Loans and Allowance for Loan Losses | 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 $148 million and $125 million at December 31, 2017 and 2016 , respectively, is presented in the following table: December 31, (Dollars in thousands) 2017 2016 Commercial loans: Software/internet $ 6,172,531 $ 5,627,031 Hardware 1,193,599 1,180,398 Private equity/venture capital 9,952,377 7,691,148 Life science/healthcare 1,808,827 1,853,004 Premium wine 204,105 200,156 Other 365,724 393,551 Total commercial loans 19,697,163 16,945,288 Real estate secured loans: Premium wine (1) 669,053 678,166 Consumer loans (2) 2,300,506 1,926,968 Other 42,068 43,487 Total real estate secured loans 3,011,627 2,648,621 Construction loans 68,546 64,671 Consumer loans 328,980 241,364 Total loans, net of unearned income (3) $ 23,106,316 $ 19,899,944 (1) Included in our premium wine portfolio are gross construction loans of $100 million and $110 million at December 31, 2017 and 2016 , respectively. (2) Consumer loans secured by real estate at December 31, 2017 and 2016 were comprised of the following: December 31, (Dollars in thousands) 2017 2016 Loans for personal residence $ 1,995,840 $ 1,655,349 Loans to eligible employees 243,118 199,291 Home equity lines of credit 61,548 72,328 Consumer loans secured by real estate $ 2,300,506 $ 1,926,968 (3) Included within our total loan portfolio are credit card loans of $270 million and $224 million at December 31, 2017 and 2016 , respectively. Credit Quality The composition of loans, net of unearned income of $148 million and $125 million at December 31, 2017 and 2016 , respectively, broken out by portfolio segment and class of financing receivable, is as follows: December 31, (Dollars in thousands) 2017 2016 Commercial loans: Software/internet $ 6,172,531 $ 5,627,031 Hardware 1,193,599 1,180,398 Private equity/venture capital 9,952,377 7,691,148 Life science/healthcare 1,808,827 1,853,004 Premium wine 873,158 878,322 Other 476,338 501,709 Total commercial loans 20,476,830 17,731,612 Consumer loans: Real estate secured loans 2,300,506 1,926,968 Other consumer loans 328,980 241,364 Total consumer loans 2,629,486 2,168,332 Total loans, net of unearned income $ 23,106,316 $ 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 December 31, 2017 and 2016 : (Dollars in thousands) 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 December 31, 2017: Commercial loans: Software/internet $ 14,257 $ 6,526 $ 141 $ 20,924 $ 6,101,147 $ 141 Hardware 1,145 77 50 1,272 1,163,278 50 Private equity/venture capital 86,566 38,580 — 125,146 9,835,317 — Life science/healthcare 4,390 191 — 4,581 1,841,692 — Premium wine 418 — — 418 871,074 — Other 445 — — 445 490,292 — Total commercial loans 107,221 45,374 191 152,786 20,302,800 191 Consumer loans: Real estate secured loans 2,164 532 — 2,696 2,292,980 — Other consumer loans 796 — — 796 327,234 — Total consumer loans 2,960 532 — 3,492 2,620,214 — Total gross loans excluding impaired loans 110,181 45,906 191 156,278 22,923,014 191 Impaired loans 1,344 11,902 30,403 43,649 131,212 — Total gross loans $ 111,525 $ 57,808 $ 30,594 $ 199,927 $ 23,054,226 $ 191 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 for the years ended December 31, 2017 and 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 December 31, 2017: Commercial loans: Software/internet $ 49,645 $ 61,009 $ 110,654 $ 129,006 Hardware 15,637 20,713 36,350 41,721 Private equity/venture capital 658 — 658 984 Life science/healthcare 20,521 1,166 21,687 26,360 Premium wine — 2,877 2,877 2,911 Other 32 — 32 165 Total commercial loans 86,493 85,765 172,258 201,147 Consumer loans: Real estate secured loans 1,331 850 2,181 3,712 Other consumer loans 422 — 422 436 Total consumer loans 1,753 850 2,603 4,148 Total $ 88,246 $ 86,615 $ 174,861 $ 205,295 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 table summarizes our average impaired loans and interest income on impaired loans, broken out by portfolio segment and class of financing receivable during 2017 , 2016 and 2015 : Year ended December 31, (Dollars in thousands) Average impaired loans Interest income on impaired loans 2017 2016 2015 2017 2016 2015 Commercial loans: Software/internet $ 119,557 $ 89,462 $ 63,825 $ 2,263 $ 1,054 $ 344 Hardware 35,022 39,108 8,854 1,061 2,624 574 Private equity/venture capital 556 — — — — — Life science/healthcare 30,842 40,620 18,083 90 155 132 Premium wine 3,249 2,056 1,455 152 28 12 Other 576 3,442 2,758 — 6 8 Total commercial loans 189,802 174,688 94,975 3,566 3,867 1,070 Consumer loans: Real estate secured loans 1,514 588 172 — — — Other consumer loans 1,804 1,136 41 — 17 — Total consumer loans 3,318 1,724 213 — 17 — Total average impaired loans $ 193,120 $ 176,412 $ 95,188 $ 3,566 $ 3,884 $ 1,070 The following tables summarize the activity relating to our allowance for loan losses for 2017 , 2016 and 2015 broken out by portfolio segment: Year ended December 31, 2017 (Dollars in thousands) Beginning Balance December 31, 2016 Charge-offs Recoveries Provision for (Reduction of) Loan Losses Foreign Currency Translation Adjustments Ending Balance December 31, 2017 Commercial loans: Software/internet $ 97,388 $ (45,012 ) $ 4,649 $ 38,462 $ 617 $ 96,104 Hardware 31,166 (10,414 ) 487 6,051 324 27,614 Private equity/venture capital 50,299 (323 ) — 31,625 867 82,468 Life science/healthcare 25,446 (8,210 ) 189 7,414 85 24,924 Premium wine 4,115 — — (540 ) (43 ) 3,532 Other 4,768 (1,156 ) 1,850 (1,459 ) (62 ) 3,941 Total commercial loans 213,182 (65,115 ) 7,175 81,553 1,788 238,583 Consumer loans 12,184 (1,567 ) 1,363 4,386 75 16,441 Total allowance for loan losses $ 225,366 $ (66,682 ) $ 8,538 $ 85,939 $ 1,863 $ 255,024 Year ended December 31, 2016 (Dollars in thousands) Beginning Balance December 31, 2015 Charge-offs Recoveries Provision for (Reduction of) Loan Losses Foreign Currency Translation Adjustments Ending Balance December 31, 2016 Commercial loans: Software/internet $ 103,045 $ (68,784 ) $ 7,278 $ 58,350 $ (2,501 ) $ 97,388 Hardware 23,085 (13,233 ) 1,667 20,851 (1,204 ) 31,166 Private equity/venture capital 35,282 — — 15,114 (97 ) 50,299 Life science/healthcare 36,576 (9,693 ) 1,129 (2,543 ) (23 ) 25,446 Premium wine 5,205 — — (1,260 ) 170 4,115 Other 4,252 (5,045 ) 1,880 3,373 308 4,768 Total commercial loans 207,445 (96,755 ) 11,954 93,885 (3,347 ) 213,182 Consumer loans 10,168 (102 ) 258 1,812 48 12,184 Total allowance for loan losses $ 217,613 $ (96,857 ) $ 12,212 $ 95,697 $ (3,299 ) $ 225,366 Year ended December 31, 2015 Beginning Balance December 31, 2014 Charge-offs Recoveries Provision for (Reduction of) Loan Losses Foreign Currency Translation Adjustments Ending Balance December 31, 2015 Commercial loans: Software/internet $ 80,981 $ (33,246 ) $ 1,621 $ 53,696 $ (7 ) $ 103,045 Hardware 25,860 (5,145 ) 3,332 (1,035 ) 73 23,085 Private equity/venture capital 27,997 — — 7,391 (106 ) 35,282 Life science/healthcare 15,208 (7,291 ) 277 28,400 (18 ) 36,576 Premium wine 4,473 — 7 725 — 5,205 Other 3,253 (4,990 ) 809 5,736 (556 ) 4,252 Total commercial loans 157,772 (50,672 ) 6,046 94,913 (614 ) 207,445 Consumer loans 7,587 (296 ) 163 2,716 (2 ) 10,168 Total allowance for loan losses $ 165,359 $ (50,968 ) $ 6,209 $ 97,629 $ (616 ) $ 217,613 The following table summarizes the activity relating to our allowance for unfunded credit commitments for 2017 , 2016 and 2015 : Year ended December 31, (Dollars in thousands) 2017 2016 2015 Allowance for unfunded credit commitments, beginning balance $ 45,265 $ 34,415 $ 36,419 Provision for (reduction of) unfunded credit commitments 6,365 10,982 (1,946 ) Foreign currency translation adjustments 140 (132 ) (58 ) Allowance for unfunded credit commitments, ending balance (1) $ 51,770 $ 45,265 $ 34,415 (1) See Note 19—“Off-Balance Sheet Arrangements, Guarantees and Other Commitments” of the “Notes to the Consolidated Financial Statements” under Part II, Item 8 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 December 31, 2017 and 2016 , broken out by portfolio segment: December 31, 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 $ 23,088 $ 110,654 $ 73,016 $ 6,061,877 $ 28,245 $ 122,748 $ 69,143 $ 5,504,283 Hardware 8,450 36,350 19,164 1,157,249 9,995 65,395 21,171 1,115,003 Private equity/venture capital 330 658 82,138 9,951,719 — — 50,299 7,691,148 Life science/healthcare 9,315 21,687 15,609 1,787,140 8,709 38,361 16,737 1,814,643 Premium wine — 2,877 3,532 870,281 520 3,187 3,595 875,135 Other 32 32 3,909 476,306 233 867 4,535 500,842 Total commercial loans 41,215 172,258 197,368 20,304,572 47,702 230,558 165,480 17,501,054 Total consumer loans 578 2,603 15,863 2,626,883 1,123 3,902 11,061 2,164,430 Total $ 41,793 $ 174,861 $ 213,231 $ 22,931,455 $ 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 full repayment of a criticized loan has been deemed improbable under the original contractual terms but full repayment remains probable overall, the loan is considered to be a “Performing Impaired (Criticized)” loan. 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 a further description of nonaccrual loans, refer to Note 2—“Summary of Significant Accounting Policies” of the “Notes to the Consolidated Financial Statements” under Part II, Item 8 of this report ). 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 December 31, 2017 and 2016 : (Dollars in thousands) Pass Performing (Criticized) Performing Impaired (Criticized) Nonperforming Impaired (Nonaccrual) Total December 31, 2017: Commercial loans: Software/internet $ 5,655,739 $ 466,332 $ 31,794 $ 78,860 $ 6,232,725 Hardware 1,112,574 51,976 20,165 16,185 1,200,900 Private equity/venture capital 9,955,082 5,381 — 658 9,961,121 Life science/healthcare 1,720,613 125,660 1,167 20,520 1,867,960 Premium wine 834,537 36,955 2,476 401 874,369 Other 469,721 21,016 — 32 490,769 Total commercial loans 19,748,266 707,320 55,602 116,656 20,627,844 Consumer loans: Real estate secured loans 2,282,375 13,301 — 2,181 2,297,857 Other consumer loans 326,851 1,179 — 422 328,452 Total consumer loans 2,609,226 14,480 — 2,603 2,626,309 Total gross loans $ 22,357,492 $ 721,800 $ 55,602 $ 119,259 $ 23,254,153 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 December 31, 2017 we had 22 TDRs with a total carrying value of $147.8 million where concessions have been granted to borrowers experiencing financial difficulties, in an attempt to maximize collection. This compares to 20 TDRs with a total carrying value of $96.1 million as of December 31, 2016 . There were unfunded commitments available for funding of $0.6 million to the clients associated with these TDRs as of December 31, 2017 . The following table summarizes our loans modified in TDRs, broken out by portfolio segment and class of financing receivables at December 31, 2017 and 2016 : December 31, (Dollars in thousands) 2017 2016 Loans modified in TDRs: Commercial loans: Software/internet $ 73,455 $ 52,646 Hardware 51,132 14,870 Private equity/venture capital 350 — Life science/healthcare 19,235 24,176 Premium wine 3,198 3,194 Other — 387 Total commercial loans 147,370 95,273 Consumer loans: Other consumer loans 423 786 Total loans modified in TDRs $ 147,793 $ 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 2017 , 2016 and 2015 : Year ended December 31, (Dollars in thousands) 2017 2016 2015 Loans modified in TDRs during the period: Commercial loans: Software/internet $ 42,184 $ 23,574 $ 56,790 Hardware 51,132 14,870 286 Private equity/venture capital 350 — — Life science/healthcare — 1,638 51,878 Premium wine 177 677 898 Other — — 519 Total commercial loans 93,843 40,759 110,371 Consumer loans: Other consumer loans — 786 — Total loans modified in TDRs during the period (1) $ 93,843 $ 41,545 $ 110,371 (1) During 2017 , we had $3.0 million of partial charge-offs on loans classified as TDRs. We had $3.6 million of partial charge-offs in 2016 and $23.5 million of partial charge-offs in 2015. During 2017 , $93.5 million of new TDRs were modified through payment deferrals granted to our clients and $0.3 million were modified through partial forgiveness of principal. During 2016 and 2015, all new TDRs were modified through payment deferrals granted to our 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 their respective periods, broken out by portfolio segment and class of financing receivable, during 2017 , 2016 and 2015 : December 31, (Dollars in thousands) 2017 (1) 2016 2015 TDRs modified within the previous 12 months that defaulted during the period: Commercial loans: Software/internet $ — $ — $ 16,804 Hardware — 134 286 Premium wine — 491 — Life science/healthcare — — 943 Total commercial loans — 625 18,033 Consumer loans: Other consumer loans — 786 — Total TDRs modified within the previous 12 months that defaulted in the period $ — $ 1,411 $ 18,033 (1) There were no loans modified in TDRs within the previous 12 months that subsequently defaulted during 2017 . 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 December 31, 2017 . |