We measure certain financial assets and liabilities at fair value on a recurring basis, including financial instruments owned, available-for-sale securities, investments, financial instruments sold, but not yet purchased, and derivatives.

We generally utilize third-party pricing services to value Level 1 and Level 2 available-for-sale investment securities, as well as certain derivatives designated as cash flow hedges. We review the methodologies and assumptions used by the third-party pricing services and evaluate the values provided, principally by comparison with other available market quotes for similar instruments and/or analysis based on internal models using available third-party market data. We may occasionally adjust certain values provided by the third-party pricing service when we believe, as the result of our review, that the adjusted price most appropriately reflects the fair value of the particular security.

Following are descriptions of the valuation methodologies and key inputs used to measure financial assets and liabilities recorded at fair value. The descriptions include an indication of the level of the fair value hierarchy in which the assets or liabilities are classified.

When available, the fair value of financial instruments is based on quoted prices in active markets and reported in Level 1. Level 1 financial instruments include highly liquid instruments with quoted prices, such as U.S. government securities, corporate fixed income securities, and equity securities listed in active markets.

If quoted prices are not available for identical instruments, fair values are obtained from pricing services, broker quotes, or other model-based valuation techniques with observable inputs, such as the present value of estimated cash flows, and reported as Level 2. The nature of these financial instruments include instruments for which quoted prices are available but traded less frequently, instruments whose fair value has been derived using a model where inputs to the model are directly observable in the market, or can be derived principally from or corroborated by observable market data, and instruments that are fair valued using other financial instruments, the parameters of which can be directly observed. Level 2 financial instruments include U.S. government agency securities, mortgage-backed securities, fixed income and equity securities infrequently traded, state and municipal securities, and asset-backed securities.

We have identified Level 3 financial instruments to include certain asset-backed securities and loans, included in other in the table below, and equity securities with unobservable pricing inputs. Level 3 financial instruments have little to no pricing observability as of the report date. These financial instruments do not have active two-way markets and are measured using management’s best estimate of fair value, where the inputs into the determination of fair value require significant management judgment or estimation.

Investments carried at fair value primarily include corporate equity securities, auction-rate securities (“ARS”), and private company investments.

Corporate equity securities are primarily valued based on quoted prices in active markets and reported in Level 1.

ARS are primarily valued based upon our expectations of issuer redemptions and using internal discounted cash flow models that utilize unobservable inputs. ARS are reported as Level 3 assets. Private company investments are primarily valued based upon internally developed models. These valuations require significant management judgment due to the absence of quoted market prices, the inherent lack of liquidity, and their long-term nature. Typically, the initial costs of these investments are considered to represent fair market value, as such amounts are negotiated between willing market participants. Private company investments are primarily reported as Level 3 assets.

Investments at fair value include investments in funds, including certain money market funds that are measured at net asset value (“NAV”). The Company uses NAV to measure the fair value of its fund investments when (i) the fund investment does not have a readily determinable fair value and (ii) the NAV of the investment fund is calculated in a manner consistent with the measurement principles of investment company accounting, including measurement of the underlying investments at fair value.

The Company’s investments in funds measured at NAV include partnership interests, mutual funds, money market funds, and private equity funds. Private equity funds primarily invest in a broad range of industries worldwide in a variety of situations, including leveraged buyouts, recapitalizations, growth investments, and distressed investments. The private equity funds are primarily closed-end funds in which the Company’s investments are generally not eligible for redemption. Distributions will be received from these funds as the underlying assets are liquidated or distributed.

The general and limited partnership interests in investment partnerships were primarily valued based upon NAVs received from third-party fund managers. The various partnerships are investment companies, which record their underlying investments at fair value based on fair value policies established by management of the underlying fund. Fair value policies at the underlying fund generally require the funds to utilize pricing/valuation information, including independent appraisals, from third-party sources. However, in some instances, current valuation information for illiquid securities or securities in markets that are not active may not be available from any third-party source or fund management may conclude that the valuations that are available from third-party sources are not reliable. In these instances, fund management may perform model-based analytical valuations that may be used as an input to value these investments.

Financial instruments sold, but not purchased, recorded at fair value based on quoted prices in active markets and other observable market data include highly liquid instruments with quoted prices, such as U.S. government securities, and equity securities listed in active markets, which are reported as Level 1.

If quoted prices are not available, fair values are obtained from pricing services, broker quotes, or other model-based valuation techniques with observable inputs, such as the present value of estimated cash flows, and reported as Level 2. The nature of these financial instruments include instruments for which quoted prices are available but traded less frequently, instruments whose fair value has been derived using a model where inputs to the model are directly observable in the market, or can be derived principally from or corroborated by observable market data, and instruments that are fair valued using other financial instruments, the parameters of which can be directly observed. Level 2 financial instruments include U.S. government agency securities, agency mortgage-backed securities not actively traded, fixed income securities, and sovereign debt securities.

Derivatives are valued using quoted market prices for identical instruments when available or observable inputs from forward and futures yield curves. The valuation models used require market observable inputs, including contractual terms, market prices, yield curves, credit curves, and measures of volatility. We manage credit risk for our derivative positions on counterparty-by-counterparty basis and calculate credit valuation adjustments, included in the fair value of these instruments, on the basis of our relationships at the counterparty portfolio/master netting agreement level. These credit valuation adjustments are determined by applying a credit spread for the counterparty to the total expected exposure of the derivative after considering collateral and other master netting arrangements. We have classified our interest rate swaps as Level 2.

Assets and liabilities measured at fair value on a recurring basis as of December 31, 2021, are presented below (in thousands):


	December 31, 2021
	Total		Level 1		Level 2		Level 3
Financial instruments owned:
U.S. government securities	$	10,774	$	10,774	$	—	$	—
U.S. government agency securities		143,793		—		143,793		—
Agency mortgage-backed securities		335,050		—		335,050		—
Asset-backed securities		132,087		—		67,381		64,706
Corporate securities:
Fixed income securities		255,999		183		255,816		—
Equity securities		75,056		73,493		1,338		225
State and municipal securities		162,335		—		162,335		—
Other (1)		41,910		—		15,053		26,857
Total financial instruments owned		1,157,004		84,450		980,766		91,788
Available-for-sale securities:
U.S. government agency securities		1,808		—		1,808		—
State and municipal securities		2,399		—		2,399		—
Mortgage-backed securities:
Agency		952,186		—		952,186		—
Commercial		73,985		—		73,985		—
Non-agency		568		—		568		—
Corporate fixed income securities		791,893		—		791,893		—
Asset-backed securities		291,054		—		291,054		—
Total available-for-sale securities		2,113,893		—		2,113,893		—
Investments:
Corporate equity securities		21,308		13,893		1,661		5,754
Auction rate securities		13,032		—		—		13,032
Other		60,406		10,217		14,352		35,837
Investments in funds and partnerships measured at NAV		23,058
Total investments		117,804		24,110		16,013		54,623
Cash equivalents measured at NAV		3,004
Derivative contracts (2)		52,129		—		52,129		—
	$	3,443,834	$	108,560	$	3,162,801	$	146,411

(1)

Includes loans, non-agency mortgage-backed securities, and sovereign debt.

(2)

Included in other assets in the consolidated statements of financial condition.


	December 31, 2021
	Total		Level 1		Level 2		Level 3
Liabilities:
Financial instruments sold, but not yet purchased:
U.S. government securities	$	377,023	$	377,023	$	—	$	—
U.S. government agency securities		37,395		—		37,395		—
Agency mortgage-backed securities		156,628		—		156,628		—
Corporate securities:
Fixed income securities		153,852		—		153,852		—
Equity securities		28,482		28,482		—		—
Sovereign debt		2,770		—		2,770		—
Total financial instruments sold, but not yet purchased		756,150		405,505		350,645		—
Derivative contracts (3)		52,147		—		52,147		—
	$	808,297	$	405,505	$	402,792	$	—

(3)

Included in accounts payable and accrued expenses in the consolidated statements of financial condition.

Assets and liabilities measured at fair value on a recurring basis as of December 31, 2020, are presented below (in thousands):


	December 31, 2020
	Total		Level 1		Level 2		Level 3
Financial instruments owned:
U.S. government securities	$	46,900	$	46,900	$	—	$	—
U.S. government agency securities		56,450		—		56,450		—
Agency mortgage-backed securities		216,434		—		216,434		—
Asset-backed securities		3,394		—		3,385		9
Corporate securities:
Fixed income securities		194,575		4,474		190,101		—
Equity securities		67,593		62,979		4,614		—
State and municipal securities		96,150		—		96,150		—
Other (1)		12,532		—		1,257		11,275
Total financial instruments owned		694,028		114,353		568,391		11,284
Available-for-sale securities:
U.S. government agency securities		4,361		—		4,361		—
State and municipal securities		2,453		—		2,453		—
Mortgage-backed securities:
Agency		793,410		—		793,410		—
Commercial		95,613		—		95,613		—
Non-agency		4,569		—		4,569		—
Corporate fixed income securities		631,758		—		631,758		—
Asset-backed securities		698,133		—		698,133		—
Total available-for-sale securities		2,230,297		—		2,230,297		—
Investments:
Corporate equity securities		29,496		29,496		—		—
Auction rate securities		12,933		—		—		12,933
Other		59,048		10,342		6,593		42,113
Investments in funds and partnerships measured at NAV		12,385
Total investments		113,862		39,838		6,593		55,046
Cash equivalents measured at NAV		34,192
	$	3,072,379	$	154,191	$	2,805,281	$	66,330

(1)

Includes loans, sovereign debt, and non-agency mortgage-backed securities.


	December 31, 2020
	Total		Level 1		Level 2		Level 3
Liabilities:
Financial instruments sold, but not yet purchased:
U.S. government securities	$	91,974	$	91,974	$	—	$	—
Agency mortgage-backed securities		141,227		—		141,227		—
Corporate securities:
Fixed income securities		162,626		4,094		158,532		—
Equity securities		30,848		30,848		—		—
Other (2)		11,303		—		11,303		—
Total financial instruments sold, but not yet purchased	$	437,978	$	126,916	$	311,062	$	—

(2)

Includes sovereign debt and state and municipal securities.

The following table summarizes the changes in fair value associated with Level 3 financial instruments during the year ended December 31, 2021 (in thousands):


	Year Ended December 31, 2021
	Financial instruments owned								Investments
	Asset-Backed Securities			Corporate Equity Securities		Loans			Corporate Equity Securities			Auction Rate Securities			Other
Balance at December 31, 2020	$	9		$	—	$	11,275		$	—		$	12,933		$	42,113
Unrealized gains/(losses)		(3,002	)		—		(68	)		(1,000	)		124			654
Realized gains		9,485			—		—			—			—			—
Purchases		68,104			—		23,600			3,000			—			—
Sales		—			—		(7,725	)		(2,000	)		—			—
Redemptions		(16,750	)		—		—			—			(25	)		—
Transfers into Level 3		6,930			225		—			5,754			—			—
Transfers out of Level 3		(70	)		—		(225	)		—			—			(6,930	)
Net change		64,697			225		15,582			5,754			99			(6,276	)
Balance at December 31, 2021	$	64,706		$	225	$	26,857		$	5,754		$	13,032		$	35,837

The following table summarizes the changes in fair value associated with Level 3 financial instruments during the year ended December 31, 2020 (in thousands):

The results included in the tables above are only a component of the overall investment strategies of our company. The tables above do not present Level 1 or Level 2 valued assets or liabilities. The changes in unrealized gains/(losses) recorded in earnings for the years ended December 31, 2021 and 2020, relating to Level 3 assets still held at December 31, 2021, were immaterial.

The fair value of certain Level 3 assets was determined using various methodologies, as appropriate, including third-party pricing vendors and broker quotes. These inputs are evaluated for reasonableness through various procedures, including due diligence reviews of third-party pricing vendors, variance analyses, consideration of current market environment, and other analytical procedures.

The fair value for our auction rate securities was determined using an income approach based on an internally developed discounted cash flow model. The discounted cash flow model utilizes two significant unobservable inputs: discount rate and workout period. Significant increases in any of these inputs in isolation would result in a significantly lower fair value. On an ongoing basis, management verifies the fair value by reviewing the appropriateness of the discounted cash flow model and its significant inputs.

The following reflects the fair value of financial instruments as of December 31, 2021 and 2020, whether or not recognized in the consolidated statements of financial condition at fair value (in thousands).


	December 31, 2021				December 31, 2020
	Carrying Value		Estimated Fair Value		Carrying Value		Estimated Fair Value
Financial assets:
Cash and cash equivalents	$	1,963,326	$	1,963,326	$	2,279,274	$	2,279,274
Cash segregated for regulatory purposes		186,331		186,331		172,932		172,932
Securities purchased under agreements to resell		579,866		579,866		217,930		217,930
Financial instruments owned		1,157,004		1,157,004		694,028		694,028
Available-for-sale securities		2,113,893		2,113,893		2,230,297		2,230,297
Held-to-maturity securities		5,348,558		5,343,481		4,117,384		4,107,960
Bank loans		16,627,847		16,704,912		11,006,760		11,088,058
Loans held for sale		207,715		207,715		551,248		551,248
Investments		117,804		117,804		113,862		113,862
Derivative contracts (1)		52,129		52,129		—		—
Financial liabilities:
Securities sold under agreements to repurchase	$	385,528	$	385,528	$	190,955	$	190,955
Bank deposits		23,280,348		22,998,842		17,396,497		17,192,722
Financial instruments sold, but not yet purchased		756,150		756,150		437,978		437,978
Senior notes		1,113,478		1,218,344		1,112,409		1,265,669
Debentures to Stifel Financial Capital Trusts		60,000		46,340		60,000		41,071
Derivative contracts (2)		52,147		52,147		—		—

(1)

Included in other assets in the consolidated statements of financial condition.

(2)

Included in accounts payable and accrued expenses in the consolidated statements of financial condition.

The following tables present the estimated fair values of financial instruments not measured at fair value on a recurring basis as of December 31, 2021 and December 31, 2020 (in thousands):


	December 31, 2021
	Total		Level 1		Level 2		Level 3
Financial assets:
Cash	$	1,960,322	$	1,960,322	$	—	$	—
Cash segregated for regulatory purposes		186,331		186,331		—		—
Securities purchased under agreements to resell		579,866		371,797		208,069		—
Held-to-maturity securities		5,343,481		—		5,205,085		138,396
Bank loans		16,704,912		—		16,704,912		—
Loans held for sale		207,715		—		207,715		—
Financial liabilities:
Securities sold under agreements to repurchase	$	385,528	$	10,000	$	375,528	$	—
Bank deposits		22,998,842		—		22,998,842		—
Senior notes		1,218,344		1,218,344		—		—
Debentures to Stifel Financial Capital Trusts		46,340		—		—		46,340


	December 31, 2020
	Total		Level 1		Level 2		Level 3
Financial assets:
Cash	$	2,245,082	$	2,245,082	$	—	$	—
Cash segregated for regulatory purposes		172,932		172,932		—		—
Securities purchased under agreements to resell		217,930		164,094		53,836		—
Held-to-maturity securities		4,107,960		—		3,943,944		164,016
Bank loans		11,088,058		—		11,088,058		—
Loans held for sale		551,248		—		551,248		—
Financial liabilities:
Securities sold under agreements to repurchase	$	190,955	$	—	$	190,955	$	—
Bank deposits		17,192,722		—		17,192,722		—
Senior notes		1,265,669		1,265,669		—		—
Debentures to Stifel Financial Capital Trusts		41,071		—		—		41,071

The following, as supplemented by the discussion above, describes the valuation techniques used in estimating the fair value of our financial instruments as of December 31, 2021 and 2020.

Securities purchased under agreements to resell are collateralized financing transactions that are recorded at their contractual amounts plus accrued interest. The carrying values at December 31, 2021 and 2020 approximate fair value due to their short-term nature.

Securities held to maturity are recorded at amortized cost based on our company’s positive intent and ability to hold these securities to maturity. Securities held to maturity include asset-backed securities, consisting of collateralized loan obligation securities and student loan ARS. The estimated fair value, included in the above table, is determined using several factors; however, primary weight is given to discounted cash flow modeling techniques that incorporated an estimated discount rate based upon recent observable debt security issuances with similar characteristics.

The fair values of mortgage loans and commercial loans were estimated using a discounted cash flow method, a form of the income approach. Discount rates were determined considering rates at which similar portfolios of loans, with similar remaining maturities, would be made and considering liquidity spreads applicable to each loan portfolio based on the secondary market.

Loans held for sale consist of fixed-rate and adjustable-rate residential real estate mortgage loans intended for sale. Loans held for sale are stated at lower of cost or market value. Market value is determined based on prevailing market prices for loans with similar characteristics or on sale contract prices.

Securities sold under agreements to repurchase are collateralized financing transactions that are recorded at their contractual amounts plus accrued interest. The carrying values at December 31, 2021 and 2020 approximate fair value due to the short-term nature.

The fair value of interest-bearing deposits, including certificates of deposits, demand deposits, savings, and checking accounts, was calculated by discounting the future cash flows using discount rates based on the replacement cost of funding of similar structures and terms.

The fair value of our senior notes is estimated based upon quoted market prices.

The fair value of our trust preferred securities is based on the discounted value of contractual cash flows. We have assumed a discount rate based on similar type debt instruments.

These fair value disclosures represent our best estimates based on relevant market information and information about the financial instruments. Fair value estimates are based on judgments regarding future expected losses, current economic conditions, risk characteristics of the various instruments, and other factors. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and, therefore, cannot be determined with precision. Changes in the above methodologies and assumptions could significantly affect the estimates.