NOTE 5 – AVAILABLE FOR SALE SECURITIES

Available for sale securities are comprised primarily of CMOs and other mortgage-related debt securities owned by RJ Bank, and certain equity securities owned by our non-broker-dealer subsidiaries. There were proceeds of $13.8 million from the sale of available for sale securities during the nine month period ended June 30, 2011, which resulted in total losses of $203,000. There were no proceeds from the sale of available for sale securities for the nine month period ended June 30, 2010.

The amortized cost and estimated fair values of available for sale securities are as follows:

	June 30, 2011
	Cost Basis		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
	(in thousands)
Available for sale securities:
Agency MBS and CMOs	$	160,313	$	335	$	(136	)	$	160,512
Non-agency CMOs (1)		203,476		-		(39,870	)		163,606
Total RJ Bank available for sale securities		363,789		335		(40,006	)		324,118
Other securities		3		8		-			11
Total available for sale securities	$	363,792	$	343	$	(40,006	)	$	324,129

	September 30, 2010
	Cost Basis		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
	(in thousands)
Available for sale securities:
Agency MBS and CMOs	$	217,516	$	559	$	(196	)	$	217,879
Non-agency CMOs (2)		252,522		16		(50,968	)		201,570
Other securities		5,000		3		-			5,003
Total RJ Bank available for sale securities		475,038		578		(51,164	)		424,452
Other securities		3		6		-			9
Total available for sale securities	$	475,041	$	584	$	(51,164	)	$	424,461

(1)	As of June 30, 2011, the non-credit portion of other-than-temporary impairment (“OTTI”) recorded in accumulated other comprehensive income (“AOCI”) was $32.5 million (before taxes).

(2)	As of September 30, 2010, the non-credit portion of OTTI recorded in AOCI was $36.1 million (before taxes).

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

Since RJ Bank's available for sale securities are backed by mortgages, actual maturities will differ from contractual maturities because borrowers may have the right to prepay obligations without prepayment penalties. The contractual maturities, amortized cost, carrying values and current yields for RJ Bank's available for sale securities are as follows:

	June 30, 2011
	Within One Year		After One but within Five Years		After Five but within Ten Years			After Ten Years			Total
	(in thousands)
Agency MBS & CMOs:
Amortized cost	$	-	$	-	$	56,578		$	103,735		$	160,313
Carrying value		-		-		56,681			103,831			160,512
Weighted-average yield		-		-		0.36	%		0.56	%		0.48	%

Non-agency CMOs:
Amortized cost	$	-	$	-	$	-		$	203,476		$	203,476
Carrying value		-		-		-			163,606			163,606
Weighted-average yield		-		-		-			4.59	%		4.59	%

Total available for sale securities:
Amortized cost	$	-	$	-	$	56,578		$	307,211		$	363,789
Carrying value		-		-		56,681			267,437			324,118
Weighted-average yield		-		-		0.36	%		3.03	%		2.56	%

Unrealized Losses

For a further discussion of our available for sale securities' accounting policies, including the fair value determination process, see Note 1, pages 82 – 83, in our 2010 Form 10-K.

RJ Bank's investments' gross unrealized losses and fair value, aggregated by investment category and length of time the individual securities have been in a continuous unrealized loss position, are as follows:

	June 30, 2011
	Less than 12 Months					12 Months or More					Total
	Estimated		Unrealized			Estimated		Unrealized			Estimated		Unrealized
	Fair Value		Losses			Fair Value		Losses			Fair Value		Losses
	(in thousands)

Agency MBS and CMOs	$	47,350	$	(87	)	$	17,145	$	(49	)	$	64,495	$	(136	)
Non-agency CMOs		1,453		(36	)		162,153		(39,834	)		163,606		(39,870	)
Total impaired securities	$	48,803	$	(123	)	$	179,298	$	(39,883	)	$	228,101	$	(40,006	)

	September 30, 2010
	Less than 12 Months					12 Months or More					Total
	Estimated		Unrealized			Estimated		Unrealized			Estimated		Unrealized
	Fair Value		Losses			Fair Value		Losses			Fair Value		Losses
	(in thousands)

Agency MBS and CMOs	$	45,026	$	(117	)	$	58,425	$	(79	)	$	103,451	$	(196	)
Non-agency CMOs		-		-			199,877		(50,968	)		199,877		(50,968	)
Total impaired securities	$	45,026	$	(117	)	$	258,302	$	(51,047	)	$	303,328	$	(51,164	)

The reference point for determining when securities are in a loss position is the reporting period end. As such, it is possible that a security had a fair value that exceeded its amortized cost on other days during the period.

Agency MBS and CMOs

The Federal National Mortgage Association (“FNMA”) or Federal Home Loan Mortgage Corporation (“FHLMC”), both of which were placed under the conservatorship of the U.S. Government on September 7, 2008, as well as the Government National Mortgage Association (“GNMA”), guarantee the contractual cash flows of the agency MBS. At June 30, 2011, of the 40 U.S. government-sponsored enterprise MBS in an unrealized loss position, 24 were in a continuous unrealized loss position for less than 12 months and 16 for 12 months or more. We do not consider these securities other-than-temporarily impaired due to the guarantee provided by FNMA, FHLMC, and GNMA as to the full payment of principal and interest, and the fact that we have the ability and intent to hold these securities to maturity.

Non-agency CMOs

As of June 30, 2011 and including subsequent ratings changes, $8 million of the non-agency CMOs were rated AAA by two rating agencies, and $155.6 million were rated less than AAA by at least one rating agency. At June 30, 2011, 24 of the 25 non-agency CMOs were in a continuous unrealized loss position for 12 months or more and one was in that position for less than 12 months. The non-agency securities carry various amounts of credit enhancement, and none are collateralized with subprime loans. These securities were purchased based on the underlying loan characteristics such as loan-to-value (“LTV”) ratio, credit scores, property type, location and level of credit enhancement. Current characteristics of each security owned, such as delinquency and foreclosure levels, credit enhancement, projected losses and coverage, are reviewed monthly by management. Only those non-agency CMOs whose amortized cost basis we do not expect to recover in full are considered to be other-than-temporarily impaired as we have the ability and intent to hold these securities to maturity. The unrealized losses at June 30, 2011 were primarily due to the continued illiquidity and uncertainty in the markets.

Based on the expected cash flows derived from the model utilized in our analysis, we expect to recover all unrealized losses not already recorded in earnings on our non-agency CMOs. However, it is possible that the underlying loan collateral of these securities will perform worse than current expectations, which may lead to adverse changes in the cash flows expected to be collected on these securities and potential future OTTI losses.

The significant assumptions used in the cash flow analysis of non-agency CMOs are as follows:

	June 30, 2011
	Range	Weighted- Average (1)

Default rate	1.1% - 34.6%	14.6%
Loss severity	15% - 60.6%	43.6%
Prepayment rate	0.7% - 20.6%	10.1%

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

Other-Than-Temporarily Impaired Securities

Although there is no intent to sell our non-agency CMOs and it is not more likely than not that we will be required to sell these securities, we do not expect to recover the entire amortized cost basis of certain securities within this portfolio.

Changes in the amount of OTTI related to credit losses recognized in other revenues on available for sale securities are as follows:

	Three months ended June 30,					Nine months ended June 30,
	2011		2010			2011			2010
	(in thousands)
Amount related to credit losses on securities we held at the beginning of the period	$	17,470	$	19,869		$	18,816		$	17,762
Additions to the amount related to credit loss for which an OTTI was not previously recognized		-		300			240			2,905
Decreases to the amount related to credit loss for securities sold during the period		-		-			(6,744	)		-
Additional increases to the amount related to credit loss for which an OTTI was previously recognized		2,255		2,215			7,413			5,048
Decreases to the amount related to credit losses for worthless securities		-		(3,038	)		-			(6,369	)
Amount related to credit losses on securities we held at the end of the period	$	19,725	$	19,346		$	19,725		$	19,346

The current period credit losses were primarily due to high loss severities on individual loan collateral of certain securities and the expected continuation of high default levels and collateral losses throughout 2011 and into 2012.