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 $173 million and $148 million at December 31, 2018 and 2017 , respectively, is presented in the following table: December 31, (Dollars in thousands) 2018 2017 Commercial loans: Software/internet $ 6,154,755 $ 6,172,531 Hardware 1,234,557 1,193,599 Private equity/venture capital 14,110,560 9,952,377 Life science/healthcare 2,385,612 1,808,827 Premium wine 249,266 204,105 Other 321,978 365,724 Total commercial loans 24,456,728 19,697,163 Real estate secured loans: Premium wine (1) 710,397 669,053 Consumer loans (2) 2,612,971 2,300,506 Other 40,435 42,068 Total real estate secured loans 3,363,803 3,011,627 Construction loans 97,077 68,546 Consumer loans 420,672 328,980 Total loans, net of unearned income (3) $ 28,338,280 $ 23,106,316 (1) Included in our premium wine portfolio are gross construction loans of $99 million and $100 million at December 31, 2018 and 2017 , respectively. (2) Consumer loans secured by real estate at December 31, 2018 and 2017 were comprised of the following: December 31, (Dollars in thousands) 2018 2017 Loans for personal residence $ 2,251,292 $ 1,995,840 Loans to eligible employees 290,194 243,118 Home equity lines of credit 71,485 61,548 Consumer loans secured by real estate $ 2,612,971 $ 2,300,506 (3) Included within our total loan portfolio are credit card loans of $335 million and $270 million at December 31, 2018 and 2017 , respectively. Credit Quality The composition of loans, net of unearned income of $173 million and $148 million at December 31, 2018 and 2017 , respectively, broken out by portfolio segment and class of financing receivable, is as follows: December 31, (Dollars in thousands) 2018 2017 Commercial loans: Software/internet $ 6,154,755 $ 6,172,531 Hardware 1,234,557 1,193,599 Private equity/venture capital 14,110,560 9,952,377 Life science/healthcare 2,385,612 1,808,827 Premium wine 959,663 873,158 Other 459,490 476,338 Total commercial loans 25,304,637 20,476,830 Consumer loans: Real estate secured loans 2,612,971 2,300,506 Other consumer loans 420,672 328,980 Total consumer loans 3,033,643 2,629,486 Total loans, net of unearned income $ 28,338,280 $ 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 December 31, 2018 and 2017 : (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, 2018: Commercial loans: Software/internet $ 28,134 $ 6,944 $ 378 $ 35,456 $ 6,059,672 $ 378 Hardware 300 34 4 338 1,233,956 4 Private equity/venture capital 59,481 11 — 59,492 14,054,940 — Life science/healthcare 16,082 817 19 16,918 2,410,091 19 Premium wine 2,953 14 — 2,967 956,285 — Other 7,391 163 1 7,555 477,442 1 Total commercial loans 114,341 7,983 402 122,726 25,192,386 402 Consumer loans: Real estate secured loans 3,598 1,750 1,562 6,910 2,598,496 1,562 Other consumer loans 361 — — 361 420,359 — Total consumer loans 3,959 1,750 1,562 7,271 3,018,855 1,562 Total gross loans excluding impaired loans 118,300 9,733 1,964 129,997 28,211,241 1,964 Impaired loans 2,843 1,181 25,092 29,116 140,958 — Total gross loans $ 121,143 $ 10,914 $ 27,056 $ 159,113 $ 28,352,199 $ 1,964 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 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, 2018 and 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 December 31, 2018: Commercial loans: Software/internet $ 49,625 $ 65,225 $ 114,850 $ 131,858 Hardware 1,256 10,250 11,506 12,159 Private equity/venture capital — 3,700 3,700 3,700 Life science/healthcare 17,791 16,276 34,067 44,446 Premium wine — 1,301 1,301 1,365 Other 411 — 411 411 Total commercial loans 69,083 96,752 165,835 193,939 Consumer loans: Real estate secured loans 3,919 320 4,239 5,969 Other consumer loans — — — — Total consumer loans 3,919 320 4,239 5,969 Total $ 73,002 $ 97,072 $ 170,074 $ 199,908 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 The following table summarizes our average impaired loans and interest income recognized on impaired loans, broken out by portfolio segment and class of financing receivable during 2018 , 2017 and 2016 : Year ended December 31, (Dollars in thousands) Average impaired loans Interest income recognized on impaired loans 2018 2017 2016 2018 2017 2016 Commercial loans: Software/internet $ 112,493 $ 119,557 $ 89,462 $ 1,513 $ 2,263 $ 1,054 Hardware 28,540 35,022 39,108 312 1,061 2,624 Private equity/venture capital 1,327 556 — — — — Life science/healthcare 30,144 30,842 40,620 756 90 155 Premium wine 2,605 3,249 2,056 68 152 28 Other 171 576 3,442 — — 6 Total commercial loans 175,280 189,802 174,688 2,649 3,566 3,867 Consumer loans: Real estate secured loans 4,028 1,514 588 15 — — Other consumer loans 358 1,804 1,136 — — 17 Total consumer loans 4,386 3,318 1,724 15 — 17 Total average impaired loans $ 179,666 $ 193,120 $ 176,412 $ 2,664 $ 3,566 $ 3,884 The following tables summarize the activity relating to our allowance for loan losses for 2018 , 2017 and 2016 broken out by portfolio segment: Year ended December 31, 2018 (Dollars in thousands) Beginning Balance December 31, 2017 Charge-offs Recoveries Provision for (Reduction of) Loan Losses Foreign Currency Translation Adjustments Ending Balance December 31, 2018 Commercial loans: Software/internet $ 96,104 $ (42,315 ) $ 5,664 $ 45,068 $ (954 ) $ 103,567 Hardware 27,614 (16,148 ) 1,849 6,555 (145 ) 19,725 Private equity/venture capital 82,468 (112 ) 13 16,485 (273 ) 98,581 Life science/healthcare 24,924 (6,662 ) 348 14,347 (777 ) 32,180 Premium wine 3,532 — — (182 ) 5 3,355 Other 3,941 (2,391 ) 3,275 (1,320 ) 53 3,558 Total commercial loans 238,583 (67,628 ) 11,149 80,953 (2,091 ) 260,966 Consumer loans 16,441 (289 ) 487 3,339 (41 ) 19,937 Total allowance for loan losses $ 255,024 $ (67,917 ) $ 11,636 $ 84,292 $ (2,132 ) $ 280,903 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 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 The following table summarizes the activity relating to our allowance for unfunded credit commitments for 2018 , 2017 and 2016 : Year ended December 31, (Dollars in thousands) 2018 2017 2016 Allowance for unfunded credit commitments, beginning balance $ 51,770 $ 45,265 $ 34,415 Provision for unfunded credit commitments 3,578 6,365 10,982 Foreign currency translation adjustments (165 ) 140 (132 ) Allowance for unfunded credit commitments, ending balance (1) $ 55,183 $ 51,770 $ 45,265 (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, 2018 and 2017 , broken out by portfolio segment: December 31, 2018 December 31, 2017 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 $ 28,527 $ 114,850 $ 75,040 $ 6,039,905 $ 23,088 $ 110,654 $ 73,016 $ 6,061,877 Hardware 1,253 11,506 18,472 1,223,051 8,450 36,350 19,164 1,157,249 Private equity/venture capital — 3,700 98,581 14,106,860 330 658 82,138 9,951,719 Life science/healthcare 7,484 34,067 24,696 2,351,545 9,315 21,687 15,609 1,787,140 Premium wine — 1,301 3,355 958,362 — 2,877 3,532 870,281 Other 411 411 3,147 459,079 32 32 3,909 476,306 Total commercial loans 37,675 165,835 223,291 25,138,802 41,215 172,258 197,368 20,304,572 Total consumer loans 266 4,239 19,671 3,029,404 578 2,603 15,863 2,626,883 Total $ 37,941 $ 170,074 $ 242,962 $ 28,168,206 $ 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 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. 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, 2018 and 2017 : (Dollars in thousands) Pass Performing (Criticized) Performing Impaired (Criticized) Nonperforming Impaired (Nonaccrual) Total December 31, 2018: Commercial loans: Software/internet $ 5,574,332 $ 520,796 $ 48,069 $ 66,781 $ 6,209,978 Hardware 1,146,985 87,309 10,250 1,256 1,245,800 Private equity/venture capital 14,098,281 16,151 — 3,700 14,118,132 Life science/healthcare 2,291,356 135,653 16,276 17,791 2,461,076 Premium wine 909,965 49,287 1,017 284 960,553 Other 467,653 17,344 — 411 485,408 Total commercial loans 24,488,572 826,540 75,612 90,223 25,480,947 Consumer loans: Real estate secured loans 2,584,261 21,145 320 3,919 2,609,645 Other consumer loans 419,771 949 — — 420,720 Total consumer loans 3,004,032 22,094 320 3,919 3,030,365 Total gross loans $ 27,492,604 $ 848,634 $ 75,932 $ 94,142 $ 28,511,312 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 Troubled Debt Restructurings As of December 31, 2018 we had 17 TDRs with a total carrying value of $83.7 million where concessions have been granted to borrowers experiencing financial difficulties, in an attempt to maximize collection. This compares to 22 TDRs with a total carrying value of $147.8 million as of December 31, 2017 . There were unfunded commitments available for funding of $2.7 million to the clients associated with these TDRs as of December 31, 2018 . The following table summarizes our loans modified in TDRs, broken out by portfolio segment and class of financing receivables at December 31, 2018 and 2017 : December 31, (Dollars in thousands) 2018 2017 Loans modified in TDRs: Commercial loans: Software/internet $ 58,089 $ 73,455 Hardware 9,665 51,132 Private equity/venture capital — 350 Life science/healthcare 12,738 19,235 Premium wine 2,883 3,198 Total commercial loans 83,375 147,370 Consumer loans: Other consumer loans 320 423 Total loans modified in TDRs $ 83,695 $ 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 2018 , 2017 and 2016 : Year ended December 31, (Dollars in thousands) 2018 2017 2016 Loans modified in TDRs during the period: Commercial loans: Software/internet $ 30,429 $ 42,184 $ 23,574 Hardware 9,665 51,132 14,870 Private equity/venture capital — 350 — Life science/healthcare 660 — 1,638 Premium wine — 177 677 Total commercial loans 40,754 93,843 40,759 Consumer loans: Other consumer loans 320 — 786 Total loans modified in TDRs during the period (1) $ 41,074 $ 93,843 $ 41,545 (1) There were $4.6 million , $3.0 million , and $3.6 million of partial charge-offs during 2018 , 2017 and 2016 , respectively. During 2018 , all new TDRs of $41.1 million were modified through payment deferrals granted to our clients. 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, 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 2018 , 2017 and 2016 : December 31 (Dollars in thousands) 2018 (1) 2017 (1) 2016 TDRs modified within the previous 12 months that defaulted during the period: Commercial loans: Hardware $ — $ — $ 134 Premium wine — — 491 Life science/healthcare — — — Total commercial loans — — 625 Consumer loans: Other consumer loans — — 786 Total TDRs modified within the previous 12 months that defaulted in the period $ — $ — $ 1,411 (1) For both the 2018 and 2017 periods, there were no loans modified in TDRs within the previous 12 months that subsequently defaulted during the period. 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 December 31, 2018 . |