Fair Value Measurements

6 Months Ended

Jun. 30, 2024

Fair Value Disclosures [Abstract]

Fair Value Measurements

NOTE 4 – Fair Value Measurements

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.

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 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, agency 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, 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

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. Corporate equity securities that have little to no pricing observability are reported in Level 3.

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.

The table below presents the fair value of our investments in, and unfunded commitments to, funds that are measured at NAV as of June 30, 2024 and December 31, 2023 (in thousands):

	June 30, 2024				December 31, 2023
	Fair value of investments		Unfunded commitments		Fair value of investments		Unfunded commitments
Partnership interests	$	25,891	$	12,678	$	24,261	$	14,454
Money market funds		1,674		—		4,706		—
Mutual funds		537		—		3,632		—
Private equity funds		447		1,181		368		1,181
Total	$	28,549	$	13,859	$	32,967	$	15,635

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, and equity and fixed income 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 agency mortgage-backed securities not actively traded, fixed income securities, and U.S. government agency securities, and sovereign debt, state and municipal securities, and asset-backed securities, included in other in the table below.

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

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, 2024, are presented below (in thousands):

	June 30, 2024
	Total		Level 1		Level 2		Level 3
Financial instruments owned:
U.S. government securities	$	10,901	$	10,901	$	—	$	—
U.S. government agency securities		194,979		—		194,979		—
Agency mortgage-backed securities		259,206		—		259,206		—
Asset-backed securities		89,007		—		87,804		1,203
Corporate securities:
Fixed income securities		293,994		—		293,994		—
Equity securities		69,216		68,839		377		—
State and municipal securities		271,417		—		271,417		—
Other (1)		72,496		—		6,783		65,713
Total financial instruments owned		1,261,216		79,740		1,114,560		66,916
Available-for-sale securities:
U.S. government agency securities		2,215		—		2,215		—
State and municipal securities		2,337		—		2,337		—
Mortgage-backed securities:
Agency		845,462		—		845,462		—
Commercial		66,830		—		66,830		—
Non-agency		222		—		222		—
Corporate fixed income securities		507,383		—		507,383		—
Asset-backed securities		159,028		—		159,028		—
Total available-for-sale securities		1,583,477		—		1,583,477		—
Investments:
Corporate equity securities		24,464		12,371		215		11,878
Auction rate securities		739		—		—		739
Other (2)		39,387		32		6		39,349
Investments in funds and partnerships measured at NAV		26,875
Total investments		91,465		12,403		221		51,966
Cash equivalents measured at NAV		1,674
Derivative contracts (3)		127,177		—		127,177		—
	$	3,065,009	$	92,143	$	2,825,435	$	118,882

(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.

	June 30, 2024
	Total		Level 1		Level 2		Level 3
Liabilities:
Financial instruments sold, but not yet purchased:
U.S. government securities	$	392,431	$	392,431	$	—	$	—
Agency mortgage-backed securities		74,742		—		74,742		—
Corporate securities:
Fixed income securities		133,943		—		133,943		—
Equity securities		29,122		29,122		—		—
Other (4)		4,073		—		350		3,723
Total financial instruments sold, but not yet purchased		634,311		421,553		209,035		3,723
Derivative contracts (5)		127,156		—		127,156		—
	$	761,467	$	421,553	$	336,191	$	3,723

(4) Includes syndicated loans and sovereign debt.

(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, 2023, are presented below (in thousands):

	December 31, 2023
	Total		Level 1		Level 2		Level 3
Financial instruments owned:
U.S. government securities	$	32,411	$	32,411	$	—	$	—
U.S. government agency securities		106,634		—		106,634		—
Agency mortgage-backed securities		159,903		—		159,903		—
Asset-backed securities		19,604		—		18,106		1,498
Corporate securities:
Fixed income securities		237,671		210		237,461		—
Equity securities		52,520		52,158		362		—
State and municipal securities		223,155		—		223,155		—
Other (1)		86,843		—		3,879		82,964
Total financial instruments owned		918,741		84,779		749,500		84,462
Available-for-sale securities:
U.S. government agency securities		2,219		—		2,219		—
State and municipal securities		2,351		—		2,351		—
Mortgage-backed securities:
Agency		746,170		—		746,170		—
Commercial		66,671		—		66,671		—
Non-agency		261		—		261		—
Corporate fixed income securities		556,161		—		556,161		—
Asset-backed securities		177,853		—		177,853		—
Total available-for-sale securities		1,551,686		—		1,551,686		—
Investments:
Corporate equity securities		22,406		10,313		215		11,878
Auction rate securities		783		—		—		783
Other (2)		39,655		73		115		39,467
Investments in funds and partnerships measured at NAV		28,261
Total investments		91,105		10,386		330		52,128
Cash equivalents measured at NAV		4,706
Derivative contracts (3)		118,668		—		118,668		—
	$	2,684,906	$	95,165	$	2,420,184	$	136,590

(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, 2023
	Total		Level 1		Level 2		Level 3
Liabilities:
Financial instruments sold, but not yet purchased:
U.S. government securities	$	273,653	$	273,653	$	—	$	—
U.S. government agency securities		4,924		—		4,924		—
Agency mortgage-backed securities		52,664		—		52,664		—
Corporate securities:
Fixed income securities		138,359		—		138,359		—
Equity securities		21,576		21,576		—		—
Other (4)		6,565		—		2,729		3,836
Total financial instruments sold, but not yet purchased		497,741		295,229		198,676		3,836
Derivative contracts (5)		118,651		—		118,651		—
	$	616,392	$	295,229	$	317,327	$	3,836

(4)Includes syndicated loans, state and municipal securities, and asset-backed 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, 2024 (in thousands):

	Three Months Ended June 30, 2024
	Financial instruments owned						Investments
	Asset-Backed Securities			Syndicated Loans			Corporate Equity Securities		Auction Rate Securities			Other
Balance at March 31, 2024	$	1,239		$	97,730		$	11,878	$	783		$	39,467
Unrealized losses		—			(27	)		—		(44	)		(118	)
Realized gains/(losses)		903			(196	)		—		—			—
Purchases		—			6,792			—		—			—
Sales		—			(32,687	)		—		—			—
Redemptions		(939	)		(5,899	)		—		—			—
Net change		(36	)		(32,017	)		—		(44	)		(118	)
Balance at June 30, 2024	$	1,203		$	65,713		$	11,878	$	739		$	39,349

The following table summarizes the change in fair value associated with Level 3 financial instruments during the six months ended June 30, 2024 (in thousands):

	Six Months Ended June 30, 2024
	Financial instruments owned						Investments
	Asset-Backed Securities			Syndicated Loans			Corporate Equity Securities		Auction Rate Securities			Other
Balance at December 31, 2023	$	1,498		$	82,964		$	11,878	$	783		$	39,467
Unrealized gains/(losses)		—			1,548			—		(44	)		(118	)
Realized gains/(losses)		1,300			(1,792	)		—		—			—
Purchases		—			28,428			—		—			—
Sales		—			(32,944	)		—		—			—
Redemptions		(1,595	)		(12,491	)		—		—			—
Net change		(295	)		(17,251	)		—		(44	)		(118	)
Balance at June 30, 2024	$	1,203		$	65,713		$	11,878	$	739		$	39,349

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, 2024, relating to Level 3 assets still held at June 30, 2024, 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.

Fair Value of Financial Instruments

The following reflects the fair value of financial instruments as of June 30, 2024 and December 31, 2023, whether or not recognized in the consolidated statements of financial condition at fair value (in thousands).

	June 30, 2024				December 31, 2023
	Carrying Value		Estimated Fair Value		Carrying Value		Estimated Fair Value
Financial assets:
Cash and cash equivalents	$	2,615,670	$	2,615,670	$	3,361,801	$	3,361,801
Cash segregated for regulatory purposes		41,290		41,290		162,048		162,048
Securities purchased under agreements to resell		439,539		439,539		349,849		349,849
Financial instruments owned		1,261,216		1,261,216		918,741		918,741
Available-for-sale securities		1,583,477		1,583,477		1,551,686		1,551,686
Held-to-maturity securities		6,059,267		6,074,257		5,888,798		5,852,176
Bank loans		19,346,967		18,418,965		19,305,805		18,259,923
Loans held for sale		472,804		472,804		423,999		423,999
Investments		91,465		91,465		91,105		91,105
Derivative contracts (1)		127,177		127,177		118,668		118,668
Financial liabilities:
Securities sold under agreements to repurchase	$	594,820	$	594,820	$	417,644	$	417,644
Bank deposits		27,139,753		25,222,469		27,334,579		25,326,174
Financial instruments sold, but not yet purchased		634,311		634,311		497,741		497,741
Senior notes		1,116,166		1,058,131		1,115,629		1,041,217
Debentures to Stifel Financial Capital Trusts		60,000		56,975		60,000		55,507
Derivative contracts (2)		127,156		127,156		118,651		118,651

(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, 2024 and December 31, 2023 (in thousands):

	June 30, 2024
	Total		Level 1		Level 2		Level 3
Financial assets:
Cash	$	2,613,996	$	2,613,996	$	—	$	—
Cash segregated for regulatory purposes		41,290		41,290		—		—
Securities purchased under agreements to resell		439,539		—		439,539		—
Held-to-maturity securities		6,074,257		—		5,980,647		93,610
Bank loans		18,418,965		—		18,418,965		—
Loans held for sale		472,804		—		472,804		—
Financial liabilities:
Securities sold under agreements to repurchase	$	594,820	$	—	$	594,820	$	—
Bank deposits		25,222,469		—		25,222,469		—
Senior notes		1,058,131		1,058,131		—		—
Debentures to Stifel Financial Capital Trusts		56,975		—		—		56,975

	December 31, 2023
	Total		Level 1		Level 2		Level 3
Financial assets:
Cash	$	3,357,095	$	3,357,095	$	—	$	—
Cash segregated for regulatory purposes		162,048		162,048		—		—
Securities purchased under agreements to resell		349,849		—		349,849		—
Held-to-maturity securities		5,852,176		—		5,758,130		94,046
Bank loans		18,259,923		—		18,259,923		—
Loans held for sale		423,999		—		423,999		—
Financial liabilities:
Securities sold under agreements to repurchase	$	417,644	$	—	$	417,644	$	—
Bank deposits		25,326,174		—		25,326,174		—
Senior notes		1,041,217		1,041,217		—		—
Debentures to Stifel Financial Capital Trusts		55,507		—		—		55,507

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, 2024 and December 31, 2023.

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 June 30, 2024 and December 31, 2023 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 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.

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, 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

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.

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 June 30, 2024 and December 31, 2023 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 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.