UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)



x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~September~~June 30, ~~2017~~2018



¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to .

Commission File Number: 000-15637

SVB FINANCIAL GROUP

(Exact name of registrant as specified in its charter)



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)

(408) 654-7400

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company,” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer x Accelerated filer ¨

Non-accelerated filer ¨ (Do not check if a smaller reporting company)

Smaller reporting company ¨ Emerging growth company ¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

At ~~October~~July 31, ~~2017, 52,740,729~~2018, 53,213,737 shares of the registrant’s common stock ($0.001 par value) were outstanding.

TABLE OF CONTENTS



		Page
PART I - FINANCIAL INFORMATION		4

Item 1.	Interim Consolidated Financial Statements	4

	Interim Consolidated Balance Sheets as of ~~September~~June 30, ~~2017~~2018 and December 31, ~~2016~~2017 (Unaudited)	4

	Interim Consolidated Statements of Income for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018 and ~~2016~~2017 (Unaudited)	5

	Interim Consolidated Statements of Comprehensive Income for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018 and ~~2016~~2017 (Unaudited)	6

	Interim Consolidated Statements of Stockholders' Equity for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018 and ~~2016~~2017 (Unaudited)	7

	Interim Consolidated Statements of Cash Flows for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018 and ~~2016~~2017 (Unaudited)	8

	Notes to Interim Consolidated Financial Statements (Unaudited)	9

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	5159

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	93103

Item 4.	Controls and Procedures	95105

PART II - OTHER INFORMATION		96106

Item 1.	Legal Proceedings	97107

Item 1A.	Risk Factors	97107

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	97107

Item 3.	Defaults Upon Senior Securities	97107

Item 4.	Mine Safety Disclosures	97107

Item 5.	Other Information	97107

Item 6.	Exhibits	97107

SIGNATURES		98108

Glossary of Acronyms that may be used in this Report

AFS— Available-for-Sale

APIC— Additional Paid-in Capital

ASC— Accounting Standards Codification

ASU— Accounting Standards Update

CET— Common Equity Tier

EHOP— Employee Home Ownership Program of the Company

EPS— Earnings Per Share

ERI— Energy and Resource Innovation

ESOP— Employee Stock Ownership Plan of the Company

ESPP— 1999 Employee Stock Purchase Plan of the Company

FASB— Financial Accounting Standards Board

FDIC— Federal Deposit Insurance Corporation

FHLB— Federal Home Loan Bank

FRB— Federal Reserve Bank

FTE— Full-Time Employee

FTP— Funds Transfer Pricing

GAAP— Accounting principles generally accepted in the United States of America

HTM— Held-to-Maturity

IASB— International Accounting Standards Board

IPO— Initial Public Offering

IRS— Internal Revenue Service

IT— Information Technology

LIBOR— London Interbank Offered Rate

M&A— Merger and Acquisition

OTTI— Other Than Temporary Impairment

SEC— Securities and Exchange Commission

SPD-SVB— SPD Silicon Valley Bank Co., Ltd. (the Bank's joint venture bank in China)

TDR— Troubled Debt Restructuring

UK— United Kingdom

VIE— Variable Interest Entity

PART I - FINANCIAL INFORMATION

ITEM 1. INTERIM CONSOLIDATED FINANCIAL STATEMENTS

~~SVB FINANCIAL GROUP AND SUBSIDIARIES~~

~~INTERIM CONSOLIDATED BALANCE SHEETS (UNAUDITED)~~

(Dollars in thousands, except par value and share data)
September 30,
2017
December 31,
2016
Assets

Cash and cash equivalents
$ 3,555,571

$ 2,545,750
Available-for-sale securities, at fair value (cost of $12,584,564 and $12,588,783, respectively)
12,603,337

12,620,411
Held-to-maturity securities, at cost (fair value of $11,023,415 and $8,376,138, respectively)
11,055,006

8,426,998
Non-marketable and other securities
627,469

622,552
Total investment securities
24,285,812

21,669,961
Loans, net of unearned income
22,189,327

19,899,944
Allowance for loan losses
(249,010 )
(225,366 )
Net loans
21,940,317

19,674,578
Premises and equipment, net of accumulated depreciation and amortization
122,826

120,683
Accrued interest receivable and other assets
849,761

672,688
Total assets
$ 50,754,287

$ 44,683,660
Liabilities and total equity

Liabilities:

Noninterest-bearing demand deposits
$ 36,862,021

$ 31,975,457
Interest-bearing deposits
7,950,012

7,004,411
Total deposits
44,812,033

38,979,868
Short-term borrowings
4,840

512,668
Other liabilities
990,498

618,383
Long-term debt
749,618

795,704
Total liabilities
46,556,989

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; 52,723,654 shares and 52,254,074 shares outstanding, respectively
53

52
Additional paid-in capital
1,294,499

1,242,741
Retained earnings
2,749,627

2,376,331
Accumulated other comprehensive income
15,634

23,430
Total SVBFG stockholders’ equity
4,059,813

3,642,554
Noncontrolling interests
137,485

134,483
Total equity
4,197,298

3,777,037
Total liabilities and total equity
$ 50,754,287

$ 44,683,660

~~See accompanying notes to interim consolidated financial statements (unaudited).~~

~~SVB FINANCIAL GROUP AND SUBSIDIARIES~~

~~INTERIM CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)~~

Three months ended September 30,
Nine months ended September 30,
(Dollars in thousands, except per share amounts)
2017
2016
2017
2016
Interest income:

Loans
$ 268,445

$ 214,227

$ 745,983

$ 617,456
Investment securities:

Taxable
109,443

83,468

294,768

261,121
Non-taxable
1,172

522

2,703

1,693
Federal funds sold, securities purchased under agreements to resell and other short-term investment securities
6,211

2,196

16,670

5,793
Total interest income
385,271

300,413

1,060,124

886,063
Interest expense:

Deposits
2,304

1,535

6,218

3,984
Borrowings
8,993

9,717

27,243

28,161
Total interest expense
11,297

11,252

33,461

32,145
Net interest income
373,974

289,161

1,026,663

853,918
Provision for credit losses (1)
23,522

20,004

70,062

90,225
Net interest income after provision for credit losses
350,452

269,157

956,601

763,693
Noninterest income:

Gains on investment securities, net
15,238

23,178

48,838

41,764
Gains on equity warrant assets, net (2)
24,922

21,558

42,432

33,253
Foreign exchange fees
29,671

25,944

82,026

76,998
Credit card fees
20,270

18,295

56,099

49,226
Deposit service charges
14,508

13,356

43,046

39,142
Client investment fees
15,563

7,952

37,571

23,959
Lending related fees
15,404

8,168

32,874

23,783
Letters of credit and standby letters of credit fees
7,306

6,811

20,951

18,414
Other (2)
15,896

18,878

41,128

36,511
Total noninterest income
158,778

144,140

404,965

343,050
Noninterest expense:

Compensation and benefits
153,263

136,568

449,412

374,410
Professional services
32,987

23,443

86,331

67,959
Premises and equipment
18,937

16,291

53,753

47,861
Net occupancy
12,660

9,525

35,437

28,919
Business development and travel
10,329

8,504

30,913

30,077
FDIC and state assessments
8,359

7,805

26,354

21,624
Correspondent bank fees
3,162

3,104

9,770

9,469
Other
18,064

15,533

54,670

44,292
Total noninterest expense (1)
257,761

220,773

746,640

624,611
Income before income tax expense
251,469

192,524

614,926

482,132
Income tax expense (3)
97,351

76,877

220,412

195,508
Net income before noncontrolling interests
154,118

115,647

394,514

286,624
Net income loss attributable to noncontrolling interests
(5,498 )
(4,566 )
(21,218 )
(3,405 )
Net income available to common stockholders (3)
$ 148,620

$ 111,081

$ 373,296

$ 283,219
Earnings per common share—basic (3)
$ 2.82

$ 2.13

$ 7.11

$ 5.46
Earnings per common share—diluted (3)
2.79

2.12

7.01

5.42

~~(1)~~

Our consolidated statements of income for the three and nine months ended September 30, 2016 were modified from prior period's presentation to conform to the current period's presentation, which reflects our provision for loan losses and provision for unfunded credit commitments together as our “provision for credit losses”. In prior periods, our provision for unfunded credit commitments were reported as a component of noninterest expense.

~~(2)~~

Our consolidated statements of income for the three and nine months ended September 30, 2016 were modified from prior period's presentation to conform to the current period's presentation, which reflects a new line item to separately disclose net gains on equity warrant assets. In prior periods, net gains on equity warrant assets were reported as a component of gains on derivative instruments, net. We removed the line item gains on derivative instruments, net and reclassified all other gains on derivative instruments, net to other noninterest income.

~~(3)~~

Included in income tax expense, net income available to common shareholders, earnings per common share-basic and earnings for common share-diluted, for the three and nine months ended September 30, 2017, are tax benefits recognized associated with the adoption of Accounting Standards Update (“ASU”) 2016-09, Improvements to Employee Share-Based Payment Accounting in the first quarter of 2017. This guidance was adopted on a prospective basis with no change to prior period amounts.

~~See accompanying notes to interim consolidated financial statements (unaudited).~~

~~SVB FINANCIAL GROUP AND SUBSIDIARIES~~

~~INTERIM CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)~~

Three months ended September 30,
Nine months ended September 30,
(Dollars in thousands)
2017
2016
2017
2016
Net income before noncontrolling interests
$ 154,118

$ 115,647

$ 394,514

$ 286,624
Other comprehensive income (loss), net of tax:

Change in cumulative translation gains (losses):

Foreign currency translation gains (losses)
1,928

(119 )
4,463

(2,168 )
Related tax (expense) benefit
(787 )
50

(1,821 )
885
Change in unrealized gains (losses) on available-for-sale securities:

Unrealized holding gains (losses)
925

(54,204 )
(12,471 )
157,564
Related tax (expense) benefit
(429 )
21,932

5,207

(64,357 )
Reclassification adjustment for losses (gains) included in net income
101

15

(384 )
(11,567 )
Related tax (benefit) expense
(41 )
(6 )
157

4,707
Amortization of unrealized gains on securities transferred from available-for-sale to held-to-maturity
(1,594 )
(1,690 )
(4,931 )
(6,507 )
Related tax benefit
641

680

1,984

2,618
Other comprehensive income (loss), net of tax
744

(33,342 )
(7,796 )
81,175
Comprehensive income
154,862

82,305

386,718

367,799
Comprehensive income attributable to noncontrolling interests
(5,498 )
(4,566 )
(21,218 )
(3,405 )
Comprehensive income attributable to SVBFG
$ 149,364

$ 77,739

$ 365,500

$ 364,394

~~See accompanying notes to interim consolidated financial statements (unaudited).~~

~~SVB FINANCIAL GROUP AND SUBSIDIARIES~~

~~INTERIM CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (UNAUDITED)~~

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
408,044
—
8,661
—
—

8,661

—

8,661
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)
—
—
(6,300 ) —
—

(6,300 )
—

(6,300 )
Net income
—
—
—
283,219
—

283,219

3,405

286,624
Capital calls and distributions, net
—
—
—
—
—

—

(8,236 )
(8,236 )
Net change in unrealized gains and losses on AFS securities, net of tax
—
—
—
—
86,347

86,347

—

86,347
Amortization of unrealized gains on securities transferred from AFS to HTM, net of tax
—
—
—
—
(3,889 )
(3,889 )
—

(3,889 )
Foreign currency translation adjustments, net of tax
—
—
—
—
(1,283 )
(1,283 )
—

(1,283 )
Share-based compensation, net
—
—
23,834
—
—

23,834

—

23,834
Balance at September 30, 2016
52,061,435

$ 52

$ 1,219,555

$ 2,276,865

$ 96,579

$ 3,593,051

$ 130,266

$ 3,723,317
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
458,742
1
14,191
—
—

14,192

—

14,192
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
—
—
—
373,296
—

373,296

21,218

394,514
Capital calls and distributions, net
—
—
—
—
—

—

(18,216 )
(18,216 )
Net change in unrealized gains and losses on AFS securities, net of tax
—
—
—
—
(7,491 )
(7,491 )
—

(7,491 )
Amortization of unrealized gains on securities transferred from AFS to HTM, net of tax
—
—
—
—
(2,947 )
(2,947 )
—

(2,947 )
Foreign currency translation adjustments, net of tax
—
—
—
—
2,642

2,642

—

2,642
Share-based compensation, net
—
—
35,473
—
—

35,473

—

35,473
Balance at September 30, 2017
52,723,654

$ 53

$ 1,294,499

$ 2,749,627

$ 15,634

$ 4,059,813

$ 137,485

$ 4,197,298

~~(1)~~

During the first quarter of 2017 we adopted ASU 2016-09, Improvements to Employee Share-Based Payment Accounting. The amendments in this ASU require that all excess tax benefits and tax deficiencies associated with share-based compensation be recognized in income tax expense or benefit in the income statement. Previously, tax effects resulting from changes in the Company's share price subsequent to grant date of share-based compensation awards were recorded through additional paid-in-capital in stockholders' equity at the time of vesting and exercise. This guidance was adopted on a prospective basis with no change to prior period amounts. 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.~~

~~See accompanying notes to interim consolidated financial statements (unaudited).~~

~~SVB FINANCIAL GROUP AND SUBSIDIARIES~~

~~INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)~~

Nine months ended September 30,
(Dollars in thousands)
2017
2016
Cash flows from operating activities:

Net income before noncontrolling interests
$ 394,514

$ 286,624
Adjustments to reconcile net income to net cash provided by operating activities:

Provision for credit losses
70,062

90,225
Changes in fair values of equity warrant assets, net of proceeds from exercises
(29,666 ) (20,505 )
Changes in fair values of derivatives, net
8,214

(4,370 )
Gains on investment securities, net
(48,838 )
(41,764 )
Depreciation and amortization
39,265

35,114
Amortization of premiums and discounts on investment securities, net
2,609

9,622
Amortization of share-based compensation
27,739

22,342
Amortization of deferred loan fees
(81,060 )
(72,807 )
Deferred income tax benefit
2,325

(6,839 )
Gain from sale of equity valuation services business (2,393 ) —
Excess tax benefit from exercise of stock options and vesting of restricted shares (1) (14,399 ) —
Changes in other assets and liabilities:

Accrued interest receivable and payable, net
(26,092 )
1,169
Accounts receivable and payable, net
4,120

(12,872 )
Income tax receivable and payable, net
30,069

13,181
Accrued compensation
(11,731 )
(48,740 )
Foreign exchange spot contracts, net
86,911

1,803
Other, net
16,383

20,821
Net cash provided by operating activities
468,032

273,004
Cash flows from investing activities:

Purchases of available-for-sale securities
(2,420,741 )
—
Proceeds from sales of available-for-sale securities
7,311

2,879,409
Proceeds from maturities and pay downs of available-for-sale securities
2,434,039

1,002,523
Purchases of held-to-maturity securities
(3,812,782 )
(225,526 )
Proceeds from maturities and pay downs of held-to-maturity securities
1,283,764

1,206,367
Purchases of non-marketable and other securities
(18,713 )
(41,925 )
Proceeds from sales and distributions of non-marketable and other securities
88,809

54,420
Net increase in loans
(2,263,600 )
(2,365,640 )
Purchases of premises and equipment
(35,470 )
(37,184 )
Proceeds from sale of equity valuation services business 3,000
—
Net cash (used for) provided by investing activities
(4,734,383 )
2,472,444
Cash flows from financing activities:

Net increase (decrease) in deposits
5,832,165

(953,360 )
Net decrease in short-term borrowings
(507,828 )
(772,479 )
Principal payments of long-term debt (46,235 ) —
(Distributions to noncontrolling interests), net of contributions from noncontrolling interests
(18,216 )
(8,236 )
Tax effect from stock exercises (1)
—

(6,300 )
Proceeds from issuance of common stock, ESPP and ESOP
16,286

12,989
Net cash provided by (used for) financing activities
5,276,172

(1,727,386 )
Net increase in cash and cash equivalents
1,009,821

1,018,062
Cash and cash equivalents at beginning of period
2,545,750

1,503,257
Cash and cash equivalents at end of period
$ 3,555,571

$ 2,521,319
Supplemental disclosures:

Cash paid during the period for:

Interest
$ 41,324

$ 39,317
Income taxes
190,706

186,474
Noncash items during the period:

Changes in unrealized gains and losses on available-for-sale securities, net of tax
$ (7,491 )
$ 86,347
Distributions of stock from investments
5,360

750


~~(1)~~	During the first quarter of 2017 we adopted ASU 2016-09, Improvements to Employee Share-Based Payment Accounting. This guidance was adopted on a prospective basis with no change to prior period amounts. 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.~~

~~See accompanying notes to interim consolidated financial statements (unaudited).~~

SVB FINANCIAL GROUP AND SUBSIDIARIES

INTERIM CONSOLIDATED BALANCE SHEETS (UNAUDITED)



(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

See accompanying notes to interim consolidated financial statements (unaudited).

SVB FINANCIAL GROUP AND SUBSIDIARIES

INTERIM CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)



	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

See accompanying notes to interim consolidated financial statements (unaudited).

SVB FINANCIAL GROUP AND SUBSIDIARIES

INTERIM CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)



	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.

See accompanying notes to interim consolidated financial statements (unaudited).

SVB FINANCIAL GROUP AND SUBSIDIARIES

INTERIM CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (UNAUDITED)



	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		Additional Paid-in Capital		Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Total SVBFG Stockholders’ Equity			Noncontrolling Interests			Total Equity
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.

See accompanying notes to interim consolidated financial statements (unaudited).

SVB FINANCIAL GROUP AND SUBSIDIARIES

INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)



	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.

See accompanying notes to interim consolidated financial statements (unaudited).

SVB FINANCIAL GROUP AND SUBSIDIARIES

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)


1.	Basis of Presentation

SVB Financial Group is a diversified financial services company, as well as a bank holding company and a financial holding company. SVB Financial was incorporated in the state of Delaware in March 1999. Through our various subsidiaries and divisions, we offer a variety of banking and financial products and services to support our clients of all sizes and stages throughout their life cycles. In these notes to our consolidated financial statements, when we refer to “SVB Financial Group,” “SVBFG”, the “Company,” “we,” “our,” “us” or use similar words, we mean SVB Financial Group and all of its subsidiaries collectively, including Silicon Valley Bank (the “Bank”), unless the context requires otherwise. When we refer to “SVB Financial” or the “Parent” we are referring only to the parent company, SVB Financial Group (not including subsidiaries).

The accompanying unaudited interim consolidated financial statements reflect all adjustments of a normal and recurring nature that are, in the opinion of management, necessary to fairly present our financial position, results of operations and cash flows in accordance with GAAP. Such unaudited interim consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q pursuant to the rules and regulations of the SEC. Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. The results of operations for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018 are not necessarily indicative of results to be expected for any future periods. These unaudited interim consolidated financial statements should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, ~~2016~~2017 (“~~2016~~2017 Form 10-K”).

The accompanying unaudited interim consolidated financial statements have been prepared on a consistent basis with the accounting policies described in Consolidated Financial Statements and Supplementary Data—Note 2—“Summary of Significant Accounting Policies” under Part II, Item 8 of our ~~2016~~2017 Form 10-K.

The preparation of unaudited interim consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Estimates may change as new information is obtained. Significant items that are subject to such estimates include measurements of fair value, the valuation of non-marketable and other equity securities, the valuation of equity warrant assets, the adequacy of the allowance for loan losses and allowance for unfunded credit commitments, and the recognition and measurement of income tax assets and liabilities.

Principles of Consolidation and Presentation

Our consolidated financial statements include the accounts of SVB Financial Group and consolidated entities. We consolidate voting entities in which we have control through voting interests or entities through which we have a controlling financial interest in a variable interest entity (“VIE”). We determine whether we have a controlling financial interest in a VIE by determining if we have: (a) the power to direct the activities of the VIE that most significantly impact the entity’s economic performance, (b) the obligation to absorb the expected losses, or (c) the right to receive the expected returns of the entity. Generally, we have significant variable interests if our commitments to a limited partnership investment represent a significant amount of the total commitments to the entity. We also evaluate the impact of related parties on our determination of variable interests in our consolidation conclusions. We consolidate VIEs in which we are the primary beneficiary based on a controlling financial interest. If we are not the primary beneficiary of a VIE, we record our pro-rata interests ~~or our cost basis in the VIE, as appropriate,~~ based on ~~other accounting guidance within GAAP.~~our ownership percentage.

VIEs are entities where investors lack sufficient equity at risk for the entity to finance its activities without additional subordinated financial support or equity investors, as a group, lack one of the following characteristics: (a) the power to direct the activities that most significantly impact the entity’s economic performance, (b) the obligation to absorb the expected losses of the entity, or (c) the right to receive the expected returns of the entity. We assess VIEs to determine if we are the primary beneficiary of a VIE. A primary beneficiary is defined as a variable interest holder that has a controlling financial interest. A controlling financial interest requires both: (a) power to direct the activities that most significantly impact the VIE’s economic performance, and (b) obligation to absorb losses or receive benefits of a VIE that could potentially be significant to a VIE. Under this analysis, we also evaluate kick-out rights and other participating rights which could provide us a controlling financial interest. The primary beneficiary of a VIE is required to consolidate the VIE.

We also evaluate fees paid to managers of our limited partnership investments. We exclude those fee arrangements that are not deemed to be variable interests from the analysis of our interests in our investments in VIEs and the determination of a primary beneficiary, if any. Fee arrangements based on terms that are customary and commensurate with the services provided are deemed not to be variable interests and are, therefore, excluded.

All significant intercompany accounts and transactions with consolidated entities have been eliminated. We have not provided financial or other support during the periods presented to any VIE that we were not previously contractually required to provide.

Adoption of New Accounting Standards

In March 2016, the FASB issued a new accounting standard update (ASU 2016-09, Improvements to Employee Share-Based Payment Accounting (Topic 718)), which includes provisions intended to simplify various aspects related to how share-based payments are accounted for and presented in the financial statements, including the accounting for income taxes, forfeitures, and statutory tax withholding requirements, as well as classification in the statement of cash flows. Under the ASU, an entity recognizes all excess tax benefits and tax deficiencies as income tax expense or benefit in the income statement in the period when the awards vest or are settled. The guidance also permits an entity to make an accounting policy election to either estimate the number of awards that are expected to vest or account for forfeitures when they occur. We adopted this guidance on January 1, 2017 and elected to estimate the number of awards that are expected to vest which, is consistent with the previous accounting guidance. In addition, we also elected to apply the amendments related to the presentation of excess tax benefits on the statement of cash flows using the prospective transition method.

Previously, tax effects resulting from changes in the Company's share price subsequent to grant date of share-based compensation awards were recorded through additional paid-in capital in stockholders' equity at the time of vesting and exercise. The adoption of the amended accounting guidance resulted in a $1.3 million and $14.4 million reduction of income tax expense (that previously would have been reflected as additional paid-in capital), or a benefit of $0.02 and $0.27 per diluted common share, for the three and nine months ended September 30, 2017, respectively. We expect the impact of this amendment will vary period to period depending on the volatility of the Company's stock price and the timing of vesting and/or settlement of awards.

~~Recent Accounting Pronouncements~~

In May 2014, the FASB issued a new accounting standard update (ASU 2014-09, Revenue from Contracts with Customers (Topic 606)), which provides revenue recognition guidance that is intended to create greater consistency with respect to how and when revenue from contracts with customers is shown in the income statement. The guidance requires that revenue from contracts with customers be recognized when transfer of control over goods or services is passed to customers in the amount of consideration expected to be ~~received~~. received. Subsequent Accounting Standard Updates have been issued clarifying the original pronouncement (ASU 2016-08, ASU 2016-10, ASU 2016-12 and ASU 2016-20). ~~The new standard and amendments will be effective~~

On January 1, 2018, ~~either on a full retrospective approach~~we adopted the new accounting standard ASU 2014-09, Revenue from Contracts with Customers and all the related amendments ("new revenue standard", "ASC 606" or ~~a modified retrospective approach. We plan to adopt the revenue guidance in the first quarter of 2018~~"ASU 2014-09") using the modified retrospective ~~transition approach~~method applied to those contracts which ~~are~~were not completed as of January 1, 2018. ~~Upon adoption, we will recognize~~We elected to apply the ~~cumulative-effect~~practical expedient which allows us to expense costs related to obtaining contracts as incurred because the amortization period would have been one year or less. We recognized the cumulative effect of ~~adopting this guidance~~initially applying the new revenue standard as an adjustment to the opening balance of retained earnings. The comparative information has not been restated and continues to be reported under the accounting standards in effect for those periods.

We ~~have conducted~~completed a comprehensive scoping exercise to determine the revenue streams that are within the scope of this guidance. The scope of this guidance explicitly excludes net interest income, including interest income earned from our loan and fixed income securities portfolios, as well as certain other noninterest income earned from our lending-, investment- and derivative-related activities. Based on our ~~contract assessments to-date,~~completed assessment, we ~~have~~did not ~~identified~~identify any material changes to the timing or the amounts of our revenue ~~recognition. We expect minor changes~~recognition, however, we identified a change in the timing of recognizing fund management fees in other noninterest income for a portion of our SVB Capital funds. Fund management fees for these certain SVB Capital funds ~~as the fees~~ will now be recognized at the time of distribution which typically occurs later in the life of the fund ~~life~~ than had been previously recognized. ~~Based on our preliminary analysis, we expect the~~The cumulative adjustment to retained earnings associated with this change ~~to be from $7~~was $5.8 million, ~~to $10 million,~~net of tax, with an immaterial impact to our net income on an ongoing basis. The impact to net income as a result of applying the new revenue standard were decreases of $0.3 million and $0.9 million for the three and six months ended June 30, 2018, respectively.

The timing of revenue recognition may differ from the timing of cash settlements or invoicing to customers. We ~~continue~~record a receivable when revenue is recognized prior to ~~evaluate~~invoicing, and unearned revenue when revenue is recognized subsequent to receipt of consideration.These assets and liabilities are reported on the consolidated balance sheets on a contract-by-contract basis at the end of each reporting period. During the three and six months endedJune 30, 2018, changes in our contract assets, contract liabilities and receivables were not material. Additionally, revenues recognized during the three and six months ended June 30, 2018 that were included in the corresponding contract liability balance at the beginning of the period were not material.

The cumulative effect of the ~~guidance has on~~changes to our revenue and the presentation of certain costs associated with our credit card and merchant services and whether these costs are presented in noninterest expense or offset against credit card fees in noninterest income. We currently recognize payment networks costs associated with our credit card and merchant services in noninterest expense. If we determine thatconsolidated balance sheets at January 1, 2018, for the adoption of the ~~guidance results in a change in~~new revenue standard were as follows:



(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

In accordance with the ~~presentation~~new revenue standard requirements, the disclosure of ~~these costs, we estimate that this will result in approximately $10 million to $15 million~~the impact of ~~annual expenses would be netted against credit card interchange fees and reported in noninterest income instead of other noninterest expense. This change would occur~~adoption on ~~a prospective basis starting January 1,~~our consolidated balance sheets at June 30, 2018 and ~~would reduce~~ our ~~non-GAAP core fee~~statements of income ~~within noninterest income~~for the three and also reduce noninterest expense with no impact to net income. Furthermore, we continue to evaluate the disaggregation of our significant categories of revenue within the scope of this guidance and plan to expand our qualitative disclosures of our noninterest income within the Consolidated Financial Statements upon adoption in 2018.six months ended June 30, 2018, were as follows:



	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		)

In ~~January 2016,~~February 2018, the FASB issued a new accounting standard update (ASU 2018-02, Income Statement - Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income (ASU "2018-02")) to address certain stranded income tax effects in accumulated other comprehensive income ("AOCI") resulting from H.R.1, known as the Tax Cuts and Jobs Act (the "TCJ Act"). ASU 2018-02 changed current accounting whereby an entity may elect to reclassify the stranded tax effect from AOCI to retained earnings in each period in which the effect of the change in the U.S. federal corporate income tax rate in the TCJ Act (or portion thereof) is recorded. ASU 2018-02 is effective for periods beginning after December 15, 2018 and early adoption is permitted. We have elected to early adopt ASU 2018-02 and reclassified approximately $0.3 millionfrom accumulated other comprehensive income to retained earnings within our consolidated statements of stockholders' equity in the first quarter of 2018.

On January 1, 2018, we adopted the new accounting standard update ASU 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities (Topic 825)), which addresses certain aspects of recognition, measurement, presentation and disclosure of financial instruments. This guidance requires equity investments (except those accounted for under the equity method of accounting) to be measured at fair value with changes in fair value recognized in net income. ~~The adoption of~~We adopted this guidance using the ~~new standard will result in the elimination of cost~~modified retrospective method ~~accounting for equity investments and will impact our nonmarketable~~

~~and other equity securities that are currently carried at cost. This guidance will be effective on January 1, 2018,~~ and our equity investments ~~measured~~carried at cost ~~will be measured~~with readily determinable fair values were re-measured at fair value and the difference between cost and fair value ~~at adoption date will be~~was recorded as a cumulative-effect adjustment to opening retained earnings as of ~~the fiscal year of adoption for our cost method venture capital and private equity fund investments with readily determinable fair values.~~January 1, 2018. The ~~actual~~ adjustment to opening retained earnings ~~will depend upon the fair value~~for these investments was $74.6 million, net of our investments at the adoption date but based on September 30, 2017 and historical values, we expect the transition adjustment to increase capital between $110 million and $120 million on a pre-tax basis. Anytax, with subsequent changes in the fair value ~~will be~~of these equity securities recorded as unrealized gains or losses in our consolidated statements of income. Additionally, in accordance with this guidance, net unrealized gains of $29.2 million, net

of tax, included in accumulated other comprehensive income on January 1, 2018, related to our previously reported available-for-sale equity securities, were reclassified as an adjustment to retained earnings. Subsequent changes in the fair value of these equity securities were recorded as unrealized gains or losses in our consolidated statements of income. Furthermore, for purposes of disclosing the fair value of loans carried at amortized cost, ~~we are evaluating~~ our valuation ~~methods to determine the necessary changes~~methodology was updated to conform to an “exit price” concept as required by the standard ~~update. Accordingly,~~update, resulting in an immaterial change in the fair ~~value~~value.

In August 2016, the FASB issued a new accounting standard update (ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments), which clarifies the guidance on eight specific cash flow issues. We adopted the new accounting standard, specifically as it relates to distributions from our equity method investments, on January 1, 2018. We elected to adopt the nature of distribution approach and applied the guidance retrospectively. The new guidance had an immaterial impact on the presentation between investing and operating activities within our statements of cash flows related to distributions and net gains from our nonmarketable and other securities portfolio.

In November 2016, the FASB issued a new accounting standard update (ASU 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash), which requires that a statement of cash flows explains the change during the period in the total cash, cash equivalents, and amounts ~~disclosed for~~generally described as restricted cash or restricted cash equivalents. Therefore, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning of period and end of period total amounts shown on the statement of cash flows. Previous to the update, there had been some diversity in practice. Given that we had already classified restricted cash such ~~loans may change upon adoption.~~as cash reserves at the Federal Reserve as part of cash and cash equivalents on the cash flow statement, the update had no impact on how we were already reporting and presenting our statement of cash flows.

Recent Accounting Pronouncements

In February 2016, the FASB issued a new accounting standard update (ASU 2016-02, Leases (Topic 842)), which will require for all operating leases the recognition of a right-of-use asset and a corresponding lease liability, in the statement of financial position. The lease cost will be allocated over the lease term on a straight-line basis. There were further amendments, including practical expedients, with the issuance of ASU 2018-01, “Leases (Topic 842): Land Easement Practical Expedient for Transition to Topic 842” in January 2018. In July 2018 the FASB issued ASU No. 2018-11, "Leases (Topic 842): Targeted Improvements", which provides us with the option to apply the new leasing standard to all open leases as of the adoption date, on a prospective basis. This guidance will be effective on January 1, 2019, ~~on a modified retrospective basis,~~ with early adoption permitted. We plan to adopt the lease accounting guidance on January 1, 2019, on a prospective basis. We intend to elect a "package of expedients" which will result in continuing to account for existing leases for which the ~~first quarter~~commencement date is before January 1, 2019, in accordance with Leases (Topic 840) throughout the lease term, including periods after adoption of ~~2019~~the new guidance. We expect the adoption of this standard to have an impact of less than one percent of total assets and ~~are currently evaluating the impact this guidance will have~~liabilities on our consolidated ~~financial statements by reviewing our existing lease contracts and service contracts that may include embedded leases. We expect to recognize~~balance sheets reflective of the recognition of right-of-use assets and related lease liabilities associated predominantly with noncancelable operating ~~leases included in~~leases. In addition, we do not expect the ~~table~~adoption of ~~minimum future payments in the amount~~this guidance to have a material impact on our consolidated statements of ~~$217 million as disclosed in Note 18 of our 2016 Form 10-K.~~income.

In June 2016, the FASB issued a new accounting standard update (ASU 2016-13, Financial Instruments- Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments), which amends the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses over the life of the loan and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. This guidance will be effective January 1, 2020, on a modified retrospective approach, with early adoption permitted, but not before January 1, 2019. We currently have a ~~working~~ project team in place and subject matter experts to assist with our review of key interpretive issues and ~~assist in~~ the assessment of our existing credit loss forecasting models and processes against the new guidance to determine what modifications may be required. We are currently evaluating the impact this guidance will have on our financial position, results of operation and stockholders’ equity.

In August 2016, the FASB issued a new accounting standard update (ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments), which clarifies the guidance on eight specific cash flow issues. This guidance will be effective January 1, 2018 on a full retrospective approach, with early adoption permitted. Our preliminary evaluation has resulted in the expectation that this guidance will primarily impact the presentation between investing and operating activities within our statements of cash flows related to distributions and net gains from our nonmarketable and other securities portfolio. We are continuing to evaluate any further impact of this guidance to the presentation of our operating, investing and financing activities within our statements of cash flows.

Reclassifications

Certain prior period amounts, primarily related to the ~~changes to our income statement presentation~~adoption of ~~net gains on derivative instruments and provision for unfunded credit commitments~~new accounting guidance, have been reclassified to conform to current period presentations.


2.	~~Stockholders’~~Stockholders' Equity and EPS

Accumulated Other Comprehensive Income

The following table summarizes the items reclassified out of accumulated other comprehensive income into the Consolidated Statements of Income (unaudited) for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018 and ~~2016~~2017:


		Three months ended September 30,						Nine months ended September 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(1)	Gains on investment securities, net	$	101		$	15		$	(384	)	$	(11,567	)	Gains on investment securities, net	$	—	$	123		$	—	$	(485	)
Related tax (benefit) expense(1)	Income tax expense	(41		)	(6		)	157			4,707			Income tax expense	—		(50		)	—		198
Total reclassification adjustment for losses (gains) included in net income, net of tax(1)		$	60		$	9		$	(227	)	$	(6,860	)		$	—	$	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.

EPS

Basic EPS is the amount of earnings available to each share of common stock outstanding during the reporting period. Diluted EPS is the amount of earnings available to each share of common stock outstanding during the reporting period adjusted to include the effect of potentially dilutive common shares. Potentially dilutive common shares include incremental shares issuable for stock options and restricted stock units outstanding under our 2006 Equity Incentive Plan and our ESPP. Potentially dilutive common shares are excluded from the computation of dilutive EPS in periods in which the effect would be antidilutive. The following is a reconciliation of basic EPS to diluted EPS for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018 and ~~2016~~2017:


	Three months ended September 30,				Nine months ended September 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	$	148,620	$	111,081	$	373,296	$	283,219	$	237,798	$	123,193	$	432,759	$	224,676
Denominator:
Weighted average common shares outstanding—basic	52,705		52,046		52,530		51,842		53,064		52,537		52,974		52,441
Weighted average effect of dilutive securities:
Stock options and ESPP	343		233		381		245		400		368		408		397
Restricted stock units	257		134		319		142		312		289		350		342
Weighted average common shares outstanding—diluted	53,305		52,413		53,230		52,229		53,776		53,194		53,732		53,180
Earnings per common share:
Basic	$	2.82	$	2.13	$	7.11	$	5.46	$	4.48	$	2.34	$	8.17	$	4.28
Diluted	$	2.79	$	2.12	$	7.01	$	5.42	4.42		2.32		8.05		4.22

The following table summarizes the weighted-average common shares excluded from the diluted EPS calculation due to the antidilutive effect for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018 and ~~2016:~~2017:


	Three months ended September 30,		Nine months ended September 30,		Three months ended June 30,		Six months ended June 30,
(Shares in thousands)	2017	2016	2017	2016	2018	2017	2018	2017
Stock options	112	518	61	444	58	73	33	36
Restricted stock units	5	120	2	9	113	—	59	—
Total	117	638	63	453	171	73	92	36


3.	Share-Based Compensation

For the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018 and ~~2016~~2017, we recorded share-based compensation and related tax benefits as follows:


	Three months ended September 30,						Nine months ended September 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	$	8,644		$	7,916		$	27,739		$	22,342		$	11,944		$	9,892		$	22,467		$	19,095
Income tax benefit related to share-based compensation expense	(3,154		)	(2,881		)	(9,518		)	(7,461		)	(2,743		)	(3,349		)	(5,060		)	(6,364		)

Unrecognized Compensation Expense

As of ~~September~~June 30, ~~2017,~~2018, unrecognized share-based compensation expense was as follows:


(Dollars in thousands)	Unrecognized Expense		Weighted Average Expected Recognition Period - in Years	Unrecognized Expense		Weighted Average Expected Recognition Period - in Years
Stock options	$	10,935	2.72	$	15,039	3.10
Restricted stock units	56,513		2.74	81,376		2.91
Total unrecognized share-based compensation expense	$	67,448		$	96,415

Share-Based Payment Award Activity

The table below provides stock option information related to the 2006 Equity Incentive Plan for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018:

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 113,535
178.23

Exercised (232,370 ) 70.79

Forfeited (9,491 ) 111.48

Outstanding at September 30, 2017 882,231
103.02
3.80 $ 74,172,891
Vested and expected to vest at September 30, 2017 857,176
101.94
3.74 72,987,562
Exercisable at September 30, 2017 533,847
83.46
2.73 55,323,524



	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

The aggregate intrinsic value of outstanding options shown in the table above represents the pre-tax intrinsic value based on our closing stock price of ~~$187.09~~$288.76 as of ~~September~~June 30, ~~2017~~.2018. The total intrinsic value of options exercised during the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018 was ~~$3.8~~$21.6 million and $31.0 million, respectively, compared to $5.6 million and ~~$25.8 million, compared to $1.5 million and $8.2~~$22.1 million for the comparable ~~2016~~2017 ~~periods, respectively.~~periods.

The table below provides information for restricted stock units under the 2006 Equity Incentive Plan for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018:


	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	239,847		180.05		185,292		301.56
Vested	(223,561	)	102.00		(206,997	)	130.29
Forfeited	(38,871	)	122.77		(21,028	)	148.43
Nonvested at September 30, 2017	648,384		134.43
Nonvested at June 30, 2018					594,934		188.96


4.	Variable Interest Entities

Our involvement with VIEs includes our investments in venture capital and private equity funds, debt funds, private and public portfolio companies and our investments in qualified affordable housing projects.

The following table presents the carrying amounts and classification of significant variable interests in consolidated and unconsolidated VIEs as of ~~September~~June 30, ~~2017~~2018 and December 31, ~~2016:~~2017:


(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
September 30, 2017:
June 30, 2018:
Assets:
Cash and cash equivalents	$	7,555	$	—	$	—	$	4,113	$	—	$	—
Non-marketable and other securities (1)	190,129		323,284		323,284
Non-marketable and other equity securities (1)							208,275		529,429		529,429
Accrued interest receivable and other assets	169		—		—		397		—		—
Total assets	$	197,853	$	323,284	$	323,284	$	212,785	$	529,429	$	529,429
Liabilities:
Other liabilities (1)	445		90,974		—		765		161,113		—
Total liabilities	$	445	$	90,974	$	—	$	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 ~~September~~June 30, ~~2017~~2018 and December 31, ~~2016~~2017 are investments in qualified affordable housing projects of ~~$148.0~~$251.5 million and ~~$112.4~~$174.2 million, respectively, and related other liabilities consisting of unfunded credit commitments of ~~$91.0~~$161.1 million and ~~$58.1~~$100.9 million, respectively.

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 and investments in qualified affordable housing projects. A majority of these investments are through ~~third~~third- party funds held by SVB Financial in which we do not have controlling or significant variable interests. These investments represent our unconsolidated VIEs in the table above. Our non-marketable and other equity securities portfolio also includes investments from SVB Capital. SVB Capital is the funds management business of SVB Financial Group, which focuses primarily on venture capital investments. The SVB Capital family of funds is comprised of direct venture funds that invest in companies and funds of funds that invest in other venture capital funds. We have a controlling and significant variable interest in four of these SVB Capital funds and consolidate these funds for financial reporting purposes.

All investments are generally nonredeemable and distributions are expected to be received through the liquidation of the underlying investments throughout the life of the investment fund. Investments may only be sold or transferred subject to the notice and approval provisions of the underlying investment agreement. Subject to applicable regulatory requirements, including the Volcker Rule, we also make commitments to invest in venture capital and private equity funds. For additional details, see Note ~~12—~~13—“Off-Balance Sheet Arrangements, Guarantees and Other Commitments” of the “Notes to Interim Consolidated Financial Statements (unaudited)” under Part I, Item 1 of this report.

The Bank also has variable interests in low income housing tax credit funds, in connection with fulfilling its responsibilities under the Community Reinvestment Act (“CRA”), that are designed to generate a return primarily through the realization of federal tax credits. These investments are typically limited partnerships in which the general partner, other than the Bank, holds the power over significant activities of the VIE; therefore, these investments are not consolidated. For additional information on our investments in qualified affordable housing projects see Note 6—“Investment Securities" of the “Notes to Interim Consolidated Financial Statements (unaudited)” under Part I, Item 1 of this report.

As of ~~September~~June 30, ~~2017,~~2018, our exposure to loss with respect to the consolidated VIEs is limited to our net assets of ~~$197.4~~$212.0 million and our exposure to loss for our unconsolidated VIEs is equal to our investment in these assets of ~~$323.3~~$529.4 million.


5.	Cash and Cash Equivalents

The following table details our cash and cash equivalents at ~~September~~June 30, ~~2017~~2018 and December 31, ~~2016~~2017:


(Dollars in thousands)	September 30, 2017		December 31, 2016		June 30, 2018		December 31, 2017
Cash and due from banks (1)	$	3,490,005	$	2,476,588	$	2,670,473	$	2,672,290
Securities purchased under agreements to resell (2)	62,664		64,028		37,379		247,876
Other short-term investment securities	2,902		5,134		4,249		2,909
Total cash and cash equivalents	$	3,555,571	$	2,545,750	$	2,712,101	$	2,923,075

(1)

At ~~September~~June 30, ~~2017~~2018 and December 31, ~~2016~~2017, $~~1.6 billion~~645.8 million and $~~1.1 billion~~624.0 million, respectively, of our cash and due from banks was deposited at the Federal Reserve Bank and was earning interest at the Federal Funds target rate, and interest-earning deposits in other financial institutions were $~~1.2~~1.0 billion and $~~721 million~~1.1 billion, respectively.


(2)	At ~~September~~June 30, ~~2017~~2018 and December 31, ~~2016~~2017, securities purchased under agreements to resell were collateralized by U.S. Treasury securities and U.S. agency securities with aggregate fair values of $6438.1 million and $66252.8 million, respectively. None of these securities were sold or repledged as of ~~September~~June 30, ~~2017~~2018 and December 31, ~~2016~~2017.


6.	Investment Securities

Our investment securities portfolio consists of: (i) an available-for-sale securities portfolio and a held-to-maturity securities portfolio, both of which represent interest-earning investment securities, and, (ii) a non-marketable and other equity securities portfolio, which primarily represents investments managed as part of our funds management ~~business.~~business as well as public equity securities held as a result of equity warrant assets exercised.

Available-for-Sale Securities

The components of our available-for-sale investment securities portfolio at ~~September~~June 30, ~~2017~~2018 and December 31, ~~2016~~2017 are as follows:


	September 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	$	7,488,126	$	14,048	$	(3,834	)	$	7,498,340	$	5,782,879	$	4,186	$	(53,995	)	$	5,733,070
U.S. agency debentures	1,668,403		9,759		(1,993		)	1,676,169		1,495,657		—		(9,793		)	1,485,864
Residential mortgage-backed securities:
Agency-issued collateralized mortgage obligations—fixed rate	3,024,649		4,998		(16,952		)	3,012,695		2,103,572		39		(65,477		)	2,038,134
Agency-issued collateralized mortgage obligations—variable rate	394,567		1,442		(129		)	395,880		335,048		1,376		(126		)	336,298
Equity securities	8,819		11,893		(459		)	20,253
Total available-for-sale securities	$	12,584,564	$	42,140	$	(23,367	)	$	12,603,337	$	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

The following table summarizes sale activity of available-for-sale securities during the three and six months ended June 30, 2018 and 2017 as recorded in the line item “Gains on investment securities, net”, a component of noninterest income:



	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

The following tables summarize our unrealized losses on our available-for-sale securities portfolio into categories of less than 12 months, or 12 months or longer as of ~~September~~June 30, ~~2017~~2018 and December 31, ~~2016:~~2017:


	September 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	$	2,824,370	$	(3,834	)	$	—	$	—		$	2,824,370	$	(3,834	)	$	4,492,009	$	(48,430	)	$	845,938	$	(5,565	)	$	5,337,947	$	(53,995	)
U.S. agency debentures	562,392		(1,993		)	—		—			562,392		(1,993		)	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	1,505,319		(7,389		)	415,200		(9,563		)	1,920,519		(16,952		)	1,857,591		(60,030		)	166,002		(5,447		)	2,023,593		(65,477		)
Agency-issued collateralized mortgage obligations—variable rate	6,651		(1		)	62,508		(128		)	69,159		(129		)	19,068		(9		)	46,057		(117		)	65,125		(126		)
Equity securities	1,787		(459		)	—		—			1,787		(459		)
Total temporarily impaired securities (1)	$	4,900,519	$	(13,676	)	$	477,708	$	(9,691	)	$	5,378,227	$	(23,367	)	$	7,396,280	$	(112,453	)	$	1,516,249	$	(16,938	)	$	8,912,529	$	(129,391	)

(1)

As of ~~September~~June 30, ~~2017~~2018, we identified a total of ~~202~~264 investments that were in unrealized loss positions, of which 6364 investments totaling $~~477.7 million~~1.5 billion with unrealized losses of $~~9.7~~16.9 million have been in an impaired position for a period of time greater than 12 months. As of ~~September~~June 30, ~~2017~~2018, we do not intend to sell any of our impaired securities prior to recovery of our adjusted cost basis, and it is more likely than not that we will not be required to sell any of our securities prior to recovery of our adjusted cost basis. Based on our analysis as of ~~September~~June 30, ~~2017~~2018, we deem all impairments to be temporary, and therefore changes in value for our temporarily impaired securities as of the same date are included in other comprehensive income. Market valuations and impairment analyses on assets in the available-for-sale securities portfolio are reviewed and monitored on a quarterly basis.


	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, ~~2016~~2017, we identified a total of ~~174~~268 investments that were in unrealized loss positions, of which 2046 investments totaling $~~233.5~~713.3 million with unrealized losses of $~~6.7~~5.8 million have been in an impaired position for a period of time greater than 12 months.

The following table summarizes thefixed income securities, carried at fair value, classified as available-for-sale as of ~~September~~June 30, ~~2017~~2018 by the remaining contractual principal maturities. For U.S. Treasury securities and U.S. agency debentures, the expected maturity is the actual contractual maturity of the notes. Expected maturities for mortgage-backed securities may differ significantly from their contractual maturities because mortgage borrowers have the right to prepay outstanding loan obligations with or without penalties. Mortgage-backed securities classified as available-for-sale 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.


	September 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	$	7,498,340	$	2,592,486	$	4,905,854	$	—	$	—	$	5,733,070	$	2,037,522	$	3,349,925	$	345,623	$	—
U.S. agency debentures	1,676,169		314,852		1,361,317		—		—		1,485,864		555,737		930,127		—		—
Residential mortgage-backed securities:
Agency-issued collateralized mortgage obligations—fixed rate	3,012,695		—		—		487,285		2,525,410		2,038,134		—		—		47,098		1,991,036
Agency-issued collateralized mortgage obligations—variable rate	395,880		—		—		—		395,880		336,298		—		—		—		336,298
Total	$	12,583,084	$	2,907,338	$	6,267,171	$	487,285	$	2,921,290	$	9,593,366	$	2,593,259	$	4,280,052	$	392,721	$	2,327,334

Held-to-Maturity Securities

The components of our held-to-maturity investment securities portfolio at ~~September~~June 30, ~~2017~~2018 and December 31, ~~2016~~2017 are as follows:


	September 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)	$	660,193	$	6,775	$	(1,080	)	$	665,888	$	713,809	$	—	$	(13,818	)	$	699,991
Residential mortgage-backed securities:
Agency-issued mortgage-backed securities	5,164,701		15,764		(17,116		)	5,163,349		8,588,483		1,591		(210,148		)	8,379,926
Agency-issued collateralized mortgage obligations—fixed rate	3,025,421		707		(27,268		)	2,998,860		2,494,834		—		(91,919		)	2,402,915
Agency-issued collateralized mortgage obligations—variable rate	269,495		704		(37		)	270,162		233,285		691		(31		)	233,945
Agency-issued commercial mortgage-backed securities	1,554,220		2,025		(11,697		)	1,544,548		2,335,971		10		(62,982		)	2,272,999
Municipal bonds and notes	380,976		1,506		(1,874		)	380,608		1,531,881		1,280		(28,942		)	1,504,219
Total held-to-maturity securities	$	11,055,006	$	27,481	$	(59,072	)	$	11,023,415	$	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.

The following tables summarize our unrealized losses on our held-to-maturity securities portfolio into categories of less than 12 months and 12 months or longer as of ~~September~~June 30, ~~2017~~2018 and December 31, ~~2016:~~2017:


	September 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	$	101,211	$	(1,080	)	$	—	$	—		$	101,211	$	(1,080	)	$	645,990	$	(10,883	)	$	54,001	$	(2,935	)	$	699,991	$	(13,818	)
Residential mortgage-backed securities:
Agency-issued mortgage-backed securities	3,071,006		(16,251		)	25,004		(865		)	3,096,010		(17,116		)	7,436,980		(192,418		)	364,687		(17,730		)	7,801,667		(210,148		)
Agency-issued collateralized mortgage obligations—fixed rate	2,661,682		(21,842		)	235,320		(5,426		)	2,897,002		(27,268		)	776,389		(24,833		)	1,626,527		(67,086		)	2,402,916		(91,919		)
Agency-issued collateralized mortgage obligations—variable rate	—		—			10,321		(37		)	10,321		(37		)	3,687		(1		)	8,889		(30		)	12,576		(31		)
Agency-issued commercial mortgage-backed securities	1,210,351		(10,615		)	82,151		(1,082		)	1,292,502		(11,697		)	1,460,340		(38,747		)	715,596		(24,235		)	2,175,936		(62,982		)
Municipal bonds and notes	111,207		(896		)	29,606		(978		)	140,813		(1,874		)	1,046,102		(28,359		)	15,859		(583		)	1,061,961		(28,942		)
Total temporarily impaired securities (1)	$	7,155,457	$	(50,684	)	$	382,402	$	(8,388	)	$	7,537,859	$	(59,072	)	$	11,369,488	$	(295,241	)	$	2,785,559	$	(112,599	)	$	14,155,047	$	(407,840	)

(1)

As of ~~September~~June 30, ~~2017~~2018, we identified a total of ~~547~~1,236 investments that were in unrealized loss positions, of which 84226 investments totaling $~~382.4 million~~2.8 billion with unrealized losses of $~~8.4~~112.6 million have been in an impaired position for a period of time greater than 12 months. As of ~~September~~June 30, ~~2017~~2018, we do not intend to sell any of our impaired securities prior to recovery of our adjusted cost basis, and it is more likely than not that we will not be required to sell any of our securities prior to recovery of our adjusted cost basis, which is consistent with our classification of these securities. Based on our analysis as of ~~September~~June 30, ~~2017~~2018, we deem all impairments to be temporary. Market valuations and impairment analyses on assets in the held-to-maturity securities portfolio are reviewed and monitored on a quarterly basis.


	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, ~~2016~~2017, we identified a total of ~~462~~753 investments that were in unrealized loss positions, of which 85237 investments totaling $~~295.7 million~~3.0 billion with unrealized losses of $~~7.6~~65.1 million have been in an impaired position for a period of time greater than 12 months.

The following table summarizes the remaining contractual principal maturities on fixed income investment securities classified as held-to-maturity as of ~~September~~June 30, ~~2017.~~2018. For U.S. agency debentures, the expected maturity is the actual contractual maturity of the notes. Expected maturities for mortgage-backed securities may differ significantly from their 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.


	September 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	$	660,193	$	665,888	$	—	$	—	$	102,581	$	103,398	$	557,612	$	562,490	$	—	$	—	$	713,809	$	699,991	$	—	$	—	$	122,040	$	120,081	$	591,769	$	579,910	$	—	$	—
Residential mortgage-backed securities:
Agency-issued mortgage-backed securities	5,164,701		5,163,349		738		731		255,275		255,128		61,538		61,270		4,847,150		4,846,220		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	3,025,421		2,998,860		—		—		—		—		437,865		431,500		2,587,556		2,567,360		2,494,834		2,402,915		—		—		—		—		412,530		394,779		2,082,304		2,008,136
Agency-issued collateralized mortgage obligations—variable rate	269,495		270,162		—		—		—		—		—		—		269,495		270,162		233,285		233,945		—		—		—		—		—		—		233,285		233,945
Agency-issued commercial mortgage-backed securities	1,554,220		1,544,548		—		—		—		—		—		—		1,554,220		1,544,548		2,335,971		2,272,999		—		—		—		—		—		—		2,335,971		2,272,999
Municipal bonds and notes	380,976		380,608		7,560		7,540		71,631		71,529		159,509		159,377		142,276		142,162		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	$	11,055,006	$	11,023,415	$	8,298	$	8,271	$	429,487	$	430,055	$	1,216,524	$	1,214,637	$	9,400,697	$	9,370,452	$	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

Non-marketable and Other Equity Securities

The components of our non-marketable and other ~~investment~~equity securities portfolio at ~~September~~June 30, ~~2017~~2018 and December 31, ~~2016~~2017 are as follows:

(Dollars in thousands) September 30, 2017 December 31, 2016
Non-marketable and other securities:
Non-marketable securities (fair value accounting):
Venture capital and private equity fund investments (1) $ 128,768
$ 141,649
Other venture capital investments (2) 1,897
2,040
Other securities (fair value accounting) (3) 392
753
Non-marketable securities (equity method accounting) (4):
Venture capital and private equity fund investments 87,218
82,823
Debt funds 17,889
17,020
Other investments 113,478
123,514
Non-marketable securities (cost method accounting):
Venture capital and private equity fund investments (5) 102,956
114,606
Other investments 26,835
27,700
Investments in qualified affordable housing projects, net (6) 148,036
112,447
Total non-marketable and other securities $ 627,469
$ 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 ~~September~~June 30, ~~2017~~2018 and December 31, ~~2016~~2017 (fair value accounting):


	September 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	$	15,624	12.6	%	$	18,459	12.6	%	$	13,972	12.6	%	$	14,673	12.6	%
Capital Preferred Return Fund, LP	55,685		20.0		57,627		20.0		58,148		20.0		54,147		20.0
Growth Partners, LP	57,459		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	$	128,768			$	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

~~(i)~~

At ~~December 31, 2016, we had a direct ownership interest of~~ ~~41.5 percent~~ ~~in the other private equity fund and an indirect ownership interest of~~ ~~12.6 percent~~ ~~through our ownership interest of Growth Partners, LP and an indirect ownership interest of~~ ~~4.1 percent~~ through our ownership interest of Capital Preferred Return Fund, LP. On January 3, 2017, the other private equity fund was closed resulting in an immaterial impact on the Company's financial statements for the nine months ended ~~September 30, 2017~~.

(2)

The ~~following table shows the amounts of other~~carrying value represents investments in 226 and 235 funds (primarily venture capital ~~investments held by the following consolidated funds and our ownership percentage~~funds) at ~~September~~June 30, ~~2017~~2018 and December 31, ~~2016~~2017, respectively, where our ownership interest is typically less than 5% ~~(fair~~of the voting interests of each such fund and in which we do not have the ability to exercise significant influence over the partnerships operating activities and financial policies. 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 carry our unconsolidated venture capital and private equity fund investments at fair value ~~accounting):~~based on the fund investments' net asset values per share as obtained from the general partners of the investments. For each fund investment, we adjust the net asset value per share for 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 31^st, for our June 30^th consolidated financial statements, adjusted for any contributions paid, distributions received from the investment, and significant fund transactions or market events during the reporting period. We recorded a cumulative adjustment to opening retained earnings on January 1, 2018 for the difference between fair value and cost for these fund investments. The estimated fair value and carrying value of these venture capital and private equity fund investments was $211.1 million as of June 30, 2018. As of December 31, 2017, these investments were carried at cost and had a carrying value of $98.5 million.

September 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.


~~(4)~~(5)	The following table shows the carrying value and our ownership percentage of each investment at ~~September~~June 30, ~~2017~~2018 and December 31, ~~2016~~2017 (equity method accounting):


	September 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	$	6,084	8.6	%	$	7,720	8.6	%	$	5,003	8.6	%	$	6,342	8.6	%
Strategic Investors Fund III, LP	19,292		5.9		20,449		5.9		18,858		5.9		18,758		5.9
Strategic Investors Fund IV, LP	25,507		5.0		24,530		5.0		29,152		5.0		25,551		5.0
Strategic Investors Fund V funds	14,987		Various		12,029		Various		21,247		Various		16,856		Various
CP II, LP (i)	6,704		5.1		7,798		5.1		6,792		5.1		6,700		5.1
Other venture capital and private equity fund investments	14,644		Various		10,297		Various		21,786		Various		15,602		Various
Total venture capital and private equity fund investments	$	87,218			$	82,823			$	102,838			$	89,809
Debt funds:
Gold Hill Capital 2008, LP (ii)	$	15,381	15.5	%	$	13,557	15.5	%	$	11,153	15.5	%	$	18,690	15.5	%
Other debt funds	2,508		Various		3,463		Various		3,062		Various		2,493		Various
Total debt funds	$	17,889			$	17,020			$	14,215			$	21,183
Other investments:
SPD Silicon Valley Bank Co., Ltd.	$	75,511	50.0	%	$	75,296	50.0	%	$	75,837	50.0	%	$	75,337	50.0	%
Other investments	37,967		Various		48,218		Various		35,589		Various		35,861		Various
Total other investments	$	113,478			$	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.

~~(5)~~

~~Represents investments in~~ ~~237~~ ~~and~~ ~~252~~ ~~funds (primarily venture capital funds) at~~ ~~September 30, 2017~~ ~~and~~ ~~December 31, 2016, respectively, where our ownership interest is typically less than~~ 5% of the voting interests of each such fund and in which we do not have the ability to exercise significant influence over the partnerships operating activities and financial policies. The carrying value, and estimated fair value, of these venture capital and private equity fund investments (cost method accounting) was ~~$103.0 million~~ ~~and~~ ~~$206.5 million, respectively, as of~~ ~~September 30, 2017. The carrying value, and estimated fair value, of these venture capital and private equity fund investments (cost method accounting) was~~ ~~$114.6 million~~ ~~and~~ ~~$221.7 million, respectively, as of~~ ~~December 31, 2016~~.


(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 ~~September~~June 30, ~~2017~~2018 and December 31, ~~2016~~2017:


(Dollars in thousands)	September 30, 2017		December 31, 2016		June 30, 2018		December 31, 2017
Investments in qualified affordable housing projects, net	$	148,036	$	112,447	$	251,479	$	174,214
Other liabilities	90,974		58,095		161,113		100,891

The following table presents other information relating to our investments in qualified affordable housing projects for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018 and ~~2016:~~2017:


	Three months ended September 30,				Nine months ended September 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	$	4,539	$	3,995	$	13,199	$	12,127	$	5,207	$	3,968	$	10,629	$	8,660
Amortization expense included in provision for income taxes (i)	3,533		2,556		10,154		9,746		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.

The following table presents the ~~components of~~net gains on non-marketable and ~~losses (realized and unrealized) on investment~~other equity securities for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018 and ~~2016~~:2017 as recorded in the line item “Gains on investment securities, net”, a component of noninterest income:


	Three months ended September 30,						Nine months ended September 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)	$	38		$	84		$	1,131		$	14,238
Net gains on non-marketable and other equity securities:
Non-marketable securities (fair value accounting):
Venture capital and private equity fund investments	5,308			6,030			24,788			16,377
Other venture capital investments	—			4			—			17
Other securities (fair value accounting)	569			271			841			639
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	4,542			5,679			11,245			9,351			9,212		2,657			18,781			6,391
Debt funds	4,222			295			5,388			1,259			726		682			(1,573		)	251
Other investments	215			7,487			1,736			11,528			2,495		(1,488		)	1,458			(2,230		)
Non-marketable securities (cost method accounting):
Venture capital and private equity fund investments	4,956			6,328			14,985			14,180
Other investments	2			150			3,611			163
Total gross gains on investment securities	19,852			26,328			63,725			67,752
Gross losses on investment securities:
Available-for-sale securities, at fair value (1)	(139		)	(99		)	(747		)	(2,671		)
Non-marketable securities (fair value accounting):
Venture capital and private equity fund investments	(835		)	(2,122		)	(4,139		)	(15,958		)
Other venture capital investments	—			—			(143		)	(38		)
Other securities (fair value accounting)	(182		)	(100		)	(561		)	(507		)
Non-marketable securities (equity method accounting):
Venture capital and private equity fund investments	(223		)	(444		)	(535		)	(4,465		)
Debt funds	(1,777		)	(129		)	(2,692		)	(458		)
Other investments	(1,148		)	(205		)	(4,899		)	(1,161		)
Non-marketable securities (cost method accounting):
Venture capital and private equity fund investments (2)	(259		)	(51		)	(914		)	(492		)
Other investments	(51		)	—			(257		)	(238		)
Total gross losses on investment securities	(4,614		)	(3,150		)	(14,887		)	(25,988		)
Gains on investment securities, net	$	15,238		$	23,178		$	48,838		$	41,764
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)

~~Includes realized gains (losses) on sales~~Prior period amounts are not determined in a manner consistent with the current period presentation due to the adoption of ~~available-for-sale equity securities that are recognized in the income statement. Unrealized gains (losses) on available-for-sale fixed income~~accounting standard update (ASU 2016-01, Recognition and ~~equity securities are recognized in other comprehensive income. The cost basis~~Measurement of ~~available-for-sale securities sold is determined on a specific identification basis.~~

~~(2)~~

~~For the three months ended~~ ~~September 30, 2017~~Financial Assets and ~~2016, includes OTTI losses of~~ ~~$0.3 million~~ ~~from the declines in value for~~ 8 ~~of the~~ ~~237~~ ~~investments and~~ ~~$0.1 million~~ ~~from the declines in value for~~ 5 ~~of the~~ ~~255~~ ~~investments, respectively. For the nine months ended~~ ~~September 30, 2017~~ ~~and~~ ~~2016, includes OTTI losses of~~ ~~$0.9 million~~ ~~for the declines in value for~~ 21 ~~of the~~ ~~237~~ ~~investments and~~ ~~$0.5 million~~ ~~for the declines in value for~~ 21 ~~of the~~ ~~255~~ ~~investments. We concluded that any declines in value for the remaining investments were temporary, and as such, no OTTI was required to be recognized.~~

Financial Liabilities (Topic 825)).


7.	Loans, Allowance for Loan Losses and Allowance for Unfunded Credit Commitments

We serve a variety of commercial clients in the technology, life science/healthcare, private equity/venture capital and premium wine industries. Our technology clients generally tend to be in the industries of hardware (semiconductors, communications, data, storage, and electronics), software/internet (such as infrastructure software, applications, software services, digital content and advertising technology), and energy and resource innovation (“ERI”). Because of the diverse nature of ERI products and services, for our loan-related reporting purposes, ERI-related loans are reported under our hardware, software/internet, life science/healthcare and other commercial loan categories, as applicable. Our life science/healthcare clients primarily tend to be in the industries of biotechnology, medical devices, healthcare information technology and healthcare services. Loans made to private equity/venture capital firm clients typically enable them to fund investments prior to their receipt

of funds from capital calls. Loans to the premium wine industry focus on vineyards and wineries that produce grapes and wines of high quality.

In addition to commercial loans, we make consumer loans through SVB Private Bank and provide real estate secured loans to eligible employees through our EHOP. Our private banking clients are primarily private equity/venture capital professionals and executive leaders in the innovation companies they support. These products and services include real estate secured home equity lines of credit, which may be used to finance real estate investments and loans used to purchase, renovate or refinance personal residences. These products and services also include restricted stock purchase loans and capital call lines of credit.

We also provide community development loans made as part of our responsibilities under the Community Reinvestment Act. These loans are included within “Construction loans” below and are primarily secured by real estate.

The composition of loans, net of unearned income of ~~$141~~$165 million and ~~$125~~$148 million at ~~September~~June 30, ~~2017~~2018 and December 31, ~~2016,~~2017, respectively, is presented in the following table:


(Dollars in thousands)	September 30, 2017		December 31, 2016		June 30, 2018		December 31, 2017
Commercial loans:
Software/internet	$	5,793,637	$	5,627,031	$	6,230,358	$	6,172,531
Hardware	1,113,509		1,180,398		1,269,241		1,193,599
Private equity/venture capital	9,623,824		7,691,148		12,224,155		9,952,377
Life science/healthcare	1,725,728		1,853,004		2,087,872		1,808,827
Premium wine	211,716		200,156		198,813		204,105
Other	384,039		393,551		316,392		365,724
Total commercial loans	18,852,453		16,945,288		22,326,831		19,697,163
Real estate secured loans:
Premium wine (1)	712,400		678,166		685,357		669,053
Consumer loans (2)	2,206,501		1,926,968		2,481,062		2,300,506
Other	42,504		43,487		41,275		42,068
Total real estate secured loans	2,961,405		2,648,621		3,207,694		3,011,627
Construction loans	75,242		64,671		64,388		68,546
Consumer loans	300,227		241,364		397,279		328,980
Total loans, net of unearned income (3)	$	22,189,327	$	19,899,944	$	25,996,192	$	23,106,316


(1)	Included in our premium wine portfolio are gross construction loans of $104 million and $~~110~~100 million at ~~September~~June 30, ~~2017~~2018 and December 31, ~~2016~~2017, respectively.


(2)	Consumer loans secured by real estate at ~~September~~June 30, ~~2017~~2018 and December 31, ~~2016~~2017 were comprised of the following:


(Dollars in thousands)	September 30, 2017		December 31, 2016		June 30, 2018		December 31, 2017
Loans for personal residence	$	1,908,319	$	1,655,349	$	2,144,326	$	1,995,840
Loans to eligible employees	232,707		199,291		266,988		243,118
Home equity lines of credit	65,475		72,328		69,748		61,548
Consumer loans secured by real estate	$	2,206,501	$	1,926,968	$	2,481,062	$	2,300,506


(3)	Included within our total loan portfolio are credit card loans of $~~273~~315 million and $~~224~~270 million at ~~September~~June 30, ~~2017~~2018 and December 31, ~~2016~~2017, respectively.

Credit Quality

The composition of loans, net of unearned income of $~~141~~165 million and $~~125~~148 million at ~~September~~June 30, ~~2017~~2018 and December 31, ~~2016~~2017, respectively, broken out by portfolio segment and class of financing receivable, is as follows:


(Dollars in thousands)	September 30, 2017		December 31, 2016		June 30, 2018		December 31, 2017
Commercial loans:
Software/internet	$	5,793,637	$	5,627,031	$	6,230,358	$	6,172,531
Hardware	1,113,509		1,180,398		1,269,241		1,193,599
Private equity/venture capital	9,623,824		7,691,148		12,224,155		9,952,377
Life science/healthcare	1,725,728		1,853,004		2,087,872		1,808,827
Premium wine	924,116		878,322		884,170		873,158
Other	501,785		501,709		422,055		476,338
Total commercial loans	19,682,599		17,731,612		23,117,851		20,476,830
Consumer loans:
Real estate secured loans	2,206,501		1,926,968		2,481,062		2,300,506
Other consumer loans	300,227		241,364		397,279		328,980
Total consumer loans	2,506,728		2,168,332		2,878,341		2,629,486
Total loans, net of unearned income	$	22,189,327	$	19,899,944	$	25,996,192	$	23,106,316

The following table summarizes the aging of our gross loans, broken out by portfolio segment and class of financing receivable as of ~~September~~June 30, ~~2017~~2018 and December 31, ~~2016~~2017:


(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
September 30, 2017:
June 30, 2018:
Commercial loans:
Software/internet	$	45,943	$	3,725	$	138	$	49,806	$	5,686,655	$	138	$	7,996	$	6,271	$	459	$	14,726	$	6,174,542	$	459
Hardware	273		44		626		943		1,080,341		626		645		40		3		688		1,238,451		3
Private equity/venture capital	35,628		34,369		—		69,997		9,563,613		—		62,536		10		—		62,546		12,170,459		—
Life science/healthcare	20,956		—		—		20,956		1,729,909		—		671		269		—		940		2,130,976		—
Premium wine	3,521		640		—		4,161		916,451		—		3,350		—		—		3,350		879,176		—
Other	7		210		—		217		512,891		—		1		3		—		4		436,011		—
Total commercial loans	106,328		38,988		764		146,080		19,489,860		764		75,199		6,593		462		82,254		23,029,615		462
Consumer loans:
Real estate secured loans	1,748		850		—		2,598		2,199,978		—		—		—		—		—		2,473,458		—
Other consumer loans	4,540		—		—		4,540		293,301		—		1,489		—		—		1,489		395,787		—
Total consumer loans	6,288		850		—		7,138		2,493,279		—		1,489		—		—		1,489		2,869,245		—
Total gross loans excluding impaired loans	112,616		39,838		764		153,218		21,983,139		764		76,688		6,593		462		83,743		25,898,860		462
Impaired loans	591		311		26,456		27,358		166,114		—		1,557		2,070		36,196		39,823		138,356		—
Total gross loans	$	113,207	$	40,149	$	27,220	$	180,576	$	22,149,253	$	764	$	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

The following table summarizes our impaired loans as they relate to our allowance for loan losses, broken out by portfolio segment and class of financing receivable as of ~~September~~June 30, ~~2017~~2018 and December 31, ~~2016~~2017:


(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
September 30, 2017:
June 30, 2018:
Commercial loans:
Software/internet	$	92,584	$	22,278	$	114,862	$	130,324	$	58,136	$	44,384	$	102,520	$	126,752
Hardware	39,728		1,012		40,740		48,061		17,093		25,201		42,294		43,403
Private equity/venture capital	1,318		—		1,318		1,321		—		—		—		—
Life science/healthcare	22,762		5,573		28,335		33,481		26,170		250		26,420		31,517
Premium wine	4,677		—		4,677		4,702		331		2,193		2,524		2,576
Other	298		—		298		487		8		—		8		36
Total commercial loans	161,367		28,863		190,230		218,376		101,738		72,028		173,766		204,284
Consumer loans:
Real estate secured loans	—		1,301		1,301		1,379		3,254		1,159		4,413		6,012
Other consumer loans	1,941		—		1,941		2,036		—		—		—		—
Total consumer loans	1,941		1,301		3,242		3,415		3,254		1,159		4,413		6,012
Total	$	163,308	$	30,164	$	193,472	$	221,791	$	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

The following tables summarize our average impaired loans and interest income recognized on impaired loans, broken out by portfolio segment and class of financing receivable for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018 and ~~2016~~:2017:


Three months ended September 30,	Average impaired loans				Interest income on impaired loans
Three months ended June 30,									Average impaired loans				Interest income recognized on impaired loans
(Dollars in thousands)	2017		2016		2017		2016		2018		2017		2018		2017
Commercial loans:
Software/internet	$	121,290	$	61,481	$	767	$	70	$	110,101	$	136,374	$	315	$	711
Hardware	35,932		45,353		419		761		37,058		29,771		237		510
Private equity/venture capital	644		—		3		—		72		327		—		3
Life science/healthcare	25,796		55,558		21		128		21,790		36,033		5		191
Premium wine	3,625		1,291		39		19		2,604		3,221		36		38
Other	348		3,768		—		6		379		708		—		—
Total commercial loans	187,635		167,451		1,249		984		172,004		206,434		593		1,453
Consumer loans:
Real estate secured loans	1,306		584		24		—		4,466		1,360		3		—
Other consumer loans	1,966		1,324		—		6		693		1,679		—		—
Total consumer loans	3,272		1,908		24		6		5,159		3,039		3		—
Total average impaired loans	$	190,907	$	169,359	$	1,273	$	990	$	177,163	$	209,473	$	596	$	1,453


Nine months ended September 30,	Average impaired loans				Interest income on impaired loans
Six months ended June 30,									Average impaired loans				Interest income recognized on impaired loans
(Dollars in thousands)	2017		2016		2017		2016		2018		2017		2018		2017
Commercial loans:
Software/internet	$	122,527	$	84,005	$	1,646	$	133	$	109,444	$	123,145	$	562	$	938
Hardware	33,271		31,000		518		1,467		37,742		31,940		289		943
Private equity/venture capital	443		—		8		—		187		342		—		5
Life science/healthcare	33,590		42,857		60		128		22,234		37,488		11		291
Premium wine	3,353		1,834		115		54		2,686		3,217		72		76
Other	706		4,369		—		21		195		885		—		—
Total commercial loans	193,890		164,065		2,347		1,803		172,488		197,017		934		2,253
Consumer loans:
Real estate secured loans	1,385		282		24		—		3,765		1,424		8		—
Other consumer loans	1,931		715		—		17		716		1,914		—		—
Total consumer loans	3,316		997		24		17		4,481		3,338		8		—
Total average impaired loans	$	197,206	$	165,062	$	2,371	$	1,820	$	176,969	$	200,355	$	942	$	2,253

The following tables summarize the activity relating to our allowance for loan losses for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018 and ~~2016~~2017, broken out by portfolio segment:


Three months ended September 30, 2017	Beginning Balance June 30, 2017			Charge-offs				Recoveries				Provision for (Reduction of) Loan Losses				Foreign Currency Translation Adjustments				Ending Balance September 30, 2017
Three months ended June 30, 2018								Recoveries			Beginning Balance March 31, 2018					Foreign Currency Translation Adjustments			Charge-offs				Recoveries				Provision for (Reduction of) Loan Losses				Foreign Currency Translation Adjustments				Ending Balance June 30, 2018
(Dollars in thousands)	Beginning Balance June 30, 2017		Beginning Balance June 30, 2017				Charge-offs				Beginning Balance March 31, 2018			Recoveries				Provision for (Reduction of) Loan Losses				Foreign Currency Translation Adjustments					Provision for (Reduction of) Loan Losses			Ending Balance September 30, 2017
Commercial loans:							Charge-offs							Recoveries																Ending Balance September 30, 2017
Software/internet	$	92,937	Beginning Balance June 30, 2017			$	(8,791	)		$	426			$	7,241			Provision for (Reduction of) Loan Losses		$	199	Foreign Currency Translation Adjustments			$	92,012			$	103,295			$	(13,402	Ending Balance June 30, 2018	)		$	404			$	13,179		$	(828	)	$	102,648
Hardware	27,800			(2,453		)		115				5,681				156				31,299			28,472				(461		)		643				6,447				(406		)		34,695
Private equity/venture capital	66,785			—				—				10,142				279				77,206			91,618				(112		)		—				(2,237		)		140				89,409
Life science/healthcare	27,730			(1,083		)		63				(1,621		)		(45		)		25,044			25,806				—				3				9,876				(621		)		35,064
Premium wine	3,133			—				—				362				10				3,505			3,365				—				—				78				(5		)		3,438
Other	4,135			—				947				(931		)		(26		)		4,125			3,482				(1,164		)		566				13				(1		)		2,896
Total commercial loans	222,520			(12,327		)		1,551				20,874				573				233,191			256,038				(15,139		)		1,616				27,356				(1,721		)		268,150
Total consumer loans	13,976			(11		)		277				1,535				42				15,819			18,256				(289		)		310				300				(18		)		18,559
Total allowance for loan losses	$	236,496		$	(12,338	)		$	1,828			$	22,409			$	615			$	249,010		$	274,294			$	(15,428	)		$	1,926			$	27,656			$	(1,739	)		$	286,709

Three months ended September 30, 2016 Beginning Balance June 30, 2016 Charge-offs Recoveries
Provision for
(Reduction of) Loan Losses
Foreign Currency Translation Adjustments Ending Balance September 30, 2016
(Dollars in thousands)
Commercial loans:
Software/internet $ 104,229
$ (16,526 ) $ 305
$ 8,591
$ (261 ) $ 96,338
Hardware 23,871
(3,058 ) 1,080
11,048
(336 ) 32,605
Private equity/venture capital 49,807
—
—
2,203
(67 ) 51,943
Life science/healthcare 41,852
(28 ) 361
(5,298 ) 161
37,048
Premium wine 4,810
—
—
288
(9 ) 5,089
Other 9,480
(5,004 ) 207
142
(4 ) 4,821
Total commercial loans 234,049
(24,616 ) 1,953
16,974
(516 ) 227,844
Total consumer loans 10,674
—
131
1,976
(60 ) 12,721
Total allowance for loan losses $ 244,723
$ (24,616 ) $ 2,084
$ 18,950
$ (576 ) $ 240,565


Nine months ended September 30, 2017	Beginning Balance December 31, 2016			Charge-offs				Recoveries				Provision for (Reduction of) Loan Losses				Foreign Currency Translation Adjustments				Ending Balance September 30, 2017
Three months ended June 30, 2017								Recoveries			Beginning Balance March 31, 2017					Foreign Currency Translation Adjustments			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, 2016		Beginning Balance December 31, 2016				Charge-offs				Beginning Balance March 31, 2017			Recoveries				Provision for (Reduction of) Loan Losses				Foreign Currency Translation Adjustments					Provision for (Reduction of) Loan Losses			Ending Balance September 30, 2017
Commercial loans:							Charge-offs							Recoveries																Ending Balance September 30, 2017
Software/internet	$	97,388	Beginning Balance December 31, 2016			$	(36,172	)		$	2,833			$	27,487			Provision for (Reduction of) Loan Losses		$	476	Foreign Currency Translation Adjustments			$	92,012			$	109,502			$	(19,401	Ending Balance June 30, 2017	)		$	1,236			$	1,527		$	73	$	92,937
Hardware	31,166			(6,726		)		459				6,075				325				31,299			23,284				(249		)		77				4,474				214				27,800
Private equity/venture capital	50,299			—				—				26,111				796				77,206			57,078				—				—				9,263				444				66,785
Life science/healthcare	25,446			(7,493		)		107				6,906				78				25,044			31,542				(4,678		)		8				819				39				27,730
Premium wine	4,115			—				—				(567		)		(43		)		3,505			4,343				—				—				(1,155		)		(55		)		3,133
Other	4,768			(1,047		)		1,424				(1,005		)		(15		)		4,125			4,377				(753		)		180				316				15				4,135
Total commercial loans	213,182			(51,438		)		4,823				65,007				1,617				233,191			230,126				(25,081		)		1,501				15,244				730				222,520
Consumer loans	12,184			(11		)		1,332				2,266				48				15,819
Total consumer loans																							13,004				—				1,034				(59		)		(3		)		13,976
Total allowance for loan losses	$	225,366		$	(51,449	)		$	6,155			$	67,273			$	1,665			$	249,010		$	243,130			$	(25,081	)		$	2,535			$	15,185			$	727			$	236,496


Nine months ended September 30, 2016	Beginning Balance December 31, 2015			Charge-offs				Recoveries				Provision for (Reduction of) Loan Losses				Foreign Currency Translation Adjustments				Ending Balance September 30, 2016
Six months ended June 30, 2018								Recoveries			Beginning Balance December 31, 2017					Foreign Currency Translation Adjustments			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, 2015		Beginning Balance December 31, 2015				Charge-offs				Beginning Balance December 31, 2017			Recoveries				Provision for (Reduction of) Loan Losses					Foreign Currency Translation Adjustments					Provision for (Reduction of) Loan Losses			Ending Balance September 30, 2016
Commercial loans:							Charge-offs							Recoveries																	Ending Balance September 30, 2016
Software/internet	$	103,045	Beginning Balance December 31, 2015			$	(56,742	)		$	4,525			$	46,438			Provision for (Reduction of) Loan Losses		$	(928	)	Foreign Currency Translation Adjustments			$	96,338			$	96,104			$	(20,073	Ending Balance June 30, 2018	)		$	977			$	25,980		$	(340	)	$	102,648
Hardware	23,085			(6,559		)		1,502				15,010				(433		)		32,605				27,614				(3,414		)		1,231				9,551				(287		)		34,695
Private equity/venture capital	35,282			—				—				17,008				(347		)		51,943				82,468				(112		)		10				6,568				475				89,409
Life science/healthcare	36,576			(3,029		)		1,037				3,252				(788		)		37,048				24,924				(864		)		56				11,507				(559		)		35,064
Premium wine	5,205			—				—				(138		)		22				5,089				3,532				—				—				(83		)		(11		)		3,438
Other	4,252			(5,034		)		880				4,573				150				4,821				3,941				(1,263		)		1,103				(893		)		8				2,896
Total commercial loans	207,445			(71,364		)		7,944				86,143				(2,324		)		227,844				238,583				(25,726		)		3,377				52,630				(714		)		268,150
Consumer loans	10,168			(102		)		214				2,481				(40		)		12,721
Total consumer loans																								16,441				(289		)		337				2,022				48				18,559
Total allowance for loan losses	$	217,613		$	(71,466	)		$	8,158			$	88,624			$	(2,364	)		$	240,565			$	255,024			$	(26,015	)		$	3,714			$	54,652			$	(666	)		$	286,709



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, 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
Hardware	31,166		(4,273		)	344		394			169			27,800
Private equity/venture capital	50,299		—			—		15,969			517			66,785
Life science/healthcare	25,446		(6,410		)	44		8,527			123			27,730
Premium wine	4,115		—			—		(929		)	(53		)	3,133
Other	4,768		(1,047		)	477		(74		)	11			4,135
Total commercial loans	213,182		(39,111		)	3,272		44,133			1,044			222,520
Total consumer loans	12,184		—			1,055		731			6			13,976
Total allowance for loan losses	$	225,366	$	(39,111	)	$	4,327	$	44,864		$	1,050		$	236,496

The following table summarizes the activity relating to our allowance for unfunded credit commitments for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018 and ~~2016:~~2017:


	Three months ended September 30,					Nine months ended September 30,					Three months ended June 30,					Six months ended June 30,
(Dollars in thousands)	2017		2016			2017		2016			2018			2017		2018			2017
Beginning balance	$	47,000	$	34,889		$	45,265	$	34,415		$	52,823		$	46,335	$	51,770		$	45,265
Provision for unfunded credit commitments	1,113		1,054			2,789		1,601			1,424			621		2,400			1,676
Foreign currency translation adjustments	59		(19		)	118		(92		)	(143		)	44		(66		)	59
Ending balance (1)	$	48,172	$	35,924		$	48,172	$	35,924		$	54,104		$	47,000	$	54,104		$	47,000


(1)	See Note ~~12—~~13—“Off-Balance Sheet Arrangements, Guarantees and Other Commitments” of the “Notes to Interim Consolidated Financial Statements (unaudited)” under Part I, Item 1 of this report for additional disclosures related to our commitments to extend credit.

The following table summarizes the allowance for loan losses individually and collectively evaluated for impairment as of ~~September~~June 30, ~~2017~~2018 and December 31, ~~2016~~2017, broken out by portfolio segment:


	September 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	$	26,981	$	114,862	$	65,031	$	5,678,775	$	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	11,179		40,740		20,120		1,072,769		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	536		1,318		76,670		9,622,506		—		—		50,299		7,691,148		—		—		89,409		12,224,155		330		658		82,138		9,951,719
Life science/healthcare	9,843		28,335		15,201		1,697,393		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	456		4,677		3,049		919,439		520		3,187		3,595		875,135		—		2,524		3,438		881,646		—		2,877		3,532		870,281
Other	145		298		3,980		501,487		233		867		4,535		500,842		8		8		2,888		422,047		32		32		3,909		476,306
Total commercial loans	49,140		190,230		184,051		19,492,369		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	1,710		3,242		14,109		2,503,486		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	$	50,850	$	193,472	$	198,160	$	21,995,855	$	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

Credit Quality Indicators

For each individual client, we establish an internal credit risk rating for that loan, which is used for assessing and monitoring credit risk as well as performance of the loan and the overall portfolio. Our internal credit risk ratings are also used to summarize the risk of loss due to failure by an individual borrower to repay the loan. For our internal credit risk ratings, each individual loan is given a risk rating of 1 through 10. Loans risk-rated 1 through 4 are performing loans and translate to an internal rating of “Pass”, with loans risk-rated 1 being cash secured. Loans risk-rated 5 through 7 are performing loans, however, we consider them as demonstrating higher risk, which requires more frequent review of the individual exposures; these translate to an internal rating of “Performing (Criticized)”. When ~~a significant payment delay occurs on~~full repayment of a criticized loan has been deemed improbable under the original contractual terms but full repayment remains probable overall, the loan is ~~impaired. The loan is also~~ considered ~~for nonaccrual status if full repayment is determined~~ to be ~~improbable.~~a “Performing Impaired (Criticized)” loan. All of our nonaccrual loans are risk-rated 8 or 9 and are classified under the nonperforming impaired category. (For further description of nonaccrual loans, refer to Note 2—“Summary of Significant Accounting Policies” under Part II, Item 8 of our ~~2016~~2017 Form 10-K). Loans rated 10 are charged-off and are not included as part of our loan portfolio balance. We review our credit quality indicators for performance and appropriateness of risk ratings as part of our evaluation process for our allowance for loan losses.

The following table summarizes the credit quality indicators, broken out by portfolio segment and class of financing receivables as of ~~September~~June 30, ~~2017~~2018 and December 31, ~~2016:~~2017:


(Dollars in thousands)	Pass		Performing (Criticized)		Performing Impaired (Criticized)		Nonperforming Impaired (Nonaccrual)		Total		Pass		Performing (Criticized)		Performing Impaired (Criticized)		Nonperforming Impaired (Nonaccrual)		Total
September 30, 2017:
June 30, 2018:
Commercial loans:
Software/internet	$	5,304,675	$	431,786	$	40,965	$	73,897	$	5,851,323	$	5,645,661	$	543,607	$	25,369	$	77,151	$	6,291,788
Hardware	1,015,947		65,337		21,886		18,854		1,122,024		1,163,629		75,510		25,201		17,093		1,281,433
Private equity/venture capital	9,633,609		1		308		1,010		9,634,928		12,229,454		3,551		—		—		12,233,005
Life science/healthcare	1,604,160		146,705		1,400		26,935		1,779,200		1,909,151		222,765		250		26,170		2,158,336
Premium wine	877,235		43,377		4,241		436		925,289		840,649		41,877		2,193		331		885,050
Other	493,856		19,252		—		298		513,406		432,652		3,363		—		8		436,023
Total commercial loans	18,929,482		706,458		68,800		121,430		19,826,170		22,221,196		890,673		53,013		120,753		23,285,635
Consumer loans:
Real estate secured loans	2,188,397		14,179		—		1,301		2,203,877		2,462,007		11,451		324		4,089		2,477,871
Other consumer loans	297,388		453		—		1,941		299,782		396,902		374		—		—		397,276
Total consumer loans	2,485,785		14,632		—		3,242		2,503,659		2,858,909		11,825		324		4,089		2,875,147
Total gross loans	$	21,415,267	$	721,090	$	68,800	$	124,672	$	22,329,829	$	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

Troubled Debt Restructurings

As of ~~September~~June 30, ~~2017~~2018 we had 1820 TDRs with a total carrying value of ~~$87.4~~$128.9 million where concessions have been granted to borrowers experiencing financial difficulties, in an attempt to maximize collection. There were ~~$1.2~~$0.6 millionof unfunded commitments available for funding to the clients associated with these TDRs as of ~~September~~June 30, ~~2017.~~2018.

The following table summarizes our loans modified in TDRs, broken out by portfolio segment and class of financing receivables at ~~September~~June 30, ~~2017~~2018 and December 31, ~~2016:~~2017:


(Dollars in thousands)	September 30, 2017		December 31, 2016		June 30, 2018		December 31, 2017
Loans modified in TDRs:
Commercial loans:
Software/internet	$	63,326	$	52,646	$	50,202	$	73,455
Hardware	395		14,870		49,834		51,132
Private equity/venture capital					—		350
Life science/healthcare	20,015		24,176		25,460		19,235
Premium wine	3,265		3,194		3,048		3,198
Other	—		387
Total commercial loans	87,001		95,273		128,544		147,370
Consumer loans:
Other consumer loans	437		786		325		423
Total	$	87,438	$	96,059	$	128,869	$	147,793

The following table summarizes the recorded investment in loans modified in TDRs, broken out by portfolio segment and class of financing receivable, for modifications made during the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018 and ~~2016:~~2017:


	Three months ended September 30,				Nine months ended September 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	$	10,876	$	78	$	26,034	$	4,569	$	14,783	$	16,135	$	14,783	$	22,242
Hardware	396		10,329		396		10,329		1,954		—		3,448		—
Private equity/venture capital									—		—		—		—
Life science/healthcare	—		1,714		—		1,714		6,231		4,588		7,461		4,588
Premium wine	—		—		185		495		—		190		—		190
Total commercial loans	11,272		12,121		26,615		17,107		22,968		20,913		25,692		27,020
Consumer loans:
Other consumer loans	—		—		—		786		—		—		325		—
Total consumer loans									—		—		325		—
Total loans modified in TDRs during the period (1)	$	11,272	$	12,121	$	26,615	$	17,893	$	22,968	$	20,913	$	26,017	$	27,020

(1)

There were ~~zero~~$8.5 million of partial charge-offs for both the three and six months endedJune 30, 2018 and $~~2.6~~12.5 million and $15.1 million of partial charge-offs during the three and ~~nine~~six months ended ~~September~~June 30, 2017~~, respectively, and~~ ~~$0.7 million~~ ~~and~~ ~~$3.5 million~~ ~~of partial charge-offs during the~~ ~~three and nine months endedSeptember 30, 2016~~, respectively.

During the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018 all new TDRs of ~~$11.3~~$23.0 million and ~~$26.6~~$26.0 million, respectively, were modified through payment deferrals granted to our clients.

During the three and six months ended ~~September~~June 30, ~~2016, $12.0~~2017, all new TDRs of $20.9 million ~~of new TDRs~~and $27.0 million, respectively, were modified through payment deferrals granted to our clients and $0.1 million were modified through partial forgiveness of principal. During the nine months ended September 30, 2016, $17.6 million of new TDRs were modified through payment deferrals granted to our clients and $0.3 million were modified through partial forgiveness of principal.clients.

The related allowance for loan losses for the majority of our TDRs is determined on an individual basis by comparing the carrying value of the loan to the present value of the estimated future cash flows, discounted at the pre-modification contractual interest rate. For certain TDRs, the related allowance for loan losses is determined based on the fair value of the collateral if the loan is collateral dependent.

The following table summarizes the recorded investment in loans modified in TDRs within the previous 12 months that subsequently defaulted during the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018 and ~~September 30, 2016.~~2017:


	Three months ended September 30,				Nine months ended September 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	$	1,234	$	—	$	1,234	$	584	$	19,625	$	—	$	22,657	$	—
Hardware									3,449		—		3,449		—
Life science/healthcare									1,230		—		1,230		—
Premium wine	186		790		186		790		—		190		—		190
Total TDRs modified within the previous 12 months that defaulted in the period	$	1,420	$	790	$	1,420	$	1,374	$	24,304	$	190	$	27,336	$	190

Charge-offs and defaults on previously restructured loans are evaluated to determine the impact to the allowance for loan losses, if any. The evaluation of these defaults may impact the assumptions used in calculating the reserve on other TDRs and impaired loans as well as management’s overall outlook of macroeconomic factors that affect the reserve on the loan portfolio as a whole. After evaluating the charge-offs and defaults experienced on our TDRs we determined that no change to our reserving methodology for TDRs was necessary to determine the allowance for loan losses as of ~~September~~June 30, ~~2017.~~2018.


8.	Short-Term Borrowings and Long-Term Debt

The following table represents outstanding short-term borrowings and long-term debt at ~~September~~June 30, ~~2017~~2018 and December 31, ~~2016~~2017:


				Carrying Value							Carrying Value
(Dollars in thousands)	Maturity	Principal value at September 30, 2017		September 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)	4,840		4,840		12,668		(1)	17,246		17,246		3,730
Total short-term borrowings				$	4,840	$	512,668				$	417,246	$	1,033,730
Long-term debt:
3.50% Senior Notes	January 29, 2025	$	350,000	$	347,221	$	346,979	January 29, 2025	$	350,000	$	347,470	$	347,303
5.375% Senior Notes	September 15, 2020	350,000		348,035		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		54,362		54,493
Total long-term debt				$	749,618	$	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.


~~(2)~~	~~Our 6.05% Subordinated Notes were repaid on June 1, 2017 and therefore, the interest rate swap agreement related to this issuance was terminated upon repayment of the 6.05% Subordinated Notes. At~~ ~~December 31, 2016, included in the carrying value of our 6.05% Subordinated Notes were~~ ~~$0.8 million~~ ~~related to hedge accounting associated with the notes.~~

Interest expense related to short-term borrowings and long-term debt was ~~$9.0~~$8.6 million and ~~$27.2~~$17.0 million for the three and ~~nine~~six months ended ~~September 30, 2017~~,June 30,2018, respectively, and ~~$9.7~~$9.0 million and ~~$28.2~~$18.3 million for the three and ~~nine~~six months ended ~~September~~June 30, ~~2016,~~2017, respectively. ~~Interest expense is net of the hedge accounting impact from our interest rate swap agreement related to our 6.05% Subordinated Notes through June 1, 2017.~~ The weighted average interest rate associated with our short-term borrowings was ~~1.06~~2.04 percent as of ~~September~~June 30, ~~2017~~2018 and ~~0.59~~1.39 percent as of December 31, ~~2016.~~2017.

Available Lines of Credit

We have certain facilities in place to enable us to access short-term borrowings on a secured (using ~~high-quality fixed income~~loans and AFS securities as collateral) and an unsecured basis. These include repurchase agreements and uncommitted federal funds lines with various financial institutions. As of ~~September~~June 30, ~~2017~~2018, we did not have any borrowings outstanding against our uncommitted federal funds lines. We also pledge securities to the FHLB of San Francisco and the discount window at the ~~Federal Reserve Bank.~~FRB. The fair value of collateral pledged to the FHLB of San Francisco (comprised primarily of loans and U.S. Treasury securities) at ~~September~~June 30, ~~2017~~2018 totaled ~~$1.9~~$3.8 billion,~~, all~~ of which $3.4 billion was unused and available to support additional borrowings. The fair value of collateral pledged at the discount window of the ~~Federal Reserve Bank~~FRB (comprised primarily of U.S. Treasury securities and U.S. agency debentures) at ~~September~~June 30, ~~2017~~2018 totaled $~~0.7~~0.9 billion, all of which was unused and available to support additional borrowings.


9.	Derivative Financial Instruments

We primarily use derivative financial instruments to manage ~~interest rate risk,~~ currency exchange rate risk and to assist customers with their risk management ~~objectives.~~objectives, which may include currency exchange rate risks and interest rate risks. Also, in connection with negotiating credit facilities and certain other services, we often obtain equity warrant assets giving us the right to acquire stock in private, venture-backed companies in the technology and life science/healthcare industries.

~~Interest Rate Risk~~

Interest rate risk is our primary market risk and can result from timing and volume differences in the repricing of our interest rate sensitive assets and liabilities and changes in market interest rates. To manage interest rate risk for our 6.05% Subordinated Notes, we entered into a fixed-for-floating interest rate swap agreement at the time of debt issuance based upon LIBOR with matched-terms. The net cash benefit associated with our interest rate swap is recorded as a reduction in “Interest expense—Borrowings,” a component of net interest income. The fair value of our interest rate swaps is calculated using a discounted cash flow method and adjusted for credit valuation associated with counterparty risk. Changes in fair value of the interest rate swaps are reflected in either other assets (for swaps in an asset position) or other liabilities (for swaps in a liability position). On June 1, 2017, our interest rate swap was terminated upon repayment of the 6.05% Subordinated Notes.

Currency Exchange Risk

We enter into foreign exchange forward contracts to economically reduce our foreign exchange exposure risk associated with the net difference between foreign currency denominated assets and liabilities. We do not designate any foreign exchange forward contracts as derivative instruments that qualify for hedge accounting. Gains or losses from changes in currency rates on foreign currency denominated instruments are recorded in the line item ~~“Other”~~“other” as part of noninterest income, a component of consolidated net income. We may experience ineffectiveness in the economic hedging relationship, because the instruments are revalued based upon changes in the currency’s spot rate on the principal value, while the forwards are revalued on a discounted cash flow basis. We record forward agreements in gain positions in other assets and loss positions in other liabilities, while net changes in fair value are recorded in the line item ~~“Other”~~“other” as part of noninterest income, a component of consolidated net income.

Other Derivative Instruments

Also included in our derivative instruments are equity warrant assets and client forward and option contracts, and client interest rate contracts. For further description of these other derivative instruments, refer to Note 2-“Summary of Significant Accounting Policies" under Part II, Item 8 of our ~~2016~~2017 Form 10-K.

Counterparty Credit Risk

We are exposed to credit risk if counterparties to our derivative contracts do not perform as expected. We mitigate counterparty credit risk through credit approvals, limits, monitoring procedures and obtaining collateral, as appropriate. With respect to measuring counterparty credit risk for derivative instruments, we measure the fair value of a group of financial assets and financial liabilities on a net risk basis by counterparty portfolio.

The total notional or contractual amounts and fair value ~~collateral and net exposure~~ of our derivative financial instruments at ~~September~~June 30, ~~2017~~2018 and December 31, ~~2016~~2017 were as follows:


																						June 30, 2018						December 31, 2017
		September 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	286,378		3,166			—		3,166			219,950		3,057			—		3,057			$	501,372	$	16,250	$	—	$	50,889		$	414		$	—
Foreign exchange forwards	Other liabilities	84,618		(1,244		)	—		(1,244		)	54,338		(968		)	—		(968		)	243,969		—		9,636		425,055			—			5,201
Net exposure				1,922			—		1,922					2,089			—		2,089
Other derivative instruments:
Equity warrant assets	Other assets	211,018		141,785			—		141,785			211,434		131,123			—		131,123			227,490		143,725		—		211,253			123,763			—
Other derivatives:
Client foreign exchange forwards	Other assets	1,925,726		90,691			4,840		85,851			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	1,838,439		(86,627		)	—		(86,627		)	1,068,991		(43,317		)	—		(43,317		)	2,305,484		—		73,323		2,092,207			—			90,253
Client foreign currency options	Other assets	101,544		1,090			—		1,090			775,000		10,383			—		10,383			107,907		1,713		—		102,678			1,187			—
Client foreign currency options	Other liabilities	101,544		(1,090		)	—		(1,090		)	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	676,148		11,824			—		11,824			583,511		10,110			—		10,110			1,274,209		—		12,532		782,586			—			11,940
Client interest rate derivatives	Other liabilities	711,969		(11,955		)	—		(11,955		)	627,639		(9,770		)	—		(9,770		)
Net exposure				3,933			4,840		(907		)			11,610			12,579		(969		)
Net				$	147,640		$	4,840	$	142,800				$	145,632		$	12,668	$	132,964
Total Derivatives not designated as hedging instruments																								$	249,505	$	97,204				$	232,152		$	108,581


(1)	~~Cash collateral received from our counterparties~~ Derivative assets and liabilities are included in ~~relation to market value exposures of derivative contracts in our favor is recorded as a component of “short-term borrowings”~~"accrued interest receivable and other assets" and "other liabilities", respectively, on our consolidated balance sheets.

(2)

~~Net exposure~~

The amount reported for ~~contracts~~June 30, 2018 reflects rule changes implemented by two central clearing houses that allow entities to elect to treat derivative assets, liabilities and the related variation margin as settlement of the related derivative fair values for legal and accounting purposes, as opposed to presenting gross derivative assets and liabilities. As a result, client interest rate derivatives at June 30, 2018, reflect reductions of approximately $5.8 million of derivative assets that previously would have been reported on a gross basis and approximately $281.8 million in a gain position reflects the replacement cost in the event of nonperformance by all such counterparties. The credit ratings of our institutional counterparties as of September 30, 2017 remain at investment grade or higher and there were no material changes in their credit ratings during the three and nine months ended September 30, 2017.related notional amounts for these derivative assets cleared through central clearing houses.

A summary of our derivative activity and the related impact on our consolidated statements of income for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018 and ~~2016~~2017 is as follows:


		Three months ended September 30,						Nine months ended September 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	$	62		$	580		$	997		$	1,778		Interest expense—borrowings	$	—		$	381		$	—		$	935
Changes in fair value of interest rate swaps	Other noninterest income	—			(3		)	(7		)	(33		)	Other noninterest income	—			(6		)	—			(7		)
Net gains associated with interest rate risk derivatives		$	62		$	577		$	990		$	1,745			$	—		$	375		$	—		$	928
Derivatives not designated as hedging instruments:
Currency exchange risks:
Gains (losses) on revaluations of internal foreign currency instruments, net	Other noninterest income	$	10,561		$	(1,406	)	$	29,265		$	(4,222	)
(Losses) gains on internal foreign exchange forward contracts, net	Other noninterest income	(10,550		)	1,352			(28,349		)	3,067
(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		$	11		$	(54	)	$	916		$	(1,155	)		$	140		$	42		$	(446	)	$	905
Other derivative instruments:
Gains on revaluations of client foreign currency instruments, net	Other noninterest income	$	3,760		$	3,488		$	8,889		$	7,009
Losses on client foreign exchange forward contracts, net	Other noninterest income	(3,871		)	(3,194		)	(8,350		)	(8,780		)
Net (losses) gains associated with client currency risk		$	(111	)	$	294		$	539		$	(1,771	)
(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	$	24,922		$	21,558		$	42,432		$	33,252		Gains on equity warrant assets, net	$	19,061		$	10,820		$	38,252		$	17,510
Net (losses) gains on other derivatives	Other noninterest income	$	(38	)	$	31		$	(524	)	$	(659	)	Other noninterest income	$	(10	)	$	(210	)	$	421		$	(486	)

Balance Sheet Offsetting

Certain of our derivative and other financial instruments are subject to enforceable master netting arrangements with our counterparties. These agreements provide for the net settlement of multiple contracts with a single counterparty through a single payment, in a single currency, in the event of default on or termination of any one contract.

The following table summarizes our assets subject to enforceable master netting arrangements as of ~~September~~June 30, ~~2017~~2018 and December 31, ~~2016~~2017:


	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				Gross Amounts of Recognized Assets		Cash Collateral Received (1)											Net Amount
September 30, 2017	Gross Amounts of Recognized Assets
June 30, 2018																						Gross Amounts offset in the Statement of Financial Position
Derivative Assets:				Gross Amounts offset in the Statement of Financial Position
Interest rate swaps	$	—		$	—	$	—		$	—		$	—			Net Amount	$	—
Foreign exchange forwards	93,857			—		93,857			(21,154		)	(4,840		)		67,863			$	97,645		$	—	$	97,645	$	(32,627	)	$	(14,416	)	$	50,602
Foreign currency options	1,090			—		1,090			(331		)	—				759			1,713			—		1,713		(973		)	—			740
Client interest rate derivatives	11,824			—		11,824			(11,808		)	—				16			6,422			—		6,422		(3,592		)	(2,830		)	—
Total derivative assets	106,771			—		106,771			(33,293		)	(4,840		)		68,638			105,780			—		105,780		(37,192		)	(17,246		)	51,342
Reverse repurchase, securities borrowing, and similar arrangements	62,664			—		62,664			(62,664		)	—				—			37,379			—		37,379		(37,379		)	—			—
Total	$	169,435		$	—	$	169,435		$	(95,957	)	$	(4,840	)		$	68,638		$	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.

The following table summarizes our liabilities subject to enforceable master netting arrangements as of ~~September~~June 30, ~~2017~~2018 and December 31, ~~2016~~2017:


	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				Gross Amounts of Recognized Liabilities			Cash Collateral Pledged (1)															Net Amount
September 30, 2017	Gross Amounts of Recognized Liabilities
June 30, 2018																						Gross Amounts offset in the Statement of Financial Position
Derivative Liabilities:				Gross Amounts offset in the Statement of Financial Position
Foreign exchange forwards	$	87,871		$	—	$	87,871		$	(68,852	)	$	—		Net Amount	$	19,019		$	82,959			$	—		$	82,959		$	(14,638	)		$	(41,113	)		$	27,208
Foreign currency options	1,090			—		1,090			(759		)	—			331			1,713				—			1,713			(772		)		—				941
Client interest rate derivatives	11,955			—		11,955			(11,936		)	—			19			12,532				—			12,532			—				(12,448		)		84
Total derivative liabilities	100,916			—		100,916			(81,547		)	—			19,369			97,204				—			97,204			(15,410		)		(53,561		)		28,233
Repurchase, securities lending, and similar arrangements	—			—		—			—			—			—			—				—			—			—				—				—
Total	$	100,916		$	—	$	100,916		$	(81,547	)	$	—		$	19,369		$	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.	~~Other~~ Noninterest Income ~~and Other Noninterest Expense~~

On January 1, 2018, we adopted Topic 606 using the modified retrospective method applied to those contracts which were not completed as of January 1, 2018. Results for reporting periods beginning after January 1, 2018, are presented under Topic 606, while prior period amounts are not adjusted and continue to be reported in accordance with our previous accounting methodology under Topic 605. A summary of ~~other~~ noninterest income for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018 and ~~2016~~2017 is as follows:

Three months ended September 30,
Nine months ended September 30,
(Dollars in thousands) 2017
2016
2017
2016
Fund management fees $ 5,198
$ 5,231
$ 15,903
$ 14,149
Service-based fee income 469
2,029
3,860
6,270
Gains on revaluation of client foreign currency instruments, net (1) 3,760
3,488
8,889
7,009
Losses on client foreign exchange forward contracts, net (1) (3,871 ) (3,194 ) (8,350 ) (8,780 )
Gains (losses) on revaluation of internal foreign currency instruments, net (2) 10,561
(1,406 ) 29,265
(4,222 )
(Losses) gains on internal foreign exchange forward contracts, net (2) (10,550 ) 1,352
(28,349 ) 3,067
Other (3) 10,329
11,378
19,910
19,018
Total other noninterest income $ 15,896
$ 18,878
$ 41,128
$ 36,511



	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

Gains on investment securities, net

Net gains on investment securities include both 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, gains and losses from sales of our AFS debt securities portfolio, when applicable and carried interest.

Our non-marketable and other equity securities portfolio primarily represents investments in venture capital and private equity funds, our China Joint Venture, debt funds, private and public portfolio companies and investments in qualified affordable housing projects. We experience variability in the performance of our non-marketable and other equity securities from period to period, which results in net gains or losses on investment securities (both realized and unrealized). This variability is due to a number of factors, including unrealized changes in the values of our investments, changes in the amount of realized gains from distributions, changes in liquidity events and general economic and market conditions. Unrealized gains from non-marketable and other equity securities for any single period are typically driven by valuation changes, and are therefore subject to potential increases or decreases in future periods. Such variability may lead to volatility in the gains or losses from investment securities. As such, our results for a particular period are not necessarily indicative of our expected performance in a future period.

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.

Carried interest is comprised of preferential allocations of profits recognizable when the return on assets of our individual managed fund of funds and direct venture funds exceeds certain performance targets and is payable to us, as the general partners of the managed funds. The carried interest we earn is often shared with employees, who are also members of the general partner entities. We record carried interest on a quarterly basis by measuring fund performance to date versus the performance target. For our unconsolidated managed funds, carried interest is recorded as gains on investment securities, net. For our consolidated managed funds, it is recorded as a component of net income attributable to noncontrolling interests. Carried interest allocated to others is recorded as a component of net income attributable to noncontrolling interests. Any carried interest paid to us (or our employees) may be subject to reversal to the extent fund performance declines to a level where inception to date carried interest is lower than actual payments made by the funds. The limited partnership agreements for our funds provide that carried interest is generally not paid to the general partners until the funds have provided a full return of contributed capital to the limited partners. Accrued, but unpaid carried interest may be subject to reversal to the extent that the fund performance declines to a level where inception-to-date carried interest is less than prior amounts recognized. Carried interest income is accounted for under an ownership model based on ASC 323 — Equity Method of Accounting and ASC 810 — Consolidation.

Our available-for-sale 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.

Gains on investment securities are outside of the scope of the new revenue standard as it explicitly excludes noninterest income earned from our investment-related activities. A summary of gains and losses on investment securities for the three and six months ended June 30, 2018 and 2017 is as follows:



	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

Gains on equity warrant assets, net

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. Any changes in fair value from the grant date fair value of equity warrant assets will be recognized as increases or decreases to other assets on our balance sheet and as net gains or losses on equity warrant assets, in noninterest income, a component of consolidated net income. Gains on equity warrant assets are recognized outside of the scope of the new revenue standard as it explicitly excludes noninterest income earned from our derivative-related activities. A summary of net gains on equity warrant assets for the three and six months ended June 30, 2018 and 2017 is as follows:



	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

Foreign exchange fees

Foreign exchange fees represent the income differential between purchases and sales of foreign currency on behalf of our clients, primarily from spot contracts. Foreign exchange spot contract fees are recognized upon the completion of the single performance obligation, the execution of a spot trade in exchange for a fee. In line with customary business practice, the legal right transfers to the client upon execution of a foreign exchange contract on the trade date, and as such, we currently recognize our fees based on the trade date and are typically settled within two business days.

Forward contract and option premium fees are recognized outside of the scope of the new revenue standard as it explicitly excludes noninterest income earned from our derivative-related activities. A summary of foreign exchange fee income by instrument type for the three and six months ended June 30, 2018 and 2017 is as follows:



	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

Credit card fees

Credit card fees include interchange income from credit and debit cards and fees earned from processing transactions for merchants. Interchange income is earned after satisfying our performance obligation of providing nightly settlement services to a payment network. Costs related to rewards programs are recorded when the rewards are earned by the customer and presented as a reduction to interchange fee income. Rewards programs continue to be accounted for under ASC 310 - Receivables. Our performance obligations for merchant service fees are to transmit data and funds between the merchant and the payment network. Credit card interchange and merchant service fees are earned daily upon completion of transaction settlement services.

Annual card service fees are recognized on a straight-line basis over a 12-month period and continue to be accounted for under ASC 310 - Receivables.

A summary of credit card fees by instrument type for the three and six months ended June 30, 2018 and 2017 is as follows:



	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

Deposit service charges

Deposit service charges include fees earned from performing cash management activities and other deposit account services. Deposit services include, but are not limited to the following: receivables services, which include merchant services, remote capture, lockbox, electronic deposit capture, and fraud control services. Payment and cash management products and services include wire transfer and automated clearing house payment services to enable clients to transfer funds more quickly, as well as business bill pay, business credit and debit cards, account analysis, and disbursement services. Deposit service charges are recognized over the period in which the related performance obligation is provided, generally on a monthly basis.

Client investment fees

Client investment fees include fees earned from discretionary investment management services for substantially all clients, managing clients’ portfolios based on their investment policies, strategies and objectives and receives investment advisory fees. Revenue is recognized on a monthly basis upon completion of our performance obligation and consideration is typically received in the subsequent month. Included in our sweep money market fees are Rule 12(b)-1 fees, revenue sharing and from customer transactional based fees. Rule 12(b)-1 fees and revenue sharing are recognized as earned based on client funds that are invested in the period, typically monthly. Transactional based fees are earned and recognized on fixed income securities when the transaction is executed on the clients' behalf. Amounts paid to third-party service providers are predominantly expensed, such that client investment fees are recorded gross of payments made to third parties. A summary of client investment fees by instrument type for the three and six months ended June 30, 2018 and 2017, is as follows:



	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 fees earned from investments in third-party money market mutual funds and fixed-income securities managed by SVB Asset Management.


(2)	Represents fees earned on client investment funds which are maintained at third-party financial institutions and are not recorded on our balance sheet.

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:



	Three months ended June 30,				Six months ended June 30,
(Dollars in thousands)	2018		2017		2018		2017
Lending related fees by instrument type:
Unused commitment fees	$	7,827	$	7,021	$	16,584	$	13,588
Other	1,701		1,488		3,679		3,882
Total lending related fees	$	9,528	$	8,509	$	20,263	$	17,470

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:



	Three months ended June 30,				Six months ended June 30,
(Dollars in thousands)	2018		2017		2018		2017
Other noninterest income by instrument type:
Fund management fees	$	5,929	$	5,536	$	11,665	$	10,705
Net gains on revaluation of foreign currency instruments, net of foreign exchange forward contracts (1)	236		227		189		1,555
Other service revenue	8,225		7,048		14,795		12,972
Total other noninterest income	$	14,390	$	12,811	$	26,649	$	25,232


(1)	Represents the net revaluation of client and internal foreign currency denominated financial instruments. We enter into ~~client~~ foreign exchange forward contracts to economically reduce our foreign exchange exposure related to client and internal foreign currency denominated financial instruments.

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:



Three months ended June 30, 2018 (Dollars in thousands)	Global Commercial Bank		SVB Private Bank		SVB Capital		Other Income		Total
Revenue from contracts with customers:
Spot contract commissions	$	31,350	$	144	$	—	$	54	$	31,548
Card interchange fees, gross	31,734		—		—		104		31,838
Merchant service fees	3,425		—		—		—		3,425
Deposit service charges	18,386		31		—		377		18,794
Client investment fees	11,895		379		—		17,178		29,452
Fund management fees	—		—		5,929		—		5,929
Correspondent bank rebates	1,473		—		—		—		1,473
Total revenue from contracts with customers	$	98,263	$	554	$	5,929	$	17,713	$	122,459

Revenues outside the scope of ASC 606 (1)	14,982		10		22,569		32,669		70,230
Total noninterest income	$	113,245	$	564	$	28,498	$	50,382	$	192,689

~~(2)~~(1)

Represents the net revaluation of foreign currency denominated financial instruments issued and held by us, primarily loans, deposits and cash. We enter into internal foreign exchange forward contracts to economically reduce our foreign exchange exposure related to these foreign currency denominated financial instruments issued and held by us.Amounts are accounted for under separate guidance than ASC 606.



Six months ended June 30, 2018 (Dollars in thousands)	Global Commercial Bank		SVB Private Bank		SVB Capital		Other Income		Total
Revenue from contracts with customers:
Spot contract commissions	$	62,322	$	323	$	—	$	105	$	62,750
Card interchange fees, gross	61,183		—		—		203		61,386
Merchant service fees	6,331		—		—		—		6,331
Deposit service charges	35,426		59		—		1,008		36,493
Client investment fees	22,145		681		—		29,501		52,327
Fund management fees	—		—		11,665		—		11,665
Correspondent bank rebates	2,869		—		—		—		2,869
Total revenue from contracts with customers	$	190,276	$	1,063	$	11,665	$	30,817	$	233,821

Revenues outside the scope of ASC 606 (1)	22,315		9		45,744		46,318		114,386
Total noninterest income	$	212,591	$	1,072	$	57,409	$	77,135	$	348,207


~~(3)~~(1)	~~Includes dividends on FHLB/FRB stock, correspondent bank rebate income, incentive fees related to carried interest and other fee income.~~Amounts are accounted for under separate guidance than ASC 606.


11.	Other Noninterest Expense

A summary of other noninterest expense for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018 and ~~2016~~2017 is as follows:


	Three months ended September 30,				Nine months ended September 30,				Three months ended June 30,				Six months ended June 30,
(Dollars in thousands)	2017		2016		2017		2016		2018		2017		2018		2017
Lending and other client related processing costs	$	6,935	$	5,885	$	18,806	$	13,721	$	7,403	$	6,332	$	10,603	$	11,871
Data processing services									2,703		2,428		5,195		5,010
Telephone	2,518		2,460		7,892		7,109		2,378		2,671		4,756		5,374
Data processing services	2,244		2,137		7,254		6,353
Dues and publications	883		809		2,355		2,258		845		677		1,694		1,472
Postage and supplies	612		598		2,013		2,172		813		652		1,480		1,401
Other	4,872		3,644		16,350		12,679		4,670		7,639		9,778		11,478
Total other noninterest expense	$	18,064	$	15,533	$	54,670	$	44,292	$	18,812	$	20,399	$	33,506	$	36,606


~~11.~~12.	Segment Reporting

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 ~~taxes~~tax expense or the provision for

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:

◦

Our Commercial Bank products and services are provided by the Bank and its subsidiaries to commercial clients in the technology, life science/healthcare and private equity/venture capital industries. The Bank provides solutions to the financial needs of commercial clients, through credit, global treasury management, foreign exchange, global trade finance, and other services. It serves clients within the United States, as well as non-U.S. clients in key international innovation markets. In addition, the Bank and its subsidiaries offer a variety of investment services and solutions to its clients that enable them to effectively manage their assets.


◦	Our Private Equity Division provides banking products and services primarily to our private equity and venture capital clients.


◦	Our Wine practice provides banking products and services to our premium wine industry clients, including vineyard development loans.


◦	SVB Analytics previously provided equity valuation services and currently provides research for investors and companies in the global innovation economy. In September 2017, SVB Analytics sold its equity valuation services business.


◦	Debt Fund Investments is comprised of our investments in certain debt funds in which we are a strategic investor.

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 ~~third party~~third-party limited partners and, on a more limited basis, SVB Financial Group. The SVB Capital family of funds is comprised of direct venture funds that invest in companies and funds of funds that invest in other venture capital funds. SVB Capital generates income for the Company primarily from investment returns (including carried interest allocations) and management fees.

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 ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018 and ~~2016~~2017 is as follows:


(Dollars in thousands)	Global Commercial Bank (1)			SVB Private Bank			SVB Capital (1)			Other Items (2)			Total			Global Commercial Bank (1)			SVB Private Bank			SVB Capital (1)			Other Items (2)			Total
Three months ended September 30, 2017
Three months ended June 30, 2018
Net interest income	$	337,860		$	14,600		$	15		$	21,499		$	373,974		$	409,057		$	15,645		$	9		$	41,732		$	466,443
Provision for credit losses	(20,874		)	(1,535		)	—			(1,113		)	(23,522		)	(27,356		)	(300		)	—			(1,424		)	(29,080		)
Noninterest income	97,227			460			13,913			47,178			158,778			113,245			564			28,498			50,382			192,689
Noninterest expense (3)	(176,964		)	(4,706		)	(4,873		)	(71,218		)	(257,761		)	(197,695		)	(5,927		)	(5,666		)	(96,451		)	(305,739		)
Income (loss) before income tax expense (4)	$	237,249		$	8,819		$	9,055		$	(3,654	)	$	251,469		$	297,251		$	9,982		$	22,841		$	(5,761	)	$	324,313
Total average loans, net of unearned income	$	18,807,616		$	2,499,507		$	—		$	277,769		$	21,584,892		$	21,714,870		$	2,777,617		$	—		$	366,016		$	24,858,503
Total average assets (5)	47,817,114			2,538,400			323,417			(883,565		)	49,795,366			52,540,865			2,515,984			369,841			(1,006,044		)	54,420,646
Total average deposits	42,376,024			1,231,390			—			435,428			44,042,842			45,991,701			1,480,162			—			500,088			47,971,951
Three months ended September 30, 2016
Three months ended June 30, 2017
Net interest income	$	262,484		$	13,298		$	1		$	13,378		$	289,161		$	311,051		$	14,742		$	16		$	16,887		$	342,696
Provision for credit losses	(16,974		)	(1,976		)	—			(1,054		)	(20,004		)	(14,856		)	(329		)	—			(621		)	(15,806		)
Noninterest income	79,226			664			30,619			33,631			144,140			83,904			536			15,019			29,069			128,528
Noninterest expense (3)	(159,479		)	(3,122		)	(3,924		)	(54,248		)	(220,773		)	(176,702		)	(4,050		)	(6,192		)	(64,302		)	(251,246		)
Income (loss) before income tax expense (4)	$	165,257		$	8,864		$	26,696		$	(8,293	)	$	192,524		$	203,397		$	10,899		$	8,843		$	(18,967	)	$	204,172
Total average loans, net of unearned income	$	16,357,099		$	2,074,982		$	—		$	215,113		$	18,647,194		$	17,907,635		$	2,365,464		$	—		$	235,442		$	20,508,541
Total average assets (5)	40,828,549			2,096,237			325,321			201,222			43,451,329			45,478,211			2,397,188			355,292			(681,327		)	47,549,364
Total average deposits	36,484,125			1,115,446			—			310,183			37,909,754			40,477,823			1,302,890			—			357,933			42,138,646
Nine months ended September 30, 2017
Six months ended June 30, 2018
Net interest income	$	924,789		$	42,952		$	41		$	58,881		$	1,026,663		$	778,924		$	31,892		$	16		$	75,474		$	886,306
Provision for credit losses	(65,007		)	(2,266		)	—			(2,789		)	(70,062		)	(52,630		)	(2,022		)	—			(2,400		)	(57,052		)
Noninterest income	260,650			1,715			45,707			96,893			404,965			212,591			1,072			57,409			77,135			348,207
Noninterest expense (3)	(525,043		)	(12,675		)	(14,537		)	(194,385		)	(746,640		)	(382,261		)	(11,969		)	(10,713		)	(166,213		)	(571,156		)
Income (loss) before income tax expense (4)	$	595,389		$	29,726		$	31,211		$	(41,400	)	$	614,926		$	556,624		$	18,973		$	46,712		$	(16,004	)	$	606,305
Total average loans, net of unearned income	$	18,125,020		$	2,371,027		$	—		$	230,420		$	20,726,467		$	21,199,897		$	2,722,444		$	—		$	413,421		$	24,335,762
Total average assets (5)	45,414,432			2,403,777			333,439			(586,597		)	47,565,051			51,252,398			2,553,024			371,572			(777,378		)	53,399,616
Total average deposits	40,398,413			1,289,990			—			373,232			42,061,635			45,022,054			1,526,038			—			496,078			47,044,170
Nine months ended September 30, 2016
Net interest income (expense)	$	773,342		$	40,508		$	(51	)	$	40,119		$	853,918
Six months ended June 30, 2017
Net interest income																$	586,929		$	28,352		$	16		$	37,392		$	652,689
Provision for credit losses	(86,143		)	(2,481		)	—			(1,601		)	(90,225		)	(43,745		)	(1,119		)	—			(1,676		)	(46,540		)
Noninterest income	231,295			2,052			44,492			65,211			343,050			163,423			1,254			31,794			49,716			246,187
Noninterest expense (3)	(462,234		)	(9,481		)	(11,521		)	(141,375		)	(624,611		)	(349,548		)	(7,968		)	(9,664		)	(121,699		)	(488,879		)
Income (loss) before income tax expense (4)	$	456,260		$	30,598		$	32,920		$	(37,646	)	$	482,132		$	357,059		$	20,519		$	22,146		$	(36,267	)	$	363,457
Total average loans, net of unearned income	$	15,769,964		$	1,978,175		$	—		$	207,358		$	17,955,497		$	17,778,065		$	2,305,723		$	—		$	206,353		$	20,290,141
Total average assets (5)	41,020,808			1,999,455			334,328			315,125			43,669,716			44,188,162			2,335,350			364,036			(456,138		)	46,431,410
Total average deposits	37,002,027			1,120,575			—			321,388			38,443,990			39,393,219			1,319,776			—			341,618			41,054,613


(1)	Global Commercial Bank’s and SVB Capital’s components of net interest income, noninterest income, noninterest expense and total average assets are shown net of noncontrolling interests for all periods presented. Noncontrolling interest is included within “Other Items”.

(2)

The “Other Items” column reflects the adjustments necessary to reconcile the results of the operating segments to the consolidated financial statements prepared in conformity with GAAP. Net interest income consists primarily of interest earned from our fixed income investment portfolio, net of FTP. Noninterest income consists primarily of gains on equity warrant assets and gains or losses on the sale of fixed income ~~securities. Noninterest expense consists primarily of expenses associated with corporate support functions such as finance, human resources, marketing, legal~~investments and ~~other expenses.~~equity securities from exercised warrant

assets. Noninterest expense consists primarily of expenses associated with corporate support functions such as finance, human resources, marketing, legal and other expenses.


(3)	The Global Commercial Bank segment includes direct depreciation and amortization of $~~5.9~~5.6 million and $~~6.4~~7.2 million for the three months ended~~September~~June 30, ~~2017~~2018 and ~~2016~~2017, respectively, and $~~19.1~~11.1 million and $~~18.3~~13.4 million for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018 and ~~2016~~2017, respectively.


(4)	The internal reporting model used by management to assess segment performance does not calculate income tax expense by segment. Our effective tax rate is a reasonable approximation of the segment rates.


(5)	Total average assets equal the greater of total average assets or the sum of total average liabilities and total average stockholders’ equity for each segment to reconcile the results to the consolidated financial statements prepared in conformity with GAAP.


~~12.~~13.	Off-Balance Sheet Arrangements, Guarantees and Other Commitments

Commitments to Extend Credit

The following table summarizes information related to our commitments to extend credit at ~~September~~June 30, ~~2017~~2018 and December 31, ~~2016~~2017:


(Dollars in thousands)	September 30, 2017		December 31, 2016		June 30, 2018		December 31, 2017
Loan commitments available for funding: (1)
Fixed interest rate commitments	$	1,462,728	$	1,475,179	$	1,803,673	$	1,478,157
Variable interest rate commitments	13,037,817		13,572,161		14,904,556		14,034,169
Total loan commitments available for funding	14,500,545		15,047,340		16,708,229		15,512,326
Commercial and standby letters of credit (2)	1,841,385		1,695,856		2,020,131		1,950,211
Total unfunded credit commitments	$	16,341,930	$	16,743,196	$	18,728,360	$	17,462,537
Commitments unavailable for funding (3)	$	2,209,680	$	1,719,524	$	2,747,090	$	2,117,057
Allowance for unfunded credit commitments (4)	48,172		45,265		54,104		51,770


(1)	Represents commitments which are available for funding, due to clients meeting all collateral, compliance and financial covenants required under loan commitment agreements.


(2)	See below for additional information on our commercial and standby letters of credit.


(3)	Represents commitments which are currently unavailable for funding, due to clients failing to meet all collateral, compliance and financial covenants under loan commitment agreements.


(4)	Our allowance for unfunded credit commitments includes an allowance for both our unfunded loan commitments and our letters of credit.

Commercial and Standby Letters of Credit

The table below summarizes our commercial and standby letters of credit at ~~September~~June 30, ~~2017~~2018. The maximum potential amount of future payments represents the amount that could be remitted under letters of credit if there were a total default by the guaranteed parties, without consideration of possible recoveries under recourse provisions or from the collateral held or pledged.


(Dollars in thousands)	Expires In One Year or Less		Expires After One Year		Total Amount Outstanding		Maximum Amount of Future Payments		Expires In One Year or Less		Expires After One Year		Total Amount Outstanding		Maximum Amount of Future Payments
Financial standby letters of credit	$	1,666,751	$	54,244	$	1,720,995	$	1,720,995	$	1,850,099	$	43,050	$	1,893,149	$	1,893,149
Performance standby letters of credit	85,220		7,042		92,262		92,262		99,750		13,345		113,095		113,095
Commercial letters of credit	28,128		—		28,128		28,128		13,836		51		13,887		13,887
Total	$	1,780,099	$	61,286	$	1,841,385	$	1,841,385	$	1,963,685	$	56,446	$	2,020,131	$	2,020,131

Deferred fees related to financial and performance standby letters of credit were ~~$10~~$11.1 million at ~~both September~~June 30, ~~2017~~2018 and $12.4 million at December 31, ~~2016.~~2017. At ~~September~~June 30, ~~2017~~2018, collateral in the form of cash of ~~$926~~$961.0 million was available to us to reimburse losses, if any, under financial and performance standby letters of credit.

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 ~~September~~June 30, ~~2017~~2018:


(Dollars in thousands)	SVBFG Capital Commitments		SVBFG Unfunded Commitments		SVBFG Ownership of each Fund (3)		SVBFG Capital Commitments		SVBFG Unfunded Commitments		SVBFG Ownership of each Fund (3)
CP I, LP	$	6,000	$	270	10.7	%	$	6,000	$	270	10.7	%
CP II, LP (1)	1,200		162		5.1		1,200		162		5.1
Shanghai Yangpu Venture Capital Fund (LP)	872		—		6.8		924		—		6.8
Strategic Investors Fund, LP	15,300		688		12.6		15,300		688		12.6
Strategic Investors Fund II, LP	15,000		1,050		8.6		15,000		1,050		8.6
Strategic Investors Fund III, LP	15,000		1,275		5.9		15,000		1,275		5.9
Strategic Investors Fund IV, LP	12,239		2,325		5.0		12,239		2,325		5.0
Strategic Investors Fund V funds	515		131		Various		515		131		Various
Capital Preferred Return Fund, LP	12,688		—		20.0		12,688		—		20.0
Growth Partners, LP	24,670		1,340		33.0		24,670		1,340		33.0
Debt funds (equity method accounting)	58,493		—		Various		58,493		—		Various
Other fund investments (2)	302,867		11,360		Various		304,184		9,685		Various
Total	$	464,844	$	18,601			$	466,213	$	16,926


(1)	Our ownership includes direct ownership of 1.3 percent and indirect ownership interest of 3.8 percent through our investment in Strategic Investors Fund II, LP.


(2)	Represents commitments to ~~243~~232 funds (primarily venture capital funds) where our ownership interest is generally less than five percent of the voting interests of each such fund.


(3)	We are subject to the Volcker Rule, which restricts or limits us from sponsoring or having ownership interests in “covered” funds including venture capital and private equity funds. See “Business - Supervision and Regulation” under Part 1, Item 1 of ~~Part I of~~ our ~~2016~~2017 Form 10-K.

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 ~~September~~June 30, ~~2017~~2018:


(Dollars in thousands)	Unfunded Commitments		Unfunded Commitments
Strategic Investors Fund, LP	$	1,338	$	1,338
Capital Preferred Return Fund, LP	2,197		2,700
Growth Partners, LP	2,936		1,895
Total	$	6,471	$	5,933


~~13.~~14.	Income Taxes

We are subject to income tax in the U.S. federal jurisdiction and various state and foreign jurisdictions and have identified our federal tax ~~return~~ and California tax returns as major tax filings. Our U.S. federal tax returns for 2014 and subsequent tax years remain open to full examination. Our California tax returns for 2013 and subsequent tax years remain open to full examination.

At ~~September~~June 30, ~~2017,~~2018, our unrecognized tax benefit was ~~$6.3~~$13.6 million, the recognition of which would reduce our income tax expense by ~~$3.8~~$10.5 million. We do not expect that our unrecognized tax benefit will materially change in the next 12 months.

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 ~~and nine~~or six months ended ~~September~~June 30, ~~2017.~~2018.


~~14.~~15.	Fair Value of Financial Instruments

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 ~~third party~~third-party pricing methodologies, review of pricing trends and monitoring of trading volumes. Additional corroboration, such as obtaining a non-binding price from a broker, may be obtained depending on the frequency of trades of the security and the level of liquidity or depth of the market. We ensure prices received from independent brokers represent a reasonable estimate of the fair value through the use of observable market inputs including comparable trades, yield curve, spreads and, when available, market indices. As a result of this analysis, if the Company determines that there is a more appropriate fair value based upon the available market data, the price received from the third party is adjusted accordingly. Below is a summary of the significant inputs used for each class of Level 2 assets and liabilities:

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.

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:

~~Other venture~~Venture capital ~~investments:~~and private equity fund investments not measured at net asset value: Fair value measurements are based on consideration of a range of factors including, but not limited to, the price at which the investment was acquired, the term and nature of the investment, local market conditions, values for comparable securities, and as it relates to the private company, the current and projected operating performance, exit strategies and financing transactions subsequent to the acquisition of the investment. The significant unobservable inputs used in the fair value measurement include the information about each portfolio company, including actual and forecasted results, cash position, recent or planned transactions and market comparable companies. Significant changes to any one of these inputs in isolation could result in a significant change in the fair value measurement, however, we generally consider all factors available through ongoing communication with the portfolio companies and venture capital fund managers to determine whether there are changes to the portfolio company or the environment that indicate a change in the fair value measurement.

~~Other securities:~~ Fair value measurements of equity securities of public companies are priced based on quoted market prices less a discount if the securities are subject to certain sales restrictions. Marketability discounts generally range from 10 percent to 20 percent depending on the duration of the sale restrictions which typically range from three to six months.

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 ~~September~~June 30, ~~2017~~2018:


(Dollars in thousands)	Level 1		Level 2		Level 3		Balance at September 30, 2017		Level 1		Level 2		Level 3		Balance at June 30, 2018
Assets:
Available-for-sale securities:
U.S. Treasury securities	$	7,498,340	$	—	$	—	$	7,498,340	$	5,733,070	$	—	$	—	$	5,733,070
U.S. agency debentures	—		1,676,169		—		1,676,169		—		1,485,864		—		1,485,864
Residential mortgage-backed securities:
Agency-issued collateralized mortgage obligations—fixed rate	—		3,012,695		—		3,012,695		—		2,038,134		—		2,038,134
Agency-issued collateralized mortgage obligations—variable rate	—		395,880		—		395,880		—		336,298		—		336,298
Equity securities	802		19,451		—		20,253
Total available-for-sale securities	7,499,142		5,104,195		—		12,603,337		5,733,070		3,860,296		—		9,593,366
Non-marketable and other securities (fair value accounting):
Non-marketable and other equity securities (fair value accounting):
Non-marketable securities:
Venture capital and private equity fund investments measured at net asset value	—		—		—		128,768		—		—		—		343,119
Other venture capital investments (1)	—		—		1,897		1,897
Other securities (1)	392		—		—		392
Total non-marketable and other securities (fair value accounting)	392		—		1,897		131,057
Venture capital and private equity fund investments not measured at net asset value (1)									—		—		1,001		1,001
Other equity securities in public companies									835		3,577		—		4,412
Total non-marketable and other equity securities (fair value accounting)									835		3,577		1,001		348,532
Other assets:
Foreign exchange forward and option contracts	—		94,947		—		94,947		—		99,358		—		99,358
Equity warrant assets	—		2,710		139,075		141,785		—		5,972		137,753		143,725
Client interest rate derivatives	—		11,824		—		11,824		—		6,422		—		6,422
Total assets	$	7,499,534	$	5,213,676	$	140,972	$	12,982,950	$	5,733,905	$	3,975,625	$	138,754	$	10,191,403
Liabilities:
Foreign exchange forward and option contracts	$	—	$	88,961	$	—	$	88,961	$	—	$	84,672	$	—	$	84,672
Client interest rate derivatives	—		11,955		—		11,955		—		12,532		—		12,532
Total liabilities	$	—	$	100,916	$	—	$	100,916	$	—	$	97,204	$	—	$	97,204


(1)	Included in Level ~~1 and Level~~ 3 assets ~~are~~is $~~0.3~~0.9 million ~~and~~ ~~$1.7 million, respectively,~~ attributable to noncontrolling interests calculated based on the ownership percentages of the noncontrolling interests.

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, ~~2016~~2017:


(Dollars in thousands)	Level 1		Level 2		Level 3		Balance at December 31, 2016		Level 1		Level 2		Level 3		Balance at December 31, 2017
Assets:
Available-for-sale securities:
U.S. Treasury securities	$	8,909,491	$	—	$	—	$	8,909,491	$	6,840,502	$	—	$	—	$	6,840,502
U.S. agency debentures	—		2,078,375		—		2,078,375		—		1,567,128		—		1,567,128
Residential mortgage-backed securities:
Agency-issued collateralized mortgage obligations—fixed rate	—		1,152,665		—		1,152,665		—		2,267,035		—		2,267,035
Agency-issued collateralized mortgage obligations—variable rate	—		474,283		—		474,283		—		373,730		—		373,730
Equity securities	175		5,422		—		5,597		158		72,111		—		72,269
Total available-for-sale securities	8,909,666		3,710,745		—		12,620,411		6,840,660		4,280,004		—		11,120,664
Non-marketable and other securities (fair value accounting):
Non-marketable and other equity securities (fair value accounting):
Non-marketable securities:
Venture capital and private equity fund investments measured at net asset value	—		—		—		141,649		—		—		—		127,192
Other venture capital investments (1)	—		—		2,040		2,040
Other securities (1)	753		—		—		753
Total non-marketable and other securities (fair value accounting)	753		—		2,040		144,442
Venture capital and private equity fund investments not measured at net asset value (1)									—		—		919		919
Other equity securities in public companies (1)									310		—		—		310
Total non-marketable and other equity securities (fair value accounting)									310		—		919		128,421
Other assets:
Interest rate swaps	—		810		—		810
Foreign exchange forward and option contracts	—		68,027		—		68,027		—		96,636		—		96,636
Equity warrant assets	—		2,310		128,813		131,123		—		2,432		121,331		123,763
Client interest rate derivatives	—		10,110		—		10,110		—		11,753		—		11,753
Total assets	$	8,910,419	$	3,792,002	$	130,853	$	12,974,923	$	6,840,970	$	4,390,825	$	122,250	$	11,481,237
Liabilities:
Foreign exchange forward and option contracts	$	—	$	54,668	$	—	$	54,668	$	—	$	96,641	$	—	$	96,641
Client interest rate derivatives	—		9,770		—		9,770		—		11,940		—		11,940
Total liabilities	$	—	$	64,438	$	—	$	64,438	$	—	$	108,581	$	—	$	108,581


(1)	Included in Level 1 and Level 3 assets are $~~0.6~~0.2 million and $~~1.8~~0.8 million, respectively, attributable to noncontrolling interests calculated based on the ownership percentages of the noncontrolling interests.

The following table presents additional information about Level 3 assets measured at fair value on a recurring basis for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018 and ~~2016~~2017:


(Dollars in thousands)	Beginning Balance		Total Realized and Unrealized Gains (Losses) Included in Income			Sales			Issuances		Distributions and Other Settlements		Transfers Out of Level 3			Ending Balance		Beginning Balance		Total Realized and Unrealized Gains (Losses) Included in Income			Sales			Issuances		Distributions and Other Settlements		Transfers Out of Level 3			Ending Balance
Three months ended September 30, 2017
Three months ended June 30, 2018
Non-marketable and other securities (fair value accounting):
Venture capital and private equity fund investments not measured at net asset value (1)																		$	1,001	$	—		$	—		$	—	$	—	$	—		$	1,001
Other assets:
Equity warrant assets (2)																		131,506		18,249			(15,235		)	4,299		—		(1,066		)	137,753
Total assets																		$	132,507	$	18,249		$	(15,235	)	$	4,299	$	—	$	(1,066	)	$	138,754
Three months ended June 30, 2017
Non-marketable and other securities (fair value accounting):
Venture capital and private equity fund investments not measured at net asset value (1)																		$	2,040	$	(143	)	$	—		$	—	$	—	$	—		$	1,897
Other assets:
Equity warrant assets (2)																		122,199		10,586			(6,500		)	3,419		—		(752		)	128,952
Total assets																		$	124,239	$	10,443		$	(6,500	)	$	3,419	$	—	$	(752	)	$	130,849
Six months ended June 30, 2018
Non-marketable and other securities (fair value accounting):
Other venture capital investments (1)	$	1,897	$	—		$	—		$	—	$	—	$	—		$	1,897	$	919	$	82		$	—		$	—	$	—	$	—		$	1,001
Other assets:
Equity warrant assets (2)	128,952		24,354			(17,412		)	3,622		—		(441		)	139,075		121,331		36,860			(27,363		)	9,198		—		(2,273		)	137,753
Total assets	$	130,849	$	24,354		$	(17,412	)	$	3,622	$	—	$	(441	)	$	140,972	$	122,250	$	36,942		$	(27,363	)	$	9,198	$	—	$	(2,273	)	$	138,754
Three months ended September 30, 2016
Six months ended June 30, 2017
Non-marketable and other securities (fair value accounting):
Other venture capital investments (1)	$	2,040	$	4		$	(4	)	$	—	$	—	$	—		$	2,040	$	2,040	$	(143	)	$	—		$	—	$	—	$	—		$	1,897
Other assets:
Equity warrant assets (2)	127,811		21,092			(10,682		)	5,251		—		(252		)	143,220		128,813		17,195			(23,586		)	7,449		—		(919		)	128,952
Total assets	$	129,851	$	21,096		$	(10,686	)	$	5,251	$	—	$	(252	)	$	145,260	$	130,853	$	17,052		$	(23,586	)	$	7,449	$	—	$	(919	)	$	130,849
Nine months ended September 30, 2017
Non-marketable and other securities (fair value accounting):
Other venture capital investments (1)	$	2,040	$	(143	)	$	—		$	—	$	—	$	—		$	1,897
Other assets:
Equity warrant assets (2)	128,813		41,549			(40,998		)	11,071		—		(1,360		)	139,075
Total assets	$	130,853	$	41,406		$	(40,998	)	$	11,071	$	—	$	(1,360	)	$	140,972
Nine months ended September 30, 2016
Non-marketable and other securities (fair value accounting):
Other venture capital investments (1)	$	2,040	$	(21	)	$	(4	)	$	—	$	25	$	—		$	2,040
Other assets:
Equity warrant assets (2)	135,168		33,115			(34,276		)	9,842		—		(629		)	143,220
Total assets	$	137,208	$	33,094		$	(34,280	)	$	9,842	$	25	$	(629	)	$	145,260


(1)	Realized and unrealized gains (losses) are recorded in the line item “Gains on investment securities, net”, a component of noninterest income.


(2)	Realized and unrealized gains (losses) are recorded in the line item “Gains on equity warrant assets, net”, a component of noninterest income.

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 ~~September~~June 30, ~~2017~~2018 and ~~2016~~2017:


	Three months ended September 30,				Nine months ended September 30,					Three months ended June 30,					Six months ended June 30,
(Dollars in thousands)	2017		2016		2017			2016		2018		2017			2018		2017
Non-marketable and other securities (fair value accounting):
Other venture capital investments (1)	$	—	$	—	$	(143	)	$	—
Venture capital and private equity fund investments not measured at net asset value (1)										$	—	$	(143	)	$	82	$	(143	)
Other assets:
Equity warrant assets (2)	17,827		15,785		23,734			23,144		10,236		7,984			18,147		7,440
Total unrealized gains, net	$	17,827	$	15,785	$	23,591		$	23,144	$	10,236	$	7,841		$	18,229	$	7,297
Unrealized losses attributable to noncontrolling interests	$	—	$	—	$	(127	)	$	—
Unrealized (losses) gains attributable to noncontrolling interests (1)										$	—	$	(127	)	$	73	$	(127	)


(1)	Unrealized gains (losses) are recorded in the line item “Gains on investment securities, net”, a component of noninterest income.


(2)	Unrealized gains (losses) are recorded in the line item “Gains on equity warrant assets, net”, a component of noninterest income.

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 ~~September~~June 30, ~~2017~~2018 and December 31, ~~2016.~~2017. We have not included in this table our venture capital and private equity fund investments (fair value accounting) as we use net asset value per share (as obtained from the general partners of the investments) as a practical expedient to determine fair value.


(Dollars in thousands)	Fair value		Valuation Technique		Significant Unobservable Inputs		Weighted Average			Fair value		Valuation Technique		Significant Unobservable Inputs		Weighted Average
September 30, 2017:
Other venture capital investments (fair value accounting)	$	1,897	Private company equity pricing		(1)		(1	)
June 30, 2018:
Venture capital and private equity fund investments (fair value accounting)										$	1,001	Private company equity pricing		(1)		(1	)
Equity warrant assets (public portfolio)	21,660		Black-Scholes option pricing model		Volatility		37.5	%		2,065		Black-Scholes option pricing model		Volatility		48.6	%
				Risk-Free interest rate		1.8							Risk-Free interest rate		2.8
				Sales restrictions discount (2)		19.9							Sales restrictions discount (2)		18.6
Equity warrant assets (private portfolio)	117,415			Black-Scholes option pricing model		Volatility		36.7			135,688		Black-Scholes option pricing model		Volatility		37.8
					Risk-Free interest rate		1.5							Risk-Free interest rate		2.5
					Marketability discount (3)		16.6							Marketability discount (3)		16.6
					Remaining life assumption (4)		45.0							Remaining life assumption (4)		45.0
December 31, 2016:
Other venture capital investments (fair value accounting)	$	2,040		Private company equity pricing		(1)		(1	)
December 31, 2017:
Venture capital and private equity fund investments (fair value accounting)										$	919	Private company equity pricing		(1)		(1	)
Equity warrant assets (public portfolio)	764		Black-Scholes option pricing model		Volatility		46.6	%		1,936		Black-Scholes option pricing model		Volatility		47.9	%
				Risk-Free interest rate		2.1							Risk-Free interest rate		2.1
				Sales restrictions discount (2)		17.7							Sales restrictions discount (2)		15.5
Equity warrant assets (private portfolio)	128,049			Black-Scholes option pricing model		Volatility		36.9			119,395		Black-Scholes option pricing model		Volatility		36.7
					Risk-Free interest rate		1.3							Risk-Free interest rate		1.8
					Marketability discount (3)		17.1							Marketability discount (3)		16.4
					Remaining life assumption (4)		45.0							Remaining life assumption (4)		45.0

(1)

In determining the fair value of our ~~other~~ venture capital and private equity fund investment portfolio (not measured at net asset value), we evaluate a variety of factors related to each underlying private portfolio company including, but not limited to, actual and forecasted results, cash position, recent or planned transactions and market comparable companies. Additionally, we have ongoing communication with the portfolio companies and venture capital fund managers, to determine whether there is a material change in fair value. We use company provided valuation reports, if available, to support our valuation assumptions. These factors are specific to each portfolio company and a weighted average or range of values of the unobservable inputs is not meaningful.


(2)	We adjust quoted market prices of public companies, which are subject to certain sales restrictions. Sales restriction discounts generally range from 10 percent to 20 percent depending on the duration of the sales restrictions, which typically range from three to six months.


(3)	Our marketability discount is applied to all private company warrants to account for a general lack of liquidity due to the private nature of the associated underlying company. The quantitative measure used is based upon various option-pricing models. On a quarterly basis, a sensitivity analysis is performed on our marketability discount.

(4)

We adjust the contractual remaining term of private company warrants based on our estimate of the actual remaining life, which we determine by utilizing historical data on cancellations and exercises. At ~~September~~June 30, ~~2017~~2018, the weighted average contractual remaining term was ~~5.9~~6.1 years, compared to our estimated remaining life of 2.7 years. On a quarterly basis, a sensitivity analysis is performed on our remaining life assumption.

For the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018 and ~~2016,~~2017, we did not have any transfers between Level 2 and Level 1 or transfers between Level 3 and Level 1. All transfers from Level 3 to Level 2 for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018 and ~~2016~~2017 were due to the transfer of equity warrant assets from our private portfolio to our public portfolio (see our Level 3 reconciliation above). All amounts reported as transfers represent the fair value as of the date of the change in circumstances that caused the transfer.

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. ~~Fair value estimates, methods and assumptions, set forth below for our financial instruments, are made solely to comply with these requirements.~~

Fair values are based on estimates or calculations at the transaction level using present value techniques in instances where quoted market prices are not available. As broadly traded markets do not exist for many of our financial instruments, the fair value calculations attempt to incorporate the effect of current market conditions at a specific time. The aggregation of the fair value calculations presented herein does not represent, and should not be construed to represent, the underlying value of the Company.

The following describes the methods and assumptions used in estimating the fair values of financial instruments for which carrying value approximates fair value and estimated fair values of financial instruments not recorded at fair value on a recurring basis and excludes financial instruments and assets and liabilities already recorded at fair value as described above.

~~Financial Instruments for which Carrying Value Approximates Fair Value~~

Certain financial instruments that are not carried at fair value on the Consolidated Balance Sheets are carried at amounts that approximate fair value, due to their short-term nature and generally negligible credit risk. These instruments include cash and cash equivalents; FHLB and FRB stock; accrued interest receivable; short-term borrowings; short-term time deposits; and accrued interest payable. In addition, U.S. GAAP requires that the fair value of deposit liabilities with no stated maturity (i.e., demand, savings and certain money market deposits) be equal to their carrying value; recognition of the inherent funding value of these instruments is not permitted.

~~Estimated Fair Values of Financial Instruments Not Recorded at Fair Value on a Recurring Basis~~

~~Held-to-Maturity Securities~~

Held-to-maturity securities include similar investments held in our available-for-sale securities portfolio and are valued using the same methodologies. All securities included in our held-to-maturity securities portfolio are valued using Level 2 inputs. Refer to Level 2 fair value measurements above for significant inputs used in the valuation of our held-to-maturity investment securities.

~~Non-Marketable Securities (Cost and Equity Method Accounting)~~

Non-marketable securities includes other investments (equity method accounting), venture capital and private equity fund investments (cost method accounting), and other venture capital investments (cost method accounting). Other investments (equity method accounting) includes our investment in SPD-SVB, our joint venture bank in China. At this time, the carrying value of our investment in SPD-SVB is a reasonable estimate of fair value. The fair value of the remaining other investments (equity method accounting) and the fair value of venture capital and private equity fund investments (cost method accounting) and other venture capital investments (cost method accounting) is based on financial information obtained from the fund investments' or debt fund investments' respective general partners. For private company investments, estimated fair value is based on consideration of a range of factors including, but not limited to, the price at which the investment was acquired, the term and nature of the investment, local market conditions, values for comparable securities, current and projected operating performance, exit strategies, and financing transactions subsequent to the acquisition of the investment. For our fund investments, we utilize the net asset value per share as obtained from the general partners of the investments. We adjust the net asset value per share for 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 June 30^th~~, for our September 30~~^th ~~consolidated~~

~~financial statements, adjusted for any contributions paid, distributions received from the investment, and significant fund transactions or market events during the reporting period.~~

~~Loans~~

The fair value of fixed and variable rate loans is estimated by discounting contractual cash flows using rates that reflect current pricing for similar loans and the projected forward yield curve. This method is not based on the exit price concept of fair value required under ASC 820, ~~Fair Value Measurements and Disclosures~~.

~~Long-Term Deposits~~

~~The fair value of long-term time deposits is estimated by discounting the cash flows using our cost of borrowings and the projected forward yield curve over their remaining contractual term.~~

~~Long-Term Debt~~

The fair value of long-term debt is generally based on quoted market prices, when available, or is estimated based on calculations utilizing third-party pricing services and current market spread, price indications from reputable dealers or observable market prices of the underlying instrument(s), whichever is deemed more reliable. Also included in the estimated fair value of our 6.05% Subordinated Notes are amounts related to hedge accounting associated with the notes.

~~Off-Balance Sheet Financial Instruments~~

The fair value of net available commitments to extend credit is estimated based on the average amount we would receive or pay to execute a new agreement with identical terms and pricing, while taking into account the counterparties’ credit standing.

~~Letters of credit are carried at their fair value, which was equivalent to the residual premium or fee at~~ ~~September 30, 2017~~ ~~and~~ ~~December 31, 2016. Commitments to extend credit and letters of credit typically result in loans with a market interest rate if funded.~~

The following fair value hierarchy table presents the estimated fair values of our financial instruments that are not carried at fair value at ~~September~~June 30, ~~2017~~2018 and December 31, ~~2016~~2017:


			Estimated Fair Value										Estimated Fair Value
(Dollars in thousands)	Carrying Amount		Total		Level 1		Level 2		Level 3		Carrying Amount		Total		Level 1		Level 2		Level 3
September 30, 2017:
June 30, 2018:
Financial assets:
Cash and cash equivalents											$	2,712,101	$	2,712,101	$	2,712,101	$	—	$	—
Held-to-maturity securities											15,898,263		15,493,995		—		15,493,995		—
Non-marketable securities not measured at net asset value											116,484		116,484		—		—		116,484
Non-marketable securities measured at net asset value											136,010		136,010		—		—		—
Net commercial loans											22,849,701		23,139,492		—		—		23,139,492
Net consumer loans											2,859,782		2,872,681		—		—		2,872,681
FHLB and Federal Reserve Bank stock											58,864		58,864		—		—		58,864
Financial liabilities:
Short-term borrowings											417,246		417,246		417,246		—		—
Non-maturity deposits (1)											48,825,291		48,825,291		48,825,291		—		—
Time deposits											62,004		61,732		—		61,732		—
3.50% Senior Notes											347,470		339,283		—		339,283		—
5.375% Senior Notes											348,502		364,980		—		364,980		—
Off-balance sheet financial assets:
Commitments to extend credit											—		23,553		—		—		23,553
December 31, 2017:
Financial assets:
Cash and cash equivalents	$	3,555,571	$	3,555,571	$	3,555,571	$	—	$	—	$	2,923,075	$	2,923,075	$	2,923,075	$	—	$	—
Held-to-maturity securities	11,055,006		11,023,415		—		11,023,415		—		12,663,455		12,548,280		—		12,548,280		—
Non-marketable securities (cost and equity method accounting) not measured at net asset value	122,493		127,338		—		—		127,338		120,019		126,345		—		—		126,345
Non-marketable securities (cost and equity method accounting) measured at net asset value	225,883		329,468		—		—		—		228,399		331,496		—		—		—
Net commercial loans	19,449,408		19,878,367		—		—		19,878,367		20,238,247		20,520,623		—		—		20,520,623
Net consumer loans	2,490,909		2,457,138		—		—		2,457,138		2,613,045		2,593,538		—		—		2,593,538
FHLB and Federal Reserve Bank stock	58,012		58,012		—		—		58,012		60,020		60,020		—		—		60,020
Accrued interest receivable	129,451		129,451		—		129,451		—
Financial liabilities:
Other short-term borrowings	4,840		4,840		4,840		—		—
Short-term borrowings											1,033,730		1,033,730		1,033,730		—		—
Non-maturity deposits (1)	44,766,988		44,766,988		44,766,988		—		—		44,206,929		44,206,929		44,206,929		—		—
Time deposits	45,045		44,895		—		44,895		—		47,146		46,885		—		46,885		—
3.50% Senior Notes	347,221		350,864		—		350,864		—		347,303		352,058		—		352,058		—
5.375% Senior Notes	348,035		383,439		—		383,439		—		348,189		374,483		—		374,483		—
7.0% Junior Subordinated Debentures	54,362		54,977		—		54,977		—
Accrued interest payable	4,150		4,150		—		4,150		—
Off-balance sheet financial assets:
Commitments to extend credit	—		20,751		—		—		20,751		—		22,208		—		—		22,208
December 31, 2016:
Financial assets:
Cash and cash equivalents	$	2,545,750	$	2,545,750	$	2,545,750	$	—	$	—
Held-to-maturity securities	8,426,998		8,376,138		—		8,376,138		—
Non-marketable securities (cost and equity method accounting) not measured at net asset value	120,037		127,343		—		—		127,343
Non-marketable securities (cost and equity method accounting) measured at net asset value	245,626		353,870		—		—		—
Net commercial loans	17,518,430		17,811,356		—		—		17,811,356
Net consumer loans	2,156,148		2,199,501		—		—		2,199,501
FHLB and Federal Reserve Bank stock	57,592		57,592		—		—		57,592
Accrued interest receivable	111,222		111,222		—		111,222		—
Financial liabilities:
Short-term FHLB advances	500,000		500,000		500,000		—		—
Other short-term borrowings	12,668		12,668		12,668		—		—
Non-maturity deposits (1)	38,923,750		38,923,750		38,923,750		—		—
Time deposits	56,118		55,949		—		55,949		—
3.50% Senior Notes	346,979		337,600		—		337,600		—
5.375% Senior Notes	347,586		378,777		—		378,777		—
6.05% Subordinated Notes (2)	46,646		47,489		—		47,489		—
7.0% Junior Subordinated Debentures	54,493		53,140		—		53,140		—
Accrued interest payable	12,013		12,013		—		12,013		—
Off-balance sheet financial assets:
Commitments to extend credit	—		22,074		—		—		22,074


(1)	Includes noninterest-bearing demand deposits, interest-bearing checking accounts, money market accounts and interest-bearing sweep deposits.


~~(2)~~	At ~~December 31, 2016, included in the carrying value and estimated fair value of our 6.05% Subordinated Notes was an interest rate swap valued at~~ ~~$0.8 million~~ ~~related to hedge accounting associated with the notes.~~

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 ~~June 30~~March 31^thst, for our ~~September~~June 30^th 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 ~~September~~June 30, ~~2017~~2018:


(Dollars in thousands)	Carrying Amount		Fair Value		Unfunded Commitments		Carrying Amount		Fair Value		Unfunded Commitments
Non-marketable securities (fair value accounting):
Venture capital and private equity fund investments (1)	$	128,768	$	128,768	$	6,471	$	343,119	$	343,119	$	13,639
Non-marketable securities (equity method accounting):
Venture capital and private equity fund investments (2)	87,218		87,218		4,943		102,838		102,838		4,943
Debt funds (2)	17,889		17,889		—		14,215		14,215		—
Other investments (2)	17,820		17,820		886		18,957		18,957		886
Non-marketable securities (cost method accounting):
Venture capital and private equity fund investments (2)	102,956		206,541		10,474
Total	$	354,651	$	458,236	$	22,774	$	479,129	$	479,129	$	19,468

(1)

Venture capital and private equity fund investments within non-marketable securities (fair value accounting) include investments made by our managed funds of funds and one of our direct venture ~~funds. These~~funds (consolidated VIEs) and investments ~~represent~~in venture capital and private equity fund investments (unconsolidated VIEs). Collectively, these investments in venture capital and private equity funds ~~that invest~~are primarily in U.S. and global technology and life science/healthcare companies. Included in the fair value and unfunded commitments of fund investments under fair value accounting are $~~95.7~~97.8 million and $~~4.9~~4.5 million, respectively, attributable to noncontrolling interests. It is estimated that we will receive distributions from the fund investments over the next 10 to 13 years, depending on the age of the funds and any potential extensions of terms of the funds.

(2)

Venture capital and private equity fund investments, debt funds, and other fund investments within non-marketable securities (equity ~~and cost~~ method accounting) include funds that invest in or lend money to primarily U.S. and global technology and life science/healthcare companies. It is estimated that we will receive distributions from the funds over the next 5 to 8 years, depending on the age of the funds and any potential extensions of the terms of the funds.


~~15.~~16.	Legal Matters

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.


~~16.~~17.	Related Parties

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 ~~16—~~17—“Employee Compensation and Benefit Plans" under Part II, Item 8 of our ~~2016~~2017 Form 10-K.

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 impact of changes in accounting standards and tax laws, ~~(including any tax reform, such as~~including the ~~proposed~~impact of the Tax Cuts and Jobs ~~Act);~~Act;

The levels of equity capital available to our client or portfolio companies;

The effectiveness of our risk management framework and quantitative models;

~~The sale of impaired assets;~~

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 ~~2016~~2017 Form 10-K.

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 ~~2016~~2017 Form 10-K.

Reclassifications

Certain prior period amounts, primarily related to the ~~changes to our income statement presentation~~adoption of ~~gains on derivative instruments, net and provision for unfunded credit commitments~~new accounting guidance, have been reclassified to conform to current period presentations.

Management’s Overview of ~~Third~~Second Quarter ~~2017~~2018 Performance

Overall, we had an ~~outstanding third~~excellent second quarter in ~~2017,~~2018, which was marked by ~~higher~~strong growth in net interest ~~and core fee~~ income, ~~increased warrant gains, strong~~outstanding total client funds growth, ~~healthy loan growth and~~higher core fee income, continued stable credit ~~quality.~~quality and strong gains on equity warrants and investment securities. Additionally, we saw higher noninterest expense, primarily ~~from increased compensation~~related to the write-off of previously capitalized costs in connection with the Economic Growth, Regulatory Relief and ~~benefits expenses~~Consumer Protection Act, as well as ~~professional services~~ expenses ~~reflective of~~incurred associated with increased ~~expenses~~investment in client experience and employee enablement and incentive compensation tied to ~~support~~ our increasing regulatory, risk and compliance initiatives to support our domestic and global expansion as well as investments made in projects, systems and technology to support our revenue growth and related initiatives and other operating costs.outperformance. Our core business continued to perform well as a result of our ongoing focus on innovation companies and their investors and continued efforts to secure client relationships. We saw continued success in working with private equity/venture capital firms, our technology and ~~technology~~life science/healthcare clients ~~as well as~~and clients in our private ~~banking~~bank division.

A summary of our performance for the three months ended ~~September~~June 30, ~~2017~~2018 (compared to the three months ended ~~September~~June 30, ~~2016,~~2017, where applicable) is as follows:



BALANCE SHEET		EARNINGS
Assets. $~~49.8~~54.4 billion in average total assets (up ~~14.6%~~14.5%). ~~$50.8~~$55.9 billion in period-end total assets (up ~~17.3%~~15.4%). Loans.~~$21.6~~ $24.9 billion in average total loan balances, net of unearned income (up ~~15.8%~~21.2%). ~~$22.2~~$26.0 billion in period-end total loan balances, net of unearned income (up ~~16.1%~~23.9%). Total Client ~~Funds~~ Funds.~~(on-balance~~ (on-balance sheet deposits and off-balance sheet client investment funds).~~$97.3~~ $119.3 billion in average total client fund balances (up ~~20.1%~~30.7%). ~~$99.0~~$124.7 billion in period-end total client fund balances (up ~~21.5%~~32.1%). Fixed Income Investments. $~~23.1~~25.2 billion in average fixed income investment securities (up ~~11.5%~~16.9%). ~~$23.7~~$25.5 billion in period-end fixed income investment securities (up ~~15.6%~~15.8%).		EPS. Earnings per diluted share of ~~$2.79~~$4.42 (up ~~31.6%~~90.5%). Net Income. Consolidated net income available to common stockholders of ~~$148.6~~$237.8 million (up ~~33.8%~~93.0%). - Net interest income of ~~$374.0~~$466.4 million (up ~~29.3%~~36.1%). - Net interest margin of ~~3.10%~~3.59% (up 3559 bps). - Noninterest income of ~~$158.8~~$192.7 million (up ~~10.2%~~49.9%), with non-GAAP core fee income⁺ of ~~$102.7~~$123.1 million (up ~~27.6%~~41.1%). - Noninterest expense of ~~$257.8~~$305.7 million (up ~~16.8%~~21.7%). ~~ROE~~ROE. .Return on average equity (annualized) (“ROE”) performance of ~~14.59%~~20.82%. Operating Efficiency Ratio. Operating efficiency ratio of ~~48.38%~~46.39%.

CAPITAL		CREDIT QUALITY
Capital. Continued strong capital levels, with all capital ratios considered “well-capitalized” under banking regulations. SVBFG and SVB capital ratios, respectively, were: - CET 1 risk-based capital ratio of ~~12.96%~~12.92% and ~~12.41%~~11.76%. - Tier 1 risk-based capital ratio of ~~13.32%~~13.10% and ~~12.41%~~11.76%. - Total risk-based capital ratio of ~~14.29%~~14.03% and ~~13.40%~~12.72%. - Tier 1 leverage ratio of ~~8.34%~~8.81% and ~~7.59%~~7.72%.		Credit Quality. Continued disciplined underwriting. - Allowance for loan losses of ~~1.12%~~1.10% as a percentage of period-end total gross loans. - Provision for loan losses of ~~0.40%~~0.42% as a percentage of period-end total gross loans (annualized). - Net loan charge-offs of ~~0.19%~~0.22% as a percentage of average total gross loans (annualized).

⁺ 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 ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018 and ~~2016~~2017 is as follows:


	Three months ended September 30,									Nine months ended September 30,									Three months ended June 30,									Six months ended June 30,
(Dollars in thousands, except per share data, employees and ratios)	2017			2016			% Change			2017			2016			% Change			2018			2017			% Change			2018			2017			% Change

Diluted earnings per common share	$	2.79		$	2.12		31.6		%	$	7.01		$	5.42		29.3		%	$	4.42		$	2.32		90.5		%	$	8.05		$	4.22		90.8		%
Net income available to common stockholders	148,620			111,081			33.8			373,296			283,219			31.8			237,798			123,193			93.0			432,759			224,676			92.6
Net interest income	373,974			289,161			29.3			1,026,663			853,918			20.2			466,443			342,696			36.1			886,306			652,689			35.8
Net interest margin	3.10		%	2.75		%	35		bps	2.99		%	2.72		%	27		bps	3.59		%	3.00		%	59		bps	3.49		%	2.94		%	55		bps
Provision for credit losses	$	23,522		$	20,004		17.6		%	$	70,062		$	90,225		(22.3	)	%	$	29,080		$	15,806		84.0		%	$	57,052		$	46,540		22.6		%
Noninterest income	158,778			144,140			10.2			404,965			343,050			18.0			192,689			128,528			49.9			348,207			246,187			41.4
Noninterest expense	257,761			220,773			16.8			746,640			624,611			19.5			305,739			251,246			21.7			571,156			488,879			16.8
Non-GAAP core fee income (1)	102,722			80,526			27.6			272,567			231,522			17.7			123,124			87,267			41.1			238,134			169,845			40.2
Non-GAAP noninterest income, net of noncontrolling interests (1)	153,164			139,461			9.8			383,256			339,423			12.9			183,244			118,992			54.0			325,738			230,092			41.6
Non-GAAP noninterest expense, net of noncontrolling interests(2)	257,636			220,656			16.8			746,123			624,327			19.5			305,512			251,023			21.7			570,961			488,487			16.9
Balance Sheet:
Average available-for-sale securities	$	12,674,610		$	12,743,715		(0.5	)	%	$	12,539,773		$	13,608,722		(7.9	)	%	$	10,048,423		$	12,393,079		(18.9	)	%	$	10,396,533		$	12,471,237		(16.6	)	%
Average held-to-maturity securities	10,467,470			8,003,825			30.8			9,405,525			8,347,190			12.7			15,112,154			9,128,407			65.6			14,178,427			8,865,752			59.9
Average loans, net of unearned income	21,584,892			18,647,194			15.8			20,726,467			17,955,497			15.4			24,858,503			20,508,541			21.2			24,335,762			20,290,141			19.9
Average noninterest-bearing demand deposits	36,578,779			30,522,314			19.8			34,653,264			30,694,119			12.9			39,814,450			34,629,070			15.0			38,887,766			33,674,549			15.5
Average interest-bearing deposits	7,464,063			7,387,440			1.0			7,408,371			7,749,871			(4.4	)		8,157,501			7,509,576			8.6			8,156,404			7,380,064			10.5
Average total deposits	44,042,842			37,909,754			16.2			42,061,635			38,443,990			9.4			47,971,951			42,138,646			13.8			47,044,170			41,054,613			14.6
Earnings Ratios:
Return on average assets (annualized) (3)	1.18		%	1.02		%	15.7		%	1.05		%	0.87		%	20.7		%	1.75		%	1.04		%	68.3		%	1.63		%	0.98		%	66.3		%
Return on average SVBFG stockholders’ equity (annualized) (4)	14.59			12.32			18.4			12.85			10.95			17.4			20.82			12.75			63.3			19.51			11.91			63.8
Asset Quality Ratios:
Allowance for loan losses as a % of total period-end gross loans	1.12		%	1.25		%	(13	)	bps	1.12		%	1.25		%	(13	)	bps	1.10		%	1.12		%	(2	)	bps	1.10		%	1.12		%	(2	)	bps
Allowance for loan losses for performing loans as a % of total gross performing loans	0.92			1.03			(11	)		0.92			1.03			(11	)		0.90			0.93			(3	)		0.90			0.93			(3	)
Gross loan charge-offs as a % of average total gross loans (annualized)	0.23			0.52			(29	)		0.33			0.53			(20	)		0.25			0.49			(24	)		0.21			0.39			(18	)
Net loan charge-offs as a % of average total gross loans (annualized)	0.19			0.48			(29	)		0.29			0.47			(18	)		0.22			0.44			(22	)		0.18			0.34			(16	)
Capital Ratios:
CET 1 risk-based capital ratio	12.96		%	12.75		%	21		bps	12.96		%	12.75		%	21		bps	12.92		%	13.05		%	(13	)	bps	12.92		%	13.05		%	(13	)	bps
Tier 1 risk-based capital ratio	13.32			13.21			11			13.32			13.21			11			13.10			13.43			(33	)		13.10			13.43			(33	)
Total risk-based capital ratio	14.29			14.22			7			14.29			14.22			7			14.03			14.39			(36	)		14.03			14.39			(36	)
Tier 1 leverage ratio	8.34			8.35			(1	)		8.34			8.35			(1	)		8.81			8.40			41			8.81			8.40			41
Tangible common equity to tangible assets (5)	8.00			8.30			(30	)		8.00			8.30			(30	)		8.34			8.06			28			8.34			8.06			28
Tangible common equity to risk-weighted assets (5)	13.01			13.11			(10	)		13.01			13.11			(10	)		12.68			13.11			(43	)		12.68			13.11			(43	)
Bank CET 1 risk-based capital ratio	12.41			12.77			(36	)		12.41			12.77			(36	)		11.76			12.59			(83	)		11.76			12.59			(83	)
Bank tier 1 risk-based capital ratio	12.41			12.77			(36	)		12.41			12.77			(36	)		11.76			12.59			(83	)		11.76			12.59			(83	)
Bank total risk-based capital ratio	13.40			13.83			(43	)		13.40			13.83			(43	)		12.72			13.59			(87	)		12.72			13.59			(87	)
Bank tier 1 leverage ratio	7.59			7.74			(15	)		7.59			7.74			(15	)		7.72			7.66			6			7.72			7.66			6
Bank tangible common equity to tangible assets (5)	7.47			7.98			(51	)		7.47			7.98			(51	)		7.39			7.58			(19	)		7.39			7.58			(19	)
Bank tangible common equity to risk-weighted assets (5)	12.44			13.14			(70	)		12.44			13.14			(70	)		11.52			12.65			(113	)		11.52			12.65			(113	)
Other Ratios:
GAAP operating efficiency ratio (6)	48.38		%	50.95		%	(5.0	)	%	52.15		%	52.18		%	(0.1	)	%	46.39		%	53.32		%	(13.0	)	%	46.27		%	54.39		%	(14.9	)	%
Non-GAAP operating efficiency ratio (2)	48.82			51.45			(5.1	)		52.87			52.28			1.1			46.88			54.32			(13.7	)		46.98			55.28			(15.0	)
Book value per common share (7)	$	77.00		$	69.02		11.6			$	77.00		$	69.02		11.6			$	87.53		$	74.02		18.3			$	87.53		$	74.02		18.3
Other Statistics:
Average full-time equivalent employees	2,434			2,255			7.9		%	2,384			2,199			8.4		%	2,591			2,372			9.2		%	2,545			2,358			7.9		%
Period-end full-time equivalent employees	2,433			2,280			6.7			2,433			2,280			6.7			2,626			2,380			10.3			2,626			2,380			10.3


(1)	See “Results of Operations–Noninterest Income” for a description and reconciliation of non-GAAP core fee income and noninterest income.


(2)	See “Results of Operations–Noninterest Expense” for a description and reconciliation of non-GAAP noninterest expense and non-GAAP operating efficiency ratio.


(3)	Ratio represents annualized consolidated net income available to common stockholders divided by quarterly ~~and year-to-date~~ average assets.


(4)	Ratio represents annualized consolidated net income available to common stockholders divided by quarterly ~~and year-to-date~~ average SVBFG stockholders’ equity.


(5)	See “Capital Resources–Capital Ratios” for a reconciliation of non-GAAP tangible common equity to tangible assets and tangible common equity to risk-weighted assets.


(6)	The operating efficiency ratio is calculated by dividing total noninterest expense by total taxable-equivalent net interest income plus noninterest income.


(7)	Book value per common share is calculated by dividing total SVBFG stockholders’ equity by total outstanding common shares at period-end.

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 ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018 to the items that we disclosed as our critical accounting policies and estimates in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” under Part II, Item 7 of our ~~2016~~2017 Form 10-K.

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), and short-term investment securities and the interest paid on funding ~~sources.~~sources which consist primarily of interest-bearing deposits and borrowings. Net interest income is our principal source of revenue. Net interest margin is defined as the amount of annualized net interest income, on a fully taxable equivalent basis, expressed as a percentage of average interest-earning assets. Net interest income and net interest margin are presented on a fully taxable equivalent basis to consistently reflect income from taxable loans and securities and tax-exempt securities based on the federal statutory tax rate of ~~35 percent.~~21.0 percent for the three and six months ended June 30, 2018 and 35.0 percent for the three and six months ended June 30, 2017.

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.


	2017 Compared to 2016									2017 Compared to 2016									2018 Compared to 2017									2018 Compared to 2017
	Three months ended September 30, increase (decrease) due to change in									Nine months ended September 30, increase (decrease) due to change in									Three months ended June 30, increase (decrease) due to change in									Six months ended June 30, increase (decrease) due to change in
(Dollars in thousands)	Volume			Rate			Total			Volume			Rate			Total			Volume			Rate			Total			Volume			Rate			Total
Interest income:
Federal Reserve deposits, federal funds sold, securities purchased under agreements to resell, trade receivables purchased and other short-term investment securities	$	1,678		$	2,337		$	4,015		$	5,788		$	5,089		$	10,877		$	(4,105	)	$	2,969		$	(1,136	)	$	(3,200	)	$	4,684		$	1,484
Fixed income investment portfolio (taxable)	15,325			10,650			25,975			6,655			26,992			33,647			23,256			18,372			41,628			42,418			33,884			76,302
Fixed income investment portfolio (non-taxable)	1,342			(342		)	1,000			2,620			(1,067		)	1,553			8,315			28			8,343			13,940			(146		)	13,794
Loans, net of unearned income	37,814			16,404			54,218			98,851			29,676			128,527			57,797			22,303			80,100			104,296			45,537			149,833
Increase in interest income, net	56,159			29,049			85,208			113,914			60,690			174,604			85,263			43,672			128,935			157,454			83,959			241,413
Interest expense:
Interest bearing checking and savings accounts	25			1			26			63			(2		)	61			25			—			25			65			1			66
Money market deposits	65			698			763			(219		)	2,466			2,247			554			3,500			4,054			1,087			5,324			6,411
Money market deposits in foreign offices	(1		)	2			1			10			(1		)	9			1			(2		)	(1		)	4			(3		)	1
Time deposits	—			5			5			(8		)	6			(2		)	4			4			8			1			3			4
Sweep deposits in foreign offices	(23		)	(3		)	(26		)	(75		)	(6		)	(81		)	(8		)	(4		)	(12		)	(21		)	(8		)	(29		)
Total increase (decrease) in deposits expense	66			703			769			(229		)	2,463			2,234
Total increase in deposits expense																			576			3,498			4,074			1,136			5,317			6,453
Short-term borrowings	(1,558		)	1,059			(499		)	(1,851		)	1,081			(770		)	568			1			569			711			172			883
3.50% Senior Notes	5			(2		)	3			4			4			8			3			—			3			6			—			6
5.375% Senior Notes	12			(5		)	7			15			9			24			8			—			8			17			—			17
Junior Subordinated Debentures	1			—			1			(9		)	10			1			(831		)	—			(831		)	(1,663		)	—			(1,663		)
6.05% Subordinated Notes	(236		)	—			(236		)	(405		)	224			(181		)	(196		)	—			(196		)	(467		)	—			(467		)
Total (decrease) increase in borrowings expense	(1,776		)	1,052			(724		)	(2,246		)	1,328			(918		)	(448		)	1			(447		)	(1,396		)	172			(1,224		)
(Decrease) increase in interest expense, net	(1,710		)	1,755			45			(2,475		)	3,791			1,316
Increase (decrease) in interest expense, net																			128			3,499			3,627			(260		)	5,489			5,229
Increase in net interest income	$	57,869		$	27,294		$	85,163		$	116,389		$	56,899		$	173,288		$	85,135		$	40,173		$	125,308		$	157,714		$	78,470		$	236,184

Net Interest Income (Fully Taxable Equivalent Basis)

Three months ended ~~September~~June 30, ~~2017~~2018 and ~~2016~~2017

Net interest income increased by ~~$85.2~~$125.3 million to ~~$374.6~~$468.5 million for the three months ended ~~September~~June 30, ~~2017,~~2018, compared to ~~$289.4~~$343.2 million for the comparable ~~2016~~2017 period. Overall, our net interest income increased primarily from interest earned on loans, reflective of higher average loan balances driven by strong loan growth from our private equity/venture capital and ~~SVB Private Bank~~software/internet loan portfolios and rate increases subsequent to ~~September~~June 30, ~~2016.~~2017. In addition, we saw an increase in interest earned on our fixed income investment securities portfolio reflective of higher average fixed income investment securities balances driven by higher average deposit balances as well as an increase in yield from rate increases.

The main factors affecting interest income for the three months ended ~~September~~June 30, ~~2017,~~2018, compared to the comparable ~~2016~~2017 period are discussed below:

Interest income for the three months ended ~~September~~June 30, ~~2017~~2018 increased by ~~$85.2~~$128.9 million due primarily to:

◦

~~A $54.2~~An $80.1 million increase in interest income on loans to $~~268.4~~330.3 million for the three months ended ~~September~~June 30, ~~2017~~2018, compared to $~~214.2~~250.2 million for the comparable ~~2016~~2017 period. The increase was reflective of an increase in average loan balances of $~~2.9~~4.3 billion and an increase in the overall loan yield of 3644 basis points to ~~4.93~~5.33 percent from ~~4.57~~4.89 percent. Gross loan yields, excluding loan interest recoveries and loan fees, increased 3752 basis points to ~~4.30~~4.72 percent from ~~3.93~~4.20 percent, reflective primarily of the benefit of interest rate increases. Loan fee yields were ~~flat at~~down three basis points to 61 basis points for ~~both~~ the three months ended ~~September~~June 30, ~~2017 and 2016.~~2018,

◦

A ~~$27.0~~$50.0 million increase in interest income on fixed income investment securities to $~~111.2~~146.9 million for the three months ended ~~September~~June 30, ~~2017~~2018, compared to $~~84.3~~96.9 million for the comparable ~~2016~~2017 period. The increase was reflective of an increase in average fixed income investments of ~~$2.4~~$3.6 billion due to growth in average deposit balances and an increase in our fixed income investment securities yield of 2953 basis points to ~~1.91~~2.34 percent from ~~1.62~~1.81 percent resulting primarily from higher reinvestment yields on maturing fixed income investments as well as higher yields on new purchases due to interest rate ~~increases.~~increases, and


◦	A ~~$4.0~~$1.1 million ~~increase~~ decrease in interest income from our interest earning cash and short-term investment securities. The decrease was due primarily to a decrease of $1.6 billion in average interest-earning Federal Reserve cash balances.

Interest expense for the three months endedJune 30, 2018 increased by $3.6 milliondue primarily to:


◦	A $4.1 millionincrease ~~was~~in deposits interest expense due primarily to an increase ~~of $0.9 billion~~ in ~~average interest-earning cash balances~~interest paid on our interest-bearing money market deposits as a result of ~~a $6.1 billion increase~~market rate adjustments, and


◦	A $0.4 million decrease in ~~average deposit balances~~borrowings interest expense primarily due to the repayment of our 6.05% Subordinated Notes and ~~from~~ the ~~impact~~redemption of ~~the recent increases~~our Junior Subordinated Debentures in ~~the Federal Funds target rate.~~2017.

The main factors affecting interest income and interest expense for the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2018, compared to the comparable ~~2016~~2017 period are discussed below:

Interest income for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018 increased by ~~$174.6~~$241.4 million due primarily to:

◦

A ~~$128.5~~$149.8 million increase in interest income on loans to ~~$746.0~~$627.4 million for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018, compared to ~~$617.5~~$477.5 million for the comparable ~~2016~~2017 period. The increase was reflective of an increase in average loan balances of ~~$2.8~~$4.0 billion and an increase in the overall loan yield of 2245 basis points to ~~4.81~~5.20 percent from ~~4.59~~4.75 percent. Gross loan yields, excluding loan interest recoveries and loan fees, increased to ~~4.18~~4.64 percent from ~~3.99~~4.12 percent, reflective of the benefit of interest rate increases, partially offset by the strong growth of our lower yielding private equity/venture capital ~~and Private Bank~~ loan ~~portfolios.~~portfolio. Our private equity/venture capital loan portfolio represented ~~43.1~~46.8 percent and ~~38.8~~42.2 percent of our total gross loan portfolio at ~~September~~June 30, 2018 and 2017, ~~and 2016,~~ respectively. ~~Our Private Bank loan portfolio represented 11.2 percent and 10.8 percent of our total~~The increase in gross loan ~~portfolio at September 30, 2017 and 2016, respectively.~~yields of 52 basis points were partially offset by a decrease in fee income from early pay-offs reflective of the increasing rate environment,

Loan fee yields increased two basis points to 60 basis points from 58 basis points in the comparable 2016 period. The increase in loan fee yields was primarily a result of higher income from loan prepayments.

◦

A ~~$35.2~~$90.1 million increase in interest income on fixed income investment securities to ~~$298.9~~$277.8 million for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018, compared to ~~$263.7~~$187.7 million for the comparable ~~2016~~2017 period. The increase was ~~primarily~~ reflective of an increase in average fixed income investments of $3.2 billion due to growth in average deposit balances and an increase in our fixed income investment securities yield of 2151 basis points to ~~1.82~~2.28 percent from ~~1.61~~1.77 percent resulting primarily from higher reinvestment yields on maturing fixed income investments as well as higher yields on new purchases due to interest rate ~~increases.~~increases, and

◦

A ~~$10.9~~$1.5 million increase in interest income from our interest earning cash and short-term investment securities. The increase was due ~~primarily~~ to ~~an increase of $1.1 billion in average interest-earning cash balances as a result of a $3.6 billion increase in average deposit balances. We also saw a~~the benefit from the impact of the ~~recent~~ increases in the Federal Funds target ~~rate.~~rate, offset by lower average balances of $0.7 billion.

Interest expense for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018 increased by ~~$1.3~~$5.2 million primarily due to:


◦	An increase in deposits interest expense of ~~$2.2~~$6.5 million, due primarily to an increase in interest paid on our interest-bearing money market deposits as a result of market rate ~~adjustments.~~adjustments, and


◦	A $1.2 million decrease in borrowings interest expense primarily due to the repayment of our 6.05% Subordinated Notes and the redemption of our Junior Subordinated Debentures in 2017.

Net Interest Margin (Fully Taxable Equivalent Basis)

Three months ended ~~September~~June 30, ~~2017~~2018 and ~~2016~~2017

Our net interest margin increased by 3559 basis points to ~~3.10~~3.59 percent for the three months ended ~~September~~June 30, ~~2017~~2018, compared to ~~2.75~~3.00 percent for the comparable ~~2016~~2017 period. The higher margin during the ~~third~~second quarter of ~~2017~~2018 was reflective primarily of the increases in the Federal Funds target rate since the ~~third~~second quarter of ~~2016.~~2017 as well as a shift in the mix of the growth in our interest-earning assets to higher-yielding loans and fixed income investment securities from our interest earning cash and other short-term investment securities. Average loans and fixed income investment securities represented 47.5 percent and 48.0 percent, respectively, of quarter-to-date average interest earnings assets compared to 44.6 percent and 46.9 percent, respectively, for the comparable 2017 period.

~~Nine~~Six months ended ~~September~~June 30, ~~2017~~2018 and ~~2016~~2017

Our net interest margin increased by 2755 basis points to ~~2.99~~3.49 percent for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018, compared to ~~2.72~~2.94 percent for the comparable ~~2016~~2017 period. ~~Our net interest~~The higher margin ~~increased~~for the six months ended June 30, 2018, was reflective primarily of the increases in the Federal Funds target rate since June 30, 2017, as well as a ~~result~~shift in the mix of the ~~impact of rising interest rates and a higher level of loans as a percentage of~~growth in our interest-earning assets ~~portfolio during the nine months ended September 30, 2017.~~to higher-yielding loans and fixed income investment securities from our interest earning cash and other short-term investment securities. Average loans and fixed income investment securities

represented 4547.3 percent and 47.8 percent, respectively, of year-to-date average interest ~~earning~~earnings assets compared to 4345.3 percent and 47.6 percent, respectively, for the comparable ~~2016~~2017 period.

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 ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018 and ~~2016~~2017:

Average Balances, Rates and Yields for the Three Months Ended ~~September~~June 30, ~~2017~~2018 and ~~2016~~2017


	Three months ended September 30,																Three months ended June 30,
	2017								2016								2018								2017
(Dollars in thousands)	Average Balance			Interest Income/ Expense			Yield/ Rate		Average Balance			Interest Income/ Expense			Yield/ Rate		Average Balance			Interest Income/ Expense			Yield/ Rate		Average Balance			Interest Income/ Expense			Yield/ Rate
Interest-earning assets:
Federal Reserve deposits, federal funds sold, securities purchased under agreements to resell and other short-term investment securities (1)	$	3,291,908		$	6,211		0.75	%	$	2,404,006		$	2,196		0.36	%	$	2,346,820		$	6,187		1.06	%	$	3,903,377		$	7,323		0.75	%
Investment securities: (2)
Available-for-sale securities:
Taxable	12,674,610			52,825			1.65		12,743,715			44,741			1.40		10,048,423			46,606			1.86		12,393,079			48,271			1.56
Held-to-maturity securities:
Taxable	10,249,131			56,618			2.19		7,947,983			38,727			1.94		13,969,843			90,544			2.60		8,964,785			47,251			2.11
Non-taxable (3)	218,339			1,803			3.28		55,842			803			5.72		1,142,311			9,704			3.41		163,622			1,361			3.34
Total loans, net of unearned income (4) (5)	21,584,892			268,445			4.93		18,647,194			214,227			4.57		24,858,503			330,297			5.33		20,508,541			250,197			4.89
Total interest-earning assets	48,018,880			385,902			3.19		41,798,740			300,694			2.86		52,365,900			483,338			3.70		45,933,404			354,403			3.10
Cash and due from banks	371,373								317,044								534,908								356,884
Allowance for loan losses	(246,210		)						(247,657		)						(280,679		)						(250,167		)
Other assets (6)	1,651,323								1,583,202								1,800,517								1,509,243
Total assets	$	49,795,366							$	43,451,329							$	54,420,646							$	47,549,364
Funding sources:
Interest-bearing liabilities:
Interest bearing checking and savings accounts	$	442,518		$	86		0.08	%	$	308,345		$	60		0.08	%	$	554,411		$	106		0.08	%	$	424,070		$	81		0.08	%
Money market deposits	5,774,281			2,079			0.14		5,592,603			1,316			0.09		6,265,809			6,021			0.39		5,689,552			1,967			0.14
Money market deposits in foreign offices	187,183			21			0.04		199,539			20			0.04		220,334			21			0.04		210,069			22			0.04
Time deposits	51,406			17			0.13		50,351			12			0.09		56,755			23			0.16		47,376			15			0.13
Sweep deposits in foreign offices	1,008,675			101			0.04		1,236,602			127			0.04		1,060,192			100			0.04		1,138,509			112			0.04
Total interest-bearing deposits	7,464,063			2,304			0.12		7,387,440			1,535			0.08		8,157,501			6,271			0.31		7,509,576			2,197			0.12
Short-term borrowings	48,614			164			1.34		513,446			663			0.51		121,098			580			1.92		2,690			11			1.64
3.50% Senior Notes	347,168			3,144			3.59		346,848			3,141			3.60		347,415			3,146			3.63		347,087			3,143			3.63
5.375% Senior Notes	347,934			4,854			5.53		347,345			4,847			5.55		348,399			4,861			5.60		347,785			4,853			5.60
Junior Subordinated Debentures	54,391			831			6.06		54,566			830			6.05		—			—			—		54,435			831			6.12
6.05% Subordinated Notes	—			—			—		47,421			236			1.98		—			—			—		30,934			196			2.54
Total interest-bearing liabilities	8,262,170			11,297			0.54		8,697,066			11,252			0.51		8,974,413			14,858			0.66		8,292,507			11,231			0.54
Portion of noninterest-bearing funding sources	39,756,710								33,101,674								43,391,487								37,640,897
Total funding sources	48,018,880			11,297			0.09		41,798,740			11,252			0.11		52,365,900			14,858			0.11		45,933,404			11,231			0.10
Noninterest-bearing funding sources:
Demand deposits	36,578,779								30,522,314								39,814,450								34,629,070
Other liabilities	773,586								517,066								908,594								617,097
SVBFG stockholders’ equity	4,041,218								3,586,196								4,581,591								3,874,880
Noncontrolling interests	139,613								128,687								141,598								135,810
Portion used to fund interest-earning assets	(39,756,710		)						(33,101,674		)						(43,391,487		)						(37,640,897		)
Total liabilities, noncontrolling interest, and SVBFG stockholders’ equity	$	49,795,366							$	43,451,329							$	54,420,646							$	47,549,364
Net interest income and margin				$	374,605		3.10	%				$	289,442		2.75	%				$	468,480		3.59	%				$	343,172		3.00	%
Total deposits	$	44,042,842							$	37,909,754							$	47,971,951							$	42,138,646
Reconciliation to reported net interest income:
Adjustments for taxable equivalent basis				(631		)						(281		)						(2,037		)						(476		)
Net interest income, as reported				$	373,974							$	289,161							$	466,443							$	342,696

(1)

Includes average interest-earning deposits in other financial institutions of $~~1.3~~0.9 billion and $~~0.8~~1.0 billion for the three months ended~~September~~June 30, ~~2017~~2018, and ~~2016~~2017, respectively. For the three months ended~~September~~June 30, ~~2017~~2018, and ~~2016~~2017, balances also include $~~1.9~~1.3 billion and $~~1.6~~2.8 billion, respectively, deposited at the FRB, earning interest at the Federal Funds target rate.


(2)	Yields on interest-earning investment securities do not give effect to changes in fair value that are reflected in other comprehensive income.


(3)	Interest income on non-taxable investment securities ~~are~~is presented on a fully ~~taxable-equivalent~~taxable equivalent basis using the federal statutory ~~income~~ tax rate of 21.0 percent for the three months ended June 30, 2018, and 35.0 percent for ~~all periods presented.~~the three months ended June 30, 2017.


(4)	Nonaccrual loans are reflected in the average balances of loans.


(5)	Interest income includes loan fees of $~~33.4~~38 million and $~~28.4~~33 million for the three months ended ~~September~~June 30, ~~2017~~2018, and ~~2016~~2017, respectively.


(6)	Average investment securities of $~~692~~773 million and $~~804~~663 million for the three months ended ~~September~~June 30, ~~2017~~2018, and ~~2016~~2017, respectively, were classified as other assets as they were noninterest-earning assets. These investments consisted primarily of non-marketable and other securities.

Average Balances, Rates and Yields for the ~~Nine~~Six Months Ended ~~September~~June 30, ~~2017~~2018 and ~~2016~~2017


	Nine months ended September 30,																Six months ended June 30,
	2017								2016								2018								2017
(Dollars in thousands)	Average Balance			Interest Income/ Expense			Yield/ Rate		Average Balance			Interest Income/ Expense			Yield/ Rate		Average Balance			Interest Income/ Expense			Yield/ Rate		Average Balance			Interest Income/ Expense			Yield/ Rate
Interest-earning assets:
Federal Reserve deposits, federal funds sold, securities purchased under agreements to resell and other short-term investment securities (1)	$	3,235,628		$	16,670		0.69	%	$	2,111,619		$	5,793		0.37	%	$	2,529,384		$	11,943		0.95	%	$	3,207,021		$	10,459		0.66	%
Investment securities: (2)
Available-for-sale securities:
Taxable	12,539,773			146,803			1.57		13,608,722			140,932			1.38		10,396,533			94,582			1.83		12,471,237			93,978			1.52
Held-to-maturity securities:
Taxable	9,242,953			147,965			2.14		8,287,043			120,189			1.94		13,196,969			167,045			2.55		8,731,526			91,347			2.11
Non-taxable (3)	162,572			4,158			3.42		60,147			2,605			5.79		981,458			16,149			3.32		134,226			2,355			3.54
Total loans, net of unearned income (4) (5)	20,726,467			745,983			4.81		17,955,497			617,456			4.59		24,335,762			627,371			5.20		20,290,141			477,538			4.75
Total interest-earning assets	45,907,393			1,061,579			3.09		42,023,028			886,975			2.82		51,440,106			917,090			3.60		44,834,151			675,677			3.04
Cash and due from banks	361,041								326,144								467,954								355,790
Allowance for loan losses	(243,594		)						(237,613		)						(271,931		)						(242,264		)
Other assets (6)	1,540,211								1,558,157								1,763,487								1,483,733
Total assets	$	47,565,051							$	43,669,716							$	53,399,616							$	46,431,410
Funding sources:
Interest-bearing liabilities:
Interest bearing checking and savings accounts	$	420,680		$	242		0.08	%	$	310,505		$	181		0.08	%	$	581,399		$	222		0.08	%	$	409,579		$	156		0.08	%
Money market deposits	5,664,082			5,544			0.13		5,887,627			3,297			0.07		6,301,677			9,876			0.32		5,608,069			3,465			0.12
Money market deposits in foreign offices	183,040			59			0.04		153,593			50			0.04		200,922			39			0.04		180,934			38			0.04
Time deposits	50,855			49			0.13		59,069			51			0.12		51,919			36			0.14		50,576			32			0.13
Sweep deposits in foreign offices	1,089,714			324			0.04		1,339,077			405			0.04		1,020,487			194			0.04		1,130,906			223			0.04
Total interest-bearing deposits	7,408,371			6,218			0.11		7,749,871			3,984			0.07		8,156,404			10,367			0.26		7,380,064			3,914			0.11
Short-term borrowings	39,523			295			1.00		287,735			1,065			0.49		116,605			1,014			1.75		34,902			131			0.76
3.5% Senior Notes	347,088			9,429			3.63		346,771			9,421			3.63
3.50% Senior Notes																	347,373			6,291			3.65		347,047			6,285			3.65
5.375% Senior Notes	347,786			14,558			5.60		347,205			14,534			5.59		348,321			9,721			5.63		347,711			9,704			5.63
Junior Subordinated Debentures	54,434			2,494			6.13		54,610			2,493			6.10		—			—			—		54,456			1,663			6.16
6.05% Subordinated Notes	25,641			467			2.44		47,859			648			1.81		—			—			—		38,673			467			2.44
Total interest-bearing liabilities	8,222,843			33,461			0.54		8,834,051			32,145			0.49		8,968,703			27,393			0.62		8,202,853			22,164			0.54
Portion of noninterest-bearing funding sources	37,684,550								33,188,977								42,471,403								36,631,298
Total funding sources	45,907,393			33,461			0.10		42,023,028			32,145			0.10		51,440,106			27,393			0.11		44,834,151			22,164			0.10
Noninterest-bearing funding sources:
Demand deposits	34,653,264								30,694,119								38,887,766								33,674,549
Other liabilities	668,417								556,568								930,193								614,961
SVBFG stockholders’ equity	3,883,876								3,453,904								4,473,729								3,803,902
Noncontrolling interests	136,651								131,074								139,225								135,145
Portion used to fund interest-earning assets	(37,684,550		)						(33,188,977		)						(42,471,403		)						(36,631,298		)
Total liabilities, noncontrolling interest, and SVBFG stockholders’ equity	$	47,565,051							$	43,669,716							$	53,399,616							$	46,431,410
Net interest income and margin				$	1,028,118		2.99	%				$	854,830		2.72	%				$	889,697		3.49	%				$	653,513		2.94	%
Total deposits	$	42,061,635							$	38,443,990							$	47,044,170							$	41,054,613
Reconciliation to reported net interest income:
Adjustments for taxable equivalent basis				(1,455		)						(912		)						(3,391		)						(824		)
Net interest income, as reported				$	1,026,663							$	853,918							$	886,306							$	652,689

(1)

Includes average interest-earning deposits in other financial institutions of $~~1.0~~1.1 billion and $~~0.7~~0.9 billion for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018, and ~~2016~~2017, respectively. The balance also includes $~~2.1~~1.3 billion and $~~1.4~~2.2 billion deposited at the FRB, earning interest at the Federal Funds target rate for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018, and ~~2016~~2017, respectively.


(2)	Yields on interest-earning investment securities do not give effect to changes in fair value that are reflected in other comprehensive income.


(3)	Interest income on non-taxable available-for-sale securities is presented on a fully taxable-equivalent basis using the federal statutory income tax rate of 21.0 percent for the six months ended June 30, 2018, and 35.0 percent for ~~all periods presented.~~the six months ended June 30, 2017.


(4)	Nonaccrual loans are reflected in the average balances of loans.


(5)	Interest income includes loan fees of $~~93.5~~68 million and $~~78.1~~60 million for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018, and ~~2016~~2017, respectively.


(6)	Average investment securities of $~~674~~780 million and $~~803~~661 million for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018, and ~~2016~~2017, respectively, were classified as other assets as they were noninterest-earning assets. These investments consisted primarily of non-marketable securities.

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 credit losses equals our best estimate of probable credit losses that are inherent in the portfolios at the balance sheet date.

The following table summarizes our allowance for loan losses and the allowance for unfunded credit commitments for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018 and ~~2016:~~2017:


	Three months ended September 30,						Nine months ended September 30,						Three months ended June 30,						Six months ended June 30,
(Dollars in thousands, except ratios)	2017			2016			2017			2016			2018			2017			2018			2017
Allowance for loan losses, beginning balance	$	236,496		$	244,723		$	225,366		$	217,613		$	274,294		$	243,130		$	255,024		$	225,366
Provision for loan losses ~~(1)~~	22,409			18,950			67,273			88,624			27,656			15,185			54,652			44,864
Gross loan charge-offs	(12,338		)	(24,616		)	(51,449		)	(71,466		)	(15,428		)	(25,081		)	(26,015		)	(39,111		)
Loan recoveries	1,828			2,084			6,155			8,158			1,926			2,535			3,714			4,327
Foreign currency translation adjustments	615			(576		)	1,665			(2,364		)	(1,739		)	727			(666		)	1,050
Allowance for loan losses, ending balance	$	249,010		$	240,565		$	249,010		$	240,565		$	286,709		$	236,496		$	286,709		$	236,496

Allowance for unfunded credit commitments, beginning balance	$	47,000		$	34,889		$	45,265		$	34,415		$	52,823		$	46,335		$	51,770		$	45,265
Provision for unfunded credit commitments(1)	1,113			1,054			2,789			1,601
Provision for unfunded credit commitments													1,424			621			2,400			1,676
Foreign currency translation adjustments	59			(19		)	118			(92		)	(143		)	44			(66		)	59
Allowance for unfunded credit commitments, ending balance (2)	$	48,172		$	35,924		$	48,172		$	35,924
Allowance for unfunded credit commitments, ending balance (1)													$	54,104		$	47,000		$	54,104		$	47,000
Ratios and other information:
Provision for loan losses as a percentage of period-end total gross loans (annualized)	0.40		%	0.39		%	0.40		%	0.62		%	0.42		%	0.29		%	0.42		%	0.43		%
Gross loan charge-offs as a percentage of average total gross loans (annualized)	0.23			0.52			0.33			0.53			0.25			0.49			0.21			0.39
Net loan charge-offs as a percentage of average total gross loans (annualized)	0.19			0.48			0.29			0.47			0.22			0.44			0.18			0.34
Allowance for loan losses as a percentage of period-end total gross loans	1.12			1.25			1.12			1.25			1.10			1.12			1.10			1.12
Provision for credit losses (1)	$	23,522		$	20,004		$	70,062		$	90,225
Provision for credit losses													$	29,080		$	15,806		$	57,052		$	46,540
Period-end total gross loans	22,329,829			19,228,928			22,329,829			19,228,928			26,160,782			21,103,946			26,160,782			21,103,946
Average total gross loans	21,712,866			18,762,144			20,850,468			18,067,893			25,014,587			20,632,237			24,488,608			20,412,123


(1)	Our consolidated statements of income were modified from prior periods’ presentation to conform to the current period presentation, which reflect our provision for loan losses and provision for unfunded credit commitments together as our “provision for credit losses.”


~~(2)~~	The “allowance for unfunded credit commitments” is included as a component of “other liabilities.”

Three months ended ~~September~~June 30, ~~2017~~2018 and ~~2016~~2017

Our provision for credit losses was ~~$23.5~~$29.1 million for the three months ended ~~September~~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 ~~$22.4~~$15.2 million and a provision for unfunded credit commitments of $1.1 million. Our provision for credit losses was $20.0 million for the three months ended September 30, 2016, consisting of a provision for loan losses of $19.0 million and a provision for unfunded credit commitments of $1.0$0.6 million.

The provision for loan losses of ~~$22.4~~$27.7 million for the three months ended ~~September~~June 30, 2018 reflects primarily an increase of $13.4 million in net new specific reserves for nonaccrual loans, additional reserves of $12.5 million for period-end loan growth, $11.4 million for charge-offs not specifically reserved for and an additional $3.4 million for performing loan reserves, offset by a decrease in reserves of $12.5 million for our performing loans from certain reserve methodology enhancements made to our qualitative reserve for large loan exposure as a result of growth within our higher credit quality private equity/venture capital loan portfolios.

The provision for unfunded credit commitments of $1.4 million was primarily driven by increased reserves of $4.5 million from growth in unfunded credit commitment balances of $1.6 billion, offset by a decrease in reserves of $3.5 million reflective of the methodology enhancements mentioned above.

The provision for loan losses of $15.2 million for the three months ended June 30, 2017 primarily reflects ~~$13.8~~$12.7 million in net new specific reserves for nonaccrual loans and a ~~$10.9~~$5.0 million increase in reserves for period-end loan growth,

partially offset by a benefit from ~~overall~~ improved credit quality ~~of our loan portfolio~~ 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 unfunded credit commitments of $0.6 million for three months ended June 30, 2017 was driven primarily by an increase of $0.7 billion in unfunded credit commitment balances.

Gross loan ~~losses of $19.0~~charge-offs were $15.4 million for the three months ended ~~September~~June 30, ~~2016,~~2018, of which $11.4 million was ~~reflective~~not specifically reserved for in prior quarters. Gross loan charge-offs included $13.4 million from our software/internet loan portfolio and consisted primarily of ~~$8.0 million increase in reserves for performing loans, $5.5~~$8.7 million for ~~charge-offs that did not previously have a specific reserve, $4.0~~one sponsor-led buyout loan with the remaining $4.7 million net reserves for nonaccrual loans and $2.8 million for loan growth. The net increase in reserves for nonaccrual loans included a $5.5 million partial reserve release for one of our non-performing sponsored buyout loans due to credit improvement.primarily from early-stage clients.

Gross loan charge-offs were ~~$12.3~~$25.1 million for the three months ended ~~September~~June 30, 2017, of which ~~$6.3~~$5.5 million was not specifically ~~previously~~ reserved ~~for.~~for in prior quarters. Gross loan charge-offs ~~were primarily from four clients consisting of $8.7 million from~~included two ~~clients~~Corporate Finance client loans in our software/internet loan portfolio ~~of which $5.9~~totaling $13.0 million ~~was a late-stage client loan,~~ and ~~two early-stage client loan charge-offs of $3.5~~$11.7 million from early-stage clients, primarily from our ~~hardware~~software/internet and life science/healthcare loan portfolios.

~~Gross loan charge-offs of $24.6 million for the three~~Six months ended ~~September~~June 30, ~~2016 included $14.2 million from two late-stage clients, all of which, previously, had been fully reserved. Remaining charge-offs were primarily from early-stage clients in our software/internet~~2018 and ~~hardware loan portfolios.~~

~~Nine months ended September 30,~~ 2017 ~~and 2016~~

Our provision for credit losses was ~~$70.1~~$57.1 million for the ~~nine~~six months ended ~~September~~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 ~~$67.3~~$44.9 million and a provision for unfunded credit commitments of $2.8 million. Our provision for credit losses was $90.2 million for the third quarter of 2016, consisting of a provision for loan losses of $88.6 million and a provision for unfunded credit commitments of $1.6$1.7 million.

The provision for loan losses of ~~$67.3~~$54.7 million for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018 was reflective primarily of ~~$51.9~~$26.5 million from period-end loan growth, $24.7 million in net new specific reserves for nonaccrual loans and ~~$20.9~~$14.8 million for charge-offs not specifically reserved for in prior quarters, offset by a decrease in reserves of $12.5 million for our performing loans from certain reserve methodology enhancements made to our qualitative reserve for large loan exposure as a result of growth within our higher credit quality private equity/venture capital loan portfolios.

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 ~~overall~~ improved credit quality ~~of our loan portfolio~~ 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 loan losses of $88.6 million for the nine months ended September 30, 2016 was reflective of $33.0 million for charge-offs that did not previously have a specific reserve and $23.0 million from period-end loan growth, with the remaining provision due primarily to reserves for new nonaccrual loans.

The provision for unfunded credit commitments of ~~$2.8~~$2.4 million for ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018 was drivenprimarily by ~~qualitative allocations based on our loan portfolio being comprised~~increased reserves of ~~larger loans.~~$4.5 million from growth in unfunded credit commitment balances, offset by a decrease in reserves reflective of the methodology enhancements mentioned above. Our provision for unfunded credit commitments was ~~$1.6~~$1.7 million for ~~nine~~the six months ended ~~September~~June 30, ~~2016.~~2017.

Gross loan charge-offs ~~of $51.4~~were $26.0 million for the ~~nine~~six months ended ~~September~~June 30, 2018, of which $14.8 million was not specifically reserved for in prior quarters. Gross loan charge-offs included $20.1 million from our software/internet loan portfolio and $4.3 million from our hardware loan portfolio and consisted primarily of $10.5 million from early-stage clients, $8.7 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 ~~$27.8~~$24.1 million from our early-stage ~~loan~~ portfolio and $13.0 million from two Corporate Finance client loans. These charge-offs were primarily from our software/internet loan portfolio. Gross loan charge-offs of $71.5 million for the nine months ended September 30, 2016 included $35.4 million from our early-stage portfolio and $27.6 million from four late-stage ~~client~~ loans. These charge-offs were primarily from our software/internet loan portfolio.

See “Consolidated Financial Condition—Credit Quality and Allowance for Loan Losses” below and Note 7—“Loans, ~~and~~ Allowance for Loan Losses and Allowance for Unfunded Credit Commitments” of the “Notes to Interim Consolidated Financial Statements (unaudited)” under Part I, Item 1 of this report for further details on our allowance for loan losses.

Noninterest Income

For the three and ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2018, noninterest income was ~~$158.8~~$192.7 million and ~~$405.0~~$348.2 million, respectively, compared to ~~$144.1~~$128.5 million and ~~$343.1~~$246.2 million for the comparable ~~2016~~2017 periods. For the three and ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2018, non-GAAP noninterest income, net of noncontrolling interests was ~~$153.2~~$183.2 million and ~~$383.3~~$325.7 million, respectively, compared to ~~$139.5~~$119.0 million and ~~$339.4~~$230.1 million for the comparable ~~2016~~2017 periods. For the three and ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2018, non-GAAP core fee income was ~~$102.7~~$123.1 million and ~~$272.6~~$238.1 million, respectively, compared to ~~$80.5~~$87.3 million and ~~$231.5~~ $169.8

million for the comparable ~~2016~~2017 periods. (See reconciliations of non-GAAP measures used below under “Use of Non-GAAP Financial Measures”.)

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 ~~certain~~ non-recurring items. 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.

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 ~~control.~~control, primarily our net gains (losses) on investment securities and equity warrant assets. Core fee income includes foreign exchange fees, credit card fees, deposit service charges, ~~credit card fees,~~ lending related fees, client investment fees and letters of credit and standby letters of credit fees.

The following table provides a reconciliation of GAAP noninterest income to non-GAAP noninterest income, net of noncontrolling interests, for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018 and ~~2016:~~2017:


	Three months ended September 30,						Nine months ended September 30,						Three months ended June 30,						Six months ended June 30,
(Dollars in thousands)	2017		2016		% Change		2017		2016		% Change		2018		2017		% Change		2018		2017		% Change
GAAP noninterest income	$	158,778	$	144,140	10.2	%	$	404,965	$	343,050	18.0	%	$	192,689	$	128,528	49.9	%	$	348,207	$	246,187	41.4	%
Less: income attributable to noncontrolling interests, including carried interest allocation	5,614		4,679		20.0		21,709		3,627		NM		9,445		9,536		(1.0	)	22,469		16,095		39.6
Non-GAAP noninterest income, net of noncontrolling interests	$	153,164	$	139,461	9.8		$	383,256	$	339,423	12.9		$	183,244	$	118,992	54.0		$	325,738	$	230,092	41.6

~~NM—Not meaningful~~

The following table provides a reconciliation of GAAP noninterest income to non-GAAP core fee income for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018 and ~~2016:~~2017:


	Three months ended September 30,						Nine months ended September 30,						Three months ended June 30,						Six months ended June 30,
(Dollars in thousands)	2017		2016		% Change		2017		2016		% Change		2018		2017		% Change		2018		2017		% Change
GAAP noninterest income	$	158,778	$	144,140	10.2	%	$	404,965	$	343,050	18.0	%	$	192,689	$	128,528	49.9	%	$	348,207	$	246,187	41.4	%
Less: gains on investment securities, net	15,238		23,178		(34.3	)	48,838		41,764		16.9		36,114		17,630		104.8		45,172		33,600		34.4
Less: gains on equity warrant assets, net	24,922		21,558		15.6		42,432		33,253		27.6		19,061		10,820		76.2		38,252		17,510		118.5
Less: other noninterest income	15,896		18,878		(15.8	)	41,128		36,511		12.6		14,390		12,811		12.3		26,649		25,232		5.6
Non-GAAP core fee income (1)	$	102,722	$	80,526	27.6		$	272,567	$	231,522	17.7		$	123,124	$	87,267	41.1		$	238,134	$	169,845	40.2


(1)	Non-GAAP core fee income represents noninterest income, but excludes certain line items where performance is typically subject to market or other conditions beyond our control and includes foreign exchange fees, credit card fees, deposit service charges, lending related fees, client investment fees and letters of credit and standby letters of credit fees.

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 ~~available-for-sale~~AFS debt securities portfolio, when applicable.

Our available-for-sale securities portfolio represents primarily interest-earning fixed income investment securities and is managed to earn an appropriate portfolio yield over the long-term while maintaining sufficient liquidity and addressing our asset/liability management objectives. Sales of equity securities held as a result of our exercised warrants, result in net gains or losses on investment securities. These sales are conducted pursuant to the guidelines of our investment policy related to the

management of our liquidity position and interest rate risk. Though infrequent, sales of investment securities in our available-for-sale securities portfolio may result in net gains or losses and are also conducted pursuant to the guidelines of our investment policy.

~~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 and investments in qualified affordable housing projects. We experience variability in the performance of our non-marketable and other equity securities from ~~quarter~~period to ~~quarter,~~period, which results in net gains or losses on investment securities (both realized and unrealized). This variability is due to a number of factors, including unrealized changes in the values of our investments, changes in the amount of realized gains and losses from distributions, changes in liquidity events and general economic and market conditions. Unrealized gains or losses from non-marketable and other equity securities for any single period are typically driven by valuation changes, and are therefore subject to potential increases or decreases in future periods. Such variability may lead to volatility in the gains or losses from investment securities. As such, our results for a particular period are not necessarily indicative of our expected performance in a future period.

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 ~~September~~June 30, ~~2017~~2018 and ~~2016~~2017

For the three months ended ~~September~~June 30, ~~2017,~~2018, we had net gains on investment securities of ~~$15.2~~$36.1 million, compared to ~~$23.2~~$17.6 million for the comparable ~~2016~~2017 period. Non-GAAP net gains on investment securities, net of noncontrolling interests, were ~~$9.7~~$26.4 million for the three months ended ~~September~~June 30, ~~2017,~~2018, compared to ~~$18.4~~$8.2 million for the comparable ~~2016~~2017 period.

Non-GAAP net gains on investment securities, net of noncontrolling interests, of ~~$9.7~~$26.4 million for the three months ended ~~September~~June 30, ~~2017~~2018 were driven by the following:

Gains of $~~3.7~~18.1 million from our strategic and other investments portfolio, comprised primarily of ~~realized gains from distributions from~~net unrealized valuation increases in both private and public company investments held in our strategic venture capital ~~fund investments reflective of M&A activity,~~funds, and

Gains of $~~3.1~~7.7 million from our managed funds of funds portfolio, related primarily to net unrealized valuation increases in the public company investments held by the funds ~~driven by IPO and M&A activity, and~~in this portfolio.

~~Gains of~~ ~~$2.4 million~~ ~~from our debt funds portfolio, related primarily to net unrealized valuation increases in the investments held by the funds driven by IPO activity during the third quarter of 2017.~~

~~Nine~~Six months ended ~~September~~June 30, ~~2017~~2018 and ~~2016~~2017

For the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2018, we had net gains on investment securities of ~~$48.8~~$45.2 million, compared to ~~$41.8~~$33.6 million for the comparable ~~2016~~2017 period. Non-GAAP net gains on investment securities, net of noncontrolling interests, were ~~$27.4~~$22.6 million for the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2018, compared to ~~net gains of $38.1~~$17.7 million for the comparable ~~2016~~2017 period.

Non-GAAP net gains, net of noncontrolling interests, of ~~$27.4~~$22.6 million for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018 were driven primarily by the following:

Gains of $~~14.2~~30.8 million from our strategic and other investments portfolio, attributable primarily to ~~distribution gains from~~net unrealized valuation increases in both private and public company investments held in our strategic venture capital funds, ~~investments and $3.4~~

Losses of $22.1 million ~~related to the partial sale~~ from our public equity securities portfolio primarily reflective of net losses on sales of shares of ~~one~~Roku, Inc. ("Roku"), from exercised warrants in 2017, which were sold in the first quarter of ~~our direct equity investments,~~2018, and

Gains of $~~9.4~~14.6 million from our managed funds of funds portfolio, related primarily to net unrealized valuation increases in the public company investments held by the funds ~~driven by IPO, M&A and private equity-backed financing activity, and~~

~~Gains of~~ ~~$2.7 million~~ ~~from our debt funds portfolio, related primarily to net unrealized valuation increases~~ in the ~~investments held by the funds driven by IPO activity during the nine months ended September 30, 2017.~~portfolio.

The following ~~table provides~~tables provide a reconciliation of GAAP total gains (losses) on investment securities, net, to non-GAAP net gains (losses) on investment securities, net of noncontrolling interests, for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018 and ~~2016:~~2017:



(Dollars in thousands)	Managed Funds of Funds		Managed Direct Venture Funds			Public Equity Securities (1)			Debt Funds			Sales of AFS Securities (1)		Strategic and Other Investments		Total
Three months ended June 30, 2018
Total gains (losses) on investment securities, net	$	17,531	$	(405	)	$	140		$	726		$	—	$	18,122	$	36,114
Less: income (loss) attributable to noncontrolling interests, including carried interest allocation	9,793		(121		)	—			—			—		—		9,672
Non-GAAP net gains (losses) on investment securities, net of noncontrolling interests	$	7,738	$	(284	)	$	140		$	726		$	—	$	18,122	$	26,442

Six months ended June 30, 2018
Total gains (losses) on investment securities, net	$	36,604	$	1,514		$	(22,142	)	$	(1,573	)	$	—	$	30,769	$	45,172
Less: income attributable to noncontrolling interests, including carried interest allocation	21,990		587			—			—			—		—		22,577
Non-GAAP net gains (losses) on investment securities, net of noncontrolling interests	$	14,614	$	927		$	(22,142	)	$	(1,573	)	$	—	$	30,769	$	22,595

(1)

Effective January 1, 2018, we adopted Accounting Standard update ("ASU") 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities, resulting in the reclassification of public equity securities out of our AFS securities portfolio into our non-marketable and other equity securities portfolio. This guidance was adopted using the modified retrospective method with a cumulative adjustment to opening retained earnings. As such, prior period amounts have not been restated.


(Dollars in thousands)	Managed Funds of Funds		Managed Direct Venture Funds			Debt Funds		Available- For-Sale Securities			Strategic and Other Investments		Total		Managed Funds of Funds		Managed Direct Venture Funds			Debt Funds		Sales of AFS Securities			Strategic and Other Investments		Total
Three months ended September 30, 2017
Three months ended June 30, 2017
Total gains (losses) on investment securities, net	$	8,446	$	729		$	2,445	$	(101	)	$	3,719	$	15,238	$	12,145	$	69		$	682	$	(123	)	$	4,857	$	17,630
Less: income attributable to noncontrolling interests, including carried interest allocation	5,335		161			—		—			—		5,496
Less: income (loss) attributable to noncontrolling interests, including carried interest allocation															9,490		(25		)	—		—			—		9,465
Non-GAAP net gains (losses) on investment securities, net of noncontrolling interests	$	3,111	$	568		$	2,445	$	(101	)	$	3,719	$	9,742	$	2,655	$	94		$	682	$	(123	)	$	4,857	$	8,165

Three months ended September 30, 2016
Total gains (losses) on investment securities, net	$	8,931	$	390		$	166	$	(15	)	$	13,706	$	23,178
Less: income attributable to noncontrolling interests, including carried interest allocation	4,615		130			—		—			—		4,745
Non-GAAP net gains (losses) on investment securities, net of noncontrolling interests	$	4,316	$	260		$	166	$	(15	)	$	13,706	$	18,433

Nine months ended September 30, 2017
Six months ended June 30, 2017
Total gains on investment securities, net	$	30,624	$	894		$	2,696	$	384		$	14,240	$	48,838	$	22,178	$	165		$	251	$	485		$	10,521	$	33,600
Less: income attributable to noncontrolling interests, including carried interest allocation	21,245		178			—		—			—		21,423		15,910		17			—		—			—		15,927
Non-GAAP net gains on investment securities, net of noncontrolling interests	$	9,379	$	716		$	2,696	$	384		$	14,240	$	27,415	$	6,268	$	148		$	251	$	485		$	10,521	$	17,673

Nine months ended September 30, 2016
Total gains (losses) on investment securities, net	$	5,830	$	(411	)	$	801	$	11,567		$	23,977	$	41,764
Less: income (losses) attributable to noncontrolling interests, including carried interest allocation	3,668		(17		)	—		—			—		3,651
Non-GAAP net gains (losses) on investment securities, net of noncontrolling interests	$	2,162	$	(394	)	$	801	$	11,567		$	23,977	$	38,113

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 ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018 and ~~2016~~2017 is as follows:


	Three months ended September 30,								Nine months ended September 30,								Three months ended June 30,								Six months ended June 30,
(Dollars in thousands)	2017			2016			% Change		2017			2016			% Change		2018			2017			% Change		2018			2017			% Change
Equity warrant assets (1)
Gains on exercises, net	$	7,449		$	5,931		25.6	%	$	22,482		$	13,808		62.8	%	$	8,875		$	3,121		184.4	%	$	20,509		$	11,345		80.8	%
Cancellations and expirations	(757		)	(1,161		)	(34.8	)	(3,614		)	(2,544		)	42.1		(826		)	(571		)	44.7		(1,726		)	(1,129		)	52.9
Changes in fair value, net	18,230			16,788			8.6		23,564			21,989			7.2		11,012			8,270			33.2		19,469			7,294			166.9
Gains on equity warrant assets, net	$	24,922		$	21,558		15.6		$	42,432		$	33,253		27.6		$	19,061		$	10,820		76.2		$	38,252		$	17,510		118.5

(1)

At ~~September~~June 30, ~~2017~~2018, we held warrants in ~~1,842~~1,967 companies, compared to ~~1,719~~1,808 companies at ~~September~~June 30, ~~2016~~2017. The total fair value of our warrant portfolio was $~~142~~143.7 million at ~~September~~June 30, ~~2017~~2018 and ~~$145~~$131.8 million at ~~September~~June 30, ~~2016~~2017. Warrants in 1615 companies each had fair values greater than $1.0 million and collectively represented ~~$51.7~~$38.6 million, or ~~36.5~~26.8 percent, of the fair value ~~of the total warrant portfolio at~~ ~~September 30, 2017~~.

~~Three months ended September 30, 2017 and 2016~~

Net gains on equity warrant assets were $24.9 million for the three months ended September 30, 2017, compared to net gains of $21.6 million for the comparable 2016 period. Net gains on equity warrant assets for the three months ended September 30, 2017 consisted of:

~~Net gains~~ of ~~$18.2 million~~ ~~from changes in warrant valuations for~~ the ~~three months endedSeptember 30, 2017, compared to net gains of~~ ~~$16.8 million~~ ~~for the comparable~~ ~~2016~~ ~~period, driven by an increase of $15.9 million in the valuation of one company in our portfolio associated with its IPO during the third quarter of 2017, and~~

~~Net gains of~~ ~~$7.4 million~~ ~~from the exercise of equity warrant assets during the three months ended~~ ~~September 30, 2017, compared to net gains of~~ ~~$5.9 million~~ ~~for the comparable~~ ~~2016~~ ~~period, reflective of increased M&A activity in the third quarter of 2017.~~

~~Nine months ended September 30, 2017 and 2016~~

Net gains on equity warrant assets were $42.4 million for the nine months ended September 30, 2017, compared to net gains of $33.3 million for the comparable 2016 period. Net gains on equity warrant assets for the nine months ended September 30, 2017 consisted of:

~~Net gains of~~ ~~$22.5 million~~ ~~from the exercise of equity warrant assets for the~~ ~~nine months endedSeptember 30, 2017, compared to net gains of~~ ~~$13.8 million~~ ~~for the comparable~~ ~~2016~~ ~~period, reflective primarily of increased M&A and IPO activity during the~~ ~~nine months endedSeptember 30, 2017, and~~

~~Net gains of~~ ~~$23.6 million~~ ~~from changes in warrant valuations for the~~ ~~nine months endedSeptember 30, 2017, compared to net gains of~~ ~~$22.0 million~~ ~~for the comparable~~ ~~2016~~ period, driven primarily by an increase in the valuation of one company in our portfolio associated with its IPO during the third quarter of 2017 as mentioned above as well as increases in valuation in our private companytotal warrant portfolio ~~reflective~~at June 30, 2018. Warrants in 15 companies each had fair values greater than $1.0 million and collectively represented $39.4 million, or 30.0 percent, of ~~M&A exit activity during~~ the ~~nine months endedSeptember~~fair value of the total warrant portfolio at June 30, ~~2017~~.2017.

Non-GAAP Core Fee Income


	Three months ended September 30,						Nine months ended September 30,						Three months ended June 30,						Six months ended June 30,
(Dollars in thousands)	2017		2016		% Change		2017		2016		% Change		2018		2017		% Change		2018		2017		% Change
Non-GAAP core fee income (1):
Foreign exchange fees	$	29,671	$	25,944	14.4	%	$	82,026	$	76,998	6.5	%	$	34,077	$	26,108	30.5	%	$	67,904	$	52,355	29.7	%
Credit card fees	20,270		18,295		10.8		56,099		49,226		14.0		22,926		18,099		26.7		44,618		35,829		24.5
Deposit service charges	14,508		13,356		8.6		43,046		39,142		10.0		18,794		14,563		29.1		36,493		28,538		27.9
Client investment fees	15,563		7,952		95.7		37,571		23,959		56.8		29,452		12,982		126.9		52,327		22,008		137.8
Lending related fees	15,404		8,168		88.6		32,874		23,783		38.2		9,528		8,509		12.0		20,263		17,470		16.0
Letters of credit and standby letters of credit fees	7,306		6,811		7.3		20,951		18,414		13.8		8,347		7,006		19.1		16,529		13,645		21.1
Total non-GAAP core fee income (1)	$	102,722	$	80,526	27.6		$	272,567	$	231,522	17.7		$	123,124	$	87,267	41.1		$	238,134	$	169,845	40.2


(1)	This non-GAAP measure represents noninterest income, but excludes certain line items where performance is typically subject to market or other conditions beyond our control. See “Use of Non-GAAP Measures” above.

Foreign Exchange Fees

Foreign exchange fees were ~~$29.7~~$34.1 million and ~~$82.0~~$67.9 million for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2018, respectively, compared to ~~$25.9~~$26.1 million and ~~$77.0~~$52.4 million for the comparable ~~2016~~2017 periods. The increases in foreign exchange fees were driven primarily by increases in spot contract commissions driven by increased volume of trades for the three and six months ended June 30, 2018 compared to the 2017 periods. The volume of trades for spot contracts increased 35.1 percent and 33.1 percent for the three and six months ended June 30, 2018, respectively, compared to the comparable 2017 periods reflective primarily of our ~~continued investments in people, expertise~~global expansion initiative and ~~focused~~increased client engagement ~~largely from our focus on our~~efforts. A summary of foreign exchange ~~business~~fee income by instrument type for the three and six months ended June 30, 2018 and 2017 is as ~~a key area targeted for growth, resulting in increased client count and higher trade volumes from existing clients across all of our client portfolios.~~follows:



	Three months ended June 30,						Six months ended June 30,
(Dollars in thousands)	2018		2017		% Change		2018		2017		% Change
Foreign exchange fees by instrument type:
Spot contract commissions	$	31,548	$	23,583	33.8	%	$	62,750	$	46,007	36.4	%
Forward contract commissions	2,455		2,470		(0.6	)	4,940		6,071		(18.6	)
Option premium fees	74		55		34.5		214		277		(22.7	)
Total foreign exchange fees	$	34,077	$	26,108	30.5		$	67,904	$	52,355	29.7

Credit Card Fees

Credit card fees were ~~$20.3~~$22.9 million and ~~$56.1~~$44.6 million for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2018, respectively, compared to ~~$18.3~~$18.1 million and ~~$49.2~~$35.8 million for the comparable ~~2016~~2017 periods. The increases were primarily due to higher net interchange fee income driven by an increase in transaction volume reflective of higher spend by our commercial clients and our focus on our credit card business as a key area targeted for growth. The increases in gross interchange fee income were partially offset by increases in rebate/rewards expense for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017.~~2018. A summary of credit card fees by instrument type for the three and six months ended June 30, 2018 and 2017 is as follows:



	Three months ended June 30,						Six months ended June 30,
(Dollars in thousands)	2018		2017		% Change		2018		2017		% Change
Credit card fees by instrument type:
Card interchange fees, net	$	18,137	$	14,033	29.2	%	$	35,697	$	28,003	27.5	%
Merchant service fees	3,425		2,883		18.8		6,331		5,623		12.6
Card service fees	1,364		1,183		15.3		2,590		2,203		17.6
Total credit card fees	$	22,926	$	18,099	26.7		$	44,618	$	35,829	24.5

Deposit Service Charges

Deposit service charges were ~~$14.5~~$18.8 million and ~~$43.0~~$36.5 million for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2018, respectively, compared to ~~$13.4~~$14.6 million and ~~$39.1~~$28.5 million for the comparable ~~2016~~2017 periods. The increases were reflective of higher deposit client counts, as well as ~~an increase in transaction~~higher volumes of our transaction-based fee products, during the three and ~~nine~~six months ended ~~September~~June 30, ~~2017.~~

~~Lending Related Fees~~

Lending related fees were $15.4 million and $32.9 million for the three and nine months ended September 30, 2017, compared to $8.2 million and $23.8 million for the comparable 2016 periods. The increases were due primarily to an adjustment of $4.5 million related to fees earned in prior periods from unused lines of credit with the remaining increase attributable primarily to higher loan syndication fee income for the three and nine months ended September 30, 2017.2018.

Client Investment Fees

Client investment fees were ~~$15.6~~$29.5 million and ~~$37.6~~$52.3 million for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2018, respectively, compared to ~~$8.0~~$13.0 million and ~~$24.0~~$22.0 million for the comparable ~~2016~~2017 periods. The increases were ~~attributable primarily to increases~~reflective of the large increase in average client investment ~~fund balances~~funds driven by our clients’ increased utilization of our off-balance sheet sweep money market funds and products managed by SVB Asset ~~Management and third-party sweep money market funds, as well as~~Management. Client investment fees also benefited from improved spreads on our client investment funds due to increases in general market rates and the reintroduction of fees that had been previously waived due to the low rate environment. A summary of client investment fees by instrument type for the three and six months ended June 30, 2018 and 2017 is as follows:



	Three months ended June 30,						Six months ended June 30,
(Dollars in thousands)	2018		2017		% Change		2018		2017		% Change
Client investment fees by type:
Sweep money market fees	$	17,178	$	6,474	165.3	%	$	29,500	$	10,870	171.4	%
Asset management fees	5,730		4,111		39.4		11,088		7,490		48.0
Repurchase agreement fees	6,544		2,397		173.0		11,739		3,648		NM
Total client investment fees	$	29,452	$	12,982	126.9		$	52,327	$	22,008	137.8

NM—Not meaningful

The following table summarizes average client investment funds for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018 and ~~2016:~~2017:


	Three months ended September 30,						Nine months ended September 30,						Three months ended June 30,						Six months ended June 30,
(Dollars in millions)	2017		2016		% Change		2017		2016		% Change		2018		2017		% Change		2018		2017		% Change
Client directed investment assets (1)	$	6,985	$	6,846	2.0	%	$	6,190	$	7,137	(13.3	)%
Sweep money market funds													$	30,164	$	18,464	63.4	%	$	28,148	$	18,091	55.6	%
Client investment assets under management ~~(2)~~(1)	26,123		20,692		26.2		24,531		21,215		15.6		33,443		24,423		36.9		32,071		23,735		35.1
Sweep money market funds	20,165		15,567		29.5		18,783		14,468		29.8
Repurchase agreements													7,705		6,223		23.8		7,626		5,794		31.6
Total average client investment funds ~~(3)~~(2)	$	53,273	$	43,105	23.6		$	49,504	$	42,820	15.6		$	71,312	$	49,110	45.2		$	67,845	$	47,620	42.5


(1)	~~Comprised of mutual funds and Repurchase Agreement Program assets.~~


~~(2)~~	These funds represent investments in ~~third party~~third-party money market mutual funds and fixed-income securities managed by SVB Asset Management.


~~(3)~~(2)	Client investment funds are maintained at ~~third party~~third-party financial institutions and are not recorded on our balance sheet.

The following table summarizes period-end client investment funds at ~~September~~June 30, ~~2017~~2018 and December 31, ~~2016~~2017:


(Dollars in millions)	September 30, 2017		December 31, 2016		% Change		June 30, 2018		December 31, 2017		% Change
Client directed investment assets (1)	$	6,860	$	5,510	24.5	%
Sweep money market funds							$	31,859	$	23,911	33.2	%
Client investment assets under management ~~(2)~~(1)	26,718		23,115		15.6		35,509		29,344		21.0
Sweep money market funds	20,664		17,173		20.3
Repurchase agreements							8,406		7,074		18.8
Total period-end client investment funds ~~(3)~~(2)	$	54,242	$	45,798	18.4		$	75,774	$	60,329	25.6


(1)	~~Comprised of mutual funds and Repurchase Agreement Program assets.~~


~~(2)~~	These funds represent investments in ~~third party~~third-party money market mutual funds and fixed-income securities managed by SVB Asset Management.


~~(3)~~(2)	Client investment funds are maintained at ~~third party~~third-party financial institutions and are not recorded on our balance sheet.

~~Other Noninterest Income~~

~~A summary of other noninterest income for the three and nine months ended September 30, 2017 and 2016 is as follows:~~

Three months ended September 30, Nine months ended September 30,
(Dollars in thousands) 2017 2016 % Change 2017 2016 % Change
Fund management fees $ 5,198
$ 5,231
(0.6 )% $ 15,903
$ 14,149
12.4 %
Service-based fee income 469
2,029
(76.9 ) 3,860
6,270
(38.4 )
Gains on revaluation of client foreign currency instruments, net (1) 3,760
3,488
7.8
8,889
7,009
26.8
Losses on client foreign exchange forward contracts, net (1) (3,871 ) (3,194 ) 21.2
(8,350 ) (8,780 ) (4.9 )
Gains (losses) on revaluation of internal foreign currency instruments, net (2) 10,561
(1,406 ) NM
29,265
(4,222 ) NM
(Losses) gains on internal foreign exchange contracts, net (2) (10,550 ) 1,352
NM
(28,349 ) 3,067
NM
Other (3) 10,329
11,378
(9.2 ) 19,910
19,018
4.7
Total other noninterest income $ 15,896
$ 18,878
(15.8 ) $ 41,128
$ 36,511
12.6

~~NM—Not meaningful~~


~~(1)~~	Represents the net revaluation of client foreign currency denominated financial instruments. We enter into client foreign exchange forward contracts to economically reduce our foreign exchange exposure related to client foreign currency denominated financial instruments.


~~(2)~~	Represents the net revaluation of foreign currency denominated financial instruments issued and held by us, primarily loans, deposits and cash. We enter into internal foreign exchange forward contracts to economically reduce our foreign exchange exposure related to these foreign currency denominated financial instruments issued and held by us.


~~(3)~~	~~Includes dividends on FHLB/FRB stock, correspondent bank rebate income, incentive fees related to carried interest and other fee income.~~

~~Three months ended September 30, 2017 and 2016~~

~~Total other noninterest income was $15.9 million for the three months ended September 30, 2017, compared to $18.9 million~~ ~~for the comparable 2016 period.~~ ~~The decrease of $3.0 million in other noninterest income was due to the following:~~

Service-based fee income of $0.5 million compared to $2.0 million for the comparable 2016 period. The $1.5 million decrease was primarily due to the sale of our equity valuation services business during the third quarter of 2017, and

Other noninterest income of $10.3 million compared to $11.4 million for the comparable 2016 period. The $1.1 million decrease was primarily attributable to higher carried interest income earned from one of our unconsolidated fund investments during the third quarter of 2016 as compared to the third quarter of 2017.

~~Nine months ended September 30, 2017 and 2016~~

~~Total other noninterest income was $41.1 million for the nine months endedSeptember 30, 2017, compared $36.5 million~~ ~~for the comparable 2016 period.~~ ~~The increase of $4.6 million in other noninterest income was due to the following:~~

~~Fund management fees of~~ ~~$15.9 million~~ ~~compared to fees of~~ ~~$14.1 million~~ ~~for the comparable 2016 period. The increase was due primarily to the addition of new managed funds at SVB Capital,~~

~~Service-based fee income of~~ ~~$3.9 million~~ ~~compared to~~ ~~$6.3 million~~ ~~for the comparable 2016 period. The $2.4 million decrease was primarily due to the sale of our equity valuation services business during the third quarter of 2017,~~

~~Net gains of $0.5 million on client foreign exchange forward contracts and the revaluation of client foreign currency denominated cash for the nine months ended~~ ~~September 30, 2017, compared to net losses of $1.8 million for the comparable 2016 period. The net losses for the nine months ended~~ ~~September 30, 2016~~ was primarily due to a reclassification of $2.8 million in unrealized gains on forward contracts to foreign exchange fee income reflecting fees earned on forward contracts executed on behalf of our clients that were previously recorded in gains on derivative instruments, and

~~Net gains of $0.9 million on internal foreign exchange forward contracts and the revaluation of internal foreign currency denominated cash for the nine months ended~~ ~~September 30, 2017, compared to net losses of $1.2 million for the comparable 2016 period. The net losses of $1.2 million for the nine months ended~~ ~~September 30, 2016~~ ~~were primarily due to the strengthening of the U.S. dollar against various foreign currencies during the nine months ended September 30, 2016.~~

Noninterest Expense

A summary of noninterest expense for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018 and ~~2016~~2017 is as follows:


	Three months ended September 30,						Nine months ended September 30,						Three months ended June 30,						Six months ended June 30,
(Dollars in thousands)	2017		2016		% Change		2017		2016		% Change		2018		2017		% Change		2018		2017		% Change
Compensation and benefits	$	153,263	$	136,568	12.2	%	$	449,412	$	374,410	20.0	%	$	181,955	$	148,973	22.1	%	$	347,761	$	296,149	17.4	%
Professional services	32,987		23,443		40.7		86,331		67,959		27.0		46,813		27,925		67.6		75,538		53,344		41.6
Premises and equipment	18,937		16,291		16.2		53,753		47,861		12.3		19,173		18,958		1.1		37,718		34,816		8.3
Net occupancy													13,288		11,126		19.4		26,904		22,777		18.1
Business development and travel	10,329		8,504		21.5		30,913		30,077		2.8		12,095		11,389		6.2		23,286		20,584		13.1
Net occupancy	12,660		9,525		32.9		35,437		28,919		22.5
FDIC and state assessments	8,359		7,805		7.1		26,354		21,624		21.9		10,326		9,313		10.9		19,756		17,995		9.8
Correspondent bank fees	3,162		3,104		1.9		9,770		9,469		3.2		3,277		3,163		3.6		6,687		6,608		1.2
Other	18,064		15,533		16.3		54,670		44,292		23.4		18,812		20,399		(7.8	)	33,506		36,606		(8.5	)
Total noninterest expense ~~(1)~~	$	257,761	$	220,773	16.8		$	746,640	$	624,611	19.5		$	305,739	$	251,246	21.7		$	571,156	$	488,879	16.8


~~(1)~~	Our consolidated statements of income were modified from prior periods' presentation to the current period presentation, which reflects our provision for loan losses and provision for unfunded credit commitments together as our “provision for credit losses”. In prior periods, our provision for unfunded credit commitments were reported separately as a component of noninterest expense.

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 ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018 and ~~2016~~2017:


	Three months ended September 30,								Nine months ended September 30,								Three months ended June 30,								Six months ended June 30,
(Dollars in thousands, except ratios)	2017			2016			% Change		2017			2016			% Change		2018			2017			% Change		2018			2017			% Change
GAAP noninterest expense	$	257,761		$	220,773		16.8	%	$	746,640		$	624,611		19.5	%	$	305,739		$	251,246		21.7	%	$	571,156		$	488,879		16.8	%
Less: amounts attributable to noncontrolling interests	125			117			6.8		517			284			82.0		227			223			1.8		195			392			(50.3	)
Non-GAAP noninterest expense, net of noncontrolling interests	$	257,636		$	220,656		16.8		$	746,123		$	624,327		19.5		$	305,512		$	251,023		21.7		$	570,961		$	488,487		16.9

GAAP net interest income	$	373,974		$	289,161		29.3		$	1,026,663		$	853,918		20.2		$	466,443		$	342,696		36.1		$	886,306		$	652,689		35.8
Adjustments for taxable equivalent basis	631			281			124.6		1,455			912			59.5		2,037			476			NM		3,391			824			NM
Non-GAAP taxable equivalent net interest income	$	374,605		$	289,442		29.4		$	1,028,118		$	854,830		20.3		$	468,480		$	343,172		36.5		$	889,697		$	653,513		36.1
Less: income attributable to noncontrolling interests	9			4			125.0		26			62			(58.1	)	10			10			—		19			17			11.8
Non-GAAP taxable equivalent net interest income, net of noncontrolling interests	$	374,596		$	289,438		29.4		$	1,028,092		$	854,768		20.3		$	468,470		$	343,162		36.5		$	889,678		$	653,496		36.1

GAAP noninterest income	$	158,778		$	144,140		10.2		$	404,965		$	343,050		18.0		$	192,689		$	128,528		49.9		$	348,207		$	246,187		41.4
Less: income attributable to noncontrolling interests	5,614			4,679			20.0		21,709			3,627			NM		9,445			9,536			(1.0	)	22,469			16,095			39.6
Non-GAAP noninterest income, net of noncontrolling interests	$	153,164		$	139,461		9.8		$	383,256		$	339,423		12.9		$	183,244		$	118,992		54.0		$	325,738		$	230,092		41.6

GAAP total revenue	$	532,752		$	433,301		23.0		$	1,431,628		$	1,196,968		19.6		$	659,132		$	471,224		39.9		$	1,234,513		$	898,876		37.3
Non-GAAP taxable equivalent revenue, net of noncontrolling interests	$	527,760		$	428,899		23.0		$	1,411,348		$	1,194,191		18.2		$	651,714		$	462,154		41.0		$	1,215,416		$	883,588		37.6
GAAP operating efficiency ratio	48.38		%	50.95		%	(5.0	)	52.15		%	52.18		%	(0.1	)	46.39		%	53.32		%	(13.0	)	46.27		%	54.39		%	(14.9	)
Non-GAAP operating efficiency ratio (1)	48.82			51.45			(5.1	)	52.87			52.28			1.1		46.88			54.32			(13.7	)	46.98			55.28			(15.0	)

NM—Not meaningful


(1)	The non-GAAP operating efficiency ratio is calculated by dividing non-GAAP noninterest expense, net of noncontrolling interests, by non-GAAP taxable-equivalent revenue, net of noncontrolling interests.

Compensation and Benefits Expense

The following table provides a summary of our compensation and benefits expense for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018 and ~~2016:~~2017:


	Three months ended September 30,						Nine months ended September 30,						Three months ended June 30,						Six months ended June 30,
(Dollars in thousands, except employees)	2017		2016		% Change		2017		2016		% Change		2018		2017		% Change		2018		2017		% Change
Compensation and benefits:
Salaries and wages	$	72,799	$	62,636	16.2	%	$	207,687	$	182,375	13.9	%	$	76,831	$	68,029	12.9	%	$	149,870	$	134,888	11.1	%
Incentive compensation & ESOP	37,668		38,255		(1.5	)	108,310		87,162		24.3		54,382		36,824		47.7		98,015		70,642		38.7
Other employee incentives and benefits (1)	42,796		35,677		20.0		133,415		104,873		27.2		50,742		44,120		15.0		99,876		90,619		10.2
Total compensation and benefits	$	153,263	$	136,568	12.2		$	449,412	$	374,410	20.0		$	181,955	$	148,973	22.1		$	347,761	$	296,149	17.4
Period-end full-time equivalent employees	2,433		2,280		6.7		2,433		2,280		6.7		2,626		2,380		10.3		2,626		2,380		10.3
Average full-time equivalent employees	2,434		2,255		7.9		2,384		2,199		8.4		2,591		2,372		9.2		2,545		2,358		7.9


(1)	Other employee incentives and benefits includes employer payroll taxes, group health and life insurance, share-based compensation, 401(k), warrant and retention plans, agency fees and other employee-related expenses.

Compensation and benefits expense was ~~$153.3~~$182.0 million for the three months ended ~~September~~June 30, ~~2017,~~2018, compared to ~~$136.6~~$149.0 million for the comparable ~~2016~~2017 period. The key changes in factors affecting compensation and benefits expense were as follows:

An increase of ~~$10.2~~$17.6 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 $8.8 million in salaries and wages reflective primarily of anthe increase in the number of average FTE by ~~179~~219 to ~~2,434 FTEs~~2,591 for the ~~third~~second quarter of ~~2017~~2018 compared to the same period in ~~2016,~~2017, as well as merit increases, and ~~annual pay raises. The increase in headcount was primarily to support our growth initiatives.~~

An increase of ~~$7.1~~$6.6 million in total other employee incentives and benefits, related to various expenses, particularly personnel contracting expenses, to support our growth both domestically and globally, and employer payroll taxes reflective of our increased headcount since the third quarter of 2016. The increase in other employee incentives and benefits ~~also includes~~primarily driven by an increase in employer payroll taxes of $2.7 million, ~~in warrant incentive plan expenses~~ reflective of ~~our quarterly equity warrant portfolio performance~~the increase in the number of average FTE since the second quarter of 2017, as well as an increase of ~~$0.7~~$2.1 million in share-based compensation expense, primarily due to our accruals based on our performance expectations for our outstanding performance-based restricted stock awards compared to our estimate for the ~~third~~second quarter of ~~2016,~~2017, reflective of the increase in our stock price relative to our peers.

Compensation and benefits expense was ~~$449.4~~$347.8 million for the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2018, compared to ~~$374.4~~$296.1 million for the comparable ~~2016~~2017 period. The key changes in factors affecting compensation and benefits expense were as follows:

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 ~~$28.5~~$15.0 million in ~~total other employee incentives~~salaries and ~~benefits, related~~wages reflective primarily of the increase in the number of average FTE by 187 to ~~various expenses, particularly personnel contracting expenses,~~2,545 for the second half of 2018 compared to ~~support our growth both domestically and globally,~~the same period in 2017, as well as ~~group health~~merit increases, and ~~life insurance and employer payroll taxes reflective~~

An increase of ~~our increased headcount since the nine months ended September 30, 2016. The increase~~$9.3 million in other employee incentives and benefits ~~also includes~~primarily driven by an increase in employer payroll taxes of ~~$5.4~~$3.9 million, ~~in warrant incentive plan expenses~~ reflective of ~~our year-to-date equity warrant portfolio performance~~the increase in the number of average FTE since the second half of 2017, as well as an increase of ~~$5.4~~$3.4 million in share-based compensation expense, primarily due to our accruals based on our performance expectations for our outstanding performance-based restricted stock awards as compared to our estimate for the ~~nine months ended September 30, 2016,~~second half of 2017, reflective of the increase in our stock price relative to our peers.

An increase of $25.3 million in salaries and wages, reflective primarily of an increase in the number of average FTE by 185 to 2,384 FTEs during the nine months ended September 30, 2017 compared to the same period in 2016, and annual pay raises.

An increase of $21.1 million in expenses related to incentive compensation plans and ESOP. Our incentive compensation expense was higher during the nine months ended September 30, 2017 primarily due to higher expected full year performance for 2017 related to the trend of our improving ROE relative to our peers, which is one of our key plan performance metrics.

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 ~~2016~~2017 Form 10-K). Total costs incurred under these plans were ~~$45.9~~$61.8 million and ~~$133.3~~$115.0 million for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2018, respectively, compared to ~~$43.7~~$43.1 million and ~~$105.9~~$87.4 million for the comparable ~~2016~~2017 periods. These amounts are included in total compensation and benefits expense discussed above.

Professional Services

Professional services expense was ~~$33.0~~$46.8 million and ~~$86.3~~$75.5 million for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2018, respectively, compared to ~~$23.4~~$27.9 million and ~~$68.0~~$53.3 million for the comparable ~~2016~~2017 periods. The increases were primarily related to enhancements in our regulatory, risk and compliance infrastructure to support our momentum as we continue to grow both domestically and globally as well as investments made in projects, systems and technology to support our revenue growth and related initiatives and other operating costs.

~~Premises and Equipment~~

~~Premises and equipment was $18.9 million and $53.8 million~~ Professional services expense for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017, compared~~2018, included a $6.0 million write-off for capitalized costs in connection with the Economic Growth, Regulatory Relief and Consumer Protection Act, which includes regulatory reform of the threshold for which certain enhanced prudential standards apply from $50 billion to $16.3 million and $47.9 million for the comparable 2016 periods. The increases related to investments to projects, systems and technology to support our revenue growth and related initiatives as well as other operating costs.

$250 billion.

Net Occupancy

Net occupancy expense was ~~$12.7~~$13.3 million and ~~$35.4~~$26.9 million for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2018, respectively, compared to ~~$9.5~~$11.1 million and ~~$28.9~~$22.8 million for the comparable ~~2016~~2017 periods. The increases were primarily due to lease renewals at higher costs, reflective of market conditions, and the expansion of certain offices to support our growth.

~~FDIC~~Business Development and ~~State Assessments~~Travel

~~FDIC~~Business development and ~~state assessments~~travel expense was ~~$8.4~~$12.1 million and ~~$26.4~~$23.3 million for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2018, respectively, compared to ~~$7.8~~$11.4 million and ~~$21.6~~$20.6 million for the comparable ~~2016 periods.~~2017 period. The increases were ~~due primarily~~ to ~~the increases in our average assets.~~support expansion initiatives as we continue to grow both domestically and 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 ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018 and ~~2016~~2017 is as follows:


	Three months ended September 30,						Nine months ended September 30,						Three months ended June 30,						Six months ended June 30,
(Dollars in thousands)	2017		2016		% Change		2017		2016		% Change		2018		2017		% Change		2018		2017		% Change
Lending and other client related processing costs	$	6,935	$	5,885	17.8	%	$	18,806	$	13,721	37.1	%	$	7,403	$	6,332	16.9	%	$	10,603	$	11,871	(10.7	)%
Data processing services													2,703		2,428		11.3		5,195		5,010		3.7
Telephone	2,518		2,460		2.4		7,892		7,109		11.0		2,378		2,671		(11.0	)	4,756		5,374		(11.5	)
Data processing services	2,244		2,137		5.0		7,254		6,353		14.2
Dues and publications	883		809		9.1		2,355		2,258		4.3		845		677		24.8		1,694		1,472		15.1
Postage and supplies	612		598		2.3		2,013		2,172		(7.3	)	813		652		24.7		1,480		1,401		5.6
Other	4,872		3,644		33.7		16,350		12,679		29.0		4,670		7,639		(38.9	)	9,778		11,478		(14.8	)
Total other noninterest expense	$	18,064	$	15,533	16.3		$	54,670	$	44,292	23.4		$	18,812	$	20,399	(7.8	)	$	33,506	$	36,606	(8.5	)

Net Income Attributable to Noncontrolling Interests

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 income attributable to noncontrolling interests” on our statements of income.

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 income attributable to noncontrolling interests for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018 and ~~2016~~2017 is as follows:


	Three months ended September 30,								Nine months ended September 30,								Three months ended June 30,								Six months ended June 30,
(Dollars in thousands)	2017			2016			% Change		2017			2016			% Change		2018			2017			% Change		2018			2017			% Change
Net interest income (1)	$	(9	)	$	(4	)	125.0	%	$	(26	)	$	(62	)	(58.1	)%	$	(10	)	$	(10	)	—	%	$	(19	)	$	(17	)	11.8	%
Noninterest income (1)	(4,341		)	(3,721		)	16.7		(19,059		)	(1,144		)	NM		(7,856		)	(9,264		)	(15.2	)	(17,378		)	(14,718		)	18.1
Noninterest expense (1)	125			117			6.8		517			284			82.0		227			223			1.8		195			392			(50.3	)
Carried interest allocation (2)	(1,273		)	(958		)	32.9		(2,650		)	(2,483		)	6.7		(1,589		)	(272		)	NM		(5,091		)	(1,377		)	NM
Net income attributable to noncontrolling interests	$	(5,498	)	$	(4,566	)	20.4		$	(21,218	)	$	(3,405	)	NM		$	(9,228	)	$	(9,323	)	(1.0	)	$	(22,293	)	$	(15,720	)	41.8

NM—Not meaningful


(1)	Represents noncontrolling interests’ share in net interest income, noninterest income or loss and noninterest expense.


(2)	Represents the preferred allocation of income (or change in income) earned by us as the general partner of certain consolidated funds.

Three months ended ~~September~~June 30, ~~2017~~2018 and ~~2016~~2017

Net income attributable to noncontrolling interests was $~~5.5~~9.2 million for the three months ended ~~September~~June 30, ~~2017,~~2018, compared to ~~$4.6~~$9.3 million for the comparable ~~2016~~2017 period. Net income attributable to noncontrolling interests of ~~$5.5~~$9.2 million for the three months ended ~~September~~June 30, ~~2017~~2018 was primarily a result of $9.4 million net gains on investment securities (including carried interest allocation) from our managed funds of funds portfolio related to net unrealized valuation increases in the investments held by the funds during the second quarter of 2018. See “Results of Operations—Noninterest Income—Gains on Investment Securities, Net”.

Six months ended June 30, 2018 and 2017

Net income attributable to noncontrolling interests was $22.3 million for the six months ended June 30, 2018, compared to $15.7 million for the comparable 2017 period. Net income attributable to noncontrolling interests of $22.3 million for the six months ended June 30, 2018 was primarily a result of $22.5 million net gains on investment securities (including carried interest allocation) from our managed funds of funds portfolio due to net unrealized valuation increases of investments held by the ~~funds driven primarily by IPO and M&A activity. See “Results of Operations—Noninterest Income—Gains on Investment Securities, Net”.~~

~~Nine months ended September 30, 2017 and 2016~~

Net income attributable to noncontrolling interests was $21.2 million for the nine months ended September 30, 2017, compared to $3.4 million for the comparable 2016 period. Net income attributable to noncontrolling interests of $21.2 million for the nine months ended September 30, 2017 was primarily a result of net gains on investment securities (including carried interest allocation) from our managed funds of funds portfolio due to net unrealized valuation increases of investments held by the funds driven by IPO, M&A and private equity-backed financing activity.funds. See “Results of Operations—Noninterest Income—Gains on Investment Securities, Net”.

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 ~~39.6~~24.5 percent and ~~37.1~~25.9 percent for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2018, respectively, compared to ~~40.9~~36.8 percent and ~~40.8~~35.4 percent for the ~~three and nine months ended September 30, 2016, respectively.~~comparable 2017 periods. Our effective tax rate is calculated by dividing income tax expense by the sum of income before income tax expense and the net income attributable to noncontrolling interests.

The reductions in the effective tax rate for the three and ~~nine~~six months ended ~~September~~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, ~~resulted from~~for the return of tax funds related to a prior year's tax return.

The effective tax rate for the three months ended June 30, 2018, and 2017, included the recognition of a tax ~~benefit~~benefits of ~~$1.3~~$12.0 million and ~~$14.4~~$7.0 million, respectively, due to the adoption and implementation of ~~Accounting Standards Update (“ASU”)~~ASU 2016-09 ~~Improvements to Employee Share-Based Payment Accounting,~~ in the first quarter of 2017. The ~~new guidance requires~~effective tax impacts from employee share-based transactions to be recognized in the provision for income taxes rather than additional paid-in-capital in stockholders' equity required under the previous guidance. Additionally, our effective income tax expense rate for the ~~nine~~six months ended ~~September~~June 30, 2018, and 2017, included the recognition of a tax ~~benefit~~benefits of ~~$4.7~~$14.5 million ~~reflective~~and $13.1 million, respectively.

The Company has considered the provisions of ~~the return of tax funds related to a prior years' tax return.~~

~~Additionally, in early November 2017, draft tax reform legislation entitled the Tax Cuts and Jobs Act (the “TCJ Act”) was introduced. If enacted,~~ the TCJ Act ~~would make significant changes~~and analyzed for potential impact to its income tax provision for the ~~U.S. Internal Revenue Code~~fiscal year ending December 31, 2018. Aside from the items noted above, the Company is not aware of ~~1986, including corporate taxation provisions. Such changes under~~any further items which could materially impact its financial statements for the ~~TCJ Act or any other similar tax reform could have a material impact on our results of operations or financial condition.~~

~~Excluding the impact of the tax benefit items discussed above~~three and ~~any tax reform, we expect the annual effective tax rate for 2017 to be comparable to the full-year 2016 effective tax rate.~~six months ended June 30, 2018.

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 ~~11—~~12—“Segment Reporting” of the “Notes to Interim Consolidated Financial Statements (unaudited)” under Part I, Item 1 of this report for additional details.

The following is our reportable segment information for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018 and ~~2016~~2017:

Global Commercial Bank


	Three months ended September 30,								Nine months ended September 30,								Three months ended June 30,								Six months ended June 30,
(Dollars in thousands)	2017			2016			% Change		2017			2016			% Change		2018			2017			% Change		2018			2017			% Change
Net interest income	$	337,860		$	262,484		28.7	%	$	924,789		$	773,342		19.6	%	$	409,057		$	311,051		31.5	%	$	778,924		$	586,929		32.7	%
Provision for credit losses	(20,874		)	(16,974		)	23.0		(65,007		)	(86,143		)	(24.5	)	(27,356		)	(14,856		)	84.1		(52,630		)	(43,745		)	20.3
Noninterest income	97,227			79,226			22.7		260,650			231,295			12.7		113,245			83,904			35.0		212,591			163,423			30.1
Noninterest expense	(176,964		)	(159,479		)	11.0		(525,043		)	(462,234		)	13.6		(197,695		)	(176,702		)	11.9		(382,261		)	(349,548		)	9.4
Income before income tax expense	$	237,249		$	165,257		43.6		$	595,389		$	456,260		30.5		$	297,251		$	203,397		46.1		$	556,624		$	357,059		55.9
Total average loans, net of unearned income	$	18,807,616		$	16,357,099		15.0		$	18,125,020		$	15,769,964		14.9		$	21,714,870		$	17,907,635		21.3		$	21,199,897		$	17,778,065		19.2
Total average assets	47,817,114			40,828,549			17.1		45,414,432			41,020,808			10.7		52,540,865			45,478,211			15.5		51,252,398			44,188,162			16.0
Total average deposits	42,376,024			36,484,125			16.1		40,398,413			37,002,027			9.2		45,991,701			40,477,823			13.6		45,022,054			39,393,219			14.3

Three months ended ~~September~~June 30, ~~2017~~2018 and ~~2016~~2017

Income before income tax expense from our Global Commercial Bank (“GCB”) increased to ~~$237.2~~$297.3 million for the three months ended ~~September~~June 30, ~~2017,~~2018, compared to ~~$165.3~~$203.4 million for the comparable ~~2016~~2017 period, which reflected the continued acquisition of new clients and growth of our core commercial business. The key components of GCB's performance for the three months ended ~~September~~June 30, ~~2017~~2018 compared to the comparable ~~2016~~2017 period are discussed below.

Net interest income from GCB increased by ~~$75.4~~$98.0 million for the three months ended ~~September~~June 30, ~~2017,~~2018, due primarily to an increase in loan interest income resulting mainly from higher average loan balances, as well as from an increase in loan yields as a result of rate increases.

GCB had a provision for credit losses of ~~$20.9~~$27.4 million for the three months ended ~~September~~June 30, ~~2017,~~2018, compared to ~~$17.0~~$14.9 million for the comparable ~~2016~~2017 period. The provision of ~~$20.9~~$27.4 million for the three months ended ~~September~~June 30, 2018 reflects primarily an increase of $13.4 million in net new specific reserves for nonaccrual loans, additional reserves of $12.5 million for period-end loan growth, $11.4 million for charge-offs not specifically reserved for and an additional $3.4 million for performing loan reserves, offset by a decrease in reserves of $12.5 million for our performing loans from certain reserve methodology enhancements made to our qualitative reserve for large loan exposure as a result of growth within our higher credit quality private equity/venture capital loan portfolios.

The provision of $14.9 million for the three months ended June 30, 2017 primarily reflected ~~$13.8~~$12.7 million in net new specific reserves for nonaccrual loans and a ~~$10.9~~$5.0 million increase in reserves for period-end loan growth, partially offset by a benefit from ~~overall~~ improved credit quality ~~of our loan portfolio and~~from the continued shift in our loan portfolio to private equity/venture capital loans, which tend to be of higher credit quality.

~~The provision of $17.0~~Noninterest income increased by $29.3 million for the three months ended ~~September~~June 30, 2016 primarily reflected $8.0 million of reserves for performing loans, $5.5 million in charge-offs that did not previously have a specific reserve, $3.0 million net reserves for nonaccrual loans and $2.8 million for loan growth.

~~Noninterest income increased by $18.0 million for the three months ended September 30, 2017,~~2018, related primarily to an overall increase ~~across~~in our non-GAAP core fee income (higher foreign exchange fees, client investment fees and credit card fees). This increase was due primarily to the continued growth of our client base and work with larger global companies reflective of investments in our platform, capabilities and global reach.

Noninterest expense increased by ~~$17.5~~$21.0 million for the three months ended ~~September~~June 30, ~~2017,~~2018, due primarily to increased ~~professional services expense and~~ compensation and benefits ~~expense. Professional~~and professional services expenses were higher due to enhancements in our risk and compliance infrastructure to support our momentum as we continue to grow both domestically and globally as well as investments made in projects, systems and technology to support our revenue growth and related initiatives and other operating costs.expenses. Compensation and benefits expense increased by $20.3 million primarily as a result of increased incentive compensation and ESOP expense, salaries and wages and other employee benefits. The increase in incentive compensation and ESOP expense is reflective primarily of our strong 2018 full-year expected performance as compared to 2017 as well as an increase in FTE. The increase in GCB salaries and wages was due primarily to an increase in the average number of FTEs at GCB, which increased by ~~111~~131 to ~~1,881~~1,977 FTEs for the three months ended ~~September~~June 30, ~~2017,~~2018, compared to ~~1,770~~1,846 FTEs for the comparable ~~2016~~2017 period. The increase in total other employee benefits was related to various expenses, particularly ~~personnel contracting expenses, to support our growth both domestically and globally, and~~ employer payroll taxes reflective of ~~our increased headcount~~the increase in the number of average FTE since the ~~third~~second quarter ~~2016.~~of 2017 and increased share-based compensation expense associated primarily with our performance-based restricted stock unit awards.

~~Nine~~Six months ended ~~September~~June 30, ~~2017~~2018 and ~~2016~~2017

Net interest income from our GCB increased by ~~$151.4~~$192.0 million for the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2018, due primarily to an increase in loan interest income resulting mainly from higher average loan balances as well as from an increase in loan yields as a result of rate increases.

GCB had a provision for credit losses of ~~$65.0~~$52.6 million for the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2018, compared to a provision of ~~$86.1~~$43.7 million for the comparable ~~2016~~2017 period. The provision of ~~$65.0~~$52.6 million for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018 was reflective primarily of ~~$51.9~~$26.5 million from period-end loan growth, $24.7 million in net new specific reserves for nonaccrual loans and ~~$20.9~~$14.8 million for charge-offs not specifically reserved for, offset by a decrease in reserves of $12.5 million for our performing loans from certain reserve methodology enhancements made to our qualitative reserve for large loan exposure as a result of growth within our higher credit quality private equity/venture capital loan portfolios.

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 ~~overall~~ improved credit quality ~~of our loan portfolio~~ and the continued shift in our loan portfolio to private equity/venture capital loans, which tend to be of higher credit quality.

The provision of $86.1 million for the nine months ended September 30, 2016 was reflective of $33.0 million in charge-offs that did not previously have a specific reserve and $23.0 million from period-end loan growth, with the remaining provision due primarily to reserves for new nonaccrual loans.

Noninterest income increased by ~~$29.4~~$49.2 million for the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2018, related primarily to an overall increase ~~across~~in our non-GAAP core fee income (higher foreign exchange fees, credit card fees and client investment fees). This increase was due primarily to the continued growth of our client base and work with larger global companies reflective of investments in our platform, capabilities and global reach.

Noninterest expense increased by ~~$62.8~~$32.7 million for the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2018, due primarily to increased expenses for compensation and benefits and professional ~~services.~~services expenses. Compensation and benefits expense increased by $33.5 million primarily as a result of ~~higher~~increased incentive compensation ~~expenses, increased~~and ESOP expense, salaries and wages and ~~higher~~ other employee benefits. The increase in incentive compensation ~~expenses was due to the expectation~~and ESOP expense is reflective primarily of our strong 2018 full-year expected performance as compared to ~~exceed budget for 2017.~~2017 as well as an increase in FTE. The increase in ~~our~~GCB salaries and wages ~~expenses~~ was due primarily to an increase in the average number of FTEs at GCB, which increased by ~~124~~106 to ~~1,857~~1,950 FTEs for the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2018, compared to ~~1,733~~1,844 FTEs for the comparable ~~2016~~2017 period. The increase in total other employee ~~incentives and~~ benefits was related to various expenses, particularly ~~personnel contracting expenses, to support our growth both domestically and globally as well as group health and life insurance and~~ employer payroll taxes reflective of ~~our increased headcount~~the increase in the number of average FTE since the ~~nine months ended September 30, 2016. Professional services expenses were higher due to enhancements in~~second half of 2017 and increased share-based compensation expense associated primarily with our risk and compliance infrastructure to support our momentum as we continue to grow both domestically and globally as well as investments made in projects, systems and technology to support our revenue growth and related initiatives and other operating costs.performance-based restricted stock unit awards.

SVB Private Bank


	Three months ended September 30,								Nine months ended September 30,								Three months ended June 30,								Six months ended June 30,
(Dollars in thousands)	2017			2016			% Change		2017			2016			% Change		2018			2017			% Change		2018			2017			% Change
Net interest income	$	14,600		$	13,298		9.8	%	$	42,952		$	40,508		6.0	%	$	15,645		$	14,742		6.1	%	$	31,892		$	28,352		12.5	%
Provision for credit losses	(1,535		)	(1,976		)	(22.3	)	(2,266		)	(2,481		)	(8.7	)	(300		)	(329		)	(8.8	)	(2,022		)	(1,119		)	80.7
Noninterest income	460			664			(30.7	)	1,715			2,052			(16.4	)	564			536			5.2		1,072			1,254			(14.5	)
Noninterest expense	(4,706		)	(3,122		)	50.7		(12,675		)	(9,481		)	33.7		(5,927		)	(4,050		)	46.3		(11,969		)	(7,968		)	50.2
Income before income tax expense	$	8,819		$	8,864		(0.5	)	$	29,726		$	30,598		(2.8	)	$	9,982		$	10,899		(8.4	)	$	18,973		$	20,519		(7.5	)
Total average loans, net of unearned income	$	2,499,507		$	2,074,982		20.5		$	2,371,027		$	1,978,175		19.9		$	2,777,617		$	2,365,464		17.4		$	2,722,444		$	2,305,723		18.1
Total average assets	2,538,400			2,096,237			21.1		2,403,777			1,999,455			20.2		2,515,984			2,397,188			5.0		2,553,024			2,335,350			9.3
Total average deposits	1,231,390			1,115,446			10.4		1,289,990			1,120,575			15.1		1,480,162			1,302,890			13.6		1,526,038			1,319,776			15.6

Three months ended ~~September~~June 30, ~~2017~~2018 and ~~2016~~2017

Net interest income from our SVB Private Bank increased by ~~$1.3~~$0.9 million for the three months ended ~~September~~June 30, ~~2017,~~2018, due primarily to higher interest income due to loan growth, partially offset by a higher funding charge for loans ~~funded~~funded.

Noninterest expense increased by $1.9 million for the three 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 of the increase in number of average FTE since the second quarter of 2017, and higher incentive compensation expenses, reflective primarily of our strong 2018 full-year expected performance as compared to 2017.

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, ~~exceeded deposit~~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 ~~$1.6~~$4.0 million for the ~~three~~six months ended ~~September~~June 30, ~~2017,~~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 ~~annual pay raises,~~the increase in the number of average FTE since the second half of 2017, and higher incentive compensation expenses, ~~due to the expectation of our performance to exceed budget for 2017.~~

~~Nine months ended September 30, 2017 and 2016~~

Net interest income from our SVB Private Bank increased by $2.4 million for the nine months ended September 30, 2017, due primarily to higher interest income due to loan growth, partially offset by a higher funding charge for loans funded as loan growth exceeded deposit growth.

SVB Private Bank had a provision for credit losses of $2.3 million for the nine months ended September 30, 2017, compared to $2.5 million for the comparable 2016 period. The provisions for both the nine months ended September 30, 2017 and 2016 were due primarily to reserves for period-end loan growth.

Noninterest expense increased by $3.2 million for the nine months ended September 30, 2017, due primarily to increased compensation and benefits expense. Compensation and benefits expense increased as a result of increased salaries and wages, reflective primarily of ~~annual pay raises, and higher incentive compensation expenses due~~our strong 2018 full-year expected performance as compared to ~~the expectation of our performance to exceed budget for~~ 2017.

SVB Capital


	Three months ended September 30,								Nine months ended September 30,								Three months ended June 30,								Six months ended June 30,
(Dollars in thousands)	2017			2016			% Change		2017			2016			% Change		2018			2017			% Change		2018			2017			% Change
Net interest income (expense)	$	15		$	1		NM		$	41		$	(51	)	(180.4	)%
Net interest income																	$	9		$	16		(43.8	)%	$	16		$	16		—	%
Noninterest income	13,913			30,619			(54.6	)	45,707			44,492			2.7		28,498			15,019			89.7		57,409			31,794			80.6
Noninterest expense	(4,873		)	(3,924		)	24.2		(14,537		)	(11,521		)	26.2		(5,666		)	(6,192		)	(8.5	)	(10,713		)	(9,664		)	10.9
Income before income tax expense	$	9,055		$	26,696		(66.1	)	$	31,211		$	32,920		(5.2	)	$	22,841		$	8,843		158.3		$	46,712		$	22,146		110.9
Total average assets	$	323,417		$	325,321		(0.6	)	$	333,439		$	334,328		(0.3	)	$	369,841		$	355,292		4.1		$	371,572		$	364,036		2.1

~~NM—Not meaningful~~

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 ~~September~~June 30, ~~2017~~2018 and ~~2016~~2017

SVB Capital had noninterest income of ~~$13.9~~$28.5 million for the three months ended ~~September~~June 30, ~~2017,~~2018, compared to ~~$30.6~~$15.0 million for the comparable 2016 period. The decrease in noninterest income was due primarily to lower net gains on investment securities compared to the comparable 2016 period. SVB Capital’s components of noninterest income primarily include the following:

~~Net gains on investment securities of $8.2 million for the~~ ~~three months endedSeptember 30,~~ 2017~~, compared to net gains of $18.2 million for the comparable~~ ~~2016~~ ~~period. The gains on investment securities of $8.2 million for the~~ ~~three months endedSeptember 30, 2017~~ were primarily related to gains from distributions from our strategic venture capital fund investments and net unrealized valuation increases in the investments held by the funds driven by IPO and M&A activity during the third quarter of 2017. Investment security gains in the three months ended September 30, 2016 included $7.2 million from valuation increases for one of our equity method fund investments,

~~In 2016, we recognized $6.7 million in carried interest related to the equity method fund that drove the $7.2 million of investment gains, and~~

~~Fund management fees remained flat at $5.2 million for the three months ended September 30, 2017 and 2016.~~

~~Nine months ended September 30, 2017 and 2016~~

~~SVB Capital had noninterest income of $45.7 million for the nine months ended September 30, 2017, compared to $44.5 million for the comparable 2016~~ period. The increase in noninterest income was due primarily to higher net gains on investment securities compared to the comparable ~~2016~~2017 period. SVB Capital’s components of noninterest income primarily include the following:

Net gains on investment securities of $20.9 million for the three months ended June 30, 2018, compared to net gains of $9.1 million for the comparable 2017 period. The increase in net gains on investment securities for the three months ended June 30, 2018, was related primarily to gains from our strategic venture capital fund investments reflective of gains from net unrealized valuation increases in public company investments held in our strategic venture capital funds and net unrealized valuation increases in the public company investments held by our managed funds of funds, and

Fund management fees of $5.9 million compared to $5.5 million for the comparable 2017 period.

Six months ended June 30, 2018 and 2017

SVB Capital had noninterest income of $57.4 million for the six months ended June 30, 2018, compared to $31.8 million for the comparable 2017 period. The increase in noninterest income was due primarily to higher net gains on investment securities compared to the comparable 2017 period. SVB Capital’s components of noninterest income primarily include the following:

Net gains on investment securities of ~~$28.2~~$43.8 million for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018, compared to net gains of ~~$23.0~~$19.9 million for the comparable ~~2016~~2017 period. The net gains on investment securities of ~~$28.2~~$43.8 million ~~for the~~ ~~nine months endedSeptember 30, 2017~~ were related to gains from ~~distributions from~~ our strategic venture capital

fund investments ~~and~~reflective of net unrealized valuation increases in ~~the~~both public and private company investments held in our strategic venture capital funds and gains from net unrealized valuation increases in public company investments held by our managed funds of funds, offset by losses from our public equity securities portfolio reflective of net losses on sales of shares of Roku, from exercised warrants in 2017, which were sold in the ~~funds driven by IPO~~first quarter of 2018, and ~~M&A activity during the nine months ended September 30, 2017, and~~

Fund management fees of ~~$15.9~~$11.7 million compared to $~~14.1~~10.7 million for the comparable ~~2016~~2017 period. ~~The increase was due primarily to the addition of new managed funds at SVB Capital.~~

Consolidated Financial Condition

Our total assets, and total liabilities and stockholders' equity, were $~~50.8~~55.9 billion at ~~September~~June 30, ~~2017~~2018 compared to ~~$44.7~~$51.2 billion at December 31, ~~2016,~~2017, an increase of ~~$6.1~~$4.7 billion, or ~~13.6~~9.1 percent. Refer below to a summary of the individual components driving the changes in total assets, total liabilities and stockholders' equity.

Cash and Cash Equivalents

Cash and cash equivalents totaled ~~$3.6~~$2.7 billion at ~~September~~June 30, ~~2017, an increase~~2018, a decrease of ~~$1.1~~$0.2 billion, or ~~39.7~~7.2 percent, compared to ~~$2.5~~$2.9 billion at December 31, ~~2016. The increase in period-end cash balances was primarily due to growth in our deposit balances during the nine months ended September 30,~~ 2017.

As of ~~September~~June 30, ~~2017 and December 31, 2016, $1.6~~2018, $0.6 billion ~~and $1.1 billion, respectively,~~ of our cash and due from banks was deposited at the Federal Reserve Bank and was earning interest at the Federal Funds target rate, and interest-earning deposits in other financial institutions were ~~$1.2~~$1.0 billion. As of December 31, 2017, $0.6 billion of our cash and ~~$721 million, respectively.~~due from banks was deposited at the Federal Reserve Bank and was earning interest at the Federal Funds target rate, and interest-earning deposits in other financial institutions were $1.1 billion.

Investment Securities

Investment securities totaled $~~24.3~~26.3 billion at ~~September~~June 30, ~~2017~~2018, an increase of ~~$2.6~~$1.9 billion, or ~~12.1~~7.8 percent, compared to $~~21.7~~24.4 billion at December 31, ~~2016~~2017. Our investment securities portfolio ~~consists~~is comprised of: (i) an available-for-sale securities portfolio and a held-to-maturity securities portfolio, both of which represent ~~primarily~~ interest earning fixed income investment securities; and (ii) a non-marketable and other equity securities portfolio, which represents primarily investments managed as part of our funds management ~~business.~~business as well as public equity securities held as a result of equity warrant assets exercised.

Available-for-Sale Securities

Period-end available-for-sale securities were ~~$12.6~~$9.6 billion at ~~September~~June 30, ~~2017~~2018 compared to ~~$12.6~~$11.1 billion at December 31, ~~2016,~~2017, a decrease of ~~$17.1 million,~~$1.5 billion, or ~~0.1~~13.7 percent. The ~~$17.1 million~~$1.5 billion decrease in period-end AFS securities balances from ~~the fourth quarter of 2016~~December 31, 2017 to ~~the third quarter of 2017~~June 30, 2018, was due primarily to ~~$2.4~~$1.8 billion in portfolio paydowns and maturities partially offset by purchases of ~~$2.4 billion of agency backed mortgage securities and U.S. Treasury 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 ~~September~~June 30, ~~2017.~~2018. The weighted average yield is computed using the amortized cost of fixed income investment securities, which are reported at fair value. For U.S. Treasury securities and U.S. agency debentures, the expected maturity is the actual contractual maturity of the notes. Expected remaining maturities for certain U.S. agency debentures may occur earlier than their contractual maturities because the note issuers have the right to call outstanding amounts ahead of their contractual maturity. Expected maturities for mortgage-backed securities may differ significantly from their contractual maturities because mortgage borrowers have the right to prepay outstanding loan obligations with or without penalties. Mortgage-backed securities classified as available-for-sale 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.


	September 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)	Carrying Value		Weighted Average Yield		Carrying Value		Weighted Average Yield		Carrying Value		Weighted Average Yield		Carrying Value		Weighted Average Yield		Carrying Value		Weighted Average Yield		Carrying Value		Weighted Average Yield		Carrying Value		Weighted Average Yield		Carrying Value		Weighted Average Yield		Carrying Value		Weighted Average Yield		Carrying Value		Weighted Average Yield
U.S. Treasury securities	$	7,498,340	1.46	%	$	2,592,486	1.19	%	$	4,905,854	1.60	%	$	—	—	%	$	—	—	%	$	5,733,070	1.67	%	$	2,037,522	1.39	%	$	3,349,925	1.71	%	$	345,623	2.99	%	$	—	—	%
U.S. agency debentures	1,676,169		1.71		314,852		1.45		1,361,317		1.77		—		—		—		—		1,485,864		1.75		555,737		1.51		930,127		1.89		—		—		—		—
Residential mortgage-backed securities:
Agency-issued collateralized mortgage obligations—fixed rate	3,012,695		2.40		—		—		—		—		487,285		1.98		2,525,410		2.48		2,038,134		2.59		—		—		—		—		47,098		2.63		1,991,036		2.58
Agency-issued collateralized mortgage obligations—variable rate	395,880		0.71		—		—		—		—		—		—		395,880		0.71		336,298		0.71		—		—		—		—		—				336,298		0.71
Total	$	12,583,084	1.69		$	2,907,338	1.22		$	6,267,171	1.64		$	487,285	1.98		$	2,921,290	2.24		$	9,593,366	1.84		$	2,593,259	1.42		$	4,280,052	1.75		$	392,721	2.95		$	2,327,334	2.31

Held-to-Maturity Securities

Period-end held-to-maturity securities were ~~$11.1~~$15.9 billion at ~~September~~June 30, ~~2017~~2018 compared to ~~$8.4~~$12.7 billion at December 31, ~~2016,~~2017, an increase of ~~$2.7~~$3.2 billion, or ~~31.2~~25.5 percent. The ~~$2.7~~$3.2 billion increase in period-end HTM security balances from ~~the fourth quarter of 2016~~December 31, 2017 to ~~the third quarter of 2017~~June 30, 2018 was due to new purchases of ~~$3.9~~$4.1 billion, ~~primarily in~~with $3.3 billion of agency backed mortgage securities purchases and $0.8 billion of municipal bond purchases, partially offset by ~~$1.2~~$0.9 billion in portfolio paydowns and maturities.

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 ~~September~~June 30, ~~2017.~~2018. Interest income on certain municipal bonds and notes (non-taxable investments) are presented on a fully taxable equivalent basis using the federal statutory tax rate of 3521.0 percent. The weighted average yield is computed using the amortized cost of fixed income investment securities. For U.S. agency

debentures, the expected maturity is the actual contractual maturity of the notes. Expected maturities for mortgage-backed securities may differ significantly from their

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.


	September 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		Weighted- Average Yield		Amortized Cost		Weighted- Average Yield		Amortized Cost		Weighted- Average Yield		Amortized Cost		Weighted- Average Yield		Amortized Cost		Weighted- Average Yield		Amortized Cost		Weighted- Average Yield		Amortized Cost		Weighted- Average Yield		Amortized Cost		Weighted- Average Yield		Amortized Cost		Weighted- Average Yield		Amortized Cost		Weighted- Average Yield
U.S. agency debentures	$	660,193	2.37	%	$	—	—	%	$	102,581	2.73	%	$	557,612	2.30	%	$	—	—	%	$	713,809	2.67	%	$	—	—	%	$	122,040	2.61	%	$	591,769	2.68	%	$	—	—	%
Residential mortgage-backed securities:
Agency-issued mortgage-backed securities	5,164,701		2.47		738		7.52		255,275		2.20		61,538		2.06		4,847,150		2.49		8,588,483		2.87		707		7.52		172,594		2.17		672,564		2.40		7,742,618		2.93
Agency-issued collateralized mortgage obligations—fixed rate	3,025,421		1.78		—		—		—		—		437,865		1.48		2,587,556		1.83		2,494,834		1.78		—		—		—		—		412,530		1.48		2,082,304		1.84
Agency-issued collateralized mortgage obligations—variable rate	269,495		0.74		—		—		—		—		—		—		269,495		0.74		233,285		0.74		—		—		—		—		—		—		233,285		0.74
Agency-issued commercial mortgage-backed securities	1,554,220		2.39		—		—		—		—		—		—		1,554,220		2.39		2,335,971		2.79		—		—		—		—		—		—		2,335,971		2.79
Municipal bonds and notes	380,976		2.24		7,560		4.04		71,631		3.06		159,509		3.24		142,276		0.59		1,531,881		3.57		7,257		2.84		75,946		2.14		259,085		2.64		1,189,593		3.87
Total	$	11,055,006	2.21		$	8,298	4.35		$	429,487	2.47		$	1,216,524	2.12		$	9,400,697	2.21		$	15,898,263	2.71		$	7,964	3.26		$	370,580	2.31		$	1,935,948	2.32		$	13,583,771	2.78

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 ~~2.7~~3.7 years and ~~2.5~~3.0 years at ~~September~~June 30, ~~2017~~2018 and December 31, ~~2016,~~2017, respectively.

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 ~~$627.5~~$852.5 million at ~~September~~June 30, ~~2017~~2018 compared to ~~$622.6~~$651.1 million at December 31, ~~2016,~~2017, an increase of ~~$4.9~~$201.4 million, or ~~0.8~~30.9 percent. Non-marketable and other equity securities, net of noncontrolling interests were ~~$506.1~~$722.3 million at ~~September~~June 30, ~~2017,~~2018, compared to ~~$500.1~~$530.6 million at December 31, ~~2016.~~2017. The increase was mostly attributable to accounting changes related to the adoption of ASU 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities, which requires equity investments (except those accounted for under the equity method of accounting) to be measured at fair value and eliminated the cost method of accounting. As part of this adoption we recorded an adjustment to opening retained earnings for cost method investments measured at NAV and increased the carrying value of our unconsolidated venture capital and private equity fund investments. We also increased our investments in qualified affordable housing projects by $77.3 million for additional tax benefits as part of our strategy to reduce our effective tax rate. The following table summarizes the carrying value (as reported) of non-marketable and other securities compared to the amounts attributable to SVBFG (which generally represents the carrying value times our ownership percentage) at ~~September~~June 30, ~~2017~~2018 and December 31, ~~2016:~~2017:

September 30, 2017 December 31, 2016
(Dollars in thousands) Carrying value (as reported) Amount attributable to SVBFG Carrying value (as reported) Amount attributable to SVBFG
Non-marketable securities (fair value accounting):
Venture capital and private equity fund investments (1) $ 128,768
$ 33,092
$ 141,649
$ 40,464
Other venture capital investments (2) 1,897
203
2,040
218
Other securities (fair value accounting) (3) 392
114
753
138
Non-marketable securities (equity method accounting):
Venture capital and private equity fund investments 87,218
63,465
82,823
64,030
Debt funds 17,889
17,889
17,020
17,020
Other investments (4) 113,478
113,478
123,514
123,514
Non-marketable securities (cost method accounting):
Venture capital and private equity fund investments 102,956
102,956
114,606
114,606
Other investments 26,835
26,835
27,700
27,700
Investments in qualified affordable housing projects, net 148,036
148,036
112,447
112,447
Total non-marketable and other securities $ 627,469
$ 506,068
$ 622,552
$ 500,137



	June 30, 2018				December 31, 2017
(Dollars in thousands)	Carrying value (as reported)		Amount attributable to SVBFG		Carrying value (as reported)		Amount attributable to SVBFG
Non-marketable and other equity securities (fair value accounting):
Consolidated venture capital and private equity fund investments (1)	$	133,007	$	34,331	$	128,111	$	33,044
Unconsolidated venture capital and private equity fund investments (2)	211,113		211,113		98,548		98,548
Other investments without a readily determinable fair value (3)	24,015		24,015		27,680		27,680
Other equity securities in public companies (4)	4,412		3,968		310		103
Non-marketable securities (equity method accounting) (5):
Venture capital and private equity fund investments	102,838		71,742		89,809		64,675
Debt funds	14,215		14,215		21,183		21,183
Other investments	111,426		111,426		111,198		111,198
Investments in qualified affordable housing projects, net	251,479		251,479		174,214		174,214
Total non-marketable and other equity securities	$	852,505	$	722,289	$	651,053	$	530,645


(1)	The following table shows the amounts of venture capital and private equity fund investments held by the following consolidated funds and amounts attributable to SVBFG for each fund at ~~September~~June 30, ~~2017~~2018 and December 31, ~~2016~~2017:

September 30, 2017 December 31, 2016
(Dollars in thousands) Carrying value (as reported) Amount attributable to SVBFG Carrying value (as reported) Amount attributable to SVBFG
Strategic Investors Fund, LP $ 15,624
$ 1,963
$ 18,459
$ 2,319
Capital Preferred Return Fund, LP 55,685
12,001
57,627
12,420
Growth Partners, LP 57,459
19,128
59,718
19,880
Other private equity fund (i) —
—
5,845
5,845
Total venture capital and private equity fund investments $ 128,768
$ 33,092
$ 141,649
$ 40,464


~~(i)~~	~~On January 3, 2017, the other private equity fund was closed resulting in an immaterial impact on the Company's financial statements.~~



	June 30, 2018				December 31, 2017
(Dollars in thousands)	Carrying value (as reported)		Amount attributable to SVBFG		Carrying value (as reported)		Amount attributable to SVBFG
Strategic Investors Fund, LP	$	13,972	$	1,755	$	14,673	$	1,843
Capital Preferred Return Fund, LP	58,148		12,532		54,147		11,670
Growth Partners, LP	59,886		19,937		58,372		19,432
CP I, LP	1,001		107		919		99
Total consolidated venture capital and private equity fund investments	$	133,007	$	34,331	$	128,111	$	33,044

(2)

The ~~following table shows the amounts of other~~carrying value represents investments in 226 and 235 funds (primarily venture capital ~~investments held by the following consolidated funds and amounts attributable to SVBFG for each fund~~funds) at ~~September~~June 30, ~~2017~~2018 and December 31, ~~2016~~2017:, respectively, where our ownership interest is typically less than 5% of the voting interests of each such fund and in which we do not have the ability to exercise significant influence over the partnerships' operating activities and financial policies. 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 carry our unconsolidated venture capital and private equity fund investments at fair value based on the fund investments' net asset values per share as obtained from the general partners of the funds. We will adjust the net asset value per share for 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 31^st, for our June 30^th consolidated financial statements, adjusted for any contributions paid, distributions received from the investment, and significant fund transactions or market events during the reporting period. We recorded a cumulative adjustment to opening retained earnings on January 1, 2018 for the difference between fair value and cost for these fund investments. The estimated fair value and carrying value of these venture capital and private equity fund investments was $211.1 million as of June 30, 2018. As of December 31, 2017, these investments were carried at cost and had a carrying value of $98.5 million.

(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. For further details on the carrying value of these investments refer to Note 6—“Investment Securities" of the “Notes to Interim Consolidated Financial Statements (unaudited)” under Part I, Item 1 of this report.

(4)


~~(4)~~(5)	The following table shows the ~~amounts~~carrying value and amount attributable to SVBFG of ~~our other investments (equity method accounting)~~each investment at ~~September~~June 30, ~~2017~~2018 and December 31, ~~2016~~2017 (equity method accounting):



	June 30, 2018				December 31, 2017
(Dollars in thousands)	Carrying value (as reported)		Amount attributable to SVBFG		Carrying value (as reported)		Amount attributable to SVBFG
Venture capital and private equity fund investments:
Strategic Investors Fund II, LP	$	5,003	$	4,692	$	6,342	$	5,971
Strategic Investors Fund III, LP	18,858		15,266		18,758		15,211
Strategic Investors Fund IV, LP	29,152		24,657		25,551		21,739
Strategic Investors Fund V, LP	21,247		11,155		16,856		8,849
CP II, LP (i)	6,792		4,110		6,700		4,056
Other venture capital and private equity fund investments	21,786		11,862		15,602		8,849
Total venture capital and private equity fund investments	$	102,838	$	71,742	$	89,809	$	64,675
Debt funds:
Gold Hill Capital 2008, LP (ii)	$	11,153	$	11,153	$	18,690	$	18,690
Other debt funds	3,062		3,062		2,493		2,493
Total debt funds	$	14,215	$	14,215	$	21,183	$	21,183
Other investments:
SPD Silicon Valley Bank Co., Ltd.	$	75,837	$	75,837	$	75,337	$	75,337
Other investments	35,589		35,589		35,861		35,861
Total other investments	$	111,426	$	111,426	$	111,198	$	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.

September 30, 2017 December 31, 2016
(Dollars in thousands) Carrying value (as reported) Amount attributable to SVBFG Carrying value (as reported) Amount attributable to SVBFG
Other investments:
SPD Silicon Valley Bank Co., Ltd. $ 75,511
$ 75,511
$ 75,296
$ 75,296
Other investments 37,967
37,967
48,218
48,218
Total other investments $ 113,478
$ 113,478
$ 123,514
$ 123,514

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 ~~September~~June 30, ~~2017,~~2018, such prohibited investments had an estimated aggregate carrying value ~~of approximately $147 million (and an aggregate~~and fair value of approximately ~~$249 million).~~$258 million. (For more information about the Volcker Rule, see “Business—Supervision and Regulation” under Part 1, Item 1 of ~~Part 1 of~~ our ~~2016~~2017 Form 10-K.)

Loans

Loans, net of unearned income increased by ~~$2.3~~$2.9 billion to ~~$22.2~~$26.0 billion at ~~September~~June 30, ~~2017,~~2018, compared to ~~$19.9~~$23.1 billion at December 31, ~~2016.~~2017. Unearned income was ~~$141~~$165 million at ~~September~~June 30, ~~2017~~2018 and ~~$125~~$148 million at December 31, ~~2016.~~2017. Total gross loans were ~~$22.3~~$26.2 billion at ~~September~~June 30, ~~2017,~~2018, an increase of ~~$2.3~~$2.9 billion, compared to ~~$20.0~~$23.3 billion at December 31, ~~2016.~~2017. Period-end loans increased compared to December 31, ~~2016,~~2017, driven primarily by loan growth in our private equity/venture capital ~~portfolio.~~ portfolio as well as from our life science/healthcare and private bank loan portfolios.

The breakdown of total gross loans and total loans as a percentage of total gross loans by ~~category~~industry sector is as follows:


	September 30, 2017				December 31, 2016				June 30, 2018				December 31, 2017
(Dollars in thousands)	Amount		Percentage		Amount		Percentage		Amount		Percentage		Amount		Percentage
Commercial loans:
Software/internet	$	5,851,323	26.2	%	$	5,668,578	28.3	%	$	6,291,788	24.0	%	$	6,232,725	26.8	%
Hardware	1,122,024		5.0		1,189,114		5.9		1,281,433		4.9		1,200,900		5.2
Private equity/venture capital	9,634,928		43.1		7,747,911		38.7		12,233,005		46.8		9,961,121		42.8
Life science/healthcare	1,779,200		8.0		1,866,685		9.3		2,158,336		8.3		1,867,960		8.0
Premium wine	211,822		1.0		201,634		1.0		198,809		0.8		204,257		0.9
Other	395,091		1.8		396,458		2.0		329,260		1.2		379,431		1.6
Total commercial loans	18,994,388		85.1		17,070,380		85.2		22,492,631		86.0		19,846,394		85.3
Real estate secured loans:
Premium wine	713,467		3.2		678,745		3.5		686,241		2.6		670,112		2.9
Consumer	2,203,877		9.9		1,925,620		9.6		2,477,871		9.5		2,297,857		9.9
Other	42,671		0.2		43,807		0.2		41,477		0.2		42,230		0.2
Total real estate secured loans	2,960,015		13.3		2,648,172		13.3		3,205,589		12.3		3,010,199		13.0
Construction loans	75,644		0.3		64,957		0.3		65,286		0.2		69,108		0.3
Consumer loans	299,782		1.3		241,153		1.2		397,276		1.5		328,452		1.4
Total gross loans	$	22,329,829	100.0		$	20,024,662	100.0		$	26,160,782	100.0		$	23,254,153	100.0

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 ~~September~~June 30, ~~2017~~2018:


	September 30, 2017												June 30, 2018
(Dollars in thousands)	Less than Five Million		Five to Ten Million		Ten to Twenty Million		Twenty to Thirty Million		Thirty Million or More		Total		Less than Five Million		Five to Ten Million		Ten to Twenty Million		Twenty to Thirty Million		Thirty Million or More		Total
Commercial loans:
Software/internet	$	1,484,316	$	859,890	$	1,485,139	$	1,144,494	$	877,484	$	5,851,323	$	1,539,475	$	1,008,935	$	1,632,610	$	1,311,264	$	799,504	$	6,291,788
Hardware	240,941		185,029		215,278		272,862		207,914		1,122,024		280,723		156,107		222,416		335,955		286,232		1,281,433
Private equity/venture capital	656,327		766,075		1,563,788		971,708		5,677,030		9,634,928		805,821		979,953		1,720,124		1,395,524		7,331,583		12,233,005
Life science/healthcare	330,412		456,618		500,453		325,108		166,609		1,779,200		304,936		468,496		579,664		437,771		367,469		2,158,336
Premium wine	73,551		42,149		39,630		48,492		8,000		211,822		66,605		31,382		41,388		59,434		—		198,809
Other	150,103		8,000		50,885		69,521		116,582		395,091		218,862		16,769		58,901		—		34,728		329,260
Commercial loans	2,935,650		2,317,761		3,855,173		2,832,185		7,053,619		18,994,388		3,216,422		2,661,642		4,255,103		3,539,948		8,819,516		22,492,631
Real estate secured loans:
Premium wine	165,085		191,436		222,088		95,440		39,418		713,467		166,024		183,678		225,818		110,721		—		686,241
Consumer	1,886,402		234,167		83,308		—		—		2,203,877		2,120,801		257,917		99,153		—		—		2,477,871
Other	7,826		—		14,312		20,533		—		42,671		7,635		—		33,842		—		—		41,477
Real estate secured loans	2,059,313		425,603		319,708		115,973		39,418		2,960,015		2,294,460		441,595		358,813		110,721		—		3,205,589
Construction loans	6,587		46,164		—		22,893		—		75,644		12,257		39,472		13,557		—		—		65,286
Consumer loans	131,676		49,404		32,097		51,755		34,850		299,782		144,545		45,198		50,204		120,974		36,355		397,276
Total gross loans	$	5,133,226	$	2,838,932	$	4,206,978	$	3,022,806	$	7,127,887	$	22,329,829	$	5,667,684	$	3,187,907	$	4,677,677	$	3,771,643	$	8,855,871	$	26,160,782

At ~~September~~June 30, ~~2017,~~2018, gross loans equal to or greater than $20 million to any single client (individually or in the aggregate) totaled ~~$10.2~~$12.6 billion, or ~~45.5~~48.3 percent of our total gross loan portfolio. These loans represented ~~257~~318 clients, and of these loans, ~~$71.6~~$28.2 million were on nonaccrual status as of ~~both September~~June 30, ~~2017 and December 31, 2016.~~2018.


	December 31, 2016												December 31, 2017
(Dollars in thousands)	Less than Five Million		Five to Ten Million		Ten to Twenty Million		Twenty to Thirty Million		Thirty Million or More		Total		Less than Five Million		Five to Ten Million		Ten to Twenty Million		Twenty to Thirty Million		Thirty Million or More		Total
Commercial loans:
Software/internet	$	1,317,707	$	779,986	$	1,657,760	$	1,021,486	$	891,639	$	5,668,578	$	1,558,717	$	974,959	$	1,545,194	$	1,190,247	$	963,608	$	6,232,725
Hardware	252,339		160,534		223,781		244,988		307,472		1,189,114		258,586		138,254		253,978		217,425		332,657		1,200,900
Private equity/venture capital	635,838		668,998		1,182,427		888,916		4,371,732		7,747,911		697,427		807,596		1,617,121		1,142,818		5,696,159		9,961,121
Life science/healthcare	328,942		372,171		457,833		420,580		287,159		1,866,685		321,738		450,445		576,926		313,656		205,195		1,867,960
Premium wine	76,400		25,209		76,609		15,902		7,514		201,634		60,663		37,845		64,062		32,423		9,264		204,257
Other	124,650		40,950		61,228		26,320		143,310		396,458		149,825		23,096		103,989		25,599		76,922		379,431
Commercial loans	2,735,876		2,047,848		3,659,638		2,618,192		6,008,826		17,070,380		3,046,956		2,432,195		4,161,270		2,922,168		7,283,805		19,846,394
Real estate secured loans:
Premium wine	151,759		172,975		229,750		101,387		22,874		678,745		150,563		187,272		220,062		89,561		22,654		670,112
Consumer loans	1,664,432		196,345		64,843		—		—		1,925,620		1,989,973		224,825		83,059		—		—		2,297,857
Other	8,014		—		14,660		21,133		—		43,807		7,763		—		14,134		20,333		—		42,230
Real estate secured loans	1,824,205		369,320		309,253		122,520		22,874		2,648,172		2,148,299		412,097		317,255		109,894		22,654		3,010,199
Construction loans	23,976		6,685		14,016		20,280		—		64,957		12,178		34,029		—		22,901		—		69,108
Consumer loans	99,119		29,092		9,473		29,089		74,380		241,153		146,395		49,921		17,120		78,742		36,274		328,452
Total gross loans	$	4,683,176	$	2,452,945	$	3,992,380	$	2,790,081	$	6,106,080	$	20,024,662	$	5,353,828	$	2,928,242	$	4,495,645	$	3,133,705	$	7,342,733	$	23,254,153

At December 31, ~~2016,~~2017, gross loans equal to or greater than $20 million to any single client (individually or in the aggregate) totaled ~~$8.9~~$10.5 billion, or ~~44.4~~45.1 percent of our total gross loan portfolio. These loans represented ~~233~~277 clients, and of these loans, ~~$79.7~~$52.1 million were on nonaccrual status as of December 31, ~~2016.~~2017.

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 11 percent of total gross loans at both ~~September~~June 30, ~~2017~~2018 and December 31, ~~2016.~~2017. These loans are made to companies in both our Accelerator (early-stage) and Growth practices. Investor dependent loans typically have modest or negative cash flows and no established record of profitable operations. Repayment of these loans may be dependent upon receipt by borrowers of additional equity financing from venture capital firms or others, or in some cases, a successful sale to a third party or an IPO. Venture capital firms may provide financing selectively, at reduced amounts, or on less favorable terms, which may have an adverse effect on our borrowers' ability to repay their loans to us. When repayment is dependent upon the next round of venture investment and there is an indication that further investment is unlikely or will not occur, it is often likely that the company would need to be sold to repay debt in full. If reasonable efforts have not yielded a likely buyer willing to repay all debt at the close of the sale or on commercially viable terms, the account will most likely be deemed to be impaired.

Balance sheet dependent loans, which includes asset-based loans, represented 109 percent of total gross loans at ~~September~~June 30, ~~2017~~2018 compared to 1310 percent at December 31, ~~2016.~~2017. Balance sheet dependent loans are structured to require constant current asset coverage (i.e. cash, cash equivalents, accounts receivable and, to a much lesser extent, inventory) in an amount that exceeds the outstanding debt. These loans are generally made to companies in our Growth and Corporate Finance practices. Our asset-based lending, which includes working capital lines and accounts receivable financing, both represented ~~three~~two percent of total gross loans as of ~~September~~June 30, ~~2017~~2018, and ~~five percent and two~~both represented three percent of total gross loans at December 31, ~~2016, respectively.~~2017. The repayment of these arrangements is dependent on the financial condition, and payment ability, of third parties with whom our clients do business.

Cash flow dependent loans, which include sponsored buyout lending, ~~represent our largest source of repayment within our technology and life science/healthcare loan portfolios at approximately 19~~represented 18 percent of total gross loans at ~~September~~June 30, ~~2017,~~2018, compared to 2219 percent ~~of total gross loans~~ at December 31, ~~2016.~~2017. Cash flow dependent loans require the borrower

to maintain 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 10eight percent of total gross loans at ~~September~~June 30, ~~2017,~~2018 compared to 11nine percent ~~of total gross loans~~ at December 31, ~~2016.~~2017. These loans are typically used to assist a select group of experienced private equity sponsors with the acquisition of businesses, are larger in size, and repayment is generally dependent upon the cash flows of the acquired company. The acquired companies are typically established, later-stage businesses of scale and characterized by reasonable levels of leverage and loan structures that include meaningful financial covenants. The sponsor's equity contribution is often 50 percent or more of the acquisition price.

(ii) Private Equity/Venture Capital

We also provide financial services to clients in the private equity/venture capital community. At ~~September~~June 30, ~~2017,~~2018, our lending to private equity/venture capital firms and funds represented 4347 percent of total gross loans, compared to 3943 percent of total gross loans at December 31, ~~2016.~~2017. The vast majority of this portfolio consists of capital call lines of credit, the repayment of which is dependent on the payment of capital calls by the underlying limited partner investors in the funds managed by these firms. These facilities are generally governed by meaningful financial covenants oriented towards ensuring that the funds' remaining callable capital is sufficient to repay the loan, and larger commitments (typically provided to larger private equity funds) are often secured by an assignment of the general partner's right to call capital from the fund's limited partner investors.

(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 ~~September~~June 30, ~~2017~~2018 and December 31, ~~2016.~~2017. Many of these clients have mortgages, which represented 8586 percent of this portfolio at ~~September~~June 30, ~~2017;~~2018; the balance of this portfolio consisted of home equity lines of credit, restricted stock purchase loans, capital call lines of credit, and other secured and unsecured lending.

State Concentrations

Approximately 3130 percent and 11 percent of our outstanding total gross loan balances ~~at both September~~as of June 30, ~~2017 and December 31, 2016~~2018 were to borrowers based in California and New ~~York.~~York, respectively, compared to 31 percent and 10 percent as of December 31, 2017. Other than California and New York, there are no states with gross loan balances greater than 10 percent. In October 2017, wildfires impacted regions of Northern California where some of our premium wine clients are located. As of September 30, 2017, our total loans outstanding for our wine portfolio was $925 million (4% of total loan portfolio) with loans outstanding to clients in the impacted regions of approximately $700 million. We do not currently believe there will be a material effect on the credit quality of our wine portfolio in the near term; however, we will continue to monitor this segment of our portfolio closely.

See generally “Risk Factors–Credit Risks” set forth under Part I, Item 1A ~~Part I~~ in our ~~2016~~2017 Form 10-K.

Credit Quality Indicators

As of ~~September~~June 30, ~~2017~~2018 and December 31, ~~2016,~~2017, our total criticized loans and impaired loans both represented four ~~percent and six~~ percent of our total gross ~~loans, respectively.~~loans. Criticized and impaired loans to early-stage clients represented 1718 percent and 22 percent of our total criticized and impaired loan balances at ~~both September~~June 30, ~~2017~~2018 and December 31, ~~2016.~~2017, respectively. Loans to early-stage clients represent a relatively small percentage of our overall portfolio at six percent of total gross loans at ~~September~~June 30, ~~2017.~~2018. It is common for an early-stage client’s remaining liquidity to fall temporarily below the threshold for a pass-rated credit during its capital-raising period for a new round of funding. Based on our experience, for most early-stage clients, this situation typically lasts one to two quarters and generally resolves itself with a subsequent round of venture funding, though there are exceptions, from time to time. As a result, we expect that each of our early-stage clients will reside in our criticized portfolio during a portion of their life cycle.

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:


(Dollars in thousands)	September 30, 2017			December 31, 2016			June 30, 2018			December 31, 2017
Gross nonaccrual, past due, and restructured loans:
Nonaccrual loans	$	124,672		$	118,979		$	124,842		$	119,259
Loans past due 90 days or more still accruing interest	764			33			462			191
Total nonperforming loans	125,436			119,012			125,304			119,450
OREO and other foreclosed assets	—			—			—			—
Total nonperforming assets	$	125,436		$	119,012		$	125,304		$	119,450
Performing TDRs	$	22,946		$	33,732		$	42,408		$	71,468
Nonperforming loans as a percentage of total gross loans	0.56		%	0.59		%	0.48		%	0.51		%
Nonperforming assets as a percentage of total assets	0.25			0.27			0.22			0.23
Allowance for loan losses	$	249,010		$	225,366		$	286,709		$	255,024
As a percentage of total gross loans	1.12		%	1.13		%	1.10		%	1.10		%
As a percentage of total gross nonperforming loans	198.52			189.36			228.81			213.50
Allowance for loan losses for nonaccrual loans	$	43,824		$	37,277		$	53,677		$	41,793
As a percentage of total gross loans	0.20		%	0.19		%	0.21		%	0.18		%
As a percentage of total gross nonperforming loans	34.94			31.32			42.84			34.99
Allowance for loan losses for total gross performing loans	$	205,186		$	188,089		$	233,032		$	213,231
As a percentage of total gross loans	0.92		%	0.94		%	0.89		%	0.92		%
As a percentage of total gross performing loans	0.92			0.94			0.90			0.92
Total gross loans	$	22,329,829		$	20,024,662		$	26,160,782		$	23,254,153
Total gross performing loans	22,204,393			19,905,650			26,035,478			23,134,703
Allowance for unfunded credit commitments (1)	48,172			45,265			54,104			51,770
As a percentage of total unfunded credit commitments	0.29		%	0.27		%	0.29		%	0.30		%
Total unfunded credit commitments (2)	$	16,341,930		$	16,743,196		$	18,728,360		$	17,462,537


(1)	The “allowance for unfunded credit commitments” is included as a component of other liabilities and any provision is included in the “provision for credit losses” in the statement of income. See “Provision for credit losses” for a discussion of the changes to the allowance.


(2)	Includes unfunded loan commitments and letters of credit.

Our allowance for loan losses as a percentage of total gross loans ~~decreased one basis point to 1.12~~remained flat at 1.10 percent at ~~September~~June 30, ~~2017,~~2018, compared to ~~1.13 percent~~December 31, 2017 reflective of a decrease in reserves for performing loans of three basis points, offset by an increase in reserves for nonaccrual loans of three basis points.

Our allowance for loan losses for performing loans was $233.0 million at June 30, 2018, compared to $213.2 million at December 31, ~~2016.~~2017. The ~~decrease of one basis point~~$19.8 million increase in reserves for performing loans was reflective primarily of ~~the decrease~~an increase in ~~our allowance~~reserves of $26.5 million for ~~performing loans as a percentage~~period-end loan growth of ~~total gross loans which decreased by two basis points to 0.92 percent,~~$2.9 billion, partially offset by ~~an increase~~a decrease in reserves of ~~one basis point in the allowance~~$12.5 million for ~~nonaccrual~~our performing loans from certain reserve methodology enhancements made to our qualitative reserve for large loan exposure as a ~~percentage~~result of ~~total gross loans at September 30, 2017.~~growth within our higher credit quality private equity/venture capital loan portfolios.

Our allowance for loan losses for nonaccrual loans was ~~$43.8~~$53.7 million at ~~September~~June 30, ~~2017,~~2018, compared to ~~$37.3~~$41.8 million at December 31, ~~2016.~~2017. The ~~$6.5~~$11.9 million increase in the allowance for nonaccrual loans included ~~$48.0~~$34.5 million of new nonaccrual loan reserves, ~~partially~~ offset by ~~$41.4~~$11.0 million of charge-offs and $11.6 million of reserve releases. New nonaccrual loan reserves of ~~$48.0~~$34.5 million were mostly attributable to our software/internet loan portfolio.

The following table presents a summary of changes in nonaccrual loans for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018 and ~~2016:~~

2017:


	Three months ended September 30,						Nine months ended September 30,						Three months ended June 30,						Six months ended June 30,
(Dollars in thousands)	2017			2016			2017			2016			2018			2017			2018			2017
Balance, beginning of period	$	120,172		$	124,319		$	118,979		$	123,392		$	116,667		$	138,764		$	119,259		$	118,979
Additions	29,650			15,940			85,990			73,680			28,960			22,015			50,763			56,339
Paydowns	(14,183		)	(14,941		)	(43,995		)	(58,376		)	(16,411		)	(17,789		)	(33,659		)	(22,116		)
Charge-offs	(10,967		)	(19,102		)	(36,299		)	(31,348		)	(4,467		)	(22,817		)	(11,579		)	(33,028		)
Other reductions	—			—			(3		)	(1,132		)	—			(1		)	(35		)	(2		)
Balance, end of period	$	124,672		$	106,216		$	124,672		$	106,216		$	124,749		$	120,172		$	124,749		$	120,172

Our nonaccrual loans as of ~~September~~June 30, ~~2017~~2018 included ~~$98.0~~$102.1 million from seven clients ~~(software/~~(six software/internet clients represent ~~$61.3 million, two life science/healthcare clients represent $25.0~~$91.2 million and one hardware client represents ~~$11.7~~$11.0 million). Two of these loans are sponsored buyout loans that were added to our nonaccrual portfolio in 2015, another is a Corporate Finance client that was added during 2016, and ~~four~~the remaining three are ~~new nonaccrual~~ loans from our Growth practice (one added during 2017 ~~spread across our Accelerator~~ and ~~Growth practices.~~the remaining were added during 2018). The total credit exposure for these seven largest nonaccrual loans is ~~$99.0~~$102.5 million, for which we have specifically reserved ~~$30.4~~$41.6 million.

Average nonaccrual loans for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018 were ~~$119.5~~$127.4 million and ~~$124.6~~$119.5 million, respectively, compared to ~~$111.8~~$128.9 million and ~~$113.1~~$127.1 million for the comparable ~~2016~~2017 periods. The ~~$7.7~~$1.5 million ~~increase~~decrease in average nonaccrual loans for the three months ended ~~September~~June 30, ~~2017~~2018 compared to ~~September~~June 30, ~~2016~~2017 was primarily from our software/internet and ~~hardware~~life science/healthcare loan portfolios, partially offset by ~~a decrease~~an increase in our ~~life sciences~~hardware loan portfolio. If the nonaccrual loans had not been impaired, ~~$1.8~~$2.1 million and ~~$5.6~~$4.0 million in interest income would have been recorded for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2018, respectively, compared to ~~$1.1~~$2.1 million and ~~$3.8~~$3.9 million for the comparable ~~2016~~2017 periods.

Accrued Interest Receivable and Other Assets

A summary of accrued interest receivable and other assets at ~~September~~June 30, ~~2017~~2018 and December 31, ~~2016~~2017 is as follows:


(Dollars in thousands)	September 30, 2017		December 31, 2016		% Change		June 30, 2018		December 31, 2017		% Change
Foreign exchange spot contract assets, gross							$	206,289	$	208,738	(1.2	)%
Derivative assets, gross (1)	$	248,556	$	210,070	18.3	%	249,505		232,152		7.5
Foreign exchange spot contract assets, gross	147,304		53,058		177.6
Accrued interest receivable	129,451		111,222		16.4		169,649		141,773		19.7
FHLB and Federal Reserve Bank stock	58,012		57,592		0.7		58,864		60,020		(1.9	)
Net deferred tax assets							75,286		63,845		17.9
Accounts receivable	78,242		62,569		25.0		57,740		55,946		3.2
Net deferred tax assets	75,043		71,840		4.5
Other assets	113,153		106,337		6.4		167,091		113,772		46.9
Total accrued interest receivable and other assets	$	849,761	$	672,688	26.3		$	984,424	$	876,246	12.3


(1)	See “Derivatives” section below.

~~Foreign Exchange Spot Contract Assets~~Accrued Interest Receivable

~~Foreign exchange spot contract assets represent unsettled client trades at the end of the period.~~ The increase of ~~$94.2~~$27.9 million in accrued interest receivable was ~~due~~ primarily toreflective of the strong growth of our loans. Period-end loan balances were $26.0 billion, an ~~overall~~ increase ~~in activity at period-end~~of $2.9 billion, or 12.5 percent, as compared to December 31, ~~2016.~~2017.

Net Deferred Tax Assets

The increase of $11.4 million in net deferred tax assets was primarily due to the decrease in the fair value of AFS securities, an increase the allowance for loan losses and the recognition of tax over book gains on warrant exercises. The increase in net deferred tax assets was partially offset by an increase in the deferred tax liability as a result of the change in book accounting following the adoption of ASU 2016-01.

Other

Other includes various asset amounts for other operational transactions. The increase of $53.3 million was primarily due to a $34.7 million increase in current tax receivable due to the payment in excess of the current quarter's tax provision. Prepaid assets also increased $11.7 million primarily due to the annual timing of prepaid software agreement 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 ~~September~~June 30, ~~2017~~2018 and December 31, ~~2016:~~2017:


(Dollars in thousands)	September 30, 2017			December 31, 2016			% Change		June 30, 2018		December 31, 2017		% Change
Assets:
Equity warrant assets	$	141,785		$	131,123		8.1	%	$	143,725	$	123,763	16.1	%
Foreign exchange forward and option contracts	94,947			68,027			39.6		99,358		96,636		2.8
Interest rate swaps	—			810			(100.0	)
Client interest rate derivatives	11,824			10,110			17.0		6,422		11,753		(45.4	)
Total derivative assets	$	248,556		$	210,070		18.3		$	249,505	$	232,152	7.5
Liabilities:
Foreign exchange forward and option contracts	$	(88,961	)	$	(54,668	)	62.7		$	84,672	$	96,641	(12.4	)
Client interest rate derivatives	(11,955		)	(9,770		)	22.4		12,532		11,940		5.0
Total derivative liabilities	$	(100,916	)	$	(64,438	)	56.6		$	97,204	$	108,581	(10.5	)

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 ~~September~~June 30, ~~2017,~~2018, we held warrants in ~~1,842~~1,967 companies, compared to ~~1,739~~1,868 companies at December 31, ~~2016.~~2017. Warrants in 1615 companies each had values greater than $1.0 million and collectively represented ~~$51.7~~$38.6 million, or ~~36.5~~26.8 percent, of the fair value of the total warrant portfolio at ~~September~~June 30, ~~2017.~~2018. The change in fair value of equity warrant assets is recorded in gains on equity warrant assets, net, in noninterest income, a component of consolidated net income. The following table provides a summary of transactions and valuation changes for equity warrant assets for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018 and ~~2016:~~2017:


	Three months ended September 30,						Nine months ended September 30,						Three months ended June 30,						Six months ended June 30,
(Dollars in thousands)	2017			2016			2017			2016			2018			2017			2018			2017
Balance, beginning of period	$	131,750		$	129,800		$	131,123		$	137,105		$	135,669		$	124,233		$	123,763		$	131,123
New equity warrant assets	3,622			5,251			11,114			9,857			4,299			3,419			9,398			7,492
Non-cash changes in fair value, net	18,230			16,788			23,564			21,989			11,012			8,270			19,469			7,294
Exercised equity warrant assets	(11,060		)	(5,338		)	(20,402		)	(21,066		)	(6,429		)	(3,601		)	(7,179		)	(13,030		)
Terminated equity warrant assets	(757		)	(1,161		)	(3,614		)	(2,545		)	(826		)	(571		)	(1,726		)	(1,129		)
Balance, end of period	$	141,785		$	145,340		$	141,785		$	145,340		$	143,725		$	131,750		$	143,725		$	131,750

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 ~~September~~June 30, ~~2017 was $1.1~~2018 and $65.6 million ~~and our net exposure~~ at December 31, ~~2016 was $0.8 million.~~2017. For additional information on our foreign exchange forward contracts and foreign currency option contracts, see Note 9—“Derivative Financial Instruments” of the “Notes to Interim Consolidated Financial Statements (unaudited)” under Part I, Item 1 of this report.

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 ~~zero~~$3.7 million at ~~September~~June 30, ~~2017~~2018 and ~~our net exposure~~$11.7 million at December 31, ~~2016 was $0.3 million.~~2017. For additional information on our client interest rate derivatives, see Note 9—“Derivative Financial Instruments” of the “Notes to Interim Consolidated Financial Statements (unaudited)” under Part I, Item 1 of this report.

Deposits

Deposits were ~~$44.8~~$48.9 billion at ~~September~~June 30, ~~2017,~~2018, an increase of ~~$5.8~~$4.6 billion, or ~~15.0~~10.5 percent, compared to ~~$39.0~~$44.3 billion at December 31, ~~2016.~~2017. The increase in deposits was driven primarily by ~~funds coming from both new~~a healthy equity funding environment across a majority of our market segments with robust activities in the IPO and existing clients in our Technology Early-Stage, Private Equity Services, and our Life Sciences portfolios during the nine months ended September 30, 2017 due to healthy venture capital funding and robust secondary public offering markets as well as strong new client acquisition. Our SVB Global, Private Equity Division and Life Sciences market ~~activities.~~segments were the leading contributors to growth in deposits for the second half of 2018.

At ~~September~~June 30, ~~2017,~~2018, the aggregate balance of time deposit accounts individually equal to or greater than $100,000 totaled ~~$38.6~~$57 million, compared to ~~$48.3~~$41 million at December 31, ~~2016.~~2017. At ~~September~~June 30, ~~2017, $38.6 million~~2018, all of the time deposit accounts individually equal to or greater than $100,000 were scheduled to mature within one year. No material portion of our deposits has been obtained from a single depositor and the loss of any one depositor would not materially affect our business. Approximately 1315 percent and 1214 percent of our total deposits at ~~September~~June 30, ~~2017~~2018 and December 31, ~~2016,~~2017, respectively, were from our clients in Asia.

Short-Term Borrowings

We had ~~$4.8 million~~$0.4 billion in short-term borrowings at ~~September~~June 30, ~~2017,~~2018, compared to ~~$512.7~~$1.0 billion at December 31, 2017. On June 29, 2018, we borrowed a total of $0.4 billion from our overnight credit facilities to support the short-term liquidity needs of the Bank. These borrowings were repaid, subsequent to quarter-end, on July 2, 2018.

Long-Term Debt

Our long-term debt was $696.0 million at June 30, 2018 and $695.5 million at December 31, ~~2016. The decrease was due to the repayment, on January 6, 2017, of our short-term FHLB advances utilized and outstanding at December 31, 2016.~~

~~Long-Term Debt~~

~~Our long-term debt was $749.6 million at September 30, 2017 and $795.7 million at December 31, 2016.~~

2017. As of ~~September~~June 30, ~~2017~~2018, long-term debt included our 3.50% Senior Notes and 5.375% Senior ~~Notes, and 7.0% Junior Subordinated Debentures.~~Notes. For more information on our long-term debt, see Note 8—“Short-Term Borrowings and Long-Term Debt” of the “Notes to Interim Consolidated Financial Statements (unaudited)” under Part I, Item 1 of this report.

~~Our 6.05% Subordinated Notes, issued by the Bank, were repaid on June 1, 2017. The interest rate swap agreement relating to this issuance was terminated upon repayment of the notes.~~

Other Liabilities

A summary of other liabilities at ~~September~~June 30, ~~2017~~2018 and December 31, ~~2016~~2017 is as follows:


(Dollars in thousands)	September 30, 2017		December 31, 2016		% Change		June 30, 2018		December 31, 2017		% Change
Foreign exchange spot contract liabilities, gross	$	249,175	$	68,018	NM		$	269,228	$	202,807	32.8
Accrued compensation	124,111		135,842		(8.6	)	111,717		167,531		(33.3	)
Allowance for unfunded credit commitments	48,172		45,265		6.4		54,103		51,770		4.5
Derivative liabilities, gross (1)	100,916		64,438		56.6		97,204		108,581		(10.5	)
Other	468,124		304,820		53.6		530,139		381,066		39.1
Total other liabilities	$	990,498	$	618,383	60.2		$	1,062,391	$	911,755	16.5

~~NM—Not meaningful~~


(1)	See “Derivatives” section above.

Foreign Exchange Spot Contract Liabilities

Foreign exchange spot contract liabilities represent unsettled client trades at the end of the period. The increase of ~~$181.2~~$66.4 million was due primarily to increased client trade activity at period-end as compared to December 31, ~~2016.~~2017.

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 $55.8 million was primarily the result of the payout of our 2017 incentive compensation plans during the first quarter of 2018, partially offset by

higher compensation incentive plan accruals for the six months ended June 30, 2018 reflective primarily of our strong full-year expected performance 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 ~~$163.3~~$149.1 million was reflective primarily of a ~~$145.3~~$107.8 million increase in unsettled fixed income investment securities purchases, a $60.2 million increase in new commitments for our qualified affordable tax credit funds, partially offset by a $16.7 million decrease in foreign currency unsettled trade liabilities at ~~September~~June 30, ~~2017~~2018 as compared to December 31, ~~2016.~~2017.

Noncontrolling Interests

Noncontrolling interests totaled ~~$137.5~~$147.2 million and ~~$134.5~~$139.6 million at ~~September~~June 30, ~~2017~~2018 and December 31, ~~2016,~~2017, respectively. The ~~$3.0~~$7.6 million increase was due primarily to income attributable to noncontrolling interests of ~~$21.2~~$22.3 million, partially offset by net distributions of ~~$18.2~~$14.7 million to limited partners from various managed funds of funds for the ~~nine~~six months ended ~~September~~June 30, ~~2017.~~2018.

Fair Value Measurements

The following table summarizes our financial assets and liabilities that are measured at fair value on a recurring basis as of ~~September~~June 30, ~~2017~~2018 and December 31, ~~2016~~2017:


	September 30, 2017						December 31, 2016						June 30, 2018						December 31, 2017
(Dollars in thousands)	Total Balance			Level 3			Total Balance			Level 3			Total Balance			Level 3			Total Balance			Level 3
Assets carried at fair value	$	12,982,950		$	140,972		$	12,974,923		$	130,853		$	10,191,403		$	138,754		$	11,481,237		$	122,250
As a percentage of total assets	25.6		%	0.3		%	29.0		%	0.3		%	18.2		%	0.2		%	22.4		%	0.2		%
Liabilities carried at fair value	$	100,916		$	—		$	64,438		$	—		$	97,204		$	—		$	108,581		$	—
As a percentage of total liabilities	0.2		%	—		%	0.2		%	—		%	0.2		%	—		%	0.2		%	—		%
As a percentage of assets carried at fair value				1.1		%				1.0		%				1.4		%				1.1		%

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 ~~14—~~15—“Fair Value of Financial Instruments” of the “Notes to Interim Consolidated Financial Statements (unaudited)” under Part I, Item 1 of this report for a summary of the valuation techniques and significant inputs used for each class of Level 3 assets.

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 ~~2016~~2017 Form 10-K.

During the three and ~~nine~~six months ended ~~September~~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 ~~$24.4~~$10.4 million and ~~$41.4~~$17.1 million, respectively, primarily due to realized and unrealized net gains on equity warrant assets due primarily to M&A and IPO activity. During the three and nine months ended September 30, 2016, the Level 3 assets that are measured at fair value on a recurring basis experienced net realized and unrealized gainsreflective of ~~$21.1 million and $33.1 million, primarily due to~~ 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.

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 ~~$4.1~~$4.7 billion at ~~September~~June 30, ~~2017,~~2018, an increase of ~~$417.3~~$477.9 million, or ~~11.5~~11.4 percent, compared to ~~$3.6~~$4.2 billion at December 31, ~~2016.~~2017. This increase was due primarily to net income of ~~$373.3~~$432.8 million for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018 and ana net increase to equity of $68.8 million related to the adoption of new accounting guidance partially offset by a decrease in ~~additional paid-in capital~~the fair value of ~~$51.8~~our AFS securities portfolio of $52.9 million, ~~attributable primarily to amortization~~net of ~~share-based compensation expense and common stock issued under employee benefit plans.~~tax, driven by increases in period-end market interest rates.

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 ~~September~~June 30, ~~2017~~2018 and December 31, ~~2016.~~2017. Capital ratios for SVB Financial and the Bank, compared to the minimum regulatory ratios applicable to bank holding companies and banks to be considered “well capitalized” and “adequately capitalized”, are set forth below:


					Minimum Ratios under Applicable Regulatory Capital Adequacy Requirements								Minimum Ratios under Applicable Regulatory Capital Adequacy Requirements
	September 30, 2017		December 31, 2016		“Well Capitalized”		“Adequately Capitalized”		June 30, 2018		December 31, 2017		“Well Capitalized”		“Adequately Capitalized”
SVB Financial:
CET 1 risk-based capital ratio	12.96	%	12.80	%	6.5	%	4.5	%	12.92	%	12.78	%	6.5	%	4.5	%
Tier 1 risk-based capital ratio	13.32		13.26		8.0		6.0		13.10		12.97		8.0		6.0
Total risk-based capital ratio	14.29		14.21		10.0		8.0		14.03		13.96		10.0		8.0
Tier 1 leverage ratio	8.34		8.34		N/A		4.0		8.81		8.34		N/A		4.0
Tangible common equity to tangible assets ratio (1)	8.00		8.15		N/A		N/A		8.34		8.16		N/A		N/A
Tangible common equity to risk-weighted assets ratio (1)	13.01		12.89		N/A		N/A		12.68		12.77		N/A		N/A
Bank:
CET 1 risk-based capital ratio	12.41	%	12.65	%	6.5	%	4.5	%	11.76	%	12.06	%	6.5	%	4.5	%
Tier 1 risk-based capital ratio	12.41		12.65		8.0		6.0		11.76		12.06		8.0		6.0
Total risk-based capital ratio	13.40		13.66		10.0		8.0		12.72		13.04		10.0		8.0
Tier 1 leverage ratio	7.59		7.67		5.0		4.0		7.72		7.56		5.0		4.0
Tangible common equity to tangible assets ratio (1)	7.47		7.77		N/A		N/A		7.39		7.47		N/A		N/A
Tangible common equity to risk-weighted assets ratio (1)	12.44		12.75		N/A		N/A		11.52		11.98		N/A		N/A


(1)	See below for a reconciliation of non-GAAP tangible common equity to tangible assets and tangible common equity to risk-weighted assets.

Capital ratios (CET 1, tier 1, and total risk-based ~~capital and tier 1 leverage)~~capital) for SVB Financial increased as of ~~September~~June 30, ~~2017,~~2018, compared to the same ratios as of December 31, ~~2016. The changes were driven by an~~2017 primarily as a result of the adoption of new accounting guidance that resulted in a net increase in capital ~~during the nine months ended September 30, 2017, primarily from net income. An~~of $68.8 million. This increase in ~~additional paid-in~~ capital from ~~share-based compensation expense during~~ the ~~nine months ended September 30, 2017 also resulted~~adoption of the new accounting guidance, in ~~a benefit~~addition to net income of $432.8 million, more than offset the ~~capital ratios. The~~

increases ~~in capital were partially offset by an increase~~ in risk-weighted assets ~~due~~primarily attributable to ~~period-end~~our robust loan growth ~~and higher investment and cash balances driven by increases in deposits.~~

~~Capital ratios (CET 1, tier 1, total~~

for the first half of 2018. Overall, excluding the impact of the adoption of new accounting guidance, SVB Financial Group's risk-based capital ~~and tier 1 leverage) for the Bank~~ratios would have decreased as of ~~September~~June 30, ~~2017,~~2018, compared to the same ratios as of December 31, ~~2016.~~2017.

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 ~~$60.0~~$55.0 million of cash dividends paid by the Bank to our bank holding company, SVB Financial, during the ~~nine~~six months ended ~~September~~June 30, ~~2017.~~2018.

Both SVB Financial and the Bank's tier 1 leverage ratios increased as of June 30, 2018, compared to December 31, 2017, due to proportionally higher capital from net income to average assets growth during the second of 2018. All of our reported capital ratios remain above the levels considered to be “well capitalized” under applicable banking regulations.

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 ~~September~~June 30, ~~2017~~2018 and December 31, ~~2016~~2017:


	SVB Financial						Bank						SVB Financial						Bank
Non-GAAP tangible common equity and tangible assets (Dollars in thousands, except ratios)	September 30, 2017			December 31, 2016			September 30, 2017			December 31, 2016			June 30, 2018			December 31, 2017			June 30, 2018			December 31, 2017
GAAP SVBFG stockholders’ equity	$	4,059,813		$	3,642,554		$	3,728,890		$	3,423,427		$	4,657,653		$	4,179,795		$	4,068,918		$	3,762,542
Tangible common equity	$	4,059,813		$	3,642,554		$	3,728,890		$	3,423,427		$	4,657,653		$	4,179,795		$	4,068,918		$	3,762,542
GAAP total assets	$	50,754,287		$	44,683,660		$	49,937,343		$	44,059,340		$	55,867,745		$	51,214,467		$	55,035,371		$	50,383,774
Tangible assets	$	50,754,287		$	44,683,660		$	49,937,343		$	44,059,340		$	55,867,745		$	51,214,467		$	55,035,371		$	50,383,774
Risk-weighted assets	$	31,208,081		$	28,248,750		$	29,970,913		$	26,856,850		$	36,727,118		$	32,736,959		$	35,326,564		$	31,403,489
Tangible common equity to tangible assets	8.00		%	8.15		%	7.47		%	7.77		%	8.34		%	8.16		%	7.39		%	7.47		%
Tangible common equity to risk-weighted assets	13.01			12.89			12.44			12.75			12.68			12.77			11.52			11.98

The tangible common equity to tangible assets ratio decreased for ~~SVB Financial and~~ the Bank due to the proportionally higher increase in our assets compared to the increases in common equity during the nine months ended September 30, 2017. Increased capital was reflective primarily of net income for the nine months ended September 30, 2017. Total assets increased primarily as a result of ~~loan growth and higher investment and~~the $55.0 million in cash ~~balances driven~~dividends paid by ~~increases in deposits.~~the Bank to our bank holding company, SVB Financial Group, during the six months ended June 30, 2018. The tangible common equity to risk-weighted assets ratio ~~increased~~decreased for both SVB Financial and ~~decreased for~~ the Bank. The ~~increase for SVB Financial~~decrease was a result of the proportionally higher increase in ~~net income compared~~risk-weighted assets relative to the ~~changes~~increase in ~~risk-weighted assets during the nine months ended September 30, 2017.~~tangible common equity. The growth in period-end risk-weighted assets was primarily due to period-end loan growth and higher investment ~~and cash~~ balances driven by increases in deposits. The decrease for the Bank was a result of $60.0 million in cash dividends paid by the Bank to our bank holding company, SVB Financial, during the nine months ended September 30, 2017. See “SVBFG Stockholders’ Equity” above for further details on changes to the individual components of our equity balance.

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 ~~12—~~13—“Off-Balance Sheet Arrangements, Guarantees and Other Commitments” of the “Notes to Interim Consolidated Financial Statements (unaudited)” under Part I, Item 1 of this report.

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 ~~12—~~13—“Off-Balance Sheet Arrangements, Guarantees and Other Commitments” of the “Notes to Interim Consolidated Financial Statements (unaudited)” under Part I, Item 1 of this report.

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 ~~September~~June 30, ~~2017,~~2018, our period-end total deposit balances were ~~$44.8~~$48.9 billion, compared to ~~$39.0~~$44.3 billion at December 31, ~~2016.~~2017.

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 ~~high-quality fixed income~~loans and AFS securities as collateral) and an unsecured basis. These include repurchase agreements and uncommitted federal funds lines with various financial institutions. We also pledge securities to the FHLB of San Francisco and the discount window at the Federal Reserve Bank. The fair value of collateral pledged to the FHLB of San Francisco (comprised primarily of loans and U.S. Treasury securities) at ~~September~~June 30, ~~2017~~2018 totaled ~~$1.9~~$3.8 billion, ~~all~~ of which $3.4 billion was unused and available to support additional borrowings. The fair value of collateral pledged at the discount window of the ~~Federal Reserve Bank~~FRB (comprised primarily of U.S. Treasury securities and U.S. agency debentures) at ~~September~~June 30, ~~2017~~2018 totaled ~~$0.7~~$0.9 billion, all of which was unused and available to support additional borrowings.

On a stand-alone basis, SVB Financial’s primary liquidity channels include ~~cash flow from investments and interest in financial assets (including equity warrants) held by SVB Financial or its operating subsidiaries other than the Bank; to the extent declared,~~ dividends from the ~~Bank;~~Bank, its portfolio of liquid assets, and its ability to ~~the extent needed, capital market transactions offering~~raise debt and ~~equity instruments in the public and private markets.~~capital. Consistent with recent prior quarters, the Bank has paid a quarterly dividend to SVB Financial. For the three and ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2018, the dividend amount paid was ~~$20~~$30 million and ~~$60~~$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 ~~2016~~2017 Form 10-K.

Consolidated Summary of Cash Flows

Below is a summary of our average cash position and statement of cash flows for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018 and ~~2016~~2017. For further details, see our “Interim Consolidated Statements of Cash Flows (Unaudited)” under Part I, Item 1 of this report.


	Nine months ended September 30,						Six months ended June 30,
(Dollars in thousands)	2017			2016			2018			2017
Average cash and cash equivalents	$	3,596,669		$	2,437,763		$	2,997,338		$	3,562,811
Percentage of total average assets	7.6		%	5.6		%	5.6		%	7.7		%
Net cash provided by operating activities	$	468,032		$	273,004		$	347,380		$	396,721
Net cash (used for) provided by investing activities	(4,734,383		)	2,472,444
Net cash provided by (used for) financing activities	5,276,172			(1,727,386		)
Net increase in cash and cash equivalents	$	1,009,821		$	1,018,062
Net cash used for investing activities							(4,570,107		)	(2,019,530		)
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

Average cash and cash equivalents ~~increased~~decreased by ~~$1.2~~$0.6 billion, or ~~47.5~~15.9 percent, to $3.0 billion for the six months ended June 30, 2018, compared to $3.6 billion for the ~~nine months ended September 30,~~comparable 2017 ~~compared to $2.4 billion for the comparable 2016~~ period.

Cash provided by operating activities was ~~$468.0~~$347.4 million for the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2018, reflective primarily of net income before noncontrolling interests of ~~$394.5 million.~~$455.1 million, partially offset by net decreases in adjustments to reconcile net income to net cash.

Cash used for investing activities of ~~$4.7~~$4.6 billion for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018 was driven by ~~$6.2~~$4.5 billion in purchases of fixed income investment securities partially offset by ~~$3.7~~$2.7 billion of proceeds from maturities and principal paydowns from our fixed income investment securities portfolio. Additionally, ~~$2.3~~$2.9 billion in cash outflows were used to fund loan growth during the ~~nine~~six months ended ~~September~~June 30, ~~2017.~~2018.

Cash provided by financing activities was ~~$5.3~~$4.0 billion for the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2018, reflective primarily of a net increase of ~~$5.8~~$4.6 billion in deposits partially offset by ~~$507.8 million~~a decrease of ~~payments on~~$0.6 billion in our short-term overnight ~~short-term borrowings and $46.2 million for the repayment of our 6.05% Subordinated Notes upon maturity.~~borrowings.

Cash and cash equivalents were ~~$3.6~~$2.7 billion and ~~$2.5~~$3.9 billion, respectively, at ~~September~~June 30, ~~2017~~2018 and ~~September~~June 30, ~~2016.~~2017.

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. Consequently, simulations used to analyze sensitivity of net interest income to interest rate risk will differ from actual results due to differences in the timing, frequency, and magnitude of changes in market rates, the impact of competition, fluctuating business conditions, and the impact of strategies taken by management to mitigate these risks.

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 derivatives to assist in managing interest rate risk.

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

A specific application of our simulation model involves measurement of the impact of changes in market interest rates on our economic value of equity (“EVE”). EVE is defined as the market value of assets, less the market value of liabilities, adjusted for any off-balance sheet items, if any. Another application of the simulation model measures the impact of changes in market interest rates on our net interest income (“NII”) assuming a static balance sheet as of the period-end reporting date. Meaning, the size and composition of earning assets and funding liabilities are held constant over the simulation horizon. Simulated cash flows during the scenario horizon are assumed to be replaced as they occur, which restores the balance sheet to its original size and composition. More specifically, with respect to earning assets, loan maturities, principal maturities, paydowns and calls on investments are added back as replacement balances as they occur during the simulation horizon. Yield and spread assumptions on cash and investment balances reflect current market rates. Yield and spread assumptions on loans reflect recent market impacts on product pricing. Similarly, we make certain deposit decay rate assumptions on demand deposits and interest bearing deposits, which are replenished to hold the level and mix of funding liabilities constant. Changes in market interest rates that affect us are principally short-term interest rates and include the following benchmark indexes: (i) National and SVB Prime rates, (ii) 1-month and 3-month LIBOR, and (iii) the Federal Funds target rate. Changes in these short-term rates impact interest earned on our variable rate loans, variable rate investment securities and balances held as cash and cash equivalents. Additionally, simulated changes in deposit pricing relative to changes in market rates, commonly referred to as deposit beta, generally follow overall changes in short-term interest rates, although actual changes may lag in terms of timing and magnitude. Overall, the assumed weighted deposit beta on interest bearing deposits is approximately 35.0 percent, which means deposit repricing is assumed to be approximately 35.0 percent of a given change in short-term interest rates. This repricing is reflected as a change in interest expense on interest bearing deposit balances.

For the three months ended September 30, 2017, our results include two key modeling assumption changes relating to our non-maturity deposits and prepayments on outstanding commercial loans. The impact was seen primarily in our EVE sensitivity profile and, to a lesser degree, on our NII sensitivity.

For non-maturity deposits, the assumed deposit decay rate is greater in current modeled results compared to assumptions used in prior periods. The impact of the change in assumptions in all rate simulations resulted in greater market value sensitivity of deposits and greater EVE sensitivity overall. Prepayment rate assumptions on commercial loans are also greater in current modeled results compared to assumptions used in prior periods. The impact of the change in assumptions resulted in lower market value sensitivity on commercial loans but the impact on overall EVE sensitivity was minimal in comparison to the overall changes in EVE sensitivity.

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 ~~basis points~~bps at ~~September~~June 30, ~~2017~~2018 and at December 31, ~~2016 (as revised based on the assumptions noted above):~~2017:


Change in interest rates (basis points) (Dollars in thousands)	Estimated		Estimated Increase/(Decrease) in EVE					Estimated		Estimated Increase/(Decrease) in NII
	EVE		Amount			Percent		NII		Amount			Percent
September 30, 2017:
Change in interest rates (bps) (Dollars in thousands)															Estimated		Estimated Increase/(Decrease) in EVE					Estimated		Estimated Increase/(Decrease) in NII
Change in interest rates (bps) (Dollars in thousands)															EVE		Amount			Percent		NII		Amount			Percent
June 30, 2018:
200	$	8,223,716	$	999,900		13.8	%	$	1,889,933	$	426,799		29.2	%	$	8,785,908	$	373,102		4.4	%	$	2,203,720	$	407,219		22.7	%
100	7,767,694		543,878			7.5		1,677,489		214,355			14.7		8,582,937		170,131			2.0		1,991,979		195,478			10.9
—	7,223,816		—			—		1,463,134		—			—		8,412,806		—			—		1,796,501		—			—
-100	6,448,044		(775,772		)	(10.7	)	1,248,346		(214,788		)	(14.7	)	8,079,862		(332,944		)	(4.0	)	1,549,652		(246,849		)	(13.7	)
-200	5,444,025		(1,779,791		)	(24.6	)	1,190,846		(272,288		)	(18.6	)	7,258,778		(1,154,028		)	(13.7	)	1,311,789		(484,712		)	(27.0	)

December 31, 2016 (As revised):
December 31, 2017:
200	$	7,601,404	$	1,129,823		17.5	%	$	1,543,247	$	365,734		31.1	%	$	8,091,107	$	805,624		11.1	%	$	1,885,885	$	400,127		26.9	%
100	7,073,407		601,826			9.3		1,360,356		182,843			15.5		7,716,066		430,583			5.9		1,683,742		197,984			13.3
—	6,471,581		—			—		1,177,513		—			—		7,285,483		—			—		1,485,758		—			—
-100	5,765,799		(705,782		)	(10.9	)	1,075,353		(102,160		)	(8.7	)	6,637,588		(647,895		)	(8.9	)	1,252,063		(233,695		)	(15.7	)
-200	4,860,540		(1,611,041		)	(24.9	)	1,039,903		(137,610		)	(11.7	)	5,718,401		(1,567,082		)	(21.5	)	1,108,712		(377,046		)	(25.4	)

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 ~~September~~June 30, ~~2017~~2018 increased from December 31, ~~2016~~2017 by ~~$0.8~~$1.1 billion, ~~primarily due to~~driven by changes in balance sheet ~~mix changes~~composition as well as ~~the assumption model changes discussed above. As of September~~rising interest rates. At June 30, ~~2017, period-end loans, net of unearned income increased $2.3 billion~~2018, as compared to December 31, ~~2016. Comparing the same periods, period-end~~2017, total loan balances increased by $2.9 billion primarily in Prime-based variable rate loans. Total fixed income ~~investment~~ securities ~~increased $2.6 billion and period-end cash and cash equivalents~~also increased by ~~$1.0~~$1.7 billion ~~driven primarily~~due to purchases of fixed rate long maturity instruments such as pass-through mortgage-backed securities and municipal debt securities combined with run-off of shorter maturity U.S. Treasury securities. Additionally, total deposits increased by ~~an increase~~$4.6 billion.

Marginally higher LIBOR/swap rates in ~~deposits balances of $5.8 billion.~~

~~Higher short-term LIBOR rates as of September 30, 2017, with marginally lower long-term rates, contributed~~the 3- to 24-month tenors continue to drive a ~~flattening of the~~relatively flat yield curve compared to December 31, ~~2016. Changes in nominal~~2017. These higher rates ~~and a~~contributed to the $1.1 billion total change in ~~the shape of the yield curve resulted in~~base EVE, mainly impacting the market value of ~~deposits decreasing proportionally higher than assets. However, as noted above, non-maturity deposit modeling assumption changes were~~deposits. Continued investment in 30-year pass-through mortgage-backed securities and municipal securities resulted in a $261 million decrease in EVE sensitivity in the ~~primary driver of a higher base case EVE as of September 30, 2017.~~+100 bps rate shock scenario. Compared to December 31, ~~2016, proportional growth in loans, investments, and deposits did not significantly impact~~2017, EVE ~~sensitivity measures~~ in the ~~+100 bps~~-100 and ~~+200~~-200 bps rate shock scenarios ~~as of September 30, 2017. The change~~increased $315 million and $413 million, respectively. This represents a decrease in ~~EVE~~the sensitivity, ~~can be attributed~~ primarily due to changes in the ~~non-maturity assumptions changes as~~investment portfolio composition described above.

12-Month Net Interest Income Simulation

Our ~~simulated~~estimated 12-month ~~base case~~ NII forecast at ~~September~~June 30, ~~2017~~2018 increased from December 31, ~~2016~~2017 by ~~$286~~$311 million, primarily due to increased balances of higher yielding loans and investments as described in the ~~impact~~EVE section above. As rates rise, interest income on assets that are tied to variable rate indexes, primarily our variable rate loans, are expected to benefit our base 12-month NII projections. In addition, the 12-month NII simulations include repricing assumptions on our interest bearing deposit products which we set at our discretion based on client needs and our overall funding mix. Repricing of interest bearing deposits impacts estimated interest expense. As noted previously, repricing deposit rates are generally assumed to be less than one-half of the ~~loan prepayment assumptions~~amount of simulated changes ~~described above, higher rates on LIBOR and Prime rate based loans, higher period-end loan growth as noted above, and a higher level of earning assets at September~~in short-term market interest rates.

At June 30, ~~2017.~~

2018, our NII sensitivity, which is measured as ~~of September 30, 2017~~the percentage change in 12-month forward net interest income earned in various interest rate scenarios compared to a base scenario where interest rates remain unchanged, decreased to 10.9 percent in the +100 ~~and -100~~ bps interest rate ~~shock scenarios is nearly symmetrical~~scenario compared to 13.3 percent at ~~+14.7% and -14.7%, respectively. This profile is as expected, given the composition of floating rate loans in our balance sheet.~~December 31, 2017. Our NII sensitivity in the +200 ~~and -200~~ bps interest rate shock scenario declined to 22.7 percent compared to 26.9 percent at December 31, 2017. The slight decline in NII sensitivity is the result of an increase in the composition of longer duration securities in our fixed income portfolio. Despite the decrease in NII sensitivity in rising interest rate scenarios, ~~still shows asymmetry,~~the current level of variable rate loans, coupled with ~~less~~a large proportion of non-interest bearing deposit balances is expected to result in an increased NII result in a rising rate environment. NII sensitivity in the -100 bps scenario of negative 13.7 percent was also lower at June 30, 2018 compared to negative 15.7 percent at December 31, 2017. The -200 bps scenario currently indicates a greater percentage change in NII at June 30, 2018 compared to December 31, 2017. This is the result of the impact of a full -200 bps decline in the rate ~~shock~~scenario. At December 31, 2017, the -200 bps scenario ~~due to floors on loans.~~was floored at zero percent, and therefore only produced a drop in rates of approximately 150 bps.

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 zero percent in the down rate scenarios. The embedded floors are also a factor in the up rate scenarios to the extent a simulated increase in rates is needed before floored rates are cleared. In addition, we assume different deposit balance decay rates for each interest rate scenario based on a historical deposit study of our clients. These assumptions may change in future periods based on changes in client behavior and at management's discretion. Actual changes in our deposit pricing strategies may differ from our current model assumptions and may have an impact on our actual sensitivity overall.

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

~~There~~Except as set forth below, there were no changes in our internal control over financial reporting identified in management’s evaluation pursuant to Rules 13a-15(d) or 15d-15(d) of the Exchange Act during the period covered by this Quarterly Report on Form 10-Q that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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 ~~15—~~16—“Legal Matters” of the “Notes to Interim Consolidated Financial Statements (unaudited)” under Part I, Item 1 of this report.

ITEM 1A. RISK FACTORS

There are no material changes to the risk factors set forth in our ~~2016~~2017 Annual Report on Form 10-K.

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

Exhibit

Number

Exhibit Description

Incorporated by Reference

Filed

Herewith

Form

File No.

Exhibit

Filing Date

10.1

Incentive Compensation Plan

31.1

Rule 13a-14(a) / 15(d)-14(a) Certification of Principal Executive Officer

31.2

Rule 13a-14(a) / 15(d)-14(a) Certification of Principal Financial Officer

32.1

Section 1350 Certifications

101.INS

XBRL Instance Document

101.SCH

XBRL Taxonomy Extension Schema Document

101.CAL

XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF

XBRL Taxonomy Extension Definition Linkbase Document

101.LAB

XBRL Taxonomy Extension Label Linkbase Document

101.PRE

XBRL Taxonomy Extension Presentation Linkbase Document

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.



		SVB Financial Group

Date: ~~November 8, 2017~~August 7, 2018		/s/ DANIEL BECK
		Daniel Beck
		Chief Financial Officer
		(Principal Financial Officer)

		SVB Financial Group

Date: ~~November 8, 2017~~August 7, 2018		/s/ KAMRAN HUSAIN
		Kamran Husain
		Chief Accounting Officer
		(Principal Accounting Officer)

98108



Three months ended September 30, 2016	Beginning Balance June 30, 2016		Charge-offs			Recoveries		Provision for (Reduction of) Loan Losses			Foreign Currency Translation Adjustments			Ending Balance September 30, 2016
(Dollars in thousands)	Beginning Balance June 30, 2016		Charge-offs			Recoveries		Provision for (Reduction of) Loan Losses			Foreign Currency Translation Adjustments			Ending Balance September 30, 2016
Commercial loans:
Software/internet	$	104,229	$	(16,526	)	$	305	$	8,591		$	(261	)	$	96,338
Hardware	23,871		(3,058		)	1,080		11,048			(336		)	32,605
Private equity/venture capital	49,807		—			—		2,203			(67		)	51,943
Life science/healthcare	41,852		(28		)	361		(5,298		)	161			37,048
Premium wine	4,810		—			—		288			(9		)	5,089
Other	9,480		(5,004		)	207		142			(4		)	4,821
Total commercial loans	234,049		(24,616		)	1,953		16,974			(516		)	227,844
Total consumer loans	10,674		—			131		1,976			(60		)	12,721
Total allowance for loan losses	$	244,723	$	(24,616	)	$	2,084	$	18,950		$	(576	)	$	240,565