guarantee of payment in the event of the borrower’s default for exposure under interest rate swaps entered into with
RJ Cap Services. At September 30, 2015, the exposure under these guarantees is $5.6 million, which was underwritten as part of
RJ Bank’s corporate credit relationship with such borrowers. The outstanding interest rate swaps at September 30, 2015 have
maturities ranging from November 2015 through December 2026. RJ Bank records an estimated reserve for its credit risk associated
with the guarantee of these client swaps, which was insignificant as of September 30, 2015. The estimated total potential exposure
under these guarantees is $32.9 million at September 30, 2015.
RJ Bank guarantees the forward foreign exchange contract obligations of its U.S. subsidiaries. See Note 18 for additional
information regarding these derivatives.
RJF guarantees interest rate swap obligations of RJ Cap Services. See Note 18 for additional information regarding interest
rate swaps.
We have from time to time authorized performance guarantees for the completion of trades with counterparties in Argentina.
At September 30, 2015, there were no such outstanding performance guarantees.
In March 2008, RJF guaranteed an $8 million letter of credit issued for settlement purposes that was requested by the Capital
Markets Board (“CMB”) for a joint venture we were at one time affiliated with in the country of Turkey. While our Turkish joint
venture ceased operations in December 2008, the CMB has not released this letter of credit. The issuing bank has instituted an
action seeking payment of its fees on the underlying letter of credit and to confirm that the guarantee remains in effect.
RJF guarantees the existing mortgage debt of RJ&A of approximately $37.7 million. See Notes 15, 16 and 17 for information
regarding our financing arrangements.
Our U.S. broker-dealer subsidiaries are required by federal law to be members of the Securities Investors Protection Corporation
(“SIPC”). The SIPC fund provides protection for securities held in client accounts up to $500 thousand per client, with a limitation
of $250 thousand on claims for cash balances. We have purchased excess SIPC coverage through various syndicates of Lloyd’s
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Index
(the “Excess SIPC Insurer”). For RJ&A, our clearing broker-dealer, the additional protection currently provided has an aggregate
firm limit of $750 million for cash and securities, including a sub-limit of $1.9 million per client for cash above basic SIPC.
Account protection applies when a SIPC member fails financially and is unable to meet obligations to clients. This coverage does
not protect against market fluctuations. RJF has provided an indemnity to the Excess SIPC Insurer against any and all losses they
may incur associated with the excess SIPC policies.
RJTCF issues certain guarantees to various third parties related to Project Partnerships whose interests have been sold to one
or more of the funds in which RJTCF is the managing member or general partner. In some instances, RJTCF is not the primary
guarantor of these obligations, which aggregate to approximately $1.6 million as of September 30, 2015.
RJTCF has provided a guaranteed return on investment to a third party investor in one of its fund offerings (“Fund 34”),
and RJF has guaranteed RJTCF’s performance under the arrangement. Under the terms of the performance guarantee, should the
underlying LIHTC project partnerships held by Fund 34 fail to deliver a certain amount of tax credits and other tax benefits to
this investor over the next seven years, RJTCF is obligated to pay the investor an amount that results in the investor achieving a
minimum specified return on their investment. A $24.5 million financing asset is included in prepaid expenses and other assets
(see Note 10 for additional information), and a related $24.5 million liability is included in trade and other payables on our
Consolidated Statements of Financial Condition as of September 30, 2015 related to this obligation. The maximum exposure to
loss under this guarantee is approximately $29 million at September 30, 2015, which represents the undiscounted future payments
due the investor.
Legal matter contingencies
Indemnification from Regions
On April 2, 2012, RJF completed its acquisition of all of the issued and outstanding shares of Morgan Keegan from Regions.
The terms of the stock purchase agreement provide that Regions will indemnify RJF for losses incurred in connection with legal
proceedings pending as of the closing date or commenced after the closing date and related to pre-closing matters that are received
prior to April 2, 2015, as well as any cost of defense pertaining thereto. All of the Morgan Keegan matters described below are
subject to such indemnification provisions. Management estimates the range of potential liability of all such matters subject to
indemnification, including the cost of defense, to be from $63 million to $224 million. Any loss arising from such matters, after
consideration of the applicable annual deductible, if any, will be borne by Regions. As of September 30, 2015 our Consolidated
Statements of Financial Condition include an indemnification asset of approximately $143 million which is included in other
assets (see Note 10 for additional information), and a liability for potential losses of approximately $143 million which is included
within trade and other payables, pertaining to the matters described below and the related indemnification from Regions. The
amount included within trade and other payables is the amount within the range of potential liability related to such matters which
management estimates is more likely than any other amount within such range.
Morgan Keegan matters subject to indemnification
In July 2006, MK & Co. and a former MK & Co. analyst were named as defendants in a lawsuit filed by a Canadian insurance
and financial services company, Fairfax Financial Holdings, and its American subsidiary in the Circuit Court of Morris County,
New Jersey. Plaintiffs made claims under a civil Racketeer Influenced and Corrupt Organizations (“RICO”) statute, for commercial
disparagement, tortious interference with contractual relationships, tortious interference with prospective economic advantage
and common law conspiracy. Plaintiffs alleged that defendants engaged in a multi-year conspiracy to publish and disseminate
false and defamatory information about plaintiffs to improperly drive down plaintiff’s stock price, so that others could profit from
short positions. Plaintiffs alleged that defendants’ actions damaged their reputations and harmed their business relationships.
Plaintiffs alleged a number of categories of damages they sustained, including lost insurance business, lost financings and increased
financing costs, increased audit fees and directors and officers insurance premiums and lost acquisitions, and have requested
monetary damages. On May 11, 2012, the trial court ruled that New York law applied to plaintiff’s RICO claims, therefore the
claims were not subject to treble damages. On June 27, 2012, the trial court dismissed plaintiffs’ tortious interference with
prospective relations claim, but allowed other claims to go forward. A jury trial was set to begin on September 10, 2012. Prior to
its commencement the court dismissed the remaining claims with prejudice. Plaintiffs have appealed the court’s rulings.
Certain of the Morgan Keegan entities, along with Regions, have been named in class-action lawsuits filed in federal and
state courts on behalf of shareholders of Regions and investors who purchased shares of certain mutual funds in the Regions
Morgan Keegan Fund complex (the “Regions Funds”). The Regions Funds were formerly managed by Morgan Asset Management
(“MAM”), an entity which was at one time a subsidiary of one of the Morgan Keegan affiliates, but an entity which was not part
of our Morgan Keegan acquisition. The complaints contain various allegations, including claims that the Regions Funds and the
defendants misrepresented or failed to disclose material facts relating to the activities of the funds. In August 2013, the United
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Index
States District Court for the Western District of Tennessee approved the settlement of the class action and the derivative action
regarding the closed end funds for $62 million and $6 million, respectively. No class has been certified. Certain of the shareholders
in the funds and other interested parties have entered into arbitration proceedings and individual civil claims, in lieu of participating
in the class action lawsuits.
The SEC and states of Missouri and Texas are investigating alleged securities law violations by MK & Co. in the underwriting
and sale of certain municipal bonds. An enforcement action was brought by the Missouri Secretary of State in April 2013, seeking
monetary penalties and other relief, was dismissed and refiled in November 2013. A civil action was brought by institutional
investors of the bonds in March 2012, seeking a return of their investment and unspecified compensatory and punitive damages,
which has been resolved. A class action was brought on behalf of retail purchasers of the bonds in September 2012, seeking
unspecified compensatory and punitive damages. In September 2014, the District Court for the Western District of Missouri granted
class certification. The matter was resolved and settlement approved by the District Court in January 2015. Other individual
investors and investor groups have also filed arbitration claims or separate civil claims, which have been resolved.
Prior to April 2, 2012, Morgan Keegan was involved in other litigation arising in the normal course of its business. On all
such matters, RJF is subject to indemnification from Regions pursuant to the terms of the stock purchase agreement.
Other matters
We are a defendant or co-defendant in various lawsuits and arbitrations incidental to our securities business as well as regulatory
investigations and other corporate litigation. We are contesting the allegations in these matters and believe that there are meritorious
defenses in each. In view of the number and diversity of claims against us, the number of jurisdictions in which litigation is pending
and the inherent difficulty of predicting the outcome of litigation and other claims, we cannot state with certainty what the eventual
outcome of pending litigation or other claims will be. Refer to Note 2 for a discussion of our criteria for establishing a range of
possible loss related to such matters. Excluding any amounts subject to indemnification from Regions related to pre-April 2, 2012
Morgan Keegan matters discussed above, as of September 30, 2015, management currently estimates the aggregate range of
possible loss is from $0 to an amount of up to $22 million in excess of the accrued liability (if any) related to these matters. In
the opinion of management, based on current available information, review with outside legal counsel, and consideration of the
accrued liability amounts provided for in the accompanying consolidated financial statements with respect to these matters, ultimate
resolution of these matters will not have a material adverse impact on our financial position or cumulative results of operations.
However, resolution of one or more of these matters may have a material effect on the results of operations in any future period,
depending upon the ultimate resolution of those matters and upon the level of income for such period.
NOTE 22 - OTHER COMPREHENSIVE (LOSS) INCOME
The Financial Accounting Standards Board issued new guidance that was first effective for us in our fiscal year 2014, related
to the reporting of reclassifications out of AOCI. This guidance, which we adopted in the prior year, provides for it’s application
on a prospective basis, and did not require the periods prior to its effective date to be presented in a similar manner. Accordingly,
the following tables present the relevant other comprehensive (loss) income information for our fiscal years 2015 and 2014, in
accordance with such guidance.
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Index
Other comprehensive (loss) income
The activity in other comprehensive (loss) income and related tax effects are as follows:
2015
Year ended September 30,
2014
(in thousands)
2013
Unrealized (losses) gains on available for sale securities, (net of tax effect of $2.2 million in
fiscal year 2015, $3.7 million in fiscal year 2014, and $9 million in fiscal year 2013)
Unrealized losses on currency translations net of the impact of net investment hedges (net of
tax effect of $31.1 million in fiscal year 2015, $15.1 million in fiscal year 2014, and $6.9
million in fiscal year 2013)
Unrealized loss on cash flow hedges (net of tax effect of $2.9 million in fiscal year 2015)
Net other comprehensive (loss) income
$
(3,325) $
6,021
$
15,042
(30,640)
(4,650)
(38,615) $
(18,635)
—
(12,614) $
(13,763)
—
1,279
$
Accumulated other comprehensive (loss) income
The following table presents the changes, and the related tax effects, of each component of accumulated other comprehensive
(loss) income for the fiscal years ended September 30, 2015 and 2014:
Available
for sale
securities
Net
investment
hedges(1)
Currency
translations
Sub-total:
currency
translations
and net
investment
hedges
Cash flow
hedges(2)
Total
(in thousands)
Year ended September 30, 2015
Accumulated other comprehensive income
(loss) as of the beginning of the year
Other comprehensive income (loss)
before reclassifications and taxes
Amounts reclassified from accumulated
other comprehensive (loss) income,
before tax
Pre-tax other comprehensive (loss) income
Income tax effect
Net other comprehensive (loss) income
for the year, net of tax
Accumulated other comprehensive income
(loss) as of September 30, 2015
Year ended September 30, 2014
Accumulated other comprehensive (loss)
income as of the beginning of the year
Other comprehensive income (loss)
before reclassifications and taxes
Amounts reclassified from accumulated
other comprehensive loss, before tax
Pre-tax other comprehensive income (loss)
Income tax effect
Net other comprehensive income (loss)
for the year, net of tax
Accumulated other comprehensive income
(loss) as of September 30, 2014
$
4,745
$
32,872
$
(39,505) $
(6,633) $
— $
(1,888)
$
$
2,863
96,499
(96,061)
(8,434)
(5,571)
2,246
—
96,499
(36,168)
—
(96,061)
5,090
438
—
438
(31,078)
(9,407)
(6,106)
1,907
(7,500)
2,850
(6,527)
(12,633)
(25,982)
(3,325)
60,331
(90,971)
(30,640)
(4,650)
(38,615)
1,420
$
93,203
$
(130,476) $
(37,273) $
(4,650) $
(40,503)
(1,276) $
3,496
$
8,506
$
12,002
$
— $
10,726
14,564
47,189
(50,682)
(3,493)
(4,849)
9,715
(3,694)
—
47,189
(17,813)
—
(50,682)
2,671
—
(3,493)
(15,142)
6,021
29,376
(48,011)
(18,635)
—
—
—
—
—
11,071
(4,849)
6,222
(18,836)
(12,614)
$
4,745
$
32,872
$
(39,505) $
(6,633) $
— $
(1,888)
(1) Comprised of net gains recognized on forward foreign exchange derivatives associated with hedges of RJ Bank’s foreign currency
exposure due to its non-U.S. dollar net investments (see Note 18 for additional information on these derivatives).
(2) Represents RJ Bank Interest Hedges (see Note 18 for additional information on these derivatives).
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Index
Reclassifications out of AOCI
The following table presents the income statement line items impacted by reclassifications out of accumulated other
comprehensive (loss) income during the years ended September 30, 2015 and 2014:
Accumulated other comprehensive (loss) income components:
Increase (decrease) in
amounts reclassified
from accumulated
other comprehensive
(loss) income
(in thousands)
Affected line items in income statement
Year ended September 30, 2015
Available for sale securities: (1)
Auction rate securities (2)
RJ Bank available for sale securities (3)
RJ Bank Interest Hedges(4)
Income tax effect
Total reclassifications for the period
Year ended September 30, 2014
Available for sale securities: (1)
Auction rate securities (2)
RJ Bank available for sale securities (3)
Income tax effect
Total reclassifications for the period
$
$
$
$
(8,976) Other revenue
542 Other revenue
1,907
Interest expense
(6,527) Total before tax
2,526 Provision for income taxes
(4,001) Net of tax
(4,614) Other revenue
(235) Other revenue
(4,849) Total before tax
1,866 Provision for income taxes
(2,983) Net of tax
(1) See Note 7 for additional information regarding the available for sale securities, and Note 5 for additional fair value information
regarding these securities.
(2) Other revenues in our Consolidated Statements of Income and Comprehensive Income include realized gains on the sale or redemption
of ARS (see Note 7 for further information). The amounts presented in the table represent the reversal out of AOCI associated with
such ARS activities. The net of such realized gain and this reversal out of AOCI represents the net effect of such redemptions and
sales activities on OCI for each respective fiscal year, on a pre-tax basis.
(3) Other revenues in our Consolidated Statements of Income and Comprehensive Income include realized gains or losses on the sale of
certain available for sale securities held by RJ Bank (see Note 7 for further information). The amounts presented in the table represent
the reversal out of AOCI associated with such securities sold. The net of such realized gains or losses and this reversal out of AOCI
represents the net effect of such sales activities on OCI for each respective period, on a pre-tax basis.
(4) See Note 18 for additional information regarding the RJ Bank Interest Hedges, and Note 5 for additional fair value information regarding
these derivatives.
All of the components of other comprehensive (loss) income described above, net of tax, are attributable to RJF.
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Index
NOTE 23 – INTEREST INCOME AND INTEREST EXPENSE
The components of interest income and interest expense are as follows:
Interest income:
Margin balances
Assets segregated pursuant to regulations and other segregated assets
Bank loans, net of unearned income
Available for sale securities
Trading instruments
Stock loan
Loans to financial advisors
Corporate cash and all other
Total interest income
Interest expense:
Brokerage client liabilities
Retail bank deposits
Trading instruments sold but not yet purchased
Stock borrow
Borrowed funds
Senior notes
Interest expense of consolidated VIEs
Other
Total interest expense
Net interest income
Subtract: provision for loan losses
Net interest income after provision for loan losses
2015
Year ended September 30,
2014
(in thousands)
2013
$
$
$
$
67,573
13,792
405,578
5,100
19,450
12,036
7,056
12,622
543,207
940
8,382
4,503
5,237
6,079
76,088
1,879
4,846
107,954
435,253
(23,570)
411,683
$
$
$
$
68,454
15,441
343,942
6,560
17,883
8,731
6,427
13,448
480,886
1,269
7,959
4,327
2,869
3,939
76,038
2,900
4,790
104,091
376,795
(13,565)
363,230
$
$
$
$
60,931
17,251
335,964
8,005
20,089
8,271
6,510
16,578
473,599
2,049
9,032
3,595
2,158
4,724
76,113
3,959
8,741
110,371
363,228
(2,565)
360,663
NOTE 24 - EMPLOYEE SHARE-BASED AND OTHER COMPENSATION
Our profit sharing plan and employee stock ownership plan (“ESOP”) provide certain death, disability or retirement benefits
for all employees who meet certain service requirements. The plans are noncontributory. Our contributions, if any, are determined
annually by our Board of Directors on a discretionary basis and are recognized as compensation cost throughout the year. Benefits
become fully vested after six years of qualified service.
All shares owned by the ESOP are included in earnings per share calculations. Cash dividends paid to the ESOP are reflected
as a reduction of retained earnings. The number of shares of our common stock held by the ESOP at September 30, 2015 and
2014 was approximately 4,719,000 and 4,814,000, respectively. The market value of our common stock held by the ESOP at
September 30, 2015 was approximately $234 million, of which approximately $2.1 million is unearned (not yet vested) by ESOP
plan participants.
We also offer a plan pursuant to section 401(k) of the Internal Revenue Code, which is a qualified plan that may provide for
a discretionary contribution or a matching contribution each year. Matching contributions are 75% of the first $1,000 and 25%
of the next $1,000 of eligible compensation deferred by each participant annually.
Our LTIP is a non-qualified deferred compensation plan that provides benefits to employees who meet certain compensation
or production requirements. We have purchased and hold life insurance on the lives of certain current and former employee
participants (see Note 10 for information regarding the carrying value of these insurance policies) to earn a competitive rate of
return for participants and to provide the primary source of funds available to satisfy our obligations under this plan (the “Deferral
Plan Funding Structure”).
Contributions to the qualified plans and the LTIP, are approved annually by the Board of Directors or a committee thereof.
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Index
We have a Voluntary Deferred Compensation Plan (the “VDCP”), a non-qualified and voluntary opportunity for certain highly
compensated employees to defer compensation. Eligible participants may elect to defer a percentage or specific dollar amount
of their compensation into the VDCP. The Deferral Plan Funding Structure is the primary source of funding for this plan.
We also maintain non-qualified deferred compensation plans or arrangements for the benefit of certain employees that provide
a return to the participating employees based upon the performance of various referenced investments. Under the terms of each
applicable plan or arrangement, we invest directly as a principal in such investments, related to our obligations to perform under
the respective deferred compensation plan (see Note 5 for the fair value of these investments as of September 30, 2015, and 2014).
Compensation expense associated with all of the qualified and non-qualified plans described above totaled $116.9 million,
$111.3 million and $98.7 million for the fiscal years ended September 30, 2015, 2014 and 2013, respectively.
Share-based compensation plans
We have one share-based compensation plan for our employees, Board of Directors and non-employees (comprised of
independent contractor financial advisors). The 2012 Stock Incentive Plan (the “2012 Plan”) permits us to grant share-based and
cash-based awards designed to be exempt from the limitation on deductible compensation under Section 162(m) of the Internal
Revenue Code. Under the 2012 Plan, we may grant 15,400,000 new shares in addition to the shares available for grant under six
predecessor plans which were terminated as of February 23, 2012 (except with respect to awards previously granted under such
terminated predecessor plans which remain outstanding). The 2012 Plan is the successor to predecessor plans under which options,
restricted stock or restricted stock units have previously been issued. We have issued new shares under the 2012 Plan and also
are permitted to reissue our treasury shares.
We recognize the resulting realized tax benefit or deficit that exceeds or is less than the previously recognized deferred tax
asset for share-based awards (the excess tax benefit) as additional paid-in capital.
Stock option awards
Options may be granted to key administrative employees and employee financial advisors who achieve certain gross
commission levels. Options are exercisable in the 36th to 72nd months following the date of grant and only in the event that the
grantee is an employee of ours or has terminated within 45 days, disabled, deceased or, in some instances, retired. Options are
granted with an exercise price equal to the market price of our stock on the grant date.
Expense and income tax benefits related to our stock options awards granted to employees are presented below:
Total share-based expense
Income tax benefits related to share-based expense
$
2015
Year ended September 30,
2014
(in thousands)
9,068
$
667
$
10,169
811
2013
8,382
596
These amounts may not be representative of future share-based compensation expense since the estimated fair value of stock
options is amortized over the requisite service period using the straight-line method, and in certain instances the graded vesting
attribution method, and additional options may be granted in future years. The fair value of each fixed option grant is estimated
on the date of grant using the Black-Scholes option pricing model with the following weighted-average assumptions used for stock
option grants in the fiscal years ended September 30, 2015, 2014 and 2013:
Dividend yield
Expected volatility
Risk-free interest rate
Expected lives (in years)
Year ended September 30,
2014
2013
2015
1.30%
29.55%
1.66%
5.48
1.33%
39.84%
1.43%
5.50
1.37%
39.38%
0.67%
5.50
The dividend yield assumption is based on our declared dividend as a percentage of the stock price at the date of the grant.
The expected volatility assumption is based on our historical stock price and is a weighted average combining (1) the volatility
of the most recent year, (2) the volatility of the most recent time period equal to the expected lives assumption, (3) the implied
volatility of option contracts of RJF stock, and (4) the annualized volatility of the price of our stock since the late 1980s. The risk-
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Index
free interest rate assumption is based on the U.S. Treasury yield curve in effect at the time of grant of the options. The expected
lives assumption is based on the average of (1) the assumption that all outstanding options will be exercised at the midpoint between
their vesting date and full contractual term and (2) the assumption that all outstanding options will be exercised at their full
contractual term.
A summary of option activity for grants to employees and members of our Board of Directors for the fiscal year ended
September 30, 2015 is presented below:
Outstanding at October 1, 2014
Granted
Exercised
Forfeited
Outstanding at September 30, 2015
Weighted-
average
exercise
price ($)
Weighted-
average
remaining
contractual
term (years)
Aggregate
intrinsic
value ($)
33.90
55.52
26.37
42.15
41.49
3.82 $ 39,482,000
Options
for shares
4,061,460 $
1,100,008
(1,015,914)
(84,200)
4,061,354
Exercisable at September 30, 2015
535,491 $
27.10
1.09 $ 12,062,000
As of September 30, 2015, there was $24.4 million of total unrecognized pre-tax compensation cost, net of estimated
forfeitures, related to stock option awards. These costs are expected to be recognized over a weighted-average period of
approximately 3.20 years.
The following stock option activity occurred under the 2012 Plan for grants to employees and members of our Board of
Directors:
Year ended September 30,
2014
(in thousands, except per option amounts)
2013
2015
Weighted-average grant date fair value per option
Total intrinsic value of stock options exercised
Total grant date fair value of stock options vested
$
$
14.36
29,574
10,483
$
16.21
15,570
5,004
12.06
14,240
11,598
Cash received from stock option exercises during the fiscal year ended September 30, 2015 was $26.9 million.
Restricted stock awards
We may grant awards under the 2012 Plan in connection with initial employment or under various retention programs for
individuals who are responsible for a contribution to our management, growth, and/or profitability. Through our Canadian
subsidiary, we established a trust fund. This trust fund was established and funded to enable the trust fund to acquire our common
stock in the open market to be used to settle restricted stock units granted as a retention vehicle for certain employees of the
Canadian subsidiary (see Note 11 for discussion of our consolidation of this trust fund, which is a VIE). We may also grant awards
to officers and certain other employees in lieu of cash for 10% to 50% of annual bonus amounts in excess of $250,000. The
determination of the number of units or shares to be granted is determined by the Corporate Governance, Nominating and
Compensation Committee of the Board of Directors. Under the plan, the awards are generally restricted for a three to five year
period, during which time the awards are forfeitable in the event of termination other than for death, disability or retirement.
Prior to February 2011, non-employee members of our Board of Directors had been granted stock option awards annually.
Commencing in February 2011, restricted stock unit awards are issued annually to such members of our Board of Directors, in
lieu of stock option awards. The restricted stock units granted to these Directors vest over a one year period from their grant date,
provided that the director is still serving on our Board of Directors at the end of such period.
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Index
The following restricted stock award activity occurred during the fiscal year ended September 30, 2015:
Non-vested at October 1, 2014
Granted
Vested
Forfeited
Non-vested at September 30, 2015
Expense and income tax benefits related to our restricted stock awards are presented below:
Weighted-
average
grant date
fair value ($)
Shares/Units
5,588,827 $
1,265,271
(2,081,400)
(88,325)
4,684,373 $
35.61
56.30
32.85
42.83
42.29
Total share-based expense
Income tax benefits related to share-based expense
$
2015
Year ended September 30,
2014
(in thousands)
54,666
$
19,105
$
57,587
20,467
2013
48,621
16,607
For the year ended September 30, 2015, we reduced the cumulative excess tax benefit realized in prior years related to our
restricted stock awards by $2.4 million.
As of September 30, 2015, there was $90 million of total unrecognized pre-tax compensation cost, net of estimated forfeitures,
related to restricted stock shares and restricted stock units. These costs are expected to be recognized over a weighted-average
period of approximately 2.75 years. The total fair value of shares and unit awards vested under this plan during the fiscal year
ended September 30, 2015 was $68.3 million.
Employee stock purchase plan
Under the 2003 Employee Stock Purchase Plan, we are authorized to issue up to 7,375,000 shares of common stock to our
full-time employees, nearly all of whom are eligible to participate. Under the terms of the plan, share purchases in any calendar
year are limited to the lesser of 1,000 shares or shares with a fair market value of $25,000. The purchase price of the stock is 85%
of the average high and low market price on the day prior to the purchase date. Under the plan we sold approximately 430,000,
397,000 and 436,000 shares to employees during the years ended September 30, 2015, 2014 and 2013, respectively. The
compensation cost is calculated as the value of the 15% discount from market value and was $3.5 million, $3 million and $2.7
million during the fiscal years ended September 30, 2015, 2014 and 2013, respectively.
Employee investment funds
Certain key employees participate in the EIF Funds, which are limited partnerships that invest in certain of our private equity
and venture capital activities and other unaffiliated venture capital limited partnerships (see Notes 2 and 11 for further information
on our consolidation of the EIF Funds, which are VIEs). We made non-recourse loans to these key employees for two-thirds of
the purchase price per unit. All of these loans have been repaid.
We have various employee investment funds. Certain key employees participate in these funds, which are limited partnerships
that invest in certain unaffiliated venture capital limited partnerships.
NOTE 25 - NON-EMPLOYEE SHARE-BASED AND OTHER COMPENSATION
Stock option awards
Under the 2012 Plan, we may grant stock options to our independent contractor financial advisors. The 2012 Plan is the
successor to the prior plan under which options have previously been issued to independent contractor financial advisors. Options
are exercisable five years after the grant date provided that the financial advisors are still associated with us or have terminated
within 45 days, disabled, deceased or, in some instances, recently retired. Option terms are specified in individual agreements
and expire on a date no later than the sixth anniversary of the grant date. Options are granted with an exercise price equal to the
market price of our stock on the grant date.
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Index
Share-based awards granted to our independent contractor financial advisors are measured at their vesting date fair value and
their fair value estimated at reporting dates prior to that time. The compensation expense recognized each period is based on the
most recent estimated value. Further, we classify these non-employee awards as liabilities at fair value upon vesting, with changes
in fair value reported in earnings until these awards are exercised or forfeited.
Expense and income tax benefits related to stock option grants to our independent contractor financial advisors are presented
below:
Total share-based expense
Income tax benefits related to share-based expense
2015
$
Year ended September 30,
2014
(in thousands)
2,523
$
959
27
10
$
2013
1,282
487
The fair value of each option grant awarded to an independent contractor financial advisor is estimated on the date of grant
and periodically revalued using the Black-Scholes option pricing model with the following weighted-average assumptions used
for the fiscal years ended September 30, 2015, 2014 and 2013:
Dividend yield
Expected volatility
Risk-free interest rate
Expected lives (in years)
Year ended September 30,
2014
2013
2015
1.44%
32.46%
1.36%
3.14
1.19%
40.27%
1.78%
3.43
1.34%
39.88%
1.16%
3.32
The dividend yield assumption is based on our declared dividend as a percentage of the stock price at each point in time the
options are valued. The expected volatility assumption is based on our historical stock price and is a weighted average combining
(1) the volatility of the most recent year, (2) the volatility of the most recent time period equal to the expected lives assumption,
(3) the implied volatility of option contracts of RJF stock, and (4) the annualized volatility of the price of our stock since the late
1980s. The risk-free interest rate assumption is based on the U.S. Treasury yield curve in effect at each point in time the options
are valued. The expected lives assumption is based on the difference between the average of (1) the assumption that all outstanding
options will be exercised at the midpoint between their vesting date and full contractual term and (2) the assumption that all
outstanding options will be exercised at their full contractual term and the date of the current reporting period.
A summary of independent contractor financial advisors option activity for the fiscal year ended September 30, 2015 is
presented below:
Outstanding at October 1, 2014
Granted
Exercised
Forfeited
Outstanding at September 30, 2015
Weighted-
average
exercise
price ($)
Weighted-
average
remaining
contractual
term (years)
Aggregate
intrinsic
value ($)
Options
for shares
239,625 $
39,200
(35,000)
(200)
243,625 $
34.37
55.49
23.86
55.49
39.26
3.05 $
2,635,000
Exercisable at September 30, 2015
13,000 $
25.28
0.15 $
307,000
As of September 30, 2015, there was $1 million of total unrecognized pre-tax compensation cost, net of estimated forfeitures,
related to unvested stock options granted to our independent contractor financial advisors based on an estimated weighted-average
fair value of $15.91 per share at that date. These costs are expected to be recognized over a weighted-average period of approximately
2.98 years.
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Index
The intrinsic value of stock options exercised, and the fair value of stock options vested, as they pertain to our independent
contractor financial advisors, for the years indicated are as follows:
Total intrinsic value of stock options exercised
Total fair value of stock options vested
$
2015
Year ended September 30,
2014
(in thousands)
1,329
$
715
1,146
783
$
2013
985
347
Cash received from stock option exercises for the fiscal year ended September 30, 2015 was $800 thousand.
Restricted stock awards
Under the 2012 Plan we may grant restricted shares of common stock or restricted stock units to our independent contractor
financial advisors. The 2012 Plan is the successor to the prior plan under which restricted stock or restricted stock units have been
issued to independent contractors. We issue new shares under this plan as it was approved by shareholders. Under the plan the
awards are generally restricted for a five year period, during which time the awards are forfeitable in the event the independent
contractor financial advisors are no longer associated with us, other than for death, disability or retirement.
The following activity pertaining to restricted stock awards to our independent contractor financial advisors occurred during
the fiscal year ended September 30, 2015:
Non-vested at October 1, 2014
Granted
Vested
Forfeited
Non-vested at September 30, 2015
Weighted-
average
reporting date
fair value ($)
Shares/Units
14,906 $
—
(12,320)
—
2,586 $
53.58
49.63
The weighted-average fair value of share and unit awards vested during the fiscal year ended September 30, 2015 was $57.51
per share. There were no restricted stock awards forfeited during the fiscal year ended September 30, 2015.
Expense and income tax benefits related to our restricted stock awards granted to our independent contractor financial advisors
are presented below:
Total share-based expense
Income tax benefits related to share-based expense
2015
$
Year ended September 30,
2014
(in thousands)
317
$
121
129
49
$
2013
829
315
The total fair value of share and unit awards vested during the fiscal years ended September 30, 2015, 2014 and 2013 was
$700 thousand, $500 thousand and $3.1 million, respectively.
Other compensation
We offer non-qualified deferred compensation plans that provide benefits to our independent contractor financial advisors
who meet certain production requirements. The Deferral Plan Funding Structure is the primary source of funding for this plan.
The contributions are made in amounts approved annually by management.
Certain independent contractor financial advisors are eligible to participate in our VDCP. Eligible participants may elect to
defer a percentage or specific dollar amount of their compensation into the VDCP. The Deferral Plan Funding Structure is the
primary source of funding for this plan.
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Index
NOTE 26 – REGULATIONS AND CAPITAL REQUIREMENTS
RJF, as a financial holding company, and RJ Bank, are subject to various regulatory capital requirements. Failure to meet
minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if
undertaken, could have a direct material effect on our and RJ Bank’s financial results. Under capital adequacy guidelines, RJF
and RJ Bank must meet specific capital guidelines that involve quantitative measures of our assets, liabilities, and certain off-
balance-sheet items as calculated under regulatory accounting practices. RJF’s and RJ Bank’s capital amounts and classification
are also subject to qualitative judgments by the regulators about components, risk-weightings, and other factors.
Effective January 1, 2015, RJF and RJ Bank became subject to Basel III. Under the Basel III rules, the quantity and quality
of regulatory capital increases, a capital conservation buffer was established, selected changes were made to the calculation of
risk-weighted assets, and a new ratio, common equity Tier 1 was introduced, all of which are applicable to both RJF and RJ Bank.
RJF and RJ Bank report regulatory capital under Basel III under the standardized approach. Various aspects of Basel III will be
subject to multi-year transition periods through December 31, 2018. Prior to January 1, 2015, RJF and RJ Bank were subject to
the capital requirements of Basel 2.5 and Basel 1, respectively.
RJF and RJ Bank are required to maintain minimum amounts and ratios of Total and Tier 1 capital (as defined in the regulations)
to risk-weighted assets (as defined), Tier 1 capital to average assets (as defined), and under rules defined in Basel III, Common
equity Tier 1 capital to risk-weighted assets. RJF and RJ Bank each calculate these ratios in order to assess compliance with both
regulatory requirements and their internal capital policies. Effective January 1, 2016, RJF and RJ Bank will be required to report
their capital conservation buffers. Capital levels are monitored to assess both RJF and RJ Bank’s capital position. At current capital
levels, RJF and RJ Bank are each categorized as “well capitalized.”
To meet requirements for capital adequacy purposes or to be categorized as “well capitalized,” RJF must maintain minimum
Common equity Tier 1, Tier 1 risk-based, Total risk-based, and Tier 1 leverage amounts and ratios as set forth in the table below.
Actual
Amount
Ratio
Requirement for capital
adequacy purposes
Ratio
Amount
($ in thousands)
To be well capitalized under
regulatory provisions
Ratio
Amount
RJF as of September 30, 2015:
(computed in accordance with Basel III)
Common equity Tier 1 capital
Tier 1 capital
Total capital
Tier 1 leverage
RJF as of September 30, 2014:
(computed in accordance with Basel 2.5)
Tier 1 capital
Total capital
Tier 1 leverage
$
$
$
$
$
$
$
4,101,353
4,101,353
4,290,431
4,101,353
22.1% $
22.1% $
23.1% $
16.1% $
834,677
1,112,902
1,483,869
1,018,859
4.5% $
6.0% $
8.0% $
4.0% $
1,205,644
1,483,869
1,854,837
1,273,574
3,775,385
3,940,516
3,775,385
19.7% $
20.6% $
16.4% $
765,589
1,531,178
919,546
4.0% $
8.0% $
4.0% $
1,148,384
1,913,973
1,149,433
6.5%
8.0%
10.0%
5.0%
6.0%
10.0%
5.0%
The increase in RJF’s Total capital and Tier 1 capital ratios at September 30, 2015 compared to September 30, 2014 is primarily
the result of positive earnings during the year ended September 30, 2015 and the implementation of the Basel III rules in relation
to margin loans and RJ Bank’s SBL portfolio, which resulted in a reduced risk-weighting of the majority of these assets which are
secured by marketable securities. RJF’s Tier 1 leverage ratio declined slightly compared to September 30, 2014 due to the growth
of RJ Bank’s loan portfolio and an increase in segregated assets held for the exclusive benefit of our broker-dealer clients.
181
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Index
To meet the requirements for capital adequacy or to be categorized as “well capitalized,” RJ Bank must maintain Common
equity Tier 1, Tier 1 risk-based, Total risk-based, and Tier 1 leverage amounts and ratios as set forth in the table below.
Actual
Amount
Ratio
Requirement for capital
adequacy purposes
Ratio
Amount
($ in thousands)
To be well capitalized under
regulatory provisions
Ratio
Amount
RJ Bank as of September 30, 2015:
(computed in accordance with Basel III)
Common equity Tier 1 capital
Tier 1 capital
Total capital
Tier 1 leverage
RJ Bank as of September 30, 2014:
(computed in accordance with Basel 1)
Tier 1 capital
Total capital
Tier 1 leverage
$
$
$
$
$
$
$
1,525,942
1,525,942
1,672,577
1,525,942
13.0% $
13.0% $
14.3% $
10.9% $
526,577
702,103
936,137
558,829
4.5% $
6.0% $
8.0% $
4.0% $
760,611
936,137
1,170,171
698,536
1,314,374
1,460,895
1,314,374
11.2% $
12.5% $
10.7% $
467,926
935,852
492,186
4.0% $
8.0% $
4.0% $
701,889
1,169,815
615,232
6.5%
8.0%
10.0%
5.0%
6.0%
10.0%
5.0%
The increase in RJ Bank’s Total and Tier 1 capital ratios at September 30, 2015 compared to September 30, 2014 is primarily
due to the implementation of the Basel III rules in relation to RJ Bank’s SBL portfolio, which resulted in a reduced risk-weighting
of the majority of these loans which are secured by marketable securities.
Our intention is to maintain RJ Bank’s “well capitalized” status. RJ Bank maintains a targeted total capital to risk-weighted
assets ratio of at least 12.5%. In the unlikely event that RJ Bank failed to maintain its “well capitalized” status, the consequences
could include a requirement to obtain a waiver prior to acceptance, renewal, or rollover of brokered deposits and higher FDIC
premiums, but would not have a significant impact on our operations.
RJ Bank may pay dividends to the parent company without prior approval by its regulator as long as the dividend does not
exceed the sum of RJ Bank’s current calendar year and the previous two calendar years’ retained net income, and RJ Bank maintains
its targeted capital to risk-weighted assets ratios.
Certain of our broker-dealer subsidiaries are subject to the requirements of the Uniform Net Capital Rule (Rule 15c3-1) under
the Securities Exchange Act of 1934. RJ&A and RJFS, each being member firms of the Financial Industry Regulatory Authority
(“FINRA”), are subject to the rules of FINRA, whose capital requirements are substantially the same as Rule 15c3-1. Rule 15c3-1
requires that aggregate indebtedness, as defined, not exceed 15 times net capital, as defined. Rule 15c3-1 also provides for an
“alternative net capital requirement,” which RJ&A and RJFS have each elected. Regulations require that minimum net capital,
as defined, be equal to the greater of $1 million, ($250 thousand for RJFS as of September 30, 2015) or two percent of aggregate
debit items arising from client transactions. FINRA may require a member firm to reduce its business if its net capital is less than
four percent of Aggregate Debit Items and may prohibit a member firm from expanding its business and declaring cash dividends
if its net capital is less than five percent of aggregate debit items.
The net capital position of our wholly owned broker-dealer subsidiary RJ&A is as follows:
Raymond James & Associates, Inc.:
(Alternative Method elected)
Net capital as a percent of aggregate debit items
Net capital
Less: required net capital
Excess net capital
As of September 30,
2015
2014
($ in thousands)
20.85%
411,222
(39,452)
371,770
$
$
24.14%
442,866
(36,694)
406,172
$
$
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Index
The net capital position of our wholly owned broker-dealer subsidiary RJFS is as follows:
Raymond James Financial Services, Inc.:
(Alternative Method elected)
Net capital
Less: required net capital
Excess net capital
As of September 30,
2015
2014
(in thousands)
$
$
25,828
(250)
25,578
$
$
23,748
(250)
23,498
RJ Ltd. is subject to the Minimum Capital Rule (Dealer Member Rule No. 17 of the Investment Industry Regulatory
Organization of Canada (“IIROC”)) and the Early Warning System (Dealer Member Rule No. 30 of the IIROC). The Minimum
Capital Rule requires that every member shall have and maintain at all times risk-adjusted capital greater than zero calculated in
accordance with Form 1 (Joint Regulatory Financial Questionnaire and Report) and with such requirements as the Board of
Directors of the IIROC may from time to time prescribe. Insufficient risk-adjusted capital may result in suspension from
membership in the stock exchanges or the IIROC.
The Early Warning System is designed to provide advance warning that a member firm is encountering financial difficulties.
This system imposes certain sanctions on members who are designated in Early Warning Level 1 or Level 2 according to their
capital, profitability, liquidity position, frequency of designation or at the discretion of the IIROC. Restrictions on business activities
and capital transactions, early filing requirements, and mandated corrective measures are sanctions that may be imposed as part
of the Early Warning System. RJ Ltd. is not in Early Warning Level 1 or Level 2 at either September 30, 2015 or 2014.
The risk adjusted capital of RJ Ltd. is as follows (in Canadian currency):
Raymond James Ltd.:
Risk adjusted capital before minimum
Less: required minimum capital
Risk adjusted capital
As of September 30,
2015
2014
(in thousands)
$
$
127,097
(250)
126,847
$
$
107,645
(250)
107,395
Raymond James Trust, N.A., (“RJ Trust”) is regulated by the OCC and is required to maintain sufficient capital and meet
capital and liquidity requirements. As of September 30, 2015 and 2014, RJ Trust met the requirements.
At September 30, 2015, all of our other active regulated domestic and international subsidiaries are in compliance with and
met all capital requirements.
RJF expects to continue paying cash dividends. However, the payment and rate of dividends on our common stock is subject
to several factors including our operating results, financial requirements, and the availability of funds from our subsidiaries,
including our broker-dealer and bank subsidiaries, which may be subject to restrictions under regulatory capital rules. The
availability of funds from subsidiaries may also be subject to restrictions contained in loan covenants of certain broker-dealer loan
agreements; dividends to the parent from RJ Bank may be subject to restrictions by bank regulators. None of these restrictions
have ever limited our past dividend payments.
NOTE 27 – FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK
In the normal course of business, we purchase and sell securities as either principal or agent on behalf of our clients. If either
the client or counterparty fails to perform, we may be required to discharge the obligations of the nonperforming party. In such
circumstances, we may sustain a loss if the market value of the security or futures contract is different from the contract value of
the transaction.
In a number of instances in the discussions that follow, reference is made to collateral. Note 19 provides additional information
regarding the recorded balances in the Consolidated Statements of Financial Condition and the collateral balances related thereto.
We also act as an intermediary between broker-dealers and other financial institutions whereby we borrow securities from
one broker-dealer and then lend them to another. Securities borrowed and securities loaned are carried at the amounts of cash
183
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Index
collateral advanced and received in connection with the transactions. We measure the market value of the securities borrowed
and loaned against the cash collateral on a daily basis. The market value of securities borrowed was $83.4 million and securities
loaned was $39.7 million at September 30, 2015, and the market value of securities borrowed was $113.3 million and securities
loaned was $61 million at September 30, 2014. The contract value of securities borrowed and securities loaned was $86.3 million
and $44.4 million, respectively, at September 30, 2015 and the contract value of securities borrowed and securities loaned was
$117.7 million and $67.3 million, respectively, at September 30, 2014. Additional cash is obtained as necessary to ensure such
transactions are adequately collateralized. If another party to the transaction fails to perform as agreed (for example, failure to
deliver a security or failure to pay for a security), we may incur a loss if the market value of the security is different from the
contract amount of the transaction.
We have also loaned, to broker-dealers and other financial institutions, securities owned by clients and others for which we
have received cash or other collateral. The market value of securities loaned was $432.6 million and $341.2 million at September 30,
2015 and 2014, respectively. The contract value of securities loaned was $434.2 million and $350 million at September 30, 2015
and 2014, respectively. If a borrowing institution or broker-dealer does not return a security, we may be obligated to purchase the
security in order to return it to the owner. In such circumstances, we may incur a loss equal to the amount by which the market
value of the security on the date of nonperformance exceeds the value of the collateral received from the financial institution or
the broker-dealer.
We have sold securities that we do not currently own, and will, therefore, be obligated to purchase such securities at a future
date. We have recorded $288 million and $238.4 million at September 30, 2015 and 2014, respectively, which represents the
market value of such securities (see Notes 5 and 6 for further information). We are subject to loss if the market price of those
securities not covered by a hedged position increases subsequent to fiscal year-end. We utilize short positions on government
obligations and equity securities to economically hedge long inventory positions.
We enter into security transactions on behalf of our clients and other brokers involving forward settlement. Forward contracts
provide for the delayed delivery of the underlying instrument. The contractual amounts related to these financial instruments
reflect the volume and activity and do not reflect the amounts at risk. The gain or loss on these transactions is recognized on a
trade date basis. Transactions involving future settlement give rise to market risk, which represents the potential loss that can be
caused by a change in the market value of a particular financial instrument. Our exposure to market risk is determined by a number
of factors, including the duration, size, composition and diversification of positions held, the absolute and relative levels of interest
rates, and market volatility. The credit risk for these transactions is limited to the unrealized market valuation gains recorded in
the Consolidated Statements of Financial Condition.
The majority of our transactions and, consequently, the concentration of our credit exposure, is with clients, broker-dealers
and other financial institutions in the U.S. These activities primarily involve collateralized arrangements and may result in credit
exposure in the event that the counterparty fails to meet its contractual obligations. Our exposure to credit risk can be directly
impacted by volatile securities markets, which may impair the ability of counterparties to satisfy their contractual obligations. We
seek to control our credit risk through a variety of reporting and control procedures, including establishing credit limits based
upon a review of the counterparties’ financial condition and credit ratings. We monitor collateral levels on a daily basis for
compliance with regulatory and internal guidelines and request changes in collateral levels as appropriate.
As a part of our fixed income public finance operations, RJ&A enters into forward commitments to purchase GNMA or FNMA
MBS. See Note 2 and Note 21 for information on these commitments. We utilize TBA security contracts to hedge our interest
rate risk associated with these commitments. We are subject to loss if the timing of, or the actual amount of, the MBS securities
differs significantly from the term and notional amount of the TBA security contracts we enter into.
RJ Ltd. is subject to foreign exchange risk primarily due to financial instruments denominated in U.S. dollars that may be
impacted by fluctuation in foreign exchange rates. In order to mitigate this risk, RJ Ltd. enters into forward foreign exchange
contracts. The fair value of these contracts is not significant. As of September 30, 2015, forward contracts outstanding to buy and
sell U.S. dollars totaled CDN $2.2 million and CDN $16.9 million, respectively. RJ Bank is also subject to foreign exchange risk
related to its net investment in a Canadian subsidiary. See Note 18 for information regarding how RJ Bank utilizes net investment
hedges to mitigate a portion of this risk.
RJ Bank has outstanding at any time a significant number of commitments to extend credit and other credit-related off-balance
sheet financial instruments such as standby letters of credit and loan purchases, which then extend over varying periods of time.
These arrangements are subject to strict credit control assessments and each customer’s credit worthiness is evaluated on a case-
by-case basis. Fixed-rate commitments are also subject to market risk resulting from fluctuations in interest rates and RJ Bank’s
exposure is limited to the replacement value of those commitments.
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Index
RJ Bank’s commitments to extend credit and other credit-related off-balance sheet financial instruments outstanding are as
follows:
Standby letters of credit
Open end consumer lines of credit (primarily SBL)
Commercial lines of credit
Unfunded loan commitments
As of September 30,
2015
2014
(in thousands)
60,925
2,531,690
1,419,746
322,419
$
$
$
$
100,582
1,585,717
1,692,896
248,931
$
$
$
$
In the normal course of business, RJ Bank issues, or participates in the issuance of, financial standby letters of credit whereby
it provides an irrevocable guarantee of payment in the event the letter of credit is drawn down by the beneficiary. These standby
letters of credit generally expire in one year or less. As of September 30, 2015, $60.9 million of such letters of credit were
outstanding. In the event that a letter of credit is drawn down, RJ Bank would pursue repayment from the party under the existing
borrowing relationship, or would liquidate collateral, or both. The proceeds from repayment or liquidation of collateral are expected
to satisfy the amounts drawn down under the existing letters of credit. The credit risk involved in issuing letters of credit is
essentially the same as that involved with extending loan commitments to clients and, accordingly, RJ Bank uses a credit evaluation
process and collateral requirements similar to those for loan commitments.
Open end consumer lines of credit primarily represent the unfunded amounts of RJ Bank loans to customers that are secured
by marketable securities at advance rates consistent with industry standards. The proceeds from repayment or, if necessary, the
liquidation of collateral, which is monitored daily, are expected to satisfy the amounts drawn against these existing lines of credit.
Because many of RJ Bank’s lending commitments expire without being funded in whole or part, the contract amounts are not
estimates of RJ Bank’s actual future credit exposure or future liquidity requirements. RJ Bank maintains a reserve to provide for
potential losses related to the unfunded lending commitments. See Note 9 for further discussion of this reserve for unfunded
lending commitments. Credit risk represents the accounting loss that would be recognized at the reporting date if counterparties
failed completely to perform as contracted. The credit risk amounts are equal to the contractual amounts, assuming that the amounts
are fully advanced and that the collateral or other security is of no value. RJ Bank uses the same credit approval and monitoring
process in extending loan commitments and other credit-related off-balance sheet instruments as it does in making loans.
185
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Index
NOTE 28 – EARNINGS PER SHARE
The following table presents the computation of basic and diluted earnings per share:
Income for basic earnings per common share:
Net income attributable to RJF
Less allocation of earnings and dividends to participating securities (1)
Net income attributable to RJF common shareholders
Income for diluted earnings per common share:
Net income attributable to RJF
Less allocation of earnings and dividends to participating securities (1)
Net income attributable to RJF common shareholders
Common shares:
Average common shares in basic computation
Dilutive effect of outstanding stock options and certain restricted stock units
Average common shares used in diluted computation
Earnings per common share:
Basic
Diluted
Stock options and certain restricted stock units excluded from weighted-average
diluted common shares because their effect would be antidilutive
Year ended September 30,
2015
2013
2014
(in thousands, except per share amounts)
$
$
$
$
$
$
$
$
$
$
502,140
(1,610)
500,530
502,140
(1,580)
500,560
142,548
3,391
145,939
$
$
$
$
480,248
(3,007)
477,241
480,248
(2,946)
477,302
139,935
3,654
143,589
3.51
3.43
$
$
3.41
3.32
$
$
2,849
1,503
367,154
(4,164)
362,990
367,154
(4,100)
363,054
137,732
2,809
140,541
2.64
2.58
1,153
(1) Represents dividends paid during the year to participating securities plus an allocation of undistributed earnings to participating
securities. Participating securities represent unvested restricted stock and certain restricted stock units and amounted to weighted-
average shares of 464 thousand, 887 thousand and 1.6 million for the years ended September 30, 2015, 2014 and 2013, respectively.
Dividends paid to participating securities amounted to $300 thousand, $500 thousand and $800 thousand for the years ended
September 30, 2015, 2014, and 2013 respectively. Undistributed earnings are allocated to participating securities based upon their
right to share in earnings if all earnings for the period had been distributed.
Dividends per common share declared and paid are as follows:
Dividends per common share - declared
Dividends per common share - paid
NOTE 29 – SEGMENT INFORMATION
Year ended September 30,
2014
2013
2015
$
$
0.72
0.70
$
$
0.64
0.62
$
$
0.56
0.55
We currently operate through the following five business segments: “Private Client Group;” “Capital Markets;” “Asset
Management;” RJ Bank; and the “Other” segment.
The business segments are determined based upon factors such as the services provided and the distribution channels served
and are consistent with how we assess performance and determine how to allocate our resources throughout our subsidiaries. The
financial results of our segments are presented using the same policies as those described in Note 2, “Summary of Significant
Accounting Policies.” Segment results include charges allocating most corporate overhead and benefits to each segment, refer to
the discussion of the Other segment below for a description of the corporate expenses that are not allocated to segments. Intersegment
revenues, expenses, receivables and payables are eliminated upon consolidation.
The Private Client Group segment includes the retail branches of our broker-dealer subsidiaries located throughout the U.S.,
Canada and the United Kingdom. These branches provide securities brokerage services including the sale of equities, mutual
funds, fixed income products and insurance products to their individual clients. The segment includes net interest earnings on
client margin loans and cash balances and certain fee revenues generated by the multi-bank aspect of the RJBDP. Additionally,
this segment includes the activities associated with the borrowing and lending of securities to and from other broker-dealers,
186
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Index
financial institutions and other counterparties, generally as an intermediary or to facilitate RJ&A’s clearance and settlement
obligations, and the correspondent clearing services that we provide to other broker-dealer firms.
The Capital Markets segment includes institutional sales and trading in the U.S., Canada and Europe. We provide securities
brokerage, trading, and research services to institutions with an emphasis on the sale of U.S. and Canadian equities and fixed
income products. This segment also includes our management of and participation in underwritings, merger and acquisition
services, public finance activities, the operations of RJTCF, and our Latin American joint ventures.
The Asset Management segment includes the operations of Eagle, the Eagle Family of Funds, Cougar, the asset management
operations of RJ&A, trust services of RJ Trust, and other fee-based asset management programs.
RJ Bank originates and purchases C&I loans, tax-exempt loans, SBL, as well as commercial and residential real estate loans,
all of which are funded primarily by cash balances swept from the investment accounts of our broker-dealer subsidiaries’ clients.
The Other segment includes our principal capital and private equity activities as well as certain corporate costs of RJF that
are not allocated to operating segments including the interest cost on our public debt and in fiscal year 2013, certain acquisition
and integration costs (see Note 3 for additional information).
Information concerning operating results in these segments are as follows:
Revenues:
Private Client Group
Capital Markets
Asset Management
RJ Bank
Other
Intersegment eliminations
Total revenues(1)
Income (loss) excluding noncontrolling interests and before provision for
income taxes:
Private Client Group
Capital Markets
Asset Management
RJ Bank
Other
Pre-tax income excluding noncontrolling interests
Add: net (loss) income attributable to noncontrolling interests
Income including noncontrolling interests and before provision for income
taxes
2015
Year ended September 30,
2014
(in thousands)
2013
$
$
$
$
$
$
3,519,558
975,064
392,378
425,988
66,967
(71,791)
5,308,164
342,243
107,009
135,050
278,721
(64,849)
798,174
(21,462)
$
$
$
3,289,503
968,635
369,690
360,317
42,203
(64,888)
4,965,460
330,278
130,565
128,286
242,834
(83,918)
748,045
(32,097)
2,930,603
945,477
292,817
356,130
126,401
(55,630)
4,595,798
230,315
102,171
96,300
267,714
(132,313)
564,187
29,723
(2)
$
776,712
$
715,948
$
593,910
(1) No individual client accounted for more than ten percent of total revenues in any of the years presented.
(2) The Other segment includes acquisition and integration related expenses pertaining to our material acquisitions (for fiscal year 2013,
our integration of Morgan Keegan) in the amount of $73.5 million for the year ended September 30, 2013. For the years ended
September 30, 2015 and 2014, acquisition and integration related expenses are not material for separate disclosure as our Morgan
Keegan integration activities were substantially complete as of September 30, 2013. See Note 3 for additional information.
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Index
The following table presents our net interest income on a segment basis:
Net interest income (expense):
Private Client Group
Capital Markets
Asset Management
RJ Bank
Other
Net interest income
The following table presents our total assets on a segment basis:
Total assets:
Private Client Group (1)
Capital Markets (2)
Asset Management
RJ Bank
Other
Total
2015
Year ended September 30,
2014
(in thousands)
2013
$
$
88,842
7,634
127
403,578
(64,928)
435,253
$
$
89,527
5,326
92
346,757
(64,907)
376,795
$
$
85,301
4,076
81
338,844
(65,074)
363,228
September 30,
2015
2014
(in thousands)
$
$
6,870,379
2,780,733
187,378
14,191,566
2,449,628
26,479,684
$
$
6,255,176
2,645,926
186,170
12,036,945
2,201,435
23,325,652
(1) Includes $186.7 million and $174.6 million of goodwill at September 30, 2015 and 2014, respectively.
(2) Includes $120.9 million of goodwill at September 30, 2015 and 2014.
We have operations in the United States, Canada, Europe and joint ventures in Latin America. Substantially all long-lived
assets are located in the United States. Revenues and income before provision for income taxes and excluding noncontrolling
interests, classified by major geographic areas in which they are earned, are as follows:
Revenues:
United States
Canada
Europe
Other
Total
Pre-tax income (loss) excluding noncontrolling interests:
United States
Canada
Europe
Other
Total
2015
Year ended September 30,
2014
(in thousands)
2013
$
$
$
$
4,911,304
279,200
85,289
32,371
5,308,164
784,517
17,770
(6,852)
2,739
798,174
$
$
$
$
4,512,808
323,038
95,865
33,749
4,965,460
706,366
37,947
(1,546)
5,278
748,045
$
$
$
$
4,177,712
310,616
83,744
23,726
4,595,798
543,093
28,470
(8,032)
656
564,187
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Index
Our total assets, classified by major geographic area in which they are held, are presented below:
Total assets:
United States (1)
Canada(2)
Europe
Other
Total
September 30,
2015
2014
(in thousands)
$
$
24,543,645
1,814,178
36,669
85,192
26,479,684
$
$
21,469,999
1,773,703
39,872
42,078
23,325,652
(1) Includes $274.6 million and $262.5 million of goodwill at September 30, 2015 and 2014, respectively.
(2) Includes $33 million of goodwill at September 30, 2015 and 2014.
NOTE 30 - CONDENSED FINANCIAL INFORMATION (PARENT COMPANY ONLY)
As more fully described in Note 1, RJF (or the “Parent”), is a financial holding company whose subsidiaries are engaged in
various financial services businesses. The Parent’s primary activities include investments in subsidiaries and corporate investments,
including cash management, company-owned life insurance and private equity investments. The primary source of operating cash
available to the Parent is provided by dividends from its subsidiaries.
Our principal domestic broker-dealer subsidiaries of the Parent, RJ&A and RJFS, are required by regulations to maintain a
minimum amount of net capital (other non-bank subsidiaries of the Parent are also required by regulations to maintain a minimum
amount of net capital, but the net capital requirements of those other subsidiaries are much less significant). RJ&A is further
required by certain covenants in its borrowing agreements to maintain net capital equal to 10% of aggregate debit balances. At
September 30, 2015, each of these brokerage subsidiaries far exceeded their minimum net capital requirements, see Note 26 for
further information.
Subsidiary net assets of approximately $1.8 billion as of September 30, 2015 are restricted under regulatory or other restrictions
from being transferred from certain subsidiaries to the Parent, without prior approval of the respective entities’ regulator.
Liquidity available to the Parent from its other subsidiaries, other than broker-dealer subsidiaries and RJ Bank, is not limited
by regulatory or other restrictions, but the available amounts are not as significant as those amounts described above. The Parent
regularly receives a portion of the profits of subsidiaries, other than RJ Bank, as dividends.
See Notes 15, 17, 21 and 26 for more information regarding borrowings, commitments, contingencies and guarantees, and
capital and regulatory requirements of the Parent and its subsidiaries.
189
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Index
The following table presents the Parent’s statements of financial condition:
Assets:
Cash and cash equivalents (1)
Intercompany receivables from subsidiaries:
Bank subsidiary
Non-bank subsidiaries (2)
Investments in consolidated subsidiaries:
Bank subsidiary
Non-bank subsidiaries
Property and equipment, net
Goodwill and identifiable intangible assets, net
Other assets
Total assets
Liabilities and equity:
Trade and other
Intercompany payables to subsidiaries:
Bank subsidiary
Non-bank subsidiaries
Accrued compensation and benefits
Senior notes payable
Total liabilities
Equity
Total liabilities and equity
September 30,
2015
2014
(in thousands)
$
746,042
$
778,855
82
853,222
1,519,263
2,378,129
10,602
31,954
628,178
6,167,472
$
—
710,318
1,310,097
2,302,128
10,320
31,954
619,616
5,763,288
78,945
$
78,993
—
129,779
287,495
1,149,222
1,645,441
4,522,031
6,167,472
$
45
109,396
284,584
1,149,034
1,622,052
4,141,236
5,763,288
$
$
$
(1) Of the Parent’s total cash and cash equivalents, $451 million and $500 million at September 30, 2015 and 2014, respectively, is held
in a deposit account at RJ Bank.
(2) Of the total receivable from non-bank subsidiaries, $494 million and $458 million at September 30, 2015 and 2014, respectively, is
invested in cash and cash equivalents by the subsidiary on behalf of the Parent.
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The following table presents the Parent’s statements of income:
Revenues:
Dividends from non-bank subsidiaries
Dividends from bank subsidiary
Interest from subsidiaries
Interest
Other
Total revenues
Interest expense
Net revenues
Non-interest expenses:
Compensation and benefits
Communications and information processing
Occupancy and equipment costs
Business development
Other
Intercompany allocations and charges
Total non-interest expenses
Income before income tax benefit and equity in undistributed net income of
subsidiaries
Income tax benefit
Income before equity in undistributed net income of subsidiaries
Equity in undistributed net income of subsidiaries
Net income
2015
Year ended September 30,
2014
(in thousands)
2013
$
230,853
—
6,886
843
3,823
242,405
(76,233)
166,172
46,758
5,999
800
17,581
10,365
(46,898)
34,605
$
253,218
25,000
5,779
2,050
1,613
287,660
(76,662)
210,998
41,482
5,036
892
15,497
8,252
(38,148)
33,011
131,567
(42,688)
174,255
327,885
502,140
$
177,987
(37,170)
215,157
265,091
480,248
$
822,996
100,000
1,966
2,510
6,017
933,489
(78,244)
855,245
43,673
5,029
1,005
16,506
9,608
(33,115)
42,706
812,539
(54,047)
866,586
(499,432)
367,154
$
$
191
7146_10K.pdf December 22, 2015 pg 195
Year ended September 30,
2014
2013
2015
(in thousands)
$
502,140
$
480,248
$
367,154
(5,586)
8,960
(327,885)
60,634
(102,866)
51,442
20,338
(49)
2,911
210,039
(49,613)
(4,601)
(44,917)
(99,131)
47,964
(88,542)
(103,143)
(143,721)
(32,813)
778,855
746,042
76,297
32,383
$
$
$
(10,245)
(17,989)
(265,091)
75,725
45,656
44,360
(108,056)
12,835
7,668
265,111
321,127
6,347
(25,581)
301,893
33,633
(8,427)
(88,102)
(62,896)
504,108
274,747
778,855
$
(11,264)
(24,907)
499,432
(120,340)
(68,635)
33,584
(214,415)
10,017
148,622
619,248
(384,622)
(171,677)
(15,017)
(571,316)
55,997
(11,718)
(76,593)
(32,314)
15,618
259,129
274,747
$
76,661
(59,552) $
78,439
(100,179)
507
$
(132,117) $
457,048
Index
The following table presents the Parent’s statements of cash flows:
Cash flows from operating activities:
Net income
Adjustments to reconcile net income to net cash provided by operating
activities:
Gain on investments
Loss (gain) on company-owned life insurance
Equity in undistributed net income of subsidiaries
Other
Net change in:
Intercompany receivables
Other
Intercompany payables
Trade and other
Accrued compensation and benefits
Net cash provided by operating activities
Cash flows from investing activities:
(Investments in and advances to) distributions from subsidiaries, net
(Purchases) sales of investments, net
Purchase of investments in company-owned life insurance, net
Net cash (used in) provided by investing activities
Cash flows from financing activities:
Exercise of stock options and employee stock purchases
Purchase of treasury stock
Dividends on common stock
Net cash used in financing activities
Net (decrease) increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
Supplemental disclosures of cash flow information:
Cash paid for interest
Cash paid (received) for income taxes, net
Supplemental disclosures of noncash investing activity:
Investments in (distributions from) subsidiaries, net
$
$
$
$
192
7146_10K.pdf December 22, 2015 pg 196
Index
SUPPLEMENTARY DATA:
SELECTED QUARTERLY FINANCIAL DATA
(unaudited)
Fiscal Year 2015
Revenues
Net revenues
Non-interest expenses
Income including noncontrolling interests and before provision
for income taxes
Net income attributable to Raymond James Financial, Inc.
Net income per share - basic
Net income per share - diluted
Dividends declared per share
Fiscal Year 2014
Revenues
Net revenues
Non-interest expenses
Income including noncontrolling interests and before provision
for income taxes
Net income attributable to Raymond James Financial, Inc.
Net income per share - basic
Net income per share - diluted
Dividends declared per share
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
1st Qtr.
2nd Qtr.
3rd Qtr.
4th Qtr.
(in thousands, except per share data)
1,279,844 $
1,252,460 $
1,053,811 $
1,312,624 $
1,285,778 $
1,110,145 $
1,348,713 $
1,320,989 $
1,119,694 $
1,366,983
1,340,983
1,139,848
198,649 $
126,296 $
0.89 $
0.87 $
0.18 $
175,633 $
113,463 $
0.79 $
0.77 $
0.18 $
201,295 $
133,195 $
0.93 $
0.91 $
0.18 $
201,135
129,186
0.90
0.88
0.18
1st Qtr.
2nd Qtr.
3rd Qtr.
4th Qtr.
(in thousands, except per share data)
1,208,774 $
1,183,402 $
1,004,590 $
1,204,625 $
1,178,645 $
1,025,646 $
1,241,283 $
1,214,231 $
1,035,298 $
1,310,778
1,285,091
1,079,887
178,812 $
116,633 $
0.83 $
0.81 $
0.16 $
152,999 $
104,560 $
0.74 $
0.72 $
0.16 $
178,933 $
122,689 $
0.87 $
0.85 $
0.16 $
205,204
136,366
0.97
0.94
0.16
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
None.
Item 9A. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
Disclosure controls are procedures designed to ensure that information required to be disclosed in our reports filed under the
Exchange Act, such as this report, are recorded, processed, summarized, and reported within the time periods specified in the
SEC’s rules and forms. Disclosure controls are also designed to ensure that such information is accumulated and communicated
to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions
regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognized that
any controls and procedures, no matter how well designed and operated, can provide only reasonable, not absolute, assurance of
achieving the desired control objectives, as ours are designed to do, and management necessarily was required to apply its judgment
in evaluating the cost-benefit relationship of possible controls and procedures.
Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial
Officer, we have evaluated the effectiveness of our disclosure controls and procedures pursuant to Exchange Act Rule 13a-15(b)
as of the end of the period covered by this report. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer
have concluded that these disclosure controls and procedures are effective.
193
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Index
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting during the year ended September 30, 2015 that have
materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. During our fiscal
year 2015, we implemented the new “Internal Control - Integrated Framework,” issued in May 2013 by the Committee of Sponsoring
Organizations of the Treadway Commission (“COSO”).
REPORT OF MANAGEMENT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
Our management is responsible for establishing and maintaining adequate internal control over our financial reporting. Internal
control over financial reporting is a process to provide reasonable assurance regarding the reliability of our financial reporting for
external purposes in accordance with accounting principles generally accepted in the United States. Internal control over financial
reporting includes maintaining records that in reasonable detail accurately and fairly reflect our transactions; providing reasonable
assurance that transactions are recorded as necessary for preparation of our financial statements; providing reasonable assurance
that receipts and expenditures of our assets are made in accordance with management authorization; and providing reasonable
assurance that unauthorized acquisition, use or disposition of our assets that could have a material effect on our financial statements
would be prevented or detected on a timely basis. Because of its inherent limitations, internal control over financial reporting is
not intended to provide absolute assurance that a misstatement of our financial statements would be prevented or detected.
Management conducted an evaluation of the effectiveness of our internal control over financial reporting based on the
framework in Internal Control - Integrated Framework (2013) issued by COSO. Based on this evaluation, management concluded
that our internal control over financial reporting was effective as of September 30, 2015. KPMG LLP, who audited and reported
on our consolidated financial statements included in this report, has issued an attestation report on our internal control over financial
reporting as of September 30, 2015 (included as follows).
194
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Index
Report of Independent Registered Public Accounting Firm
The Board of Directors and Shareholders
Raymond James Financial, Inc.:
We have audited Raymond James Financial Inc.’s (the “Company” or “Raymond James”) internal control over financial reporting
as of September 30, 2015, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee
of Sponsoring Organizations of the Treadway Commission. The Company’s management is responsible for maintaining effective
internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting,
included in the accompanying report of management on internal control over financial reporting. Our responsibility is to express
an opinion on the Company’s internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States).
Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control
over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control
over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating
effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we
considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability
of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted
accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain
to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets
of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are
being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable
assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that
could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because
of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
In our opinion, Raymond James maintained, in all material respects, effective internal control over financial reporting as of
September 30, 2015, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of
Sponsoring Organizations of the Treadway Commission.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the
consolidated statements of financial condition of Raymond James as of September 30, 2015 and 2014, and the related consolidated
statements of income and comprehensive income, changes in shareholders’ equity, and cash flows for each of the years in the
three-year period ended September 30, 2015, and our report dated November 25, 2015 expressed an unqualified opinion on those
consolidated financial statements.
/s/ KPMG LLP
Tampa, Florida
November 25, 2015
Certified Public Accountants
195
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Index
Item 9B. OTHER INFORMATION
None.
PART III
Item 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
A list of our executive officers appears in Part I, Item 1 of this report. The balance of the information required by Item 10 is
incorporated herein by reference to the registrant’s definitive proxy statement for the 2016 Annual Meeting of Shareholders which
will be filed with the SEC no later than 120 days after the close of the fiscal year ended September 30, 2015.
Item 11, 12, 13 and 14.
The information required by Items 11, 12, 13 and 14 is incorporated herein by reference to the registrant’s definitive proxy
statement for the 2016 Annual Meeting of Shareholders which will be filed with the SEC no later than 120 days after the close of
the fiscal year ended September 30, 2015.
Item 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Financial Statements and Schedules
PART IV
The financial statements are set forth under Item 8 of this Annual Report on Form 10-K. Financial statement schedules
have been omitted since they are either not required, not applicable, or the information is otherwise included.
(b) Exhibit listing
See the following pages.
196
7146_10K.pdf December 22, 2015 pg 200
Index
Exhibit
Number
3.1
3.2
4.1
4.2.1
4.2.2
4.2.3
4.2.4
4.2.5
10.1
10.2
10.3
10.4
10.5
10.6
Description
Restated Articles of Incorporation of Raymond James Financial, Inc. as filed with the Secretary of State of Florida on
November 25, 2008, incorporated by reference to Exhibit 3(i).1 to the Company’s Annual Report on Form 10-K, filed with
the Securities and Exchange Commission on November 28, 2008.
Amended and Restated By-Laws of Raymond James Financial, Inc., reflecting amendments adopted by the Board of
Directors on February 20, 2015, incorporated by reference to Exhibit 3.2 to the Company’s Current Report on Form 8-K,
filed with the Securities and Exchange Commission on February 24, 2015.
Description of Capital Stock, incorporated by reference to Exhibit 4.1 to the Company’s Quarterly Report on Form 10-Q,
filed with the Securities and Exchange Commission on August 10, 2009.
Indenture, dated as of August 10, 2009 (for senior debt securities) between Raymond James Financial, Inc. and The Bank of
New York Mellon Trust Company, N.A., incorporated by reference to Exhibit 4.2 to the Company’s Quarterly Report on
Form 10-Q, filed with the Securities and Exchange Commission on August 10, 2009.
First Supplemental Indenture, dated as of August 20, 2009 (for senior debt securities) between Raymond James Financial,
Inc. and The Bank of New York Mellon Trust Company, N.A., as trustee, incorporated by reference to Exhibit 4.1 to the
Company’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on August 20, 2009.
Second Supplemental Indenture, dated as of April 11, 2011 (for senior debt securities) between Raymond James Financial,
Inc. and The Bank of New York Mellon Trust Company, N.A., as trustee, incorporated by reference to Exhibit 4.1 to the
Company’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on April 11, 2011.
Third Supplemental Indenture, dated as of March 7, 2012 (for senior debt securities), between Raymond James Financial,
Inc. and The Bank of New York Mellon Trust Company, N.A., as trustee, incorporated by reference to Exhibit 4.1 to the
Company’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on March 7, 2012.
Fourth Supplemental Indenture, dated as of March 26, 2012 (for senior debt securities), between Raymond James Financial,
Inc. and The Bank of New York Mellon Trust Company, N.A., as trustee, incorporated by reference to Exhibit 4.1 to the
Company’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on March 26, 2012.
* Raymond James Financial, Inc. 2002 Incentive Stock Option Plan effective February 14, 2002, incorporated by reference to
Exhibit 4.1 to the Company’s Registration Statement on Form S-8, No. 333-98537, filed with the Securities and Exchange
Commission on August 22, 2002.
Mortgage Agreement for $75 million dated as of December 13, 2002 incorporated by reference to Exhibit No. 10 to the
Company’s Annual Report on Form 10-K, filed with the Securities and Exchange Commission on December 23, 2002.
* Raymond James Financial, Inc. Stock Option Plan for Key Management Personnel effective November 21, 1996,
incorporated by reference to Exhibit 4.1 to the Company’s Registration Statement on Form S-8, No. 333-103277, filed with
the Securities and Exchange Commission on February 18, 2003.
Form of Indemnification Agreement with Directors, incorporated by reference to Exhibit 10.18 to the Company’s Annual
Report on Form 10-K, filed with the Securities and Exchange Commission on December 8, 2004.
The 2007 Raymond James Financial, Inc. Stock Option Plan for Independent Contractors effective February 15, 2007,
incorporated by reference to Appendix C to the Company’s Definitive Proxy Statement for the Annual Meeting of
Shareholders held February 15, 2007, filed with the Securities and Exchange Commission on January 16, 2007.
* Composite Version of 2003 Raymond James Financial, Inc. Employee Stock Purchase Plan, as amended and restated,
incorporated by reference to Appendix B to the Company’s Definitive Proxy Statement for the Annual Meeting of
Shareholders held February 19, 2009, filed with the Securities and Exchange Commission on January 12, 2009.
10.7
* Letter agreement dated February 25, 2009 between Raymond James Financial, Inc. and Paul Reilly, incorporated by
reference to Exhibit No. 10.14 to the Company’s Current Report on Form 8-K, filed with the Securities and Exchange
Commission on March 3, 2009.
10.8
10.9.1
10.9.2
* Agreement dated December 23, 2009, between Raymond James Financial, Inc. and Thomas A. James regarding service as
Chairman of the Board after his retirement as Chief Executive Officer, incorporated by reference to Exhibit 10.15 to the
Company’s Quarterly Report on Form 10-Q, filed with the Securities and Exchange Commission on February 9, 2010.
* Composite Version of 2005 Raymond James Financial, Inc. Restricted Stock Plan (as amended on December 10, 2010),
incorporated by reference to Appendix A to the Company’s Definitive Proxy Statement for the Annual Meeting of
Shareholders held February 24, 2011, filed with the Securities and Exchange Commission on January 18, 2011.
* Form of Notice of Restricted Stock Unit Award and associated Restricted Stock Unit Agreement (employee/independent
contractor) under 2005 Raymond James Financial, Inc. Restricted Stock Plan, as amended, incorporated by reference to
Exhibit 10.17.2 to the Company’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on
November 30, 2010.
10.9.3
* Form of Amendment to Restricted Stock Grant Agreements outstanding under 2005 Raymond James Financial, Inc.
Restricted Stock Plan, incorporated by reference to Exhibit 10.17.3 to the Company’s Current Report on Form 8-K, filed with
the Securities and Exchange Commission on November 30, 2010.
10.10
* Amended and Restated Raymond James Financial Long-Term Incentive Plan, as further amended and restated effective
10.11
August 22, 2013, incorporated by reference to Exhibit 10.14 to the Company’s Annual Report on Form 10-K, filed with the
Securities and Exchange Commission on November 26, 2013.
Stock Purchase Agreement, dated January 11, 2012, between Raymond James Financial, Inc. and Regions Financial
Corporation (excluding certain exhibits and schedules), incorporated by reference to Exhibit 10.19 to the Company’s Current
Report on Form 8-K, filed with the Securities and Exchange Commission on January 12, 2012.
197
7146_10K.pdf December 22, 2015 pg 201
Index
Exhibit
Number
10.12.1
Description
* Raymond James Financial, Inc. 2012 Stock Incentive Plan, incorporated by reference to Appendix A to the Company’s
Definitive Proxy Statement for the Annual Meeting of Shareholders held February 23, 2012, filed with the Securities and
Exchange Commission January 25, 2012.
10.12.2
* Form of Contingent Stock Option Agreement under 2012 Stock Incentive Plan, incorporated by reference to Exhibit 10.22 to
the Company’s Quarterly Report on Form 10-Q, filed with the Securities and Exchange Commission on May 9, 2012.
10.12.3
* Form of Stock Option Agreement under 2012 Stock Incentive Plan, as revised and approved on August 21, 2013,
incorporated by reference to Exhibit 10.16.3 to the Company’s Annual Report on Form 10-K, filed with the Securities and
Exchange Commission on November 26, 2013.
10.12.4
* Form of Restricted Stock Unit Agreement for Non-Bonus Award (Employee/Independent Contractor) under 2012 Stock
Incentive Plan, as revised and approved on August 21, 2013, incorporated by reference to Exhibit 10.16.4 to the Company’s
Annual Report on Form 10-K, filed with the Securities and Exchange Commission on November 26, 2013.
10.12.5
10.12.6
10.12.7
* Form of Restricted Stock Unit Agreement for Non-Employee Director under 2012 Stock Incentive Plan, incorporated by
reference to Exhibit 10.25 to the Company’s Quarterly Report on Form 10-Q, filed with the Securities and Exchange
Commission on May 9, 2012.
* Form of Restricted Stock Unit Agreement for Stock Bonus Award under 2012 Stock Incentive Plan, as revised and approved
on August 21, 2013, incorporated by reference to Exhibit 10.16.6 to the Company’s Annual Report on Form 10-K, filed with
the Securities and Exchange Commission on November 26, 2013.
* Form of Restricted Stock Unit Agreement for John C. Carson, Jr. (Performance-based Retention Award) under 2012 Stock
Incentive Plan, incorporated by reference to Exhibit 10.27 to the Company’s Quarterly Report on Form 10-Q, filed with the
Securities and Exchange Commission on May 9, 2012.
10.12.8
* Form of Restricted Stock Unit Agreement for Performance Based Restricted Stock Unit Award under 2012 Stock Incentive
10.12.9
10.12.10
10.12.11
Plan, incorporated by reference to Exhibit 10.20.8 to the Company’s Quarterly Report on Form 10-Q, filed with the
Securities and Exchange Commission on February 8, 2013.
Raymond James Financial, Inc. 2012 Stock Incentive Plan Sub-Plan for French Employees with Form of Restricted Stock
Unit Agreement, adopted and approved on February 20, 2014, incorporated by reference to Exhibit 10.16.9 to the Company’s
Quarterly Report on Form 10-Q, filed with the Securities and Exchange Commission on May 9, 2014.
* Form of Restricted Stock Unit Award Notice and Agreement (time-based vesting) which amends and restates Mr. Reilly’s
award agreement issued in 2012 and will also be used for his subsequent award agreements, incorporated by reference to
Exhibit 10.21.1 to the Company’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on
December 20, 2013.
* Form of Restricted Stock Unit Award Notice and Agreement (performance-based vesting) which amends and restates Mr.
Reilly’s award agreement issued in 2012 and will also be used for his subsequent award agreements, incorporated by
reference to Exhibit 10.21.2 to the Company’s Current Report on Form 8-K, filed with the Securities and Exchange
Commission on December 20, 2013.
10.12.12
* Form of Restricted Stock Unit Award Notice and Agreement (time-based vesting), incorporated by reference to Exhibit
10.22.1 to the Company’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on December
20, 2013.
10.12.13
* Form of Restricted Stock Unit Award Notice and Agreement (performance-based vesting), incorporated by reference to
Exhibit 10.22.2 to the Company’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on
December 20, 2013.
10.12.14
* Form of Stock Option Agreement under 2012 Stock Incentive Plan, as revised and approved on November 20, 2013,
incorporated by reference to Exhibit 10.23 to the Company’s Quarterly Report on Form 10-Q, filed with the Securities and
Exchange Commission on February 7, 2014.
10.12.15
* Form of Restricted Stock Unit Agreement for Non-Bonus Award under 2012 Stock Incentive Plan, as revised and approved
on November 20, 2013, incorporated by reference to Exhibit 10.24 to the Company’s Quarterly Report on Form 10-Q, filed
with the Securities and Exchange Commission on February 7, 2014.
10.13.1
* Employment Agreement, dated January 11, 2012, as amended and restated as of April 20, 2012, by and between Raymond
James Financial, Inc. and John C. Carson, Jr., incorporated by reference to Exhibit 10.1 to the Company’s Current Report on
Form 8-K, filed with the Securities and Exchange Commission on April 25, 2012.
10.13.2
10.14
10.15
* Amendment to Employment Agreement, dated as of December 2, 2013, by and between Raymond James Financial, Inc. and
John C. Carson, Jr., incorporated by reference to Exhibit 10.17.2 to the Company’s Current Report on Form 8-K, filed with
the Securities and Exchange Commission on December 4, 2013.
* Raymond James Financial, Inc. Voluntary Deferred Compensation Plan effective January 1, 2013, including the related Non-
Qualified Deferred Compensation Plan Summary, incorporated by reference to Exhibit 10.24 to the Company’s Quarterly
Report on Form 10-Q, filed with the Securities and Exchange Commission on February 8, 2013.
* Form of Raymond James Financial, Inc. Restricted Cash Agreement dated as of March 31, 2013, incorporated by reference to
Exhibit 99.1 to the Company’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on March
20, 2013.
10.16
* Letter Agreement, dated January 9, 2014, between Raymond James Financial, Inc. and Chester B. Helck regarding his
10.17
11
retirement and transition of service and employment matters, incorporated by reference to Exhibit 10.25 to the Company’s
Quarterly Report on Form 10-Q, filed with the Securities and Exchange Commission on May 9, 2014.
Revolving Credit Agreement, dated as of August 6, 2015, among Raymond James Financial, Inc. and a syndicate of lenders
led by Bank of America, N.A. and Regions Bank, incorporated by reference to Exhibit 10.1 to the Company’s Current Report
on Form 8-K, filed with the Securities and Exchange Commission on August 10, 2015.
Statement re Computation of per Share Earnings (the calculation of per share earnings is included in Part II, Item 8, Note 28
in the Notes to Consolidated Financial Statements (Earnings Per Share) and is omitted here in accordance with Section (b)
(11) of Item 601 of Regulation S-K).
198
7146_10K.pdf December 22, 2015 pg 202
Index
Exhibit
Number
12
21
23
31.1
31.2
32
101.INS
101.SCH
101.CAL
101.DEF
101.LAB
101.PRE
Description
Statement of Computation of Ratio of Earnings to Fixed Charges and Preferred Stock Dividends.
List of Subsidiaries.
Consent of Independent Registered Public Accounting Firm.
Certification of Paul C. Reilly pursuant to Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.
Certification of Jeffrey P. Julien pursuant to Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.
Certification of Paul C. Reilly and Jeffrey P. Julien pursuant to Rule 13a-14(b) and 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
XBRL Instance Document.
XBRL Taxonomy Extension Schema Document.
XBRL Taxonomy Extension Calculation Linkbase Document.
XBRL Taxonomy Extension Definition Linkbase Document.
XBRL Taxonomy Extension Label Linkbase Document.
XBRL Taxonomy Extension Presentation Linkbase Document.
* Indicates a management contract or compensatory plan or arrangement in which a director or named executive officer participates.
199
7146_10K.pdf December 22, 2015 pg 203
Index
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused
this report to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of St. Petersburg, State of Florida,
on the 25th day of November, 2015.
SIGNATURES
RAYMOND JAMES FINANCIAL, INC.
By /s/ PAUL C. REILLY
Paul C. Reilly, Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following
persons on behalf of the Registrant and in the capacities and on the dates indicated.
Signature
Title
Date
/s/ PAUL C. REILLY
Paul C. Reilly
/s/ THOMAS A. JAMES
Thomas A. James
Chief Executive Officer and Director
November 25, 2015
Executive Chairman and Director
November 25, 2015
/s/ CHARLES G. VON ARENTSCHILDT
Director
November 25, 2015
Charles G. von Arentschildt
/s/ SHELLEY G. BROADER
Shelley G. Broader
/s/ JEFFREY N. EDWARDS
Jeffrey N. Edwards
/s/ BENJAMIN C. ESTY
Benjamin C. Esty
Director
Director
Director
November 25, 2015
November 25, 2015
November 25, 2015
/s/ FRANCIS S. GODBOLD
Vice Chairman and Director
November 25, 2015
Francis S. Godbold
/s/ GORDON L. JOHNSON
Gordon L. Johnson
/s/ ROBERT P. SALTZMAN
Robert P. Saltzman
/s/ HARDWICK SIMMONS
Hardwick Simmons
/s/ SUSAN N. STORY
Susan N. Story
/s/ JEFFREY P. JULIEN
Jeffrey P. Julien
Director
Director
Director
Director
November 25, 2015
November 25, 2015
November 25, 2015
November 25, 2015
Executive Vice President - Finance,
November 25, 2015
Chief Financial Officer and Treasurer
/s/ JENNIFER C. ACKART
Senior Vice President and Controller
November 25, 2015
Jennifer C. Ackart
(Principal Accounting Officer)
200
7146_10K.pdf December 22, 2015 pg 204
EXHIBIT 12
STATEMENT OF COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
(in thousands, except ratio of earnings to fixed charges and preferred stock dividends)
Year ended September 30,
2015
2014
2013
2012
2011
Earnings:
Pre-tax income excluding noncontrolling interests
$
798,174
$
748,045
$
564,187
$
471,525
$
461,247
Fixed charges
Less: preferred stock dividends
Earnings
Fixed charges:
Interest expense
Estimated interest portion within rental expense
Amortization of debt issuance cost
Preferred stock dividends
Total fixed charges
$
$
137,753
134,366
140,708
115,992
—
—
—
—
84,557
—
935,927
$
882,411
$
704,895
$
587,517
$
545,804
106,741
$
102,878
$
109,159
$
90,389
$
29,799
1,213
—
30,275
1,213
—
30,337
1,212
—
24,623
980
—
65,351
18,727
479
—
$
137,753
$
134,366
$
140,708
$
115,992
$
84,557
Ratio of earnings to fixed charges and preferred stock
dividends
6.79
6.57
5.01
5.07
6.45
We calculated our ratio of earnings to fixed charges and preferred stock dividends by adding pre-tax income excluding
noncontrolling interests, plus fixed charges minus preferred stock dividends and dividing that sum by our fixed charges. Our fixed
charges for this ratio consist of interest expense, the portion of our rental expense deemed to represent interest (calculated as one
third of rental expense), amortization of debt issuance costs and preferred stock dividends.
201
7146_10K.pdf December 22, 2015 pg 205
EXHIBIT 21
RAYMOND JAMES FINANCIAL, INC.
LIST OF SUBSIDIARIES
The following listing includes all of the registrant's subsidiaries as of September 30, 2015, which are included in the
consolidated financial statements:
Entity Name
Carillon Tower Advisers, Inc.
ClariVest Asset Management, LLC
Cougar Global ETF Portfolio Management Inc.
Cougar Global Investments Limited
Eagle Asset Management, Inc.
Eagle Boston Investment Management, Inc.
Eagle Fund Distributors, Inc.
Eagle Fund Services, Inc.
EB Management I, LLC
Former WT, Inc.
Gateway Institutional Tax Credit Fund II, Ltd
HBI Investment Funds, LLC
Heritage International Limited
Howe Barnes Hoefer & Arnett, Inc.
Merchant Bankers, Inc.
MK Holding, Inc.
MK Investment Management, Inc.
MK Mezzanine Management, LLC
MOR Associates, LP
Morgan Keegan & Associates, LLC
Morgan Keegan & Company, LLC
Morgan Keegan Employee Investment Fund, LP
Morgan Keegan Financial Services, LLC
Morgan Keegan Fund Management, Inc.
Morgan Keegan Investment Partners Fund, LP
Morgan Keegan Mezzanine Fund, LP
State/Country of
Incorporation
Florida
Delaware
Delaware
Canada
Florida
Florida
Florida
Florida
Florida
Tennessee
Florida
Illinois
Mauritius
Delaware
Tennessee
Alabama
Delaware
Delaware
Tennessee
Delaware
Tennessee
Delaware
Delaware
Tennessee
Delaware
Delaware
Subsidiary or Joint Venture of
Raymond James Financial, Inc.
Eagle Asset Management, Inc.
Cougar Global Investments Limited
Raymond James International Canada, Inc.
Raymond James Financial, Inc.
Eagle Asset Management, Inc.
Eagle Asset Management, Inc.
Eagle Asset Management, Inc.
Eagle Asset Management, Inc.
MK Holding, Inc.
Raymond James Tax Credit Funds, Inc.
Howe Barnes Hoefer & Arnett, Inc.
Raymond James International Holdings, Inc.
Raymond James Financial, Inc.
MK Holding, Inc.
Raymond James Financial, Inc.
MK Holding, Inc.
Morgan Properties, LLC
Merchant Bankers, Inc.
MK Holding, Inc.
Raymond James Financial, Inc.
Merchant Bankers, Inc.
MK Holding, Inc.
MK Holding, Inc.
MK Investment Management, Inc.
MK Mezzanine Management, LLC
Morgan Keegan Private Equity Employee Fund of Funds II, LP
Delaware
MK Investment Management, Inc.
Morgan Keegan Private Equity Fund of Funds II, LP
Delaware
MK Investment Management, Inc.
Morgan Keegan Private Equity Fund of Funds II Blocker, LLC
Delaware
Morgan Keegan Private Equity Fund of Funds II Holdings, LP
Delaware
Morgan Keegan Private Equity QP Fund of Funds II, LP
Morgan Properties, LLC
Preferred Fund of Funds, LLC
Raymond James & Associates, Inc.
Raymond James (USA) Ltd.
Raymond James Affordable Housing Fund 1, LP
Raymond James Affordable Housing Fund 2, LP
Raymond James Argentina Sociedad De Bolsa, S.A.
Raymond James Asset Management International, S.A.
Raymond James Bank, National Association
Delaware
Tennessee
Delaware
Florida
Canada
Delaware
Delaware
Argentina
France
U.S.A.
202
Morgan Keegan Private Equity QP Fund of Funds II, LP;
Morgan Keegan Private Equity Fund of Funds II, LP;
Morgan Keegan Private Equity Employee Fund of Funds II,
LP
Morgan Keegan Private Equity QP Fund of Funds II, LP;
Morgan Keegan Private Equity Fund of Funds II, LP;
Morgan Keegan Private Equity Employee Fund of Funds II,
LP; Morgan Keegan Private Equity Fund of Funds II
Blocker, LLC
MK Investment Management, Inc.
Raymond James Investments, LLC
Morgan Keegan Fund Management, Inc.
Raymond James Financial, Inc.
Raymond James Ltd.
Raymond James Tax Credit Funds, Inc.
Raymond James Tax Credit Funds, Inc.
Raymond James South American Holdings, Inc.
Raymond James International Holdings, Inc.
Raymond James Financial, Inc.
7146_10K.pdf December 22, 2015 pg 206
Entity Name
Raymond James Canada, LLC
Raymond James Canadian Acquisition, Inc.
Raymond James Canadian Holdings, LLC
Raymond James Capital Inc.
Raymond James Capital Funding, Inc.
Raymond James Capital Partners, LP
Raymond James Capital Services, LLC
Raymond James Community Reinvestment Fund 1, LLC
Raymond James Development Tax Credit Fund, LLC
Raymond James Employee Investment Fund I, L.P.
Raymond James Employee Investment Fund II, L.P.
Raymond James Euro Equities SAS
Raymond James European Holdings, Inc.
Raymond James European Securities S.A.S.
Raymond James Finance Company of Canada, Ltd.
Raymond James Financial International Limited
Raymond James Financial Management Ltd.
Raymond James Financial Planning Ltd.
Raymond James Financial Products, Inc.
Raymond James Financial Services Advisors, Inc.
Raymond James Financial Services, Inc.
State/Country of
Incorporation
Florida
Florida
Florida
Delaware
Florida
Delaware
Delaware
Florida
Delaware
Delaware
Delaware
France
Florida
France
Canada
U.K.
Canada
Canada
Tennessee
Florida
Florida
Subsidiary or Joint Venture of
Raymond James Financial, Inc.
Raymond James Bank, National Association
Raymond James Canadian Acquisition, Inc.
Raymond James Financial, Inc.
Raymond James Bank, National Association
RJC Partners, LP
MK Holding, Inc.
Raymond James Bank, National Association
Raymond James Tax Credit Funds, Inc.
RJEIF, Inc.
RJEIF, Inc.
Raymond James European Securities S.A.S.
Raymond James International Holdings, Inc.
Raymond James International Holdings, Inc.
Raymond James Canadian Holdings, LLC
Raymond James International Holdings, Inc.
Raymond James Ltd.
Raymond James Ltd.
MK Holding, Inc.
Raymond James Financial, Inc.
Raymond James Financial, Inc.
Raymond James Global Securities, Limited
British Virgin Islands
Raymond James International Holdings, Inc.; Raymond
James South American Holdings, Inc.
Raymond James Holdings, Ltd.
Raymond James Indian Country Tax Credit Fund I, LLC
Raymond James Insurance Group, Inc.
Raymond James International Canada, Inc.
Raymond James International Holdings, Inc.
Raymond James Investments, LLC
Raymond James Investment Services Limited
Florida
Delaware
Florida
Florida
Florida
Florida
U.K.
Residual Partners
Raymond James Tax Credit Funds, Inc.
Raymond James Financial, Inc.
Raymond James International Holdings, Inc.
Raymond James Financial, Inc.
Raymond James Financial, Inc.
Raymond James Financial, Inc.
Raymond James Latin Advisors Limited
British Virgin Islands
Raymond James Global Securities, Limited
Raymond James Latin America S.A.
Raymond James Latin Fund Advisors S.A.
Raymond James Ltd.
Raymond James Management, LLC
Raymond James Management-EPG, LLC
Raymond James Management-Forensics, LLC
Raymond James Mortgage Company, Inc.
Raymond James Multifamily Finance, Inc.
Raymond James Municipal Products, Inc.
Raymond James Partners, Inc.
Raymond James Research Services, LLC
Raymond James South American Holdings, Inc.
Raymond James Structured Products, Inc.
Raymond James Tax Credit Fund 32 - A, LLC
Raymond James Tax Credit Fund 32 - B, LLC
Raymond James Tax Credit Fund 33, LLC
Raymond James Tax Credit Fund 34, LLC
Raymond James Tax Credit Fund XXII, LLC
Raymond James Tax Credit Fund XXV - A, LLC
Raymond James Tax Credit Fund XXV - B, LLC
Raymond James Tax Credit Funds, Inc.
Uruguay
Uruguay
Canada
Delaware
Delaware
Delaware
Tennessee
Florida
Delaware
Florida
Florida
Florida
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Florida
203
Raymond James South American Holdings, Inc.
Raymond James South American Holdings, Inc.
Raymond James Canada, LLC
Raymond James Investments, LLC
Raymond James Investments, LLC
Raymond James Investments, LLC
MK Holding, Inc.
Raymond James Tax Credit Funds, Inc.
MK Holding, Inc.
Raymond James Financial, Inc.
Raymond James Financial, Inc.
Raymond James International Holdings, Inc.
MK Holding, Inc.
Raymond James Tax Credit Funds, Inc.
Raymond James Tax Credit Funds, Inc.
Raymond James Tax Credit Funds, Inc.
Raymond James Tax Credit Funds, Inc.
Raymond James Tax Credit Funds, Inc.
Raymond James Tax Credit Funds, Inc.
Raymond James Tax Credit Funds, Inc.
Raymond James Financial, Inc.
7146_10K.pdf December 22, 2015 pg 207
Raymond James Trust, National Association
Entity Name
Raymond James Uruguay, S.A.
Residual Partners
RJ Capital Services, Inc.
RJ Delta Asset Management S.A.
RJ Delta Capital S.A.
RJ Equities, Inc.
RJ Government Securities, Inc.
RJ Partners, Inc.
RJ Securities, Inc.
RJ Specialist Corp.
RJA Structured Finance, Inc.
RJ-Contrarian, LLC
RJC Event Photos, LLC
RJC Forensics, LLC
RJC Partners, Inc.
RJC Partners LP
RJEIF, Inc.
RJF Capital Trust I
RJF Capital Trust II
RJF Capital Trust III
RJTCF Disposition Corporation
RJTCF Disposition Fund, L.L.C.
Strategic Investment Management Services, Inc.
SLG Partners GP, LLC
SLG Partners, LP
SLG Partners, LP II
The Producers Choice LLC
TPC Acquisition Co.
Value Partners, Inc.
State/Country of
Incorporation
U.S.A.
Uruguay
Florida
Delaware
Argentina
Argentina
Florida
Florida
Florida
Florida
Florida
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Florida
Florida
Florida
Delaware
Delaware
Delaware
Michigan
Florida
Florida
Subsidiary or Joint Venture of
Raymond James Financial, Inc.
Raymond James Global Securities, Limited
Raymond James Financial, Inc.
Raymond James Financial, Inc.
Raymond James South American Holdings, Inc.
Raymond James South American Holdings, Inc.
Raymond James Financial, Inc.
Raymond James Financial, Inc.
Raymond James Financial, Inc.
Raymond James Investments, LLC
Raymond James Financial, Inc.
Raymond James Financial, Inc.
RJ Specialist Corp.
Raymond James Investments, LLC
Raymond James Investments, LLC
Raymond James Financial, Inc.
RJC Partners, Inc.
Raymond James Financial, Inc.
Raymond James Financial, Inc.
Raymond James Financial, Inc.
Raymond James Financial, Inc.
Raymond James Tax Credit Funds, Inc.
Raymond James Tax Credit Funds, Inc.
Raymond James Financial, Inc.
Raymond James Investments, LLC; Raymond James
Management, LLC
SLG Partners GP, LLC
SLG Partners GP, LLC
TPC Acquisition Co.
Raymond James Financial, Inc.
Raymond James Tax Credit Funds, Inc.
204
7146_10K.pdf December 22, 2015 pg 208
EXHIBIT 23
Consent of Independent Registered Public Accounting Firm
The Board of Directors
Raymond James Financial, Inc.:
We consent to the incorporation by reference in the registration statements (Nos. 333-103280, 333-103277, 333-98537, 333-125214,
333-141998, 333-142000, 333-157516, 333-157519, 333-179683) on Form S-8 and (Nos. 333-159583, 333-181663, 333-204400)
on Form S-3ASR of Raymond James Financial, Inc. and subsidiaries of our reports dated November 25, 2015, with respect to the
consolidated statements of financial condition of Raymond James Financial, Inc. and subsidiaries as of September 30, 2015 and
2014, and the related consolidated statements of income and comprehensive income, changes in shareholders’ equity, and cash
flows for each of the years in the three-year period ended September 30, 2015 and the effectiveness of internal control over financial
reporting as of September 30, 2015, which reports appear in the September 30, 2015 annual report on Form 10-K of Raymond
James Financial, Inc.
/s/ KPMG LLP
Tampa, Florida
November 25, 2015
Certified Public Accountants
205
7146_10K.pdf December 22, 2015 pg 209
EXHIBIT 31.1
I, Paul C. Reilly, certify that:
CERTIFICATIONS
1. I have reviewed this annual report on Form 10-K of Raymond James Financial, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with
respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all
material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this
report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in
Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under
our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to
us by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be
designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on
such evaluation; and
d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the
registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or
is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over
financial reporting, to the registrant’s auditors and the audit committee of registrant’s Board of Directors (or persons performing the
equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting
which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information;
and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the
registrant’s internal control over financial reporting.
Date: November 25, 2015
/s/ PAUL C. REILLY
Paul C. Reilly
Chief Executive Officer
206
7146_10K.pdf December 22, 2015 pg 210
EXHIBIT 31.2
CERTIFICATIONS
I, Jeffrey P. Julien, certify that:
1. I have reviewed this annual report on Form 10-K of Raymond James Financial, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with
respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all
material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this
report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in
Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under
our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to
us by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be
designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on
such evaluation; and
d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the
registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or
is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over
financial reporting, to the registrant’s auditors and the audit committee of registrant’s Board of Directors (or persons performing the
equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting
which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information;
and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the
registrant’s internal control over financial reporting.
Date: November 25, 2015
/s/ JEFFREY P. JULIEN
Jeffrey P. Julien
Executive Vice President - Finance,
Chief Financial Officer and Treasurer
207
7146_10K.pdf December 22, 2015 pg 211
Exhibit 32
CERTIFICATION BY CHIEF EXECUTIVE OFFICER AND CHIEF
FINANCIAL OFFICER PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of Raymond James Financial, Inc. (the “Company”) on Form 10-K for the year ended
September 30, 2015 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), we hereby certify,
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to our knowledge:
1.
2.
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934;
and
The information contained in the Report fairly presents, in all material respects, the financial condition and results
of operations of the Company.
/s/ PAUL C. REILLY
Paul C. Reilly
Chief Executive Officer
November 25, 2015
/s/ JEFFREY P. JULIEN
Jeffrey P. Julien
Executive Vice President - Finance,
Chief Financial Officer and Treasurer
November 25, 2015
208
7146_10K.pdf December 22, 2015 pg 212
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International Headquarters: The Raymond James Financial Center
880 Carillon Parkway St. Petersburg, FL 33716 800.248.8863
raymondjames.com
©2015 Raymond James Financial Raymond James® is a registered trademark of Raymond James Financial, Inc.
47146.indd 28
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