RAYMOND JAMES FINANCIAL INC 10-K

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Table of Contents PAGE Report of Independent Registered Public Accounting Firm 78 Consolidated Statements of Financial Condition 81 Consolidated Statements of Income and Comprehensive Income 82 Consolidated Statements of Changes in Shareholders’ Equity 83 Consolidated Statements of Cash Flows 84 Notes to Consolidated Financial Statements Note 1 - Organization and basis of presentation 86 Note 2 - Summary of significant accounting policies 86 Note 3 - Acquisitions 104 Note 4 - Fair value 106 Note 5 - Available-for-sale securities 112 Note 6 - Derivative assets and derivative liabilities 114 Note 7 - Collateralized agreements and financings 116 Note 8 - Bank loans, net 117 Note 9 - Loans to financial advisors, net 123 Note 10 - Variable interest entities 123 Note 11 - Goodwill and identifiable intangible assets, net 125 Note 12 - Other assets 127 Note 13 - Property and equipment, net 127 Note 14 - Leases 128 Note 15 - Bank deposits 129 Note 16 - Other borrowings 130 Note 17 - Senior notes payable 131 Note 18 - Income taxes 132 Note 19 - Commitments, contingencies and guarantees 134 Note 20 - Accumulated other comprehensive income/(loss) 137 Note 21 - Revenues 138 Note 22 - Interest income and interest expense 141 Note 23 - Share-based and other compensation 141 Note 24 - Regulatory capital requirements 143 Note 25 - Earnings per share 145 Note 26 - Segment information 146 Note 27 - Condensed financial information (parent company only) 148 77 Report of Independent Registered Public Accounting Firm To the Shareholders and Board of Directors Raymond James Financial, Inc.: Opinion on the Consolidated Financial Statements We have audited the accompanying consolidated statements of financial condition of Raymond James Financial, Inc. and subsidiaries (the Company) as of September 30, 2021 and 2020, the related consolidated statements of income and comprehensive income, changes in shareholders’ equity, and cash flows for each of the years in the three‑year period ended September 30, 2021, and the related notes (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of September 30, 2021 and 2020, and the results of its operations and its cash flows for each of the years in the three‑year period ended September 30, 2021, in conformity with U.S. generally accepted accounting principles. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of September 30, 2021, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated November 23, 2021 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting. Basis for Opinion These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matter The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. Assessment of the allowance for credit losses related to the commercial and industrial (C&I), real estate investment trust (REIT) and the commercial real estate (CRE) portfolio segments that are collectively evaluated for impairment As discussed in Note 2 and Note 8 to the consolidated financial statements, the Company’s allowance for credit losses on Bank loans was $320 million as of September 30, 2021, a portion of which related to the allowance for credit losses (ACL) on C&I, REIT and CRE portfolio segments evaluated on a collective basis (the collective ACL). The Company estimates the collective ACL using a current expected credit losses methodology which is based on relevant information about historical losses, current conditions, and reasonable and supportable forecasts of economic conditions that affect the collectability of loan balances. The collective ACL is a product of multiplying the Company’s estimates of probability of default (PD), loss given default (LGD) and exposure at default. The Company uses third-party historical information 78 combined with macroeconomic variables over the reasonable and supportable forecast periods based on a single economic forecast scenario to estimate the PDs and LGDs. After the reasonable and supportable forecast periods, for C&I and REIT portfolio segments, the Company reverts to historical loss information over a one-year period using a straight-line reversion approach. For the CRE portfolio segment, the Company incorporates a reasonable and supportable forecast of various macroeconomic variables over the remaining life of the assets. The estimated PDs and LGDs are applied to estimated exposure at default considering the contractual loan term adjusted for expected prepayments to estimate expected losses. Adjustments are made to the collective ACL to reflect certain qualitative factors that are not incorporated into the quantitative models and related estimate. We identified the assessment of the September 30, 2021 collective ACL on Bank loans related to the C&I, REIT and CRE portfolio segments as a critical audit matter. A high degree of audit effort, including specialized skills and knowledge, and subjective and complex auditor judgment was involved in the assessment due to significant measurement uncertainty. Specifically, the assessment encompassed the evaluation of the September 30, 2021 collective ACL methodology, including the methods and models used to estimate the PDs and LGDs and their significant assumptions. Such significant assumptions included portfolio segmentation, risk ratings, the selection of the single economic forecast scenario and macroeconomic variables, the reasonable and supportable forecast periods and the reversion periods, and third-party historical information. The assessment also included the evaluation of the qualitative factors by portfolio segment. The assessment also included an evaluation of the conceptual soundness and performance of the PD and LGD models. In addition, auditor judgment was required to evaluate the sufficiency of audit evidence obtained. The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls related to the Company’s measurement of the September 30, 2021 collective ACL estimate on Bank loans related to the C&I, REIT and CRE portfolio segments, including controls over the: • development of the collective ACL methodology on Bank loans related to the C&I, REIT and CRE portfolio segments • development of the PD and LGD models • identification and determination of the significant assumptions used in the PD and LGD models • development of the qualitative methodology and factors • performance monitoring of the PD and LGD models • analysis of the collective ACL on Bank loans related to the C&I, REIT and CRE portfolio segments results, trends, and ratios. We evaluated the Company’s process to develop the September 30, 2021 collective ACL estimate on Bank loans related to the C&I, REIT and CRE portfolio segments by testing certain sources of data, factors, and assumptions that the Company used, and considered the relevance and reliability of such data, factors, and assumptions. In addition, we involved credit risk professionals with specialized skills and knowledge, who assisted in: • evaluating the Company’s collective ACL methodology for compliance with U.S. generally accepted accounting principles • evaluating judgments made by the Company relative to the development and performance testing of the PD and LGD models by comparing them to relevant Company-specific metrics and trends and the applicable industry and regulatory practices • assessing the conceptual soundness and performance of the PD and LGD models by inspecting the model documentation to determine whether the models are suitable for their intended use • evaluating the selection of the economic forecast scenario and underlying macroeconomic variables by comparing it to the Company’s business environment and relevant industry practices • evaluating the length of the reasonable and supportable forecast periods and the reversion periods by comparing them to specific portfolio segment risk characteristics and trends • determining whether the loan portfolio is segmented by similar risk characteristics by comparing to the Company’s business environment and relevant industry practices • evaluating the relevance of third-party historical information by comparing to specific portfolio segment risk characteristics • performing credit file reviews on a selection of loans to assess loan characteristics or risk ratings by evaluating the financial performance of the borrower, sources of repayment, and any relevant guarantees or underlying collateral and • evaluating the methodology used to develop the qualitative factors and the effect of those factors on the allowance for credit losses on Bank loans compared with relevant credit risk factors and consistency with credit trends and identified limitations of the underlying quantitative models. 79 We also assessed the sufficiency of the audit evidence obtained related to the September 30, 2021 collective ACL estimate on Bank loans related to the C&I, REIT and CRE portfolio segments by evaluating the: • cumulative results of the audit procedures • qualitative aspects of the Company’s accounting practices and • potential bias in the accounting estimate. /s/ KPMG LLP We have served as the Company’s auditor since 2001. Tampa, Florida November 23, 2021 80 RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION September 30, $ in millions, except per share amounts 2021 2020 Assets: Cash and cash equivalents $ 7,201 $ 5,390 Assets segregated for regulatory purposes and restricted cash ( $ 2,100 and $ 0 at fair value) 11,348 4,244 Collateralized agreements 480 422 Financial instruments, at fair value: Trading assets ( $ 326 and $ 265 pledged as collateral) 610 513 Available-for-sale securities ( $ 20 and $ 23 pledged as collateral) 8,315 7,650 Derivative assets 255 438 Other investments ( $ 22 and $ 37 pledged as collateral) 357 334 Brokerage client receivables, net 2,831 2,435 Other receivables, net 999 927 Bank loans, net 24,994 21,195 Loans to financial advisors, net 1,057 1,012 Deferred income taxes, net 305 262 Goodwill and identifiable intangible assets, net 882 600 Other assets 2,257 2,060 Total assets $ 61,891 $ 47,482 Liabilities and shareholders’ equity: Bank deposits $ 32,495 $ 26,801 Collateralized financings 277 250 Financial instrument liabilities, at fair value: Trading liabilities 176 240 Derivative liabilities 228 393 Brokerage client payables 13,991 6,792 Accrued compensation, commissions and benefits 1,825 1,384 Other payables 1,701 1,513 Other borrowings 858 888 Senior notes payable 2,037 2,045 Total liabilities 53,588 40,306 Commitments and contingencies (see Note 19) Shareholders’ equity Preferred stock; $ .10 par value; 10,000,000 shares authorized; - 0 - shares issued and outstanding — — Common stock; $ .01 par value; 350,000,000 shares authorized; 239,062,254 and 238,510,737 shares issued as of September 30, 2021 and 2020, respectively, and 205,738,821 and 204,834,839 shares outstanding as of September 30, 2021 and 2020, respectively 2 2 Additional paid-in capital 2,088 2,007 Retained earnings 7,633 6,484 Treasury stock, at cost; 33,323,433 and 33,675,898 common shares as of September 30, 2021 and 2020, respectively ( 1,437 ) ( 1,390 ) Accumulated other comprehensive income/(loss) ( 41 ) 11 Total equity attributable to Raymond James Financial, Inc. 8,245 7,114 Noncontrolling interests 58 62 Total shareholders’ equity 8,303 7,176 Total liabilities and shareholders’ equity $ 61,891 $ 47,482 See accompanying Notes to Consolidated Financial Statements. 81 RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME Year ended September 30, in millions, except per share amounts 2021 2020 2019 Revenues: Asset management and related administrative fees $ 4,868 $ 3,834 $ 3,451 Brokerage revenues: Securities commissions 1,651 1,468 1,450 Principal transactions 561 488 357 Total brokerage revenues 2,212 1,956 1,807 Account and service fees 635 624 738 Investment banking 1,143 650 596 Interest income 823 1,000 1,281 Other 229 104 150 Total revenues 9,910 8,168 8,023 Interest expense ( 150 ) ( 178 ) ( 283 ) Net revenues 9,760 7,990 7,740 Non-interest expenses: Compensation, commissions and benefits 6,583 5,465 5,087 Non-compensation expenses: Communications and information processing 429 393 373 Occupancy and equipment 232 225 218 Business development 111 134 194 Investment sub-advisory fees 130 101 94 Professional fees 112 91 85 Bank loan provision/(benefit) for credit losses ( 32 ) 233 22 Losses on extinguishment of debt 98 — — Acquisition and disposition-related expenses 19 7 15 Reduction in workforce expenses — 46 — Other 287 243 277 Total non-compensation expenses 1,386 1,473 1,278 Total non-interest expenses 7,969 6,938 6,365 Pre-tax income 1,791 1,052 1,375 Provision for income taxes 388 234 341 Net income $ 1,403 $ 818 $ 1,034 Earnings per common share – basic $ 6.81 $ 3.96 $ 4.88 Earnings per common share – diluted $ 6.63 $ 3.88 $ 4.78 Weighted-average common shares outstanding – basic 205.7 206.4 211.5 Weighted-average common and common equivalent shares outstanding – diluted 211.2 210.3 216.0 Net income $ 1,403 $ 818 $ 1,034 Other comprehensive income/(loss), net of tax: Available-for-sale securities ( 94 ) 68 71 Currency translations, net of the impact of net investment hedges 16 — ( 2 ) Cash flow hedges 26 ( 34 ) ( 61 ) Total other comprehensive income/(loss), net of tax ( 52 ) 34 8 Total comprehensive income $ 1,351 $ 852 $ 1,042 See accompanying Notes to Consolidated Financial Statements. 82 RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY Year ended September 30, $ in millions, except per share amounts 2021 2020 2019 Common stock, par value $ .01 per share: Balance beginning of year $ 2 $ 2 $ 2 Share issuances — — — Issuance of shares for stock split 1 — — Other ( 1 ) — — Balance end of year 2 2 2 Additional paid-in capital: Balance beginning of year 2,007 1,938 1,808 Employee stock purchases 32 36 34 Vesting of restricted stock units and exercise of stock options, net of forfeitures ( 77 ) ( 80 ) 21 Restricted stock, stock option and restricted stock unit expense 126 113 107 Acquisition of noncontrolling interest and other 1 — ( 32 ) Issuance of shares for stock split ( 1 ) — — Balance end of year 2,088 2,007 1,938 Retained earnings: Balance beginning of year 6,484 5,874 5,032 Cumulative adjustments for changes in accounting principles ( 35 ) — 4 Net income attributable to Raymond James Financial, Inc. 1,403 818 1,034 Cash dividends declared (see Note 25) ( 219 ) ( 208 ) ( 196 ) Balance end of year 7,633 6,484 5,874 Treasury stock: Balance beginning of year ( 1,390 ) ( 1,210 ) ( 447 ) Purchases/surrenders ( 128 ) ( 273 ) ( 759 ) Exercise of stock options and vesting of restricted stock units, net of forfeitures 81 93 ( 4 ) Balance end of year ( 1,437 ) ( 1,390 ) ( 1,210 ) Accumulated other comprehensive income/(loss): Balance beginning of year 11 ( 23 ) ( 27 ) Other comprehensive income/(loss), net of tax ( 52 ) 34 8 Other — — ( 4 ) Balance end of year ( 41 ) 11 ( 23 ) Total equity attributable to Raymond James Financial, Inc. $ 8,245 $ 7,114 $ 6,581 Noncontrolling interests: Balance beginning of year $ 62 $ 62 $ 84 Net income/(loss) attributable to noncontrolling interests 23 ( 26 ) ( 14 ) Other ( 27 ) 26 ( 8 ) Balance end of year 58 62 62 Total shareholders’ equity $ 8,303 $ 7,176 $ 6,643 See accompanying Notes to Consolidated Financial Statements. 83 RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS Year ended September 30, $ in millions 2021 2020 2019 Cash flows from operating activities: Net income $ 1,403 $ 818 $ 1,034 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 134 119 112 Deferred income taxes ( 37 ) ( 39 ) ( 23 ) Premium and discount amortization on available-for-sale securities and net gain/loss on other investments 15 57 14 Provisions/(benefits) for credit losses and legal and regulatory proceedings ( 20 ) 257 59 Share-based compensation expense 132 120 112 Unrealized gain on company-owned life insurance policies, net of expenses ( 150 ) ( 46 ) ( 10 ) Losses on extinguishment of debt 98 — — Goodwill impairment — — 19 Other 66 92 51 Net change in: Assets segregated for regulatory purposes excluding cash and cash equivalents ( 2,100 ) — — Collateralized agreements, net of collateralized financings ( 29 ) ( 55 ) ( 101 ) Loans provided to financial advisors, net of repayments ( 90 ) ( 49 ) ( 79 ) Brokerage client receivables and other receivables, net ( 420 ) 127 682 Trading instruments, net ( 141 ) 150 41 Derivative instruments, net 53 ( 51 ) ( 144 ) Other assets 16 ( 13 ) ( 71 ) Brokerage client payables and other payables 7,284 2,486 ( 1,231 ) Accrued compensation, commissions and benefits 416 70 80 Purchases and originations of loans held for sale, net of proceeds from sales of securitizations and loans held for sale ( 5 ) 11 32 Net cash provided by operating activities 6,625 4,054 577 Cash flows from investing activities: Increase in bank loans, net ( 4,027 ) ( 1,136 ) ( 1,605 ) Proceeds from sales of loans held for investment 287 634 235 Purchases of available-for-sale securities ( 4,218 ) ( 5,710 ) ( 1,027 ) Available-for-sale securities maturations, repayments and redemptions 2,181 1,188 644 Proceeds from sales of available-for-sale securities 969 222 — Business acquisitions, net of cash acquired ( 266 ) ( 5 ) ( 5 ) Additions to property and equipment ( 74 ) ( 124 ) ( 138 ) Other investing activities, net 8 ( 54 ) ( 1 ) Net cash used in investing activities ( 5,140 ) ( 4,985 ) ( 1,897 ) See accompanying Notes to Consolidated Financial Statements. 84 RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS Year ended September 30, $ in millions 2021 2020 2019 Cash flows from financing activities: Increase in bank deposits 5,694 4,520 2,339 Purchases of treasury stock ( 128 ) ( 272 ) ( 778 ) Dividends on common stock ( 218 ) ( 205 ) ( 191 ) Exercise of stock options and employee stock purchases 53 62 65 Proceeds from senior notes issuances, net of debt issuance costs paid 737 494 — Extinguishment of senior notes payable ( 844 ) — — Proceeds from Federal Home Loan Bank advances — 850 850 Repayments of Federal Home Loan Bank advances and other borrowed funds ( 31 ) ( 855 ) ( 855 ) Proceeds from borrowings on the RJF Credit Facility — — 300 Repayment of borrowings on the RJF Credit Facility — — ( 300 ) Other financing, net ( 9 ) ( 1 ) ( 57 ) Net cash provided by financing activities 5,254 4,593 1,373 Currency adjustment: Effect of exchange rate changes on cash 76 1 ( 23 ) Net increase in cash and cash equivalents, including those segregated for regulatory purposes and restricted cash 6,815 3,663 30 Cash and cash equivalents, including those segregated for regulatory purposes and restricted cash at beginning of year 9,634 5,971 5,941 Cash and cash equivalents, including those segregated for regulatory purposes and restricted cash at end of year $ 16,449 $ 9,634 $ 5,971 Cash and cash equivalents $ 7,201 $ 5,390 $ 3,957 Cash and cash equivalents segregated for regulatory purposes and restricted cash 9,248 4,244 2,014 Total cash and cash equivalents, including those segregated for regulatory purposes and restricted cash at end of year $ 16,449 $ 9,634 $ 5,971 Supplemental disclosures of cash flow information: Cash paid for interest $ 145 $ 164 $ 283 Cash paid for income taxes, net $ 437 $ 246 $ 390 Cash outflows for lease liabilities $ 110 $ 101 N/A Non-cash right-of-use assets recorded for new and modified leases $ 168 $ 74 N/A See accompanying Notes to Consolidated Financial Statements. 85 RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS September 30, 2021 NOTE 1 – ORGANIZATION AND BASIS OF PRESENTATION Organization Raymond James Financial, Inc. (“RJF” or the “firm”) is a financial holding company which, together with its subsidiaries, is engaged in various financial services activities, including providing investment management services to retail and institutional clients, merger & acquisition and advisory services, the underwriting, distribution, trading and brokerage of equity and debt securities, and the sale of mutual funds and other investment products. The firm also provides corporate and retail banking services, and trust services. For further information about our business segments, see Note 26 of this Form 10-K. As used herein, the terms “our,” “we,” or “us” refer to RJF and/or one or more of its subsidiaries. Basis of presentation The accompanying consolidated financial statements include the accounts of RJF and its consolidated subsidiaries that are generally controlled through a majority voting interest. We consolidate all of our 100 %-owned subsidiaries. In addition, we consolidate any variable interest entity (“VIE”) in which we are the primary beneficiary. Additional information on these VIEs is provided in Note 2 and in Note 10 of this Form 10-K. When we do not have a controlling interest in an entity, but we exert significant influence over the entity, we apply the equity method of accounting. All material intercompany balances and transactions have been eliminated in consolidation. On August 24, 2021, our Board approved a three-for-two 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. Accounting estimates and assumptions The preparation of consolidated financial statements in conformity with United States (“U.S.”) generally accepted accounting principles (“GAAP”) requires us to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenues and expenses for the reporting period. Actual results could differ from those estimates and could have a material impact on the consolidated financial statements. Reclassifications Certain prior-period amounts have been reclassified to conform to the current year’s presentation. NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Recent accounting developments Accounting guidance recently adopted In June 2016, the Financial Accounting Standards Board (“FASB”) issued new guidance related to the measurement of credit losses on financial instruments (“ASU 2016-13”), which replaces the incurred credit loss and other models with the current expected credit loss (“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 in-scope financial assets. The measurement of expected credit losses includes historical experience, current conditions and reasonable and supportable economic forecasts. This new guidance was effective for our fiscal year beginning on October 1, 2020 and was adopted under a modified retrospective approach. The impact of adoption of this new standard resulted in an increase in our allowance for credit losses of $ 42 million (including $ 25 million related to loans to financial advisors, $ 9 million related to funded bank loans and $ 8 million related to unfunded lending commitments) and a corresponding reduction in the beginning balance of retained earnings of 86 RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements $ 35 million, net of tax. Prior-period amounts were calculated under the incurred loss model and have not been restated. See Notes 8 and 9 for further information related to bank loans and loans to financial advisors and the related allowances for credit losses. Our significant accounting policies described below have been updated for adoption of this guidance where applicable. Significant Accounting Policies Recognition of non-interest revenues Revenue from contracts with customers is recognized when promised services are delivered to our customers in an amount we expect to receive in exchange for those services (i.e., the transaction price). Contracts with customers can include multiple services, which are accounted for as separate “performance obligations” if they are determined to be distinct. Our performance obligations to our customers are generally satisfied when we transfer the promised service to our customer, either at a point in time or over time. Revenue from a performance obligation transferred at a point in time is recognized at the time that the customer obtains control over the promised service. Revenue from our performance obligations satisfied over time is recognized in a manner that depicts our performance in transferring control of the service, which is generally measured based on time elapsed, as our customers receive the benefit of our services as they are provided. Payment for the majority of our services is considered to be variable consideration, as the amount of revenue we expect to receive is subject to factors outside of our control, including market conditions. Variable consideration is only included in revenue when amounts are not subject to significant reversal, which is generally when uncertainty around the amount of revenue to be received is resolved. We record deferred revenue from contracts with customers when payment is received prior to the performance of our obligation to the customer. We involve third parties in providing services to the customer for certain of our contracts with customers. We are generally deemed to control the promised services before they are transferred to the customer. Accordingly, we present the related revenues gross of the related costs. We have elected the practical expedient allowed by the accounting guidance to not disclose information about remaining performance obligations pertaining to contracts that have an original expected duration of one year or less. See Note 21 for additional information on our revenues. Asset management and related administrative fees We earn asset management and related administrative fees for performing asset management, portfolio management and related administrative services to retail and institutional clients. Such fees are generally calculated as a percentage of the value of client assets in fee-based accounts in our Private Client Group (“PCG”) segment or on the net asset value of assets managed by Carillon Tower Advisers and its affiliates (collectively “Carillon Tower Advisers”) in our Asset Management segment. The value of these assets is impacted by market fluctuations and net inflows or outflows of assets. Fees are generally collected quarterly and are based on balances either at the beginning of the quarter or the end of the quarter, or average balances throughout the quarter. Asset management and related administrative fees are recognized on a monthly basis (i.e., over time) as the services are performed. Revenues related to fee-based accounts under administration in PCG are shared by the PCG and Asset Management segments, the amount of which depends on whether clients are invested in “managed programs” that are overseen by our Asset Management segment (i.e., included in financial assets under management (“AUM”) in the Asset Management segment) and the administrative services provided. Asset management revenues earned by Carillon Tower Advisers for retail accounts managed on behalf of third-party institutions, institutional accounts or proprietary mutual funds that we manage are recorded entirely in the Asset Management segment. Brokerage revenues Securities commissions Mutual and other fund products and insurance and annuity products We earn revenues for distribution and related support services performed related to mutual and other funds, fixed and variable annuities and insurance products. Depending on the product sold, we may receive an upfront fee for our services, a trailing commission, or some combination thereof. Upfront commissions received are generally based on a fixed rate applied, as a percentage, to amounts invested or the value of the contract at the time of sale and are generally recognized at the time of sale. 87 RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements Trailing commissions are generally based on a fixed rate applied, as a percentage, to the net asset value of the fund, or the value of the insurance policy or annuity contract. Trailing commissions are generally received monthly or quarterly while our client holds the investment or holds the contract. As these trailing commissions are based on factors outside of our control, including market movements and client behavior (i.e., how long clients hold their investment, insurance policy or annuity contract), such revenue is recognized when it is probable that a significant reversal will not occur. Equities, ETFs and fixed income products We earn commissions for executing and clearing transactions for customers, primarily in listed and OTC equity securities, including exchange-traded funds (“ETFs”), and options. Such revenues primarily arise from transactions for retail clients in our PCG segment, as well as services related to sales and trading activities transacted on an agency basis in our Capital Markets segment. Commissions are recognized on trade date, generally received from the customer on settlement date, and we record a receivable between the trade date and the date collected from the customer. Principal transactions Principal transactions include revenues from clients’ purchases and sales of financial instruments, including fixed income and equity securities and derivatives, in which we transact on a principal basis. To facilitate such transactions, we carry inventories of financial instruments. The gains and losses on such inventories, both realized and unrealized, are reported as principal transactions revenues. Account and service fees Mutual fund and annuity service fees We earn servicing fees for providing sales and marketing support to product partners and for supporting the availability and distribution of their products on our platforms. We also earn servicing fees for accounting and administrative services provided to such partners. These fees, which are received monthly or quarterly, are generally based on the market value of the related assets or a fixed annual fee or, in certain cases, the number of positions in such programs, and are recognized over time as the services are performed. RJBDP fees We earn servicing fees from various banks for administrative services we provide related to our clients’ deposits that are swept to such banks as part of the Raymond James Bank Deposit Program (“RJBDP”), our multi-bank sweep program. The amounts received 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 fees are earned over time as the related administrative services are performed and are received monthly. Our PCG segment also earns servicing fees from Raymond James Bank, which are based on the number of accounts that are swept to Raymond James Bank. These fees, and the offsetting expense in the Raymond James Bank segment, are eliminated in consolidation. Investment banking We earn revenue from investment banking transactions, including public and private equity and debt financing, merger & acquisition advisory services, and other advisory services. Underwriting revenues, which are typically deducted from the proceeds remitted to the issuer, are recognized on trade date if there is no uncertainty or contingency related to the amount to be paid. Fees from merger & acquisition and advisory assignments are generally recognized at the time the services related to the transaction are completed under the terms of the engagement. Fees for merger & acquisition and advisory services are typically received upfront, as non-refundable retainer fees, and/or upon completion of a transaction as a success fee. Expenses related to investment banking transactions are generally deferred until the related revenue is recognized or the assignment is otherwise concluded. Such expenses are included in “Professional fees” on our Consolidated Statements of Income and Comprehensive Income. Cash and cash equivalents Our cash equivalents include money market funds or highly liquid investments with maturities of 3 months or less as of our date of purchase, other than those used for trading purposes. 88 RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements Assets segregated for regulatory purposes and restricted cash In accordance with Rule 15c3-3 of the Securities Exchange Act of 1934, Raymond James & Associates, Inc. (“RJ&A”), as a broker-dealer carrying client accounts, is subject to requirements to maintain cash or qualified securities on deposit in a segregated reserve account for the exclusive benefit of its clients. Such amounts are included in “Assets segregated for regulatory purposes and restricted cash” on our Consolidated Statements of Financial Condition as of each respective period end. These amounts include cash and cash equivalents, which represent highly liquid investments with maturities of 3 months or less as of our date of purchase (amounts as of September 30, 2021 included $ 3.55 billion of U.S. Treasuries with maturities of 3 months or less as of our date of purchase), and highly liquid securities, such as U.S. Treasuries, which have maturities of greater than 3 months as of our date of purchase and are carried at fair value on our Consolidated Statements of Financial Condition ($ 2.10 billion as of September 30, 2021). We may also from time-to-time be required to restrict cash for other corporate purposes, including cash contractually required to fund acquisition commitments (see Note 3 for further discussion). In addition, Raymond James Ltd. (“RJ Ltd.”) holds client Registered Retirement Savings Plan funds in trust in accordance with Canadian retirement plan regulations. Collateralized agreements and financings Securities purchased under agreements to resell and securities sold under agreements to repurchase We purchase securities under short-term agreements to resell (“reverse repurchase agreements”). Additionally, we sell securities under agreements to repurchase (“repurchase agreements”). Reverse repurchase agreements and repurchase agreements are accounted for as collateralized agreements and collateralized financings, respectively, and are carried at contractual amounts plus accrued interest. We receive collateral with a fair value that is typically equal to or in excess of the principal amount loaned under reverse repurchase agreements to mitigate credit exposure. To ensure that the market value of the underlying collateral remains sufficient, collateral values are evaluated on a daily basis, and collateral is obtained from or returned to the counterparty when contractually required. Under repurchase agreements, we are required to post collateral in an amount that typically exceeds the carrying value of these agreements. In the event that the market value of the securities we pledge as collateral declines, we may have to post additional collateral or reduce borrowing amounts. Reverse repurchase agreements and repurchase agreements are included in “Collateralized agreements” and “Collateralized financings,” respectively, on our Consolidated Statements of Financial Condition. See Note 7 for additional information regarding collateralized agreements and financings. Securities borrowed and securities loaned We act as an intermediary between broker-dealers and other financial institutions whereby we borrow securities from one broker-dealer and then either lend them to another broker-dealer or use them in our broker-dealer operations to cover short positions. Where permitted, we have also loaned, to broker-dealers and other financial institutions, securities owned by the firm, our clients, or others we have received as collateral. Both securities borrowed and securities loaned transactions are accounted for as collateralized financings and are recorded at the amount of cash advanced or received. In securities borrowed transactions, we are required to deposit cash with the lender in an amount which is generally in excess of the market value of securities borrowed. With respect to securities loaned, we generally receive cash in an amount in excess of the market value of securities loaned. We evaluate the market value of securities borrowed and loaned on a daily basis, with additional collateral obtained or refunded as necessary. Securities borrowed and securities loaned are included in “Collateralized agreements” and “Collateralized financings,” respectively, on our Consolidated Statements of Financial Condition. See Note 7 for additional information regarding collateralized agreements and financings. Financial instruments, financial instrument liabilities, at fair value “Financial instruments” and “Financial instrument liabilities” are recorded at fair value. Fair value is defined by GAAP as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the measurement date in the principal or most advantageous market for the asset or liability. In determining the fair value of our financial instruments in accordance with GAAP, we use various valuation approaches, including market and/or income approaches. Fair value is a market-based measurement considered from the perspective of a market participant. As such, our fair value measurements reflect assumptions that we believe market participants would use in pricing the asset or liability at the measurement date. GAAP provides for the following three levels to be used to classify our fair value measurements. 89 RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements Level 1 - Financial instruments included in Level 1 are highly liquid instruments valued using unadjusted quoted prices in active markets for identical assets or liabilities. Level 2 - Financial instruments reported in Level 2 include those that have pricing inputs that are other than unadjusted quoted prices in active markets, but which are either directly or indirectly observable as of the reporting date (i.e., prices for similar instruments). Level 3 - Financial instruments reported in Level 3 have little, if any, market activity and are measured using one or more inputs that are significant to the fair value measurement and unobservable. These valuations require judgment or estimation. These instruments are generally valued using discounted cash flow techniques, market multiples, or investment-specific events. GAAP requires that we maximize the use of observable inputs and minimize the use of unobservable inputs when performing our fair value measurements. The availability of observable inputs can vary from instrument to instrument and, in certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, an instrument’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. Our assessment of the significance of a particular input to the fair value measurement of an instrument requires judgment and consideration of factors specific to the instrument. Valuation techniques and inputs The fair values for certain of our financial instruments are derived using pricing models and other valuation techniques that involve management judgment. The price transparency of financial instruments is a key determinant of the degree of judgment involved in determining the fair value of our financial instruments. Financial instruments which are actively traded will generally have a higher degree of price transparency than financial instruments that are less frequently traded. In accordance with GAAP, the criteria used to determine whether the market for a financial instrument is active or inactive is based on the particular asset or liability. For equity securities, our definition of actively traded is based on average daily trading volume. We have determined the market for certain other types of financial instruments, including private equity investments, to be uncertain or inactive as of both September 30, 2021 and 2020. As a result, the valuation of these financial instruments included management judgment in determining the relevance and reliability of market information available. The level within the fair value hierarchy, specific valuation techniques, and other significant accounting policies pertaining to financial instruments at fair value on our Consolidated Statements of Financial Condition are described as follows. Trading assets and trading liabilities Trading assets and trading liabilities are comprised primarily of the financial instruments held by our broker-dealer subsidiaries and include debt securities, equity securities, brokered certificates of deposit, and other financial instruments. Trading assets and trading liabilities are recorded at fair value with realized and unrealized gains and losses reflected in current period net income. When available, we use quoted prices in active markets to determine the fair value of our trading assets and trading liabilities. Such instruments are classified within Level 1 of the fair value hierarchy. When trading instruments are traded in secondary markets and quoted market prices for identical instruments do not exist, we utilize valuation techniques, including matrix pricing, to estimate fair value. Matrix pricing generally utilizes spread-based models periodically re-calibrated to observable inputs such as market trades or to dealer price bids in similar securities in order to derive the fair value of the instruments. Valuation techniques may also rely on other observable inputs such as yield curves, interest rates and expected principal prepayments and default probabilities. We utilize prices from third-party pricing services to corroborate our estimates of fair value. Depending upon the type of security, the pricing service may provide a listed price, a matrix price or use other methods including broker-dealer price quotations. Securities valued using these techniques are classified within Level 2 of the fair value hierarchy. We offset our long and short positions for identical securities recorded at fair value as part of our trading assets (long positions) and trading liabilities (short positions). 90 RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements Available-for-sale securities Available-for-sale securities are generally held by Raymond James Bank and are classified at the date of purchase. They are comprised primarily of agency mortgage-backed securities (“MBS”) and agency collateralized mortgage obligations (“CMOs”), which a re guaranteed by the U.S. government or its agencies. Available-for-sale securities owned by Raymond James Bank are used as part of its interest rate risk and liquidity management strategies and may be sold in response to changes in interest rates, changes in prepayment risks, or other factors. The fair values of our available-for-sale securities are determined by obtaining prices from third-party pricing services, which are primarily based on valuation models. The third-party pricing services provide comparable price evaluations utilizing observable market data for similar securities. Such observable market data is comprised of benchmark yields, reported trades, broker-dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids, offers, reference data (including market research publications), and loan performance experience. We utilize other third-party pricing services to corroborate the pricing information obtained from the primary pricing service. Securities valued using valuation techniques that rely on observable market data are classified within Level 2 of the fair value hierarchy. Interest on available-for-sale securities is recognized in interest income on an accrual basis, with the related accrued interest not yet received reflected in “Other receivables” on our Consolidated Statements of Financial Condition. Discounts are accreted and premiums are amortized as an adjustment to yield over the estimated average life of the security. Realized gains and losses on sales of available-for-sale securities are recognized using the specific identification method and reflected in “Other” revenue in the period sold. Unrealized gains or losses due to market factors on available-for-sale securities are recorded through other comprehensive income/(loss) (“OCI”), net of applicable taxes, and are thereafter presented in equity as a component of accumulated other comprehensive income (“AOCI”) on our Consolidated Statements of Financial Condition. As a result of our October 1, 2020 adoption of the CECL model (see “Recent accounting developments” above), credit losses on available-for-sale securities are limited to the difference between the security’s amortized cost basis and its fair value and are recognized through an allowance for credit losses rather than as a direct reduction in amortized cost basis. Given that our available-for-sale securities portfolio is comprised of government agency-backed securities for which payments of both principal and interest are guaranteed, and based on the lack of historical credit losses, we expect zero credit losses on this portfolio and the related accrued interest receivable. On a quarterly basis, we reassess our expectation of zero credit losses, giving consideration to any relevant changes in the available-for-sale securities portfolio. Derivative assets and derivative liabilities Our derivative assets and derivative liabilities are recorded at fair value and are included in “Derivative assets” and “Derivative liabilities” on our Consolidated Statements of Financial Condition. To reduce credit exposure on certain of our derivative transactions, we may enter into a master netting arrangement that allows for net settlement of all derivative transactions with each counterparty. In addition, the credit support annex allows parties to the master netting agreement to mitigate their credit risk by requiring the party which is out of the money to post collateral. We accept collateral in the form of cash or other marketable securities. Where permitted, we elect to net-by-counterparty certain derivatives entered into under a legally enforceable master netting agreement and, therefore, the fair value of those derivatives are netted by counterparty on our Consolidated Statements of Financial Condition. As we elect to net-by-counterparty the fair value of such derivatives, we also net-by-counterparty cash collateral exchanged as part of those derivative agreements. We may also require certain counterparties to make a deposit at the inception of a derivative agreement, referred to as “initial margin.” This initial margin is included in “Other payables” on our Consolidated Statements of Financial Condition. We are also required to maintain deposits with the clearing organizations we utilize to clear certain of our interest rate derivatives, for which we have posted securities as collateral. This initial margin is included as a component of “Other investments” and “Available-for-sale securities” on our Consolidated Statements of Financial Condition. On a daily basis, we also pay cash to, or receive cash from, these clearing organizations due to changes in the fair value of the derivatives which they clear. Such payments are referred to as “variation margin” and are considered to be settlement of the related derivatives. 91 RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements Fixed income business operations We enter into interest rate derivatives in our fixed income business to facilitate client transactions or to actively manage risk exposures that arise from our client activity, including a portion of our trading inventory. The majority of these derivatives are traded in the over-the-counter market and are executed directly with another counterparty or are cleared and settled through a clearing organization. Realized and unrealized gains or losses on our fixed income derivatives are recorded in “Principal transactions” on our Consolidated Statements of Income and Comprehensive Income. The fair values of these interest rate derivatives are obtained from internal pricing models that consider current market trading levels and the contractual prices for the underlying financial instruments, as well as time value, yield curve and other volatility factors underlying the positions. Since our model inputs can be observed in liquid markets and the models do not require significant judgment, such derivatives are classified within Level 2 of the fair value hierarchy. We corroborate the output of our internal pricing models by preparing an independent calculation using a third-party model. Our fixed income business also holds to-be-announced (“TBA”) security contracts that are accounted for as derivatives, which are classified within Level 1 of the fair value hierarchy. Matched book We also facilitate matched book derivative transactions in which we enter into interest rate derivatives with clients. For every derivative we enter into with a client, we also enter into an offsetting derivative on terms that mirror the client transaction with a credit support provider, which is a third-party financial institution. Any collateral required to be exchanged under these derivatives is administered directly between the client and the third-party financial institution. Due to this pass-through transaction structure, we have completely mitigated the market and credit risk on these derivatives. As a result, derivatives for which the fair value is in an asset position have an equal and offsetting derivative liability. Fair value is determined using an internal pricing model which includes inputs from independent pricing sources to project future cash flows under each underlying derivative. Since any changes in fair value are completely offset by a change in fair value of the offsetting derivative, there is no net impact on our Consolidated Statements of Income and Comprehensive Income from changes in the fair value of these derivatives. We recognize revenue on these derivatives on the transaction date, computed as the present value of the expected cash flows we expect to receive from the third-party financial institution over the life of the derivative. The difference between the present value of these cash flows at the date of inception and the gross amount potentially received is accreted to revenue over the term of the contract. The revenue from these transactions is included within “Other” revenues on our Consolidated Statements of Income and Comprehensive Income. Raymond James Bank derivatives Foreign-exchange derivatives We enter into three-month forward foreign exchange contracts primarily to hedge the risks related to Raymond James Bank’s investment in its Canadian subsidiary, as well as its risk resulting from transactions denominated in currencies other than the U.S. dollar. The majority of these derivatives are designated as net investment hedges. The gain or loss related to these designated net investment hedges is recorded, net of tax, in shareholders’ equity as part of the cumulative translation adjustment component of AOCI with such balance impacting “Other” revenues in the event the net investment is sold or substantially liquidated. Gains and losses on undesignated derivative instruments are recorded in earnings on our Consolidated Statements of Income and Comprehensive Income. Hedge effectiveness is assessed at each reporting period using a method that is based on changes in forward rates and measured using the hypothetical derivatives method. As the terms of the hedging instrument and hypothetical derivative generally match at inception, the hedge is expected to be highly effective. The fair value of our forward foreign exchange contracts is determined by obtaining valuations from a third-party pricing service or model. These valuations are based on observable inputs such as spot rates, forward foreign exchange rates and both U.S. and foreign interest rate curves. We validate the observable inputs utilized in the third-party valuation model by preparing an independent calculation using a secondary valuation model. These forward foreign exchange contracts are classified within Level 2 of the fair value hierarchy. Interest rate derivatives The cash flows associated with certain assets held by Raymond James Bank provide interest income at fixed interest rates. Therefore, the value of these assets, absent any risk mitigation, is subject to fluctuation based upon changes in market rates of interest over time. Raymond James Bank enters into floating-rate advances from the Federal Home Loan Bank (“FHLB”) to, in part, fund these assets and then enters into interest rate contracts which swap variable interest payments on this debt for fixed interest payments. These interest rate swaps are designated as cash flow hedges and effectively fix Raymond James Bank’s cost of funds associated with these assets to mitigate a portion of the market risk. The gain or loss on Raymond James Bank’s 92 RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements cash flow hedges is recorded, net of tax, in shareholders’ equity as part of the cash flow hedge component of AOCI and subsequently reclassified to earnings when the hedged transaction affects earnings, specifically upon the incurrence of interest expense on the hedged borrowings. Hedge effectiveness is assessed at inception and at each reporting period utilizing regression analysis. As the key terms of the hedging instrument and hedged transaction match at inception, management expects the hedges to be effective while they are outstanding. The fair value of these interest rate swaps is determined by obtaining valuations from a third-party pricing service. These third-party valuations are based on observable inputs such as time value and yield curves. We validate these observable inputs by preparing an independent calculation using a secondary model. Cash flows from hedging activities are included in the same category as the items being hedged. Cash flows from derivative instruments used to manage interest rates are classified as operating activities. We classify these derivatives within Level 2 of the fair value hierarchy. Other investments Other investments consist primarily of private equity investments, securities pledged as collateral with clearing organizations, and term deposits with Canadian financial institutions. Our securities pledged as collateral with clearing organizations, which primarily include U.S. Treasury securities, and term deposits are categorized within Level 1 of the fair value hierarchy. Private equity investments consist of direct investments, investments in third-party private equity funds and various legacy private equity funds which we sponsor. The private equity funds in which we invest are primarily closed-end funds in which our investments are generally not eligible for redemption. We receive distributions from these funds as the underlying assets are liquidated or distributed. These investments are measured at fair value with any gains or losses recognized in “Other” revenues on our Consolidated Statements of Income and Comprehensive Income. The fair value of private equity investments are determined utilizing either the net asset value (“NAV”) of the fund as a practical expedient or Level 3 valuation techniques. The portion of our private equity investment portfolio that is not valued at NAV is valued initially at the transaction price until significant transactions or developments indicate that a change in the carrying values of these investments is appropriate. The carrying values of these investments are adjusted based on financial performance, investment-specific events, financing and sales transactions with third parties and/or discounted cash flow models incorporating changes in market outlook. Investments valued using these valuation techniques are classified within Level 3 of the fair value hierarchy. The valuation of such investments requires judgment due to the absence of quoted market prices, inherent lack of liquidity and long-term nature of these assets. As a result, these values cannot be determined with precision and the calculated fair value estimates may not be realizable in a current sale. Brokerage client receivables, net Brokerage client receivables include receivables from the clients of our broker-dealer subsidiaries and are principally for amounts due on cash and margin transactions. Such receivables are generally collateralized by securities owned by the clients. Brokerage client receivables are reported at their outstanding principal balance, net of any allowance for credit losses. See the “Allowance for credit losses” section below for the application of the practical expedient under CECL for financial assets secured by collateral. Securities beneficially owned by clients, including those that collateralize margin or other similar transactions, are not reflected on our Consolidated Statements of Financial Condition (see Note 7 for additional information regarding this collateral). Other receivables, net Other receivables primarily include receivables from brokers, dealers and clearing organizations, accrued fees from product sponsors, and accrued interest receivables. Receivables from brokers, dealers and clearing organizations primarily consist of deposits placed with clearing organizations, which includes initial margin, and receivables related to sales of securities which have traded but not yet settled including amounts receivable for securities failed to deliver. We present “Other receivables, net” on our Consolidated Statements of Financial Condition, net of any allowance for credit losses. However, these receivables generally have minimal credit risk due to the low probability of clearing organization default and the short-term nature of receivables related to securities settlements and therefore, the allowance for credit losses on such receivables is not significant. Any allowance for credit losses for other receivables is estimated using assumptions based on historical experience, current facts and other factors. We update these estimates through periodic evaluations against actual trends experienced. 93 RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements As permitted under the CECL guidance, we include accrued interest receivables related to our financial assets in “Other receivables, net” on the Consolidated Statements of Financial Condition instead of with the related financial instrument. We reverse any uncollectible accrued interest against interest income when the related financial asset is moved to nonaccrual status. Given that we write off uncollectible amounts in a timely manner, we do not recognize an allowance for credit losses against accrued interest receivable. Bank loans, net Loans held for investment Bank loans are comprised of loans originated or purchased by Raymond James Bank and include commercial and industrial (“C&I”) loans, real estate investment trust loans (“REIT”), tax-exempt loans, commercial and residential real estate loans, securities-based loans (“SBL”) and other loans. The loans which we have the intent and the ability to hold until maturity or payoff are recorded at their unpaid principal balance plus any premium paid in connection with the purchase of the loan, less the allowance for credit losses and any discounts received in connection with the purchase of the loan and net of deferred fees and costs on originated loans. Loan origination fees and direct costs, as well as premiums and discounts on loans that are not revolving, are capitalized and recognized in interest income using the effective interest method. For revolving loans, the straight-line method is used based on the contractual term. Syndicated loans purchased in the secondary market are recognized as of the trade date. Interest income is recognized on an accrual basis. We segregate our loan portfolio into six loan portfolio segments: C&I, commercial real estate (“CRE”) (primarily loans that are secured by income-producing properties and CRE construction loans), REIT (loans made to businesses that own or finance income-producing real estate), tax-exempt, residential mortgage, and SBL and other. These portfolio segments also serve as the portfolio loan classes for purposes of credit analysis. See the “Allowance for credit losses” section below for information on our allowance policies. Loans held for sale Certain residential mortgage loans originated and intended for sale in the secondary market due to their fixed interest rate terms, as well as Small Business Administration (“SBA”) loans purchased and intended for sale in the secondary market but not yet aggregated for securitization into pools, are each carried at the lower of cost or estimated fair value. The fair values of the residential mortgage loans held for sale are estimated using observable prices obtained from counterparties for similar loans. These nonrecurring fair value measurements are classified within Level 2 of the fair value hierarchy. We purchase t he guaranteed portions of SBA loans and account f or these loans in accordance with the policy for loans held for sale. We then aggregate SBA loans with similar characteristics into pools for securitization and sell these pools in the secondary market. Individual SBA loans may be sold prior to securitization. The fair values of the SBA loans are determined based upon their committed sales price, third-party price quotes, or are determined using a third-party pricing service. Once the SBA loans are securitized into a pool, the respective securities are classified as trading instruments and are carried at fair value based on our intention to sell the securitizations. Sales of the securitizations are accounted for as of settlement date, which is the date we have surrendered control over the transferred assets. We do not retain any interest in the securitizations once they are sold. Corporate loans, which include C&I, CRE and REIT loans, and tax-exempt loans are designated as held for investment upon inception and recognized in loans receivable. If we subsequently designate a corporate or tax-exempt loan as held for sale, which generally occurs as part of our credit management activities, we then write down the carrying value of the loan with a partial charge-off, if necessary, to carry it at the lower of cost or estimated fair value. Gains and losses on sales of residential mortgage loans held for sale, SBA loans that are not part of a securitized pool, and corporate loans transferred from the held for investment portfolio, are included as a component of “Other” revenues on our Consolidated Statements of Income and Comprehensive Income, while interest collected on these assets is included in “Interest income.” Net unrealized losses are a component of “Other” revenues on our Consolidated Statements of Income and Comprehensive Income. Unfunded lending commitments We have outstanding at any time a significant number of commitments to extend credit and other credit-related off-balance-sheet financial instruments such as revolving lines of credit, standby letters of credit and loan purchases. Our policy is 94 RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements generally to require customers to provide collateral at the time of closing. The amount of collateral obtained, if it is deemed necessary upon extension of credit, is based on our credit evaluation of the borrower. Collateral held varies but may include assets such as marketable securities, accounts receivable, inventory, real estate, and income-producing commercial properties. In the normal course of business, Raymond James Bank issues or participates in the issuance of standby letters of credit whereby it provides an irrevocable guarantee of payment in the event the letter of credit is drawn down by the beneficiary. These standby letters of credit generally expire in one year or less. In the event that a letter of credit is drawn down, Raymond James Bank would pursue repayment from the party under the existing borrowing relationship or would liquidate collateral, or both. The proceeds from repayment or liquidation of collateral are expected to satisfy the amounts drawn down under the existing letters of credit. The allowance for potential credit losses associated with these unfunded lending commitments is included in “Other payables” on our Consolidated Statements of Financial Condition. Refer to the “Allowance for credit losses” section that follows for a discussion of the reserve calculation methodology and Note 19 for further information about these commitments. We recognize the revenue associated with corporate syndicated standby letters of credit, which is generally received quarterly, on a cash basis, the effect of which does not differ significantly from recognizing the revenue in the period the fee is earned. Unused corporate line of credit fees are accounted for on an accrual basis. Nonperforming assets Nonperforming assets are comprised of both nonperforming loans and other real estate owned (“OREO”). Nonperforming loans include those loans which have been placed on nonaccrual status and any accruing loans which are 90 days or more past due and in the process of collection. Loans which have been restructured in a manner that grants a concession that would not normally be granted to a borrower experiencing financial difficulties are deemed to be troubled debt restructurings (“TDRs”). Loans structured as TDRs which are currently placed on nonaccrual status are considered nonperforming loans. Loans of all classes are placed on nonaccrual status when we determine that full payment of all contractual principal and interest is in doubt or the loan is past due 90 days or more as to contractual interest or principal unless the loan, in our opinion, is well-secured and in the process of collection. When a loan is placed on nonaccrual status, the accrued and unpaid interest receivable is written-off against interest income and accretion of the net deferred loan origination fees ceases. Interest is recognized using the cash method for residential mortgage loans and SBL and other loans, and the cost recovery method for corporate and tax-exempt loans thereafter until the loan qualifies for return to accrual status. Most loans (including residential mortgage TDRs) are returned to an accrual status when the loans have been brought contractually current with the original or amended terms and have been maintained on a current basis for a reasonable period, generally six months . However, corporate loan TDRs have generally been partially charged off and therefore, remain on nonaccrual status until the loan is fully repaid or sold. Other real estate acquired in the settlement of loans, including through, or in lieu of, loan foreclosure, is initially recorded at the lower of cost or fair value less estimated selling costs through a charge to the allowance for credit losses, thus establishing a new cost basis. Subsequent to foreclosure, valuations are periodically performed and the assets are carried at the lower of the carrying amount or fair value, as determined by a current appraisal or valuation less estimated costs to sell, and are included in “Other assets” on our Consolidated Statements of Financial Condition. These nonrecurring fair value measurements are classified within Level 2 of the fair value hierarchy. Bank loan charge-off policies Corporate and tax-exempt loans are monitored on an individual basis, and loan grades are reviewed at least quarterly to ensure they reflect the loan’s current credit risk. When we determine that it is likely that a corporate or tax-exempt loan will not be collected in full, the loan is evaluated for a potential write down of the carrying value. After consideration of the borrower’s ability to restructure the loan, alternative sources of repayment, and other factors affecting the borrower’s ability to repay the debt, the portion of the loan deemed to be a confirmed loss, if any, is charged-off. For collateral-dependent loans secured by real estate, the amount of the loan considered a confirmed loss and charged-off is generally equal to the difference between the recorded investment in the loan and the collateral’s appraised value less estimated costs to sell. For C&I and tax-exempt loans, we evaluate all sources of repayment to arrive at the amount considered to be a loss and charged-off. Corporate banking and credit risk managers also meet regularly to review criticized loans (i.e., loans that are rated special mention or worse as defined by bank regulators, see Note 8 for further discussion). Additional charge-offs are taken when the value of the collateral changes or there is an adverse change in the expected cash flows. 95 RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements The majority of our corporate loan portfolio is comprised of participations in either Shared National Credits (“SNCs”) or other large syndicated loans in the U.S. and Canada. The SNCs are U.S. loan syndications totaling over $ 100 million that are shared between three or more regulated institutions. The agent bank’s regulator reviews a portion of SNC loans on a semi-annual basis and provides a synopsis of each loan’s regulatory classification, including loans that are designated for nonaccrual status and directed charge-offs. We are at least as critical with nonaccrual designations, directed charge-offs, and classifications, potentially impacting our allowance for credit losses and charge-offs. Corporate loans are subject to our internal review procedures and regulatory review by the Florida Office of Financial Regulation (“OFR”) and the Board of Governors of the Federal Reserve System (“the Fed”) as part of the Bank’s regulatory examinations. Every residential mortgage loan over 60 days past due is reviewed to determine loan status, collection strategy and charge-off recommendations. Charge-offs are typically considered on residential mortgage loans once the loans are delinquent 90 days or more and then generally taken before the loan is 120 days past due. A charge-off is taken against the allowance for credit losses for the difference between the loan amount and the amount that we estimate will ultimately be collected, based on the value of the underlying collateral less estimated costs to sell. We predominantly use broker price opinions for these valuations. If a loan remains in pre-foreclosure status for more than nine months , an updated valuation is obtained to determine if further charge-offs are necessary. Loans to financial advisors, net We offer loans to financial advisors for recruiting and retention purposes. The decision to extend credit to a financial advisor or other key revenue producer is generally based on their ability to generate future revenues. Loans offered are generally repaid over a five to ten year period, with interest recognized as earned and are contingent upon affiliation with us (i.e., whether the advisor is actively affiliated with us or has terminated affiliation with us). These loans are not assignable by the financial advisor and may only be assigned by us to a successor in interest. There is no fee income associated with these loans. In the event that the financial advisor is no longer affiliated with us, any unpaid balance of such loan becomes immediately due and payable to us and generally does not continue to accrue interest. Based upon the nature of these financing receivables, affiliation status is the primary credit risk factor within this portfolio. We present the outstanding balance of loans to financial advisors on our Consolidated Statements of Financial Condition, net of the allowance for credit losses. Refer to the allowance for credit losses section that follows for further information related to our allowance for credit losses on our loans to financial advisors. See Note 9 for additional information on our loans to financial advisors. Loans for financial advisors who are actively affiliated with us are considered past due once they are 30 days or more delinquent as to the payment of contractual interest or principal. Such loans are placed on nonaccrual status when we determine that full payment of contractual principal and interest is in doubt, or the loan is past due 180 days or more as to contractual interest or principal. When a loan is placed on nonaccrual status, the accrued and unpaid interest receivable is written-off against interest income. Interest is recognized using the cash method for these loans thereafter until the loan qualifies for return to accrual status. Loans are returned to an accrual status when the loans have been brought contractually current with the original terms and have been maintained on a current basis for a reasonable period, generally six months. When we determine that it is likely a loan will not be collected in full, the loan is evaluated for a potential write down of the carrying value. After consideration of the borrower’s ability to restructure the loan, sources of repayment, and other factors affecting the borrower’s ability to repay the debt, the portion of the loan deemed a confirmed loss, if any, is charged-off. A charge-off is taken against the allowance for credit losses for the difference between the amortized cost and the amount we estimate will ultimately be collected. Additional charge-offs are taken if there is an adverse change in the expected cash flows. Allowance for credit losses We evaluate our held for investment bank loans, unfunded lending commitments, loans to financial advisors and certain other financial assets to estimate an allowance for credit losses over the remaining life of the financial instrument. The remaining life of our financial assets is determined by considering contractual terms and expected prepayments, among other factors. We use 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. For certain of our financial assets with collateral maintenance provisions (e.g., collateralized agreements, margin loans and SBL), we apply the practical expedient allowed under the CECL guidance in estimating an allowance for credit losses. We reasonably expect that borrowers (or counterparties, as applicable) will replenish the collateral as required. As a result, we estimate zero credit losses to the extent that the fair value equals or exceeds the related carrying value of the financial asset. When the fair value of the collateral securing the financial asset is less than the carrying value, qualitative factors such as historical experience 96 RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (adjusted for current risk characteristics and economic conditions) as well as reasonable and supportable forecasts are considered in estimating the allowance for credit losses on the unsecured portion of the financial asset. Credit losses are charged-off against the allowance when we believe the uncollectibility of the financial asset is confirmed. Subsequent recoveries, if any, are credited to the allowance once received. A credit loss expense, or benefit, is recorded in earnings in an amount necessary to adjust the allowance for credit losses to our estimate as of the end of each reporting period. Our provision or benefit for credit losses for outstanding bank loans is included in “Bank loan provision/(benefit) for credit losses” on our Consolidated Statements of Income and Comprehensive Income and our provision or benefit for credit losses for all other financing receivables, including loans to financial advisors, and unfunded lending commitments is included in “Other” expense. Loans We generally estimate the allowance for credit losses on our loan portfolios using credit risk models which incorporate relevant available information from internal and external sources relating to past events, current conditions, and reasonable and supportable economic forecasts. After testing the reasonableness of a variety of economic forecast scenarios, we select a single forecast scenario for use in our models. Our forecasts incorporate assumptions related to macroeconomic indicators including, but not limited to, U.S. gross domestic product, equity market indices, unemployment rates, and commercial real estate and residential home price indices. At the conclusion of our reasonable and supportable forecast period, which currently ranges from two to three years depending on the model and macroeconomic variables, we use a straight-line reversion approach over a one-year period to revert to historical loss information for C&I, REIT and tax-exempt loans. For CRE and residential mortgage loans, we incorporate a reasonable and supportable forecast of various macroeconomic variables over the remaining life of the assets. The development of the forecast used for CRE and residential mortgage loans incorporates an assumption that each macroeconomic variable will revert to a long-term expectation starting in years two to three of the forecast and largely completing within the first five years of the forecast. We assess the length of the reasonable and supportable forecast period and the reversion period, our reversion approach, our economic forecasts and our methodology for estimating the historical loss information on a quarterly basis. The allowance for credit losses on loans is generally evaluated and measured on a collective basis, typically by loan portfolio segment, due to similar risk characteristics. When a loan does not share similar risk characteristics with other loans, the loan is evaluated for credit losses on an individual basis. Various risk characteristics are considered when determining whether the loan should be collectively evaluated including, but not limited to, financial asset type, internal risk ratings, collateral type, industry of the borrower, and historical or expected credit loss patterns. The allowance for credit losses on collectively evaluated loans is comprised of two components: (a) a quantitative allowance; and (b) a qualitative allowance, which is based on an analysis of model limitations and other factors not considered by the quantitative models. There are several factors considered in estimating the quantitative allowance for credit losses on collectively evaluated loans which generally include, but are not limited to, the internal risk rating, historical loss experience (including adjustments due to current risk characteristics and economic conditions), prepayments, borrower-controlled extensions, and expected recoveries. We use third-party data for historical information on collectively evaluated corporate loans (C&I, CRE and REIT loans) and residential mortgage loans. The qualitative portion of our allowance for credit losses includes certain factors that are not incorporated into the quantitative estimate and would generally require adjustments to the allowance for credit losses. These qualitative factors are intended to address developing trends related to each portfolio segment and would generally include, but are not limited to: changes in lending policies and procedures, including changes in underwriting standards and collection; our loan review process; volume and severity of delinquent loans; changes in the nature, volume and terms of loans; credit concentrations; changes in the value of underlying collateral; changes in legal and regulatory environments; and local, regional, national and international economic conditions. Held for investment bank loans The allowance for credit losses for the C&I, CRE, REIT, tax-exempt and residential mortgage portfolio segments is estimated using credit risk models that project a probability of default (“PD”), which is then multiplied by the loss given default (“LGD”) and the estimated exposure at default (“EAD”) at the loan-level for every period remaining in the loan’s expected life, including the maturity period. Historical information, combined with macroeconomic variables, are used in estimating the PD, LGD and EAD. Our credit risk models consider several factors when estimating the expected credit losses which may include, but are not limited to, financial performance and position, estimated prepayments, geographic location, industry or sector type, debt 97 RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements type, loan size, capital structure, initial risk levels and the economic outlook. Additional factors considered by the residential mortgage model include Fair Isaac Corporation (“FICO”) scores and loan-to-value (“LTV”) ratios. We generally use one of two methods to measure the allowance for credit losses on individually evaluated loans. A discounted cash flow approach is used to estimate the allowance for credit losses on certain nonaccrual corporate loans and all TDRs that are not collateral-dependent. For collateral-dependent loans and for instances where foreclosure is probable, we use an approach that considers the fair value of the collateral less selling costs when measuring the allowance for credit losses. A loan is collateral-dependent when the borrower is experiencing financial difficulty and repayment is expected to be provided substantially through the sale of the collateral. See Note 8 for further information about our bank loans, including credit quality indicators considered in developing the allowance for credit losses. Unfunded lending commitments We estimate credit losses on unfunded lending commitments using a methodology consistent with that used in the corresponding bank loan portfolio segment and also based on the expected funding probabilities for fully binding commitments. As a result, the allowance for credit losses for unfunded lending commitments will vary depending upon the mix of lending commitments and future funding expectations. All classes of individually evaluated unfunded lending commitments are analyzed in conjunction with the specific allowance process previously described. Loans to financial advisors The allowance for credit losses on loans to financial advisors is estimated using credit risk models that incorporate average annual loan-level loss rates and estimated prepayments based on historical data. The qualitative component of our estimate considers internal and external factors that are not incorporated into the quantitative estimate such as the reasonable and supportable forecast period. In estimating an allowance for credit losses on our individually-evaluated loans to financial advisors, we generally take into account the affiliation status of the financial advisor (i.e., whether the advisor is actively affiliated with us or has terminated affiliation with us), the borrower’s ability to restructure the loan, sources of repayment, and other factors affecting the borrower’s ability to repay the debt. Identifiable intangible assets, net Certain identifiable intangible assets we acquire such as customer relationships, trade names and non-compete agreements, are amortized over their estimated useful lives on a straight-line basis and are evaluated for potential impairment whenever events or changes in circumstances suggest that the carrying value of an asset or asset group may not be fully recoverable. Amortization expense associated with certain identifiable intangible assets with short useful lives is included in “Acquisition and disposition-related expenses” on our Consolidated Statements of Income and Comprehensive Income, while amortization expense related to our remaining identifiable intangible assets is included in “Other” expenses on our Consolidated Statements of Income and Comprehensive Income. We also hold indefinite-lived identifiable intangible assets, which are not amortized. Rather, these assets are subject to an evaluation of potential impairment on an annual basis to determine whether the estimated fair value is in excess of its carrying value, or between annual impairment evaluation dates, if events or circumstances indicate there may be impairment. In the course of our evaluation of the potential impairment of such indefinite-lived assets, we may elect either a qualitative or a quantitative assessment. If after assessing the totality of events or circumstances, we determine it is more likely than not that the fair value is greater than its carrying amount, we are not required to perform a quantitative impairment analysis. However, if we conclude otherwise, we then perform a quantitative impairment analysis. We have elected January 1 as our annual impairment evaluation date, evaluating balances as of December 31. See Note 11 for additional information regarding the outcome of our impairment assessment. Goodwill Goodwill represents the cost of acquired businesses in excess of the fair value of the related net assets acquired. Indefinite-lived intangible assets such as goodwill are not amortized, but rather evaluated for impairment at least annually, or between annual impairment evaluation dates whenever events or circumstances indicate potential impairment exists. Impairment exists when the carrying value of a reporting unit, which is generally at the level of or one level below our business segments, exceeds its respective fair value. 98 RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements In the course of our evaluation of the potential impairment to goodwill, we may elect either a qualitative or a quantitative assessment. Our qualitative assessments consider macroeconomic indicators including, but not limited to, trends in equity and fixed income markets and other revenue-generating activities, gross domestic product, unemployment rates, and interest rates. We also consider regulatory changes, market capitalization, reporting unit specific results, and changes in key personnel and strategy. We assess these, and other, qualitative factors to determine whether the existence of events or circumstances indicates that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If we determine it is more likely than not that the fair value of a reporting unit is greater than its carrying amount, then performing a quantitative impairment analysis is not required. However, if we conclude otherwise, we then perform a quantitative impairment analysis. If we elect not to perform a qualitative assessment, we perform a quantitative evaluation. In our quantitative assessment, we estimate the fair value of the reporting unit with which the goodwill is associated and compare it to the carrying value. We estimate the fair value of our reporting units using an income approach based on a discounted cash flow model that includes significant assumptions about future operating results and cash flows, and, if appropriate, a market approach. If the carrying value of a reporting unit is greater than the estimated fair value, an impairment charge is recognized for the excess. We have elected January 1 as our annual goodwill impairment evaluation date, evaluating balances as of December 31. See Note 11 for additional information regarding the outcome of our goodwill impairment assessments. Other assets Other assets is primarily comprised of investments in company-owned life insurance, property and equipment, net, right-of-use assets (“ROU assets”) associated with leases, prepaid expenses, FHLB stock, Federal Reserve Bank (“FRB”) stock, and investments in real estate partnerships held by consolidated VIEs. See Note 12 for further information. We maintain investments in company-owned life insurance policies utilized to indirectly fund certain non-qualified deferred compensation plans and other employee benefit plans (see Note 23 for information on the non-qualified deferred compensation plans). These life insurance policies are recorded at cash surrender value as determined by the insurer. Ownership of FHLB and FRB stock is a requirement for all banks seeking membership into and access to the services provided by these banking systems. These investments are carried at cost. Raymond James Tax Credit Funds, Inc. (“RJTCF”), a wholly-owned subsidiary of RJF, or one of its affiliates, is the managing member or general partner in Low-Income Housing Tax Credit (“LIHTC”) funds and other funds of a similar nature, some of which require consolidation. These funds invest in housing project limited partnerships or limited liability companies (“LLCs”) which purchase and develop affordable housing properties generally qualifying for federal and state low-income housing tax credits. The investments in project partnerships of all of the LIHTC fund VIEs which require consolidation are included in “Other assets” on our Consolidated Statements of Financial Condition. Property and equipment, net Property and equipment are stated at cost less accumulated depreciation and software amortization. Property and equipment primarily consists of software, buildings, certain leasehold improvements, and furniture. Software includes both purchased software and internally developed software, including certain projects where development is in progress. Buildings primarily consists of owned facilities. Leasehold improvements are generally costs associated with lessee-owned interior office space improvements. Equipment primarily consists of communications and technology hardware. Depreciation of assets (other than land) is primarily calculated using the straight-line method over the estimated useful lives of the assets, within ranges outlined in the following table. Asset type Estimated useful life Buildings, building components and land improvements 15 to 40 years Furniture, fixtures and equipment 3 to 5 years Software 2 to 10 years Leasehold improvements (lessee-owned) Lesser of useful life or lease term Costs for significant internally developed software projects are capitalized when the costs relate to development of new applications or modification of existing internal-use software that results in additional functionality. Internally developed software project costs related to preliminary-project and post-project activities are expensed as incurred. 99 RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements Additions, improvements and expenditures that extend the useful life of an asset are capitalized. Expenditures for repairs and maintenance, as well as all maintenance costs associated with software applications, are expensed in the period incurred. Depreciation expense associated with property and equipment is included in “Occupancy and equipment” expense on our Consolidated Statements of Income and Comprehensive Income. Amortization expense associated with computer software is included in “Communications and information processing” expense on our Consolidated Statements of Income and Comprehensive Income. Gains and losses on disposals of property and equipment are included in “Other” revenues on our Consolidated Statements of Income and Comprehensive Income in the period incurred. Leases We have operating leases for the premises we occupy in many of our U.S. and foreign locations, including our employee-based branch office operations. At inception, we determine if an arrangement to utilize a building or piece of equipment is a lease and, if so, the appropriate lease classification. Substantially all of our leases are operating leases. If the arrangement is determined to be a lease, we recognize an ROU asset in “Other assets” and a corresponding lease liability in “Other payables” on our Consolidated Statements of Financial Condition. ROU assets represent our right to use an underlying asset for the lease term, and lease liabilities represent our obligation to make lease payments arising from the lease. We elected the practical expedient, where leases with an initial term of 12 months or less are not recorded as an ROU asset or lease liability. Our lease terms include any noncancelable periods and may reflect periods covered by options to extend or terminate when it is reasonably certain that we will exercise those options. We record our lease ROU assets at the amount of the lease liability plus any prepaid rent, amounts paid for lessor-owned leasehold improvements, and initial direct costs, less any lease incentives and accrued rent. We record lease liabilities at commencement date based on the present value of lease payments over the lease term, which is discounted using our commencement date incremental borrowing rate, or at the imputed rate within the lease, as appropriate. Our incremental borrowing rate considers the weighted-average yields on our senior notes payable, adjusted for collateralization and tenor. Payments that vary because of changes in facts or circumstances occurring after the commencement date, such as operating expense payments under a real estate lease, are considered variable and are expensed in the period incurred. For our real estate leases, we elected the practical expedient to account for the lease and non-lease components as a single lease. Lease expense for our lease payments is recognized on a straight-line basis over the lease term if the ROU asset has not been impaired or abandoned. See Note 14 for additional information on our leases. Contingent liabilities We recognize liabilities for contingencies when there is an exposure that, when fully analyzed, indicates it is both probable that a liability has been incurred and the amount of loss can be reasonably estimated. Whether a loss is probable, and if so, the estimated range of possible loss, is based upon currently available information and is subject to significant judgment, a variety of assumptions, and uncertainties. When a loss is probable and a range of possible loss can be estimated, we accrue the most likely amount within that range; if the most likely amount of possible loss within that range is not determinable, the minimum amount in the range of loss is accrued. No liability is recognized for those matters which, in management’s judgment, the determination of a reasonable estimate of loss is not possible, or for which a loss is not determined to be probable. We record liabilities related to legal and regulatory proceedings in “Other payables” on our Consolidated Statements of Financial Condition. The determination of these liability amounts requires significant judgment on the part of management. Management considers many factors including, but not limited to: the amount of the claim; the amount of the loss in the client’s account; the basis and validity of the claim; the possibility of wrongdoing on the part of one of our employees or financial advisors; previous results in similar cases; and legal precedents and case law. Each legal proceeding or significant regulatory matter is reviewed in each accounting period and the liability balance is adjusted as deemed appropriate by management. Any change in the liability amount is recorded through “Other” expense on our Consolidated Statements of Income and Comprehensive Income in that period. The actual costs of resolving legal matters or regulatory proceedings may be substantially higher or lower than the recorded liability amounts for such matters. Our costs of defense related to such matters are expensed in the period they are incurred. Such defense costs are primarily related to external legal fees which are included within “Professional fees” on our Consolidated Statements of Income and Comprehensive Income. See Note 19 for additional information. 100 RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements Share-based compensation We account for share-based awards through the measurement and recognition of compensation expense for all share-based payment awards made to employees, directors, and independent contractors based on estimated fair values. The compensation cost of our share-based awards, net of estimated forfeitures, is recognized over the requisite service period of the awards and is calculated as the market value of the awards on the date of the grant. See Note 23 for additional information on our share-based compensation plan. Deferred compensation plans We maintain various deferred compensation plans for the benefit of certain employees and independent contractors that provide a return to the participant based upon the performance of various referenced investments. For the Voluntary Deferred Compensation Plan (“VDCP”), Long-Term Incentive Plan (“LTIP”), and certain other plans, we purchase and hold company-owned life insurance policies on the lives of certain current and former participants to earn a competitive rate of return for participants and to provide a source of funds available to satisfy our obligations under the plan. See Note 12 for information regarding the carrying value of such policies. Compensation expense is recognized for all awards made under such plans with future service requirements over the requisite service period using the straight-line method. Changes in the value of the company-owned life insurance policies and other investments, as well as the expenses associated with the related deferred compensation plans, are recorded in “Compensation, commissions and benefits” expense on our Consolidated Statements of Income and Comprehensive Income. See Note 23 for additional information. Foreign currency translation The statements of financial condition of the foreign subsidiaries we consolidate are translated at exchange rates as of the period-end. The statements of income are translated either at an average exchange rate for the period or, in certain cases, at the exchange rate in effect on the date which transactions occur. The gains or losses resulting from translating foreign currency financial statements into U.S. dollars are included in OCI and are thereafter presented in equity as a component of AOCI. Income taxes The objective of accounting for income taxes is to recognize the amount of taxes payable or refundable for the current year. We utilize the asset and liability method to provide for income taxes on all transactions recorded in our consolidated financial statements. This method requires that income taxes reflect the expected future tax consequences of temporary differences between the carrying amounts of assets or liabilities for book and tax purposes. Accordingly, a deferred tax asset or liability for each temporary difference is determined based on the tax rates that we expect to be in effect when the underlying items of income and expense are realized. Judgment is required in assessing the future tax consequences of events that have been recognized in our financial statements or tax returns, including the repatriation of undistributed earnings of foreign subsidiaries. Variations in the actual outcome of these future tax consequences could materially impact our financial position, results of operations, or liquidity. See Note 18 for further information on our income taxes. Earnings per share (“EPS”) Basic EPS is calculated by dividing earnings attributable to common shareholders by the weighted-average common shares outstanding. Earnings attributable to common shareholders represents net income reduced by the allocation of earnings and dividends to participating securities. Diluted EPS is similar to basic EPS, but adjusts for the dilutive effect of outstanding stock options and certain restricted stock units (“RSUs”) by application of the treasury stock method. Evaluation of VIEs to determine whether consolidation is required A VIE requires consolidation by the entity’s primary beneficiary. Examples of entities that may be VIEs include certain legal entities structured as corporations, partnerships or limited liability companies. We evaluate all of the entities in which we are involved to determine if the entity is a VIE and if so, whether we hold a variable interest and are the primary beneficiary. We hold variable interests primarily in the following VIEs: certain private equity investments, a trust fund established for employee retention purposes (“Restricted Stock Trust Fund”) and certain LIHTC funds. See Note 10 for further information on our VIEs. 101 RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements Determination of the primary beneficiary of a VIE We consolidate VIEs that are subject to assessment when we are deemed to be the primary beneficiary of the VIE. The process for determining whether we are the primary beneficiary of the VIE is to conclude whether we are a party to the VIE holding a variable interest that meets both of the following criteria: (1) has the power to make decisions that most significantly affect the economic performance of the VIE, and (2) has the obligation to absorb losses or the right to receive benefits that in either case could potentially be significant to the VIE. Private Equity Interests As part of our private equity investments, we hold interests in a number of limited partnerships (our “Private Equity Interests”). We have concluded that the Private Equity Interests are VIEs, primarily as a result of the treatment of limited partner kick-out and participation rights as a simple majority of the limited partners cannot initiate an action to kick-out the general partner without cause and the limited partners with equity at-risk lack substantive participating rights. In our analysis of the criteria to determine whether we are the primary beneficiary of the Private Equity Interests VIEs, we analyze the power and benefits criteria. In a number of these entities, we are a passive limited partner investor, and thus, we do not have the power to make decisions that most significantly affect the economic performance of such VIEs. Accordingly, in such circumstances, we have determined we are not the primary beneficiary and therefore we do not consolidate the VIE. However, in certain of these entities, we have concluded that we are the primary beneficiary as we meet the power and benefits criteria. In such instances, we consolidate the Private Equity Interests VIE. Restricted Stock Trust Fund We utilize a trust in connection with certain of our RSU awards. This trust fund was established and funded for the purpose of acquiring our common stock in the open market to be used to settle RSUs granted as a retention vehicle for certain employees of our Canadian subsidiaries. We are deemed to be the primary beneficiary and, accordingly, consolidate this trust fund. LIHTC funds RJTCF is the managing member or general partner in a number of LIHTC funds having one or more investor members or limited partners. These LIHTC funds are organized as LLCs or limited partnerships for the purpose of investing in a number of project partnerships, which are limited partnerships or LLCs that purchase and develop, or hold, low-income housing properties qualifying for tax credits and/or provide a mechanism for banks and other institutions to meet their Community Reinvestment Act obligations throughout the U.S. Our determination of the primary beneficiary of each tax credit fund in which RJTCF has a variable interest requires judgment and is based on an analysis of all relevant facts and circumstances, including: (1) an assessment of the characteristics of RJTCF’s variable interest and other involvement it has with the tax credit fund, including involvement of related parties and any de facto agents, as well as the involvement of other variable interest holders, namely, limited partners or investor members, and (2) the tax credit fund’s purpose and design, including the risks that the tax credit fund was designed to create and pass through to its variable interest holders. In the design of most tax credit fund VIEs, the investor members invest solely for tax attributes associated with the portfolio of low-income housing properties held by the fund. However, the tax credit fund VIEs which invest and hold LIHTC project partnerships that have already delivered most of the tax credits to their investors hold the projects to monetize anticipated future tax benefits for which the project may ultimately qualify. In both instances, RJTCF, as the managing member or general partner of the fund, is responsible for overseeing the fund’s operations. RJTCF sponsors two general types of tax credit funds designed to deliver tax benefits to the investors. Generally, neither type meets the VIE consolidation criteria. These types of funds include single investor funds and multi-investor funds. RJTCF does not typically provide guarantees related to the delivery or funding of tax credits or other tax attributes to the investor members or limited partners of tax credit funds. The investor member(s) or limited partner(s) of the VIEs bear the risk of loss on their investment. Additionally, under the tax credit funds’ designed structure, the investor member(s) or limited partner(s) receive nearly all of the tax credits and tax-deductible loss benefits designed to be delivered by the fund entity, as well as a majority of any proceeds upon a sale of a project partnership held by a tax credit fund (fund level residuals). RJTCF earns fees from the fund for its services in organizing the fund, identifying and acquiring the project partnership investments and ongoing asset management, and receives a share of any residuals arising from sale of project partnerships upon the termination of the fund. In single investor funds that deliver tax benefits, RJTCF has concluded that the one single investor member or limited partner in such funds, in nearly all instances, has significant participating rights over the activities that most significantly impact the 102 RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements economics of the fund. Therefore RJTCF, as managing member or general partner of such funds, is not the one party with power over such activities and resultantly is not deemed to be the primary beneficiary of such single investor funds and, in nearly all cases, these funds are not consolidated. In multi-investor funds that deliver tax benefits, RJTCF has concluded that since the participating rights over the activities that most significantly impact the economics of the fund are not held by one single investor member or limited partner, RJTCF is deemed to have the power over such activities. RJTCF then assesses whether its projected benefits to be received from the multi-investor funds, primarily its share of any residuals upon the termination of the fund, are potentially significant to the fund. As such residuals received upon termination are not expected to be significant to the funds, in nearly all cases, these funds are not consolidated. LIHTC funds designed to hold projects to monetize future tax benefits for which the project may qualify are also sponsored by RJTCF in either single investor or multi-investor form. In single investor form, the limited partner has significant participating rights over the activities that most significantly impact the economics of the fund, and therefore RJTCF is not the primary beneficiary of such funds and such funds are not consolidated. In multi-investor form, RJTCF has concluded it meets both the power and benefits criteria for such funds since participating rights are not held by any one single investor, and thus RJTCF is deemed to have the power over such activities. In such instances, since RJTCF has benefit opportunities in the fund that could potentially be significant, such fund is consolidated. Direct investments in LIHTC project partnerships Raymond James Bank is the investor member of a LIHTC fund that delivers tax benefits which we have determined to be a VIE, and in which a subsidiary of RJTCF is the managing member. We have determined that Raymond James Bank is the primary beneficiary of this VIE and therefore, we consolidate the fund. These LIHTC funds which we consolidate are investor members in certain LIHTC project partnerships. Since unrelated third parties are the managing members of the investee project partnerships, we have determined that consolidation of these project partnerships is not required and the funds account for their project partnership investments under the equity method. The carrying value of the funds’ project partnership investments are included in “Other assets” on our Consolidated Statements of Financial Condition. Any losses on such equity method investments are included in “Other” expenses on our Consolidated Statements of Income and Comprehensive Income. The federal tax credits that result from these investments reduce our provision for income taxes in the year they are received. Acquisitions Our financial statements include the operations of an acquired business starting from the completion of the acquisition. Acquisitions are generally recorded as a business combination, whereby the assets acquired and liabilities assumed are recorded on the date of acquisition at their respective estimated fair values, including any identifiable intangible assets. Any excess of the purchase price over the estimated fair values of the net assets acquired is recorded as goodwill. Significant judgment is required in estimating the fair value of certain acquired assets and liabilities. The fair value estimates are based on available historical information, and, in part, on inputs that are unobservable, including future expectations and assumptions. Significant estimates and assumptions inherent in the valuations reflect a consideration of other marketplace participants and include the amount and timing of future cash flows (including expected growth rates and profitability), the underlying demand, the economic barriers to entry and the discount rate applied to the cash flows. To estimate the fair value of identifiable intangible assets we consider the income, market and cost approaches and place reliance on the approach or approaches deemed most indicative of value. Depending on the timing of an acquisition, the estimated fair values of the assets acquired and liabilities assumed may be considered provisional and based on information available at the time the financial statements are prepared, providing a reasonable basis for estimating the fair values. Provisional estimates may be adjusted upon the availability of new information regarding facts and circumstances which existed at the acquisition date. Our policy is to finalize the valuation of assets and liabilities as soon as practicable, but not later than one year from the acquisition date. Any adjustments to the initial estimates of the fair values of the acquired assets and liabilities assumed are recorded as adjustments to the respective assets and liabilities. Determining the useful life of an intangible asset also requires judgment. With the exception of certain customer relationships, the majority of our acquired intangible assets (e.g., customer relationships, trade names and non-compete agreements) are expected to have determinable useful lives. We estimate the useful lives of these intangible assets based on a number of factors including competitive environment, market share, trademark, brand history, underlying demand, and operating plans. Finite-lived intangible assets are amortized over their estimated useful life. 103 RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements Acquisition-related expenses Acquisition-related expenses associated with certain acquisitions are separately reported on our Consolidated Statements of Income and Comprehensive Income and include certain incremental expenses arising from our acquisitions. These costs do not represent recurring operating costs within the fully integrated combined organization. See Note 3 for additional information regarding the nature of these expenses. NOTE 3 – ACQUISITIONS Acquisitions completed or announced during the twelve months ended September 30, 2021 NWPS In December 2020, we completed our acquisition of all of the outstanding shares of NWPS Holdings, Inc. and its wholly-owned subsidiaries (collectively “NWPS”), doing business as NWPS and Northwest Plan Services. As an independent provider of retirement plan administration, consulting, actuarial and administration services, the addition of NWPS expands our retirement services offerings, which now include retirement plan administration services, to advisors and clients. For purposes of certain acquisition-related financial reporting requirements, the NWPS acquisition was not considered a material acquisition. NWPS has been integrated into our PCG segment and its results of operations have been included in our results prospectively from the closing date of December 24, 2020. During the twelve months ended September 30, 2021, the NWPS acquisition resulted in the addition of $ 139 million of goodwill and $ 96 million of identifiable intangible assets. The goodwill associated with this acquisition primarily represents synergies from combining NWPS with our existing businesses. The identifiable intangible assets primarily relate to client relationships and have a weighted-average useful life of 24.8 years. Financo In March 2021, we completed our acquisition of all of the outstanding ownership interests of Financo, LLC and its subsidiaries (collectively “Financo”), an investment bank focused on the consumer sector. The addition of Financo expands our investment banking capabilities in the consumer and retail space, both domestically and internationally. For purposes of certain acquisition-related financial reporting requirements, the Financo acquisition was not considered a material acquisition. Financo has been integrated into our Capital Markets segment and its results of operations have been included in our results prospectively from the closing date of March 30, 2021. During the twelve months ended September 30, 2021, the Financo acquisition resulted in the addition of $ 30 million of goodwill and $ 9 million of identifiable intangible assets. The goodwill associated with this acquisition primarily represents synergies from combining Financo with our existing businesses and is generally deductible for tax purposes over 15 years. The identifiable intangible assets primarily relate to client relationships and have a weighted-average useful life of 9 months. Cebile In September 2021, we completed our acquisition of all of the outstanding ownership interests of Cebile Capital (“Cebile”), a private fund placement agent and secondary market advisor to private equity firms. The addition of Cebile deepens our investment banking relationships with the private equity community and expands our related service offerings. For purposes of certain acquisition-related financial reporting requirements, the Cebile acquisition was not considered a material acquisition. Cebile has been integrated into our Capital Markets segment and its results of operations have been included in our results prospectively from the closing date of September 1, 2021. During the twelve months ended September 30, 2021, the Cebile acquisition resulted in the addition of $ 24 million of goodwill and $ 4 million of identifiable intangible assets. The goodwill associated with this acquisition primarily represents synergies from combining Cebile with our existing businesses. The identifiable intangible assets primarily relate to client relationships and have a weighted-average useful life of 2.5 years. Due to the timing of the close of this acquisition, certain information is not yet available and the amounts of goodwill and intangible assets are considered provisional. We believe the information currently available provides a reasonable basis for estimating the fair value of these assets. However, these provisional estimates may be adjusted upon the availability of new information regarding facts and circumstances which existed at the acquisition date. We expect to finalize this valuation in our fiscal first quarter of 2022. 104 RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements See Notes 2 and 11 for additional information about our goodwill and identifiable intangible assets, including the related accounting policies. Acquisition announcements Charles Stanley On July 29, 2021, we announced our firm intention to make an offer for the entire issued and to be issued share capital of United Kingdom (“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 U.K. Financial Conduct Authority 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. The acquisition would provide us the opportunity to accelerate growth in the U.K. and, through Charles Stanley’s multiple affiliation options, give us the ability to offer wealth management affiliation choices consistent with our model in the U.S. and Canada. For purposes of certain acquisition-related financial reporting requirements, the Charles Stanley acquisition will not be considered a material acquisition. Charles Stanley will operate within our PCG segment upon completion of the acquisition. TriState Capital 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. TriState Capital offers private banking, commercial banking, and investment management products and services. TriState Capital will continue to operate as a separately branded firm and as an independently-charted bank subsidiary upon closing of the acquisition. Acquisition and disposition-related expenses Certain acquisition and integration costs associated with these acquisitions were included in “Acquisition and disposition-related expenses” during fiscal 2021 on our Consolidated Statements of Income and Comprehensive Income. Such costs primarily included legal and other professional fees and, with respect to Financo and Cebile, amortization expense related to identifiable intangible assets with short useful lives. The following table details our acquisition and disposition-related expenses. Year ended September 30, $ in millions 2021 2020 2019 Acquisition-related expenses: Legal $ 7 $ — $ — Identifiable intangible amortization 6 — — Other professional fees 6 — — Total Acquisition-related expenses 19 — — Disposition-related expenses (1) — 7 15 Total Acquisition and disposition-related expenses $ 19 $ 7 $ 15 (1) The twelve months ended September 30, 2020 included a $ 7 million loss in our Capital Markets segment related to the sale of our interests in certain entities that operated predominantly in France. The twelve months ended September 30, 2019 included a $ 15 million loss in our Capital Markets segment on the sale of our operations related to research, sales and trading of European equities. 105 RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements NOTE 4 – FAIR VALUE Our “Financial instruments” and “Financial instrument liabilities” on our Consolidated Statements of Financial Condition are recorded at fair value. For further information about such instruments and our significant accounting policies related to fair value, see Note 2. The following tables present assets and liabilities measured at fair value on a recurring basis. Netting adjustments represent the impact of counterparty and collateral netting on our derivative balances included on our Consolidated Statements of Financial Condition. See Note 6 for additional information. $ in millions Level 1 Level 2 Level 3 Netting adjustments Balance as of September 30, 2021 Assets at fair value on a recurring basis: Assets segregated for regulatory purposes (1) $ 2,100 $ — $ — $ — $ 2,100 Trading assets: Municipal and provincial obligations — 155 — — 155 Corporate obligations 16 63 — — 79 Government and agency obligations 15 94 — — 109 Agency MBS, CMOs and asset-backed securities (“ABS”) — 211 — — 211 Non-agency CMOs and ABS — 14 — — 14 Total debt securities 31 537 — — 568 Equity securities 8 4 — — 12 Brokered certificates of deposit — 16 — — 16 Other — — 14 — 14 Total trading assets 39 557 14 — 610 Available-for-sale securities (2) 15 8,300 — — 8,315 Derivative assets: Interest rate - matched book — 193 — — 193 Interest rate - other 16 128 — ( 87 ) 57 Foreign exchange — 5 — — 5 Total derivative assets 16 326 — ( 87 ) 255 Other investments - private equity - not measured at NAV — — 75 — 75 All other investments: Government and agency obligations (3) 86 — — — 86 Other 77 2 23 — 102 Total all other investments 163 2 23 — 188 Subtotal 2,333 9,185 112 ( 87 ) 11,543 Other investments - private equity - measured at NAV 94 Total assets at fair value on a recurring basis $ 2,333 $ 9,185 $ 112 $ ( 87 ) $ 11,637 Liabilities at fair value on a recurring basis: Trading liabilities: Municipal and provincial obligations $ 2 $ — $ — $ — $ 2 Corporate obligations — 6 — — 6 Government and agency obligations 137 — — — 137 Total debt securities 139 6 — — 145 Equity securities 28 3 — — 31 Total trading liabilities 167 9 — — 176 Derivative liabilities: Interest rate - matched book — 193 — — 193 Interest rate - other 16 106 — ( 88 ) 34 Other — — 1 — 1 Total derivative liabilities 16 299 1 ( 88 ) 228 Total liabilities at fair value on a recurring basis $ 183 $ 308 $ 1 $ ( 88 ) $ 404 106 RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements $ in millions Level 1 Level 2 Level 3 Netting adjustments Balance as of September 30, 2020 Assets at fair value on a recurring basis: Trading assets: Municipal and provincial obligations $ 5 $ 120 $ — $ — $ 125 Corporate obligations 11 45 — — 56 Government and agency obligations 13 131 — — 144 Agency MBS and agency CMOs — 130 — — 130 Non-agency CMOs and ABS — 13 — — 13 Total debt securities 29 439 — — 468 Equity securities 11 5 — — 16 Brokered certificates of deposit — 17 — — 17 Other — — 12 — 12 Total trading assets 40 461 12 — 513 Available-for-sale securities (2) 16 7,634 — — 7,650 Derivative assets: Interest rate - matched book — 333 — — 333 Interest rate - other 16 224 — ( 135 ) 105 Total derivative assets 16 557 — ( 135 ) 438 Other investments - private equity - not measured at NAV — — 37 — 37 All other investments: Government and agency obligations (3) 103 — — — 103 Other 92 1 22 — 115 Total all other investments 195 1 22 — 218 Subtotal 267 8,653 71 ( 135 ) 8,856 Other investments - private equity - measured at NAV 79 Total assets at fair value on a recurring basis $ 267 $ 8,653 $ 71 $ ( 135 ) $ 8,935 Liabilities at fair value on a recurring basis: Trading liabilities: Municipal and provincial obligations $ 1 $ — $ — $ — $ 1 Corporate obligations — 5 — — 5 Government and agency obligations 136 — — — 136 Non-agency CMOs and ABS — 2 — — 2 Total debt securities 137 7 — — 144 Equity securities 96 — — — 96 Total trading liabilities 233 7 — — 240 Derivative liabilities: Interest rate - matched book — 333 — — 333 Interest rate - other 16 145 — ( 112 ) 49 Foreign exchange — 5 — — 5 Other — 1 5 — 6 Total derivative liabilities 16 484 5 ( 112 ) 393 Total liabilities at fair value on a recurring basis $ 249 $ 491 $ 5 $ ( 112 ) $ 633 (1) These assets consist of U.S. Treasuries with maturities greater than 3 months as of our date of purchase. (2) Substantially all of our available-for-sale securities consist of agency MBS and agency CMOs. See Note 5 for further information. (3) These assets are comprised of U.S. Treasuries primarily purchased to meet certain deposit requirements with clearing organizations. 107 RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements Level 3 recurring fair value measurements The following tables present the changes in fair value for Level 3 assets and liabilities measured at fair value on a recurring basis. The realized and unrealized gains and losses in the tables may include changes in fair value that were attributable to both observable and unobservable inputs. In the following tables, gains/(losses) on trading instruments are reported in “Principal transactions” and gains/(losses) on other investments are reported in “Other” revenues on our Consolidated Statements of Income and Comprehensive Income. Year ended September 30, 2021 Level 3 instruments at fair value Financial assets Financial liabilities Trading assets Derivative assets Other investments Derivative liabilities $ in millions Other Other Private equity investments All other Other Fair value beginning of year $ 12 $ — $ 37 $ 22 $ ( 5 ) Total gains/(losses) included in earnings ( 1 ) 1 37 1 5 Purchases and contributions 49 — 1 — — Sales and distributions ( 46 ) ( 1 ) — — ( 1 ) Transfers: Into Level 3 — — — — — Out of Level 3 — — — — — Fair value end of year $ 14 $ — $ 75 $ 23 $ ( 1 ) Unrealized gains/(losses) for the year included in earnings for instruments held at the end of the year $ — $ — $ 37 $ 1 $ ( 1 ) The net unrealized gains included in earnings on our Level 3 private equity investments for the year ended September 30, 2021 primarily reflected the impact of continued improvement in market conditions and an improved outlook for certain of our investments. Of these gains, $ 24 million were attributable to noncontrolling interests, which are reflected as an offset in “Other” expenses on our Consolidated Statements of Income and Comprehensive Income. Year ended September 30, 2020 Level 3 instruments at fair value Financial assets Financial liabilities Trading assets Other investments Trading liabilities Derivative liabilities $ in millions Other Private equity investments All other Other Other Fair value beginning of year $ 3 $ 63 $ 24 $ ( 1 ) $ — Total gains/(losses) included in earnings ( 4 ) ( 29 ) ( 2 ) — ( 5 ) Purchases and contributions 70 4 — 2 — Sales and distributions ( 57 ) ( 1 ) — ( 1 ) — Transfers: Into Level 3 — — — — — Out of Level 3 — — — — — Fair value end of year $ 12 $ 37 $ 22 $ — $ ( 5 ) Unrealized gains/(losses) for the year included in earnings for instruments held at the end of the year $ ( 1 ) $ ( 29 ) $ ( 2 ) $ — $ ( 5 ) The net unrealized losses on our Level 3 private equity investments for the year ended September 30, 2020 were primarily driven by the then anticipated negative impact of the coronavirus (“COVID-19”) pandemic on certain of our investments. Of these losses, $ 20 million were attributable to noncontrolling interests, which are reflected as an offset in “Other” expenses on our Consolidated Statements of Income and Comprehensive Income. 108 RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements As of September 30, 2021, 19 % of our assets and 1 % of our liabilities were measured at fair value on a recurring basis. In comparison, as of September 30, 2020, 19 % of our assets and 2 % of our liabilities were measured at fair value on a recurring basis. As of both September 30, 2021 and 2020, Level 3 assets represented less than 1 % of our assets measured at fair value on a recurring basis. Quantitative information about level 3 fair value measurements The following table presents the valuation techniques and significant unobservable inputs used in the valuation of certain of our private equity investments classified as level 3. These inputs represent those that a market participant would take into account when pricing these instruments. Weighted averages are calculated by weighting each input by the relative fair value of the related financial instrument. Certain investments are valued initially at transaction price and updated as other investment-specific events take place which indicate that a change in the carrying values of these investments is appropriate. Other investment-specific events include such events as our periodic review, significant transactions occur or new developments become known. Recurring measurements $ in millions Fair value at September 30, 2021 Valuation technique(s) Unobservable input Range (weighted-average) Other investments - private equity investments (not measured at NAV) $ 75 Discounted cash flow, transaction price or other investment-specific events Discount rate 25 % Terminal earnings before interest, taxes, depreciation and amortization (“EBITDA”) multiple 10.0 x Terminal year 2023 - 2035 (2024) Fair value at September 30, 2020 Other investments - private equity investments (not measured at NAV) $ 37 Discounted cash flow, transaction price or other investment-specific events Discount rate 25 % Terminal EBITDA multiple 9.0 x Terminal year 2021 - 2042 (2023) Qualitative information about unobservable inputs The significant unobservable inputs used in the fair value measurement of private equity investments generally relate to the financial performance of the investment entity and the market’s required return on investments from entities in industries in which we hold investments. Increases in the discount rate would have resulted in a lower fair value measurement. Increases in the terminal EBITDA multiple would have resulted in a higher fair value measurement. Increases in the terminal year are dependent upon each investment’s strategy, but generally result in a lower fair value measurement. Investments in private equity measured at net asset value per share As a practical expedient, we utilize NAV or its equivalent to determine the recorded value of a portion of our private equity investments portfolio. We utilize NAV when the fund investment does not have a readily determinable fair value and the NAV of the fund is calculated in a manner consistent with the measurement principles of investment company accounting, including measurement of the investments at fair value. Our private equity portfolio as of September 30, 2021 includes various direct investments, as well as investments in third-party private equity funds and various legacy private equity funds which we sponsor. The portfolio is primarily invested in a broad range of strategies including leveraged buyouts, growth capital, distressed capital, venture capital and mezzanine capital. Due to the closed-end nature of certain of our fund investments, such investments cannot be redeemed directly with the funds. Our investment is monetized by distributions received through the liquidation of the underlying assets of those funds, the timing of which is uncertain. 109 RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements The following table presents the recorded value and unfunded commitments related to our private equity investments portfolio. $ in millions Recorded value Unfunded commitment September 30, 2021 Private equity investments measured at NAV $ 94 $ 8 Private equity investments not measured at NAV 75 Total private equity investments $ 169 September 30, 2020 Private equity investments measured at NAV $ 79 $ 9 Private equity investments not measured at NAV 37 Total private equity investments $ 116 Of the total private equity investments, the portions we owned were $ 120 million and $ 90 million as of September 30, 2021 and 2020, respectively. The portions of the private equity investments we did not own were $ 49 million and $ 26 million as of September 30, 2021 and 2020, respectively, and were included as a component of noncontrolling interests on our Consolidated Statements of Financial Condition. As a financial holding company, we are subject to holding period limitations for our merchant banking activities. Additionally, many of our private equity fund investments meet the definition of prohibited covered funds as defined by the Volcker Rule enacted pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”). We have received approval from the Fed to continue to hold the majority of our covered fund investments until July 2022. As a result, we will be required to exit or restructure certain of our private equity investments during fiscal 2022. Financial instruments measured at fair value on a nonrecurring basis The following table presents assets measured at fair value on a nonrecurring basis along with the valuation techniques and significant unobservable inputs used in the valuation of the assets classified as level 3. These inputs represent those that a market participant would take into account when pricing these instruments. Weighted averages are calculated by weighting each input by the relative fair value of the related financial instrument. $ in millions Level 2 Level 3 Total fair value Valuation technique(s) Unobservable input Range (weighted-average) September 30, 2021 Bank loans: Residential mortgage loans $ 3 $ 11 $ 14 Collateral or discounted cash flow (1) Prepayment rate 7 yrs. - 12 yrs. ( 10.5 yrs.) Corporate loans $ — $ 49 $ 49 Collateral or discounted cash flow (1) Not meaningful (1) Not meaningful (1) Loans held for sale $ 29 $ — $ 29 N/A N/A N/A September 30, 2020 Bank loans: Residential mortgage loans $ 4 $ 13 $ 17 Collateral or discounted cash flow (1) Prepayment rate 7 yrs. - 12 yrs. ( 10.6 yrs.) Corporate loans $ — $ 15 $ 15 Collateral or discounted cash flow (1) Not meaningful (1) Not meaningful (1) Loans held for sale $ 38 $ — $ 38 N/A N/A N/A Other assets: other real estate owned $ 1 $ — $ 1 N/A N/A N/A (1) The valuation techniques used to estimate the fair values are based on collateral value less selling costs for the collateral-dependent loans and discounted cash flows for loans that are not collateral-dependent. 110 RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements Financial instruments not recorded at fair value Many, but not all, of the financial instruments we hold were recorded at fair value on the Consolidated Statements of Financial Condition. The following table presents the estimated fair value and fair value hierarchy of financial assets and liabilities that are not recorded at fair value on the Consolidated Statements of Financial Condition at September 30, 2021 and 2020. This table excludes financial instruments that are carried at amounts which approximate fair value. $ in millions Level 2 Level 3 Total estimated fair value Carrying amount September 30, 2021 Financial assets: Bank loans, net $ 116 $ 24,839 $ 24,955 $ 24,902 Financial liabilities: Bank deposits - certificates of deposit $ — $ 898 $ 898 $ 878 Senior notes payable $ 2,459 $ — $ 2,459 $ 2,037 September 30, 2020 Financial assets: Bank loans, net $ 72 $ 21,119 $ 21,191 $ 21,125 Financial liabilities: Bank deposits - certificates of deposit $ — $ 1,056 $ 1,056 $ 1,017 Senior notes payable $ 2,504 $ — $ 2,504 $ 2,045 Short-term financial instruments: The carrying value of short-term financial instruments, such as cash and cash equivalents, including amounts segregated for regulatory purposes and restricted cash, and the majority of collateralized agreements and collateralized financings, are recorded at amounts that approximate the fair value of these instruments. These financial instruments generally expose us to limited credit risk and have no stated maturities or have short-term maturities and carry interest rates that approximate market rates. Under the fair value hierarchy, cash and cash equivalents, including amounts segregated for regulatory purposes and restricted cash, are classified as Level 1 and collateralized agreements and financings are classified as Level 2. Bank loans, net: These financial instruments are primarily comprised of loans originated or purchased by Raymond James Bank and include C&I loans, commercial and residential real estate loans, tax-exempt loans, SBL and other loans intended to be held until maturity or payoff. These financial instruments are primarily recorded at amounts that result from the application of the methodologies for loans held for investment summarized in Note 2. Certain bank loans are held for sale, which are carried at the lower of cost or market value. A portion of these loans held for sale, as well as certain held for investment loans which have been written-down, are recorded at fair value as nonrecurring fair value measurements and therefore are excluded from the preceding table. The fair values for both variable and fixed-rate loans held for investment are estimated using a discounted cash flow analysis based on interest rates currently being offered for loans with similar terms to borrowers of similar credit quality, which includes our estimate of future credit losses expected to be incurred. The majority of these loans are classified as Level 3 under the fair value hierarchy. Refer to Note 2 for information regarding the fair value policies specific to loans held for sale. Receivables and other assets: Brokerage client receivables, other receivables, and certain other assets are recorded at amounts that approximate fair value and are classified as Levels 2 and 3 under the fair value hierarchy. As specified under GAAP, the FHLB and FRB stock are recorded at cost, which we have determined to approximate their estimated fair value, and are classified as Level 2 under the fair value hierarchy. Loans to financial advisors, net: These financial instruments are primarily comprised of loans to financial advisors, primarily for recruiting and retention purposes. Loans to financial advisors, net are recorded at amounts that approximate fair value and are classified as Level 2 under the fair value hierarchy. Refer to Note 2 for information regarding loans to financial advisors, net. Bank deposits: The carrying amounts of variable-rate money market and savings accounts approximate their fair values as these are short-term in nature. Due to their short-term nature, variable-rate money market and savings accounts are classified as Level 2 under the fair value hierarchy. Fair values for fixed-rate certificates of deposit are estimated using a discounted cash flow calculation that applies interest rates currently being offered on certificates to a schedule of expected monthly maturities on time deposits. These fixed-rate certificates of deposit are classified as Level 3 under the fair value hierarchy. 111 RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements Payables: Brokerage client payables and other payables are recorded at amounts that approximate fair value and are classified as Level 2 under the fair value hierarchy. Other borrowings: Other borrowings is primarily comprised of Raymond James Bank’s borrowings from the FHLB, which reflect terms that approximate current market rates for similar loans and therefore, their carrying value approximates fair value. Our other borrowings are classified as Level 2 under the fair value hierarchy. Senior notes payable: The fair value of our senior notes payable is calculated based upon recent trades of those debt securities in the market. Our senior notes payable are classified as Level 2 under the fair value hierarchy. NOTE 5 – AVAILABLE-FOR-SALE SECURITIES Available-for-sale securities are primarily comprised of agency MBS and agency CMOs owned by Raymond James Bank. As of October 1, 2020, we adopted new accounting guidance related to the measurement of credit losses on financial instruments, including available-for-sale securities. Refer to Note 2 for further information about this guidance and a discussion of our available-for-sale securities. The following table details the amortized costs and fair values of our available-for-sale securities. $ in millions Cost basis Gross unrealized gains Gross unrealized losses Fair value September 30, 2021 Agency residential MBS $ 5,168 $ 46 $ ( 25 ) $ 5,189 Agency commercial MBS 1,285 7 ( 28 ) 1,264 Agency CMOs 1,854 9 ( 16 ) 1,847 Other securities 15 — — 15 Total available-for-sale securities $ 8,322 $ 62 $ ( 69 ) $ 8,315 September 30, 2020 Agency residential MBS $ 4,064 $ 74 $ ( 3 ) $ 4,135 Agency commercial MBS 948 22 ( 1 ) 969 Agency CMOs 2,504 27 ( 1 ) 2,530 Other securities 15 1 — 16 Total available-for-sale securities $ 7,531 $ 124 $ ( 5 ) $ 7,650 The amortized costs and fair values in the preceding table exclude $ 14 million and $ 15 million of accrued interest on available-for-sale securities as of September 30, 2021 and September 30, 2020, respectively, which was included in “Other receivables, net” on our Consolidated Statements of Financial Condition. See Note 4 for additional information regarding the fair value of available-for-sale securities. 112 RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements The following table details the contractual maturities, amortized costs, carrying values and current yields for our available-for-sale securities. Since our MBS and CMO available-for-sale securities are backed by mortgages, actual maturities may differ from contractual maturities because borrowers may have the right to prepay obligations without prepayment penalties. As a result, as of September 30, 2021, the weighted-average life of our available-for-sale securities portfolio was approximately four years . September 30, 2021 $ in millions Within one year After one but within five years After five but within ten years After ten years Total Agency residential MBS Amortized cost $ — $ 80 $ 2,554 $ 2,534 $ 5,168 Carrying value $ — $ 84 $ 2,570 $ 2,535 $ 5,189 Agency commercial MBS Amortized cost $ 21 $ 298 $ 878 $ 88 $ 1,285 Carrying value $ 21 $ 299 $ 856 $ 88 $ 1,264 Agency CMOs Amortized cost $ — $ 1 $ 32 $ 1,821 $ 1,854 Carrying value $ — $ 1 $ 33 $ 1,813 $ 1,847 Other securities Amortized cost $ — $ 8 $ 7 $ — $ 15 Carrying value $ — $ 8 $ 7 $ — $ 15 Total available-for-sale securities Amortized cost $ 21 $ 387 $ 3,471 $ 4,443 $ 8,322 Carrying value $ 21 $ 392 $ 3,466 $ 4,436 $ 8,315 Weighted-average yield 2.24 % 1.61 % 1.15 % 1.08 % 1.14 % The following table details the gross unrealized losses and fair values of securities that were in a loss position at the reporting period end, aggregated by investment category and length of time the individual securities have been in a continuous unrealized loss position. Less than 12 months 12 months or more Total $ in millions Estimated fair value Unrealized losses Estimated fair value Unrealized losses Estimated fair value Unrealized losses September 30, 2021 Agency residential MBS $ 3,155 $ ( 25 ) $ 18 $ — $ 3,173 $ ( 25 ) Agency commercial MBS 645 ( 13 ) 353 ( 15 ) 998 ( 28 ) Agency CMOs 918 ( 12 ) 231 ( 4 ) 1,149 ( 16 ) Other securities 3 — — — 3 — Total $ 4,721 $ ( 50 ) $ 602 $ ( 19 ) $ 5,323 $ ( 69 ) September 30, 2020 Agency residential MBS $ 966 $ ( 3 ) $ — $ — $ 966 $ ( 3 ) Agency commercial MBS 177 ( 1 ) — — 177 ( 1 ) Agency CMOs 410 ( 1 ) — — 410 ( 1 ) Total $ 1,553 $ ( 5 ) $ — $ — $ 1,553 $ ( 5 ) The contractual cash flows of our available-for-sale securities are guaranteed by the U.S. government or its agencies. At September 30, 2021, of the 276 available-for-sale securities in an unrealized loss position, 239 were in a continuous unrealized loss position for less than 12 months and 37 securities were in a continuous unrealized loss position for greater than 12 months. We do not consider unrealized losses associated with these securities to be credit losses due to the guarantee of the full payment of principal and interest, and the fact that we have the ability and intent to hold these securities. In addition, unrealized losses related to these available-for-sale securities are generally due to changes in market interest rates. At September 30, 2021, based on our assessment of this portfolio, we did not recognize an allowance for credit losses on our available-for-sale securities. At September 30, 2021, debt securities we held in excess of ten percent of our equity included those issued by the Federal National Home Mortgage Association and Federal Home Loan Mortgage Corporation with amortized costs of $ 5.17 billion and $ 2.90 billion, respectively, which also approximated the fair values of the securities. We received proceeds of $ 969 million and $ 222 million, respectively, from the sales of available-for-sale securities for the years ended September 30, 2021 and 2020, respectively. These sales resulted in insignificant gains for both periods, which were included in “Other” revenues on our Consolidated Statements of Income and Comprehensive Income. There were no sales of available-for-sale securities for the year ended September 30, 2019. 113 RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements NOTE 6 – DERIVATIVE ASSETS AND DERIVATIVE LIABILITIES Our derivative assets and derivative liabilities are recorded at fair value and are included in “Derivative assets” and “Derivative liabilities” on our Consolidated Statements of Financial Condition. Cash flows related to our derivatives are included within operating activities on the Consolidated Statements of Cash Flows. The significant accounting policies governing our derivatives, including our methodologies for determining fair value, are described in Note 2. Derivative balances included on our financial statements The following table presents the gross fair values and notional amounts of derivatives by product type, the amounts of counterparty and cash collateral netting on our Consolidated Statements of Financial Condition, as well as collateral posted and received under credit support agreements that do not meet the criteria for netting under GAAP. September 30, 2021 September 30, 2020 $ in millions Derivative assets Derivative liabilities Notional amount Derivative assets Derivative liabilities Notional amount Derivatives not designated as hedging instruments Interest rate - matched book $ 193 $ 193 $ 1,736 $ 333 $ 333 $ 2,174 Interest rate - other (1) 144 122 15,087 240 161 19,206 Foreign exchange 3 — 826 — 2 605 Other — 1 551 — 6 608 Subtotal 340 316 18,200 573 502 22,593 Derivatives designated as hedging instruments Interest rate — — 850 — — 850 Foreign exchange 2 — 939 — 3 866 Subtotal 2 — 1,789 — 3 1,716 Total gross fair value/notional amount 342 316 $ 19,989 573 505 $ 24,309 Offset on the Consolidated Statements of Financial Condition Counterparty netting ( 46 ) ( 46 ) ( 40 ) ( 40 ) Cash collateral netting ( 41 ) ( 42 ) ( 95 ) ( 72 ) Total amounts offset ( 87 ) ( 88 ) ( 135 ) ( 112 ) Net amounts presented on the Consolidated Statements of Financial Condition 255 228 438 393 Gross amounts not offset on the Consolidated Statements of Financial Condition Financial instruments (2) ( 205 ) ( 193 ) ( 349 ) ( 333 ) Total $ 50 $ 35 $ 89 $ 60 (1) Substantially all relates to interest rate derivatives entered into as part of our fixed income business operations, including TBA security contracts that are accounted for as derivatives. (2) Although the matched book derivative arrangements do not meet the definition of a master netting arrangement as specified by GAAP, the agreement with the third-party intermediary includes terms that are similar to a master netting agreement. As a result, we present the matched book amounts net in the preceding table. The following table details the gains/(losses) included in AOCI, net of income taxes, on derivatives designated as hedging instruments. These gains/(losses) included any amounts reclassified from AOCI to net income during the year. See Note 20 for additional information. Year ended September 30, $ in millions 2021 2020 2019 Interest rate (cash flow hedges) $ 26 $ ( 34 ) $ ( 61 ) Foreign exchange (net investment hedges) ( 34 ) 5 22 Total gains/(losses) included in AOCI, net of taxes $ ( 8 ) $ ( 29 ) $ ( 39 ) There were no components of derivative gains or losses excluded from the assessment of hedge effectiveness for any of the years ended September 30, 2021, 2020 or 2019. We expect to reclassify $ 16 million of interest expense out of AOCI and into earnings within the next 12 months. The maximum length of time over which forecasted transactions are or will be hedged is six years . 114 RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements The following table details the gains/(losses) on derivatives not designated as hedging instruments recognized on the Consolidated Statements of Income and Comprehensive Income. Year ended September 30, $ in millions Location of gain/(loss) 2021 2020 2019 Interest rate Principal transactions/other revenues $ 13 $ 7 $ 7 Foreign exchange Other revenues $ ( 21 ) $ — $ 25 Other Principal transactions $ 4 $ ( 5 ) $ — Other Compensation, commissions and benefits expense $ — $ ( 1 ) $ 5 Risks associated with our derivatives and related risk mitigation Credit risk We are exposed to credit losses in the event of nonperformance by the counterparties to derivatives that are not cleared through a clearing organization. Where we are subject to credit exposure, we perform a credit evaluation of counterparties prior to entering into derivative transactions and we monitor their credit standings. We may require initial margin or collateral from counterparties in the form of cash or other marketable securities to support certain of these obligations as established by the credit threshold specified by the agreement and/or as a result of monitoring the credit standing of the counterparties. Our only exposure to credit risk on matched book derivatives is related to our uncollected derivative transaction fee revenues, which were insignificant as of both September 30, 2021 and 2020. We are not exposed to market risk on these derivatives due to the pass-through transaction structure described in Note 2. Interest rate and foreign exchange risk We are exposed to interest rate risk related to certain of our interest rate derivatives. We are also exposed to foreign exchange risk related to our forward foreign exchange derivatives. On a daily basis, we monitor our risk exposure on our derivatives based on established limits with respect to a number of factors, including interest rate, foreign exchange spot and forward rates, spread, ratio, basis and volatility risks, both for the total portfolio and by maturity period. 115 RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements NOTE 7 – COLLATERALIZED AGREEMENTS AND FINANCINGS Collateralized agreements are comprised of reverse repurchase agreements and securities borrowed. Collateralized financings are comprised of repurchase agreements and securities loaned. We enter into these transactions in order to facilitate client activities, acquire securities to cover short positions and finance certain firm activities. The significant accounting policies governing our collateralized agreements and financings are described in Note 2. Our reverse repurchase agreements, repurchase agreements, securities borrowing and securities lending transactions are governed by master agreements that are widely used by counterparties and that may allow for net settlements of payments in the normal course, as well as offsetting of all contracts with a given counterparty in the event of bankruptcy or default of one of the parties to the transaction. For financial statement purposes, we do not offset our reverse repurchase agreements, repurchase agreements, securities borrowed and securities loaned because the conditions for netting as specified by GAAP are not met. Although not offset on the Consolidated Statements of Financial Condition, these transactions are included in the following table. Collateralized agreements Collateralized financings $ in millions Reverse repurchase agreements Securities borrowed Total Repurchase agreements Securities loaned Total September 30, 2021 Gross amounts of recognized assets/liabilities $ 279 $ 201 $ 480 $ 205 $ 72 $ 277 Gross amounts offset on the Consolidated Statements of Financial Condition — — — — — — Net amounts presented on the Consolidated Statements of Financial Condition 279 201 480 205 72 277 Gross amounts not offset on the Consolidated Statements of Financial Condition ( 279 ) ( 195 ) ( 474 ) ( 205 ) ( 68 ) ( 273 ) Net amounts $ — $ 6 $ 6 $ — $ 4 $ 4 September 30, 2020 Gross amounts of recognized assets/liabilities $ 207 $ 215 $ 422 $ 165 $ 85 $ 250 Gross amounts offset on the Consolidated Statements of Financial Condition — — — — — — Net amounts presented on the Consolidated Statements of Financial Condition 207 215 422 165 85 250 Gross amounts not offset on the Consolidated Statements of Financial Condition ( 207 ) ( 209 ) ( 416 ) ( 165 ) ( 79 ) ( 244 ) Net amounts $ — $ 6 $ 6 $ — $ 6 $ 6 The total amount of collateral received under reverse repurchase agreements and the total amount of collateral posted under repurchase agreements exceeds the carrying value of these agreements on our Consolidated Statements of Financial Condition. Collateral received and pledged We receive cash and securities as collateral, primarily in connection with reverse repurchase agreements, securities borrowed, derivative transactions and client margin loans. The collateral we receive reduces our credit exposure to individual counterparties. In many cases, we are permitted to deliver or repledge financial instruments we have received as collateral to satisfy our collateral requirements under our repurchase agreements, securities lending agreements or other secured borrowings, to satisfy deposit requirements with clearing organizations, or to otherwise meet either our or our clients’ settlement requirements. The following table presents financial instruments at fair value that we received as collateral, were not included on our Consolidated Statements of Financial Condition, and that were available to be delivered or repledged, along with the balances of such instruments that were delivered or repledged, to satisfy one of our purposes previously described. September 30, $ in millions 2021 2020 Collateral we received that was available to be delivered or repledged $ 3,429 $ 2,869 Collateral that we delivered or repledged $ 830 $ 788 116 RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements Encumbered assets We pledge certain of our assets to collateralize either repurchase agreements or other secured borrowings, maintain lines of credit, or to satisfy our collateral or settlement requirements with counterparties or clearing organizations who may or may not have the right to deliver or repledge such instruments. The following table presents information about our assets that have been pledged for one of the purposes previously described. September 30, $ in millions 2021 2020 Had the right to deliver or repledge $ 368 $ 325 Did not have the right to deliver or repledge $ 65 $ 65 Bank loans, net pledged at FHLB and the Federal Reserve Bank of Atlanta $ 5,716 $ 5,367 Repurchase agreements, repurchase-to-maturity transactions and securities loaned accounted for as secured borrowings The following table presents the remaining contractual maturity of repurchase agreements and securities lending transactions accounted for as secured borrowings. $ in millions Overnight and continuous Up to 30 days 30-90 days Greater than 90 days Total September 30, 2021 Repurchase agreements: Government and agency obligations $ 122 $ — $ — $ — $ 122 Agency MBS and agency CMOs 83 — — — 83 Total repurchase agreements 205 — — — 205 Securities loaned: Equity securities 72 — — — 72 Total collateralized financings $ 277 $ — $ — $ — $ 277 September 30, 2020 Repurchase agreements: Government and agency obligations $ 87 $ — $ — $ — $ 87 Agency MBS and agency CMOs 78 — — — 78 Total repurchase agreements 165 — — — 165 Securities loaned: Equity securities 85 — — — 85 Total collateralized financings $ 250 $ — $ — $ — $ 250 As of both September 30, 2021 and 2020, we did not have any “repurchase-to-maturity” agreements, which are repurchase agreements where a security is transferred under an agreement to repurchase and the maturity date of the repurchase agreement matches the maturity date of the underlying security. NOTE 8 – BANK LOANS, NET Bank client receivables are comprised of loans originated or purchased by Raymond James Bank and include C&I loans, REIT loans, tax-exempt loans, commercial and residential real estate loans, and SBL and other loans. These receivables are collateralized by first and, to a lesser extent, second mortgages on residential or other real property, other assets of the borrower, a pledge of revenue, securities or are unsecured. See Note 2 for a discussion of accounting policies related to bank loans. As of October 1, 2020, we adopted new accounting guidance related to the measurement of credit losses on financial instruments. See Note 2 for further information about this guidance and a discussion of our accounting policies related to our allowance for credit losses. We segregate our loan portfolio into six loan portfolio segments: C&I, CRE, REIT, tax-exempt, residential mortgage, and SBL and other. Upon adoption, we redefined certain of our portfolio segments to align with the new methodology applied in determining the allowance for credit losses. Prior-period loan portfolio segment balances have been revised to conform to the current presentation. Loan balances in the following tables are presented at amortized cost (outstanding principal balance net of unearned income and deferred expenses, which include purchase premiums, purchase discounts and net deferred origination fees and costs), except for certain held for sale loans recorded at fair value. Bank loans 117 RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements are presented on our Consolidated Statements of Financial Condition at amortized cost (or fair value where applicable) less the allowance for credit losses. The following table presents the balances for both the held for sale and held for investment loan portfolios, as well as the associated percentage of each portfolio segment in Raymond James Bank’s total loan portfolio. September 30, 2021 2020 2019 2018 2017 $ in millions Balance % Balance % Balance % Balance % Balance % C&I loans $ 8,440 33 % $ 7,421 34 % $ 8,056 38 % $ 7,741 39 % $ 7,339 43 % CRE loans 2,872 11 % 2,489 12 % 2,507 12 % 2,309 12 % 1,859 11 % REIT loans 1,112 5 % 1,210 5 % 1,333 6 % 1,470 8 % 1,361 8 % Tax-exempt loans 1,321 5 % 1,259 6 % 1,241 6 % 1,227 6 % 1,018 6 % Residential mortgage loans 5,318 21 % 4,973 23 % 4,479 21 % 3,775 19 % 3,162 18 % SBL and other 6,106 24 % 4,087 19 % 3,351 16 % 3,035 15 % 2,388 14 % Total loans held for investment 25,169 99 % 21,439 99 % 20,967 99 % 19,557 99 % 17,127 100 % Held for sale loans 145 1 % 110 1 % 142 1 % 164 1 % 70 — % Total loans held for sale and investment 25,314 100 % 21,549 100 % 21,109 100 % 19,721 100 % 17,197 100 % Allowance for credit losses ( 320 ) ( 354 ) ( 218 ) ( 203 ) ( 190 ) Bank loans, net $ 24,994 $ 21,195 $ 20,891 $ 19,518 $ 17,007 Accrued interest receivable on bank loans $ 48 $ 45 $ 53 $ 52 $ 37 The allowance for credit losses was 1.27 % of the held for investment loan portfolio as of September 30, 2021 and was determined using the CECL methodology, which we adopted on October 1, 2020. Prior periods have not been restated and were calculated under the incurred loss methodology, which differs from the CECL methodology in that it was based on historical loss experience and did not include an estimate of credit losses using a reasonable and supportable forecast period. Accrued interest receivables presented in the preceding table are reported in “Other receivables, net” on our Consolidated Statements of Financial Condition. At September 30, 2021, the FHLB had a blanket lien on Raymond James Bank’s residential mortgage loan portfolio as security for the repayment of certain borrowings. See Note 16 for more information regarding borrowings from the FHLB. Held for sale loans Raymond James Bank originated or purchased $ 2.15 billion, $ 1.79 billion and $ 2.33 billion of loans held for sale during the years ended September 30, 2021, 2020 and 2019, respectively. The majority of these loans were purchases of the guaranteed portions of SBA loans intended for resale in the secondary market as individual SBA loans or as securitized pools of SBA loans. Proceeds from the sale of held for sale loans amounted to $ 973 million, $ 776 million and $ 800 million for the years ended September 30, 2021, 2020 and 2019, respectively. Net gains resulting from such sales were insignificant in each of the years ended September 30, 2021, 2020 and 2019. Purchases and sales of loans held for investment The following table presents purchases and sales of loans held for investment by portfolio segment. $ in millions C&I loans CRE loans Residential mortgage loans Total Year ended September 30, 2021 Purchases $ 1,528 $ — $ 524 $ 2,052 Sales $ 297 $ — $ — $ 297 Year ended September 30, 2020 Purchases $ 589 $ 5 $ 402 $ 996 Sales $ 598 $ 27 $ 2 $ 627 Year ended September 30, 2019 Purchases $ 1,046 $ 42 $ 400 $ 1,488 Sales $ 126 $ — $ — $ 126 118 RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements Sales in the preceding table represent the recorded investment (i.e., net of charge-offs and discounts or premiums) of loans held for investment that were transferred to loans held for sale and subsequently sold to a third party during the respective period. As more fully described in Note 2, corporate loan sales generally occur as part of our credit management activities. Aging analysis of loans held for investment The following table presents information on delinquency status of our loans held for investment. $ in millions 30-89 days and accruing 90 days or more and accruing Total past due and accruing Nonaccrual with allowance Nonaccrual with no allowance Current and accruing Total loans held for investment September 30, 2021 C&I loans $ — $ — $ — $ 39 $ — $ 8,401 $ 8,440 CRE loans — — — — 20 2,852 2,872 REIT loans — — — — — 1,112 1,112 Tax-exempt loans — — — — — 1,321 1,321 Residential mortgage loans 2 — 2 2 13 5,301 5,318 SBL and other — — — — — 6,106 6,106 Total loans held for investment $ 2 $ — $ 2 $ 41 $ 33 $ 25,093 $ 25,169 September 30, 2020 C&I loans $ — $ — $ — $ 2 $ — $ 7,419 $ 7,421 CRE loans — — — — 14 2,475 2,489 REIT loans — — — — — 1,210 1,210 Tax-exempt loans — — — — — 1,259 1,259 Residential mortgage loans — — — 3 11 4,959 4,973 SBL and other — — — — — 4,087 4,087 Total loans held for investment $ — $ — $ — $ 5 $ 25 $ 21,409 $ 21,439 The preceding table includes $ 61 million and $ 15 million at September 30, 2021 and 2020, respectively, of nonaccrual loans which were current pursuant to their contractual terms. The table also includes CRE and residential first mortgage loan TDRs of $ 12 million and $ 13 million, respectively, at September 30, 2021, and $ 6 million and $ 15 million, respectively, at September 30, 2020. Other real estate owned, included in “Other assets” on our Consolidated Statements of Financial Condition, was insignificant at September 30, 2021 and 2020. Collateral-dependent loans A loan is considered collateral-dependent when the borrower is experiencing financial difficulty and repayment is expected to be provided substantially through the sale of the underlying collateral. At September 30, 2021, we had $ 20 million of collateral-dependent CRE loans, which were fully collateralized by retail and industrial real estate, and $ 5 million of collateral-dependent residential loans, which were fully collateralized by single family homes. Collateral-dependent loans do not include loans to borrowers who have been granted forbearance as result of the COVID-19 pandemic or loans for which the borrower had requested a loan modification, where the request had been initiated but had not been approved or completed as of September 30, 2021. Such loans may be considered collateral-dependent after the forbearance period expires. The recorded investment in mortgage loans secured by one-to-four family residential properties for which formal foreclosure proceedings were in process was $ 4 million and $ 6 million at September 30, 2021 and 2020, respectively. Credit quality indicators The credit quality of our bank loan portfolio is summarized monthly by management using internal risk ratings, which align with the standard asset classification system utilized by bank regulators. These classifications are divided into three groups: Not Classified (Pass), Special Mention, and Classified or Adverse Rating (Substandard, Doubtful and Loss). These terms are defined as follows: Pass – Loans which are well protected by the current net worth and paying capacity of the obligor (or guarantors, if any) or by the fair value, less costs to acquire and sell, of any underlying collateral in a timely manner. 119 RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements Special Mention – Loans which have potential weaknesses that deserve management’s close attention. These loans are not adversely classified and do not expose us to sufficient risk to warrant an adverse classification. Substandard – Loans which are inadequately protected by the current sound worth and paying capacity of the obligor or by the collateral pledged, if any. Loans with this classification are characterized by the distinct possibility that we will sustain some loss if the deficiencies are not corrected. Doubtful – Loans which have all the weaknesses inherent in loans classified as substandard with the added characteristic that the weaknesses make collection or liquidation in full highly questionable and improbable on the basis of currently-known facts, conditions and values. Loss – Loans which are considered by management to be uncollectible and of such little value that their continuance on our books as an asset, without establishment of a specific valuation allowance or charge-off, is not warranted. We do not have any loan balances within this classification because, in accordance with our accounting policy, loans, or a portion thereof considered to be uncollectible are charged-off prior to the assignment of this classification. 120 RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements The following tables present our held for investment bank loan portfolio by credit quality indicator. September 30, 2021 September 30, 2020 Loans by origination year $ in millions 2021 2020 2019 2018 2017 Prior Revolving loans Total Total C&I loans Risk rating: Pass $ 999 $ 1,273 $ 1,180 $ 1,408 $ 935 $ 1,633 $ 739 $ 8,167 $ 6,939 Special mention — — 41 — 26 54 1 122 235 Substandard — — 24 84 — 28 — 136 247 Doubtful — — 15 — — — — 15 — Total C&I loans $ 999 $ 1,273 $ 1,260 $ 1,492 $ 961 $ 1,715 $ 740 $ 8,440 $ 7,421 CRE loans Risk rating: Pass $ 533 $ 459 $ 442 $ 652 $ 223 $ 174 $ 62 $ 2,545 $ 2,141 Special mention — 45 58 36 — — — 139 213 Substandard — — 32 98 8 50 — 188 135 Doubtful — — — — — — — — — Total CRE loans $ 533 $ 504 $ 532 $ 786 $ 231 $ 224 $ 62 $ 2,872 $ 2,489 REIT loans Risk rating: Pass $ 235 $ 95 $ 75 $ 60 $ 46 $ 167 $ 237 $ 915 $ 1,138 Special mention — — 13 11 33 106 6 169 43 Substandard — — 21 — 4 — 3 28 29 Doubtful — — — — — — — — — Total REIT loans $ 235 $ 95 $ 109 $ 71 $ 83 $ 273 $ 246 $ 1,112 $ 1,210 Tax-exempt loans Risk rating: Pass $ 158 $ 57 $ 124 $ 204 $ 272 $ 506 $ — $ 1,321 $ 1,259 Special mention — — — — — — — — — Substandard — — — — — — — — — Doubtful — — — — — — — — — Total tax-exempt loans $ 158 $ 57 $ 124 $ 204 $ 272 $ 506 $ — $ 1,321 $ 1,259 Residential mortgage loans Risk rating: Pass $ 1,861 $ 1,266 $ 640 $ 386 $ 451 $ 666 $ 20 $ 5,290 $ 4,944 Special mention — — — — — 5 — 5 6 Substandard — — — 1 2 20 — 23 23 Doubtful — — — — — — — — — Total residential mortgage loans $ 1,861 $ 1,266 $ 640 $ 387 $ 453 $ 691 $ 20 $ 5,318 $ 4,973 SBL and other Risk rating: Pass $ 3 $ 45 $ 12 $ — $ — $ — $ 6,046 $ 6,106 $ 4,087 Special mention — — — — — — — — — Substandard — — — — — — — — — Doubtful — — — — — — — — — Total SBL and other $ 3 $ 45 $ 12 $ — $ — $ — $ 6,046 $ 6,106 $ 4,087 Loans classified as special mention, substandard or doubtful are all considered to be “criticized” loans. We also monitor the credit quality of the residential mortgage loan portfolio utilizing FICO scores and LTV ratios. A FICO score measures a borrower’s creditworthiness by considering factors such as payment and credit history. LTV measures the carrying value of the loan as a percentage of the value of the property securing the loan. 121 RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements The following table presents the held for investment residential mortgage loan portfolio by FICO score and by LTV ratio at origination. $ in millions September 30, 2021 September 30, 2020 FICO score: Below 600 $ 67 $ 67 600 - 699 416 363 700 - 799 3,772 3,463 800 + 1,058 1,076 FICO score not available 5 4 Total $ 5,318 $ 4,973 LTV ratio: Below 80% $ 4,123 $ 3,852 80%+ 1,195 1,121 Total $ 5,318 $ 4,973 Allowance for credit losses The following table presents changes in the allowance for credit losses on held for investment bank loans by portfolio segment. $ in millions C&I loans CRE loans REIT loans Tax-exempt loans Residential mortgage loans SBL and other Total Year ended September 30, 2021 Balance at beginning of year $ 200 $ 81 $ 36 $ 14 $ 18 $ 5 $ 354 Impact of CECL adoption 19 ( 11 ) ( 9 ) ( 12 ) 24 ( 2 ) 9 Provision/(benefit) for credit losses ( 25 ) 5 ( 5 ) — ( 8 ) 1 ( 32 ) Net (charge-offs)/recoveries: Charge-offs ( 4 ) ( 10 ) — — — — ( 14 ) Recoveries — — — — 1 — 1 Net (charge-offs)/recoveries ( 4 ) ( 10 ) — — 1 — ( 13 ) Foreign exchange translation adjustment 1 1 — — — — 2 Balance at end of year $ 191 $ 66 $ 22 $ 2 $ 35 $ 4 $ 320 Year ended September 30, 2020 Balance at beginning of year $ 139 $ 34 $ 15 $ 9 $ 16 $ 5 $ 218 Provision/(benefit) for credit losses 157 48 23 5 — — 233 Net (charge-offs)/recoveries: Charge-offs ( 96 ) ( 2 ) ( 2 ) — — — ( 100 ) Recoveries — — — — 2 — 2 Net (charge-offs)/recoveries ( 96 ) ( 2 ) ( 2 ) — 2 — ( 98 ) Foreign exchange translation adjustment — 1 — — — — 1 Balance at end of year $ 200 $ 81 $ 36 $ 14 $ 18 $ 5 $ 354 The allowance for credit losses on held for investment bank loans decreased $ 43 million to $ 320 million since the adoption of CECL on October 1, 2020, largely attributable to improved forecasts for certain macroeconomic inputs to our CECL model since our adoption date, 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. The allowance for credit losses on unfunded lending commitments, which is included in “Other payables” on our Consolidated Statements of Financial Condition, was $ 13 million and $ 12 million at September 30, 2021 and 2020, respectively. The increase in the allowance for credit losses on unfunded lending commitments as of September 30, 2021 compared with September 30, 2020 was due to the adoption impact of CECL of $ 8 million, partially offset by improved forecasts for certain macroeconomic inputs to our CECL model and lower unfunded exposure in the CRE portfolio. See Note 2 for further information about the adoption of CECL and the impact to the allowance for credit losses. 122 RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements NOTE 9 – LOANS TO FINANCIAL ADVISORS, NET Loans to financial advisors are primarily comprised of loans originated as a part of our recruiting activities. See Note 2 for a discussion of our accounting policies related to loans to financial advisors and the related allowance for credit losses. The following table presents the balances for our loans to financial advisors and the related accrued interest receivable. September 30, $ in millions 2021 2020 Currently affiliated with the firm (1) $ 1,074 $ 1,001 No longer affiliated with the firm (2) 10 15 Total loans to financial advisors 1,084 1,016 Allowance for credit losses ( 27 ) ( 4 ) Loans to financial advisors, net $ 1,057 $ 1,012 Accrued interest receivable on loans to financial advisors $ 4 $ 4 (1) These loans were predominantly current. (2) These loans were predominantly past due for a period of 180 days or more. Accrued interest receivables presented in the preceding table are reported in “Other receivables, net” on the Consolidated Statements of Financial Condition. The allowance for credit losses was 2.49 % of the loan portfolio as of September 30, 2021 and was determined using the CECL methodology, which we adopted on October 1, 2020. The allowance for credit losses as of September 30, 2020 was determined under the incurred loss methodology and has not been restated. The increase in the allowance from September 30, 2020 to September 30, 2021 was primarily due to the impact of the October 1, 2020 CECL adoption, which resulted in an increase in our allowance for credit losses of $ 25 million. See Note 2 for further information on the CECL adoption. NOTE 10 – VARIABLE INTEREST ENTITIES A VIE requires consolidation by the entity’s primary beneficiary. We evaluate all of the entities in which we are involved to determine if the entity is a VIE and if so, whether we hold a variable interest and are the primary beneficiary. Refer to Note 2 for a discussion of our principal involvement with VIEs and the accounting policies regarding determination of whether we are deemed to be the primary beneficiary of VIEs. VIEs where we are the primary beneficiary Of the VIEs in which we hold an interest, we have determined that certain Private Equity Interests, certain LIHTC funds and the Restricted Stock Trust Fund require consolidation in our financial statements, as we are deemed the primary beneficiary of such VIEs. The aggregate assets and liabilities of the VIEs we consolidate are provided in the following table. Aggregate assets and aggregate liabilities may differ from the consolidated carrying value of assets and liabilities due to the elimination of intercompany assets and liabilities held by the consolidated VIE. $ in millions Aggregate assets Aggregate liabilities September 30, 2021 Private Equity Interests $ 66 $ 4 LIHTC funds 111 52 Restricted Stock Trust Fund 15 15 Total $ 192 $ 71 September 30, 2020 Private Equity Interests $ 39 $ 4 LIHTC funds 168 76 Restricted Stock Trust Fund 14 14 Total $ 221 $ 94 123 RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements The following table presents information about the carrying value of the assets and liabilities of the VIEs which we consolidate and which are included on our Consolidated Statements of Financial Condition. Intercompany balances are eliminated in consolidation and not reflected in the following table. September 30, $ in millions 2021 2020 Assets: Cash and cash equivalents and assets segregated for regulatory purposes and restricted cash $ 10 $ 9 Other investments 63 37 Other assets 105 164 Total assets $ 178 $ 210 Liabilities: Other payables $ 45 $ 76 Total liabilities $ 45 $ 76 Noncontrolling interests $ 58 $ 62 VIEs where we hold a variable interest but are not the primary beneficiary As discussed in Note 2, we have concluded that for certain VIEs we are not the primary beneficiary and therefore do not consolidate these VIEs. Such VIEs include certain Private Equity Interests, certain LIHTC funds, and other limited partnerships. Our risk of loss for these VIEs is limited to our investments in, advances to, and/or receivables due from these VIEs. Aggregate assets, liabilities and risk of loss The aggregate assets, liabilities, and our exposure to loss from those VIEs in which we hold a variable interest, but as to which we have concluded we are not the primary beneficiary, are provided in the following table. September 30, 2021 2020 $ in millions Aggregate assets Aggregate liabilities Our risk of loss Aggregate assets Aggregate liabilities Our risk of loss Private Equity Interests $ 7,318 $ 47 $ 82 $ 7,738 $ 96 $ 67 LIHTC funds 7,032 2,280 71 6,516 1,993 66 Other 519 155 10 227 136 6 Total $ 14,869 $ 2,482 $ 163 $ 14,481 $ 2,225 $ 139 124 RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements NOTE 11 - GOODWILL AND IDENTIFIABLE INTANGIBLE ASSETS, NET Our goodwill and identifiable intangible assets result from various acquisitions. See Note 2 for a discussion of our goodwill and intangible assets accounting policies. The following table presents our goodwill and net identifiable intangible asset balances as of the dates indicated. September 30, $ in millions 2021 2020 Goodwill $ 660 $ 466 Identifiable intangible assets, net 222 134 Total goodwill and identifiable intangible assets, net $ 882 $ 600 Goodwill The following table summarizes our goodwill by segment and the balances and activity for the years indicated. $ in millions Private Client Group Capital Markets Asset Management Total Year ended September 30, 2021 Goodwill as of beginning of year $ 277 $ 120 $ 69 $ 466 Additions 139 54 — 193 Foreign currency translations 1 — — 1 Goodwill as of end of year $ 417 $ 174 $ 69 $ 660 Year ended September 30, 2020 Goodwill as of beginning of year $ 275 $ 120 $ 69 $ 464 Foreign currency translations 2 — — 2 Goodwill as of end of year $ 277 $ 120 $ 69 $ 466 The additions to goodwill during the year ended September 30, 2021 arose from our acquisitions of NWPS in the Private Client Group segment and Financo and Cebile in the Capital Markets segment. See Note 3 for additional discussion of these acquisitions. Qualitative assessments As described in Note 2, we perform goodwill impairment testing on an annual basis or when an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying value. We performed our latest annual goodwill impairment testing as of our January 1, 2021 evaluation date, evaluating balances as of December 31, 2020. In that testing, we performed a qualitative impairment assessment for each of our reporting units that had goodwill. Based upon the outcome of our qualitative assessments, no impairment was identified. Our qualitative assessments consider macroeconomic indicators, such as trends in equity and fixed income markets, gross domestic product, unemployment rates, interest rates, and housing markets. We also consider regulatory changes, reporting unit results, and changes in key personnel and strategy. Changes in these indicators, and our ability to respond to such changes, may trigger the need for impairment testing at a point other than our annual assessment date. No events have occurred since our annual assessment date that would cause us to update this impairment testing. 125 RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements Identifiable intangible assets, net The following table sets forth our identifiable intangible asset balances by segment, net of accumulated amortization, and activity for the years indicated. $ in millions Private Client Group Capital Markets Asset Management Total Year ended September 30, 2021 Net identifiable intangible assets as of beginning of year $ 31 $ 13 $ 90 $ 134 Additions 96 13 — 109 Amortization expense ( 7 ) ( 9 ) ( 5 ) ( 21 ) Net identifiable intangible assets as of end of year $ 120 $ 17 $ 85 $ 222 Year ended September 30, 2020 Net identifiable intangible assets as of beginning of year $ 35 $ 17 $ 95 $ 147 Amortization expense ( 4 ) ( 4 ) ( 5 ) ( 13 ) Net identifiable intangible assets as of end of year $ 31 $ 13 $ 90 $ 134 The additions of identifiable intangible assets during the year ended September 30, 2021 arose from our acquisitions of NWPS in the Private Client Group segment and Financo and Cebile in the Capital Markets segment. See Note 3 for additional discussion of these acquisitions. The following table summarizes our identifiable intangible assets by type. September 30, 2021 2020 $ in millions Gross carrying value Accumulated amortization Gross carrying value Accumulated amortization Customer relationships $ 238 $ ( 79 ) $ 134 $ ( 61 ) Non-amortizing customer relationships 52 — 52 — Trade name 12 ( 5 ) 10 ( 4 ) Seller relationship agreements 4 ( 3 ) 4 ( 2 ) Other 6 ( 3 ) 6 ( 5 ) Total $ 312 $ ( 90 ) $ 206 $ ( 72 ) The following table sets forth the projected amortization expense by fiscal year associated with our identifiable intangible assets with finite lives. Fiscal year ended September 30, $ in millions 2022 $ 22 2023 15 2024 14 2025 13 2026 10 Thereafter 96 Total $ 170 Qualitative assessments As described in Note 2, we perform impairment testing for our non-amortizing customer relationships intangible asset on an annual basis or when an event occurs or circumstances change that would more likely than not reduce the fair value of the asset below its carrying value. We performed our latest annual impairment testing as of our January 1, 2021 evaluation date, evaluating the balance as of December 31, 2020. In that testing, we performed a qualitative assessment for our non-amortizing customer relationships intangible asset. Based upon the outcome of our qualitative assessment, no impairment was identified. No events have occurred since such assessment that would cause us to update this impairment testing. 126 RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements NOTE 12 - OTHER ASSETS The following table details the components of other assets. See Note 2 for a discussion of the accounting polices related to certain of these components. September 30, $ in millions 2021 2020 Investments in company-owned life insurance policies $ 952 $ 773 Property and equipment, net 499 535 Lease ROU assets 446 321 Prepaid expenses 127 123 Investments in FHLB and FRB stock 72 77 All other 161 231 Total other assets $ 2,257 $ 2,060 As of September 30, 2021, the cumulative face value of our company-owned life insurance policies was $ 2.04 billion. See Note 13 for further information regarding our property and equipment and Note 14 for further information regarding our leases. NOTE 13 - PROPERTY AND EQUIPMENT, NET The following table presents the components of our property and equipment, net as of the dates indicated. September 30, 2021 2020 $ in millions Gross carrying value Accumulated depreciation/ software amortization Property and equipment, net Gross carrying value Accumulated depreciation/ software amortization Property and equipment, net Land $ 29 $ — $ 29 $ 29 $ — $ 29 Software, including development in progress 606 ( 362 ) 244 565 ( 302 ) 263 Buildings, building components, leasehold and land improvements 397 ( 225 ) 172 406 ( 215 ) 191 Furniture, fixtures and equipment 321 ( 267 ) 54 294 ( 242 ) 52 Total $ 1,353 $ ( 854 ) $ 499 $ 1,294 $ ( 759 ) $ 535 Depreciation expense associated with property and equipment was $ 51 million, $ 52 million, and $ 48 million for the years ended September 30, 2021, 2020, and 2019, respectively, and is included in “Occupancy and equipment” expense on our Consolidated Statements of Income and Comprehensive Income. Amortization expense associated with computer software was $ 62 million, $ 54 million, and $ 49 million for the years ended September 30, 2021, 2020, and 2019, respectively, and is included in “Communications and information processing” expense on our Consolidated Statements of Income and Comprehensive Income. We also incur software licensing fees, which are also included in “Communications and information processing” expense on our Consolidated Statements of Income and Comprehensive Income. 127 RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements NOTE 14 - LEASES The following table presents balances related to our leases on our Consolidated Statements of Financial Condition. See Note 2 for a discussion of our accounting policies related to leases. $ in millions September 30, 2021 September 30, 2020 ROU assets (included in Other assets) $ 446 $ 321 Lease liabilities (included in Other payables) $ 450 $ 345 The weighted-average remaining lease term and discount rate for our leases is presented in the following table. September 30, 2021 September 30, 2020 Weighted-average remaining lease term 6.7 years 5.0 years Weighted-average discount rate 3.45 % 3.86 % Lease expense The following table details the components of lease expense, which is included in “Occupancy and equipment” expense on our Consolidated Statements of Income and Comprehensive Income. Year ended September 30, $ in millions 2021 2020 Lease costs $ 110 $ 98 Variable lease costs $ 27 $ 26 Variable lease costs in the preceding table include payments for common area maintenance charges and other variable costs that are not reflected in the measurement of ROU assets and lease liabilities. Lease liabilities The maturities by fiscal year of our lease liabilities as of September 30, 2021 are presented in the following table. $ in millions 2022 $ 102 2023 94 2024 72 2025 56 2026 46 Thereafter 136 Gross lease payments 506 Less: interest ( 56 ) Present value of lease liabilities $ 450 Lease payments in the preceding table exclude $ 20 million of legally binding minimum lease payments for leases signed but not yet commenced. These leases are estimated to commence between fiscal year 2022 and 2023 with lease terms ranging from three to seven years . 128 RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements NOTE 15 – BANK DEPOSITS Bank deposits include savings and money market accounts, certificates of deposit with Raymond James Bank, Negotiable Order of Withdrawal (“NOW”) accounts and demand deposits. The following table presents a summary of bank deposits, as well as the weighted-average interest rates on such deposits. The calculation of the weighted-average rates were based on the actual deposit balances and rates at each respective period end. September 30, 2021 2020 $ in millions Balance Weighted-average rate Balance Weighted-average rate Savings and money market accounts $ 31,415 0.01 % $ 25,604 0.01 % Certificates of deposit 878 1.87 % 1,017 1.94 % NOW accounts 164 1.84 % 156 1.92 % Demand deposits (non-interest-bearing) 38 — 24 — Total bank deposits $ 32,495 0.07 % $ 26,801 0.09 % Total bank deposits in the preceding table exclude affiliate deposits of $ 301 million and $ 185 million at September 30, 2021 and 2020, respectively. As of September 30, 2021, these affiliate deposits included $ 229 million and $ 72 million held in deposit accounts at Raymond James Bank on behalf of RJF and Raymond James Trust Company of New Hampshire, respectively. As of September 30, 2020, these affiliate deposits were held by Raymond James Bank on behalf of RJF. See Note 27 for additional information. Savings and money market accounts in the preceding table consist primarily of deposits that are cash balances swept to Raymond James Bank from the client investment accounts maintained at RJ&A. These balances are held in FDIC-insured bank accounts through the RJBDP. The aggregate amount of individual time deposit account balances that exceeded the FDIC insurance limit at September 30, 2021 was approximately $ 42 million. The following table sets forth the scheduled maturities of certificates of deposit. September 30, 2021 2020 $ in millions Denominations greater than or equal to $100,000 Denominations less than $100,000 Denominations greater than or equal to $100,000 Denominations less than $100,000 Three months or less $ 22 $ 87 $ 59 $ 76 Over three through six months 21 76 26 18 Over six through twelve months 32 54 19 26 Over one through two years 93 170 43 206 Over two through three years 37 166 67 170 Over three through four years 6 99 37 165 Over four through five years 9 6 7 98 Total certificates of deposit $ 220 $ 658 $ 258 $ 759 Interest expense on deposits, excluding interest expense related to affiliate deposits, is summarized in the following table. Year ended September 30, $ in millions 2021 2020 2019 Savings, money market, and NOW accounts $ 6 $ 21 $ 120 Certificates of deposit 17 20 12 Total interest expense on deposits $ 23 $ 41 $ 132 129 RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements NOTE 16 – OTHER BORROWINGS The following table details the components of other borrowings. September 30, $ in millions 2021 2020 FHLB advances $ 850 $ 875 Mortgage notes payable 8 13 Total other borrowings $ 858 $ 888 FHLB advances Borrowings from the FHLB were comprised of floating-rate advances of $ 850 million as of September 30, 2021, and floating and fixed-rate advances of $ 850 million and $ 25 million, respectively, as of September 30, 2020. The fixed-rate advance, which incurred interest at 3.4 %, matured and was repaid in October 2020. 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. Refer to Note 2 for information regarding these interest rate swaps, which are accounted for as hedging instruments. The weighted-average interest rate on our floating-rate FHLB advances was 0.26 % and 0.45 % as of September 30, 2021 and September 30, 2020, respectively. The interest rates on the FHLB borrowings will transition to a Secured Overnight Financing Rate (“SOFR”)-based rate in December 2021. All of the advances were secured by a blanket lien granted to the FHLB on our residential mortgage loan portfolio. Secured and unsecured financing arrangements In February 2019, RJF and RJ&A entered into an unsecured revolving credit facility agreement (the “Credit Facility”) with a syndicate of lenders. In April 2021, we amended our Credit Facility, extending the term from February 2024 to April 2026 and incorporating a lower cost of borrowing under the Credit Facility and certain favorable covenant modifications. This committed unsecured borrowing facility 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 of RJF. The interest rates on borrowings under the Credit Facility are variable and were based on LIBOR as of September 30, 2021, as adjusted for RJF’s credit rating; however, the administrative agent has the right to select a commercially available alternative reference rate to LIBOR if adequate and reasonable means do not exist for ascertaining LIBOR. There were no borrowings outstanding on the Credit Facility as of September 30, 2021. There is a facility fee associated with the Credit Facility, which also varies with RJF’s credit rating. Based upon RJF’s credit rating as of September 30, 2021, the variable rate facility fee, which is applied to the committed amount, was 0.175 % per annum. In addition to the Credit Facility, we maintain various secured and unsecured lines of credit, which are generally utilized to finance certain fixed income securities or for cash management purposes. Borrowings during the year were generally day-to-day and there were no borrowings outstanding on these arrangements as of September 30, 2021. The interest rates for these arrangements are variable and are based on a daily bank quoted rate, which may reference LIBOR, the Fed Funds rate, a lender’s prime rate, the Canadian prime rate, or another commercially available rate, as applicable. We also have other collateralized financings included in “Collateralized financings” on our Consolidated Statements of Financial Condition. See Note 7 for information regarding our other collateralized financing arrangements. Mortgage notes payable Mortgage notes payable pertain to mortgage loans on certain of our corporate headquarters offices located in St. Petersburg, Florida. These mortgage loans are secured by land, buildings, and improvements. These mortgage loans bear a fixed interest rate of 5.7 % with repayment terms of monthly interest and principal debt service and have a January 2023 maturity. 130 RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements NOTE 17 – SENIOR NOTES PAYABLE The following table summarizes our senior notes payable. September 30, $ in millions 2021 2020 4.65 % senior notes, due 2030 $ 500 $ 500 4.95 % senior notes, due 2046 800 800 3.75 % senior notes, due 2051 750 — 5.625 % senior notes, due 2024 — 250 3.625 % senior notes, due 2026 — 500 Total principal amount 2,050 2,050 Unaccreted premiums/(discounts) 5 10 Unamortized debt issuance costs ( 18 ) ( 15 ) Total senior notes payable $ 2,037 $ 2,045 In March 2020, we sold $ 500 million in aggregate principal amount of 4.65 % senior notes due April 2030 in a registered underwritten public offering. Interest on these senior notes is payable semi-annually. We may redeem some or all of these senior notes at any time prior to January 1, 2030, at a redemption price equal to the greater of (i) 100 % of the principal amount of the notes redeemed, or (ii) the sum of the present values of the remaining scheduled payments of principal and interest thereon, discounted to the redemption date at a discount rate equal to a designated U.S. Treasury rate, plus 50 basis points; and on or after January 1, 2030, at 100 % of the principal amount of the notes redeemed; plus, in each case, accrued and unpaid interest thereon to the redemption date. In July 2016, we sold $ 300 million in aggregate principal amount of 4.95 % senior notes due July 2046 in a registered underwritten public offering. In May 2017, we reopened the offering and sold, in a registered underwritten public offering, an additional $ 500 million in aggregate principal amount of 4.95 % senior notes due July 2046. These additional senior notes were consolidated, formed into a single series, and are fully fungible with the $ 300 million in aggregate principal amount of 4.95 % senior notes issued in July 2016. Interest on these senior notes is payable semi-annually. We may redeem some or all of these senior notes at any time prior to their maturity, at a redemption price equal to the greater of (i) 100 % of the principal amount of the notes redeemed, or (ii) the sum of the present values of the remaining scheduled payments of principal and interest thereon, discounted to the redemption date at a discount rate equal to a designated U.S. Treasury rate, plus 45 basis points, plus accrued and unpaid interest thereon to the redemption date. 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. Interest on these senior notes is payable semi-annually. We may redeem some or all of these senior notes at any time prior to October 1, 2050, at a redemption price equal to the greater of (i) 100 % of the principal amount of the notes redeemed, or (ii) the sum of the present values of the remaining scheduled payments of principal and interest thereon, discounted to the redemption date at a discount rate equal to a designated U.S. Treasury rate, plus 20 basis points; and on or after October 1, 2050, at 100 % of the principal amount of the notes redeemed; plus, in each case, accrued and unpaid interest thereon to the redemption date. Tender offers and redemptions of certain senior notes Concurrently with the launch of our offering of $ 750 million in aggregate principal amount of 3.75 % senior notes due April 2051 described above, we commenced cash tender offers (the “Tender Offers”) for any and all of our then outstanding 5.625 % senior notes due 2024 and 3.625 % senior notes due 2026 (the “Pre-existing Notes”). Pursuant to the Tender Offers, in April 2021 we repurchased an aggregate of $ 332 million outstanding Pre-existing Notes for an aggregate purchase price of $ 373 million. In addition, in April 2021 we issued notices of redemption to holders of the Pre-existing Notes pursuant to the indentures governing such notes, to redeem any Pre-existing Notes that remained outstanding following the closing of the Tender Offers. In May 2021 we redeemed the remaining outstanding balance of the Pre-existing Notes of $ 418 million for an aggregate redemption price of $ 473 million. 131 RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements These repurchases and redemptions of the Pre-existing Notes were funded with the net proceeds from our 3.75 % senior notes due April 2051 and cash on hand, and resulted in a loss of $ 98 million which was comprised of make-whole premiums, unamortized debt issuance costs which were accelerated, and certain legal and professional fees. This loss was presented in “Losses on extinguishment of debt” on our Consolidated Statements of Income and Comprehensive Income for our fiscal year ended September 30, 2021. NOTE 18 – INCOME TAXES For a discussion of our income tax accounting policies and other income tax-related information see Note 2. Income taxes The following table details the total income tax provision/(benefit) allocation for each respective period. Year ended September 30, $ in millions 2021 2020 2019 Recorded in: Net income $ 388 $ 234 $ 341 Equity, arising from available-for-sale securities recorded through OCI ( 32 ) 23 27 Equity, arising from currency translations, net of the impact of net investment hedges recorded through OCI ( 10 ) 2 7 Equity, arising from cash flow hedges recorded through OCI 8 ( 12 ) ( 23 ) Total provision for income taxes $ 354 $ 247 $ 352 The following table details our provision/(benefit) for income taxes included in net income for each respective period. Year ended September 30, $ in millions 2021 2020 2019 Current: Federal $ 321 $ 215 $ 286 State and local 79 49 63 Foreign 25 9 15 Total current 425 273 364 Deferred: Federal ( 28 ) ( 36 ) ( 22 ) State and local ( 6 ) ( 3 ) ( 1 ) Foreign ( 3 ) — — Total deferred ( 37 ) ( 39 ) ( 23 ) Total provision for income taxes $ 388 $ 234 $ 341 A reconciliation of the U.S. federal statutory income tax rate to our effective income tax rate is detailed in the following table. Year ended September 30, 2021 2020 2019 Provision calculated at statutory rate 21.0 % 21.0 % 21.0 % State income tax, net of federal benefit 3.3 % 3.6 % 3.6 % Gains on company-owned life insurance policies which are not subject to tax ( 1.8 ) % ( 1.0 ) % ( 0.1 ) % Federal tax credits ( 0.7 ) % ( 1.1 ) % ( 0.9 ) % Excess tax benefits related to share-based compensation ( 0.2 ) % ( 0.6 ) % ( 0.4 ) % Other, net 0.1 % 0.3 % 1.6 % Total provision for income tax 21.7 % 22.2 % 24.8 % The following table presents our U.S. and foreign components of pre-tax income for each respective period. Year ended September 30, $ in millions 2021 2020 2019 U.S. $ 1,701 $ 1,019 $ 1,340 Foreign 90 33 35 Pre-tax income $ 1,791 $ 1,052 $ 1,375 132 RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements The cumulative effects of temporary differences that give rise to significant portions of the deferred tax asset/(liability) items are detailed in the following table. September 30, $ in millions 2021 2020 Deferred tax assets: Deferred compensation $ 287 $ 229 Allowances for credit losses 81 89 Unrealized loss associated with foreign currency translations 3 8 Unrealized loss associated with available-for-sale securities 2 — Unrealized loss associated with cash flow hedges 9 18 Accrued expenses 46 34 Partnership investments 9 13 Lease liabilities 115 80 Other 18 16 Total deferred tax assets 570 487 Deferred tax liabilities: Goodwill and identifiable intangible assets ( 64 ) ( 34 ) Property and equipment ( 85 ) ( 81 ) Lease ROU assets ( 114 ) ( 80 ) Unrealized gain associated with available-for-sale securities — ( 30 ) Other ( 2 ) — Total deferred tax liabilities ( 265 ) ( 225 ) Net deferred tax assets $ 305 $ 262 Deferred income taxes are provided for the effects of temporary differences between the tax basis of an asset or liability and its reported amount in the financial statements. Deferred income tax assets are subject to a valuation allowance if, in management’s opinion, it is more likely than not that these benefits will not be realized. Our deferred income taxes principally relate to deferred compensation, allowances for credit losses and other accrued expenses. Substantially all of our deferred tax assets relate to U.S. federal and state taxing jurisdictions. As of September 30, 2021, the deferred tax assets aggregated to $ 570 million. We continue to believe that the realization of our deferred tax assets is more likely than not based on expectations of future taxable income. As of September 30, 2021, we considered substantially all undistributed earnings of non-U.S. subsidiaries to be permanently reinvested. Due to the fact that the Tax Cut and Jobs Act (“TCJA”) enacted on December 22, 2017 reduces our incremental tax cost of repatriating offshore earnings, we have not provided for any U.S. deferred income taxes related to such subsidiaries. The TCJA instituted a territorial system of international taxation. Under the system, dividends received by a U.S. corporation from its 10%-or-greater-owned foreign subsidiaries are generally exempt from U.S. tax if attributable to non-U.S. source earnings, but are subject to tax on “Global intangible low-taxed income” which is applicable regardless of whether the income is repatriated. As of September 30, 2021, we had approximately $ 331 million of cumulative undistributed earnings attributable to foreign subsidiaries. Because the time and manner of repatriation is uncertain, we cannot determine the impact of local taxes, withholding taxes and foreign tax credits associated with the future repatriation of such earnings, and therefore, cannot quantify the tax liability that would be payable in the event all such foreign earnings are repatriated. As of September 30, 2021, the current tax receivable, which is included in “Other receivables” on our Consolidated Statements of Financial Condition, was $ 12 million, and the current tax payable, which is included in “Other payables,” was $ 51 million. As of September 30, 2020, the current tax receivable was $ 17 million and the current tax payable was $ 82 million. Uncertain tax positions We recognize the accrual of interest and penalties related to income tax matters in interest expense and other expense, respectively. As of September 30, 2021 and 2020, accrued interest and penalties were $ 7 million and $ 8 million, respectively. 133 RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements The following table presents the aggregate changes in the balances for uncertain tax positions. Year ended September 30, $ in millions 2021 2020 2019 Uncertain tax positions beginning of year $ 45 $ 42 $ 31 Increases for tax positions related to the current year 5 5 11 Increases for tax positions related to prior years 2 3 7 Decreases for tax positions related to prior years ( 7 ) ( 1 ) — Decreases due to lapsed statute of limitations ( 5 ) ( 4 ) ( 2 ) Decreases related to settlements ( 4 ) — ( 5 ) Uncertain tax positions end of year $ 36 $ 45 $ 42 The total amount of uncertain tax positions that, if recognized, would impact the effective tax rate (the items included in the preceding table after considering the federal tax benefit associated with any state tax provisions) was $ 31 million, $ 40 million, and $ 38 million at September 30, 2021, 2020 and 2019, respectively. We anticipate that the uncertain tax position liability balance will decrease by approximately $ 10 million over the next 12 months due to expiration of statutes of limitations of federal and state tax returns and settlements of positions with the Internal Revenue Service. We file U.S. federal income tax returns as well as returns with various state, local and foreign jurisdictions. With few exceptions, we are generally no longer subject to U.S. federal, state and local, or foreign income tax examination by tax authorities for years prior to fiscal year 2018 for federal tax returns, fiscal year 2017 for state and local tax returns and fiscal year 2017 for foreign tax returns. Various foreign and state audits in process are expected to be completed in fiscal year 2022. NOTE 19 – COMMITMENTS, CONTINGENCIES AND GUARANTEES Commitments and contingencies Underwriting commitments In the normal course of business, we enter into commitments for debt and equity underwritings. As of September 30, 2021, we had three such open underwriting commitments, which were subsequently settled in open market transactions and did not result in significant losses. Lending commitments and other credit-related financial instruments Raymond James Bank has outstanding, at any time, a significant number of commitments to extend credit and other credit-related off-balance-sheet financial instruments, such as standby letters of credit and loan purchases, which then extend over varying periods of time. These arrangements are subject to strict underwriting assessments and each customer’s credit worthiness is evaluated on a case-by-case basis. Fixed-rate commitments are subject to market risk resulting from fluctuations in interest rates and our exposure is limited to the replacement value of those commitments. The following table presents Raymond James Bank’s commitments to extend credit and other credit-related off-balance sheet financial instruments outstanding. September 30, $ in millions 2021 2020 Open-end consumer lines of credit (primarily SBL) $ 17,515 $ 12,148 Commercial lines of credit $ 2,075 $ 1,482 Unfunded lending commitments $ 548 $ 532 Standby letters of credit $ 22 $ 33 Open-end consumer lines of credit primarily represent the unfunded amounts of bank loans to consumers that are secured by marketable securities at advance rates consistent with industry standards. The proceeds from repayment or, if necessary, the liquidation of collateral, which is monitored daily, are expected to satisfy the amounts drawn against these existing lines of credit. These lines of credit are primarily uncommitted, as we reserve the right to not make any advances or may terminate these lines at any time. 134 RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements Because many of Raymond James Bank’s lending commitments expire without being funded in whole or in part, the contractual amounts are not estimates of our actual future credit exposure or future liquidity requirements. The allowance for credit losses calculated under CECL provides for potential losses related to the unfunded lending commitments. See Notes 2 and 8 for further discussion of this allowance for credit losses related to unfunded lending commitments. RJ&A enters into margin lending arrangements which allow customers to borrow against the value of qualifying securities. Margin loans are collateralized by the securities held in the customer’s account at RJ&A. Collateral levels and established credit terms are monitored daily and we require customers to deposit additional collateral or reduce balances as necessary. We offer loans to prospective financial advisors for recruiting and retention purposes (see Notes 2 and 9 for further discussion of our loans to financial advisors). These offers are contingent upon certain events occurring, including the individuals joining us and meeting certain other conditions outlined in their offer. We had unfunded commitments of $ 21 million for loans to financial advisors who have met such conditions as of September 30, 2021. Investment commitments We had unfunded commitments to various investments, including private equity investments and certain Raymond James Bank investments, of $ 36 million as of September 30, 2021. Other commitments RJTCF sells investments in project partnerships to various LIHTC funds, which have third-party investors, and for which RJTCF serves as the managing member or general partner. RJTCF typically sells investments in project partnerships to LIHTC funds within 90 days of their acquisition. Until such investments are sold to LIHTC funds, RJTCF is responsible for funding investment commitments to such partnerships. As of September 30, 2021, RJTCF had committed approximately $ 61 million to project partnerships that had not yet been sold to LIHTC funds. Because we expect to sell these project partnerships to LIHTC funds and the equity funding events arise over future periods, the contractual commitments are not expected to materially impact our future liquidity requirements. RJTCF may also make short-term loans or advances to project partnerships and LIHTC funds. As a part of our fixed income public finance operations, we enter into forward commitments to purchase agency MBS. At September 30, 2021, we had $ 198 million of principal amount of outstanding forward MBS purchase commitments, which were expected to be purchased within 90 days following commitment. In order to hedge the market interest rate risk to which we would otherwise be exposed between the date of the commitment and the date of sale of the MBS, we enter into TBA security contracts with investors for generic MBS at specific rates and prices to be delivered on settlement dates in the future. We may be subject to loss if the timing of, or the actual amount of, the MBS differs significantly from the term and notional amount of the TBA security contract to which we entered. These TBA securities and related purchase commitments are accounted for at fair value. As of September 30, 2021, the fair value of the TBA securities and the estimated fair value of the purchase commitments were insignificant. For information regarding our acquisition commitments associated with our intended acquisitions of Charles Stanley and TriState Capital, see Note 3. For information regarding our lease commitments, including the maturities of our lease liabilities, see Note 14. Guarantees Our U.S. broker-dealer subsidiaries are required by federal law to be members of the Securities Investors Protection Corporation (“SIPC”). The SIPC fund provides protection up to $ 500 thousand per client for securities and cash held in client accounts, including a limitation of $ 250 thousand on claims for cash balances. We have purchased excess SIPC coverage through various syndicates of Lloyd’s of London. For RJ&A, our clearing broker-dealer, the additional protection currently provided has an aggregate firm limit of $ 750 million for cash and securities, including a sub-limit of $ 1.9 million per client for cash above basic SIPC. Account protection applies when a SIPC member fails financially and is unable to meet its obligations to clients. This coverage does not protect against market fluctuations. RJF has provided an indemnity to Lloyd’s of London against any and all losses they may incur associated with the excess SIPC policies. We guarantee the debt of one of our private equity investments. The amount of such debt, including the undrawn portion of a revolving credit facility, was $ 13 million as of September 30, 2021. The debt, which matures in 2022, is secured by substantially all of the assets of the borrower. 135 RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements Legal and regulatory matter contingencies In the normal course of our business, we have been named, from time to time, as a defendant in various legal actions, including arbitrations, class actions and other litigation, arising in connection with our activities as a diversified financial services institution. RJF and certain of its subsidiaries are subject to regular reviews and inspections by regulatory authorities and self-regulatory organizations. Reviews can result in the imposition of sanctions for regulatory violations, ranging from non-monetary censures to fines and, in serious cases, temporary or permanent suspension from conducting business, or limitations on certain business activities. In addition, regulatory agencies and self-regulatory organizations institute investigations from time to time, among other things, into industry practices, which can also result in the imposition of such sanctions. We may contest liability and/or the amount of damages, as appropriate, in each pending matter. Over the last several years, the level of litigation and investigatory activity (both formal and informal) by government and self-regulatory agencies in the financial services industry continues to be significant. There can be no assurance that material losses will not be incurred from claims that have not yet been asserted or are not yet determined to be material. For many legal and regulatory matters, we are unable to estimate a range of reasonably possible loss as we cannot predict if, how or when such proceedings or investigations will be resolved or what the eventual settlement, fine, penalty or other relief, if any, may be. A large number of factors may contribute to this inherent unpredictability: the proceeding is in its early stages; the damages sought are unspecified, unsupported or uncertain; it is unclear whether a case brought as a class action will be allowed to proceed on that basis; the other party is seeking relief other than or in addition to compensatory damages (including, in the case of regulatory and governmental proceedings, potential fines and penalties); the matters present significant legal uncertainties; we have not engaged in settlement discussions; discovery is not complete; there are significant facts in dispute; and numerous parties are named as defendants (including where it is uncertain how liability might be shared among defendants). Subject to the foregoing, after consultation with counsel, we believe that the outcome of such litigation and regulatory proceedings will not have a material adverse effect on our consolidated financial condition. However, the outcome of such litigation and regulatory proceedings could be material to our operating results and cash flows for a particular future period, depending on, among other things, our revenues or income for such period. There are certain matters for which we are unable to estimate the upper end of the range of reasonably possible loss. With respect to legal and regulatory matters for which management has been able to estimate a range of reasonably possible loss as of September 30, 2021, we estimated the upper end of the range of reasonably possible aggregate loss to be approximately $ 90 million in excess of the aggregate accruals for such matters. Refer to Note 2 for a discussion of our criteria for recognizing liabilities for contingencies. 136 RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements NOTE 20 – ACCUMULATED OTHER COMPREHENSIVE INCOME/(LOSS) All of the components of OCI, net of tax, were attributable to RJF. The following table presents the net change in AOCI as well as the changes, and the related tax effects, of each component of AOCI. $ in millions Net investment hedges Currency translations Subtotal: net investment hedges and currency translations Available-for-sale securities Cash flow hedges Total Year ended September 30, 2021 AOCI as of beginning of year $ 115 $ ( 140 ) $ ( 25 ) $ 89 $ ( 53 ) $ 11 OCI: OCI before reclassifications and taxes ( 44 ) 48 4 ( 119 ) 19 ( 96 ) Amounts reclassified from AOCI, before tax — 2 2 ( 7 ) 15 10 Pre-tax net OCI ( 44 ) 50 6 ( 126 ) 34 ( 86 ) Income tax effect 10 — 10 32 ( 8 ) 34 OCI for the year, net of tax ( 34 ) 50 16 ( 94 ) 26 ( 52 ) AOCI as of end of year $ 81 $ ( 90 ) $ ( 9 ) $ ( 5 ) $ ( 27 ) $ ( 41 ) Year ended September 30, 2020 AOCI as of beginning of year $ 110 $ ( 135 ) $ ( 25 ) $ 21 $ ( 19 ) $ ( 23 ) OCI: OCI before reclassifications and taxes 7 ( 5 ) 2 94 ( 51 ) 45 Amounts reclassified from AOCI, before tax — — — ( 3 ) 5 2 Pre-tax net OCI 7 ( 5 ) 2 91 ( 46 ) 47 Income tax effect ( 2 ) — ( 2 ) ( 23 ) 12 ( 13 ) OCI for the year, net of tax 5 ( 5 ) — 68 ( 34 ) 34 AOCI as of end of year $ 115 $ ( 140 ) $ ( 25 ) $ 89 $ ( 53 ) $ 11 Year ended September 30, 2019 AOCI as of beginning of year $ 88 $ ( 111 ) $ ( 23 ) $ ( 46 ) $ 42 $ ( 27 ) Cumulative effect of adoption of ASU 2016-01 — — — ( 4 ) — ( 4 ) OCI: OCI before reclassifications and taxes 29 ( 24 ) 5 98 ( 79 ) 24 Amounts reclassified from AOCI, before tax — — — — ( 5 ) ( 5 ) Pre-tax net OCI 29 ( 24 ) 5 98 ( 84 ) 19 Income tax effect ( 7 ) — ( 7 ) ( 27 ) 23 ( 11 ) OCI for the year, net of tax 22 ( 24 ) ( 2 ) 71 ( 61 ) 8 AOCI as of end of year $ 110 $ ( 135 ) $ ( 25 ) $ 21 $ ( 19 ) $ ( 23 ) Reclassifications from AOCI to net income, excluding taxes, for the years ended September 30, 2021 and 2020 were primarily recorded in “Other” revenue and “Interest expense” on the Consolidated Statements of Income and Comprehensive Income. Reclassifications from AOCI to net income, excluding taxes, for the year ended September 30, 2019 were recorded in “Interest expense” on the Consolidated Statements of Income and Comprehensive Income. As of October 1, 2018, we adopted accounting guidance (ASU 2016-01) that generally requires changes in the fair value of equity securities to be recorded in net income. Accordingly, as of the date of adoption, we reclassified a cumulative unrealized gain on such securities, net of tax, from AOCI to retained earnings. Our net investment hedges and cash flow hedges relate to our derivatives associated with Raymond James Bank’s business operations. See Notes 2 and 6 for additional information on these derivatives. 137 RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements NOTE 21 - REVENUES The following tables present our sources of revenues by segment. For further information about our significant accounting policies related to revenue recognition, see Note 2. See Note 26 for additional information on our segment results. Year ended September 30, 2021 $ in millions Private Client Group Capital Markets Asset Management Raymond James Bank Other and intersegment eliminations Total Revenues: Asset management and related administrative fees $ 4,056 $ 4 $ 837 $ — $ ( 29 ) $ 4,868 Brokerage revenues: Securities commissions: Mutual and other fund products 670 6 10 — ( 3 ) 683 Insurance and annuity products 438 — — — — 438 Equities, ETFs and fixed income products 388 143 — — ( 1 ) 530 Subtotal securities commissions 1,496 149 10 — ( 4 ) 1,651 Principal transactions (1) 50 511 — — — 561 Total brokerage revenues 1,546 660 10 — ( 4 ) 2,212 Account and service fees: Mutual fund and annuity service fees 408 — — — ( 2 ) 406 RJBDP fees 259 1 — — ( 184 ) 76 Client account and other fees 157 7 18 — ( 29 ) 153 Total account and service fees 824 8 18 — ( 215 ) 635 Investment banking: Merger & acquisition and advisory — 639 — — — 639 Equity underwriting 47 285 — — — 332 Debt underwriting — 172 — — — 172 Total investment banking 47 1,096 — — — 1,143 Other: Tax credit fund revenues — 105 — — — 105 All other (1) 25 6 2 30 61 124 Total other 25 111 2 30 61 229 Total non-interest revenues 6,498 1,879 867 30 ( 187 ) 9,087 Interest income (1) 123 16 — 684 — 823 Total revenues 6,621 1,895 867 714 ( 187 ) 9,910 Interest expense ( 10 ) ( 10 ) — ( 42 ) ( 88 ) ( 150 ) Net revenues $ 6,611 $ 1,885 $ 867 $ 672 $ ( 275 ) $ 9,760 (1) These revenues are generally not in scope of the accounting guidance for revenue from contracts with customers. 138 RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements Year ended September 30, 2020 $ in millions Private Client Group Capital Markets Asset Management Raymond James Bank Other and intersegment eliminations Total Revenues: Asset management and related administrative fees $ 3,162 $ 7 $ 688 $ — $ ( 23 ) $ 3,834 Brokerage revenues: Securities commissions: Mutual and other fund products 567 7 8 — ( 3 ) 579 Insurance and annuity products 397 — — — — 397 Equities, ETFs and fixed income products 355 137 — — — 492 Subtotal securities commissions 1,319 144 8 — ( 3 ) 1,468 Principal transactions (1) 64 427 — 1 ( 4 ) 488 Total brokerage revenues 1,383 571 8 1 ( 7 ) 1,956 Account and service fees: Mutual fund and annuity service fees 348 — 1 — ( 1 ) 348 RJBDP fees 330 1 — — ( 181 ) 150 Client account and other fees 129 5 15 — ( 23 ) 126 Total account and service fees 807 6 16 — ( 205 ) 624 Investment banking: Merger & acquisition and advisory — 290 — — — 290 Equity underwriting 41 185 — — 1 227 Debt underwriting — 133 — — — 133 Total investment banking 41 608 — — 1 650 Other: Tax credit fund revenues — 83 — — — 83 All other (1) 27 7 2 26 ( 41 ) 21 Total other 27 90 2 26 ( 41 ) 104 Total non-interest revenues 5,420 1,282 714 27 ( 275 ) 7,168 Interest income (1) 155 25 1 800 19 1,000 Total revenues 5,575 1,307 715 827 ( 256 ) 8,168 Interest expense ( 23 ) ( 16 ) — ( 62 ) ( 77 ) ( 178 ) Net revenues $ 5,552 $ 1,291 $ 715 $ 765 $ ( 333 ) $ 7,990 (1) These revenues are generally not in scope of the accounting guidance for revenue from contracts with customers. 139 RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements Year ended September 30, 2019 $ in millions Private Client Group Capital Markets Asset Management Raymond James Bank Other and intersegment eliminations Total Revenues: Asset management and related administrative fees $ 2,820 $ 6 $ 645 $ — $ ( 20 ) $ 3,451 Brokerage revenues: Securities commissions: Mutual and other fund products 599 6 10 — ( 4 ) 611 Insurance and annuity products 412 — — — — 412 Equities, ETFs and fixed income products 304 123 — — — 427 Subtotal securities commissions 1,315 129 10 — ( 4 ) 1,450 Principal transactions (1) 74 285 — — ( 2 ) 357 Total brokerage revenues 1,389 414 10 — ( 6 ) 1,807 Account and service fees: Mutual fund and annuity service fees 334 — 2 — ( 10 ) 326 RJBDP fees 453 — 3 — ( 176 ) 280 Client account and other fees 122 5 26 — ( 21 ) 132 Total account and service fees 909 5 31 — ( 207 ) 738 Investment banking: Merger & acquisition and advisory — 379 — — — 379 Equity underwriting 32 100 — — — 132 Debt underwriting — 85 — — — 85 Total investment banking 32 564 — — — 596 Other: Tax credit fund revenues — 86 — — — 86 All other (1) 26 4 2 26 6 64 Total other 26 90 2 26 6 150 Total non-interest revenues 5,176 1,079 688 26 ( 227 ) 6,742 Interest income (1) 225 38 3 975 40 1,281 Total revenues 5,401 1,117 691 1,001 ( 187 ) 8,023 Interest expense ( 42 ) ( 34 ) — ( 155 ) ( 52 ) ( 283 ) Net revenues $ 5,359 $ 1,083 $ 691 $ 846 $ ( 239 ) $ 7,740 (1) These revenues are generally not in scope of the accounting guidance for revenue from contracts with customers. At September 30, 2021 and September 30, 2020, net receivables related to contracts with customers were $ 416 million and $ 342 million, respectively. 140 RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements NOTE 22 – INTEREST INCOME AND INTEREST EXPENSE The following table details the components of interest income and interest expense. Year ended September 30, $ in millions 2021 2020 2019 Interest income: Cash and cash equivalents $ 12 $ 41 $ 83 Assets segregated for regulatory purposes and restricted cash 15 28 59 Available-for-sale securities 85 83 69 Brokerage client receivables 77 84 122 Bank loans, net of unearned income and deferred expenses 593 702 871 All other 41 62 77 Total interest income 823 1,000 1,281 Interest expense: Bank deposits 23 41 132 Brokerage client payables 3 11 21 Other borrowings 19 20 21 Senior notes payable 96 85 73 All other 9 21 36 Total interest expense 150 178 283 Net interest income 673 822 998 Bank loan (provision)/benefit for credit losses 32 ( 233 ) ( 22 ) Net interest income after bank loan (provision)/benefit for credit losses $ 705 $ 589 $ 976 Interest expense related to bank deposits in the preceding table excludes interest expense associated with affiliate deposits, which has been eliminated in consolidation. NOTE 23 - SHARE-BASED AND OTHER COMPENSATION Share-based compensation plans We have one share-based compensation plan for our employees, Board of Directors and independent contractor financial advisors. The Amended and Restated 2012 Stock Incentive Plan (the “2012 Plan”) authorizes us to grant 78.4 million new shares, including the shares available for grant under six predecessor plans. As of September 30, 2021, 17.5 million shares were available under the 2012 Plan. Generally, we reissue our treasury shares under the 2012 Plan; however, we are also permitted to issue new shares. Our share-based compensation accounting policies are described in Note 2. We had stock options outstanding as of September 30, 2021 which had been issued to our employees and independent contractors. As of our fiscal first quarter 2017, we no longer issue stock options to our employees and instead issue RSUs. We issue stock options to our independent contractors in limited quantities. Stock options granted to our independent contractors, as well as the related expense for the years ended September 30, 2021, 2020 and 2019 were insignificant. Cash received from stock options exercised by our employees and independent contractors during the year ended September 30, 2021 was $ 23 million. RSU awards We may grant RSU awards under the 2012 Plan in connection with initial employment or under various retention programs for individuals who are responsible for contributing to our management, growth, and/or profitability. Through our Canadian subsidiary, we established the Restricted Stock Trust Fund, which we funded to enable the trust fund to acquire our common stock in the open market to be used to settle RSUs granted as a retention vehicle for certain employees of our Canadian subsidiaries. We may also grant awards to officers and certain other employees in lieu of cash for 10 % to 50 % of annual bonus amounts in excess of $ 250,000 . Under the plan, the awards are generally restricted for a three - to five-year period, during which time the awards are generally forfeitable in the event of termination other than for death, disability or retirement. We grant RSUs annually to non-employee members of our Board of Directors. The RSUs granted to these Directors vest over a 1 -year period from their grant date or upon retirement from our Board. 141 RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements The following table presents the RSU award activity, which includes grants to employees and members of our Board of Directors, for the year ended September 30, 2021. Shares/Units (in millions) (1) Weighted- average grant date fair value (per share) (1) Non-vested as of beginning of year 7.9 $ 53.43 Granted 2.3 $ 63.86 Vested ( 1.8 ) $ 51.98 Forfeited ( 0.2 ) $ 57.00 Non-vested as of end of year 8.2 $ 56.61 (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. The following table presents expense and income tax benefits related to our RSUs granted to our employees and members of our Board of Directors for the periods indicated. Year ended September 30, $ in millions 2021 2020 2019 Total share-based expense $ 126 $ 110 $ 101 Income tax benefits related to share-based expense $ 29 $ 25 $ 23 For the year ended September 30, 2021, we realized $ 19 million of excess tax benefits related to our RSUs, which favorably impacted income tax expense on our Consolidated Statements of Income and Comprehensive Income. See Note 18 for additional information regarding income taxes. As of September 30, 2021, there was $ 187 million of total pre-tax compensation costs not yet recognized (net of estimated forfeitures) related to RSUs granted to employees and members of our Board of Directors. These costs are expected to be recognized over a weighted-average period of approximately three years . The following RSU activity occurred for the periods indicated. Year ended September 30, $ in millions, except per unit award amounts (1) 2021 2020 2019 Weighted-average grant date fair value per unit award $ 63.86 $ 58.20 $ 51.15 Total fair value of shares and RSU awards vested $ 87 $ 83 $ 63 (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. Employee stock purchase plan Under the 2003 Employee Stock Purchase Plan, we are authorized to issue up to 13.1 million shares of common stock to eligible employees. Under the terms of the plan, share purchases in any calendar year are limited to the lesser of 1,000 shares or shares with a fair value of $ 25,000 . The purchase price of the stock is 85 % of the average high and low market price on the day prior to the purchase date. Under the plan, we sold approximately 393 thousand, 699 thousand and 636 thousand shares to employees during the years ended September 30, 2021, 2020 and 2019, respectively. The compensation cost is calculated as the value of the 15 % discount from market value and was $ 5 million for each of the years ended September 30, 2021, 2020 and 2019. Employee other compensation Our profit sharing plan and employee stock ownership plan (“ESOP”) are qualified plans that provide certain death, disability or retirement benefits for all employees who meet certain service requirements. The plans are noncontributory and our contributions, if any, are determined annually by our Board of Directors, or a committee thereof, on a discretionary basis and are recognized as compensation expense throughout the year. Benefits become fully vested after five years of qualified service, age 65, or if a participant separates from service due to death or disability. All shares owned by the ESOP are included in earnings per share calculations. Cash dividends paid to the ESOP are reflected as a reduction of retained earnings. The number of shares of our common stock held by the ESOP at September 30, 2021 and 2020 was 6.7 million and 7.0 million (as adjusted for the stock split), respectively. The market value of our common stock held by the ESOP at September 30, 2021 was $ 622 million, of which $ 7 million was unearned (not yet vested) by ESOP plan participants. 142 RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements We also offer a plan pursuant to section 401(k) of the Internal Revenue Code, which is a qualified plan that may provide for a discretionary contribution or a matching contribution each year. Matching contributions are 75 % of the first $ 1,000 and 25 % of the next $ 1,000 of eligible compensation deferred by each participant annually. Our LTIP is a non-qualified deferred compensation plan that provides benefits to certain employees who meet certain compensation or production requirements. We have purchased and hold life insurance on the lives of certain current and former employee participants to earn a competitive rate of return for participants and to provide the primary source of funds available to satisfy our obligations under this plan. See Note 12 for information regarding the carrying value of these company-owned life insurance policies. Contributions to the qualified plans and the LTIP are approved annually by the Board of Directors or a committee thereof. The VDCP is a non-qualified deferred compensation plan for certain employees, in which eligible participants may elect to defer a percentage or specific dollar amount of their compensation. Company-owned life insurance is the primary source of funding for this plan. Compensation expense associated with all of the qualified and non-qualified plans previously described totaled $ 175 million, $ 149 million and $ 162 million for the fiscal years ended September 30, 2021, 2020 and 2019, respectively. Non-employee other compensation We offer non-qualified deferred compensation plans that provide benefits to our independent contractor financial advisors who meet certain production requirements. Company-owned life insurance is the primary source of funding for these plans. The contributions are made in amounts approved annually by management. Certain independent contractor financial advisors are also eligible to participate in our VDCP. Eligible participants may elect to defer a percentage or specific dollar amount of their compensation into the VDCP. Company-owned life insurance is the primary source of funding for this plan. NOTE 24 – REGULATORY CAPITAL REQUIREMENTS RJF, as a bank holding company and financial holding company, Raymond James Bank, our broker-dealer subsidiaries and our trust subsidiaries are subject to capital requirements by various regulatory authorities. Capital levels of each entity are monitored to ensure compliance with our various regulatory capital requirements. Failure to meet minimum capital requirements can initiate certain mandatory, and possibly additional discretionary actions, by regulators that, if undertaken, could have a direct material effect on our financial results. As a bank holding company under the Bank Holding Company Act of 1956, as amended (the “BHC Act”) that has made an election to be a financial holding company, RJF is subject to supervision, examination and regulation by the Fed. We are subject to the Fed’s capital rules which establish an integrated regulatory capital framework and implement, in the U.S., the Basel III regulatory capital reforms from the Basel Committee on Banking Supervision and certain changes required by the Dodd-Frank Act. We apply the standardized approach for calculating risk-weighted assets and are also subject to the market risk provisions of the Fed’s capital rules (“market risk rule”). Under these rules, minimum requirements are established for both the quantity and quality of capital held by banking organizations. RJF and Raymond James Bank are required to maintain minimum ratios of common equity tier 1 (“CET1”), tier 1 capital and total capital to risk-weighted assets, as well as minimum leverage ratios (defined as tier 1 capital divided by adjusted average assets). These capital ratios incorporate quantitative measures of our assets, liabilities, and certain off-balance sheet items as calculated under the regulatory capital rules and are subject to qualitative judgments by the regulators about components, risk-weightings, and other factors. RJF and Raymond James Bank each calculate these ratios in order to assess compliance with both regulatory requirements and their internal capital policies. In order to maintain our ability to take certain capital actions, including dividends and common equity repurchases, and to make bonus payments, we must hold a capital conservation buffer above our minimum risk-based capital requirements. As of September 30, 2021, both RJF’s and Raymond James Bank’s capital levels exceeded the capital conservation buffer requirement and were each categorized as “well-capitalized.” 143 RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements To meet requirements for capital adequacy or to be categorized as “well-capitalized,” RJF must maintain minimum CET1, Tier 1 capital, Total capital and Tier 1 leverage amounts and ratios as set forth in the following table. Actual Requirement for capital adequacy purposes To be well-capitalized under regulatory provisions $ in millions Amount Ratio Amount Ratio Amount Ratio RJF as of September 30, 2021: CET1 $ 7,428 25.0 % $ 1,337 4.5 % $ 1,932 6.5 % Tier 1 capital $ 7,428 25.0 % $ 1,783 6.0 % $ 2,377 8.0 % Total capital $ 7,780 26.2 % $ 2,377 8.0 % $ 2,972 10.0 % Tier 1 leverage $ 7,428 12.6 % $ 2,363 4.0 % $ 2,954 5.0 % RJF as of September 30, 2020: CET1 $ 6,490 24.2 % $ 1,208 4.5 % $ 1,744 6.5 % Tier 1 capital $ 6,490 24.2 % $ 1,610 6.0 % $ 2,147 8.0 % Total capital $ 6,804 25.4 % $ 2,147 8.0 % $ 2,684 10.0 % Tier 1 leverage $ 6,490 14.2 % $ 1,824 4.0 % $ 2,280 5.0 % As of September 30, 2021, RJF’s regulatory capital increase was driven by an increase in equity, due to positive earnings net of dividends and share repurchases, partially offset by an increase in goodwill and identifiable intangible assets arising from our fiscal 2021 acquisitions. See Note 3 for additional information regarding our acquisitions. RJF’s Tier 1 and Total capital ratios increased compared to September 30, 2020, resulting from the increase in regulatory capital, partially offset by an increase in risk-weighted assets. The increase in risk-weighted assets was driven by increases in our loan portfolio, assets segregated for regulatory purposes and restricted cash and available-for-sale securities. RJF’s Tier 1 leverage ratio at September 30, 2021 decreased compared to September 30, 2020, due to increased average assets, driven by higher assets segregated for regulatory purposes and restricted cash due to an increase in client cash in the Client Interest Program (“CIP”), as well as growth in loans and available-for-sale securities. The increase in average assets was partially offset by the increase in regulatory capital. To meet the requirements for capital adequacy or to be categorized as “well-capitalized,” Raymond James Bank must maintain CET1, Tier 1 capital, Total capital and Tier 1 leverage amounts and ratios as set forth in the following table. Actual Requirement for capital adequacy purposes To be well-capitalized under regulatory provisions $ in millions Amount Ratio Amount Ratio Amount Ratio Raymond James Bank as of September 30, 2021: CET1 $ 2,626 13.4 % $ 883 4.5 % $ 1,275 6.5 % Tier 1 capital $ 2,626 13.4 % $ 1,177 6.0 % $ 1,569 8.0 % Total capital $ 2,873 14.6 % $ 1,569 8.0 % $ 1,962 10.0 % Tier 1 leverage $ 2,626 7.4 % $ 1,411 4.0 % $ 1,763 5.0 % Raymond James Bank as of September 30, 2020: CET1 $ 2,279 13.0 % $ 788 4.5 % $ 1,138 6.5 % Tier 1 capital $ 2,279 13.0 % $ 1,051 6.0 % $ 1,401 8.0 % Total capital $ 2,500 14.3 % $ 1,401 8.0 % $ 1,751 10.0 % Tier 1 leverage $ 2,279 7.7 % $ 1,183 4.0 % $ 1,479 5.0 % As of September 30, 2021, Raymond James Bank’s Tier 1 and Total capital ratios increased compared to September 30, 2020 due to positive earnings, partially offset by higher risk-weighted assets, primarily resulting from increases in our loan portfolio and available-for-sale securities. Raymond James Bank’s Tier 1 leverage ratio at September 30, 2021 decreased compared to September 30, 2020, due to increased average assets, driven by the growth in loans and available-for-sale securities. Our intention is to maintain Raymond James Bank’s “well-capitalized” status. In the unlikely event that Raymond James Bank failed to maintain its “well-capitalized” status, the consequences could include a requirement to obtain a waiver from the FDIC prior to acceptance, renewal, or rollover of brokered deposits and result in higher FDIC premiums, but would not significantly impact our operations. Raymond James Bank may pay dividends to RJF without prior approval of its regulator as long as the dividend does not exceed the sum of Raymond James Bank’s current calendar year and the previous two calendar years’ retained net income, and 144 RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 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. Certain of our broker-dealer subsidiaries are subject to the requirements of the Uniform Net Capital Rule (Rule 15c3-1) under the Securities Exchange Act of 1934. As a member firm of the Financial Industry Regulatory Authority (“FINRA”), RJ&A is subject to FINRA’s capital requirements, which are substantially the same as Rule 15c3-1. Rule 15c3-1 provides for an “alternative net capital requirement,” which RJ&A has elected. Regulations require that minimum net capital, as defined, be equal to the greater of $ 1.5 million or 2 % of aggregate debit items arising from client balances. 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. As of September 30, 2021, RJ&A had excess net capital available to remit dividends to RJF, some of which may be remitted without prior regulatory approval and the remainder may be remitted in conformity with all required regulatory rules or approvals. The following table presents the net capital position of RJ&A. September 30, $ in millions 2021 2020 Raymond James & Associates, Inc.: (Alternative Method elected) Net capital as a percent of aggregate debit items 72.1 % 48.0 % Net capital $ 2,035 $ 1,245 Less: required net capital ( 56 ) ( 52 ) Excess net capital $ 1,979 $ 1,193 As of September 30, 2021, all of our other active regulated domestic and international subsidiaries were in compliance with and exceeded all applicable capital requirements. RJF expects to continue paying cash dividends. However, the payment and rate of dividends on our common stock are subject to several factors including our operating results, financial and regulatory requirements or restrictions, and the availability of funds from our subsidiaries, including our broker-dealer and bank subsidiaries, which may also be subject to restrictions under regulatory capital rules. The availability of funds from subsidiaries may also be subject to restrictions contained in loan covenants of certain broker-dealer loan agreements and restrictions by bank regulators on dividends to the parent from Raymond James Bank. NOTE 25 – EARNINGS PER SHARE 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. The following table presents the computation of basic and diluted earnings per common share. Year ended September 30, $ in millions, except per share amounts 2021 2020 2019 Income for basic earnings per common share: Net income $ 1,403 $ 818 $ 1,034 Less allocation of earnings and dividends to participating securities ( 2 ) ( 1 ) ( 2 ) Net income attributable to RJF common shareholders $ 1,401 $ 817 $ 1,032 Income for diluted earnings per common share: Net income $ 1,403 $ 818 $ 1,034 Less allocation of earnings and dividends to participating securities ( 2 ) ( 1 ) ( 2 ) Net income attributable to RJF common shareholders $ 1,401 $ 817 $ 1,032 Common shares: Average common shares in basic computation 205.7 206.4 211.5 Dilutive effect of outstanding stock options and certain RSUs 5.5 3.9 4.5 Average common and common equivalent shares used in diluted computation 211.2 210.3 216.0 Earnings per common share: Basic $ 6.81 $ 3.96 $ 4.88 Diluted $ 6.63 $ 3.88 $ 4.78 Stock options and certain RSUs excluded from weighted-average diluted common shares because their effect would be antidilutive 0.1 2.3 0.6 145 RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements The allocation of earnings and dividends to participating securities in the preceding table represents dividends paid during the year to participating securities, consisting of certain RSUs, plus an allocation of undistributed earnings to such participating securities. Participating securities and related dividends paid on these participating securities were insignificant for the years ended September 30, 2021, 2020 and 2019. Undistributed earnings are allocated to participating securities based upon their right to share in earnings if all earnings for the period had been distributed. Dividends per common share declared and paid are detailed in the following table for each respective period. Year ended September 30, 2021 2020 2019 Dividends per common share - declared $ 1.04 $ 0.99 $ 0.91 Dividends per common share - paid $ 1.03 $ 0.97 $ 0.88 NOTE 26 – SEGMENT INFORMATION We currently operate through the following five segments: PCG; Capital Markets; Asset Management; Raymond James Bank; and Other. The segments are determined based upon factors such as the services provided and the distribution channels served and are consistent with how we assess performance and determine how to allocate our resources. The financial results of our segments are presented using the same policies as those described in Note 2. Segment results include allocations of most corporate overhead and benefits expenses to each segment. Refer to the following discussion of the Other segment for a description of the corporate expenses that are not allocated to segments. Intersegment revenues, expenses, receivables and payables are eliminated upon consolidation. The PCG segment provides financial planning, investment advisory and securities transaction services in the U.S., Canada and the U.K. for which we generally charge either asset-based fees or sales commissions. The PCG segment also earns revenues for distribution and related support services performed related to mutual funds, fixed and variable annuities and insurance products. The segment includes servicing fee revenues from mutual fund and annuity companies whose products we distribute and from banks to which we sweep clients’ cash in the RJBDP, our multi-bank sweep program. The segment also includes net interest earnings primarily on client margin loans, cash balances, and assets segregated for regulatory purposes, net of interest paid to clients on cash balances in the CIP. Our Capital Markets segment conducts investment banking, institutional sales, securities trading, equity research, and the syndication and management of investments in low-income housing funds. We primarily conduct these activities in the U.S., Canada and Europe. Our Asset Management segment earns asset management and related administrative fees for providing asset management, portfolio management and related administrative services to retail and institutional clients. This segment oversees a portion of our fee-based assets under administration for our PCG clients through our Asset Management Services division and through RJ Trust. This segment also provides asset management services through Carillon Tower Advisers for certain retail accounts managed on behalf of third-party institutions, institutional accounts and proprietary mutual funds that we manage. 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. The Other segment includes the results of our private equity investments, interest income on certain corporate cash balances, acquisition-related expenses, and certain corporate overhead costs of RJF that are not allocated to operating segments, including the interest costs on our public debt and any losses on the extinguishment of such debt. The Other segment also includes expenses related to our reduction in workforce, which occurred in fiscal 2020 in response to the economic environment at that time. 146 RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements The following table presents information concerning operations in these segments. Year ended September 30, $ in millions 2021 2020 2019 Net revenues: Private Client Group $ 6,611 $ 5,552 $ 5,359 Capital Markets 1,885 1,291 1,083 Asset Management 867 715 691 Raymond James Bank 672 765 846 Other ( 8 ) ( 82 ) 5 Intersegment eliminations ( 267 ) ( 251 ) ( 244 ) Total net revenues $ 9,760 $ 7,990 $ 7,740 Pre-tax income/(loss): Private Client Group $ 749 $ 539 $ 579 Capital Markets 532 225 110 Asset Management 389 284 253 Raymond James Bank 367 196 515 Other ( 246 ) ( 192 ) ( 82 ) Total pre-tax income $ 1,791 $ 1,052 $ 1,375 No individual client accounted for more than ten percent of revenues in any of the years presented. The following table presents our net interest income on a segment basis. Year ended September 30, $ in millions 2021 2020 2019 Net interest income/(expense): Private Client Group $ 113 $ 132 $ 183 Capital Markets 6 9 4 Asset Management — 1 3 Raymond James Bank 642 738 820 Other ( 88 ) ( 58 ) ( 12 ) Net interest income $ 673 $ 822 $ 998 The following table presents our total assets on a segment basis. September 30, $ in millions 2021 2020 Total assets: Private Client Group $ 20,270 $ 12,574 Capital Markets 2,457 2,336 Asset Management 476 380 Raymond James Bank 36,154 30,356 Other 2,534 1,836 Total $ 61,891 $ 47,482 The following table presents goodwill, which was included in our total assets, on a segment basis. September 30, $ in millions 2021 2020 Goodwill: Private Client Group (1) $ 417 $ 277 Capital Markets (2) 174 120 Asset Management 69 69 Total $ 660 $ 466 (1) The September 30, 2021 balance includes $ 139 million of goodwill arising from our acquisition of NWPS in December 2020. (2) The September 30, 2021 balance includes $ 30 million of goodwill arising from our acquisition of Financo in March 2021 and a provisional estimate of $ 24 million of goodwill arising from our acquisition of Cebile in September 2021. 147 RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements We have operations in the U.S., Canada and Europe. Substantially all long-lived assets are located in the U.S. The following table presents our net revenues and pre-tax income classified by major geographic area in which they were earned. Year ended September 30, $ in millions 2021 2020 2019 Net revenues: U.S. $ 9,067 $ 7,446 $ 7,211 Canada 485 386 391 Europe 208 158 138 Total $ 9,760 $ 7,990 $ 7,740 Pre-tax income/(loss): U.S. $ 1,701 $ 1,028 $ 1,356 Canada 53 29 29 Europe (1) 37 ( 5 ) ( 10 ) Total $ 1,791 $ 1,052 $ 1,375 (1) The pre-tax loss in Europe for the year ended September 30, 2020 reflected a $ 7 million loss related to the disposition of our interests in certain entities that operated predominantly in France. The pre-tax loss in Europe for the year ended September 30, 2019 reflected a $ 15 million loss on the sale of our operations related to research, sales and trading of European equities. These losses were recorded in our Capital Markets segment. The following table presents our total assets by major geographic area in which they were held. September 30, $ in millions 2021 2020 Total assets: U.S. $ 57,952 $ 44,090 Canada 3,724 3,260 Europe 215 132 Total $ 61,891 $ 47,482 The following table presents goodwill, which was included in our total assets, classified by major geographic area in which it was held. September 30, $ in millions 2021 2020 Goodwill: U.S. (1) $ 619 $ 433 Canada 25 24 Europe (2) 16 9 Total $ 660 $ 466 (1) The September 30, 2021 balance includes $ 139 million of goodwill arising from our acquisition of NWPS in December 2020, $ 30 million of goodwill arising from our acquisition of Financo in March 2021 and a provisional estimate of $ 17 million of goodwill arising from our acquisition of Cebile in September 2021. (2) The September 30, 2021 balance includes a provisional estimate of $ 7 million of goodwill arising from our acquisition of Cebile in September 2021. NOTE 27 – CONDENSED FINANCIAL INFORMATION (PARENT COMPANY ONLY) As more fully described in Note 1, RJF (or the “Parent”) is a financial holding company whose subsidiaries are engaged in various financial services activities. The Parent’s primary activities include investments in subsidiaries and corporate investments, including cash management, company-owned life insurance policies and private equity investments. The primary source of operating cash available to the Parent is provided by dividends from its subsidiaries. The broker-dealer subsidiaries of the Parent, including RJ&A our principal domestic broker-dealer, and certain other subsidiaries are required to maintain a minimum amount of net capital due to regulatory requirements. RJ&A is further required by certain covenants in its borrowing agreements to maintain minimum net capital equal to 10 % of aggregate debit balances. At September 30, 2021, each of these subsidiaries exceeded their minimum net capital requirements (see Note 24 for further information). Of the Parent’s net assets as of September 30, 2021, approximately $ 210 million of its investment in RJ&A and RJFS was available for distribution to the Parent without further regulatory approvals, and approximately $ 4.30 billion of its investment in 148 RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements Raymond James Bank, RJ&A, RJFS and RJ Ltd. was restricted due to regulatory or other restrictions from distribution to the Parent without prior approval of the respective entity’s regulator. Cash and cash equivalents of $ 1.16 billion and $ 2.16 billion as of September 30, 2021 and 2020, respectively, were held directly by RJF in depository accounts at third-party financial institutions, held in depository accounts at Raymond James Bank, or were otherwise invested by one of our subsidiaries on behalf of RJF. The amount held in depository accounts at Raymond James Bank was $ 229 million as of September 30, 2021, of which $ 152 million was available on demand without restriction. As of September 30, 2020, $ 185 million was held in depository accounts at Raymond James Bank, of which $ 108 million was available on demand without restriction. The 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. This restricted cash is included in “Assets segregated for regulatory purposes and restricted cash.” See Notes 16, 17, 19 and 24 for more information regarding borrowings, commitments, contingencies and guarantees, and regulatory capital requirements of the Parent and its subsidiaries. The following table presents the Parent’s statements of financial condition. September 30, $ in millions 2021 2020 Assets: Cash and cash equivalents $ 527 $ 478 Assets segregated for regulatory purposes and restricted cash ( $ 1 and $ 1 at fair value) 478 78 Intercompany receivables from subsidiaries (primarily non-bank subsidiaries) 877 1,903 Investments in consolidated subsidiaries: Bank subsidiary 2,594 2,315 Non-bank subsidiaries 5,703 4,306 Goodwill and identifiable intangible assets, net 32 32 Other assets 1,055 818 Total assets $ 11,266 $ 9,930 Liabilities and equity: Accrued compensation, commissions and benefits $ 798 $ 596 Intercompany payables to subsidiaries: Bank subsidiary 2 21 Non-bank subsidiaries 33 28 Other payables 151 126 Senior notes payable 2,037 2,045 Total liabilities 3,021 2,816 Equity 8,245 7,114 Total liabilities and equity $ 11,266 $ 9,930 Of the total intercompany receivable from non-bank subsidiaries, $ 649 million and $ 1.70 billion at September 30, 2021 and 2020, respectively, was invested in cash and cash equivalents by the subsidiary on behalf of the Parent. 149 RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements The following table presents the Parent’s statements of income. Year ended September 30, $ in millions 2021 2020 2019 Revenues: Dividends from non-bank subsidiaries $ 257 $ 634 $ 632 Dividends from bank subsidiary — 130 190 Interest from subsidiaries 9 18 31 Interest income 1 3 7 Other 21 23 20 Total revenues 288 808 880 Interest expense ( 97 ) ( 87 ) ( 75 ) Net revenues 191 721 805 Non-interest expenses: Compensation, commissions and benefits (1) 81 63 73 Non-compensations expenses: Communications and information processing 5 6 8 Occupancy and equipment 1 1 1 Business development 19 18 20 Losses on extinguishment of debt 98 — — Other 30 23 16 Intercompany allocations and charges ( 14 ) ( 16 ) ( 24 ) Total non-compensation expenses 139 32 21 Total non-interest expenses 220 95 94 Pre-tax income/(loss) before equity in undistributed net income of subsidiaries ( 29 ) 626 711 Income tax benefit ( 99 ) ( 58 ) ( 31 ) Income before equity in undistributed net income of subsidiaries 70 684 742 Equity in undistributed net income of subsidiaries 1,333 134 292 Net income $ 1,403 $ 818 $ 1,034 (1) The year ended September 30, 2020 includes the portion of the reduction in workforce expenses incurred during the fiscal fourth quarter of 2020 that relates to the Parent. 150 RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements The following table presents the Parent’s statements of cash flows. Year ended September 30, $ in millions 2021 2020 2019 Cash flows from operating activities: Net income $ 1,403 $ 818 $ 1,034 Adjustments to reconcile net income to net cash provided by operating activities: Loss on investments 5 4 4 Unrealized gain on company-owned life insurance policies, net of expenses ( 157 ) ( 50 ) ( 5 ) Equity in undistributed net income of subsidiaries ( 1,333 ) ( 134 ) ( 292 ) Losses on extinguishment of debt 98 — — Other 94 102 100 Net change in: Intercompany receivables ( 14 ) 126 ( 51 ) Other assets ( 35 ) 24 ( 16 ) Intercompany payables ( 14 ) ( 70 ) ( 22 ) Other payables 15 24 ( 1 ) Accrued compensation, commissions and benefits 202 73 34 Net cash provided by operating activities 264 917 785 Cash flows from investing activities: Investments in subsidiaries ( 420 ) ( 106 ) ( 24 ) (Advances to)/repayments from subsidiaries, net 1,039 ( 885 ) 63 Proceeds from sales of investments 2 9 3 Purchase of investments in company-owned life insurance policies, net ( 36 ) ( 55 ) ( 44 ) Net cash provided by/(used in) investing activities 585 ( 1,037 ) ( 2 ) Cash flows from financing activities: Purchase of treasury stock ( 128 ) ( 272 ) ( 778 ) Dividends on common stock ( 218 ) ( 205 ) ( 191 ) Exercise of stock options and employee stock purchases 53 62 65 Proceeds from senior note issuances, net of debt issuance costs paid 737 494 — Extinguishment of senior notes payable ( 844 ) — — Proceeds from borrowing on the RJF Credit Facility — — 300 Repayment of borrowings on the RJF Credit Facility — — ( 300 ) Net cash provided by/(used in) financing activities ( 400 ) 79 ( 904 ) Net increase/(decrease) in cash and cash equivalents 449 ( 41 ) ( 121 ) Cash and cash equivalents, including those segregated for regulatory purposes and restricted cash at beginning of year 555 596 717 Cash and cash equivalents, including those segregated for regulatory purposes and restricted cash at end of year $ 1,004 $ 555 $ 596 Cash and cash equivalents $ 527 $ 478 $ 540 Cash and cash equivalents segregated for regulatory purposes and restricted cash 477 77 56 Total cash and cash equivalents, including those segregated for regulatory purposes and restricted cash at end of year $ 1,004 $ 555 $ 596 Supplemental disclosures of cash flow information: Cash paid for interest $ 89 $ 72 $ 78 Cash paid for income taxes, net $ 35 $ 32 $ 42 Supplemental disclosures of noncash activity: Investments in subsidiaries, net $ — $ — $ ( 43 ) 151 RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None.