NOTE 6 – Fair Value Measurements

We measure certain financial assets and liabilities at fair value on a recurring basis, including cash equivalents, 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.

Cash Equivalents

Cash equivalents include highly liquid investments with original maturities of three months or less. Due to their short-term nature, the carrying amount of these instruments approximates the estimated fair value. Actively traded money market funds are measured at their reported net asset value, which approximates fair value. As such, we classify the estimated fair value of these instruments as Level 1.

Financial Instruments Owned and Available-For-Sale Securities

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 equity securities listed in active markets, corporate fixed income securities, mortgage-backed securities, and U.S. government securities.

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, corporate fixed income securities infrequently traded, state and municipal securities, asset-backed securities, and equity securities not actively traded.

We have identified Level 3 financial instruments to include certain corporate fixed income securities with unobservable pricing inputs, and certain state and municipal securities, which include auction rate securities (“ARS”). 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. ARS are valued based upon our expectations of issuer redemptions and using internal discounted cash flow models that utilize unobservable inputs.

Investments

Investments carried at fair value primarily include corporate equity securities, ARS, investments in mutual funds, U.S. government securities, and investments in public companies, private equity securities, and partnerships, which are classified as other in the following tables.

Corporate equity securities, mutual funds and U.S. government securities are valued based on quoted prices in active markets and reported in Level 1.

ARS for which the market has been dislocated and largely ceased to function are reported as Level 3 assets. The methods used to value ARS are discussed above.

Investments in partnerships and other investments include our general and limited partnership interests in investment partnerships and direct investments in non-public companies. The net assets of investment partnerships consist primarily of investments in non-marketable securities. The value of these investments is at risk to changes in equity markets, general economic conditions, and a variety of other factors. We estimate fair value for private equity investments based on our percentage ownership in the net asset value of the entire fund, as reported by the fund or on behalf of the fund, after indication that the fund adheres to applicable fair value measurement guidance.

The valuation of these investments requires significant management judgment due to the absence of quoted market prices, inherent lack of liquidity, and long-term nature of these assets. As a result, these values cannot be determined with precision and the calculated fair value estimates may not be realizable in a current sale or immediate settlement of the instrument.

For those funds where the net asset value is not reported by the fund, we derive the fair value of the fund by estimating the fair value of each underlying investment in the fund. In addition to using qualitative information about each underlying investment, as provided by the fund, we give consideration to information pertinent to the specific nature of the debt or equity investment, such as relevant market conditions, offering prices, operating results, financial conditions, exit strategy, and other qualitative information, as available. The lack of an independent source to validate fair value estimates, including the impact of future capital calls and transfer restrictions, is an inherent limitation in the valuation process. Commitments to fund additional investments in nonmarketable equity securities recorded at fair value were $11.5 million and $12.4 million at December 31, 2014 and 2013, respectively.

Financial Instruments Sold, But Not Yet Purchased

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, corporate fixed income 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, mortgage-backed securities not actively traded, and corporate fixed income securities.

Derivatives

Derivatives are valued using quoted market prices for identical instruments when available or pricing models based on the net present value of estimated future cash flows. 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 a 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, 2014 are presented below:


	December 31, 2014
	Total		Level 1		Level 2		Level 3
Assets:
Cash equivalents	$	122,875	$	122,875	$	-	$	-
Financial instruments owned:
U.S. government securities		58,992		58,992		-		-
U.S. government agency securities		101,439		-		101,439		-
Mortgage-backed securities:
Agency		159,057		-		159,057		-
Non-agency		13,366		189		12,371		806
Corporate securities:
Fixed income securities		245,909		75,236		168,680		1,993
Equity securities		77,548		76,316		88		1,144
State and municipal securities		130,544		-		130,544		-
Total financial instruments owned		786,855		210,733		572,179		3,943
Available-for-sale securities:
U.S. government agency securities		1,610		-		1,610		-
State and municipal securities		74,401		-		74,401		-
Mortgage-backed securities:
Agency		209,206		-		209,206		-
Commercial		107,644		-		107,644		-
Non-agency		3,137		-		3,137		-
Corporate fixed income securities		337,406		50,892		286,514		-
Asset-backed securities		780,074		-		736,029		44,045
Total available-for-sale securities		1,513,478		50,892		1,418,541		44,045
Investments:
Corporate equity securities		59,203		35,123		24,080		-
Mutual funds		18,144		18,144		-		-
U.S. government securities		6,555		104		6,451		-
Auction rate securities:
Equity securities		46,197		-		-		46,197
Municipal securities		1,326		-		-		1,326
Other (1)		78,830		1,283		4,557		72,990
Total investments		210,255		54,654		35,088		120,513
	$	2,633,463	$	439,154	$	2,025,808	$	168,501
Liabilities:
Financial instruments sold, but not yet purchased
U.S. government securities	$	146,592	$	146,592	$	-	$	-
U.S. government agency securities		10,029		-		10,029		-
Mortgage-backed securities:
Agency		28,067		-		28,067		-
Commercial		4,556		401		4,155		-
Corporate securities:
Fixed income securities		293,008		17,116		275,892		-
Equity securities		105,013		105,013		-		-
Total financial instruments sold, but not yet purchased		587,265		269,122		318,143		-
Securities sold, but not yet purchased		-		-		-		-
Derivative contracts (2)		5,641		-		5,641		-
	$	592,906	$	269,122	$	323,784	$	-

(1) Includes $42.1 million of partnership interests, $16.4 million of private company investments, and $14.3 million of private equity and other investments.
(2) 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, 2013 are presented below:


	December 31, 2013
	Total		Level 1		Level 2		Level 3
Assets:
Cash equivalents	$	78,163	$	78,163	$	-	$	-
Financial instruments owned:
U.S. government agency securities		80,835		307		80,528		-
U.S. government securities		10,594		10,594		-		-
Mortgage-backed securities:
Agency		267,933		-		267,933
Non-agency		22,570		-		22,570
Corporate securities:
Fixed income securities		201,579		23,106		176,434		2,039
Equity securities		76,709		76,462		6		241
State and municipal securities		141,274		-		141,274		-
Total financial instruments owned		801,494		110,469		688,745		2,280
Available-for-sale securities:
U.S. government agency securities		1,072		-		1,072		-
State and municipal securities		90,677		-		84,477		6,200
Mortgage-backed securities:
Agency		183,987		-		183,987		-
Commercial		211,246		-		211,246		-
Non-agency		4,619		-		4,619		-
Corporate fixed income securities		498,316		83,655		414,661		-
Asset-backed securities		766,336		-		708,258		58,078
Total available-for-sale securities		1,756,253		83,655		1,608,320		64,278
Investments:
Corporate equity securities		32,402		32,402		-		-
Corporate preferred securities		-		-		-		-
Mutual funds		16,994		16,994		-		-
U.S. government securities		-		-		-		-
Auction rate securities:
Equity securities		56,693		-		-		56,693
Municipal securities		10,939		-		-		10,939
Other (1)		100,200		10		2,422		97,768
Total investments		217,228		49,406		2,422		165,400
	$	2,853,138	$	321,693	$	2,299,487	$	231,958


Liabilities:
Financial instruments sold, but not yet purchased
U.S. government securities	$	253,221	$	253,221	$	-	$	-
U.S. government agency securities		-		-		-		-
Agency mortgage-backed securities		37,201		-		37,201		-
Corporate securities:
Fixed income securities		100,745		17,857		82,888		-
Equity securities		90,015		86,933		3,082		-
State and municipal securities		32		-		32		-
Total financial instruments sold, but not yet purchased		481,214		358,011		123,203		-
Securities sold, but not yet purchased		-		-		-		-
Derivative contracts (2)		9,349		-		9,349		-
	$	490,563	$	358,011	$	132,552	$	-

(1) Includes $56.0 million of partnership interests, $22.5 million of private company investments, and $19.2 million of private equity and other investments.
(2) Included in accounts payable and accrued expenses in the consolidated statements of financial condition.

The following table summarizes the changes in fair value carrying values associated with Level 3 financial instruments during the years ended December 31, 2014 and 2013 (in thousands):


	Year Ended December 31, 2014
	Financial instruments owned						Available-for-sale securities				Investments
	Mortgage-backed securities		Corporate Fixed Income Securities		Equity Securities		State & Municipal Securities		Asset-Backed Securities		Auction Rate Securities - Equity		Auction Rate Securities - Municipal		Other (1)

Balance at December 31, 2013	$	-	$	2,039	$	241	$	6,200	$	58,078	$	56,693	$	10,939	$	97,768
Unrealized gains/(losses):
Included in changes in net assets (2)		(127)		(445)		(494)		-		-		604		688		903
Included in OCI (3)		-		-		-		62		(530)		-		-		-
Realized gains/(losses) (2)		13		(1,320)		4,965		-		1,322		-		-		3,290
Purchases		-		8,549		1,394		-		-		25		1,650		1,263
Sales		-		(5,783)		(5,205)		-		(4,825)		(1,725)		(10,324)		(22,058)
Redemptions		(44)		(88)		-		-		(10,000)		(9,400)		(1,627)		(4,294)
Transfers:
Into Level 3		964		-		243		-		-		-		-		-
Out of Level 3				(959)		-		(6,262)		-		-		-		(3,882)
Net change		806		(46)		903		(6,200)		(14,033)		(10,496)		(9,613)		(24,778)
Balance at December 31, 2014	$	806		1,993	$	1,144		-	$	44,054	$	46,197	$	1,326	$	72,990


	Year ended December 31, 2013
	Financial instruments Owned				Available-for-sale securities				Investments
	Corporate Fixed Income Securities		Equity Securities		State & Municipal Securities		Asset-Backed Securities		Auction Rate Securities - Equity		Auction Rate Securities - Municipal		Other (1)

Balance at December 31, 2012	$	583	$	-	$	90,487	$	-	$	64,397	$	14,067	$	37,297
Unrealized gains/(losses):
Included in changes in net assets (2)		779		1,333		-		(233)		571		75		6,328
Included in OCI (3)		-		-		(1,822)		-		-		-		-
Realized gains/(losses) (2)		281		-		2,053		-		-		-		13
Purchases		10,261		11,717		5,000		-		75		-		50,914
Sales		(6,888)		(208)		-		-		-		-		(6,801)
Redemptions		(1,349)		-		(32,000)		-		(8,350)		(3,203)		(2,584)
Transfers:
Into Level 3		139		-		6,201		58,311		-		-		12,601
Out of Level 3		(1,767)		(12,601)		(63,719)		-		-		-		-
Net change		1,456		241		(84,287)		58,078		(7,704)		(3,128)		60,471
Balance at December 31, 2013	$	2,039	$	241		6,200	$	58,078	$	56,693	$	10,939	$	97,768

(1) Includes partnership interests, private company investments, and private equity investments.

(2) Realized and unrealized gains/(losses) related to financial instruments owned and investments are reported in other income in the consolidated statements of operations.

(3) Unrealized gains/(losses) related to available-for-sale securities are reported in accumulated other comprehensive loss in the consolidated statements of financial condition.

The results included in the table above are only a component of the overall investment strategies of our company. The table above does not present Level 1 or Level 2 valued assets or liabilities. The changes to our company’s Level 3 classified instruments were principally a result of: unrealized gains and losses, and redemptions of ARS at par during the year ended December 31, 2014.

During the year ended December 31, 2013, financial instruments owned and investments acquired as part of the KBW merger that are classified as Level 3 totaled $54.1 million. The changes in unrealized gains/(losses) recorded in earnings for the year ended December 31, 2014, relating to Level 3 assets still held at December 31, 2014, were immaterial.

The following table summarizes quantitative information related to the significant unobservable inputs utilized in our company’s Level 3 recurring fair value measurements as of December 31, 2014.



	Valuation technique	Unobservable input	Range	Weighted average
Available-for-sale securities:
Asset-backed securities	Discounted cash flow	Discount rate	6.3% - 8.4%	8.2%
		Workout period	3 - 4 years	3.9 years

Investments:
Auction rate securities
Equity securities	Discounted cash flow	Discount rate	2.2% - 13.2%	5.8%
		Workout period	1 - 3 years	2.3 years

Municipal securities	Discounted cash flow	Discount rate	0.1% - 8.6%	7.0%
		Workout period	1 -4 years	2.9 years

Other
Investments in partnerships	Market approach	Revenue multiple	1.3 - 4.2	2.9
		EBITDA multiple	9.4 - 15.3	12.3

Private equity investments	Market/Income approach	Revenue multiple	0.5 - 2.0	1.4
		EBITDA multiple	4.3 - 9.8	6.7

The fair value of certain Level 3 assets was determined using various methodologies as appropriate, including net asset values (“NAVs”) of underlying investments, third-party pricing vendors, broker quotes and market and income approaches. 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. The discount rate was calculated using credit spreads of the underlying collateral or similar securities. The workout period was based on an assessment of publicly available information on efforts to re-establish functioning markets for these securities and our company’s own redemption experience. 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.

General and limited partnership interests in investment partnerships totaled $42.1 million and $56.0 million at December 31, 2014 and 2013, respectively. 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.

Direct investments in private equity companies totaled $21.2 million and $8.2 million at December 31, 2014 and 2013, respectively. Direct investments in private equity companies may be valued using the market approach or the income approach, or a combination thereof, and were valued based on an assessment of each underlying investment, incorporating evaluation of additional significant third-party financing, changes in valuations of comparable peer companies, the business environment of the companies, market indices, assumptions relating to appropriate risk adjustments for nonperformance and legal restrictions on disposition, among other factors. The fair value derived from the methods used are evaluated and weighted, as appropriate, considering the reasonableness of the range of values indicated. Under the market approach, fair value may be determined by reference to multiples of market-comparable companies or transactions, including earnings before interest, taxes, depreciation and amortization (“EBITDA”) multiples. Under the income approach, fair value may be determined by discounting the cash flows to a single present amount using current market expectations about those future amounts. Unobservable inputs used in a discounted cash flow model may include projections of operating performance generally covering a five-year period and a terminal value of the private equity direct investment. For securities utilizing the discounted cash flow valuation technique, a significant increase (decrease) in the discount rate, risk premium or discount for lack of marketability in isolation could result in a significantly lower (higher) fair value measurement. For securities utilizing the market comparable companies valuation technique, a significant increase (decrease) in the EBITDA multiple in isolation could result in a significantly higher (lower) fair value measurement.

Transfers Within the Fair Value Hierarchy

We assess our financial instruments on a quarterly basis to determine the appropriate classification within the fair value hierarchy. Transfers between fair value classifications occur when there are changes in pricing observability levels. Transfers of financial instruments among the levels are deemed to occur at the beginning of the reporting period. There were $15.0 million of transfers of financial assets from Level 2 to Level 1 during the year ended December 31, 2014, primarily related to tax-exempt and equity securities for which market trades were observed that provided transparency into the valuation of these assets. There were $11.5 million of transfers of financial assets from Level 1 to Level 2 during the year ended December 31, 2014, primarily related to tax-exempt and equity securities for which there were low volumes of recent trade activity observed. There were $2.7 million of transfers of financial assets into Level 3 during the year ended December 31, 2014. There were $11.1 million of transfers of financial assets out of Level 3 during the year ended December 31, 2014, primarily municipal securities and other investments for market trades were observed that provided transparency into the valuation of these assets.

Fair Value of Financial Instruments

The following reflects the fair value of financial instruments, as of December 31, 2014 and 2013, whether or not recognized in the consolidated statements of financial condition at fair value (in thousands).


	December 31, 2014				December 31, 2013
	Carrying Value		Estimated Fair Value		Carrying Value		Estimated Fair Value
Financial assets:
Cash and cash equivalents	$	689,782	$	689,782	$	716,560	$	716,560
Restricted cash		-		-		4,268		4,268
Cash segregated for regulatory purposes		49,646		49,646		35		35
Securities purchased under agreements to resell		55,078		55,078		225,075		225,075
Financial instruments owned		786,855		786,855		801,494		801,494
Available-for-sale securities		1,513,478		1,513,478		1,756,253		1,756,253
Held-to-maturity securities		1,177,565		1,211,976		1,312,115		1,305,959
Loans held for sale		121,939		121,939		109,110		109,110
Bank loans		2,065,420		2,086,864		1,404,353		1,420,068
Investments		210,255		210,255		217,228		217,228
Financial liabilities:
Securities sold under agreements to repurchase	$	39,180	$	39,180	$	263,809	$	263,809
Bank deposits		4,790,081		4,246,214		4,663,323		4,072,038
Financial instruments sold, but not yet purchased		587,265		587,265		481,214		481,214
Derivative contracts (1)		5,641		5,641		9,349		9,349
Senior notes		625,000		638,690		325,000		328,635
Debentures to Stifel Financial Capital Trusts		82,500		76,714		82,500		72,201
Liabilities subordinated to claims of general creditors		-		-		3,131		3,122

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

The following table presents the estimated fair values of financial instruments not measured at fair value on a recurring basis (in thousands):


	December 31, 2014
	Total		Level 1		Level 2		Level 3
Financial assets:
Cash	$	566,907	$	566,907	$	-	$	-
Restricted cash		-		-		-		-
Cash segregated for regulatory purposes		49,646		49,646		-		-
Securities purchased under agreements to resell		55,078		44,996		10,082		-
Held-to-maturity securities		1,211,976		-		969,913		242,063
Loans held for sale		121,939		-		121,939		-
Bank loans		2,086,864		-		2,086,864		-
Financial liabilities:
Securities sold under agreements to repurchase	$	39,180	$	39,180	$	-	$	-
Bank deposits		4,246,214		-		4,246,214		-
Senior notes		638,690		638,690		-		-
Debentures to Stifel Financial Capital Trusts		76,714		-		-		76,714


	December 31, 2013
	Total		Level 1		Level 2		Level 3
Financial assets:
Cash	$	638,397	$	638,397	$	-	$	-
Restricted cash		4,268		4,268		-		-
Cash segregated for regulatory purposes		35		35		-		-
Securities purchased under agreements to resell		225,075		225,075		-		-
Held-to-maturity securities		1,305,959		-		1,073,953		232,006
Loans held for sale		109,110		-		109,110		-
Bank loans		1,420,068		-		1,420,068		-
Financial liabilities:
Securities sold under agreements to repurchase	$	263,809	$	747	$	263,062	$	-
Bank deposits		4,072,038		-		4,072,038		-
Senior notes		328,635		328,635		-		-
Debentures to Stifel Financial Capital Trusts		72,201		-		-		72,201
Liabilities subordinated to claims of general creditors		3,122		-		-		3,122

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, 2014 and 2013.

Financial Assets

Securities Purchased Under Agreements to Resell

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, 2014 and 2013 approximate fair value due to their short-term nature.

Held-to-Maturity Securities

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 corporate obligations, collateralized debt obligation securities and 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.

Loans Held for Sale

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 fair value. Fair value is determined based on prevailing market prices for loans with similar characteristics or on sale contract prices.

Bank Loans

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 would be made under current conditions and considering liquidity spreads applicable to each loan portfolio based on the secondary market.

Financial Liabilities

Securities Sold Under Agreements to Repurchase

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, 2014 and 2013 approximate fair value due to the short-term nature.

Bank Deposits

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.

Senior Notes

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

Debentures to Stifel Financial Capital Trusts

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 the coupon achieved in our 5.375% senior notes due 2022.

Liabilities Subordinated to Claims of General Creditors

The fair value of subordinated debt was measured using the interest rates commensurate with borrowings of similar terms.

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.