FAIR VALUE

For a discussion of our valuation methodologies for assets, liabilities measured at fair value, and the fair value hierarchy, see Note 2 on pages 105 - 110 of our 2015 Form 10-K. There have been no material changes to our valuation methodologies since our year ended September 30, 2015.

Assets and liabilities measured at fair value on a recurring and nonrecurring basis are presented below:



March 31, 2016	Quoted prices in active markets for identical assets (Level 1) ⁽¹⁾		Significant other observable inputs (Level 2) ⁽¹⁾		Significant unobservable inputs (Level 3)			Netting adjustments ⁽²⁾			Balance as of March 31, 2016
	(in thousands)
Assets at fair value on a recurring basis:
Trading instruments:
Municipal and provincial obligations	$	102	$	239,478	$	—		$	—		$	239,580
Corporate obligations	4,976		132,085		—			—			137,061
Government and agency obligations	7,897		125,590		—			—			133,487
Agency mortgage-backed securities (“MBS”) and collateralized mortgage obligations (“CMOs”)	433		98,144		—			—			98,577
Non-agency CMOs and asset-backed securities (“ABS”)	—		35,925		8			—			35,933
Total debt securities	13,408		631,222		8			—			644,638
Derivative contracts	—		147,905		—			(96,630		)	51,275
Equity securities	53,338		1,186		—			—			54,524
Brokered certificates of deposit	—		32,257		—			—			32,257
Other	534		1,929		14,296			—			16,759
Total trading instruments	67,280		814,499		14,304			(96,630		)	799,453
Available for sale securities:
Agency MBS and CMOs	—		354,430		—			—			354,430
Non-agency CMOs	—		63,694		—			—			63,694
Other securities	1,297		—		—			—			1,297
Auction rate securities (“ARS”):
Municipals	—		—		25,422			—			25,422
Preferred securities	—		—		102,599			—			102,599
Total available for sale securities	1,297		418,124		128,021			—			547,442
Private equity investments	—		—		204,398		⁽³⁾	—			204,398
Other investments ⁽⁴⁾	271,885		21,774		439			—			294,098
Derivative instruments associated with offsetting matched book positions	—		396,163		—			—			396,163
Deposits with clearing organizations:
Government and agency obligations	29,636		—		—			—			29,636
Other assets:
Derivative contracts ⁽⁵⁾	—		2,938		—			—			2,938
Other assets	—		—		3,112		⁽⁶⁾	—			3,112
Total other assets	—		2,938		3,112			—			6,050
Total assets at fair value on a recurring basis	$	370,098	$	1,653,498	$	350,274		$	(96,630	)	$	2,277,240

Assets at fair value on a nonrecurring basis:
Bank loans, net:
Impaired loans	$	—	$	26,228	$	35,720		$	—		$	61,948
Loans held for sale⁽⁷⁾	—		78,297		—			—			78,297
Total bank loans, net	—		104,525		35,720			—			140,245
Other real estate owned (“OREO”)⁽⁸⁾	—		238		—			—			238
Total assets at fair value on a nonrecurring basis	$	—	$	104,763	$	35,720		$	—		$	140,483

(continued on next page)



March 31, 2016	Quoted prices in active markets for identical assets (Level 1) ⁽¹⁾		Significant other observable inputs (Level 2) ⁽¹⁾		Significant unobservable inputs (Level 3)		Netting adjustments ⁽²⁾			Balance as of March 31, 2016
	(in thousands)
	(continued from previous page)
Liabilities at fair value on a recurring basis:
Trading instruments sold but not yet purchased:
Municipal and provincial obligations	$	4	$	—	$	—	$	—		$	4
Corporate obligations	1,102		47,758		—		—			48,860
Government obligations	260,727		—		—		—			260,727
Agency MBS and CMOs	3,122		—		—		—			3,122
Total debt securities	264,955		47,758		—		—			312,713
Derivative contracts	—		135,641		—		(128,002		)	7,639
Equity securities	4,958		—		—		—			4,958
Other securities	—		100		—		—			100
Total trading instruments sold but not yet purchased	269,913		183,499		—		(128,002		)	325,410
Derivative instruments associated with offsetting matched book positions	—		396,163		—		—			396,163
Trade and other payables:
Derivative contracts⁽⁵⁾	—		21,004		—		—			21,004
Other liabilities	—		—		67		—			67
Total trade and other payables	—		21,004		67		—			21,071
Total liabilities at fair value on a recurring basis	$	269,913	$	600,666	$	67	$	(128,002	)	$	742,644

(1)

We had $1.3 million in transfers of financial instruments from Level 1 to Level 2 during the six months ended March 31, 2016. These transfers were a result of a decrease in the availability and reliability of the observable inputs utilized in the respective instruments’ fair value measurement. There were no transfers of financial instruments from Level 1 to Level 2 during the three months ended March 31, 2016. We had $300 thousand and $700 thousand in transfers of financial instruments from Level 2 to Level 1 during the three and six months ended March 31, 2016. These transfers were a result of an increase in the availability and reliability of the observable inputs utilized in the respective instruments’ fair value measurement. Our policy is that the end of each respective quarterly reporting period determines when transfers of financial instruments between levels are recognized.

(2)

For derivative transactions not cleared through an exchange, and where permitted, we have elected to net derivative receivables and derivative payables and the related cash collateral received and paid when a legally enforceable master netting agreement exists (see Note 14 for additional information regarding offsetting financial instruments). Deposits associated with derivative transactions cleared through an exchange are included in deposits with clearing organizations on our Condensed Consolidated Statements of Financial Condition.

(3)

The portion of these investments we do not own is approximately $50 million as of March 31, 2016 and are included as a component of noncontrolling interest in our Condensed Consolidated Statements of Financial Condition. The weighted average portion we own is approximately $154 million or 75% of the total private equity investments of $204 million included in our Condensed Consolidated Statements of Financial Condition.


(4)	Other investments include $103 million of financial instruments that are related to obligations to perform under certain deferred compensation plans (see Note 2 on pages 117 - 118, and Note 24 on page 176, of our 2015 Form 10-K for further information regarding these plans).


(5)	Consists of derivatives arising from RJ Bank’s business operations, see Note 13 for additional information.


(6)	Includes the fair value of forward commitments to purchase GNMA or FNMA (as hereinafter defined) MBS arising from our fixed income public finance operations. See Note 2 on page 107, and Note 21 on page 170 of our 2015 Form 10-K, as well as Note 16 in this report, for additional information regarding the GNMA or FNMA MBS commitments.


(7)	Includes individual loans classified as held for sale, which were recorded at a fair value lower than cost.


(8)	Represents the fair value of foreclosed properties which were measured at a fair value subsequent to their initial classification as OREO. The recorded value in the Condensed Consolidated Statements of Financial Condition is net of the estimated selling costs.



September 30, 2015	Quoted prices in active markets for identical assets (Level 1) ⁽¹⁾		Significant other observable inputs (Level 2) ⁽¹⁾		Significant unobservable inputs (Level 3)			Netting adjustments ⁽²⁾			Balance as of September 30, 2015
	(in thousands)
Assets at fair value on a recurring basis:
Trading instruments:
Municipal and provincial obligations	$	17,318	$	188,745	$	—		$	—		$	206,063
Corporate obligations	2,254		92,907		156			—			95,317
Government and agency obligations	7,781		108,166		—			—			115,947
Agency MBS and CMOs	253		117,317		—			—			117,570
Non-agency CMOs and ABS	—		46,931		9			—			46,940
Total debt securities	27,606		554,066		165			—			581,837
Derivative contracts	—		132,707		—			(90,621		)	42,086
Equity securities	24,859		3,485		—			—			28,344
Brokered certificates of deposit	—		30,803		—			—			30,803
Other	679		4,816		1,986			—			7,481
Total trading instruments	53,144		725,877		2,151			(90,621		)	690,551
Available for sale securities:
Agency MBS and CMOs	—		302,195		—			—			302,195
Non-agency CMOs	—		71,369		—			—			71,369
Other securities	1,402		—		—			—			1,402
ARS:
Municipals	—		—		28,015			—			28,015
Preferred securities	—		—		110,749			—			110,749
Total available for sale securities	1,402		373,564		138,764			—			513,730
Private equity investments	—		—		209,088		⁽³⁾	—			209,088
Other investments ⁽⁴⁾	230,839		17,347		565			—			248,751
Derivative instruments associated with offsetting matched book positions	—		389,457		—			—			389,457
Deposits with clearing organizations:⁽⁵⁾
Government and agency obligations	29,701		—		—			—			29,701
Other assets:
Derivative contracts ⁽⁶⁾	—		917		—			—			917
Other assets	—		—		4,975		⁽⁷⁾	—			4,975
Total other assets	—		917		4,975			—			5,892
Total assets at fair value on a recurring basis	$	315,086	$	1,507,162	$	355,543		$	(90,621	)	$	2,087,170

Assets at fair value on a nonrecurring basis:
Bank loans, net:
Impaired loans	$	—	$	28,082	$	37,830		$	—		$	65,912
Loans held for sale ⁽⁸⁾	—		14,334		—			—			14,334
Total bank loans, net	—		42,416		37,830			—			80,246
OREO ⁽⁹⁾	—		671		—			—			671
Total assets at fair value on a nonrecurring basis	$	—	$	43,087	$	37,830		$	—		$	80,917

(continued on next page)



September 30, 2015	Quoted prices in active markets for identical assets (Level 1) ⁽¹⁾		Significant other observable inputs (Level 2) ⁽¹⁾		Significant unobservable inputs (Level 3)		Netting adjustments ⁽²⁾			Balance as of September 30, 2015
	(in thousands)
	(continued from previous page)
Liabilities at fair value on a recurring basis:
Trading instruments sold but not yet purchased:
Municipal and provincial obligations	$	17,966	$	347	$	—	$	—		$	18,313
Corporate obligations	167		33,017		—		—			33,184
Government obligations	205,658		—		—		—			205,658
Agency MBS and CMOs	5,007		—		—		—			5,007
Total debt securities	228,798		33,364		—		—			262,162
Derivative contracts	—		109,120		—		(88,881		)	20,239
Equity securities	3,098		—		—		—			3,098
Other securities	—		2,494		—		—			2,494
Total trading instruments sold but not yet purchased	231,896		144,978		—		(88,881		)	287,993
Derivative instruments associated with offsetting matched book positions	—		389,457		—		—			389,457
Trade and other payables:
Derivative contracts ⁽⁶⁾	—		7,545		—		—			7,545
Other liabilities	—		—		58		—			58
Total trade and other payables	—		7,545		58		—			7,603
Total liabilities at fair value on a recurring basis	$	231,896	$	541,980	$	58	$	(88,881	)	$	685,053

(1)

We had $1.1 million in transfers of financial instruments from Level 1 to Level 2 during the year ended September 30, 2015. These transfers were a result of a decrease in the availability and reliability of the observable inputs utilized in the respective instruments’ fair value measurement. We had $1.8 million in transfers of financial instruments from Level 2 to Level 1 during the year ended September 30, 2015. These transfers were a result of an increase in the availability and reliability of the observable inputs utilized in the respective instruments’ fair value measurement. Our policy is that the end of each respective quarterly reporting period determines when transfers of financial instruments between levels are recognized.

(2)

(3)

The portion of these investments we do not own is approximately $52 million as of September 30, 2015 and are included as a component of noncontrolling interest in our Condensed Consolidated Statements of Financial Condition. The weighted average portion we own is approximately $157 million or 75% of the total private equity investments of $209 million included in our Condensed Consolidated Statements of Financial Condition.


(4)	Other investments include $106 million of financial instruments that are related to obligations to perform under certain deferred compensation plans (see Note 2 on pages 117 - 118, and Note 24 on page 176, of our 2015 Form 10-K for further information regarding these plans).


(5)	Consists of deposits we provide to clearing organizations or exchanges that are in the form of marketable securities.


(6)	Consists of derivatives arising from RJ Bank’s business operations, see Note 13 for additional information.


(7)	Includes the fair value of forward commitments to purchase GNMA or FNMA (as hereinafter defined) MBS arising from our fixed income public finance operations. See Note 2 on page 107, and Note 21 on page 170 of our 2015 Form 10-K for additional information.


(8)	Includes individual loans classified as held for sale, which were recorded at a fair value lower than cost.


(9)	Represents the fair value of foreclosed properties which were measured at a fair value subsequent to their initial classification as OREO. The recorded value in the Condensed Consolidated Statements of Financial Condition is net of the estimated selling costs.

The adjustment to fair value of the nonrecurring fair value measures for the six months ended March 31, 2016 resulted in a $2 million additional provision for loan losses relating to impaired loans and $200 thousand in other losses relating to loans held for sale and OREO. The adjustment to fair value of the nonrecurring fair value measures for the six months ended March 31, 2015 resulted in a $200 thousand additional provision for loan losses relating to impaired loans and $100 thousand in other losses relating to loans held for sale and OREO.

Changes in Level 3 recurring fair value measurements

The realized and unrealized gains and losses for assets and liabilities within the Level 3 category presented in the tables below may include changes in fair value that were attributable to both observable and unobservable inputs.

Additional information about Level 3 assets and liabilities measured at fair value on a recurring basis is presented below:



Three months ended March 31, 2016 Level 3 assets at fair value (in thousands)
	Financial assets																							Financial liabilities
	Trading instruments									Available for sale securities						Private equity, other investments and other assets								Payables- trade and other
	Corporate obligations			Non- agency CMOs & ABS			Other			ARS – municipals			ARS - preferred securities			Private equity investments			Other investments			Other assets		Other liabilities
Fair value December 31, 2015	$	189		$	9		$	1,964		$	27,480		$	102,899		$	207,523		$	493		$	1,526	$	(67	)
Total gains (losses) for the period:
Included in earnings	(97		)	—			(100		)	133			—			4,269			18			1,586		—
Included in other comprehensive income	—			—			—			(583		)	(300		)	—			—			—		—
Purchases and contributions	2			—			19,470			—			—			2,407			—			—		—
Sales	(94		)	—			(7,038		)	(1,583		)	—			—			—			—		—
Redemptions by issuer	—			—			—			(25		)	—			—			(5		)	—		—
Distributions	—			(1		)	—			—			—			(9,801		)	(67		)	—		—
Transfers: ⁽¹⁾
Into Level 3	—			—			—			—			—			—			—			—		—
Out of Level 3	—			—			—			—			—			—			—			—		—
Fair value March 31, 2016	$	—		$	8		$	14,296		$	25,422		$	102,599		$	204,398		$	439		$	3,112	$	(67	)

Change in unrealized gains (losses) for the period included in earnings (or changes in net assets) for assets held at the end of the reporting period	$	—		$	—		$	(60	)	$	—		$	—		$	4,269		$	18		$	1,586	$	—


(1)	Our policy is that the end of each respective quarterly reporting period determines when transfers of financial instruments between levels are recognized.



Six months ended March 31, 2016 Level 3 assets at fair value (in thousands)
	Financial assets																								Financial liabilities
	Trading instruments									Available for sale securities						Private equity, other investments and other assets									Payables- trade and other
	Corporate obligations			Non- agency CMOs & ABS			Other			ARS – municipals			ARS - preferred securities			Private equity investments			Other investments			Other assets			Other liabilities
Fair value September 30, 2015	$	156		$	9		$	1,986		$	28,015		$	110,749		$	209,088		$	565		$	4,975		$	(58	)
Total gains (losses) for the period:
Included in earnings	(137		)	—			(349		)	133			—			4,440			11			(1,863		)	—
Included in other comprehensive income	—			—			—			(1,118		)	(8,150		)	—			—			—			—
Purchases and contributions	75			—			38,487			—			—			6,961			—			—			(9		)
Sales	(94		)	—			(25,828		)	(1,583		)	—			(18		)	—			—			—
Redemptions by issuer	—			—			—			(25		)	—			—			(14		)	—			—
Distributions	—			(1		)	—			—			—			(16,073		)	(123		)	—			—
Transfers: ⁽¹⁾
Into Level 3	—			—			—			—			—			—			—			—			—
Out of Level 3	—			—			—			—			—			—			—			—			—
Fair value March 31, 2016	$	—		$	8		$	14,296		$	25,422		$	102,599		$	204,398		$	439		$	3,112		$	(67	)

Change in unrealized gains (losses) for the period included in earnings (or changes in net assets) for assets held at the end of the reporting period	$	(40	)	$	1		$	(71	)	$	—		$	—		$	4,440		$	11		$	(1,863	)	$	—


(1)	Our policy is that the end of each respective quarterly reporting period determines when transfers of financial instruments between levels are recognized.



Three months ended March 31, 2015 Level 3 assets at fair value (in thousands)
	Financial assets																								Financial liabilities
	Trading instruments								Available for sale securities						Private equity, other investments and other assets										Payables- trade and other
	Non- agency CMOs & ABS			Equity securities		Other			ARS – municipals			ARS - preferred securities			Private equity investments				Other investments			Other assets			Other liabilities
Fair value December 31, 2014	$	11		$	14	$	5,264		$	85,814		$	112,955		$	208,674			$	1,564		$	2,407		$	(58	)
Total gains (losses) for the period:
Included in earnings	—			—		(20		)	2			25			14,414			⁽¹⁾	41			(211		)	—
Included in other comprehensive income	—			—		—			3,843			(282		)	—				—			—			—
Purchases and contributions	—			—		11,358			—			—			2,241				—			—			—
Sales	—			—		(15,822		)	(45		)	—			—				—			—			—
Redemptions by issuer	—			—		—			—			(250		)	—				(663		)	—			—
Distributions	(1		)	—		—			—			—			(4,385		)		(26		)	—			—
Transfers: ⁽²⁾
Into Level 3	—			—		—			—			—			—				—			—			—
Out of Level 3	—			—		—			—			—			—				—			—			—
Fair value March 31, 2015	$	10		$	14	$	780		$	89,614		$	112,448		$	220,944			$	916		$	2,196		$	(58	)

Change in unrealized gains (losses) for the period included in earnings (or changes in net assets) for assets held at the end of the reporting period	$	—		$	—	$	—		$	—		$	—		$	14,414			$	41		$	(211	)	$	—

(1)

Primarily results from valuation adjustments of certain private equity investments. Since we only own a portion of these investments, our share of the net valuation adjustments resulted in a gain of $9.8 million which is included in net income attributable to RJF (after noncontrolling interests). The noncontrolling interests’ share of the net valuation adjustments was a gain of approximately $4.6 million.


(2)	Our policy is that the end of each respective quarterly reporting period determines when transfers of financial instruments between levels are recognized.



Six months ended March 31, 2015 Level 3 assets at fair value (in thousands)
	Financial assets																								Financial liabilities
	Trading instruments									Available for sale securities						Private equity, other investments and other assets									Payables- trade and other
	Non- agency CMOs & ABS			Equity securities			Other			ARS – municipals			ARS - preferred securities			Private equity investments				Other investments			Other assets		Other liabilities
Fair value September 30, 2014	$	11		$	44		$	2,309		$	86,696		$	114,039		$	211,666			$	1,731		$	787	$	(58	)
Total gains (losses) for the period:
Included in earnings	—			5			(40		)	2			25			17,060			⁽¹⁾	81			1,409		—
Included in other comprehensive income	—			—			—			2,961			(1,366		)	—				—			—		—
Purchases and contributions	—			20			23,333			—			—			6,343				—			—		—
Sales	—			—			(24,822		)	(45		)	—			—				—			—		—
Redemptions by issuer	—			—			—			—			(250		)	—				(673		)	—		—
Distributions	(1		)	—			—			—			—			(14,125		)		(223		)	—		—
Transfers: ⁽²⁾
Into Level 3	—			—			—			—			—			—				—			—		—
Out of Level 3	—			(55		)	—			—			—			—				—			—		—
Fair value March 31, 2015	$	10		$	14		$	780		$	89,614		$	112,448		$	220,944			$	916		$	2,196	$	(58	)

Change in unrealized gains (losses) for the period included in earnings (or changes in net assets) for assets held at the end of the reporting period	$	—		$	5		$	—		$	—		$	—		$	17,060			$	81		$	1,409	$	—

(1)

Primarily results from valuation adjustments of certain private equity investments. Since we only own a portion of these investments, our share of the net valuation adjustments resulted in a gain of $12.2 million which is included in net income attributable to RJF (after noncontrolling interests). The noncontrolling interests’ share of the net valuation adjustments was a gain of approximately $4.9 million.


(2)	Our policy is that the end of each respective quarterly reporting period determines when transfers of financial instruments between levels are recognized.

As of March 31, 2016, 8.2% of our assets and 3.2% of our liabilities are instruments measured at fair value on a recurring basis. Instruments measured at fair value on a recurring basis categorized as Level 3 as of March 31, 2016 represent 15.4% of our assets measured at fair value. In comparison, as of March 31, 2015, 8.9% and 3.9% of our assets and liabilities, respectively, represented instruments measured at fair value on a recurring basis. Instruments measured at fair value on a recurring basis categorized as Level 3 as of March 31, 2015 represented 19% of our assets measured at fair value. Level 3 instruments as a percentage of total financial instruments decreased by 4% as compared to March 31, 2015, primarily as a result of the sale or redemption of a portion of our ARS portfolio since March 31, 2015.

Gains and losses related to Level 3 recurring fair value measurements included in earnings are presented in net trading profit, other revenues and other comprehensive income in our Condensed Consolidated Statements of Income and Comprehensive Income as follows:



	Net trading profit			Other revenues		Other comprehensive income
	(in thousands)
For the three months ended March 31, 2016
Total (losses) gains included in revenues	$	(197	)	$	6,006	$	—
Change in unrealized (losses) gains for assets held at the end of the reporting period	$	(60	)	$	5,873	$	(883	)

For the six months ended March 31, 2016
Total (losses) gains included in revenues	$	(486	)	$	2,721	$	—
Change in unrealized (losses) gains for assets held at the end of the reporting period	$	(110	)	$	2,588	$	(9,268	)

For the three months ended March 31, 2015
Total (losses) gains included in revenues	$	(20	)	$	14,271	—
Change in unrealized gains for assets held at the end of the reporting period	$	—		$	14,244	$	3,561

For the six months ended March 31, 2015
Total (losses) gains included in revenues	$	(35	)	$	18,577	$	—
Change in unrealized gains for assets held at the end of the reporting period	$	5		$	18,550	$	1,595

Quantitative information about level 3 fair value measurements

The significant assumptions used in the valuation of level 3 financial instruments are as follows (the table that follows includes the significant majority of the financial instruments we hold that are classified as level 3 measures):



Level 3 financial instrument	Fair value at March 31, 2016 (in thousands)		Valuation technique(s)	Unobservable input	Range (weighted-average)
Recurring measurements:
Available for sale securities:
ARS:
Municipals - issuer is a municipality	$	10,500	Discounted cash flow	Average discount rate^(a)	5.37% - 6.61% (5.99%)
				Average interest rates applicable to future interest income on the securities^(b)	1.29% - 2.31% (1.80%)
				Prepayment year^(c)	2018 - 2025 (2022)
Municipals - tax-exempt preferred securities	$	14,922	Discounted cash flow	Average discount rate^(a)	4.58% - 5.58% (5.08%)
				Average interest rates applicable to future interest income on the securities^(b)	1.07% - 1.07% (1.07%)
				Prepayment year^(c)	2016 - 2021 (2020)
Preferred securities - taxable	$	102,599	Discounted cash flow	Average discount rate^(a)	4.58% - 6.38% (5.50%)
				Average interest rates applicable to future interest income on the securities^(b)	1.07% - 2.83% (1.50%)
				Prepayment year^(c)	2016 - 2021 (2020)
Private equity investments:	$	49,393	Income or market approach:
			Scenario 1 - income approach - discounted cash flow	Discount rate^(a)	13% - 21% (17.8%)
				Terminal growth rate of cash flows	3% - 3% (3%)
				Terminal year	2017 - 2019 (2018)
			Scenario 2 - market approach - market multiple method	EBITDA Multiple^(d)	4.75 - 7.5 (6.1)
				Weighting assigned to outcome of scenario 1/scenario 2	75%/25%
	$	155,005	Transaction price or other investment-specific events^(e)	Not meaningful^(e)	Not meaningful^(e)
Nonrecurring measurements:
Impaired loans: residential	$	22,937	Discounted cash flow	Prepayment rate	7 yrs. - 12 yrs. (10.21 yrs.)
Impaired loans: corporate	$	12,783	Appraisal or discounted cash flow value^(f)	Not meaningful^(f)	Not meaningful^(f)


(a)	Represents discount rates used when we have determined that market participants would take these discounts into account when pricing the investments.


(b)	Future interest rates are projected based upon a forward interest rate path, plus a spread over such projected base rate that is applicable to each future period for each security within this portfolio segment. The interest rates presented represent the average interest rate over all projected periods for securities within the portfolio segment.


(c)	Assumed year of at least a partial redemption of the outstanding security by the issuer.


(d)	Represents amounts used when we have determined that market participants would use such multiples when pricing the investments.


(e)	Certain private equity investments are valued initially at the transaction price until either our annual review, significant transactions occur, new developments become known, or we receive information from the fund manager that allows us to update our proportionate share of net assets, when any of which indicate that a change in the carrying values of these investments is appropriate.


(f)	The valuation techniques used for the impaired corporate loan portfolio are appraisals less selling costs for the collateral dependent loans and discounted cash flows for the remaining impaired loans that are not collateral dependent.

Qualitative disclosure about unobservable inputs

For our recurring fair value measurements categorized within Level 3 of the fair value hierarchy, the sensitivity of the fair value measurement to changes in significant unobservable inputs and interrelationships between those unobservable inputs are described below:

Auction rate securities:

One of the significant unobservable inputs used in the fair value measurement of auction rate securities presented within our available for sale securities portfolio relates to judgments regarding whether the level of observable trading activity is sufficient to conclude markets are active. Where insufficient levels of trading activity are determined to exist as of the reporting date, then management’s assessment of how much weight to apply to trading prices in inactive markets versus management’s own valuation models could significantly impact the valuation conclusion. The valuation of the securities impacted by changes in management’s assessment of market activity levels could be either higher or lower, depending upon the relationship of the inactive trading prices compared to the outcome of management’s internal valuation models.

The future interest rate and maturity assumptions impacting the valuation of the auction rate securities are directly related. As short-term interest rates rise, due to the variable nature of the penalty interest rate provisions embedded in most of these securities in the event auctions fail to set the security’s interest rate, then a penalty rate that is specified in the security increases. These penalty rates are based upon a stated interest rate spread over what is typically a short-term base interest rate index. Management estimates that at some level of increase in short-term interest rates, issuers of the securities will have the economic incentive to refinance (and thus prepay) the securities. Therefore, the short-term interest rate assumption directly impacts the input related to the timing of any projected prepayment. The faster and steeper short-term interest rates rise, the earlier prepayments will likely occur and the higher the fair value of the security.

Private equity investments:

The significant unobservable inputs used in the fair value measurement of private equity investments relate to the financial performance of the investment entity and the market’s required return on investments from entities in industries in which we hold investments. Significant increases (or decreases) in our investment entities’ future economic performance will have a directly proportional impact on the valuation results. The value of our investment moves inversely with the market’s expectation of returns from such investments. Should the market require higher returns from industries in which we are invested, all other factors held constant, our investments will decrease in value. Should the market accept lower returns from industries in which we are invested, all other factors held constant, our investments will increase in value.

Fair value option

The fair value option is an accounting election that allows the reporting entity to apply fair value accounting for certain financial assets and liabilities on an instrument by instrument basis. As of March 31, 2016, we have elected not to choose the fair value option for any of our financial assets or liabilities not already recorded at fair value.

Other fair value disclosures

Many, but not all, of the financial instruments we hold are recorded at fair value in the Condensed Consolidated Statements of Financial Condition. Refer to Note 5 on pages 132 - 133 of our 2015 Form 10-K for discussion of the methods and assumptions we apply to the determination of fair value of our financial instruments that are not otherwise recorded at fair value.

The estimated fair values by level within the fair value hierarchy and the carrying amounts of our financial instruments that are not carried at fair value are as follows:



	Quoted prices in active markets for identical assets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)		Total estimated fair value		Carrying amount
	(in thousands)
March 31, 2016
Financial assets:
Bank loans, net ⁽¹⁾	$	—	$	93,926	$	14,149,555	$	14,243,481	$	14,208,236

Financial liabilities:
Bank deposits	$	—	$	12,380,262	$	353,612	$	12,733,874	$	12,729,457
Other borrowings ⁽²⁾	$	—	$	36,549	$	—	$	36,549	$	35,584
Senior notes payable	$	367,080	$	875,288	$	—	$	1,242,368	$	1,149,316

September 30, 2015
Financial assets:
Bank loans, net ⁽¹⁾	$	—	$	105,199	$	12,799,065	$	12,904,264	$	12,907,776

Financial liabilities:
Bank deposits	$	—	$	11,564,963	$	358,981	$	11,923,944	$	11,919,881
Other borrowings ⁽²⁾	$	—	$	38,455	$	—	$	38,455	$	37,716
Senior notes payable	$	368,760	$	892,963	$	—	$	1,261,723	$	1,149,222


(1)	Excludes all impaired loans and loans held for sale which have been recorded at fair value in the Condensed Consolidated Statements of Financial Condition at March 31, 2016 and September 30, 2015.


(2)	Excludes the components of other borrowings that are recorded at amounts that approximate their fair value in the Condensed Consolidated Statements of Financial Condition at March 31, 2016 and September 30, 2015.