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New words:
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Accelerator, added, aforementioned, amidst, appraised, ascertain, bearing, captured, categorized, close, compel, compression, conformed, construed, deem, degradation, denial, disable, disaggregation, enhancement, espionage, exploit, export, formula, GCB, hack, ICP, import, imprecise, initiated, lag, letter, macro, mandatory, motivation, noncancelable, outbreak, overview, payout, persuade, prediction, qualitatively, relied, rent, residence, ship, simplify, Simplifying, submission, subsequently, typical, unsettled
Financial report summary
?Risks
- Because of the credit profile of our loan portfolio, our levels of nonperforming assets and charge-offs can be volatile. We have and may in the future need to make material provisions for credit losses in any period, which could reduce net income, increase net losses or otherwise adversely affect our financial condition in that period.
- Our ACL is determined based upon both objective and subjective factors, and may not be adequate to absorb credit losses.
- The borrowing needs of our clients have been and may continue to be unpredictable, especially during a challenging economic environment. We may not be able to meet our unfunded credit commitments, or adequately reserve for losses associated with our unfunded credit commitments, which could have a material adverse effect on our business, financial condition, results of operations or reputation.
- Instability and adverse developments in national or global financial markets and overall economic conditions, including as a result of geopolitical matters, may materially affect our business, financial condition and results of operation.
- Our interest rate spread may further decline in the future. Any material reduction in our interest rate spread could have a material adverse effect on our business, results of operations or financial condition.
- Liquidity risk could impair our ability to fund operations and jeopardize our financial condition.
- Our equity warrant assets, venture capital and private equity fund investments and direct equity investment portfolio gains and losses depend upon the performance of our portfolio investments and the general condition of the public and private equity and M&A markets, which are uncertain and may vary materially by period.
- Changes in the market for public equity offerings, M&A or a slowdown in private equity or venture capital investment levels have affected and may continue to affect the needs of our clients for investment banking or M&A advisory services and lending products, which could in turn adversely affect our business, results of operations or financial condition.
- Fraudulent activity could have a material adverse effect on our business, financial condition or results of operations.
- A data breach, disruption of service or other cybersecurity-related incident could have a material adverse effect on our business, financial condition or results of operations.
- We face risks associated with the ability of our IT systems and our people and processes to support our operations and future growth effectively.
- Business disruptions and interruptions due to natural disasters and other external events beyond our control, including pandemics, have in the past adversely affected our business, financial condition or results of operations and may do so in the future.
- We face risks from a prolonged work-from-home arrangement as well as our implementation of a broader plan to return to the office.
- We face reputation and business risks due to our reliance on business partners, service providers and other third parties.
- The soundness of other financial institutions could adversely affect us.
- We depend on the accuracy and completeness of information about customers and counterparties.
- We face risks associated with our current international operations and ongoing international expansion.
- Our holding company, SVB Financial, relies on equity warrant assets income, investment distributions, periodic capital market transactions and dividends from its subsidiaries for most of its cash revenues.
- Climate change has the potential to disrupt our business and adversely impact the operations and creditworthiness of our clients.
- The COVID-19 pandemic created significant economic and financial disruptions that adversely affected certain aspects of our business and operations, and such disruptions have the potential to reoccur.
- We are subject to extensive regulation that could limit or restrict our activities, impose financial requirements or limitations on the conduct of our business, or result in higher costs to us, and the stringency of the regulatory framework applicable to us may increase if, and as, our balance sheet continues to grow.
- As a bank holding company with more than $100 billion of average total consolidated assets, we are subject to stringent regulations, including certain enhanced prudential standards applicable to large bank holding companies. If we exceed certain other thresholds, we will become subject to even more stringent regulations.
- We face a risk of noncompliance and enforcement action with the Bank Secrecy Act, other anti-money laundering and anti-bribery statutes and regulations and U.S. economic and trade sanctions.
- Laws and regulations regarding the handling of personal data and information may impede our services or result in increased costs, legal claims or fines against us.
- Adverse results from litigation or governmental or regulatory investigations can impact our business practices and operating results.
- A failure to appropriately identify and address potential conflicts of interest could adversely affect our businesses.
- Anti-takeover provisions and federal laws, particularly those applicable to financial institutions, may limit the ability of another party to acquire us, which could prevent a merger or acquisition that may be attractive to stockholders and/or have a material adverse effect on our stock price.
- We have experienced significant growth during 2021 and into 2022, including deposit growth. If we again experience deposit growth at a similar or greater rate than has occurred in the past, we may need to raise additional equity to support our capital ratios.
- Concentration of risk increases the potential for significant losses, while the establishment of limits to mitigate concentration risk increases the potential for lower revenues and slower growth.
- Decreases in the amount of equity capital available to our clients could adversely affect our business, growth and profitability.
- We face competitive pressures that could adversely affect our business, results of operations, financial condition or growth.
- Our ability to maintain or increase our market share depends on our ability to attract and maintain, as well as meet the needs of, existing and future clients.
- We face risks in connection with our strategic undertakings and new business initiatives.
- We may fail to realize the growth prospects and other benefits anticipated as a result of the Boston Private acquisition.
- Our business reputation and relationships are important and any damage to them could have a material adverse effect on our business.
- An ineffective risk management framework could have a material adverse effect on our strategic planning and our ability to mitigate risks and/or losses and could have adverse regulatory consequences.
- If we fail to retain key employees or recruit new employees, or if we are unable to effectively manage the growth of our employee base, our growth and results of operations could be adversely affected.
- Changes in accounting standards could materially impact our financial statements.
- We could be adversely affected by changes in tax laws and regulations or their interpretations.
- We rely on quantitative and qualitative models to measure risks and to estimate certain financial values.
- The price of our capital stock may be volatile or may decline.
- Our capital stock is subordinate to our existing and future indebtedness.
Management Discussion
- NII is defined as the difference between: (i) interest earned on loans, fixed income investments in our AFS and HTM securities portfolios and cash and cash equivalents and (ii) interest paid on funding sources. Net interest margin is defined as NII, on a fully taxable equivalent basis, as a percentage of average interest-earning assets. NII and net interest margin are presented on a fully taxable equivalent basis to consistently reflect income from taxable loans and securities and tax-exempt securities based on the applicable federal statutory tax rate.
- (1)Upon the completion of the Boston Private acquisition in July 2021, a $104 million fair market value adjustment was made on the acquired loans that will be amortized into loan interest income over the contractual terms of the underlying loans using the constant effective yield method. The adjustment will be approximately 90 percent amortized by the end of fiscal year 2023. For the year ended December 31, 2022, $40 million of this premium amortization partially offset the overall increase in NII. At December 31, 2022, $24 million of unamortized fair market value adjustment was included in the line item "loans, amortized cost" on the consolidated balance sheet.
- NII increased by $1.3 billion to $4.5 billion in 2022, compared to $3.2 billion in 2021. Overall, our NII increased primarily from higher yields as well as increases in average balances of our fixed income investment securities and loans. The increase in NII was partially offset by higher rates on deposits as well as increases in average balances of interest-bearing deposits and increases in average balances of short-term borrowings.