Worried Taxpayer

Response to Raymond James' Q3 Conference Call

It seems to me that the SEC Auction Rate Securities investigation is a serious issue for Raymond James. Do you have any insight into the potential ramifications?

Response to Raymond James' Q3 Conference Call

The fact that the majority of RJF Bank deposits are sweeps from the brokerage and are FDIC insured is disconcerting and does seem very similar to the E*Trade model. The bank then uses these deposits to buy risky loans. On the residential side the majority are Alt-A 5/1 Interest Only mortgages. S&P just recently increased its loss assumptions on Alt-A loans and are expecting a significant increase in delinquencies in these types of loans. It is these types of loans in which Fannie and Freddie are seeing its biggest losses today and going forward, not in sub-prime loans.

On the “corporate” side they buy S&P BB rated loans. These loans have exposures to REIT’s, in areas like strip malls and hotels, which are certainly not risk free loans. One example of this type of loan is the WCI Communities loans which defaulted this week. RJF Bank has a commitment of $2.668 million in the term loan and $4.569 million in the revolver. This loan alone will increase Non-Performing Loans by 20%.

However, this information can only be obtained by digging through 8Ks as the company has not disclosed very much about the details of its portfolio. So your concerns and frustrations are certainly warranted and should be shared by both shareholders and tax payers alike.