x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Delaware | 91-1962278 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
3003 Tasman Drive, Santa Clara, California | 95054-1191 | |
(Address of principal executive offices) | (Zip Code) |
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(Dollars in thousands, except par value and share data) | June 30, 2017 | December 31, 2016 | ||||||
Assets | ||||||||
Cash and cash equivalents | $ | 3,854,244 | $ | 2,545,750 | ||||
Available-for-sale securities, at fair value (cost of $12,053,305 and $12,588,783, respectively) | 12,071,052 | 12,620,411 | ||||||
Held-to-maturity securities, at cost (fair value of $9,910,504 and $8,376,138, respectively) | 9,938,371 | 8,426,998 | ||||||
Non-marketable and other securities | 630,670 | 622,552 | ||||||
Total investment securities | 22,640,093 | 21,669,961 | ||||||
Loans, net of unearned income | 20,976,466 | 19,899,944 | ||||||
Allowance for loan losses | (236,496 | ) | (225,366 | ) | ||||
Net loans | 20,739,970 | 19,674,578 | ||||||
Premises and equipment, net of accumulated depreciation and amortization | 121,947 | 120,683 | ||||||
Accrued interest receivable and other assets | 1,044,125 | 672,688 | ||||||
Total assets | $ | 48,400,379 | $ | 44,683,660 | ||||
Liabilities and total equity | ||||||||
Liabilities: | ||||||||
Noninterest-bearing demand deposits | $ | 35,046,371 | $ | 31,975,457 | ||||
Interest-bearing deposits | 7,418,920 | 7,004,411 | ||||||
Total deposits | 42,465,291 | 38,979,868 | ||||||
Short-term borrowings | 470 | 512,668 | ||||||
Other liabilities | 1,145,154 | 618,383 | ||||||
Long-term debt | 749,429 | 795,704 | ||||||
Total liabilities | 44,360,344 | 40,906,623 | ||||||
Commitments and contingencies (Note 12 and Note 15) | ||||||||
SVBFG stockholders’ equity: | ||||||||
Preferred stock, $0.001 par value, 20,000,000 shares authorized; no shares issued and outstanding | — | — | ||||||
Common stock, $0.001 par value, 150,000,000 shares authorized; 52,684,159 shares and 52,254,074 shares outstanding, respectively | 53 | 52 | ||||||
Additional paid-in capital | 1,283,485 | 1,242,741 | ||||||
Retained earnings | 2,601,007 | 2,376,331 | ||||||
Accumulated other comprehensive income | 14,890 | 23,430 | ||||||
Total SVBFG stockholders’ equity | 3,899,435 | 3,642,554 | ||||||
Noncontrolling interests | 140,600 | 134,483 | ||||||
Total equity | 4,040,035 | 3,777,037 | ||||||
Total liabilities and total equity | $ | 48,400,379 | $ | 44,683,660 |
Three months ended June 30, | Six months ended June 30, | |||||||||||||||
(Dollars in thousands, except per share amounts) | 2017 | 2016 | 2017 | 2016 | ||||||||||||
Interest income: | ||||||||||||||||
Loans | $ | 250,197 | $ | 205,287 | $ | 477,538 | $ | 403,229 | ||||||||
Investment securities: | ||||||||||||||||
Taxable | 95,522 | 86,603 | 185,325 | 177,653 | ||||||||||||
Non-taxable | 885 | 575 | 1,531 | 1,171 | ||||||||||||
Federal funds sold, securities purchased under agreements to resell and other short-term investment securities | 7,323 | 1,527 | 10,459 | 3,597 | ||||||||||||
Total interest income | 353,927 | 293,992 | 674,853 | 585,650 | ||||||||||||
Interest expense: | ||||||||||||||||
Deposits | 2,197 | 1,261 | 3,914 | 2,449 | ||||||||||||
Borrowings | 9,034 | 9,395 | 18,250 | 18,444 | ||||||||||||
Total interest expense | 11,231 | 10,656 | 22,164 | 20,893 | ||||||||||||
Net interest income | 342,696 | 283,336 | 652,689 | 564,757 | ||||||||||||
Provision for credit losses (1) | 15,806 | 36,746 | 46,540 | 70,221 | ||||||||||||
Net interest income after provision for credit losses | 326,890 | 246,590 | 606,149 | 494,536 | ||||||||||||
Noninterest income: | ||||||||||||||||
Gains on investment securities, net | 17,630 | 23,270 | 33,600 | 18,586 | ||||||||||||
Gains on equity warrant assets, net (2) | 10,820 | 5,089 | 17,510 | 11,695 | ||||||||||||
Foreign exchange fees | 26,108 | 24,088 | 52,355 | 51,054 | ||||||||||||
Credit card fees | 18,099 | 15,424 | 35,829 | 30,931 | ||||||||||||
Deposit service charges | 14,563 | 13,114 | 28,538 | 25,786 | ||||||||||||
Client investment fees | 12,982 | 8,012 | 22,008 | 16,007 | ||||||||||||
Lending related fees | 8,509 | 7,802 | 17,470 | 15,615 | ||||||||||||
Letters of credit and standby letters of credit fees | 7,006 | 6,014 | 13,645 | 11,603 | ||||||||||||
Other (2) | 12,811 | 9,963 | 25,232 | 17,633 | ||||||||||||
Total noninterest income | 128,528 | 112,776 | 246,187 | 198,910 | ||||||||||||
Noninterest expense: | ||||||||||||||||
Compensation and benefits | 148,973 | 115,580 | 296,149 | 237,842 | ||||||||||||
Professional services | 27,925 | 25,516 | 53,344 | 44,516 | ||||||||||||
Premises and equipment | 18,958 | 16,586 | 34,816 | 31,570 | ||||||||||||
Net occupancy | 11,126 | 9,359 | 22,777 | 19,394 | ||||||||||||
Business development and travel | 11,389 | 9,327 | 20,584 | 21,573 | ||||||||||||
FDIC and state assessments | 9,313 | 6,892 | 17,995 | 13,819 | ||||||||||||
Correspondent bank fees | 3,163 | 2,713 | 6,608 | 6,365 | ||||||||||||
Other | 20,399 | 13,966 | 36,606 | 28,759 | ||||||||||||
Total noninterest expense (1) | 251,246 | 199,939 | 488,879 | 403,838 | ||||||||||||
Income before income tax expense | 204,172 | 159,427 | 363,457 | 289,608 | ||||||||||||
Income tax expense (3) | 71,656 | 65,047 | 123,061 | 118,631 | ||||||||||||
Net income before noncontrolling interests | 132,516 | 94,380 | 240,396 | 170,977 | ||||||||||||
Net (income) loss attributable to noncontrolling interests | (9,323 | ) | (1,416 | ) | (15,720 | ) | 1,161 | |||||||||
Net income available to common stockholders (3) | $ | 123,193 | $ | 92,964 | $ | 224,676 | $ | 172,138 | ||||||||
Earnings per common share—basic (3) | $ | 2.34 | $ | 1.79 | $ | 4.28 | $ | 3.33 | ||||||||
Earnings per common share—diluted (3) | 2.32 | 1.78 | 4.22 | 3.30 |
Three months ended June 30, | Six months ended June 30, | |||||||||||||||
(Dollars in thousands) | 2017 | 2016 | 2017 | 2016 | ||||||||||||
Net income before noncontrolling interests | $ | 132,516 | $ | 94,380 | $ | 240,396 | $ | 170,977 | ||||||||
Other comprehensive (loss) income, net of tax: | ||||||||||||||||
Change in cumulative translation gains (losses): | ||||||||||||||||
Foreign currency translation gains (losses) | 1,578 | (1,795 | ) | 2,535 | (2,049 | ) | ||||||||||
Related tax (expense) benefit | (644 | ) | 731 | (1,034 | ) | 835 | ||||||||||
Change in unrealized (losses) gains on available-for-sale securities: | ||||||||||||||||
Unrealized holding (losses) gains | (5,639 | ) | 40,937 | (13,396 | ) | 211,768 | ||||||||||
Related tax benefit (expense) | 2,500 | (16,686 | ) | 5,636 | (86,289 | ) | ||||||||||
Reclassification adjustment for losses (gains) included in net income | 123 | (12,328 | ) | (485 | ) | (11,582 | ) | |||||||||
Related tax (benefit) expense | (50 | ) | 5,017 | 198 | 4,713 | |||||||||||
Amortization of unrealized gains on securities transferred from available-for-sale to held-to-maturity | (1,566 | ) | (2,250 | ) | (3,337 | ) | (4,817 | ) | ||||||||
Related tax benefit | 630 | 905 | 1,343 | 1,938 | ||||||||||||
Other comprehensive (loss) income, net of tax | (3,068 | ) | 14,531 | (8,540 | ) | 114,517 | ||||||||||
Comprehensive income | 129,448 | 108,911 | 231,856 | 285,494 | ||||||||||||
Comprehensive (income) loss attributable to noncontrolling interests | (9,323 | ) | (1,416 | ) | (15,720 | ) | 1,161 | |||||||||
Comprehensive income attributable to SVBFG | $ | 120,125 | $ | 107,495 | $ | 216,136 | $ | 286,655 |
Common Stock | Additional Paid-in Capital | Retained Earnings | Accumulated Other Comprehensive Income | Total SVBFG Stockholders’ Equity | Noncontrolling Interests | Total Equity | |||||||||||||||||||||||||
(Dollars in thousands) | Shares | Amount | |||||||||||||||||||||||||||||
Balance at December 31, 2015 | 51,610,226 | $ | 52 | $ | 1,189,032 | $ | 1,993,646 | $ | 15,404 | $ | 3,198,134 | $ | 135,097 | $ | 3,333,231 | ||||||||||||||||
Common stock issued under employee benefit plans, net of restricted stock cancellations | 372,282 | — | 6,852 | — | — | 6,852 | — | 6,852 | |||||||||||||||||||||||
Common stock issued under ESOP | 43,165 | — | 4,328 | — | — | 4,328 | — | 4,328 | |||||||||||||||||||||||
Income tax effect from stock options exercised, vesting of restricted stock and other (1) | — | — | (6,587 | ) | — | — | (6,587 | ) | — | (6,587 | ) | ||||||||||||||||||||
Net income (loss) | — | — | — | 172,138 | — | 172,138 | (1,161 | ) | 170,977 | ||||||||||||||||||||||
Capital calls and distributions, net | — | — | — | — | — | — | (5,721 | ) | (5,721 | ) | |||||||||||||||||||||
Net change in unrealized gains and losses on AFS securities, net of tax | — | — | — | — | 118,610 | 118,610 | — | 118,610 | |||||||||||||||||||||||
Amortization of unrealized gains on securities transferred from AFS to HTM, net of tax | — | — | — | — | (2,879 | ) | (2,879 | ) | — | (2,879 | ) | ||||||||||||||||||||
Foreign currency translation adjustments, net of tax | — | — | — | — | (1,214 | ) | (1,214 | ) | — | (1,214 | ) | ||||||||||||||||||||
Share-based compensation, net | — | — | 16,196 | — | — | 16,196 | — | 16,196 | |||||||||||||||||||||||
Balance at June 30, 2016 | 52,025,673 | $ | 52 | $ | 1,209,821 | $ | 2,165,784 | $ | 129,921 | $ | 3,505,578 | $ | 128,215 | $ | 3,633,793 | ||||||||||||||||
Balance at December 31, 2016 | 52,254,074 | $ | 52 | $ | 1,242,741 | $ | 2,376,331 | $ | 23,430 | $ | 3,642,554 | $ | 134,483 | $ | 3,777,037 | ||||||||||||||||
Common stock issued under employee benefit plans, net of restricted stock cancellations | 419,247 | 1 | 11,821 | — | — | 11,822 | — | 11,822 | |||||||||||||||||||||||
Common stock issued under ESOP | 10,838 | — | 2,094 | — | — | 2,094 | — | 2,094 | |||||||||||||||||||||||
Income tax effect from stock options exercised, vesting of restricted stock and other (1) | — | — | — | — | — | — | — | — | |||||||||||||||||||||||
Net income | — | — | — | 224,676 | — | 224,676 | 15,720 | 240,396 | |||||||||||||||||||||||
Capital calls and distributions, net | — | — | — | — | — | — | (9,603 | ) | (9,603 | ) | |||||||||||||||||||||
Net change in unrealized gains and losses on AFS securities, net of tax | — | — | — | — | (8,047 | ) | (8,047 | ) | — | (8,047 | ) | ||||||||||||||||||||
Amortization of unrealized gains on securities transferred from AFS to HTM, net of tax | — | — | — | — | (1,994 | ) | (1,994 | ) | — | (1,994 | ) | ||||||||||||||||||||
Foreign currency translation adjustments, net of tax | — | — | — | — | 1,501 | 1,501 | — | 1,501 | |||||||||||||||||||||||
Share-based compensation, net | — | — | 26,829 | — | — | 26,829 | — | 26,829 | |||||||||||||||||||||||
Balance at June 30, 2017 | 52,684,159 | $ | 53 | $ | 1,283,485 | $ | 2,601,007 | $ | 14,890 | $ | 3,899,435 | $ | 140,600 | $ | 4,040,035 |
Six months ended June 30, | ||||||||
(Dollars in thousands) | 2017 | 2016 | ||||||
Cash flows from operating activities: | ||||||||
Net income before noncontrolling interests | $ | 240,396 | $ | 170,977 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Provision for credit losses | 46,540 | 70,221 | ||||||
Changes in fair values of equity warrant assets, net of proceeds from exercises | (9,053 | ) | (1,803 | ) | ||||
Changes in fair values of derivatives, net | 8,505 | (1,636 | ) | |||||
Gains on investment securities, net | (33,600 | ) | (18,586 | ) | ||||
Depreciation and amortization | 26,268 | 23,768 | ||||||
Amortization of premiums and discounts on investment securities, net | 1,747 | 7,923 | ||||||
Amortization of share-based compensation | 19,095 | 14,425 | ||||||
Amortization of deferred loan fees | (51,869 | ) | (46,896 | ) | ||||
Deferred income tax benefit | (9,827 | ) | (6,374 | ) | ||||
Excess tax benefit from exercise of stock options and vesting of restricted shares (1) | (13,028 | ) | — | |||||
Changes in other assets and liabilities: | ||||||||
Accrued interest receivable and payable, net | (8,852 | ) | 232 | |||||
Accounts receivable and payable, net | (6,227 | ) | (2,598 | ) | ||||
Income tax receivable and payable, net | 840 | (32,915 | ) | |||||
Accrued compensation | (51,636 | ) | (79,858 | ) | ||||
Foreign exchange spot contracts, net | 159,607 | 53,870 | ||||||
Other, net | 41,172 | (8,683 | ) | |||||
Net cash provided by operating activities | 360,078 | 142,067 | ||||||
Cash flows from investing activities: | ||||||||
Purchases of available-for-sale securities | (1,174,666 | ) | — | |||||
Proceeds from sales of available-for-sale securities | 5,024 | 2,878,272 | ||||||
Proceeds from maturities and pay downs of available-for-sale securities | 1,715,291 | 660,464 | ||||||
Purchases of held-to-maturity securities | (2,298,290 | ) | (140,641 | ) | ||||
Proceeds from maturities and pay downs of held-to-maturity securities | 806,386 | 743,117 | ||||||
Purchases of non-marketable and other securities | (9,435 | ) | (31,239 | ) | ||||
Proceeds from sales and distributions of non-marketable and other securities | 60,355 | 28,064 | ||||||
Net increase in loans | (1,066,056 | ) | (2,085,829 | ) | ||||
Purchases of premises and equipment | (21,496 | ) | (24,057 | ) | ||||
Net cash (used for) provided by investing activities | (1,982,887 | ) | 2,028,151 | |||||
Cash flows from financing activities: | ||||||||
Net increase (decrease) in deposits | 3,485,423 | (1,546,209 | ) | |||||
Net decrease in short-term borrowings | (512,198 | ) | (271,681 | ) | ||||
Principal payments of long-term debt | (46,235 | ) | — | |||||
(Distributions to noncontrolling interests), net of contributions from noncontrolling interests | (9,603 | ) | (5,721 | ) | ||||
Tax effect from stock exercises (1) | — | (6,587 | ) | |||||
Proceeds from issuance of common stock, ESPP and ESOP | 13,916 | 11,180 | ||||||
Net cash provided by (used for) financing activities | 2,931,303 | (1,819,018 | ) | |||||
Net increase in cash and cash equivalents | 1,308,494 | 351,200 | ||||||
Cash and cash equivalents at beginning of period | 2,545,750 | 1,503,257 | ||||||
Cash and cash equivalents at end of period | $ | 3,854,244 | $ | 1,854,457 | ||||
Supplemental disclosures: | ||||||||
Cash paid during the period for: | ||||||||
Interest | $ | 22,293 | $ | 20,942 | ||||
Income taxes | 137,371 | 157,825 | ||||||
Noncash items during the period: | ||||||||
Changes in unrealized gains and losses on available-for-sale securities, net of tax | $ | (8,047 | ) | $ | 118,610 | |||
Distributions of stock from investments | 2,514 | 265 |
(Dollars in thousands, except par value and share data) | June 30, 2018 | December 31, 2017 | ||||||
Assets | ||||||||
Cash and cash equivalents | $ | 2,712,101 | $ | 2,923,075 | ||||
Available-for-sale securities, at fair value (cost of $9,717,156 and $11,131,008, respectively) | 9,593,366 | 11,120,664 | ||||||
Held-to-maturity securities, at cost (fair value of $15,493,995 and $12,548,280, respectively) | 15,898,263 | 12,663,455 | ||||||
Non-marketable and other equity securities | 852,505 | 651,053 | ||||||
Total investment securities | 26,344,134 | 24,435,172 | ||||||
Loans, net of unearned income | 25,996,192 | 23,106,316 | ||||||
Allowance for loan losses | (286,709 | ) | (255,024 | ) | ||||
Net loans | 25,709,483 | 22,851,292 | ||||||
Premises and equipment, net of accumulated depreciation and amortization | 117,603 | 128,682 | ||||||
Accrued interest receivable and other assets | 984,424 | 876,246 | ||||||
Total assets | $ | 55,867,745 | $ | 51,214,467 | ||||
Liabilities and total equity | ||||||||
Liabilities: | ||||||||
Noninterest-bearing demand deposits | $ | 40,593,302 | $ | 36,655,497 | ||||
Interest-bearing deposits | 8,293,993 | 7,598,578 | ||||||
Total deposits | 48,887,295 | 44,254,075 | ||||||
Short-term borrowings | 417,246 | 1,033,730 | ||||||
Other liabilities | 1,062,391 | 911,755 | ||||||
Long-term debt | 695,972 | 695,492 | ||||||
Total liabilities | 51,062,904 | 46,895,052 | ||||||
Commitments and contingencies (Note 13 and Note 16) | ||||||||
SVBFG stockholders’ equity: | ||||||||
Preferred stock, $0.001 par value, 20,000,000 shares authorized; no shares issued and outstanding | — | — | ||||||
Common stock, $0.001 par value, 150,000,000 shares authorized; 53,210,627 shares and 52,835,188 shares outstanding, respectively | 53 | 53 | ||||||
Additional paid-in capital | 1,346,586 | 1,314,377 | ||||||
Retained earnings | 3,397,879 | 2,866,837 | ||||||
Accumulated other comprehensive loss | (86,865 | ) | (1,472 | ) | ||||
Total SVBFG stockholders’ equity | 4,657,653 | 4,179,795 | ||||||
Noncontrolling interests | 147,188 | 139,620 | ||||||
Total equity | 4,804,841 | 4,319,415 | ||||||
Total liabilities and total equity | $ | 55,867,745 | $ | 51,214,467 |
Three months ended June 30, | Six months ended June 30, | |||||||||||||||
(Dollars in thousands, except per share amounts) | 2018 | 2017 | 2018 | 2017 | ||||||||||||
Interest income: | ||||||||||||||||
Loans | $ | 330,298 | $ | 250,197 | $ | 627,371 | $ | 477,538 | ||||||||
Investment securities: | ||||||||||||||||
Taxable | 137,150 | 95,522 | 261,627 | 185,325 | ||||||||||||
Non-taxable | 7,666 | 885 | 12,758 | 1,531 | ||||||||||||
Federal funds sold, securities purchased under agreements to resell and other short-term investment securities | 6,187 | 7,323 | 11,943 | 10,459 | ||||||||||||
Total interest income | 481,301 | 353,927 | 913,699 | 674,853 | ||||||||||||
Interest expense: | ||||||||||||||||
Deposits | 6,270 | 2,197 | 10,367 | 3,914 | ||||||||||||
Borrowings | 8,588 | 9,034 | 17,026 | 18,250 | ||||||||||||
Total interest expense | 14,858 | 11,231 | 27,393 | 22,164 | ||||||||||||
Net interest income | 466,443 | 342,696 | 886,306 | 652,689 | ||||||||||||
Provision for credit losses | 29,080 | 15,806 | 57,052 | 46,540 | ||||||||||||
Net interest income after provision for credit losses | 437,363 | 326,890 | 829,254 | 606,149 | ||||||||||||
Noninterest income: | ||||||||||||||||
Gains on investment securities, net | 36,114 | 17,630 | 45,172 | 33,600 | ||||||||||||
Gains on equity warrant assets, net | 19,061 | 10,820 | 38,252 | 17,510 | ||||||||||||
Foreign exchange fees | 34,077 | 26,108 | 67,904 | 52,355 | ||||||||||||
Credit card fees | 22,926 | 18,099 | 44,618 | 35,829 | ||||||||||||
Deposit service charges | 18,794 | 14,563 | 36,493 | 28,538 | ||||||||||||
Client investment fees | 29,452 | 12,982 | 52,327 | 22,008 | ||||||||||||
Lending related fees | 9,528 | 8,509 | 20,263 | 17,470 | ||||||||||||
Letters of credit and standby letters of credit fees | 8,347 | 7,006 | 16,529 | 13,645 | ||||||||||||
Other | 14,390 | 12,811 | 26,649 | 25,232 | ||||||||||||
Total noninterest income | 192,689 | 128,528 | 348,207 | 246,187 | ||||||||||||
Noninterest expense: | ||||||||||||||||
Compensation and benefits | 181,955 | 148,973 | 347,761 | 296,149 | ||||||||||||
Professional services | 46,813 | 27,925 | 75,538 | 53,344 | ||||||||||||
Premises and equipment | 19,173 | 18,958 | 37,718 | 34,816 | ||||||||||||
Net occupancy | 13,288 | 11,126 | 26,904 | 22,777 | ||||||||||||
Business development and travel | 12,095 | 11,389 | 23,286 | 20,584 | ||||||||||||
FDIC and state assessments | 10,326 | 9,313 | 19,756 | 17,995 | ||||||||||||
Correspondent bank fees | 3,277 | 3,163 | 6,687 | 6,608 | ||||||||||||
Other | 18,812 | 20,399 | 33,506 | 36,606 | ||||||||||||
Total noninterest expense | 305,739 | 251,246 | 571,156 | 488,879 | ||||||||||||
Income before income tax expense | 324,313 | 204,172 | 606,305 | 363,457 | ||||||||||||
Income tax expense | 77,287 | 71,656 | 151,253 | 123,061 | ||||||||||||
Net income before noncontrolling interests | 247,026 | 132,516 | 455,052 | 240,396 | ||||||||||||
Net income attributable to noncontrolling interests | (9,228 | ) | (9,323 | ) | (22,293 | ) | (15,720 | ) | ||||||||
Net income available to common stockholders | $ | 237,798 | $ | 123,193 | $ | 432,759 | $ | 224,676 | ||||||||
Earnings per common share—basic | $ | 4.48 | $ | 2.34 | $ | 8.17 | $ | 4.28 | ||||||||
Earnings per common share—diluted | 4.42 | 2.32 | 8.05 | 4.22 |
Three months ended June 30, | Six months ended June 30, | |||||||||||||||
(Dollars in thousands) | 2018 | 2017 | 2018 | 2017 | ||||||||||||
Net income before noncontrolling interests | $ | 247,026 | $ | 132,516 | $ | 455,052 | $ | 240,396 | ||||||||
Other comprehensive loss, net of tax: | ||||||||||||||||
Change in foreign currency cumulative translation gains and losses: | ||||||||||||||||
Foreign currency translation (losses) gains | (5,184 | ) | 1,578 | (2,078 | ) | 2,535 | ||||||||||
Related tax benefit (expense) | 1,433 | (644 | ) | 577 | (1,034 | ) | ||||||||||
Change in unrealized gains and losses on available-for-sale securities: | ||||||||||||||||
Unrealized holding losses | (15,103 | ) | (5,639 | ) | (73,130 | ) | (13,396 | ) | ||||||||
Related tax benefit | 4,349 | 2,500 | 20,275 | 5,636 | ||||||||||||
Reclassification adjustment for losses (gains) included in net income (1) | — | 123 | — | (485 | ) | |||||||||||
Related tax (benefit) expense (1) | — | (50 | ) | — | 198 | |||||||||||
Reclassification of unrealized gains on equity securities to retained earnings for ASU 2016-01 (1) | — | — | (40,316 | ) | — | |||||||||||
Related tax expense (1) | — | — | 11,145 | — | ||||||||||||
Amortization of unrealized holding gains on securities transferred from available-for-sale to held-to-maturity | (932 | ) | (1,566 | ) | (2,138 | ) | (3,337 | ) | ||||||||
Related tax benefit | 258 | 630 | 591 | 1,343 | ||||||||||||
Reclassification of stranded tax effect to retained earnings for ASU 2018-02 (1) | — | — | (319 | ) | — | |||||||||||
Other comprehensive loss, net of tax | (15,179 | ) | (3,068 | ) | (85,393 | ) | (8,540 | ) | ||||||||
Comprehensive income | 231,847 | 129,448 | 369,659 | 231,856 | ||||||||||||
Comprehensive income attributable to noncontrolling interests | (9,228 | ) | (9,323 | ) | (22,293 | ) | (15,720 | ) | ||||||||
Comprehensive income attributable to SVBFG | $ | 222,619 | $ | 120,125 | $ | 347,366 | $ | 216,136 |
(1) | See "Adoption of New Accounting Standards" in Note 1—“Basis of Presentation” of the “Notes to Interim Consolidated Financial Statements (unaudited)” under Part I, Item 1 of this report for additional details. |
Common Stock | Additional Paid-in Capital | Retained Earnings | Accumulated Other Comprehensive Income (Loss) | Total SVBFG Stockholders’ Equity | Noncontrolling Interests | Total Equity | |||||||||||||||||||||||||
(Dollars in thousands) | Shares | Amount | |||||||||||||||||||||||||||||
Balance at December 31, 2016 | 52,254,074 | $ | 52 | $ | 1,242,741 | $ | 2,376,331 | $ | 23,430 | $ | 3,642,554 | $ | 134,483 | $ | 3,777,037 | ||||||||||||||||
Common stock issued under employee benefit plans, net of restricted stock cancellations | 419,247 | 1 | 11,821 | — | — | 11,822 | — | 11,822 | |||||||||||||||||||||||
Common stock issued under ESOP | 10,838 | — | 2,094 | — | — | 2,094 | — | 2,094 | |||||||||||||||||||||||
Net income | — | — | — | 224,676 | — | 224,676 | 15,720 | 240,396 | |||||||||||||||||||||||
Capital calls and distributions, net | — | — | — | — | — | — | (9,603 | ) | (9,603 | ) | |||||||||||||||||||||
Net change in unrealized gains and losses on AFS securities, net of tax | — | — | — | — | (8,047 | ) | (8,047 | ) | — | (8,047 | ) | ||||||||||||||||||||
Amortization of unrealized holding gains on securities transferred from AFS to HTM, net of tax | — | — | — | — | (1,994 | ) | (1,994 | ) | — | (1,994 | ) | ||||||||||||||||||||
Foreign currency translation adjustments, net of tax | — | — | — | — | 1,501 | 1,501 | — | 1,501 | |||||||||||||||||||||||
Share-based compensation, net | — | — | 26,829 | — | — | 26,829 | — | 26,829 | |||||||||||||||||||||||
Balance at June 30, 2017 | 52,684,159 | $ | 53 | $ | 1,283,485 | $ | 2,601,007 | $ | 14,890 | $ | 3,899,435 | $ | 140,600 | $ | 4,040,035 | ||||||||||||||||
Balance at December 31, 2017 | 52,835,188 | $ | 53 | $ | 1,314,377 | $ | 2,866,837 | $ | (1,472 | ) | $ | 4,179,795 | $ | 139,620 | $ | 4,319,415 | |||||||||||||||
Cumulative adjustment for ASU 2014-09, net of tax (1) | — | — | — | (5,802 | ) | — | (5,802 | ) | — | (5,802 | ) | ||||||||||||||||||||
Cumulative adjustment for ASU 2016-01, net of tax (1) | — | — | — | 103,766 | (29,171 | ) | 74,595 | — | 74,595 | ||||||||||||||||||||||
Reclassification of stranded tax effect for ASU 2018-02 (1) | — | — | — | 319 | (319 | ) | — | — | — | ||||||||||||||||||||||
Common stock issued under employee benefit plans, net of restricted stock cancellations | 365,767 | — | 7,165 | — | — | 7,165 | — | 7,165 | |||||||||||||||||||||||
Common stock issued under ESOP | 9,672 | — | 2,577 | — | — | 2,577 | — | 2,577 | |||||||||||||||||||||||
Net income | — | — | — | 432,759 | — | 432,759 | 22,293 | 455,052 | |||||||||||||||||||||||
Capital calls and distributions, net | — | — | — | — | — | — | (14,725 | ) | (14,725 | ) | |||||||||||||||||||||
Net change in unrealized gains and losses on AFS securities, net of tax | — | — | — | — | (52,855 | ) | (52,855 | ) | — | (52,855 | ) | ||||||||||||||||||||
Amortization of unrealized holding gains on securities transferred from AFS to HTM, net of tax | — | — | — | — | (1,547 | ) | (1,547 | ) | — | (1,547 | ) | ||||||||||||||||||||
Foreign currency translation adjustments, net of tax | — | — | — | — | (1,501 | ) | (1,501 | ) | — | (1,501 | ) | ||||||||||||||||||||
Share-based compensation, net | — | — | 22,467 | — | — | 22,467 | — | 22,467 | |||||||||||||||||||||||
Balance at June 30, 2018 | 53,210,627 | $ | 53 | $ | 1,346,586 | $ | 3,397,879 | $ | (86,865 | ) | $ | 4,657,653 | $ | 147,188 | $ | 4,804,841 |
(1) | See "Adoption of New Accounting Standards" in Note 1—“Basis of Presentation” of the “Notes to Interim Consolidated Financial Statements (unaudited)” under Part I, Item 1 of this report for additional details. |
Six months ended June 30, | ||||||||
(Dollars in thousands) | 2018 | 2017 | ||||||
Cash flows from operating activities: | ||||||||
Net income before noncontrolling interests | $ | 455,052 | $ | 240,396 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Provision for credit losses | 57,052 | 46,540 | ||||||
Changes in fair values of equity warrant assets, net of proceeds from exercises | (24,940 | ) | (9,053 | ) | ||||
Changes in fair values of derivatives, net | (8,768 | ) | 8,505 | |||||
Gains on investment securities, net (1) | (45,172 | ) | (20,341 | ) | ||||
Distributions of earnings from non-marketable and other equity securities (1) | 27,409 | 27,214 | ||||||
Depreciation and amortization | 28,902 | 26,268 | ||||||
Amortization of premiums and discounts on investment securities, net | (478 | ) | 1,747 | |||||
Amortization of share-based compensation | 22,467 | 19,095 | ||||||
Amortization of deferred loan fees | (65,606 | ) | (51,869 | ) | ||||
Deferred income tax benefit | (18,594 | ) | (9,827 | ) | ||||
Excess tax benefit from exercise of stock options and vesting of restricted shares | (14,488 | ) | (13,028 | ) | ||||
Losses from the write-off of premises and equipment | 7,006 | — | ||||||
Other gains | — | (3,858 | ) | |||||
Changes in other assets and liabilities: | ||||||||
Accrued interest receivable and payable, net | (28,213 | ) | (8,852 | ) | ||||
Accounts receivable and payable, net | (10,169 | ) | (6,227 | ) | ||||
Income tax receivable and payable, net | (21,076 | ) | 840 | |||||
Accrued compensation | (55,814 | ) | (51,636 | ) | ||||
Foreign exchange spot contracts, net | 68,870 | 159,607 | ||||||
Other, net | (26,060 | ) | 41,200 | |||||
Net cash provided by operating activities | 347,380 | 396,721 | ||||||
Cash flows from investing activities: | ||||||||
Purchases of available-for-sale securities | (390,758 | ) | (1,174,666 | ) | ||||
Proceeds from sales of available-for-sale securities | — | 5,024 | ||||||
Proceeds from maturities and paydowns of available-for-sale securities | 1,775,568 | 1,715,291 | ||||||
Purchases of held-to-maturity securities | (4,067,389 | ) | (2,298,290 | ) | ||||
Proceeds from maturities and paydowns of held-to-maturity securities | 935,820 | 806,386 | ||||||
Purchases of non-marketable and other securities | (28,099 | ) | (9,488 | ) | ||||
Proceeds from sales and distributions of capital of non-marketable and other securities (1) | 75,139 | 23,765 | ||||||
Net increase in loans | (2,855,537 | ) | (1,066,056 | ) | ||||
Purchases of premises and equipment | (14,851 | ) | (21,496 | ) | ||||
Net cash used for investing activities | (4,570,107 | ) | (2,019,530 | ) | ||||
Cash flows from financing activities: | ||||||||
Net increase in deposits | 4,633,220 | 3,485,423 | ||||||
Net decrease in short-term borrowings | (616,484 | ) | (512,198 | ) | ||||
Principal payments of long-term debt | — | (46,235 | ) | |||||
(Distributions to noncontrolling interests), net of contributions from noncontrolling interests | (14,725 | ) | (9,603 | ) | ||||
Proceeds from issuance of common stock, ESPP and ESOP | 9,742 | 13,916 | ||||||
Net cash provided by financing activities | 4,011,753 | 2,931,303 | ||||||
Net (decrease) increase in cash and cash equivalents | (210,974 | ) | 1,308,494 | |||||
Cash and cash equivalents at beginning of period | 2,923,075 | 2,545,750 | ||||||
Cash and cash equivalents at end of period | $ | 2,712,101 | $ | 3,854,244 | ||||
Supplemental disclosures: | ||||||||
Cash paid during the period for: | ||||||||
Interest | $ | 27,730 | $ | 22,293 | ||||
Income taxes | 193,682 | 137,371 | ||||||
Noncash items during the period: | ||||||||
Changes in unrealized gains and losses on available-for-sale securities, net of tax | $ | (52,855 | ) | $ | (8,047 | ) | ||
Distributions of stock from investments | 3,136 | 2,514 |
(1) | During the first quarter of 2018 we adopted ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments. This guidance was adopted on a retrospective basis and impacted the presentation between investing and operating activities related to distributions and net gains from our nonmarketable and other securities portfolio. See Note 1—“Basis of Presentation” of the “Notes to Interim Consolidated Financial Statements (unaudited)” under Part I, Item 1 of this report for additional details. |
1. | Basis of Presentation |
(Dollars in thousands) | Balance at December 31, 2017 | Adjustments Due to Adoption of ASC 606 | Balance at January 1, 2018 | |||||||||
Accrued interest receivable and other assets: | ||||||||||||
Accounts receivable | $ | 55,946 | $ | (34,340 | ) | $ | 21,606 | |||||
Other liabilities: | ||||||||||||
Deferred revenue | 27,057 | (26,321 | ) | 736 | ||||||||
Current taxes payable | 4,675 | (2,217 | ) | 2,458 | ||||||||
Stockholders' Equity: | ||||||||||||
Retained earnings | 2,866,837 | (5,802 | ) | 2,861,035 |
June 30, 2018 | ||||||||||||
(Dollars in thousands) | As Reported | Balances Without Adoption of ASC 606 | Effect of Change Higher/(Lower) | |||||||||
Accrued interest receivable and other assets: | ||||||||||||
Accounts receivable | $ | 57,740 | $ | 97,584 | $ | (39,844 | ) | |||||
Other liabilities: | ||||||||||||
Deferred fees | 479 | 29,964 | (29,485 | ) | ||||||||
Current taxes payable (receivable) | 1,616 | (924 | ) | 2,540 | ||||||||
Stockholders' Equity: | ||||||||||||
Retained earnings | 3,397,879 | 3,403,357 | (5,478 | ) |
Three months ended June 30, 2018 | ||||||||||||
(Dollars in thousands) | As Reported | Balances Without Adoption of ASC 606 | Effect of Change Higher/(Lower) | |||||||||
Other noninterest income: | ||||||||||||
Fund management fees | $ | 5,929 | $ | 6,308 | $ | (379 | ) | |||||
Income tax expense | 77,287 | 77,380 | (93 | ) | ||||||||
Net Income available to common stockholders | 237,798 | 238,084 | (286 | ) | ||||||||
Diluted earnings per share | 4.42 | 4.43 | (0.01 | ) |
Six months ended June 30, 2018 | ||||||||||||
(Dollars in thousands) | As Reported | Balances Without Adoption of ASC 606 | Effect of Change Higher/(Lower) | |||||||||
Other noninterest income: | ||||||||||||
Fund management fees | $ | 11,665 | $ | 12,914 | $ | (1,249 | ) | |||||
Income tax expense | 151,253 | 151,577 | (324 | ) | ||||||||
Net Income available to common stockholders | 432,759 | 433,684 | (925 | ) | ||||||||
Diluted earnings per share | 8.05 | 8.07 | (0.02 | ) |
2. |
Three months ended June 30, | Six months ended June 30, | Three months ended June 30, | Six months ended June 30, | |||||||||||||||||||||||||||||||||
(Dollars in thousands) | Income Statement Location | 2017 | 2016 | 2017 | 2016 | Income Statement Location | 2018 | 2017 | 2018 | 2017 | ||||||||||||||||||||||||||
Reclassification adjustment for losses (gains) included in net income | Gains on investment securities, net | $ | 123 | $ | (12,328 | ) | $ | (485 | ) | $ | (11,582 | ) | Gains on investment securities, net | $ | — | $ | 123 | $ | — | $ | (485 | ) | ||||||||||||||
Related tax (benefit) expense | Income tax expense | (50 | ) | 5,017 | 198 | 4,713 | Income tax expense | — | (50 | ) | — | 198 | ||||||||||||||||||||||||
Total reclassification adjustment for losses (gains) included in net income, net of tax | $ | 73 | $ | (7,311 | ) | $ | (287 | ) | $ | (6,869 | ) | $ | — | $ | 73 | $ | — | $ | (287 | ) |
(1) | See "Adoption of New Accounting Standards" in Note 1—“Basis of Presentation” of the “Notes to Interim Consolidated Financial Statements (unaudited)” under Part I, Item 1 of this report for additional details. |
Three months ended June 30, | Six months ended June 30, | Three months ended June 30, | Six months ended June 30, | |||||||||||||||||||||||||||||
(Dollars and shares in thousands, except per share amounts) | 2017 | 2016 | 2017 | 2016 | 2018 | 2017 | 2018 | 2017 | ||||||||||||||||||||||||
Numerator: | ||||||||||||||||||||||||||||||||
Net income available to common stockholders | $ | 123,193 | $ | 92,964 | $ | 224,676 | $ | 172,138 | $ | 237,798 | $ | 123,193 | $ | 432,759 | $ | 224,676 | ||||||||||||||||
Denominator: | ||||||||||||||||||||||||||||||||
Weighted average common shares outstanding—basic | 52,537 | 51,831 | 52,441 | 51,739 | 53,064 | 52,537 | 52,974 | 52,441 | ||||||||||||||||||||||||
Weighted average effect of dilutive securities: | ||||||||||||||||||||||||||||||||
Stock options and ESPP | 368 | 238 | 397 | 246 | 400 | 368 | 408 | 397 | ||||||||||||||||||||||||
Restricted stock units | 289 | 118 | 342 | 145 | 312 | 289 | 350 | 342 | ||||||||||||||||||||||||
Weighted average common shares outstanding—diluted | 53,194 | 52,187 | 53,180 | 52,130 | 53,776 | 53,194 | 53,732 | 53,180 | ||||||||||||||||||||||||
Earnings per common share: | ||||||||||||||||||||||||||||||||
Basic | $ | 2.34 | $ | 1.79 | $ | 4.28 | $ | 3.33 | $ | 4.48 | $ | 2.34 | $ | 8.17 | $ | 4.28 | ||||||||||||||||
Diluted | $ | 2.32 | $ | 1.78 | $ | 4.22 | $ | 3.30 | 4.42 | 2.32 | 8.05 | 4.22 |
Three months ended June 30, | Six months ended June 30, | Three months ended June 30, | Six months ended June 30, | |||||||||||||||||||||
(Shares in thousands) | 2017 | 2016 | 2017 | 2016 | 2018 | 2017 | 2018 | 2017 | ||||||||||||||||
Stock options | 73 | 462 | 36 | 407 | 58 | 73 | 33 | 36 | ||||||||||||||||
Restricted stock units | — | 143 | — | 88 | 113 | — | 59 | — | ||||||||||||||||
Total | 73 | 605 | 36 | 495 | 171 | 73 | 92 | 36 |
3. | Share-Based Compensation |
Three months ended June 30, | Six months ended June 30, | Three months ended June 30, | Six months ended June 30, | |||||||||||||||||||||||||||||
(Dollars in thousands) | 2017 | 2016 | 2017 | 2016 | 2018 | 2017 | 2018 | 2017 | ||||||||||||||||||||||||
Share-based compensation expense | $ | 9,892 | $ | 7,548 | $ | 19,095 | $ | 14,425 | $ | 11,944 | $ | 9,892 | $ | 22,467 | $ | 19,095 | ||||||||||||||||
Income tax benefit related to share-based compensation expense | (3,349 | ) | (4,581 | ) | (6,364 | ) | (6,698 | ) | (2,743 | ) | (3,349 | ) | (5,060 | ) | (6,364 | ) |
(Dollars in thousands) | Unrecognized Expense | Weighted Average Expected Recognition Period - in Years | Unrecognized Expense | Weighted Average Expected Recognition Period - in Years | ||||||||
Stock options | $ | 12,309 | 2.88 | $ | 15,039 | 3.10 | ||||||
Restricted stock units | 62,942 | 2.89 | 81,376 | 2.91 | ||||||||
Total unrecognized share-based compensation expense | $ | 75,251 | $ | 96,415 |
Options | Weighted Average Exercise Price | Weighted Average Remaining Contractual Life - in Years | Aggregate Intrinsic Value of In-The- Money Options | ||||||||||
Outstanding at December 31, 2016 | 1,010,557 | $ | 87.24 | ||||||||||
Granted | 111,855 | 178.16 | |||||||||||
Exercised | (196,006 | ) | 69.93 | ||||||||||
Forfeited | (3,662 | ) | 93.88 | ||||||||||
Outstanding at June 30, 2017 | 922,744 | 101.91 | 4.00 | $ | 68,457,617 | ||||||||
Vested and expected to vest at June 30, 2017 | 893,276 | 100.71 | 3.94 | 67,315,191 | |||||||||
Exercisable at June 30, 2017 | 568,202 | 82.89 | 2.95 | 52,783,813 |
Options | Weighted Average Exercise Price | Weighted Average Remaining Contractual Life - in Years | Aggregate Intrinsic Value of In-The- Money Options | ||||||||||
Outstanding at December 31, 2017 | 808,049 | $ | 105.68 | ||||||||||
Granted | 87,352 | 305.22 | |||||||||||
Exercised | (156,580 | ) | 84.83 | ||||||||||
Forfeited | (1,926 | ) | 130.69 | ||||||||||
Expired | (2,337 | ) | 60.37 | ||||||||||
Outstanding at June 30, 2018 | 734,558 | 133.93 | 3.92 | $ | 115,185,279 | ||||||||
Vested and expected to vest at June 30, 2018 | 710,108 | 131.27 | 3.85 | 113,119,954 | |||||||||
Exercisable at June 30, 2018 | 449,728 | 97.80 | 2.82 | 85,881,104 |
Shares | Weighted Average Grant Date Fair Value | Shares | Weighted Average Grant Date Fair Value | |||||||||||
Nonvested at December 31, 2016 | 670,969 | $ | 106.64 | |||||||||||
Nonvested at December 31, 2017 | 637,667 | $ | 135.86 | |||||||||||
Granted | 230,822 | 179.94 | 185,292 | 301.56 | ||||||||||
Vested | (218,336 | ) | 102.07 | (206,997 | ) | 130.29 | ||||||||
Forfeited | (16,078 | ) | 117.29 | (21,028 | ) | 148.43 | ||||||||
Nonvested at June 30, 2017 | 667,377 | 133.23 | ||||||||||||
Nonvested at June 30, 2018 | 594,934 | 188.96 |
4. | Variable Interest Entities |
(Dollars in thousands) | Consolidated VIEs | Unconsolidated VIEs | Maximum Exposure to Loss in Unconsolidated VIEs | Consolidated VIEs | Unconsolidated VIEs | Maximum Exposure to Loss in Unconsolidated VIEs | ||||||||||||||||||
June 30, 2017: | ||||||||||||||||||||||||
June 30, 2018: | ||||||||||||||||||||||||
Assets: | ||||||||||||||||||||||||
Cash and cash equivalents | $ | 7,440 | $ | — | $ | — | $ | 4,113 | $ | — | $ | — | ||||||||||||
Non-marketable and other securities (1) | 194,543 | 323,426 | 323,426 | |||||||||||||||||||||
Non-marketable and other equity securities (1) | 208,275 | 529,429 | 529,429 | |||||||||||||||||||||
Accrued interest receivable and other assets | 142 | — | — | 397 | — | — | ||||||||||||||||||
Total assets | $ | 202,125 | $ | 323,426 | $ | 323,426 | $ | 212,785 | $ | 529,429 | $ | 529,429 | ||||||||||||
Liabilities: | ||||||||||||||||||||||||
Other liabilities (1) | 604 | 86,545 | — | 765 | 161,113 | — | ||||||||||||||||||
Total liabilities | $ | 604 | $ | 86,545 | $ | — | $ | 765 | $ | 161,113 | $ | — | ||||||||||||
December 31, 2016: | ||||||||||||||||||||||||
December 31, 2017: | ||||||||||||||||||||||||
Assets: | ||||||||||||||||||||||||
Cash and cash equivalents | $ | 11,469 | $ | — | $ | — | $ | 6,674 | $ | — | $ | — | ||||||||||||
Non-marketable and other securities (1) | 196,140 | 314,810 | 314,810 | |||||||||||||||||||||
Non-marketable and other equity securities (1) | 190,562 | 346,097 | 346,097 | |||||||||||||||||||||
Accrued interest receivable and other assets | 294 | — | — | 365 | — | — | ||||||||||||||||||
Total assets | $ | 207,903 | $ | 314,810 | $ | 314,810 | $ | 197,601 | $ | 346,097 | $ | 346,097 | ||||||||||||
Liabilities: | ||||||||||||||||||||||||
Other liabilities (1) | 517 | 58,095 | — | 990 | 100,891 | — | ||||||||||||||||||
Total liabilities | $ | 517 | $ | 58,095 | $ | — | $ | 990 | $ | 100,891 | $ | — |
(1) | Included in our unconsolidated non-marketable and other equity securities portfolio at June 30, |
5. | Cash and Cash Equivalents |
(Dollars in thousands) | June 30, 2017 | December 31, 2016 | June 30, 2018 | December 31, 2017 | ||||||||||||
Cash and due from banks (1) | $ | 3,658,927 | $ | 2,476,588 | $ | 2,670,473 | $ | 2,672,290 | ||||||||
Securities purchased under agreements to resell (2) | 192,421 | 64,028 | 37,379 | 247,876 | ||||||||||||
Other short-term investment securities | 2,896 | 5,134 | 4,249 | 2,909 | ||||||||||||
Total cash and cash equivalents | $ | 3,854,244 | $ | 2,545,750 | $ | 2,712,101 | $ | 2,923,075 |
(1) | At June 30, |
(2) | At June 30, |
6. | Investment Securities |
June 30, 2017 | June 30, 2018 | |||||||||||||||||||||||||||||||
(Dollars in thousands) | Amortized Cost | Unrealized Gains | Unrealized Losses | Carrying Value | Amortized Cost | Unrealized Gains | Unrealized Losses | Carrying Value | ||||||||||||||||||||||||
Available-for-sale securities, at fair value: | ||||||||||||||||||||||||||||||||
U.S. Treasury securities | $ | 7,785,838 | $ | 19,443 | $ | (3,599 | ) | $ | 7,801,682 | $ | 5,782,879 | $ | 4,186 | $ | (53,995 | ) | $ | 5,733,070 | ||||||||||||||
U.S. agency debentures | 1,917,475 | 11,355 | (1,577 | ) | 1,927,253 | 1,495,657 | — | (9,793 | ) | 1,485,864 | ||||||||||||||||||||||
Residential mortgage-backed securities: | ||||||||||||||||||||||||||||||||
Agency-issued collateralized mortgage obligations—fixed rate | 1,925,216 | 3,885 | (13,820 | ) | 1,915,281 | 2,103,572 | 39 | (65,477 | ) | 2,038,134 | ||||||||||||||||||||||
Agency-issued collateralized mortgage obligations—variable rate | 418,173 | 1,361 | (147 | ) | 419,387 | 335,048 | 1,376 | (126 | ) | 336,298 | ||||||||||||||||||||||
Equity securities | 6,603 | 1,495 | (649 | ) | 7,449 | |||||||||||||||||||||||||||
Total available-for-sale securities | $ | 12,053,305 | $ | 37,539 | $ | (19,792 | ) | $ | 12,071,052 | $ | 9,717,156 | $ | 5,601 | $ | (129,391 | ) | $ | 9,593,366 |
December 31, 2016 | December 31, 2017 | |||||||||||||||||||||||||||||||
(Dollars in thousands) | Amortized Cost | Unrealized Gains | Unrealized Losses | Carrying Value | Amortized Cost | Unrealized Gains | Unrealized Losses | Carrying Value | ||||||||||||||||||||||||
Available-for-sale securities, at fair value: | ||||||||||||||||||||||||||||||||
U.S. Treasury securities | $ | 8,880,358 | $ | 30,323 | $ | (1,190 | ) | $ | 8,909,491 | $ | 6,865,068 | $ | 1,113 | $ | (25,679 | ) | $ | 6,840,502 | ||||||||||||||
U.S. agency debentures | 2,065,535 | 14,443 | (1,603 | ) | 2,078,375 | 1,569,195 | 3,569 | (5,636 | ) | 1,567,128 | ||||||||||||||||||||||
Residential mortgage-backed securities: | ||||||||||||||||||||||||||||||||
Agency-issued collateralized mortgage obligations—fixed rate | 1,163,017 | 3,046 | (13,398 | ) | 1,152,665 | 2,292,311 | 258 | (25,534 | ) | 2,267,035 | ||||||||||||||||||||||
Agency-issued collateralized mortgage obligations—variable rate | 474,238 | 685 | (640 | ) | 474,283 | 372,481 | 1,375 | (126 | ) | 373,730 | ||||||||||||||||||||||
Equity securities | 5,635 | 748 | (786 | ) | 5,597 | 31,953 | 40,525 | (209 | ) | 72,269 | ||||||||||||||||||||||
Total available-for-sale securities | $ | 12,588,783 | $ | 49,245 | $ | (17,617 | ) | $ | 12,620,411 | $ | 11,131,008 | $ | 46,840 | $ | (57,184 | ) | $ | 11,120,664 |
Three months ended June 30, | Six months ended June 30, | |||||||||||||||
(Dollars in thousands) | 2018 | 2017 | 2018 | 2017 | ||||||||||||
Sales proceeds | $ | — | $ | 2,946 | $ | — | $ | 5,024 | ||||||||
Net realized gains and losses: | ||||||||||||||||
Gross realized gains | — | 418 | — | 1,093 | ||||||||||||
Gross realized losses | — | (541 | ) | — | (608 | ) | ||||||||||
Net realized (losses) gains | $ | — | $ | (123 | ) | $ | — | $ | 485 |
June 30, 2017 | June 30, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||
Less than 12 months | 12 months or longer | Total | Less than 12 months | 12 months or longer | Total | |||||||||||||||||||||||||||||||||||||||||||
(Dollars in thousands) | Fair Value of Investments | Unrealized Losses | Fair Value of Investments | Unrealized Losses | Fair Value of Investments | Unrealized Losses | Fair Value of Investments | Unrealized Losses | Fair Value of Investments | Unrealized Losses | Fair Value of Investments | Unrealized Losses | ||||||||||||||||||||||||||||||||||||
Available-for-sale securities: | ||||||||||||||||||||||||||||||||||||||||||||||||
U.S. Treasury securities | $ | 2,724,519 | $ | (3,599 | ) | $ | — | $ | — | $ | 2,724,519 | $ | (3,599 | ) | $ | 4,492,009 | $ | (48,430 | ) | $ | 845,938 | $ | (5,565 | ) | $ | 5,337,947 | $ | (53,995 | ) | |||||||||||||||||||
U.S. agency debentures | 762,920 | (1,577 | ) | — | — | 762,920 | (1,577 | ) | 1,027,612 | (3,984 | ) | 458,252 | (5,809 | ) | 1,485,864 | (9,793 | ) | |||||||||||||||||||||||||||||||
Residential mortgage-backed securities: | ||||||||||||||||||||||||||||||||||||||||||||||||
Agency-issued collateralized mortgage obligations—fixed rate | 851,825 | (7,849 | ) | 201,986 | (5,971 | ) | 1,053,811 | (13,820 | ) | 1,857,591 | (60,030 | ) | 166,002 | (5,447 | ) | 2,023,593 | (65,477 | ) | ||||||||||||||||||||||||||||||
Agency-issued collateralized mortgage obligations—variable rate | 6,185 | (14 | ) | 69,706 | (133 | ) | 75,891 | (147 | ) | 19,068 | (9 | ) | 46,057 | (117 | ) | 65,125 | (126 | ) | ||||||||||||||||||||||||||||||
Equity securities | 3,561 | (649 | ) | — | — | 3,561 | (649 | ) | ||||||||||||||||||||||||||||||||||||||||
Total temporarily impaired securities (1) | $ | 4,349,010 | $ | (13,688 | ) | $ | 271,692 | $ | (6,104 | ) | $ | 4,620,702 | $ | (19,792 | ) | $ | 7,396,280 | $ | (112,453 | ) | $ | 1,516,249 | $ | (16,938 | ) | $ | 8,912,529 | $ | (129,391 | ) |
(1) | As of June 30, |
December 31, 2016 | December 31, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||
Less than 12 months | 12 months or longer | Total | Less than 12 months | 12 months or longer | Total | |||||||||||||||||||||||||||||||||||||||||||
(Dollars in thousands) | Fair Value of Investments | Unrealized Losses | Fair Value of Investments | Unrealized Losses | Fair Value of Investments | Unrealized Losses | Fair Value of Investments | Unrealized Losses | Fair Value of Investments | Unrealized Losses | Fair Value of Investments | Unrealized Losses | ||||||||||||||||||||||||||||||||||||
Available-for-sale securities: | ||||||||||||||||||||||||||||||||||||||||||||||||
U.S. Treasury securities | $ | 879,255 | $ | (1,190 | ) | $ | — | $ | — | $ | 879,255 | $ | (1,190 | ) | $ | 5,968,914 | $ | (23,397 | ) | $ | 323,966 | $ | (2,282 | ) | $ | 6,292,880 | $ | (25,679 | ) | |||||||||||||||||||
U.S. agency debentures | 513,198 | (1,603 | ) | — | — | 513,198 | (1,603 | ) | 736,541 | (2,289 | ) | 336,196 | (3,347 | ) | 1,072,737 | (5,636 | ) | |||||||||||||||||||||||||||||||
Residential mortgage-backed securities: | ||||||||||||||||||||||||||||||||||||||||||||||||
Agency-issued collateralized mortgage obligations—fixed rate | 635,566 | (6,704 | ) | 227,480 | (6,694 | ) | 863,046 | (13,398 | ) | 2,193,277 | (25,534 | ) | — | — | 2,193,277 | (25,534 | ) | |||||||||||||||||||||||||||||||
Agency-issued collateralized mortgage obligations—variable rate | 258,325 | (613 | ) | 6,068 | (27 | ) | 264,393 | (640 | ) | 13,843 | (3 | ) | 53,186 | (123 | ) | 67,029 | (126 | ) | ||||||||||||||||||||||||||||||
Equity securities | 3,693 | (786 | ) | — | — | 3,693 | (786 | ) | 624 | (209 | ) | — | — | 624 | (209 | ) | ||||||||||||||||||||||||||||||||
Total temporarily impaired securities (1) | $ | 2,290,037 | $ | (10,896 | ) | $ | 233,548 | $ | (6,721 | ) | $ | 2,523,585 | $ | (17,617 | ) | $ | 8,913,199 | $ | (51,432 | ) | $ | 713,348 | $ | (5,752 | ) | $ | 9,626,547 | $ | (57,184 | ) |
(1) | As of December 31, |
June 30, 2017 | June 30, 2018 | |||||||||||||||||||||||||||||||||||||||
(Dollars in thousands) | Total | One Year or Less | After One Year to Five Years | After Five Years to Ten Years | After Ten Years | Total | One Year or Less | After One Year to Five Years | After Five Years to Ten Years | After Ten Years | ||||||||||||||||||||||||||||||
U.S. Treasury securities | $ | 7,801,682 | $ | 2,144,571 | $ | 5,657,111 | $ | — | $ | — | $ | 5,733,070 | $ | 2,037,522 | $ | 3,349,925 | $ | 345,623 | $ | — | ||||||||||||||||||||
U.S. agency debentures | 1,927,253 | 424,613 | 1,502,640 | — | — | 1,485,864 | 555,737 | 930,127 | — | — | ||||||||||||||||||||||||||||||
Residential mortgage-backed securities: | ||||||||||||||||||||||||||||||||||||||||
Agency-issued collateralized mortgage obligations—fixed rate | 1,915,281 | — | — | 554,866 | 1,360,415 | 2,038,134 | — | — | 47,098 | 1,991,036 | ||||||||||||||||||||||||||||||
Agency-issued collateralized mortgage obligations—variable rate | 419,387 | — | — | — | 419,387 | 336,298 | — | — | — | 336,298 | ||||||||||||||||||||||||||||||
Total | $ | 12,063,603 | $ | 2,569,184 | $ | 7,159,751 | $ | 554,866 | $ | 1,779,802 | $ | 9,593,366 | $ | 2,593,259 | $ | 4,280,052 | $ | 392,721 | $ | 2,327,334 |
June 30, 2017 | June 30, 2018 | |||||||||||||||||||||||||||||||
(Dollars in thousands) | Amortized Cost | Unrealized Gains | Unrealized Losses | Fair Value | Amortized Cost | Unrealized Gains | Unrealized Losses | Fair Value | ||||||||||||||||||||||||
Held-to-maturity securities, at cost: | ||||||||||||||||||||||||||||||||
U.S. agency debentures (1) | $ | 641,191 | $ | 7,553 | $ | (1,291 | ) | $ | 647,453 | $ | 713,809 | $ | — | $ | (13,818 | ) | $ | 699,991 | ||||||||||||||
Residential mortgage-backed securities: | ||||||||||||||||||||||||||||||||
Agency-issued mortgage-backed securities | 4,170,585 | 12,047 | (14,619 | ) | 4,168,013 | 8,588,483 | 1,591 | (210,148 | ) | 8,379,926 | ||||||||||||||||||||||
Agency-issued collateralized mortgage obligations—fixed rate | 3,240,643 | 853 | (26,227 | ) | 3,215,269 | 2,494,834 | — | (91,919 | ) | 2,402,915 | ||||||||||||||||||||||
Agency-issued collateralized mortgage obligations—variable rate | 283,519 | 581 | (57 | ) | 284,043 | 233,285 | 691 | (31 | ) | 233,945 | ||||||||||||||||||||||
Agency-issued commercial mortgage-backed securities | 1,386,455 | 2,507 | (9,267 | ) | 1,379,695 | 2,335,971 | 10 | (62,982 | ) | 2,272,999 | ||||||||||||||||||||||
Municipal bonds and notes | 215,978 | 1,451 | (1,398 | ) | 216,031 | 1,531,881 | 1,280 | (28,942 | ) | 1,504,219 | ||||||||||||||||||||||
Total held-to-maturity securities | $ | 9,938,371 | $ | 24,992 | $ | (52,859 | ) | $ | 9,910,504 | $ | 15,898,263 | $ | 3,572 | $ | (407,840 | ) | $ | 15,493,995 |
(1) | Consists of pools of Small Business Investment Company debentures issued and guaranteed by the U.S. Small Business Administration, an independent agency of the United States. |
December 31, 2016 | December 31, 2017 | |||||||||||||||||||||||||||||||
(Dollars in thousands) | Amortized Cost | Unrealized Gains | Unrealized Losses | Fair Value | Amortized Cost | Unrealized Gains | Unrealized Losses | Fair Value | ||||||||||||||||||||||||
Held-to-maturity securities, at cost: | ||||||||||||||||||||||||||||||||
U.S. agency debentures (1) | $ | 622,445 | $ | 7,840 | $ | (1,198 | ) | $ | 629,087 | $ | 659,979 | $ | 3,167 | $ | (1,601 | ) | $ | 661,545 | ||||||||||||||
Residential mortgage-backed securities: | ||||||||||||||||||||||||||||||||
Agency-issued mortgage-backed securities | 2,896,179 | 6,919 | (24,526 | ) | 2,878,572 | 6,304,969 | 4,854 | (43,528 | ) | 6,266,295 | ||||||||||||||||||||||
Agency-issued collateralized mortgage obligations—fixed rate | 3,362,598 | 788 | (31,274 | ) | 3,332,112 | 2,829,979 | 23 | (54,372 | ) | 2,775,630 | ||||||||||||||||||||||
Agency-issued collateralized mortgage obligations—variable rate | 312,665 | 176 | (1,339 | ) | 311,502 | 255,782 | 733 | (34 | ) | 256,481 | ||||||||||||||||||||||
Agency-issued commercial mortgage-backed securities | 1,151,363 | 1,237 | (7,638 | ) | 1,144,962 | 1,868,985 | 694 | (25,563 | ) | 1,844,116 | ||||||||||||||||||||||
Municipal bonds and notes | 81,748 | 8 | (1,853 | ) | 79,903 | 743,761 | 3,452 | (3,000 | ) | 744,213 | ||||||||||||||||||||||
Total held-to-maturity securities | $ | 8,426,998 | $ | 16,968 | $ | (67,828 | ) | $ | 8,376,138 | $ | 12,663,455 | $ | 12,923 | $ | (128,098 | ) | $ | 12,548,280 |
(1) | Consists of pools of Small Business Investment Company debentures issued and guaranteed by the U.S. Small Business Administration, an independent agency of the United States. |
June 30, 2017 | June 30, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||
Less than 12 months | 12 months or longer | Total | Less than 12 months | 12 months or longer | Total | |||||||||||||||||||||||||||||||||||||||||||
(Dollars in thousands) | Fair Value of Investments | Unrealized Losses | Fair Value of Investments | Unrealized Losses | Fair Value of Investments | Unrealized Losses | Fair Value of Investments | Unrealized Losses | Fair Value of Investments | Unrealized Losses | Fair Value of Investments | Unrealized Losses | ||||||||||||||||||||||||||||||||||||
Held-to-maturity securities: | ||||||||||||||||||||||||||||||||||||||||||||||||
U.S. agency debentures | $ | 63,160 | $ | (1,291 | ) | $ | — | $ | — | $ | 63,160 | $ | (1,291 | ) | $ | 645,990 | $ | (10,883 | ) | $ | 54,001 | $ | (2,935 | ) | $ | 699,991 | $ | (13,818 | ) | |||||||||||||||||||
Residential mortgage-backed securities: | ||||||||||||||||||||||||||||||||||||||||||||||||
Agency-issued mortgage-backed securities | 2,242,392 | (13,972 | ) | 20,690 | (647 | ) | 2,263,082 | (14,619 | ) | 7,436,980 | (192,418 | ) | 364,687 | (17,730 | ) | 7,801,667 | (210,148 | ) | ||||||||||||||||||||||||||||||
Agency-issued collateralized mortgage obligations—fixed rate | 2,719,351 | (21,887 | ) | 201,313 | (4,340 | ) | 2,920,664 | (26,227 | ) | 776,389 | (24,833 | ) | 1,626,527 | (67,086 | ) | 2,402,916 | (91,919 | ) | ||||||||||||||||||||||||||||||
Agency-issued collateralized mortgage obligations—variable rate | — | — | 17,247 | (57 | ) | 17,247 | (57 | ) | 3,687 | (1 | ) | 8,889 | (30 | ) | 12,576 | (31 | ) | |||||||||||||||||||||||||||||||
Agency-issued commercial mortgage-backed securities | 1,166,556 | (9,159 | ) | 13,658 | (108 | ) | 1,180,214 | (9,267 | ) | 1,460,340 | (38,747 | ) | 715,596 | (24,235 | ) | 2,175,936 | (62,982 | ) | ||||||||||||||||||||||||||||||
Municipal bonds and notes | 39,675 | (345 | ) | 31,607 | (1,053 | ) | 71,282 | (1,398 | ) | 1,046,102 | (28,359 | ) | 15,859 | (583 | ) | 1,061,961 | (28,942 | ) | ||||||||||||||||||||||||||||||
Total temporarily impaired securities (1) | $ | 6,231,134 | $ | (46,654 | ) | $ | 284,515 | $ | (6,205 | ) | $ | 6,515,649 | $ | (52,859 | ) | $ | 11,369,488 | $ | (295,241 | ) | $ | 2,785,559 | $ | (112,599 | ) | $ | 14,155,047 | $ | (407,840 | ) |
(1) | As of June 30, |
December 31, 2016 | December 31, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||
Less than 12 months | 12 months or longer | Total | Less than 12 months | 12 months or longer | Total | |||||||||||||||||||||||||||||||||||||||||||
(Dollars in thousands) | Fair Value of Investments | Unrealized Losses | Fair Value of Investments | Unrealized Losses | Fair Value of Investments | Unrealized Losses | Fair Value of Investments | Unrealized Losses | Fair Value of Investments | Unrealized Losses | Fair Value of Investments | Unrealized Losses | ||||||||||||||||||||||||||||||||||||
Held-to-maturity securities: | ||||||||||||||||||||||||||||||||||||||||||||||||
U.S. agency debentures | $ | 118,721 | $ | (1,198 | ) | $ | — | $ | — | $ | 118,721 | $ | (1,198 | ) | $ | 104,688 | $ | (1,601 | ) | $ | — | $ | — | $ | 104,688 | $ | (1,601 | ) | ||||||||||||||||||||
Residential mortgage-backed securities: | ||||||||||||||||||||||||||||||||||||||||||||||||
Agency-issued mortgage-backed securities | 1,801,861 | (23,558 | ) | 21,917 | (968 | ) | 1,823,778 | (24,526 | ) | 4,270,377 | (34,092 | ) | 408,913 | (9,436 | ) | 4,679,290 | (43,528 | ) | ||||||||||||||||||||||||||||||
Agency-issued collateralized mortgage obligations—fixed rate | 2,729,889 | (25,723 | ) | 228,220 | (5,551 | ) | 2,958,109 | (31,274 | ) | 1,011,709 | (13,631 | ) | 1,741,614 | (40,741 | ) | 2,753,323 | (54,372 | ) | ||||||||||||||||||||||||||||||
Agency-issued collateralized mortgage obligations—variable rate | 251,012 | (1,339 | ) | — | — | 251,012 | (1,339 | ) | — | — | 9,812 | (34 | ) | 9,812 | (34 | ) | ||||||||||||||||||||||||||||||||
Agency-issued commercial mortgage-backed securities | 999,440 | (7,494 | ) | 14,934 | (144 | ) | 1,014,374 | (7,638 | ) | 979,361 | (11,566 | ) | 773,712 | (13,997 | ) | 1,753,073 | (25,563 | ) | ||||||||||||||||||||||||||||||
Municipal bonds and notes | 42,267 | (877 | ) | 30,586 | (976 | ) | 72,853 | (1,853 | ) | 344,796 | (2,103 | ) | 32,844 | (897 | ) | 377,640 | (3,000 | ) | ||||||||||||||||||||||||||||||
Total temporarily impaired securities (1) | $ | 5,943,190 | $ | (60,189 | ) | $ | 295,657 | $ | (7,639 | ) | $ | 6,238,847 | $ | (67,828 | ) | $ | 6,710,931 | $ | (62,993 | ) | $ | 2,966,895 | $ | (65,105 | ) | $ | 9,677,826 | $ | (128,098 | ) |
(1) | As of December 31, |
June 30, 2017 | June 30, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total | One Year or Less | After One Year to Five Years | After Five Years to Ten Years | After Ten Years | Total | One Year or Less | After One Year to Five Years | After Five Years to Ten Years | After Ten Years | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(Dollars in thousands) | Amortized Cost | Fair Value | Amortized Cost | Fair Value | Amortized Cost | Fair Value | Amortized Cost | Fair Value | Amortized Cost | Fair Value | Amortized Cost | Fair Value | Amortized Cost | Fair Value | Amortized Cost | Fair Value | Amortized Cost | Fair Value | Amortized Cost | Fair Value | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
U.S. agency debentures | $ | 641,191 | $ | 647,453 | $ | — | $ | — | $ | 75,321 | $ | 76,035 | $ | 565,870 | $ | 571,418 | $ | — | $ | — | $ | 713,809 | $ | 699,991 | $ | — | $ | — | $ | 122,040 | $ | 120,081 | $ | 591,769 | $ | 579,910 | $ | — | $ | — | ||||||||||||||||||||||||||||||||||||||||
Residential mortgage-backed securities: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Agency-issued mortgage-backed securities | 4,170,585 | 4,168,013 | — | — | 288,094 | 287,229 | 66,949 | 66,539 | 3,815,542 | 3,814,245 | 8,588,483 | 8,379,926 | 707 | 706 | 172,594 | 168,271 | 672,564 | 648,623 | 7,742,618 | 7,562,326 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Agency-issued collateralized mortgage obligations—fixed rate | 3,240,643 | 3,215,269 | — | — | — | — | 150,940 | 149,193 | 3,089,703 | 3,066,076 | 2,494,834 | 2,402,915 | — | — | — | — | 412,530 | 394,779 | 2,082,304 | 2,008,136 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Agency-issued collateralized mortgage obligations—variable rate | 283,519 | 284,043 | — | — | — | — | — | — | 283,519 | 284,043 | 233,285 | 233,945 | — | — | — | — | — | — | 233,285 | 233,945 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Agency-issued commercial mortgage-backed securities | 1,386,455 | 1,379,695 | — | — | — | — | — | — | 1,386,455 | 1,379,695 | 2,335,971 | 2,272,999 | — | — | — | — | — | — | 2,335,971 | 2,272,999 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Municipal bonds and notes | 215,978 | 216,031 | 7,609 | 7,590 | 71,297 | 71,015 | 111,037 | 111,294 | 26,035 | 26,132 | 1,531,881 | 1,504,219 | 7,257 | 7,236 | 75,946 | 74,989 | 259,085 | 250,034 | 1,189,593 | 1,171,960 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total | $ | 9,938,371 | $ | 9,910,504 | $ | 7,609 | $ | 7,590 | $ | 434,712 | $ | 434,279 | $ | 894,796 | $ | 898,444 | $ | 8,601,254 | $ | 8,570,191 | $ | 15,898,263 | $ | 15,493,995 | $ | 7,964 | $ | 7,942 | $ | 370,580 | $ | 363,341 | $ | 1,935,948 | $ | 1,873,346 | $ | 13,583,771 | $ | 13,249,366 |
(Dollars in thousands) | June 30, 2017 | December 31, 2016 | ||||||
Non-marketable and other securities: | ||||||||
Non-marketable securities (fair value accounting): | ||||||||
Venture capital and private equity fund investments (1) | $ | 135,438 | $ | 141,649 | ||||
Other venture capital investments (2) | 1,897 | 2,040 | ||||||
Other securities (fair value accounting) (3) | 788 | 753 | ||||||
Non-marketable securities (equity method accounting) (4): | ||||||||
Venture capital and private equity fund investments | 85,609 | 82,823 | ||||||
Debt funds | 16,476 | 17,020 | ||||||
Other investments | 113,322 | 123,514 | ||||||
Non-marketable securities (cost method accounting): | ||||||||
Venture capital and private equity fund investments (5) | 110,001 | 114,606 | ||||||
Other investments | 26,758 | 27,700 | ||||||
Investments in qualified affordable housing projects, net (6) | 140,381 | 112,447 | ||||||
Total non-marketable and other securities | $ | 630,670 | $ | 622,552 |
(Dollars in thousands) | June 30, 2018 | December 31, 2017 | ||||||
Non-marketable and other equity securities: | ||||||||
Non-marketable securities (fair value accounting): | ||||||||
Consolidated venture capital and private equity fund investments (1) | $ | 133,007 | $ | 128,111 | ||||
Unconsolidated venture capital and private equity fund investments (2) | 211,113 | 98,548 | ||||||
Other investments without a readily determinable fair value (3) | 24,015 | 27,680 | ||||||
Other equity securities in public companies (fair value accounting) (4) | 4,412 | 310 | ||||||
Non-marketable securities (equity method accounting) (5): | ||||||||
Venture capital and private equity fund investments | 102,838 | 89,809 | ||||||
Debt funds | 14,215 | 21,183 | ||||||
Other investments | 111,426 | 111,198 | ||||||
Investments in qualified affordable housing projects, net (6) | 251,479 | 174,214 | ||||||
Total non-marketable and other equity securities | $ | 852,505 | $ | 651,053 |
(1) | The following table shows the amounts of venture capital and private equity fund investments held by the following consolidated funds and our ownership percentage of each fund at June 30, |
June 30, 2017 | December 31, 2016 | June 30, 2018 | December 31, 2017 | |||||||||||||||||||||||||
(Dollars in thousands) | Amount | Ownership % | Amount | Ownership % | Amount | Ownership % | Amount | Ownership % | ||||||||||||||||||||
Strategic Investors Fund, LP | $ | 16,841 | 12.6 | % | $ | 18,459 | 12.6 | % | $ | 13,972 | 12.6 | % | $ | 14,673 | 12.6 | % | ||||||||||||
Capital Preferred Return Fund, LP | 57,640 | 20.0 | 57,627 | 20.0 | 58,148 | 20.0 | 54,147 | 20.0 | ||||||||||||||||||||
Growth Partners, LP | 60,957 | 33.0 | 59,718 | 33.0 | 59,886 | 33.0 | 58,372 | 33.0 | ||||||||||||||||||||
Other private equity fund (i) | — | — | 5,845 | 58.2 | ||||||||||||||||||||||||
Total venture capital and private equity fund investments | $ | 135,438 | $ | 141,649 | ||||||||||||||||||||||||
CP I, LP | 1,001 | 10.7 | 919 | 10.7 | ||||||||||||||||||||||||
Total consolidated venture capital and private equity fund investments | $ | 133,007 | $ | 128,111 |
(2) | The |
June 30, 2017 | December 31, 2016 | |||||||||||||
(Dollars in thousands) | Amount | Ownership % | Amount | Ownership % | ||||||||||
CP I, LP | $ | 1,897 | 10.7 | % | $ | 2,040 | 10.7 | % | ||||||
Total other venture capital investments | $ | 1,897 | $ | 2,040 |
(3) | Effective January 1, 2018, we adopted ASU 2016-01 Recognition and Measurement of Financial Assets and Financial Liabilities which eliminated the concept of cost method accounting. On a prospective basis we will report our other investments in the line item "Other investments without a readily determinable fair value". These investments include direct equity investments in private companies. The carrying value is based on the price at which the investment was acquired plus or minus changes resulting from observable price changes in orderly transactions for identical or similar investments. We consider a range of factors when adjusting the fair value of these investments, including, but not limited to, the term and nature of the investment, local market conditions, values for comparable securities, current and projected operating performance, exit strategies, financing transactions subsequent to the acquisition of the investment and a discount for certain investments that have lock-up restrictions or other features that indicate a discount to fair value is warranted. The following table shows the changes to the carrying amount of other investments without a readily determinable fair value for the six months ended June 30, 2018: |
(Dollars in thousands) | Six months ended June 30, 2018 | |||
Carrying value as of January 1, 2018 | $ | 27,680 | ||
Upward carrying value adjustments | 3,630 | |||
Downward carrying value adjustments | (1,611 | ) | ||
Additions | 3,654 | |||
Sales and dispositions | (9,338 | ) | ||
Carrying value as of June 30, 2018 | $ | 24,015 |
(4) | Investments classified as other equity securities (fair value accounting) represent shares held in public companies as a result of exercising public equity warrant assets and direct equity investments in public companies held by our consolidated funds. Effective January 1, 2018 we adopted ASU 2016-01 Recognition and Measurement of Financial Assets and Financial Liabilities which requires equity securities to be measured at fair value with changes in the fair value recognized through net income. Prior to January 1, 2018 we reported equity securities in public companies that we held as a result of exercising public equity warrant assets in available-for-sale securities. On a prospective basis, these equity securities will be reported in non-marketable and other equity securities. |
The following table shows the carrying value and our ownership percentage of each investment at June 30, |
June 30, 2017 | December 31, 2016 | June 30, 2018 | December 31, 2017 | |||||||||||||||||||||||||
(Dollars in thousands) | Amount | Ownership % | Amount | Ownership % | Amount | Ownership % | Amount | Ownership % | ||||||||||||||||||||
Venture capital and private equity fund investments: | ||||||||||||||||||||||||||||
Strategic Investors Fund II, LP | $ | 6,797 | 8.6 | % | $ | 7,720 | 8.6 | % | $ | 5,003 | 8.6 | % | $ | 6,342 | 8.6 | % | ||||||||||||
Strategic Investors Fund III, LP | 19,443 | 5.9 | 20,449 | 5.9 | 18,858 | 5.9 | 18,758 | 5.9 | ||||||||||||||||||||
Strategic Investors Fund IV, LP | 25,398 | 5.0 | 24,530 | 5.0 | 29,152 | 5.0 | 25,551 | 5.0 | ||||||||||||||||||||
Strategic Investors Fund V funds | 13,557 | Various | 12,029 | Various | 21,247 | Various | 16,856 | Various | ||||||||||||||||||||
CP II, LP (i) | 7,623 | 5.1 | 7,798 | 5.1 | 6,792 | 5.1 | 6,700 | 5.1 | ||||||||||||||||||||
Other venture capital and private equity fund investments | 12,791 | Various | 10,297 | Various | 21,786 | Various | 15,602 | Various | ||||||||||||||||||||
Total venture capital and private equity fund investments | $ | 85,609 | $ | 82,823 | $ | 102,838 | $ | 89,809 | ||||||||||||||||||||
Debt funds: | ||||||||||||||||||||||||||||
Gold Hill Capital 2008, LP (ii) | $ | 13,159 | 15.5 | % | $ | 13,557 | 15.5 | % | $ | 11,153 | 15.5 | % | $ | 18,690 | 15.5 | % | ||||||||||||
Other debt funds | 3,317 | Various | 3,463 | Various | 3,062 | Various | 2,493 | Various | ||||||||||||||||||||
Total debt funds | $ | 16,476 | $ | 17,020 | $ | 14,215 | $ | 21,183 | ||||||||||||||||||||
Other investments: | ||||||||||||||||||||||||||||
SPD Silicon Valley Bank Co., Ltd. | $ | 75,052 | 50.0 | % | $ | 75,296 | 50.0 | % | $ | 75,837 | 50.0 | % | $ | 75,337 | 50.0 | % | ||||||||||||
Other investments | 38,270 | Various | 48,218 | Various | 35,589 | Various | 35,861 | Various | ||||||||||||||||||||
Total other investments | $ | 113,322 | $ | 123,514 | $ | 111,426 | $ | 111,198 |
(i) | Our ownership includes direct ownership of 1.3 percent and indirect ownership interest of 3.8 percent through our investments in Strategic Investors Fund II, LP. |
(ii) | Our ownership includes direct ownership interest of 11.5 percent in the fund and an indirect interest in the fund through our investment in Gold Hill Capital 2008, LLC of 4.0 percent. |
(6) | The following table presents the balances of our investments in qualified affordable housing projects and related unfunded commitments included as a component of “other liabilities” on our consolidated balance sheets at June 30, |
(Dollars in thousands) | June 30, 2017 | December 31, 2016 | June 30, 2018 | December 31, 2017 | ||||||||||||
Investments in qualified affordable housing projects, net | $ | 140,381 | $ | 112,447 | $ | 251,479 | $ | 174,214 | ||||||||
Other liabilities | 86,545 | 58,095 | 161,113 | 100,891 |
Three months ended June 30, | Six months ended June 30, | Three months ended June 30, | Six months ended June 30, | |||||||||||||||||||||||||||||
(Dollars in thousands) | 2017 | 2016 | 2017 | 2016 | 2018 | 2017 | 2018 | 2017 | ||||||||||||||||||||||||
Tax credits and other tax benefits recognized | $ | 3,968 | $ | 4,066 | $ | 8,660 | $ | 8,132 | $ | 5,207 | $ | 3,968 | $ | 10,629 | $ | 8,660 | ||||||||||||||||
Amortization expense included in provision for income taxes (i) | 3,385 | 3,578 | 6,621 | 7,190 | 4,705 | 3,385 | 9,497 | 6,621 |
(i) | All investments are amortized using the proportional amortization method and amortization expense is included in the provision for income taxes. |
Three months ended June 30, | Six months ended June 30, | Three months ended June 30, | Six months ended June 30, | |||||||||||||||||||||||||||||
(Dollars in thousands) | 2017 | 2016 | 2017 | 2016 | 2018 | 2017 | 2018 | 2017 | ||||||||||||||||||||||||
Gross gains on investment securities: | ||||||||||||||||||||||||||||||||
Available-for-sale securities, at fair value (1) | $ | 418 | $ | 12,401 | $ | 1,093 | $ | 14,154 | ||||||||||||||||||||||||
Net gains on non-marketable and other equity securities: | ||||||||||||||||||||||||||||||||
Non-marketable securities (fair value accounting): | ||||||||||||||||||||||||||||||||
Venture capital and private equity fund investments | 12,398 | 7,524 | 19,480 | 10,347 | ||||||||||||||||||||||||||||
Other venture capital investments | — | 5 | — | 13 | ||||||||||||||||||||||||||||
Other securities (fair value accounting) | 116 | 305 | 272 | 368 | ||||||||||||||||||||||||||||
Consolidated venture capital and private equity fund investments | $ | 4,397 | $ | 9,713 | $ | 16,044 | $ | 16,176 | ||||||||||||||||||||||||
Unconsolidated venture capital and private equity fund investments (1) | 19,136 | 6,184 | 30,855 | 9,231 | ||||||||||||||||||||||||||||
Other investments without a readily determinable fair value (1) | 60 | 30 | 1,801 | 3,403 | ||||||||||||||||||||||||||||
Other equity securities in public companies (fair value accounting) (1) | 88 | (25 | ) | (22,194 | ) | (107 | ) | |||||||||||||||||||||||||
Non-marketable securities (equity method accounting): | ||||||||||||||||||||||||||||||||
Venture capital and private equity fund investments | 2,786 | 2,019 | 6,703 | 3,672 | 9,212 | 2,657 | 18,781 | 6,391 | ||||||||||||||||||||||||
Debt funds | 928 | 64 | 1,166 | 964 | 726 | 682 | (1,573 | ) | 251 | |||||||||||||||||||||||
Other investments | 779 | 3,190 | 1,521 | 4,041 | 2,495 | (1,488 | ) | 1,458 | (2,230 | ) | ||||||||||||||||||||||
Non-marketable securities (cost method accounting): | ||||||||||||||||||||||||||||||||
Venture capital and private equity fund investments | 6,870 | 5,514 | 10,029 | 7,852 | ||||||||||||||||||||||||||||
Other investments | 40 | 13 | 3,609 | 13 | ||||||||||||||||||||||||||||
Total gross gains on investment securities | 24,335 | 31,035 | 43,873 | 41,424 | ||||||||||||||||||||||||||||
Gross losses on investment securities: | ||||||||||||||||||||||||||||||||
Available-for-sale securities, at fair value (1) | (541 | ) | (73 | ) | (608 | ) | (2,572 | ) | ||||||||||||||||||||||||
Non-marketable securities (fair value accounting): | ||||||||||||||||||||||||||||||||
Venture capital and private equity fund investments | (2,685 | ) | (5,943 | ) | (3,304 | ) | (13,836 | ) | ||||||||||||||||||||||||
Other venture capital investments | (143 | ) | — | (143 | ) | (38 | ) | |||||||||||||||||||||||||
Other securities (fair value accounting) | (141 | ) | (250 | ) | (379 | ) | (407 | ) | ||||||||||||||||||||||||
Non-marketable securities (equity method accounting): | ||||||||||||||||||||||||||||||||
Venture capital and private equity fund investments | (129 | ) | (466 | ) | (312 | ) | (4,021 | ) | ||||||||||||||||||||||||
Debt funds | (246 | ) | (284 | ) | (915 | ) | (329 | ) | ||||||||||||||||||||||||
Other investments | (2,267 | ) | (312 | ) | (3,751 | ) | (956 | ) | ||||||||||||||||||||||||
Non-marketable securities (cost method accounting): | ||||||||||||||||||||||||||||||||
Venture capital and private equity fund investments (2) | (543 | ) | (270 | ) | (655 | ) | (441 | ) | ||||||||||||||||||||||||
Other investments | (10 | ) | (167 | ) | (206 | ) | (238 | ) | ||||||||||||||||||||||||
Total gross losses on investment securities | (6,705 | ) | (7,765 | ) | (10,273 | ) | (22,838 | ) | ||||||||||||||||||||||||
Gains on investment securities, net | $ | 17,630 | $ | 23,270 | $ | 33,600 | $ | 18,586 | ||||||||||||||||||||||||
Total net gains on non-marketable and other equity securities | $ | 36,114 | $ | 17,753 | $ | 45,172 | $ | 33,115 | ||||||||||||||||||||||||
Less: Net gains (losses) on non-marketable and other equity securities sold | 1,915 | 31 | (21,163 | ) | 3,404 | |||||||||||||||||||||||||||
Unrealized net gains on non-marketable and other equity securities still held | $ | 34,199 | $ | 17,722 | $ | 66,335 | $ | 29,711 |
(1) |
7. | Loans, Allowance for Loan Losses and Allowance for Unfunded Credit Commitments |
(Dollars in thousands) | June 30, 2017 | December 31, 2016 | June 30, 2018 | December 31, 2017 | ||||||||||||
Commercial loans: | ||||||||||||||||
Software/internet | $ | 5,392,022 | $ | 5,627,031 | $ | 6,230,358 | $ | 6,172,531 | ||||||||
Hardware | 1,118,266 | 1,180,398 | 1,269,241 | 1,193,599 | ||||||||||||
Private equity/venture capital | 8,891,662 | 7,691,148 | 12,224,155 | 9,952,377 | ||||||||||||
Life science/healthcare | 1,698,617 | 1,853,004 | 2,087,872 | 1,808,827 | ||||||||||||
Premium wine | 210,909 | 200,156 | 198,813 | 204,105 | ||||||||||||
Other | 443,337 | 393,551 | 316,392 | 365,724 | ||||||||||||
Total commercial loans | 17,754,813 | 16,945,288 | 22,326,831 | 19,697,163 | ||||||||||||
Real estate secured loans: | ||||||||||||||||
Premium wine (1) | 694,060 | 678,166 | 685,357 | 669,053 | ||||||||||||
Consumer loans (2) | 2,127,901 | 1,926,968 | 2,481,062 | 2,300,506 | ||||||||||||
Other | 42,893 | 43,487 | 41,275 | 42,068 | ||||||||||||
Total real estate secured loans | 2,864,854 | 2,648,621 | 3,207,694 | 3,011,627 | ||||||||||||
Construction loans | 80,540 | 64,671 | 64,388 | 68,546 | ||||||||||||
Consumer loans | 276,259 | 241,364 | 397,279 | 328,980 | ||||||||||||
Total loans, net of unearned income (3) | $ | 20,976,466 | $ | 19,899,944 | $ | 25,996,192 | $ | 23,106,316 |
(1) | Included in our premium wine portfolio are gross construction loans of $ |
(2) | Consumer loans secured by real estate at June 30, |
(Dollars in thousands) | June 30, 2017 | December 31, 2016 | June 30, 2018 | December 31, 2017 | ||||||||||||
Loans for personal residence | $ | 1,837,491 | $ | 1,655,349 | $ | 2,144,326 | $ | 1,995,840 | ||||||||
Loans to eligible employees | 223,718 | 199,291 | 266,988 | 243,118 | ||||||||||||
Home equity lines of credit | 66,692 | 72,328 | 69,748 | 61,548 | ||||||||||||
Consumer loans secured by real estate | $ | 2,127,901 | $ | 1,926,968 | $ | 2,481,062 | $ | 2,300,506 |
(3) | Included within our total loan portfolio are credit card loans of $ |
(Dollars in thousands) | June 30, 2017 | December 31, 2016 | June 30, 2018 | December 31, 2017 | ||||||||||||
Commercial loans: | ||||||||||||||||
Software/internet | $ | 5,392,022 | $ | 5,627,031 | $ | 6,230,358 | $ | 6,172,531 | ||||||||
Hardware | 1,118,266 | 1,180,398 | 1,269,241 | 1,193,599 | ||||||||||||
Private equity/venture capital | 8,891,662 | 7,691,148 | 12,224,155 | 9,952,377 | ||||||||||||
Life science/healthcare | 1,698,617 | 1,853,004 | 2,087,872 | 1,808,827 | ||||||||||||
Premium wine | 904,969 | 878,322 | 884,170 | 873,158 | ||||||||||||
Other | 566,770 | 501,709 | 422,055 | 476,338 | ||||||||||||
Total commercial loans | 18,572,306 | 17,731,612 | 23,117,851 | 20,476,830 | ||||||||||||
Consumer loans: | ||||||||||||||||
Real estate secured loans | 2,127,901 | 1,926,968 | 2,481,062 | 2,300,506 | ||||||||||||
Other consumer loans | 276,259 | 241,364 | 397,279 | 328,980 | ||||||||||||
Total consumer loans | 2,404,160 | 2,168,332 | 2,878,341 | 2,629,486 | ||||||||||||
Total loans, net of unearned income | $ | 20,976,466 | $ | 19,899,944 | $ | 25,996,192 | $ | 23,106,316 |
(Dollars in thousands) | 30 - 59 Days Past Due | 60 - 89 Days Past Due | Greater Than 90 Days Past Due | Total Past Due | Current | Loans Past Due 90 Days or More Still Accruing Interest | 30 - 59 Days Past Due | 60 - 89 Days Past Due | Equal to or Greater Than 90 Days Past Due | Total Past Due | Current | Loans Past Due 90 Days or More Still Accruing Interest | ||||||||||||||||||||||||||||||||||||
June 30, 2017: | ||||||||||||||||||||||||||||||||||||||||||||||||
June 30, 2018: | ||||||||||||||||||||||||||||||||||||||||||||||||
Commercial loans: | ||||||||||||||||||||||||||||||||||||||||||||||||
Software/internet | $ | 8,524 | $ | 532 | $ | 79 | $ | 9,135 | $ | 5,303,770 | $ | 79 | $ | 7,996 | $ | 6,271 | $ | 459 | $ | 14,726 | $ | 6,174,542 | $ | 459 | ||||||||||||||||||||||||
Hardware | 4,654 | 47 | 5 | 4,706 | 1,096,455 | 5 | 645 | 40 | 3 | 688 | 1,238,451 | 3 | ||||||||||||||||||||||||||||||||||||
Private equity/venture capital | 48,132 | 7,012 | — | 55,144 | 8,846,984 | — | 62,536 | 10 | — | 62,546 | 12,170,459 | — | ||||||||||||||||||||||||||||||||||||
Life science/healthcare | 794 | 165 | — | 959 | 1,715,883 | — | 671 | 269 | — | 940 | 2,130,976 | — | ||||||||||||||||||||||||||||||||||||
Premium wine | 2,260 | — | — | 2,260 | 900,699 | — | 3,350 | — | — | 3,350 | 879,176 | — | ||||||||||||||||||||||||||||||||||||
Other | 85 | 270 | — | 355 | 571,425 | — | 1 | 3 | — | 4 | 436,011 | — | ||||||||||||||||||||||||||||||||||||
Total commercial loans | 64,449 | 8,026 | 84 | 72,559 | 18,435,216 | 84 | 75,199 | 6,593 | 462 | 82,254 | 23,029,615 | 462 | ||||||||||||||||||||||||||||||||||||
Consumer loans: | ||||||||||||||||||||||||||||||||||||||||||||||||
Real estate secured loans | — | 847 | — | 847 | 2,123,151 | — | — | — | — | — | 2,473,458 | — | ||||||||||||||||||||||||||||||||||||
Other consumer loans | 2 | — | — | 2 | 273,878 | — | 1,489 | — | — | 1,489 | 395,787 | — | ||||||||||||||||||||||||||||||||||||
Total consumer loans | 2 | 847 | — | 849 | 2,397,029 | — | 1,489 | — | — | 1,489 | 2,869,245 | — | ||||||||||||||||||||||||||||||||||||
Total gross loans excluding impaired loans | 64,451 | 8,873 | 84 | 73,408 | 20,832,245 | 84 | 76,688 | 6,593 | 462 | 83,743 | 25,898,860 | 462 | ||||||||||||||||||||||||||||||||||||
Impaired loans | 652 | 3,738 | 27,408 | 31,798 | 166,495 | 1,557 | 2,070 | 36,196 | 39,823 | 138,356 | — | |||||||||||||||||||||||||||||||||||||
Total gross loans | $ | 65,103 | $ | 12,611 | $ | 27,492 | $ | 105,206 | $ | 20,998,740 | $ | 84 | $ | 78,245 | $ | 8,663 | $ | 36,658 | $ | 123,566 | $ | 26,037,216 | $ | 462 | ||||||||||||||||||||||||
December 31, 2016: | ||||||||||||||||||||||||||||||||||||||||||||||||
December 31, 2017: | ||||||||||||||||||||||||||||||||||||||||||||||||
Commercial loans: | ||||||||||||||||||||||||||||||||||||||||||||||||
Software/internet | $ | 37,087 | $ | 1,162 | $ | 6 | $ | 38,255 | $ | 5,507,575 | $ | 6 | $ | 14,257 | $ | 6,526 | $ | 141 | $ | 20,924 | $ | 6,101,147 | $ | 141 | ||||||||||||||||||||||||
Hardware | 5,591 | 36 | 27 | 5,654 | 1,118,065 | 27 | 1,145 | 77 | 50 | 1,272 | 1,163,278 | 50 | ||||||||||||||||||||||||||||||||||||
Private equity/venture capital | 689 | — | — | 689 | 7,747,222 | — | 86,566 | 38,580 | — | 125,146 | 9,835,317 | — | ||||||||||||||||||||||||||||||||||||
Life science/healthcare | 283 | 551 | — | 834 | 1,827,490 | — | 4,390 | 191 | — | 4,581 | 1,841,692 | — | ||||||||||||||||||||||||||||||||||||
Premium wine | 1,003 | 4 | — | 1,007 | 876,185 | — | 418 | — | — | 418 | 871,074 | — | ||||||||||||||||||||||||||||||||||||
Other | 34 | 300 | — | 334 | 504,021 | — | 445 | — | — | 445 | 490,292 | — | ||||||||||||||||||||||||||||||||||||
Total commercial loans | 44,687 | 2,053 | 33 | 46,773 | 17,580,558 | 33 | 107,221 | 45,374 | 191 | 152,786 | 20,302,800 | 191 | ||||||||||||||||||||||||||||||||||||
Consumer loans: | ||||||||||||||||||||||||||||||||||||||||||||||||
Real estate secured loans | 850 | — | — | 850 | 1,923,266 | — | 2,164 | 532 | — | 2,696 | 2,292,980 | — | ||||||||||||||||||||||||||||||||||||
Other consumer loans | 1,402 | — | — | 1,402 | 237,353 | — | 796 | — | — | 796 | 327,234 | — | ||||||||||||||||||||||||||||||||||||
Total consumer loans | 2,252 | — | — | 2,252 | 2,160,619 | — | 2,960 | 532 | — | 3,492 | 2,620,214 | — | ||||||||||||||||||||||||||||||||||||
Total gross loans excluding impaired loans | 46,939 | 2,053 | 33 | 49,025 | 19,741,177 | 33 | 110,181 | 45,906 | 191 | 156,278 | 22,923,014 | 191 | ||||||||||||||||||||||||||||||||||||
Impaired loans | 34,636 | 3,451 | 11,180 | 49,267 | 185,193 | — | 1,344 | 11,902 | 30,403 | 43,649 | 131,212 | — | ||||||||||||||||||||||||||||||||||||
Total gross loans | $ | 81,575 | $ | 5,504 | $ | 11,213 | $ | 98,292 | $ | 19,926,370 | $ | 33 | $ | 111,525 | $ | 57,808 | $ | 30,594 | $ | 199,927 | $ | 23,054,226 | $ | 191 |
(Dollars in thousands) | Impaired loans for which there is a related allowance for loan losses | Impaired loans for which there is no related allowance for loan losses | Total carrying value of impaired loans | Total unpaid principal of impaired loans | Impaired loans for which there is a related allowance for loan losses | Impaired loans for which there is no related allowance for loan losses | Total carrying value of impaired loans | Total unpaid principal of impaired loans | ||||||||||||||||||||||||
June 30, 2017: | ||||||||||||||||||||||||||||||||
June 30, 2018: | ||||||||||||||||||||||||||||||||
Commercial loans: | ||||||||||||||||||||||||||||||||
Software/internet | $ | 98,970 | $ | 30,657 | $ | 129,627 | $ | 154,587 | $ | 58,136 | $ | 44,384 | $ | 102,520 | $ | 126,752 | ||||||||||||||||
Hardware | 29,396 | 624 | 30,020 | 35,251 | 17,093 | 25,201 | 42,294 | 43,403 | ||||||||||||||||||||||||
Private equity/venture capital | 308 | — | 308 | 308 | — | — | — | — | ||||||||||||||||||||||||
Life science/healthcare | 30,898 | 573 | 31,471 | 38,128 | 26,170 | 250 | 26,420 | 31,517 | ||||||||||||||||||||||||
Premium wine | 3,167 | — | 3,167 | 3,188 | 331 | 2,193 | 2,524 | 2,576 | ||||||||||||||||||||||||
Other | 408 | — | 408 | 1,408 | 8 | — | 8 | 36 | ||||||||||||||||||||||||
Total commercial loans | 163,147 | 31,854 | 195,001 | 232,870 | 101,738 | 72,028 | 173,766 | 204,284 | ||||||||||||||||||||||||
Consumer loans: | ||||||||||||||||||||||||||||||||
Real estate secured loans | 1,328 | — | 1,328 | 1,387 | 3,254 | 1,159 | 4,413 | 6,012 | ||||||||||||||||||||||||
Other consumer loans | 1,964 | — | 1,964 | 2,036 | — | — | — | — | ||||||||||||||||||||||||
Total consumer loans | 3,292 | — | 3,292 | 3,423 | 3,254 | 1,159 | 4,413 | 6,012 | ||||||||||||||||||||||||
Total | $ | 166,439 | $ | 31,854 | $ | 198,293 | $ | 236,293 | $ | 104,992 | $ | 73,187 | $ | 178,179 | $ | 210,296 | ||||||||||||||||
December 31, 2016: | ||||||||||||||||||||||||||||||||
December 31, 2017: | ||||||||||||||||||||||||||||||||
Commercial loans: | ||||||||||||||||||||||||||||||||
Software/internet | $ | 121,658 | $ | 1,090 | $ | 122,748 | $ | 129,648 | $ | 49,645 | $ | 61,009 | $ | 110,654 | $ | 129,006 | ||||||||||||||||
Hardware | 65,395 | — | 65,395 | 70,683 | 15,637 | 20,713 | 36,350 | 41,721 | ||||||||||||||||||||||||
Private equity/venture capital | — | — | — | — | 658 | — | 658 | 984 | ||||||||||||||||||||||||
Life science/healthcare | 38,361 | — | 38,361 | 41,130 | 20,521 | 1,166 | 21,687 | 26,360 | ||||||||||||||||||||||||
Premium wine | 3,187 | — | 3,187 | 3,187 | — | 2,877 | 2,877 | 2,911 | ||||||||||||||||||||||||
Other | 867 | — | 867 | 867 | 32 | — | 32 | 165 | ||||||||||||||||||||||||
Total commercial loans | 229,468 | 1,090 | 230,558 | 245,515 | 86,493 | 85,765 | 172,258 | 201,147 | ||||||||||||||||||||||||
Consumer loans: | ||||||||||||||||||||||||||||||||
Real estate secured loans | 1,504 | — | 1,504 | 2,779 | 1,331 | 850 | 2,181 | 3,712 | ||||||||||||||||||||||||
Other consumer loans | 2,398 | — | 2,398 | 2,398 | 422 | — | 422 | 436 | ||||||||||||||||||||||||
Total consumer loans | 3,902 | — | 3,902 | 5,177 | 1,753 | 850 | 2,603 | 4,148 | ||||||||||||||||||||||||
Total | $ | 233,370 | $ | 1,090 | $ | 234,460 | $ | 250,692 | $ | 88,246 | $ | 86,615 | $ | 174,861 | $ | 205,295 |
Three months ended June 30, | Average impaired loans | Interest income on impaired loans | Average impaired loans | Interest income recognized on impaired loans | ||||||||||||||||||||||||||||
(Dollars in thousands) | 2017 | 2016 | 2017 | 2016 | 2018 | 2017 | 2018 | 2017 | ||||||||||||||||||||||||
Commercial loans: | ||||||||||||||||||||||||||||||||
Software/internet | $ | 136,374 | $ | 101,168 | $ | 711 | $ | 438 | $ | 110,101 | $ | 136,374 | $ | 315 | $ | 711 | ||||||||||||||||
Hardware | 29,771 | 23,221 | 510 | 442 | 37,058 | 29,771 | 237 | 510 | ||||||||||||||||||||||||
Private equity/venture capital | 327 | — | 3 | — | 72 | 327 | — | 3 | ||||||||||||||||||||||||
Life science/healthcare | 36,033 | 33,324 | 191 | — | 21,790 | 36,033 | 5 | 191 | ||||||||||||||||||||||||
Premium wine | 3,221 | 2,040 | 38 | 18 | 2,604 | 3,221 | 36 | 38 | ||||||||||||||||||||||||
Other | 708 | 5,485 | — | 7 | 379 | 708 | — | — | ||||||||||||||||||||||||
Total commercial loans | 206,434 | 165,238 | 1,453 | 905 | 172,004 | 206,434 | 593 | 1,453 | ||||||||||||||||||||||||
Consumer loans: | ||||||||||||||||||||||||||||||||
Real estate secured loans | 1,360 | 127 | — | — | 4,466 | 1,360 | 3 | — | ||||||||||||||||||||||||
Other consumer loans | 1,679 | 786 | — | 11 | 693 | 1,679 | — | — | ||||||||||||||||||||||||
Total consumer loans | 3,039 | 913 | — | 11 | 5,159 | 3,039 | 3 | — | ||||||||||||||||||||||||
Total average impaired loans | $ | 209,473 | $ | 166,151 | $ | 1,453 | $ | 916 | $ | 177,163 | $ | 209,473 | $ | 596 | $ | 1,453 |
Six months ended June 30, | Average impaired loans | Interest income on impaired loans | Average impaired loans | Interest income recognized on impaired loans | ||||||||||||||||||||||||||||
(Dollars in thousands) | 2017 | 2016 | 2017 | 2016 | 2018 | 2017 | 2018 | 2017 | ||||||||||||||||||||||||
Commercial loans: | ||||||||||||||||||||||||||||||||
Software/internet | $ | 123,145 | $ | 95,268 | $ | 938 | $ | 763 | $ | 109,444 | $ | 123,145 | $ | 562 | $ | 938 | ||||||||||||||||
Hardware | 31,940 | 23,824 | 943 | 749 | 37,742 | 31,940 | 289 | 943 | ||||||||||||||||||||||||
Private equity/venture capital | 342 | — | 5 | — | 187 | 342 | — | 5 | ||||||||||||||||||||||||
Life science/healthcare | 37,488 | 36,507 | 291 | — | 22,234 | 37,488 | 11 | 291 | ||||||||||||||||||||||||
Premium wine | 3,217 | 2,106 | 76 | 35 | 2,686 | 3,217 | 72 | 76 | ||||||||||||||||||||||||
Other | 885 | 4,669 | — | 15 | 195 | 885 | — | — | ||||||||||||||||||||||||
Total commercial loans | 197,017 | 162,374 | 2,253 | 1,562 | 172,488 | 197,017 | 934 | 2,253 | ||||||||||||||||||||||||
Consumer loans: | ||||||||||||||||||||||||||||||||
Real estate secured loans | 1,424 | 131 | — | — | 3,765 | 1,424 | 8 | — | ||||||||||||||||||||||||
Other consumer loans | 1,914 | 410 | — | 11 | 716 | 1,914 | — | — | ||||||||||||||||||||||||
Total consumer loans | 3,338 | 541 | — | 11 | 4,481 | 3,338 | 8 | — | ||||||||||||||||||||||||
Total average impaired loans | $ | 200,355 | $ | 162,915 | $ | 2,253 | $ | 1,573 | $ | 176,969 | $ | 200,355 | $ | 942 | $ | 2,253 |
Three months ended June 30, 2017 | Beginning Balance March 31, 2017 | Charge-offs | Recoveries | Provision for (Reduction of) Loan Losses | Foreign Currency Translation Adjustments | Ending Balance June 30, 2017 | ||||||||||||||||||||||||||||||||||||||||||
Three months ended June 30, 2018 | Beginning Balance March 31, 2018 | Charge-offs | Recoveries | Provision for (Reduction of) Loan Losses | Foreign Currency Translation Adjustments | Ending Balance June 30, 2018 | ||||||||||||||||||||||||||||||||||||||||||
(Dollars in thousands) | Beginning Balance March 31, 2017 | Charge-offs | Recoveries | Provision for (Reduction of) Loan Losses | Foreign Currency Translation Adjustments | Ending Balance June 30, 2017 | ||||||||||||||||||||||||||||||||||||||||||
Commercial loans: | ||||||||||||||||||||||||||||||||||||||||||||||||
Software/internet | $ | 109,502 | $ | (19,401 | ) | $ | 1,236 | $ | 1,527 | $ | 73 | $ | 92,937 | $ | 103,295 | $ | (13,402 | ) | $ | 404 | $ | 13,179 | $ | (828 | ) | $ | 102,648 | |||||||||||||||||||||
Hardware | 23,284 | (249 | ) | 77 | 4,474 | 214 | 27,800 | 28,472 | (461 | ) | 643 | 6,447 | (406 | ) | 34,695 | |||||||||||||||||||||||||||||||||
Private equity/venture capital | 57,078 | — | — | 9,263 | 444 | 66,785 | 91,618 | (112 | ) | — | (2,237 | ) | 140 | 89,409 | ||||||||||||||||||||||||||||||||||
Life science/healthcare | 31,542 | (4,678 | ) | 8 | 819 | 39 | 27,730 | 25,806 | — | 3 | 9,876 | (621 | ) | 35,064 | ||||||||||||||||||||||||||||||||||
Premium wine | 4,343 | — | — | (1,155 | ) | (55 | ) | 3,133 | 3,365 | — | — | 78 | (5 | ) | 3,438 | |||||||||||||||||||||||||||||||||
Other | 4,377 | (753 | ) | 180 | 316 | 15 | 4,135 | 3,482 | (1,164 | ) | 566 | 13 | (1 | ) | 2,896 | |||||||||||||||||||||||||||||||||
Total commercial loans | 230,126 | (25,081 | ) | 1,501 | 15,244 | 730 | 222,520 | 256,038 | (15,139 | ) | 1,616 | 27,356 | (1,721 | ) | 268,150 | |||||||||||||||||||||||||||||||||
Total consumer loans | 13,004 | — | 1,034 | (59 | ) | (3 | ) | 13,976 | 18,256 | (289 | ) | 310 | 300 | (18 | ) | 18,559 | ||||||||||||||||||||||||||||||||
Total allowance for loan losses | $ | 243,130 | $ | (25,081 | ) | $ | 2,535 | $ | 15,185 | $ | 727 | $ | 236,496 | $ | 274,294 | $ | (15,428 | ) | $ | 1,926 | $ | 27,656 | $ | (1,739 | ) | $ | 286,709 |
Three months ended June 30, 2016 | Beginning Balance March 31, 2016 | Charge-offs | Recoveries | Provision for (Reduction of) Loan Losses | Foreign Currency Translation Adjustments | Ending Balance June 30, 2016 | ||||||||||||||||||||||||||||||||||||||||||
Three months ended June 30, 2017 | Beginning Balance March 31, 2017 | Charge-offs | Recoveries | Provision for (Reduction of) Loan Losses | Foreign Currency Translation Adjustments | Ending Balance June 30, 2017 | ||||||||||||||||||||||||||||||||||||||||||
(Dollars in thousands) | Beginning Balance March 31, 2016 | Charge-offs | Recoveries | Provision for (Reduction of) Loan Losses | Foreign Currency Translation Adjustments | Ending Balance June 30, 2016 | ||||||||||||||||||||||||||||||||||||||||||
Commercial loans: | ||||||||||||||||||||||||||||||||||||||||||||||||
Software/internet | $ | 106,898 | $ | (18,055 | ) | $ | 260 | $ | 16,215 | $ | (1,089 | ) | $ | 104,229 | $ | 109,502 | $ | (19,401 | ) | $ | 1,236 | $ | 1,527 | $ | 73 | $ | 92,937 | |||||||||||||||||||||
Hardware | 23,836 | (2,015 | ) | 183 | 2,003 | (136 | ) | 23,871 | 23,284 | (249 | ) | 77 | 4,474 | 214 | 27,800 | |||||||||||||||||||||||||||||||||
Private equity/venture capital | 43,686 | — | — | 6,562 | (441 | ) | 49,807 | 57,078 | — | — | 9,263 | 444 | 66,785 | |||||||||||||||||||||||||||||||||||
Life science/healthcare | 30,285 | (606 | ) | 185 | 12,853 | (865 | ) | 41,852 | 31,542 | (4,678 | ) | 8 | 819 | 39 | 27,730 | |||||||||||||||||||||||||||||||||
Premium wine | 5,244 | — | — | (465 | ) | 31 | 4,810 | 4,343 | — | — | (1,155 | ) | (55 | ) | 3,133 | |||||||||||||||||||||||||||||||||
Other | 9,547 | — | 599 | (714 | ) | 48 | 9,480 | 4,377 | (753 | ) | 180 | 316 | 15 | 4,135 | ||||||||||||||||||||||||||||||||||
Total commercial loans | 219,496 | (20,676 | ) | 1,227 | 36,454 | (2,452 | ) | 234,049 | 230,126 | (25,081 | ) | 1,501 | 15,244 | 730 | 222,520 | |||||||||||||||||||||||||||||||||
Total consumer loans | 10,753 | — | 34 | (121 | ) | 8 | 10,674 | 13,004 | — | 1,034 | (59 | ) | (3 | ) | 13,976 | |||||||||||||||||||||||||||||||||
Total allowance for loan losses | $ | 230,249 | $ | (20,676 | ) | $ | 1,261 | $ | 36,333 | $ | (2,444 | ) | $ | 244,723 | $ | 243,130 | $ | (25,081 | ) | $ | 2,535 | $ | 15,185 | $ | 727 | $ | 236,496 |
Six months ended June 30, 2017 | Beginning Balance December 31, 2016 | Charge-offs | Recoveries | Provision for (Reduction of) Loan Losses | Foreign Currency Translation Adjustments | Ending Balance June 30, 2017 | ||||||||||||||||||||||||||||||||||||||||||
Six months ended June 30, 2018 | Beginning Balance December 31, 2017 | Charge-offs | Recoveries | Provision for (Reduction of) Loan Losses | Foreign Currency Translation Adjustments | Ending Balance June 30, 2018 | ||||||||||||||||||||||||||||||||||||||||||
(Dollars in thousands) | Beginning Balance December 31, 2016 | Charge-offs | Recoveries | Provision for (Reduction of) Loan Losses | Foreign Currency Translation Adjustments | Ending Balance June 30, 2017 | ||||||||||||||||||||||||||||||||||||||||||
Commercial loans: | ||||||||||||||||||||||||||||||||||||||||||||||||
Software/internet | $ | 97,388 | $ | (27,381 | ) | $ | 2,407 | $ | 20,246 | $ | 277 | $ | 92,937 | $ | 96,104 | $ | (20,073 | ) | $ | 977 | $ | 25,980 | $ | (340 | ) | $ | 102,648 | |||||||||||||||||||||
Hardware | 31,166 | (4,273 | ) | 344 | 394 | 169 | 27,800 | 27,614 | (3,414 | ) | 1,231 | 9,551 | (287 | ) | 34,695 | |||||||||||||||||||||||||||||||||
Private equity/venture capital | 50,299 | — | — | 15,969 | 517 | 66,785 | 82,468 | (112 | ) | 10 | 6,568 | 475 | 89,409 | |||||||||||||||||||||||||||||||||||
Life science/healthcare | 25,446 | (6,410 | ) | 44 | 8,527 | 123 | 27,730 | 24,924 | (864 | ) | 56 | 11,507 | (559 | ) | 35,064 | |||||||||||||||||||||||||||||||||
Premium wine | 4,115 | — | — | (929 | ) | (53 | ) | 3,133 | 3,532 | — | — | (83 | ) | (11 | ) | 3,438 | ||||||||||||||||||||||||||||||||
Other | 4,768 | (1,047 | ) | 477 | (74 | ) | 11 | 4,135 | 3,941 | (1,263 | ) | 1,103 | (893 | ) | 8 | 2,896 | ||||||||||||||||||||||||||||||||
Total commercial loans | 213,182 | (39,111 | ) | 3,272 | 44,133 | 1,044 | 222,520 | 238,583 | (25,726 | ) | 3,377 | 52,630 | (714 | ) | 268,150 | |||||||||||||||||||||||||||||||||
Consumer loans | 12,184 | — | 1,055 | 731 | 6 | 13,976 | ||||||||||||||||||||||||||||||||||||||||||
Total consumer loans | 16,441 | (289 | ) | 337 | 2,022 | 48 | 18,559 | |||||||||||||||||||||||||||||||||||||||||
Total allowance for loan losses | $ | 225,366 | $ | (39,111 | ) | $ | 4,327 | $ | 44,864 | $ | 1,050 | $ | 236,496 | $ | 255,024 | $ | (26,015 | ) | $ | 3,714 | $ | 54,652 | $ | (666 | ) | $ | 286,709 |
Six months ended June 30, 2016 | Beginning Balance December 31, 2015 | Charge-offs | Recoveries | Provision for (Reduction of) Loan Losses | Foreign Currency Translation Adjustments | Ending Balance June 30, 2016 | ||||||||||||||||||||||||||||||||||||||||||
Six months ended June 30, 2017 | Beginning Balance December 31, 2016 | Charge-offs | Recoveries | Provision for (Reduction of) Loan Losses | Foreign Currency Translation Adjustments | Ending Balance June 30, 2017 | ||||||||||||||||||||||||||||||||||||||||||
(Dollars in thousands) | Beginning Balance December 31, 2015 | Charge-offs | Recoveries | Provision for (Reduction of) Loan Losses | Foreign Currency Translation Adjustments | Ending Balance June 30, 2016 | ||||||||||||||||||||||||||||||||||||||||||
Commercial loans: | ||||||||||||||||||||||||||||||||||||||||||||||||
Software/internet | $ | 103,045 | $ | (40,216 | ) | $ | 4,220 | $ | 37,847 | $ | (667 | ) | $ | 104,229 | $ | 97,388 | $ | (27,381 | ) | $ | 2,407 | $ | 20,246 | $ | 277 | $ | 92,937 | |||||||||||||||||||||
Hardware | 23,085 | (3,501 | ) | 422 | 3,962 | (97 | ) | 23,871 | 31,166 | (4,273 | ) | 344 | 394 | 169 | 27,800 | |||||||||||||||||||||||||||||||||
Private equity/venture capital | 35,282 | — | — | 14,805 | (280 | ) | 49,807 | 50,299 | — | — | 15,969 | 517 | 66,785 | |||||||||||||||||||||||||||||||||||
Life science/healthcare | 36,576 | (3,001 | ) | 676 | 8,550 | (949 | ) | 41,852 | 25,446 | (6,410 | ) | 44 | 8,527 | 123 | 27,730 | |||||||||||||||||||||||||||||||||
Premium wine | 5,205 | — | — | (426 | ) | 31 | 4,810 | 4,115 | — | — | (929 | ) | (53 | ) | 3,133 | |||||||||||||||||||||||||||||||||
Other | 4,252 | (30 | ) | 673 | 4,431 | 154 | 9,480 | 4,768 | (1,047 | ) | 477 | (74 | ) | 11 | 4,135 | |||||||||||||||||||||||||||||||||
Total commercial loans | 207,445 | (46,748 | ) | 5,991 | 69,169 | (1,808 | ) | 234,049 | 213,182 | (39,111 | ) | 3,272 | 44,133 | 1,044 | 222,520 | |||||||||||||||||||||||||||||||||
Consumer loans | 10,168 | (102 | ) | 83 | 505 | 20 | 10,674 | |||||||||||||||||||||||||||||||||||||||||
Total consumer loans | 12,184 | — | 1,055 | 731 | 6 | 13,976 | ||||||||||||||||||||||||||||||||||||||||||
Total allowance for loan losses | $ | 217,613 | $ | (46,850 | ) | $ | 6,074 | $ | 69,674 | $ | (1,788 | ) | $ | 244,723 | $ | 225,366 | $ | (39,111 | ) | $ | 4,327 | $ | 44,864 | $ | 1,050 | $ | 236,496 |
Three months ended June 30, | Six months ended June 30, | Three months ended June 30, | Six months ended June 30, | |||||||||||||||||||||||||||||
(Dollars in thousands) | 2017 | 2016 | 2017 | 2016 | 2018 | 2017 | 2018 | 2017 | ||||||||||||||||||||||||
Beginning balance | $ | 46,335 | $ | 34,541 | $ | 45,265 | $ | 34,415 | $ | 52,823 | $ | 46,335 | $ | 51,770 | $ | 45,265 | ||||||||||||||||
Provision for unfunded credit commitments | 621 | 413 | 1,676 | 547 | 1,424 | 621 | 2,400 | 1,676 | ||||||||||||||||||||||||
Foreign currency translation adjustments | 44 | (65 | ) | 59 | (73 | ) | (143 | ) | 44 | (66 | ) | 59 | ||||||||||||||||||||
Ending balance (1) | $ | 47,000 | $ | 34,889 | $ | 47,000 | $ | 34,889 | $ | 54,104 | $ | 47,000 | $ | 54,104 | $ | 47,000 |
(1) | See Note |
June 30, 2017 | December 31, 2016 | June 30, 2018 | December 31, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Individually Evaluated for Impairment | Collectively Evaluated for Impairment | Individually Evaluated for Impairment | Collectively Evaluated for Impairment | Individually Evaluated for Impairment | Collectively Evaluated for Impairment | Individually Evaluated for Impairment | Collectively Evaluated for Impairment | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(Dollars in thousands) | Allowance for loan losses | Recorded investment in loans | Allowance for loan losses | Recorded investment in loans | Allowance for loan losses | Recorded investment in loans | Allowance for loan losses | Recorded investment in loans | Allowance for loan losses | Recorded investment in loans | Allowance for loan losses | Recorded investment in loans | Allowance for loan losses | Recorded investment in loans | Allowance for loan losses | Recorded investment in loans | ||||||||||||||||||||||||||||||||||||||||||||||||
Commercial loans: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Software/internet | $ | 30,291 | $ | 129,627 | $ | 62,646 | $ | 5,262,395 | $ | 28,245 | $ | 122,748 | $ | 69,143 | $ | 5,504,283 | $ | 25,320 | $ | 102,520 | $ | 77,328 | $ | 6,127,838 | $ | 23,088 | $ | 110,654 | $ | 73,016 | $ | 6,061,877 | ||||||||||||||||||||||||||||||||
Hardware | 5,329 | 30,020 | 22,471 | 1,088,246 | 9,995 | 65,395 | 21,171 | 1,115,003 | 13,392 | 42,294 | 21,303 | 1,226,947 | 8,450 | 36,350 | 19,164 | 1,157,249 | ||||||||||||||||||||||||||||||||||||||||||||||||
Private equity/venture capital | 31 | 308 | 66,754 | 8,891,354 | — | — | 50,299 | 7,691,148 | — | — | 89,409 | 12,224,155 | 330 | 658 | 82,138 | 9,951,719 | ||||||||||||||||||||||||||||||||||||||||||||||||
Life science/healthcare | 11,223 | 31,471 | 16,507 | 1,667,146 | 8,709 | 38,361 | 16,737 | 1,814,643 | 14,442 | 26,420 | 20,622 | 2,061,452 | 9,315 | 21,687 | 15,609 | 1,787,140 | ||||||||||||||||||||||||||||||||||||||||||||||||
Premium wine | 290 | 3,167 | 2,843 | 901,802 | 520 | 3,187 | 3,595 | 875,135 | — | 2,524 | 3,438 | 881,646 | — | 2,877 | 3,532 | 870,281 | ||||||||||||||||||||||||||||||||||||||||||||||||
Other | 270 | 408 | 3,865 | 566,362 | 233 | 867 | 4,535 | 500,842 | 8 | 8 | 2,888 | 422,047 | 32 | 32 | 3,909 | 476,306 | ||||||||||||||||||||||||||||||||||||||||||||||||
Total commercial loans | 47,434 | 195,001 | 175,086 | 18,377,305 | 47,702 | 230,558 | 165,480 | 17,501,054 | 53,162 | 173,766 | 214,988 | 22,944,085 | 41,215 | 172,258 | 197,368 | 20,304,572 | ||||||||||||||||||||||||||||||||||||||||||||||||
Total consumer loans | 936 | 3,292 | 13,040 | 2,400,868 | 1,123 | 3,902 | 11,061 | 2,164,430 | 515 | 4,413 | 18,044 | 2,873,928 | 578 | 2,603 | 15,863 | 2,626,883 | ||||||||||||||||||||||||||||||||||||||||||||||||
Total | $ | 48,370 | $ | 198,293 | $ | 188,126 | $ | 20,778,173 | $ | 48,825 | $ | 234,460 | $ | 176,541 | $ | 19,665,484 | $ | 53,677 | $ | 178,179 | $ | 233,032 | $ | 25,818,013 | $ | 41,793 | $ | 174,861 | $ | 213,231 | $ | 22,931,455 |
(Dollars in thousands) | Pass | Performing (Criticized) | Performing Impaired (Criticized) | Nonperforming Impaired (Nonaccrual) | Total | Pass | Performing (Criticized) | Performing Impaired (Criticized) | Nonperforming Impaired (Nonaccrual) | Total | ||||||||||||||||||||||||||||||
June 30, 2017: | ||||||||||||||||||||||||||||||||||||||||
June 30, 2018: | ||||||||||||||||||||||||||||||||||||||||
Commercial loans: | ||||||||||||||||||||||||||||||||||||||||
Software/internet | $ | 4,922,821 | $ | 390,084 | $ | 42,413 | $ | 87,214 | $ | 5,442,532 | $ | 5,645,661 | $ | 543,607 | $ | 25,369 | $ | 77,151 | $ | 6,291,788 | ||||||||||||||||||||
Hardware | 952,429 | 148,732 | 23,710 | 6,310 | 1,131,181 | 1,163,629 | 75,510 | 25,201 | 17,093 | 1,281,433 | ||||||||||||||||||||||||||||||
Private equity/venture capital | 8,896,099 | 6,029 | 308 | — | 8,902,436 | 12,229,454 | 3,551 | — | — | 12,233,005 | ||||||||||||||||||||||||||||||
Life science/healthcare | 1,576,136 | 140,706 | 8,972 | 22,499 | 1,748,313 | 1,909,151 | 222,765 | 250 | 26,170 | 2,158,336 | ||||||||||||||||||||||||||||||
Premium wine | 888,305 | 14,654 | 2,718 | 449 | 906,126 | 840,649 | 41,877 | 2,193 | 331 | 885,050 | ||||||||||||||||||||||||||||||
Other | 550,943 | 20,837 | — | 408 | 572,188 | 432,652 | 3,363 | — | 8 | 436,023 | ||||||||||||||||||||||||||||||
Total commercial loans | 17,786,733 | 721,042 | 78,121 | 116,880 | 18,702,776 | 22,221,196 | 890,673 | 53,013 | 120,753 | 23,285,635 | ||||||||||||||||||||||||||||||
Consumer loans: | ||||||||||||||||||||||||||||||||||||||||
Real estate secured loans | 2,112,234 | 11,764 | — | 1,328 | 2,125,326 | 2,462,007 | 11,451 | 324 | 4,089 | 2,477,871 | ||||||||||||||||||||||||||||||
Other consumer loans | 273,405 | 475 | — | 1,964 | 275,844 | 396,902 | 374 | — | — | 397,276 | ||||||||||||||||||||||||||||||
Total consumer loans | 2,385,639 | 12,239 | — | 3,292 | 2,401,170 | 2,858,909 | 11,825 | 324 | 4,089 | 2,875,147 | ||||||||||||||||||||||||||||||
Total gross loans | $ | 20,172,372 | $ | 733,281 | $ | 78,121 | $ | 120,172 | $ | 21,103,946 | $ | 25,080,105 | $ | 902,498 | $ | 53,337 | $ | 124,842 | $ | 26,160,782 | ||||||||||||||||||||
December 31, 2016: | ||||||||||||||||||||||||||||||||||||||||
December 31, 2017: | ||||||||||||||||||||||||||||||||||||||||
Commercial loans: | ||||||||||||||||||||||||||||||||||||||||
Software/internet | $ | 4,924,923 | $ | 620,907 | $ | 46,143 | $ | 76,605 | $ | 5,668,578 | $ | 5,655,739 | $ | 466,332 | $ | 31,794 | $ | 78,860 | $ | 6,232,725 | ||||||||||||||||||||
Hardware | 985,889 | 137,830 | 58,814 | 6,581 | 1,189,114 | 1,112,574 | 51,976 | 20,165 | 16,185 | 1,200,900 | ||||||||||||||||||||||||||||||
Private equity/venture capital | 7,747,317 | 594 | — | — | 7,747,911 | 9,955,082 | 5,381 | — | 658 | 9,961,121 | ||||||||||||||||||||||||||||||
Life science/healthcare | 1,707,499 | 120,825 | 6,578 | 31,783 | 1,866,685 | 1,720,613 | 125,660 | 1,167 | 20,520 | 1,867,960 | ||||||||||||||||||||||||||||||
Premium wine | 865,354 | 11,838 | 2,696 | 491 | 880,379 | 834,537 | 36,955 | 2,476 | 401 | 874,369 | ||||||||||||||||||||||||||||||
Other | 480,845 | 23,510 | 464 | 403 | 505,222 | 469,721 | 21,016 | — | 32 | 490,769 | ||||||||||||||||||||||||||||||
Total commercial loans | 16,711,827 | 915,504 | 114,695 | 115,863 | 17,857,889 | 19,748,266 | 707,320 | 55,602 | 116,656 | 20,627,844 | ||||||||||||||||||||||||||||||
Consumer loans: | ||||||||||||||||||||||||||||||||||||||||
Real estate secured loans | 1,914,512 | 9,604 | — | 1,504 | 1,925,620 | 2,282,375 | 13,301 | — | 2,181 | 2,297,857 | ||||||||||||||||||||||||||||||
Other consumer loans | 238,256 | 499 | 786 | 1,612 | 241,153 | 326,851 | 1,179 | — | 422 | 328,452 | ||||||||||||||||||||||||||||||
Total consumer loans | 2,152,768 | 10,103 | 786 | 3,116 | 2,166,773 | 2,609,226 | 14,480 | — | 2,603 | 2,626,309 | ||||||||||||||||||||||||||||||
Total gross loans | $ | 18,864,595 | $ | 925,607 | $ | 115,481 | $ | 118,979 | $ | 20,024,662 | $ | 22,357,492 | $ | 721,800 | $ | 55,602 | $ | 119,259 | $ | 23,254,153 |
(Dollars in thousands) | June 30, 2017 | December 31, 2016 | June 30, 2018 | December 31, 2017 | ||||||||||||
Loans modified in TDRs: | ||||||||||||||||
Commercial loans: | ||||||||||||||||
Software/internet | $ | 67,518 | $ | 52,646 | $ | 50,202 | $ | 73,455 | ||||||||
Hardware | 5,582 | 14,870 | 49,834 | 51,132 | ||||||||||||
Private equity/venture capital | — | 350 | ||||||||||||||
Life science/healthcare | 25,385 | 24,176 | 25,460 | 19,235 | ||||||||||||
Premium wine | 3,304 | 3,194 | 3,048 | 3,198 | ||||||||||||
Other | — | 387 | ||||||||||||||
Total commercial loans | 101,789 | 95,273 | 128,544 | 147,370 | ||||||||||||
Consumer loans: | ||||||||||||||||
Other consumer loans | 436 | 786 | 325 | 423 | ||||||||||||
Total | $ | 102,225 | $ | 96,059 | $ | 128,869 | $ | 147,793 |
Three months ended June 30, | Six months ended June 30, | Three months ended June 30, | Six months ended June 30, | |||||||||||||||||||||||||||||
(Dollars in thousands) | 2017 | 2016 | 2017 | 2016 | 2018 | 2017 | 2018 | 2017 | ||||||||||||||||||||||||
Loans modified in TDRs during the period: | ||||||||||||||||||||||||||||||||
Commercial loans: | ||||||||||||||||||||||||||||||||
Software/internet | $ | 16,135 | $ | 4,402 | $ | 22,242 | $ | 5,525 | $ | 14,783 | $ | 16,135 | $ | 14,783 | $ | 22,242 | ||||||||||||||||
Hardware | 1,954 | — | 3,448 | — | ||||||||||||||||||||||||||||
Private equity/venture capital | — | — | — | — | ||||||||||||||||||||||||||||
Life science/healthcare | 4,588 | — | 4,588 | — | 6,231 | 4,588 | 7,461 | 4,588 | ||||||||||||||||||||||||
Premium wine | 190 | — | 190 | 506 | — | 190 | — | 190 | ||||||||||||||||||||||||
Total commercial loans | 20,913 | 4,402 | 27,020 | 6,031 | 22,968 | 20,913 | 25,692 | 27,020 | ||||||||||||||||||||||||
Consumer loans: | ||||||||||||||||||||||||||||||||
Other consumer loans | — | 786 | — | 786 | — | — | 325 | — | ||||||||||||||||||||||||
Total consumer loans | — | — | 325 | — | ||||||||||||||||||||||||||||
Total loans modified in TDRs during the period (1) | $ | 20,913 | $ | 5,188 | $ | 27,020 | $ | 6,817 | $ | 22,968 | $ | 20,913 | $ | 26,017 | $ | 27,020 |
(1) | There were$8.5 million of partial charge-offs for both the three and six months endedJune 30, 2018 and $12.5 million and $15.1 million of partial charge-offs during the three and six months ended June 30, 2017, |
Three months ended June 30, | Six months ended June 30, | Three months ended June 30, | Six months ended June 30, | |||||||||||||||||||||||||||||
(Dollars in thousands) | 2017 | 2016 | 2017 | 2016 | 2018 | 2017 | 2018 | 2017 | ||||||||||||||||||||||||
TDRs modified within the previous 12 months that defaulted during the period: | ||||||||||||||||||||||||||||||||
Commercial loans: | ||||||||||||||||||||||||||||||||
Software/internet | $ | — | $ | 1,474 | $ | — | $ | 1,474 | $ | 19,625 | $ | — | $ | 22,657 | $ | — | ||||||||||||||||
Hardware | 3,449 | — | 3,449 | — | ||||||||||||||||||||||||||||
Life science/healthcare | 1,230 | — | 1,230 | — | ||||||||||||||||||||||||||||
Premium wine | 190 | 506 | 190 | 506 | — | 190 | — | 190 | ||||||||||||||||||||||||
Total TDRs modified within the previous 12 months that defaulted in the period | $ | 190 | $ | 1,980 | $ | 190 | $ | 1,980 | $ | 24,304 | $ | 190 | $ | 27,336 | $ | 190 |
8. | Short-Term Borrowings and Long-Term Debt |
Carrying Value | Carrying Value | |||||||||||||||||||||||||||
(Dollars in thousands) | Maturity | Principal value at June 30, 2017 | June 30, 2017 | December 31, 2016 | Maturity | Principal value at June 30, 2018 | June 30, 2018 | December 31, 2017 | ||||||||||||||||||||
Short-term borrowings: | ||||||||||||||||||||||||||||
Short-term FHLB advances | $ | — | $ | — | $ | 500,000 | July 2, 2018 | $ | 400,000 | $ | 400,000 | $ | 700,000 | |||||||||||||||
Federal funds purchased | — | — | 330,000 | |||||||||||||||||||||||||
Other short-term borrowings | (1) | 470 | 470 | 12,668 | (1) | 17,246 | 17,246 | 3,730 | ||||||||||||||||||||
Total short-term borrowings | $ | 470 | $ | 512,668 | $ | 417,246 | $ | 1,033,730 | ||||||||||||||||||||
Long-term debt: | ||||||||||||||||||||||||||||
3.50% Senior Notes | January 29, 2025 | $ | 350,000 | $ | 347,140 | $ | 346,979 | January 29, 2025 | $ | 350,000 | $ | 347,470 | $ | 347,303 | ||||||||||||||
5.375% Senior Notes | September 15, 2020 | 350,000 | 347,883 | 347,586 | September 15, 2020 | 350,000 | 348,502 | 348,189 | ||||||||||||||||||||
6.05% Subordinated Notes (2) | June 1, 2017 | — | — | 46,646 | ||||||||||||||||||||||||
7.0% Junior Subordinated Debentures | October 15, 2033 | 50,000 | 54,406 | 54,493 | ||||||||||||||||||||||||
Total long-term debt | $ | 749,429 | $ | 795,704 | $ | 695,972 | $ | 695,492 |
(1) | Represents cash collateral received from certain counterparties in relation to market value exposures of derivative contracts in our favor. |
9. | Derivative Financial Instruments |
June 30, 2018 | December 31, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
June 30, 2017 | December 31, 2016 | Notional or Contractual Amount | Fair Value | Notional or Contractual Amount | Fair Value | |||||||||||||||||||||||||||||||||||||||||||||||||||||
(Dollars in thousands) | Balance Sheet Location | Notional or Contractual Amount | Fair Value | Collateral (1) | Net Exposure (2) | Notional or Contractual Amount | Fair Value | Collateral (1) | Net Exposure (2) | Derivative Assets (1) | Derivative Liabilities (1) | Derivative Assets (1) | Derivative Liabilities (1) | |||||||||||||||||||||||||||||||||||||||||||||
Derivatives designated as hedging instruments: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Interest rate risks: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Interest rate swaps | Other assets | $ | — | $ | — | $ | — | $ | — | $ | 45,964 | $ | 810 | $ | 89 | $ | 721 | |||||||||||||||||||||||||||||||||||||||||
Derivatives not designated as hedging instruments: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Currency exchange risks: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Foreign exchange forwards | Other assets | — | — | — | — | 219,950 | 3,057 | — | 3,057 | $ | 501,372 | $ | 16,250 | $ | — | $ | 50,889 | $ | 414 | $ | — | |||||||||||||||||||||||||||||||||||||
Foreign exchange forwards | Other liabilities | 293,721 | (2,336 | ) | — | (2,336 | ) | 54,338 | (968 | ) | — | (968 | ) | 243,969 | — | 9,636 | 425,055 | — | 5,201 | |||||||||||||||||||||||||||||||||||||||
Net exposure | (2,336 | ) | — | (2,336 | ) | 2,089 | — | 2,089 | ||||||||||||||||||||||||||||||||||||||||||||||||||
Other derivative instruments: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Equity warrant assets | Other assets | 215,655 | 131,750 | — | 131,750 | 211,434 | 131,123 | — | 131,123 | 227,490 | 143,725 | — | 211,253 | 123,763 | — | |||||||||||||||||||||||||||||||||||||||||||
Other derivatives: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Client foreign exchange forwards | Other assets | 1,934,019 | 76,882 | 470 | 76,412 | 1,251,308 | 54,587 | 12,579 | 42,008 | 2,582,993 | 81,395 | — | 2,203,643 | 95,035 | — | |||||||||||||||||||||||||||||||||||||||||||
Client foreign exchange forwards | Other liabilities | 1,930,994 | (68,865 | ) | — | (68,865 | ) | 1,068,991 | (43,317 | ) | — | (43,317 | ) | 2,305,484 | — | 73,323 | 2,092,207 | — | 90,253 | |||||||||||||||||||||||||||||||||||||||
Client foreign currency options | Other assets | 606,926 | 4,961 | — | 4,961 | 775,000 | 10,383 | — | 10,383 | 107,907 | 1,713 | — | 102,678 | 1,187 | — | |||||||||||||||||||||||||||||||||||||||||||
Client foreign currency options | Other liabilities | 606,930 | (4,969 | ) | — | (4,969 | ) | 775,000 | (10,383 | ) | — | (10,383 | ) | 107,907 | — | 1,713 | 102,678 | — | 1,187 | |||||||||||||||||||||||||||||||||||||||
Client interest rate derivatives (2) | 919,033 | 6,422 | — | 726,984 | 11,753 | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Client interest rate derivatives | Other assets | 631,690 | 11,655 | — | 11,655 | 583,511 | 10,110 | — | 10,110 | 1,274,209 | — | 12,532 | 782,586 | — | 11,940 | |||||||||||||||||||||||||||||||||||||||||||
Client interest rate derivatives | Other liabilities | 675,539 | (11,765 | ) | — | (11,765 | ) | 627,639 | (9,770 | ) | — | (9,770 | ) | |||||||||||||||||||||||||||||||||||||||||||||
Net exposure | 7,899 | 470 | 7,429 | 11,610 | 12,579 | (969 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||
Net | $ | 137,313 | $ | 470 | $ | 136,843 | $ | 145,632 | $ | 12,668 | $ | 132,964 | ||||||||||||||||||||||||||||||||||||||||||||||
Total Derivatives not designated as hedging instruments | $ | 249,505 | $ | 97,204 | $ | 232,152 | $ | 108,581 |
(1) | Derivative assets and liabilities are included in |
(2) | The amount reported for |
Three months ended June 30, | Six months ended June 30, | Three months ended June 30, | Six months ended June 30, | |||||||||||||||||||||||||||||||||
(Dollars in thousands) | Statement of income location | 2017 | 2016 | 2017 | 2016 | Statement of income location | 2018 | 2017 | 2018 | 2017 | ||||||||||||||||||||||||||
Derivatives designated as hedging instruments: | ||||||||||||||||||||||||||||||||||||
Interest rate risks: | ||||||||||||||||||||||||||||||||||||
Net cash benefit associated with interest rate swaps | Interest expense—borrowings | $ | 381 | $ | 590 | $ | 935 | $ | 1,199 | Interest expense—borrowings | $ | — | $ | 381 | $ | — | $ | 935 | ||||||||||||||||||
Changes in fair value of interest rate swaps | Other noninterest income | (6 | ) | (13 | ) | (7 | ) | (30 | ) | Other noninterest income | — | (6 | ) | — | (7 | ) | ||||||||||||||||||||
Net gains associated with interest rate risk derivatives | $ | 375 | $ | 577 | $ | 928 | $ | 1,169 | $ | — | $ | 375 | $ | — | $ | 928 | ||||||||||||||||||||
Derivatives not designated as hedging instruments: | ||||||||||||||||||||||||||||||||||||
Currency exchange risks: | ||||||||||||||||||||||||||||||||||||
Gains (losses) on revaluations of internal foreign currency instruments, net | Other noninterest income | $ | 14,596 | $ | (5,307 | ) | $ | 18,704 | $ | (2,816 | ) | |||||||||||||||||||||||||
(Losses) gains on internal foreign exchange forward contracts, net | Other noninterest income | (14,554 | ) | 3,923 | (17,799 | ) | 1,715 | |||||||||||||||||||||||||||||
(Losses) gains on revaluations of internal foreign currency instruments, net | Other noninterest income | $ | (319 | ) | $ | 14,596 | $ | 2,607 | $ | 18,704 | ||||||||||||||||||||||||||
Gains (losses) on internal foreign exchange forward contracts, net | Other noninterest income | 459 | (14,554 | ) | (3,053 | ) | (17,799 | ) | ||||||||||||||||||||||||||||
Net gains (losses) associated with internal currency risk | $ | 42 | $ | (1,384 | ) | $ | 905 | $ | (1,101 | ) | $ | 140 | $ | 42 | $ | (446 | ) | $ | 905 | |||||||||||||||||
Other derivative instruments: | ||||||||||||||||||||||||||||||||||||
Gains (losses) on revaluations of client foreign currency instruments, net | Other noninterest income | $ | 2,375 | $ | (133 | ) | $ | 5,129 | $ | 3,521 | ||||||||||||||||||||||||||
(Losses) gains on client foreign exchange forward contracts, net | Other noninterest income | (2,190 | ) | 68 | (4,479 | ) | (5,586 | ) | ||||||||||||||||||||||||||||
Net gains (losses) associated with client currency risk | $ | 185 | $ | (65 | ) | $ | 650 | $ | (2,065 | ) | ||||||||||||||||||||||||||
(Losses) gains on revaluations of client foreign currency instruments, net | Other noninterest income | $ | (2,748 | ) | $ | 2,375 | $ | 4,905 | $ | 5,129 | ||||||||||||||||||||||||||
Gains (losses) on client foreign exchange forward contracts, net | Other noninterest income | 2,844 | (2,190 | ) | (4,270 | ) | (4,479 | ) | ||||||||||||||||||||||||||||
Net gains associated with client currency risk | $ | 96 | $ | 185 | $ | 635 | $ | 650 | ||||||||||||||||||||||||||||
Net gains on equity warrant assets | Gains on equity warrant assets, net | $ | 10,820 | $ | 5,089 | $ | $ | Gains on equity warrant assets, net | $ | 19,061 | $ | 10,820 | $ | 38,252 | $ | 17,510 | ||||||||||||||||||||
Net losses on other derivatives | Other noninterest income | $ | (210 | ) | $ | (269 | ) | $ | (486 | ) | $ | (690 | ) | |||||||||||||||||||||||
Net (losses) gains on other derivatives | Other noninterest income | $ | (10 | ) | $ | (210 | ) | $ | 421 | $ | (486 | ) |
Gross Amounts of Recognized Assets | Gross Amounts offset in the Statement of Financial Position | Net Amounts of Assets Presented in the Statement of Financial Position | Gross Amounts Not Offset in the Statement of Financial Position But Subject to Master Netting Arrangements | Net Amount | Gross Amounts of Recognized Assets | Gross Amounts offset in the Statement of Financial Position | Net Amounts of Assets Presented in the Statement of Financial Position | Gross Amounts Not Offset in the Statement of Financial Position But Subject to Master Netting Arrangements | Net Amount | |||||||||||||||||||||||||||||||||||||||
(Dollars in thousands) | Financial Instruments | Cash Collateral Received | Financial Instruments | Cash Collateral Received (1) | ||||||||||||||||||||||||||||||||||||||||||||
June 30, 2017 | ||||||||||||||||||||||||||||||||||||||||||||||||
June 30, 2018 | ||||||||||||||||||||||||||||||||||||||||||||||||
Derivative Assets: | ||||||||||||||||||||||||||||||||||||||||||||||||
Interest rate swaps | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||||||||||||||||||||||||||
Foreign exchange forwards | 76,882 | — | 76,882 | (24,960 | ) | (470 | ) | 51,452 | $ | 97,645 | $ | — | $ | 97,645 | $ | (32,627 | ) | $ | (14,416 | ) | $ | 50,602 | ||||||||||||||||||||||||||
Foreign currency options | 4,961 | — | 4,961 | (419 | ) | — | 4,542 | 1,713 | — | 1,713 | (973 | ) | — | 740 | ||||||||||||||||||||||||||||||||||
Client interest rate derivatives | 11,655 | — | 11,655 | (11,638 | ) | — | 17 | 6,422 | — | 6,422 | (3,592 | ) | (2,830 | ) | — | |||||||||||||||||||||||||||||||||
Total derivative assets | 93,498 | — | 93,498 | (37,017 | ) | (470 | ) | 56,011 | 105,780 | — | 105,780 | (37,192 | ) | (17,246 | ) | 51,342 | ||||||||||||||||||||||||||||||||
Reverse repurchase, securities borrowing, and similar arrangements | 192,421 | — | 192,421 | (192,421 | ) | — | — | 37,379 | — | 37,379 | (37,379 | ) | — | — | ||||||||||||||||||||||||||||||||||
Total | $ | 285,919 | $ | — | $ | 285,919 | $ | (229,438 | ) | $ | (470 | ) | $ | 56,011 | $ | 143,159 | $ | — | $ | 143,159 | $ | (74,571 | ) | $ | (17,246 | ) | $ | 51,342 | ||||||||||||||||||||
December 31, 2016 | ||||||||||||||||||||||||||||||||||||||||||||||||
December 31, 2017 | ||||||||||||||||||||||||||||||||||||||||||||||||
Derivative Assets: | ||||||||||||||||||||||||||||||||||||||||||||||||
Interest rate swaps | $ | 810 | $ | — | $ | 810 | $ | (721 | ) | $ | (89 | ) | $ | — | ||||||||||||||||||||||||||||||||||
Foreign exchange forwards | 57,644 | — | 57,644 | (22,738 | ) | (12,579 | ) | 22,327 | $ | 95,449 | $ | — | $ | 95,449 | $ | (14,570 | ) | $ | (3,616 | ) | $ | 77,263 | ||||||||||||||||||||||||||
Foreign currency options | 10,383 | — | 10,383 | (8,806 | ) | — | 1,577 | 1,187 | — | 1,187 | (557 | ) | — | 630 | ||||||||||||||||||||||||||||||||||
Client interest rate derivatives | 10,110 | — | 10,110 | (10,091 | ) | — | 19 | 11,753 | — | 11,753 | (11,627 | ) | (114 | ) | 12 | |||||||||||||||||||||||||||||||||
Total derivative assets | 78,947 | — | 78,947 | (42,356 | ) | (12,668 | ) | 23,923 | 108,389 | — | 108,389 | (26,754 | ) | (3,730 | ) | 77,905 | ||||||||||||||||||||||||||||||||
Reverse repurchase, securities borrowing, and similar arrangements | 64,028 | — | 64,028 | (64,028 | ) | — | — | 247,876 | — | 247,876 | (247,876 | ) | — | — | ||||||||||||||||||||||||||||||||||
Total | $ | 142,975 | $ | — | $ | 142,975 | $ | (106,384 | ) | $ | (12,668 | ) | $ | 23,923 | $ | 356,265 | $ | — | $ | 356,265 | $ | (274,630 | ) | $ | (3,730 | ) | $ | 77,905 |
(1) | Cash collateral received from our counterparties in relation to market value exposures of derivative contracts in our favor is recorded as a component of “short-term borrowings” on our consolidated balance sheets. |
Gross Amounts of Recognized Liabilities | Gross Amounts offset in the Statement of Financial Position | Net Amounts of Liabilities Presented in the Statement of Financial Position | Gross Amounts Not Offset in the Statement of Financial Position But Subject to Master Netting Arrangements | Net Amount | Gross Amounts of Recognized Liabilities | Gross Amounts offset in the Statement of Financial Position | Net Amounts of Liabilities Presented in the Statement of Financial Position | Gross Amounts Not Offset in the Statement of Financial Position But Subject to Master Netting Arrangements | Net Amount | |||||||||||||||||||||||||||||||||||||||
(Dollars in thousands) | Financial Instruments | Cash Collateral Pledged | Financial Instruments | Cash Collateral Pledged (1) | ||||||||||||||||||||||||||||||||||||||||||||
June 30, 2017 | ||||||||||||||||||||||||||||||||||||||||||||||||
June 30, 2018 | ||||||||||||||||||||||||||||||||||||||||||||||||
Derivative Liabilities: | ||||||||||||||||||||||||||||||||||||||||||||||||
Foreign exchange forwards | $ | 71,201 | $ | — | $ | 71,201 | $ | (50,275 | ) | $ | — | $ | 20,926 | $ | 82,959 | $ | — | $ | 82,959 | $ | (14,638 | ) | $ | (41,113 | ) | $ | 27,208 | |||||||||||||||||||||
Foreign currency options | 4,969 | — | 4,969 | (4,550 | ) | — | 419 | 1,713 | — | 1,713 | (772 | ) | — | 941 | ||||||||||||||||||||||||||||||||||
Client interest rate derivatives | 11,765 | — | 11,765 | (11,765 | ) | — | — | 12,532 | — | 12,532 | — | (12,448 | ) | 84 | ||||||||||||||||||||||||||||||||||
Total derivative liabilities | 87,935 | — | 87,935 | (66,590 | ) | — | 21,345 | 97,204 | — | 97,204 | (15,410 | ) | (53,561 | ) | 28,233 | |||||||||||||||||||||||||||||||||
Repurchase, securities lending, and similar arrangements | — | — | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
Total | $ | 87,935 | $ | — | $ | 87,935 | $ | (66,590 | ) | $ | — | $ | 21,345 | $ | 97,204 | $ | — | $ | 97,204 | $ | (15,410 | ) | $ | (53,561 | ) | $ | 28,233 | |||||||||||||||||||||
December 31, 2016 | ||||||||||||||||||||||||||||||||||||||||||||||||
December 31, 2017 | ||||||||||||||||||||||||||||||||||||||||||||||||
Derivative Liabilities: | ||||||||||||||||||||||||||||||||||||||||||||||||
Foreign exchange forwards | $ | 44,285 | $ | — | $ | 44,285 | $ | (17,964 | ) | $ | — | $ | 26,321 | $ | 95,454 | $ | — | $ | 95,454 | $ | (10,997 | ) | $ | (69,110 | ) | $ | 15,347 | |||||||||||||||||||||
Foreign currency options | 10,383 | — | 10,383 | (1,585 | ) | — | 8,798 | 1,187 | — | 1,187 | (501 | ) | (130 | ) | 556 | |||||||||||||||||||||||||||||||||
Client interest rate derivatives | 9,770 | — | 9,770 | (9,770 | ) | — | — | 11,940 | — | 11,940 | — | (11,924 | ) | 16 | ||||||||||||||||||||||||||||||||||
Total derivative liabilities | 64,438 | — | 64,438 | (29,319 | ) | — | 35,119 | 108,581 | — | 108,581 | (11,498 | ) | (81,164 | ) | 15,919 | |||||||||||||||||||||||||||||||||
Repurchase, securities lending, and similar arrangements | — | — | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
Total | $ | 64,438 | $ | — | $ | 64,438 | $ | (29,319 | ) | $ | — | $ | 35,119 | $ | 108,581 | $ | — | $ | 108,581 | $ | (11,498 | ) | $ | (81,164 | ) | $ | 15,919 |
(1) | Cash collateral pledged to our counterparties in relation to market value exposures of derivative contracts in a liability position is recorded as a component of “cash and cash equivalents" on our consolidated balance sheets. |
10. |
Three months ended June 30, | Six months ended June 30, | |||||||||||||||
(Dollars in thousands) | 2017 | 2016 | 2017 | 2016 | ||||||||||||
Fund management fees | $ | 5,536 | $ | 4,298 | $ | 10,705 | $ | 8,918 | ||||||||
Service-based fee income | 1,496 | 2,148 | 3,391 | 4,240 | ||||||||||||
Gains (losses) on revaluation of client foreign currency instruments, net (1) | 2,375 | (133 | ) | 5,129 | 3,521 | |||||||||||
(Losses) gains on client foreign exchange forward contracts, net (1) | (2,190 | ) | 68 | (4,479 | ) | (5,586 | ) | |||||||||
Gains (losses) on revaluation of internal foreign currency instruments, net (2) | 14,596 | (5,307 | ) | 18,704 | (2,816 | ) | ||||||||||
(Losses) gains on internal foreign exchange forward contracts, net (2) | (14,554 | ) | 3,923 | (17,799 | ) | 1,715 | ||||||||||
Other (3) | 5,552 | 4,966 | 9,581 | 7,641 | ||||||||||||
Total other noninterest income | $ | 12,811 | $ | 9,963 | $ | 25,232 | $ | 17,633 |
Three months ended June 30, | Six months ended June 30, | |||||||||||||||
(Dollars in thousands) | 2018 | 2017 | 2018 | 2017 | ||||||||||||
Noninterest income: | ||||||||||||||||
Gains on investment securities, net | $ | 36,114 | $ | 17,630 | $ | 45,172 | $ | 33,600 | ||||||||
Gains on equity warrant assets, net | 19,061 | 10,820 | 38,252 | 17,510 | ||||||||||||
Foreign exchange fees | 34,077 | 26,108 | 67,904 | 52,355 | ||||||||||||
Credit card fees | 22,926 | 18,099 | 44,618 | 35,829 | ||||||||||||
Deposit service charges | 18,794 | 14,563 | 36,493 | 28,538 | ||||||||||||
Client investment fees | 29,452 | 12,982 | 52,327 | 22,008 | ||||||||||||
Lending related fees | 9,528 | 8,509 | 20,263 | 17,470 | ||||||||||||
Letters of credit and standby letters of credit fees | 8,347 | 7,006 | 16,529 | 13,645 | ||||||||||||
Other | 14,390 | 12,811 | 26,649 | 25,232 | ||||||||||||
Total noninterest income | $ | 192,689 | $ | 128,528 | $ | 348,207 | $ | 246,187 |
Three months ended June 30, | Six months ended June 30, | |||||||||||||||
(Dollars in thousands) | 2018 | 2017 | 2018 | 2017 | ||||||||||||
Gains on non-marketable and other equity securities, net | $ | 36,114 | $ | 17,753 | $ | 45,172 | $ | 33,115 | ||||||||
(Losses) gains on sales of available-for-sale securities, net | — | (123 | ) | — | 485 | |||||||||||
Total gains on investment securities, net | $ | 36,114 | $ | 17,630 | $ | 45,172 | $ | 33,600 |
Three months ended June 30, | Six months ended June 30, | |||||||||||||||
(Dollars in thousands) | 2018 | 2017 | 2018 | 2017 | ||||||||||||
Equity warrant assets: | ||||||||||||||||
Gains on exercises, net | $ | 8,875 | $ | 3,121 | $ | 20,509 | $ | 11,345 | ||||||||
Cancellations and expirations | (826 | ) | (571 | ) | (1,726 | ) | (1,129 | ) | ||||||||
Changes in fair value, net | 11,012 | 8,270 | 19,469 | 7,294 | ||||||||||||
Total net gains on equity warrant assets | $ | 19,061 | $ | 10,820 | $ | 38,252 | $ | 17,510 |
Three months ended June 30, | Six months ended June 30, | |||||||||||||||
(Dollars in thousands) | 2018 | 2017 | 2018 | 2017 | ||||||||||||
Foreign exchange fees by instrument type: | ||||||||||||||||
Spot contract commissions | $ | 31,548 | $ | 23,583 | $ | 62,750 | $ | 46,007 | ||||||||
Forward contract commissions | 2,455 | 2,470 | 4,940 | 6,071 | ||||||||||||
Option premium fees | 74 | 55 | 214 | 277 | ||||||||||||
Total foreign exchange fees | $ | 34,077 | $ | 26,108 | $ | 67,904 | $ | 52,355 |
Three months ended June 30, | Six months ended June 30, | |||||||||||||||
(Dollars in thousands) | 2018 | 2017 | 2018 | 2017 | ||||||||||||
Credit card fees by instrument type: | ||||||||||||||||
Card interchange fees, net | $ | 18,137 | $ | 14,033 | $ | 35,697 | $ | 28,003 | ||||||||
Merchant service fees | 3,425 | 2,883 | 6,331 | 5,623 | ||||||||||||
Card service fees | 1,364 | 1,183 | 2,590 | 2,203 | ||||||||||||
Total credit card fees | $ | 22,926 | $ | 18,099 | $ | 44,618 | $ | 35,829 |
Three months ended June 30, | Six months ended June 30, | |||||||||||||||
(Dollars in thousands) | 2018 | 2017 | 2018 | 2017 | ||||||||||||
Client investment fees by type: | ||||||||||||||||
Sweep money market fees | $ | 17,178 | $ | 6,474 | $ | 29,500 | $ | 10,870 | ||||||||
Asset management fees (1) | 5,730 | 4,111 | 11,088 | 7,490 | ||||||||||||
Repurchase agreement fees | 6,544 | 2,397 | 11,739 | 3,648 | ||||||||||||
Total client investment fees (2) | $ | 29,452 | $ | 12,982 | $ | 52,327 | $ | 22,008 |
(1) | Represents |
(2) | Represents |
Lending related fees Unused commitment fees, minimum finance fees and unused line fees are recognized as earned on a monthly basis. Fees that qualify for syndication treatment are recognized at the completion of the syndicated loan deal for which the fees were received. Lending related fees are recognized outside of the scope of the new revenue standard as it explicitly excludes noninterest income earned from our lending-related activities. A summary of lending related fees by instrument type for the three and six months ended June 30, 2018 and 2017 is as follows:
Letters of credit and standby letters of credit fees Commercial and standby letters of credit represent conditional commitments issued by us on behalf of a client to guarantee the performance of the client to a third party when certain specified future events have occurred. Fees generated from letters of credit and standby letters of credit are deferred as a component of other liabilities and recognized in noninterest income over the commitment period using the straight-line method, based on the likelihood that the commitment being drawn down will be remote. Letters of credit and standby letters of credit fees are recognized outside of the scope of the new revenue standard as it explicitly excludes noninterest income earned from our lending-related activities. Other Other noninterest income primarily includes income from fund management fees and service revenue. Fund management fees are comprised of fees charged directly to our managed funds of funds and direct venture funds. Fund management fees are based upon the contractual terms of the limited partnership agreements and are generally recognized as earned over the specified contract period, which is generally equal to the life of the individual fund. Fund management fees are calculated as a percentage of committed capital and collected in advance and are received quarterly. Fund management fees for certain of our limited partnership agreements are calculated as a percentage of distributions made by the funds and revenue is recorded only at the time of a distribution event. As distribution events are not predetermined for these certain funds, management fees are considered variable and constrained under the new revenue standard. Other noninterest income primarily consists of dividend income on FHLB/FRB stock, correspondent bank rebate income, incentive fees related to carried interest and other fee income. We recognize revenue when our performance obligations are met and record revenues on a daily/monthly basis, quarterly, semi-annually or annual basis. For event driven revenue sources, we recognize revenue when: (i) persuasive evidence of an arrangement exists, (ii) we have performed the service, provided we have no other remaining obligations to the customer, (iii) the fee is fixed or determinable and (iv) collectability is probable. A summary of other noninterest income by instrument type for the three and six months ended June 30, 2018 and 2017 is as follows:
Disaggregation of Revenue from Contracts with Customers The following tables presents our revenues from contracts with customers disaggregated by revenue source and segment for the three and six months ended June 30, 2018:
A summary of other noninterest expense for the three and six months ended June 30,
We have three reportable segments for management reporting purposes: Global Commercial Bank, SVB Private Bank and SVB Capital. The results of our operating segments are based on our internal management reporting process. Our Global Commercial Bank and SVB Private Bank segments' primary source of revenue is from net interest income, which is primarily the difference between interest earned on loans, net of funds transfer pricing (“FTP”), and interest paid on deposits, net of FTP. Accordingly, these segments are reported using net interest income, net of FTP. FTP is an internal measurement framework designed to assess the financial impact of a financial institution’s sources and uses of funds. It is the mechanism by which a funding credit is given for deposits raised, and a funding charge is made for loans funded. FTP is calculated at an instrument level based on account characteristics. We also evaluate performance based on provision for credit losses, noninterest income and noninterest expense, which are presented as components of segment operating profit or loss. In calculating each operating segment’s noninterest expense, we consider the direct costs incurred by the operating segment as well as certain allocated direct costs. As part of this review, we allocate certain corporate overhead costs to a corporate account. We do not allocate income unfunded credit commitments (included in provision for credit losses) to our segments. Additionally, our management reporting model is predicated on average asset balances; therefore, period-end asset balances are not presented for segment reporting purposes. Changes in an individual client’s primary relationship designation have resulted, and in the future may result, in the inclusion of certain clients in different segments in different periods. Unlike financial reporting, which benefits from the comprehensive structure provided by GAAP, our internal management reporting process is highly subjective, as there is no comprehensive, authoritative guidance for management reporting. Our management reporting process measures the performance of our operating segments based on our internal operating structure, which is subject to change from time to time, and is not necessarily comparable with similar information for other financial services companies. For reporting purposes, SVB Financial Group has three operating segments for which we report our financial information: Global Commercial Bank is comprised of results from the following:
SVB Private Bank is the private banking division of the Bank, which provides a range of personal financial solutions for consumers. Our clients are primarily private equity/venture capital professionals and executive leaders of the innovation companies they support. We offer a customized suite of private banking services, including mortgages, home equity lines of credit, restricted stock purchase loans, capital call lines of credit and other secured and unsecured lending, as well as cash and wealth management services. SVB Capital is the funds management business of SVBFG, which focuses primarily on venture capital investments. SVB Capital manages funds (primarily venture capital funds) on behalf of The summary financial results of our operating segments are presented along with a reconciliation to our consolidated interim results. Our segment information for the three and six months ended June 30,
assets. Noninterest expense consists primarily of expenses associated with corporate support functions such as finance, human resources, marketing, legal and other expenses.
In the normal course of business, we use financial instruments with off-balance sheet risk to meet the financing needs of our customers. These financial instruments include commitments to extend credit, commercial and standby letters of credit and commitments to invest in venture capital and private equity fund investments. These instruments involve, to varying degrees, elements of credit risk. Credit risk is defined as the possibility of sustaining a loss because other parties to the financial instrument fail to perform in accordance with the terms of the contract. Commitments to Extend Credit The following table summarizes information related to our commitments to extend credit at June 30,
Commercial and Standby Letters of Credit The table below summarizes our commercial and standby letters of credit at June 30,
Deferred fees related to financial and performance standby letters of credit were Commitments to Invest in Venture Capital and Private Equity Funds Subject to applicable regulatory requirements, including the Volcker Rule, we make commitments to invest in venture capital and private equity funds, which generally makes investments in privately-held companies. Commitments to invest in these funds are generally made for a 10-year period from the inception of the fund. Although the limited partnership agreements governing these investments typically do not restrict the general partners from calling 100% of committed capital in one year, it is customary for these funds to call most of the capital commitments over 5 to 7 years, and in certain cases, the funds may not call 100% of committed capital. The actual timing of future cash requirements to fund these commitments is generally dependent upon the investment cycle, overall market conditions, and the nature and type of industry in which the privately held companies operate. The following table details our total capital commitments, unfunded capital commitments, and our ownership percentage in each fund at June 30,
The following table details the amounts of remaining unfunded commitments to venture capital and private equity funds by our consolidated managed funds of funds (including our interest and the noncontrolling interests) at June 30,
We are subject to income tax in the U.S. federal jurisdiction and various state and foreign jurisdictions and have identified our federal tax At June 30, We recognize interest and penalties related to income tax matters as part of income before income taxes. Interest and penalties were not material for the three
Fair Value Measurements Our available-for-sale securities, derivative instruments and certain non-marketable and other equity securities are financial instruments recorded at fair value on a recurring basis. We make estimates regarding valuation of assets and liabilities measured at fair value in preparing our interim consolidated financial statements. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (the “exit price”) in an orderly transaction between market participants at the measurement date. There is a three-level hierarchy for disclosure of assets and liabilities recorded at fair value. The classification of assets and liabilities within the hierarchy is based on whether the inputs to the valuation methodology used for measurement are observable or unobservable and the significance of those inputs in the fair value measurement. Observable inputs reflect market-derived or market-based information obtained from independent sources, while unobservable inputs reflect our estimates about market data and views of market participants. The three levels for measuring fair value are based on the reliability of inputs and are as follows: Level 1 Fair value measurements based on quoted prices in active markets for identical assets or liabilities that we have the ability to access. Since valuations are based on quoted prices that are readily and regularly available in an active market, valuation of these instruments does not entail a significant degree of judgment. Assets utilizing Level 1 inputs include U.S. Treasury securities, exchange-traded equity securities and certain marketable securities accounted for under fair value accounting. Level 2 Fair value measurements based on quoted prices in markets that are not active or for which all significant inputs are observable, directly or indirectly. Valuations for the available-for-sale securities are provided by independent pricing service providers who have experience in valuing these securities and by comparison to and/or average of quoted market prices obtained from independent brokers. We perform a monthly analysis on the values received from third parties to ensure that the prices represent a reasonable estimate of the fair value. The procedures include, but are not limited to, initial and ongoing review of U.S. agency debentures: Fair value measurements of U.S. agency debentures are based on the characteristics specific to bonds held, such as issuer name, coupon rate, maturity date and any applicable issuer call option features. Valuations are based on market spreads relative to similar term benchmark market interest rates, generally U.S. Treasury securities. Agency-issued mortgage-backed securities: Agency-issued mortgage-backed securities are pools of individual conventional mortgage loans underwritten to U.S. agency standards with similar coupon rates, tenor, and other attributes such as geographic location, loan size and origination vintage. Fair value measurements of these securities are based on observable price adjustments relative to benchmark market interest rates taking into consideration estimated loan prepayment speeds. Agency-issued collateralized mortgage obligations: Agency-issued collateralized mortgage obligations are structured into classes or tranches with defined cash flow characteristics and are collateralized by U.S. agency-issued mortgage pass-through securities. Fair value measurements of these securities incorporate similar characteristics of mortgage pass-through securities such as coupon rate, tenor, geographic location, loan size and origination vintage, in addition to incorporating the effect of estimated prepayment speeds on the cash flow structure of the class or tranche. These measurements incorporate observable market spreads over an estimated average life after considering the inputs listed above. Agency-issued commercial mortgage-backed securities: Fair value measurements of these securities are based on spreads to benchmark market interest rates (usually U.S. Treasury rates or rates observable in the swaps market), prepayment speeds, loan default rate assumptions and loan loss severity assumptions on underlying loans. Municipal bonds and notes: Bonds issued by municipal governments generally have stated coupon rates, final maturity dates and are subject to being called ahead of the final maturity date at the option of the issuer. Fair value measurements of these securities are priced based on spreads to other municipal benchmark bonds with similar characteristics; or, relative to market rates on U.S. Treasury bonds of similar maturity. Interest rate derivative assets and liabilities: Fair value measurements of interest rate derivatives are priced considering the coupon rate of the fixed leg of the contract and the variable coupon on the floating leg of the contract. Valuation is based on both spot and forward rates on the swap yield curve and the credit worthiness of the contract counterparty. Foreign exchange forward and option contract assets and liabilities: Fair value measurements of these assets and liabilities are priced based on spot and forward foreign currency rates and option volatility assumptions. Equity warrant assets (public portfolio): Fair value measurements of equity warrant assets of publicly-traded portfolio companies are valued based on the Black-Scholes option pricing model. The model uses the price of publicly-traded companies (underlying stock price), stated strike prices, warrant expiration dates, the risk-free interest rate and market-observable option volatility assumptions. Level 3 The fair value measurement is derived from valuation techniques that use significant assumptions not observable in the market. These unobservable assumptions reflect our own estimates of assumptions we believe market participants would use in pricing the asset. Below is a summary of the valuation techniques used for each class of Level 3 assets: Equity warrant assets (public portfolio): Fair value measurements of equity warrant assets of publicly-traded portfolio companies are valued based on the Black-Scholes option pricing model. The model uses the price of publicly-traded companies (underlying stock price), stated strike prices, warrant expiration dates, the risk-free interest rate and market-observable option volatility assumptions. Modeled asset values are further adjusted by applying a discount of up to 20 percent for certain warrants that have lock-up restrictions or other features that indicate a discount to fair value is warranted. As a lock-up term nears, and other sale restrictions are lifted, discounts are adjusted downward to zero percent once all restrictions expire or are removed. Equity warrant assets (private portfolio): Fair value measurements of equity warrant assets of private portfolio companies are priced based on a Black-Scholes option pricing model to estimate the asset value by using stated strike prices, option expiration dates, risk-free interest rates and option volatility assumptions. Option volatility assumptions used in the model are based on public market indices whose members operate in similar industries as companies in our private company portfolio. Option expiration dates are modified to account for estimates to actual life relative to stated expiration. Overall model asset values are further adjusted for a general lack of liquidity due to the private nature of the associated underlying company. There is a direct correlation between changes in the volatility and remaining life assumptions in isolation and the fair value measurement while there is an inverse correlation between changes in the liquidity discount assumption and the fair value measurement. It is our policy to maximize the use of observable inputs and minimize the use of unobservable inputs when developing fair value measurements. When available, we use quoted market prices to measure fair value. If market prices are not available, fair value measurement is based upon valuation techniques that use primarily market-based or independently-sourced market parameters, including interest rate yield curves, prepayment speeds, option volatilities and currency rates. Substantially all of our financial instruments use the foregoing methodologies, and are categorized as a Level 1 or Level 2 measurement in the fair value hierarchy. However, in certain cases, when market observable inputs for our valuation techniques may not be readily available, we are required to make judgments about assumptions we believe market participants would use in estimating the fair value of the financial instrument, and based on the significance of those judgments, the measurement may be determined to be a Level 3 fair value measurement. The degree of management judgment involved in determining the fair value of a financial instrument is dependent upon the availability of quoted market prices or observable market parameters. For financial instruments that trade actively and have quoted market prices or observable market parameters, there is minimal subjectivity involved in measuring fair value. When observable market prices and parameters are not fully available, management judgment is necessary to estimate fair value. For inactive markets, there is little information, if any, to evaluate if individual transactions are orderly. Accordingly, we are required to estimate, based upon all available facts and circumstances, the degree to which orderly transactions are occurring and provide more weighting to price quotes that are based upon orderly transactions. In addition, changes in the market conditions may reduce the availability of quoted prices or observable data. For example, reduced liquidity in the capital markets or changes in secondary market activities could result in observable market inputs becoming unavailable. Therefore, when market data is not available, we use valuation techniques requiring more management judgment to estimate the appropriate fair value measurement. Accordingly, the degree of judgment exercised by management in determining fair value is greater for financial assets and liabilities categorized as Level 3. The following fair value hierarchy table presents information about our assets and liabilities that are measured at fair value on a recurring basis as of June 30,
The following fair value hierarchy table presents information about our assets and liabilities that are measured at fair value on a recurring basis as of December 31,
The following table presents additional information about Level 3 assets measured at fair value on a recurring basis for the three and six months ended June 30,
The following table presents the amount of net unrealized gains and losses included in earnings (which is inclusive of noncontrolling interest) attributable to Level 3 assets still held at June 30,
The extent to which any unrealized gains or losses will become realized is subject to a variety of factors, including, among other things, the expiration of current sales restrictions to which these securities are subject, the actual sales of securities and the timing of such actual sales. The following table presents quantitative information about the significant unobservable inputs used for certain of our Level 3 fair value measurements at June 30,
For the three and six months ended June 30, Financial Instruments not Carried at Fair Value FASB guidance over financial instruments requires that we disclose estimated fair values for our financial instruments not carried at fair value. The following fair value hierarchy table presents the estimated fair values of our financial instruments that are not carried at fair value at June 30,
Investments in Entities that Calculate Net Asset Value Per Share FASB guidance over certain fund investments requires that we disclose the fair value of funds, significant investment strategies of the investees, redemption features of the investees, restrictions on the ability to sell investments, estimate of the period of time over which the underlying assets are expected to be liquidated by the investee, and unfunded commitments related to the investments. Our investments in debt funds and venture capital and private equity fund investments generally cannot be redeemed. Alternatively, we expect distributions, if any, to be received primarily through IPO and M&A activity of the underlying assets of the fund. Subject to applicable requirements under the Volcker Rule, we do not have any plans to sell any of these fund investments. If we decide to sell these investments in the future, the investee fund’s management must approve of the buyer before the sale of the investments can be completed. The fair values of the fund investments have been estimated using the net asset value per share of the investments, adjusted for any differences between our measurement date and the date of the fund investment’s net asset value by using the most recently available financial information from the investee general partner, for example March 31st, for our June 30th consolidated financial statements, adjusted for any contributions paid, distributions received from the investment, and significant fund transactions or market events during the reporting period. The following table is a summary of the estimated fair values of these investments and remaining unfunded commitments for each major category of these investments as of June 30,
Certain lawsuits and claims arising in the ordinary course of business have been filed or are pending against us and/or our affiliates, and we may from time to time be involved in other legal or regulatory proceedings. In accordance with applicable accounting guidance, we establish accruals for all such matters, including expected settlements, when we believe it is probable that a loss has been incurred and the amount of the loss is reasonably estimable. When a loss contingency is not both probable and estimable, we do not establish an accrual. Any such loss estimates are inherently uncertain, based on currently available information and are subject to management’s judgment and various assumptions. Due to the inherent subjectivity of these estimates and unpredictability of outcomes of legal proceedings, any amounts accrued may not represent the ultimate resolution of such matters. To the extent we believe any potential loss relating to such matters may have a material impact on our liquidity, consolidated financial position, results of operations, and/or our business as a whole and is reasonably possible but not probable, we aim to disclose information relating to such potential loss. We also aim to disclose information relating to any material potential loss that is probable but not reasonably estimable. In such cases, where reasonably practicable, we aim to provide an estimate of loss or range of potential loss. No disclosures are generally made for any loss contingencies that are deemed to be remote. Based upon information available to us, our review of lawsuits and claims filed or pending against us to date and consultation with our outside legal counsel, we have not recognized a material accrual liability for any such matters, nor do we currently expect that these matters will result in a material liability to the Company. However, the outcome of litigation and other legal and regulatory matters is inherently uncertain, and it is possible that one or more of such matters currently pending or threatened could have an unanticipated material adverse effect on our liquidity, consolidated financial position, results of operations, and/or our business as a whole, in the future.
We have no material related party transactions requiring disclosure. In the ordinary course of business, the Bank may extend credit to related parties, including executive officers, directors, principal shareholders and their related interests. Additionally, we provide real estate secured loans to eligible employees through our EHOP. For additional details, see Note ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Forward-Looking Statements This Quarterly Report on Form 10-Q, including in particular “Management’s Discussion and Analysis of Financial Condition and Results of Operations” under Part I, Item 2 of this report, contains forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. In addition, management has in the past and might in the future make forward-looking statements orally to analysts, investors, the media and others. Forward-looking statements are statements that are not historical facts. Broadly speaking, forward-looking statements include, but are not limited to, the following: Financial projections, including with respect to our net interest income, noninterest income, earnings per share, noninterest expenses (including professional services, compliance, compensation and other costs), cash flows, balance sheet positions, capital expenditures, liquidity and capitalization or other financial items; Descriptions of our strategic initiatives, plans or objectives for future operations, including pending sales or acquisitions; Forecasts of private equity/venture capital funding and investment levels; Forecasts of future interest rates, economic performance, and income from investments; Forecasts of expected levels of provisions for loan losses, nonperforming loans, loan growth and client funds; and Descriptions of assumptions underlying or relating to any of the foregoing. You can identify these and other forward-looking statements by the use of words such as “becoming,” “may,” “will,” “should,” "could," "would," “predict,” “potential,” “continue,” “anticipate,” “believe,” “estimate,” “assume,” “seek,” “expect,” “plan,” “intend,” the negative of such words, or comparable terminology. Forward-looking statements are neither historical facts nor assurances of future performance. Although we believe that the expectations reflected in these forward-looking statements are reasonable, we have based these expectations on our current beliefs as well as our assumptions, and such expectations may prove to be incorrect. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict and many of which are outside of our control. Our actual results of operations and financial performance could differ significantly from those expressed in or implied by our management’s forward-looking statements. Important factors that could cause our actual results and financial condition to differ from the expectations stated in the forward-looking statements include, among others: Market and economic conditions, including the interest rate environment, and the associated impact on us; The credit profile and credit quality of our loan portfolio and volatility of our levels of nonperforming assets and charge-offs; The adequacy of our allowance for loan losses and the need to make provisions for loan losses for any period; The borrowing needs of our clients; The sufficiency of our capital and liquidity positions; The levels of loans, deposits and client investment fund balances; The performance of our portfolio investments; the general condition of the public and private equity and mergers and acquisitions markets and their impact on our investments, including equity warrant assets, venture capital and private equity funds and direct equity investments; Our overall investment plans and strategies; the realization, timing, valuation and performance of our equity or other investments; The levels of public offerings, mergers and acquisitions and venture capital investment activity of our clients that may impact the borrowing needs of our clients; The occurrence of fraudulent activity, including breaches of our information security or cyber security-related incidents; Business disruptions and interruptions due to natural disasters and other external events; The impact on our reputation and business from our interactions with business partners, counterparties, service providers and other third parties; Expansion of our business internationally, and the impact of international market and economic events on us; The impact of governmental policy, legal requirements and regulations, including the Economic Growth, Regulatory Relief and Consumer Protection Act and the Dodd-Frank Act, promulgated by the Federal Reserve and other regulatory requirements; The impact of lawsuits and claims, as well as legal or regulatory proceedings; The levels of equity capital available to our client or portfolio companies; The effectiveness of our risk management framework and quantitative models; Our ability to maintain or increase our market share, including through successfully implementing our business strategy and undertaking new business initiatives; and Other factors as discussed in “Risk Factors” under Part I, Item 1A in our We urge investors to consider all of these factors carefully in evaluating the forward-looking statements contained in this Quarterly Report on Form 10-Q. All subsequent written or oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by these cautionary statements. The forward-looking statements included in this filing are made only as of the date of this filing. We assume no obligation and do not intend to revise or update any forward-looking statements contained in this Quarterly Report on Form 10-Q, except as required by law. The following discussion and analysis of financial condition and results of operations should be read in conjunction with our unaudited interim consolidated financial statements and accompanying notes as presented in Part I, Item 1 of this report and in conjunction with our Reclassifications Certain prior period amounts, primarily related to the Management’s Overview of Second Quarter Overall, we had A summary of our performance for the three months ended June 30,
+ Consists of fee income for deposit services, letters of credit and standby letters of credit, credit cards, client investments, foreign exchange and lending-related activities. This is a non-GAAP financial metric. (See the non-GAAP reconciliation under “Results of Operations—Noninterest Income”) A summary of our performance for the three and six months ended June 30,
For more information with respect to our capital ratios, please refer to “Capital Ratios” under “Consolidated Financial Condition-Capital Ratios” below. Critical Accounting Policies and Estimates The accompanying management’s discussion and analysis of results of operations and financial condition is based upon our unaudited interim consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of these financial statements in accordance with GAAP requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, expenses and related disclosure of contingent assets and liabilities. Management evaluates estimates and assumptions on an ongoing basis. Management bases its estimates on historical experiences and various other factors and assumptions that are believed to be reasonable under the circumstances. Actual results may differ materially from these estimates under different assumptions or conditions. There have been no significant changes during the six months ended June 30, Results of Operations Net Interest Income and Margin (Fully Taxable Equivalent Basis) Net interest income is defined as the difference between interest earned on loans, fixed income investment portfolio (available-for-sale and held-to-maturity securities) Analysis of Net Interest Income Changes Due to Volume and Rate (Fully Taxable Equivalent Basis) Net interest income is affected by changes in the amount and composition of interest-earning assets and interest-bearing liabilities, referred to as “volume change.” Net interest income is also affected by changes in yields earned on interest-earning assets and rates paid on interest-bearing liabilities, referred to as “rate change.” The following table sets forth changes in interest income for each major category of interest-earning assets and interest expense for each major category of interest-bearing liabilities. The table also reflects the amount of simultaneous changes attributable to both volume and rate changes for the periods indicated. For this table, changes that are not solely due to either volume or rate are allocated in proportion to the percentage changes in average volume and average rate.
Net Interest Income (Fully Taxable Equivalent Basis) Three months ended June 30, Net interest income increased by The main factors affecting interest income for the three months ended June 30, Interest income for the three months ended June 30,
Interest expensefor the
The main factors affecting interest income and interest expense for the six months ended June 30, 2018, compared to the comparable 2017 period are discussed below: Interest income for the six months endedJune 30, 2018 increased by $241.4 million due primarily to:
Interest expense for the six months endedJune 30, 2018 increased by $5.2 million primarily due to:
Net Interest Margin (Fully Taxable Equivalent Basis) Three months ended June 30, Our net interest margin increased by Six months ended June 30, Our net interest margin increased by represented Average Balances, Yields and Rates Paid (Fully Taxable Equivalent Basis) The average yield earned on interest-earning assets is the amount of annualized fully taxable equivalent interest income expressed as a percentage of average interest-earning assets. The average rate paid on funding sources is the amount of annualized interest expense expressed as a percentage of average funding sources. The following tables set forth average assets, liabilities, noncontrolling interests and SVBFG stockholders’ equity, interest income, interest expense, annualized yields and rates, and the composition of our annualized net interest margin for the three and six months ended June 30, Average Balances, Rates and Yields for the Three Months Ended June 30,
Average Balances, Rates and Yields for the Six Months Ended June 30,
Provision for Credit Losses The provision for credit losses is the combination of both the provision for loan losses and the provision for unfunded credit commitments. Our provision for loan losses is a function of our reserve methodology, which is used to determine an appropriate allowance for loan losses for the period. Our reserve methodology is based on our evaluation of the existing allowance for loan losses in relation to total gross loans using historical and other objective information, and on our qualitative assessment of the inherent and identified credit risk of the loan portfolio. Our provision for unfunded credit commitments is determined using a methodology that is similar to the methodology used for calculating the allowance for loan losses, adjusted for factors specific to binding commitments, including the probability of funding and exposure at funding. Our provision for The following table summarizes our allowance for loan losses and the allowance for unfunded credit commitments for the three and six months ended June 30,
Three months ended June 30, Our provision for credit losses was $29.1 million for the three months ended June 30, 2018, consisting of a provision for loan losses of $27.7 million and a provision for unfunded credit commitments of $1.4 million. Our provision for credit losses was $15.8 million for the three months ended June 30, 2017, consisting of a provision for loan losses of $15.2 million and a provision for unfunded credit commitments of $0.6 million. The provision for The provision for unfunded credit commitments of The provision for loan losses of $15.2 million for the three months ended June 30, 2017 primarily reflects $12.7 million in net new specific reserves for nonaccrual loans and a $5.0 million increase in reserves for period-end loan growth, partially offset by a benefit from improved credit quality and the continued shift in our loan portfolio to private equity/venture capital loans, which tend to be of higher credit quality. The provision for Gross loan charge-offs were $15.4 million for Gross loan charge-offs were $25.1 million for the three months ended June 30, 2017, of which $5.5 million was not specifically reserved for Six months ended June 30, Our provision for credit losses was $57.1 million for the six months ended June 30, 2018, consisting of a provision for loan losses of $54.7 million and a provision for unfunded credit commitments of $2.4 million. Our provision for credit losses was $46.5 million for the six months ended June 30, 2017, consisting of a provision for loan losses of $44.9 million and a provision for unfunded credit commitments of $1.7 million. The provision for loan losses of The provision for loan losses of $44.9 million for the six months ended June 30, 2017 was reflective primarily of $38.1 million in net new specific reserves for nonaccrual loans and $10.0 million from period-end loan growth, partially offset by a benefit from improved credit quality and the continued shift in our loan portfolio to private equity/venture capital loans, which tend to be of higher credit quality. The provision for Gross loan charge-offs were $26.0 million for one sponsor-led buyout loan and $3.2 million from one late-stage client. Gross loan charge-offs of $39.1 million for the six months ended June 30, 2017, included $24.1 million from our early-stage See “Consolidated Financial Condition—Credit Quality and Allowance for Loan Losses” below and Note 7—“Loans, Noninterest Income For the three and six months ended June 30, million for the comparable Use of Non-GAAP Financial Measures To supplement our unaudited interim consolidated financial statements presented in accordance with GAAP, we use certain non-GAAP measures of financial performance (including, but not limited to, non-GAAP core fee income, non-GAAP noninterest income, non-GAAP net gains on investment securities). These supplemental performance measures may vary from, and may not be comparable to, similarly titled measures by other companies in our industry. Non-GAAP financial measures are not in accordance with, or an alternative for, GAAP. Generally, a non-GAAP financial measure is a numerical measure of a company’s performance that either excludes or includes amounts that are not normally excluded or included in the most directly comparable measure calculated and presented in accordance with GAAP. A non-GAAP financial measure may also be a financial metric that is not required by GAAP or other applicable requirement. We believe these non-GAAP financial measures, when taken together with the corresponding GAAP financial measures, provide meaningful supplemental information regarding our performance by excluding items that represent income attributable to investors other than us and our subsidiaries and certain other Included in net income is income and expense attributable to noncontrolling interests. We recognize, as part of our investment funds management business through SVB Capital, the entire income or loss from funds consolidated in accordance with ASC Topic 810 as discussed in Note 1—“Basis of Presentation” of the “Notes to Interim Consolidated Financial Statements (unaudited)” under Part I, Item 1 of this report. We are required under GAAP to consolidate 100% of the results of these entities, even though we may own less than 100% of such entities. The relevant amounts attributable to investors other than us are reflected under “Net Income Attributable to Noncontrolling Interests” on our statements of income. Where applicable, the tables below for noninterest income and net gains on investment securities exclude noncontrolling interests. Core fee income is a non-GAAP financial measure, which represents GAAP noninterest income, but excludes certain line items where performance is typically subject to market or other conditions beyond our The following table provides a reconciliation of GAAP noninterest income to non-GAAP noninterest income, net of noncontrolling interests, for the three and six months ended June 30,
The following table provides a reconciliation of GAAP noninterest income to non-GAAP core fee income for the three and six months ended June 30,
Gains on Investment Securities, Net Net gains and losses on investment securities include gains and losses from our non-marketable and other equity securities, which include public equity securities held as a result of exercised equity warrant assets, as well as gains and losses from sales of our Our The extent to which any unrealized gains or losses will become realized is subject to a variety of factors, including, among other things, the expiration of certain sales restrictions to which these equity securities may be subject to (i.e. lock-up agreements), changes in prevailing market prices, market conditions, the actual sales or distributions of securities, the timing of such actual sales or distributions, which, to the extent such securities are managed by our managed funds, are subject to our funds' separate discretionary sales/distributions and governance processes. Our AFS securities portfolio is a fixed income investment portfolio that is managed with the objective of earning an appropriate portfolio yield over the long-term while maintaining sufficient liquidity and credit diversification as well as addressing our asset/liability management objectives. Though infrequent, sales of debt securities in our AFS securities portfolio may result in net gains or losses and are conducted pursuant to the guidelines of our investment policy related to the management of our liquidity position and interest rate risk. Three months ended June 30, For the three months ended June 30, Non-GAAP net gains on investment securities, net of noncontrolling interests, of Gains of $ Gains of $ Six months ended June 30, For the six months ended June 30, Non-GAAP net gains, net of noncontrolling interests, of Gains of $ Losses of $22.1 million Gains of $ The following
Gains on Equity Warrant Assets, Net Three months ended June 30, 2018 and 2017 Net gains on equity warrant assets were $19.1 million for the three months ended June 30, 2018, compared to net gains of $10.8 million for the comparable 2017 period. Net gains on equity warrant assets for the three months ended June 30, 2018 consisted of: Net gains of $11.0 million from changes in warrant valuation increases compared to net gains of $8.3 million, driven by our private company warrant portfolio and reflective of increased M&A exit activity and comparable market valuations during the three months ended June 30, 2018, and Net gains of $8.9 million from the exercise of equity warrant assets compared to net gains of $3.1 million, primarily driven by increased IPO and M&A activity during the three months ended June 30, 2018. Six months ended June 30, 2018 and 2017 Net gains on equity warrant assets were $38.3 million for the six months ended June 30, 2018, compared to net gains of $17.5 million for the comparable 2017 period. Net gains on equity warrant assets for the six months ended June 30, 2018 consisted of: Net gains of $20.5 million from the exercise of equity warrant assets compared to net gains of $11.3 million , reflective primarily of increased IPO and M&A activity during the six months endedJune 30, 2018, and Net gains of $19.5 million from changes in warrant valuation increases compared to net gains of $7.3 million, driven by our private company warrant portfolio and reflective of increased M&A activity during the six months endedJune 30, 2018. A summary of gains on equity warrant assets, net, for the three and six months ended June 30,
Non-GAAP Core Fee Income
Foreign Exchange Fees Foreign exchange fees were
Credit Card Fees Credit card fees were
Deposit Service Charges Deposit service charges were Client Investment Fees Client investment fees were
NM—Not meaningful The following table summarizes average client investment funds for the three and six months ended June 30,
The following table summarizes period-end client investment funds at June 30,
Noninterest Expense A summary of noninterest expense for the three and six months ended June 30,
Included in noninterest expense is expense attributable to noncontrolling interests. See below for a description and reconciliation of non-GAAP noninterest expense and non-GAAP operating efficiency ratio, both of which exclude noncontrolling interests. Non-GAAP Noninterest Expense We use and report non-GAAP noninterest expense, non-GAAP taxable equivalent revenue and non-GAAP operating efficiency ratio, which excludes noncontrolling interests. We believe these non-GAAP financial measures, when taken together with the corresponding GAAP financial measures, provide meaningful supplemental information regarding our performance by: (i) excluding certain items that represent expenses attributable to investors other than us and our subsidiaries, or certain items that do not occur every reporting period; or (ii) providing additional information used by management that is not otherwise required by GAAP or other applicable requirements. Our management uses, and believes that investors benefit from referring to, these non-GAAP financial measures in assessing our operating results and when planning, forecasting and analyzing future periods. However, these non-GAAP financial measures should be considered in addition to, not as a substitute for or preferable to, financial measures prepared in accordance with GAAP. The table below provides a summary of non-GAAP noninterest expense and non-GAAP operating efficiency ratio, both net of noncontrolling interests for the three and six months ended June 30,
NM—Not meaningful
Compensation and Benefits Expense The following table provides a summary of our compensation and benefits expense for the three and six months ended June 30,
Compensation and benefits expense was An increase of An increase of $8.8 million in salaries and wages reflective primarily of the increase in the number of average FTE by 219 to 2,591 for the second quarter of An increase of Compensation and benefits expense was An increase of $27.4 million in incentive compensation and ESOP expense reflective primarily of our strong 2018 full-year expected performance as compared to 2017 as well as an increase in the number of average FTE since June 30, 2017, An increase of An increase of Our variable compensation plans consist primarily of our Incentive Compensation Plan, Direct Drive Incentive Compensation Plan, 401(k) and ESOP Plan, Retention Program and Warrant Incentive Plan (see descriptions in our Professional Services Professional services expense was Business Development and Travel Business development and travel expense was $12.1 million and $23.3 million for the three and six months ended June 30, 2018, respectively, compared to $11.4 million and $20.6 million for the comparable 2017 period. The increases were to support globally. Other Noninterest Expense Total other noninterest expense was $18.8 million and $33.5 million for the three and six months ended June 30, 2018, respectively, compared to $20.4 million and $36.6 million for the comparable2017 periods. The decreases were driven primarily by certain reimbursement incentives received associated with a new vendor agreement signed during the first quarter 2018. A summary of other noninterest expense for the three and six months ended June 30,
Net Included in net income is income and expense attributable to noncontrolling interests. The relevant amounts allocated to investors in our consolidated subsidiaries, other than us, are reflected under “Net In the table below, noninterest income consists primarily of net investment gains and losses from our consolidated funds. Noninterest expense is primarily related to management fees paid by our managed funds to SVB Financial’s subsidiaries as the funds’ general partners. A summary of net
NM—Not meaningful
Three months ended June 30, Net income attributable to noncontrolling interests was $ Six months ended June 30, Net income attributable to noncontrolling interests was Income Taxes On December 22, 2017, the TCJ Act was signed into law. The TCJ Act amends the Internal Revenue Code to, among other things, reduce tax rates, and make changes to credits and deductions for individuals and businesses. For businesses, the TCJ Act permanently lowers the Federal corporate tax rate to 21.0 percent from the prior maximum rate of 35.0 percent, effective for tax years including or commencing January 1, 2018. The Company has also considered the provisions of the TCJ Act related to non-U.S. operations which would potentially impact the Company’s income tax provision. Such provisions include the one-time transition tax (“TT”) on foreign earnings and the new base erosion anti-avoidance tax (“BEAT”). Based on analyses performed by the Company as of June 30, 2018, the impact of both of these provisions continue to have an immaterial impact on the Company’s income tax provision. Our effective income tax expense rate was The reductions in the effective tax rate for the three and six months ended June 30, 2018 were primarily due to the lower Federal corporate tax rate as a result of the TCJ Act effective January 1, 2018, partially offset by the period-over-period reduction in tax benefits associated with employee stock transactions as a result of the reduction in the Federal statutory rate and a one-time benefit of $4.7 million recorded in the period ended March 31, 2017, The effective tax rate for the three months ended June 30, 2018, and 2017, included the recognition of The Company has considered the provisions of the Operating Segment Results We have three segments for which we report our financial information: Global Commercial Bank, SVB Private Bank and SVB Capital. We report segment information based on the “management” approach, which designates the internal reporting used by management for making decisions and assessing performance as the source of our reporting segments. Please refer to Note The following is our reportable segment information for the three and six months ended June 30, Global Commercial Bank
Three months ended June 30, Income before income tax expense from our Global Commercial Bank (“GCB”) increased to Net interest income from GCB increased by GCB had a provision for credit losses of The provision of $14.9 million for the three months ended June 30, 2017 primarily reflected $12.7 million in net new specific reserves for nonaccrual loans and a $5.0 million increase in reserves for period-end loan growth, partially offset by a benefit from improved credit quality Noninterest expense increased by Six months ended June 30, Net interest income from our GCB increased by GCB had a provision for credit losses of The provision of $43.7 million for the six months ended June 30, 2017 was reflective primarily of $38.1 million in net new specific reserves for nonaccrual loans and $10.0 million from period-end loan growth, partially offset by a benefit from improved credit quality and the continued shift in our loan portfolio to private equity/venture capital loans, which tend to be of higher credit quality. Noninterest expense increased by SVB Private Bank
Three months ended June 30, Net interest income from our SVB Private Bank increased by Noninterest expense increased by Six months ended June 30, 2018 and 2017 Net interest income from our SVB Private Bank increased by $3.5 million for the six months ended June 30, 2018, due primarily to higher interest income due to loan growth, partially offset by a higher funding charge for loans funded. SVB Private Bank had a provision for credit losses of $2.0 million for the six months ended June 30, 2018, compared to $1.1 million for the comparable 2017 period. The provisions for both the six months ended June 30, 2018 and 2017 were due primarily to reserves for period-end loan growth. Noninterest expense increased by $4.0 million for the six months ended June 30, 2018, due primarily to increased compensation and benefits expense. Compensation and benefits expense increased as a result of increased salaries and wages, reflective primarily of SVB Capital
SVB Capital’s components of noninterest income primarily include net gains and losses on non-marketable and other equity securities, carried interest and fund management fees. All components of income before income tax expense and average assets discussed below are net of noncontrolling interests. We experience variability in the performance of SVB Capital from quarter to quarter due to a number of factors, including changes in the values of our funds’ underlying investments, changes in the amount of distributions and general economic and market conditions. Such variability may lead to volatility in the gains and losses from investment securities and cause our results to differ from period to period. Three months ended June 30, SVB Capital had noninterest income of Net gains on investment securities of Fund management fees of Six months ended June 30, SVB Capital had noninterest income of Net gains on investment securities of Fund management fees of Consolidated Financial Condition Our total assets, and total liabilities and stockholders' equity, were $ Cash and Cash Equivalents Cash and cash equivalents totaled As of June 30, Investment Securities Investment securities totaled $ Available-for-Sale Securities $0.4 billion. Securities classified as available-for-sale are carried at fair value with changes in fair value recorded as unrealized gains or losses in a separate component of stockholders' equity. During the six months ending June 30, 2018 the AFS portfolio had unrealized losses of $73.1 million ($52.9 million net of tax), primarily driven by increases in period-end market interest rates. The following table summarizes the remaining contractual principal maturities and fully taxable equivalent yields on fixed income securities, carried at fair value, classified as available-for-sale as of June 30,
Held-to-Maturity Securities Period-end held-to-maturity securities were Securities classified as held-to-maturity are accounted for at cost with no adjustments for changes in fair value. For securities previously re-designated as held-to-maturity from available-for-sale, the net unrealized gains at the date of transfer will continue to be reported as a separate component of shareholders' equity and amortized over the life of the securities in a manner consistent with the amortization of a premium or discount. The following table summarizes the remaining contractual principal maturities and fully taxable equivalent yields on fixed income investment securities classified as held-to-maturity as of June 30, contractual maturities because mortgage borrowers have the right to prepay outstanding loan obligations with or without penalties. Mortgage-backed securities classified as held-to-maturity typically have original contractual maturities from 10 to 30 years whereas expected average lives of these securities tend to be significantly shorter and vary based upon structure and prepayments in lower interest rate environments. The weighted average yield on mortgage-backed securities is based on prepayment assumptions at the purchase date. Actual yields earned may differ significantly based upon actual prepayments.
Portfolio duration is a standard measure used to approximate changes in the market value of fixed income instruments due to a change in market interest rates. The measure is an estimate based on the level of current market interest rates, expectations for changes in the path of forward rates and the effect of forward rates on mortgage prepayment speed assumptions. As such, portfolio duration will fluctuate with changes in market interest rates. Changes in portfolio duration are also impacted by changes in the mix of longer versus shorter term-to-maturity securities. Our estimated fixed income investment securities portfolio average duration was Non-Marketable and Other Equity Securities Our non-marketable and other equity securities portfolio primarily represents investments in venture capital and private equity funds, SPD Silicon Valley Bank Co., Ltd. (the Bank's joint venture bank in China (“SPD-SVB”)), debt funds, private and public portfolio companies, including public equity securities held as a result of equity warrant assets exercised, and investments in qualified affordable housing projects. Included in our non-marketable and other equity securities carried under fair value accounting are amounts that are attributable to noncontrolling interests. We are required under GAAP to consolidate 100% of these investments that we are deemed to control, even though we may own less than 100% of such entities. See below for a summary of the carrying value (as reported) of non-marketable and other securities compared to the amounts attributable to SVBFG. Period-end non-marketable and other equity securities were
Volcker Rule On June 6, 2017, we received notice that the Board of Governors of the Federal Reserve System approved the Company’s application for an extension of the permitted conformance period for the Company’s investments in “illiquid” covered funds. The approval extends the deadline by which the Company must sell, divest, restructure or otherwise conform such investments to the provisions of the Volcker Rule until the earlier of (i) July 21, 2022, or (ii) the date by which each fund matures by its terms or is otherwise conformed to the Volcker Rule. As implemented under the Dodd-Frank Wall Street Reform and Consumer Protection Act, the Volcker Rule prohibits, subject to certain exceptions, a banking entity, such as the Company, from sponsoring or investing in covered funds, defined to include many venture capital and private equity funds. As noted above, the Company currently maintains certain investments deemed to be prohibited investments in “illiquid” covered funds, which are now covered under the approved extension. As of June 30, Loans Loans, net of unearned income increased by The breakdown of total gross loans and total loans as a percentage of total gross loans by
Loan Concentration The following table provides a summary of gross loans by size and category. The breakout of the categories is based on total client balances (individually or in the aggregate) as of June 30,
At June 30, The following table provides a summary of gross loans by size and category. The breakout of the categories is based on total client balances (individually or in the aggregate) as of December 31,
At December 31, The credit profile of our loan portfolio clients varies based on the nature of the lending we do for different market segments. Our three main market segments include (i) technology (software/internet and hardware) and life science/healthcare, (ii) private equity/venture capital, and (iii) SVB Private Bank. (i) Technology and Life Science/Healthcare Our technology and life science/healthcare loan portfolios include loans to clients at all stages of their life cycles and represent the largest segments of our loan portfolio. The primary underwriting method for our technology and life science/healthcare portfolios are classified as investor dependent, balance sheet dependent or cash flow dependent. Investor dependent loans represent a relatively small percentage of our overall portfolio at Balance sheet dependent loans, which includes asset-based loans, represented Cash flow dependent loans, which include sponsored buyout lending, cash flow from operations that is sufficient to service all debt. Borrowers must demonstrate normalized cash flow in excess of all fixed charges associated with operating the business. Sponsored buyout loans represented (ii) Private Equity/Venture Capital We also provide financial services to clients in the private equity/venture capital community. At June 30, (iii) SVB Private Bank Our SVB Private Bank clients are primarily private equity/venture capital professionals and executive leaders of the innovation companies they support. Our lending to SVB Private Bank clients represented 11 percent of total gross loans at both June 30, State Concentrations Approximately See generally “Risk Factors–Credit Risks” set forth under Part I, Item 1A Credit Quality Indicators As of June 30, Credit Quality and Allowance for Loan Losses Nonperforming assets consist of loans on nonaccrual status, loans past due 90 days or more still accruing interest, and Other Real Estate Owned (“OREO”) and other foreclosed assets. We measure all loans placed on nonaccrual status for impairment based on the fair value of the underlying collateral or the net present value of the expected cash flows. The table below sets forth certain data and ratios between nonperforming loans, nonperforming assets and the allowance for loan losses:
Our allowance for loan losses as a percentage of total gross loans Our allowance for loan losses for performing loans was $233.0 million at June 30, 2018, compared to $213.2 million at December 31, 2017. The Our allowance for loan losses for nonaccrual loans was The following table presents a summary of changes in nonaccrual
Our nonaccrual loans as of June 30, loans that were added to our nonaccrual portfolio in 2015, another is a Corporate Finance client that was Average nonaccrual loans for the three and six months ended June 30, Accrued Interest Receivable and Other Assets A summary of accrued interest receivable and other assets at June 30,
Net Deferred Tax Assets The increase of Other Other includes various asset amounts for other operational transactions. The increase of renewals. Derivatives Derivative instruments are recorded as a component of other assets and other liabilities on the balance sheet. The following table provides a summary of derivative assets and liabilities, net at June 30,
Equity Warrant Assets In connection with negotiating credit facilities and certain other services, we often obtain rights to acquire stock in the form of equity warrant assets in primarily private, venture-backed companies in the technology and life science/healthcare industries. At June 30,
Foreign Exchange Forward and Foreign Currency Option Contracts We enter into foreign exchange forward contracts and foreign currency option contracts with clients involved in foreign activities, either as the purchaser or seller, depending upon the clients’ needs. For each forward or option contract entered into with our clients, we enter into an opposite way forward or option contract with a correspondent bank, which mitigates the risk of fluctuations in currency rates. We also enter into forward contracts with correspondent banks to economically reduce our foreign exchange exposure related to certain foreign currency denominated instruments. Net gains and losses on the revaluation of foreign currency denominated instruments are recorded in the line item “Other” as part of noninterest income, a component of consolidated net income. We have not experienced nonperformance by any of our counterparties and therefore have not incurred any related losses. Further, we anticipate performance by all counterparties. Our net exposure for foreign exchange forward and foreign currency option contracts, net of cash collateral, was $41.4 million at June 30, Client Interest Rate Derivatives We sell interest rate contracts to clients who wish to mitigate their interest rate exposure. We economically reduce the interest rate risk from this business by entering into opposite way contracts with correspondent banks. Our net exposure for client interest rate derivative contracts, net of cash collateral, was Deposits Deposits were At June 30, Short-Term Borrowings We had Long-Term Debt Our long-term debt was $696.0 million at June 30, 2018 and $695.5 million at December 31, 2017. As of June 30, Other Liabilities A summary of other liabilities at June 30,
Foreign Exchange Spot Contract Liabilities Foreign exchange spot contract liabilities represent unsettled client trades at the end of the period. The increase of Accrued Compensation Accrued compensation includes amounts for our Incentive Compensation Plan, Direct Drive Incentive Compensation Plan, Retention Program, Warrant Incentive Plan, ESOP and other compensation arrangements. The decrease of higher compensation incentive plan accruals for the six months ended June 30, as well as an increase in the number of average FTEs during the first half of 2018. Other Other includes various accrued liability amounts for other operational transactions. The increase of Noncontrolling Interests Noncontrolling interests totaled Fair Value Measurements The following table summarizes our financial assets and liabilities that are measured at fair value on a recurring basis as of June 30,
Financial assets valued using Level 3 measurements consist of our non-marketable investment securities in shares of private company stock and equity warrant assets (rights to shares of private and public company capital stock). The valuation methodologies of our non-marketable securities carried under fair value accounting and equity warrant assets involve a significant degree of management judgment. Refer to Note The inherent uncertainty in the process of valuing securities for which a ready market does not exist may cause our estimated values of these securities to differ significantly from the values that would have been derived had a ready market for the securities existed, and those differences could be material. The timing and amount of changes in fair value, if any, of these financial instruments depend upon factors beyond our control, including the performance of the underlying companies, fluctuations in the market prices of the preferred or common stock of the underlying companies, general volatility and interest rate market factors, and legal and contractual restrictions. The timing and amount of actual net proceeds, if any, from the disposition of these financial instruments depend upon factors beyond our control, including investor demand for IPOs, levels of M&A activity, legal and contractual restrictions on our ability to sell, and the perceived and actual performance of portfolio companies. All of these factors are difficult to predict and there can be no assurances that we will realize the full value of these securities, which could result in significant losses. See “Risk Factors” set forth in our During the three and six months ended June 30, 2018, the Level 3 assets that are measured at fair value on a recurring basis experienced net realized and unrealized gains of $18.2 million and $36.9 million, respectively, primarily reflective of valuation increases from our public and private company warrant portfolios and net gains realized on exercised warrant assets due to IPO and M&A activity. During the three and six months ended June 30, 2017, the Level 3 assets that are measured at fair value on a recurring basis experienced net realized and unrealized gains of $10.4 million and $17.1 million, respectively, primarily Capital Resources We maintain an adequate capital base to support anticipated asset growth, operating needs and credit and other business risks, and to provide for SVB Financial and the Bank to be in compliance with all regulatory capital guidelines. Our primary sources of new capital include retained earnings and proceeds from the sale and issuance of our capital stock or other securities. In consultation with the Finance Committee of our Board of Directors, management engages in regular capital planning processes in an effort to optimize the use of capital available to us and to appropriately plan for our future capital needs. The capital plan considers capital needs for the foreseeable future and allocates capital to both existing and future business activities. Expected future use or activities for which capital may be set aside include balance sheet growth and associated relative increases in market or credit exposure, investment activity, potential product and business expansions, acquisitions and strategic or infrastructure investments. In addition, we conduct capital stress tests as part of our annual capital planning process. The capital stress tests allow us to assess the impact of adverse changes in the economy and interest rates on our capital adequacy position. SVBFG Stockholders’ Equity SVBFG stockholders’ equity totaled Funds generated through retained earnings are a significant source of capital and liquidity and are expected to continue to be so in the future. Capital Ratios Both SVB Financial and the Bank are subject to various regulatory capital requirements administered by state and federal banking agencies. Regulatory capital ratios for SVB Financial and the Bank exceeded minimum federal regulatory guidelines for a well-capitalized depository institution as of June 30,
Capital ratios (CET 1, tier 1, and total risk-based for the first half of Capital ratios (CET 1, tier 1, and total risk-based capital) for the Bank decreased as of June 30, 2018, compared to the same ratios as of December 31, 2017. The decrease in the Bank's capital ratios reflected Both SVB Financial and the Bank's tier 1 leverage ratios increased as of The tangible common equity to tangible assets ratio and the tangible common equity to risk-weighted assets ratios are not required by GAAP or applicable bank regulatory requirements. However, we believe these ratios provide meaningful supplemental information regarding our capital levels. Our management uses, and believes that investors benefit from referring to, these ratios in evaluating the adequacy of the Company’s capital levels; however, these financial measures should be considered in addition to, not as a substitute for or preferable to, comparable financial measures prepared in accordance with GAAP. These ratios are calculated by dividing total SVBFG stockholders' equity, by total period-end assets and risk-weighted assets, after reducing both amounts by acquired intangibles, if any. The manner in which this ratio is calculated varies among companies. Accordingly, our ratio is not necessarily comparable to similar measures of other companies. The following table provides a reconciliation of non-GAAP financial measures with financial measures defined by GAAP for SVB Financial and the Bank for the periods ended June 30,
The tangible common equity to tangible assets ratio decreased for the Bank primarily as a result of the $55.0 million in cash dividends paid by the Bank to our bank holding company, SVB Financial Off-Balance Sheet Arrangements In the normal course of business, we use financial instruments with off-balance sheet risk to meet the financing needs of our customers. These financial instruments include commitments to extend credit, commercial and standby letters of credit and commitments to invest in venture capital and private equity fund investments. These instruments involve, to varying degrees, elements of credit risk. Credit risk is defined as the possibility of sustaining a loss because other parties to the financial instrument fail to perform in accordance with the terms of the contract. For details of our commitments to extend credit, and commercial and standby letters of credit, please refer to Note Commitments to Invest in Venture Capital and Private Equity Funds Subject to applicable regulatory requirements, including the Volcker Rule, we make investments. We make commitments to invest in venture capital and private equity funds, which in turn make investments generally in, or in some cases make loans to, privately-held companies. Commitments to invest in these funds are generally made for a 10-year period from the inception of the fund. Although the limited partnership agreements governing these investments typically do not restrict the general partners from calling 100% of committed capital in one year, it is customary for these funds to generally call most of the capital commitments over 5 to 7 years; however in certain cases, the funds may not call 100% of committed capital over the life of the fund. The actual timing of future cash requirements to fund these commitments is generally dependent upon the investment cycle, overall market conditions, and the nature and type of industry in which the privately held companies operate. For further details on our commitments to invest in venture capital and private equity funds, refer to Note Liquidity The objective of liquidity management is to ensure that funds are available in a timely manner to meet our financial obligations, including, as necessary, paying creditors, meeting depositors’ needs, accommodating loan demand and growth, funding investments, repurchasing securities and other operating or capital needs, without incurring undue cost or risk, or causing a disruption to normal operating conditions. We regularly assess the amount and likelihood of projected funding requirements through a review of factors such as historical deposit volatility and funding patterns, present and forecasted market and economic conditions, individual client funding needs, and existing and planned business activities. Our Asset/Liability Committee (“ALCO”), which is a management committee, provides oversight to the liquidity management process and recommends policy guidelines for the approval of the Finance Committee of our Board of Directors, and courses of action to address our actual and projected liquidity needs. Additionally, we routinely conduct liquidity stress testing as part of our liquidity management practices. Our deposit base is, and historically has been, our primary source of liquidity. Our deposit levels and cost of deposits may fluctuate from time to time due to a variety of factors, including market conditions, prevailing interest rates, changes in client deposit behaviors, availability of insurance protection, and our offering of deposit products. We may also offer more investment alternatives for our off-balance sheet products which may impact deposit levels. At June 30, Our liquidity requirements can also be met through the use of our portfolio of liquid assets. Our definition of liquid assets includes cash and cash equivalents in excess of the minimum levels necessary to carry out normal business operations, short-term investment securities maturing within one year, available-for-sale securities eligible and available for financing or pledging purposes with a maturity in excess of one year and anticipated near-term cash flows from investments. We have certain facilities in place to enable us to access short-term borrowings on a secured (using On a stand-alone basis, SVB Financial’s primary liquidity channels include six months ended June 30, 2018, the dividend amount paid was $30 million and $55 million, respectively. The ability of the Bank to pay dividends is subject to certain regulations described in “Business—Supervision and Regulation—Restriction on Dividends” under Part I, Item 1 of our Consolidated Summary of Cash Flows Below is a summary of our average cash position and statement of cash flows for the six months ended June 30,
Average cash and cash equivalents Cash provided by operating activities was Cash used for investing activities of Cash provided by financing activities was Cash and cash equivalents were ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Interest Rate Risk Management Market risk is defined as the risk of adverse fluctuations in the market value of financial instruments due to changes in market interest rates. Interest rate risk is our primary market risk and can result from timing and volume differences in the repricing of our rate-sensitive assets and liabilities, widening or tightening of credit spreads, changes in the general level of market interest rates and changes in the shape and level of the benchmark LIBOR/SWAP yield curve. Additionally, changes in interest rates can influence the rate of principal prepayments on mortgage securities, which affects the rate of amortization of purchase premiums and discounts. Other market risks include foreign currency exchange risk, equity price risk, including the effect of competition on product pricing. While all of these risks are important considerations, all are inherently difficult to predict, and it is equally difficult to assess the impact of each on the overall simulation results. Interest rate risk is managed by our ALCO. ALCO reviews the sensitivity of the market valuation on earning assets and funding liabilities and 12-month forward looking net interest income from changes in interest rates, structural changes in investment and funding portfolios, loan and deposit activity and current market conditions. Adherence with relevant metrics included in our Interest Rate Risk Policy, which is approved by the Finance Committee of our Board of Directors, is monitored on an ongoing basis. Management of interest rate risk is carried out primarily through strategies involving our fixed income securities portfolio, available funding channels and capital market activities. In addition, our policies permit the use of off-balance sheet We utilize a simulation model to perform sensitivity analysis on the economic value of our equity and our net interest income under a variety of interest rate scenarios, balance sheet forecasts and business strategies. The simulation model provides a dynamic assessment of interest rate sensitivity embedded within our balance sheet which measures the potential variability in economic value and net interest income relating solely to changes in market interest rates over time. We review our interest rate risk position and sensitivity to market rates on a quarterly basis at a minimum. Model Simulation and Sensitivity Analysis The following table presents our EVE and NII sensitivity exposure related to an instantaneous and sustained parallel shift in market interest rates of 100 and 200
Economic Value of Equity The estimated EVE in the preceding table is based on a combination of valuation methodologies including a discounted cash flow analysis and a multi-path lattice based valuation. Both methodologies use publicly available market interest rates to determine discounting factors on projected cash flows. The model simulations and calculations are highly assumption-dependent and will change regularly as the composition of earning assets and funding liabilities change (including the impact of changes in the value of interest rate derivatives, if any), as interest rate environments evolve, and as we change our assumptions in response to relevant market conditions, competition or business circumstances. These calculations do not reflect forecast changes in our balance sheet or changes we may make to reduce our EVE exposure as a part of our overall interest rate risk management strategy. As with any method of measuring interest rate risk, certain limitations are inherent in the method of analysis presented in the preceding table. We are exposed to yield curve risk, prepayment risk, basis risk, and yield spread compression, which cannot be fully modeled and expressed using the above methodology. Accordingly, the results in the preceding table should not be relied upon as a precise indicator of actual results in the event of changing market interest rates. Additionally, the resulting EVE and NII estimates are not intended to represent, and should not be construed to represent our estimate of the underlying value of equity or forecast of NII. Our base case EVE as of June 30, Marginally higher LIBOR/swap rates in 12-Month Net Interest Income Simulation Our At June 30, 2018, our NII sensitivity, which is measured as The simulation model used in the above analysis incorporates embedded floors on loans, where present, in our interest rate scenarios, which prevent model benchmark rates from moving below ITEM 4. CONTROLS AND PROCEDURES Disclosure Controls and Procedures Disclosure controls and procedures are the controls and other procedures that are designed to ensure that information required to be disclosed in the reports that we file or submit under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms. Disclosure controls and procedures include, among other things, processes, controls and procedures designed to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. We carried out an evaluation, under the supervision and with the participation of management, including the Chief Executive Officer and the Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of our most recently completed fiscal quarter, pursuant to Exchange Act Rule 13a-15(b). Based upon this evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of the period covered by this report, the Company’s disclosure controls and procedures were effective. Changes in Internal Control Beginning January 1, 2018, we implemented ASC 606, Revenue from Contracts with Customers. Although the new revenue standard is expected to have an immaterial impact on our ongoing net income, we did implement changes to our processes related to revenue recognition and the control activities within them. These included the development of new policies based on the five-step model provided in the new revenue standard, new training, ongoing contract review requirements, and gathering of information provided for disclosures. PART II–OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS Please refer to Note ITEM 1A. RISK FACTORS There are no material changes ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS Recent Sales of Unregistered Securities None. Issuer Purchases of Equity Securities None. ITEM 3. DEFAULTS UPON SENIOR SECURITIES None. ITEM 4. MINE SAFETY DISCLOSURES Not applicable. ITEM 5. OTHER INFORMATION None. ITEM 6. EXHIBITS
SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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