What changed in this filing

/stocks — the workspaceLOADING

Item 7. Management’s Discussion and Analysis

2021-11-23 compared with 2020-11-24 · 646 added, 718 removed, 853 unchanged (62% of the section changed)

8 unchanged sentences

Asset Management

Raymond James Bank 53

Certain statistical disclosures by bank holding companies 55

Liquidity and capital resources 57

Statement of financial condition analysis 55

Contractual obligations 62

Liquidity and capital resources 56

Regulatory 61

1 unchanged sentence

Recent accounting developments 62

Off-balance sheet arrangements 65

Effects of inflation 65

Risk management 62

13 unchanged sentences

Year ended September 30, 2021 compared with the year ended September 30, 2020

Net revenues of $7.99 billion for our fiscal year ended September 30, 2020 increased $250 million, or 3%.

Pre-tax income of $1.05 billion decreased $323 million, or 23%, and our net income of $818 million decreased $216 million, or 21%.

Our earnings per diluted share were $5.83, reflecting a 19% decrease.

We generated strong results for fiscal 2021, with net revenues of $9.76 billion, an increase of 22% compared with the prior year, and pre-tax income of $1.79 billion, an increase of 70%.

During fiscal 2021, pre-tax margin increased in all of our operating segments and we generated particularly strong results in our PCG, Capital Markets and Asset Management segments.

Our net income of $1.40 billion was 72% higher than the prior year, and our earnings per diluted share of $6.63 (1) , which reflected the impact of a 3-for-2 stock split in September 2021, increased 71%.

Our return on equity (“ROE”) was 18.4%, compared with 11.9% for the prior year, and return on tangible common equity (“ROTCE”) was 20.4% (2) , compared with 13.0% (2) for the prior year.

Our financial results were significantly impacted by the direct and indirect impacts of the COVID-19 pandemic.

The COVID-19 pandemic and related government-imposed and other measures intended to control the spread of the disease, including restrictions on travel and the conduct of business, such as stay-at-home orders, quarantines, travel bans, border closings, business closures and other similar measures, had a significant impact on global economic conditions and the environment in which we operated during our 2020 fiscal year.

In response to the pandemic, in March 2020 we activated certain aspects of our business continuity plans endeavoring to protect our associates and our clients.

As a result, nearly all of our associates transitioned to working remotely, while still maintaining our high standards of client service.

Although economies began to reopen during the latter portion of our fiscal third quarter and continued to progress during our fourth quarter, a substantial portion of our associates continued to work remotely through the end of our fiscal year.

The COVID-19 pandemic had varied impacts across our businesses.

While certain of our businesses benefited from increased volatility and higher levels of client activity caused by the pandemic, our results were significantly and negatively affected by the significant reduction in interest rates implemented by The Federal Reserve in March 2020.

The economic impact and uncertainty attributable to the pandemic also resulted in factors that contributed to an elevated bank loan loss provision.

Uncertainty carries over into our 2021 fiscal year with regard to the extent and duration of the disruptions related to the pandemic, as well as its continuing impacts on the global economy.

The extent of such effects will depend on future developments, which are highly uncertain.

As a result of the economic environment, in September 2020 we announced a reduction in workforce and as a result recognized $46 million of related expenses in our fiscal fourth quarter of 2020.

Excluding these expenses and a $7 million loss related to the pending disposition of our interests in certain entities in our Capital Markets segment that operate predominately in France, adjusted net income was $858 million (1) , a decrease of 20% compared with adjusted net income of $1.07 billion (1) for the prior year.

The prior year included a $19 million goodwill impairment charge associated with our Canadian Capital Markets business and a $15 million loss on the sale of our operations related to research, sales and trading of European equities, which did not recur in fiscal year 2020.

Adjusted earnings per diluted share were $6.11 (1) , a 17% decrease compared with adjusted earnings per diluted share of $7.40 (1) for the prior year.

During fiscal 2021, we completed a $750 million, 30-year senior notes offering at 3.75%, utilizing the proceeds from the offering and cash on hand to early-redeem our $250 million of 5.625% senior notes due 2024 and our $500 million of 3.625% senior notes due 2026.

We recognized losses on the extinguishment of such notes of $98 million.

Excluding these losses and acquisition-related expenses of $19 million, our adjusted net income was $1.49 billion (2) , an increase of 74% compared with adjusted net income for the prior year.

Adjusted earnings per diluted share were $7.05 (1)(2) , a 73% increase compared with adjusted earnings per diluted share of $4.08 (1)(2) for the prior year.

Our adjusted ROE was 19.5% (2) , compared with 12.5% (2) for the prior year, and adjusted ROTCE was 21.6% (2) , compared with 13.6% (2) for the prior year.

The significant increase in net revenues compared with the prior year was driven by higher asset management and related administrative fees, largely attributable to higher PCG assets in fee-based accounts, as well as strong investment banking revenues and brokerage revenues.

Revenues in the current year also included $74 million of private equity valuation gains, of which $25 million were attributable to noncontrolling interests and were offset in other expenses, compared with $28 million of losses in the prior year, of which $20 million were attributable to noncontrolling interests.

Offsetting these increases was the negative impact of lower short-term interest rates on our net interest income and RJBDP fees from third-party banks.

Compensation, commissions and benefits expense increased $1.12 billion, or 20%, primarily resulting from the growth in revenues and pre-tax income compared with the prior year.

Our compensation ratio, or the ratio of compensation, commissions and benefits expense to net revenues, decreased to 67.4% compared with 68.4% for the prior year.

The decrease in our compensation ratio primarily resulted from higher revenues and changes in our revenue mix due to strong net revenues in our Capital Markets segment, which had a lower compensation ratio at 56% than our PCG segment, and the private equity valuation gains which have no associated direct compensation.

Our compensation ratio also benefited from expense management initiatives.

(1) During our fiscal fourth quarter of 2021 the Board of Directors approved a 3-for-2 stock split, effected in the form of a 50% stock dividend, paid on September 21, 2021.

All share and per share information has been retroactively adjusted to reflect this stock split.

(2) “ROTCE,” “Adjusted net income,” “adjusted earnings per diluted share,” “adjusted ROE” and “adjusted ROTCE” are each non-GAAP financial measures.

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Management’s Discussion and Analysis

A $250 million increase in net revenues compared with the prior year was driven by higher asset management and related administrative fees, primarily attributable to higher PCG assets in fee-based accounts, as well as strong fixed income brokerage revenues and investment banking revenues.

Offsetting these increases were the negative impacts of lower short-term interest rates on our net interest income and RJBDP fees from third-party banks, and valuation losses on private equity investments, a portion of which was attributable to noncontrolling interests (reflected as an offset in other expenses).

Compensation, commissions and benefits expense increased $378 million, or 7%, mostly due to an increase in revenues, which primarily include asset management and related administrative fees, brokerage revenues and investment banking revenues.

Certain of our revenue streams, such as net interest income, do not have a direct associated payout;

therefore, changes in these revenue streams do not directly impact our compensation-related expenses but do affect our ratio of compensation, commissions and benefits expense to net revenues (“compensation ratio”).

Our compensation ratio increased to 68.4%, compared with 65.7% for the prior year, primarily due to the negative impact of lower interest rates on revenue streams that are not directly compensable, such as net interest income and RJBDP fees from third-party banks.

Non-compensation expenses increased $195 million, or 15%, due to a $211 million increase in the bank loan loss provision, which was $233 million in the current year compared with $22 million in the prior year, and the aforementioned $46 million of reduction in workforce expenses.

These increases were partially offset by a significant decline in business development expenses, due to lower travel and conference-related expenses during the second half of the fiscal year as a result of the COVID-19 pandemic.

Our effective income tax rate was 22.2% for fiscal 2020, a decrease compared with the 24.8% effective tax rate for fiscal year 2019, primarily due to non-taxable gains on our corporate-owned life insurance portfolio.

We ended fiscal 2020 with capital ratios well in excess of regulatory requirements and substantial liquidity, with over $2 billion (1) of cash at the parent company, which included the proceeds of a $500 million 10-year senior notes issuance at the end of our fiscal second quarter of 2020.

Pursuant to our Board of Directors’ share repurchase authorization, we repurchased approximately 3.4 million shares of common stock during fiscal year 2020 for $263 million at an average price of approximately $78.50 per share.

Due to heightened market uncertainty as a result of the COVID-19 pandemic, share repurchases were suspended from mid-March through our fiscal third quarter but were resumed in our fiscal fourth quarter to offset dilution related to our share-based compensation.

We expect to continue share repurchases in fiscal 2021 to offset dilution and may make additional share repurchases, as appropriate.

As of September 30, 2020, we had $487 million of availability remaining under the previously-announced authorization.

Certain of the impacts of the COVID-19 pandemic are likely to continue to affect our results in fiscal 2021.

Our net interest income and RJBDP fees from third-party banks will likely reflect the full-year impact of the 150 basis point reduction by the Federal Reserve of its benchmark short-term interest rate in March 2020, as we do not anticipate short-term interest rates to recover to the beginning of the fiscal year 2020 level during fiscal 2021.

In Capital Markets, market uncertainty during the pandemic may result in volatility of both brokerage revenues and investment banking revenues.

While our results during fiscal 2020 were negatively impacted by elevated bank loan loss provisions, including losses on certain corporate loans that were sold during the year, further market deterioration could result in additional provisions in fiscal 2021.

The timing and amount of the business development expenses we will incur in fiscal 2021 will be heavily influenced by the progression of the COVID-19 pandemic.

We continue to pursue opportunities to reduce costs and invest in and implement efficiencies in our processes to remain well-positioned for future growth and success.

A summary of our financial results by segment compared to the prior year is as follows:

• PCG segment net revenues of $5.55 billion increased 4%, while pre-tax income of $539 million decreased 7%.

The $193 million increase in net revenues was primarily attributable to an increase in asset management and related administrative fees due to higher average assets in fee-based accounts, partially offset by decreases in RJBDP fees from third-party banks and net interest income due to lower short-term interest rates.

Non-interest expenses increased $233 million, or 5%, primarily resulting from an increase in compensation expenses largely due to the growth in compensable net revenues, primarily asset management and related administrative fees.

(1) For additional information, please see the “Liquidity and capital resources - Sources of liquidity” section in this MD&A.

RAYMOND JAMES FINANCIAL, INC.

AND SUBSIDIARIES

Management’s Discussion and Analysis

• Capital Markets net revenues of $1.29 billion increased 19% and pre-tax income of $225 million increased 105%.

The $208 million increase in net revenues was primarily due to an increase in fixed income brokerage revenues, due to higher client activity, as well as increases in equity and debt underwriting revenues.

These increases were partially offset by a decline in merger & acquisition revenues.

Non-interest expenses increased $93 million, or 10%, due to higher compensation expenses, primarily attributable to the increase in revenues.

• Asset Management segment net revenues of $715 million increased 3% and pre-tax income of $284 million increased 12%.

The increase in net revenues was driven by higher assets in fee-based programs offered to PCG clients and market appreciation, which offset net outflows at Carillon Town Advisers.

• RJ Bank net revenues of $765 million decreased 10% and pre-tax income of $196 million decreased 62%.

The $81 million decrease in net revenues reflected the negative impact of lower short-term interest rates, which more than offset the growth in interest-earning assets.

Non-interest expenses increased $238 million, or 72%, primarily due to a $211 million increase in the loan loss provision.

• Our Other segment reflected a pre-tax loss that was $110 million larger compared to the prior year, primarily due to the aforementioned $46 million in reduction in workforce expenses, private equity valuation losses, as compared to gains in the prior year, lower interest income on corporate cash balances due to lower short-term interest rates, and increased interest expense, due to the issuance of $500 million of senior notes at the end of the fiscal second quarter.

Non-compensation expenses decreased $87 million, or 6%, primarily due to a $265 million decrease in the bank loan provision for credit losses, which was a benefit of $32 million in the current year computed under the current expected credit loss (“CECL”) methodology compared with a provision of $233 million in the prior year computed under the incurred loss methodology.

Non-compensation expenses also decreased as a result of $46 million of expenses in the prior year related to a reduction in workforce, which did not recur in the current year, as well as a decrease in business development expenses due to lower travel and event-related expenses as a result of the COVID-19 pandemic.

These decreases were partially offset by the aforementioned losses on extinguishment of debt of $98 million in the current year, and an increase in other expenses, primarily due to the change in private equity valuations attributable to noncontrolling interests compared with the prior year.

Our effective income tax rate was 21.7% for fiscal 2021, a decrease compared with the 22.2% effective tax rate for fiscal 2020, primarily due to an increase in non-taxable gains on our corporate-owned life insurance portfolio.

Liquidity and capital remained strong.

As of September 30, 2021, our total capital ratio of 26.2% and tier 1 leverage ratio of 12.6% were each more than double the regulatory requirements to be considered well-capitalized.

We also continued to have substantial liquidity, with $1.16 billion (1) of cash at the parent company, which includes parent cash loaned to RJ&A.

We expect to continue to be opportunistic in deploying our capital in fiscal 2022, through a combination of organic growth and acquisitions, as evidenced by our fiscal 2021 acquisitions of NWPS Holdings, Inc., Financo, LLC, and Cebile Capital, and the announced acquisitions of Charles Stanley Group PLC and TriState Capital Holdings, Inc.

which we expect to close in fiscal 2022.

Pursuant to our Board of Directors’ share repurchase authorization, we repurchased 1.5 million (2) shares of common stock during fiscal 2021 for $118 million, leaving $632 million of availability remaining under the authorization as of September 30, 2021.

However, due to regulatory restrictions following our announced acquisition of TriState Capital Holdings, we do not expect to repurchase shares until after closing.

We remain well-positioned entering fiscal 2022, with nearly $1.2 trillion of client assets under administration, strong activity levels for financial advisory recruiting, and a strong investment banking pipeline.

However, we expect to continue to face headwinds from near-zero short-term interest rates and economic uncertainty, including that arising from inflation, supply chain complications and uncertainty around U.S.

economic policy.

In addition, although the economy has improved since the beginning of the COVID-19 pandemic, the pace of recovery in the future is uncertain due to concerns related to the pandemic, including the spread of the Delta variant and other variants, vaccine distribution, and vaccine rates.

As a result, we may experience volatility in brokerage and investment banking revenues, which may negatively impact our ability to sustain the level of revenues in future periods which were achieved in fiscal 2021.

Although our results during the year were positively impacted by a benefit for credit losses related to our bank loan portfolio, net loan growth and/or future market deterioration could result in increased provisions in future periods.

In addition, we expect that expenses will continue to increase in fiscal 2022, as business and event-related travel increase and as we continue to make investments in our people and technology to support our growth.

Year ended September 30, 2020 compared with the year ended September 30, 2019

Refer to “Item 7 - Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our 2020 Form 10-K for a discussion of our fiscal 2020 results compared to fiscal 2019.

(1) For additional information, please see the “Liquidity and capital resources - Sources of liquidity” section in this MD&A.

(2) During our fiscal fourth quarter of 2021 the Board of Directors approved a 3-for-2 stock split, effected in the form of a 50% stock dividend, paid on September 21, 2021.

All share and per share information has been retroactively adjusted to reflect this stock split.

RAYMOND JAMES FINANCIAL, INC.

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We utilize certain non-GAAP financial measures as additional measures to aid in, and enhance, the understanding of our financial results and related measures.

These non-GAAP financial measures include adjusted net income, adjusted earnings per diluted share, adjusted return on equity, ROTCE, and adjusted ROTCE.

These non-GAAP financial measures include adjusted net income, adjusted earnings per diluted share, adjusted ROE, ROTCE, and adjusted ROTCE.

We believe certain of these non-GAAP financial measures provides useful information to management and investors by excluding certain material items that may not be indicative of our core operating results.

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In addition, our non-GAAP financial measures may not be comparable to similarly titled non-GAAP financial measures of other companies.

The following tables provide a reconciliation of non-GAAP financial measures to the most directly comparable GAAP measures for those periods which include non-GAAP adjustments.

The following tables provide a reconciliation of non-GAAP financial measures to the most directly comparable GAAP financial measures for the periods indicated.

Year ended September 30,

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Non-GAAP adjustments:

Losses on extinguishment of debt 98 —

Acquisition and disposition-related expenses

Reduction in workforce expenses — 46

Goodwill impairment — 19

Pre-tax impact of non-GAAP adjustments 117 53

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Non-GAAP adjustments:

Losses on extinguishment of debt 0.46 —

Acquisition and disposition-related expenses 0.09 0.03

Reduction in workforce expenses — 0.22

Goodwill impairment — 0.13

Pre-tax impact of non-GAAP adjustments 0.55 0.25

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Impact on average equity of non-GAAP adjustments:

Losses on extinguishment of debt 39 —

Acquisition and disposition-related expenses 6 1

Reduction in workforce expenses — 9

Goodwill impairment — 4

Pre-tax impact of non-GAAP adjustments 45 10

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Impact on average tangible common equity of non-GAAP adjustments :

Losses on extinguishment of debt 39 —

Acquisition and disposition-related expenses 6 1

Reduction in workforce expenses — 9

Goodwill impairment — 4

Pre-tax impact of non-GAAP adjustments 45 10

8 unchanged sentences

Adjusted return on tangible common equity 21.6 % 13.6 %

Tangible common equity is computed by subtracting goodwill and identifiable intangible assets, net, along with the associated deferred tax liabilities, from total equity attributable to RJF.

Average equity is computed by adding the total equity attributable to RJF as of each quarter-end date during the indicated fiscal year to the beginning of the year total and dividing by five, or in the case of average tangible common equity, computed by adding tangible common equity as of each quarter-end date during the indicated fiscal year to the beginning of year total, and dividing by five.

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Pre-tax income $ 389 $ 284 $ 253 37 % 12 %

Raymond James Bank

Net revenues $ 672 $ 765 $ 846 (12) % (10) %

Pre-tax income $ 367 $ 196 $ 515 87 % (62) %

Net revenues $ (82) $ 5 $ (15) NM NM

Net revenues $ (8) $ (82) $ 5 90 % NM

Pre-tax loss $ (246) $ (192) $ (82) (28) % (134) %

Intersegment eliminations

Net revenues $ (251) $ (244) $ (149) NM NM

RAYMOND JAMES FINANCIAL, INC.

AND SUBSIDIARIES

Management’s Discussion and Analysis

Net revenues $ (267) $ (251) $ (244) (6) % (3) %

NET INTEREST ANALYSIS

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In response to macroeconomic concerns resulting from the COVID-19 pandemic, the Federal Reserve decreased its benchmark short-term interest rate in March 2020 to a range of 0-0.25%, a decrease of 150 basis points.

This decrease, as well as the interest rate cuts implemented in calendar 2019 (225 basis points in total) have had a negative impact on our fiscal year 2020 results, as we have certain assets and liabilities, primarily held in our PCG, RJ Bank and Other segments, which are sensitive to changes in interest rates.

Fees we earn from third-party banks on client cash balances swept to such banks as part of the RJBDP are also sensitive to changes in interest rates.

The negative impact of the decline in short-term interest rates outweighed the growth in interest-earning assets and RJBDP balances swept to third-party banks compared with the prior year.

Although our results for fiscal 2020 were impacted by the March rate cuts for a portion of the year, if interest rates remain at the September 2020 levels throughout fiscal 2021, we expect our financial results in fiscal 2021 will include a full twelve-month impact of the interest rate cuts.

Given the relationship between our interest-sensitive assets and liabilities held in each of these segments and the nature of fees we earn from third-party banks on the RJBDP, decreases in short-term interest rates generally result in an overall decrease in our net earnings, although the magnitude of the impact to our net interest margin depends on the yields on interest-earning assets relative to the cost of interest-bearing liabilities, including deposit rates paid to clients on their cash balances.

These decreases, as well as the interest rate cuts implemented in calendar 2019 (225 basis points in total) have negatively impacted our net interest income, as well as the fees we earn from third-party banks on client cash balances swept to such banks as part of the RJBDP which are also sensitive to changes in interest rates.

The negative impact of the decline in short-term interest rates has outweighed the growth in average interest-earning assets and average RJBDP balances swept to third-party banks compared with the prior year.

We expect the current near-zero interest rate environment to continue into fiscal 2022.

Given the relationship between our interest-sensitive assets and liabilities (primarily held in our PCG, Raymond James Bank and Other segments) and the nature of fees we earn from third-party banks on the RJBDP, decreases in short-term interest rates generally result in an overall decrease in our net earnings, although the magnitude of the impact to our net interest margin depends on the yields on interest-earning assets relative to the cost of interest-bearing liabilities, including deposit rates paid to clients on their cash balances.

Conversely, any increases in short-term interest rates and/or decreases in the deposit rates paid to clients generally have a positive impact on our earnings.

Refer to the discussion of the specific components of our net interest income within the “Management’s Discussion and Analysis - Results of Operations” of our PCG, RJ Bank, and Other segments.

Also refer to “Management’s Discussion and Analysis - Results of Operations - Private Client Group - Clients’ domestic cash sweep balances” for further information on the RJBDP.

RAYMOND JAMES FINANCIAL, INC.

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Management’s Discussion and Analysis

Refer to the discussion of the specific components of our net interest income within the “Management’s Discussion and Analysis - Results of Operations” of our PCG, Raymond James Bank, and Other segments.

Also refer to “Management’s Discussion and Analysis - Results of Operations - Private Client Group - Clients’ domestic cash sweep balances” for further information on the RJBDP.

The following table presents our consolidated average interest-earning asset and interest-bearing liability balances, interest income and expense and the related yields and rates.

Average balances are calculated on a daily basis, with the exception of Loans to financial advisors, net and Corporate cash and all other, which are calculated based on the average of the end-of-month balances for each month within the period.

Year ended September 30,

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$ in millions Average

balance Interest

yield/cost Average

balance Interest

yield/cost Average

balance Interest

balance Interest Average rate Average

balance Interest Average rate

Interest-earning assets:

Assets segregated pursuant to regulations $ 3,040 $ 28 0.91 % $ 2,399 $ 59 2.47 % $ 3,011 $ 53 1.76 %

Trading instruments

545 20 3.65 % 733 26 3.56 % 693 23 3.32 %

Cash and cash equivalents $ 5,561 $ 12 0.21 % $ 5,173 $ 41 0.79 % $ 3,340 $ 83 2.49 %

Assets segregated for regulatory purposes and restricted cash 8,735 15 0.17 % 3,042 28 0.94 % 2,399 59 2.47 %

Available-for-sale securities

7,950 85 1.07 % 4,250 83 1.94 % 2,872 69 2.39 %

2,206 84 3.82 % 2,584 122 4.73 % 2,590 107 4.14 %

Brokerage client receivables 2,280 77 3.37 % 2,232 84 3.77 % 2,584 122 4.73 %

Bank loans, net of unearned income and deferred expenses:

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7,828 201 2.54 % 7,860 274 3.43 % 8,050 377 4.62 %

CRE construction loans

209 9 4.10 % 221 12 5.51 % 166 8 5.08 %

3,688 120 3.21 % 3,451 159 4.53 % 3,231 133 4.06 %

CRE loans 2,703 70 2.56 % 2,589 88 3.34 % 2,311 110 4.68 %

REIT loans 1,273 32 2.48 % 1,333 42 3.09 % 1,381 62 4.43 %

Tax-exempt loans

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23,336 593 2.55 % 21,591 702 3.25 % 20,407 871 4.26 %

Loans to financial advisors, net

978 20 2.01 % 916 18 2.01 % 882 15 1.71 %

Corporate cash and all other

6,077 63 1.05 % 4,658 116 2.48 % 4,007 72 1.79 %

All other interest-earning assets 2,251 41 1.77 % 2,289 62 2.70 % 2,967 77 2.60 %

Total interest-earning assets $ 50,113 $ 823 1.64 % $ 38,577 $ 1,000 2.59 % $ 34,569 $ 1,281 3.71 %

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904 17 1.90 % 1,006 20 2.03 % 536 12 2.24 %

Trading instrument liabilities 192 3 1.58 % 292 7 2.50 % 278 7 2.64 %

Total bank deposits 29,263 23 0.08 % 24,635 41 0.17 % 21,425 132 0.62 %

Brokerage client payables 10,180 3 0.03 % 4,179 11 0.28 % 3,326 21 0.62 %

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Senior notes payable 2,078 96 4.58 % 1,800 85 4.72 % 1,550 73 4.70 %

406 18 3.04 % 738 29 3.91 % 599 19 3.10 %

All other interest-bearing liabilities 585 9 0.82 % 795 21 1.99 % 1,030 36 3.13 %

Total interest-bearing liabilities

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$ 673 $ 822 $ 998

Firmwide net interest margin (net yield on interest-earning assets) 1.35 % 2.14 % 2.89 %

Raymond James Bank net interest margin 1.95 % 2.63 % 3.32 %

Nonaccrual loans are included in the average loan balances in the preceding table.

Any payments received for corporate nonaccrual loans are applied entirely to principal.

Income on residential mortgage nonaccrual loans is recognized on a cash basis.

Fee income on bank loans included in interest income for the years ended September 30, 2020, 2019 and 2018 was $11 million, $18 million and $24 million, respectively.

Interest income on residential mortgage nonaccrual loans is recognized on a cash basis.

The yield on tax-exempt loans in the preceding table is presented on a tax-equivalent basis utilizing the applicable federal statutory rates for each of the years presented.

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Management’s Discussion and Analysis

Increases and decreases in interest income and interest expense result from changes in average balances (volume) of interest-earning assets and interest-bearing liabilities, as well as changes in average interest rates.

The following table shows the effect that these factors had on the interest earned on our interest-earning assets and the interest incurred on our interest-bearing liabilities.

The effect of changes in volume is determined by multiplying the change in volume by the previous period’s average yield/cost.

Similarly, the effect of rate changes is calculated by multiplying the change in average yield/cost by the previous period’s volume.

Changes attributable to both volume and rate have been allocated proportionately.

Year ended September 30,

2021 compared to 2020

2020 compared to 2019

Increase/(decrease) due to Increase/(decrease) due to

$ in millions Volume Rate Total Volume Rate Total

Interest income:

Interest-earning assets:

Cash and cash equivalents $ 3 $ (32) $ (29) $ 46 $ (88) $ (42)

Assets segregated for regulatory purposes and restricted cash 54 (67) (13) 16 (47) (31)

Available-for-sale securities 71 (69) 2 33 (19) 14

Brokerage client receivables 2 (9) (7) (16) (22) (38)

Bank loans, net of unearned income and deferred expenses:

Loans held for investment:

C&I loans (1) (72) (73) (9) (94) (103)

CRE loans 4 (22) (18) 13 (34) (21)

REIT loans (2) (8) (10) (3) (18) (21)

Tax-exempt loans 2 (1) 1 (2) — (2)

Residential mortgage loans 8 (16) (8) 26 (13) 13

SBL and other 45 (45) — 19 (52) (33)

Loans held for sale 1 (2) (1) (1) (1) (2)

Total bank loans, net 57 (166) (109) 43 (212) (169)

All other interest-earning assets (1) (20) (21) (18) 3 (15)

Total interest-earning assets 186 (363) (177) 104 (385) (281)

Interest expense:

Interest-bearing liabilities:

Bank deposits:

Savings, money market and NOW accounts 4 (19) (15) 17 (116) (99)

Certificates of deposit (2) (1) (3) 10 (2) 8

Total bank deposits 2 (20) (18) 27 (118) (91)

Brokerage client payables 17 (25) (8) 5 (15) (10)

Other borrowings (1) — (1) (1) — (1)

Senior notes payable 13 (2) 11 12 — 12

All other interest-bearing liabilities (9) (3) (12) (8) (7) (15)

Total interest-bearing liabilities 22 (50) (28) 35 (140) (105)

Change in net interest income $ 164 $ (313) $ (149) $ 69 $ (245) $ (176)

RESULTS OF OPERATIONS – PRIVATE CLIENT GROUP

Through our PCG segment, we provide financial planning, investment advisory and securities transaction services for which we charge either asset-based fees (presented in “Asset management and related administrative fees”) or sales commissions (presented in “Brokerage revenues”).

We also earn revenues for distribution and related support services performed related primarily to mutual funds, fixed and variable annuities and insurance products.

Through our PCG segment, we provide financial planning, investment advisory and securities transaction services for which we generally charge either asset-based fees (presented in “Asset management and related administrative fees”) or sales commissions (presented in “Brokerage revenues”).

We also earn revenues for distribution and related support services performed primarily related to mutual funds, fixed and variable annuities and insurance products.

Revenues of this segment are typically correlated with the level of PCG client AUA, including fee-based accounts, as well as the overall U.S.

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In periods where equity markets improve, AUA and client activity generally increase, thereby having a favorable impact on net revenues.

We also earn certain servicing fees, such as omnibus and education and marketing support fees, from mutual fund and annuity companies whose products we distribute.

We also earn servicing fees, such as omnibus and education and marketing support fees, from mutual fund and annuity companies whose products we distribute.

Servicing fees earned from mutual fund and annuity companies are based on the level of assets, a flat fee or number of positions in such programs.

We also earn fees from banks to which we sweep clients’ cash in the RJBDP, including both third-party banks and RJ Bank.

Such fees are included in “Account and service fees.” See “Clients’ domestic cash sweep balances” in the “Selected key metrics” section for further information about fees earned from the RJBDP.

Net interest income in the PCG segment is primarily generated by interest earnings on margin loans provided to clients and on assets segregated pursuant to regulations, less interest paid on client cash balances in the Client Interest Program (“CIP”).

Higher client cash balances generally lead to increased interest income, depending on spreads realized in the CIP.

For more information on client cash balances, see “Clients’ domestic cash sweep balances” in the “Selected key metrics” section.

For an overview of our PCG segment operations, refer to the information presented in “Item 1 - Business” of this Form 10-K.

Our PCG segment also earns fees from banks to which we sweep clients’ cash in the RJBDP, including both third-party banks and Raymond James Bank.

Such fees are included in “Account

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Management’s Discussion and Analysis

and service fees.” See “Clients’ domestic cash sweep balances” in the “Selected key metrics” section for further information about fees earned from the RJBDP.

Net interest income in the PCG segment is primarily generated by interest earnings on margin loans provided to clients and on assets segregated for regulatory purposes, less interest paid on client cash balances in the CIP.

Higher client cash balances generally lead to increased interest income, depending on spreads realized in the CIP.

For more information on client cash balances, see “Clients’ domestic cash sweep balances” in the “Selected key metrics” section.

For an overview of our PCG segment operations, refer to the information presented in “Item 1 - Business” of this Form 10-K.

Operating results

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Third-party banks 76 150 280 (49) % (46) %

RJ Bank 180 173 92 4 % 88 %

Raymond James Bank 183 180 173 2 % 4 %

Client account and other fees 157 129 122 22 % 6 %

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Pre-tax income $ 749 $ 539 $ 579 39 % (7) %

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Management’s Discussion and Analysis

Selected key metrics

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The majority of assets in fee-based accounts within our PCG segment are invested in programs for which our financial advisors provide investment advisory services, either on a discretionary or non-discretionary basis.

Administrative services for such accounts (e.g., record-keeping) are generally performed by our Asset Management segment and, as a result, a portion of the related revenues is shared with the Asset Management segment.

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Management’s Discussion and Analysis

Administrative services for such accounts (e.g., record-keeping) are generally performed by our Asset Management segment and, as a result, a portion of the related revenue is shared with the Asset Management segment.

We also offer our clients fee-based accounts that are invested in “managed programs” overseen by AMS, which is part of our Asset Management segment.

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The vast majority of the revenues we earn from fee-based accounts are recorded in “Asset management and related administrative fees” on our Consolidated Statements of Income and Comprehensive Income.

Fees received from such accounts are based on the value of client assets in fee-based accounts and vary based on the specific account types in which the client participates and the level of assets in the client relationship.

Fees received from such accounts are based on the value of client assets in fee-based accounts and vary based on the specific account types in which the client invests and the level of assets in the client relationship.

As fees for substantially all of such accounts are billed based on balances as of the beginning of the quarter, revenues from fee-based accounts may not be immediately affected by changes in asset values, but rather the impacts are seen in the following quarter.

PCG assets under administration increased compared to the prior year due to equity market appreciation and the net addition of financial advisors.

In addition, PCG assets in fee-based accounts continued to increase as a percentage of overall PCG assets under administration due to clients’ increased preference for fee-based alternatives versus transaction-based accounts.

Assets in fee-based accounts in this segment increased 2% as of September 30, 2021 compared with June 30, 2021, which we expect will have a favorable impact on our related revenues in our fiscal first quarter of 2022.

PCG AUA increased compared to the prior year due to equity market appreciation, the net addition of financial advisors, as well as net inflows of client assets.

In addition, PCG assets in fee-based accounts continued to increase as a percentage of overall PCG AUA due to clients’ increased preference for fee-based alternatives versus transaction-based accounts.

As a result of the shift to fee-based accounts over the past several years, a larger portion of our PCG revenues are more directly impacted by market movements.

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Total advisors 8,482 8,239 8,011

The number of financial advisors increased from prior years due to successful financial advisor recruiting (despite disruptions and delays in recruiting and transitions of financial advisors during the onset of the COVID-19 pandemic) and high levels of retention.

While the financial advisor recruiting pipeline was strong as of the end of our fiscal year, the impact of the COVID-19 pandemic on future recruiting and the timing of transitions remains uncertain.

The number of financial advisors increased from prior years due to a combination of strong retention and recruiting of financial advisors, as well as new trainees that were moved into production roles, partially offset by the impact of advisors who left the firm, including planned retirements, where assets are generally retained at the firm.

The growth in the number of financial advisors has been negatively impacted by the transfer of advisors who were previously affiliated with the firm as independent contractors or employees to our RCS division.

Advisors in RCS are not included in the financial advisor count, although their assets of $92.7 billion are included in client AUA.

The recruiting pipeline remains robust across our affiliation options despite an increasingly competitive recruiting environment.

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Management’s Discussion and Analysis

Clients’ domestic cash sweep balances

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$ in millions 2021 2020 2019

RJ Bank $ 25,599 $ 21,649 $ 19,446

Raymond James Bank $ 31,410 $ 25,599 $ 21,649

Third-party banks 24,496 25,998 14,043

Subtotal RJBDP 55,906 51,597 35,692

Money market funds (1)

CIP 10,762 3,999 2,022

Total clients’ domestic cash sweep balances $ 66,668 $ 55,596 $ 37,714

(1) Money market funds were discontinued as a sweep option in June 2019.

Balances in those funds were converted to the RJBDP or reinvested by the client.

Year ended September 30,

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0.30 % 0.77 % 1.88 %

A significant portion of our clients’ cash is included in the RJBDP, a multi-bank sweep program in which clients’ cash deposits in their accounts are swept into interest-bearing deposit accounts at RJ Bank and various third-party banks.

We earn servicing fees for the administrative services we provide related to our clients’ deposits that are swept to such banks as part of the RJBDP.

The amounts from third-party banks are variable in nature and fluctuate based on client cash balances in the program, as well as the level of short-term interest rates and the interest paid to clients by the third-party banks on balances in the RJBDP.

The “Average yield on RJBDP - third party banks” in the preceding table is computed by dividing RJBDP fees from third-party banks, which are net of the interest expense paid to clients by the third-party banks, by the average daily RJBDP

The average yield on RJBDP - third-party banks decreased compared with the prior year to 0.30%, as the current year reflected a full year of near-zero short-term interest rates.

If demand for deposits from third-party banks does not improve from current levels, this yield could further decline, particularly in the second half of fiscal 2022.

The PCG segment also earns RJBDP servicing fees from the Raymond James Bank segment, which are based on the number of accounts that are swept to Raymond James Bank.

The fees from the Raymond James Bank segment are eliminated in consolidation.

PCG segment results are impacted by changes in the allocation of client cash balances in RJBDP between Raymond James Bank and third-party banks.

PCG segment results are also impacted by changes in the allocation of cash balances between RJBDP and CIP, as the net yield to the firm on cash balances in CIP (i.e., the spread between amounts earned on assets segregated for regulatory purposes and the interest paid to clients on CIP balances) is lower than the yield to the firm on RJBDP balances, on average.

Client cash balances remained elevated as of September 30, 2021, as a result of a number of factors, including the continuing economic uncertainty caused, in part, by the effects of the COVID-19 pandemic, as well as uncertainty related to the nature and timing of policy changes that may be put forth by the federal government administration.

As we continued to experience growing cash balances and less demand from third-party banks in the RJBDP during fiscal 2021, cash held in CIP increased significantly, also driving an increase in our segregated asset balances.

Year ended September 30, 2021 compared with the year ended September 30, 2020

Net revenues of $6.61 billion increased $1.06 billion, or 19%, and pre-tax income of $749 million increased $210 million, or 39%.

Asset management and related administrative fees increased $894 million, or 28%, primarily due to higher assets in fee-based accounts at the beginning of each of the current-year quarterly billing periods compared with the prior-year quarterly billing periods.

Brokerage revenues increased $163 million, or 12%, primarily due to higher trailing revenues from mutual and other fund products and annuity products, resulting from higher average asset values, as well as higher transactional revenues due to increased client activity.

Account and service fees increased $17 million, or 2%, primarily due to an increase in mutual fund service fees, primarily resulting from higher average mutual fund assets, as well as incremental client account and other fees resulting from our acquisition of NWPS at the end of our fiscal first quarter of 2021.

Partially offsetting these increases was a decline in RJBDP fees from third-party banks as a result of lower short-term interest rates.

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Management’s Discussion and Analysis

balance at third-party banks.

The PCG segment also earns RJBDP servicing fees from RJ Bank, which are based on the number of accounts that are swept to RJ Bank.

The fees from RJ Bank are eliminated in consolidation.

RJBDP fees from third-party banks and the average yield on RJBDP (third-party banks) were negatively impacted by the significant decrease in short-term interest rates.

The Federal Reserve decreased its benchmark short-term interest rate twice toward the end of our fiscal second quarter, to a current range of 0-0.25%, a decrease of 150 basis points.

These decreases were in addition to the three rate cuts implemented during calendar 2019 (225 basis points in total).

We expect the average yield on RJBDP (third-party banks) to be approximately 0.30% in fiscal 2021, consistent with average yields for our fiscal third and fourth quarters of 2020.

However, any additional decreases in short-term interest rates, lower spreads earned from third-party banks, increases in deposit rates paid to clients, and/or a significant decline in our clients’ cash balances will have a negative impact on our earnings.

Further, PCG segment results are impacted by changes in the allocation of client cash balances in the RJBDP between RJ Bank and third-party banks.

Client cash balances were elevated as of September 30, 2020 as a result of the market uncertainty caused primarily by the COVID-19 pandemic.

Year ended September 30, 2020 compared with the year ended September 30, 2019

Net revenues of $5.55 billion increased $193 million, or 4%, while pre-tax income of $539 million decreased $40 million, or 7%, largely due to the impact of lower short-term interest rates.

Asset management and related administrative fees increased $342 million, or 12%, primarily due to higher assets in fee-based accounts at the beginning of each of the current-year quarterly billing periods compared with the prior-year quarterly billing periods.

As assets in these accounts are billed primarily on balances as of the beginning of a quarter, the increase in fee-based accounts as of September 30, 2020 will positively impact asset management fees in our fiscal first quarter of 2021.

Brokerage revenues were essentially flat as the impact of increased trading activity, resulting from higher levels of market volatility during the current year, was offset by a decrease in mutual fund trails and lower revenues from annuity products.

Account and service fees decreased $102 million, or 11%, due to a decline in RJBDP fees from third-party banks, as a result of lower short-term interest rates, which more than offset the impact of the increase in cash balances swept to such banks.

Partially offsetting this decrease was an increase in mutual fund service fees.

Net interest income decreased $51 million, or 28%, primarily driven by a decline in short-term interest rates, reducing the interest income earned on assets segregated pursuant to regulations and client margin loans.

Partially offsetting the decrease in interest income, interest expense also decreased, primarily due to the impact of lower deposit rates paid on client cash balances in CIP.

Net interest income decreased $19 million, or 14%, driven by a decline in interest income due to lower short-term interest rates, which more than offset the impact of higher average asset balances.

In addition, our CIP balances increased significantly compared with the prior year resulting in an increase in segregated assets, and a significant portion of the increase was held in segregated short-term U.S.

Treasury securities at very low interest rates.

Partially offsetting the impact of the decrease in interest income, interest expense also decreased, despite the significant increase in client cash balances in our CIP, due to the impact of lower deposit rates paid on these balances.

Compensation-related expenses increased $820 million, or 19%, primarily due to higher compensable net revenues.

Non-compensation expenses decreased $43 million, or 7%, primarily due to decreases in conference and travel-related expenses, as a result of the COVID-19 pandemic, and lower legal reserves.

Partially offsetting these decreases were increases in technology and occupancy costs to support our growth.

Non-compensation expenses increased $29 million, or 5%, largely due to higher communications and information processing expenses primarily due to ongoing upgrades to our technology platforms, as well as higher professional fees largely due to an increase in external legal fees and consulting expenses.

Partially offsetting these increases was a decline in business development expenses due to limited travel and event-related expenses during the COVID-19 pandemic.

Year ended September 30, 2020 compared with the year ended September 30, 2019

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RESULTS OF OPERATIONS – CAPITAL MARKETS

Our Capital Markets segment conducts institutional sales, securities trading, equity research, investment banking and the syndication and management of investments that qualify for tax credits.

Our Capital Markets segment conducts investment banking, institutional sales, securities trading, the syndication and management of investments in low-income housing funds, the majority of which qualify for tax credits, and equity research.

We provide various investment banking services, including underwriting or advisory services on public and private equity and debt financing for corporate clients, public financing activities, merger & acquisition advisory, and other advisory services.

Revenues from investment banking activities are driven principally by our role in the transaction and the number and sizes of the transactions with which we are involved.

We earn brokerage revenues for the sale of both equity and fixed income products to institutional clients.

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In certain cases, we transact on a principal basis, which 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 on behalf of their clients.

Profits and losses related to this activity are primarily derived from the spreads between bid

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Management’s Discussion and Analysis

and ask prices, as well as market trends for the individual securities during the period we hold them.

Profits and losses related to this 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.

To facilitate such transactions, we carry inventories of financial instruments.

In our fixed income businesses, we also enter into interest rate swaps and futures contracts to facilitate client transactions or to actively manage risk exposures.

We provide various investment banking services, including public and private equity and debt financing for corporate clients, public financing activities, merger & acquisition advisory, and other advisory services.

Revenues from investment banking activities are driven principally by our role in the transaction and the number and sizes of the transactions with which we are involved.

For an overview of our Capital Markets segment operations, refer to the information presented in “Item 1 - Business” of this Form 10-K.

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Management’s Discussion and Analysis

Operating results

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Acquisition and disposition-related expenses

7 15 — (53) % NM

6 7 15 (14) % (53) %

Goodwill impairment

— 19 — (100) % NM

— — 19 — % (100) %

84 77 71 9 % 8 %

Total non-compensation expenses

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Net revenues of $1.89 billion increased $594 million, or 46%, and pre-tax income of $532 million increased $307 million, or 136%.

Brokerage revenues increased $157 million, or 38%, primarily due to a significant increase in fixed income brokerage revenues, as well as an increase in equity brokerage revenues.

The increase in fixed income brokerage revenues was primarily due to a higher level of client activity during the current year, particularly with depository clients.

The increase in equity brokerage revenues was primarily due to strong client activity during our fiscal second and third quarters, driven by market volatility resulting from the COVID-19 pandemic.

Investment banking revenues increased $488 million, or 80%, due to a significant increase in merger & acquisition and advisory revenues and, to a lesser extent, underwriting revenues.

The significant increase in merger & acquisition and advisory revenues reflected larger individual transactions and an increase in the number of transactions, as the current year reflected high levels of client activity throughout the year, while the prior year was impacted by lower levels of client activity during the onset of the COVID-19 pandemic.

Equity underwriting revenues also increased significantly, primarily due to an increase in market activity in both the U.S.

An increase in debt underwriting primarily resulted from higher revenues from corporate underwritings.

In addition to the strong results during the current year, our investment banking pipelines remain strong at the beginning of fiscal 2022 and, in part, reflect the results of investments we have made over the past several years, which have positioned us to enhance our services to our clients.

The most recent examples of such investments are our acquisitions of Financo and Cebile, which closed during fiscal 2021.

Brokerage revenues increased $89 million, or 16%, due to a significant increase in fixed income brokerage revenues as a result of higher levels of client activity throughout the current year.

The significant increase in client activity levels, particularly with depository institution clients, began toward the end of our fiscal second quarter of fiscal 2020, but were more sustained throughout fiscal 2021.

We expect fixed income brokerage revenues to remain solid in fiscal 2022 driven in large part by anticipated continued demand from depository clients.

Compensation-related expenses increased $281 million, or 36%, primarily due to the increase in net revenues.

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Management’s Discussion and Analysis

Investment banking revenues increased $44 million, or 8%, due to a significant increase in both equity and debt underwriting revenues, resulting from an increase in the number of transactions, as well as larger individual transactions compared to the prior year.

Merger & acquisition revenues decreased compared with a strong prior year, as activity during the current year was negatively impacted by uncertainty caused by the COVID-19 pandemic, although activity improved during our fiscal fourth quarter.

While our investment banking pipelines are solid, closings may be negatively affected if economic conditions deteriorate.

Compensation-related expenses increased $109 million, or 16%, primarily due to the increase in revenues.

Non-compensation expenses decreased $16 million, or 5%, compared with the prior year, as the prior year included a $19 million goodwill impairment charge associated with our Canadian Capital Market business that did not recur in the current year.

The current year included a $7 million loss related to the pending disposition of our interests in certain entities that operate predominately in France, whereas the prior year included a $15 million loss associated with the sale of our operations related to research, sales and trading of European equities.

Non-compensation expenses increased $6 million, or 2%, primarily due to an increase in various expense categories as a result of growth in the business.

These increases were partially offset by lower travel and event-related expenses as a result of the COVID-19 pandemic.

Acquisition and disposition-related expenses were flat year-over-year, as the current year included $6 million of amortization expense related to intangible assets with short useful lives associated with our Financo and Cebile acquisitions, while the prior year included a $7 million loss related to the disposition of our interests in certain entities that operated predominantly in France.

Year ended September 30, 2020 compared with the year ended September 30, 2019

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Financial assets under management at beginning of year $ 161.7 $ 150.3 $ 146.6

Carillon Tower Advisers:

Scout Group acquisition — — 27.1

Other - net outflows (5.4) (5.8) (0.1)

Carillon Tower Advisers - net outflows (0.5) (5.4) (5.8)

AMS - net inflows 13.5 6.1 6.0

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Financial assets under management at end of year $ 202.2 $ 161.7 $ 150.3

AMS division of RJ&A

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

Carillon Tower Advisers

Assets managed by Carillon Tower Advisers include assets managed by its subsidiaries and affiliates:

Eagle Asset Management, the Scout Group, ClariVest Asset Management and Cougar Global Investments.

The following table presents

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Management’s Discussion and Analysis

Carillon Tower Advisers’ AUM by objective, excluding assets for which it does not exercise discretion, as well as the approximate average client fee rate earned on such assets for the fiscal year ended September 30, 2020.

Carillon Tower Advisers

Assets managed by Carillon Tower Advisers include assets managed by its subsidiaries and affiliates:

Eagle Asset Management, Scout Investments, Reams Asset Management (a division of Scout Investments), ClariVest Asset Management and Cougar Global Investments.

The following table presents Carillon Tower Advisers’ AUM by objective, excluding assets for which it does not exercise discretion, as well as the approximate average client fee rate earned on such assets.

$ in billions September 30, 2021 Average fee rate

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Total assets $ 365.3 $ 280.6 $ 229.7

The increase in assets over the prior-year level was primarily due to clients moving to fee-based accounts from transaction-based accounts, equity market appreciation, and successful financial advisor recruiting and retention.

The increase in assets over the prior year was primarily due to equity market appreciation, successful financial advisor recruiting and retention, and the continued trend of clients moving to fee-based accounts from transaction-based accounts.

Administrative fees associated with these programs are predominantly based on balances at the beginning of the quarter.

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Net revenues of $867 million increased $152 million, or 21%, and pre-tax income of $389 million increased $105 million, or 37%.

Asset management and related administrative fees increased $43 million, or 7%, driven by higher assets in non-discretionary asset-based programs compared with the prior year, as well as higher average financial assets under management during the current year.

The increase in average financial assets under management reflected equity market appreciation and net inflows at AMS, partially offset by net outflows at Carillon Tower Advisers.

The net outflows at Carillon Tower Advisers were negatively impacted by the industry shift from actively managed investment strategies to passive investment strategies.

If this trend continues, our AUM and asset management fees would continue to be negatively affected.

Account and service fees declined $15 million, or 48%, primarily due to a decline in servicing fees related to the money market sweep program, which was discontinued in June 2019.

A significant portion of these fees were paid to PCG, resulting in a corresponding decline in other expenses compared with the prior year.

Non-compensation expenses decreased $5 million, or 2%, primarily due to the aforementioned decline in other expenses, partially offset by an increase in investment sub-advisory fees resulting from an increase in assets under management in sub-advised programs.

Year ended September 30, 2019 compared to the year ended September 30, 2018

Refer to “Item 7 - Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our 2019 Form 10-K for a discussion of our fiscal 2019 results compared to fiscal 2018.

RESULTS OF OPERATIONS – RJ BANK

RJ Bank provides various types of loans, including corporate loans, tax-exempt loans, residential loans, SBL and other loans.

RJ Bank is active in corporate loan syndications and participations and also provides FDIC-insured deposit accounts, including

Asset management and related administrative fees increased $149 million, or 22%, driven by higher average AUM and higher assets in non-discretionary asset-based programs compared with the prior year, resulting from equity market appreciation and net inflows at AMS.

While Carillon Tower Advisers continued to be negatively impacted by the industry shift from actively managed investment strategies to passive investment strategies, its net outflows for the year were much lower than in prior years.

Beginning October 1, 2021, AMS will receive a lower portion of the client fee on certain managed fee-based products offered to PCG clients through AMS.

Based on balances as of September 30, 2021, these changes are expected to result in an approximately $35 million annual reduction in asset management and related administrative fees in the Asset Management segment and an approximately $25 million reduction in firmwide pre-tax income.

Compensation expenses increased $5 million, or 3%, and included the impact of higher net revenues.

Non-compensation expenses increased $42 million, or 17%, primarily due to increases in investment sub-advisory fees, resulting from an increase in AUM in sub-advised programs, and an increase in platform fees.

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Management’s Discussion and Analysis

to clients of our broker-dealer subsidiaries.

RJ Bank generates net interest income principally through the interest income earned on loans and an investment portfolio of securities, which is offset by the interest expense it pays on client deposits and on its borrowings.

RJ Bank’s net interest income is affected by the levels of interest rates, interest-earning assets and interest-bearing liabilities.

Year ended September 30, 2020 compared to the year ended September 30, 2019

RESULTS OF OPERATIONS – RAYMOND JAMES BANK

Raymond James Bank provides various types of loans, including corporate loans, tax-exempt loans, residential loans, SBL and other loans.

Raymond James Bank is active in corporate loan syndications and participations and also provides FDIC-insured deposit accounts, including to clients of our broker-dealer subsidiaries.

Raymond James Bank generates net interest income principally through the interest income earned on loans and an investment portfolio of available-for-sale securities, which is offset by the interest expense it pays on client deposits and on its borrowings.

Raymond James Bank’s net interest income is affected by the levels of interest rates, interest-earning assets and interest-bearing liabilities.

Higher interest-earning asset balances and higher interest rates generally lead to increased net interest income, depending upon spreads realized on interest-bearing liabilities.

For more information on average interest-earning asset and interest-bearing liability balances and the related interest income and expense, see the following discussion in this MD&A.

For an overview of our RJ Bank segment operations, refer to the information presented in “Item 1- Business” of this Form 10-K.

For an overview of our Raymond James Bank segment operations, refer to the information presented in “Item 1- Business” of this Form 10-K.

Operating results

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Non-compensation expenses:

Loan loss provision

233 22 20 959 % 10 %

Bank loan provision/(benefit) for credit losses (32) 233 22 NM 959 %

RJBDP fees to PCG

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Year ended September 30, 2021 compared with the year ended September 30, 2020

Net revenues of $765 million decreased $81 million, or 10%, and pre-tax income of $196 million decreased $319 million, or 62%.

Net interest income decreased $82 million, or 10%, as the negative impact from lower short-term interest rates more than offset the $3.36 billion increase in average interest-earning assets.

The increase in average interest-earning assets was primarily driven by growth in average available-for-sale securities of $1.38 billion, average loans of $1.18 billion, and average cash balances of $742 million.

The net interest margin for the current year decreased to 2.63% from 3.32% for the prior year, primarily due to the significant decline in short-term interest rates and the corresponding decline in LIBOR, as well as a higher concentration of agency-backed available-for-sale securities, which have a lower yield than loans, on average.

Based on current rates, we expect our net interest margin to be approximately 2% in fiscal 2021.

The loan loss provision was $233 million, compared to $22 million in the prior year.

The increase in the provision in the current year was primarily attributable to the economic impacts of the COVID-19 pandemic during the current year and included charge-offs on certain corporate loans sold during the year.

Compensation and benefits expenses increased $2 million.

Non-compensation expenses (excluding the provision for loan losses) increased $25 million, including a $7 million, or 4%, increase in fees for the RJBDP paid to PCG, primarily driven by an increase in the number of accounts, as well as an increase in reserves for unfunded lending commitments and higher FDIC insurance premiums.

The RJBDP fees paid to PCG are eliminated in the consolidation.

Year ended September 30, 2019 compared to the year ended September 30, 2018

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Management’s Discussion and Analysis

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

Year ended September 30,

2020 2019 2018

$ in millions Average

balance Interest

Interest-earning assets:

$ 1,981 $ 11 0.55 % $ 1,239 $ 28 2.29 % $ 957 $ 15 1.57 %

Available-for-sale securities

4,250 83 1.94 % 2,872 69 2.39 % 2,430 50 2.04 %

Bank, net of unearned income and deferred expenses:

Loans held for investment:

C&I loans 7,885 275 3.43 % 8,070 378 4.62 % 7,619 326 4.22 %

CRE construction loans

209 9 4.10 % 221 12 5.51 % 166 8 5.08 %

CRE loans 3,688 120 3.21 % 3,451 159 4.53 % 3,231 133 4.06 %

Tax-exempt loans

1,246 33 3.35 % 1,284 35 3.36 % 1,146 30 3.42 %

Residential mortgage loans

4,874 148 3.04 % 4,091 135 3.30 % 3,448 109 3.16 %

SBL and other 3,559 112 3.10 % 3,139 145 4.57 % 2,690 111 4.09 %

Loans held for sale 130 5 3.70 % 151 7 4.73 % 126 5 4.01 %

Total loans, net 21,591 702 3.25 % 20,407 871 4.26 % 18,426 722 3.93 %

FHLB stock, Federal Reserve Bank (“FRB”) stock and other

223 4 2.04 % 172 7 4.01 % 138 6 4.33 %

Total interest-earning assets 28,045 $ 800 2.85 % 24,690 $ 975 3.95 % 21,951 $ 793 3.62 %

Non-interest-earning assets:

Unrealized gain/(loss) on available-for-sale securities 80 (22) (44)

Allowance for loan losses (271) (214) (193)

Other assets 392 394 379

Total non-interest-earning assets 201 158 142

Total assets $ 28,246 $ 24,848 $ 22,093

Interest-bearing liabilities:

Bank deposits:

Savings, money market and NOW accounts

$ 23,806 $ 22 0.09 % $ 21,058 $ 124 0.59 % $ 18,694 $ 63 0.34 %

Certificates of deposit 1,006 20 2.03 % 536 12 2.24 % 372 6 1.67 %

FHLB advances and other

889 20 2.21 % 911 19 2.08 % 917 20 2.13 %

Total interest-bearing liabilities 25,701 $ 62 0.24 % 22,505 $ 155 0.69 % 19,983 $ 89 0.44 %

Non-interest-bearing liabilities 246 200 195

Total liabilities 25,947 22,705 20,178

Total shareholder’s equity 2,299 2,143 1,915

Total liabilities and shareholder’s equity $ 28,246 $ 24,848 $ 22,093

Excess of interest-earning assets over interest-bearing liabilities/net interest income $ 2,344 $ 738 $ 2,185 $ 820 $ 1,968 $ 704

Bank net interest:

Spread 2.61 % 3.26 % 3.18 %

Margin (net yield on interest-earning assets) 2.63 % 3.32 % 3.22 %

Ratio of interest-earning assets to interest-bearing liabilities 109.12 % 109.71 % 109.85 %

Nonaccrual loans are included in the average loan balances in the preceding table.

Any payments received for corporate nonaccrual loans are applied to principal.

Interest income on residential mortgage nonaccrual loans is recognized on a cash basis.

Fee income on bank loans included in interest income for the years ended September 30, 2020, 2019 and 2018 was $11 million, $18 million, and $24 million, respectively.

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Management’s Discussion and Analysis

The yield on tax-exempt loans in the preceding table is presented on a tax-equivalent basis utilizing the applicable federal statutory rates for each of the years presented.

The following table shows the effect that these factors had on the interest earned on our interest-earning assets and the interest incurred on our interest-bearing liabilities.

The effect of changes in volume is determined by multiplying the change in volume by the previous year’s average yield/cost.

Similarly, the effect of rate changes is calculated by multiplying the change in average yield/cost by the previous year’s volume.

Changes attributable to both volume and rate have been allocated proportionately.

Year ended September 30,

2020 compared to 2019

2019 compared to 2018

Increase/(decrease) due to Increase/(decrease) due to

$ in millions Volume Rate Total Volume Rate Total

Interest income:

Interest-earning assets:

Cash $ 17 $ (34) $ (17) $ 4 $ 9 $ 13

Available-for-sale securities 33 (19) $ 14 9 10 19

Bank loans, net of unearned income and deferred expenses:

Loans held for investment:

C&I loans (9) (94) (103) 19 33 52

CRE construction loans (1) (2) (3) 3 1 4

CRE loans 11 (50) (39) 9 17 26

Tax-exempt loans (2) — (2) 4 1 5

Residential mortgage loans 26 (13) 13 20 6 26

SBL and other 19 (52) (33) 19 15 34

Loans held for sale (1) (1) (2) 1 1 2

Total bank loans, net 43 (212) (169) 75 74 149

FHLB stock, FRB stock and other 3 (6) (3) 2 (1) 1

Total interest-earning assets $ 96 $ (271) $ (175) $ 90 $ 92 $ 182

Interest expense:

Interest-bearing liabilities:

Bank deposits:

Savings, money market and NOW accounts $ 16 $ (118) $ (102) $ 8 $ 53 $ 61

Certificates of deposit 10 (2) 8 3 3 6

FHLB advances and other (1) 2 1 — (1) (1)

Total interest-bearing liabilities 25 (118) (93) 11 55 66

Change in net interest income $ 71 $ (153) $ (82) $ 79 $ 37 $ 116

Net revenues of $672 million decreased $93 million, or 12%, while pre-tax income of $367 million increased $171 million, or 87%.

Net interest income decreased $96 million, or 13%, as the negative impact from lower short-term interest rates more than offset the impact of higher average interest-earning assets.

The increase in average interest-earning assets was primarily driven by growth in the available-for-sale securities portfolio and securities-based loans to PCG clients.

The net interest margin decreased to 1.95% from 2.63% for the prior year, primarily due to the relatively low short-term interest rates throughout fiscal 2021 compared to only a partial year of such low rates in fiscal 2020, as well as a higher concentration of agency-backed available-for-sale securities, which have a lower yield on average than loans.

Based on current interest rates and our current asset mix, we expect our net interest margin to approximate 1.90% for the first half of fiscal 2022.

The bank loan benefit for credit losses was $32 million in the current year, which was calculated under the CECL model, compared with a provision for credit losses of $233 million in the prior year, which was calculated under the incurred loss model.

The current year benefit reflected improved economic forecasts used in our CECL model since our adoption of CECL on October 1, 2020, including improved outlooks on unemployment, gross domestic product and property price indices, as well as improved credit ratings within our corporate loan portfolio, partially offset by provisions for credit losses related to loan growth.

We plan to continue to grow our bank loan portfolio in fiscal 2022, which we expect will result in an increased

RAYMOND JAMES FINANCIAL, INC.

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Management’s Discussion and Analysis

provision for credit losses in future periods, absent further improvement in our economic forecasts.

The provision for credit losses in the prior year was significant due to the rapid and widespread economic deterioration and uncertainty caused by the onset of the COVID-19 pandemic, as well as charge-offs on certain corporate loans sold during the prior year primarily driven by our credit risk mitigation activities.

Year ended September 30, 2020 compared to the year ended September 30, 2019

RESULTS OF OPERATIONS – OTHER

This segment includes our private equity investments, interest income on certain corporate cash balances, and certain corporate overhead costs of RJF that are not allocated to other segments, including the interest costs on our public debt.

The Other segment also includes reduction in workforce expenses associated with certain position eliminations that occurred in our fiscal fourth quarter of 2020 in response to the economic environment.

This segment includes our private equity investments, interest income on certain corporate cash balances, certain acquisition-related expenses, and certain corporate overhead costs of RJF, including the interest costs on our public debt and any losses on extinguishment of such debt.

The Other segment also includes the reduction in workforce expenses, primarily the result of the elimination of certain positions, that occurred in our fiscal fourth quarter of 2020 in response to the economic environment at that time.

For an overview of our Other segment operations, refer to the information presented in “Item 1 - Business” of this Form 10-K.

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Interest income $ 8 $ 30 $ 63 (73) % (52) %

Gains/(losses) on private equity investments (28) 14 9 NM 56 %

Gains/(losses) on private equity investments 74 (28) 14 NM NM

All other 6 4 3 50 % 33 %

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Interest expense (96) (88) (75) 9 % 17 %

Net revenues (82) 5 (15) NM NM

Net revenues (8) (82) 5 90 % NM

Non-interest expenses:

Compensation and all other 127 64 87 98 % (26) %

Losses on extinguishment of debt 98 — — NM — %

Acquisition and disposition-related expenses 13 — — NM — %

Reduction in workforce expenses — 46 — (100) % NM

Acquisition-related expenses — — 4 — (100) %

Total non-interest expenses 238 110 87 116 % 26 %

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The pre-tax loss of $246 million was $54 million larger than the loss generated in the prior year.

Net revenues decreased $87 million as income of $5 million in the prior year declined to a loss of $82 million.

Interest income earned on corporate cash balances decreased due to lower short-term interest rates, partially offset by the impact of higher average balances, and interest expense increased as a result of the issuance of $500 million of senior notes.

In addition, the current year included $28 million of private equity valuation losses, compared with gains of $14 million in the prior year.

In the current year, $20 million of the losses on private equity investments were attributable to noncontrolling interests, which are reflected as an offset within other expenses.

These valuation losses were primarily the result of the negative impact of the COVID-19 pandemic on certain of our investments.

Non-interest expenses increased $23 million, or 26%, primarily due to $46 million of reduction in workforce expenses in the current year, partially offset by the aforementioned $20 million offset of private equity valuation losses attributable to noncontrolling interests.

Net revenues increased $74 million, primarily due to private equity valuation gains in the current year, compared with valuation losses in the prior year, which reflected the impact of challenging market conditions at the onset of the COVID-19 pandemic.

The current year included $74 million of private equity valuation gains, of which $25 million were attributable to noncontrolling interests and were offset within “Other” expenses.

These valuation gains were primarily the result of an improvement in market conditions and an improved outlook for certain of our investments.

The prior year included $28 million of private equity valuation losses, of which $20 million were attributable to noncontrolling interests and were offset within “Other” expenses.

Interest income earned on corporate cash balances decreased compared with the prior year due to lower short-term interest rates, and interest expense increased primarily as a result of an increase in corporate debt arising from the issuance of $500 million of senior notes in March 2020.

Non-interest expenses increased $128 million, or 116%, primarily due to losses on extinguishment of debt of $98 million in the current year (refer to the “Executive overview” section of this MD&A), the aforementioned $25 million of gains attributable to noncontrolling interests compared with $20 million of losses in the prior year, and acquisition-related expenses of $13 million in the current year, which primarily included professional and integration expenses associated with our acquisitions of NWPS, Financo and Cebile during fiscal 2021 and our announced acquisitions of Charles Stanley and TriState Capital.

These increases

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Management’s Discussion and Analysis

were partially offset by the impact of $46 million of reduction in workforce expenses in the prior year, which did not recur in the current year.

Year ended September 30, 2020 compared to the year ended September 30, 2019

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Dividend payout ratio 15.7% 25.4% 19.0%

Return on assets is computed by dividing net income by average assets for each indicated fiscal year.

Average assets is computed by adding total assets as of each quarter-end date during the indicated fiscal year to the beginning of the year total and dividing by five.

Return on equity is computed by dividing net income by average equity for each indicated 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 to the beginning of the year total and dividing by five.

Average equity to average assets is computed by dividing average equity by average assets for each indicated fiscal year, as calculated in accordance with the previous explanations.

Dividend payout ratio is computed by dividing dividends declared per common share by earnings per diluted common share for each indicated fiscal year.

Refer to the “Net interest analysis” and “Risk management - Credit risk” sections of this MD&A and to the Notes to Consolidated Financial Statements of this Form 10-K for the other required disclosures.

STATEMENT OF FINANCIAL CONDITION ANALYSIS

The assets on our Consolidated Statements of Financial Condition consisted primarily of cash and cash equivalents, assets segregated for regulatory purposes and restricted cash (primarily segregated for the benefit of clients), receivables including bank loans, financial instruments held either for trading purposes or as investments, and other assets.

A significant portion of our assets were liquid in nature, providing us with flexibility in financing our business.

Total assets of $61.89 billion as of September 30, 2021 were $14.41 billion, or 30%, greater than our total assets as of September 30, 2020.

The increase in assets was primarily due to a $7.10 billion increase in assets segregated for regulatory purposes and restricted cash, primarily due to a significant increase in client cash balances.

Bank loans, net increased by $3.80 billion, primarily due to an increase in securities-based loans to PCG clients and an increase in corporate loans.

In addition, cash and cash equivalents increased $1.81 billion, available-for-sale securities increased $665 million, and brokerage client receivables, net increased $396 million.

Goodwill and identifiable intangible assets, net increased $282 million due to the acquisitions of NWPS, Financo, and Cebile during fiscal 2021.

As of September 30, 2021, our total liabilities of $53.59 billion were $13.28 billion, or 33%, greater than our total liabilities as of September 30, 2020.

The increase in total liabilities was primarily related to the significant increase in client cash balances as of September 30, 2021, resulting in a $7.20 billion increase in brokerage client payables, primarily due to an increase in client cash held in our CIP, and a $5.69 billion increase in bank deposits, reflecting higher RJBDP balances held at Raymond James Bank.

Our accrued compensation, commissions and benefits increased $441 million, primarily due to an increase in accrued bonuses and benefits resulting from higher net revenues and pre-tax earnings compared with the prior year.

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Management’s Discussion and Analysis

Return on assets is computed by dividing net income for the year indicated by average assets for each respective fiscal year.

Average assets is computed by adding total assets as of each quarter-end date during the indicated fiscal year to the beginning of the year total and dividing by five.

Return on equity is computed by dividing net income for the year indicated by 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 to the beginning of the year total and dividing by five.

Average equity to average assets is computed by dividing average equity by average assets as calculated in accordance with the previous explanations.

Dividend payout ratio is computed by dividing dividends declared per common share for the year indicated by earnings per diluted common share for the year indicated.

Refer to the “Results of Operations - RJ Bank” and “Risk management - Credit risk” sections of this MD&A and to the Notes to Consolidated Financial Statements of this Form 10-K for the other required disclosures.

LIQUIDITY AND CAPITAL RESOURCES

Liquidity is essential to our business.

Liquidity and capital are essential to our business.

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

Senior management establishes our liquidity and capital management framework.

This framework includes senior management’s review of short- and long-term cash flow forecasts, review of monthly capital expenditures, monitoring of the availability of alternative sources of financing, and daily monitoring of liquidity in our significant subsidiaries.

Our decisions on the allocation of capital to our business units consider, among other factors, projected profitability, cash flow, risk, and future liquidity needs.

Our treasury department assists in evaluating, monitoring and controlling the impact that our business activities have on our financial condition, liquidity and capital structure, and maintains our relationships with various lenders.

The objective of this framework is to support the successful execution of our business strategies while ensuring ongoing and sufficient liquidity.

Liquidity is provided primarily through our business operations and financing activities.

We seek to manage capital levels to support execution of our business strategy, provide financial strength to our subsidiaries, and maintain sustained access to the capital markets, while at the same time meeting our regulatory capital requirements and conservative internal management targets.

Liquidity and capital resources are provided primarily through our business operations and financing activities.

Financing activities could include bank borrowings, collateralized financing arrangements or additional capital raising activities under our “universal” shelf registration statement.

Cash and cash equivalents increased $1.43 billion to $5.39 billion during the year ended September 30, 2020, primarily due to $4.59 billion of cash provided by financing activities and $4.05 billion of cash provided by operating activities, offset by cash used in investing activities of $4.99 billion and an increase in the amount of cash required to be segregated pursuant to regulations of $2.23 billion.

Cash provided by financing activities primarily related to an increase in bank deposits, as client cash balances increased due to the market uncertainty resulting from the COVID-19 pandemic, and proceeds from our senior notes issuance in March 2020, partially offset by our open-market share repurchases and dividends on our common stock.

Cash used in investing activities primarily related to a net increase in our available-for-sale securities portfolio due to our growth strategy for this portfolio, and a net increase in bank loans.

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

We also believe that we will be able to continue to meet our long-term cash requirements due to our strong financial position and ability to access capital from financial markets.

Liquidity and capital management

Senior management establishes our liquidity and capital management frameworks.

Our liquidity and capital management frameworks are overseen by the RJF Asset and Liability Committee, a senior management committee that develops and executes strategies and policies to manage our liquidity risk and interest rate risk, as well as provides oversight over the firm’s investments.

The liquidity management framework includes senior management’s review of short- and long-term cash flow forecasts, review of capital expenditures, monitoring of the availability of alternative sources of financing, and daily monitoring of liquidity in our significant subsidiaries.

Our decisions on the allocation of resources to our business units consider, among other factors, projected profitability, cash flow, risk, and future liquidity needs.

Our treasury department assists in evaluating, monitoring and controlling the impact that our business activities have on our financial condition and liquidity, and also maintains our relationships with various lenders.

The objective of our liquidity management framework is to support the successful execution of our business strategies while ensuring ongoing and sufficient liquidity.

Our capital planning and capital risk management processes are governed by the Capital Planning Committee (“CPC”), a senior management committee that provides oversight on our capital planning and ensures that our strategic planning and risk management processes are integrated into the capital planning process.

The CPC meets at least quarterly to review key metrics related to the firm’s capital, such as debt structure and capital ratios;

to analyze potential and emerging risks to capital;

to oversee our annual firmwide capital stress test;

and to propose capital actions to the Board of Directors, such as declaring dividends, repurchasing securities, and raising capital.

To ensure that we have sufficient capital to absorb unanticipated losses, the firm adheres to capital risk appetite statements and tolerances set in excess of regulatory minimums, which are established by the CPC and approved by the Board of Directors.

We conduct enterprise-wide capital stress testing to ensure that we maintain adequate capital to adhere to our established tolerances under multiple scenarios, including stressed scenarios.

Cash and cash equivalents increased $1.81 billion to $7.20 billion during the year ended September 30, 2021.

During the year ended September 30, 2021, cash provided by our operations (including significant net income) and proceeds from our $750 million of 3.75% senior notes offering (net of debt issuance costs), were offset by cash used for the early-redemption of $750 million of our pre-existing senior notes and the related make-whole premiums, dividend payments, share repurchases, and investments in future growth with our acquisitions of NWPS, Financo, and Cebile.

We also had significant increases in client cash balances, which increased both our brokerage client payables and our bank deposits.

However, this cash was largely used to increase our assets segregated for regulatory purposes, including through the purchase of U.S.

Treasuries, as part of our brokerage activities, and to increase our bank loan portfolio and available-for-sale securities as part of our banking activities.

Sources of liquidity

Approximately $1.16 billion of our total September 30, 2021 cash and cash equivalents included cash held directly at the parent, or parent cash loaned to RJ&A.

This parent cash balance does not include $400 million of cash set aside by RJF in a restricted account during the fiscal fourth quarter of 2021 to be used to fund our closing obligations associated with the pending acquisition of Charles Stanley.

As of September 30, 2021, this restricted cash was included in “Assets segregated for regulatory purposes and restricted cash” on our Consolidated Statements of Financial Condition and is not included in the amounts presented in the following table.

As of September 30, 2021, RJF had loaned $649 million to RJ&A (such amount is included in the RJ&A cash balance in the following table), which RJ&A has invested on behalf of RJF in cash and cash equivalents or

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Management’s Discussion and Analysis

Sources of liquidity

Over $2 billion of our total September 30, 2020 cash and cash equivalents included cash on hand at the parent, as well as parent cash loaned to RJ&A.

otherwise deployed in its normal business activities.

The following table presents our holdings of cash and cash equivalents.

$ in millions September 30, 2021

RJ Bank 1,072

Raymond James Bank 2,359

Carillon Tower Advisers 98

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Total cash and cash equivalents $ 7,201

RJF maintained depository accounts at RJ Bank with a balance of $185 million as of September 30, 2020.

The portion of this total that was available on demand without restrictions, which amounted to $108 million as of September 30, 2020, is reflected in the RJF total (and is excluded from the RJ Bank cash balance in the preceding table).

RJF had loaned $1.70 billion to RJ&A as of September 30, 2020 (such amount is included in the RJ&A cash balance in the preceding table), which RJ&A has invested on behalf of RJF in cash and cash equivalents or otherwise deployed in its normal business activities.

RJF maintained depository accounts at Raymond James Bank with a balance of $229 million as of September 30, 2021.

The portion of this total that was available on demand without restrictions, which amounted to $152 million as of September 30, 2021, is reflected in the RJF total (and is excluded from the Raymond James Bank cash balance in the preceding table).

A large portion of the RJ Ltd.

cash and cash equivalents balance as of September 30, 2021 was held to meet regulatory requirements and was not available for use by the parent.

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

Liquidity available from subsidiaries

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

Liquidity is principally available to RJF, the parent company, from RJ&A and Raymond James Bank.

Certain of our broker-dealer subsidiaries are subject to the requirements of the Uniform Net Capital Rule (Rule 15c3-1) under the Securities and Exchange Act of 1934.

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In addition, covenants in RJ&A’s committed financing facilities require its net capital to be a minimum of 10% of aggregate debit items.

At September 30, 2020, RJ&A significantly exceeded the minimum regulatory requirements, the covenants in its financing arrangements pertaining to net capital, as well as its internally-targeted net capital tolerances.

FINRA may impose certain restrictions, such as restricting withdrawals of equity capital, if a member firm were to fall below a certain threshold or fail to meet minimum net capital requirements.

RJ&A, as a nonbank custodian of IRAs, must also satisfy certain IRS regulations in order to accept new IRA and qualified plans and retain the accounts for which it serves as nonbank custodian.

With growth in the value of client assets in such accounts, the capital of RJ&A may need to grow to continue to satisfy this requirement.

As a result, RJ&A may limit dividends it would otherwise remit to RJF.

At September 30, 2021, RJ&A significantly exceeded the minimum regulatory requirements, the covenants in its financing arrangements pertaining to net capital, as well as its internally-targeted net capital tolerances and intends to use a portion of its excess net capital to remit dividends to RJF in fiscal 2022, in conformity with all required regulatory rules or approvals.

FINRA may impose certain restrictions, such as restricting withdrawals of equity capital, if a member firm were to fall below a certain threshold or fail to meet minimum net capital requirements which may result in RJ&A limiting dividends it would otherwise remit to RJF.

We evaluate regulatory requirements, loan covenants and certain internal tolerances when determining the amount of liquidity available to RJF from RJ&A.

RJ Bank may pay dividends to RJF without prior approval of 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 regulatory capital ratios.

Dividends from RJ Bank may be limited to the extent that capital is needed to support its balance sheet growth.

Raymond James Bank may pay dividends to RJF without prior approval of its regulator as long as the dividends do not exceed the sum of Raymond James Bank’s current calendar year and the previous two calendar years’ retained net income, and Raymond James Bank maintains its targeted regulatory capital ratios.

Dividends from Raymond James Bank may be limited to the extent that capital is needed to support its balance sheet growth.

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

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Management’s Discussion and Analysis

Borrowings and financing arrangements

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Our ability to borrow is dependent upon compliance with the conditions in our various loan agreements and, in the case of secured borrowings, collateral eligibility requirements.

Our committed financing arrangements consist of a tri-party repurchase agreement (i.e., securities sold under agreements to repurchase) and, in the case of the Credit Facility, an unsecured line of credit.

Our committed financing arrangements consist of a tri-party repurchase agreement (i.e., securities sold under agreements to repurchase) and, in the case of our $500 million revolving credit facility agreement (the “Credit Facility”), an unsecured line of credit.

The required market value of the collateral associated with the tri-party repurchase agreement ranges from 105% to 125% of the amount financed.

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Management’s Discussion and Analysis

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

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Committed unsecured 200 300 500 1

200 300 500 1

Total committed financing arrangements

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Total outstanding borrowing amount

(1) The Credit Facility provides for maximum borrowings of up to $500 million, with a sublimit of $300 million for RJF.

Our committed unsecured financing arrangement in the preceding table represents our Credit Facility, which provides for maximum borrowings of up to $500 million, with a sublimit of $300 million for RJF.

RJ&A may borrow up to $500 million under the Credit Facility, depending on the amount of outstanding borrowings by RJF.

For additional details on our committed unsecured financing arrangement, see our discussion of the Credit Facility in Note 16 of the Notes to Consolidated Financial Statements of this Form 10-K.

In April 2021, we amended our Credit Facility, maintaining the $500 million maximum borrowing amount, but extending the term through April 2026 and incorporating a lower cost of borrowing under the facility and certain favorable covenant modifications.

Uncommitted financing arrangements

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Our arrangements with third-party lenders are generally utilized to finance a portion of our fixed income securities or for cash management purposes.

Our uncommitted secured financing arrangements generally require us to post collateral in excess of the amount borrowed and are generally collateralized by non-customer, RJ&A-owned securities or by securities that we have received as collateral under reverse repurchase agreements (i.e., securities purchased under agreements to resell).

As of September 30, 2020, we had outstanding borrowings under one uncommitted secured borrowing arrangement out of a total of 11 uncommitted financing arrangements (seven uncommitted secured and four uncommitted unsecured).

Our uncommitted secured financing arrangements generally require us to post collateral in excess of the amount borrowed and are generally collateralized by RJ&A-owned securities or by securities that we have received as collateral under reverse repurchase agreements (i.e., securities purchased under agreements to resell).

As of September 30, 2021, we had outstanding borrowings under two uncommitted secured borrowing arrangements out of a total of 11 uncommitted financing arrangements (seven uncommitted secured and four uncommitted unsecured).

However, lenders are under no contractual obligation to lend to us under uncommitted credit facilities.

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Total outstanding borrowing amount

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Management’s Discussion and Analysis

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

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September 30, 2020 $ 140 $ 165 $ 165 $ 199 $ 260 $ 207

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Management’s Discussion and Analysis

Other borrowings and collateralized financings

RJ Bank had $875 million in FHLB borrowings outstanding at September 30, 2020, comprised of floating-rate advances totaling $850 million and a $25 million fixed-rate advance, all of which were secured by a blanket lien on RJ Bank’s residential mortgage loan portfolio (see Note 14 of the Notes to Consolidated Financial Statements of this Form 10-K for additional information regarding these borrowings).

RJ Bank had an additional $3.04 billion in immediate credit available from the FHLB as of September 30, 2020 and, with the pledge of additional eligible collateral to the FHLB, total available credit of 30% of total assets.

RJ Bank is eligible to participate in the FRB’s discount window program;

however, we do not view borrowings from the FRB as a primary source of funding.

The credit available in this program is subject to periodic review, may be terminated or reduced at the discretion of the FRB, and is secured by pledged C&I loans.

We had $850 million in Federal Home Loan Bank (“FHLB”) borrowings outstanding at September 30, 2021, comprised of floating-rate advances.

The interest rates on the floating-rate advances, which mature in December 2022, reset quarterly and are generally based on LIBOR.

We use interest rate swaps to manage the risk of increases in interest rates associated with these floating-rate advances by converting the balances subject to variable interest rates to a fixed interest rate.

The interest rates on the FHLB borrowings will transition to a SOFR-based rate in December 2021.

These FHLB borrowings were secured by a blanket lien on Raymond James Bank’s residential mortgage loan portfolio.

Raymond James Bank had an additional $3.31 billion in immediate credit available from the FHLB as of September 30, 2021 and, with the pledge of additional eligible collateral to the FHLB, total available credit of 30% of total assets.

See Note 16 of the Notes to Consolidated Financial Statements of this Form 10-K for additional information regarding these borrowings.

Raymond James Bank is eligible to participate in the Federal Reserve’s discount window program;

however, we do not view borrowings from the Federal Reserve as a primary source of funding.

The credit available in this program is subject to periodic review, may be terminated or reduced at the discretion of the Federal Reserve, and is secured by pledged C&I loans.

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

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See Notes 2 and 7 of the Notes to Consolidated Financial Statements of this Form 10-K for more information on our collateralized agreements and financings.

At September 30, 2020, in addition to the financing arrangements previously described, we had $13 million outstanding on a mortgage loan for our St.

Petersburg, Florida home-office complex that is included in “Other borrowings” on our Consolidated Statements of Financial Condition of this Form 10-K.

Senior notes payable

At September 30, 2020, we had aggregate outstanding senior notes payable of $2.05 billion.

Our senior notes payable, exclusive of any unaccreted premiums or discounts and debt issuance costs, was comprised of $250 million par 5.625% senior notes due 2024, $500 million par 3.625% senior notes due 2026, $500 million par 4.65% senior notes due 2030, which were issued during our fiscal second quarter of 2020, and $800 million par 4.95% senior notes due 2046.

In April 2021, we sold $750 million in aggregate principal amount of 3.75% senior notes due April 2051 in a registered underwritten public offering.

We utilized the proceeds from the offering and cash on hand to early-redeem our $250 million par 5.625% senior notes due 2024 and our $500 million par 3.625% senior notes due 2026.

See Note 17 of the Notes to Consolidated Financial Statements of this Form 10-K for additional information.

After the issuance of the 3.75% senior notes due April 2051 and repurchase and redemption of the 5.625% senior notes due 2024 and 3.625% senior notes due 2026, at September 30, 2021, we had aggregate outstanding senior notes payable of $2.04 billion, which, exclusive of any unaccreted premiums or discounts and debt issuance costs, was comprised of $500 million par 4.65% senior notes due 2030, $800 million par 4.95% senior notes due 2046, and $750 million par 3.75% senior notes due 2051.

At September 30, 2021, estimated future contractual interest payments on our senior notes were approximately $2 billion, of which $91 million is payable in fiscal 2022, with the remainder extending through 2051.

Credit ratings

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Rating Agency Rating Outlook

Standard & Poor’s Ratings Services

Fitch Ratings, Inc.

Moody’s Investors Services (2)

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Management’s Discussion and Analysis

liquidity management, capital structure, overall risk management, business diversification and market share, and competitive position in the markets in which we operate.

Deteriorations in any of these factors could impact our credit ratings.

Baa1 Review for Upgrade

Standard & Poor’s Ratings Services BBB+ Stable

(1) In March 2021, Fitch Ratings, Inc.

assigned its first issuer and senior long-term debt rating for Raymond James Financial, Inc.

(2) In November 2021, Moody’s Investor Services placed our senior debt and issuer rating on review for upgrade.

Our current long-term debt ratings depend upon a number of factors, including industry dynamics, operating and economic environment, operating results, operating margins, earnings trends and volatility, balance sheet composition, liquidity and liquidity management, capital structure, overall risk management, business diversification and market share, and competitive position in the markets in which we operate.

Deterioration in any of these factors could impact our credit ratings.

Any rating downgrades could increase our costs in the event we were to obtain additional financing.

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A downgrade to below investment grade may make a public debt offering difficult to execute on terms we would consider to be favorable.

A downgrade below investment grade could result in the termination of certain derivative contracts and the counterparties to the derivative instruments could request immediate payment or demand immediate and ongoing overnight collateralization on our derivative instruments in liability positions (see Note 5 of the Notes to Consolidated Financial Statements of this Form 10-K for additional information).

A downgrade below investment grade could result in the termination of certain

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Management’s Discussion and Analysis

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.

A credit downgrade could damage our reputation and result in certain counterparties limiting their business with us, result in negative comments by analysts, potentially negatively impact investors’ and/or clients’ perception of us, and cause a decline in our stock price.

None of our borrowing arrangements contains a condition or event of default related to our credit ratings.

However, a credit downgrade would result in the firm incurring a higher facility fee on the $500 million Credit Facility, in addition to triggering a higher interest rate applicable to any borrowings outstanding on that line as of and subsequent to such downgrade.

However, a credit downgrade would result in the firm incurring a higher facility fee on the Credit Facility, in addition to triggering a higher interest rate applicable to any borrowings outstanding on that line as of and subsequent to such downgrade.

Conversely, an improvement in RJF’s current credit rating could have a favorable impact on the facility fee, as well as the interest rate applicable to any borrowings on such line.

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Certain of our non-qualified deferred compensation plans and other employee benefit plans are employee-directed while others are company-directed.

Certain policies which we could readily borrow against had a cash surrender value of $657 million as of September 30, 2020, comprised of $399 million related to employee-directed plans and $258 million related to company-directed plans, and we were able to borrow up to 90%, or $591 million, of the September 30, 2020 total without restriction.

Of the company-owned life insurance policies which fund these plans, certain policies could be used as a source of liquidity for the firm.

Those policies against which we could readily borrow had a cash surrender value of $835 million as of September 30, 2021, comprised of $520 million related to employee-directed plans and $315 million related to company-directed plans, and we were able to borrow up to 90%, or $751 million, of the September 30, 2021 total without restriction.

To effect any such borrowing, the underlying investments would be converted to money market investments, therefore requiring us to take market risk related to the employee-directed plans.

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Subject to certain conditions, this registration statement will be effective through May 12, 2024.

See the Contractual obligations section of this MD&A for information regarding our contractual obligations.

STATEMENT OF FINANCIAL CONDITION ANALYSIS

The assets on our Consolidated Statements of Financial Condition consisted 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 either for trading purposes or as investments, and other assets.

A significant portion of our assets were liquid in nature, providing us with flexibility in financing our business.

Total assets of $47.48 billion as of September 30, 2020 were $8.65 billion, or 22%, greater than our total assets as of September 30, 2019.

The increase in assets was primarily due to a $4.56 billion increase in available-for-sale securities, in line with our growth strategy for this portfolio, and a $3.66 billion increase in cash and cash and cash equivalents (including amounts segregated pursuant to regulations).

The increase in cash was primarily due to a significant increase in client cash balances as clients reacted to the market uncertainty resulting from the COVID-19 pandemic, as well as proceeds from our $500 million senior notes issuance in March 2020.

In addition, other assets increased $505 million, primarily due to right-of-use assets (“ROU assets”) recorded as a result of the adoption of new guidance related to the accounting for leases.

As of September 30, 2020, our total liabilities of $40.31 billion were $8.12 billion, or 25%, greater than our total liabilities as of September 30, 2019.

The increase in total liabilities was primarily related to the significant increase in client cash balances and was comprised of a $4.52 billion increase in bank deposits, reflecting higher RJBDP balances held at RJ Bank and certificate of deposit issuances during the year, and a $2.43 billion increase in brokerage client payables, primarily due to an increase in client cash held in our CIP as of September 30, 2020.

In addition, other payables increased $766 million, primarily due to lease liabilities recorded as a result of the adoption of new guidance related to the accounting for leases and an increase in payables arising from our brokerage operations.

In addition, senior notes payable increased due to the issuance of $500 million of 4.65% senior notes due April 2030.

On July 29, 2021, we announced our firm intention to make an offer for the entire issued and to be issued share capital of U.K.-based Charles Stanley Group PLC (“Charles Stanley”) at a price of £5.15 per share, or approximately £279 million ($387 million as of July 28, 2021).

Under the terms of the intended offer, a loan note alternative will be available to Charles Stanley shareholders which will enable eligible Charles Stanley shareholders to elect to receive a loan note in lieu of part or all of the cash consideration to which they would otherwise be entitled under the terms of the offer.

The initial interest rate for the loan note alternative for the first year is 0.1%.

The note bears interest at a variable rate which resets annually, calculated as the Bank of England’s base rate plus a differential defined in the loan note, with the interest rate not to exceed 1.5% in any period.

The transaction, which is subject to FCA approval, is expected to close in the first half of fiscal 2022.

We have segregated $400 million in cash to fund the acquisition on the closing date, which is included in “Assets segregated for regulatory purposes and restricted cash” on our Consolidated Statements of Financial Condition as of September 30, 2021.

See Note 3 of the Notes to Consolidated Financial Statements of this Form 10‑K for additional information.

On October 20, 2021, we announced we had entered into a definitive agreement to acquire TriState Capital Holdings, Inc.

(“TriState Capital”) in a combination cash and stock transaction, valued at approximately $1.1 billion.

Under the terms of the agreement, TriState Capital common stockholders will receive $6.00 cash and 0.25 RJF shares for each share of TriState Capital common stock, which represents per share consideration of $31.09 based on the closing price of RJF common stock on October 19, 2021.

We have entered into an agreement with the sole holder of the TriState Capital Series C Perpetual Non-Cumulative Convertible Non-Voting Preferred Stock (“Series C Convertible Preferred”) pursuant to which the Series C Convertible Preferred will be converted to common shares at the prescribed exchange ratio and cashed out at $30 per share.

The TriState Capital Series A Non-Cumulative Perpetual Preferred Stock and Series B Non-Cumulative Perpetual Preferred Stock will remain outstanding and will be converted into equivalent preferred stock of RJF.

The transaction, which is subject to customary closing conditions, including regulatory approvals and approval by TriState Capital shareholders, is expected to close in fiscal 2022.

We currently have the ability to utilize our cash on hand to fund the acquisition.

See Note 3 of the Notes to Consolidated Financial Statements of this Form 10-K for additional information.

As part of our ongoing operations, we also enter into contractual arrangements that may require future cash payments, including certificates of deposit, lease obligations and other contractual arrangements, such as for software and various services.

See Notes 14 and 15 of the Notes to the Consolidated Financial Statements of this Form 10-K for information regarding our lease obligations and certificates of deposit, respectively.

We have entered into investment commitments, lending commitments and other commitments to extend credit for which we are unable to reasonably predict the timing of future payments.

See Note 19 of the Notes to Consolidated Financial Statements of this Form 10-K for further information.

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See Notes 2 and 12 of the Notes to Consolidated Financial Statements of this Form 10-K for further information on our adoption of the new leasing guidance.

CONTRACTUAL OBLIGATIONS

The following table sets forth our contractual obligations and payments due thereunder by fiscal year.

Year ended September 30,

$ in millions Total 2021 2022 2023 2024 2025 Thereafter

Long-term debt obligations:

Senior notes payable - principal $ 2,050 $ — $ — $ — $ 250 $ — $ 1,800

Other borrowings

863 5 6 852 — — —

Total long-term debt obligations 2,913 5 6 852 250 — 1,800

Contractual interest payments 1,452 114 100 96 95 81 966

Certificates of deposit (including interest) 1,060 241 262 246 206 105 —

Lease obligations 583 101 98 85 68 54 177

Purchase obligations and other 428 200 101 57 37 15 18

Total contractual obligations

$ 6,436 $ 661 $ 567 $ 1,336 $ 656 $ 255 $ 2,961

Contractual interest payments represent estimated future interest payments related to our senior notes, mortgage notes payable, FHLB advances, and unsecured borrowings with original maturities greater than one year based on applicable interest rates at September 30, 2020.

Estimated future interest payments for FHLB advances include the effect of the related interest rate hedges, which swap variable interest rate payments to fixed interest payments.

Lease obligations are comprised of minimum payments under lease obligations, as well as legally binding minimum lease payments for leases executed but not yet commenced.

See Notes 12, 14 and 15 of the Notes to Consolidated Financial Statements of this Form 10-K for information regarding our leases, other borrowings and senior notes payable, respectively.

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, computer software contracts and our stadium naming rights contract which has a term through 2027.

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.

We have entered into investment commitments, lending commitments and other commitments to extend credit for which we are unable to reasonably predict the timing of future payments.

See Note 17 of the Notes to Consolidated Financial Statements of this Form 10-K for further information.

Refer to the discussion of the regulatory environment in which we operate and the impact on our operations of certain rules and regulations in “Item 1 - Business - Regulation” of this Form 10-K.

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As of September 30, 2021, all of our active regulated domestic and international subsidiaries had net capital in excess of minimum requirements.

In addition, RJF and RJ Bank were categorized as “well-capitalized” as of September 30, 2020.

In addition, RJF and Raymond James Bank were categorized as “well-capitalized” as of September 30, 2021.

The maintenance of certain risk-based and other regulatory capital levels could influence various capital allocation decisions impacting one or more of our businesses.

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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

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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.

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We believe that of our accounting estimates and assumptions, those described in the following sections involve a high degree of judgment and complexity.

Recent market disruptions as a result of the COVID-19 pandemic have made it more challenging for us to determine the amount of our allowance for loan losses and the fair value of certain of our assets, particularly our private equity investments.

The current circumstances have required a greater reliance on judgment than in recent periods in determining these amounts as of September 30, 2020.

Valuation of financial instruments

The use of fair value to measure financial instruments, with related gains or losses recognized on our Consolidated Statements of Income and Comprehensive Income, is fundamental to our financial statements and our risk management processes.

“Financial instruments owned” and “Financial instrument liabilities” are reflected on the Consolidated Statements of Financial Condition at fair value.

“Financial instruments” and “Financial instrument liabilities” are reflected on the Consolidated Statements of Financial Condition at fair value.

Unrealized gains and losses related to these financial instruments are reflected in our net income or our other comprehensive income/(loss) (“OCI”), depending on the underlying purpose of the instrument.

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Level 2 represents valuations based on inputs other than unadjusted quoted prices in active markets, but for which all significant inputs are observable;

and Level 3 consists of valuation techniques that incorporate significant unobservable inputs and, therefore, requires the greatest use of judgment.

and Level 3 consists of valuation techniques that incorporate one or more significant unobservable inputs and, therefore, requires the greatest use of judgment.

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.

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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 which are actively traded will generally have a higher degree of price transparency than financial instruments that are less frequently traded.

As a result, the valuation of certain financial instruments included management judgment in determining the relevance and reliability of market information available.

These instruments are classified in Level 3 of the fair value hierarchy.

Financial instruments which are actively traded will

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generally have a higher degree of price transparency than financial instruments that are less frequently traded.

As a result, the valuation of certain financial instruments which are less frequently traded included management judgment in determining the relevance and reliability of market information available and are generally classified in Level 3 of the fair value hierarchy.

See Notes 2 and 4 of the Notes to Consolidated Financial Statements of this Form 10-K for further information about the level within the fair value hierarchy, specific valuation techniques and inputs, and other significant accounting policies pertaining to financial instruments at fair value.

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The recorded amount of liabilities related to legal and regulatory matters is subject to significant management judgment.

For a description of the significant estimates and judgments associated with establishing such accruals, see the “Contingent

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liabilities” section of Note 2 of the Notes to Consolidated Financial Statements of this Form 10-K.

In addition, refer to Note 17 of the Notes to the Consolidated Financial Statements of this Form 10-K for information regarding legal and regulatory matter contingencies as of September 30, 2020.

Loan loss provisions arising from operations of RJ Bank

We provide an allowance for loan losses which reflects our ongoing evaluation of the probable losses inherent in RJ Bank’s loan portfolio.

See the discussion regarding our methodology in estimating the allowance for loan losses in Note 2 of the Notes to Consolidated Financial Statements of this Form 10-K.

See Note 7 of the Notes to Consolidated Financial Statements of this Form 10-K for additional information on our bank loans.

At September 30, 2020, the amortized cost of all RJ Bank loans was $21.55 billion and the allowance for loan losses was $354 million, which was 1.65% of the held for investment loan portfolio.

Our process of evaluating probable loan losses includes a complex analysis of several quantitative and qualitative factors, requiring management judgment.

As a result, the allowance for loan losses could be insufficient to cover actual losses.

For a description of the significant estimates and judgments associated with establishing such accruals, see the “Contingent liabilities” section of Note 2 of the Notes to Consolidated Financial Statements of this Form 10-K.

In addition, refer to Note 19 of the Notes to Consolidated Financial Statements of this Form 10-K for information regarding legal and regulatory matter contingencies as of September 30, 2021.

Allowance for credit losses

We evaluate certain of our financial assets, including bank loans, to estimate an allowance for credit losses.

Effective October 1, 2020, we adopted the CECL accounting guidance which changed the methodology used to measure the allowance for credit losses from an allowance based on incurred losses to an allowance based on expected credit losses over a financial asset’s lifetime.

The remaining life of our financial assets is determined by considering contractual terms and expected prepayments, among other factors.

We employ multiple methodologies in estimating an allowance for credit losses and our approaches differ by type of financial asset and the risk characteristics within each financial asset type.

Our estimates are based on ongoing evaluations of the portfolio, the related credit risk characteristics, and the overall economic and environmental conditions affecting the financial assets.

Our process for determining the allowance for credit losses includes a complex analysis of several quantitative and qualitative factors requiring significant management judgment due to matters that are inherently uncertain.

This uncertainty can produce volatility in our allowance for credit losses.

In addition, the allowance for credit losses could be insufficient to cover actual losses.

In such an event, any losses in excess of our allowance would result in a decrease in our net income, as well as a decrease in the level of regulatory capital.

See the discussion regarding our methodology in estimating the allowance for credit losses in Note 2 of the Notes to Consolidated Financial Statements of this Form 10-K.

RECENT ACCOUNTING DEVELOPMENTS

The FASB has issued certain accounting updates that apply to us.

Accounting updates not listed in the following section were assessed and either determined to be not applicable or are not expected to have a significant impact on our financial statements.

Accounting guidance not yet adopted as of September 30, 2020

Credit losses - In June 2016, the FASB issued new guidance related to the measurement of credit losses on financial instruments (ASU 2016-13), which replaces the existing incurred credit loss and other models with the Current Expected Credit Losses (“CECL”) model.

The guidance involves several aspects of the accounting for credit losses related to certain financial instruments, including assets measured at amortized cost, available-for-sale debt securities and certain off-balance sheet commitments.

The new guidance, and subsequent updates, broadens the information that an entity must consider in developing its estimated credit losses expected to occur over the remaining life of financial assets.

The measurement of expected credit losses includes historical experience, current conditions and reasonable and supportable forecasts.

The new guidance also expands the disclosure requirements regarding an entity’s assumptions, models, and methods for estimating credit losses and requires new disclosures of the amortized cost balances for each class of financial asset by credit quality indicator, disaggregated by the year of origination.

This new guidance was effective for our fiscal year beginning on October 1, 2020 and was adopted under a modified retrospective approach.

We have determined that certain portfolios qualify under the practical expedient outlined in the accounting guidance based on collateral maintenance provisions (e.g., margin loans, securities-based loans and collateralized agreements) and therefore, our expected credit losses are not expected to be significant.

In addition, we have a zero loss expectation for certain financial assets based on the credit quality of the borrower or issuer, such as government and agency loans and debt securities.

The impact of adoption of this new standard resulted in an increase in our allowances for credit losses, including reserves for unfunded lending commitments, of approximately $40 to $50 million and a corresponding reduction in retained earnings of approximately $30 to $40 million, net of tax.

The increases in our allowances for credit losses were primarily attributable to loans to financial advisors and, to a lesser extent, bank loans.

Prior-period amounts will not be restated.

Internal use software (cloud computing) - In August 2018, the FASB issued guidance on the accounting for implementation costs incurred by customers in cloud computing arrangements (ASU 2018-15).

This guidance requires implementation costs incurred by customers in cloud computing arrangements that are service contracts to be deferred and recognized over the non-cancelable term of the service contract plus any optional renewal periods (1) that are reasonably certain to be exercised by the customer or (2) for which exercise of the renewal option is controlled by the cloud service provider.

We adopted this new guidance on October 1, 2020 using a prospective approach as of the adoption date.

The impact of this amended guidance is dependent on implementation costs incurred subsequent to adoption.

The adoption did not have an impact on our financial position, results of operations, or cash flows.

Consolidation (decision making fees) - In October 2018, the FASB issued guidance on how all entities evaluate decision-making fees under the VIE guidance (ASU 2018-17).

Under the new guidance, to determine whether decision-making fees

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represent a variable interest, an entity considers indirect interests held through related parties under common control on a proportionate basis, rather than in their entirety.

We adopted this new guidance on October 1, 2020.

The adoption of this new guidance did not have a material impact on our financial position, results of operations, or cash flows.

OFF-BALANCE SHEET ARRANGEMENTS

For information regarding our off-balance sheet arrangements, see Notes 2 and 17 of the Notes to Consolidated Financial Statements of this Form 10-K.

EFFECTS OF INFLATION

Our assets are primarily liquid in nature and are not significantly affected by inflation.

However, the rate of inflation affects our expenses, including employee compensation, communications and information processing, and occupancy costs, which may not be readily recoverable through charges for services we provide to our clients.

The FASB has issued certain accounting updates which were assessed and either determined to be not applicable or are not expected to have a significant impact on our financial statements.

RISK MANAGEMENT

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

Our Board of Directors oversees the firm’s management and mitigation of risk, reinforcing a culture that encourages ethical conduct and risk management throughout the firm.

Our Board of Directors, including its Audit and Risk Committee, oversees the firm’s management and mitigation of risk, reinforcing a culture that encourages ethical conduct and risk management throughout the firm.

Senior management communicates and reinforces this culture through three lines of risk management and a number of senior-level management committees.

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The second line of risk management, which includes the Compliance, Legal, and Risk Management departments, supports and provides guidance and oversight to client-facing businesses and other first-line risk management functions in identifying and mitigating risk.

The second line of risk management also tests and monitors the effectiveness of controls, escalates risks when appropriate, and reports on these risks.

The third line of risk management, Internal Audit, independently reviews activities conducted by the previous lines of risk management to assess their management and mitigation of risk, providing additional assurance to the Board of Directors and senior management, with a view toward enhancing our oversight, management, and mitigation of risk.

Market risk is our risk of loss resulting from the impact of changes in market prices on our trading inventory, derivatives and investment positions.

We have exposure to market risk primarily through our broker-dealer trading operations and, to a lesser extent, through our banking operations.

Our broker-dealer subsidiaries, primarily RJ&A, act as market makers in equity and debt securities and maintain inventories in order to ensure availability of securities and to facilitate client transactions.

We also hold investments in agency MBS and agency CMOs within RJ Bank’s available-for-sale securities portfolio, and from time-to-time may hold SBA loan securitizations not yet transferred.

See Notes 2, 3, 4 and 5 of the Notes to Consolidated Financial Statements of this Form 10-K for fair value and other information regarding our trading inventories, available-for-sale securities and derivative instruments.

Changes in value of our trading inventory may result from fluctuations in interest rates, credit spreads, equity prices, macroeconomic factors and asset liquidity, as well as relationships among these factors.

We manage our trading inventory by product type and have established trading desks 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 positions held overnight in inventory.

A hierarchy of limits exists at multiple levels including firm, division, trading desk (e.g., for over-the-counter (“OTC”) equities, corporate bonds, municipal bonds), product 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

The second line of risk management also tests and monitors the effectiveness of controls, escalates risks when appropriate, and reports on these

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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 also include futures contracts and forward foreign exchange contracts, we monitor daily exposure against established limits with respect to a number of factors, including interest rates, foreign exchange spot and forward rates, spread, ratio, basis and volatility risk, both for the total portfolio and by maturity period.

In the normal course of business, we enter into underwriting commitments.

RJ&A and RJ Ltd., as a lead or co-lead manager or syndicate member in underwritings, may be subject to market risk on any unsold shares issued in offerings to which we are committed.

Risk exposure is controlled by limiting participation, the deal size or through the syndication process.

Market risk is our risk of loss resulting from the impact of changes in market prices on our trading inventory, derivatives and investment positions.

We have exposure to market risk primarily through our broker-dealer trading operations and our banking operations.

Our broker-dealer subsidiaries, primarily RJ&A, act as market makers and trade debt obligations and equity securities and maintain inventories to ensure availability of securities and to facilitate client transactions.

Inventory levels may fluctuate daily as a result of client demand.

We also hold investments in agency-backed MBS and agency-backed CMOs within Raymond James Bank’s available-for-sale securities portfolio, and from time-to-time may hold SBA loan securitizations not yet transferred.

Our primary market risks relate to interest rates, equity prices, and foreign exchange rates.

Interest rate risk results from changes in levels of interest rates, the volatilities of interest rates, mortgage prepayment speeds and credit spreads.

Equity risk results from changes in prices of equity securities.

Foreign exchange risk results from changes in spot prices, forward prices and volatilities of foreign exchange rates.

See Notes 2, 4, 5 and 6 of the Notes to Consolidated Financial Statements of this Form 10-K for fair value and other information regarding our trading inventories, available-for-sale securities and derivative instruments.

We regularly enter into underwriting commitments and, as a result, we may be subject to market risk on any unsold shares issued in the offerings to which we are committed.

Risk exposure is controlled by limiting our participation, the transaction size or through the syndication process.

The Market Risk Management department is responsible for measuring, monitoring, and reporting market risks associated with the firm’s trading and derivative portfolios.

While Market Risk Management maintains ongoing communication with the revenue-generating business units, it is independent of such units.

Interest rate risk

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We are exposed to interest rate risk as a result of our trading inventory (primarily comprised of fixed income instruments) in our Capital Markets segment.

We actively manage the interest rate risk arising from our fixed income trading securities through the use of hedging strategies that involve U.S.

Changes in value of our trading inventory may result from fluctuations in interest rates, credit spreads, equity prices, macroeconomic factors, investor expectations or risk appetites, liquidity, as well as dynamic relationships among these factors.

We actively manage interest rate risk arising from our fixed income trading securities through the use of hedging strategies utilizing U.S.

Treasury securities, futures contracts, liquid spread products and derivatives.

In response to the significant market uncertainty caused by the COVID-19 pandemic, we took steps to proactively manage our market risk exposures, including enhanced review and monitoring of exposures and risk mitigation initiatives.

We monitor the Value-at-Risk (“VaR”) for all of our trading portfolios on a daily basis.

VaR is an appropriate statistical technique for estimating potential losses in trading portfolios due to typical adverse market movements over a specified time horizon with a suitable confidence level.

We apply the Fed’s Market Risk Rule (“MRR”) for the purpose of calculating our capital ratios.

Our primary method for controlling risks within trading inventories is through the use of dollar-based and exposure-based limits.

A hierarchy of limits exists at multiple levels, including firm, business unit, desk (e.g., for equities, corporate bonds, municipal bonds), product sub-type (e.g., below-investment-grade positions) and, at times, at the individual position.

For derivative positions, which are primarily comprised of interest rate swaps, we have established limits based on a number of factors, including interest rate, foreign exchange spot and forward rates, spread, ratio, basis, and volatility risk.

Derivative exposures are also monitored both for the total portfolio and by maturity periods.

Trading positions and derivatives are monitored against these limits through daily reports that are distributed to senior management.

During volatile markets, we may temporarily reduce limits and/or choose to pare our trading inventories to reduce risk.

We monitor Value-at-Risk (“VaR”) for all of our trading portfolios on a daily basis for risk management purposes and as a result of applying the Fed’s Market Risk Rule (“MRR”) for the purpose of calculating our capital ratios.

The MRR, also known as the “Risk-Based Capital Guidelines:

Market Risk” rule released by the Fed, the OCC and FDIC, requires us to calculate VaR for all of our trading portfolios (including derivatives), including fixed income, equity, and foreign exchange instruments.

To calculate VaR, we use historical simulation.

Market Risk” rule released by the Fed, the OCC and the FDIC, requires us to calculate VaR for all of our trading portfolios, including fixed income, equity, derivatives, and foreign exchange instruments.

However, there are inherent limitations of utilizing VaR including:

historical movements in markets may not accurately predict future market movements;

VaR does not take into account the liquidity of individual positions;

VaR does not estimate losses over longer time horizons;

and extended periods of one-directional markets potentially distort risks within the portfolio.

In addition, should markets become more volatile, actual trading losses may exceed VaR results presented on a single day and might accumulate over a longer time horizon.

As a result, management complements VaR with sensitivity analysis and stress testing and employs additional controls such as a daily

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review of trading results, review of aged inventory, independent review of pricing, monitoring of concentrations and review of issuer ratings.

To calculate VaR, we use models which incorporate historical simulation.

This approach assumes that historical changes in market conditions, such as in interest rates and equity prices, are representative of future changes.

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Assuming that future market conditions change as they have in the past twelve months, we would expect to incur losses greater than those predicted by our one-day VaR estimates about once every 100 trading days, or about three times per year on average.

For regulatory capital calculation purposes, we also report VaR numbers for a ten-day time horizon.

The Fed’s MRR requires us to perform daily back-testing procedures of our VaR model, whereby we compare each day’s projected VaR to its regulatory-defined daily trading losses, which exclude fees, commissions, reserves, net interest income and intraday trading.

Regulatory-defined daily trading losses are used to evaluate the performance of our VaR model and are not comparable to our actual daily net revenues.

Based on these daily “ex ante” versus “ex post” comparisons, we determine whether the number of times that regulatory-defined daily trading losses exceed VaR is consistent with our expectations at a 99% confidence level.

During the year ended September 30, 2020, our regulatory-defined daily loss in our trading portfolios exceeded our predicted VaR on 11 occasions due to significantly higher levels of market volatility during our fiscal second quarter as a result of the COVID-19 pandemic.

The following table sets forth the high, low, period-end and average daily one-day VaR for all of our trading portfolios, including fixed income, equity, and foreign exchange instruments, for the period and dates indicated.

For regulatory capital calculation purposes, we also report VaR and Stressed VaR numbers for a ten-day time horizon.

The VaR model is independently reviewed by our Model Risk Management function.

See the “Model risk” section that follows for further information.

The modeling of the risk characteristics of trading positions involves a number of assumptions and approximations that management believes to be reasonable.

However, there is no uniform industry methodology for estimating VaR, and different assumptions or approximations could produce materially different VaR estimates.

As a result, VaR results 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.

The following table sets forth the high, low, period-end and average daily one-day VaR for all of our trading portfolios, including fixed income and equity instruments, and for our derivatives for the periods and dates indicated.

Year ended September 30, 2021 Period-end VaR For the year ended September 30,

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Daily VaR $ 11 $ 1 $ 1 $ 8 Average daily VaR $ 4 $ 3

Our period-end VaR increased to $9 million as of September 2020 from $1 million as of September 2019, primarily due to the impact of increased volatility from the COVID-19 pandemic on our VaR model.

The modeling of the risk characteristics of trading positions involves a number of assumptions and approximations.

While management believes that these assumptions and approximations are reasonable, there is no uniform industry methodology for estimating VaR, and different assumptions or approximations could produce materially different VaR estimates.

As a result, VaR statistics are more reliable when used as indicators of risk levels and trends within a firm than as a basis for inferring differences in risk-taking across firms.

Average daily VaR was higher during fiscal 2021 compared to the prior year due to the impact of scenarios of elevated volatility as a result of the COVID-19 pandemic (which commenced in March 2020) on our VaR model during the first half of the year.

However, during our fiscal third quarter of 2021, the remaining COVID-19 pandemic-related scenarios fell outside of the VaR model’s 12-month historical simulation period, resulting in period-end VaR decreasing to $1 million as of September 30, 2021 from $8 million as of September 30, 2020.

The Fed’s MRR requires us to perform daily back-testing procedures for our VaR model, whereby we compare each day’s projected VaR to its regulatory-defined daily trading losses, which exclude fees, commissions, reserves, net interest income and intraday trading.

Regulatory-defined daily trading losses are used to evaluate the performance of our VaR model and are not comparable to our actual daily net revenues.

During the year ended September 30, 2021, our regulatory-defined daily losses in our trading portfolios did not exceed our predicted VaR.

Separately, RJF provides additional market risk disclosures to comply with the MRR, including 10-day VaR and 10-day Stressed VaR, which are available on our website at https://www.raymondjames.com/investor-relations/financial-information/filings-and-reports within “Other Reports and Information.”

Banking operations

Raymond James Bank maintains an interest-earning asset portfolio that is comprised of cash, C&I loans, commercial and residential real estate loans, REIT loans, tax-exempt loans and SBL and other loans, as well as agency-backed MBS and agency-backed CMOs (held in the available-for-sale securities portfolio), and SBA loan securitizations.

These interest-earning assets are primarily funded by client deposits.

Based on its current asset portfolio, Raymond James Bank is subject to interest rate risk.

Raymond James Bank analyzes interest rate risk based on forecasted net interest income, which is the net amount of interest received and interest paid, and the net portfolio valuation, both across a range of interest rate scenarios.

One of the objectives of Raymond James Bank’s Asset and Liability 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 Raymond James Bank’s interest rate risk, including scenario analysis and economic value of equity.

To ensure that Raymond James Bank remains within its tolerances established for net interest income, a sensitivity analysis of net interest income to interest rate conditions is estimated under a variety of scenarios.

We use simulation models and

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Management’s Discussion and Analysis

Separately, RJF provides additional market risk disclosures to comply with the MRR which are available on our website under https://www.raymondjames.com/investor-relations/financial-information/filings-and-reports within “Other Reports and Information.”

Should markets suddenly become more volatile, as they did in our fiscal second quarter of 2020, actual trading losses may exceed VaR results presented on a single day and might accumulate over a longer time horizon, such as a number of consecutive trading days.

Accordingly, management applies additional controls including position limits, a daily review of trading results, review of the status of aged inventory, independent controls on pricing, monitoring of concentration risk, review of issuer ratings and stress testing.

We utilize stress testing to complement our VaR analysis so as to measure risk under historical and hypothetical adverse scenarios.

During volatile markets, we may choose to pare our trading inventories to reduce risk, as we did during our fiscal second quarter of 2020.

Banking operations

RJ Bank maintains an interest-earning asset portfolio that is comprised of cash, C&I loans, tax-exempt loans, commercial and residential real estate loans, SBL and other loans, as well as agency MBS and agency CMOs (held in the available-for-sale securities portfolio), SBA loan securitizations and a trading portfolio of corporate loans.

These interest-earning assets are primarily funded by client deposits.

Based on its current asset portfolio, RJ Bank is subject to interest rate risk.

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 across 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.

RJ Bank uses simulation models and estimation techniques to assess the sensitivity of net interest income to movements in interest rates.

To ensure that RJ Bank remains within its tolerances established for net interest income, a sensitivity analysis of net interest income to interest rate conditions is estimated under a variety of scenarios.

The model estimates the sensitivity by calculating interest income and interest expense in a dynamic balance sheet environment using current repricing, prepayment, and reinvestment of cash flow assumptions over a twelve month time horizon.

estimation techniques to assess the sensitivity of net interest income to movements in interest rates.

Assumptions used in the model include interest rate movement, the slope of the yield curve, and balance sheet composition and growth.

The model also considers interest rate-related risks such as pricing spreads, pricing of client cash accounts, and prepayments.

Various interest rate scenarios are modeled in order to determine the effect those scenarios may have on net interest income.

Scenarios presented include instantaneous interest rate shocks of up 100 and 200 basis points and down 100 basis points.

The following table is an analysis of Raymond James Bank’s estimated net interest income over a 12-month period based on instantaneous shifts in interest rates (expressed in basis points) using our asset/liability model, which assumes that interest rates do not decline below zero.

While not presented, additional rate scenarios are performed, including interest rate ramps and yield curve shifts that may more realistically mimic the speed of potential interest rate movements.

RJ Bank also performs simulations on time horizons of up to five years to assess longer term impacts to various interest rate scenarios.

On a quarterly basis, RJ Bank tests expected model results to actual performance.

Additionally, any changes made to key assumptions in the model are documented and approved by RJ Bank’s Asset Liability Management Committee.

We utilize a hedging strategy using interest rate swaps as a result of RJ Bank’s asset and liability management process previously described.

For further information regarding this hedging strategy, see Note 2 of the Notes to Consolidated Financial Statements of 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 asset/liability model, which assumes that interest rates do not decline below zero.

We also perform simulations on time horizons of up to five years to assess longer-term impacts to various interest rate scenarios.

On a quarterly basis, we test expected model results to actual performance.

Additionally, any changes made to key assumptions in the model are documented and approved by Raymond James Bank’s Asset and Liability Committee.

Instantaneous changes in rate Net interest income

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Refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Net interest analysis” of this Form 10-K for a discussion of the impact changes in short-term interest rates could have on the firm’s operations.

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The following table shows the contractual maturities of RJ Bank’s loan portfolio at September 30, 2020, including contractual principal repayments.

In addition, we utilize a hedging strategy using interest rate swaps as a result of Raymond James Bank’s asset and liability management process.

For further information regarding this hedging strategy, see Note 2 of the Notes to Consolidated Financial Statements of this Form 10-K.

The following table shows the contractual maturities of our bank loan portfolio at September 30, 2021, including contractual principal repayments.

This table does not include any estimates of prepayments, which could shorten the average loan lives and cause the actual timing of the loan repayments to differ significantly from those shown in the table.

Loan amounts in the table exclude unearned income and deferred expenses.

$ in millions One year or less > One year – five

years > 5 years Total

Loans held for investment:

years > Five years Total

C&I loans $ 257 $ 4,663 $ 3,520 $ 8,440

CRE construction loans 26 149 2 177

CRE loans 727 1,637 508 2,872

REIT loans 168 924 20 1,112

Tax-exempt loans — 59 1,262 1,321

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Total loans held for investment 7,219 7,328 10,622 25,169

Loans held for sale — 1 101 102

Held for sale loans — 14 131 145

Total loans $ 7,219 $ 7,342 $ 10,753 $ 25,314

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, 2020.

Loan amounts in the table exclude unearned income and deferred expenses.

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Management’s Discussion and Analysis

The following table shows the distribution of the recorded investment of those bank loans that mature in more than one year between fixed and adjustable interest rate loans at September 30, 2021.

Interest rate type

$ in millions Fixed Adjustable Total

Loans held for investment:

C&I loans $ 303 $ 7,880 $ 8,183

CRE construction loans 2 149 151

CRE loans 90 2,055 2,145

REIT loans — 944 944

Tax-exempt loans 1,321 — 1,321

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Total loans held for investment 1,912 16,038 17,950

Loans held for sale 4 98 102

Held for sale loans 1 144 145

Total loans $ 1,913 $ 16,182 $ 18,095

Contractual loan terms for C&I, CRE, CRE construction and residential mortgage loans may include an interest rate floor, cap and/or fixed interest rates for a certain period of time, which would impact the timing of the interest rate reset for the respective loan.

See the discussion within the “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Risk management - Credit risk - Risk monitoring process” section of this Form 10-K for additional information regarding RJ Bank’s interest-only residential mortgage loan portfolio.

In our RJ Bank available-for-sale securities portfolio, we hold primarily fixed-rate agency MBS and agency CMOs which are carried at fair value on our Consolidated Statements of Financial Condition, with changes in the fair value of the portfolio recorded through OCI in our Consolidated Statements of Income and Comprehensive Income.

At September 30, 2020, our RJ Bank available-for-sale securities portfolio had a fair value of $7.65 billion with a weighted-average yield of 1.51% and average expected duration of three years.

Contractual loan terms for C&I, CRE, REIT and residential mortgage loans may include an interest rate floor, cap and/or fixed interest rates for a certain period of time, which would impact the timing of the interest rate reset for the respective loan.

See the discussion within the “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Risk management - Credit risk - Risk monitoring process” section of this Form 10-K for additional information regarding Raymond James Bank’s interest-only residential mortgage loan portfolio.

In our available-for-sale securities portfolio, we hold primarily fixed-rate agency-backed MBS and agency-backed CMOs which are carried at fair value on our Consolidated Statements of Financial Condition, with changes in the fair value of the portfolio recorded through OCI on our Consolidated Statements of Income and Comprehensive Income.

At September 30, 2021, our available-for-sale securities portfolio had a fair value of $8.32 billion with a weighted-average yield of 1.14% and a weighted-average life of approximately four years.

See Note 5 of the Notes to Consolidated Financial Statements of this Form 10-K for additional information.

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Our broker-dealer activities are generally client-driven, and we carry equity securities as part of our trading inventory to facilitate such activities, although the amounts are not as significant as our fixed income trading inventory.

We attempt to reduce the risk of loss inherent in our inventory of equity securities by monitoring those security positions throughout each day and establishing position limits.

We attempt to reduce the risk of loss inherent in our inventory of equity securities by monitoring those security positions each day and establishing position limits.

Equity securities held in our trading inventory are generally included in VaR.

In addition, we have a private equity portfolio, included in “Other investments” on our Consolidated Statements of Financial Condition, which is comprised of various direct investments, as well as investments in third-party private equity funds and various legacy private equity funds which we sponsor.

Of the total private equity investments at September 30, 2020 of $ 116

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million, the portion we owned was $ 90 million.

Of the total private equity investments at September 30, 2021 of $169 million, the portion we owned was $120 million.

See Note 4 of the Notes to Consolidated Financial Statements of this Form 10-K for additional information on this portfolio.

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We are subject to foreign exchange risk due to our investments in foreign subsidiaries, as well as transactions and resulting balances denominated in a currency other than the U.S.

For example, a portion of our bank loan portfolio includes loans which are denominated in Canadian dollars, totaling $1.06 billion and $1.10 billion at September 30, 2020 and 2019, respectively, when converted to the U.S.

A portion of such loans are held by RJ Bank’s Canadian subsidiary, which is discussed in the following sections.

For example, our bank loan portfolio includes loans which are denominated in Canadian dollars, totaling $1.29 billion and $1.05 billion at September 30, 2021 and 2020, respectively, when converted to the U.S.

A majority of such loans are held by Raymond James Bank’s Canadian subsidiary, which is discussed in the following sections.

Investments in foreign subsidiaries

RJ Bank has an investment in a Canadian subsidiary, resulting in foreign exchange risk.

To mitigate its foreign exchange risk, RJ Bank utilizes short-term, forward foreign exchange contracts.

Raymond James Bank has an investment in a Canadian subsidiary, resulting in foreign exchange risk.

To mitigate its foreign exchange risk, Raymond James Bank utilizes short-term, forward foreign exchange contracts.

These derivatives are primarily accounted for as net investment hedges in the consolidated financial statements.

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of CAD 346 million at September 30, 2021, which was not hedged.

Foreign exchange gains/losses related to this investment are primarily reflected in OCI on our Consolidated Statements of Income and Comprehensive Income.

Foreign exchange gains/losses related to this investment are primarily reflected in OCI on our Consolidated Statements of

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Income and Comprehensive Income.

See Note 20 of the Notes to Consolidated Financial Statements of this Form 10-K for further information regarding our components of OCI.

We also have foreign exchange risk associated with our investments in subsidiaries located in Europe.

These investments are not hedged and we do not believe we have material foreign exchange risk either individually, or in the aggregate, pertaining to these subsidiaries.

These investments are not hedged and we do not believe we had material foreign exchange risk either individually, or in the aggregate, pertaining to these subsidiaries as of September 30, 2021.

As previously noted, on July 29, 2021 we announced our intention to make an offer for the entire issued and to be issued share capital of U.K.-based Charles Stanley at a price of £5.15 per share, or approximately £279 million.

Prior to closing, we will use U.S.

dollars to purchase the required British pounds sterling (“GBP”) to be used at closing.

Upon closing, this transaction will increase our foreign exchange exposure associated with investments in subsidiaries located in Europe.

Transactions and resulting balances denominated in a currency other than the U.S.

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The foreign exchange risk associated with a portion of such transactions and balances denominated in foreign currency are mitigated utilizing short-term, forward foreign exchange contracts.

Such derivatives are not designated hedges and therefore, the related gains/losses associated with these contracts are included in “Other” revenues in our Consolidated Statements of Income and Comprehensive Income.

Such derivatives are not designated hedges and therefore, the related gains/losses are included in “Other” revenues in our Consolidated Statements of Income and Comprehensive Income.

See Note 6 of the Notes to Consolidated Financial Statements of this Form 10-K for information regarding our derivatives.

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Credit risk is an integral component of the profit assessment of lending and other financing activities.

We are exposed to credit risk through our brokerage activities, as well as our lending activities, primarily in RJ Bank.

The decline in economic activity as a result of COVID-19 has caused increased credit risk in general and particularly with regard to companies in sectors that have been most significantly impacted by the economic disruption, including energy, airlines, entertainment and leisure, restaurants and gaming.

Given the stresses on certain of our clients’ liquidity, we have enhanced our credit monitoring activities, with an increased focus on monitoring our credit exposures and counterparty credit risk.

Since the onset of the pandemic, RJ Bank has enacted risk mitigation strategies including, but not limited to, the sale of loans in those sectors with a high likelihood of adverse impact arising from the pandemic.

We have also required collateral to be posted across our credit risk exposures in accordance with agreements with our borrowers and counterparties.

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).

Repurchase agreements consist primarily of securities issued by the U.S.

government or its agencies.

Receivables from and payables to clients and securities borrowing 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

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Management’s Discussion and Analysis

underwritings, may involve exposure to individual issuers and businesses.

We seek to mitigate 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 initial decline in economic activity as a result of the COVID-19 pandemic caused increased credit risk particularly with regard to companies in sectors that were most significantly impacted by the economic disruption.

The speed and magnitude in which various sectors have recovered since the onset of the pandemic has been continually evolving.

Given the stresses on certain of our clients’ liquidity, we enhanced our credit monitoring activities, with an increased focus on monitoring our credit exposures and counterparty credit risk.

In addition, since the onset of the COVID-19 pandemic, Raymond James Bank has enacted risk mitigation strategies including, but not limited to, the sale of loans in those sectors with a high likelihood of adverse impact arising from the pandemic.

Although economic conditions have generally improved, we have maintained our increased focus on monitoring our credit exposures and counterparty credit risk.

Brokerage activities

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We are exposed to risk that these counterparties may not fulfill their obligations.

In addition, certain commitments, including underwritings, may create exposure to individual issuers and businesses.

The risk of default depends on the creditworthiness of the counterparty and/or the issuer of the instrument.

We manage this risk by imposing and monitoring individual and aggregate position limits within each business segment for each counterparty, conducting regular credit reviews of financial counterparties, reviewing security and loan concentrations, holding and calculating the fair value of collateral on certain transactions and conducting business through clearing organizations, which may guarantee performance.

In addition, we may be subject to concentration risk if we hold large positions in or have large commitments to a single counterparty, borrower, or group of similar counterparties or borrowers (e.g., in the same industry).

We seek to mitigate these risks by imposing and monitoring individual and aggregate position limits within each business segment for each counterparty, conducting regular credit reviews of financial counterparties, reviewing security and loan concentrations, holding and calculating the fair value of collateral on certain transactions and conducting business through clearing organizations, which may guarantee performance.

See Notes 2, 6 and 7 of the Notes to Consolidated Financial Statements of this Form 10-K for further information about our credit risk mitigation related to derivatives and collateralized agreements.

Our client activities involve the execution, settlement, and financing of various transactions on behalf of our clients.

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We adjust our margin requirements if we believe our risk exposure is not appropriate based on market conditions.

In addition, when clients execute a purchase, we are at some risk that the client will default on their financial obligation associated with the trade.

In addition, when clients execute a

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Management’s Discussion and Analysis

purchase, we are at some risk that the client will default on their financial obligation associated with the trade.

If this occurs, we may have to liquidate the position at a loss.

We offer loans to financial advisors and certain other key revenue producers primarily for recruiting, transitional cost assistance and retention purposes.

We offer loans to financial advisors for recruiting and retention purposes.

We have credit risk and may incur a loss primarily in the event that such borrower is no longer affiliated with us.

See Notes 2 and 9 of the Notes to Consolidated Financial Statements of this Form 10-K for further information about our loans to financial advisors.

Banking activities

RJ Bank has a substantial loan portfolio.

While RJ Bank’s loan portfolio is diversified, a significant downturn in the overall economy, such as that experienced in fiscal 2020 as a result of the COVID-19 pandemic, deterioration in real estate values or a significant issue within any sector or sectors where RJ Bank has a concentration will generally result in large provisions for loan losses and/or charge-offs.

RJ Bank determines the allowance that is 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.

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, tax-exempt, residential, SBL and other credit exposures.

The strategy also includes diversification on a geographic, industry and customer level, regular credit examinations and management reviews of all corporate and tax-exempt loans as well as individual delinquent residential loans.

Raymond James Bank has a substantial loan portfolio.

While our bank loan portfolio is diversified, a significant downturn in the overall economy, such as that experienced in our fiscal year 2020 as a result of the COVID-19 pandemic, deterioration in real estate values or a significant issue within any sector or sectors where we have a concentration will generally result in large provisions for credit losses and/or charge-offs.

Conversely, should the economy recover at a faster pace than initially forecasted, or the negative impact of the significant downturn event be less than originally projected, we may experience a benefit for credit losses and/or recovery of amounts previously charged off, the timing and magnitude of which can be uncertain.

We determine the allowance required for specific loan grades based on relative risk characteristics of the loan portfolio.

On an ongoing basis, we evaluate our methods for determining the allowance for each class of loans and make enhancements we consider appropriate.

Our strategy for credit risk management related to bank loans includes well-defined credit policies, uniform underwriting criteria, and ongoing risk monitoring and review processes for all corporate, tax-exempt, residential, SBL and other credit exposures.

The strategy also includes diversification on a geographic, industry and client level, regular credit examinations and management reviews of all corporate and tax-exempt loans as well as 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 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 inherent losses.

RJ Bank utilizes a comprehensive credit risk rating system to measure the credit quality of individual corporate and tax-exempt loans and related unfunded lending commitments, including the probability of default and/or loss given default of each corporate and tax-exempt 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.

RJ Bank’s allowance for loan losses methodology is described in Note 2 of the Notes to Consolidated Financial Statements of 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.

We seek to identify potential problem loans early, record any necessary risk rating changes and charge-offs promptly, and maintain appropriate reserve levels for expected losses.

We utilize a comprehensive credit risk rating system to measure the credit quality of individual corporate and tax-exempt loans and related unfunded lending commitments, including the probability of default and/or loss given default of each corporate and tax-exempt loan and commitment outstanding.

For our SBL and residential mortgage loans, we utilize the credit risk rating system used by bank regulators in measuring the credit quality of each homogeneous class of loans.

Our allowance for credit losses methodology is described in Note 2 of the Notes to Consolidated Financial Statements of this Form 10-K.

As our bank loan portfolio is segregated into six portfolio segments, likewise, the allowance for credit losses is segregated by these same segments.

The risk characteristics relevant to each portfolio segment are as follows.

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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

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.

This portfolio segment includes CRE construction loans which also look at other risks such as project budget overruns and performance variables related to the contractor and subcontractors.

With respect to commercial construction of residential developments, there is also the risk that the builder has a geographical concentration of developments.

Adverse information arising from any of these factors may have a negative effect on the credit quality of loans in this segment.

Loans in this segment are made to businesses that own or finance income-producing real estate across various property sectors.

This portfolio segment may include extensions of credit to companies that engage in real estate development.

Repayment of these loans is dependent on income generated from real estate properties or the sale of real estate.

A portion of this segment may consist of loans secured by residential product types (single-family residential, including condominiums and land held for residential development) within a range of markets.

Deterioration in the financial condition of the operating business, reductions in the value of real estate, as well as increased vacancy and rental rates may all adversely affect the loans in this segment.

RAYMOND JAMES FINANCIAL, INC.

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Management’s Discussion and Analysis

deterioration in the financial condition of the operating business.

The underlying cash flows generated by non-owner-occupied properties may be adversely affected by increased vacancy and rental rates, which are monitored on a quarterly basis.

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 previously described.

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.

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.

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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.

These loans are subject to demographic risk, therefore much of the credit assessment of tax-exempt loans is driven by the entity’s revenue base and the general economic environment.

Adverse developments in either of these areas may have a negative effect on the credit quality of loans in this segment.

Residential mortgage (includes home equity loans/lines):

All of RJ Bank’s residential mortgage loans adhere to stringent underwriting parameters pertaining to credit score and credit history, debt-to-income ratio of borrower, loan-to-value (“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 loans to subprime borrowers.

Loans with deeply discounted teaser rates are not originated or purchased.

All of our residential mortgage loans adhere to stringent underwriting parameters pertaining to credit score and credit history, debt-to-income ratio of borrower, loan-to-value (“LTV”), and combined LTV (including second mortgage/home equity loans).

We do not originate or purchase adjustable rate mortgage (“ARM”) loans with negative amortization, reverse mortgages, or loans to subprime borrowers.

Loans with deeply discounted teaser rates are also 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.

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Past due loans are minimal as any past due amounts result in a notice to the client for payment or the potential sale of the collateral which will bring the loan to a current status.

In evaluating credit risk, 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.

In evaluating credit risk, we consider trends in loan performance, the level of allowance coverage relative to similar banking institutions, industry or client concentrations, the loan portfolio composition and macroeconomic factors (both current and forecasted).

These factors have a potentially negative impact on loan performance and net charge-offs.

However, during fiscal year 2020, 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, 2020, including the risk profile of the portfolios, net charge-offs during the period, the level of nonperforming loans, delinquency ratios and the impact of the COVID-19 pandemic.

RJ Bank also considered the uncertainty related to certain industry sectors and the extent of credit exposure to specific borrowers within the portfolio.

Finally, RJ Bank considered current economic conditions that might impact the portfolio.

In response to the COVID-19 pandemic, we performed a portfolio-wide assessment of our loan portfolio.

As a result, we downgraded loans in certain impacted industries, which gave rise to elevated loan loss provisions during fiscal 2020.

In addition, we sold approximately $695 million (before charge-offs and discounts or premiums) of corporate loans during the fiscal year in industries that we believe to be most vulnerable to the COVID-19 pandemic.

We will continue to assess the impact of COVID-19 and, as more information becomes available regarding the financial repercussions to our borrowers, the risk ratings for individual loans will be updated and the allowance will be adjusted accordingly.

Our allowance for credit losses as of September 30, 2021 was determined under the CECL model due to our October 1, 2020 adoption of the standard.

See Notes 2 and 8 of the Notes to Consolidated Financial Statements of this Form 10-K for further information.

Our allowance for credit losses, as well as our methodologies and assumptions used in estimating the allowance, are regularly evaluated to determine if our methods and estimates continue to be appropriate for each class of loans, with adjustments made on a quarterly basis.

Several factors were taken into consideration in evaluating the allowance for credit losses at September 30, 2021, including loan and borrower characteristics, such as internal risk ratings, delinquency status, collateral type and the remaining term of the loan adjusted for expected prepayments.

In addition, the estimate of credit losses considered the relatively small amount of net charge-offs during the period, the level of nonperforming loans, and the impact of the COVID-19 pandemic.

We also considered the uncertainty related to certain industry sectors, including commercial real estate, and the extent of credit exposure to specific borrowers within the portfolio.

Finally, we considered current economic conditions that might impact the portfolio.

We continue to assess the impact of both the COVID-19 pandemic and the economic recovery therefrom, as new information becomes available regarding the financial repercussions to our borrowers, the risk ratings for individual loans will be updated and the allowance will be adjusted accordingly.

RAYMOND JAMES FINANCIAL, INC.

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Management’s Discussion and Analysis

The following table presents RJ Bank’s changes in the allowance for loan losses.

The following table presents our changes in the allowance for credit losses related to our bank loan portfolio.

Year ended September 30,

$ in millions 2021 2020 2019 2018 2017

Allowance for loan losses beginning of year $ 218 $ 203 $ 190 $ 197 $ 172

Provision for loan losses 233 22 20 13 28

Allowance for credit losses beginning of year $ 354 $ 218 $ 203 $ 190 $ 197

Impact of CECL Adoption 9 — — — —

Provision/(benefit) for credit losses (32) 233 22 20 13

C&I loans (4) (96) (2) (10) (26)

CRE loans (10) (2) (5) — —

REIT loans — (2) — — —

Residential mortgage loans — — (1) — (1)

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Foreign exchange translation adjustment 2 1 (1) 1 1

Allowance for loan losses end of year $ 354 $ 218 $ 203 $ 190 $ 197

Allowance for loan losses to loans held for investment 1.65 % 1.04 % 1.04 % 1.11 % 1.30 %

See further explanation of the loan loss provision in “Item 7 - Management’s Discussion and Analysis of Financial Condition and Results of Operations - Results of Operations - RJ Bank” of this Form 10-K.

Allowance for credit losses end of year (1)

$ 320 $ 354 $ 218 $ 203 $ 190

Allowance for credit losses as a % of total bank loans held for investment 1.27 % 1.65 % 1.04 % 1.04 % 1.11 %

(1) The allowance for credit losses at September 30, 2021 was computed under the CECL methodology, while the prior years were computed under the incurred loss methodology.

See further explanation of the current year benefit for credit losses in “Item 7 - Management’s Discussion and Analysis of Financial Condition and Results of Operations - Results of Operations - Raymond James Bank” of this Form 10-K.

The level of charge-off activity is a factor that is considered in evaluating the potential severity of future credit losses.

The following tables present net loan (charge-offs)/recoveries and the percentage of net loan (charge-offs)/recoveries to the average outstanding loan balances by loan portfolio segment.

Of the $98 million of charge-offs in fiscal 2020, the majority was associated with loans we sold as part of our risk mitigation strategies.

Year ended September 30,

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CRE loans (10) 0.37 % (2) 0.08 % (5) 0.22 %

REIT loans — — % (2) 0.15 % — — %

Residential mortgage loans 1 0.02 % 2 0.04 % 1 0.02 %

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CRE loans — — % 5 0.30 %

Residential mortgage loans 2 0.06 % — — %

Total $ (8) 0.04 % $ (21) 0.13 %

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The level of nonperforming loans is another indicator of potential future credit losses.

The following tables present the nonperforming loans balance and total allowance for loan losses balance for the periods presented.

The following tables present the nonperforming loans balance and total allowance for credit losses for the periods presented.

September 30,

2021 2020 2019

$ in millions Nonperforming loan balance Allowance for loan losses balance Nonperforming loan balance Allowance for loan losses balance Nonperforming loan balance Allowance for loan losses balance

Loans held for investment:

$ in millions Nonperforming loan balance Allowance for credit losses balance (1)

Nonperforming loan balance Allowance for credit losses balance (1)

C&I loans $ 39 $ 191 $ 2 $ 200 $ 19 $ 139

CRE construction loans — 3 — 3 — 3

CRE loans 20 66 14 81 8 34

REIT loans — 22 — 36 — 15

Tax-exempt loans — 2 — 14 — 9

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SBL and other — 4 — 5 — 5

Total $ 30 $ 354 $ 43 $ 218 $ 25 $ 203

Total nonperforming loans as a % of RJ Bank total loans 0.14 % 0.21 % 0.12 %

Total nonperforming loans held for investment (2)

$ 74 $ 320 $ 30 $ 354 $ 43 $ 218

Total nonperforming loans as a % of total bank loans 0.29 % 0.14 % 0.21 %

(1) The allowance for credit losses at September 30, 2021 was computed under the CECL methodology, while the prior years were computed under the incurred loss methodology.

(2) Total nonperforming loans held for investment at September 30, 2021 included $61 million of nonperforming loans which were current pursuant to their contractual terms, including a $39 million C&I loan.

September 30,

$ in millions Nonperforming loan balance Allowance for loan losses balance Nonperforming loan balance Allowance for loan losses balance

Loans held for investment:

$ in millions Nonperforming loan balance Allowance for credit losses balance (1)

Nonperforming loan balance Allowance for credit losses balance (1)

C&I loans $ 2 $ 123 $ 5 $ 120

CRE construction loans — 1 — 1

CRE loans — 33 — 28

REIT loans — 17 — 15

Tax-exempt loans — 9 — 6

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SBL and other — 4 — 4

Total $ 39 $ 190 $ 81 $ 197

Total nonperforming loans as a % of RJ Bank total loans 0.23 % 0.53 %

Included in nonperforming residential mortgage loans as of September 30, 2020, were $7 million in loans for which $3 million in charge-offs were previously recorded, resulting in less exposure within the remaining balance.

See Note 7 in the Notes to the Consolidated Financial Statements of this Form 10-K for loan categories as a percentage of total loans receivable.

Total nonperforming loans held for investment $ 25 $ 203 $ 39 $ 190

Total nonperforming loans as a % of total bank loans 0.12 % 0.23 %

(1) The allowance for credit losses at September 30, 2021 was computed under the CECL methodology, while the prior years were computed under the incurred loss methodology.

The nonperforming loan balances in the preceding table exclude $8 million, $10 million, $12 million, $12 million and $14 million as of September 30, 2021, 2020, 2019, 2018, and 2017, respectively, of residential TDRs which were returned to accrual status in accordance with our policy.

Total nonperforming assets, including the nonperforming loans in the preceding table and other real estate acquired in the settlement of residential mortgages, amounted to $32 million, $46 million, $28 million, $44 million and $86 million as of September 30, 2020, 2019, 2018, 2017, and 2016, respectively.

Total nonperforming assets as a percentage of RJ Bank total assets were 0.10%, 0.18%, 0.12%, 0.21% and 0.50% as of September 30, 2020, 2019, 2018, 2017, and 2016 respectively.

Although our nonperforming assets as a percentage of RJ Bank assets remained low as of September 30, 2020, prolonged or further market deterioration could result in an increase in our nonperforming assets, an increase in our allowance for loan losses and/or an increase in net charge-offs in future periods, although the extent will depend on future developments that are highly uncertain.

We have received requests from certain borrowers for forbearance, or deferral of their loan payments to us, driven or exacerbated by the economic impacts of the COVID-19 pandemic.

Certain borrowers have also requested modifications of covenant terms.

In accordance with the CARES Act, we have elected to not apply TDR classification to any COVID-19 related loan modifications that were performed after March 1, 2020 to borrowers who were current as of December 31, 2019.

Based on the outstanding principal balance as of the end of September 30, 2020, we have active short-term payment deferrals on approximately $189 million and $77 million of our corporate and residential loans, respectively.

Such deferrals could delay the recognition of net charge-offs, delinquencies, and nonaccrual status for those borrowers who would have otherwise moved into past due or nonaccrual status.

The following table presents total nonperforming assets, including the nonperforming loans in the preceding table and other real estate acquired in the settlement of residential mortgages, as a percentage of Raymond James Bank’s total assets.

Year ended September 30,

$ in millions 2021 2020 2019 2018 2017

Total nonperforming assets (1)

$ 74 $ 32 $ 46 $ 28 $ 44

Total nonperforming assets as a % of Raymond James Bank’s total assets 0.20 % 0.10 % 0.18 % 0.12 % 0.21 %

(1) Total nonperforming assets at September 30, 2021 included $61 million of nonperforming loans which were current pursuant to their contractual terms, including a $39 million C&I loan.

Although our nonperforming assets as a percentage of Raymond James Bank’s assets remained low as of September 30, 2021, prolonged market deterioration could result in an increase in our nonperforming assets, an increase in our allowance for credit losses and/or an increase in net charge-offs in future periods, although the extent will depend on future developments that are highly uncertain.

See Note 8 in the Notes to the Consolidated Financial Statements of this Form 10-K for loan categories as a percentage of total bank loans.

RAYMOND JAMES FINANCIAL, INC.

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Management’s Discussion and Analysis

We have received requests from certain borrowers for forbearance, which is generally a short-term deferral of their loan payments or modification of certain covenant terms driven or exacerbated by the economic impacts of the COVID-19 pandemic.

Based on the amortized costs, approximately $13 million and $3 million of our corporate and residential loans, respectively, were in active forbearance as of September 30, 2021.

As certain borrowers exit forbearance, we have received requests for loan modifications, including repayment plans.

In accordance with the CARES Act and the Consolidated Appropriations Act, 2021, we are not applying TDR classification to any COVID-19 related loan modifications performed from March 1, 2020 through December 31, 2021, to borrowers who were current as of December 31, 2019.

As of September 30, 2021, we had residential loans of $10 million for which the borrower had requested a loan modification, where the request had been initiated but not completed or approved.

As the delinquency status is not affected for loans that are in active forbearance or for loan modifications that have not yet been approved, the recognition of charge-offs, delinquencies, and nonaccrual status could be delayed for those borrowers who would have otherwise moved into past due or nonaccrual status.

Forbearance and modification requests have continued to decline and the majority of the borrowers that have exited forbearance but have not requested loan modifications, have become current on their principal and interest payments.

Loan underwriting policies

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 described in the following sections.

A component of Raymond James Bank’s credit risk management strategy is conservative, well-defined policies and procedures.

Raymond James Bank’s underwriting policies for the major types of loans are described in the following sections.

Residential mortgage and SBL and other loan portfolios

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).

As of September 30, 2020, approximately 65% of the residential loans were fully documented loans to industry standards and 96% of the residential mortgage loan portfolio consisted of owner-occupant borrowers (77% for their primary residences and 19% for second home residences).

Our residential mortgage loan portfolio consists of first mortgage loans originated by us via referrals from our PCG financial advisors and the general public, as well as first mortgage loans purchased by us.

All of our 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).

As of September 30, 2021, 96% of the residential mortgage loan portfolio consisted of owner-occupant borrowers (75% for their primary residences and 21% for second home residences).

Approximately 37% of the first lien residential mortgage loans were ARM loans, which receive interest-only payments based on a fixed rate for an initial period of the loan and then become fully amortizing, subject to annual and lifetime interest rate caps.

A significant portion of our originated 15 or 30-year fixed-rate mortgage loans are sold in the secondary market.

RJ Bank’s SBL and other portfolio is comprised primarily of loans fully collateralized by client’s marketable securities and represented 19% of RJ Bank’s total loan portfolio as of September 30, 2020.

The underwriting policy for the SBL and other portfolio 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.

Our SBL and other portfolio is primarily comprised of loans fully collateralized by client’s marketable securities and represented 24% of our total loan portfolio as of September 30, 2021.

The underwriting policy for the SBL and other portfolio primarily includes a review of collateral, including LTV, and a review of repayment history.

While we have chosen not to participate in any government-sponsored loan modification programs, our loan modification policy takes into consideration some of the programs’ parameters and supports every effort to assist borrowers within the guidelines of safety and soundness.

In general, we consider the qualification terms outlined in the government-sponsored programs as well as the affordability test and other factors.

We retain 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 us to mitigate credit losses.

Corporate and tax-exempt loan portfolios

RJ Bank’s corporate and tax-exempt loan portfolios were comprised of approximately 500 borrowers, the majority of which are underwritten, managed and reviewed at our 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.

Our corporate and tax-exempt loan portfolios were comprised of approximately 500 borrowers, the majority of which are underwritten, managed and reviewed at our corporate headquarters location, which facilitates close monitoring of the portfolio by credit risk personnel, relationship officers and senior bank executives.

Our corporate loan portfolio is diversified among a number of industries in both the U.S.

and Canada and is comprised of project finance real estate loans, commercial lines of credit and term loans, the majority of which are participations in Shared National Credit (“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.

We are sometimes involved in the syndication of the loan at inception and some of these loans have been purchased in secondary trading markets.

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.

RJ Bank’s tax-exempt loans are long-term loans to governmental and nonprofit entities.

Our 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.

Regardless of the source, all corporate and tax-exempt loans are independently underwritten to RJ Bank credit policies and are subject to approval by a loan committee, and credit quality is monitored on an on-going basis by RJ Bank’s 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 and tax-exempt loans are subject to RJ Bank’s regulatory review.

Regardless of the source, all corporate and tax-exempt loans are independently underwritten to our credit policies and are subject to approval by a loan committee, and credit quality is monitored on an ongoing basis by our lending staff.

Our 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

RAYMOND JAMES FINANCIAL, INC.

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Management’s Discussion and Analysis

limits, secondary sources of repayment, municipality demographics, and other criteria.

A large portion of our corporate loans are to borrowers in industries in which we have expertise through coverage provided by our Capital Markets research analysts.

Approximately half of our corporate borrowers are public companies.

Our 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, corporate and tax-exempt loans are subject to 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, corporate and tax-exempt credit exposures, as well as our rigorous processes to manage and limit credit losses arising from loan delinquencies.

Another component of credit risk strategy for our bank loan portfolio is the ongoing risk monitoring and review processes, including our internal loan review process, for all residential, SBL, corporate and tax-exempt credit exposures, as well as our rigorous processes to manage and limit credit losses arising from loan delinquencies.

There are various other factors included in these processes, depending on the loan portfolio.

Residential mortgage and SBL and other loan portfolios

The collateral securing RJ Bank’s SBL and other portfolio is monitored on a recurring basis, with marketable collateral monitored on a daily basis.

Collateral adjustments are made by the borrower as necessary to ensure RJ Bank’s loans are adequately secured, resulting in minimizing its credit risk.

The collateral securing our SBL and other portfolio is monitored on a recurring basis, with marketable collateral monitored on a daily basis.

Collateral adjustments, as triggered by our monitoring procedures, are made by the borrower as necessary to ensure our loans are adequately secured, resulting in minimizing our credit risk.

Collateral calls have been minimal relative to our SBL and other portfolio with no losses incurred to date.

We track and review many factors to monitor credit risk in RJ Bank’s residential mortgage loan portfolio.

We track and review many factors to monitor credit risk in our residential mortgage loan portfolio.

The factors include, but are not limited to:

loan performance trends, loan product parameters and qualification requirements, borrower credit scores, level of documentation, loan purpose, geographic concentrations, average loan size and LTV ratios.

These measures, while considered and reviewed in establishing the allowance for loan losses, have not resulted in any material adjustments to RJ Bank’s historical loss rates.

See Note 8 in the Notes to Consolidated Financial Statements of this Form 10-K for additional information.

The following table presents a summary of delinquent residential mortgage loans, the vast majority of which are first mortgage loans, which are comprised of loans which are two or more payments past due as well as loans in the process of foreclosure.

Amounts in the following table do not include residential loans to borrowers who have been granted forbearance as a result of the COVID-19 pandemic and whose loans were not considered delinquent prior to the forbearance.

Such loans may be considered delinquent after the forbearance period, depending on their payment status.

As a result, the amount of residential loans considered delinquent may increase significantly in fiscal 2021 as the forbearance periods expire.

Amounts in the following table do not include residential loans to borrowers who were granted forbearance as a result of the COVID-19 pandemic and whose loans were not considered delinquent prior to the forbearance.

Such loans may be considered delinquent after the forbearance period or completion of loss mitigation efforts, depending on their payment status.

As a result, the amount of residential loans considered delinquent may increase significantly in the future.

Amount of delinquent residential loans Delinquent residential loans as a percentage of outstanding loan balances

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September 30, 2020 $ 3 $ 7 $ 10 0.06 % 0.14 % 0.20 %

Our September 30, 2020 percentage continues to compare favorably to the national average for over 30 day delinquencies of 2.68%, as most recently reported by the Fed.

Our September 30, 2021 percentage compares favorably to the national average for over 30 day delinquencies of 2.67%, as most recently reported by the Fed.

To manage and limit credit losses, we maintain a rigorous process to manage our loan delinquencies.

With all residential 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 quarterly to discuss the status, collection strategy and charge-off recommendations on every residential mortgage loan over 60 days past due.

Our 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 (e.g., appraisers, attorneys, etc.).

Additionally, every residential mortgage loan over 60 days past due is reviewed by our personnel monthly and documented in a written report detailing delinquency information, balances, collection status, appraised value, and other data points.

Our senior management meets quarterly to discuss the status, collection strategy and charge-off 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.

RAYMOND JAMES FINANCIAL, INC.

AND SUBSIDIARIES

Management’s Discussion and Analysis

Credit risk is also managed by diversifying the residential mortgage portfolio.

Most of the loans in our residential loan portfolio are to Private Client Group clients across the country.

The following table details the geographic concentrations (top five states) of RJ Bank’s one-to-four family residential mortgage loans.

Most of the loans in our residential loan portfolio are to PCG clients across the U.S.

The following table details the geographic concentrations (top five states) of our one-to-four family residential mortgage loans.

September 30, 2021

Loans outstanding as a % of RJ Bank total residential mortgage loans Loans outstanding as a % of RJ Bank total loans

Loans outstanding as a % of total residential mortgage loans Loans outstanding as a % of total bank loans

CA 25.6% 5.4%

FL 17.6% 3.7%

RAYMOND JAMES FINANCIAL, INC.

AND SUBSIDIARIES

Management’s Discussion and Analysis

Loans where borrowers may be subject to payment increases include ARM loans with terms that initially require payment of interest only.

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The weighted-average number of years before the remainder of the loans, which were still in their interest-only period at September 30, 2021, begins amortizing is 6 years.

A component of credit risk management for the residential portfolio is the LTV ratio and borrower credit score at origination or purchase.

The weighted-average LTV ratios and FICO scores at origination of RJ Bank’s residential first mortgage loan portfolio were 65% and 762, respectively.

Corporate and tax-exempt loans

Credit risk in RJ Bank’s corporate and tax-exempt loan portfolios is monitored on an individual loan basis for trends in borrower operating performance, payment history, credit ratings, collateral performance, loan covenant compliance, semi-annual SNC exam results, municipality demographics and other factors including industry performance and concentrations.

Credit risk in our corporate and tax-exempt loan portfolios is monitored on an individual loan basis for trends in borrower operating performance, payment history, credit ratings, collateral performance, loan covenant compliance, semi-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 exams 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.

The majority of RJ Bank’s tax-exempt loan portfolio is comprised of loans to investment-grade borrowers.

See Note 2 of the Notes to Consolidated Financial Statements of this Form 10-K, specifically the “Bank loans, net” section, for additional information on RJ Bank’s allowance for loan loss policies.

Credit risk is managed by diversifying the corporate loan portfolio.

RJ Bank’s corporate loan portfolio does not contain a significant concentration in any single industry.

The following table details the industry concentrations (top five categories) of RJ Bank’s corporate loans.

The individual loan ratings resulting from the SNC exams are incorporated in our internal loan ratings when the ratings are received.

If the SNC rating is lower on an individual loan than our internal rating, the loan is downgraded.

While we consider historical SNC exam results in our loan ratings methodology, differences between the SNC exam and internal ratings on individual loans typically arise due to subjectivity of the loan classification process.

Downgrades resulting from these differences may result in additional provisions for credit losses in periods when SNC exam results are received.

The majority of our tax-exempt loan portfolio is comprised of loans to investment-grade borrowers.

See Note 2 of the Notes to Consolidated Financial Statements of this Form 10-K for additional information on our allowance for credit losses policies.

Credit risk is managed by diversifying the corporate bank loan portfolio.

Our corporate bank loan portfolio does not contain a significant concentration in any single industry.

The following table details the industry concentrations (top five categories) of our corporate bank loans.

September 30, 2021

Loans outstanding as a % of RJ Bank total corporate loans Loans outstanding as a % of RJ Bank total loans

Loans outstanding as a % of total corporate bank loans Loans outstanding as a % of total bank loans

Office real estate 7.4% 3.6%

Automotive/transportation 6.7% 3.5%

Hospitality 6.5% 3.4%

Consumer products and services 6.8% 3.4%

Business systems and services 6.7% 3.3%

Automotive/transportation 6.3% 3.1%

Multi-family 5.9% 2.9%

The COVID-19 pandemic has negatively impacted our corporate loan portfolio and could continue to do so in the future.

Although we have reduced our exposure to sectors that we believe to be most vulnerable to the COVID-19 pandemic, such as the energy, airlines, entertainment and leisure, restaurant and gaming sectors, we may experience further losses on our remaining loans to borrowers in these sectors, particularly if economic conditions deteriorate.

In addition, we continue to monitor our exposure to office real estate, where trends are changing rapidly and possibly permanently as a result of the COVID-19 pandemic, and may experience additional losses on loans in this sector in the future.

The COVID-19 pandemic negatively impacted our corporate loan portfolio in fiscal 2020.

Although economic conditions have improved and we reduced our exposure and revised our credit limits related to sectors that we believe to be most vulnerable to the COVID-19 pandemic, such as the energy, airlines, entertainment and leisure, restaurant and gaming sectors, we may experience further losses on our remaining loans to borrowers in these sectors, particularly if economic conditions do not continue to improve in the future.

In addition, we continue to monitor our exposure to office real estate, where trends have changed rapidly and possibly permanently as a result of the COVID-19 pandemic, and may experience additional losses on loans in this sector in the future.

We may also experience further losses on corporate loans in other industries as a direct or indirect result of the pandemic, including on our CRE loans secured by retail and hospitality properties.

Although we saw deterioration in oil prices during the current fiscal year, our energy portfolio primarily consists of loans to midstream distribution companies and convenience stores, with no loans to exploration and production enterprises.

As a result, the portfolio has minimal direct commodity price exposure.

However, if we continue to see a significant deterioration in oil prices, our borrowers, and as a result our loans to such clients, could be negatively impacted in the future.

Liquidity risk

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

See “Item 7 - Management’s Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and capital resources” of this Form 10-K for information regarding our liquidity and how we manage liquidity risk.

RAYMOND JAMES FINANCIAL, INC.

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Operational risk

Operational risk generally refers to the risk of loss resulting from our operations, including, but not limited to, business disruptions, improper or unauthorized execution and processing of transactions, deficiencies in our technology or financial operating systems and inadequacies or breaches in our control processes including cybersecurity incidents.

See “Item 1A - Risk Factors” of this Form 10-K for a discussion of certain cybersecurity 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.

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.

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.

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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.

In addition, we have created business continuity plans for critical systems, and redundancies are built into the systems as deemed appropriate.

We have an Operational Risk Management Committee comprised of members of senior management, which reviews and addresses operational risks across our businesses.

The committee establishes, and from time-to-time will reassess, 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.

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.

In response to the COVID-19 pandemic, we activated and successfully executed on our business continuity protocols and continue to monitor the COVID-19 pandemic under such protocols.

We have endeavored to protect our associates and our clients and to ensure continuity of business operations for our clients.

As a result, a substantial portion of our associates are working remotely.

Periods of severe market volatility, such as those that arose in response to the COVID-19 pandemic, can result in a significantly higher level of transactions on specific days and other activity which may cause operational challenges from time to time that may result in losses.

We have endeavored to protect the health and well-being of our associates and our clients while ensuring the continuity of business operations for our clients.

As a result, a substantial portion of our associates continue to work remotely.

The firm continues to monitor conditions and has developed and is implementing a phased approach to reopening our offices which complies with all applicable laws, regulations, and CDC guidelines.

As of September 30, 2021, we had reopened most of our offices in a limited capacity and have been operating under strict public health and safety protocols in such locations.

We are planning for a full return to office in the second quarter of our fiscal 2022, which will include more work location flexibility for our associates;

however, disruptions caused by variants may impact the timing of the implementation of these plans.

Periods of severe market volatility, such as those that arose most notably in fiscal 2020 in response to the onset of the COVID-19 pandemic, can result in a significantly higher level of transactions on specific days and other activity which may present operational challenges from time to time that may result in losses.

These losses can result from, but are not limited to, trade errors, failed transaction settlements, late collateral calls to borrowers and counterparties, or interruptions to our system processing.

We did not incur any significant losses related to our operations during the year ended September 30, 2020.

The firm continues to monitor conditions and has developed a phased approach to reopening our offices based on regional indicators of infection positivity rates, and has and will continue to operate in compliance with all applicable laws and regulations.

As of September 30, 2020, we have reopened certain of our offices in a limited capacity and are operating under strict public health and safety protocols in such locations.

We did not incur any significant losses related to such operational challenges during the year ended September 30, 2021.

As more fully described in the discussion of our business technology risks included in various risk factors presented in “Item 1A - Risk Factors” of this Form 10-K, 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, cyber-attacks and other information security breaches, and other events that could have an impact on the security and stability of our operations.

Model risk refers to the possibility of unintended business outcomes arising from the design, implementation or use of models.

Models are used throughout the firm for a variety of purposes such as the valuation of financial instruments, assessing risk, stress testing, and to assist in the making of business decisions.

Models are used throughout the firm for a variety of purposes such as the valuation of financial instruments, the calculation of our allowance for credit losses, assessing risk, stress testing, and to assist in making certain business decisions.

Model risk includes the potential risk that management makes incorrect decisions based upon either incorrect model results or incorrect understanding and use of model results.

Model risk may also occur when model outputs differ from the expected result.

Model risk can result in significant financial loss, inaccurate financial or regulatory reporting, misaligned business strategies or damage to our reputation.

Model errors or misuse could result in significant financial loss, inaccurate financial or regulatory reporting, misaligned business strategies or damage to our reputation.

Model Risk Management (“MRM”) is a separate department within our Risk Management department and is independent of model owners, users, and developers.

Our model risk management framework consists primarily of model governance, maintaining the firmwide model inventory, validating and approving models used across the firm, and ongoing monitoring.

Results of validations and issues identified are reported to the Enterprise Risk Management Committee and the Audit and Risk Committee of the Board of Directors.

MRM assumes responsibility for the independent and effective challenge of model completeness, integrity and design based on intended use.

Results of validations and issues identified are reported to the Enterprise Risk Management Committee and the Audit and Risk

RAYMOND JAMES FINANCIAL, INC.

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Management’s Discussion and Analysis

Committee of the Board of Directors.

MRM assumes responsibility for the independent and effective challenge of model completeness, integrity and design based on intended use.

Compliance risk

5 unchanged sentences

It does this by conducting an annual compliance risk assessment, carrying out compliance monitoring and testing activities, implementing compliance policies, training associates on compliance-related topics, and reporting compliance risk-related issues and metrics to the Board of Directors and senior management, among other activities.

We continue to devote resources to support the firm’s compliance risk management framework, including the enhancement of processes and controls to help the firm meet its obligations to oversee, manage, and mitigate compliance risk.

We also continue to invest in technology to improve our associates’ ability to monitor and detect compliance risk.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

3 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis