Loans, Allowance for Loan Losses and Allowance for Unfunded Credit Commitments | 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 $127 million and $125 million at June 30, 2017 and December 31, 2016 , respectively, is presented in the following table: (Dollars in thousands) June 30, 2017 December 31, 2016 Commercial loans: Software/internet $ 5,392,022 $ 5,627,031 Hardware 1,118,266 1,180,398 Private equity/venture capital 8,891,662 7,691,148 Life science/healthcare 1,698,617 1,853,004 Premium wine 210,909 200,156 Other 443,337 393,551 Total commercial loans 17,754,813 16,945,288 Real estate secured loans: Premium wine (1) 694,060 678,166 Consumer loans (2) 2,127,901 1,926,968 Other 42,893 43,487 Total real estate secured loans 2,864,854 2,648,621 Construction loans 80,540 64,671 Consumer loans 276,259 241,364 Total loans, net of unearned income (3) $ 20,976,466 $ 19,899,944 (1) Included in our premium wine portfolio are gross construction loans of $107 million and $110 million at June 30, 2017 and December 31, 2016 , respectively. (2) Consumer loans secured by real estate at June 30, 2017 and December 31, 2016 were comprised of the following: (Dollars in thousands) June 30, 2017 December 31, 2016 Loans for personal residence $ 1,837,491 $ 1,655,349 Loans to eligible employees 223,718 199,291 Home equity lines of credit 66,692 72,328 Consumer loans secured by real estate $ 2,127,901 $ 1,926,968 (3) Included within our total loan portfolio are credit card loans of $253 million and $224 million at June 30, 2017 and December 31, 2016 , respectively. Credit Quality The composition of loans, net of unearned income of $127 million and $125 million at June 30, 2017 and December 31, 2016 , respectively, broken out by portfolio segment and class of financing receivable, is as follows: (Dollars in thousands) June 30, 2017 December 31, 2016 Commercial loans: Software/internet $ 5,392,022 $ 5,627,031 Hardware 1,118,266 1,180,398 Private equity/venture capital 8,891,662 7,691,148 Life science/healthcare 1,698,617 1,853,004 Premium wine 904,969 878,322 Other 566,770 501,709 Total commercial loans 18,572,306 17,731,612 Consumer loans: Real estate secured loans 2,127,901 1,926,968 Other consumer loans 276,259 241,364 Total consumer loans 2,404,160 2,168,332 Total loans, net of unearned income $ 20,976,466 $ 19,899,944 The following table summarizes the aging of our gross loans, broken out by portfolio segment and class of financing receivable as of June 30, 2017 and December 31, 2016 : (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 June 30, 2017: Commercial loans: Software/internet $ 8,524 $ 532 $ 79 $ 9,135 $ 5,303,770 $ 79 Hardware 4,654 47 5 4,706 1,096,455 5 Private equity/venture capital 48,132 7,012 — 55,144 8,846,984 — Life science/healthcare 794 165 — 959 1,715,883 — Premium wine 2,260 — — 2,260 900,699 — Other 85 270 — 355 571,425 — Total commercial loans 64,449 8,026 84 72,559 18,435,216 84 Consumer loans: Real estate secured loans — 847 — 847 2,123,151 — Other consumer loans 2 — — 2 273,878 — Total consumer loans 2 847 — 849 2,397,029 — Total gross loans excluding impaired loans 64,451 8,873 84 73,408 20,832,245 84 Impaired loans 652 3,738 27,408 31,798 166,495 Total gross loans $ 65,103 $ 12,611 $ 27,492 $ 105,206 $ 20,998,740 $ 84 December 31, 2016: Commercial loans: Software/internet $ 37,087 $ 1,162 $ 6 $ 38,255 $ 5,507,575 $ 6 Hardware 5,591 36 27 5,654 1,118,065 27 Private equity/venture capital 689 — — 689 7,747,222 — Life science/healthcare 283 551 — 834 1,827,490 — Premium wine 1,003 4 — 1,007 876,185 — Other 34 300 — 334 504,021 — Total commercial loans 44,687 2,053 33 46,773 17,580,558 33 Consumer loans: Real estate secured loans 850 — — 850 1,923,266 — Other consumer loans 1,402 — — 1,402 237,353 — Total consumer loans 2,252 — — 2,252 2,160,619 — Total gross loans excluding impaired loans 46,939 2,053 33 49,025 19,741,177 33 Impaired loans 34,636 3,451 11,180 49,267 185,193 — Total gross loans $ 81,575 $ 5,504 $ 11,213 $ 98,292 $ 19,926,370 $ 33 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 June 30, 2017 and December 31, 2016 : (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 June 30, 2017: Commercial loans: Software/internet $ 98,970 $ 30,657 $ 129,627 $ 154,587 Hardware 29,396 624 30,020 35,251 Private equity/venture capital 308 — 308 308 Life science/healthcare 30,898 573 31,471 38,128 Premium wine 3,167 — 3,167 3,188 Other 408 — 408 1,408 Total commercial loans 163,147 31,854 195,001 232,870 Consumer loans: Real estate secured loans 1,328 — 1,328 1,387 Other consumer loans 1,964 — 1,964 2,036 Total consumer loans 3,292 — 3,292 3,423 Total $ 166,439 $ 31,854 $ 198,293 $ 236,293 December 31, 2016: Commercial loans: Software/internet $ 121,658 $ 1,090 $ 122,748 $ 129,648 Hardware 65,395 — 65,395 70,683 Private equity/venture capital — — — — Life science/healthcare 38,361 — 38,361 41,130 Premium wine 3,187 — 3,187 3,187 Other 867 — 867 867 Total commercial loans 229,468 1,090 230,558 245,515 Consumer loans: Real estate secured loans 1,504 — 1,504 2,779 Other consumer loans 2,398 — 2,398 2,398 Total consumer loans 3,902 — 3,902 5,177 Total $ 233,370 $ 1,090 $ 234,460 $ 250,692 The following tables summarize our average impaired loans, broken out by portfolio segment and class of financing receivable for the three and six months ended June 30, 2017 and 2016 : Three months ended June 30, Average impaired loans Interest income on impaired loans (Dollars in thousands) 2017 2016 2017 2016 Commercial loans: Software/internet $ 136,374 $ 101,168 $ 711 $ 438 Hardware 29,771 23,221 510 442 Private equity/venture capital 327 — 3 — Life science/healthcare 36,033 33,324 191 — Premium wine 3,221 2,040 38 18 Other 708 5,485 — 7 Total commercial loans 206,434 165,238 1,453 905 Consumer loans: Real estate secured loans 1,360 127 — — Other consumer loans 1,679 786 — 11 Total consumer loans 3,039 913 — 11 Total average impaired loans $ 209,473 $ 166,151 $ 1,453 $ 916 Six months ended June 30, Average impaired loans Interest income on impaired loans (Dollars in thousands) 2017 2016 2017 2016 Commercial loans: Software/internet $ 123,145 $ 95,268 $ 938 $ 763 Hardware 31,940 23,824 943 749 Private equity/venture capital 342 — 5 — Life science/healthcare 37,488 36,507 291 — Premium wine 3,217 2,106 76 35 Other 885 4,669 — 15 Total commercial loans 197,017 162,374 2,253 1,562 Consumer loans: Real estate secured loans 1,424 131 — — Other consumer loans 1,914 410 — 11 Total consumer loans 3,338 541 — 11 Total average impaired loans $ 200,355 $ 162,915 $ 2,253 $ 1,573 The following tables summarize the activity relating to our allowance for loan losses for the three and six months ended June 30, 2017 and 2016 , broken out by portfolio segment: Three months ended June 30, 2017 Beginning Balance March 31, 2017 Charge-offs Recoveries Provision for (Reduction of) Loan Losses Foreign Currency Translation Adjustments Ending Balance June 30, 2017 (Dollars in thousands) Commercial loans: Software/internet $ 109,502 $ (19,401 ) $ 1,236 $ 1,527 $ 73 $ 92,937 Hardware 23,284 (249 ) 77 4,474 214 27,800 Private equity/venture capital 57,078 — — 9,263 444 66,785 Life science/healthcare 31,542 (4,678 ) 8 819 39 27,730 Premium wine 4,343 — — (1,155 ) (55 ) 3,133 Other 4,377 (753 ) 180 316 15 4,135 Total commercial loans 230,126 (25,081 ) 1,501 15,244 730 222,520 Total consumer loans 13,004 — 1,034 (59 ) (3 ) 13,976 Total allowance for loan losses $ 243,130 $ (25,081 ) $ 2,535 $ 15,185 $ 727 $ 236,496 Three months ended June 30, 2016 Beginning Balance March 31, 2016 Charge-offs Recoveries Provision for (Reduction of) Loan Losses Foreign Currency Translation Adjustments Ending Balance June 30, 2016 (Dollars in thousands) Commercial loans: Software/internet $ 106,898 $ (18,055 ) $ 260 $ 16,215 $ (1,089 ) $ 104,229 Hardware 23,836 (2,015 ) 183 2,003 (136 ) 23,871 Private equity/venture capital 43,686 — — 6,562 (441 ) 49,807 Life science/healthcare 30,285 (606 ) 185 12,853 (865 ) 41,852 Premium wine 5,244 — — (465 ) 31 4,810 Other 9,547 — 599 (714 ) 48 9,480 Total commercial loans 219,496 (20,676 ) 1,227 36,454 (2,452 ) 234,049 Total consumer loans 10,753 — 34 (121 ) 8 10,674 Total allowance for loan losses $ 230,249 $ (20,676 ) $ 1,261 $ 36,333 $ (2,444 ) $ 244,723 Six months ended June 30, 2017 Beginning Balance December 31, 2016 Charge-offs Recoveries Provision for Foreign Currency Translation Adjustments Ending Balance June 30, 2017 (Dollars in thousands) 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 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 Six months ended June 30, 2016 Beginning Balance December 31, 2015 Charge-offs Recoveries Provision for (Reduction of) Loan Losses Foreign Currency Translation Adjustments Ending Balance June 30, 2016 (Dollars in thousands) Commercial loans: Software/internet $ 103,045 $ (40,216 ) $ 4,220 $ 37,847 $ (667 ) $ 104,229 Hardware 23,085 (3,501 ) 422 3,962 (97 ) 23,871 Private equity/venture capital 35,282 — — 14,805 (280 ) 49,807 Life science/healthcare 36,576 (3,001 ) 676 8,550 (949 ) 41,852 Premium wine 5,205 — — (426 ) 31 4,810 Other 4,252 (30 ) 673 4,431 154 9,480 Total commercial loans 207,445 (46,748 ) 5,991 69,169 (1,808 ) 234,049 Consumer loans 10,168 (102 ) 83 505 20 10,674 Total allowance for loan losses $ 217,613 $ (46,850 ) $ 6,074 $ 69,674 $ (1,788 ) $ 244,723 The following table summarizes the activity relating to our allowance for unfunded credit commitments for the three and six months ended June 30, 2017 and 2016 : Three months ended June 30, Six months ended June 30, (Dollars in thousands) 2017 2016 2017 2016 Beginning balance $ 46,335 $ 34,541 $ 45,265 $ 34,415 Provision for unfunded credit commitments 621 413 1,676 547 Foreign currency translation adjustments 44 (65 ) 59 (73 ) Ending balance (1) $ 47,000 $ 34,889 $ 47,000 $ 34,889 (1) See Note 12—“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 June 30, 2017 and December 31, 2016 , broken out by portfolio segment: June 30, 2017 December 31, 2016 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/internet $ 30,291 $ 129,627 $ 62,646 $ 5,262,395 $ 28,245 $ 122,748 $ 69,143 $ 5,504,283 Hardware 5,329 30,020 22,471 1,088,246 9,995 65,395 21,171 1,115,003 Private equity/venture capital 31 308 66,754 8,891,354 — — 50,299 7,691,148 Life science/healthcare 11,223 31,471 16,507 1,667,146 8,709 38,361 16,737 1,814,643 Premium wine 290 3,167 2,843 901,802 520 3,187 3,595 875,135 Other 270 408 3,865 566,362 233 867 4,535 500,842 Total commercial loans 47,434 195,001 175,086 18,377,305 47,702 230,558 165,480 17,501,054 Total consumer loans 936 3,292 13,040 2,400,868 1,123 3,902 11,061 2,164,430 Total $ 48,370 $ 198,293 $ 188,126 $ 20,778,173 $ 48,825 $ 234,460 $ 176,541 $ 19,665,484 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 a criticized loan, the loan is impaired. The loan is also considered for nonaccrual status if full repayment is determined to be improbable. 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 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 June 30, 2017 and December 31, 2016 : (Dollars in thousands) Pass Performing (Criticized) Performing Impaired (Criticized) Nonperforming Impaired (Nonaccrual) Total June 30, 2017: Commercial loans: Software/internet $ 4,922,821 $ 390,084 $ 42,413 $ 87,214 $ 5,442,532 Hardware 952,429 148,732 23,710 6,310 1,131,181 Private equity/venture capital 8,896,099 6,029 308 — 8,902,436 Life science/healthcare 1,576,136 140,706 8,972 22,499 1,748,313 Premium wine 888,305 14,654 2,718 449 906,126 Other 550,943 20,837 — 408 572,188 Total commercial loans 17,786,733 721,042 78,121 116,880 18,702,776 Consumer loans: Real estate secured loans 2,112,234 11,764 — 1,328 2,125,326 Other consumer loans 273,405 475 — 1,964 275,844 Total consumer loans 2,385,639 12,239 — 3,292 2,401,170 Total gross loans $ 20,172,372 $ 733,281 $ 78,121 $ 120,172 $ 21,103,946 December 31, 2016: Commercial loans: Software/internet $ 4,924,923 $ 620,907 $ 46,143 $ 76,605 $ 5,668,578 Hardware 985,889 137,830 58,814 6,581 1,189,114 Private equity/venture capital 7,747,317 594 — — 7,747,911 Life science/healthcare 1,707,499 120,825 6,578 31,783 1,866,685 Premium wine 865,354 11,838 2,696 491 880,379 Other 480,845 23,510 464 403 505,222 Total commercial loans 16,711,827 915,504 114,695 115,863 17,857,889 Consumer loans: Real estate secured loans 1,914,512 9,604 — 1,504 1,925,620 Other consumer loans 238,256 499 786 1,612 241,153 Total consumer loans 2,152,768 10,103 786 3,116 2,166,773 Total gross loans $ 18,864,595 $ 925,607 $ 115,481 $ 118,979 $ 20,024,662 Troubled Debt Restructurings As of June 30, 2017 we had 18 TDRs with a total carrying value of $102.2 million where concessions have been granted to borrowers experiencing financial difficulties, in an attempt to maximize collection. There were $1.4 million of unfunded commitments available for funding to the clients associated with these TDRs as of June 30, 2017 . The following table summarizes our loans modified in TDRs, broken out by portfolio segment and class of financing receivables at June 30, 2017 and December 31, 2016 : (Dollars in thousands) June 30, 2017 December 31, 2016 Loans modified in TDRs: Commercial loans: Software/internet $ 67,518 $ 52,646 Hardware 5,582 14,870 Life science/healthcare 25,385 24,176 Premium wine 3,304 3,194 Other — 387 Total commercial loans 101,789 95,273 Consumer loans: Other consumer loans 436 786 Total $ 102,225 $ 96,059 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 six months ended June 30, 2017 and 2016 : Three months ended June 30, Six months ended June 30, (Dollars in thousands) 2017 2016 2017 2016 Loans modified in TDRs during the period: Commercial loans: Software/internet $ 16,135 $ 4,402 $ 22,242 $ 5,525 Life science/healthcare 4,588 — 4,588 — Premium wine 190 — 190 506 Total commercial loans 20,913 4,402 27,020 6,031 Consumer loans: Other consumer loans — 786 — 786 Total loans modified in TDRs during the period (1) $ 20,913 $ 5,188 $ 27,020 $ 6,817 (1) There were $12.5 million and $15.1 million of partial charge-offs during the three and six months ended June 30, 2017 , respectively, and $0.5 million and $4.3 million of partial charge-offs during the three and six months ended June 30, 2016 , respectively. During the three and six months ended June 30, 2017 all new TDRs of $20.9 million and $27.0 million , respectively, were modified through payment deferrals granted to our clients. During the three months ended June 30, 2016, all new TDRs were modified through payment deferrals granted to our clients. During the six months ended June 30, 2016, $5.7 million of new TDRs were modified through payment deferrals granted to our clients and $1.1 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 six months ended June 30, 2017 and June 30, 2016. Three months ended June 30, Six months ended June 30, (Dollars in thousands) 2017 2016 2017 2016 TDRs modified within the previous 12 months that defaulted during the period: Commercial loans: Software/internet $ — $ 1,474 $ — $ 1,474 Premium wine 190 506 190 506 Total TDRs modified within the previous 12 months that defaulted in the period $ 190 $ 1,980 $ 190 $ 1,980 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 June 30, 2017 . |