NOTE 5 – AVAILABLE FOR SALE SECURITIES

Available for sale securities are comprised of MBS and CMOs owned by RJ Bank, ARS 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 for the fiscal year ended September 30, 2011, which resulted in total losses of $209,000. There were no proceeds from the sale of available for sale securities for the fiscal years ended September 30, 2010 or 2009.

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

	September 30, 2011
	Cost basis		Gross unrealized gains		Gross unrealized losses			Fair value
	(in thousands)
Available for sale securities:
Agency MBS and CMOs	$	178,120	$	639	$	(27	)	$	178,732
Non-agency CMOs (1)		192,956		-		(47,081	)		145,875
Total RJ Bank available for sale securities		371,076		639		(47,108	)		324,607

Auction rate securities:
Municipal obligations		79,524		-		-			79,524
Preferred securities		116,524		-		-			116,524
Total auction rate securities (2)		196,048		-		-			196,048

Other securities		3		7		-			10
Total available for sale securities	$	567,127	$	646	$	(47,108	)	$	520,665

	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 (3)		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

	September 30, 2009
	Cost basis		Gross unrealized gains		Gross unrealized losses			Fair Value
	(in thousands)
Available for sale securities:
Agency MBS and CMOs	$	275,995	$	213	$	(3,316	)	$	272,892
Non-agency CMOs (4)		325,823		-		(94,660	)		231,163
Other securities		5,000		10		-			5,010
Total RJ Bank available for sale securities		606,818		223		(97,976	)		509,065
Other securities		3		5		-			8
Total available for sale securities	$	606,821	$	228	$	(97,976	)	$	509,073

(1)	As of September 30, 2011, the non-credit portion of OTTI recorded in AOCI was $37.9 million (before taxes).

(2)	During fiscal year 2011, ARS with a fair value of approximately $7.5 million which were previously held in trading instruments and arose prior to the ARS settlement (refer to Note 17 for discussion of the ARS settlement) were transferred into available for sale securities.

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

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

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

The contractual maturities, amortized cost, carrying values and current yields for our available for sale securities are as presented below. Since RJ Bank's available for sale securities are backed by mortgages, actual maturities will differ from contractual maturities because borrowers may have the right to prepay obligations without prepayment penalties. Expected maturities of ARS and other securities may differ significantly from contractual maturities, as issuers may have the right to call or prepay obligations with or without call or prepayment penalties.

	September 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	$	-	$	-	$	51,262		$	126,858		$	178,120
Carrying value		-		-		51,418			127,314			178,732
Weighted-average yield		-		-		0.46	%		0.57	%		0.54	%

Non-agency CMOs:
Amortized cost	$	-	$	-	$	-		$	192,956		$	192,956
Carrying value		-		-		-			145,875			145,875
Weighted-average yield		-		-		-			4.33	%		4.33	%

Sub-total agency MBS & CMOs and non-agency CMOs:
Amortized cost	$	-	$	-	$	51,262		$	319,814		$	371,076
Carrying value		-		-		51,418			273,189			324,607
Weighted-average yield		-		-		0.46	%		2.58	%		2.24	%

Auction rate securities:
Municipal obligations
Amortized cost	$	-	$	-	$	553		$	78,971		$	79,524
Carrying value		-		-		553			78,971			79,524
Weighted-average yield		-		-		0.48	%		0.75	%		0.75	%

Preferred securities:
Amortized cost	$	-	$	-	$	-		$	116,524		$	116,524
Carrying value		-		-		-			116,524			116,524
Weighted-average yield		-		-		-			0.26	%		0.26	%

Sub-total auction rate securities:
Amortized cost	$	-	$	-	$	553		$	195,495		$	196,048
Carrying value		-		-		553			195,495			196,048
Weighted-average yield		-		-		0.48	%		0.46	%		0.46	%

Other securities:
Amortized cost	$	-	$	-	$	-		$	3		$	3
Carrying value		-		-		-			10			10

Total available for sale securities:
Amortized cost	$	-	$	-	$	51,815		$	515,312		$	567,127
Carrying value		-		-		51,971			468,694			520,665
Weighted-average yield		-		-		0.46	%		1.78	%		1.66	%

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

	September 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	$	23,366	$	(6	)	$	17,702	$	(21	)	$	41,068	$	(27	)
Non-agency CMOs		1,345		(93	)		144,530		(46,988	)		145,875		(47,081	)
Total impaired securities	$	24,711	$	(99	)	$	162,232	$	(47,009	)	$	186,943	$	(47,108	)

	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”), the Federal Home Loan Mortgage Corporation (“FHLMC”), as well as the Government National Mortgage Association (“GNMA”), guarantee the contractual cash flows of the agency MBS and CMOs. At September 30, 2011, of the 14 U.S. government-sponsored enterprise MBS and CMOs in an unrealized loss position, three were in a continuous unrealized loss position for less than 12 months and 11 for 12 months or more. On August 5, 2011, Standard and Poors (“S&P”), a nationally recognized statistical rating organization, downgraded long-term U.S. sovereign debt. Despite this downgrade, S&P indicated that the short-term capacity of the U.S. to meet its financial commitments on its outstanding obligations is still strong. Further, two other nationally recognized rating organizations did not downgrade their previously issued U.S. sovereign debt credit ratings. Accordingly, we do not believe that S&P's downgrade of long-term U.S. sovereign debt indicates that there are credit losses on U.S. agency-guaranteed securities. 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 September 30, 2011 and including subsequent ratings changes, $40.7 million of the non-agency CMOs were rated investment grade by at least one rating agency, and $105.2 million were rated less than investment grade. At September 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 September 30, 2011 were primarily due to the continued volatility 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:

	September 30, 2011
	Range	Weighted- average (1)

Default rate	0.3% - 36.3%	14.4%
Loss severity	15.0% - 70.8%	45.2%
Prepayment rate	0% - 30.2%	10.4%

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

ARS

Our cost basis in the ARS we hold is the fair value of the securities in the period in which we acquired them (see Note 17 for further information regarding our repurchase of ARS). All unrealized gains or losses, except for those that are deemed to be other-than-temporary, that arise after their acquisition will be recorded through other comprehensive income and thereafter presented in equity as a component of AOCI.

During the year ended September 30, 2011, ARS which we held with an aggregate par value of $15.9 million were redeemed by their issuer at par; no gains or losses were recorded in our Consolidated Statements of Income and Comprehensive Income on the ARS securities which were subject to these redemptions.

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 the non-agency CMO portfolio.

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

	Year ended September 30,
	2011			2010			2009
	(in thousands)

Amount related to credit losses on securities we held at the beginning of the period	$	18,816		$	17,762		$	4,869
Additions to the amount related to credit loss for which an OTTI was not previously recognized		240			5,166			11,393
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		9,994			6,864			1,500
Decreases to the amount related to credit losses for worthless securities		-			(10,976	)		-
Amount related to credit losses on securities we held at the end of the period	$	22,306		$	18,816		$	17,762

The fiscal year 2011 increase in 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 for the duration of calendar year 2011 and into calendar year 2012.