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 $165 million and $173 million at September 30, 2019 and December 31, 2018 , respectively, is presented in the following table: (Dollars in thousands) September 30, 2019 December 31, 2018 Commercial loans: Software/internet $ 6,009,518 $ 6,154,755 Hardware 1,357,617 1,234,557 Private equity/venture capital 16,293,556 14,110,560 Life science/healthcare 2,381,822 2,385,612 Premium wine 234,555 249,266 Other 385,013 321,978 Total commercial loans 26,662,081 24,456,728 Real estate secured loans: Premium wine (1) 749,259 710,397 Consumer loans (2) 3,015,396 2,612,971 Other 39,332 40,435 Total real estate secured loans 3,803,987 3,363,803 Construction loans 116,854 97,077 Consumer loans 481,072 420,672 Total loans, net of unearned income (3) $ 31,063,994 $ 28,338,280 (1) Included in our premium wine portfolio are gross construction loans of $96 million and $99 million at September 30, 2019 and December 31, 2018 , respectively. (2) Consumer loans secured by real estate at September 30, 2019 and December 31, 2018 were comprised of the following: (Dollars in thousands) September 30, 2019 December 31, 2018 Loans for personal residence $ 2,577,623 $ 2,251,292 Loans to eligible employees 380,677 290,194 Home equity lines of credit 57,096 71,485 Consumer loans secured by real estate $ 3,015,396 $ 2,612,971 (3) Included within our total loan portfolio are credit card loans of $396 million and $335 million at September 30, 2019 and December 31, 2018 , respectively. Credit Quality The composition of loans, net of unearned income of $165 million and $173 million at September 30, 2019 and December 31, 2018 , respectively, broken out by portfolio segment and class of financing receivable, is as follows: (Dollars in thousands) September 30, 2019 December 31, 2018 Commercial loans: Software/internet $ 6,009,518 $ 6,154,755 Hardware 1,357,617 1,234,557 Private equity/venture capital 16,293,556 14,110,560 Life science/healthcare 2,381,822 2,385,612 Premium wine 983,814 959,663 Other 541,199 459,490 Total commercial loans 27,567,526 25,304,637 Consumer loans: Real estate secured loans 3,015,396 2,612,971 Other consumer loans 481,072 420,672 Total consumer loans 3,496,468 3,033,643 Total loans, net of unearned income $ 31,063,994 $ 28,338,280 The following table summarizes the aging of our gross loans, broken out by portfolio segment and class of financing receivable as of September 30, 2019 and December 31, 2018 : (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 September 30, 2019: Commercial loans: Software/internet $ 11,314 $ 6,760 $ 806 $ 18,880 $ 5,967,307 $ 806 Hardware 2,934 342 — 3,276 1,354,693 — Private equity/venture capital 21,493 92 — 21,585 16,288,499 — Life science/healthcare 6,645 453 58 7,156 2,400,516 58 Premium wine 5,846 — — 5,846 976,903 — Other 13 8,050 — 8,063 546,943 — Total commercial loans 48,245 15,697 864 64,806 27,534,861 864 Consumer loans: Real estate secured loans 599 2,117 — 2,716 3,002,256 — Other consumer loans 147 — — 147 481,277 — Total consumer loans 746 2,117 — 2,863 3,483,533 — Total gross loans excluding impaired loans 48,991 17,814 864 67,669 31,018,394 864 Impaired loans 2,000 39,135 3,059 44,194 98,746 — Total gross loans $ 50,991 $ 56,949 $ 3,923 $ 111,863 $ 31,117,140 $ 864 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 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, 2019 and December 31, 2018 : (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, 2019: Commercial loans: Software/internet $ 55,892 $ 25,588 $ 81,480 $ 91,126 Hardware 5,441 4,482 9,923 10,175 Life science/healthcare 32,634 6,887 39,521 76,305 Premium wine 393 1,946 2,339 2,424 Other 2,589 — 2,589 2,639 Total commercial loans 96,949 38,903 135,852 182,669 Consumer loans: Real estate secured loans 3,315 3,760 7,075 10,871 Other consumer loans 13 — 13 13 Total consumer loans 3,328 3,760 7,088 10,884 Total $ 100,277 $ 42,663 $ 142,940 $ 193,553 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 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 months ended September 30, 2019 and 2018 : Three months ended September 30, Average impaired loans Interest income recognized on impaired loans (Dollars in thousands) 2019 2018 2019 2018 Commercial loans: Software/internet $ 59,336 $ 118,840 $ 507 $ 607 Hardware 10,617 27,922 70 410 Private equity/venture capital — 1,233 — — Life science/healthcare 42,242 38,545 192 365 Premium wine 2,308 2,384 41 35 Other 3,404 — — — Total commercial loans 117,907 188,924 810 1,417 Consumer loans: Real estate secured loans 7,113 4,330 — 4 Other consumer loans 9 — — — Total consumer loans 7,122 4,330 — 4 Total average impaired loans $ 125,029 $ 193,254 $ 810 $ 1,421 Nine months ended September 30, Average impaired loans Interest income recognized on impaired loans (Dollars in thousands) 2019 2018 2019 2018 Commercial loans: Software/internet $ 88,487 $ 112,576 $ 2,275 $ 991 Hardware 14,188 34,469 417 499 Private equity/venture capital 3,019 536 — — Life science/healthcare 47,208 27,671 785 376 Premium wine 1,538 2,586 141 103 Other 1,541 130 — — Total commercial loans 155,981 177,968 3,618 1,969 Consumer loans: Real estate secured loans 7,379 3,953 54 12 Other consumer loans 9 477 — — Total consumer loans 7,388 4,430 54 12 Total average impaired loans $ 163,369 $ 182,398 $ 3,672 $ 1,981 The following tables summarize the activity relating to our allowance for loan losses for the three and nine months ended September 30, 2019 and 2018 , broken out by portfolio segment: Three months ended September 30, 2019 Beginning Balance June 30, 2019 Charge-offs Recoveries Provision for (Reduction of) Loan Losses Foreign Currency Translation Adjustments Ending Balance September 30, 2019 (Dollars in thousands) Commercial loans: Software/internet $ 101,998 $ (27,128 ) $ 988 $ 22,679 $ (335 ) $ 98,202 Hardware 26,932 (331 ) 1,669 (4,290 ) 64 24,044 Private equity/venture capital 105,524 — 1,200 1,834 (27 ) 108,531 Life science/healthcare 40,206 (9,361 ) 15 13,836 (204 ) 44,492 Premium wine 3,998 — — 46 (1 ) 4,043 Other 4,291 — — (30 ) — 4,261 Total commercial loans 282,949 (36,820 ) 3,872 34,075 (503 ) 283,573 Total consumer loans 18,939 — 16 1,910 (28 ) 20,837 Total allowance for loan losses $ 301,888 $ (36,820 ) $ 3,888 $ 35,985 $ (531 ) $ 304,410 Three months ended September 30, 2018 Beginning Balance June 30, 2018 Charge-offs Recoveries Provision for (Reduction of) Loan Losses Foreign Currency Translation Adjustments Ending Balance September 30, 2018 (Dollars in thousands) Commercial loans: Software/internet $ 102,648 $ (6,304 ) $ 841 $ 16,640 $ (335 ) $ 113,490 Hardware 34,695 (12,697 ) 227 (1,763 ) 36 20,498 Private equity/venture capital 89,409 — 3 1,632 (33 ) 91,011 Life science/healthcare 35,064 (2,076 ) 189 2,322 (47 ) 35,452 Premium wine 3,438 — — 125 (3 ) 3,560 Other 2,896 (1,128 ) 771 118 (2 ) 2,655 Total commercial loans 268,150 (22,205 ) 2,031 19,074 (384 ) 266,666 Total consumer loans 18,559 — 133 362 (7 ) 19,047 Total allowance for loan losses $ 286,709 $ (22,205 ) $ 2,164 $ 19,436 $ (391 ) $ 285,713 Nine months ended September 30, 2019 Beginning Balance December 31, 2018 Charge-offs Recoveries Provision for Loan Losses Foreign Currency Translation Adjustments Ending Balance September 30, 2019 (Dollars in thousands) Commercial loans: Software/internet $ 103,567 $ (38,319 ) $ 8,758 $ 24,667 $ (471 ) $ 98,202 Hardware 19,725 (3,576 ) 4,738 2,962 195 24,044 Private equity/venture capital 98,581 (2,047 ) 1,200 11,305 (508 ) 108,531 Life science/healthcare 32,180 (26,879 ) 196 38,397 598 44,492 Premium wine 3,355 — — 681 7 4,043 Other 3,558 (415 ) — 1,163 (45 ) 4,261 Total commercial loans 260,966 (71,236 ) 14,892 79,175 (224 ) 283,573 Total consumer loans 19,937 (1,019 ) 241 1,779 (101 ) 20,837 Total allowance for loan losses $ 280,903 $ (72,255 ) $ 15,133 $ 80,954 $ (325 ) $ 304,410 Nine months ended September 30, 2018 Beginning Balance December 31, 2017 Charge-offs Recoveries Provision for (Reduction of) Loan Losses Foreign Currency Translation Adjustments Ending Balance September 30, 2018 (Dollars in thousands) Commercial loans: Software/internet $ 96,104 $ (26,377 ) $ 1,818 $ 42,620 $ (675 ) $ 113,490 Hardware 27,614 (16,111 ) 1,458 7,788 (251 ) 20,498 Private equity/venture capital 82,468 (112 ) 13 8,200 442 91,011 Life science/healthcare 24,924 (2,940 ) 245 13,829 (606 ) 35,452 Premium wine 3,532 — — 42 (14 ) 3,560 Other 3,941 (2,391 ) 1,874 (775 ) 6 2,655 Total commercial loans 238,583 (47,931 ) 5,408 71,704 (1,098 ) 266,666 Total consumer loans 16,441 (289 ) 470 2,384 41 19,047 Total allowance for loan losses $ 255,024 $ (48,220 ) $ 5,878 $ 74,088 $ (1,057 ) $ 285,713 The following table summarizes the activity relating to our allowance for unfunded credit commitments for the three and nine months ended September 30, 2019 and 2018 : Three months ended September 30, Nine months ended September 30, (Dollars in thousands) 2019 2018 2019 2018 Allowance for unfunded credit commitments, beginning balance $ 62,664 $ 54,104 $ 55,183 $ 51,770 Provision for unfunded credit commitments 551 (2,262 ) 8,079 138 Foreign currency translation adjustments (107 ) (34 ) (154 ) (100 ) Allowance for unfunded credit commitments, ending balance (1) $ 63,108 $ 51,808 $ 63,108 $ 51,808 (1) See Note 16—“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 30, 2019 and December 31, 2018 , broken out by portfolio segment: September 30, 2019 December 31, 2018 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 $ 24,882 $ 81,480 $ 73,320 $ 5,928,038 $ 28,527 $ 114,850 $ 75,040 $ 6,039,905 Hardware 5,230 9,923 18,814 1,347,694 1,253 11,506 18,472 1,223,051 Private equity/venture capital — — 108,531 16,293,556 — 3,700 98,581 14,106,860 Life science/healthcare 22,161 39,521 22,331 2,342,301 7,484 34,067 24,696 2,351,545 Premium wine 394 2,339 3,649 981,475 — 1,301 3,355 958,362 Other 910 2,589 3,351 538,610 411 411 3,147 459,079 Total commercial loans 53,577 135,852 229,996 27,431,674 37,675 165,835 223,291 25,138,802 Total consumer loans 151 7,088 20,686 3,489,380 266 4,239 19,671 3,029,404 Total $ 53,728 $ 142,940 $ 250,682 $ 30,921,054 $ 37,941 $ 170,074 $ 242,962 $ 28,168,206 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 further description of nonaccrual loans, refer to Note 2—“Summary of Significant Accounting Policies” under Part II, Item 8 of our 2018 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, 2019 and December 31, 2018 : (Dollars in thousands) Pass Performing (Criticized) Performing Impaired (Criticized) Nonperforming Impaired (Nonaccrual) Total September 30, 2019: Commercial loans: Software/internet $ 5,454,896 $ 531,291 $ 25,588 $ 55,892 $ 6,067,667 Hardware 1,251,074 106,895 4,482 5,441 1,367,892 Private equity/venture capital 16,310,056 28 — — 16,310,084 Life science/healthcare 2,258,771 148,901 6,879 32,642 2,447,193 Premium wine 928,817 53,932 1,946 393 985,088 Other 537,852 17,154 — 2,589 557,595 Total commercial loans 26,741,466 858,201 38,895 96,957 27,735,519 Consumer loans: Real estate secured loans 2,994,694 10,278 — 7,075 3,012,047 Other consumer loans 481,424 — — 13 481,437 Total consumer loans 3,476,118 10,278 — 7,088 3,493,484 Total gross loans $ 30,217,584 $ 868,479 $ 38,895 $ 104,045 $ 31,229,003 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 Troubled Debt Restructurings As of September 30, 2019 , we had 20 TDRs with a total carrying value of $105.2 million where concessions have been granted to borrowers experiencing financial difficulties, in an attempt to maximize collection. There were $3.8 million of unfunded commitments available for funding to the clients associated with these TDRs as of September 30, 2019 . The following table summarizes our loans modified in TDRs, broken out by portfolio segment and class of financing receivables at September 30, 2019 and December 31, 2018 : (Dollars in thousands) September 30, 2019 December 31, 2018 Loans modified in TDRs: Commercial loans: Software/internet $ 80,704 $ 58,089 Hardware — 9,665 Life science/healthcare 18,689 12,738 Premium wine 3,712 2,883 Total commercial loans 103,105 83,375 Consumer loans: Other consumer loans 2,140 320 Total loans modified in TDRs $ 105,245 $ 83,695 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, 2019 and 2018 : Three months ended September 30, Nine months ended September 30, (Dollars in thousands) 2019 2018 2019 2018 Loans modified in TDRs during the period: Commercial loans: Software/internet $ 8,566 $ — $ 60,650 $ 14,069 Hardware — 10,398 — 12,347 Life science/healthcare — — 10,963 5,909 Total commercial loans 8,566 10,398 71,613 32,325 Consumer loans: Other consumer loans — — 1,826 322 Total loans modified in TDRs during the period (1) $ 8,566 $ 10,398 $ 73,439 $ 32,647 (1) There were $3.7 million and $9.2 million of partial charge-offs for the three and nine months ended September 30, 2019 , respectively, and $13.0 million and $21.5 million of partial charge-offs for the three and nine months ended September 30, 2018 , respectively. During the three and nine months ended September 30, 2019 , $6.4 million and $69.4 million , respectively, were modified through payment deferrals granted to our clients. During the three and nine months ended September 30, 2019 , $2.2 million and $4.0 million , respectively, were modified through partial forgiveness of principal. During the three and nine months ended September 30, 2018 , all new TDRs of $10.4 million and $32.6 million , respectively, 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 the three and nine months ended September 30, 2019 and 2018 : Three months ended September 30, Nine months ended September 30, (Dollars in thousands) 2019 2018 2019 2018 TDRs modified within the previous 12 months that defaulted during the period: Commercial loans: Software/internet $ 37,294 $ 18,911 $ 37,294 $ 41,568 Hardware — 2,100 — 5,549 Life science/healthcare 10,963 5,909 10,963 7,139 Total TDRs modified within the previous 12 months that defaulted in the period $ 48,257 $ 26,920 $ 48,257 $ 54,256 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 30, 2019 . |