Loans and Allowance for Loan Losses | Loans and Allowance for Loan Losses We serve a variety of clients in the technology and life science & healthcare industries. Our technology clients tend to be in the industries of: hardware (such as semiconductors, communications, data storage, and electronics); software and 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 hardware and software, 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 $115 million and $104 million at September 30, 2015 and December 31, 2014 , respectively, is presented in the following table: (Dollars in thousands) September 30, 2015 December 31, 2014 Commercial loans: Software and internet $ 5,272,825 $ 4,954,676 Hardware 962,295 1,131,006 Private equity/venture capital 4,571,102 4,582,906 Life science & healthcare 1,598,362 1,289,904 Premium wine 193,712 187,568 Other 295,550 234,551 Total commercial loans 12,893,846 12,380,611 Real estate secured loans: Premium wine (1) 633,248 606,753 Consumer loans (2) 1,444,067 1,118,115 Other 38,043 39,651 Total real estate secured loans 2,115,358 1,764,519 Construction loans 92,551 78,626 Consumer loans 212,825 160,520 Total loans, net of unearned income (3) $ 15,314,580 $ 14,384,276 (1) Included in our premium wine portfolio are gross construction loans of $119 million and $112 million at September 30, 2015 and December 31, 2014 , respectively. (2) Consumer loans secured by real estate at September 30, 2015 and December 31, 2014 were comprised of the following: (Dollars in thousands) September 30, 2015 December 31, 2014 Loans for personal residence $ 1,225,794 $ 918,629 Loans to eligible employees 149,612 133,568 Home equity lines of credit 68,661 65,918 Consumer loans secured by real estate $ 1,444,067 $ 1,118,115 (3) Included within our total loan portfolio are credit card loans of $186 million and $131 million at September 30, 2015 and December 31, 2014 , respectively. Credit Quality The composition of loans, net of unearned income of $115 million and $104 million at September 30, 2015 and December 31, 2014 , respectively, broken out by portfolio segment and class of financing receivable, is as follows: (Dollars in thousands) September 30, 2015 December 31, 2014 Commercial loans: Software and internet $ 5,272,825 $ 4,954,676 Hardware 962,295 1,131,006 Private equity/venture capital 4,571,102 4,582,906 Life science & healthcare 1,598,362 1,289,904 Premium wine 826,960 794,321 Other 426,144 352,828 Total commercial loans 13,657,688 13,105,641 Consumer loans: Real estate secured loans 1,444,067 1,118,115 Other consumer loans 212,825 160,520 Total consumer loans 1,656,892 1,278,635 Total loans, net of unearned income $ 15,314,580 $ 14,384,276 The following table summarizes the aging of our gross loans, broken out by portfolio segment and class of financing receivable as of September 30, 2015 and December 31, 2014 : (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 September 30, 2015: Commercial loans: Software and internet $ 9,729 $ 1,168 $ 169 $ 11,066 $ 5,244,198 $ 169 Hardware 620 1,021 — 1,641 965,511 — Private equity/venture capital 410 — — 410 4,611,543 — Life science & healthcare 377 729 — 1,106 1,566,185 — Premium wine 295 — — 295 827,709 — Other — 8 — 8 429,145 — Total commercial loans 11,431 2,926 169 14,526 13,644,291 169 Consumer loans: Real estate secured loans — — — — 1,443,011 — Other consumer loans 1,313 — — 1,313 211,339 — Total consumer loans 1,313 — — 1,313 1,654,350 — Total gross loans excluding impaired loans 12,744 2,926 169 15,839 15,298,641 169 Impaired loans — 1,798 8,295 10,093 105,368 — Total gross loans $ 12,744 $ 4,724 $ 8,464 $ 25,932 $ 15,404,009 $ 169 December 31, 2014: Commercial loans: Software and internet $ 10,989 $ 1,627 $ 52 $ 12,668 $ 4,950,291 $ 52 Hardware 13,424 126 — 13,550 1,124,423 — Private equity/venture capital 40,773 — — 40,773 4,580,526 — Life science & healthcare 738 786 — 1,524 1,298,728 — Premium wine — — — — 795,345 — Other 178 3 — 181 354,939 — Total commercial loans 66,102 2,542 52 68,696 13,104,252 52 Consumer loans: Real estate secured loans 1,592 341 1,250 3,183 1,114,286 1,250 Other consumer loans — — — — 160,212 — Total consumer loans 1,592 341 1,250 3,183 1,274,498 1,250 Total gross loans excluding impaired loans 67,694 2,883 1,302 71,879 14,378,750 1,302 Impaired loans 598 1,293 22,320 24,211 13,926 — Total gross loans $ 68,292 $ 4,176 $ 23,622 $ 96,090 $ 14,392,676 $ 1,302 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 30, 2015 and December 31, 2014 : (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 September 30, 2015: Commercial loans: Software and internet $ 64,792 $ — $ 64,792 $ 89,471 Hardware 3,586 177 3,763 3,802 Private equity/venture capital — — — — Life science & healthcare 45,389 — 45,389 45,904 Premium wine — 1,201 1,201 1,716 Other 157 — 157 157 Total commercial loans 113,924 1,378 115,302 141,050 Consumer loans: Real estate secured loans — 159 159 1,399 Other consumer loans — — — — Total consumer loans — 159 159 1,399 Total $ 113,924 $ 1,537 $ 115,461 $ 142,449 December 31, 2014: Commercial loans: Software and internet $ 33,287 $ — $ 33,287 $ 34,218 Hardware 1,403 1,118 2,521 2,535 Private equity/venture capital — — — — Life science & healthcare 475 — 475 2,453 Premium wine — 1,304 1,304 1,743 Other 233 — 233 233 Total commercial loans 35,398 2,422 37,820 41,182 Consumer loans: Real estate secured loans — 192 192 1,412 Other consumer loans 125 — 125 305 Total consumer loans 125 192 317 1,717 Total $ 35,523 $ 2,614 $ 38,137 $ 42,899 The following table summarizes our average impaired loans, broken out by portfolio segment and class of financing receivable for the three and nine months ended September 30, 2015 and 2014 : Three months ended September 30, Nine months ended September 30, (Dollars in thousands) 2015 2014 2015 2014 Average impaired loans: Commercial loans: Software and internet $ 77,156 $ 10,651 $ 54,543 $ 13,690 Hardware 2,796 1,540 1,944 8,140 Life science & healthcare 17,184 333 6,526 636 Premium wine 1,213 1,364 1,245 1,398 Other 3,132 674 3,498 1,383 Total commercial loans 101,481 14,562 67,756 25,247 Consumer loans: Real estate secured loans 162 212 180 224 Other consumer loans — 261 55 375 Total consumer loans 162 473 235 599 Total average impaired loans $ 101,643 $ 15,035 $ 67,991 $ 25,846 The following tables summarize the activity relating to our allowance for loan losses for the three and nine months ended September 30, 2015 and 2014 , broken out by portfolio segment: Three months ended September 30, 2015 (dollars in thousands) Beginning Balance June 30, 2015 Charge-offs Recoveries Provision for (Reduction of) Loan Losses Ending Balance September 30, 2015 Commercial loans: Software and internet $ 106,728 $ (24,815 ) $ 195 $ 5,958 $ 88,066 Hardware 20,472 — 240 (70 ) 20,642 Private equity/venture capital 29,276 — — 3,166 32,442 Life science & healthcare 17,233 (117 ) 50 19,793 36,959 Premium wine 4,409 — — 253 4,662 Other 5,894 (4,186 ) 89 2,976 4,773 Total commercial loans 184,012 (29,118 ) 574 32,076 187,544 Consumer loans 8,632 — 4 1,327 9,963 Total allowance for loan losses $ 192,644 $ (29,118 ) $ 578 $ 33,403 $ 197,507 Three months ended September 30, 2014 (dollars in thousands) Beginning Balance June 30, 2014 Charge-offs Recoveries Provision for (Reduction of) Loan Losses Ending Balance September 30, 2014 Commercial loans: Software and internet $ 53,239 $ (6,907 ) $ 790 $ 11,078 $ 58,200 Hardware 24,780 (2,643 ) 113 2,491 24,741 Private equity/venture capital 19,004 — — 845 19,849 Life science & healthcare 10,597 — 53 1,591 12,241 Premium wine 3,546 (35 ) — 710 4,221 Other 3,218 (1,072 ) 1,306 (530 ) 2,922 Total commercial loans 114,384 (10,657 ) 2,262 16,185 122,174 Consumer loans 6,344 — 118 425 6,887 Total allowance for loan losses $ 120,728 $ (10,657 ) $ 2,380 $ 16,610 $ 129,061 Nine months ended September 30, 2015 (dollars in thousands) Beginning Balance December 31, 2014 Charge-offs Recoveries Provision for Ending Balance September 30, 2015 Commercial loans: Software and internet $ 80,981 $ (26,980 ) $ 1,239 $ 32,826 $ 88,066 Hardware 25,860 (4,049 ) 3,049 (4,218 ) 20,642 Private equity/venture capital 27,997 — — 4,445 32,442 Life science & healthcare 15,208 (3,336 ) 129 24,958 36,959 Premium wine 4,473 — 7 182 4,662 Other 3,253 (4,974 ) 559 5,935 4,773 Total commercial loans 157,772 (39,339 ) 4,983 64,128 187,544 Consumer loans 7,587 — 136 2,240 9,963 Total allowance for loan losses $ 165,359 $ (39,339 ) $ 5,119 $ 66,368 $ 197,507 Nine months ended September 30, 2014 (dollars in thousands) Beginning Balance December 31, 2013 Charge-offs Recoveries Provision for (Reduction of) Loan Losses Ending Balance September 30, 2014 Commercial loans: Software and internet $ 64,084 $ (18,932 ) $ 1,023 $ 12,025 $ 58,200 Hardware 36,553 (15,230 ) 2,070 1,348 24,741 Private equity/venture capital 16,385 — — 3,464 19,849 Life science & healthcare 11,926 (930 ) 341 904 12,241 Premium wine 3,914 (35 ) 238 104 4,221 Other 3,680 (3,062 ) 1,316 988 2,922 Total commercial loans 136,542 (38,189 ) 4,988 18,833 122,174 Consumer loans 6,344 — 325 218 6,887 Total allowance for loan losses $ 142,886 $ (38,189 ) $ 5,313 $ 19,051 $ 129,061 The following table summarizes the allowance for loan losses individually and collectively evaluated for impairment as of September 30, 2015 and December 31, 2014 , broken out by portfolio segment: September 30, 2015 December 31, 2014 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 Commercial loans: Software and internet $ 25,260 $ 64,792 $ 62,806 $ 5,208,033 $ 13,695 $ 33,287 $ 67,286 $ 4,921,389 Hardware 1,100 3,763 19,542 958,532 1,133 2,521 24,727 1,128,485 Private equity/venture capital — — 32,442 4,571,102 — — 27,997 4,582,906 Life science & healthcare 19,739 45,389 17,220 1,552,973 121 475 15,087 1,289,429 Premium wine — 1,201 4,662 825,759 — 1,304 4,473 793,017 Other 157 157 4,616 425,987 71 233 3,182 352,595 Total commercial loans 46,256 115,302 141,288 13,542,386 15,020 37,820 142,752 13,067,821 Consumer loans — 159 9,963 1,656,733 31 317 7,556 1,278,318 Total $ 46,256 $ 115,461 $ 151,251 $ 15,199,119 $ 15,051 $ 38,137 $ 150,308 $ 14,346,139 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)”. Loans risk-rated 8 and 9 are loans that are considered to be impaired and are on nonaccrual status. (For further description of nonaccrual loans, refer to Note 2—“Summary of Significant Accounting Policies” under Part II, Item 8 of our 2014 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 30, 2015 and December 31, 2014 : (Dollars in thousands) Pass Performing (Criticized) Impaired Total September 30, 2015: Commercial loans: Software and internet $ 4,802,522 $ 452,742 $ 64,792 $ 5,320,056 Hardware 834,067 133,085 3,763 970,915 Private equity/venture capital 4,611,953 — — 4,611,953 Life science & healthcare 1,446,972 120,319 45,389 1,612,680 Premium wine 804,411 23,593 1,201 829,205 Other 417,459 11,694 157 429,310 Total commercial loans 12,917,384 741,433 115,302 13,774,119 Consumer loans: Real estate secured loans 1,433,926 9,085 159 1,443,170 Other consumer loans 211,366 1,286 — 212,652 Total consumer loans 1,645,292 10,371 159 1,655,822 Total gross loans $ 14,562,676 $ 751,804 $ 115,461 $ 15,429,941 December 31, 2014: Commercial loans: Software and internet $ 4,611,253 $ 351,706 $ 33,287 $ 4,996,246 Hardware 945,998 191,975 2,521 1,140,494 Private equity/venture capital 4,615,231 6,068 — 4,621,299 Life science & healthcare 1,165,266 134,986 475 1,300,727 Premium wine 774,962 20,383 1,304 796,649 Other 346,153 8,967 233 355,353 Total commercial loans 12,458,863 714,085 37,820 13,210,768 Consumer loans: Real estate secured loans 1,112,396 5,073 192 1,117,661 Other consumer loans 158,162 2,050 125 160,337 Total consumer loans 1,270,558 7,123 317 1,277,998 Total gross loans $ 13,729,421 $ 721,208 $ 38,137 $ 14,488,766 TDRs As of September 30, 2015 we had thirteen TDRs with a total carrying value of $91.3 million where concessions have been granted to borrowers experiencing financial difficulties, in an attempt to maximize collection. There were less than $0.5 million of unfunded commitments available for funding to the clients associated with these TDRs as of September 30, 2015 . The following table summarizes our loans modified in TDRs, broken out by portfolio segment and class of financing receivables at September 30, 2015 and December 31, 2014 : (Dollars in thousands) September 30, 2015 December 31, 2014 Loans modified in TDRs: Commercial loans: Software and internet $ 57,766 $ 3,784 Hardware 2,301 1,118 Life science & healthcare 29,529 — Premium wine 1,202 1,891 Other 518 233 Total commercial loans 91,316 7,026 Consumer loans: Other consumer loans — 125 Total consumer loans — 125 Total $ 91,316 $ 7,151 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 months ended September 30, 2015 and 2014 : Three months ended September 30, Nine months ended September 30, (Dollars in thousands) 2015 2014 2015 2014 Loans modified in TDRs during the period: Commercial loans: Software and internet (1) $ 51,749 $ 496 $ 57,766 $ 7,848 Hardware — — 2,031 — Life science & healthcare 29,530 — 29,530 — Premium wine — — — 614 Other 518 — 518 — Total loans modified in TDRs during the period (1) $ 81,797 $ 496 $ 89,845 $ 8,462 (1) There were partial charge-offs of two loans classified as TDRs in our software and internet loan portfolio for $22.4 million during the three and nine months ended September 30, 2015 and no partial charge-offs during the three and nine months ended September 30, 2014. During the three and nine months ended September 30, 2015 , new TDRs of $81.8 million and $89.8 million were modified through payment deferrals granted to our clients. During the three months ended September 30, 2014 , new TDRs of $0.5 million were modified through payment deferrals granted to our clients. During the nine months ended September 30, 2014 , new TDRs of $7.1 million were modified through payment deferrals granted to our clients and $1.3 million were modified through partial forgiveness of principal. 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 months ended September 30, 2015 . There were no loans modified in TDRs within the previous 12 months that subsequently defaulted during the three and nine months ended September 30, 2014. Three months ended September 30, Nine months ended September 30, (Dollars in thousands) 2015 2015 TDRs modified within the previous 12 months that defaulted during the period: Commercial loans: Software and internet $ 11,107 $ 17,124 Hardware 2,031 2,031 Life science & healthcare 958 958 Total TDRs modified within the previous 12 months that defaulted in the period $ 14,096 $ 20,113 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 was necessary to determine the allowance for loan losses as of September 30, 2015 . |