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, asset-backed securities, and non-agency mortgage-backed securities and sovereign debt securities, included in other in the table below.

We have identified Level 3 financial instruments to include certain asset-backed securities and syndicated loans, included in other in the table below. 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 fixed income 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 state and municipal securities.

We have identified Level 3 financial instruments to include syndicated loans, included in other in the table below. 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.

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 have classified our derivatives as Level 2. The counterparties to most of our company’s derivative transactions represent regulated banks, bank holding companies, and derivative clearing houses. Management has determined that the counterparty credit risk associated with its derivative transactions is not significant. Accordingly, the recorded fair values for these transactions have not been adjusted to reflect counterparty credit risk.

Assets and liabilities measured at fair value on a recurring basis as of June 30, 2023, are presented below (in thousands):


	June 30, 2023
	Total		Level 1		Level 2		Level 3
Financial instruments owned:
U.S. government securities	$	24,571	$	24,571	$	—	$	—
U.S. government agency securities		351,095		—		351,095		—
Agency mortgage-backed securities		173,629		—		173,629		—
Asset-backed securities		46,022		—		44,043		1,979
Corporate securities:
Fixed income securities		243,240		141		243,099		—
Equity securities		40,392		40,392		—		—
State and municipal securities		159,089		—		159,089		—
Other (1)		106,860		—		1,319		105,541
Total financial instruments owned		1,144,898		65,104		972,274		107,520
Available-for-sale securities:
U.S. government agency securities		2,163		—		2,163		—
State and municipal securities		2,350		—		2,350		—
Mortgage-backed securities:
Agency		768,548		—		768,548		—
Commercial		65,578		—		65,578		—
Non-agency		343		—		343		—
Corporate fixed income securities		545,964		—		545,964		—
Asset-backed securities		197,472		—		197,472		—
Total available-for-sale securities		1,582,418		—		1,582,418		—
Investments:
Corporate equity securities		23,648		10,099		1,671		11,878
Auction rate securities		14,683		—		—		14,683
Other (2)		37,556		99		115		37,342
Investments in funds and partnerships measured at NAV		24,892
Total investments		100,779		10,198		1,786		63,903
Cash equivalents measured at NAV		791
Derivative contracts (3)		136,112		—		136,112		—
	$	2,964,998	$	75,302	$	2,692,590	$	171,423

(1) Includes syndicated loans and non-agency mortgage-backed securities.

(2) Primarily includes private company investments.

(3) Included in other assets in the consolidated statements of financial condition.


	June 30, 2023
	Total		Level 1		Level 2		Level 3
Liabilities:
Financial instruments sold, but not yet purchased:
U.S. government securities	$	445,251	$	445,251	$	—	$	—
U.S. government agency securities		12,889		—		12,889		—
Agency mortgage-backed securities		69,150		—		69,150		—
Corporate securities:
Fixed income securities		116,263		45		116,218		—
Equity securities		16,067		16,067		—		—
Other (4)		5,867		—		—		5,867
Total financial instruments sold, but not yet purchased		665,487		461,363		198,257		5,867
Derivative contracts (5)		136,099		—		136,099		—
	$	801,586	$	461,363	$	334,356	$	5,867

(4) Includes syndicated loans.

(5) 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, 2022, are presented below (in thousands):


	December 31, 2022
	Total		Level 1		Level 2		Level 3
Financial instruments owned:
U.S. government securities	$	38,956	$	38,956	$	—	$	—
U.S. government agency securities		73,608		—		73,608		—
Agency mortgage-backed securities		172,642		—		172,642		—
Asset-backed securities		8,270		—		6,091		2,179
Corporate securities:
Fixed income securities		202,169		689		201,480		—
Equity securities		38,129		37,383		746		—
State and municipal securities		126,237		—		126,237		—
Other (1)		71,741		—		1,853		69,888
Total financial instruments owned		731,752		77,028		582,657		72,067
Available-for-sale securities:
U.S. government agency securities		2,148		—		2,148		—
State and municipal securities		2,351		—		2,351		—
Mortgage-backed securities:
Agency		791,022		—		791,022		—
Commercial		66,113		—		66,113		—
Non-agency		388		—		388		—
Corporate fixed income securities		566,294		—		566,294		—
Asset-backed securities		207,725		—		207,725		—
Total available-for-sale securities		1,636,041		—		1,636,041		—
Investments:
Corporate equity securities		23,597		9,928		1,791		11,878
Auction rate securities		14,681		—		—		14,681
Other (2)		37,136		117		45		36,974
Investments in funds and partnerships measured at NAV		23,962
Total investments		99,376		10,045		1,836		63,533
Cash equivalents measured at NAV		1,650
Derivative contracts (3)		142,042		—		142,042		—
	$	2,610,861	$	87,073	$	2,362,576	$	135,600

(1)

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

(2)

Primarily includes private company investments.

(3)

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


	December 31, 2022
	Total		Level 1		Level 2		Level 3
Liabilities:
Financial instruments sold, but not yet purchased:
U.S. government securities	$	254,265	$	254,265	$	—	$	—
U.S. government agency securities		3,971		—		3,971		—
Agency mortgage-backed securities		44,793		—		44,793		—
Corporate securities:
Fixed income securities		134,381		88		134,293		—
Equity securities		11,590		11,590		—		—
Other (4)		5,817		—		36		5,781
Total financial instruments sold, but not yet purchased		454,817		265,943		183,093		5,781
Derivative contracts (5)		142,028		—		142,028		—
	$	596,845	$	265,943	$	325,121	$	5,781

(4)

Includes syndicated loans and state and municipal securities.

(5)

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

The following table summarizes the changes in fair value associated with Level 3 financial instruments during the three months ended June 30, 2023 (in thousands):


	Three Months Ended June 30, 2023
	Financial instruments owned						Investments
	Asset-Backed Securities			Syndicated Loans			Corporate Equity Securities		Auction Rate Securities		Other
Balance at March 31, 2023	$	2,124		$	93,591		$	11,878	$	14,680	$	37,368
Unrealized gains/(losses)		—			(22	)		—		3		(26	)
Realized gains		220			61			—		—		—
Purchases		—			23,395			—		—		—
Sales		—			(2,466	)		—		—		—
Redemptions		(365	)		(9,018	)		—		—		—
Net change		(145	)		11,950			—		3		(26	)
Balance at June 30, 2023	$	1,979		$	105,541		$	11,878	$	14,683	$	37,342

The following table summarizes the change in fair value associated with Level 3 financial instruments during the six months ended June 30, 2023 (in thousands):


	Six Months Ended June 30, 2023
	Financial instruments owned						Investments
	Asset-Backed Securities			Syndicated Loans			Corporate Equity Securities		Auction Rate Securities		Other
Balance at December 31, 2022	$	2,179		$	69,888		$	11,878	$	14,681	$	36,974
Unrealized gains		—			86			—		2		368
Realized gains/(losses)		226			(73	)		—		—		—
Purchases		—			54,760			—		—		—
Sales		—			(4,569	)		—		—		—
Redemptions		(426	)		(14,551	)		—		—		—
Net change		(200	)		35,653			—		2		368
Balance at June 30, 2023	$	1,979		$	105,541		$	11,878	$	14,683	$	37,342

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 three and six months ended June 30, 2023, relating to Level 3 assets still held at June 30, 2023, 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 June 30, 2023 and December 31, 2022, whether or not recognized in the consolidated statements of financial condition at fair value (in thousands).


	June 30, 2023				December 31, 2022
	Carrying Value		Estimated Fair Value		Carrying Value		Estimated Fair Value
Financial assets:
Cash and cash equivalents	$	1,907,926	$	1,907,926	$	2,199,985	$	2,199,985
Cash segregated for regulatory purposes		21,372		21,372		29,017		29,017
Securities purchased under agreements to resell		542,582		542,582		348,162		348,162
Financial instruments owned		1,144,898		1,144,898		731,752		731,752
Available-for-sale securities		1,582,418		1,582,418		1,636,041		1,636,041
Held-to-maturity securities		5,951,482		5,789,788		5,990,451		5,738,418
Bank loans		20,338,475		19,460,855		20,465,092		19,752,043
Loans held for sale		224,017		224,017		156,912		156,912
Investments		100,779		100,779		99,376		99,376
Derivative contracts (1)		136,112		136,112		142,042		142,042
Financial liabilities:
Securities sold under agreements to repurchase	$	318,321	$	318,321	$	212,011	$	212,011
Bank deposits		27,004,807		24,575,014		27,117,111		24,274,224
Financial instruments sold, but not yet purchased		665,487		665,487		454,817		454,817
Senior notes		1,115,091		1,033,723		1,114,554		1,016,755
Debentures to Stifel Financial Capital Trusts		60,000		52,511		60,000		53,385
Derivative contracts (2)		136,099		136,099		142,028		142,028

(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 June 30, 2023 and December 31, 2022 (in thousands):


	June 30, 2023
	Total		Level 1		Level 2		Level 3
Financial assets:
Cash	$	1,907,135	$	1,907,135	$	—	$	—
Cash segregated for regulatory purposes		21,372		21,372		—		—
Securities purchased under agreements to resell		542,582		—		542,582		—
Held-to-maturity securities		5,789,788		—		5,696,680		93,108
Bank loans		19,460,855		—		19,460,855		—
Loans held for sale		224,017		—		224,017		—
Financial liabilities:
Securities sold under agreements to repurchase	$	318,321	$	—	$	318,321	$	—
Bank deposits		24,575,014		—		24,575,014		—
Senior notes		1,033,723		1,033,723		—		—
Debentures to Stifel Financial Capital Trusts		52,511		—		—		52,511


	December 31, 2022
	Total		Level 1		Level 2		Level 3
Financial assets:
Cash	$	2,198,335	$	2,198,335	$	—	$	—
Cash segregated for regulatory purposes		29,017		29,017		—		—
Securities purchased under agreements to resell		348,162		218,515		129,647		—
Held-to-maturity securities		5,738,418		—		5,624,042		114,376
Bank loans		19,752,043		—		19,752,043		—
Loans held for sale		156,912		—		156,912		—
Financial liabilities:
Securities sold under agreements to repurchase	$	212,011	$	—	$	212,011	$	—
Bank deposits		24,274,224		—		24,274,224		—
Senior notes		1,016,755		1,016,755		—		—
Debentures to Stifel Financial Capital Trusts		53,385		—		—		53,385

The following, as supplemented by the discussion above, describes the valuation techniques used in estimating the fair value of our financial instruments as of June 30, 2023 and December 31, 2022.

Securities purchased under agreements to resell are collateralized financing transactions that are recorded at their contractual amounts plus accrued interest. The carrying values at June 30, 2023 and December 31, 2022 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 June 30, 2023 and December 31, 2022 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.