0000719739 sivb:OtherDerivativeInstrumentsMember us-gaap:NondesignatedMember sivb:OtherNoninterestIncomeMember sivb:ForeignExchangeForwardContractsNetMember 2018-01-01 2018-06-30

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

~~(Mark One)~~☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



x	~~QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934~~

For the quarterly period ended ~~September~~June 30, ~~2017~~2019



¨	~~TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934~~

☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________________ to .__________________

Commission File Number: 000-15637

SVB FINANCIAL GROUP

(Exact name of registrant as specified in its charter)



Delaware		91-1962278
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

3003 Tasman Drive, Santa Clara, California95054-1191



~~3003 Tasman Drive, Santa Clara, California~~		~~95054-1191~~
~~(Address of principal executive offices)~~		~~(Zip~~(Address of principal executive offices) (Zip Code)

~~(408)~~ (408) 654-7400

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yesx☒ No ¨☐

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit ~~and post~~ such files). Yesx☒ No ¨☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company,” in Rule 12b-2 of the Exchange Act. ~~(Check one):~~

Large accelerated filerx☒ Accelerated filer ¨☐

Non-accelerated filer ¨ ~~(Do not check if a smaller reporting company)~~

☐Smaller reporting company ¨☐

Emerging growth company ¨☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨☐ No x☒

Securities registered pursuant to Section 12(b) of the Act:



Title of Each Class	Trading Symbol	Name of Exchange on Which Registered
Common Stock, par value $0.001 per share	SIVB	NASDAQ Global Select Market

At ~~October~~July 31, ~~2017, 52,740,729~~2019, 51,538,553 shares of the registrant’s common stock ($0.001 par value) were outstanding.

TABLE OF CONTENTS



		Page
PART I - FINANCIAL INFORMATION		4

Item 1.	Interim Consolidated Financial Statements	4

	Interim Consolidated Balance Sheets as of ~~September~~June 30, ~~2017~~2019 and December 31, ~~2016~~2018 (Unaudited)	4

	Interim Consolidated Statements of Income for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2019 and ~~2016~~2018 (Unaudited)	5

	Interim Consolidated Statements of Comprehensive Income for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2019 and ~~2016~~2018 (Unaudited)	6

	Interim Consolidated Statements of Stockholders' Equity for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2019 and ~~2016~~2018 (Unaudited)	7

	Interim Consolidated Statements of Cash Flows for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2019 and ~~2016~~2018 (Unaudited)	8

	Notes to Interim Consolidated Financial Statements (Unaudited)	9

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	5164

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	93109

Item 4.	Controls and Procedures	95112

PART II - OTHER INFORMATION		96113

Item 1.	Legal Proceedings	97113

Item 1A.	Risk Factors	97113

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	97113

Item 3.	Defaults Upon Senior Securities	97113

Item 4.	Mine Safety Disclosures	97113

Item 5.	Other Information	97113

Item 6.	Exhibits	97113

SIGNATURES		98114

Glossary of Acronyms that may be used in this Report

AFS— Available-for-Sale

APIC— Additional Paid-in Capital

ASC— Accounting Standards Codification

ASU— Accounting Standards Update

CET— Common Equity Tier

EHOP— Employee Home Ownership Program of the Company

EPS— Earnings Per Share

ERI— Energy and Resource Innovation

ESOP— Employee Stock Ownership Plan of the Company

ESPP— 1999 Employee Stock Purchase Plan of the Company

FASB— Financial Accounting Standards Board

FDIC— Federal Deposit Insurance Corporation

FHLB— Federal Home Loan Bank

FRB— Federal Reserve Bank

FTE— Full-Time Employee

FTP— Funds Transfer Pricing

GAAP— Accounting principles generally accepted in the United States of America

HTM— Held-to-Maturity

IASB— International Accounting Standards Board

IPO— Initial Public Offering

IRS— Internal Revenue Service

IT— Information Technology

LIBOR— London Interbank Offered Rate

M&A— Merger and Acquisition

OTTI— Other Than Temporary Impairment

SEC— Securities and Exchange Commission

SPD-SVB— SPD Silicon Valley Bank Co., Ltd. (the Bank's joint venture bank in China)

TDR— Troubled Debt Restructuring

UK— United Kingdom

VIE— Variable Interest Entity

PART I - FINANCIAL INFORMATION

ITEM 1. INTERIM CONSOLIDATED FINANCIAL STATEMENTS

~~SVB FINANCIAL GROUP AND SUBSIDIARIES~~

~~INTERIM CONSOLIDATED BALANCE SHEETS (UNAUDITED)~~

(Dollars in thousands, except par value and share data)
September 30,
2017
December 31,
2016
Assets

Cash and cash equivalents
$ 3,555,571

$ 2,545,750
Available-for-sale securities, at fair value (cost of $12,584,564 and $12,588,783, respectively)
12,603,337

12,620,411
Held-to-maturity securities, at cost (fair value of $11,023,415 and $8,376,138, respectively)
11,055,006

8,426,998
Non-marketable and other securities
627,469

622,552
Total investment securities
24,285,812

21,669,961
Loans, net of unearned income
22,189,327

19,899,944
Allowance for loan losses
(249,010 )
(225,366 )
Net loans
21,940,317

19,674,578
Premises and equipment, net of accumulated depreciation and amortization
122,826

120,683
Accrued interest receivable and other assets
849,761

672,688
Total assets
$ 50,754,287

$ 44,683,660
Liabilities and total equity

Liabilities:

Noninterest-bearing demand deposits
$ 36,862,021

$ 31,975,457
Interest-bearing deposits
7,950,012

7,004,411
Total deposits
44,812,033

38,979,868
Short-term borrowings
4,840

512,668
Other liabilities
990,498

618,383
Long-term debt
749,618

795,704
Total liabilities
46,556,989

40,906,623
Commitments and contingencies (Note 12 and Note 15)

SVBFG stockholders’ equity:

Preferred stock, $0.001 par value, 20,000,000 shares authorized; no shares issued and outstanding
—

—
Common stock, $0.001 par value, 150,000,000 shares authorized; 52,723,654 shares and 52,254,074 shares outstanding, respectively
53

52
Additional paid-in capital
1,294,499

1,242,741
Retained earnings
2,749,627

2,376,331
Accumulated other comprehensive income
15,634

23,430
Total SVBFG stockholders’ equity
4,059,813

3,642,554
Noncontrolling interests
137,485

134,483
Total equity
4,197,298

3,777,037
Total liabilities and total equity
$ 50,754,287

$ 44,683,660

~~See accompanying notes to interim consolidated financial statements (unaudited).~~

~~SVB FINANCIAL GROUP AND SUBSIDIARIES~~

~~INTERIM CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)~~

Three months ended September 30,
Nine months ended September 30,
(Dollars in thousands, except per share amounts)
2017
2016
2017
2016
Interest income:

Loans
$ 268,445

$ 214,227

$ 745,983

$ 617,456
Investment securities:

Taxable
109,443

83,468

294,768

261,121
Non-taxable
1,172

522

2,703

1,693
Federal funds sold, securities purchased under agreements to resell and other short-term investment securities
6,211

2,196

16,670

5,793
Total interest income
385,271

300,413

1,060,124

886,063
Interest expense:

Deposits
2,304

1,535

6,218

3,984
Borrowings
8,993

9,717

27,243

28,161
Total interest expense
11,297

11,252

33,461

32,145
Net interest income
373,974

289,161

1,026,663

853,918
Provision for credit losses (1)
23,522

20,004

70,062

90,225
Net interest income after provision for credit losses
350,452

269,157

956,601

763,693
Noninterest income:

Gains on investment securities, net
15,238

23,178

48,838

41,764
Gains on equity warrant assets, net (2)
24,922

21,558

42,432

33,253
Foreign exchange fees
29,671

25,944

82,026

76,998
Credit card fees
20,270

18,295

56,099

49,226
Deposit service charges
14,508

13,356

43,046

39,142
Client investment fees
15,563

7,952

37,571

23,959
Lending related fees
15,404

8,168

32,874

23,783
Letters of credit and standby letters of credit fees
7,306

6,811

20,951

18,414
Other (2)
15,896

18,878

41,128

36,511
Total noninterest income
158,778

144,140

404,965

343,050
Noninterest expense:

Compensation and benefits
153,263

136,568

449,412

374,410
Professional services
32,987

23,443

86,331

67,959
Premises and equipment
18,937

16,291

53,753

47,861
Net occupancy
12,660

9,525

35,437

28,919
Business development and travel
10,329

8,504

30,913

30,077
FDIC and state assessments
8,359

7,805

26,354

21,624
Correspondent bank fees
3,162

3,104

9,770

9,469
Other
18,064

15,533

54,670

44,292
Total noninterest expense (1)
257,761

220,773

746,640

624,611
Income before income tax expense
251,469

192,524

614,926

482,132
Income tax expense (3)
97,351

76,877

220,412

195,508
Net income before noncontrolling interests
154,118

115,647

394,514

286,624
Net income loss attributable to noncontrolling interests
(5,498 )
(4,566 )
(21,218 )
(3,405 )
Net income available to common stockholders (3)
$ 148,620

$ 111,081

$ 373,296

$ 283,219
Earnings per common share—basic (3)
$ 2.82

$ 2.13

$ 7.11

$ 5.46
Earnings per common share—diluted (3)
2.79

2.12

7.01

5.42

~~(1)~~

Our consolidated statements of income for the three and nine months ended September 30, 2016 were modified from prior period's presentation to conform to the current period's presentation, which reflects our provision for loan losses and provision for unfunded credit commitments together as our “provision for credit losses”. In prior periods, our provision for unfunded credit commitments were reported as a component of noninterest expense.

~~(2)~~

Our consolidated statements of income for the three and nine months ended September 30, 2016 were modified from prior period's presentation to conform to the current period's presentation, which reflects a new line item to separately disclose net gains on equity warrant assets. In prior periods, net gains on equity warrant assets were reported as a component of gains on derivative instruments, net. We removed the line item gains on derivative instruments, net and reclassified all other gains on derivative instruments, net to other noninterest income.

~~(3)~~

Included in income tax expense, net income available to common shareholders, earnings per common share-basic and earnings for common share-diluted, for the three and nine months ended September 30, 2017, are tax benefits recognized associated with the adoption of Accounting Standards Update (“ASU”) 2016-09, Improvements to Employee Share-Based Payment Accounting in the first quarter of 2017. This guidance was adopted on a prospective basis with no change to prior period amounts.

~~See accompanying notes to interim consolidated financial statements (unaudited).~~

~~SVB FINANCIAL GROUP AND SUBSIDIARIES~~

~~INTERIM CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)~~

Three months ended September 30,
Nine months ended September 30,
(Dollars in thousands)
2017
2016
2017
2016
Net income before noncontrolling interests
$ 154,118

$ 115,647

$ 394,514

$ 286,624
Other comprehensive income (loss), net of tax:

Change in cumulative translation gains (losses):

Foreign currency translation gains (losses)
1,928

(119 )
4,463

(2,168 )
Related tax (expense) benefit
(787 )
50

(1,821 )
885
Change in unrealized gains (losses) on available-for-sale securities:

Unrealized holding gains (losses)
925

(54,204 )
(12,471 )
157,564
Related tax (expense) benefit
(429 )
21,932

5,207

(64,357 )
Reclassification adjustment for losses (gains) included in net income
101

15

(384 )
(11,567 )
Related tax (benefit) expense
(41 )
(6 )
157

4,707
Amortization of unrealized gains on securities transferred from available-for-sale to held-to-maturity
(1,594 )
(1,690 )
(4,931 )
(6,507 )
Related tax benefit
641

680

1,984

2,618
Other comprehensive income (loss), net of tax
744

(33,342 )
(7,796 )
81,175
Comprehensive income
154,862

82,305

386,718

367,799
Comprehensive income attributable to noncontrolling interests
(5,498 )
(4,566 )
(21,218 )
(3,405 )
Comprehensive income attributable to SVBFG
$ 149,364

$ 77,739

$ 365,500

$ 364,394

~~See accompanying notes to interim consolidated financial statements (unaudited).~~

~~SVB FINANCIAL GROUP AND SUBSIDIARIES~~

~~INTERIM CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (UNAUDITED)~~

Common Stock
Additional
Paid-in Capital
Retained Earnings
Accumulated
Other
Comprehensive Income
Total SVBFG
Stockholders’ Equity
Noncontrolling Interests
Total Equity
(Dollars in thousands)
Shares
Amount

Balance at December 31, 2015
51,610,226
$ 52
$ 1,189,032
$ 1,993,646
$ 15,404

$ 3,198,134

$ 135,097

$ 3,333,231
Common stock issued under employee benefit plans, net of restricted stock cancellations
408,044
—
8,661
—
—

8,661

—

8,661
Common stock issued under ESOP
43,165
—
4,328
—
—

4,328

—

4,328
Income tax effect from stock options exercised, vesting of restricted stock and other (1)
—
—
(6,300 ) —
—

(6,300 )
—

(6,300 )
Net income
—
—
—
283,219
—

283,219

3,405

286,624
Capital calls and distributions, net
—
—
—
—
—

—

(8,236 )
(8,236 )
Net change in unrealized gains and losses on AFS securities, net of tax
—
—
—
—
86,347

86,347

—

86,347
Amortization of unrealized gains on securities transferred from AFS to HTM, net of tax
—
—
—
—
(3,889 )
(3,889 )
—

(3,889 )
Foreign currency translation adjustments, net of tax
—
—
—
—
(1,283 )
(1,283 )
—

(1,283 )
Share-based compensation, net
—
—
23,834
—
—

23,834

—

23,834
Balance at September 30, 2016
52,061,435

$ 52

$ 1,219,555

$ 2,276,865

$ 96,579

$ 3,593,051

$ 130,266

$ 3,723,317
Balance at December 31, 2016
52,254,074

$ 52

$ 1,242,741

$ 2,376,331

$ 23,430

$ 3,642,554

$ 134,483

$ 3,777,037
Common stock issued under employee benefit plans, net of restricted stock cancellations
458,742
1
14,191
—
—

14,192

—

14,192
Common stock issued under ESOP
10,838
—
2,094
—
—

2,094

—

2,094
Income tax effect from stock options exercised, vesting of restricted stock and other (1) —
—
—
—
—
—
—
—
Net income
—
—
—
373,296
—

373,296

21,218

394,514
Capital calls and distributions, net
—
—
—
—
—

—

(18,216 )
(18,216 )
Net change in unrealized gains and losses on AFS securities, net of tax
—
—
—
—
(7,491 )
(7,491 )
—

(7,491 )
Amortization of unrealized gains on securities transferred from AFS to HTM, net of tax
—
—
—
—
(2,947 )
(2,947 )
—

(2,947 )
Foreign currency translation adjustments, net of tax
—
—
—
—
2,642

2,642

—

2,642
Share-based compensation, net
—
—
35,473
—
—

35,473

—

35,473
Balance at September 30, 2017
52,723,654

$ 53

$ 1,294,499

$ 2,749,627

$ 15,634

$ 4,059,813

$ 137,485

$ 4,197,298

~~(1)~~

During the first quarter of 2017 we adopted ASU 2016-09, Improvements to Employee Share-Based Payment Accounting. The amendments in this ASU require that all excess tax benefits and tax deficiencies associated with share-based compensation be recognized in income tax expense or benefit in the income statement. Previously, tax effects resulting from changes in the Company's share price subsequent to grant date of share-based compensation awards were recorded through additional paid-in-capital in stockholders' equity at the time of vesting and exercise. This guidance was adopted on a prospective basis with no change to prior period amounts. See ~~Note 1—“Basis of Presentation” of the “Notes to Interim Consolidated Financial Statements (unaudited)” under Part I, Item 1 of this report~~ ~~for additional details.~~

~~See accompanying notes to interim consolidated financial statements (unaudited).~~

~~SVB FINANCIAL GROUP AND SUBSIDIARIES~~

~~INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)~~

Nine months ended September 30,
(Dollars in thousands)
2017
2016
Cash flows from operating activities:

Net income before noncontrolling interests
$ 394,514

$ 286,624
Adjustments to reconcile net income to net cash provided by operating activities:

Provision for credit losses
70,062

90,225
Changes in fair values of equity warrant assets, net of proceeds from exercises
(29,666 ) (20,505 )
Changes in fair values of derivatives, net
8,214

(4,370 )
Gains on investment securities, net
(48,838 )
(41,764 )
Depreciation and amortization
39,265

35,114
Amortization of premiums and discounts on investment securities, net
2,609

9,622
Amortization of share-based compensation
27,739

22,342
Amortization of deferred loan fees
(81,060 )
(72,807 )
Deferred income tax benefit
2,325

(6,839 )
Gain from sale of equity valuation services business (2,393 ) —
Excess tax benefit from exercise of stock options and vesting of restricted shares (1) (14,399 ) —
Changes in other assets and liabilities:

Accrued interest receivable and payable, net
(26,092 )
1,169
Accounts receivable and payable, net
4,120

(12,872 )
Income tax receivable and payable, net
30,069

13,181
Accrued compensation
(11,731 )
(48,740 )
Foreign exchange spot contracts, net
86,911

1,803
Other, net
16,383

20,821
Net cash provided by operating activities
468,032

273,004
Cash flows from investing activities:

Purchases of available-for-sale securities
(2,420,741 )
—
Proceeds from sales of available-for-sale securities
7,311

2,879,409
Proceeds from maturities and pay downs of available-for-sale securities
2,434,039

1,002,523
Purchases of held-to-maturity securities
(3,812,782 )
(225,526 )
Proceeds from maturities and pay downs of held-to-maturity securities
1,283,764

1,206,367
Purchases of non-marketable and other securities
(18,713 )
(41,925 )
Proceeds from sales and distributions of non-marketable and other securities
88,809

54,420
Net increase in loans
(2,263,600 )
(2,365,640 )
Purchases of premises and equipment
(35,470 )
(37,184 )
Proceeds from sale of equity valuation services business 3,000
—
Net cash (used for) provided by investing activities
(4,734,383 )
2,472,444
Cash flows from financing activities:

Net increase (decrease) in deposits
5,832,165

(953,360 )
Net decrease in short-term borrowings
(507,828 )
(772,479 )
Principal payments of long-term debt (46,235 ) —
(Distributions to noncontrolling interests), net of contributions from noncontrolling interests
(18,216 )
(8,236 )
Tax effect from stock exercises (1)
—

(6,300 )
Proceeds from issuance of common stock, ESPP and ESOP
16,286

12,989
Net cash provided by (used for) financing activities
5,276,172

(1,727,386 )
Net increase in cash and cash equivalents
1,009,821

1,018,062
Cash and cash equivalents at beginning of period
2,545,750

1,503,257
Cash and cash equivalents at end of period
$ 3,555,571

$ 2,521,319
Supplemental disclosures:

Cash paid during the period for:

Interest
$ 41,324

$ 39,317
Income taxes
190,706

186,474
Noncash items during the period:

Changes in unrealized gains and losses on available-for-sale securities, net of tax
$ (7,491 )
$ 86,347
Distributions of stock from investments
5,360

750


~~(1)~~	During the first quarter of 2017 we adopted ASU 2016-09, Improvements to Employee Share-Based Payment Accounting. This guidance was adopted on a prospective basis with no change to prior period amounts. See ~~Note 1—“Basis of Presentation” of the “Notes to Interim Consolidated Financial Statements (unaudited)” under Part I, Item 1 of this report~~ ~~for additional details.~~

~~See accompanying notes to interim consolidated financial statements (unaudited).~~

SVB FINANCIAL GROUP AND SUBSIDIARIES

INTERIM CONSOLIDATED BALANCE SHEETS (UNAUDITED)



(Dollars in thousands, except par value and share data)	June 30, 2019			December 31, 2018
Assets:
Cash and cash equivalents	$	9,020,925		$	3,571,539
Available-for-sale securities, at fair value (cost of $7,842,667 and $7,862,311, respectively)	7,940,322			7,790,043
Held-to-maturity securities, at cost (fair value of $15,064,962 and $15,188,236, respectively)	14,868,761			15,487,442
Non-marketable and other equity securities	1,079,749			941,104
Total investment securities	23,888,832			24,218,589
Loans, net of unearned income	29,209,573			28,338,280
Allowance for loan losses	(301,888		)	(280,903		)
Net loans	28,907,685			28,057,377
Premises and equipment, net of accumulated depreciation and amortization	141,888			129,213
Goodwill	137,823			—
Other intangible assets, net	55,158			—
Lease right-of-use assets	156,347			—
Accrued interest receivable and other assets	1,465,081			951,261
Total assets	$	63,773,739		$	56,927,979
Liabilities and total equity:
Liabilities:
Noninterest-bearing demand deposits	$	39,331,489		$	39,103,422
Interest-bearing deposits	16,279,051			10,225,478
Total deposits	55,610,540			49,328,900
Short-term borrowings	24,252			631,412
Lease liabilities	195,326			—
Other liabilities	1,540,476			1,006,359
Long-term debt	696,970			696,465
Total liabilities	58,067,564			51,663,136
Commitments and contingencies (Note 16 and Note 19)
SVBFG stockholders’ equity:
Preferred stock, $0.001 par value, 20,000,000 shares authorized; no shares issued and outstanding	—			—
Common stock, $0.001 par value, 150,000,000 shares authorized; 51,561,719 shares and 52,586,498 shares issued and outstanding, respectively	52			53
Additional paid-in capital	1,421,565			1,378,438
Retained earnings	4,051,194			3,791,838
Accumulated other comprehensive income (loss)	81,232			(54,120		)
Total SVBFG stockholders’ equity	5,554,043			5,116,209
Noncontrolling interests	152,132			148,634
Total equity	5,706,175			5,264,843
Total liabilities and total equity	$	63,773,739		$	56,927,979

See accompanying notes to interim consolidated financial statements (unaudited).

SVB FINANCIAL GROUP AND SUBSIDIARIES

INTERIM CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)



	Three months ended June 30,						Six months ended June 30,
(Dollars in thousands, except per share amounts)	2019			2018			2019			2018
Interest income:
Loans	$	414,077		$	330,298		$	808,221		$	627,371
Investment securities:
Taxable	134,395			137,150			261,112			261,627
Non-taxable	10,931			7,666			21,868			12,758
Federal funds sold, securities purchased under agreements to resell and other short-term investment securities	26,364			6,187			45,580			11,943
Total interest income	585,767			481,301			1,136,781			913,699
Interest expense:
Deposits	47,150			6,270			75,057			10,367
Borrowings	9,214			8,588			19,435			17,026
Total interest expense	56,364			14,858			94,492			27,393
Net interest income	529,403			466,443			1,042,289			886,306
Provision for credit losses	23,946			29,080			52,497			57,052
Net interest income after provision for credit losses	505,457			437,363			989,792			829,254
Noninterest income:
Gains on investment securities, net	47,698			36,114			76,726			45,172
Gains on equity warrant assets, net	48,347			19,061			69,652			38,252
Client investment fees	45,744			29,452			90,226			52,327
Foreign exchange fees	38,506			34,077			76,554			67,904
Credit card fees	28,790			22,926			56,273			44,618
Deposit service charges	22,075			18,794			43,014			36,493
Lending related fees	11,213			9,528			25,150			20,263
Letters of credit and standby letters of credit fees	11,009			8,347			20,363			16,529
Investment banking revenue	48,694			—			98,489			—
Commissions	14,429			—			28,537			—
Other	17,245			14,390			29,142			26,649
Total noninterest income	333,750			192,689			614,126			348,207
Noninterest expense:
Compensation and benefits	243,172			181,955			481,233			347,761
Professional services	40,830			46,813			77,816			75,538
Premises and equipment	23,911			19,173			45,611			37,718
Net occupancy	16,687			13,288			32,735			26,904
Business development and travel	17,022			12,095			32,376			23,286
FDIC and state assessments	4,483			10,326			8,462			19,756
Other	37,417			22,089			70,953			40,193
Total noninterest expense	383,522			305,739			749,186			571,156
Income before income tax expense	455,685			324,313			854,732			606,305
Income tax expense	119,114			77,287			226,549			151,253
Net income before noncontrolling interests	336,571			247,026			628,183			455,052
Net income attributable to noncontrolling interests	(18,584		)	(9,228		)	(21,464		)	(22,293		)
Net income available to common stockholders	$	317,987		$	237,798		$	606,719		$	432,759
Earnings per common share—basic	$	6.12		$	4.48		$	11.61		$	8.17
Earnings per common share—diluted	6.08			4.42			11.51			8.05

See accompanying notes to interim consolidated financial statements (unaudited).

SVB FINANCIAL GROUP AND SUBSIDIARIES

INTERIM CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)



	Three months ended June 30,						Six months ended June 30,
(Dollars in thousands)	2019			2018			2019			2018
Net income before noncontrolling interests	$	336,571		$	247,026		$	628,183		$	455,052
Other comprehensive income (loss), net of tax:
Change in foreign currency cumulative translation gains and losses:
Foreign currency translation losses	(2,900		)	(5,184		)	(94		)	(2,078		)
Related tax benefit	808			1,433			26			577
Change in unrealized gains and losses on available-for-sale securities:
Unrealized holding gains (losses)	119,182			(15,103		)	166,018			(73,130		)
Related tax (expense) benefit	(33,194		)	4,349			(46,239		)	20,275
Reclassification adjustment for losses included in net income	275			—			3,905			—
Related tax benefit	(77		)	—			(1,087		)	—
Reclassification of unrealized gains on equity securities to retained earnings for ASU 2016-01	—			—			—			(40,316		)
Related tax expense	—			—			—			11,145
Amortization of unrealized holding gains on securities transferred from available-for-sale to held-to-maturity	(719		)	(932		)	(1,393		)	(2,138		)
Related tax benefit	200			258			388			591
Reclassification of stranded tax effect to retained earnings for ASU 2018-02	—			—			—			(319		)
Change in unrealized gains and losses on cash flow hedges:
Unrealized gains	17,554			—			18,656			—
Related tax expense	(4,890		)	—			(5,197		)	—
Reclassification adjustment for losses included in net income	508			—			511			—
Related tax benefit	(141		)	—			(142		)	—
Other comprehensive income (loss), net of tax	96,606			(15,179		)	135,352			(85,393		)
Comprehensive income	433,177			231,847			763,535			369,659
Comprehensive income attributable to noncontrolling interests	(18,584		)	(9,228		)	(21,464		)	(22,293		)
Comprehensive income attributable to SVBFG	$	414,593		$	222,619		$	742,071		$	347,366

See accompanying notes to interim consolidated financial statements (unaudited).

SVB FINANCIAL GROUP AND SUBSIDIARIES

INTERIM CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (UNAUDITED)



	Common Stock					Additional Paid-in Capital		Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Total SVBFG Stockholders’ Equity			Noncontrolling Interests			Total Equity
(Dollars in thousands)	Shares		Amount			Additional Paid-in Capital		Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Total SVBFG Stockholders’ Equity			Noncontrolling Interests			Total Equity
Balance at December 31, 2017	52,835,188		$	53		$	1,314,377	$	2,866,837		$	(1,472	)	$	4,179,795		$	139,620		$	4,319,415
Cumulative adjustment for adoption of the revenue standard (ASU 2014-09), net of tax	—		—			—		(5,802		)	—			(5,802		)	—			(5,802		)
Cumulative adjustment for adoption of financial instruments (ASU 2016-01), net of tax	—		—			—		103,766			(29,171		)	74,595			—			74,595
Reclassification of stranded tax effect for ASU 2018-02	—		—			—		319			(319		)	—			—			—
Common stock issued under employee benefit plans, net of restricted stock cancellations	365,767		—			7,165		—			—			7,165			—			7,165
Common stock issued under ESOP	9,672		—			2,577		—			—			2,577			—			2,577
Net income	—		—			—		432,759			—			432,759			22,293			455,052
Capital calls and distributions, net	—		—			—		—			—			—			(14,725		)	(14,725		)
Net change in unrealized gains and losses on AFS securities, net of tax	—		—			—		—			(52,855		)	(52,855		)	—			(52,855		)
Amortization of unrealized holding gains on securities transferred from AFS to HTM, net of tax	—		—			—		—			(1,547		)	(1,547		)	—			(1,547		)
Foreign currency translation adjustments, net of tax	—		—			—		—			(1,501		)	(1,501		)	—			(1,501		)
Share-based compensation, net	—		—			22,467		—			—			22,467			—			22,467
Balance at June 30, 2018	53,210,627		$	53		$	1,346,586	$	3,397,879		$	(86,865	)	$	4,657,653		$	147,188		$	4,804,841
Balance at December 31, 2018	52,586,498		$	53		$	1,378,438	$	3,791,838		$	(54,120	)	$	5,116,209		$	148,634		$	5,264,843
Cumulative adjustment for the adoption of premium amortization on purchased callable debt securities (ASU 2017-08) (1)	—		—			—		(583		)	—			(583		)	—			(583		)
Acquisition of SVB Leerink	—		—			—		—			—			—			5,256			5,256
Common stock issued under employee benefit plans, net of restricted stock cancellations	467,427		—			7,853		—			—			7,853			—			7,853
Common stock issued under ESOP	14,442		—			3,506		—			—			3,506			—			3,506
Net income	—		—			—		606,719			—			606,719			21,464			628,183
Capital calls and distributions, net	—		—			—		—			—			—			(23,222		)	(23,222		)
Net change in unrealized gains and losses on AFS securities, net of tax	—		—			—		—			122,597			122,597			—			122,597
Amortization of unrealized holding gains on securities transferred from AFS to HTM, net of tax	—		—			—		—			(1,005		)	(1,005		)	—			(1,005		)
Foreign currency translation adjustments, net of tax	—		—			—		—			(68		)	(68		)	—			(68		)
Net change in unrealized gains and losses on cash flow hedges, net of tax	—		—			—		—			13,828			13,828			—			13,828
Share-based compensation, net	—		—			31,768		—			—			31,768			—			31,768
Common stock repurchases	(1,506,648	)	(1		)	—		(346,780		)	—			(346,781		)	—			(346,781		)
Balance at June 30, 2019	51,561,719		$	52		$	1,421,565	$	4,051,194		$	81,232		$	5,554,043		$	152,132		$	5,706,175


(1)	See "Adoption of New Accounting Standards" in Note 1—“Basis of Presentation” of the “Notes to Interim Consolidated Financial Statements (unaudited)” under Part I, Item 1 of this report for additional details.

See accompanying notes to interim consolidated financial statements (unaudited).

SVB FINANCIAL GROUP AND SUBSIDIARIES

INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)



	Six months ended June 30,
(Dollars in thousands)	2019			2018
Cash flows from operating activities:
Net income before noncontrolling interests	$	628,183		$	455,052
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for credit losses	52,497			57,052
Changes in fair values of equity warrant assets, net of proceeds from exercises	(825		)	(24,940		)
Changes in fair values of derivatives, net	(9,958		)	(8,768		)
Gains on investment securities, net	(76,726		)	(45,172		)
Distributions of earnings from non-marketable and other equity securities	40,584			27,409
Depreciation and amortization	40,824			28,902
Amortization of premiums and discounts on investment securities, net	4,993			(478		)
Amortization of share-based compensation	31,768			22,467
Amortization of deferred loan fees	(76,712		)	(65,606		)
Deferred income tax benefit	(3,854		)	(18,594		)
Excess tax benefit from exercise of stock options and vesting of restricted shares	(7,369		)	(14,488		)
Losses from the write-off of premises and equipment	185			7,006
Changes in other assets and liabilities:
Accrued interest receivable and payable, net	(3,850		)	(28,213		)
Accounts receivable and payable, net	22,308			(10,169		)
Income tax receivable and payable, net	(87,097		)	(21,076		)
Accrued compensation	(175,469		)	(55,814		)
Foreign exchange spot contracts, net	108,307			68,870
Other, net	(37,218		)	(26,060		)
Net cash provided by operating activities	450,571			347,380
Cash flows from investing activities:
Purchases of available-for-sale securities	(2,553,326		)	(390,758		)
Proceeds from sales of available-for-sale securities	2,189,087			—
Proceeds from maturities and paydowns of available-for-sale securities	382,054			1,775,568
Purchases of held-to-maturity securities	(277,889		)	(4,067,389		)
Proceeds from maturities and paydowns of held-to-maturity securities	888,943			935,820
Purchases of non-marketable and other equity securities	(39,287		)	(28,099		)
Proceeds from sales and distributions of capital of non-marketable and other equity securities	59,187			75,139
Net increase in loans	(844,830		)	(2,855,537		)
Purchases of premises and equipment	(18,632		)	(14,851		)
Acquisition of SVB Leerink, net of cash acquired	(102,328		)	—
Net cash used for investing activities	(317,021		)	(4,570,107		)
Cash flows from financing activities:
Net increase in deposits	6,281,640			4,633,220
Net decrease in short-term borrowings	(607,160		)	(616,484		)
(Distributions to noncontrolling interests), net of contributions from noncontrolling interests	(23,222		)	(14,725		)
Common stock repurchases	(346,781		)	—
Proceeds from issuance of common stock, ESPP and ESOP	11,359			9,742
Net cash provided by financing activities	5,315,836			4,011,753
Net increase (decrease) in cash and cash equivalents	5,449,386			(210,974		)
Cash and cash equivalents at beginning of period	3,571,539			2,923,075
Cash and cash equivalents at end of period	$	9,020,925		$	2,712,101
Supplemental disclosures:
Cash paid during the period for:
Interest	$	94,851		$	27,730
Income taxes	310,604			193,682
Noncash items during the period:
Changes in unrealized gains and losses on available-for-sale securities, net of tax	$	122,597		$	(52,855	)
Distributions of stock from investments	6,747			3,136

See accompanying notes to interim consolidated financial statements (unaudited).

SVB FINANCIAL GROUP AND SUBSIDIARIES

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)


1.	Basis of Presentation

SVB Financial Group is a diversified financial services company, as well as a bank holding company and a financial holding company. SVB Financial was incorporated in the state of Delaware in March 1999. Through our various subsidiaries and divisions, we offer a ~~variety~~diverse set of banking and financial products and services to support our clients of all sizes and stages throughout their life cycles. In these notes to our unaudited interim consolidated financial statements, when we refer to “SVB Financial Group,” ~~“SVBFG”,~~“SVBFG," the “Company,” “we,” “our,” “us” or use similar words, we mean SVB Financial Group and all of its subsidiaries collectively, including Silicon Valley Bank (the “Bank”), unless the context requires otherwise. When we refer to “SVB Financial” or the “Parent” we are referring only to the parent company, SVB Financial Group (not including subsidiaries).

The accompanying unaudited interim consolidated financial statements reflect all adjustments of a normal and recurring nature that are, in the opinion of management, necessary to fairly present our financial position, results of operations and cash flows in accordance with GAAP. Such unaudited interim consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q pursuant to the rules and regulations of the SEC. Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. The results of operations for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2019 are not necessarily indicative of results to be expected for any future periods. These unaudited interim consolidated financial statements should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, ~~2016~~2018 (“~~2016~~2018 Form 10-K”).

The accompanying unaudited interim consolidated financial statements have been prepared on a consistent basis with the accounting policies described in Consolidated Financial Statements and Supplementary Data—Note 2—“Summary of Significant Accounting Policies” under Part II, Item 8 of our ~~2016~~2018 Form 10-K.

The preparation of unaudited interim consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Estimates may change as new information is obtained. Significant items that are subject to such estimates include measurements of fair value, the valuation of non-marketable and other equity securities, the valuation of equity warrant assets, the adequacy of the allowance for loan losses and allowance for unfunded credit commitments, and the recognition and measurement of income tax assets and liabilities.

Principles of Consolidation and Presentation

Our unaudited interim consolidated financial statements include the accounts of SVB Financial Group and consolidated entities. We consolidate voting entities in which we have control through voting interests or entities through which we have a controlling financial interest in a variable interest entity (“VIE”). We determine whether we have a controlling financial interest in a VIE by determining if we have: (a) the power to direct the activities of the VIE that most significantly impact the entity’s economic performance, (b) the obligation to absorb the expected losses, or (c) the right to receive the expected returns of the entity. Generally, we have significant variable interests if our commitments to a limited partnership investment represent a significant amount of the total commitments to the entity. We also evaluate the impact of related parties on our determination of variable interests in our consolidation conclusions. We consolidate VIEs in which we are the primary beneficiary based on a controlling financial interest. If we are not the primary beneficiary of a VIE, we record our pro-rata interests ~~or our cost basis in the VIE, as appropriate,~~ based on ~~other accounting guidance within GAAP.~~our ownership percentage.

VIEs are entities where investors lack sufficient equity at risk for the entity to finance its activities without additional subordinated financial support or equity investors, as a group, lack one of the following characteristics: (a) the power to direct the activities that most significantly impact the entity’s economic performance, (b) the obligation to absorb the expected losses of the entity, or (c) the right to receive the expected returns of the entity. We assess VIEs to determine if we are the primary beneficiary of a VIE. A primary beneficiary is defined as a variable interest holder that has a controlling financial interest. A controlling financial interest requires both: (a) the power to direct the activities that most significantly impact the VIE’s economic performance, and (b) obligation to absorb losses or receive benefits of a VIE that could potentially be significant to a VIE. Under this analysis, we also evaluate kick-out rights and other participating rights, which could provide us a controlling financial interest. The primary beneficiary of a VIE is required to consolidate the VIE.

We also evaluate fees paid to managers of our limited partnership investments. We exclude those fee arrangements that are not deemed to be variable interests from the analysis of our interests in our investments in VIEs and the determination of a primary beneficiary, if any. Fee arrangements based on terms that are customary and commensurate with the services provided are deemed not to be variable interests and are, therefore, excluded.

All significant intercompany accounts and transactions with consolidated entities have been eliminated. We have not provided financial or other support during the periods presented to any VIE that we were not previously contractually required to provide.

Adoption of New Accounting Standards

In March 2016, the FASB issued a new accounting standard update (ASU 2016-09, Improvements to Employee Share-Based Payment Accounting (Topic 718)), which includes provisions intended to simplify various aspects related to how share-based payments are accounted for and presented in the financial statements, including the accounting for income taxes, forfeitures, and statutory tax withholding requirements, as well as classification in the statement of cash flows. Under the ASU, an entity recognizes all excess tax benefits and tax deficiencies as income tax expense or benefit in the income statement in the period when the awards vest or are settled. The guidance also permits an entity to make an accounting policy election to either estimate the number of awards that are expected to vest or account for forfeitures when they occur. We adopted this guidance on January 1, 2017 and elected to estimate the number of awards that are expected to vest which, is consistent with the previous accounting guidance. In addition, we also elected to apply the amendments related to the presentation of excess tax benefits on the statement of cash flows using the prospective transition method.

Previously, tax effects resulting from changes in the Company's share price subsequent to grant date of share-based compensation awards were recorded through additional paid-in capital in stockholders' equity at the time of vesting and exercise. The adoption of the amended accounting guidance resulted in a $1.3 million and $14.4 million reduction of income tax expense (that previously would have been reflected as additional paid-in capital), or a benefit of $0.02 and $0.27 per diluted common share, for the three and nine months ended September 30, 2017, respectively. We expect the impact of this amendment will vary period to period depending on the volatility of the Company's stock price and the timing of vesting and/or settlement of awards.

~~Recent Accounting Pronouncements~~

In May 2014, the FASB issued a new accounting standard update (ASU 2014-09, Revenue from Contracts with Customers (Topic 606)), which provides revenue recognition guidance that is intended to create greater consistency with respect to how and when revenue from contracts with customers is shown in the income statement. The guidance requires that revenue from contracts with customers be recognized when transfer of control over goods or services is passed to customers in the amount of consideration expected to be received. Subsequent Accounting Standard Updates have been issued clarifying the original pronouncement (ASU 2016-08, ASU 2016-10, ASU 2016-12 and ASU 2016-20). The new standard and amendments will be effective January 1, 2018, either on a full retrospective approach or a modified retrospective approach. We plan to adopt the revenue guidance in the first quarter of 2018 using the modified retrospective transition approach applied to contracts which are not completed as of January 1, 2018. Upon adoption, we will recognize the cumulative-effect of adopting this guidance as an adjustment to opening retained earnings. We have conducted a comprehensive scoping exercise to determine the revenue streams that are within the scope of this guidance. The scope of this guidance explicitly excludes net interest income, including interest income earned from our loan and fixed income securities portfolios, as well as certain other noninterest income earned from our lending-, investment- and derivative-related activities. Based on our contract assessments to-date, we have not identified any material changes to the timing or the amounts of our revenue recognition. We expect minor changes in the timing of recognizing fund management fees in noninterest income for a portion of our SVB Capital funds as the fees will be recognized at the time of distribution which typically occurs later in the fund life than had been previously recognized. Based on our preliminary analysis, we expect the cumulative adjustment to retained earnings associated with this change to be from $7 million to $10 million, with an immaterial impact to our net income on an ongoing basis. We continue to evaluate the effect the guidance has on our revenue and the presentation of certain costs associated with our credit card and merchant services and whether these costs are presented in noninterest expense or offset against credit card fees in noninterest income. We currently recognize payment networks costs associated with our credit card and merchant services in noninterest expense. If we determine that the adoption of the guidance results in a change in the presentation of these costs, we estimate that this will result in approximately $10 million to $15 million of annual expenses would be netted against credit card interchange fees and reported in noninterest income instead of other noninterest expense. This change would occur on a prospective basis starting January 1, 2018 and would reduce our non-GAAP core fee income within noninterest income and also reduce noninterest expense with no impact to net income. Furthermore, we continue to evaluate the disaggregation of our significant categories of revenue within the scope of this guidance and plan to expand our qualitative disclosures of our noninterest income within the Consolidated Financial Statements upon adoption in 2018.

In January 2016, the FASB issued a new accounting standard update (ASU 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities (Topic 825)), which addresses certain aspects of recognition, measurement, presentation and disclosure of financial instruments. This guidance requires equity investments (except those accounted for under the equity method of accounting) to be measured at fair value with changes in fair value recognized in net income. The adoption of the new standard will result in the elimination of cost method accounting for equity investments and will impact our nonmarketable

and other equity securities that are currently carried at cost. This guidance will be effective on January 1, 2018, and our equity investments measured at cost will be measured at fair value and the difference between cost and fair value at adoption date will be recorded as a cumulative-effect adjustment to opening retained earnings of the fiscal year of adoption for our cost method venture capital and private equity fund investments with readily determinable fair values. The actual adjustment to opening retained earnings will depend upon the fair value of our investments at the adoption date but based on September 30, 2017 and historical values, we expect the transition adjustment to increase capital between $110 million and $120 million on a pre-tax basis. Any subsequent changes in the fair value will be recorded as unrealized gains or losses in our consolidated statements of income. Additionally, for purposes of disclosing the fair value of loans carried at amortized cost, we are evaluating our valuation methods to determine the necessary changes to conform to an “exit price” concept as required by the standard update. Accordingly, the fair value amounts disclosed for such loans may change upon adoption.

In February 2016, the FASB issued a new accounting standard update (ASU 2016-02, Leases (Topic 842)), which ~~will require~~requires for all operating leases the recognition of a right-of-use ("ROU") asset and a corresponding lease liability, in the statement of financial position. For short term leases (term of 12 months or less), a lessee is permitted to make an accounting election not to recognize lease assets and lease liabilities. The lease cost will be allocated over the lease term on a straight-line basis. ~~This guidance will be effective~~There were further amendments, including practical expedients, with the issuance of ASU 2018-01, “Leases (Topic 842): Land Easement Practical Expedient for Transition to Topic 842” in January 2018. In July 2018 the FASB issued ASU No. 2018-11, "Leases (Topic 842): Targeted Improvements", which provides us with the option to apply the new leasing standard to all open leases as of the adoption date, on a prospective basis.

On January 1, 2019, we adopted the new accounting standard ASU 2016-02, Leases (Topic 842) and all the related amendments ("new lease standard", "ASC 842" or "ASU 2016-02") utilizing the practical expedient to apply the new lease standard as of January 1, 2019 on a prospective basis. We also elected the "package of expedients" and elected as an accounting policy to exclude recording ROU assets and lease liabilities for leases that meet the definition of short-term leases. In addition to excluding short-term leases, we have implemented an accounting policy in which non-lease components are not separated from lease components in the measurement of ROU assets and lease liabilities for all lease contracts. The "package of expedients" allowed us to continue to account for existing leases for which the commencement date is before January 1, 2019, in accordance with the previous guidance, Leases (Topic 840), throughout the lease term, including periods after adoption of the new guidance. We recognized $146 million in ROU assets and $178 million in lease liabilities as a result of applying the new lease standard as an adjustment to our opening consolidated balance sheet on January 1, 2019. The comparative information has not been restated and continues to be reported under the accounting standards in effect for those periods. See Note 9—"Leases" of the “Notes to Interim Consolidated Financial Statements (unaudited)” under Part I, Item 1 of this report for additional disclosures related to our leases.

In March 2017, the FASB issued ASU No. 2017-08, Receivables—Nonrefundable Fees and Other Costs (Subtopic 310-20): Premium Amortization on Purchased Callable Debt Securities, which amends the amortization period for certain purchased callable debt securities held at a premium. The ASU requires entities to amortize premiums on debt securities by the first call date when the securities have fixed and determinable call dates and prices. The scope of the ASU includes all accounting premiums, such as purchase premiums and cumulative fair value hedge adjustments. The ASU does not change the accounting for discounts, which continue to be recognized over the contractual life of a security. Adoption of the ASU is on a modified retrospective basis ~~with early adoption permitted. We plan~~through a cumulative effect adjustment to ~~adopt~~retained earnings as of the ~~lease accounting guidance in~~beginning of the ~~first quarter~~year of adoption. Adoption of the ASU primarily affected our HTM portfolio of callable state and municipal debt securities. On January 1, 2019, we adopted the ASU and are currently evaluating the impact this guidance will have on our consolidated financial statements by reviewing our existing lease contracts and service contracts that may include embedded leases. We expectrecognized a net reduction to ~~recognize right-of-use assets and related lease liabilities associated predominantly with noncancelable operating leases included in the table~~retained earnings of ~~minimum future payments in the amount of $217 million as disclosed in Note 18 of our 2016 Form 10-K.~~$583 thousand.

Recent Accounting Pronouncements

In June 2016, the FASB issued a new accounting standard update (ASU 2016-13, Financial Instruments- Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments) ("ASU 2016-13" or "CECL"), which amends the incurred loss impairment methodology in current GAAP with a methodology that reflects a current expected credit loss measurement to estimate the allowance for credit losses ("ACL") over the contractual life of the loan and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. This guidance will be effective January 1, 2020, on a modified retrospective approach, with early adoption permitted, but not before January 1, 2019. We ~~currently~~expect to adopt the guidance in the first quarter of 2020.

Our implementation process includes loss forecasting model development, evaluation of technical accounting topics, updates to our allowance documentation, reporting processes and related internal controls, and overall operational readiness for our adoption of CECL, which will continue throughout 2019, including parallel runs for CECL alongside our current allowance process. The ultimate effect of CECL on our ACL will depend on the size and composition of our portfolio, the portfolio’s credit quality and economic conditions at the time of adoption, as well as any refinements to our models, methodology and other key assumptions. At adoption, we will have a ~~working project team in place and subject matter experts~~cumulative-effect adjustment to ~~assist with~~retained earnings for our ~~review of key interpretive issues and assist~~change in the assessment of our existing credit loss forecasting models and processes against the new guidance to determine what modifications may be required. We are currently evaluating the impact this guidance will have on our financial position, results of operation and stockholders’ equity.ACL.

In August ~~2016,~~2018, the FASB issued a new accounting standard update (ASU ~~2016-15, Statement of Cash Flows~~No. 2018-13, Fair Value Measurement (Topic ~~230)~~820): ~~Classification of Certain Cash Receipts and Cash Payments), which clarifies~~Disclosure Framework - Changes to the ~~guidance on eight specific cash flow issues.~~Disclosure Requirements for Fair Value Measurement). The ASU primarily modifies certain disclosures with respect to Level 3 fair value measurements. This guidance will be effective January 1, ~~2018 on a full retrospective approach,~~2020, with early adoption permitted. ~~Our preliminary evaluation has resulted in the expectation that this~~This guidance will ~~primarily~~not have an impact on our consolidated financial position or results of operations, and we do not expect the presentation between investing and operating activities within our statements of cash flows related to distributions and net gains from our nonmarketable and other securities portfolio. We are continuing to evaluate any further impactadoption of this ~~guidance~~standard to have a material impact on the disclosures in our Notes to the ~~presentation of our operating, investing and financing activities within our statements of cash flows.~~Consolidated Financial Statements.

Reclassifications

Certain prior period amounts, primarily related to ~~the~~presentation changes to our ~~income~~financial statement ~~presentation of net gains on derivative instruments~~line items and ~~provision for unfunded credit commitments~~immaterial changes to our reportable segments, have been reclassified to conform to current period presentations.


2.	~~Stockholders’~~ Business Combination

On January 4, 2019, we completed the acquisition of Leerink Holdings LLC, the Boston-based parent company of healthcare and life science investment bank Leerink Partners LLC, now SVB Leerink Holdings LLC ("SVB Leerink"). The acquisition was previously announced on November 13, 2018. SVB Leerink is an investment bank specializing in Equity & Convertible Capital Markets, Mergers & Acquisitions, Equity Research and Sales & Trading for growth and innovation-minded healthcare and life science companies and operates as a wholly-owned subsidiary of SVB Financial.

The acquisition was accounted for as a business combination and accordingly, the results of SVB Leerink's operations have been included in the Company's unaudited interim consolidated financial statements at and for the three and six months ended June 30, 2019 from the date of acquisition. We acquired SVB Leerink for approximately $273.2 million comprised of cash and share-based replacement award liabilities. In addition, we provided a retention pool for employees of $60.0 million to be paid over five years comprised of a mix of cash and equity issued under the Company's current Equity Incentive Plan. Refer to Note 4—“Share-Based Compensation” of the “Notes to Interim Consolidated Financial Statements (unaudited)” under Part I, Item 1 of this report for more information. The following table summarizes the allocation of the purchase price to the net assets of SVB Leerink as of January 4, 2019:



(Dollars in thousands)	January 4, 2019
Cash paid (1)	$	265,601
Replacement award liabilities (2)	7,629
Total purchase consideration	$	273,230
Fair value of net assets acquired (1)	135,407
Goodwill	$	137,823


(1)	During the three months ended June 30, 2019, the Company recorded purchase price allocation adjustments based on new information about facts and circumstances that existed at the time of the acquisition.


(2)	The replacement award liabilities recognized as part of the total purchase consideration and the post-combination expenses of $9.1 million related to share-based replacement awards will be paid out in cash in accordance with SVB Leerink's original grant date vesting schedules.

The following table summarizes the estimated fair value of assets acquired and liabilities assumed upon the finalization of the purchase:



(Dollars in thousands)	January 4, 2019
Assets acquired:
Cash and cash equivalents	$	163,273
Investment securities (1)	33,644
Accounts receivable (1)	36,538
Intangible assets	60,900
Other assets	35,128
Total assets acquired	329,483
Liabilities assumed:
Accrued compensation	137,206
Due to broker-dealers	18,483
Other liabilities	33,131
Noncontrolling interests	5,256
Total liabilities assumed	194,076
Fair value of net assets acquired	$	135,407


(1)	During the three months ended June 30, 2019, the Company recorded purchase price allocation adjustments described below.

The Company recognized identifiable intangible assets of $60.9 million and goodwill of $137.8 million as a result of the acquisition. Intangible assets of $60.9 million are subject to amortization over their estimated useful lives. The goodwill recorded includes revenue generating synergies expected from collaboration between SVB Leerink and the Company. All reported goodwill amounts have been allocated to the SVB Leerink reporting segment and are expected to be deductible for tax purposes. During the three months ended June 30, 2019, the Company made measurement period adjustments to reflect facts and circumstances in existence as of the acquisition date. These adjustments resulted in an increase in goodwill from March 31, 2019 of $2.6 million due to the net impact of an increase in cash paid of $2.3 million, an increase in investment securities of $0.7 million and a reduction in accounts receivable of $1.0 million. The fair value of the noncontrolling interests in Leerink Holdings LLC represents the noncontrolling ownership percentage for SVB Leerink's consolidated VIE investment securities which are measured at net asset value.

The following table summarizes the fair value and estimated useful lives of the other intangible assets at the date of acquisition:



(Dollars in thousands)	Estimated Fair Value		Weighted Average Estimated Useful Life - in Years
Other intangible assets:
Customer relationships	$	42,000	11.0
Other	18,900		9.9
Total other intangible assets	$	60,900

SVB Leerink's net income from January 4, 2019 through June 30, 2019 was approximately $9.7 million. Supplementary pro forma financial information related to the acquisition is not included because the impact to the Company's unaudited interim consolidated statements of income is not material. The following table represents the amount of revenue and earnings attributable to SVB Leerink that is included in our financial results for the three and six months ended June 30, 2019:



(Dollars in thousands)	Three months ended June 30, 2019		Six months ended June 30, 2019
Net interest income	$	242	$	684
Noninterest income	67,035		135,152
Noninterest expense	61,935		122,475
Income before income tax expense	5,342		13,361
Income tax expense	1,449		3,623
Net income attributable to noncontrolling interests	35		35
Net income available to common stockholders	$	3,858	$	9,703

The following table shows the components of acquisition-related activities expense for the three and six months ended June 30, 2019:



(Dollars in thousands)	Three months ended June 30, 2019		Six months ended June 30, 2019
Professional fees	$	283	$	651
Other	69		273
Total acquisition-related expenses	$	352	$	924


3.	Stockholders' Equity and EPS

Accumulated Other Comprehensive Income

The following table summarizes the items reclassified out of accumulated other comprehensive income into the Consolidated Statements of Income (unaudited) for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2019 and ~~2016~~:2018:



		Three months ended June 30,					Six months ended June 30,
(Dollars in thousands)	Income Statement Location	2019			2018		2019			2018
Reclassification adjustment for losses on available-for-sale securities included in net income	Gains on investment securities, net	$	275		$	—	$	3,905		$	—
Related tax benefit	Income tax expense	(77		)	—		(1,087		)	—
Reclassification adjustment for losses on cash flow hedges included in net income	Net interest income	508			—		511			—
Related tax benefit	Income tax expense	(141		)	—		(142		)	—
Total reclassification adjustment for losses included in net income, net of tax		$	565		$	—	$	3,187		$	—

Three months ended September 30, Nine months ended September 30,
(Dollars in thousands) Income Statement Location 2017
2016 2017 2016
Reclassification adjustment for losses (gains) included in net income Gains on investment securities, net $ 101
$ 15
$ (384 ) $ (11,567 )
Related tax (benefit) expense Income tax expense (41 ) (6 ) 157
4,707
Total reclassification adjustment for losses (gains) included in net income, net of tax $ 60
$ 9
$ (227 ) $ (6,860 )
The table below summarizes the activity relating to net gains on our cash flow hedges included in accumulated other comprehensive income for the three and six months ended June 30, 2019 and 2018. Over the next 12 months, we expect that approximately $1.5 million in accumulated other comprehensive income ("AOCI") at June 30, 2019, related to our cash flow hedges will be reclassified out of AOCI and recognized in net income.



	Three months ended June 30,				Six months ended June 30,
(Dollars in thousands)	2019		2018		2019		2018
Beginning balance	$	797	$	—	$	—	$	—
Net increase in fair value, net of tax	12,664		—		13,459		—
Net realized loss reclassified to net income, net of tax	367		—		369		—
Ending balance	$	13,828	$	—	$	13,828	$	—

EPS

Basic EPS is the amount of earnings available to each share of common stock outstanding during the reporting period. Diluted EPS is the amount of earnings available to each share of common stock outstanding during the reporting period adjusted to include the effect of potentially dilutive common shares. Potentially dilutive common shares include incremental shares issuable for stock options and restricted stock ~~units~~unit awards outstanding under our 2006 Equity Incentive Plan and our ESPP. Potentially dilutive common shares are excluded from the computation of dilutive EPS in periods in which the effect would be antidilutive. The following is a reconciliation of basic EPS to diluted EPS for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2019 and ~~2016~~2018:



	Three months ended June 30,				Six months ended June 30,
(Dollars and shares in thousands, except per share amounts)	2019		2018		2019		2018
Numerator:
Net income available to common stockholders	$	317,987	$	237,798	$	606,719	$	432,759
Denominator:
Weighted average common shares outstanding—basic	51,955		53,064		52,269		52,974
Weighted average effect of dilutive securities:
Stock options and ESPP	235		400		254		408
Restricted stock units and awards	146		312		192		350
Weighted average common shares outstanding—diluted	52,336		53,776		52,715		53,732
Earnings per common share:
Basic	$	6.12	$	4.48	$	11.61	$	8.17
Diluted	6.08		4.42		11.51		8.05

Three months ended September 30, Nine months ended September 30,
(Dollars and shares in thousands, except per share amounts) 2017 2016 2017 2016
Numerator:
Net income available to common stockholders $ 148,620
$ 111,081
$ 373,296
$ 283,219
Denominator:
Weighted average common shares outstanding—basic 52,705
52,046
52,530
51,842
Weighted average effect of dilutive securities:
Stock options and ESPP 343
233
381
245
Restricted stock units 257
134
319
142
Weighted average common shares outstanding—diluted 53,305
52,413
53,230
52,229
Earnings per common share:
Basic $ 2.82
$ 2.13
$ 7.11
$ 5.46
Diluted $ 2.79
$ 2.12
$ 7.01
$ 5.42

The following table summarizes the weighted-average common shares excluded from the diluted EPS calculation due to the antidilutive effect for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2019 and ~~2016:~~2018:



	Three months ended June 30,		Six months ended June 30,
(Shares in thousands)	2019	2018	2019	2018
Stock options	166	58	128	33
Restricted stock units	333	113	228	59
Total	499	171	356	92

Stock Repurchase Program

On November 13, 2018, the Company announced a new program to repurchase up to $500 million of our outstanding common stock (the "Stock Repurchase Program"). For the three months ended June 30, 2019, we repurchased 1.0 million shares of our outstanding common stock for $230.8 million under the Stock Repurchase Program. As of June 30, 2019, we had repurchased 2.2 million shares of our outstanding common stock for $493.9 million under the Stock Repurchase Program.

Consolidated Statement of Changes in Equity

The following table summarizes the changes in our consolidated equity for the three months ended June 30, 2019 and 2018:

Three months ended September 30, Nine months ended September 30,
(Shares in thousands) 2017 2016 2017 2016
Stock options 112
518
61
444
Restricted stock units 5
120
2
9
Total 117
638
63
453



	Common Stock				Additional Paid-in Capital		Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Total SVBFG Stockholders’ Equity			Noncontrolling Interests			Total Equity
(Dollars in thousands)	Shares		Amount		Additional Paid-in Capital		Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Total SVBFG Stockholders’ Equity			Noncontrolling Interests			Total Equity
Balance at March 31, 2018	52,922,219		$	53	$	1,326,998	$	3,160,081		$	(71,686	)	$	4,415,446		$	144,278		$	4,559,724
Common stock issued under employee benefit plans, net of restricted stock cancellations	288,408		—		7,644		—			—			7,644			—			7,644
Net income	—		—		—		237,798			—			237,798			9,228			247,026
Capital calls and distributions, net	—		—		—		—			—			—			(6,318		)	(6,318		)
Net change in unrealized gains and losses on AFS securities, net of tax	—		—		—		—			(10,754		)	(10,754		)	—			(10,754		)
Amortization of unrealized holding gains on securities transferred from AFS to HTM, net of tax	—		—		—		—			(674		)	(674		)	—			(674		)
Foreign currency translation adjustments, net of tax	—		—		—		—			(3,751		)	(3,751		)	—			(3,751		)
Share-based compensation, net	—		—		11,944		—			—			11,944			—			11,944
Balance at June 30, 2018	53,210,627		$	53	$	1,346,586	$	3,397,879		$	(86,865	)	$	4,657,653		$	147,188		$	4,804,841
Balance at March 31, 2019	52,322,105		$	52	$	1,394,130	$	3,963,965		$	(15,374	)	$	5,342,773		$	141,050		$	5,483,823
Common stock issued under employee benefit plans, net of restricted stock cancellations	257,684		—		10,789		—			—			10,789			—			10,789
Net income	—		—		—		317,987			—			317,987			18,584			336,571
Capital calls and distributions, net	—		—		—		—			—			—			(7,502		)	(7,502		)
Net change in unrealized gains and losses on AFS securities, net of tax	—		—		—		—			86,186			86,186			—			86,186
Amortization of unrealized holding gains on securities transferred from AFS to HTM, net of tax	—		—		—		—			(519		)	(519		)	—			(519		)
Foreign currency translation adjustments, net of tax	—		—		—		—			(2,092		)	(2,092		)	—			(2,092		)
Net change in unrealized gains and losses on cash flow hedges, net of tax	—		—		—		—			13,031			13,031			—			13,031
Share-based compensation, net	—		—		16,646		—			—			16,646			—			16,646
Common stock repurchases	(1,018,070	)	—		—		(230,758		)	—			(230,758		)	—			(230,758		)
Balance at June 30, 2019	51,561,719		$	52	$	1,421,565	$	4,051,194		$	81,232		$	5,554,043		$	152,132		$	5,706,175


3.4.	Share-Based Compensation

For the three and ~~nine~~six months ended~~September~~June 30, ~~2017~~2019 and ~~2016~~2018, we recorded share-based compensation and related tax benefits as follows:



	Three months ended June 30,						Six months ended June 30,
(Dollars in thousands)	2019			2018			2019			2018
Share-based compensation expense	$	16,646		$	11,944		$	31,768		$	22,467
Income tax benefit related to share-based compensation expense	(3,817		)	(2,743		)	(7,144		)	(5,060		)

Three months ended September 30, Nine months ended September 30,
(Dollars in thousands) 2017 2016 2017 2016
Share-based compensation expense $ 8,644
$ 7,916
$ 27,739
$ 22,342
Income tax benefit related to share-based compensation expense (3,154 ) (2,881 ) (9,518 ) (7,461 )

Unrecognized Compensation Expense

As of ~~September~~June 30, ~~2017,~~2019, unrecognized share-based compensation expense was as follows:



(Dollars in thousands)	Unrecognized Expense		Weighted Average Expected Recognition Period - in Years
Stock options	$	17,537	2.89
Restricted stock units and awards	128,493		3.10
Total unrecognized share-based compensation expense	$	146,030

(Dollars in thousands)
Unrecognized
Expense

Weighted Average
Expected
Recognition
Period - in Years
Stock options $ 10,935
2.72
Restricted stock units 56,513
2.74
Total unrecognized share-based compensation expense $ 67,448

Share-Based Payment Award Activity

The table below provides stock option information related to the 2006 Equity Incentive Plan for the ~~nine~~six months ended~~September~~June 30, ~~2017~~2019:



	Options		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life - in Years	Aggregate Intrinsic Value of In-The- Money Options
Outstanding at December 31, 2018	679,659		$	137.19
Granted	119,835		250.31
Exercised	(88,600	)	80.99
Forfeited	(16,265	)	208.27
Expired	(720	)	64.37
Outstanding at June 30, 2019	693,909		162.31		3.91	$	52,916,546
Vested and expected to vest at June 30, 2019	673,285		159.83		3.84	52,600,866
Exercisable at June 30, 2019	427,405		120.15		2.71	46,281,877

Options
Weighted
Average
Exercise Price
Weighted Average Remaining Contractual Life - in Years
Aggregate
Intrinsic Value
of In-The-
Money
Options
Outstanding at December 31, 2016 1,010,557
$ 87.24

Granted 113,535
178.23

Exercised (232,370 ) 70.79

Forfeited (9,491 ) 111.48

Outstanding at September 30, 2017 882,231
103.02
3.80 $ 74,172,891
Vested and expected to vest at September 30, 2017 857,176
101.94
3.74 72,987,562
Exercisable at September 30, 2017 533,847
83.46
2.73 55,323,524

The aggregate intrinsic value of outstanding options shown in the table above represents the pre-tax intrinsic value based on our closing stock price of ~~$187.09~~$224.59 as of ~~September~~June 30, ~~2017~~.2019. The total intrinsic value of options exercised during the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2019 was ~~$3.8~~$6.9 million and ~~$25.8~~$14.4 million, respectively, compared to ~~$1.5~~$21.6 million and ~~$8.2~~$31.0 million for the comparable ~~2016~~ ~~periods, respectively.~~2018 periods.

The table below provides information for restricted stock units and awards under the 2006 Equity Incentive Plan for the ~~nine~~six months ended~~September~~June 30, ~~2017~~2019:



	Shares		Weighted Average Grant Date Fair Value
Nonvested at December 31, 2018	597,296		$	194.48
Granted (1)	526,639		244.61
Vested	(212,179	)	150.20
Forfeited	(43,377	)	179.28
Nonvested at June 30, 2019	868,379		236.46

Shares Weighted Average Grant Date Fair Value
Nonvested at December 31, 2016 670,969
$ 106.64
Granted 239,847
180.05
Vested (223,561 ) 102.00
Forfeited (38,871 ) 122.77
Nonvested at September 30, 2017 648,384
134.43


(1)	On February 1, 2019, we granted 125,160 restricted stock awards to SVB Leerink employees at a market price of $238.28 under the retention plan previously announced on November 13, 2018. The restricted stock awards will vest over a five-year period.


4.5.	Variable Interest Entities

Our involvement with VIEs includes our investments in venture capital and private equity funds, debt funds, private and public portfolio companies and ~~our investments in~~ qualified affordable housing projects.

The following table presents the carrying amounts and classification of significant variable interests in consolidated and unconsolidated VIEs as of ~~September~~June 30, ~~2017~~2019 and December 31, ~~2016:~~2018:


(Dollars in thousands)	Consolidated VIEs		Unconsolidated VIEs		Maximum Exposure to Loss in Unconsolidated VIEs		Consolidated VIEs		Unconsolidated VIEs		Maximum Exposure to Loss in Unconsolidated VIEs
September 30, 2017:
June 30, 2019:
Assets:
Cash and cash equivalents	$	7,555	$	—	$	—	$	7,387	$	—	$	—
Non-marketable and other securities (1)	190,129		323,284		323,284
Non-marketable and other equity securities (1)							250,028		642,882		642,882
Accrued interest receivable and other assets	169		—		—		469		—		—
Total assets	$	197,853	$	323,284	$	323,284	$	257,884	$	642,882	$	642,882
Liabilities:
Other liabilities (1)	445		90,974		—		2,421		266,761		—
Total liabilities	$	445	$	90,974	$	—	$	2,421	$	266,761	$	—
December 31, 2016:
December 31, 2018:
Assets:
Cash and cash equivalents	$	11,469	$	—	$	—	$	9,058	$	—	$	—
Non-marketable and other securities (1)	196,140		314,810		314,810
Non-marketable and other equity securities (1)							221,646		568,272		568,272
Accrued interest receivable and other assets	294		—		—		228		—		—
Total assets	$	207,903	$	314,810	$	314,810	$	230,932	$	568,272	$	568,272
Liabilities:
Other liabilities (1)	517		58,095		—		919		205,685		—
Total liabilities	$	517	$	58,095	$	—	$	919	$	205,685	$	—

(1)

Included in our unconsolidated non-marketable and other equity securities portfolio at ~~September~~June 30, ~~2017~~2019 and December 31, ~~2016~~2018 are investments in qualified affordable housing projects of ~~$148.0~~$394.0 million and ~~$112.4~~$318.6 million, respectively, and related other liabilities consisting of unfunded credit commitments of ~~$91.0~~$266.8 million and ~~$58.1~~$205.7 million, respectively.

Non-marketable and other equity securities

held by SVB Financial in which we do not have controlling or significant variable interests. These investments represent our unconsolidated VIEs in the table above. Our non-marketable and other equity securities portfolio also includes investments from SVB Capital. SVB Capital is the funds management business of SVB Financial Group, which focuses primarily on venture capital investments. The SVB Capital family of funds is comprised of direct venture funds that invest in companies and funds of funds that invest in other venture capital funds. We have a controlling and significant variable interest in four of these SVB Capital funds and consolidate these funds for financial reporting purposes.

All investments are generally nonredeemable and distributions are expected to be received through the liquidation of the underlying investments throughout the life of the investment fund. Investments may only be sold or transferred subject to the notice and approval provisions of the underlying investment agreement. Subject to applicable regulatory requirements, including the Volcker Rule, we also make commitments to invest in venture capital and private equity funds. For additional details, see Note ~~12—~~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.

The Bank also has variable interests in low income housing tax credit funds, in connection with fulfilling its responsibilities under the Community Reinvestment Act (“CRA”), that are designed to generate a return primarily through the realization of federal tax credits. These investments are typically limited partnerships in which the general partner, other than the Bank, holds the power over significant activities of the VIE; therefore, these investments are not consolidated. For additional information on our investments in qualified affordable housing projects, see Note 6—7—“Investment Securities" of the “Notes to Interim Consolidated Financial Statements (unaudited)” under Part I, Item 1 of this report.

As of ~~September~~June 30, ~~2017,~~2019, our exposure to loss with respect to the consolidated VIEs is limited to our net assets of ~~$197.4~~$255.5 million and our exposure to loss for our unconsolidated VIEs is equal to our investment in these assets of ~~$323.3~~$642.9 million.


5.6.	Cash and Cash Equivalents

The following table details our cash and cash equivalents at ~~September~~June 30, ~~2017~~2019 and December 31, ~~2016~~:2018:


(Dollars in thousands)	September 30, 2017		December 31, 2016		June 30, 2019		December 31, 2018
Cash and due from banks (1)	$	3,490,005	$	2,476,588	$	8,727,265	$	3,444,971
Securities purchased under agreements to resell (2)	62,664		64,028		291,678		123,611
Other short-term investment securities	2,902		5,134		1,982		2,957
Total cash and cash equivalents	$	3,555,571	$	2,545,750	$	9,020,925	$	3,571,539


(1)	At ~~September~~June 30, ~~2017~~2019 and December 31, ~~2016~~2018, $~~1.6~~6.4 billion and $~~1.1~~1.7 billion, respectively, of our cash and due from banks was deposited at the Federal Reserve Bank and was earning interest at the Federal Funds target rate, and interest-earning deposits in other financial institutions were $1.8 billion and $1.2 billion ~~and~~ ~~$721 million~~, respectively.

(2)

At ~~September~~June 30, ~~2017~~2019 and December 31, ~~2016~~2018, securities purchased under agreements to resell were collateralized by U.S. Treasury securities and U.S. agency securities with aggregate fair ~~values~~values of $64297.7 million an and $66126.2 million, respectively. None of these securities were sold or repledged as of ~~September~~June 30, ~~2017~~2019 and December 31, ~~2016~~2018.


6.7.	Investment Securities

Our investment securities portfolio consists of: (i) an available-for-sale securities portfolio and a held-to-maturity securities portfolio, both of which represent interest-earning investment securities, and (ii) a non-marketable and other equity securities portfolio, which primarily represents investments managed as part of our funds management ~~business.~~business as well as public equity securities held as a result of equity warrant assets exercised.

Available-for-Sale Securities

The major components of our available-for-sale investment securities portfolio at ~~September~~June 30, ~~2017~~2019 and December 31, ~~2016~~2018 are as follows:


	September 30, 2017									June 30, 2019
(Dollars in thousands)	Amortized Cost		Unrealized Gains		Unrealized Losses			Carrying Value		Amortized Cost		Unrealized Gains		Unrealized Losses			Carrying Value
Available-for-sale securities, at fair value:
U.S. Treasury securities	$	7,488,126	$	14,048	$	(3,834	)	$	7,498,340	$	4,757,164	$	69,279	$	(5,369	)	$	4,821,074
U.S. agency debentures	1,668,403		9,759		(1,993		)	1,676,169
Foreign government debt securities										9,203		8		—			9,211
Residential mortgage-backed securities:
Agency-issued mortgage-backed securities										1,303,634		18,245		(22		)	1,321,857
Agency-issued collateralized mortgage obligations—fixed rate	3,024,649		4,998		(16,952		)	3,012,695		1,772,666		15,569		(55		)	1,788,180
Agency-issued collateralized mortgage obligations—variable rate	394,567		1,442		(129		)	395,880
Equity securities	8,819		11,893		(459		)	20,253
Total available-for-sale securities	$	12,584,564	$	42,140	$	(23,367	)	$	12,603,337	$	7,842,667	$	103,101	$	(5,446	)	$	7,940,322



	December 31, 2018
(Dollars in thousands)	Amortized Cost		Unrealized Gains		Unrealized Losses			Carrying Value
Available-for-sale securities, at fair value:
U.S. Treasury securities	$	4,762,182	$	11,638	$	(35,562	)	$	4,738,258
U.S. agency debentures	1,090,426		61		(6,370		)	1,084,117
Foreign government debt securities	5,815		—		(3		)	5,812
Residential mortgage-backed securities:
Agency-issued collateralized mortgage obligations—fixed rate	1,922,618		—		(42,400		)	1,880,218
Agency-issued collateralized mortgage obligations—variable rate	81,270		383		(15		)	81,638
Total available-for-sale securities	$	7,862,311	$	12,082	$	(84,350	)	$	7,790,043

The following table summarizes sale activity of available-for-sale securities during the three and six months ended June 30, 2019 and 2018 as recorded in the line item “Gains on investment securities, net," a component of noninterest income:

December 31, 2016
(Dollars in thousands)
Amortized
Cost

Unrealized
Gains

Unrealized
Losses

Carrying
Value
Available-for-sale securities, at fair value:
U.S. Treasury securities $ 8,880,358
$ 30,323
$ (1,190 ) $ 8,909,491
U.S. agency debentures 2,065,535
14,443
(1,603 ) 2,078,375
Residential mortgage-backed securities:
Agency-issued collateralized mortgage obligations—fixed rate 1,163,017
3,046
(13,398 ) 1,152,665
Agency-issued collateralized mortgage obligations—variable rate 474,238
685
(640 ) 474,283
Equity securities 5,635
748
(786 ) 5,597
Total available-for-sale securities $ 12,588,783
$ 49,245
$ (17,617 ) $ 12,620,411



	Three months ended June 30,					Six months ended June 30,
(Dollars in thousands)	2019			2018		2019			2018
Sales proceeds	$	1,017,523		$	—	$	2,189,087		$	—
Net realized gains and losses:
Gross realized gains	1,250			—		1,250			—
Gross realized losses	(1,525		)	—		(5,155		)	—
Net realized losses	$	(275	)	$	—	$	(3,905	)	$	—

The following tables summarize our unrealized losses on our available-for-sale securities portfolio into categories of less than 12 months, or 12 months or longer as of ~~September~~June 30, ~~2017~~2019 and December 31, ~~2016:~~2018:


	September 30, 2017															June 30, 2019
	Less than 12 months					12 months or longer					Total					Less than 12 months					12 months or longer (1)					Total
(Dollars in thousands)	Fair Value of Investments		Unrealized Losses			Fair Value of Investments		Unrealized Losses			Fair Value of Investments		Unrealized Losses			Fair Value of Investments		Unrealized Losses			Fair Value of Investments		Unrealized Losses			Fair Value of Investments		Unrealized Losses
Available-for-sale securities:
U.S. Treasury securities	$	2,824,370	$	(3,834	)	$	—	$	—		$	2,824,370	$	(3,834	)	$	—	$	—		$	2,318,760	$	(5,369	)	$	2,318,760	$	(5,369	)
U.S. agency debentures	562,392		(1,993		)	—		—			562,392		(1,993		)
Residential mortgage-backed securities:
Agency-issued mortgage-backed securities																8,220		(22		)	—		—			8,220		(22		)
Agency-issued collateralized mortgage obligations—fixed rate	1,505,319		(7,389		)	415,200		(9,563		)	1,920,519		(16,952		)	—		—			25,331		(55		)	25,331		(55		)
Agency-issued collateralized mortgage obligations—variable rate	6,651		(1		)	62,508		(128		)	69,159		(129		)
Equity securities	1,787		(459		)	—		—			1,787		(459		)
Total temporarily impaired securities (1)	$	4,900,519	$	(13,676	)	$	477,708	$	(9,691	)	$	5,378,227	$	(23,367	)	$	8,220	$	(22	)	$	2,344,091	$	(5,424	)	$	2,352,311	$	(5,446	)

(1)

As of ~~September~~June 30, ~~2017~~2019, we identified a total of ~~202~~57 investments that were in unrealized loss positions, of which 6354 investments totaling $~~477.7 million~~2.3 billion with unrealized losses of $~~9.7~~5.4 million have been in an impaired position for a period of time greater than 12 months. As of ~~September~~June 30, ~~2017~~2019, we do not intend to sell any of our impaired securities prior to recovery of our adjusted cost basis, and it is more likely than not that we will not be required to sell any of our securities prior to recovery of our adjusted cost basis. Based on our analysis as of ~~September~~June 30, ~~2017~~2019, we deem all impairments to be temporary, and therefore changes in value for our temporarily impaired securities as of the same date are included in other comprehensive income. Market valuations and impairment analyses on assets in the available-for-sale securities portfolio are reviewed and monitored on a quarterly basis.


	December 31, 2016															December 31, 2018
	Less than 12 months					12 months or longer					Total					Less than 12 months					12 months or longer (1)					Total
(Dollars in thousands)	Fair Value of Investments		Unrealized Losses			Fair Value of Investments		Unrealized Losses			Fair Value of Investments		Unrealized Losses			Fair Value of Investments		Unrealized Losses			Fair Value of Investments		Unrealized Losses			Fair Value of Investments		Unrealized Losses
Available-for-sale securities:
U.S. Treasury securities	$	879,255	$	(1,190	)	$	—	$	—		$	879,255	$	(1,190	)	$	494,287	$	(3,785	)	$	3,568,119	$	(31,777	)	$	4,062,406	$	(35,562	)
U.S. agency debentures	513,198		(1,603		)	—		—			513,198		(1,603		)	443,790		(1,602		)	591,216		(4,768		)	1,035,006		(6,370		)
Foreign government debt securities																5,812		(3		)	—		—			5,812		(3		)
Residential mortgage-backed securities:
Agency-issued collateralized mortgage obligations—fixed rate	635,566		(6,704		)	227,480		(6,694		)	863,046		(13,398		)	13,430		(22		)	1,866,788		(42,378		)	1,880,218		(42,400		)
Agency-issued collateralized mortgage obligations—variable rate	258,325		(613		)	6,068		(27		)	264,393		(640		)	—		—			13,516		(15		)	13,516		(15		)
Equity securities	3,693		(786		)	—		—			3,693		(786		)
Total temporarily impaired securities (1)	$	2,290,037	$	(10,896	)	$	233,548	$	(6,721	)	$	2,523,585	$	(17,617	)	$	957,319	$	(5,412	)	$	6,039,639	$	(78,938	)	$	6,996,958	$	(84,350	)


(1)	As of December 31, ~~2016~~2018, we identified a total of ~~174~~200 investments that were in unrealized loss positions, of which 20162 investments totaling $~~233.5 million~~6.0 billion with unrealized losses of $~~6.7~~78.9 million have been in an impaired position for a period of time greater than 12 months.

The following table summarizes thefixed income securities, carried at fair value, classified as available-for-sale as of ~~September~~June 30, ~~2017~~2019 by the remaining contractual principal maturities. For U.S. Treasury securities and ~~U.S. agency debentures,~~foreign government debt securities, the expected maturity is the actual contractual maturity of the notes. Expected maturities for mortgage-backed securities may differ significantly from their contractual maturities because mortgage borrowers have the right to prepay outstanding loan obligations with or without penalties. Mortgage-backed securities classified as available-for-sale typically have original contractual maturities from 10 to 30 years whereas expected average lives of these securities tend to be significantly shorter and vary based upon structure and prepayments in lower interest rate environments.



	June 30, 2019
(Dollars in thousands)	Total		One Year or Less		After One Year to Five Years		After Five Years to Ten Years		After Ten Years
U.S. Treasury securities	$	4,821,074	$	1,677,718	$	1,974,793	$	1,168,563	$	—
Foreign government debt securities	9,211		—		9,211		—		—
Residential mortgage-backed securities:
Agency-issued mortgage-backed securities	1,321,857		—		—		—		1,321,857
Agency-issued collateralized mortgage obligations—fixed rate	1,788,180		—		—		5,244		1,782,936
Total	$	7,940,322	$	1,677,718	$	1,984,004	$	1,173,807	$	3,104,793

September 30, 2017
(Dollars in thousands) Total One Year
or Less After One
Year to
Five Years After Five
Years to
Ten Years After
Ten Years
U.S. Treasury securities $ 7,498,340
$ 2,592,486
$ 4,905,854
$ —
$ —
U.S. agency debentures 1,676,169
314,852
1,361,317
—
—
Residential mortgage-backed securities:
Agency-issued collateralized mortgage obligations—fixed rate
3,012,695
—
—
487,285
2,525,410
Agency-issued collateralized mortgage obligations—variable rate
395,880
—
—
—
395,880
Total $ 12,583,084
$ 2,907,338
$ 6,267,171
$ 487,285
$ 2,921,290

Held-to-Maturity Securities

The components of our held-to-maturity investment securities portfolio at ~~September~~June 30, ~~2017~~2019 and December 31, ~~2016~~2018 are as follows:


	September 30, 2017									June 30, 2019
(Dollars in thousands)	Amortized Cost		Unrealized Gains		Unrealized Losses			Fair Value		Amortized Cost		Unrealized Gains		Unrealized Losses			Fair Value
Held-to-maturity securities, at cost:
U.S. agency debentures (1)	$	660,193	$	6,775	$	(1,080	)	$	665,888	$	585,817	$	14,111	$	—		$	599,928
Residential mortgage-backed securities:
Agency-issued mortgage-backed securities	5,164,701		15,764		(17,116		)	5,163,349		7,706,133		105,024		(7,790		)	7,803,367
Agency-issued collateralized mortgage obligations—fixed rate	3,025,421		707		(27,268		)	2,998,860		1,912,839		1,780		(14,322		)	1,900,297
Agency-issued collateralized mortgage obligations—variable rate	269,495		704		(37		)	270,162		197,962		109		(357		)	197,714
Agency-issued commercial mortgage-backed securities	1,554,220		2,025		(11,697		)	1,544,548		2,886,958		49,057		(12,455		)	2,923,560
Municipal bonds and notes	380,976		1,506		(1,874		)	380,608		1,579,052		61,137		(93		)	1,640,096
Total held-to-maturity securities	$	11,055,006	$	27,481	$	(59,072	)	$	11,023,415	$	14,868,761	$	231,218	$	(35,017	)	$	15,064,962


(1)	Consists of pools of Small Business Investment Company debentures issued and guaranteed by the U.S. Small Business Administration, an independent agency of the United States.


	December 31, 2016									December 31, 2018
(Dollars in thousands)	Amortized Cost		Unrealized Gains		Unrealized Losses			Fair Value		Amortized Cost		Unrealized Gains		Unrealized Losses			Fair Value
Held-to-maturity securities, at cost:
U.S. agency debentures (1)	$	622,445	$	7,840	$	(1,198	)	$	629,087	$	640,990	$	2,148	$	(4,850	)	$	638,288
Residential mortgage-backed securities:
Agency-issued mortgage-backed securities	2,896,179		6,919		(24,526		)	2,878,572		8,103,638		5,011		(157,767		)	7,950,882
Agency-issued collateralized mortgage obligations—fixed rate	3,362,598		788		(31,274		)	3,332,112		2,183,204		—		(62,272		)	2,120,932
Agency-issued collateralized mortgage obligations—variable rate	312,665		176		(1,339		)	311,502		214,483		608		(14		)	215,077
Agency-issued commercial mortgage-backed securities	1,151,363		1,237		(7,638		)	1,144,962		2,769,706		6,969		(64,374		)	2,712,301
Municipal bonds and notes	81,748		8		(1,853		)	79,903		1,575,421		2,304		(26,969		)	1,550,756
Total held-to-maturity securities	$	8,426,998	$	16,968	$	(67,828	)	$	8,376,138	$	15,487,442	$	17,040	$	(316,246	)	$	15,188,236


(1)	Consists of pools of Small Business Investment Company debentures issued and guaranteed by the U.S. Small Business Administration, an independent agency of the United States.

The following tables summarize our unrealized losses on our held-to-maturity securities portfolio into categories of less than 12 months and 12 months or longer as of ~~September~~June 30, ~~2017~~2019 and December 31, ~~2016:~~2018:


	September 30, 2017															June 30, 2019
	Less than 12 months					12 months or longer					Total					Less than 12 months					12 months or longer (1)					Total
(Dollars in thousands)	Fair Value of Investments		Unrealized Losses			Fair Value of Investments		Unrealized Losses			Fair Value of Investments		Unrealized Losses			Fair Value of Investments		Unrealized Losses			Fair Value of Investments		Unrealized Losses			Fair Value of Investments		Unrealized Losses
Held-to-maturity securities:
U.S. agency debentures	$	101,211	$	(1,080	)	$	—	$	—		$	101,211	$	(1,080	)
Residential mortgage-backed securities:
Agency-issued mortgage-backed securities	3,071,006		(16,251		)	25,004		(865		)	3,096,010		(17,116		)	$	23,334	$	(99	)	$	1,649,553	$	(7,691	)	$	1,672,887	$	(7,790	)
Agency-issued collateralized mortgage obligations—fixed rate	2,661,682		(21,842		)	235,320		(5,426		)	2,897,002		(27,268		)	—		—			1,566,989		(14,322		)	1,566,989		(14,322		)
Agency-issued collateralized mortgage obligations—variable rate	—		—			10,321		(37		)	10,321		(37		)	156,837		(351		)	7,515		(6		)	164,352		(357		)
Agency-issued commercial mortgage-backed securities	1,210,351		(10,615		)	82,151		(1,082		)	1,292,502		(11,697		)	—		—			1,040,014		(12,455		)	1,040,014		(12,455		)
Municipal bonds and notes	111,207		(896		)	29,606		(978		)	140,813		(1,874		)	—		—			20,962		(93		)	20,962		(93		)
Total temporarily impaired securities (1)	$	7,155,457	$	(50,684	)	$	382,402	$	(8,388	)	$	7,537,859	$	(59,072	)	$	180,171	$	(450	)	$	4,285,033	$	(34,567	)	$	4,465,204	$	(35,017	)

(1)

As of ~~September~~June 30, ~~2017~~2019, we identified a total of ~~547~~337 investments that were in unrealized loss positions, of which 84324 investments totaling $~~382.4 million~~4.3 billion with unrealized losses of $~~8.4~~34.6 million have been in an impaired position for a period of time greater than 12 months. As of ~~September~~June 30, ~~2017~~2019, we do not intend to sell any of our impaired securities prior to recovery of our adjusted cost basis, and it is more likely than not that we will not be required to sell any of our securities prior to recovery of our adjusted cost basis, which is consistent with our classification of these securities. Based on our analysis as of ~~September~~June 30, ~~2017~~2019, we deem all impairments to be temporary. Market valuations and impairment analyses on assets in the held-to-maturity securities portfolio are reviewed and monitored on a quarterly basis.


	December 31, 2016															December 31, 2018
	Less than 12 months					12 months or longer					Total					Less than 12 months					12 months or longer (1)					Total
(Dollars in thousands)	Fair Value of Investments		Unrealized Losses			Fair Value of Investments		Unrealized Losses			Fair Value of Investments		Unrealized Losses			Fair Value of Investments		Unrealized Losses			Fair Value of Investments		Unrealized Losses			Fair Value of Investments		Unrealized Losses
Held-to-maturity securities:
U.S. agency debentures	$	118,721	$	(1,198	)	$	—	$	—		$	118,721	$	(1,198	)	$	291,432	$	(2,915	)	$	66,624	$	(1,935	)	$	358,056	$	(4,850	)
Residential mortgage-backed securities:
Agency-issued mortgage-backed securities	1,801,861		(23,558		)	21,917		(968		)	1,823,778		(24,526		)	2,493,156		(34,956		)	3,972,690		(122,811		)	6,465,846		(157,767		)
Agency-issued collateralized mortgage obligations—fixed rate	2,729,889		(25,723		)	228,220		(5,551		)	2,958,109		(31,274		)	16,952		(109		)	2,103,980		(62,163		)	2,120,932		(62,272		)
Agency-issued collateralized mortgage obligations—variable rate	251,012		(1,339		)	—		—			251,012		(1,339		)	3,364		(1		)	8,101		(13		)	11,465		(14		)
Agency-issued commercial mortgage-backed securities	999,440		(7,494		)	14,934		(144		)	1,014,374		(7,638		)	177,697		(1,580		)	1,600,277		(62,794		)	1,777,974		(64,374		)
Municipal bonds and notes	42,267		(877		)	30,586		(976		)	72,853		(1,853		)	868,751		(17,075		)	340,413		(9,894		)	1,209,164		(26,969		)
Total temporarily impaired securities (1)	$	5,943,190	$	(60,189	)	$	295,657	$	(7,639	)	$	6,238,847	$	(67,828	)	$	3,851,352	$	(56,636	)	$	8,092,085	$	(259,610	)	$	11,943,437	$	(316,246	)


(1)	As of December 31, ~~2016~~2018, we identified a total of ~~462~~1,244 investments that were in unrealized loss positions, of which 85695 investments totaling $~~295.7 million~~8.1 billion with unrealized losses of $~~7.6~~259.6 million have been in an impaired position for a period of time greater than 12 months.

The following table summarizes the remaining contractual principal maturities on fixed income investment securities classified as held-to-maturity as of ~~September~~June 30, ~~2017.~~2019. For U.S. agency debentures, the expected maturity is the actual contractual maturity of the notes. Expected remaining maturities for certain U.S. agency debentures may occur earlier than their contractual maturities because the note issuers have the right to call outstanding amounts ahead of their contractual maturity. Expected maturities for mortgage-backed securities may differ significantly from their contractual maturities because mortgage borrowers have the right to prepay outstanding loan obligations with or without penalties. Mortgage-backed securities classified as held-to-maturity typically have original contractual maturities from 10 to 30 years whereas expected average lives of these securities tend to be significantly shorter and vary based upon structure and prepayments in lower interest rate environments.



	June 30, 2019
	Total				One Year or Less				After One Year to Five Years				After Five Years to Ten Years				After Ten Years
(Dollars in thousands)	Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value
U.S. agency debentures	$	585,817	$	599,928	$	—	$	—	$	101,464	$	103,530	$	484,353	$	496,398	$	—	$	—
Residential mortgage-backed securities:
Agency-issued mortgage-backed securities	7,706,133		7,803,367		—		—		110,633		110,834		821,076		817,428		6,774,424		6,875,105
Agency-issued collateralized mortgage obligations—fixed rate	1,912,839		1,900,297		—		—		—		—		506,773		501,451		1,406,066		1,398,846
Agency-issued collateralized mortgage obligations—variable rate	197,962		197,714		—		—		—		—		—		—		197,962		197,714
Agency-issued commercial mortgage-backed securities	2,886,958		2,923,560		—		—		—		—		—		—		2,886,958		2,923,560
Municipal bonds and notes	1,579,052		1,640,096		14,977		14,984		83,468		84,297		340,526		351,481		1,140,081		1,189,334
Total	$	14,868,761	$	15,064,962	$	14,977	$	14,984	$	295,565	$	298,661	$	2,152,728	$	2,166,758	$	12,405,491	$	12,584,559

September 30, 2017
Total
One Year
or Less

After One Year to
Five Years

After Five Years to
Ten Years

After
Ten Years
(Dollars in thousands) Amortized Cost Fair Value Amortized Cost Fair Value Amortized Cost Fair Value Amortized Cost Fair Value Amortized Cost Fair Value
U.S. agency debentures $ 660,193
$ 665,888
$ —
$ —
$ 102,581
$ 103,398
$ 557,612
$ 562,490
$ —
$ —
Residential mortgage-backed securities:
Agency-issued mortgage-backed securities 5,164,701
5,163,349
738
731
255,275
255,128
61,538
61,270
4,847,150
4,846,220
Agency-issued collateralized mortgage obligations—fixed rate
3,025,421
2,998,860
—
—
—
—
437,865
431,500
2,587,556
2,567,360
Agency-issued collateralized mortgage obligations—variable rate
269,495
270,162
—
—
—
—
—
—
269,495
270,162
Agency-issued commercial mortgage-backed securities 1,554,220
1,544,548
—
—
—
—
—
—
1,554,220
1,544,548
Municipal bonds and notes 380,976
380,608
7,560
7,540
71,631
71,529
159,509
159,377
142,276
142,162
Total $ 11,055,006
$ 11,023,415
$ 8,298
$ 8,271
$ 429,487
$ 430,055
$ 1,216,524
$ 1,214,637
$ 9,400,697
$ 9,370,452

Non-marketable and Other Equity Securities

The major components of our non-marketable and other ~~investment~~equity securities portfolio at ~~September~~June 30, ~~2017~~2019 and December 31, ~~2016~~2018 are as follows:

(Dollars in thousands) September 30, 2017 December 31, 2016
Non-marketable and other securities:
Non-marketable securities (fair value accounting):
Venture capital and private equity fund investments (1) $ 128,768
$ 141,649
Other venture capital investments (2) 1,897
2,040
Other securities (fair value accounting) (3) 392
753
Non-marketable securities (equity method accounting) (4):
Venture capital and private equity fund investments 87,218
82,823
Debt funds 17,889
17,020
Other investments 113,478
123,514
Non-marketable securities (cost method accounting):
Venture capital and private equity fund investments (5) 102,956
114,606
Other investments 26,835
27,700
Investments in qualified affordable housing projects, net (6) 148,036
112,447
Total non-marketable and other securities $ 627,469
$ 622,552



(Dollars in thousands)	June 30, 2019		December 31, 2018
Non-marketable and other equity securities:
Non-marketable securities (fair value accounting):
Consolidated venture capital and private equity fund investments (1)	$	110,086	$	118,333
Unconsolidated venture capital and private equity fund investments (2)	193,206		201,098
Other investments without a readily determinable fair value (3)	42,419		25,668
Other equity securities in public companies (fair value accounting) (4)	39,808		20,398
Non-marketable securities (equity method accounting) (5):
Venture capital and private equity fund investments	169,219		129,485
Debt funds	7,168		5,826
Other investments	123,797		121,721
Investments in qualified affordable housing projects, net (6)	394,046		318,575
Total non-marketable and other equity securities	$	1,079,749	$	941,104


(1)	The following table shows the amounts of venture capital and private equity fund investments held by the following consolidated funds and our ownership percentage of each fund at ~~September~~June 30, ~~2017~~2019 and December 31, ~~2016~~2018 (fair value accounting):



	June 30, 2019				December 31, 2018
(Dollars in thousands)	Amount		Ownership %		Amount		Ownership %
Strategic Investors Fund, LP	$	8,860	12.6	%	$	12,452	12.6	%
Capital Preferred Return Fund, LP	51,801		20.0		53,957		20.0
Growth Partners, LP	48,984		33.0		50,845		33.0
CP I, LP	441		10.7		1,079		10.7
Total consolidated venture capital and private equity fund investments	$	110,086			$	118,333

September 30, 2017 December 31, 2016
(Dollars in thousands) Amount Ownership % Amount Ownership %
Strategic Investors Fund, LP $ 15,624
12.6 % $ 18,459
12.6 %
Capital Preferred Return Fund, LP 55,685
20.0
57,627
20.0
Growth Partners, LP 57,459
33.0
59,718
33.0
Other private equity fund (i) —
—
5,845
58.2
Total venture capital and private equity fund investments $ 128,768
$ 141,649

~~(i)~~

At ~~December 31, 2016, we had a direct ownership interest of~~ ~~41.5 percent~~ ~~in the other private equity fund and an indirect ownership interest of~~ ~~12.6 percent~~ ~~through our ownership interest of Growth Partners, LP and an indirect ownership interest of~~ ~~4.1 percent~~ through our ownership interest of Capital Preferred Return Fund, LP. On January 3, 2017, the other private equity fund was closed resulting in an immaterial impact on the Company's financial statements for the nine months ended ~~September 30, 2017~~.


(2)	The ~~following table shows the amounts of other venture capital investments held by the following consolidated funds and our ownership percentage at~~ ~~September 30, 2017~~ ~~and~~ ~~December 31, 2016~~ ~~(fair~~carrying value ~~accounting):~~

September 30, 2017 December 31, 2016
(Dollars in thousands) Amount Ownership % Amount Ownership %
CP I, LP $ 1,897
10.7 % $ 2,040
10.7 %
Total other venture capital investments $ 1,897
$ 2,040


~~(3)~~	~~Investments classified as other securities (fair value accounting) represent direct equity~~represents investments in ~~public companies held by our consolidated funds.~~


~~(4)~~	~~The following table shows the carrying value~~212 and ~~our ownership percentage of each investment at~~ ~~September 30, 2017~~ ~~and~~ ~~December 31, 2016~~ ~~(equity method accounting):~~

September 30, 2017 December 31, 2016
(Dollars in thousands) Amount Ownership % Amount Ownership %
Venture capital and private equity fund investments:
Strategic Investors Fund II, LP $ 6,084
8.6 % $ 7,720
8.6 %
Strategic Investors Fund III, LP 19,292
5.9
20,449
5.9
Strategic Investors Fund IV, LP 25,507
5.0
24,530
5.0
Strategic Investors Fund V funds 14,987
Various
12,029
Various
CP II, LP (i) 6,704
5.1
7,798
5.1
Other venture capital and private equity fund investments 14,644
Various
10,297
Various
Total venture capital and private equity fund investments $ 87,218
$ 82,823

Debt funds:
Gold Hill Capital 2008, LP (ii) $ 15,381
15.5 % $ 13,557
15.5 %
Other debt funds 2,508
Various
3,463
Various
Total debt funds $ 17,889
$ 17,020

Other investments:
SPD Silicon Valley Bank Co., Ltd. $ 75,511
50.0 % $ 75,296
50.0 %
Other investments 37,967
Various
48,218
Various
Total other investments $ 113,478
$ 123,514


~~(i)~~	~~Our ownership includes direct ownership of~~ ~~1.3 percent~~ ~~and indirect ownership interest of~~ ~~3.8 percent~~ ~~through our investments in Strategic Investors Fund II, LP.~~


~~(ii)~~	~~Our ownership includes direct ownership interest of~~ ~~11.5 percent~~ ~~in the fund and an indirect interest in the fund through our investment in Gold Hill Capital 2008, LLC of~~ ~~4.0 percent~~.

~~(5)~~

~~Represents investments in~~ ~~237~~ ~~and~~ ~~252~~213 funds (primarily venture capital funds) at ~~September~~June 30, ~~2017~~2019 and December 31, ~~2016~~2018, respectively, where our ownership interest is typically less than 5% of the voting interests of each such fund and in which we do not have the ability to exercise significant influence over the partnerships operating activities and financial policies. ~~The carrying value, and estimated fair value, of these~~We carry our unconsolidated venture capital and private equity fund investments ~~(cost method accounting) was~~ ~~$103.0 million~~ ~~and~~ ~~$206.5 million, respectively, as of~~ ~~September 30, 2017. The carrying value, and estimated~~at fair value based on the fund investments' net asset values per share as obtained from the general partners of ~~these venture capital~~the investments. For each fund investment, we adjust the net asset value per share for differences between our measurement date and ~~private equity~~the date of the fund ~~investments (cost method accounting) was~~ ~~$114.6 million~~investment’s net asset value by using the most recently available financial information from the investee general partner, for example March 31^st for our June 30^th consolidated financial statements, adjusted for any contributions paid, distributions received from the investment, and ~~$221.7 million, respectively, as of~~ ~~December 31, 2016~~.significant fund transactions or market events during the reporting period.

(3)

These investments include direct equity investments in private companies. The carrying value is based on the price at which the investment was acquired plus or minus changes resulting from observable price changes in orderly transactions for identical or similar investments. We consider a range of factors when adjusting the fair value of these investments, including, but not limited to, the term and nature of the investment, local market conditions, values for comparable securities, current and projected operating performance, exit strategies, financing transactions subsequent to the acquisition of the investment and a discount for certain investments that have lock-up restrictions or other features that indicate a discount to fair value is warranted.

The following table shows the changes to the carrying amount of other investments without a readily determinable fair value for the six months endedJune 30, 2019:



(Dollars in thousands)	Six months ended June 30, 2019			Cumulative Adjustments
Measurement alternative:
Carrying value at June 30, 2019	$	42,419
Carrying value adjustments:
Impairment	$	—		$	—
Upward changes for observable prices	2,611			3,512
Downward changes for observable prices	(2,376		)	(3,996		)


(4)	Investments classified as other equity securities (fair value accounting) represent shares held in public companies as a result of exercising public equity warrant assets and direct equity investments in public companies held by our consolidated funds. Changes in equity securities measured at fair value are recognized through net income.


(5)	The following table shows the carrying value and our ownership percentage of each investment at June 30, 2019 and December 31, 2018 (equity method accounting):



	June 30, 2019				December 31, 2018
(Dollars in thousands)	Amount		Ownership %		Amount		Ownership %
Venture capital and private equity fund investments:
Strategic Investors Fund II, LP	$	4,200	8.6	%	$	4,670	8.6	%
Strategic Investors Fund III, LP	16,364		5.9		17,396		5.9
Strategic Investors Fund IV, LP	28,404		5.0		28,974		5.0
Strategic Investors Fund V funds	33,300		Various		28,189		Various
CP II, LP (i)	7,450		5.1		7,122		5.1
Other venture capital and private equity fund investments	79,501		Various		43,134		Various
Total venture capital and private equity fund investments	$	169,219			$	129,485
Debt funds:
Gold Hill Capital 2008, LP (ii)	$	5,323	15.5	%	$	3,901	15.5	%
Other debt funds	1,845		Various		1,925		Various
Total debt funds	$	7,168			$	5,826
Other investments:
SPD Silicon Valley Bank Co., Ltd.	$	76,544	50.0	%	$	76,412	50.0	%
Other investments	47,253		Various		45,309		Various
Total other investments	$	123,797			$	121,721


(i)	Our ownership includes direct ownership interest of 1.3 percent and indirect ownership interest of 3.8 percent through our investments in Strategic Investors Fund II, LP.


(ii)	Our ownership includes direct ownership interest of 11.5 percent in the fund and an indirect interest in the fund through our investment in Gold Hill Capital 2008, LLC of 4.0 percent.


(6)	The following table presents the balances of our investments in qualified affordable housing projects and related unfunded commitments included as a component of ~~“other~~“Other liabilities” on our consolidated balance sheets at ~~September~~June 30, ~~2017~~2019 and December 31, ~~2016~~2018:


(Dollars in thousands)	September 30, 2017		December 31, 2016		June 30, 2019		December 31, 2018
Investments in qualified affordable housing projects, net	$	148,036	$	112,447	$	394,046	318,575
Other liabilities	90,974		58,095		266,761		205,685

The following table presents other information relating to our investments in qualified affordable housing projects for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2019 and ~~2016:~~2018:


	Three months ended September 30,				Nine months ended September 30,				Three months ended June 30,				Six months ended June 30,
(Dollars in thousands)	2017		2016		2017		2016		2019		2018		2019		2018
Tax credits and other tax benefits recognized	$	4,539	$	3,995	$	13,199	$	12,127	$	10,988	$	5,207	$	20,245	$	10,629
Amortization expense included in provision for income taxes (i)	3,533		2,556		10,154		9,746		6,758		4,705		14,394		9,497


(i)	All investments are amortized using the proportional amortization method and amortization expense is included in the provision for income taxes.

The following table presents the ~~components of~~net gains and losses ~~(realized~~on non-marketable and ~~unrealized) on investment~~other equity securities for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2019 and ~~2016~~:

2018 as recorded in the line item “Gains on investment securities, net," a component of noninterest income:


	Three months ended September 30,						Nine months ended September 30,						Three months ended June 30,					Six months ended June 30,
(Dollars in thousands)	2017			2016			2017			2016			2019			2018		2019		2018
Gross gains on investment securities:
Available-for-sale securities, at fair value (1)	$	38		$	84		$	1,131		$	14,238
Net gains (losses) on non-marketable and other equity securities:
Non-marketable securities (fair value accounting):
Venture capital and private equity fund investments	5,308			6,030			24,788			16,377
Other venture capital investments	—			4			—			17
Other securities (fair value accounting)	569			271			841			639
Consolidated venture capital and private equity fund investments													$	14,830		$	4,397	$	18,119	$	16,044
Unconsolidated venture capital and private equity fund investments													10,152			19,136		18,158		30,855
Other investments without a readily determinable fair value													167			60		5,172		1,801
Other equity securities in public companies (fair value accounting)													282			88		12,085		(22,194		)
Non-marketable securities (equity method accounting):
Venture capital and private equity fund investments	4,542			5,679			11,245			9,351			22,351			9,212		25,140		18,781
Debt funds	4,222			295			5,388			1,259			1,342			726		1,342		(1,573		)
Other investments	215			7,487			1,736			11,528			(1,151		)	2,495		615		1,458
Non-marketable securities (cost method accounting):
Venture capital and private equity fund investments	4,956			6,328			14,985			14,180
Other investments	2			150			3,611			163
Total gross gains on investment securities	19,852			26,328			63,725			67,752
Gross losses on investment securities:
Available-for-sale securities, at fair value (1)	(139		)	(99		)	(747		)	(2,671		)
Non-marketable securities (fair value accounting):
Venture capital and private equity fund investments	(835		)	(2,122		)	(4,139		)	(15,958		)
Other venture capital investments	—			—			(143		)	(38		)
Other securities (fair value accounting)	(182		)	(100		)	(561		)	(507		)
Non-marketable securities (equity method accounting):
Venture capital and private equity fund investments	(223		)	(444		)	(535		)	(4,465		)
Debt funds	(1,777		)	(129		)	(2,692		)	(458		)
Other investments	(1,148		)	(205		)	(4,899		)	(1,161		)
Non-marketable securities (cost method accounting):
Venture capital and private equity fund investments (2)	(259		)	(51		)	(914		)	(492		)
Other investments	(51		)	—			(257		)	(238		)
Total gross losses on investment securities	(4,614		)	(3,150		)	(14,887		)	(25,988		)
Gains on investment securities, net	$	15,238		$	23,178		$	48,838		$	41,764
Total net gains on non-marketable and other equity securities													$	47,973		$	36,114	$	80,631	$	45,172
Less: realized net gains (losses) on sales of securities (1)													2,524			1,915		12,359		(21,163		)
Net gains on non-marketable and other equity securities still held													$	45,449		$	34,199	$	68,272	$	66,335

(1)

~~Includes realized~~Realized gains ~~(losses) on~~and losses include sales of ~~available-for-sale~~non-marketable and other equity securities that are recognized in the income statement. Unrealized gains (losses) on available-for-sale fixed income and equity securities are recognized in other comprehensive income. The cost basis of available-for-sale securities sold is determined on a specific identification basis.

~~(2)~~

~~For~~securities. No OTTI was recorded during the three and six months ended ~~September~~June 30, ~~2017~~2019 and ~~2016, includes OTTI losses of~~ ~~$0.3 million~~ ~~from the declines in value for~~ 8 ~~of the~~ ~~237~~ ~~investments and~~ ~~$0.1 million~~ ~~from the declines in value for~~ 5 ~~of the~~ ~~255~~ ~~investments, respectively. For the nine months ended~~ ~~September 30, 2017~~ ~~and~~ ~~2016, includes OTTI losses of~~ ~~$0.9 million~~ ~~for the declines in value for~~ 21 ~~of the~~ ~~237~~ ~~investments and~~ ~~$0.5 million~~ ~~for the declines in value for~~ 21 ~~of the~~ ~~255~~ ~~investments. We concluded that any declines in value for the remaining investments were temporary, and as such, no OTTI was required to be recognized.~~

2018.


7.8.	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 ~~$141~~$161 million and ~~$125~~$173 million at ~~September~~June 30, ~~2017~~2019 and December 31, ~~2016,~~2018, respectively, is presented in the following table:


(Dollars in thousands)	September 30, 2017		December 31, 2016		June 30, 2019		December 31, 2018
Commercial loans:
Software/internet	$	5,793,637	$	5,627,031	$	6,000,284	$	6,154,755
Hardware	1,113,509		1,180,398		1,328,589		1,234,557
Private equity/venture capital	9,623,824		7,691,148		14,684,900		14,110,560
Life science/healthcare	1,725,728		1,853,004		2,382,847		2,385,612
Premium wine	211,716		200,156		236,116		249,266
Other	384,039		393,551		384,247		321,978
Total commercial loans	18,852,453		16,945,288		25,016,983		24,456,728
Real estate secured loans:
Premium wine (1)	712,400		678,166		753,468		710,397
Consumer loans (2)	2,206,501		1,926,968		2,808,707		2,612,971
Other	42,504		43,487		39,666		40,435
Total real estate secured loans	2,961,405		2,648,621		3,601,841		3,363,803
Construction loans	75,242		64,671		126,895		97,077
Consumer loans	300,227		241,364		463,854		420,672
Total loans, net of unearned income (3)	$	22,189,327	$	19,899,944	$	29,209,573	$	28,338,280


(1)	Included in our premium wine portfolio are gross construction loans of $~~104~~94 million and $~~110~~99 million at ~~September~~June 30, ~~2017~~2019 and December 31, ~~2016~~2018, respectively.


(2)	Consumer loans secured by real estate at ~~September~~June 30, ~~2017~~2019 and December 31, ~~2016~~2018 were comprised of the following:



(Dollars in thousands)	June 30, 2019		December 31, 2018
Loans for personal residence	$	2,418,103	$	2,251,292
Loans to eligible employees	330,374		290,194
Home equity lines of credit	60,230		71,485
Consumer loans secured by real estate	$	2,808,707	$	2,612,971

(Dollars in thousands) September 30, 2017 December 31, 2016
Loans for personal residence $ 1,908,319
$ 1,655,349
Loans to eligible employees 232,707
199,291
Home equity lines of credit 65,475
72,328
Consumer loans secured by real estate $ 2,206,501
$ 1,926,968


(3)	Included within our total loan portfolio are credit card loans of $~~273~~377 million and $~~224~~335 million at ~~September~~June 30, ~~2017~~2019 and December 31, ~~2016~~2018, respectively.

Credit Quality

The composition of loans, net of unearned income of ~~$141~~$161 million and ~~$125~~$173 million at ~~September~~June 30, ~~2017~~2019 and December 31, ~~2016~~2018, respectively, broken out by portfolio segment and class of financing receivable, is as follows:



(Dollars in thousands)	June 30, 2019		December 31, 2018
Commercial loans:
Software/internet	$	6,000,284	$	6,154,755
Hardware	1,328,589		1,234,557
Private equity/venture capital	14,684,900		14,110,560
Life science/healthcare	2,382,847		2,385,612
Premium wine	989,584		959,663
Other	550,808		459,490
Total commercial loans	25,937,012		25,304,637
Consumer loans:
Real estate secured loans	2,808,707		2,612,971
Other consumer loans	463,854		420,672
Total consumer loans	3,272,561		3,033,643
Total loans, net of unearned income	$	29,209,573	$	28,338,280

(Dollars in thousands) September 30, 2017 December 31, 2016
Commercial loans:
Software/internet $ 5,793,637
$ 5,627,031
Hardware 1,113,509
1,180,398
Private equity/venture capital 9,623,824
7,691,148
Life science/healthcare 1,725,728
1,853,004
Premium wine 924,116
878,322
Other 501,785
501,709
Total commercial loans 19,682,599
17,731,612
Consumer loans:
Real estate secured loans 2,206,501
1,926,968
Other consumer loans 300,227
241,364
Total consumer loans 2,506,728
2,168,332
Total loans, net of unearned income $ 22,189,327
$ 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 ~~September~~June 30, ~~2017~~2019 and December 31, ~~2016~~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
June 30, 2019:
Commercial loans:
Software/internet	$	4,693	$	20,568	$	97	$	25,358	$	5,909,916	$	97
Hardware	347		2,507		3		2,857		1,318,806		3
Private equity/venture capital	5,526		14		—		5,540		14,682,798		—
Life science/healthcare	1,895		378		11		2,284		2,394,468		11
Premium wine	821		—		—		821		988,290		—
Other	367		—		—		367		589,456		—
Total commercial loans	13,649		23,467		111		37,227		25,883,734		111
Consumer loans:
Real estate secured loans	—		3,294		—		3,294		2,796,397		—
Other consumer loans	60		—		—		60		464,168		—
Total consumer loans	60		3,294		—		3,354		3,260,565		—
Total gross loans excluding impaired loans	13,709		26,761		111		40,581		29,144,299		111
Impaired loans	2,051		4,281		14,954		21,286		164,237		—
Total gross loans	$	15,760	$	31,042	$	15,065	$	61,867	$	29,308,536	$	111
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

(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
September 30, 2017:
Commercial loans:
Software/internet $ 45,943
$ 3,725
$ 138
$ 49,806
$ 5,686,655
$ 138
Hardware 273
44
626
943
1,080,341
626
Private equity/venture capital 35,628
34,369
—
69,997
9,563,613
—
Life science/healthcare 20,956
—
—
20,956
1,729,909
—
Premium wine 3,521
640
—
4,161
916,451
—
Other 7
210
—
217
512,891
—
Total commercial loans 106,328
38,988
764
146,080
19,489,860
764
Consumer loans:
Real estate secured loans 1,748
850
—
2,598
2,199,978
—
Other consumer loans 4,540
—
—
4,540
293,301
—
Total consumer loans 6,288
850
—
7,138
2,493,279
—
Total gross loans excluding impaired loans 112,616
39,838
764
153,218
21,983,139
764
Impaired loans 591
311
26,456
27,358
166,114
—
Total gross loans $ 113,207
$ 40,149
$ 27,220
$ 180,576
$ 22,149,253
$ 764
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 ~~September~~June 30, ~~2017~~2019 and December 31, ~~2016~~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
June 30, 2019:
Commercial loans:
Software/internet	$	37,016	$	72,060	$	109,076	$	114,285
Hardware	8,868		6,667		15,535		15,641
Private equity/venture capital	—		—		—		—
Life science/healthcare	41,639		9,372		51,011		78,471
Premium wine	244		784		1,028		1,108
Other	3,230		—		3,230		3,230
Total commercial loans	90,997		88,883		179,880		212,735
Consumer loans:
Real estate secured loans	1,818		3,812		5,630		9,348
Other consumer loans	13		—		13		13
Total consumer loans	1,831		3,812		5,643		9,361
Total	$	92,828	$	92,695	$	185,523	$	222,096
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

(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, 2017:
Commercial loans:
Software/internet

$ 92,584
$ 22,278
$ 114,862
$ 130,324
Hardware 39,728
1,012
40,740
48,061
Private equity/venture capital 1,318
—
1,318
1,321
Life science/healthcare 22,762
5,573
28,335
33,481
Premium wine 4,677
—
4,677
4,702
Other 298
—
298
487
Total commercial loans 161,367
28,863
190,230
218,376
Consumer loans:
Real estate secured loans —
1,301
1,301
1,379
Other consumer loans 1,941
—
1,941
2,036
Total consumer loans 1,941
1,301
3,242
3,415
Total $ 163,308
$ 30,164
$ 193,472
$ 221,791
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 and interest income recognized on impaired loans, broken out by portfolio segment and class of financing receivable for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2019 and ~~2016~~:2018:



Three months ended June 30,	Average impaired loans				Interest income recognized on impaired loans
(Dollars in thousands)	2019		2018		2019		2018
Commercial loans:
Software/internet	$	101,813	$	110,101	$	1,232	$	315
Hardware	15,131		37,058		95		237
Private equity/venture capital	3,860		72		—		—
Life science/healthcare	55,219		21,790		246		5
Premium wine	1,051		2,604		14		36
Other	1,078		379		—		—
Total commercial loans	178,152		172,004		1,587		593
Consumer loans:
Real estate secured loans	5,412		4,466		—		3
Other consumer loans	13		693		—		—
Total consumer loans	5,425		5,159		—		3
Total average impaired loans	$	183,577	$	177,163	$	1,587	$	596


Three months ended September 30,	Average impaired loans				Interest income on impaired loans
Six months ended June 30,									Average impaired loans				Interest income recognized on impaired loans
(Dollars in thousands)	2017		2016		2017		2016		2019		2018		2019		2018
Commercial loans:
Software/internet	$	121,290	$	61,481	$	767	$	70	$	103,062	$	109,444	$	1,835	$	562
Hardware	35,932		45,353		419		761		15,973		37,742		347		289
Private equity/venture capital	644		—		3		—		4,529		187		—		—
Life science/healthcare	25,796		55,558		21		128		49,691		22,234		593		11
Premium wine	3,625		1,291		39		19		1,154		2,686		33		72
Other	348		3,768		—		6		609		195		—		—
Total commercial loans	187,635		167,451		1,249		984		175,018		172,488		2,808		934
Consumer loans:
Real estate secured loans	1,306		584		24		—		7,513		3,765		54		8
Other consumer loans	1,966		1,324		—		6		9		716		—		—
Total consumer loans	3,272		1,908		24		6		7,522		4,481		54		8
Total average impaired loans	$	190,907	$	169,359	$	1,273	$	990	$	182,540	$	176,969	$	2,862	$	942

Nine months ended September 30, Average impaired loans Interest income on impaired loans
(Dollars in thousands) 2017 2016 2017 2016
Commercial loans:
Software/internet $ 122,527
$ 84,005
$ 1,646
$ 133
Hardware 33,271
31,000
518
1,467
Private equity/venture capital 443
—
8
—
Life science/healthcare 33,590
42,857
60
128
Premium wine 3,353
1,834
115
54
Other 706
4,369
—
21
Total commercial loans 193,890
164,065
2,347
1,803
Consumer loans:
Real estate secured loans 1,385
282
24
—
Other consumer loans 1,931
715
—
17
Total consumer loans 3,316
997
24
17
Total average impaired loans $ 197,206
$ 165,062
$ 2,371
$ 1,820

The following tables summarize the activity relating to our allowance for loan losses for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2019 and ~~2016~~2018, broken out by portfolio segment:


Three months ended September 30, 2017	Beginning Balance June 30, 2017			Charge-offs				Recoveries				Provision for (Reduction of) Loan Losses				Foreign Currency Translation Adjustments				Ending Balance September 30, 2017
Three months ended June 30, 2019								Recoveries			Beginning Balance March 31, 2019					Foreign Currency Translation Adjustments			Charge-offs				Recoveries				Provision for Loan Losses				Foreign Currency Translation Adjustments				Ending Balance June 30, 2019
(Dollars in thousands)	Beginning Balance June 30, 2017		Beginning Balance June 30, 2017				Charge-offs				Beginning Balance March 31, 2019			Recoveries				Provision for (Reduction of) Loan Losses				Foreign Currency Translation Adjustments					Provision for Loan Losses			Ending Balance September 30, 2017
Commercial loans:							Charge-offs							Recoveries																Ending Balance September 30, 2017
Software/internet	$	92,937	Beginning Balance June 30, 2017			$	(8,791	)		$	426			$	7,241			Provision for (Reduction of) Loan Losses		$	199	Foreign Currency Translation Adjustments			$	92,012			$	95,683			$	(2,937	Ending Balance June 30, 2019	)	$	6,716			$	2,646		$	(110	)	$	101,998
Hardware	27,800			(2,453		)		115				5,681				156				31,299			25,121				(2,992		)		3,013				1,868			(78		)		26,932
Private equity/venture capital	66,785			—				—				10,142				279				77,206			97,460				(2,047		)		—				10,550			(439		)		105,524
Life science/healthcare	27,730			(1,083		)		63				(1,621		)		(45		)		25,044			55,814				(17,495		)		76				1,889			(78		)		40,206
Premium wine	3,133			—				—				362				10				3,505			3,799				—				—				208			(9		)		3,998
Other	4,135			—				947				(931		)		(26		)		4,125			3,208				(4		)		—				1,134			(47		)		4,291
Total commercial loans	222,520			(12,327		)		1,551				20,874				573				233,191			281,085				(25,475		)		9,805				18,295			(761		)		282,949
Total consumer loans	13,976			(11		)		277				1,535				42				15,819			19,066				(960		)		15				853			(35		)		18,939
Total allowance for loan losses	$	236,496		$	(12,338	)		$	1,828			$	22,409			$	615			$	249,010		$	300,151			$	(26,435	)		$	9,820			$	19,148		$	(796	)		$	301,888


Three months ended September 30, 2016	Beginning Balance June 30, 2016			Charge-offs				Recoveries				Provision for (Reduction of) Loan Losses				Foreign Currency Translation Adjustments				Ending Balance September 30, 2016
Three months ended June 30, 2018								Recoveries			Beginning Balance March 31, 2018					Foreign Currency Translation Adjustments			Charge-offs					Recoveries				Provision for (Reduction of) Loan Losses				Foreign Currency Translation Adjustments				Ending Balance June 30, 2018
(Dollars in thousands)	Beginning Balance June 30, 2016		Beginning Balance June 30, 2016				Charge-offs				Beginning Balance March 31, 2018			Recoveries				Provision for (Reduction of) Loan Losses					Foreign Currency Translation Adjustments					Provision for (Reduction of) Loan Losses			Ending Balance September 30, 2016
Commercial loans:							Charge-offs							Recoveries																	Ending Balance September 30, 2016
Software/internet	$	104,229	Beginning Balance June 30, 2016			$	(16,526	)		$	305			$	8,591			Provision for (Reduction of) Loan Losses		$	(261	)	Foreign Currency Translation Adjustments			$	96,338			$	103,295			$	(13,402	Ending Balance June 30, 2018	)		$	404			$	13,179		$	(828	)	$	102,648
Hardware	23,871			(3,058		)		1,080				11,048				(336		)		32,605				28,472				(461		)		643				6,447				(406		)		34,695
Private equity/venture capital	49,807			—				—				2,203				(67		)		51,943				91,618				(112		)		—				(2,237		)		140				89,409
Life science/healthcare	41,852			(28		)		361				(5,298		)		161				37,048				25,806				—				3				9,876				(621		)		35,064
Premium wine	4,810			—				—				288				(9		)		5,089				3,365				—				—				78				(5		)		3,438
Other	9,480			(5,004		)		207				142				(4		)		4,821				3,482				(1,164		)		566				13				(1		)		2,896
Total commercial loans	234,049			(24,616		)		1,953				16,974				(516		)		227,844				256,038				(15,139		)		1,616				27,356				(1,721		)		268,150
Total consumer loans	10,674			—				131				1,976				(60		)		12,721				18,256				(289		)		310				300				(18		)		18,559
Total allowance for loan losses	$	244,723		$	(24,616	)		$	2,084			$	18,950			$	(576	)		$	240,565			$	274,294			$	(15,428	)		$	1,926			$	27,656			$	(1,739	)		$	286,709


Nine months ended September 30, 2017	Beginning Balance December 31, 2016			Charge-offs				Recoveries				Provision for (Reduction of) Loan Losses				Foreign Currency Translation Adjustments				Ending Balance September 30, 2017
Six months ended June 30, 2019								Recoveries			Beginning Balance December 31, 2018					Foreign Currency Translation Adjustments			Charge-offs				Recoveries				Provision for (Reduction of) Loan Losses				Foreign Currency Translation Adjustments				Ending Balance June 30, 2019
(Dollars in thousands)	Beginning Balance December 31, 2016		Beginning Balance December 31, 2016				Charge-offs				Beginning Balance December 31, 2018			Recoveries				Provision for (Reduction of) Loan Losses				Foreign Currency Translation Adjustments					Provision for (Reduction of) Loan Losses			Ending Balance September 30, 2017
Commercial loans:							Charge-offs							Recoveries																Ending Balance September 30, 2017
Software/internet	$	97,388	Beginning Balance December 31, 2016			$	(36,172	)		$	2,833			$	27,487			Provision for (Reduction of) Loan Losses		$	476	Foreign Currency Translation Adjustments			$	92,012			$	103,567			$	(11,191	Ending Balance June 30, 2019	)		$	7,770			$	1,988		$	(136	)	$	101,998
Hardware	31,166			(6,726		)		459				6,075				325				31,299			19,725				(3,245		)		3,069				7,252				131				26,932
Private equity/venture capital	50,299			—				—				26,111				796				77,206			98,581				(2,047		)		—				9,471				(481		)		105,524
Life science/healthcare	25,446			(7,493		)		107				6,906				78				25,044			32,180				(17,518		)		181				24,561				802				40,206
Premium wine	4,115			—				—				(567		)		(43		)		3,505			3,355				—				—				635				8				3,998
Other	4,768			(1,047		)		1,424				(1,005		)		(15		)		4,125			3,558				(415		)		—				1,193				(45		)		4,291
Total commercial loans	213,182			(51,438		)		4,823				65,007				1,617				233,191			260,966				(34,416		)		11,020				45,100				279				282,949
Consumer loans	12,184			(11		)		1,332				2,266				48				15,819
Total consumer loans																							19,937				(1,019		)		225				(131		)		(73		)		18,939
Total allowance for loan losses	$	225,366		$	(51,449	)		$	6,155			$	67,273			$	1,665			$	249,010		$	280,903			$	(35,435	)		$	11,245			$	44,969			$	206			$	301,888



Six months ended June 30, 2018	Beginning Balance December 31, 2017		Charge-offs			Recoveries		Provision for (Reduction of) Loan Losses			Foreign Currency Translation Adjustments			Ending Balance June 30, 2018
(Dollars in thousands)	Beginning Balance December 31, 2017		Charge-offs			Recoveries		Provision for (Reduction of) Loan Losses			Foreign Currency Translation Adjustments			Ending Balance June 30, 2018
Commercial loans:
Software/internet	$	96,104	$	(20,073	)	$	977	$	25,980		$	(340	)	$	102,648
Hardware	27,614		(3,414		)	1,231		9,551			(287		)	34,695
Private equity/venture capital	82,468		(112		)	10		6,568			475			89,409
Life science/healthcare	24,924		(864		)	56		11,507			(559		)	35,064
Premium wine	3,532		—			—		(83		)	(11		)	3,438
Other	3,941		(1,263		)	1,103		(893		)	8			2,896
Total commercial loans	238,583		(25,726		)	3,377		52,630			(714		)	268,150
Total consumer loans	16,441		(289		)	337		2,022			48			18,559
Total allowance for loan losses	$	255,024	$	(26,015	)	$	3,714	$	54,652		$	(666	)	$	286,709

Nine months ended September 30, 2016 Beginning Balance December 31, 2015 Charge-offs Recoveries
Provision for
(Reduction of) Loan Losses
Foreign Currency Translation Adjustments Ending Balance September 30, 2016
(Dollars in thousands)
Commercial loans:
Software/internet $ 103,045
$ (56,742 ) $ 4,525
$ 46,438
$ (928 ) $ 96,338
Hardware 23,085
(6,559 ) 1,502
15,010
(433 ) 32,605
Private equity/venture capital 35,282
—
—
17,008
(347 ) 51,943
Life science/healthcare 36,576
(3,029 ) 1,037
3,252
(788 ) 37,048
Premium wine 5,205
—
—
(138 ) 22
5,089
Other 4,252
(5,034 ) 880
4,573
150
4,821
Total commercial loans 207,445
(71,364 ) 7,944
86,143
(2,324 ) 227,844
Consumer loans 10,168
(102 ) 214
2,481
(40 ) 12,721
Total allowance for loan losses $ 217,613
$ (71,466 ) $ 8,158
$ 88,624
$ (2,364 ) $ 240,565

The following table summarizes the activity relating to our allowance for unfunded credit commitments for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2019 and ~~2016:~~2018:


	Three months ended September 30,					Nine months ended September 30,					Three months ended June 30,						Six months ended June 30,
(Dollars in thousands)	2017		2016			2017		2016			2019			2018			2019			2018
Beginning balance	$	47,000	$	34,889		$	45,265	$	34,415
Allowance for unfunded credit commitments, beginning balance											$	57,970		$	52,823		$	55,183		$	51,770
Provision for unfunded credit commitments	1,113		1,054			2,789		1,601			4,798			1,424			7,528			2,400
Foreign currency translation adjustments	59		(19		)	118		(92		)	(104		)	(143		)	(47		)	(66		)
Ending balance (1)	$	48,172	$	35,924		$	48,172	$	35,924
Allowance for unfunded credit commitments, ending balance (1)											$	62,664		$	54,104		$	62,664		$	54,104


(1)	See Note ~~12—~~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~~June 30, ~~2017~~2019 and December 31, ~~2016~~2018, broken out by portfolio segment:



	June 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	$	25,284	$	109,076	$	76,714	$	5,891,208	$	28,527	$	114,850	$	75,040	$	6,039,905
Hardware	8,389		15,535		18,543		1,313,054		1,253		11,506		18,472		1,223,051
Private equity/venture capital	—		—		105,524		14,684,900		—		3,700		98,581		14,106,860
Life science/healthcare	17,722		51,011		22,484		2,331,836		7,484		34,067		24,696		2,351,545
Premium wine	244		1,028		3,754		988,556		—		1,301		3,355		958,362
Other	1,284		3,230		3,007		547,578		411		411		3,147		459,079
Total commercial loans	52,923		179,880		230,026		25,757,132		37,675		165,835		223,291		25,138,802
Total consumer loans	144		5,643		18,795		3,266,918		266		4,239		19,671		3,029,404
Total	$	53,067	$	185,523	$	248,821	$	29,024,050	$	37,941	$	170,074	$	242,962	$	28,168,206

September 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 $ 26,981
$ 114,862
$ 65,031
$ 5,678,775
$ 28,245
$ 122,748
$ 69,143
$ 5,504,283
Hardware 11,179
40,740
20,120
1,072,769
9,995
65,395
21,171
1,115,003
Private equity/venture capital 536
1,318
76,670
9,622,506
—
—
50,299
7,691,148
Life science/healthcare 9,843
28,335
15,201
1,697,393
8,709
38,361
16,737
1,814,643
Premium wine 456
4,677
3,049
919,439
520
3,187
3,595
875,135
Other 145
298
3,980
501,487
233
867
4,535
500,842
Total commercial loans 49,140
190,230
184,051
19,492,369
47,702
230,558
165,480
17,501,054
Total consumer loans 1,710
3,242
14,109
2,503,486
1,123
3,902
11,061
2,164,430
Total $ 50,850
$ 193,472
$ 198,160
$ 21,995,855
$ 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”,~~“Pass," with loans risk-rated 1 being cash secured. Loans risk-rated 5 through 7 are performing ~~loans,~~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~~full repayment of a criticized loan has been deemed improbable under the original contractual terms but full repayment remains probable overall, the loan is ~~impaired. The loan is also~~ considered ~~for nonaccrual status if full repayment is determined~~ to be ~~improbable.~~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 ~~2016~~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~~June 30, ~~2017~~2019 and December 31, ~~2016:~~

2018:


(Dollars in thousands)	Pass		Performing (Criticized)		Performing Impaired (Criticized)		Nonperforming Impaired (Nonaccrual)		Total		Pass		Performing (Criticized)		Performing Impaired (Criticized)		Nonperforming Impaired (Nonaccrual)		Total
September 30, 2017:
June 30, 2019:
Commercial loans:
Software/internet	$	5,304,675	$	431,786	$	40,965	$	73,897	$	5,851,323	$	5,457,188	$	478,086	$	72,060	$	37,016	$	6,044,350
Hardware	1,015,947		65,337		21,886		18,854		1,122,024		1,185,161		136,502		6,667		8,868		1,337,198
Private equity/venture capital	9,633,609		1		308		1,010		9,634,928		14,688,329		9		—		—		14,688,338
Life science/healthcare	1,604,160		146,705		1,400		26,935		1,779,200		2,310,262		86,490		9,371		41,640		2,447,763
Premium wine	877,235		43,377		4,241		436		925,289		925,649		63,462		784		244		990,139
Other	493,856		19,252		—		298		513,406		574,978		14,845		—		3,230		593,053
Total commercial loans	18,929,482		706,458		68,800		121,430		19,826,170		25,141,567		779,394		88,882		90,998		26,100,841
Consumer loans:
Real estate secured loans	2,188,397		14,179		—		1,301		2,203,877		2,787,853		11,838		—		5,630		2,805,321
Other consumer loans	297,388		453		—		1,941		299,782		463,850		378		—		13		464,241
Total consumer loans	2,485,785		14,632		—		3,242		2,503,659		3,251,703		12,216		—		5,643		3,269,562
Total gross loans	$	21,415,267	$	721,090	$	68,800	$	124,672	$	22,329,829	$	28,393,270	$	791,610	$	88,882	$	96,641	$	29,370,403
December 31, 2016:
December 31, 2018:
Commercial loans:
Software/internet	$	4,924,923	$	620,907	$	46,143	$	76,605	$	5,668,578	$	5,574,332	$	520,796	$	48,069	$	66,781	$	6,209,978
Hardware	985,889		137,830		58,814		6,581		1,189,114		1,146,985		87,309		10,250		1,256		1,245,800
Private equity/venture capital	7,747,317		594		—		—		7,747,911		14,098,281		16,151		—		3,700		14,118,132
Life science/healthcare	1,707,499		120,825		6,578		31,783		1,866,685		2,291,356		135,653		16,276		17,791		2,461,076
Premium wine	865,354		11,838		2,696		491		880,379		909,965		49,287		1,017		284		960,553
Other	480,845		23,510		464		403		505,222		467,653		17,344		—		411		485,408
Total commercial loans	16,711,827		915,504		114,695		115,863		17,857,889		24,488,572		826,540		75,612		90,223		25,480,947
Consumer loans:
Real estate secured loans	1,914,512		9,604		—		1,504		1,925,620		2,584,261		21,145		320		3,919		2,609,645
Other consumer loans	238,256		499		786		1,612		241,153		419,771		949		—		—		420,720
Total consumer loans	2,152,768		10,103		786		3,116		2,166,773		3,004,032		22,094		320		3,919		3,030,365
Total gross loans	$	18,864,595	$	925,607	$	115,481	$	118,979	$	20,024,662	$	27,492,604	$	848,634	$	75,932	$	94,142	$	28,511,312

Troubled Debt Restructurings

As of ~~September~~June 30, ~~2017~~2019, we had 1820 TDRs with a total carrying value of ~~$87.4~~$112.0 million where concessions have been granted to borrowers experiencing financial difficulties, in an attempt to maximize collection. There were ~~$1.2~~$4.3 million of unfunded commitments available for funding to the clients associated with these TDRs as of ~~September~~June 30, ~~2017.~~2019.

The following table summarizes our loans modified in TDRs, broken out by portfolio segment and class of financing receivables at ~~September~~June 30, ~~2017~~2019 and December 31, ~~2016:~~2018:



(Dollars in thousands)	June 30, 2019		December 31, 2018
Loans modified in TDRs:
Commercial loans:
Software/internet	$	79,512	$	58,089
Hardware	8,159		9,665
Life science/healthcare	19,592		12,738
Premium wine	2,587		2,883
Total commercial loans	109,850		83,375
Consumer loans:
Other consumer loans	2,181		320
Total loans modified in TDRs	$	112,031	$	83,695

(Dollars in thousands) September 30, 2017 December 31, 2016
Loans modified in TDRs:
Commercial loans:
Software/internet $ 63,326
$ 52,646
Hardware 395
14,870
Life science/healthcare 20,015
24,176
Premium wine 3,265
3,194
Other —
387
Total commercial loans 87,001
95,273
Consumer loans:
Other consumer loans 437
786
Total $ 87,438
$ 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 ~~nine~~six months ended ~~September~~June 30, ~~2017~~2019 and ~~2016:~~2018:


	Three months ended September 30,				Nine months ended September 30,				Three months ended June 30,				Six months ended June 30,
(Dollars in thousands)	2017		2016		2017		2016		2019		2018		2019		2018
Loans modified in TDRs during the period:
Commercial loans:
Software/internet	$	10,876	$	78	$	26,034	$	4,569	$	55,065	$	14,783	$	55,681	$	14,783
Hardware	396		10,329		396		10,329		—		1,954		—		3,448
Life science/healthcare	—		1,714		—		1,714		11,227		6,231		11,227		7,461
Premium wine	—		—		185		495
Total commercial loans	11,272		12,121		26,615		17,107		66,292		22,968		66,908		25,692
Consumer loans:
Other consumer loans	—		—		—		786		1,865		—		1,865		325
Total loans modified in TDRs during the period (1)	$	11,272	$	12,121	$	26,615	$	17,893	$	68,157	$	22,968	$	68,773	$	26,017


(1)	There were ~~zero~~$3.4 million and $~~2.6~~5.6 million of partial charge-offs ~~during~~for the three and ~~nine~~six months ended~~September~~June 30, ~~2017~~2019, respectively, and $~~0.7~~8.5 million ~~and~~ ~~$3.5 million~~ of partial charge-offs ~~during~~for both the three and ~~nine~~six months ended~~September~~June 30, ~~2016, respectively.~~2018.

During the three and ~~nine~~six months ended ~~September~~June 30, ~~2017 all new TDRs of $11.3~~2019, $66.3 million and ~~$26.6~~$66.9 million, respectively, were modified through payment deferrals granted to our clients.

During the three and six months ended ~~September~~June 30, ~~2016, $12.0~~2019, $1.9 million were modified through partial forgiveness of principal for both periods presented. During the three and six months ended June 30, 2018, all new TDRs of $23.0 million and $26.0 million, respectively, were modified through payment deferrals granted to our clients and $0.1 million were modified through partial forgiveness of principal. During the nine months ended September 30, 2016, $17.6 million of new TDRs were modified through payment deferrals granted to our clients and $0.3 million were modified through partial forgiveness of principal.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~~six months ended ~~September~~June 30, ~~2017~~2019 and ~~September 30, 2016.~~2018:



	Three months ended June 30,				Six months ended June 30,
(Dollars in thousands)	2019		2018		2019		2018
TDRs modified within the previous 12 months that defaulted during the period:
Commercial loans:
Software/internet	$	—	$	19,625	$	—	$	22,657
Hardware	—		3,449		—		3,449
Life science/healthcare	—		1,230		—		1,230
Total TDRs modified within the previous 12 months that defaulted in the period	$	—	$	24,304	$	—	$	27,336

Three months ended September 30, Nine months ended September 30,
(Dollars in thousands) 2017 2016 2017 2016
TDRs modified within the previous 12 months that defaulted during the period:
Commercial loans:
Software/internet $ 1,234
$ —
$ 1,234
$ 584
Premium wine 186
790
186
790
Total TDRs modified within the previous 12 months that defaulted in the period $ 1,420
$ 790
$ 1,420
$ 1,374

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~~June 30, ~~2017.~~2019.


8. 9.	Leases

We have operating leases for our corporate offices, data centers and certain equipment utilized at those properties. We are obligated under a number of noncancelable operating leases for premises and equipment that expire at various dates, through 2030, and in most instances, include options to renew or extend at market rates and terms. Such leases may provide for periodic adjustments of rentals during the term of the lease based on changes in various economic indicators.

At the inception of the lease, the lease is evaluated to determine whether the lease will be accounted for as an operating or a finance lease. There were no significant assumptions or judgments required upon applying the new lease standard. Operating lease ROU assets and operating lease liabilities are included in our consolidated balance sheets. We have no leases that meet the definition of a finance lease under ASC 842 and our lessor accounting treatment for subleases is not material. The comparative information has not been restated and continues to be reported under the accounting standards in effect for those periods.

Total recorded balances for the lease assets and liabilities are as follows:



(Dollars in thousands)	June 30, 2019
Assets:
Right-of-use assets - operating leases (1)	$	156,347
Liabilities:
Lease liabilities - operating leases (1)	195,326


(1)	Included in these amounts are $23.3 million and $32.3 million of ROU assets and lease liabilities, respectively, attributable to the inclusion of SVB Leerink in our financial results at June 30, 2019.

The components of our lease cost and supplemental cash flow information related to leases for the three and six months ended June 30, 2019 were as follows:



(Dollars in thousands)	Three months ended June 30, 2019			Six months ended June 30, 2019
Operating lease cost	$	9,462		$	18,980
Short-term lease cost	582			845
Variable lease cost	933			1,779
Less: sublease income	(1,115		)	(2,223		)
Total lease cost, net	$	9,862		$	19,381
Supplemental cash flows information:
Cash paid for operating leases	$	10,884		$	21,238

The table below presents additional information related to the Company's leases as of June 30, 2019:



	June 30, 2019
Weighted-average remaining term (in years) - operating leases	6.22
Weighted-average discount rate - operating leases (1)	3.19	%

(1)

The incremental borrowing rate used to calculate the lease liability was determined based on the facts and circumstances of the economic environment and the Company’s credit standing as of the effective date of ASC 842. Additionally, the total lease term and total lease payments were also considered in determining the rate. Based on these considerations the Company identified credit terms available under its existing credit lines which represent a collateralized borrowing rate that has varying credit terms that could be matched to total lease terms and total lease payments in ultimately determining the implied borrowing rate in each lease contract.

The following table presents our undiscounted future cash payments for our operating lease liabilities as of June 30, 2019:



Years ended December 31, (Dollars in thousands)	Operating Leases
2019 (excluding the six months ended June 30, 2019)	$	21,753
2020	40,222
2021	37,410
2022	31,853
2023	30,384
2024 and thereafter	38,204
Total future lease payments (1)	$	199,826
Less: imputed interest	(4,500		)
Total lease liabilities	$	195,326


(1)	As of June 30, 2019, we have additional operating leases that have not yet commenced. We estimate that we will record additional operating lease liabilities of $30.1 million upon commencement. These operating leases will commence in 2019 with lease terms of one to ten years.

The following table presents minimum future payments under noncancelable operating leases under ASC 840, as of December 31, 2018:



(Dollars in thousands)	Amount
2019	$	38,609
2020	37,575
2021	35,854
2022	31,659
2023	30,904
2024 and thereafter	49,071
Total minimum future payments	$	223,672


10.	Goodwill and Other Intangible Assets

Goodwill

On January 4, 2019, we completed the acquisition of Leerink Holdings LLC, the Boston-based parent company of healthcare and life science investment bank Leerink Partners LLC, now SVB Leerink. We recognized identifiable intangible assets of $60.9 million and goodwill of $137.8 million as a result of the acquisition. For additional information, refer to Note 2—“Business Combination” of the “Notes to Interim Consolidated Financial Statements (unaudited)” under Part I, Item 1 of this report. The goodwill of $137.8 million includes revenue generating synergies expected from collaboration between SVB Leerink and the Company.

The changes in goodwill were as follows for the six months ended June 30, 2019:



(Dollars in thousands)	Goodwill
Beginning balance at December 31, 2018	$	—
Acquisitions (1)	137,823
Ending balance at June 30, 2019	$	137,823


(1)	All reported goodwill amounts have been allocated to the SVB Leerink reporting segment and are expected to be deductible for tax purposes. Refer to Note 15—“Segment Reporting” of the “Notes to Interim Consolidated Financial Statements (unaudited)” under Part I, Item 1 of this report for additional information.

Other Intangible Assets

The components of net other intangible assets related to the acquisition of SVB Leerink were as follows:



	June 30, 2019
(Dollars in thousands)	Gross Amount		Accumulated Amortization		Net Carrying Amount
Other intangible assets:
Customer relationships	$	42,000	$	1,910	$	40,090
Other	18,900		3,832		15,068
Total other intangible assets	$	60,900	$	5,742	$	55,158

For the six months ended June 30, 2019, we recorded amortization expense of $5.7 million. Assuming no future impairments of other intangible assets or additional acquisitions or dispositions, the following table presents the Company's future expected amortization expense for other intangible assets that will continue to be amortized:



Years ended December 31, (Dollars in thousands)	Other Intangible Assets
2019 (excluding the six months ended June 30, 2019)	$	5,742
2020	5,382
2021	4,732
2022	4,732
2023	4,732
2024 and thereafter	29,838
Total future amortization expense	$	55,158


11.	Short-Term Borrowings and Long-Term Debt

The following table represents outstanding short-term borrowings and long-term debt at ~~September~~June 30, ~~2017~~2019 and December 31, ~~2016~~2018:


				Carrying Value							Carrying Value
(Dollars in thousands)	Maturity	Principal value at September 30, 2017		September 30, 2017		December 31, 2016		Maturity	Principal value at June 30, 2019		June 30, 2019		December 31, 2018
Short-term borrowings:
Short-term FHLB advances		$	—	$	—	$	500,000				$	—	$	300,000
Securities sold under agreement to repurchase								(1)			—		319,414
Other short-term borrowings	(1)	4,840		4,840		12,668		(2)	$	24,252	24,252		11,998
Total short-term borrowings				$	4,840	$	512,668				$	24,252	$	631,412
Long-term debt:
3.50% Senior Notes	January 29, 2025	$	350,000	$	347,221	$	346,979	January 29, 2025	$	350,000	$	347,812	$	347,639
5.375% Senior Notes	September 15, 2020	350,000		348,035		347,586		September 15, 2020	350,000		349,158		348,826
6.05% Subordinated Notes (2)	June 1, 2017	—		—		46,646
7.0% Junior Subordinated Debentures	October 15, 2033	50,000		54,362		54,493
Total long-term debt				$	749,618	$	795,704				$	696,970	$	696,465


(1)	Securities sold under repurchase agreements are effectively short-term borrowings collateralized by U.S. Treasury securities.


(2)	Represents cash collateral received from certain counterparties in relation to market value exposures of derivative contracts in our favor.


~~(2)~~	~~Our 6.05% Subordinated Notes were repaid on June 1, 2017 and therefore, the interest rate swap agreement related to this issuance was terminated upon repayment of the 6.05% Subordinated Notes. At~~ ~~December 31, 2016, included in the carrying value of our 6.05% Subordinated Notes were~~ ~~$0.8 million~~ ~~related to hedge accounting associated with the notes.~~

Interest expense related to short-term borrowings and long-term debt was ~~$9.0~~$9.2 million and ~~$27.2~~$19.4 million for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~,2019, respectively, and ~~$9.7~~$8.6 million and ~~$28.2~~$17.0 million for the three and ~~nine~~six months ended ~~September~~June 30, ~~2016, respectively. Interest expense is net of the hedge accounting impact from our interest rate swap agreement related to our 6.05% Subordinated Notes through June 1, 2017.~~2018. The weighted average interest rate associated with our overnight short-term borrowings was ~~1.06 percent as of September 30, 2017 and 0.59~~2.62 percent as of December 31, ~~2016.~~2018. There were no overnight short-term borrowings as of June 30, 2019.

Short-term Borrowings

~~Available Lines of Credit~~

We have certain facilities in place to enable us to access short-term borrowings on a secured ~~(using high-quality fixed income securities as collateral)~~ and an unsecured basis. ~~These~~Our secured facilities include ~~repurchase agreements and uncommitted federal funds lines with various financial institutions. As of~~ ~~September 30, 2017, we did not have any borrowings outstanding against our uncommitted federal funds lines. We also pledge securities~~collateral pledged to the FHLB of San Francisco and the discount window at the ~~Federal Reserve Bank. The fair value~~FRB (using both fixed income securities and loans as collateral). Our unsecured facility consists of our uncommitted federal funds lines. As of June 30, 2019, collateral pledged to the FHLB of San Francisco ~~(comprised~~was comprised primarily of ~~U.S. Treasury securities)~~fixed income investment securities and loans and had a carrying value of $4.6 billion, of which $4.1 billion was available to support additional borrowings. As of June 30, 2019, collateral pledged to the discount window at ~~September 30, 2017~~ ~~totaled~~ ~~$1.9~~the FRB was comprised of fixed income investment securities and had a carrying value of $0.6 billion,, all of which was unused and available to support additional borrowings. ~~The fair value of collateral pledged at the discount window of the Federal Reserve Bank at~~ ~~September 30, 2017~~ ~~totaled~~ ~~$0.7 billion, all of which was~~Our total unused and available ~~to support additional borrowings.~~borrowing capacity for our uncommitted federal funds lines totaled $1.9 billion at June 30, 2019. Our total unused and available borrowing capacity under our master repurchase agreements with various financial institutions totaled $3.3 billion at June 30, 2019.


9.12.	Derivative Financial Instruments

We primarily use derivative financial instruments to manage interest rate risk, currency exchange rate risk and to assist customers with their risk management ~~objectives.~~objectives, which may include currency exchange rate risks and interest rate risks. Also, in connection with negotiating credit facilities and certain other services, we often obtain equity warrant assets giving us the right to acquire stock in private, venture-backed companies in the technology and life science/healthcare industries.

Interest Rate Risk

Interest rate risk is our primary market risk and can result from timing and volume differences in the repricing of our interest rate sensitive assets and liabilities and changes in market interest rates. To manage interest rate risk ~~for~~on our ~~6.05% Subordinated Notes,~~variable-interest rate loan portfolio, we ~~entered~~enter into ~~a fixed-for-floating~~ interest rate swap ~~agreement at~~contracts to hedge against future changes in interest rates by using hedging instruments to lock in future cash inflows that would otherwise be impacted by movements in the ~~time of debt issuance based upon LIBOR with matched-terms. The net cash benefit associated with our~~market interest rates. We designate these interest rate swap ~~is recorded~~contracts as ~~a reduction in “Interest expense—Borrowings,” a component of net interest income. The fair value of our interest rate swaps is calculated using a discounted~~ cash flow ~~method~~hedges that qualify for hedge accounting under ASC 815, Derivatives and ~~adjusted for credit valuation associated with counterparty risk. Changes~~Hedging ("ASC 815"), and record them in other assets and other liabilities. For qualifying cash flow hedges, changes in the fair value of the ~~interest rate swaps~~derivative are ~~reflected~~recorded in ~~either~~accumulated other ~~assets (for swaps~~comprehensive income and recognized in ~~an asset position) or other liabilities (for swaps in a liability position). On June 1, 2017, our interest rate swap was terminated upon repayment~~earnings as the hedged item affects earnings. Derivative amounts affecting earnings are recognized consistent with the classification of the ~~6.05% Subordinated Notes.~~hedged item in the line item "Loans" as part of interest income, a component of consolidated net income.

We assess hedge effectiveness under ASC 815 on a quarterly basis to ensure all hedges remain highly effective to ensure hedge accounting under ASC 815 can be applied. If the hedging relationship no longer exists or no longer qualifies as a hedge per ASC 815, any amounts remaining as gain or loss in accumulated other comprehensive income are reclassified into earnings in the line item "Loans" as part of interest income, a component of consolidated net income. As of June 30, 2019, no derivatives classified as hedges were terminated or were disqualified for hedge accounting. The maximum length of time over which the forecasted transactions are hedged is approximately six years.

Currency Exchange Risk

We enter into foreign exchange forward contracts to economically reduce our foreign exchange exposure risk associated with the net difference between foreign currency denominated assets and liabilities. We do not designate any foreign exchange forward contracts as derivative instruments that qualify for hedge accounting. Gains or losses from changes in currency rates on foreign currency denominated instruments are recorded in the line item “Other” as part of noninterest income, a component of consolidated net income. We may experience ineffectiveness in the economic hedging relationship, because the instruments are revalued based upon changes in the currency’s spot rate on the principal value, while the forwards are revalued on a discounted cash flow basis. We record forward agreements in gain positions in other assets and loss positions in other liabilities, while net changes in fair value are recorded in the line item “Other” as part of noninterest income, a component of consolidated net income.

Other Derivative Instruments

Also included in our derivative instruments are equity warrant assets and client forward and option contracts, and client interest rate contracts. For further description of these other derivative instruments, refer to Note 2-“Summary of Significant Accounting Policies" under Part II, Item 8 of our ~~2016~~2018 Form 10-K.

Counterparty Credit Risk

We are exposed to credit risk if counterparties to our derivative contracts do not perform as expected. We mitigate counterparty credit risk through credit approvals, limits, monitoring procedures and obtaining collateral, as appropriate. With respect to measuring counterparty credit risk for derivative instruments, we measure the fair value of a group of financial assets and financial liabilities on a net risk basis by counterparty portfolio.

The total notional or contractual amounts and fair value ~~collateral and net exposure~~ of our derivative financial instruments at ~~September~~June 30, ~~2017~~2019 and December 31, ~~2016~~2018 were as follows:


																						June 30, 2019						December 31, 2018
		September 30, 2017										December 31, 2016										Notional or Contractual Amount		Fair Value				Notional or Contractual Amount			Fair Value
(Dollars in thousands)	Balance Sheet Location	Notional or Contractual Amount		Fair Value			Collateral (1)		Net Exposure (2)			Notional or Contractual Amount		Fair Value			Collateral (1)		Net Exposure (2)					Derivative Assets (1)		Derivative Liabilities (1)				Derivative Assets (1)			Derivative Liabilities (1)
Derivatives designated as hedging instruments:
Interest rate risks:
Interest rate swaps	Other assets	$	—	$	—		$	—	$	—		$	45,964	$	810		$	89	$	721		$	1,015,000	$	19,558	$	—	$	—		$	—		$	—
Interest rate swaps																						250,000		—		391		—			—			—
Derivatives not designated as hedging instruments:
Currency exchange risks:
Foreign exchange forwards	Other assets	286,378		3,166			—		3,166			219,950		3,057			—		3,057			37,120		1,081		—		263,733			4,767			—
Foreign exchange forwards	Other liabilities	84,618		(1,244		)	—		(1,244		)	54,338		(968		)	—		(968		)	275,704		—		4,210		178,310			—			1,094
Net exposure				1,922			—		1,922					2,089			—		2,089
Other derivative instruments:
Equity warrant assets	Other assets	211,018		141,785			—		141,785			211,434		131,123			—		131,123			221,013		158,048		—		223,532			149,238			—
Other derivatives:
Client foreign exchange forwards	Other assets	1,925,726		90,691			4,840		85,851			1,251,308		54,587			12,579		42,008			3,447,213		92,623		—		2,759,878			93,876			—
Client foreign exchange forwards	Other liabilities	1,838,439		(86,627		)	—		(86,627		)	1,068,991		(43,317		)	—		(43,317		)	3,137,742		—		81,489		2,568,085			—			85,706
Client foreign currency options	Other assets	101,544		1,090			—		1,090			775,000		10,383			—		10,383			87,439		758		—		93,556			1,759			—
Client foreign currency options	Other liabilities	101,544		(1,090		)	—		(1,090		)	775,000		(10,383		)	—		(10,383		)	87,538		—		758		93,579			—			1,759
Client interest rate derivatives(2)	Other assets	676,148		11,824			—		11,824			583,511		10,110			—		10,110			1,159,613		19,440		—		1,020,416			8,499			—
Client interest rate derivatives(2)	Other liabilities	711,969		(11,955		)	—		(11,955		)	627,639		(9,770		)	—		(9,770		)	1,237,704		—		25,803		1,337,328			—			9,491
Net exposure				3,933			4,840		(907		)			11,610			12,579		(969		)
Net				$	147,640		$	4,840	$	142,800				$	145,632		$	12,668	$	132,964
Total derivatives not designated as hedging instruments																								271,950		112,260					258,139			98,050
Total derivatives																								$	291,508	$	112,651				$	258,139		$	98,050


(1)	~~Cash collateral received from our counterparties~~ Derivative assets and liabilities are included in ~~relation to market value exposures of derivative contracts in our favor is recorded as a component of “short-term borrowings”~~"Accrued interest receivable and other assets" and "Other liabilities", respectively, on our consolidated balance sheets.

(2)

~~Net exposure~~

The amount reported for ~~contracts in~~June 30, 2019 reflects rule changes implemented by two central clearing houses that require entities to treat derivative assets, liabilities and the related variation margin as settlement of the related derivative fair values for legal and accounting purposes, as opposed to presenting gross derivative assets and liabilities. As a ~~gain position reflects the replacement cost in the event~~result, client interest rate derivatives reflect reductions of ~~nonperformance by all such counterparties. The credit ratings~~approximately $4.2 million and $0.4 million of ~~our institutional counterparties as of September~~derivative assets at June 30, ~~2017 remain at investment grade or higher~~2019 and ~~there were no material changes in their credit ratings during the three and nine months ended September 30, 2017.~~December 31, 2018, respectively.

A summary of our derivative activity and the related impact on our consolidated statements of income for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2019 and ~~2016~~2018 is as follows:



		Three months ended June 30,						Six months ended June 30,
(Dollars in thousands)	Statement of income location	2019			2018			2019			2018
Derivatives designated as hedging instruments:
Interest rate risks:
Amounts reclassified from accumulated other comprehensive income into income	Interest income—loans	$	(508	)	$	—		$	(511	)	$	—
Derivatives not designated as hedging instruments:
Currency exchange risks:
Gains (losses) on revaluations of internal foreign currency instruments, net	Other noninterest income	$	2,491		$	(319	)	$	3,541		$	2,607
(Losses) gains on internal foreign exchange forward contracts, net	Other noninterest income	(3,274		)	459			(3,743		)	(3,053		)
Net (losses) gains associated with internal currency risk		$	(783	)	$	140		$	(202	)	$	(446	)
Other derivative instruments:
Gains (losses) on revaluations of client foreign currency instruments, net	Other noninterest income	$	959		$	(2,748	)	$	(12,612	)	$	4,905
Gains (losses) on client foreign exchange forward contracts, net	Other noninterest income	411			2,844			13,065			(4,270		)
Net gains associated with client currency risk		$	1,370		$	96		$	453		$	635
Net gains on equity warrant assets	Gains on equity warrant assets, net	$	48,347		$	19,061		$	69,652		$	38,252
Net (losses) gains on other derivatives	Other noninterest income	$	(1,131	)	$	(10	)	$	(1,496	)	$	421

Three months ended September 30, Nine months ended September 30,
(Dollars in thousands) Statement of income location 2017 2016 2017 2016
Derivatives designated as hedging instruments:
Interest rate risks:

Net cash benefit associated with interest rate swaps Interest expense—borrowings $ 62
$ 580
$ 997
$ 1,778
Changes in fair value of interest rate swaps Other noninterest income —
(3 ) (7 ) (33 )
Net gains associated with interest rate risk derivatives $ 62
$ 577
$ 990
$ 1,745
Derivatives not designated as hedging instruments:
Currency exchange risks:

Gains (losses) on revaluations of internal foreign currency instruments, net Other noninterest income $ 10,561
$ (1,406 ) $ 29,265
$ (4,222 )
(Losses) gains on internal foreign exchange forward contracts, net Other noninterest income (10,550 ) 1,352
(28,349 ) 3,067
Net gains (losses) associated with internal currency risk $ 11
$ (54 ) $ 916
$ (1,155 )
Other derivative instruments:

Gains on revaluations of client foreign currency instruments, net Other noninterest income $ 3,760
$ 3,488
$ 8,889
$ 7,009
Losses on client foreign exchange forward contracts, net Other noninterest income (3,871 ) (3,194 ) (8,350 ) (8,780 )
Net (losses) gains associated with client currency risk $ (111 ) $ 294
$ 539
$ (1,771 )
Net gains on equity warrant assets Gains on equity warrant assets, net $ 24,922
$ 21,558
$ 42,432
$ 33,252
Net (losses) gains on other derivatives Other noninterest income $ (38 ) $ 31
$ (524 ) $ (659 )

Balance Sheet Offsetting

Certain of our derivative and other financial instruments are subject to enforceable master netting arrangements with our counterparties. These agreements provide for the net settlement of multiple contracts with a single counterparty through a single payment, in a single currency, in the event of default on or termination of any one contract.

The following table summarizes our assets subject to enforceable master netting arrangements as of ~~September~~June 30, ~~2017~~2019 and December 31, ~~2016~~2018:



	Gross Amounts of Recognized Assets		Gross Amounts offset in the Statement of Financial Position		Net Amounts of Assets Presented in the Statement of Financial Position		Gross Amounts Not Offset in the Statement of Financial Position but Subject to Master Netting Arrangements						Net Amount
(Dollars in thousands)	Gross Amounts of Recognized Assets		Gross Amounts offset in the Statement of Financial Position				Financial Instruments			Cash Collateral Received (1)			Net Amount
June 30, 2019
Derivative assets:
Interest rate swaps	$	19,558	$	—	$	19,558	$	(19,558	)	$	—		$	—
Foreign exchange forwards	93,704		—		93,704		(30,435		)	(24,171		)	39,098
Foreign currency options	758		—		758		(246		)	(59		)	453
Client interest rate derivatives	19,440		—		19,440		(19,418		)	(22		)	—
Total derivative assets	133,460		—		133,460		(69,657		)	(24,252		)	39,551
Reverse repurchase, securities borrowing, and similar arrangements	291,678		—		291,678		(291,678		)	—			—
Total	$	425,138	$	—	$	425,138	$	(361,335	)	$	(24,252	)	$	39,551
December 31, 2018
Derivative assets:
Foreign exchange forwards	$	98,643	$	—	$	98,643	$	(38,213	)	$	(11,825	)	$	48,605
Foreign currency options	1,759		—		1,759		(613		)	(90		)	1,056
Client interest rate derivatives	8,499		—		8,499		(8,416		)	(83		)	—
Total derivative assets	108,901		—		108,901		(47,242		)	(11,998		)	49,661
Reverse repurchase, securities borrowing, and similar arrangements	123,611		—		123,611		(123,611		)	—			—
Total	$	232,512	$	—	$	232,512	$	(170,853	)	$	(11,998	)	$	49,661

Gross Amounts of Recognized Assets Gross Amounts offset in the Statement of Financial Position Net Amounts of Assets Presented in the Statement of Financial Position Gross Amounts Not Offset in the Statement of Financial Position But Subject to Master Netting Arrangements Net Amount
(Dollars in thousands) Financial Instruments Cash Collateral Received
September 30, 2017
Derivative Assets:
   Interest rate swaps $ —
$ —
$ —
$ —
$ —
$ —
Foreign exchange forwards 93,857
—
93,857
(21,154 ) (4,840 ) 67,863
   Foreign currency options 1,090
—
1,090
(331 ) —
759
   Client interest rate derivatives 11,824
—
11,824
(11,808 ) —
16
Total derivative assets 106,771
—
106,771
(33,293 ) (4,840 ) 68,638
Reverse repurchase, securities borrowing, and similar arrangements 62,664
—
62,664
(62,664 ) —
—
Total $ 169,435
$ —
$ 169,435
$ (95,957 ) $ (4,840 ) $ 68,638
December 31, 2016
Derivative Assets:
   Interest rate swaps $ 810
$ —
$ 810
$ (721 ) $ (89 ) $ —
Foreign exchange forwards 57,644
—
57,644
(22,738 ) (12,579 ) 22,327
   Foreign currency options 10,383
—
10,383
(8,806 ) —
1,577
   Client interest rate derivatives 10,110
—
10,110
(10,091 ) —
19
Total derivative assets 78,947
—
78,947
(42,356 ) (12,668 ) 23,923
Reverse repurchase, securities borrowing, and similar arrangements 64,028
—
64,028
(64,028 ) —
—
Total $ 142,975
$ —
$ 142,975
$ (106,384 ) $ (12,668 ) $ 23,923


(1)	Cash collateral received from our counterparties in relation to market value exposures of derivative contracts in our favor is recorded as a component of “Short-term borrowings” on our consolidated balance sheets.

The following table summarizes our liabilities subject to enforceable master netting arrangements as of ~~September~~June 30, ~~2017~~2019 and December 31, ~~2016~~2018:



	Gross Amounts of Recognized Liabilities		Gross Amounts offset in the Statement of Financial Position		Net Amounts of Liabilities Presented in the Statement of Financial Position		Gross Amounts Not Offset in the Statement of Financial Position but Subject to Master Netting Arrangements						Net Amount
(Dollars in thousands)	Gross Amounts of Recognized Liabilities		Gross Amounts offset in the Statement of Financial Position				Financial Instruments			Cash Collateral Pledged (1)			Net Amount
June 30, 2019
Derivative liabilities:
Interest rate swaps	$	391	$	—	$	391	$	(391	)	$	—		$	—
Foreign exchange forwards	85,699		—		85,699		(17,096		)	(29,296		)	39,307
Foreign currency options	758		—		758		(475		)	—			283
Client interest rate derivatives	25,803		—		25,803		—			(25,579		)	224
Total derivative liabilities	112,651		—		112,651		(17,962		)	(54,875		)	39,814
Repurchase, securities lending, and similar arrangements	—		—		—		—			—			—
Total	$	112,651	$	—	$	112,651	$	(17,962	)	$	(54,875	)	$	39,814
December 31, 2018
Derivative liabilities:
Foreign exchange forwards	$	86,800	$	—	$	86,800	$	(24,778	)	$	(20,732	)	$	41,290
Foreign currency options	1,759		—		1,759		(1,054		)	—			705
Client interest rate derivatives	9,491		—		9,491		—			(9,207		)	284
Total derivative liabilities	98,050		—		98,050		(25,832		)	(29,939		)	42,279
Repurchase, securities lending, and similar arrangements	319,414		—		319,414		—			—			319,414
Total	$	417,464	$	—	$	417,464	$	(25,832	)	$	(29,939	)	$	361,693

Gross Amounts of Recognized Liabilities Gross Amounts offset in the Statement of Financial Position Net Amounts of Liabilities Presented in the Statement of Financial Position Gross Amounts Not Offset in the Statement of Financial Position But Subject to Master Netting Arrangements Net Amount
(Dollars in thousands) Financial Instruments Cash Collateral Pledged
September 30, 2017
Derivative Liabilities:
   Foreign exchange forwards $ 87,871
$ —
$ 87,871
$ (68,852 ) $ —
$ 19,019
   Foreign currency options 1,090
—
1,090
(759 ) —
331
   Client interest rate derivatives 11,955
—
11,955
(11,936 ) —
19
Total derivative liabilities 100,916
—
100,916
(81,547 ) —
19,369
Repurchase, securities lending, and similar arrangements —
—
—
—
—
—
Total $ 100,916
$ —
$ 100,916
$ (81,547 ) $ —
$ 19,369
December 31, 2016
Derivative Liabilities:
   Foreign exchange forwards $ 44,285
$ —
$ 44,285
$ (17,964 ) $ —
$ 26,321
   Foreign currency options 10,383
—
10,383
(1,585 ) —
8,798
   Client interest rate derivatives 9,770
—
9,770
(9,770 ) —
—
Total derivative liabilities 64,438
—
64,438
(29,319 ) —
35,119
Repurchase, securities lending, and similar arrangements —
—
—
—
—
—
Total $ 64,438
$ —
$ 64,438
$ (29,319 ) $ —
$ 35,119


~~10.~~	~~Other Noninterest Income and Other Noninterest Expense~~

~~A summary of other noninterest income for the three and nine months ended~~ ~~September 30, 2017~~ ~~and~~ ~~2016~~ ~~is as follows:~~

Three months ended September 30,
Nine months ended September 30,
(Dollars in thousands) 2017
2016
2017
2016
Fund management fees $ 5,198
$ 5,231
$ 15,903
$ 14,149
Service-based fee income 469
2,029
3,860
6,270
Gains on revaluation of client foreign currency instruments, net (1) 3,760
3,488
8,889
7,009
Losses on client foreign exchange forward contracts, net (1) (3,871 ) (3,194 ) (8,350 ) (8,780 )
Gains (losses) on revaluation of internal foreign currency instruments, net (2) 10,561
(1,406 ) 29,265
(4,222 )
(Losses) gains on internal foreign exchange forward contracts, net (2) (10,550 ) 1,352
(28,349 ) 3,067
Other (3) 10,329
11,378
19,910
19,018
Total other noninterest income $ 15,896
$ 18,878
$ 41,128
$ 36,511


(1)	Cash collateral pledged to our counterparties in relation to market value exposures of derivative contracts in a liability position and repurchase agreements are recorded as a component of “Cash and cash equivalents" on our consolidated balance sheets.


13.	Noninterest Income

On January 1, 2018, we adopted accounting standard ASU 2014-09, Revenue from Contracts with Customers and all the related amendments ("ASC 606" or "ASU 2014-09"). Included below is a summary of noninterest income, as well as the impact of such adoption, for the three and six months ended June 30, 2019 and 2018:



	Three months ended June 30,				Six months ended June 30,
(Dollars in thousands)	2019		2018		2019		2018
Noninterest income:
Gains on investment securities, net	$	47,698	$	36,114	$	76,726	$	45,172
Gains on equity warrant assets, net	48,347		19,061		69,652		38,252
Client investment fees	45,744		29,452		90,226		52,327
Foreign exchange fees	38,506		34,077		76,554		67,904
Credit card fees	28,790		22,926		56,273		44,618
Deposit service charges	22,075		18,794		43,014		36,493
Lending related fees	11,213		9,528		25,150		20,263
Letters of credit and standby letters of credit fees	11,009		8,347		20,363		16,529
Investment banking revenue	48,694		—		98,489		—
Commissions	14,429		—		28,537		—
Other	17,245		14,390		29,142		26,649
Total noninterest income	$	333,750	$	192,689	$	614,126	$	348,207

Gains on investment securities, net

Net gains on investment securities include both gains and losses from our non-marketable and other equity securities, which include public equity securities held as a result of exercised equity warrant assets, gains and losses from sales of our AFS debt securities portfolio, when applicable, and carried interest.

Our non-marketable and other equity securities portfolio primarily represents investments in venture capital and private equity funds, our China Joint Venture, debt funds, private and public portfolio companies, which include public equity securities held as a result of exercised equity warrant assets and qualified affordable housing projects. We experience variability in the performance of our non-marketable and other equity securities from period to period, which results in net gains or losses on investment securities (both realized and unrealized). This variability is due to a number of factors, including unrealized changes in the values of our investments, changes in the amount of realized gains from distributions, changes in liquidity events and general economic and market conditions. Unrealized gains from non-marketable and other equity securities for any single period are typically driven by valuation changes.

The extent to which any unrealized gains or losses will become realized is subject to a variety of factors, including, among other things, the expiration of certain sales restrictions to which these equity securities may be subject to (i.e., lock-up agreements), changes in prevailing market prices, market conditions, the actual sales or distributions of securities, and the timing of such actual sales or distributions, which, to the extent such securities are managed by our managed funds, are subject to our funds' separate discretionary sales/distributions and governance processes.

Carried interest is comprised of preferential allocations of profits recognizable when the return on assets of our individual managed fund of funds and direct venture funds exceeds certain performance targets and is payable to us, as the general partners of the managed funds. The carried interest we earn is often shared with employees, who are also members of the general partner entities. We record carried interest on a quarterly basis by measuring fund performance to date versus the performance target. For our unconsolidated managed funds, carried interest is recorded as gains on investment securities, net. For our consolidated managed funds, it is recorded as a component of net income attributable to noncontrolling interests. Carried interest allocated to others is recorded as a component of net income attributable to noncontrolling interests. Any carried interest paid to us (or our employees) may be subject to reversal to the extent fund performance declines to a level where inception to date carried interest is lower than actual payments made by the funds. The limited partnership agreements for our funds provide that carried interest is generally not paid to the general partners until the funds have provided a full return of contributed capital to the limited partners. Accrued, but unpaid carried interest may be subject to reversal to the extent that the fund performance declines

to a level where inception-to-date carried interest is less than prior amounts recognized. Carried interest income is accounted for under an ownership model based on ASC 323 — Equity Method of Accounting and ASC 810 — Consolidation.

Our available-for-sale securities portfolio is a fixed income investment portfolio that is managed with the objective of earning an appropriate portfolio yield over the long-term while maintaining sufficient liquidity and credit diversification as well as addressing our asset/liability management objectives. Though infrequent, sales of debt securities in our AFS securities portfolio may result in net gains or losses and are conducted pursuant to the guidelines of our investment policy related to the management of our liquidity position and interest rate risk.

Gains on investment securities are recognized outside of the scope of ASC 606 as it explicitly excludes noninterest income earned from our investment-related activities. A summary of gains and losses on investment securities for the three and six months ended June 30, 2019 and 2018 is as follows:



	Three months ended June 30,					Six months ended June 30,
(Dollars in thousands)	2019			2018		2019			2018
Gains on non-marketable and other equity securities, net	$	47,973		$	36,114	$	80,631		$	45,172
Losses on sales of available-for-sale securities, net	(275		)	—		(3,905		)	—
Total gains on investment securities, net	$	47,698		$	36,114	$	76,726		$	45,172

Gains on equity warrant assets, net

In connection with negotiating credit facilities and certain other services, we often obtain rights to acquire stock in the form of equity warrant assets in primarily private, venture-backed companies in the technology and life science/healthcare industries. Any changes in fair value from the grant date fair value of equity warrant assets will be recognized as increases or decreases to other assets on our balance sheet and as net gains or losses on equity warrant assets, in noninterest income, a component of consolidated net income. Gains on equity warrant assets are recognized outside of the scope of ASC 606 as it explicitly excludes noninterest income earned from our derivative-related activities. A summary of net gains on equity warrant assets for the three and six months ended June 30, 2019 and 2018 is as follows:



	Three months ended June 30,						Six months ended June 30,
(Dollars in thousands)	2019			2018			2019			2018
Equity warrant assets:
Gains on exercises, net	$	40,226		$	8,875		$	49,180		$	20,509
Terminations	(1,045		)	(826		)	(1,884		)	(1,726		)
Changes in fair value, net	9,166			11,012			22,356			19,469
Total net gains on equity warrant assets	$	48,347		$	19,061		$	69,652		$	38,252

Client investment fees

Client investment fees include fees earned from discretionary investment management services for substantially all clients, managing clients’ portfolios based on their investment policies, strategies and objectives and investment advisory fees. Revenue is recognized on a monthly basis upon completion of our performance obligation and consideration is typically received in the subsequent month. Included in our sweep money market fees are Rule 12(b)-1 fees, revenue sharing and customer transactional-based fees. Rule 12(b)-1 fees and revenue sharing are recognized as earned based on client funds that are invested in the period, typically monthly. Transactional based fees are earned and recognized on fixed income securities when the transaction is executed on the clients' behalf. Amounts paid to third-party service providers are predominantly expensed, such that client investment fees are recorded gross of payments made to third parties. A summary of client investment fees by instrument type for the three and six months ended June 30, 2019 and 2018 is as follows:



	Three months ended June 30,				Six months ended June 30,
(Dollars in thousands)	2019		2018		2019		2018
Client investment fees by type:
Sweep money market fees	$	26,952	$	17,178	$	53,496	$	29,500
Asset management fees (1)	6,956		5,730		13,628		11,088
Repurchase agreement fees	11,836		6,544		23,102		11,739
Total client investment fees (2)	$	45,744	$	29,452	$	90,226	$	52,327


(1)	Represents fees earned from investments in third-party money market mutual funds and fixed-income securities managed by SVB Asset Management.


(2)	Represents fees earned on client investment funds which are maintained at third-party financial institutions and are not recorded on our balance sheet.

Foreign exchange fees

Foreign exchange fees represent the income differential between purchases and sales of foreign currency on behalf of our clients, primarily from spot contracts. Foreign exchange spot contract fees are recognized upon the completion of the single performance obligation, the execution of a spot trade in exchange for a fee. In line with customary business practice, the legal right transfers to the client upon execution of a foreign exchange contract on the trade date, and as such, we currently recognize our fees based on the trade date and are typically settled within two business days.

Forward contract and option premium fees are recognized outside of the scope of ASC 606 as it explicitly excludes noninterest income earned from our derivative-related activities. A summary of foreign exchange fee income by instrument type for the three and six months ended June 30, 2019 and 2018 is as follows:



	Three months ended June 30,				Six months ended June 30,
(Dollars in thousands)	2019		2018		2019		2018
Foreign exchange fees by instrument type:
Spot contract commissions	$	34,696	$	31,548	$	69,725	$	62,750
Forward contract commissions	3,778		2,455		6,773		4,940
Option premium fees	32		74		56		214
Total foreign exchange fees	$	38,506	$	34,077	$	76,554	$	67,904

Credit card fees

Credit card fees include interchange income from credit and debit cards and fees earned from processing transactions for merchants. Interchange income is earned after satisfying our performance obligation of providing nightly settlement services to a payment network. Costs related to rewards programs are recorded when the rewards are earned by the customer and presented as a reduction to interchange fee income. Rewards programs continue to be accounted for under ASC 310 - Receivables. Our performance obligations for merchant service fees are to transmit data and funds between the merchant and the payment network. Credit card interchange and merchant service fees are earned daily upon completion of transaction settlement services.

Annual card service fees are recognized on a straight-line basis over a 12-month period and continue to be accounted for under ASC 310 - Receivables.

A summary of credit card fees by instrument type for the three and six months ended June 30, 2019 and 2018 is as follows:



	Three months ended June 30,				Six months ended June 30,
(Dollars in thousands)	2019		2018		2019		2018
Credit card fees by instrument type:
Card interchange fees, net	$	22,855	$	18,137	$	44,248	$	35,697
Merchant service fees	4,286		3,425		8,821		6,331
Card service fees	1,649		1,364		3,204		2,590
Total credit card fees	$	28,790	$	22,926	$	56,273	$	44,618

Deposit service charges

Deposit service charges include fees earned from performing cash management activities and other deposit account services. Deposit services include, but are not limited to, the following: receivables services, which include merchant services, remote capture, lockbox, electronic deposit capture, and fraud control services. Payment and cash management products and services include wire transfer and automated clearing house payment services to enable clients to transfer funds more quickly, as well as business bill pay, business credit and debit cards, account analysis, and disbursement services. Deposit service charges are recognized over the period in which the related performance obligation is provided, generally on a monthly basis, and are presented in the "Disaggregation of revenue from contracts with customers"table below.

Lending related fees

Unused commitment fees, minimum finance fees and unused line fees are recognized as earned on a monthly basis. Fees that qualify for syndication treatment are recognized at the completion of the syndicated loan deal for which the fees were received. Lending related fees are recognized outside of the scope of ASC 606 as it explicitly excludes noninterest income earned from our lending-related activities. A summary of lending related fees by instrument type for the three and six months ended June 30, 2019 and 2018 is as follows:



	Three months ended June 30,				Six months ended June 30,
(Dollars in thousands)	2019		2018		2019		2018
Lending related fees by instrument type:
Unused commitment fees	$	7,051	$	7,827	$	16,721	$	16,584
Other	4,162		1,701		8,429		3,679
Total lending related fees	$	11,213	$	9,528	$	25,150	$	20,263

Letters of credit and standby letters of credit fees

Commercial and standby letters of credit represent conditional commitments issued by us on behalf of a client to guarantee the performance of the client to a third party when certain specified future events have occurred. Fees generated from letters of credit and standby letters of credit are deferred as a component of other liabilities and recognized in noninterest income over the commitment period using the straight-line method, based on the likelihood that the commitment being drawn down will be remote. Letters of credit and standby letters of credit fees are recognized outside of the scope of ASC 606 as it explicitly excludes noninterest income earned from our lending related activities.

Investment banking revenue

The Company earns investment banking revenue from clients for providing services related to securities underwriting, private placements and advisory services on strategic matters such as mergers and acquisitions. Underwriting fees are attributable to public and private offerings of equity and debt securities and are recognized at the point in time when the offering has been deemed to be completed by the lead manager of the underwriting group. Once the offering is completed, the performance obligation has been satisfied and the Company recognizes the applicable management fee as well the underwriting fee, net of consideration payable to customers. The Company recognizes private placement fees at the point in time when the private placement is completed, which is generally when the client accepts capital from the fund raise. Advisory fees from mergers and acquisitions engagements are generally recognized at the point in time when the related transaction is completed. Expenses are deferred only to the extent they are explicitly reimbursable by the client and the related revenue is recognized at a point in time. All other deal-related expenses are expensed as incurred. The Company has determined that it acts as principal in the majority of these transactions and therefore presents expenses gross within other operating expenses.

A summary of investment banking revenue by instrument type for the three and six months ended June 30, 2019 and 2018 is as follows:



	Three months ended June 30,				Six months ended June 30,
(Dollars in thousands)	2019		2018		2019		2018
Investment banking revenue:
Underwriting fees	$	42,584	$	—	$	78,356	$	—
Advisory fees	5,315		—		17,588		—
Private placements and other	795		—		2,545		—
Total investment banking revenue	$	48,694	$	—	$	98,489	$	—

Commissions

Commissions include commissions received from customers for the execution of agency-based brokerage transactions in listed and over-the-counter equities. The execution of each trade order represents a distinct performance obligation and the transaction price is fixed at the point in time or trade order execution. Trade execution is satisfied at the point in time that the customer has control of the asset and as such, fees are recorded on a trade date basis. Commission are presented in the "Disaggregation of revenue from contracts with customers"table below.

Other

Other noninterest income primarily includes income from fund management fees and service revenue. Fund management fees are comprised of fees charged directly to our managed funds of funds and direct venture funds. Fund management fees are based upon the contractual terms of the limited partnership agreements and are generally recognized as earned over the specified contract period, which is generally equal to the life of the individual fund. Fund management fees are calculated as a percentage of committed capital and collected in advance and are received quarterly. Fund management fees for certain of our limited partnership agreements are calculated as a percentage of distributions made by the funds and revenue is recorded only at the time of a distribution event. As distribution events are not predetermined for these certain funds, management fees are considered variable and constrained under ASC 606.

Other service revenue primarily consists of dividend income on FHLB/FRB stock, correspondent bank rebate income, incentive fees related to carried interest and other fee income. We recognize revenue when our performance obligations are met and record revenues on a daily/monthly basis, quarterly, semi-annually or annual basis. For event driven revenue sources, we recognize revenue when: (i) persuasive evidence of an arrangement exists, (ii) we have performed the service, provided we have no other remaining obligations to the customer, (iii) the fee is fixed or determinable and (iv) collectability is probable.

A summary of other noninterest income by instrument type for the three and six months ended June 30, 2019 and 2018 is as follows:



	Three months ended June 30,				Six months ended June 30,
(Dollars in thousands)	2019		2018		2019		2018
Other noninterest income by instrument type:
Fund management fees	$	7,758	$	5,929	$	15,799	$	11,665
Net gains on revaluation of foreign currency instruments, net of foreign exchange forward contracts (1)	587		236		251		189
Other service revenue	8,900		8,225		13,092		14,795
Total other noninterest income	$	17,245	$	14,390	$	29,142	$	26,649


(1)	Represents the net revaluation of client and internal foreign currency denominated financial instruments. We enter into ~~client~~ foreign exchange forward contracts to economically reduce our foreign exchange exposure related to client and internal foreign currency denominated financial instruments.

Disaggregation of revenue from contracts with customers

The following tables present our revenues from contracts with customers disaggregated by revenue source and segment for the three and six months ended June 30, 2019 and 2018:



Three months ended June 30, 2019 (Dollars in thousands)	Global Commercial Bank (2)		SVB Private Bank		SVB Capital (2)		SVB Leerink (2)		Other Items		Total
Revenue from contracts with customers:
Client investment fees	$	18,325	$	466	$	—	$	—	$	26,953	$	45,744
Spot contract commissions	34,428		165		—		—		103		34,696
Card interchange fees, gross	41,887		—		—		—		190		42,077
Merchant service fees	4,286		—		—		—		—		4,286
Deposit service charges	21,750		33		—		—		292		22,075
Investment banking revenue	—		—		—		48,694		—		48,694
Commissions	—		—		—		14,429		—		14,429
Fund management fees	—		—		6,328		1,430		—		7,758
Correspondent bank rebates	1,612		—		—		—		—		1,612
Total revenue from contracts with customers	$	122,288	$	664	$	6,328	$	64,553	$	27,538	$	221,371
Revenues outside the scope of ASC 606 (1)	8,364		22		33,731		2,447		67,815		112,379
Total noninterest income	$	130,652	$	686	$	40,059	$	67,000	$	95,353	$	333,750


(1)	Amounts are accounted for under separate guidance than ASC 606.

(2)

~~Represents the~~Global Commercial Bank’s, SVB Capital’s and SVB Leerink's components of noninterest income are shown net ~~revaluation~~ of foreign currency denominated financial instruments issued and held by us, primarily loans, deposits and cash. We enter into internal foreign exchange forward contracts to economically reduce our foreign exchange exposure related to these foreign currency denominated financial instruments issued and held by us.noncontrolling interests. Noncontrolling interest is included within “Other Items."



Three months ended June 30,2018 (Dollars in thousands)	Global Commercial Bank (2)		SVB Private Bank		SVB Capital (2)		Other Items		Total
Revenue from contracts with customers:
Client investment fees	$	11,895	$	379	$	—	$	17,178	$	29,452
Spot contract commissions	31,350		144		—		54		31,548
Card interchange fees, gross	31,734		—		—		104		31,838
Merchant service fees	3,425		—		—		—		3,425
Deposit service charges	18,386		31		—		377		18,794
Fund management fees	—		—		5,929		—		5,929
Correspondent bank rebates	1,473		—		—		—		1,473
Total revenue from contracts with customers	$	98,263	$	554	$	5,929	$	17,713	$	122,459
Revenues outside the scope of ASC 606 (1)	13,411		11		23,460		33,348		70,230
Total noninterest income	$	111,674	$	565	$	29,389	$	51,061	$	192,689


(1)	Amounts are accounted for under separate guidance than ASC 606.


~~(3)~~(2)	~~Includes dividends on FHLB/FRB stock, correspondent bank rebate~~Global Commercial Bank’s and SVB Capital’s components of noninterest income ~~incentive fees related to carried~~are shown net of noncontrolling interests. Noncontrolling interest is included within “Other Items."



Six months ended June 30, 2019 (Dollars in thousands)	Global Commercial Bank (2)		SVB Private Bank			SVB Capital (2)		SVB Leerink (2)		Other Items		Total
Revenue from contracts with customers:
Client investment fees	$	35,884	$	846		$	—	$	—	$	53,496	$	90,226
Spot contract commissions	69,233		288			—		—		204		69,725
Card interchange fees, gross	80,601		—			—		—		337		80,938
Merchant service fees	8,821		—			—		—		—		8,821
Deposit service charges	42,543		68			—		—		403		43,014
Investment banking revenue	—		—			—		98,489		—		98,489
Commissions	—		—			—		28,537		—		28,537
Fund management fees	—		—			12,987		2,812		—		15,799
Correspondent bank rebates	3,079		—			—		—		—		3,079
Total revenue from contracts with customers	$	240,161	$	1,202		$	12,987	$	129,838	$	54,440	$	438,628
Revenues outside the scope of ASC 606 (1)	16,808		(6		)	51,917		5,279		101,500		175,498
Total noninterest income	$	256,969	$	1,196		$	64,904	$	135,117	$	155,940	$	614,126


(1)	Amounts are accounted for under separate guidance than ASC 606.


(2)	Global Commercial Bank’s, SVB Capital’s and ~~other fee income.~~SVB Leerink's components of noninterest income are shown net of noncontrolling interests. Noncontrolling interest is included within “Other Items."



Six months ended June 30,2018 (Dollars in thousands)	Global Commercial Bank (2)		SVB Private Bank		SVB Capital (2)		Other Items		Total
Revenue from contracts with customers:
Client investment fees	$	22,145	$	681	$	—	$	29,501	$	52,327
Spot contract commissions	62,322		323		—		105		62,750
Card interchange fees, gross	61,183		—		—		203		61,386
Merchant service fees	6,331		—		—		—		6,331
Deposit service charges	35,426		59		—		1,008		36,493
Fund management fees	—		—		11,665		—		11,665
Correspondent bank rebates	2,869		—		—		—		2,869
Total revenue from contracts with customers	$	190,276	$	1,063	$	11,665	$	30,817	$	233,821
Revenues outside the scope of ASC 606 (1)	19,284		9		47,698		47,395		114,386
Total noninterest income	$	209,560	$	1,072	$	59,363	$	78,212	$	348,207


(1)	Amounts are accounted for under separate guidance than ASC 606.


(2)	Global Commercial Bank’s and SVB Capital’s components of noninterest income are shown net of noncontrolling interests. Noncontrolling interest is included within “Other Items."

The timing of revenue recognition may differ from the timing of cash settlements or invoicing to customers. We record a receivable when revenue is recognized prior to invoicing, and unearned revenue when revenue is recognized subsequent to receipt of consideration. These assets and liabilities are reported on the consolidated balance sheets on a contract-by-contract basis at the end of each reporting period. During the three and six months ended June 30, 2019 and 2018, changes in our contract assets, contract liabilities and receivables were not material. Additionally, revenues recognized during the three and six months ended June 30, 2019 and 2018 that were included in the corresponding contract liability balance at the beginning of the periods were not material.


14.	Other Noninterest Expense

A summary of other noninterest expense for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2019 and ~~2016~~2018 is as follows:



	Three months ended June 30,				Six months ended June 30,
(Dollars in thousands)	2019		2018		2019		2018
Lending and other client related processing costs	$	8,763	$	7,403	$	13,940	$	10,603
Correspondent bank fees	3,569		3,277		7,313		6,687
Investment banking activities	3,869		—		8,054		—
Trade order execution costs	2,828		—		5,344		—
Data processing services	2,659		2,703		5,558		5,195
Telephone	2,422		2,378		5,163		4,756
Dues and publications	860		845		2,384		1,694
Postage and supplies	678		813		1,448		1,480
Other	11,769		4,670		21,749		9,778
Total other noninterest expense	$	37,417	$	22,089	$	70,953	$	40,193

Three months ended September 30, Nine months ended September 30,
(Dollars in thousands) 2017 2016 2017 2016
Lending and other client related processing costs $ 6,935
$ 5,885
$ 18,806
$ 13,721
Telephone 2,518
2,460
7,892
7,109
Data processing services 2,244
2,137
7,254
6,353
Dues and publications 883
809
2,355
2,258
Postage and supplies 612
598
2,013
2,172
Other 4,872
3,644
16,350
12,679
Total other noninterest expense $ 18,064
$ 15,533
$ 54,670
$ 44,292


~~11.~~15.	Segment Reporting

We have ~~three~~four reportable segments for management reporting purposes: Global Commercial Bank, SVB Private Bank, SVB Capital and SVB ~~Capital.~~Leerink. SVB Leerink is a new reportable segment and was created as a result of the acquisition of Leerink Holdings LLC effective January 4, 2019. The results of our operating segments are based on our internal management reporting process.

Our Global Commercial Bank and SVB Private Bank segments' primary source of revenue is from net interest income, which is primarily the difference between interest earned on loans, net of funds transfer pricing (“FTP”), and interest paid on deposits,

net of FTP. Accordingly, these segments are reported using net interest income, net of FTP. FTP is an internal measurement framework designed to assess the financial impact of a financial institution’s sources and uses of funds. It is the mechanism by which a funding credit is given for deposits raised, and a funding charge is made for ~~loans funded.~~funded loans. FTP is calculated at an instrument level based on account characteristics.

We also evaluate performance based on provision for credit losses, noninterest income and noninterest expense, which are presented as components of segment operating profit or loss. In calculating each operating segment’s noninterest expense, we consider the direct costs incurred by the operating segment as well as certain allocated direct costs. As part of this review, we allocate certain corporate overhead costs to a corporate account. We do not allocate income ~~taxes~~tax expense or the provision for

unfunded credit commitments (included in provision for credit losses) to our segments. Additionally, our management reporting model is predicated on average asset balances; therefore, period-end asset balances are not presented for segment reporting purposes. Changes in an individual client’s primary relationship designation have resulted, and in the future may result, in the inclusion of certain clients in different segments in different periods.

Unlike financial reporting, which benefits from the comprehensive structure provided by GAAP, our internal management reporting process is highly subjective, as there is no comprehensive, authoritative guidance for management reporting. Our management reporting process measures the performance of our operating segments based on our internal operating structure, which is subject to change from time to time, and is not necessarily comparable with similar information for other financial services companies.

For reporting purposes, SVB Financial Group has ~~three~~four operating segments for which we report our financial information:

~~Global Commercial Bank~~ ~~is comprised of results from the following:~~


•	Global Commercial Bank is comprised of results from the following:

◦

Our Commercial Bank products and services are provided by the Bank and its subsidiaries to commercial clients in the technology, life science/healthcare and private equity/venture capital industries. The Bank provides solutions to the financial needs of commercial clients through credit, global treasury management, foreign exchange, ~~global~~ trade finance, and other services. ~~It serves~~We broadly serve clients within the ~~United States,~~U.S., as well as non-U.S. clients in key international innovation markets. In addition, the Bank and its subsidiaries offer a variety of investment services and solutions to its clients that enable them to effectively manage their assets.


◦	Our Private Equity Division provides banking products and services primarily to our private equity and venture capital clients.


◦	~~Our~~ SVBWine ~~practice~~ provides banking products and services to our premium wine industry clients, including vineyard development loans.


◦	SVB Analytics previously provided equity valuation services and currently provides research for investors and companies in the global innovation economy. In September 2017, SVB Analytics sold its equity valuation services business.


◦	Debt Fund Investments is comprised of our investments in certain debt funds in which we are a strategic investor.

~~SVB Private Bank~~ is the private banking division of the Bank, which provides a range of personal financial solutions for consumers. Our clients are primarily private equity/venture capital professionals and executive leaders of the innovation companies they support. We offer a customized suite of private banking services, including mortgages, home equity lines of credit, restricted stock purchase loans, capital call lines of credit and other secured and unsecured lending, as well as cash and wealth management services.

~~SVB Capital~~ is the funds management business of SVBFG, which focuses primarily on venture capital investments. SVB Capital manages funds (primarily venture capital funds) on behalf of third party limited partners and, on a more limited basis, SVB Financial Group. The SVB Capital family of funds is comprised of direct venture funds that invest in companies and funds of funds that invest in other venture capital funds. SVB Capital generates income for the Company primarily from investment returns (including carried interest allocations) and management fees.

•

SVB Private Bank is the private banking division of the Bank, which provides a range of personal financial solutions for consumers. Our clients are primarily private equity/venture capital professionals and executive leaders of the innovation companies they support. We offer a customized suite of private banking services, including mortgages, home equity lines of credit, restricted stock purchase loans, capital call lines of credit and other secured and unsecured lending products, as well as cash and wealth management services.

•

SVB Capital is the funds management business of SVBFG, which focuses primarily on venture capital investments. SVB Capital manages funds (primarily venture capital funds) on behalf of third-party limited partners and, on a more limited basis, SVB Financial Group. The SVB Capital family of funds is comprised of direct venture funds that invest in companies and funds of funds that invest in other venture capital funds. SVB Capital generates income for the Company primarily from investment returns (including carried interest allocations) and management fees.

•

SVB Leerink is an investment bank specializing in the equity and convertible capital markets, mergers and acquisitions, equity research and sales and trading for growth and innovation-minded healthcare and life science companies and operates as a wholly-owned subsidiary of SVB Financial. SVB Leerink provides investment banking services across all subsectors of healthcare including: biotechnology, pharmaceuticals, medical devices, diagnostic and life science tools, healthcare services and digital health. SVB Leerink focuses on two primary lines of business: (i) investment banking focused on providing companies with capital-raising services, financial advice on mergers and acquisitions, sales and trading services and equity research, and (ii) sponsorship of private investment funds.

The summary financial results of our operating segments are presented along with a reconciliation to our consolidated interim results.

Our segment information for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2019 and ~~2016~~2018 is as follows:


(Dollars in thousands)	Global Commercial Bank (1)			SVB Private Bank			SVB Capital (1)			Other Items (2)			Total			Global Commercial Bank (1)			SVB Private Bank			SVB Capital (1)			SVB Leerink (1)			Other Items (2)			Total
Three months ended September 30, 2017
Three months ended June 30, 2019
Net interest income																$	461,752		$	12,277		$	6		$	242		$	55,126		$	529,403
Provision for credit losses																(18,295		)	(853		)	—			—			(4,798		)	(23,946		)
Noninterest income																130,652			686			40,059			67,000			95,353			333,750
Noninterest expense (3)																(206,902		)	(9,526		)	(7,883		)	(61,935		)	(97,276		)	(383,522		)
Income before income tax expense (4)																$	367,207		$	2,584		$	32,182		$	5,307		$	48,405		$	455,685
Total average loans, net of unearned income																$	25,724,704		$	3,217,597		$	—		$	—		$	464,319		$	29,406,620
Total average assets (5) (6)																60,502,170			2,432,358			373,167			410,279			(3,017,488		)	60,700,486
Total average deposits																51,126,806			1,394,905			—			—			440,497			52,962,208
Three months ended June 30, 2018
Net interest income	$	337,860		$	14,600		$	15		$	21,499		$	373,974		$	409,057		$	15,600		$	9		$	—		$	41,777		$	466,443
Provision for credit losses	(20,874		)	(1,535		)	—			(1,113		)	(23,522		)	(27,356		)	(300		)	—			—			(1,424		)	(29,080		)
Noninterest income	97,227			460			13,913			47,178			158,778			111,674			565			29,389			—			51,061			192,689
Noninterest expense (3)	(176,964		)	(4,706		)	(4,873		)	(71,218		)	(257,761		)	(196,992		)	(7,974		)	(5,666		)	—			(95,107		)	(305,739		)
Income (loss) before income tax expense (4)	$	237,249		$	8,819		$	9,055		$	(3,654	)	$	251,469		$	296,383		$	7,891		$	23,732		$	—		$	(3,693	)	$	324,313
Total average loans, net of unearned income	$	18,807,616		$	2,499,507		$	—		$	277,769		$	21,584,892		$	21,714,870		$	2,777,617		$	—		$	—		$	366,016		$	24,858,503
Total average assets (5)	47,817,114			2,538,400			323,417			(883,565		)	49,795,366			52,561,973			2,515,984			369,841			—			(1,027,152		)	54,420,646
Total average deposits	42,376,024			1,231,390			—			435,428			44,042,842			45,991,701			1,480,162			—			—			500,088			47,971,951
Three months ended September 30, 2016
Six months ended June 30, 2019
Net interest income																$	907,628		$	24,258		$	12		$	684		$	109,707		$	1,042,289
(Provision for) reduction of credit losses																(45,100		)	131			—			—			(7,528		)	(52,497		)
Noninterest income																256,969			1,196			64,904			135,117			155,940			614,126
Noninterest expense (3)																(404,147		)	(18,378		)	(13,665		)	(122,475		)	(190,521		)	(749,186		)
Income before income tax expense (4)																$	715,350		$	7,207		$	51,251		$	13,326		$	67,598		$	854,732
Total average loans, net of unearned income																$	25,264,010		$	3,152,104		$	—		$	—		$	484,046		$	28,900,160
Total average assets (5) (6)																58,214,465			2,469,804			375,934			355,609			(2,292,578		)	59,123,234
Total average deposits																49,371,589			1,442,803			—			—			532,788			51,347,180
Six months ended June 30, 2018
Net interest income	$	262,484		$	13,298		$	1		$	13,378		$	289,161		$	778,924		$	31,847		$	16		$	—		$	75,519		$	886,306
Provision for credit losses	(16,974		)	(1,976		)	—			(1,054		)	(20,004		)	(52,630		)	(2,022		)	—			—			(2,400		)	(57,052		)
Noninterest income	79,226			664			30,619			33,631			144,140			209,560			1,072			59,363			—			78,212			348,207
Noninterest expense (3)	(159,479		)	(3,122		)	(3,924		)	(54,248		)	(220,773		)	(382,251		)	(16,199		)	(10,712		)	—			(161,994		)	(571,156		)
Income (loss) before income tax expense (4)	$	165,257		$	8,864		$	26,696		$	(8,293	)	$	192,524		$	553,603		$	14,698		$	48,667		$	—		$	(10,663	)	$	606,305
Total average loans, net of unearned income	$	16,357,099		$	2,074,982		$	—		$	215,113		$	18,647,194		$	21,199,897		$	2,722,444		$	—		$	—		$	413,421		$	24,335,762
Total average assets (5)	40,828,549			2,096,237			325,321			201,222			43,451,329			51,274,033			2,553,024			371,572			—			(799,013		)	53,399,616
Total average deposits	36,484,125			1,115,446			—			310,183			37,909,754			45,022,054			1,526,038			—			—			496,078			47,044,170
Nine months ended September 30, 2017
Net interest income	$	924,789		$	42,952		$	41		$	58,881		$	1,026,663
Provision for credit losses	(65,007		)	(2,266		)	—			(2,789		)	(70,062		)
Noninterest income	260,650			1,715			45,707			96,893			404,965
Noninterest expense (3)	(525,043		)	(12,675		)	(14,537		)	(194,385		)	(746,640		)
Income (loss) before income tax expense (4)	$	595,389		$	29,726		$	31,211		$	(41,400	)	$	614,926
Total average loans, net of unearned income	$	18,125,020		$	2,371,027		$	—		$	230,420		$	20,726,467
Total average assets (5)	45,414,432			2,403,777			333,439			(586,597		)	47,565,051
Total average deposits	40,398,413			1,289,990			—			373,232			42,061,635
Nine months ended September 30, 2016
Net interest income (expense)	$	773,342		$	40,508		$	(51	)	$	40,119		$	853,918
Provision for credit losses	(86,143		)	(2,481		)	—			(1,601		)	(90,225		)
Noninterest income	231,295			2,052			44,492			65,211			343,050
Noninterest expense (3)	(462,234		)	(9,481		)	(11,521		)	(141,375		)	(624,611		)
Income (loss) before income tax expense (4)	$	456,260		$	30,598		$	32,920		$	(37,646	)	$	482,132
Total average loans, net of unearned income	$	15,769,964		$	1,978,175		$	—		$	207,358		$	17,955,497
Total average assets (5)	41,020,808			1,999,455			334,328			315,125			43,669,716
Total average deposits	37,002,027			1,120,575			—			321,388			38,443,990


(1)	Global Commercial Bank’s, SVB Capital’s and SVB ~~Capital’s~~Leerink's components of net interest income, noninterest income, noninterest expense and total average assets are shown net of noncontrolling interests for all periods presented. Noncontrolling interest is included within “Other ~~Items”.~~Items."

(2)

The “Other Items” column reflects the adjustments necessary to reconcile the results of the operating segments to the consolidated financial statements prepared in conformity with GAAP. Net interest income consists primarily of interest earned from our fixed income investment portfolio, net of FTP. Noninterest income consists primarily of gains on equity warrant assets, ~~and~~ gains or losses on the sale of fixed income ~~securities.~~investments and gains on equity securities from exercised warrant assets. Noninterest expense consists primarily of expenses associated with corporate support functions such as finance, human resources, marketing, legal and other expenses.


(3)	The Global Commercial Bank segment includes direct depreciation and amortization of $~~5.9~~4.8 million and $~~6.4~~5.5 million for the three months ended~~September~~June 30, ~~2017~~2019 and ~~2016~~2018, respectively, and $~~19.1~~9.6 million and $~~18.3~~11.0 million for the ~~nine~~six months ended~~September~~June 30, ~~2017~~2019 and ~~2016, respectively.~~2018.


(4)	The internal reporting model used by management to assess segment performance does not calculate income tax expense by segment. Our effective tax rate is a reasonable approximation of the segment rates.


(5)	Total average assets equal the greater of total average assets or the sum of total average liabilities and total average stockholders’ equity for each segment to reconcile the results to the consolidated financial statements prepared in conformity with GAAP.


(6)	Included in the total average assets for SVB Leerink is goodwill of $137.8 million for both the three and six months ended June 30, 2019 related to the acquisition effective January 4, 2019.


~~12.~~16.	Off-Balance Sheet Arrangements, Guarantees and Other Commitments

Commitments to Extend Credit

The following table summarizes information related to our commitments to extend credit at ~~September~~June 30, ~~2017~~2019 and December 31, ~~2016~~2018:


(Dollars in thousands)	September 30, 2017		December 31, 2016		June 30, 2019		December 31, 2018
Loan commitments available for funding: (1)
Fixed interest rate commitments	$	1,462,728	$	1,475,179	$	1,917,907	$	1,839,190
Variable interest rate commitments	13,037,817		13,572,161		16,484,542		14,821,815
Total loan commitments available for funding	14,500,545		15,047,340		18,402,449		16,661,005
Commercial and standby letters of credit (2)	1,841,385		1,695,856		2,549,620		2,252,016
Total unfunded credit commitments	$	16,341,930	$	16,743,196	$	20,952,069	$	18,913,021
Commitments unavailable for funding (3)	$	2,209,680	$	1,719,524	$	2,922,238	$	2,723,835
Allowance for unfunded credit commitments (4)	48,172		45,265		62,664		55,183


(1)	Represents commitments which are available for funding, due to clients meeting all collateral, compliance and financial covenants required under loan commitment agreements.


(2)	See below for additional information on our commercial and standby letters of credit.


(3)	Represents commitments which are currently unavailable for funding due to clients failing to meet all collateral, compliance and financial covenants under loan commitment agreements.


(4)	Our allowance for unfunded credit commitments includes an allowance for both our unfunded loan commitments and our letters of credit.

Commercial and Standby Letters of Credit

The table below summarizes our commercial and standby letters of credit at ~~September~~June 30, ~~2017~~2019. The maximum potential amount of future payments represents the amount that could be remitted under letters of credit if there were a total default by the guaranteed parties, without consideration of possible recoveries under recourse provisions or from the collateral held or pledged.



(Dollars in thousands)	Expires In One Year or Less		Expires After One Year		Total Amount Outstanding		Maximum Amount of Future Payments
Financial standby letters of credit	$	2,290,762	$	95,663	$	2,386,425	$	2,386,425
Performance standby letters of credit	125,310		22,804		148,114		148,114
Commercial letters of credit	14,781		300		15,081		15,081
Total	$	2,430,853	$	118,767	$	2,549,620	$	2,549,620

(Dollars in thousands)
Expires In One
Year or Less

Expires After
One Year

Total Amount
Outstanding

Maximum Amount
of Future Payments
Financial standby letters of credit $ 1,666,751
$ 54,244
$ 1,720,995
$ 1,720,995
Performance standby letters of credit 85,220
7,042
92,262
92,262
Commercial letters of credit 28,128
—
28,128
28,128
Total $ 1,780,099
$ 61,286
$ 1,841,385
$ 1,841,385

Deferred fees related to financial and performance standby letters of credit were ~~$10~~$16.2 million at ~~both September~~June 30, ~~2017~~2019 and $14.1 million at December 31, ~~2016.~~2018. At ~~September~~June 30, ~~2017~~,2019, collateral in the form of cash of ~~$926 million~~$1.4 billion was available to us to reimburse losses, if any, under financial and performance standby letters of credit.

Commitments to Invest in Venture Capital and Private Equity Funds

Subject to applicable regulatory requirements, including the Volcker Rule, we make commitments to invest in venture capital and private equity funds, which generally ~~makes~~make investments in privately-held companies. Commitments to invest in these funds are generally made for a 10-year period from the inception of the fund. Although the limited partnership agreements governing these investments typically do not restrict the general partners from calling 100% of committed capital in one year, it is customary for these funds to call most of the capital commitments over 5 to 7 years, and in certain cases, the funds may not call 100% of committed capital. The actual timing of future cash requirements to fund these commitments is generally dependent upon the investment cycle, overall market conditions, and the nature and type of industry in which the privately held companies operate. The following table details our total capital commitments, unfunded capital commitments, and our ownership percentage in each fund at ~~September~~June 30, ~~2017~~2019:


(Dollars in thousands)	SVBFG Capital Commitments		SVBFG Unfunded Commitments		SVBFG Ownership of each Fund (3)		SVBFG Capital Commitments		SVBFG Unfunded Commitments		SVBFG Ownership of each Fund (3)
CP I, LP	$	6,000	$	270	10.7	%	$	6,000	$	270	10.7	%
CP II, LP (1)	1,200		162		5.1		1,200		162		5.1
Shanghai Yangpu Venture Capital Fund (LP)	872		—		6.8
Capital Preferred Return Fund, LP							12,688		—		20.0
Growth Partners, LP							24,670		1,340		33.0
Strategic Investors Fund, LP	15,300		688		12.6		15,300		688		12.6
Strategic Investors Fund II, LP	15,000		1,050		8.6		15,000		1,050		8.6
Strategic Investors Fund III, LP	15,000		1,275		5.9		15,000		1,275		5.9
Strategic Investors Fund IV, LP	12,239		2,325		5.0		12,239		2,325		5.0
Strategic Investors Fund V funds	515		131		Various		515		131		Various
Capital Preferred Return Fund, LP	12,688		—		20.0
Growth Partners, LP	24,670		1,340		33.0
Other venture capital and private equity fund investments (equity method accounting)							21,813		5,914		Various
Debt funds (equity method accounting)	58,493		—		Various		58,493		—		Various
Other fund investments (2)	302,867		11,360		Various		295,648		7,709		Various
Total	$	464,844	$	18,601			$	478,566	$	20,864


(1)	Our ownership includes direct ownership of 1.3 percent and indirect ownership interest of 3.8 percent through our investment in Strategic Investors Fund II, LP.


(2)	Represents commitments to ~~243~~215 funds (primarily venture capital funds) where our ownership interest is generally less than five percent of the voting interests of each such fund.


(3)	We are subject to the Volcker Rule, which restricts or limits us from sponsoring or having ownership interests in “covered” funds including venture capital and private equity funds. See “Business - Supervision and Regulation” under Part 1, Item 1 of ~~Part I of~~ our ~~2016~~2018 Form 10-K.

The following table details the amounts of remaining unfunded commitments to venture capital and private equity funds by our consolidated managed funds of funds (including our interest and the noncontrolling interests) at ~~September~~June 30, ~~2017~~2019:



(Dollars in thousands)	Unfunded Commitments
Strategic Investors Fund, LP	$	1,338
Capital Preferred Return Fund, LP	1,572
Growth Partners, LP	2,527
Total	$	5,437

(Dollars in thousands) Unfunded Commitments
Strategic Investors Fund, LP $ 1,338
Capital Preferred Return Fund, LP 2,197
Growth Partners, LP 2,936
Total $ 6,471


~~13.~~17.	Income Taxes

We are subject to income tax in the U.S. federal jurisdiction and various state and foreign jurisdictions and have identified our federal tax ~~return~~ and California tax returns as major tax filings. Our U.S. federal tax returns for ~~2014~~2015 and subsequent tax years remain open to full examination. Our California tax returns for ~~2013~~2015 and subsequent tax years remain open to full examination.

At ~~September~~June 30, ~~2017,~~2019, our unrecognized tax benefit was ~~$6.3~~$13.3 million, the recognition of which would reduce our income tax expense by ~~$3.8~~$10.4 million. We do not expect that our unrecognized tax benefit will materially change in the next 12 months.

We recognize interest and penalties related to income tax matters as part of income before income taxes. Interest and penalties were not material for the three ~~and nine~~ months ended ~~September~~June 30, ~~2017.~~2019.


~~14.~~18.	Fair Value of Financial Instruments

Fair Value Measurements

Our available-for-sale securities, derivative instruments and certain non-marketable and other equity securities are financial instruments recorded at fair value on a recurring basis. We make estimates regarding valuation of assets and liabilities measured at fair value in preparing our interim consolidated financial statements.

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (the “exit price”) in an orderly transaction between market participants at the measurement date. There is a three-level hierarchy for disclosure of assets and liabilities recorded at fair value. The classification of assets and liabilities within the hierarchy is based on whether the inputs to the valuation methodology used for measurement are observable or unobservable and on the significance of those inputs in the fair value measurement. Observable inputs reflect market-derived or market-based information obtained from independent sources, while unobservable inputs reflect our estimates about market data and views of market participants. The three levels for measuring fair value are based on the reliability of inputs and are as follows:

Level 1

Fair value measurements based on quoted prices in active markets for identical assets or liabilities that we have the ability to access. Since valuations are based on quoted prices that are readily and regularly available in an active market, valuation of these instruments does not entail a significant degree of judgment. Assets utilizing Level 1 inputs include U.S. Treasury securities, foreign government debt securities, exchange-traded equity securities and certain marketable securities accounted for under fair value accounting.

Level 2

Fair value measurements based on quoted prices in markets that are not active or for which all significant inputs are observable, directly or indirectly. Valuations for the available-for-sale securities are provided by independent pricing service providers who have experience in valuing these securities and by comparison to and/or average of quoted market prices obtained from independent brokers. We perform a monthly analysis on the values received from third parties to ensure that the prices represent a reasonable estimate of the fair value. The procedures include, but are not limited to, initial and ongoing review of ~~third party~~third-party pricing methodologies, review of pricing trends and monitoring of trading volumes. Additional corroboration, such as obtaining a non-binding price from a broker, may be obtained depending on the frequency of trades of the security and the level of liquidity or depth of the market. We ensure prices received from independent brokers represent a reasonable estimate of the fair value through the use of observable market inputs including comparable trades, yield curve, spreads and, when available, market indices. As a result of this analysis, if the Company determines that there is a more appropriate fair value based upon the available market data, the price received from the third party is adjusted accordingly. Below is a summary of the significant inputs used for each class of Level 2 assets and liabilities:

U.S. agency debentures: Fair value measurements of U.S. agency debentures are based on the characteristics specific to bonds held, such as issuer name, coupon rate, maturity date and any applicable issuer call option features. Valuations are based on market spreads relative to similar term benchmark market interest rates, generally U.S. Treasury securities.

Agency-issued mortgage-backed securities: Agency-issued mortgage-backed securities are pools of individual conventional mortgage loans underwritten to U.S. agency standards with similar coupon rates, tenor, and other attributes such as geographic location, loan size and origination vintage. Fair value measurements of these securities are based on observable price adjustments relative to benchmark market interest rates taking into consideration estimated loan prepayment speeds.

Agency-issued collateralized mortgage obligations: Agency-issued collateralized mortgage obligations are structured into classes or tranches with defined cash flow characteristics and are collateralized by U.S. agency-issued mortgage pass-through securities. Fair value measurements of these securities incorporate similar characteristics of mortgage pass-through securities such as coupon rate, tenor, geographic location, loan size and origination vintage, in addition to incorporating the effect of estimated prepayment speeds on the cash flow structure of the class or tranche. These measurements incorporate observable market spreads over an estimated average life after considering the inputs listed above.

Agency-issued commercial mortgage-backed securities: Fair value measurements of these securities are based on spreads to benchmark market interest rates (usually U.S. Treasury rates or rates observable in the swaps market), prepayment speeds, loan default rate assumptions and loan loss severity assumptions on underlying loans.

Municipal bonds and notes: Bonds issued by municipal governments generally have stated coupon rates, final maturity dates and are subject to being called ahead of the final maturity date at the option of the issuer. Fair value measurements

of these securities are priced based on spreads to other municipal benchmark bonds with similar characteristics; or, relative to market rates on U.S. Treasury bonds of similar maturity.

Other equity securities: Fair value measurements of equity securities of public companies are priced based on quoted market prices less a discount if the securities are subject to certain sales restrictions. Certain sales restriction discounts generally range from 10 percent to 20 percent depending on the duration of the sale restrictions which typically range from three to six months.

Foreign exchange forward and option contract assets and liabilities: Fair value measurements of these assets and liabilities are priced based on spot and forward foreign currency rates and option volatility assumptions.

Interest rate derivative and interest rate swap assets and liabilities: Fair value measurements of interest rate derivatives are priced considering the coupon rate of the fixed leg of the contract and the variable coupon on the floating leg of the contract. Valuation is based on both spot and forward rates on the swap yield curve and the credit worthiness of the contract counterparty.

~~Foreign exchange forward and option contract assets and liabilities:~~ ~~Fair value measurements of these assets and liabilities are priced based on spot and forward foreign currency rates and option volatility assumptions.~~

~~Equity warrant assets (public portfolio):~~ Fair value measurements of equity warrant assets of publicly-traded portfolio companies are valued based on the Black-Scholes option pricing model. The model uses the price of publicly-traded companies (underlying stock price), stated strike prices, warrant expiration dates, the risk-free interest rate and market-observable option volatility assumptions.

Level 3

The fair value measurement is derived from valuation techniques that use significant assumptions not observable in the market. These unobservable assumptions reflect our own estimates of assumptions we believe market participants would use in pricing the asset. Below is a summary of the valuation techniques used for each class of Level 3 assets:

~~Other venture~~Venture capital ~~investments:~~and private equity fund investments not measured at net asset value: Fair value measurements are based on consideration of a range of factors including, but not limited to, the price at which the investment was acquired, the term and nature of the investment, local market conditions, values for comparable securities, and as it relates to the private company, the current and projected operating performance, exit strategies and financing transactions subsequent to the acquisition of the investment. The significant unobservable inputs used in the fair value measurement include the information about each portfolio company, including actual and forecasted results, cash position, recent or planned transactions and market comparable companies. Significant changes to any one of these inputs in isolation could result in a significant change in the fair value ~~measurement,~~measurement; however, we generally consider all factors available through ongoing communication with the portfolio companies and venture capital fund managers to determine whether there are changes to the portfolio company or the environment that indicate a change in the fair value measurement.

~~Other securities:~~ Fair value measurements of equity securities of public companies are priced based on quoted market prices less a discount if the securities are subject to certain sales restrictions. Marketability discounts generally range from 10 percent to 20 percent depending on the duration of the sale restrictions which typically range from three to six months.

Equity warrant assets (public portfolio): Fair value measurements of equity warrant assets of publicly-traded portfolio companies are valued based on the Black-Scholes option pricing model. The model uses the price of publicly-traded companies (underlying stock price), stated strike prices, warrant expiration dates, the risk-free interest rate and market-observable option volatility assumptions. Modeled asset values are further adjusted by applying a discount of up to 20 percent for certain warrants that have lock-up restrictions or other features that indicate a discount to fair value is warranted. As a lock-up term nears, and other sale restrictions are lifted, discounts are adjusted downward to zero percent once all restrictions expire or are removed.

Equity warrant assets (private portfolio): Fair value measurements of equity warrant assets of private portfolio companies are priced based on a Black-Scholes option pricing model to estimate the asset value by using stated strike prices, option expiration dates, risk-free interest rates and option volatility assumptions. Option volatility assumptions used in the model are based on public market indices whose members operate in similar industries as companies in our private company portfolio. Option expiration dates are modified to account for estimates to actual life relative to stated expiration. Overall model asset values are further adjusted for a general lack of liquidity due to the private nature of the associated underlying company. There is a direct correlation between changes in the volatility and remaining life assumptions in isolation and the fair value measurement while there is an inverse correlation between changes in the liquidity discount assumption and the fair value measurement.

It is our policy to maximize the use of observable inputs and minimize the use of unobservable inputs when developing fair value measurements. When available, we use quoted market prices to measure fair value. If market prices are not available, fair value measurement is based upon valuation techniques that use primarily market-based or independently-sourced market parameters, including interest rate yield curves, prepayment speeds, option volatilities and currency rates. Substantially all of our financial instruments use the foregoing methodologies and are categorized as a Level 1 or Level 2 measurement in the fair value hierarchy. However, in certain cases, when market observable inputs for our valuation techniques may not be readily available, we are required to make judgments about assumptions we believe market participants would use in estimating the fair value of the financial instrument, and based on the significance of those judgments, the measurement may be determined to be a Level 3 fair value measurement.

The degree of management judgment involved in determining the fair value of a financial instrument is dependent upon the availability of quoted market prices or observable market parameters. For financial instruments that trade actively and have quoted market prices or observable market parameters, there is minimal subjectivity involved in measuring fair value. When observable market prices and parameters are not fully available, management judgment is necessary to estimate fair value. For inactive markets, there is little information, if any, to evaluate if individual transactions are orderly. Accordingly, we are required to estimate, based upon all available facts and circumstances, the degree to which orderly transactions are occurring and provide more weighting to price quotes that are based upon orderly transactions. In addition, changes in the market conditions may reduce the availability of quoted prices or observable data. For example, reduced liquidity in the capital markets or changes in secondary market activities could result in observable market inputs becoming unavailable. Therefore, when market data is not available, we use valuation techniques requiring more management judgment to estimate the appropriate fair value measurement. Accordingly, the degree of judgment exercised by management in determining fair value is greater for financial assets and liabilities categorized as Level 3.

The following fair value hierarchy table presents information about our assets and liabilities that are measured at fair value on a recurring basis as of ~~September~~June 30, ~~2017~~2019:


(Dollars in thousands)	Level 1		Level 2		Level 3		Balance at September 30, 2017		Level 1		Level 2		Level 3		Balance at June 30, 2019
Assets:
Available-for-sale securities:
U.S. Treasury securities	$	7,498,340	$	—	$	—	$	7,498,340	$	4,821,074	$	—	$	—	$	4,821,074
U.S. agency debentures	—		1,676,169		—		1,676,169
Foreign government debt securities									9,211		—		—		9,211
Residential mortgage-backed securities:
Agency-issued mortgage-backed securities									—		1,321,857		—		1,321,857
Agency-issued collateralized mortgage obligations—fixed rate	—		3,012,695		—		3,012,695		—		1,788,180		—		1,788,180
Agency-issued collateralized mortgage obligations—variable rate	—		395,880		—		395,880
Equity securities	802		19,451		—		20,253
Total available-for-sale securities	7,499,142		5,104,195		—		12,603,337		4,830,285		3,110,037		—		7,940,322
Non-marketable and other securities (fair value accounting):
Non-marketable and other equity securities (fair value accounting):
Non-marketable securities:
Venture capital and private equity fund investments measured at net asset value	—		—		—		128,768		—		—		—		302,852
Other venture capital investments (1)	—		—		1,897		1,897
Other securities (1)	392		—		—		392
Total non-marketable and other securities (fair value accounting)	392		—		1,897		131,057
Venture capital and private equity fund investments not measured at net asset value (1)									—		—		441		441
Other equity securities in public companies									5,068		34,740		—		39,808
Total non-marketable and other equity securities (fair value accounting)									5,068		34,740		441		343,101
Other assets:
Foreign exchange forward and option contracts	—		94,947		—		94,947		—		94,462		—		94,462
Equity warrant assets	—		2,710		139,075		141,785		—		10,278		147,770		158,048
Interest rate swaps									—		19,558		—		19,558
Client interest rate derivatives	—		11,824		—		11,824		—		19,440		—		19,440
Total assets	$	7,499,534	$	5,213,676	$	140,972	$	12,982,950	$	4,835,353	$	3,288,515	$	148,211	$	8,574,931
Liabilities:
Foreign exchange forward and option contracts	$	—	$	88,961	$	—	$	88,961	$	—	$	86,457	$	—	$	86,457
Interest rate swaps									—		391		—		391
Client interest rate derivatives	—		11,955		—		11,955		—		25,803		—		25,803
Total liabilities	$	—	$	100,916	$	—	$	100,916	$	—	$	112,651	$	—	$	112,651


(1)	Included in Level ~~1 and Level~~ 3 assets ~~are~~ is $~~0.3 million~~ ~~and~~ ~~$1.7 million, respectively,~~394 thousand attributable to noncontrolling interests calculated based on the ownership percentages of the noncontrolling interests.

The following fair value hierarchy table presents information about our assets and liabilities that are measured at fair value on a recurring basis as of December 31, ~~2016~~2018:


(Dollars in thousands)	Level 1		Level 2		Level 3		Balance at December 31, 2016		Level 1		Level 2		Level 3		Balance at December 31, 2018
Assets:
Available-for-sale securities:
U.S. Treasury securities	$	8,909,491	$	—	$	—	$	8,909,491	$	4,738,258	$	—	$	—	$	4,738,258
U.S. agency debentures	—		2,078,375		—		2,078,375		—		1,084,117		—		1,084,117
Foreign government debt securities									5,812		—		—		5,812
Residential mortgage-backed securities:
Agency-issued collateralized mortgage obligations—fixed rate	—		1,152,665		—		1,152,665		—		1,880,218		—		1,880,218
Agency-issued collateralized mortgage obligations—variable rate	—		474,283		—		474,283		—		81,638		—		81,638
Equity securities	175		5,422		—		5,597
Total available-for-sale securities	8,909,666		3,710,745		—		12,620,411		4,744,070		3,045,973		—		7,790,043
Non-marketable and other securities (fair value accounting):
Non-marketable and other equity securities (fair value accounting):
Non-marketable securities:
Venture capital and private equity fund investments measured at net asset value	—		—		—		141,649		—		—		—		318,352
Other venture capital investments (1)	—		—		2,040		2,040
Other securities (1)	753		—		—		753
Total non-marketable and other securities (fair value accounting)	753		—		2,040		144,442
Venture capital and private equity fund investments not measured at net asset value (1)									—		—		1,079		1,079
Other equity securities in public companies									1,181		19,217		—		20,398
Total non-marketable and other equity securities (fair value accounting)									1,181		19,217		1,079		339,829
Other assets:
Interest rate swaps	—		810		—		810
Foreign exchange forward and option contracts	—		68,027		—		68,027		—		100,402		—		100,402
Equity warrant assets	—		2,310		128,813		131,123		—		4,039		145,199		149,238
Client interest rate derivatives	—		10,110		—		10,110		—		8,499		—		8,499
Total assets	$	8,910,419	$	3,792,002	$	130,853	$	12,974,923	$	4,745,251	$	3,178,130	$	146,278	$	8,388,011
Liabilities:
Foreign exchange forward and option contracts	$	—	$	54,668	$	—	$	54,668	$	—	$	88,559	$	—	$	88,559
Client interest rate derivatives	—		9,770		—		9,770		—		9,491		—		9,491
Total liabilities	$	—	$	64,438	$	—	$	64,438	$	—	$	98,050	$	—	$	98,050


(1)	Included in Level ~~1 and Level~~ 3 assets ~~are~~ is $~~0.6 million~~ ~~and~~ ~~$1.8 million, respectively,~~964 thousand attributable to noncontrolling interests calculated based on the ownership percentages of the noncontrolling interests.

The following table presents additional information about Level 3 assets measured at fair value on a recurring basis for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2019 and ~~2016~~2018:


(Dollars in thousands)	Beginning Balance		Total Realized and Unrealized Gains (Losses) Included in Income			Sales			Issuances		Distributions and Other Settlements		Transfers Out of Level 3			Ending Balance		Beginning Balance		Total Realized and Unrealized Gains (Losses) Included in Income			Purchases		Sales/Exits			Issuances		Distributions and Other Settlements		Transfers Out of Level 3			Ending Balance
Three months ended September 30, 2017
Non-marketable and other securities (fair value accounting):
Other venture capital investments (1)	$	1,897	$	—		$	—		$	—	$	—	$	—		$	1,897
Three months ended June 30, 2019
Non-marketable and other equity securities (fair value accounting):
Venture capital and private equity fund investments not measured at net asset value (1)																		$	1,035	$	2		$	—	$	(596	)	$	—	$	—	$	—		$	441
Other assets:
Equity warrant assets (2)	128,952		24,354			(17,412		)	3,622		—		(441		)	139,075		156,749		46,645			—		(55,568		)	3,041		—		(3,097		)	147,770
Total assets	$	130,849	$	24,354		$	(17,412	)	$	3,622	$	—	$	(441	)	$	140,972	$	157,784	$	46,647		$	—	$	(56,164	)	$	3,041	$	—	$	(3,097	)	$	148,211
Three months ended September 30, 2016
Non-marketable and other securities (fair value accounting):
Other venture capital investments (1)	$	2,040	$	4		$	(4	)	$	—	$	—	$	—		$	2,040
Three months ended June 30, 2018
Non-marketable and other equity securities (fair value accounting):
Venture capital and private equity fund investments not measured at net asset value (1)																		$	1,001	$	—		$	—	$	—		$	—	$	—	$	—		$	1,001
Other assets:
Equity warrant assets (2)	127,811		21,092			(10,682		)	5,251		—		(252		)	143,220		131,506		18,249			—		(15,235		)	4,299		—		(1,066		)	137,753
Total assets	$	129,851	$	21,096		$	(10,686	)	$	5,251	$	—	$	(252	)	$	145,260	$	132,507	$	18,249		$	—	$	(15,235	)	$	4,299	$	—	$	(1,066	)	$	138,754
Nine months ended September 30, 2017
Non-marketable and other securities (fair value accounting):
Other venture capital investments (1)	$	2,040	$	(143	)	$	—		$	—	$	—	$	—		$	1,897
Six months ended June 30, 2019
Non-marketable and other equity securities (fair value accounting):
Venture capital and private equity fund investments not measured at net asset value (1)																		$	1,079	$	(45	)	$	—	$	(596	)	$	—	$	3	$	—		$	441
Other assets:
Equity warrant assets (2)	128,813		41,549			(40,998		)	11,071		—		(1,360		)	139,075		145,199		65,811			575		(67,873		)	7,584		—		(3,526		)	147,770
Total assets	$	130,853	$	41,406		$	(40,998	)	$	11,071	$	—	$	(1,360	)	$	140,972	$	146,278	$	65,766		$	575	$	(68,469	)	$	7,584	$	3	$	(3,526	)	$	148,211
Nine months ended September 30, 2016
Non-marketable and other securities (fair value accounting):
Other venture capital investments (1)	$	2,040	$	(21	)	$	(4	)	$	—	$	25	$	—		$	2,040
Six months ended June 30, 2018
Non-marketable and other equity securities (fair value accounting):
Venture capital and private equity fund investments not measured at net asset value (1)																		$	919	$	82		$	—	$	—		$	—	$	—	$	—		$	1,001
Other assets:
Equity warrant assets (2)	135,168		33,115			(34,276		)	9,842		—		(629		)	143,220		121,331		36,860			—		(27,363		)	9,198		—		(2,273		)	137,753
Total assets	$	137,208	$	33,094		$	(34,280	)	$	9,842	$	25	$	(629	)	$	145,260	$	122,250	$	36,942		$	—	$	(27,363	)	$	9,198	$	—	$	(2,273	)	$	138,754


(1)	Realized and unrealized gains (losses) are recorded in the line item “Gains on investment securities, ~~net”,~~net," a component of noninterest income.


(2)	Realized and unrealized gains (losses) are recorded in the line item “Gains on equity warrant assets, ~~net”,~~net," a component of noninterest income.

The following table presents the amount of net unrealized gains and losses included in earnings (which is inclusive of noncontrolling interest) attributable to Level 3 assets still held at ~~September~~June 30, ~~2017~~2019 and ~~2016~~2018:



	Three months ended June 30,					Six months ended June 30,
(Dollars in thousands)	2019			2018		2019			2018
Non-marketable and other equity securities (fair value accounting):
Venture capital and private equity fund investments not measured at net asset value (1)	$	2		$	—	$	(45	)	$	82
Other assets:
Equity warrant assets (2)	4,416			10,236		19,188			18,147
Total unrealized gains, net	$	4,418		$	10,236	$	19,143		$	18,229
Unrealized (losses) gains attributable to noncontrolling interests (1)	$	(1	)	$	—	$	(40	)	$	73

Three months ended September 30, Nine months ended September 30,
(Dollars in thousands) 2017 2016 2017 2016
Non-marketable and other securities (fair value accounting):
Other venture capital investments (1) $ —
$ —
$ (143 ) $ —
Other assets:
Equity warrant assets (2) 17,827
15,785
23,734
23,144
Total unrealized gains, net $ 17,827
$ 15,785
$ 23,591
$ 23,144
Unrealized losses attributable to noncontrolling interests $ —
$ —
$ (127 ) $ —


(1)	Unrealized gains (losses) are recorded in the line item “Gains on investment securities, net”," a component of noninterest income.


(2)	Unrealized gains (losses) are recorded in the line item “Gains on equity warrant assets, net”," a component of noninterest income.

The extent to which any unrealized gains or losses will become realized is subject to a variety of factors, including, among other things, the expiration of current sales restrictions to which these securities are subject, the actual sales of securities and the timing of such actual sales.

The following table presents quantitative information about the significant unobservable inputs used for certain of our Level 3 fair value measurements at ~~September~~June 30, ~~2017~~2019 and December 31, ~~2016.~~2018. We have not included in this table our venture capital and private equity fund investments (fair value accounting) as we use net asset value per share (as obtained from the general partners of the investments) as a practical expedient to determine fair value.


(Dollars in thousands)	Fair value		Valuation Technique		Significant Unobservable Inputs		Weighted Average			Fair value		Valuation Technique		Significant Unobservable Inputs		Weighted Average
September 30, 2017:
Other venture capital investments (fair value accounting)	$	1,897	Private company equity pricing		(1)		(1	)
June 30, 2019:
Venture capital and private equity fund investments (fair value accounting)										$	441	Private company equity pricing		(1)		(1	)
Equity warrant assets (public portfolio)	21,660		Black-Scholes option pricing model		Volatility		37.5	%		3,775		Black-Scholes option pricing model		Volatility		42.3	%
				Risk-Free interest rate		1.8							Risk-Free interest rate		1.9
				Sales restrictions discount (2)		19.9							Sales restrictions discount (2)		16.2
Equity warrant assets (private portfolio)	117,415			Black-Scholes option pricing model		Volatility		36.7			143,995		Black-Scholes option pricing model		Volatility		38.9
					Risk-Free interest rate		1.5							Risk-Free interest rate		1.7
					Marketability discount (3)		16.6							Marketability discount (3)		18.6
					Remaining life assumption (4)		45.0							Remaining life assumption (4)		45.0
December 31, 2016:
Other venture capital investments (fair value accounting)	$	2,040		Private company equity pricing		(1)		(1	)
December 31, 2018:
Venture capital and private equity fund investments (fair value accounting)										$	1,079	Private company equity pricing		(1)		(1	)
Equity warrant assets (public portfolio)	764		Black-Scholes option pricing model		Volatility		46.6	%		2,757		Black-Scholes option pricing model		Volatility		54.7	%
				Risk-Free interest rate		2.1							Risk-Free interest rate		2.6
				Sales restrictions discount (2)		17.7							Sales restrictions discount (2)		18.5
Equity warrant assets (private portfolio)	128,049			Black-Scholes option pricing model		Volatility		36.9			142,442		Black-Scholes option pricing model		Volatility		38.5
					Risk-Free interest rate		1.3							Risk-Free interest rate		2.5
					Marketability discount (3)		17.1							Marketability discount (3)		17.7
					Remaining life assumption (4)		45.0							Remaining life assumption (4)		45.0

(1)

In determining the fair value of our ~~other~~ venture capital and private equity fund investment portfolio (not measured at net asset value), we evaluate a variety of factors related to each underlying private portfolio company including, but not limited to, actual and forecasted results, cash position, recent or planned transactions and market comparable companies. Additionally, we have ongoing communication with the portfolio companies and venture capital fund managers, to determine whether there is a material change in fair value. We use company provided valuation reports, if available, to support our valuation ~~assumptions. These factors are specific to each portfolio company and a weighted average or range of values of the unobservable inputs is not meaningful.~~

assumptions. These factors are specific to each portfolio company and a weighted average or range of values of the unobservable inputs is not meaningful.


(2)	We adjust quoted market prices of public companies, which are subject to certain sales restrictions. Sales restriction discounts generally range from 10 percent to 20 percent depending on the duration of the sales restrictions, which typically range from three to six ~~months.~~ months.


(3)	Our marketability discount is applied to all private company warrants to account for a general lack of liquidity due to the private nature of the associated underlying company. The quantitative measure used is based upon various option-pricing models. On a quarterly basis, a sensitivity analysis is performed on our marketability discount.

(4)

We adjust the contractual remaining term of private company warrants based on our estimate of the actual remaining life, which we determine by utilizing historical data on ~~cancellations~~terminations and exercises. At ~~September~~June 30, ~~2017~~2019, the weighted average contractual remaining term was ~~5.9~~6.1 years, compared to our estimated remaining life of ~~2.7~~2.8 years. On a quarterly basis, a sensitivity analysis is performed on our remaining life assumption.

For the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2019 and ~~2016,~~2018, we did not have any transfers between Level 2 and Level 1 or transfers between Level 3 and Level 1. All transfers from Level 3 to Level 2 for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2019 and ~~2016~~2018 were due to the transfer of equity warrant assets from our private portfolio to our public portfolio (see our Level 3 reconciliation above). All amounts reported as transfers represent the fair value as of the date of the change in circumstances that caused the transfer.

Financial Instruments not Carried at Fair Value

FASB guidance over financial instruments requires that we disclose estimated fair values for our financial instruments not carried at fair value. ~~Fair value estimates, methods and assumptions, set forth below for our financial instruments, are made solely to comply with these requirements.~~

Fair values are based on estimates or calculations at the transaction level using present value techniques in instances where quoted market prices are not available. As broadly traded markets do not exist for many of our financial instruments, the fair value calculations attempt to incorporate the effect of current market conditions at a specific time. The aggregation of the fair value calculations presented herein does not represent, and should not be construed to represent, the underlying value of the Company.

The following describes the methods and assumptions used in estimating the fair values of financial instruments for which carrying value approximates fair value and estimated fair values of financial instruments not recorded at fair value on a recurring basis and excludes financial instruments and assets and liabilities already recorded at fair value as described above.

~~Financial Instruments for which Carrying Value Approximates Fair Value~~

Certain financial instruments that are not carried at fair value on the Consolidated Balance Sheets are carried at amounts that approximate fair value, due to their short-term nature and generally negligible credit risk. These instruments include cash and cash equivalents; FHLB and FRB stock; accrued interest receivable; short-term borrowings; short-term time deposits; and accrued interest payable. In addition, U.S. GAAP requires that the fair value of deposit liabilities with no stated maturity (i.e., demand, savings and certain money market deposits) be equal to their carrying value; recognition of the inherent funding value of these instruments is not permitted.

~~Estimated Fair Values of Financial Instruments Not Recorded at Fair Value on a Recurring Basis~~

~~Held-to-Maturity Securities~~

Held-to-maturity securities include similar investments held in our available-for-sale securities portfolio and are valued using the same methodologies. All securities included in our held-to-maturity securities portfolio are valued using Level 2 inputs. Refer to Level 2 fair value measurements above for significant inputs used in the valuation of our held-to-maturity investment securities.

~~Non-Marketable Securities (Cost and Equity Method Accounting)~~

Non-marketable securities includes other investments (equity method accounting), venture capital and private equity fund investments (cost method accounting), and other venture capital investments (cost method accounting). Other investments (equity method accounting) includes our investment in SPD-SVB, our joint venture bank in China. At this time, the carrying value of our investment in SPD-SVB is a reasonable estimate of fair value. The fair value of the remaining other investments (equity method accounting) and the fair value of venture capital and private equity fund investments (cost method accounting) and other venture capital investments (cost method accounting) is based on financial information obtained from the fund investments' or debt fund investments' respective general partners. For private company investments, estimated fair value is based on consideration of a range of factors including, but not limited to, the price at which the investment was acquired, the term and nature of the investment, local market conditions, values for comparable securities, current and projected operating performance, exit strategies, and financing transactions subsequent to the acquisition of the investment. For our fund investments, we utilize the net asset value per share as obtained from the general partners of the investments. We adjust the net asset value per share for differences between our measurement date and the date of the fund investment’s net asset value by using the most recently available financial information from the investee general partner, for example June 30^th~~, for our September 30~~^th ~~consolidated~~

~~financial statements, adjusted for any contributions paid, distributions received from the investment, and significant fund transactions or market events during the reporting period.~~

~~Loans~~

The fair value of fixed and variable rate loans is estimated by discounting contractual cash flows using rates that reflect current pricing for similar loans and the projected forward yield curve. This method is not based on the exit price concept of fair value required under ASC 820, ~~Fair Value Measurements and Disclosures~~.

~~Long-Term Deposits~~

~~The fair value of long-term time deposits is estimated by discounting the cash flows using our cost of borrowings and the projected forward yield curve over their remaining contractual term.~~

~~Long-Term Debt~~

The fair value of long-term debt is generally based on quoted market prices, when available, or is estimated based on calculations utilizing third-party pricing services and current market spread, price indications from reputable dealers or observable market prices of the underlying instrument(s), whichever is deemed more reliable. Also included in the estimated fair value of our 6.05% Subordinated Notes are amounts related to hedge accounting associated with the notes.

~~Off-Balance Sheet Financial Instruments~~

The fair value of net available commitments to extend credit is estimated based on the average amount we would receive or pay to execute a new agreement with identical terms and pricing, while taking into account the counterparties’ credit standing.

~~Letters of credit are carried at their fair value, which was equivalent to the residual premium or fee at~~ ~~September 30, 2017~~ ~~and~~ ~~December 31, 2016. Commitments to extend credit and letters of credit typically result in loans with a market interest rate if funded.~~

The following fair value hierarchy table presents the estimated fair values of our financial instruments that are not carried at fair value at ~~September~~June 30, ~~2017~~2019 and December 31, ~~2016~~2018:


			Estimated Fair Value										Estimated Fair Value
(Dollars in thousands)	Carrying Amount		Total		Level 1		Level 2		Level 3		Carrying Amount		Total		Level 1		Level 2		Level 3
September 30, 2017:
June 30, 2019:
Financial assets:
Cash and cash equivalents	$	3,555,571	$	3,555,571	$	3,555,571	$	—	$	—	$	9,020,925	$	9,020,925	$	9,020,925	$	—	$	—
Held-to-maturity securities	11,055,006		11,023,415		—		11,023,415		—		14,868,761		15,064,962		—		15,064,962		—
Non-marketable securities (cost and equity method accounting) not measured at net asset value	122,493		127,338		—		—		127,338
Non-marketable securities (cost and equity method accounting) measured at net asset value	225,883		329,468		—		—		—
Non-marketable securities not measured at net asset value											151,431		151,431		—		—		151,431
Non-marketable securities measured at net asset value											191,172		191,172		—		—		—
Net commercial loans	19,449,408		19,878,367		—		—		19,878,367		25,654,063		26,263,514		—		—		26,263,514
Net consumer loans	2,490,909		2,457,138		—		—		2,457,138		3,253,622		3,330,518		—		—		3,330,518
FHLB and Federal Reserve Bank stock	58,012		58,012		—		—		58,012		59,508		59,508		—		—		59,508
Accrued interest receivable	129,451		129,451		—		129,451		—
Financial liabilities:
Other short-term borrowings	4,840		4,840		4,840		—		—
Short-term borrowings											24,252		24,252		—		24,252		—
Non-maturity deposits (1)	44,766,988		44,766,988		44,766,988		—		—		55,452,274		55,452,274		55,452,274		—		—
Time deposits	45,045		44,895		—		44,895		—		158,266		157,958		—		157,958		—
3.50% Senior Notes	347,221		350,864		—		350,864		—		347,812		357,368		—		357,368		—
5.375% Senior Notes	348,035		383,439		—		383,439		—		349,158		362,114		—		362,114		—
7.0% Junior Subordinated Debentures	54,362		54,977		—		54,977		—
Accrued interest payable	4,150		4,150		—		4,150		—
Off-balance sheet financial assets:
Commitments to extend credit	—		20,751		—		—		20,751		—		24,349		—		—		24,349
December 31, 2016:
December 31, 2018:
Financial assets:
Cash and cash equivalents	$	2,545,750	$	2,545,750	$	2,545,750	$	—	$	—	$	3,571,539	$	3,571,539	$	3,571,539	$	—	$	—
Held-to-maturity securities	8,426,998		8,376,138		—		8,376,138		—		15,487,442		15,188,236		—		15,188,236		—
Non-marketable securities (cost and equity method accounting) not measured at net asset value	120,037		127,343		—		—		127,343
Non-marketable securities (cost and equity method accounting) measured at net asset value	245,626		353,870		—		—		—
Non-marketable securities not measured at net asset value											131,453		131,453		—		—		131,453
Non-marketable securities measured at net asset value											151,247		151,247		—		—		—
Net commercial loans	17,518,430		17,811,356		—		—		17,811,356		25,043,671		25,463,968		—		—		25,463,968
Net consumer loans	2,156,148		2,199,501		—		—		2,199,501		3,013,706		3,064,093		—		—		3,064,093
FHLB and Federal Reserve Bank stock	57,592		57,592		—		—		57,592		58,878		58,878		—		—		58,878
Accrued interest receivable	111,222		111,222		—		111,222		—
Financial liabilities:
Short-term FHLB advances	500,000		500,000		500,000		—		—
Other short-term borrowings	12,668		12,668		12,668		—		—
Short-term borrowings											631,412		631,412		—		631,412		—
Non-maturity deposits (1)	38,923,750		38,923,750		38,923,750		—		—		49,278,174		49,278,174		49,278,174		—		—
Time deposits	56,118		55,949		—		55,949		—		50,726		50,337		—		50,337		—
3.50% Senior Notes	346,979		337,600		—		337,600		—		347,639		336,088		—		336,088		—
5.375% Senior Notes	347,586		378,777		—		378,777		—		348,826		361,281		—		361,281		—
6.05% Subordinated Notes (2)	46,646		47,489		—		47,489		—
7.0% Junior Subordinated Debentures	54,493		53,140		—		53,140		—
Accrued interest payable	12,013		12,013		—		12,013		—
Off-balance sheet financial assets:
Commitments to extend credit	—		22,074		—		—		22,074		—		22,930		—		—		22,930


(1)	Includes noninterest-bearing demand deposits, interest-bearing checking accounts, money market accounts and interest-bearing sweep deposits.


~~(2)~~	At ~~December 31, 2016, included in the carrying value and estimated fair value of our 6.05% Subordinated Notes was an interest rate swap valued at~~ ~~$0.8 million~~ ~~related to hedge accounting associated with the notes.~~

Investments in Entities that Calculate Net Asset Value Per Share

FASB guidance over certain fund investments requires that we disclose the fair value of funds, significant investment strategies of the investees, redemption features of the investees, restrictions on the ability to sell investments, estimate of the period of time over which the underlying assets are expected to be liquidated by the investee, and unfunded commitments related to the investments.

Our investments in debt funds and venture capital and private equity fund investments generally cannot be redeemed. Alternatively, we expect distributions, if any, to be received primarily through IPO and M&A activity of the underlying assets of the fund. Subject to applicable requirements under the Volcker Rule, we do not have any plans to sell any of these fund investments. If we decide to sell these investments in the future, the investee fund’s management must approve of the buyer before the sale of the investments can be completed. The fair values of the fund investments have been estimated using the net asset value per share of the investments, adjusted for any differences between our measurement date and the date of the fund investment’s net asset value by using the most recently available financial information from the investee general partner, for example ~~June 30~~March 31^thst, for our ~~September~~June 30^th consolidated financial statements, adjusted for any contributions paid, distributions received from the investment, and significant fund transactions or market events during the reporting period.

The following table is a summary of the estimated fair values of these investments and remaining unfunded commitments for each major category of these investments as of ~~September~~June 30, ~~2017~~2019:


(Dollars in thousands)	Carrying Amount		Fair Value		Unfunded Commitments		Carrying Amount		Fair Value		Unfunded Commitments
Non-marketable securities (fair value accounting):
Venture capital and private equity fund investments (1)	$	128,768	$	128,768	$	6,471	$	302,852	$	302,852	$	12,259
Non-marketable securities (equity method accounting):
Venture capital and private equity fund investments (2)	87,218		87,218		4,943		169,219		169,219		10,857
Debt funds (2)	17,889		17,889		—		7,168		7,168		—
Other investments (2)	17,820		17,820		886		14,785		14,785		886
Non-marketable securities (cost method accounting):
Venture capital and private equity fund investments (2)	102,956		206,541		10,474
Total	$	354,651	$	458,236	$	22,774	$	494,024	$	494,024	$	24,002

(1)

Venture capital and private equity fund investments within non-marketable securities (fair value accounting) include investments made by our managed funds of funds and one of our direct venture ~~funds. These~~funds (consolidated VIEs) and investments ~~represent~~in venture capital and private equity fund investments (unconsolidated VIEs). Collectively, these investments in venture capital and private equity funds ~~that invest~~are primarily in U.S. and global technology and life science/healthcare companies. Included in the fair value and unfunded commitments of fund investments under fair value accounting are $~~95.7~~81.1 million and $~~4.9~~4.1 million, respectively, attributable to noncontrolling interests. It is estimated that we will receive distributions from the fund investments over the next 10 to 13 years, depending on the age of the funds and any potential extensions of terms of the funds.

(2)

Venture capital and private equity fund investments, debt funds, and other fund investments within non-marketable securities (equity ~~and cost~~ method accounting) include funds that invest in or lend money to primarily U.S. and global technology and life science/healthcare companies. It is estimated that we will receive distributions from the funds over the next 5 to 8 years, depending on the age of the funds and any potential extensions of the terms of the funds.


~~15.~~19.	Legal Matters

Certain lawsuits and claims arising in the ordinary course of business have been filed or are pending against us and/or our affiliates, and we may from time to time be involved in other legal or regulatory proceedings. In accordance with applicable accounting guidance, we establish accruals for all such matters, including expected settlements, when we believe it is probable that a loss has been incurred and the amount of the loss is reasonably estimable. When a loss contingency is not both probable and estimable, we do not establish an accrual. Any such loss estimates are inherently uncertain, based on currently available information and are subject to management’s judgment and various assumptions. Due to the inherent subjectivity of these estimates and unpredictability of outcomes of legal proceedings, any amounts accrued may not represent the ultimate resolution of such matters.

To the extent we believe any potential loss relating to such matters may have a material impact on our liquidity, consolidated financial position, results of operations, and/or our business as a whole and is reasonably possible but not probable, we aim to disclose information relating to such potential loss. We also aim to disclose information relating to any material potential loss that is probable but not reasonably estimable. In such cases, where reasonably practicable, we aim to provide an estimate of loss or range of potential loss. No disclosures are generally made for any loss contingencies that are deemed to be remote.

Based upon information available to us, our review of lawsuits and claims filed or pending against us to date and consultation with our outside legal counsel, we have not recognized a material accrual liability for any such matters, nor do we currently expect that these matters will result in a material liability to the Company. However, the outcome of litigation and other legal and regulatory matters is inherently uncertain, and it is possible that one or more of such matters currently pending or threatened could have an unanticipated material adverse effect on our liquidity, consolidated financial position, results of operations, and/or our business as a whole, in the future.


~~16.~~20.	Related Parties

We have no material related party transactions requiring disclosure. In the ordinary course of business, the Bank may extend credit to related parties, including executive officers, directors, principal shareholders and their related interests. Additionally, we provide real estate secured loans to eligible employees through our EHOP. For additional details, see Note ~~16—~~17—“Employee Compensation and Benefit Plans" under Part II, Item 8 of our ~~2016~~2018 Form 10-K.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward-Looking Statements

This Quarterly Report on Form 10-Q, including in particular “Management’s Discussion and Analysis of Financial Condition and Results of Operations” under Part I, Item 2 of this report, contains forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. In addition, management has in the past and might in the future make forward-looking statements orally to analysts, investors, the media and others. Forward-looking statements are statements that are not historical facts. Broadly speaking, forward-looking statements include, but are not limited to, the following:

Financial projections, including with respect to our net interest income, noninterest income, earnings per share, noninterest expenses (including professional services, compliance, compensation and other costs), cash flows, balance sheet positions, capital expenditures, liquidity and capitalization or other financial items;

Descriptions of our strategic initiatives, plans or objectives for future operations, including pending sales or acquisitions;

Forecasts of private equity/venture capital funding and investment levels;

Forecasts of future interest rates, economic performance, and income from investments;

Forecasts of expected levels of provisions for loan losses, nonperforming loans, loan growth and client funds; and

Descriptions of assumptions underlying or relating to any of the foregoing.

You can identify these and other forward-looking statements by the use of words such as “becoming,” “may,” “will,” “should,” "could,""would," “predict,” “potential,” “continue,” “anticipate,” “believe,” “estimate,” “assume,” “seek,” “expect,” “plan,” “intend,” the negative of such words, or comparable terminology. Forward-looking statements are neither historical facts nor assurances of future performance. Although we believe that the expectations reflected in these forward-looking statements are reasonable, we have based these expectations on our current beliefs as well as our assumptions, and such expectations may prove to be incorrect. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict and many of which are outside of our control. Our actual results of operations and financial performance could differ significantly from those expressed in or implied by our management’s forward-looking statements. Important factors that could cause our actual results and financial condition to differ from the expectations stated in the forward-looking statements include, among others:

Market and economic conditions, including the interest rate environment, and the associated impact on us;

The credit profile and credit quality of our loan portfolio and volatility of our levels of nonperforming assets and charge-offs;

The adequacy of our allowance for loan losses and the need to make provisions for loan losses for any period;

The borrowing needs of our clients;

The sufficiency of our capital and liquidity positions;

The levels of loans, deposits and client investment fund balances;

The performance of our portfolio investments; the general condition of the public and private equity and mergers and acquisitions markets and their impact on our investments, including equity warrant assets, venture capital and private equity funds and direct equity investments;

Our overall investment plans and strategies; the realization, timing, valuation and performance of our equity or other investments;

The levels of public offerings, mergers and acquisitions and venture capital investment activity of our clients that may impact the borrowing needs of our clients;

The occurrence of fraudulent activity, including breaches of our information security or cyber security-related incidents;

Business disruptions and interruptions due to natural disasters and other external events;

The impact on our reputation and business from our interactions with business partners, counterparties, service providers and other third parties;

Expansion of our business internationally, and the impact of international market and economic events on us;

The impact of governmental policy, legal requirements and regulations, including the Economic Growth, Regulatory Relief and Consumer Protection Act and the Dodd-Frank Act, promulgated by the Federal Reserve and other regulatory requirements;

The impact of lawsuits and claims, as well as legal or regulatory proceedings;

The impact of changes in accounting standards and tax ~~laws (including any tax reform, such as the proposed Tax Cuts and Jobs Act);~~laws;

The levels of equity capital available to our client or portfolio companies;

The effectiveness of our risk management framework and quantitative models;

~~The sale of impaired assets;~~

Our ability to maintain or increase our market share, including through successfully implementing our business strategy and undertaking new business ~~initiatives;~~initiatives, including through the integration of SVB Leerink; and


•	Other factors as discussed in “Risk Factors” under Part I, Item 1A in our 2018 Form 10-K.

~~Other factors as discussed in “Risk Factors” under Part I, Item 1A in our~~ ~~2016~~ ~~Form 10-K.~~

We urge investors to consider all of these factors carefully in evaluating the forward-looking statements contained in this Quarterly Report on Form 10-Q. All subsequent written or oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by these cautionary statements. The forward-looking statements included in this filing are made only as of the date of this filing. We assume no obligation and do not intend to revise or update any forward-looking statements contained in this Quarterly Report on Form 10-Q, except as required by law.

The following discussion and analysis of financial condition and results of operations should be read in conjunction with our unaudited interim consolidated financial statements and accompanying notes as presented in Part I, Item 1 of this report and in conjunction with our ~~2016~~2018 Form 10-K.

Reclassifications

Certain prior period amounts, primarily related to ~~the~~presentation changes to our ~~income~~financial statement ~~presentation of gains on derivative instruments, net~~line items and ~~provision for unfunded credit commitments~~immaterial changes to our reportable segments, have been reclassified to conform to current period presentations.

Management’s Overview of ~~Third~~Second Quarter ~~2017~~2019 Performance

Overall, we ~~had an outstanding third~~continued to deliver strong results in the second quarter ~~in 2017, which was~~of 2019, marked by ~~higher net interest and~~continued healthy balance sheet growth, stable credit quality, robust core fee income ~~increased warrant~~and strong gains strong total client funds growth, healthy loan growth and stable credit quality. Additionally, we saw higher noninterest expense, primarily from increased compensation and benefits expenses as well as professional services expenses reflective of increased expenses to support our increasing regulatory, risk and compliance initiatives to support our domestic and global expansion as well as investments made in projects, systems and technology to support our revenue growth and related initiatives and other operating costs.on equity warrants. Our core business continued to perform well as a result of our ongoing focus on innovation companies and their investors and continued efforts to secure client relationships. We saw continued success in working with private equity/venture capital firms, our technology and ~~technology~~life science/healthcare clients ~~as well as~~and clients in our private ~~banking~~bank division.

A summary of our performance for the three months ended ~~September~~June 30, ~~2017~~2019 (compared to the three months ended ~~September~~June 30, ~~2016,~~2018, where applicable) is as follows:



BALANCE SHEET		EARNINGS
Assets.$~~49.8~~60.7 billion in average total assets (up ~~14.6%~~11.5%). ~~$50.8~~$63.8 billion in period-end total assets (up ~~17.3%~~14.2%). Loans.$~~21.6~~29.4 billion in average total loan balances, net of unearned income (up ~~15.8%~~18.3%). ~~$22.2~~$29.2 billion in period-end total loan balances, net of unearned income (up ~~16.1%~~12.4%). Total Client ~~Funds~~ ~~(on-balance~~Funds. (on-balance sheet deposits and off-balance sheet client investment funds).~~$97.3~~ $142.6 billion in average total client fund balances (up ~~20.1%~~19.6%). ~~$99.0~~$147.1 billion in period-end total client fund balances (up ~~21.5%~~18.0%). AFS/HTM Fixed Income Investments.$23.1 billion in average fixed income investment securities ~~(up 11.5%~~(down 8.1%). ~~$23.7~~$22.8 billion in period-end fixed income investment securities ~~(up 15.6%~~(down 10.5%).		EPS. Earnings per diluted share of ~~$2.79~~$6.08 (up ~~31.6%~~37.6%). Net Income. Consolidated net income available to common stockholders of ~~$148.6~~$318.0 million (up ~~33.8%~~33.7%). - Net interest income of ~~$374.0~~$529.4 million (up ~~29.3%~~13.5%). - Net interest margin of ~~3.10%~~3.68% (up 359 bps). - Noninterest income of ~~$158.8~~$333.8 million (up ~~10.2%~~73.2%), with non-GAAP core fee income⁺ of ~~$102.7~~$157.3 million (up ~~27.6%~~27.8%). - Noninterest expense of ~~$257.8~~$383.5 million (up ~~16.8%~~25.4%). ~~ROE~~.ROE.Return on average equity (annualized) (“ROE”) performance of ~~14.59%~~23.29%. Operating Efficiency Ratio.Operating efficiency ratio of ~~48.38%~~44.43% with a non-GAAP core operating efficiency ratio of 45.49%⁺⁺.

CAPITAL		CREDIT QUALITY
Capital.Continued strong capital, ~~levels,~~ with all capital ratios considered “well-capitalized” under banking regulations. SVBFG and SVB capital ratios, respectively, were: - CET 1 risk-based capital ratio of ~~12.96%~~12.92% and ~~12.41%~~12.50%. - Tier 1 risk-based capital ratio of ~~13.32%~~13.08% and ~~12.41%~~12.50%. - Total risk-based capital ratio of ~~14.29%~~13.97% and ~~13.40%~~13.44%. - Tier 1 leverage ratio of ~~8.34%~~8.82% and ~~7.59%~~8.17%.		Credit Quality.Continued disciplined underwriting. - Allowance for loan losses of ~~1.12%~~1.03% as a percentage of period-end total gross loans. - Provision for loan losses of ~~0.40%~~0.26% as a percentage of period-end total gross loans (annualized). - Net loan charge-offs of ~~0.19%~~0.23% as a percentage of average total gross loans (annualized).

⁺ Consists of fee income for deposit services, letters of credit and standby letters of credit, credit cards, client investments, foreign exchange and lending-related activities. This is a non-GAAP financial ~~metric.~~measure. (See the non-GAAP reconciliation under “Results of Operations—Noninterest Income”)

⁺⁺ This ratio excludes certain financial line items where performance is typically subject to market or other conditions beyond our control and excludes SVB Leerink revenue and expenses. It is calculated by dividing noninterest expense after adjusting for noninterest expense attributable to SVB Leerink by total revenue after adjusting for noninterest income attributable to SVB Leerink, net gains or losses on investment securities and equity warrant assets, investment banking revenue and commissions. Additionally, noninterest expense and total revenue are adjusted for income or losses and expenses attributable to noncontrolling interests and adjustments to net interest income for a taxable equivalent basis. This is a non-GAAP financial measure. (See the non-GAAP reconciliation under "Results of Operations-Noninterest Expense").

A summary of our performance for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2019 and ~~2016~~2018 is as follows:

Three months ended September 30, Nine months ended September 30,
(Dollars in thousands, except per share data, employees and ratios) 2017
2016 % Change   2017 2016 % Change

Diluted earnings per common share $ 2.79
$ 2.12
31.6
% $ 7.01
$ 5.42
29.3
%
Net income available to common stockholders 148,620
111,081
33.8
   373,296
283,219
31.8

Net interest income 373,974
289,161
29.3
   1,026,663
853,918
20.2

Net interest margin 3.10 % 2.75 % 35
bps 2.99 % 2.72 % 27
bps
Provision for credit losses $ 23,522
$ 20,004
17.6
% $ 70,062
$ 90,225
(22.3 ) %
Noninterest income 158,778
144,140
10.2
404,965
343,050
18.0

Noninterest expense 257,761
220,773
16.8
746,640
624,611
19.5

Non-GAAP core fee income (1) 102,722
80,526
27.6
272,567
231,522
17.7

Non-GAAP noninterest income, net of noncontrolling interests (1) 153,164
139,461
9.8
   383,256
339,423
12.9

Non-GAAP noninterest expense, net of noncontrolling interests(2) 257,636
220,656
16.8
   746,123
624,327
19.5

Balance Sheet:

Average available-for-sale securities $ 12,674,610
$ 12,743,715
(0.5 ) % $ 12,539,773
$ 13,608,722
(7.9 ) %
Average held-to-maturity securities 10,467,470
8,003,825
30.8
9,405,525
8,347,190
12.7

Average loans, net of unearned income 21,584,892
18,647,194
15.8

20,726,467
17,955,497
15.4

Average noninterest-bearing demand deposits 36,578,779
30,522,314
19.8
   34,653,264
30,694,119
12.9

Average interest-bearing deposits 7,464,063
7,387,440
1.0
   7,408,371
7,749,871
(4.4 )
Average total deposits 44,042,842
37,909,754
16.2
   42,061,635
38,443,990
9.4

Earnings Ratios:

Return on average assets (annualized) (3) 1.18 % 1.02 % 15.7
% 1.05 % 0.87 % 20.7
%
Return on average SVBFG stockholders’ equity (annualized) (4) 14.59
12.32
18.4
   12.85
10.95
17.4

Asset Quality Ratios:

Allowance for loan losses as a % of total period-end gross loans 1.12 % 1.25 % (13 ) bps 1.12 % 1.25 % (13 ) bps
Allowance for loan losses for performing loans as a % of total gross performing loans 0.92
1.03
(11 )    0.92
1.03
(11 )
Gross loan charge-offs as a % of average total gross loans (annualized) 0.23
0.52
(29 )    0.33
0.53
(20 )
Net loan charge-offs as a % of average total gross loans (annualized) 0.19
0.48
(29 )    0.29
0.47
(18 )
Capital Ratios:

CET 1 risk-based capital ratio 12.96 % 12.75 % 21
bps 12.96 % 12.75 % 21
bps
Tier 1 risk-based capital ratio 13.32
13.21
11
13.32
13.21
11

Total risk-based capital ratio 14.29
14.22
7
14.29
14.22
7

Tier 1 leverage ratio 8.34
8.35
(1 )    8.34
8.35
(1 )
Tangible common equity to tangible assets (5) 8.00
8.30
(30 )    8.00
8.30
(30 )
Tangible common equity to risk-weighted assets (5) 13.01
13.11
(10 )    13.01
13.11
(10 )
Bank CET 1 risk-based capital ratio 12.41
12.77
(36 ) 12.41
12.77
(36 )
Bank tier 1 risk-based capital ratio 12.41
12.77
(36 )    12.41
12.77
(36 )
Bank total risk-based capital ratio 13.40
13.83
(43 )    13.40
13.83
(43 )
Bank tier 1 leverage ratio 7.59
7.74
(15 )    7.59
7.74
(15 )
Bank tangible common equity to tangible assets (5) 7.47
7.98
(51 )    7.47
7.98
(51 )
Bank tangible common equity to risk-weighted assets (5) 12.44
13.14
(70 )    12.44
13.14
(70 )
Other Ratios:

GAAP operating efficiency ratio (6) 48.38 % 50.95 % (5.0 ) % 52.15 % 52.18 % (0.1 ) %
Non-GAAP operating efficiency ratio (2) 48.82
51.45
(5.1 )    52.87
52.28
1.1

Book value per common share (7) $ 77.00
$ 69.02
11.6
   $ 77.00
$ 69.02
11.6

Other Statistics:

Average full-time equivalent employees 2,434
2,255
7.9
% 2,384
2,199
8.4
%
Period-end full-time equivalent employees 2,433
2,280
6.7
   2,433
2,280
6.7



	Three months ended June 30,									Six months ended June 30,
(Dollars in thousands, except per share data, employees and ratios)	2019			2018			% Change			2019			2018			% Change
Income Statement:
Diluted earnings per share	$	6.08		$	4.42		37.6		%	$	11.51		$	8.05		43.0		%
Net income available to common stockholders	317,987			237,798			33.7			606,719			432,759			40.2
Net interest income	529,403			466,443			13.5			1,042,289			886,306			17.6
Net interest margin	3.68		%	3.59		%	9		bps	3.74		%	3.49		%	25		bps
Provision for credit losses	$	23,946		$	29,080		(17.7	)	%	$	52,497		$	57,052		(8.0	)	%
Noninterest income	333,750			192,689			73.2			614,126			348,207			76.4
Noninterest expense	383,522			305,739			25.4			749,186			571,156			31.2
Non-GAAP core fee income (1)	157,337			123,124			27.8			311,580			238,134			30.8
Non-GAAP core fee income, including investment banking revenue and commissions (1)	220,460			123,124			79.1			438,606			238,134			84.2
Non-GAAP noninterest income, net of noncontrolling interests (1)	315,014			183,244			71.9			592,142			325,738			81.8
Non-GAAP noninterest expense, net of noncontrolling interests (2)	383,354			305,512			25.5			748,639			570,961			31.1
Balance Sheet:



Average available-for-sale securities	$	8,205,333		$	10,048,423		(18.3	)	%	$	7,541,439		$	10,396,533		(27.5	)	%
Average held-to-maturity securities	14,922,589			15,112,154			(1.3	)		15,072,441			14,178,427			6.3
Average loans, net of unearned income	29,406,620			24,858,503			18.3			28,900,160			24,335,762			18.8
Average noninterest-bearing demand deposits	38,117,893			39,814,450			(4.3	)		38,170,001			38,887,766			(1.8	)
Average interest-bearing deposits	14,844,315			8,157,501			82.0			13,177,179			8,156,404			61.6
Average total deposits	52,962,208			47,971,951			10.4			51,347,180			47,044,170			9.1
Earnings Ratios:
Return on average assets (annualized) (3)	2.10		%	1.75		%	20.0		%	2.07		%	1.63		%	27.0		%
Return on average SVBFG stockholders’ equity (annualized) (4)	23.29			20.82			11.9			22.74			19.51			16.6
Asset Quality Ratios:
Allowance for loan losses as a % of total period-end gross loans	1.03		%	1.10		%	(7	)	bps	1.03		%	1.10		%	(7	)	bps
Allowance for loan losses for performing loans as a % of total gross performing loans	0.85			0.90			(5	)		0.85			0.90			(5	)
Gross loan charge-offs as a % of average total gross loans (annualized)	0.36			0.25			11			0.25			0.21			4
Net loan charge-offs as a % of average total gross loans (annualized)	0.23			0.22			1			0.17			0.18			(1	)
Capital Ratios:
SVBFG CET 1 risk-based capital ratio	12.92		%	12.92		%	—		bps	12.92		%	12.92		%	—		bps
SVBFG tier 1 risk-based capital ratio	13.08			13.10			(2	)		13.08			13.10			(2	)
SVBFG total risk-based capital ratio	13.97			14.03			(6	)		13.97			14.03			(6	)
SVBFG tier 1 leverage ratio	8.82			8.81			1			8.82			8.81			1
SVBFG tangible common equity to tangible assets (5)	8.43			8.34			9			8.43			8.34			9
SVBFG tangible common equity to risk-weighted assets (5)	13.13			12.68			45			13.13			12.68			45
Bank CET 1 risk-based capital ratio	12.50			11.76			74			12.50			11.76			74
Bank tier 1 risk-based capital ratio	12.50			11.76			74			12.50			11.76			74
Bank total risk-based capital ratio	13.44			12.72			72			13.44			12.72			72
Bank tier 1 leverage ratio	8.17			7.72			45			8.17			7.72			45
Bank tangible common equity to tangible assets (5)	7.91			7.39			52			7.91			7.39			52
Bank tangible common equity to risk-weighted assets (5)	12.72			11.52			120			12.72			11.52			120
Other Ratios:
GAAP operating efficiency ratio (6)	44.43		%	46.39		%	(4.2	)	%	45.23		%	46.27		%	(2.2	)	%
Non-GAAP core operating efficiency ratio (2)	45.49			50.40			(9.7	)		45.11			49.45			(8.8	)
Total costs of deposits (annualized) (7)	0.36			0.05			620.0			0.29			0.04			625.0
Book value per common share (8)	$	107.72		$	87.53		23.1			$	107.72		$	87.53		23.1
Other Statistics:
Average full-time equivalent employees	3,287			2,591			26.9		%	3,257			2,545			28.0		%
Period-end full-time equivalent employees	3,314			2,626			26.2			3,314			2,626			26.2


(1)	See “Results of Operations–Noninterest Income” for a description and reconciliation of non-GAAP core fee income and ~~noninterest income.~~non-GAAP core fee income including investment banking revenue and commissions.


(2)	See “Results of Operations–Noninterest Expense” for a description and reconciliation of non-GAAP noninterest expense and non-GAAP core operating efficiency ratio.


(3)	Ratio represents annualized consolidated net income available to common stockholders divided by quarterly ~~and year-to-date~~ average assets.


(4)	Ratio represents annualized consolidated net income available to common stockholders divided by quarterly ~~and year-to-date~~ average SVBFG stockholders’ equity.


(5)	See “Capital Resources–Capital Ratios” for a reconciliation of non-GAAP tangible common equity to tangible assets and tangible common equity to risk-weighted assets.


(6)	The operating efficiency ratio is calculated by dividing total noninterest expense by total ~~taxable-equivalent~~ net interest income plus noninterest income.


(7)	Ratio represents annualized total cost of deposits and is calculated by dividing interest expense from deposits by average total deposits.


(8)	Book value per common share is calculated by dividing total SVBFG stockholders’ equity by total outstanding common shares at period-end.

For more information with respect to our capital ratios, please refer to “Capital Ratios” under “Consolidated Financial Condition-Capital Ratios” below.

Critical Accounting Policies and Estimates

The accompanying management’s discussion and analysis of results of operations and financial condition is based upon our unaudited interim consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of these financial statements in accordance with GAAP requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, expenses and related disclosure of contingent assets and liabilities. Management evaluates estimates and assumptions on an ongoing basis. Management bases its estimates on historical experiences and various other factors and assumptions that are believed to be reasonable under the circumstances. Actual results may differ materially from these estimates under different assumptions or conditions.

There have been no significant changes during the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2019 to the items that we disclosed as our critical accounting policies and estimates in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” under Part II, Item 7 of our ~~2016~~2018 Form 10-K.

Results of Operations

Net Interest Income and Margin (Fully Taxable Equivalent Basis)

Net interest income is defined as the difference ~~between~~between: (i) interest earned on loans, fixed income ~~investment portfolio (available-for-sale~~investments in our available-for-sale and held-to-maturity ~~securities),~~securities portfolios and short-term investment securities, and (ii) interest paid on funding sources. Net interest ~~income is our principal source of revenue. Net interest~~ margin is defined as ~~the amount of~~ annualized net interest income, on a fully taxable equivalent basis, ~~expressed~~ as a percentage of average interest-earning assets. Net interest income 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 federal statutory tax rate of 3521.0 percent.

Analysis of Net Interest Income Changes Due to Volume and Rate (Fully Taxable Equivalent Basis)

Net interest income is affected by changes in the amount and ~~composition~~mix of interest-earning assets and interest-bearing liabilities, referred to as “volume change.” Net interest income is also affected by changes in yields earned on interest-earning assets and rates paid on interest-bearing liabilities, referred to as “rate change.” The following table sets forth changes in interest income for each major category of interest-earning assets and interest expense for each major category of interest-bearing liabilities. The table also reflects the amount of simultaneous changes attributable to both volume and rate changes for the periods indicated. For this table, changes that are not solely due to either volume or rate are allocated in proportion to the percentage changes in average volume and average rate.


	2017 Compared to 2016									2017 Compared to 2016									2019 Compared to 2018								2019 Compared to 2018
	Three months ended September 30, increase (decrease) due to change in									Nine months ended September 30, increase (decrease) due to change in									Three months ended June 30, increase (decrease) due to change in								Six months ended June 30, increase (decrease) due to change in
(Dollars in thousands)	Volume			Rate			Total			Volume			Rate			Total			Volume			Rate		Total			Volume			Rate		Total
Interest income:
Federal Reserve deposits, federal funds sold, securities purchased under agreements to resell, trade receivables purchased and other short-term investment securities	$	1,678		$	2,337		$	4,015		$	5,788		$	5,089		$	10,877
Federal Reserve deposits, federal funds sold, securities purchased under agreements to resell and other short-term investment securities																			$	14,919		$	5,258	$	20,177		$	22,222		$	11,415	$	33,637
Fixed income investment portfolio (taxable)	15,325			10,650			25,975			6,655			26,992			33,647			(14,317		)	11,562		(2,755		)	(26,529		)	26,014		(515		)
Fixed income investment portfolio (non-taxable)	1,342			(342		)	1,000			2,620			(1,067		)	1,553			3,782			350		4,132			10,402			1,129		11,531
Loans, net of unearned income	37,814			16,404			54,218			98,851			29,676			128,527			64,043			19,737		83,780			127,648			53,202		180,850
Increase in interest income, net	56,159			29,049			85,208			113,914			60,690			174,604			68,427			36,907		105,334			133,743			91,760		225,503
Interest expense:
Interest bearing checking and savings accounts	25			1			26			63			(2		)	61			(23		)	17		(6		)	(34		)	28		(6		)
Money market deposits	65			698			763			(219		)	2,466			2,247			20,849			14,379		35,228			26,549			26,655		53,204
Money market deposits in foreign offices	(1		)	2			1			10			(1		)	9			(5		)	—		(5		)	(10		)	2		(8		)
Time deposits	—			5			5			(8		)	6			(2		)	43			105		148			36			128		164
Sweep deposits in foreign offices	(23		)	(3		)	(26		)	(75		)	(6		)	(81		)	1,583			3,931		5,514			4,058			7,278		11,336
Total increase (decrease) in deposits expense	66			703			769			(229		)	2,463			2,234
Total increase in deposits expense																			22,447			18,432		40,879			30,599			34,091		64,690
Short-term borrowings	(1,558		)	1,059			(499		)	(1,851		)	1,081			(770		)	430			185		615			1,935			450		2,385
3.50% Senior Notes	5			(2		)	3			4			4			8			3			—		3			7			—		7
5.375% Senior Notes	12			(5		)	7			15			9			24			9			—		9			17			—		17
Junior Subordinated Debentures	1			—			1			(9		)	10			1
6.05% Subordinated Notes	(236		)	—			(236		)	(405		)	224			(181		)
Total (decrease) increase in borrowings expense	(1,776		)	1,052			(724		)	(2,246		)	1,328			(918		)
(Decrease) increase in interest expense, net	(1,710		)	1,755			45			(2,475		)	3,791			1,316
Total increase in borrowings expense																			442			185		627			1,959			450		2,409
Increase in interest expense, net																			22,889			18,617		41,506			32,558			34,541		67,099
Increase in net interest income	$	57,869		$	27,294		$	85,163		$	116,389		$	56,899		$	173,288		$	45,538		$	18,290	$	63,828		$	101,185		$	57,219	$	158,404

Net Interest Income (Fully Taxable Equivalent Basis)

Three months ended ~~September~~June 30, ~~2017~~2019 and ~~2016~~2018

Net interest income increased by ~~$85.2~~$63.8 million to ~~$374.6~~$532.3 million for the three months ended ~~September~~June 30, ~~2017,~~2019, compared to ~~$289.4~~$468.5 million for the comparable ~~2016~~2018 period. Overall, our net interest income increased primarily from interest earned on loans, reflective of higher average loan balances driven by strong loan growth from our private equity/venture capital loan portfolio as well as increases from our life science/healthcare and ~~SVB Private Bank~~private bank loan portfolios and rate increases subsequent to ~~September~~June 30, ~~2016.~~2018. In addition, we saw an increase in interest ~~earned on~~income from our ~~fixed income~~interest earning cash and short-term investment securities ~~portfolio~~ reflective of higher average ~~fixed income investment securities balances driven by higher average deposit~~ balances as well as an increase in ~~yield~~yields from rate increases. These increases were partially offset by an increase in interest paid on our interest-bearing deposits due to the increase in average interest-bearing deposits as well as continued market rate adjustments on our interest-bearing deposits.

The main factors affecting interest income and interest expense for the three months ended ~~September~~June 30, ~~2017,~~2019, compared to the comparable ~~2016~~2018 period are discussed below:

~~Interest income~~ ~~for the~~ ~~three months endedSeptember 30, 2017~~ ~~increased by $85.2 million due primarily to:~~


•	Interest income for the three months endedJune 30, 2019 increased by $105.3 million due primarily to:

◦

~~A $54.2~~An $83.8 million increase in interest income on loans to $~~268.4~~414.1 million for the three months ended~~September~~June 30, ~~2017~~2019, compared to $~~214.2~~330.3 million for the comparable ~~2016~~2018 period. The increase was reflective of an increase in average loan balances of $~~2.9~~4.5 billion and an increase in the overall loan yield of 3632 basis points to ~~4.93~~5.65 percent from ~~4.57~~5.33 percent. Gross loan yields, excluding loan interest recoveries and loan fees, increased 3729 basis points to ~~4.30~~5.01 percent from ~~3.93~~4.72 percent, reflective primarily of the benefit of interest rate ~~increases.~~increases since the second quarter of 2018. Loan fee yields ~~were~~remained relatively flat, ~~at 61~~while loan interest recoveries contributed 3 basis points for ~~both~~ the three months ended ~~September~~June 30, ~~2017~~2019, and ~~2016.~~

◦

A ~~$27.0~~$20.2 million increase in interest income ~~on fixed income~~from our interest-earning cash and short-term investment ~~securities to~~ ~~$111.2 million~~ ~~for the~~ ~~three months endedSeptember 30, 2017, compared to~~ ~~$84.3 million~~ ~~for the comparable~~ ~~2016~~ ~~period.~~securities. The increase was ~~reflective~~due to the increase of ~~an increase~~$3.1 billion in average ~~fixed income investments of $2.4 billion due to growth in average deposit~~interest-earning Federal Reserve cash balances and an increase in our fixed income investment securities yield of 29 basis points to 1.91 percent from 1.62 percent resulting primarily from higher reinvestment yields on maturing fixed income investments as well as ~~higher yields on new purchases~~ the benefit from the impact of the increases in the Federal Funds target rate since June 30, 2018.


•	Interest expense for the three months endedJune 30, 2019 increased by $41.5 milliondue ~~to interest rate increases.~~primarily to:

◦

A ~~$4.0~~$40.9 million increase in interest ~~income from our interest earning cash and short-term investment securities. The increase was~~expense on deposits due primarily to an increase ~~of $0.9 billion~~in interest paid on our interest-bearing money market and foreign sweep deposits due to the growth in average ~~interest-earning cash balances~~interest-bearing deposits of $6.7 billion as ~~a result of a $6.1 billion increase in average deposit balances and from the impact of the recent increases in the Federal Funds target rate.~~well as market rate adjustments.

Six months ended June 30, 2019 and 2018

The main factors affecting interest income and interest expense for the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2019, compared to the comparable ~~2016~~2018 period are discussed below:

~~Interest income~~ ~~for the~~ ~~nine months endedSeptember 30, 2017~~ ~~increased by $174.6 million due primarily to:~~


•	Interest income for the six months endedJune 30, 2019 increased by $225.5 million due primarily to:

◦

A ~~$128.5~~$180.9 million increase in interest income on loans to ~~$746.0~~$808.2 million for the ~~nine~~six months ended~~September~~June 30, ~~2017~~2019,compared to ~~$617.5~~$627.4 million for the comparable ~~2016~~2018 period. The increase was reflective of an increase in average loan balances of ~~$2.8~~$4.6 billion and an increase in the overall loan yield of 2244 basis points to ~~4.81~~5.64 percent from ~~4.59~~5.20 percent. Gross loan yields, excluding loan interest recoveries and loan fees, increased 42 basis points to ~~4.18~~5.05 percent from ~~3.99~~4.63 percent, reflective of the benefit of interest rate increases, partially offset by the strong growth of our lower yielding private equity/venture capital ~~and Private Bank~~ loan ~~portfolios.~~portfolio. Our private equity/venture capital loan portfolio represented ~~43.1~~50.0 percent and ~~38.8~~46.8 percent of our total gross loan portfolio at ~~September~~June 30, ~~2017~~2019 and ~~2016,~~2018, respectively. ~~Our Private Bank~~Loan fee yields remained flat, while loan ~~portfolio represented 11.2 percent and 10.8 percent of our total gross loan portfolio at September 30, 2017 and 2016, respectively.~~

~~Loan fee yields increased two~~interest recoveries contributed 2 basis points ~~to 60 basis points from 58 basis points in the comparable 2016 period. The increase in loan fee yields was primarily a result of higher income from loan prepayments.~~

◦

~~A $35.2 million increase in interest income on fixed income investment securities to $298.9 million~~ for the ~~nine~~six months ended~~September~~ June 30, ~~2017, compared to $263.7 million for the comparable~~ ~~2016~~ period. The increase was primarily reflective of an increase in our fixed income investment securities yield of 21 basis points to 1.82 percent from 1.61 percent resulting primarily from higher reinvestment yields on maturing fixed income investments as well as higher yields on new purchases due to interest rate increases.2019, and

◦

A ~~$10.9~~$33.6 million increase in interest income from our interest earning cash and short-term investment securities.The increase was due ~~primarily~~ to anthe increase of ~~$1.1~~$2.4 billion in average interest-earning Federal Reserve cash balances ~~as a result of a $3.6 billion increase in average~~driven by deposit ~~balances. We also saw a~~growth and the benefit from the impact of ~~the recent~~ increases in the Federal Funds target ~~rate.~~rate since June 30, 2018.

~~Interest expense~~ ~~for the~~ ~~nine months endedSeptember 30, 2017~~ ~~increased by $1.3 million primarily due to:~~


•	Interest expense for the six months endedJune 30, 2019 increased by $67.1 million primarily due to:


◦	An A $64.7 million increase in ~~deposits~~ interest expense ~~of $2.2 million,~~on deposits due primarily to an increase in interest paid on our interest-bearing money market deposits and foreign sweep deposits due to the growth in average interest-bearing deposits of $5.0 billion as ~~a result of~~well as market rate adjustments.

Net Interest Margin (Fully Taxable Equivalent Basis)

Three months ended ~~September~~June 30, ~~2017~~2019 and ~~2016~~2018

•

Our net interest margin increased by 9 basis points to 3.68 percent for the three months endedJune 30, 2019, compared to 3.59 percent for the comparable 2018 period. The higher margin for the second quarter of 2019 was reflective primarily of the increases in the Federal Funds target rate since June 30, 2018, as well as a shift in the mix of the growth in our interest-earning assets to higher-yielding loans from our fixed income investment securities portfolio. Average loans represented 50.8 percent of average interest earnings assets for the three months ended June 30, 2019, compared to 47.5 percent for the comparable 2018 period.

~~Our net interest margin increased by 35 basis points to 3.10 percent for the~~ ~~three months endedSeptember 30, 2017, compared to~~ ~~2.75~~ ~~percent for the comparable~~ ~~2016~~ ~~period. The higher margin during the third quarter of 2017 was reflective primarily of the increases in the Federal Funds target rate since the third quarter of 2016.~~

~~Nine~~Six months ended ~~September~~June 30, ~~2017~~2019 and ~~2016~~2018

•

Our net interest margin increased by 25 basis points to 3.74 percent for the six months endedJune 30, 2019, compared to 3.49 percent for the comparable 2018 period. The higher margin for the six months ended June 30, 2019 was reflective primarily of the increases in the Federal Funds target rate since June 30, 2018, as well as a shift in the mix of the growth in our interest-earning assets to higher-yielding loans from our fixed income investment securities portfolio. Average loans represented 51.2 percent of year-to-date average interest earnings assets, compared to 47.3 percent for the comparable 2018 period.

~~Our net interest margin increased by 27 basis points to 2.99 percent for the~~ ~~nine months endedSeptember 30, 2017, compared to~~ ~~2.72 percent~~ ~~for the comparable~~ ~~2016~~ period. Our net interest margin increased primarily as a result of the impact of rising interest rates and a higher level of loans as a percentage of our interest-earning assets portfolio during the nine months ended September 30, 2017. Average loans represented 45 percent of year-to-date interest earning assets compared to 43 percent for the comparable ~~2016~~ ~~period.~~

Average Balances, Yields and Rates Paid (Fully Taxable Equivalent Basis)

The average yield earned on interest-earning assets is the amount of annualized fully taxable equivalent interest income expressed as a percentage of average interest-earning assets. The average rate paid on funding sources is the amount of annualized interest expense expressed as a percentage of average funding sources. The following tables set forth average assets, liabilities, noncontrolling interests and SVBFG stockholders’ equity, interest income, interest expense, annualized yields and rates, and the composition of our annualized net interest margin for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2019 and ~~2016~~2018:

Average Balances, Rates and Yields for the Three Months Ended ~~September~~June 30, ~~2017~~2019 and ~~2016~~2018


	Three months ended September 30,																Three months ended June 30,
	2017								2016								2019								2018
(Dollars in thousands)	Average Balance			Interest Income/ Expense			Yield/ Rate		Average Balance			Interest Income/ Expense			Yield/ Rate		Average Balance			Interest Income/ Expense			Yield/ Rate		Average Balance			Interest Income/ Expense			Yield/ Rate
Interest-earning assets:
Federal Reserve deposits, federal funds sold, securities purchased under agreements to resell and other short-term investment securities (1)	$	3,291,908		$	6,211		0.75	%	$	2,404,006		$	2,196		0.36	%	$	5,405,899		$	26,364		1.96	%	$	2,346,820		$	6,187		1.06	%
Investment securities: (2)
Available-for-sale securities:
Taxable	12,674,610			52,825			1.65		12,743,715			44,741			1.40		8,205,333			45,347			2.22		10,048,423			46,606			1.86
Held-to-maturity securities:
Taxable	10,249,131			56,618			2.19		7,947,983			38,727			1.94		13,350,533			89,048			2.68		13,969,843			90,544			2.60
Non-taxable (3)	218,339			1,803			3.28		55,842			803			5.72		1,572,056			13,836			3.53		1,142,311			9,704			3.41
Total loans, net of unearned income (4) (5)	21,584,892			268,445			4.93		18,647,194			214,227			4.57		29,406,620			414,077			5.65		24,858,503			330,297			5.33
Total interest-earning assets	48,018,880			385,902			3.19		41,798,740			300,694			2.86		57,940,441			588,672			4.07		52,365,900			483,338			3.70
Cash and due from banks	371,373								317,044								542,345								534,908
Allowance for loan losses	(246,210		)						(247,657		)						(311,709		)						(280,679		)
Other assets (6)	1,651,323								1,583,202								2,529,409								1,800,517
Total assets	$	49,795,366							$	43,451,329							$	60,700,486							$	54,420,646
Funding sources:
Interest-bearing liabilities:
Interest bearing checking and savings accounts	$	442,518		$	86		0.08	%	$	308,345		$	60		0.08	%	$	459,972		$	100		0.09	%	$	554,411		$	106		0.08	%
Money market deposits	5,774,281			2,079			0.14		5,592,603			1,316			0.09		12,669,422			41,249			1.31		6,265,809			6,021			0.39
Money market deposits in foreign offices	187,183			21			0.04		199,539			20			0.04		162,586			16			0.04		220,334			21			0.04
Time deposits	51,406			17			0.13		50,351			12			0.09		75,721			171			0.91		56,755			23			0.16
Sweep deposits in foreign offices	1,008,675			101			0.04		1,236,602			127			0.04		1,476,614			5,614			1.52		1,060,192			100			0.04
Total interest-bearing deposits	7,464,063			2,304			0.12		7,387,440			1,535			0.08		14,844,315			47,150			1.27		8,157,501			6,271			0.31
Short-term borrowings	48,614			164			1.34		513,446			663			0.51		188,998			1,195			2.54		121,098			580			1.92
3.50% Senior Notes	347,168			3,144			3.59		346,848			3,141			3.60		347,755			3,149			3.63		347,415			3,146			3.63
5.375% Senior Notes	347,934			4,854			5.53		347,345			4,847			5.55		349,048			4,870			5.60		348,399			4,861			5.60
Junior Subordinated Debentures	54,391			831			6.06		54,566			830			6.05
6.05% Subordinated Notes	—			—			—		47,421			236			1.98
Total interest-bearing liabilities	8,262,170			11,297			0.54		8,697,066			11,252			0.51		15,730,116			56,364			1.44		8,974,413			14,858			0.66
Portion of noninterest-bearing funding sources	39,756,710								33,101,674								42,210,325								43,391,487
Total funding sources	48,018,880			11,297			0.09		41,798,740			11,252			0.11		57,940,441			56,364			0.39		52,365,900			14,858			0.11
Noninterest-bearing funding sources:
Demand deposits	36,578,779								30,522,314								38,117,893								39,814,450
Other liabilities	773,586								517,066								1,232,464								908,594
SVBFG stockholders’ equity	4,041,218								3,586,196								5,477,148								4,581,591
Noncontrolling interests	139,613								128,687								142,865								141,598
Portion used to fund interest-earning assets	(39,756,710		)						(33,101,674		)						(42,210,325		)						(43,391,487		)
Total liabilities, noncontrolling interest, and SVBFG stockholders’ equity	$	49,795,366							$	43,451,329							$	60,700,486							$	54,420,646
Net interest income and margin				$	374,605		3.10	%				$	289,442		2.75	%				$	532,308		3.68	%				$	468,480		3.59	%
Total deposits	$	44,042,842							$	37,909,754							$	52,962,208							$	47,971,951
Reconciliation to reported net interest income:
Adjustments for taxable equivalent basis				(631		)						(281		)						(2,905		)						(2,037		)
Net interest income, as reported				$	373,974							$	289,161							$	529,403							$	466,443

(1)

Includes average interest-earning deposits in other financial institutions of $~~1.3~~0.9 billion ~~and~~ ~~$0.8 billion~~ for both the three months ended~~September~~June 30, ~~2017~~2019 and ~~2016, respectively.~~2018. For the three months ended~~September~~June 30, ~~2017~~2019 and ~~2016~~2018, balances also include $~~1.9~~3.7 billion and $~~1.6~~1.3 billion, respectively, deposited at the FRB, earning interest at the Federal Funds target rate.


(2)	Yields on interest-earning investment securities do not give effect to changes in fair value that are reflected in other comprehensive income.


(3)	Interest income on non-taxable investment securities ~~are~~is presented on a fully ~~taxable-equivalent~~taxable equivalent basis using the federal statutory ~~income~~ tax rate of ~~35.0~~21.0 percent for all periods presented.


(4)	Nonaccrual loans are reflected in the average balances of loans.


(5)	Interest income includes loan fees of $~~33.4~~44.1 million and $~~28.4~~37.8 million for the three months ended ~~September~~June 30, ~~2017~~2019 and ~~2016~~2018, respectively.


(6)	Average investment securities of $~~692 million~~1.0 billion and $~~804~~773 million for the three months ended ~~September~~June 30, ~~2017~~2019 and ~~2016~~2018, respectively, were classified as other assets as they were noninterest-earning assets. These investments primarily consisted ~~primarily~~ of non-marketable and other equity securities.

Average Balances, Rates and Yields for the ~~Nine~~Six Months Ended ~~September~~June 30, ~~2017~~2019 and ~~2016~~2018


	Nine months ended September 30,																Six months ended June 30,
	2017								2016								2019								2018
(Dollars in thousands)	Average Balance			Interest Income/ Expense			Yield/ Rate		Average Balance			Interest Income/ Expense			Yield/ Rate		Average Balance			Interest Income/ Expense			Yield/ Rate		Average Balance			Interest Income/ Expense			Yield/ Rate
Interest-earning assets:
Federal Reserve deposits, federal funds sold, securities purchased under agreements to resell and other short-term investment securities (1)	$	3,235,628		$	16,670		0.69	%	$	2,111,619		$	5,793		0.37	%	$	4,935,751		$	45,580		1.86	%	$	2,529,384		$	11,943		0.95	%
Investment securities: (2)
Available-for-sale securities:
Taxable	12,539,773			146,803			1.57		13,608,722			140,932			1.38		7,541,439			80,769			2.16		10,396,533			94,582			1.83
Held-to-maturity securities:
Taxable	9,242,953			147,965			2.14		8,287,043			120,189			1.94		13,500,091			180,343			2.69		13,196,969			167,045			2.55
Non-taxable (3)	162,572			4,158			3.42		60,147			2,605			5.79		1,572,350			27,680			3.55		981,458			16,149			3.32
Total loans, net of unearned income (4) (5)	20,726,467			745,983			4.81		17,955,497			617,456			4.59		28,900,160			808,221			5.64		24,335,762			627,371			5.20
Total interest-earning assets	45,907,393			1,061,579			3.09		42,023,028			886,975			2.82		56,449,791			1,142,593			4.08		51,440,106			917,090			3.60
Cash and due from banks	361,041								326,144								534,769								467,954
Allowance for loan losses	(243,594		)						(237,613		)						(300,381		)						(271,931		)
Other assets (6)	1,540,211								1,558,157								2,439,055								1,763,487
Total assets	$	47,565,051							$	43,669,716							$	59,123,234							$	53,399,616
Funding sources:
Interest-bearing liabilities:
Interest bearing checking and savings accounts	$	420,680		$	242		0.08	%	$	310,505		$	181		0.08	%	$	502,369		$	216		0.09	%	$	581,399		$	222		0.08	%
Money market deposits	5,664,082			5,544			0.13		5,887,627			3,297			0.07		10,881,455			63,080			1.17		6,301,677			9,876			0.32
Money market deposits in foreign offices	183,040			59			0.04		153,593			50			0.04		155,503			31			0.04		200,922			39			0.04
Time deposits	50,855			49			0.13		59,069			51			0.12		63,275			200			0.64		51,919			36			0.14
Sweep deposits in foreign offices	1,089,714			324			0.04		1,339,077			405			0.04		1,574,577			11,530			1.48		1,020,487			194			0.04
Total interest-bearing deposits	7,408,371			6,218			0.11		7,749,871			3,984			0.07		13,177,179			75,057			1.15		8,156,404			10,367			0.26
Short-term borrowings	39,523			295			1.00		287,735			1,065			0.49		270,740			3,399			2.53		116,605			1,014			1.75
3.5% Senior Notes	347,088			9,429			3.63		346,771			9,421			3.63
3.50% Senior Notes																	347,712			6,298			3.65		347,373			6,291			3.65
5.375% Senior Notes	347,786			14,558			5.60		347,205			14,534			5.59		348,966			9,738			5.63		348,321			9,721			5.63
Junior Subordinated Debentures	54,434			2,494			6.13		54,610			2,493			6.10
6.05% Subordinated Notes	25,641			467			2.44		47,859			648			1.81
Total interest-bearing liabilities	8,222,843			33,461			0.54		8,834,051			32,145			0.49		14,144,597			94,492			1.35		8,968,703			27,393			0.62
Portion of noninterest-bearing funding sources	37,684,550								33,188,977								42,305,194								42,471,403
Total funding sources	45,907,393			33,461			0.10		42,023,028			32,145			0.10		56,449,791			94,492			0.34		51,440,106			27,393			0.11
Noninterest-bearing funding sources:
Demand deposits	34,653,264								30,694,119								38,170,001								38,887,766
Other liabilities	668,417								556,568								1,280,981								930,193
SVBFG stockholders’ equity	3,883,876								3,453,904								5,381,022								4,473,729
Noncontrolling interests	136,651								131,074								146,633								139,225
Portion used to fund interest-earning assets	(37,684,550		)						(33,188,977		)						(42,305,194		)						(42,471,403		)
Total liabilities, noncontrolling interest, and SVBFG stockholders’ equity	$	47,565,051							$	43,669,716							$	59,123,234							$	53,399,616
Net interest income and margin				$	1,028,118		2.99	%				$	854,830		2.72	%				$	1,048,101		3.74	%				$	889,697		3.49	%
Total deposits	$	42,061,635							$	38,443,990							$	51,347,180							$	47,044,170
Reconciliation to reported net interest income:
Adjustments for taxable equivalent basis				(1,455		)						(912		)						(5,812		)						(3,391		)
Net interest income, as reported				$	1,026,663							$	853,918							$	1,042,289							$	886,306

(1)

Includes average interest-earning deposits in other financial institutions of $~~1.0~~0.8 billion and $~~0.7~~1.1 billion for the ~~nine~~six months ended~~September~~June 30, ~~2017~~2019, and ~~2016~~2018, respectively. The balance also includes $~~2.1~~3.3 billion and $~~1.4~~1.3 billion deposited at the FRB, earning interest at the Federal Funds target rate for the ~~nine~~six months ended~~September~~June 30, ~~2017~~2019, and ~~2016~~2018, respectively.


(2)	Yields on interest-earning investment securities do not give effect to changes in fair value that are reflected in other comprehensive income.


(3)	Interest income on non-taxable available-for-sale securities is presented on a fully taxable-equivalent basis using the federal statutory ~~income~~ tax rate of ~~35.0~~21.0 percent for all periods presented.


(4)	Nonaccrual loans are reflected in the average balances of loans.


(5)	Interest income includes loan fees of $~~93.5~~80.8 million and $~~78.1~~67.7 million for the ~~nine~~six months ended~~September~~June 30, ~~2017~~2019, and ~~2016~~2018, respectively.


(6)	Average investment securities of $~~674~~963 million and $~~803~~780 million for the ~~nine~~six months ended~~September~~June 30, ~~2017~~2019, and ~~2016~~2018, respectively, were classified as other assets as they were noninterest-earning assets. These investments consisted primarily of non-marketable securities.

Provision for Credit Losses

The provision for credit losses is the combination of both the provision for loan losses and the provision for unfunded credit commitments. Our provision for loan losses is a function of our reserve methodology, which is used to determine an appropriate allowance for loan losses for the period. Our reserve methodology is based on our evaluation of the existing allowance for loan losses in relation to total gross loans using historical and other objective information, and on our qualitative assessment of the inherent and identified credit risk of the loan portfolio. Our provision for unfunded credit commitments is determined using a methodology that is similar to the methodology used for calculating the allowance for loan losses, adjusted for factors specific to binding commitments, including the probability of funding and exposure at funding. Our provision for credit losses equals our best estimate of probable credit losses that are inherent in the portfolios at the balance sheet date.

The following table summarizes our allowance for loan losses and the allowance for unfunded credit commitments for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2019 and ~~2016:~~2018:


	Three months ended September 30,						Nine months ended September 30,						Three months ended June 30,						Six months ended June 30,
(Dollars in thousands, except ratios)	2017			2016			2017			2016			2019			2018			2019			2018
Allowance for loan losses, beginning balance	$	236,496		$	244,723		$	225,366		$	217,613		$	300,151		$	274,294		$	280,903		$	255,024
Provision for loan losses ~~(1)~~	22,409			18,950			67,273			88,624			19,148			27,656			44,969			54,652
Gross loan charge-offs	(12,338		)	(24,616		)	(51,449		)	(71,466		)	(26,435		)	(15,428		)	(35,435		)	(26,015		)
Loan recoveries	1,828			2,084			6,155			8,158			9,820			1,926			11,245			3,714
Foreign currency translation adjustments	615			(576		)	1,665			(2,364		)	(796		)	(1,739		)	206			(666		)
Allowance for loan losses, ending balance	$	249,010		$	240,565		$	249,010		$	240,565		$	301,888		$	286,709		$	301,888		$	286,709

Allowance for unfunded credit commitments, beginning balance	$	47,000		$	34,889		$	45,265		$	34,415		57,970			52,823			55,183			51,770
Provision for unfunded credit commitments(1)	1,113			1,054			2,789			1,601
Provision for unfunded credit commitments													4,798			1,424			7,528			2,400
Foreign currency translation adjustments	59			(19		)	118			(92		)	(104		)	(143		)	(47		)	(66		)
Allowance for unfunded credit commitments, ending balance (2)	$	48,172		$	35,924		$	48,172		$	35,924
Allowance for unfunded credit commitments, ending balance (1)													$	62,664		$	54,104		$	62,664		$	54,104
Ratios and other information:
Provision for loan losses as a percentage of period-end total gross loans (annualized)	0.40		%	0.39		%	0.40		%	0.62		%	0.26		%	0.42		%	0.31		%	0.42		%
Gross loan charge-offs as a percentage of average total gross loans (annualized)	0.23			0.52			0.33			0.53			0.36			0.25			0.25			0.21
Net loan charge-offs as a percentage of average total gross loans (annualized)	0.19			0.48			0.29			0.47			0.23			0.22			0.17			0.18
Allowance for loan losses as a percentage of period-end total gross loans	1.12			1.25			1.12			1.25			1.03			1.10			1.03			1.10
Provision for credit losses (1)	$	23,522		$	20,004		$	70,062		$	90,225
Provision for credit losses													$	23,946		$	29,080		$	52,497		$	57,052
Period-end total gross loans	22,329,829			19,228,928			22,329,829			19,228,928			29,370,403			26,160,782			29,370,403			26,160,782
Average total gross loans	21,712,866			18,762,144			20,850,468			18,067,893			29,568,968			25,014,587			29,065,111			24,488,608


(1)	Our consolidated statements of income were modified from prior periods’ presentation to conform to the current period presentation, which reflect our provision for loan losses and provision for unfunded credit commitments together as our “provision for credit losses.”


~~(2)~~	The “allowance for unfunded credit commitments” is included as a component of ~~“other liabilities.”~~“Other liabilities” on our consolidated balance sheets.

Three months ended ~~September~~June 30, ~~2017~~2019 and ~~2016~~2018

Our provision for credit losses was ~~$23.5~~$23.9 million for the three months ended ~~September~~June 30, ~~2017,~~2019, consisting of a provision for loan losses of ~~$22.4~~$19.1 million and a provision for unfunded credit commitments of ~~$1.1~~$4.8 million.Our provision for credit losses was ~~$20.0~~$29.1 million for the three months ended ~~September~~June 30, ~~2016,~~2018, consisting of a provision for loan losses of ~~$19.0~~$27.7 million and a provision for unfunded credit commitments of ~~$1.0~~$1.4 million.

The provision for loan losses of $19.1 million for the three months ended June 30, 2019 reflects an increase of $7.5 million for our performing loans, $10.9 million for net new nonaccrual loans, $7.3 million for charge-offs not specifically reserved for and $3.2 million in additional reserves for period-end loan growth, partially offset by recoveries of $9.8 million.

The provision for unfunded credit commitments of $4.8 million was driven primarily by growth in unfunded credit commitments of $0.7 billion for three months ended June 30, 2019.

The provision for loan losses of $27.7 million for the three months ended June 30, 2018 reflects primarily an increase of $13.4 million in net new specific reserves for nonaccrual loans, additional reserves of $12.5 million for period-end loan growth, $11.4 million for charge-offs not specifically reserved for and an additional $3.4 million for performing loan reserves, partially

offset by a decrease in reserves of $12.5 million for our performing loans from certain reserve methodology enhancements made to our qualitative reserve for large loan exposure as a result of growth within our higher credit quality private equity/venture capital loan portfolios.

The provision for unfunded credit commitments of $1.4 million for the three months ended June 30, 2018 was primarily driven by increased reserves of $4.5 million from growth in unfunded credit commitment balances of $1.6 billion, partially offset by a decrease in reserves of $3.5 million reflective of the methodology enhancements mentioned above.

Gross loan charge-offs were $26.4 million for the three months ended June 30, 2019, of which $7.3 million was not specifically reserved for in prior quarters. Gross loan charge-offs were primarily driven by a $13.1 million charge-off for one mid-stage life science/healthcare portfolio client previously included in our nonaccrual loan portfolio. The remaining charge-offs came primarily from our early-stage clients.

Gross loan charge-offs were $15.4 million for the three months ended June 30, 2018, of which $11.4 million was not specifically reserved for in prior quarters. Gross loan charge-offs included $13.4 million from our software/internet loan portfolio and consisted primarily of $8.7 million for one sponsor-led buyout loan with the remaining $4.7 million primarily from early-stage clients.

Six months ended June 30, 2019 and 2018

Our provision for credit losses was $52.5 million for the six months ended June 30, 2019, consisting of a provision for loan losses of $45.0 million and a provision for unfunded credit commitments of $7.5 million. Our provision for credit losses was $57.1 million for the six months ended June 30, 2018, consisting of a provision for loan losses of $54.7 million and a provision for unfunded credit commitments of $2.4 million.

The provision for loan losses of ~~$22.4~~$45.0 million for the ~~three~~six months ended ~~September~~June 30, ~~2017~~2019 was reflective primarily ~~reflects $13.8~~of $38.4 million in net new specific reserves for nonaccrual loans, $12.2 million for charge-offs not specifically reserved for in prior quarters, $7.3 million from period-end loan growth, partially offset by recoveries of $11.2 million.

The provision for loan losses of $54.7 million for the six months ended June 30, 2018 was reflective primarily of $26.5 million from period-end loan growth, $24.7 million in net new specific reserves for nonaccrual loans and ~~a $10.9~~$14.8 million ~~increase~~for charge-offs not specifically reserved for in ~~reserves for period-end loan growth,~~

prior quarters, offset by a ~~benefit~~decrease in reserves of $12.5 for our performing loans from ~~overall improved~~certain reserve methodology enhancements made to our qualitative reserve for large loan exposure as a result of growth within our higher credit quality ~~of our loan portfolio and the continued shift in our loan portfolio to~~ private equity/venture capital ~~loans, which tend to be of higher credit quality.~~

The provision for loan losses of $19.0 million for the three months ended September 30, 2016, was reflective primarily of $8.0 million increase in reserves for performing loans, $5.5 million for charge-offs that did not previously have a specific reserve, $4.0 million net reserves for nonaccrual loans and $2.8 million for loan growth. The net increase in reserves for nonaccrual loans included a $5.5 million partial reserve release for one of our non-performing sponsored buyout loans due to credit improvement.

Gross loan charge-offs were $12.3 million for three months ended September 30, 2017, of which $6.3 million was not specifically previously reserved for. Gross loan charge-offs were primarily from four clients consisting of $8.7 million from two clients in our software/internet loan portfolio, of which $5.9 million was a late-stage client loan, and two early-stage client loan charge-offs of $3.5 million from our hardware and life science/healthcare portfolios.

Gross loan charge-offs of $24.6 million for the three months ended September 30, 2016 included $14.2 million from two late-stage clients, all of which, previously, had been fully reserved. Remaining charge-offs were primarily from early-stage clients in our software/internet and hardware loan portfolios.

~~Nine months ended September 30, 2017 and 2016~~

Our provision for credit losses was $70.1 million for the nine months ended September 30, 2017, consisting of a provision for loan losses of $67.3 million and a provision for unfunded credit commitments of $2.8 million. Our provision for credit losses was $90.2 million for the third quarter of 2016, consisting of a provision for loan losses of $88.6 million and a provision for unfunded credit commitments of $1.6 million.

The provision for loan losses of $67.3 million for the nine months ended September 30, 2017 was reflective primarily of $51.9 million in net new specific reserves for nonaccrual loans and $20.9 million from period-end loan growth, partially offset by a benefit from overall improved credit quality of our loan portfolio and the continued shift in our loan portfolio to private equity/venture capital loans, which tend to be of higher credit quality.

The provision for loan losses of $88.6 million for the nine months ended September 30, 2016 was reflective of $33.0 million for charge-offs that did not previously have a specific reserve and $23.0 million from period-end loan growth, with the remaining provision due primarily to reserves for new nonaccrual loans.

The provision for unfunded credit commitments of ~~$2.8~~$7.5 million for ~~nine~~six months ended ~~September~~June 30, ~~2017~~2019 was driven primarily by ~~qualitative allocations based on our loan portfolio being comprised of larger loans. Our provision for~~growth in unfunded credit commitments ~~was $1.6 million for nine months ended September 30, 2016.~~of $2.0 billion.

Gross loan charge-offs ~~of $51.4~~were $35.4 million for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2019, of which $12.2 million was not specifically reserved for in prior quarters. Gross loan charge-offs included ~~$27.8~~$17.5 million from our ~~early-stage~~life science/healthcare loan portfolio and ~~$13.0~~$11.2 million ~~from two Corporate Finance client loans. These charge-offs were primarily~~ from our software/internet loan portfolio. Gross loan charge-offs for our life science/healthcare portfolio were driven primarily by $13.1 million from one mid-stage client. Gross loan charge-offs for our software/internet loan portfolio were driven primarily by our early-stage clients.

Gross loan charge-offs of ~~$71.5~~$26.0 million for the ~~nine~~six months ended ~~September~~June 30, ~~2016~~2018 included ~~$35.4~~$20.1 million ~~from our early-stage portfolio and $27.6 million from four late-stage client loans. These charge-offs were primarily~~ from our software/internet loan ~~portfolio.~~portfolio and $4.3 million from our hardware loan portfolio and consisted primarily of $10.5 million from early-stage clients, $8.7 million for one sponsor-led buyout loan and $3.2 million from one late-stage client.

See “Consolidated Financial Condition—Credit Quality and Allowance for Loan Losses” below and Note 7—8—“Loans, ~~and~~ Allowance for Loan Losses and Allowance for Unfunded Credit Commitments” of the “Notes to Interim Consolidated Financial Statements (unaudited)” under Part I, Item 1 of this report for further details on our allowance for loan losses.

Noninterest Income

For the three and ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2019, noninterest income was ~~$158.8~~$333.8 million and ~~$405.0~~$614.1 million, respectively, compared to ~~$144.1~~$192.7 million and ~~$343.1~~$348.2 million for the comparable ~~2016~~2018 periods. For the three and ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2019, non-GAAP noninterest income, net of noncontrolling interests was ~~$153.2~~$315.0 million and ~~$383.3~~$592.1 million, respectively, compared to ~~$139.5~~$183.2 million and ~~$339.4~~$325.7 million for the comparable ~~2016~~2018 periods. For the three and ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2019, non-GAAP core fee income including investment banking revenue and commissions was $220.5 million and $438.6 million, respectively, compared to $123.1 million and $238.1 million for the comparable 2018 periods. For the three and six months ended June 30, 2019, non-GAAP core fee income was ~~$102.7~~$157.3 million and ~~$272.6~~$311.6 million, respectively, compared to ~~$80.5~~$123.1 million and ~~$231.5~~$238.1 million for the comparable ~~2016~~2018 periods. (See reconciliations of non-GAAP measures used below under “Use of Non-GAAP Financial Measures”.)

Use of Non-GAAP Financial Measures

To supplement our unaudited interim consolidated financial statements presented in accordance with GAAP, we use certain non-GAAP measures of financial performance (including, but not limited to, non-GAAP core fee income, non-GAAP core fee income including investment banking revenue and commissions, non-GAAP noninterest income, and non-GAAP net gains on investment securities). These supplemental performance measures may vary from, and may not be comparable to, similarly titled measures by other companies in our industry. Non-GAAP financial measures are not in accordance with, or an alternative for, GAAP. Generally, a non-GAAP financial measure is a numerical measure of a company’s performance that either excludes or includes amounts that are not normally excluded or included in the most directly comparable

measure calculated and presented in accordance with GAAP. A non-GAAP financial measure may also be a financial metric that is not required by GAAP or other applicable requirement.

We believe these non-GAAP financial measures, when taken together with the corresponding GAAP financial measures, provide meaningful supplemental information regarding our performance by excluding items that represent income attributable to investors other than us and our subsidiaries and certain other ~~certain~~ non-recurring items. Our management uses, and believes that investors benefit from referring to, these non-GAAP financial measures in assessing our operating results and when planning, forecasting and analyzing future periods. However, these non-GAAP financial measures should be considered in addition to, and not as a substitute for or preferable to, financial measures prepared in accordance with GAAP.

Included in net income is income and expense attributable to noncontrolling interests. We recognize, as part of our investment funds management business through SVB Capital and SVB Leerink, the entire income or loss from funds consolidated in accordance with ASC Topic 810 as discussed in Note 1—“Basis of Presentation” of the “Notes to Interim Consolidated Financial Statements (unaudited)” under Part I, Item 1 of this report. We are required under GAAP to consolidate 100% of the results of these entities, even though we may own less than 100% of such entities. The relevant amounts attributable to investors other than us are reflected under “Net Income Attributable to Noncontrolling Interests” on our statements of income. Where applicable, the tables below for noninterest income and net gains on investment securities exclude noncontrolling interests.

Core fee income is a non-GAAP financial measure, which represents GAAP noninterest income, but excludes certain line items where performance is typically subject to market or other conditions beyond our ~~control.~~control, primarily our net gains (losses) on investment securities and equity warrant assets. Core fee income includes client investment fees, foreign exchange fees, credit card fees, deposit service charges, ~~credit card fees,~~ lending related ~~fees, client investment~~ fees and letters of credit and letters of credit fees.

Core fee income including investment banking revenue and commissions is a non-GAAP measure, which represents GAAP noninterest income, but excludes certain line items where performance is typically subject to market or other conditions beyond our control.

The following table provides a reconciliation of GAAP noninterest income to non-GAAP noninterest income, net of noncontrolling interests, for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2019 and ~~2016:~~2018:


	Three months ended September 30,						Nine months ended September 30,						Three months ended June 30,						Six months ended June 30,
(Dollars in thousands)	2017		2016		% Change		2017		2016		% Change		2019		2018		% Change		2019		2018		% Change
GAAP noninterest income	$	158,778	$	144,140	10.2	%	$	404,965	$	343,050	18.0	%	$	333,750	$	192,689	73.2	%	$	614,126	$	348,207	76.4	%
Less: income attributable to noncontrolling interests, including carried interest allocation	5,614		4,679		20.0		21,709		3,627		NM		18,736		9,445		98.4		21,984		22,469		(2.2	)
Non-GAAP noninterest income, net of noncontrolling interests	$	153,164	$	139,461	9.8		$	383,256	$	339,423	12.9		$	315,014	$	183,244	71.9		$	592,142	$	325,738	81.8

~~NM—Not meaningful~~

The following table provides a reconciliation of GAAP noninterest income to non-GAAP core fee income for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2019 and ~~2016:~~2018:


	Three months ended September 30,						Nine months ended September 30,						Three months ended June 30,						Six months ended June 30,
(Dollars in thousands)	2017		2016		% Change		2017		2016		% Change		2019		2018		% Change		2019		2018		% Change
GAAP noninterest income	$	158,778	$	144,140	10.2	%	$	404,965	$	343,050	18.0	%	$	333,750	$	192,689	73.2	%	$	614,126	$	348,207	76.4	%
Less: gains on investment securities, net	15,238		23,178		(34.3	)	48,838		41,764		16.9		47,698		36,114		32.1		76,726		45,172		69.9
Less: gains on equity warrant assets, net	24,922		21,558		15.6		42,432		33,253		27.6		48,347		19,061		153.6		69,652		38,252		82.1
Less: other noninterest income	15,896		18,878		(15.8	)	41,128		36,511		12.6		17,245		14,390		19.8		29,142		26,649		9.4
Non-GAAP core fee income (1)	$	102,722	$	80,526	27.6		$	272,567	$	231,522	17.7
Non-GAAP core fee income including investment banking revenue and commissions (1)													$	220,460	$	123,124	79.1		$	438,606	$	238,134	84.2
Less: investment banking revenue													48,694		—		—		98,489		—		—
Less: commissions													14,429		—		—		28,537		—		—
Non-GAAP core fee income (2)													$	157,337	$	123,124	27.8		$	311,580	$	238,134	30.8


(1)	Non-GAAP core fee income including investment banking revenue and commissions represents noninterest income, but excludes certain line items where performance is typically subject to market or other conditions beyond our control.

(2)

Non-GAAP core fee income represents noninterest income, but excludes certain line items where performance is typically subject to market or other conditions beyond our control, as well as our investment banking revenue and commissions, and includes client investment fees, foreign exchange fees, credit card fees, deposit service charges, lending related fees ~~client investment fees~~ and letters of credit and standby letters of credit fees.

Gains on Investment Securities, Net

Net gains ~~and losses~~ on investment securities include gains and losses from our non-marketable and other equity securities, which include public equity securities held as a result of exercised equity warrant assets, as well as gains and losses from sales of our ~~available-for-sale~~AFS debt securities portfolio, when applicable.

Our available-for-sale securities portfolio represents primarily interest-earning fixed income investment securities and is managed to earn an appropriate portfolio yield over the long-term while maintaining sufficient liquidity and addressing our asset/liability management objectives. Sales of equity securities held as a result of our exercised warrants, result in net gains or losses on investment securities. These sales are conducted pursuant to the guidelines of our investment policy related to the

management of our liquidity position and interest rate risk. Though infrequent, sales of investment securities in our available-for-sale securities portfolio may result in net gains or losses and are also conducted pursuant to the guidelines of our investment policy.

~~Our~~ non-marketable and other equity securities portfolio primarily represents investments in venture capital and private equity funds, SPD Silicon Valley Bank Co., Ltd. (the Bank's joint venture bank in China (“SPD-SVB”)), debt funds, private and public portfolio companies and ~~investments in~~ qualified affordable housing projects. We experience variability in the performance of our non-marketable and other equity securities from ~~quarter~~period to ~~quarter,~~period, which results in net gains or losses on investment securities (both realized and unrealized). This variability is due to a number of factors, including unrealized changes in the values of our investments, changes in the amount of realized gains and losses from distributions, changes in liquidity events and general economic and market conditions. Unrealized gains or losses from non-marketable and other equity securities for any single period are typically driven by valuation changes, and are therefore subject to potential increases or decreases in future periods. Such variability may lead to volatility in the gains or losses from investment securities. As such, our results for a particular period are not necessarily indicative of our expected performance in a future period.

The extent to which any unrealized gains or losses will become realized is subject to a variety of factors, including, among other things, the expiration of certain sales restrictions to which these equity securities may be subject to ~~(i.e.~~(e.g. lock-up agreements), changes in prevailing market prices, market conditions, the actual sales or distributions of securities, and the timing of such actual sales or distributions, which, to the extent such securities are managed by our managed funds, are subject to our funds' separate discretionary sales/distributions and governance processes.

Our AFS securities portfolio is a fixed income investment portfolio that is managed with the objective of earning an appropriate portfolio yield over the long-term while maintaining sufficient liquidity and credit diversification as well as addressing our asset/liability management objectives. Though infrequent, sales of debt securities in our AFS securities portfolio may result in net gains or losses and are conducted pursuant to the guidelines of our investment policy related to the management of our liquidity position and interest rate risk.

Three months ended ~~September~~June 30, ~~2017~~2019 and ~~2016~~2018

For the three months ended ~~September~~June 30, ~~2017,~~2019, we had net gains on investment securities of ~~$15.2~~$47.7 million, compared to ~~$23.2~~$36.1 million for the comparable ~~2016~~2018 period. Non-GAAP net gains on investment securities, net of noncontrolling interests, were ~~$9.7~~$29.1 million for the three months ended ~~September~~June 30, ~~2017,~~2019, compared to ~~$18.4~~non-GAAP net gains, net of controlling interest of $26.4 million for the comparable ~~2016~~2018 period.

Non-GAAP net gains on investment securities, net of noncontrolling interests, of ~~$9.7~~$29.1 million for the three months ended ~~September~~June 30, ~~2017~~2019 were driven by the following:


•	Gains of $15.5 million from managed funds of funds portfolio, related primarily to net unrealized valuation increases in the public company investments held by the funds in the portfolio, and


•	Gains of $7.3 million from our strategic and other investments portfolio, comprised primarily of net unrealized valuation increases in private and public companies held in our strategic venture capital funds.

~~Gains of~~ ~~$3.7 million~~ ~~from our strategic and other investments, comprised primarily of realized gains from distributions from our strategic venture capital fund investments reflective of M&A activity,~~

~~Gains of~~ ~~$3.1 million~~ ~~from our managed funds of funds portfolio, related primarily to net unrealized valuation increases in the investments held by the funds driven by IPO and M&A activity, and~~

~~Gains of~~ ~~$2.4 million~~ ~~from our debt funds portfolio, related primarily to net unrealized valuation increases in the investments held by the funds driven by IPO activity during the third quarter of 2017.~~

~~Nine~~Six months ended ~~September~~June 30, ~~2017~~2019 and ~~2016~~2018

For the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2019, we had net gains on investment securities of ~~$48.8~~$76.7 million, compared to ~~$41.8~~$45.2 million for the comparable ~~2016~~2018 period. Non-GAAP net gains on investment securities, net of noncontrolling interests, were ~~$27.4~~$54.7 million for the ~~nine~~six months ended~~September~~June 30, ~~2017,~~2019, compared to ~~net gains of $38.1~~$22.6 million for the comparable ~~2016~~2018 period.

Non-GAAP net gains, net of noncontrolling interests, of ~~$27.4~~$54.7 million for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2019 were driven primarily by the following:

~~Gains of~~ ~~$14.2 million~~ from our strategic and other investments, attributable primarily to distribution gains from our strategic venture capital funds investments and $3.4 million related to the partial sale of shares of one of our direct equity investments,

~~Gains of~~ ~~$9.4 million~~ from our managed funds of funds portfolio, related primarily to net unrealized valuation increases in the investments held by the funds driven by IPO, M&A and private equity-backed financing activity, and

~~Gains of~~ ~~$2.7 million~~ ~~from our debt funds portfolio, related primarily to net unrealized valuation increases in the investments held by the funds driven by IPO activity during the nine months ended September 30, 2017.~~


•	Gains of $22.3 million from our strategic and other investments portfolio, comprised primarily of net unrealized valuation increases in private and public companies held in our strategic venture capital funds and a realized gain for one company in our direct equity portfolio due to M&A activity,


•	Gains of $18.0 million from managed funds of funds portfolio, related primarily to net unrealized valuation increases in the public company investments held by the funds in the portfolio, and


•	Gains of $10.1 million from our public equity securities portfolio primarily attributable to the sale of our shares from exercised warrants in one company which were sold as soon as practicable following the lock-up period expiration.

The following ~~table provides~~tables provide a reconciliation of GAAP total gains (losses) on investment securities, net, to non-GAAP net gains (losses) on investment securities, net of noncontrolling interests, for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2019 and ~~2016:~~2018:


(Dollars in thousands)	Managed Funds of Funds		Managed Direct Venture Funds			Debt Funds		Available- For-Sale Securities			Strategic and Other Investments		Total		Managed Funds of Funds		Managed Direct Venture Funds			Public Equity Securities			Debt Funds			Sales of AFS Securities			Strategic and Other Investments		SVB Leerink		Total
Three months ended September 30, 2017
Three months ended June 30, 2019
Total gains (losses) on investment securities, net	$	8,446	$	729		$	2,445	$	(101	)	$	3,719	$	15,238	$	32,335	$	4,101		$	444		$	1,342		$	(275	)	$	7,311	$	2,440	$	47,698
Less: income attributable to noncontrolling interests, including carried interest allocation	5,335		161			—		—			—		5,496		16,852		1,711			—			—			—			—		35		18,598
Non-GAAP net gains (losses) on investment securities, net of noncontrolling interests	$	3,111	$	568		$	2,445	$	(101	)	$	3,719	$	9,742	$	15,483	$	2,390		$	444		$	1,342		$	(275	)	$	7,311	$	2,405	$	29,100

Three months ended September 30, 2016
Three months ended June 30, 2018
Total gains (losses) on investment securities, net															$	17,531	$	(405	)	$	140		$	726		$	—		$	18,122	$	—	$	36,114
Less: income (loss) attributable to noncontrolling interests, including carried interest allocation															9,793		(121		)	—			—			—			—		—		9,672
Non-GAAP net gains (losses) on investment securities, net of noncontrolling interests															$	7,738	$	(284	)	$	140		$	726		$	—		$	18,122	$	—	$	26,442

Six months ended June 30, 2019
Total gains (losses) on investment securities, net	$	8,931	$	390		$	166	$	(15	)	$	13,706	$	23,178	$	38,564	$	3,467		$	10,080		$	1,342		$	(3,905	)	$	22,313	$	4,865	$	76,726
Less: income attributable to noncontrolling interests, including carried interest allocation	4,615		130			—		—			—		4,745		20,597		1,402			—			—			—			—		35		22,034
Non-GAAP net gains (losses) on investment securities, net of noncontrolling interests	$	4,316	$	260		$	166	$	(15	)	$	13,706	$	18,433	$	17,967	$	2,065		$	10,080		$	1,342		$	(3,905	)	$	22,313	$	4,830	$	54,692

Nine months ended September 30, 2017
Total gains on investment securities, net	$	30,624	$	894		$	2,696	$	384		$	14,240	$	48,838
Six months ended June 30, 2018
Total gains (losses) on investment securities, net															$	36,604	$	1,514		$	(22,142	)	$	(1,573	)	$	—		$	30,769	$	—	$	45,172
Less: income attributable to noncontrolling interests, including carried interest allocation	21,245		178			—		—			—		21,423		21,990		587			—			—			—			—		—		22,577
Non-GAAP net gains on investment securities, net of noncontrolling interests	$	9,379	$	716		$	2,696	$	384		$	14,240	$	27,415

Nine months ended September 30, 2016
Total gains (losses) on investment securities, net	$	5,830	$	(411	)	$	801	$	11,567		$	23,977	$	41,764
Less: income (losses) attributable to noncontrolling interests, including carried interest allocation	3,668		(17		)	—		—			—		3,651
Non-GAAP net gains (losses) on investment securities, net of noncontrolling interests	$	2,162	$	(394	)	$	801	$	11,567		$	23,977	$	38,113	$	14,614	$	927		$	(22,142	)	$	(1,573	)	$	—		$	30,769	$	—	$	22,595

Gains on Equity Warrant Assets, Net

Three months ended June 30, 2019 and 2018

Net gains on equity warrant assets were $48.3 million for the three months ended June 30, 2019, compared to net gains of $19.1 million for the comparable 2018 period. Net gains on equity warrant assets for the three months ended June 30, 2019 consisted of:


•	Net gains of $40.2 million from the exercise of equity warrant assets compared to net gains of $8.9 million, primarily driven by healthy gains from IPO activity, and


•	Net gains of $9.2 million from increases in warrant valuations compared to net gains of $11.0 million, driven by valuation increases in our private company warrant portfolio driven by healthy funding rounds during the three months ended June 30, 2019.

Six months ended June 30, 2019 and 2018

Net gains on equity warrant assets were $69.7 million for the six months ended June 30, 2019, compared to net gains of $38.3 million for the comparable 2018 period. Net gains on equity warrant assets for the six months ended June 30, 2019 consisted of:


•	Net gains of $49.2 million from the exercise of equity warrant assets compared to net gains of $20.5 million, reflective primarily of increased IPO activity during the six months endedJune 30, 2019, and


•	Net gains of $22.4 million from changes in warrant valuation increases compared to net gains of $19.5 million, driven by valuation increases in our private company warrant portfolio during the six months endedJune 30, 2019.

A summary of gains on equity warrant assets, net, for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2019 and ~~2016~~2018 is as follows:


	Three months ended September 30,								Nine months ended September 30,								Three months ended June 30,								Six months ended June 30,
(Dollars in thousands)	2017			2016			% Change		2017			2016			% Change		2019			2018			% Change		2019			2018			% Change
Equity warrant assets (1)
Equity warrant assets (1):
Gains on exercises, net	$	7,449		$	5,931		25.6	%	$	22,482		$	13,808		62.8	%	$	40,226		$	8,875		NM		$	49,180		$	20,509		139.8	%
Cancellations and expirations	(757		)	(1,161		)	(34.8	)	(3,614		)	(2,544		)	42.1
Terminations																	(1,045		)	(826		)	26.5		(1,884		)	(1,726		)	9.2
Changes in fair value, net	18,230			16,788			8.6		23,564			21,989			7.2		9,166			11,012			(16.8	)	22,356			19,469			14.8
Gains on equity warrant assets, net	$	24,922		$	21,558		15.6		$	42,432		$	33,253		27.6
Total gains on equity warrant assets, net																	$	48,347		$	19,061		153.6		$	69,652		$	38,252		82.1

NM—Not meaningful

(1)

At ~~September~~June 30, ~~2017~~2019, we held warrants in ~~1,842~~2,173 companies, compared to ~~1,719~~1,967 companies at ~~September~~June 30, ~~2016~~2018. The total fair value of our warrant portfolio was $~~142~~158.0 million at ~~September~~June 30, ~~2017~~2019 and ~~$145~~$143.7 million at ~~September~~June 30, ~~2016~~2018. Warrants in 1622 companies each had fair values greater than $1.0 million and collectively represented ~~$51.7~~$51.8 million, or ~~36.5~~32.8 percent, of the fair value of the total warrant portfolio at ~~September~~June 30, ~~2017~~2019. Warrants in 15 companies each had fair values greater than $1.0 million and collectively represented $38.6 million, or 26.8 percent, of the fair value of the total warrant portfolio at June 30, 2018.

~~Three months ended September 30, 2017 and 2016~~

Net gains on equity warrant assets were $24.9 million for the three months ended September 30, 2017, compared to net gains of $21.6 million for the comparable 2016 period. Net gains on equity warrant assets for the three months ended September 30, 2017 consisted of:

~~Net gains of~~ ~~$18.2 million~~ ~~from changes in warrant valuations for the~~ ~~three months endedSeptember 30, 2017, compared to net gains of~~ ~~$16.8 million~~ ~~for the comparable~~ ~~2016~~ ~~period, driven by an increase of $15.9 million in the valuation of one company in our portfolio associated with its IPO during the third quarter of 2017, and~~

~~Net gains of~~ ~~$7.4 million~~ ~~from the exercise of equity warrant assets during the three months ended~~ ~~September 30, 2017, compared to net gains of~~ ~~$5.9 million~~ ~~for the comparable~~ ~~2016~~ ~~period, reflective of increased M&A activity in the third quarter of 2017.~~

~~Nine months ended September 30, 2017 and 2016~~

Net gains on equity warrant assets were $42.4 million for the nine months ended September 30, 2017, compared to net gains of $33.3 million for the comparable 2016 period. Net gains on equity warrant assets for the nine months ended September 30, 2017 consisted of:

~~Net gains of~~ ~~$22.5 million~~ ~~from the exercise of equity warrant assets for the~~ ~~nine months endedSeptember 30, 2017, compared to net gains of~~ ~~$13.8 million~~ ~~for the comparable~~ ~~2016~~ ~~period, reflective primarily of increased M&A and IPO activity during the~~ ~~nine months endedSeptember 30, 2017, and~~

~~Net gains of~~ ~~$23.6 million~~ ~~from changes in warrant valuations for the~~ ~~nine months endedSeptember 30, 2017, compared to net gains of~~ ~~$22.0 million~~ ~~for the comparable~~ ~~2016~~ period, driven primarily by an increase in the valuation of one company in our portfolio associated with its IPO during the third quarter of 2017 as mentioned above as well as increases in valuation in our private company warrant portfolio reflective of M&A exit activity during the ~~nine months endedSeptember 30, 2017~~.

Non-GAAP Core Fee Income


	Three months ended September 30,						Nine months ended September 30,						Three months ended June 30,						Six months ended June 30,
(Dollars in thousands)	2017		2016		% Change		2017		2016		% Change		2019		2018		% Change		2019		2018		% Change
Non-GAAP core fee income (1):
Client investment fees													$	45,744	$	29,452	55.3	%	$	90,226	$	52,327	72.4	%
Foreign exchange fees	$	29,671	$	25,944	14.4	%	$	82,026	$	76,998	6.5	%	38,506		34,077		13.0		76,554		67,904		12.7
Credit card fees	20,270		18,295		10.8		56,099		49,226		14.0		28,790		22,926		25.6		56,273		44,618		26.1
Deposit service charges	14,508		13,356		8.6		43,046		39,142		10.0		22,075		18,794		17.5		43,014		36,493		17.9
Client investment fees	15,563		7,952		95.7		37,571		23,959		56.8
Lending related fees	15,404		8,168		88.6		32,874		23,783		38.2		11,213		9,528		17.7		25,150		20,263		24.1
Letters of credit and standby letters of credit fees	7,306		6,811		7.3		20,951		18,414		13.8		11,009		8,347		31.9		20,363		16,529		23.2
Total non-GAAP core fee income (1)	$	102,722	$	80,526	27.6		$	272,567	$	231,522	17.7		$	157,337	$	123,124	27.8		$	311,580	$	238,134	30.8
Investment banking revenue													48,694		—		—		98,489		—		—
Commissions													14,429		—		—		28,537		—		—
Total non-GAAP core fee income including investment banking revenue and commissions (2)													$	220,460	$	123,124	79.1		$	438,606	$	238,134	84.2


(1)	This non-GAAP measure represents noninterest income, but excludes certain line items where performance is typically subject to market or other conditions beyond our control. See “Use of Non-GAAP Measures” above.


(2)	This non-GAAP measure represents noninterest income, but excludes certain line items where performance is typically subject to market or other conditions beyond our control, as well as investment banking revenue and commissions. See “Use of Non-GAAP Measures” above.

Client Investment Fees

Client investment fees were $45.7 million and $90.2 million for the three and six months ended June 30, 2019, compared to $29.5 million and $52.3 million for the comparable 2018 periods. The increases were reflective of the large increases in average client investment funds driven by our clients’ increased utilization of our off-balance sheet sweep money market funds and products managed by SVB Asset Management. Client investment fees also benefited from improved spreads on our client investment funds due to increases in general market rates since the second quarter ended June 30, 2018. A summary of client investment fees by instrument type for the three and six months ended June 30, 2019 and 2018 is as follows:



	Three months ended June 30,						Six months ended June 30,
(Dollars in thousands)	2019		2018		% Change		2019		2018		% Change
Client investment fees by type:
Sweep money market fees	$	26,952	$	17,178	56.9	%	$	53,496	$	29,500	81.3	%
Asset management fees	6,956		5,730		21.4		13,628		11,088		22.9
Repurchase agreement fees	11,836		6,544		80.9		23,102		11,739		96.8
Total client investment fees	$	45,744	$	29,452	55.3		$	90,226	$	52,327	72.4

The following table summarizes average client investment funds for the three and six months ended June 30, 2019 and 2018:



	Three months ended June 30,						Six months ended June 30,
(Dollars in millions)	2019		2018		% Change		2019		2018		% Change
Sweep money market funds	$	40,017	$	30,164	32.7	%	$	39,911	$	28,148	41.8	%
Client investment assets under management (1)	40,825		33,443		22.1		40,036		32,071		24.8
Repurchase agreements	8,810		7,705		14.3		8,586		7,626		12.6
Total average client investment funds (2)	$	89,652	$	71,312	25.7		$	88,533	$	67,845	30.5


(1)	These funds represent investments in third-party money market mutual funds and fixed-income securities managed by SVB Asset Management.


(2)	Client investment funds are maintained at third-party financial institutions and are not recorded on our balance sheet.

The following table summarizes period-end client investment funds at June 30, 2019 and December 31, 2018:



(Dollars in millions)	June 30, 2019		December 31, 2018		% Change
Sweep money market funds	$	40,008	$	38,348	4.3	%
Client investment assets under management (1)	41,614		39,214		6.1
Repurchase agreements	9,873		8,422		17.2
Total period-end client investment funds (2)	$	91,495	$	85,984	6.4


(1)	These funds represent investments in third-party money market mutual funds and fixed-income securities managed by SVB Asset Management.


(2)	Client investment funds are maintained at third-party financial institutions and are not recorded on our balance sheet.

Foreign Exchange Fees

Foreign exchange fees were ~~$29.7~~$38.5 million and ~~$82.0~~$76.6 million for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2019, respectively, compared to ~~$25.9~~$34.1 million and ~~$77.0~~$67.9 million for the comparable ~~2016~~2018 periods. The ~~increases~~increase in foreign exchange fees ~~were~~was driven primarily by increases in spot contract commissions driven by increased volume of trades for the three and six months ended June 30, 2019 compared to the 2018 periods. The volume of trades for spot contracts increased 13.8 and 17.9 percent for the three and six months ended June 30, 2019, respectively, compared to the comparable 2018 periods reflective primarily of our ~~continued investments in people, expertise~~global expansion initiative and ~~focused~~increased client engagement ~~largely from our focus on our~~efforts. A summary of foreign exchange ~~business~~fee income by instrument type for the three and six months ended June 30, 2019 and 2018 is as ~~a key area targeted for growth, resulting in increased client count and higher trade volumes from existing clients across all of our client portfolios.~~follows:



	Three months ended June 30,						Six months ended June 30,
(Dollars in thousands)	2019		2018		% Change		2019		2018		% Change
Foreign exchange fees by instrument type:
Spot contract commissions	$	34,696	$	31,548	10.0	%	$	69,725	$	62,750	11.1	%
Forward contract commissions	3,778		2,455		53.9		6,773		4,940		37.1
Option premium fees	32		74		(56.8	)	56		214		(73.8	)
Total foreign exchange fees	$	38,506	$	34,077	13.0		$	76,554	$	67,904	12.7

Credit Card Fees

Credit card fees were ~~$20.3~~$28.8 million and ~~$56.1~~$56.3 million for the three and ~~nine~~six months ended~~September~~June 30, ~~2017,~~2019, respectively, compared to ~~$18.3~~$22.9 million and ~~$49.2~~$44.6 million for the comparable ~~2016~~2018 periods. The increases were primarily due to higher gross interchange fee income driven by an increase in transaction volume reflective of higher ~~spend~~spending by our commercial clients and our focus on our credit card business as a key area targeted for growth. The ~~increases~~increase in gross interchange fee income ~~were~~was partially offset by ~~increases~~an increase in ~~rebate/~~rebates/rewards expense for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017.~~2019. A summary of credit card fees by instrument type for the three and six months ended June 30, 2019 and 2018 is as follows:



	Three months ended June 30,						Six months ended June 30,
(Dollars in thousands)	2019		2018		% Change		2019		2018		% Change
Credit card fees by instrument type:
Card interchange fees, net	$	22,855	$	18,137	26.0	%	$	44,248	$	35,697	24.0	%
Merchant service fees	4,286		3,425		25.1		8,821		6,331		39.3
Card service fees	1,649		1,364		20.9		3,204		2,590		23.7
Total credit card fees	$	28,790	$	22,926	25.6		$	56,273	$	44,618	26.1

Deposit Service Charges

Deposit service charges were ~~$14.5~~$22.1 million and $43.0 million for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2019, respectively, compared to ~~$13.4~~$18.8 million and ~~$39.1~~$36.5 million for the comparable ~~2016~~2018 periods. The increases were reflective of higher deposit client counts as well as ~~an increase in transaction~~higher volumes of our transaction-based fee products during the three and ~~nine~~six months ended ~~September~~June 30, ~~2017.~~2019.

Lending Related Fees

Lending related fees were ~~$15.4~~$11.2 million and ~~$32.9~~$25.2 million for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017,~~ 2019, respectively,

compared to ~~$8.2~~$9.5 million and ~~$23.8~~$20.3 million for the comparable ~~2016~~2018 periods. The increases were due primarily to an ~~adjustment of $4.5 million related to fees earned~~increase in ~~prior periods from unused lines of credit with the remaining increase attributable primarily to higher loan~~ syndication fee income for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017.~~2019. A summary of lending related fees by type for the three and six months ended June 30, 2019 and 2018 is as follows:

~~Client Investment~~



	Three months ended June 30,						Six months ended June 30,
(Dollars in thousands)	2019		2018		% Change		2019		2018		% Change
Lending related fees by instrument type:
Unused commitment fees	$	7,051	$	7,827	(9.9	)%	$	16,721	$	16,584	0.8	%
Other	4,162		1,701		144.7		8,429		3,679		129.1
Total lending related fees	$	11,213	$	9,528	17.7		$	25,150	$	20,263	24.1

Letters of Credit and Standby Letters of Credit Fees

~~Client investment~~Letters of credit and standby letters of credit fees were ~~$15.6~~$11.0 million and ~~$37.6~~$20.4 million for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2019, respectively, compared to ~~$8.0~~$8.3 million and ~~$24.0~~$16.5 million for the comparable 2018 periods. The increases were primarily driven by increases in deferred fee income reflective of larger letter of credit issuances.

Investment Banking Revenue

Investment banking revenue was $48.7 million and $98.5 million for the three and six months ended June 30, 2019, respectively, consisting primarily of underwriting fees. A summary of investment banking revenue by type for the three and six months ended June 30, 2019 and 2018 is as follows:



	Three months ended June 30,					Six months ended June 30,
(Dollars in thousands)	2019		2018		% Change	2019		2018		% Change
Investment banking revenue:
Underwriting fees	$	42,584	$	—	—	$	78,356	$	—	—
Advisory fees	5,315		—		—	17,588		—		—
Private placements and other	795		—		—	2,545		—		—
Total investment banking revenue	$	48,694	$	—	—	$	98,489	$	—	—

Commissions

Commissions for the three and six months ended June 30, 2019 were $14.4 million and $28.5 million, respectively, which were driven by client trading activity, consistent with market volumes.

Other Noninterest Income

Total other noninterest income was $17.2 million and $29.1 million for the three and six months ended June 30, 2019, respectively, compared to $14.4 million and $26.6 million for the comparable ~~2016~~2018 periods. The increases were ~~attributable~~due primarily to ~~increases~~an increase in ~~average client investment~~ fund balances driven by our clients’ increased utilization of off-balance sheet products managed by SVB Asset Management and third-party sweep money market funds, as well as from improved spreads on our client investment funds due to increases in general market rates and the reintroduction ofmanagement fees ~~that had been previously waived~~ due to the ~~low rate environment.~~

~~The following table summarizes average client investment funds for the three and nine months ended September 30, 2017 and 2016:~~

Three months ended September 30, Nine months ended September 30,
(Dollars in millions) 2017 2016 % Change 2017 2016 % Change
Client directed investment assets (1) $ 6,985
$ 6,846
2.0 % $ 6,190
$ 7,137
(13.3 )%
Client investment assets under management (2) 26,123
20,692
26.2
24,531
21,215
15.6
Sweep money market funds 20,165
15,567
29.5
18,783
14,468
29.8
Total average client investment funds (3) $ 53,273
$ 43,105
23.6
$ 49,504
$ 42,820
15.6


~~(1)~~	~~Comprised of mutual funds and Repurchase Agreement Program assets.~~


~~(2)~~	~~These funds represent investments in third party money market mutual funds and fixed-income securities managed by SVB Asset Management.~~


~~(3)~~	~~Client investment funds are maintained at third party financial institutions and are not recorded on our balance sheet.~~

~~The following table summarizes period-end client investment funds at~~ ~~September 30, 2017~~ ~~and~~ ~~December 31, 2016~~:

(Dollars in millions) September 30, 2017 December 31, 2016 % Change
Client directed investment assets (1) $ 6,860
$ 5,510
24.5 %
Client investment assets under management (2) 26,718
23,115
15.6
Sweep money market funds 20,664
17,173
20.3
Total period-end client investment funds (3) $ 54,242
$ 45,798
18.4


~~(1)~~	~~Comprised of mutual funds and Repurchase Agreement Program assets.~~


~~(2)~~	~~These funds represent investments in third party money market mutual funds and fixed-income securities managed by SVB Asset Management.~~


~~(3)~~	~~Client investment funds are maintained at third party financial institutions and are not recorded on our balance sheet.~~

~~Other Noninterest Income~~

inclusion of SVB Leerink in our financial results as of January 4, 2019. A summary of other noninterest income for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2019 and ~~2016~~2018 is as follows:

Three months ended September 30, Nine months ended September 30,
(Dollars in thousands) 2017 2016 % Change 2017 2016 % Change
Fund management fees $ 5,198
$ 5,231
(0.6 )% $ 15,903
$ 14,149
12.4 %
Service-based fee income 469
2,029
(76.9 ) 3,860
6,270
(38.4 )
Gains on revaluation of client foreign currency instruments, net (1) 3,760
3,488
7.8
8,889
7,009
26.8
Losses on client foreign exchange forward contracts, net (1) (3,871 ) (3,194 ) 21.2
(8,350 ) (8,780 ) (4.9 )
Gains (losses) on revaluation of internal foreign currency instruments, net (2) 10,561
(1,406 ) NM
29,265
(4,222 ) NM
(Losses) gains on internal foreign exchange contracts, net (2) (10,550 ) 1,352
NM
(28,349 ) 3,067
NM
Other (3) 10,329
11,378
(9.2 ) 19,910
19,018
4.7
Total other noninterest income $ 15,896
$ 18,878
(15.8 ) $ 41,128
$ 36,511
12.6



	Three months ended June 30,						Six months ended June 30,
(Dollars in thousands)	2019		2018		% Change		2019		2018		% Change
Other noninterest income by instrument type:
Fund management fees	$	7,758	$	5,929	30.8	%	$	15,799	$	11,665	35.4	%
Net gains on revaluation of foreign currency instruments, net of foreign exchange forward contracts (1)	587		236		148.7		251		189		32.8
Other service revenue (2)	8,900		8,225		8.2		13,092		14,795		(11.5	)
Total other noninterest income	$	17,245	$	14,390	19.8		$	29,142	$	26,649	9.4

~~NM—Not meaningful~~


(1)	Represents the net revaluation of client and internal foreign currency denominated financial instruments. We enter into ~~client~~ foreign exchange forward contracts to economically reduce our foreign exchange exposure related to client and internal foreign currency denominated financial instruments.


(2)	Represents the net revaluation of foreign currency denominated financial instruments issued and held by us, primarily loans, deposits and cash. We enter into internal foreign exchange forward contracts to economically reduce our foreign exchange exposure related to these foreign currency denominated financial instruments issued and held by us.


~~(3)~~	Includes dividends on FHLB/FRB stock, correspondent bank rebate income, incentive fees related to carried interest, valuation fee income and other fee income.

~~Three months ended September 30, 2017 and 2016~~

~~Total other noninterest income was $15.9 million for the three months ended September 30, 2017, compared to $18.9 million~~ ~~for the comparable 2016 period.~~ ~~The decrease of $3.0 million in other noninterest income was due to the following:~~

Service-based fee income of $0.5 million compared to $2.0 million for the comparable 2016 period. The $1.5 million decrease was primarily due to the sale of our equity valuation services business during the third quarter of 2017, and

Other noninterest income of $10.3 million compared to $11.4 million for the comparable 2016 period. The $1.1 million decrease was primarily attributable to higher carried interest income earned from one of our unconsolidated fund investments during the third quarter of 2016 as compared to the third quarter of 2017.

~~Nine months ended September 30, 2017 and 2016~~

~~Total other noninterest income was $41.1 million for the nine months endedSeptember 30, 2017, compared $36.5 million~~ ~~for the comparable 2016 period.~~ ~~The increase of $4.6 million in other noninterest income was due to the following:~~

~~Fund management fees of~~ ~~$15.9 million~~ ~~compared to fees of~~ ~~$14.1 million~~ ~~for the comparable 2016 period. The increase was due primarily to the addition of new managed funds at SVB Capital,~~

~~Service-based fee income of~~ ~~$3.9 million~~ ~~compared to~~ ~~$6.3 million~~ ~~for the comparable 2016 period. The $2.4 million decrease was primarily due to the sale of our equity valuation services business during the third quarter of 2017,~~

~~Net gains of $0.5 million on client foreign exchange forward contracts and the revaluation of client foreign currency denominated cash for the nine months ended~~ ~~September 30, 2017, compared to net losses of $1.8 million for the comparable 2016 period. The net losses for the nine months ended~~ ~~September 30, 2016~~ was primarily due to a reclassification of $2.8 million in unrealized gains on forward contracts to foreign exchange fee income reflecting fees earned on forward contracts executed on behalf of our clients that were previously recorded in gains on derivative instruments, and

~~Net gains of $0.9 million on internal foreign exchange forward contracts and the revaluation of internal foreign currency denominated cash for the nine months ended~~ ~~September 30, 2017, compared to net losses of $1.2 million for the comparable 2016 period. The net losses of $1.2 million for the nine months ended~~ ~~September 30, 2016~~ ~~were primarily due to the strengthening of the U.S. dollar against various foreign currencies during the nine months ended September 30, 2016.~~

Noninterest Expense

A summary of noninterest expense for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2019 and ~~2016~~2018 is as follows:


	Three months ended September 30,						Nine months ended September 30,						Three months ended June 30,						Six months ended June 30,
(Dollars in thousands)	2017		2016		% Change		2017		2016		% Change		2019		2018		% Change		2019		2018		% Change
Compensation and benefits	$	153,263	$	136,568	12.2	%	$	449,412	$	374,410	20.0	%	$	243,172	$	181,955	33.6	%	$	481,233	$	347,761	38.4	%
Professional services	32,987		23,443		40.7		86,331		67,959		27.0		40,830		46,813		(12.8	)	77,816		75,538		3.0
Premises and equipment	18,937		16,291		16.2		53,753		47,861		12.3		23,911		19,173		24.7		45,611		37,718		20.9
Net occupancy													16,687		13,288		25.6		32,735		26,904		21.7
Business development and travel	10,329		8,504		21.5		30,913		30,077		2.8		17,022		12,095		40.7		32,376		23,286		39.0
Net occupancy	12,660		9,525		32.9		35,437		28,919		22.5
FDIC and state assessments	8,359		7,805		7.1		26,354		21,624		21.9		4,483		10,326		(56.6	)	8,462		19,756		(57.2	)
Correspondent bank fees	3,162		3,104		1.9		9,770		9,469		3.2
Other	18,064		15,533		16.3		54,670		44,292		23.4		37,417		22,089		69.4		70,953		40,193		76.5
Total noninterest expense (1)	$	257,761	$	220,773	16.8		$	746,640	$	624,611	19.5
Total noninterest expense													$	383,522	$	305,739	25.4		$	749,186	$	571,156	31.2


~~(1)~~	Our consolidated statements of income were modified from prior periods' presentation to the current period presentation, which reflects our provision for loan losses and provision for unfunded credit commitments together as our “provision for credit losses”. In prior periods, our provision for unfunded credit commitments were reported separately as a component of noninterest expense.

Included in noninterest expense is expense attributable to noncontrolling interests. See below for a description and reconciliation of non-GAAP noninterest expense and non-GAAP core operating efficiency ratio, both of which exclude noncontrolling interests.

Non-GAAP Noninterest Expense

We use and report non-GAAP noninterest expense, non-GAAP taxable equivalent revenue and non-GAAP core operating efficiency ratio, which excludes noncontrolling ~~interests.~~interests and SVB Leerink. We believe these non-GAAP financial measures, when taken together with the corresponding GAAP financial measures, provide meaningful supplemental information regarding our performance by: (i) excluding certain items that represent expenses attributable to investors other than us and our subsidiaries, or certain items that do not occur every reporting period; or (ii) providing additional information used by management that is not otherwise required by GAAP or other applicable requirements. Our management uses, and believes that investors benefit from referring to, these non-GAAP financial measures in assessing our operating results and when planning, forecasting and analyzing future periods. However, these non-GAAP financial measures should be considered in addition to, not as a substitute for or preferable to, financial measures prepared in accordance with GAAP.

The table below provides a summary of non-GAAP noninterest expense and non-GAAP core operating efficiency ratio ~~both net of noncontrolling interests~~ for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2019 and ~~2016~~2018:


	Three months ended September 30,								Nine months ended September 30,								Three months ended June 30,								Six months ended June 30,
(Dollars in thousands, except ratios)	2017			2016			% Change		2017			2016			% Change
Non-GAAP core operating efficiency ratio (Dollars in thousands, except ratios)																	2019			2018			% Change		2019			2018			% Change
GAAP noninterest expense	$	257,761		$	220,773		16.8	%	$	746,640		$	624,611		19.5	%	$	383,522		$	305,739		25.4	%	$	749,186		$	571,156		31.2	%
Less: amounts attributable to noncontrolling interests	125			117			6.8		517			284			82.0
Less: expense attributable to noncontrolling interests																	168			227			(26.0	)	547			195			180.5
Non-GAAP noninterest expense, net of noncontrolling interests	$	257,636		$	220,656		16.8		$	746,123		$	624,327		19.5		383,354			305,512			25.5		748,639			570,961			31.1
Less: expense attributable to SVB Leerink																	61,935			—			—		122,475			—			—
Non-GAAP noninterest expense, net of noncontrolling interests and SVB Leerink																	$	321,419		$	305,512		5.2		$	626,164		$	570,961		9.7

GAAP net interest income	$	373,974		$	289,161		29.3		$	1,026,663		$	853,918		20.2		$	529,403		$	466,443		13.5		$	1,042,289		$	886,306		17.6
Adjustments for taxable equivalent basis	631			281			124.6		1,455			912			59.5		2,905			2,037			42.6		5,812			3,391			71.4
Non-GAAP taxable equivalent net interest income	$	374,605		$	289,442		29.4		$	1,028,118		$	854,830		20.3		532,308			468,480			13.6		1,048,101			889,697			17.8
Less: income attributable to noncontrolling interests	9			4			125.0		26			62			(58.1	)	16			10			60.0		27			19			42.1
Non-GAAP taxable equivalent net interest income, net of noncontrolling interests	$	374,596		$	289,438		29.4		$	1,028,092		$	854,768		20.3		532,292			468,470			13.6		1,048,074			889,678			17.8
Less: net interest income attributable to SVB Leerink																	242			—			—		684			—			—
Non-GAAP taxable equivalent net interest income, net of noncontrolling interests and SVB Leerink																	$	532,050		$	468,470		13.6		$	1,047,390		$	889,678		17.7

GAAP noninterest income	$	158,778		$	144,140		10.2		$	404,965		$	343,050		18.0		$	333,750		$	192,689		73.2		$	614,126		$	348,207		76.4
Less: income attributable to noncontrolling interests	5,614			4,679			20.0		21,709			3,627			NM
Less: income attributable to noncontrolling interests, including carried interest allocation																	18,736			9,445			98.4		21,984			22,469			(2.2	)
Non-GAAP noninterest income, net of noncontrolling interests	$	153,164		$	139,461		9.8		$	383,256		$	339,423		12.9		315,014			183,244			71.9		592,142			325,738			81.8
Less: non-GAAP net gains on investment securities, net of noncontrolling interests																	29,100			26,442			10.1		54,692			22,595			142.1
Less: net gains on equity warrant assets																	48,347			19,061			153.6		69,652			38,252			82.1
Less: investment banking revenue																	48,694			—			—		98,489			—			—
Less: commissions																	14,429			—			—		28,537			—			—
Non-GAAP noninterest income, net of noncontrolling interests and net of net gains on investment securities, net gains on equity warrant assets, investment banking revenue and commissions																	$	174,444		$	137,741		26.6		$	340,772		$	264,891		28.6

GAAP total revenue	$	532,752		$	433,301		23.0		$	1,431,628		$	1,196,968		19.6		$	863,153		$	659,132		31.0		$	1,656,415		$	1,234,513		34.2
Non-GAAP taxable equivalent revenue, net of noncontrolling interests	$	527,760		$	428,899		23.0		$	1,411,348		$	1,194,191		18.2
Non-GAAP taxable equivalent revenue, net of noncontrolling interests and SVB Leerink, net gains on investment securities, net gains on equity warrant assets, investment banking revenue and commissions																	$	706,494		$	606,211		16.5		$	1,388,162		$	1,154,569		20.2

GAAP operating efficiency ratio	48.38		%	50.95		%	(5.0	)	52.15		%	52.18		%	(0.1	)	44.43		%	46.39		%	(4.2	)	45.23		%	46.27		%	(2.2	)
Non-GAAP operating efficiency ratio (1)	48.82			51.45			(5.1	)	52.87			52.28			1.1
Non-GAAP core operating efficiency ratio (1)																	45.49			50.40			(9.7	)	45.11			49.45			(8.8	)

~~NM—Not meaningful~~

(1)

The non-GAAP core operating efficiency ratio is calculated by dividing ~~non-GAAP~~ noninterest expense after adjusting for noninterest expense attributable to SVB Leerink by total revenue after adjusting for net ofinterest income attributable to SVB Leerink, net gains or losses on investment securities and equity warrant assets, investment banking revenue and commissions. Additionally, noninterest expense and total revenue are adjusted for income or losses and expenses attributable to noncontrolling interests ~~by non-GAAP taxable-equivalent revenue,~~and adjustments to net ~~of noncontrolling interests.~~interest income for a taxable equivalent basis.

Compensation and Benefits Expense

The following table provides a summary of our compensation and benefits expense for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2019 and ~~2016:~~2018:


	Three months ended September 30,						Nine months ended September 30,						Three months ended June 30,						Six months ended June 30,
(Dollars in thousands, except employees)	2017		2016		% Change		2017		2016		% Change		2019		2018		% Change		2019		2018		% Change
Compensation and benefits:
Salaries and wages	$	72,799	$	62,636	16.2	%	$	207,687	$	182,375	13.9	%	$	105,799	$	76,831	37.7	%	$	206,999	$	149,870	38.1	%
Incentive compensation & ESOP	37,668		38,255		(1.5	)	108,310		87,162		24.3		72,576		54,382		33.5		143,128		98,015		46.0
Other employee incentives and benefits (1)	42,796		35,677		20.0		133,415		104,873		27.2		64,797		50,742		27.7		131,106		99,876		31.3
Total compensation and benefits	$	153,263	$	136,568	12.2		$	449,412	$	374,410	20.0		$	243,172	$	181,955	33.6		$	481,233	$	347,761	38.4
Period-end full-time equivalent employees	2,433		2,280		6.7		2,433		2,280		6.7		3,314		2,626		26.2		3,314		2,626		26.2
Average full-time equivalent employees	2,434		2,255		7.9		2,384		2,199		8.4		3,287		2,591		26.9		3,257		2,545		28.0


(1)	Other employee incentives and benefits includes employer payroll taxes, group health and life insurance, share-based compensation, 401(k), warrant and retention plans, agency fees and other employee-related expenses.

Compensation and benefits expense was ~~$153.3~~$243.2 million for the three months ended ~~September~~June 30, ~~2017,~~2019, compared to ~~$136.6~~$182.0 million for the comparable ~~2016~~2018 period. The key changes in factors affecting compensation and benefits expense were as follows:

An increase of ~~$10.2~~$29.0 million in salaries and wages reflective primarily of anthe increase in the number of average FTE by ~~179~~696 to ~~2,434 FTEs~~3,287 for the ~~third~~second quarter of ~~2017~~2019, of which 230 FTEs were attributable to the acquisition of SVB Leerink compared to the same period in ~~2016, and~~2018, as well as annual pay ~~raises. The increase in headcount was primarily to support our growth initiatives.~~raises,

An increase of ~~$7.1~~$18.2 million in ~~total other employee incentives~~incentive compensation and ~~benefits, related to various expenses, particularly personnel contracting expenses, to support~~ESOP expense reflective primarily of the inclusion of SVB Leerink in our ~~growth both domestically and globally, and employer payroll taxes reflective of our increased headcount since~~financial results for the ~~third~~second quarter of ~~2016. The~~2019, and

An increase of $14.0 million in other employee incentives and benefits ~~also includes~~primarily driven by an increase of ~~$2.7 million in warrant incentive plan expenses reflective of our quarterly equity warrant portfolio performance as well as an increase of $0.7~~$4.7 million in share-based compensation expense ~~primarily~~ due to ~~our accruals based on our performance expectations for our outstanding performance-based~~the increased restricted stock awards ~~compared~~granted during 2019, $2.8 million for increased warrant compensation expense due to ~~our estimate for~~ the ~~third quarter of 2016, reflective of~~exceptional gains on equity warrant assets, and other miscellaneous employee expenses related to the increase in ~~our stock price relative to our peers.~~average FTEs as noted above.

Compensation and benefits expense was ~~$449.4~~$481.2 million for the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2019, compared to ~~$374.4~~$347.8 million for the comparable ~~2016~~2018 period. The key changes in factors affecting compensation and benefits expense were as follows:

An increase of $28.5 million in total other employee incentives and benefits, related to various expenses, particularly personnel contracting expenses, to support our growth both domestically and globally, as well as group health and life insurance and employer payroll taxes reflective of our increased headcount since the nine months ended September 30, 2016. The increase in other employee incentives and benefits also includes an increase of $5.4 million in warrant incentive plan expenses reflective of our year-to-date equity warrant portfolio performance as well as an increase of $5.4 million in share-based compensation expense, primarily due to our accruals based on our performance expectations for our outstanding performance-based restricted stock awards as compared to our estimate for the nine months ended September 30, 2016, reflective of the increase in our stock price relative to our peers.

~~An increase of $25.3~~$57.1 million in salaries and wages reflective primarily of anthe increase in the number of average FTE by ~~185~~712 to ~~2,384 FTEs during~~3,257 for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2019, of which 231 FTEs were attributable to the acquisition of SVB Leerink compared to the same period in ~~2016, and~~2018, as well as annual pay ~~raises.~~raises,

An increase of ~~$21.1~~$45.1 million in incentive compensation and ESOP expense reflective primarily of the inclusion of SVB Leerink in our financial results for the six months ended June 30, 2019, and

An increase of $31.2 million in other employee incentives and benefits primarily driven by an increase of $9.3 million in share-based compensation expense due to the increased restricted stock awards granted during 2019, $5.7 million for increased warrant compensation expense due to exceptional gains on equity warrant assets, and other miscellaneous employee expenses related to ~~incentive compensation plans and ESOP. Our incentive compensation expense was higher during~~ the nine months ended September 30, 2017 primarily due to higher expected full year performance for 2017 related to the trend of our improving ROE relative to our peers, which is one of our key plan performance metrics.increase in average FTEs as noted above.

Our variable compensation plans consist primarily of our Incentive Compensation Plan, Direct Drive Incentive Compensation Plan, 401(k) and ESOP Plan, Retention Program and Warrant Incentive Plan (see descriptions in our ~~2016~~2018 Form 10-K). Total costs incurred under these plans were ~~$45.9~~$85.4 million and ~~$133.3~~$172.0 million for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2019, respectively, compared to ~~$43.7~~$61.8 million and ~~$105.9~~$115.0 million for the comparable ~~2016~~2018 periods. These amounts are included in total compensation and benefits expense discussed above.

Professional Services

Professional services expense was ~~$33.0~~$40.8 million and ~~$86.3~~$77.8 million for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2019, respectively, compared to ~~$23.4~~$46.8 million and ~~$68.0~~$75.5 million for the comparable ~~2016~~2018 periods. The ~~increases were~~decrease for the three months ended June 30, 2019 was primarily related to ~~enhancements~~a $6.0 million write-off in ~~our regulatory, risk~~the three months ended June 30, 2018 for capitalized costs in connection with the Economic Growth, Regulatory Relief and ~~compliance infrastructure~~Consumer Protection Act. The increase for the six months ended June 30, 2019 was primarily due to ~~support our momentum as we continue~~the increase in legal and consulting costs related to ~~grow both domestically and globally as well as investments made in projects, systems and technology to support our revenue growth and related initiatives and other operating costs.~~the acquisition of SVB Leerink.

Premises and Equipment

Premises and equipment expense was ~~$18.9~~$23.9 million and ~~$53.8~~$45.6 million for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2019, respectively, compared to ~~$16.3~~$19.2 million and ~~$47.9~~$37.7 million for the comparable ~~2016~~2018 periods. The increases related to investments toin projects, systems and technology to support our revenue growth and related initiatives as well as other operating costs.

Net Occupancy

Net occupancy expense was ~~$12.7~~$16.7 million and ~~$35.4~~$32.7 million for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2019, respectively, compared to ~~$9.5~~$13.3 million and ~~$28.9~~$26.9 million for the comparable ~~2016~~2018 periods. The increases were primarily due to lease renewals at higher costs, reflective of market conditions, and the expansion of certain offices to support our growth. Additionally, for the three and six months ended June 30, 2019, $1.9 million and $3.7 million, respectively, were directly attributable to the inclusion of SVB Leerink in our financial results effective January 1, 2019.

FDIC and State Assessments

FDIC and state assessments expense was ~~$8.4~~$4.5 million and ~~$26.4~~$8.5 million for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2019, respectively, compared to ~~$7.8~~$10.3 million and ~~$21.6~~$19.8 million for the comparable ~~2016~~2018 periods. The decreases were primarily due to the elimination of the FDIC surcharge for banks effective October 1, 2018, reflective of the deposit insurance fund reserve ratio reaching its minimum funding requirements.

Business Development and Travel

Business development and travel expense was $17.0 million and $32.4 million for the three and six months ended June 30, 2019, respectively, compared to $12.1 million and $23.3 million for the comparable 2018 periods. The increases were ~~due primarily~~ to ~~the increases in our average assets.~~support expansion initiatives as we continue to grow both domestically and globally.

Other Noninterest Expense

Total other noninterest expense was $37.4 million and $71.0 million for the three and six months ended June 30, 2019, respectively, compared to $22.1 million and $40.2 million for the comparable 2018 periods. The increases were driven primarily by ongoing expenses related to the consolidation of SVB Leerink, specifically, $9.6 million and $19.1 million of the overall increases for the three and six months ended June 30, 2019, respectively, were related to expenses for investment banking and trade order execution costs as well as amortization of intangible assets recorded as part of the acquisition.

A summary of other noninterest expense for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2019 and ~~2016~~2018 is as follows:


	Three months ended September 30,						Nine months ended September 30,						Three months ended June 30,						Six months ended June 30,
(Dollars in thousands)	2017		2016		% Change		2017		2016		% Change		2019		2018		% Change		2019		2018		% Change
Lending and other client related processing costs	$	6,935	$	5,885	17.8	%	$	18,806	$	13,721	37.1	%	$	8,763	$	7,403	18.4	%	$	13,940	$	10,603	31.5	%
Correspondent bank fees													3,569		3,277		8.9		7,313		6,687		9.4
Investment banking activities													3,869		—		—		8,054		—		—
Trade order execution costs													2,828		—		—		5,344		—		—
Data processing services													2,659		2,703		(1.6	)	5,558		5,195		7.0
Telephone	2,518		2,460		2.4		7,892		7,109		11.0		2,422		2,378		1.9		5,163		4,756		8.6
Data processing services	2,244		2,137		5.0		7,254		6,353		14.2
Dues and publications	883		809		9.1		2,355		2,258		4.3		860		845		1.8		2,384		1,694		40.7
Postage and supplies	612		598		2.3		2,013		2,172		(7.3	)	678		813		(16.6	)	1,448		1,480		(2.2	)
Other	4,872		3,644		33.7		16,350		12,679		29.0		11,769		4,670		152.0		21,749		9,778		122.4
Total other noninterest expense	$	18,064	$	15,533	16.3		$	54,670	$	44,292	23.4		$	37,417	$	22,089	69.4		$	70,953	$	40,193	76.5

Net Income Attributable to Noncontrolling Interests

Included in net income is income and expense attributable to noncontrolling interests. The relevant amounts allocated to investors in our consolidated subsidiaries, other than us, are reflected under ~~“Net~~“net income attributable to noncontrolling interests” on our statements of income.

In the table below, noninterest income consists primarily of net investment gains and losses from our consolidated funds. Noninterest expense is primarily related to management fees paid by our managed funds to SVB Financial’s subsidiaries as the managed funds’ general partners. A summary of net income attributable to noncontrolling interests for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2019 and ~~2016~~2018 is as follows:


	Three months ended September 30,								Nine months ended September 30,								Three months ended June 30,								Six months ended June 30,
(Dollars in thousands)	2017			2016			% Change		2017			2016			% Change		2019			2018			% Change		2019			2018			% Change
Net interest income (1)	$	(9	)	$	(4	)	125.0	%	$	(26	)	$	(62	)	(58.1	)%	$	(16	)	$	(10	)	60.0	%	$	(27	)	$	(19	)	42.1	%
Noninterest income (1)	(4,341		)	(3,721		)	16.7		(19,059		)	(1,144		)	NM		(12,406		)	(7,856		)	57.9		(14,676		)	(17,378		)	(15.5	)
Noninterest expense (1)	125			117			6.8		517			284			82.0		168			227			(26.0	)	547			195			180.5
Carried interest allocation (2)	(1,273		)	(958		)	32.9		(2,650		)	(2,483		)	6.7		(6,330		)	(1,589		)	NM		(7,308		)	(5,091		)	43.5
Net income attributable to noncontrolling interests	$	(5,498	)	$	(4,566	)	20.4		$	(21,218	)	$	(3,405	)	NM		$	(18,584	)	$	(9,228	)	101.4		$	(21,464	)	$	(22,293	)	(3.7	)

NM—Not meaningful


(1)	Represents noncontrolling interests’ share in net interest income, noninterest income or loss and noninterest expense.


(2)	Represents the preferred allocation of income (or change in income) earned by us as the general partner of certain consolidated funds.

Three months ended ~~September~~June 30, ~~2017~~2019 and ~~2016~~2018

Net income attributable to noncontrolling interests was $~~5.5~~18.6 million for the three months ended ~~September~~June 30, ~~2017,~~2019, compared to ~~$4.6~~$9.2 million for the comparable ~~2016~~2018 period. Net income attributable to noncontrolling interests of ~~$5.5~~$18.6 million for the three months ended ~~September~~June 30, ~~2017~~2019 was primarily a result of net gains on investment securities (including carried interest allocation) from our managed funds of funds in the portfolio, ~~due~~related primarily to net unrealized valuation increases offor public company investments held by the funds ~~driven primarily by IPO and M&A activity.~~in the portfolio. See “Results of Operations—Noninterest Income—Gains on Investment Securities, Net”.

~~Nine~~

Six months ended ~~September~~June 30, ~~2017~~2019 and ~~2016~~2018

Net income attributable to noncontrolling interests was ~~$21.2~~$21.5 million for the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2019, compared to ~~$3.4~~$22.3 million for the comparable ~~2016~~2018 period. Net income attributable to noncontrolling interests of ~~$21.2~~$21.5 million for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2019 was primarily a result of net gains on investment securities (including carried interest allocation) from our managed funds of funds in the portfolio, ~~due~~related primarily to net unrealized valuation increases offor public company investments held by the funds ~~driven by IPO, M&A and private equity-backed financing activity.~~in the portfolio. See “Results of Operations—Noninterest Income—Gains on Investment Securities, Net”.

Income Taxes

Our effective income tax expense rate was ~~39.6~~27.3 percent and ~~37.1~~27.2 percent for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2019, respectively, compared to ~~40.9~~24.5 percent and ~~40.8~~25.9 percent for the ~~three and nine months ended September 30, 2016, respectively.~~comparable 2018 periods. Our effective tax rate is calculated by dividing income tax expense by the sum of income before income tax expense and the net income attributable to noncontrolling interests.

The ~~reductions~~increases in the effective tax rate for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017 resulted from the recognition of a tax benefit of $1.3 million and $14.4 million, respectively,~~2019 was due to the adoption and implementation of Accounting Standards Update (“ASU”) 2016-09, Improvements to Employee Share-Based Payment Accounting, in the first quarter of 2017. The new guidance requires tax impacts from employee share-based transactions to be recognized in the provision for income taxes rather than additional paid-in-capital in stockholders' equity required under the previous guidance. Additionally, our effective income tax expense rate for the nine months ended September 30, 2017 included the recognition of a tax benefit of $4.7 million reflective of the return of tax funds relatedprimarily to a ~~prior years' tax return.~~

~~Additionally,~~decrease in early November 2017, draft tax reform legislation entitled the Tax Cuts and Jobs Act (the “TCJ Act”) was introduced. If enacted, the TCJ Act would make significant changes to the U.S. Internal Revenue Code of 1986, including corporate taxation provisions. Such changes under the TCJ Act or any other similar tax reform could have a material impact on our results of operations or financial condition.

~~Excluding the impact of~~ the tax benefit ~~items discussed above and any tax reform, we expect~~for share-based compensation expense related to the annual ~~effective tax rate for 2017 to be comparable to~~release of restricted stock awards. The decrease in the ~~full-year 2016 effective tax rate.~~benefit was driven by the decrease in the stock price of SIVB since the second quarter of 2018.

Operating Segment Results

We have ~~three~~four segments for which we report our financial information: Global Commercial Bank, SVB Private Bank, SVB Capital and SVB ~~Capital.~~Leerink. SVB Leerink is a new reportable segment for 2019 as a result of the acquisition of SVB Leerink effective January 4, 2019.

We report segment information based on the “management” approach. The management approach ~~which~~ designates the internal reporting used by management for making decisions and assessing performance as the source of our reporting segments. Please refer to Note ~~11—~~15—“Segment Reporting” of the “Notes to Interim Consolidated Financial Statements (unaudited)” under Part I, Item 1 of this report for additional details.

The following is our reportable segment information for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2019 and ~~2016~~2018:

Global Commercial Bank


	Three months ended September 30,								Nine months ended September 30,								Three months ended June 30,								Six months ended June 30,
(Dollars in thousands)	2017			2016			% Change		2017			2016			% Change		2019			2018			% Change		2019			2018			% Change
Net interest income	$	337,860		$	262,484		28.7	%	$	924,789		$	773,342		19.6	%	$	461,752		$	409,057		12.9	%	$	907,628		$	778,924		16.5	%
Provision for credit losses	(20,874		)	(16,974		)	23.0		(65,007		)	(86,143		)	(24.5	)	(18,295		)	(27,356		)	(33.1	)	(45,100		)	(52,630		)	(14.3	)
Noninterest income	97,227			79,226			22.7		260,650			231,295			12.7		130,652			111,674			17.0		256,969			209,560			22.6
Noninterest expense	(176,964		)	(159,479		)	11.0		(525,043		)	(462,234		)	13.6		(206,902		)	(196,992		)	5.0		(404,147		)	(382,251		)	5.7
Income before income tax expense	$	237,249		$	165,257		43.6		$	595,389		$	456,260		30.5		$	367,207		$	296,383		23.9		$	715,350		$	553,603		29.2
Total average loans, net of unearned income	$	18,807,616		$	16,357,099		15.0		$	18,125,020		$	15,769,964		14.9		$	25,724,704		$	21,714,870		18.5		$	25,264,010		$	21,199,897		19.2
Total average assets	47,817,114			40,828,549			17.1		45,414,432			41,020,808			10.7		60,502,170			52,561,973			15.1		58,214,465			51,274,033			13.5
Total average deposits	42,376,024			36,484,125			16.1		40,398,413			37,002,027			9.2		51,126,806			45,991,701			11.2		49,371,589			45,022,054			9.7

Three months ended ~~September~~June 30, ~~2017~~2019 and ~~2016~~2018

Income before income tax expense from our Global Commercial Bank (“GCB”) increased to ~~$237.2~~$367.2 million for the three months ended ~~September~~June 30, ~~2017,~~2019, compared to ~~$165.3~~$296.4 million for the comparable ~~2016~~2018 period, which reflected the continued acquisition of new clients and growth of our core commercial business. The key components of GCB's performance for the three months ended ~~September~~June 30, ~~2017~~2019 compared to the comparable ~~2016~~2018 period are discussed below.

Net interest income from GCB increased by ~~$75.4~~$52.7 million for the three months ended ~~September~~June 30, ~~2017,~~2019, due primarily to an increase in loan interest income resulting mainly from higher average loan balances, as well as from an increase in loan yields as a result of rate increases.

GCB had a provision for credit losses of ~~$20.9~~$18.3 million for the three months ended ~~September~~June 30, ~~2017,~~2019, compared to ~~$17.0~~$27.4 million for the comparable ~~2016~~2018 period. The provision of ~~$20.9~~$18.3 million for the three months ended ~~September~~June 30, ~~2017~~2019 primarily reflects an increase of $7.5 million for our performing loans, $10.9 million for net new nonaccrual loans, $7.3 million for charge-offs not

specifically reserved for and $3.2 million in additional reserves for period-end loan growth, partially offset by recoveries of $9.8 million.

The provision of $27.4 million for the three months ended June 30, 2018 primarily reflected ~~$13.8~~$13.4 million in net new specific reserves for nonaccrual loans, $12.5 million increase in reserves for period-end loan growth, $11.4 million of charge-offs not specifically reserved for and $3.4 million for performing loan reserves, partially offset by a decrease in reserves of $12.5 million for our performing loans from certain reserve methodology enhancements made to our qualitative reserve for large loan exposure as a result of growth within our higher credit quality private equity/venture capital loan portfolios.

Noninterest income increased by $19.0 million for the three months ended June 30, 2019related primarily to an overall increase in our non-GAAP core fee income (higher client investment fees, credit card fees and foreign exchange fees). These increases were due primarily to the continued growth of our client base and work with larger global companies reflective of investments in our platform, capabilities and global reach.

Noninterest expense increased by $9.9 million for the three months ended June 30, 2019, due primarily to increased compensation and benefits expense. Compensation and benefits expense increased as a result of higher salaries and wages expenses. The increase in GCB salaries and wages was due primarily to an increase in the average number of FTEs at GCB, which increased by 339 to 2,261 FTEs for the three months ended June 30, 2019, compared to 1,922 FTEs for the comparable 2018 period.

Six months ended June 30, 2019 and 2018

Net interest income from our GCB increased by $128.7 million for the six months ended June 30, 2019, due primarily to an increase in loan interest income resulting mainly from higher average loan balances as well as from an increase in loan yields as a result of rate increases.

GCB had a provision for credit losses of $45.1 million for the six months ended June 30, 2019, compared to a provision of $52.6 million for the comparable 2018 period. The provision of $45.1 million for the six months ended June 30, 2019 was reflective primarily of $38.4 million in net new specific reserves for nonaccrual loans, $12.2 million for charge-offs not specifically reserved for in prior quarters, $7.3 million for period-end loan growth, partially offset by recoveries of $11.2 million.

The provision of $52.6 million for the six months ended June 30, 2018 was reflective primarily of $26.5 million from period-end loan growth, $24.7 million in net new specific reserves for nonaccrual loans and ~~a $10.9~~$14.8 million ~~increase in reserves~~ for ~~period-end loan growth,~~charge-offs not specifically reserved for, partially offset by a ~~benefit~~decrease in reserves of $12.5 million for our performing loans from ~~overall improved~~certain reserve methodology enhancements made to our qualitative reserve for large loan exposure as a result of growth within our higher credit quality ~~of our loan portfolio and the continued shift in our loan portfolio to~~ private equity/venture capital ~~loans, which tend to be of higher credit quality.~~

The provision of $17.0 million for the three months ended September 30, 2016 primarily reflected $8.0 million of reserves for performing loans, $5.5 million in charge-offs that did not previously have a specific reserve, $3.0 million net reserves for nonaccrual loans and $2.8 million for loan ~~growth.~~portfolios.

Noninterest income increased by ~~$18.0~~$47.4 million for the ~~three~~six months ended ~~September~~June 30, ~~2017,~~2019, related primarily to an overall increase ~~across~~in our non-GAAP core fee income (higher client investment fees, credit card fees, foreign exchange fees ~~client investment fees~~ and ~~credit card fees)~~deposit service charges). This increase was due primarily to the continued growth of our client base and work with larger global companies reflective of investments in our platform, capabilities and global reach.

Noninterest expense increased by ~~$17.5~~$21.9 million for the ~~three~~six months ended ~~September~~June 30, ~~2017,~~2019, due primarily to increased ~~professional services expense and~~expenses for compensation and benefits expense. Professional services expenses were higher due to enhancements in our risk and compliance infrastructure to support our momentum as we continue to grow both domestically and globally as well as investments made in projects, systems and technology to support our revenue growth and related initiatives and other operating costs. Compensation and benefits expense increased by $20.4 million primarily as a result of increased salaries and ~~wages and other employee benefits.~~wages. The increase in GCB salaries and wages was due primarily to an increase in the average number of FTEs at GCB, which increased by ~~111~~346 to ~~1,881~~2,242 FTEs for the ~~three~~six months ended ~~September~~June 30, ~~2017,~~2019, compared to ~~1,770~~1,896 FTEs for the comparable ~~2016~~2018 period. The increase in total other employee benefits was related to various expenses, particularly personnel contracting expenses, to support our growth both domestically and globally, and employer payroll taxes reflective of our increased headcount since the third quarter 2016.

~~Nine months ended September 30, 2017 and 2016~~

Net interest income from our GCB increased by $151.4 million for the nine months ended September 30, 2017, due primarily to an increase in loan interest income resulting mainly from higher average loan balances as well as from an increase in loan yields as a result of rate increases.

GCB had a provision for credit losses of $65.0 million for the nine months ended September 30, 2017, compared to a provision of $86.1 million for the comparable 2016 period. The provision of $65.0 million for the nine months ended September 30, 2017 was reflective primarily of $51.9 million in net new specific reserves for nonaccrual loans and $20.9 million from period-end loan growth, partially offset by a benefit from overall improved credit quality of our loan portfolio and the continued shift in our loan portfolio to private equity/venture capital loans, which tend to be of higher credit quality.

The provision of $86.1 million for the nine months ended September 30, 2016 was reflective of $33.0 million in charge-offs that did not previously have a specific reserve and $23.0 million from period-end loan growth, with the remaining provision due primarily to reserves for new nonaccrual loans.

Noninterest income increased by $29.4 million for the nine months ended September 30, 2017, related primarily to an increase across our non-GAAP core fee income (higher foreign exchange fees, credit card fees and client investment fees). This increase was due primarily to the continued growth of our client base and work with larger global companies reflective of investments in our platform, capabilities and global reach.

Noninterest expense increased by $62.8 million for the nine months ended September 30, 2017, due primarily to increased expenses for compensation and benefits and professional services. Compensation and benefits expense increased as a result of higher incentive compensation expenses, increased salaries and wages and higher other employee benefits. The increase in incentive compensation expenses was due to the expectation of our performance to exceed budget for 2017. The increase in our salaries and wages expenses was due primarily to an increase in the average number of FTEs at GCB, which increased by 124 to 1,857 FTEs for the nine months ended September 30, 2017, compared to 1,733 FTEs for the comparable 2016 period. The increase in total other employee incentives and benefits was related to various expenses, particularly personnel contracting expenses, to support our growth both domestically and globally as well as group health and life insurance and employer payroll taxes reflective of our increased headcount since the nine months ended September 30, 2016. Professional services expenses were higher due to enhancements in our risk and compliance infrastructure to support our momentum as we continue to grow both domestically and globally as well as investments made in projects, systems and technology to support our revenue growth and related initiatives and other operating costs.

SVB Private Bank


	Three months ended September 30,								Nine months ended September 30,								Three months ended June 30,								Six months ended June 30,
(Dollars in thousands)	2017			2016			% Change		2017			2016			% Change		2019			2018			% Change		2019			2018			% Change
Net interest income	$	14,600		$	13,298		9.8	%	$	42,952		$	40,508		6.0	%	$	12,277		$	15,600		(21.3	)%	$	24,258		$	31,847		(23.8	)%
Provision for credit losses	(1,535		)	(1,976		)	(22.3	)	(2,266		)	(2,481		)	(8.7	)
(Provision for) reduction of credit losses																	(853		)	(300		)	184.3		131			(2,022		)	(106.5	)
Noninterest income	460			664			(30.7	)	1,715			2,052			(16.4	)	686			565			21.4		1,196			1,072			11.6
Noninterest expense	(4,706		)	(3,122		)	50.7		(12,675		)	(9,481		)	33.7		(9,526		)	(7,974		)	19.5		(18,378		)	(16,199		)	13.5
Income before income tax expense	$	8,819		$	8,864		(0.5	)	$	29,726		$	30,598		(2.8	)	$	2,584		$	7,891		(67.3	)	$	7,207		$	14,698		(51.0	)
Total average loans, net of unearned income	$	2,499,507		$	2,074,982		20.5		$	2,371,027		$	1,978,175		19.9		$	3,217,597		$	2,777,617		15.8		$	3,152,104		$	2,722,444		15.8
Total average assets	2,538,400			2,096,237			21.1		2,403,777			1,999,455			20.2		2,432,358			2,515,984			(3.3	)	2,469,804			2,553,024			(3.3	)
Total average deposits	1,231,390			1,115,446			10.4		1,289,990			1,120,575			15.1		1,394,905			1,480,162			(5.8	)	1,442,803			1,526,038			(5.5	)

Three months ended ~~September~~June 30, ~~2017~~2019 and ~~2016~~2018

Net interest income from our SVB Private Bank ~~increased~~decreased by ~~$1.3~~$3.3 million for the three months ended ~~September~~June 30, ~~2017,~~2019, due primarily to higher interest ~~income~~paid on interest-bearing deposits due to ~~loan growth, partially offset by a higher funding charge~~the continued market rate adjustments for ~~loans funded~~the three months ended June 30, 2019 as ~~loan growth exceeded deposit growth.~~compared to the 2018 comparable period.

Noninterest expense increased by $1.6 million for the three months ended ~~September~~June 30, ~~2017,~~2019, due primarily to increased compensation and benefits expense. Compensation and benefits expense increased as a result of increased salaries and wages reflective of the increase in number of average FTE since the second quarter of 2018.

Six months ended June 30, 2019 and 2018

Net interest income from our SVB Private Bank decreased by $7.6 million for the six months ended June 30, 2019, due primarily to higher interest paid on interest-bearing deposits due to the continued market rate adjustments for the six months ended June 30, 2019 as compared to the 2018 comparable period.

Noninterest expense increased by $2.2 million for the six months ended June 30, 2019, due primarily to increased compensation and benefits expense. Compensation and benefits expense increased as a result of increased salaries and wages reflective primarily of ~~annual pay raises, and higher incentive compensation expenses due to~~ the ~~expectation~~increase in the number of ~~our performance to exceed budget for 2017.~~

~~Nine months ended September~~average FTE since June 30, ~~2017 and 2016~~

Net interest income from our SVB Private Bank increased by $2.4 million for the nine months ended September 30, 2017, due primarily to higher interest income due to loan growth, partially offset by a higher funding charge for loans funded as loan growth exceeded deposit growth.

SVB Private Bank had a provision for credit losses of $2.3 million for the nine months ended September 30, 2017, compared to $2.5 million for the comparable 2016 period. The provisions for both the nine months ended September 30, 2017 and 2016 were due primarily to reserves for period-end loan growth.

Noninterest expense increased by $3.2 million for the nine months ended September 30, 2017, due primarily to increased compensation and benefits expense. Compensation and benefits expense increased as a result of increased salaries and wages, reflective primarily of annual pay raises, and higher incentive compensation expenses due to the expectation of our performance to exceed budget for 2017.

2018.

SVB Capital


	Three months ended September 30,								Nine months ended September 30,								Three months ended June 30,								Six months ended June 30,
(Dollars in thousands)	2017			2016			% Change		2017			2016			% Change		2019			2018			% Change		2019			2018			% Change
Net interest income (expense)	$	15		$	1		NM		$	41		$	(51	)	(180.4	)%
Net interest income																	$	6		$	9		(33.3	)%	$	12		$	16		(25.0	)%
Noninterest income	13,913			30,619			(54.6	)	45,707			44,492			2.7		40,059			29,389			36.3		64,904			59,363			9.3
Noninterest expense	(4,873		)	(3,924		)	24.2		(14,537		)	(11,521		)	26.2		(7,883		)	(5,666		)	39.1		(13,665		)	(10,712		)	27.6
Income before income tax expense	$	9,055		$	26,696		(66.1	)	$	31,211		$	32,920		(5.2	)	$	32,182		$	23,732		35.6		$	51,251		$	48,667		5.3
Total average assets	$	323,417		$	325,321		(0.6	)	$	333,439		$	334,328		(0.3	)	$	373,167		$	369,841		0.9		$	375,934		$	371,572		1.2

~~NM—Not meaningful~~

SVB Capital’s components of noninterest income primarily include net gains and losses on non-marketable and other equity securities, carried interest and fund management fees. All components of income before income tax expense ~~and average assets~~ discussed below are net of noncontrolling interests.

We experience variability in the performance of SVB Capital from quarter to quarter due to a number of factors, including changes in the values of our funds’ underlying investments, changes in the amount of distributions and general economic and market conditions. Such variability may lead to volatility in the gains and losses from investment securities and cause our results to differ from period to period.

Three months ended~~September~~June 30, ~~2017~~2019 and ~~2016~~2018

SVB Capital had noninterest income of ~~$13.9~~$40.1 million for the three months ended ~~September~~June 30, ~~2017,~~2019, compared to ~~$30.6~~$29.4 million for the comparable 2016 period. The decrease in noninterest income was due primarily to lower net gains on investment securities compared to the comparable 2016 period. SVB Capital’s components of noninterest income primarily include the following:

~~Net gains on investment securities of $8.2 million for the~~ ~~three months endedSeptember 30, 2017, compared to net gains of $18.2 million for the comparable~~ ~~2016~~ ~~period. The gains on investment securities of $8.2 million for the~~ ~~three months endedSeptember 30, 2017~~ were primarily related to gains from distributions from our strategic venture capital fund investments and net unrealized valuation increases in the investments held by the funds driven by IPO and M&A activity during the third quarter of 2017. Investment security gains in the three months ended September 30, 2016 included $7.2 million from valuation increases for one of our equity method fund investments,

~~In 2016, we recognized $6.7 million in carried interest related to the equity method fund that drove the $7.2 million of investment gains, and~~

~~Fund management fees remained flat at $5.2 million for the three months ended September 30, 2017 and 2016.~~

~~Nine months ended September 30, 2017 and 2016~~

~~SVB Capital had noninterest income of $45.7 million for the nine months ended September 30, 2017, compared to $44.5 million for the comparable 2016~~2018 period. The increase in noninterest income was due primarily to higher net gains on investment securities compared to the comparable ~~2016~~2018 period. SVB Capital’s components of noninterest income primarily include the following:

•

Net gains on investment securities of $27.9 million for the three months endedJune 30, 2019, compared to net gains of $21.1 million for the comparable 2018 period. The net gains on investment securities of $27.9 million were related primarily to gains from our managed funds of funds and our strategic venture capital fund investments reflective of net unrealized valuation increases in public and private company securities held in our funds, and


•	Fund management fees of $6.3 million for the three months endedJune 30, 2019, compared to $5.9 million for the comparable 2018 period.

Six months ended June 30, 2019 and 2018

~~Net gains on investment securities~~SVB Capital had noninterest income of ~~$28.2~~$64.9 million for the ~~nine~~six months ended~~September~~ June 30, ~~2017~~,2019, compared to ~~net gains of $23.0~~$59.4 million for the comparable ~~2016~~2018 period. The ~~net gains on investment securities of $28.2 million for the~~ ~~nine months endedSeptember 30, 2017~~ ~~were related to gains from distributions from our strategic venture capital~~

~~fund investments and net unrealized valuation increases~~increase in ~~the investments held by the funds driven by IPO and M&A activity during the nine months ended September 30, 2017, and~~

~~Fund management fees of $15.9 million compared to~~ ~~$14.1 million~~ ~~for the comparable 2016 period. The increase~~noninterest income was due primarily to higher fund management fees and other noninterest income compared to the ~~addition~~comparable 2018 period. SVB Capital’s components of ~~new managed funds at~~ noninterest income primarily include the following:


•	Fund management fees of $13.0 million for the six months endedJune 30, 2019, compared to $11.7 million for the comparable 2018 period.

SVB ~~Capital.~~Leerink



	Three months ended June 30,						Six months ended June 30,
(Dollars in thousands)	2019			2018		% Change	2019			2018		% Change
Net interest income	$	242		$	—	—	$	684		$	—	—
Noninterest income	67,000			—		—	135,117			—		—
Noninterest expense	(61,935		)	—		—	(122,475		)	—		—
Income before income tax expense	$	5,307		$	—	—	$	13,326		$	—	—
Total average assets	$	410,279		$	—	—	$	355,609		$	—	—

SVB Leerink’s components of noninterest income primarily include investment banking revenue, commissions and net gains and losses on non-marketable and other equity securities, carried interest and fund management fees. All components of income before income tax expense discussed below are net of noncontrolling interests.

Three months ended June 30, 2019

SVB Leerink had noninterest income of $67.0 million for the three months ended June 30, 2019, primarily consisting of $48.7 million of investment banking revenue, $14.4 million of commissions and $1.4 million in fund management fees.

SVB Leerink had noninterest expense of $61.9 million for the three months ended June 30, 2019, primarily consisting of $44.3 million in compensation and benefits expense and $11.3 million in other noninterest expense, driven by investment banking and trade order execution costs as well as amortization of intangible assets recorded as part of the acquisition.

Six months endedJune 30, 2019

SVB Leerink had noninterest income of $135.1 million for the six months ended June 30, 2019, primarily consisting of $98.5 million of investment banking revenue, $28.5 million of commissions and $2.8 million in fund management fees.

SVB Leerink had noninterest expense of $122.5 million for the six months ended June 30, 2019, primarily consisting of $87.2 million in compensation and benefits expense and $22.2 million in other noninterest expense, driven by investment banking and trade order execution costs as well as amortization of intangible assets recorded as part of the acquisition.

Consolidated Financial Condition

Our total assets, and total liabilities and stockholders' equity, were ~~$50.8~~$63.8 billion at ~~September~~June 30, ~~2017~~2019 compared to ~~$44.7~~$56.9 billion at December 31, ~~2016,~~2018, an increase of ~~$6.1~~$6.9 billion, or ~~13.6~~12.0 percent. Refer below to a summary of the individual components driving the changes in total assets, total liabilities and stockholders' equity.

Cash and Cash Equivalents

Cash and cash equivalents totaled ~~$3.6~~$9.0 billion at ~~September~~June 30, ~~2017,~~2019, an increase of ~~$1.1~~$5.4 billion, or ~~39.7~~152.6 percent, compared to ~~$2.5~~$3.6 billion at December 31, ~~2016. The increase in period-end cash balances was primarily due to growth in our deposit balances during the nine months ended September 30, 2017.~~

2018. As of ~~September~~June 30, ~~2017 and December 31, 2016, $1.6~~2019, $6.4 billion ~~and $1.1 billion, respectively,~~ of our cash and due from banks was deposited at the Federal Reserve Bank and was earning interest at the Federal Funds target rate and interest-earning deposits in other financial institutions were ~~$1.2~~$1.8 billion. As of December 31, 2018, $1.7 billion of our cash and ~~$721 million, respectively.~~due from banks was deposited at the Federal Reserve Bank and was earning interest at the Federal Funds target rate and interest-earning deposits in other financial institutions were $1.2 billion.

Investment Securities

Investment securities totaled ~~$24.3~~$23.9 billion at ~~September~~June 30, ~~2017, an increase~~2019, a decrease of ~~$2.6~~$0.3 billion, or ~~12.1~~1.4 percent,, compared to ~~$21.7~~$24.2 billion at December 31, ~~2016~~.2018. Our investment securities portfolio ~~consists~~is comprised of: (i) an available-for-sale securities portfolio and a held-to-maturity securities portfolio, both of which represent ~~primarily~~ interest earning fixed income investment securities; and (ii) a non-marketable and other equity securities portfolio, which represents primarily investments managed as part of our funds management ~~business.~~

business as well as public equity securities held as a result of equity warrant assets exercised.

Available-for-Sale Securities

Period-end available-for-sale securities were ~~$12.6~~$7.9 billion at ~~September~~June 30, ~~2017~~2019 compared to ~~$12.6~~$7.8 billion at December 31, ~~2016,a decrease~~2018, an increase of ~~$17.1 million,~~$0.1 billion, or ~~0.1~~1.9 percent. The ~~$17.1 million decrease~~$0.1 billion increase in period-end AFS securities balances from ~~the fourth quarter of 2016~~December 31, 2018 to ~~the third quarter of 2017~~June 30, 2019, was due primarily to ~~$2.4 billion~~the increase in the fair value of our AFS securities portfolio $166.0 million ($119.8 million net of tax) driven primarily by decreases in market interest rates at June 30, 2019, compared to December 31, 2018. Portfolio purchases and cash flows from paydowns and ~~maturities offset by purchases of $2.4~~sales were both $2.6 billion ~~of agency backed mortgage securities and U.S. Treasury securities.~~

during the six months ended June 30, 2019. Securities classified as available-for-sale are carried at fair value with changes in fair value recorded as unrealized gains or losses in a separate component of stockholders' equity.

The following table summarizes the remaining contractual principal maturities and fully taxable equivalent yields on fixed income securities, carried at fair value, classified as available-for-sale as of ~~September~~June 30, ~~2017.~~2019. The weighted average yield is computed using the amortized cost of fixed income investment securities, which are reported at fair value. For U.S. Treasury securities and foreign government debt securities, the expected maturity is the actual contractual maturity of the notes. Expected maturities for mortgage-backed securities may differ significantly from their contractual maturities because mortgage borrowers have the right to prepay outstanding loan obligations with or without penalties. Mortgage-backed securities classified as available-for-sale typically have original contractual maturities from 10 to 30 years whereas expected average lives of these securities tend to be significantly shorter and vary based upon structure and prepayments in lower interest rate environments. The weighted average yield on mortgage-backed securities is based on prepayment assumptions at the purchase date. Actual yields earned may differ significantly based upon actual prepayments.



	June 30, 2019
	Total				One Year or Less				After One Year to Five Years				After Five Years to Ten Years				After Ten Years
(Dollars in thousands)	Carrying Value		Weighted Average Yield		Carrying Value		Weighted Average Yield		Carrying Value		Weighted Average Yield		Carrying Value		Weighted Average Yield		Carrying Value		Weighted Average Yield
U.S. Treasury securities	$	4,821,074	2.02	%	$	1,677,718	1.64	%	$	1,974,793	2.13	%	$	1,168,563	2.40	%	$	—	—	%
Foreign government debt securities	9,211		(0.41	)	—		—		9,211		(0.41	)	—		—		—		—
Residential mortgage-backed securities:
Agency-issued mortgage-backed securities	1,321,857		3.01		—		—		—		—		—		—		1,321,857		3.01
Agency-issued collateralized mortgage obligations—fixed rate	1,788,180		2.58		—		—		—		—		5,244		2.97		1,782,936		2.58
Total	$	7,940,322	2.31		$	1,677,718	1.64		$	1,984,004	2.12		$	1,173,807	2.40		$	3,104,793	2.77

Held-to-Maturity Securities

Period-end held-to-maturity securities were $14.9 billion at June 30, 2019 compared to $15.5 billion at December 31, 2018, a decrease of $0.6 billion, or 4.0 percent. The $0.6 billion decrease in period-end HTM security balances from December 31, 2018 to June 30, 2019 was due primarily to pay downs and maturities of $0.9 billion, partially offset by the purchase of $0.3 billion of securities.

Securities classified as held-to-maturity are accounted for at cost with no adjustments for changes in fair value. For securities previously re-designated as held-to-maturity from available-for-sale, the net unrealized gains at the date of transfer will continue to be reported as a separate component of shareholders' equity and amortized over the life of the securities in a manner consistent with the amortization of a premium or discount.

The following table summarizes the remaining contractual principal maturities and fully taxable equivalent yields on fixed income investment securities classified as held-to-maturity as of June 30, 2019. Interest income on certain municipal bonds and notes (non-taxable investments) are presented on a fully taxable equivalent basis using the federal statutory tax rate of 21.0 percent. The weighted average yield is computed using the amortized cost of fixed income investment securities. For U.S. agency debentures, the expected maturity is the actual contractual maturity of the notes. Expected remaining maturities for certain U.S. agency debentures may occur earlier than their contractual maturities because the note issuers have the right to call outstanding amounts ahead of their contractual maturity. Expected maturities for mortgage-backed securities may differ significantly from their contractual maturities because mortgage borrowers have the right to prepay outstanding loan obligations with or without penalties. Mortgage-backed securities classified as available-for-sale typically have original contractual maturities from 10 to 30 years whereas expected average lives of these securities tend to be significantly shorter and vary based upon structure and prepayments in lower rate environments. The weighted average yield on mortgage-backed securities is based on prepayment assumptions at the purchase date. Actual yields earned may differ significantly based upon actual prepayments.

September 30, 2017
Total
One Year
or Less

After One Year to
Five Years

After Five Years to
Ten Years

After
Ten Years
(Dollars in thousands)
Carrying
Value

Weighted
Average
Yield

Carrying
Value
Weighted
Average
Yield
Carrying
Value
Weighted
Average
Yield
Carrying
Value
Weighted
Average
Yield
Carrying
Value
Weighted
Average
Yield
U.S. Treasury securities $ 7,498,340
1.46 % $ 2,592,486
1.19 % $ 4,905,854
1.60 % $ —
— % $ —
— %
U.S. agency debentures 1,676,169
1.71
314,852
1.45
1,361,317
1.77
—
—
—
—
Residential mortgage-backed securities:
Agency-issued collateralized mortgage obligations—fixed rate
3,012,695
2.40
—
—
—
—
487,285
1.98
2,525,410
2.48
Agency-issued collateralized mortgage obligations—variable rate
395,880
0.71
—
—
—
—
—
—
395,880
0.71
Total $ 12,583,084
1.69
$ 2,907,338
1.22
$ 6,267,171
1.64
$ 487,285
1.98
$ 2,921,290
2.24

~~Held-to-Maturity Securities~~

Period-end held-to-maturity securities were $11.1 billion at September 30, 2017 compared to $8.4 billion at December 31, 2016, an increase of $2.7 billion, or 31.2 percent. The $2.7 billion increase in period-end HTM security balances from the fourth quarter of 2016 to the third quarter of 2017 was due to new purchases of $3.9 billion primarily in agency backed mortgage securities, partially offset by $1.2 billion in portfolio paydowns and maturities.

debentures, the expected maturity is the actual contractual maturity of the notes. Expected maturities for mortgage-backed securities may differ significantly from their contractual maturities because mortgage borrowers have the right to prepay outstanding loan obligations with or without penalties. Mortgage-backed securities classified as held-to-maturity typically have original contractual maturities from 10 to 30 years whereas expected average lives of these securities tend to be significantly shorter and vary based upon structure and prepayments in lower interest rate environments. The weighted average yield on mortgage-backed securities is based on prepayment assumptions at the purchase date. Actual yields earned may differ significantly based upon actual prepayments.


	September 30, 2017																				June 30, 2019
	Total				One Year or Less				After One Year to Five Years				After Five Years to Ten Years				After Ten Years				Total				One Year or Less				After One Year to Five Years				After Five Years to Ten Years				After Ten Years
(Dollars in thousands)	Amortized Cost		Weighted- Average Yield		Amortized Cost		Weighted- Average Yield		Amortized Cost		Weighted- Average Yield		Amortized Cost		Weighted- Average Yield		Amortized Cost		Weighted- Average Yield		Amortized Cost		Weighted- Average Yield		Amortized Cost		Weighted- Average Yield		Amortized Cost		Weighted- Average Yield		Amortized Cost		Weighted- Average Yield		Amortized Cost		Weighted- Average Yield
U.S. agency debentures	$	660,193	2.37	%	$	—	—	%	$	102,581	2.73	%	$	557,612	2.30	%	$	—	—	%	$	585,817	2.65	%	$	—	—	%	$	101,464	2.70	%	$	484,353	2.64	%	$	—	—	%
Residential mortgage-backed securities:
Agency-issued mortgage-backed securities	5,164,701		2.47		738		7.52		255,275		2.20		61,538		2.06		4,847,150		2.49		7,706,133		2.90		—		—		110,633		2.01		821,076		2.48		6,774,424		2.96
Agency-issued collateralized mortgage obligations—fixed rate	3,025,421		1.78		—		—		—		—		437,865		1.48		2,587,556		1.83		1,912,839		1.78		—		—		—		—		506,773		1.61		1,406,066		1.84
Agency-issued collateralized mortgage obligations—variable rate	269,495		0.74		—		—		—		—		—		—		269,495		0.74		197,962		0.74		—		—		—		—		—		—		197,962		0.74
Agency-issued commercial mortgage-backed securities	1,554,220		2.39		—		—		—		—		—		—		1,554,220		2.39		2,886,958		2.82		—		—		—		—		—		—		2,886,958		2.82
Municipal bonds and notes	380,976		2.24		7,560		4.04		71,631		3.06		159,509		3.24		142,276		0.59		1,579,052		3.61		14,977		2.29		83,468		2.15		340,526		2.83		1,140,081		3.96
Total	$	11,055,006	2.21		$	8,298	4.35		$	429,487	2.47		$	1,216,524	2.12		$	9,400,697	2.21		$	14,868,761	2.78		$	14,977	2.29		$	295,565	2.29		$	2,152,728	2.36		$	12,405,491	2.86

Portfolio duration is a standard measure used to approximate changes in the market value of fixed income instruments due to a change in market interest rates. The measure is an estimate based on the level of current market interest rates, expectations for changes in the path of forward rates and the effect of forward rates on mortgage prepayment speed assumptions. As such, portfolio duration will fluctuate with changes in market interest rates. Changes in portfolio duration are also impacted by changes in the mix of longer versus shorter term-to-maturity securities. ~~Our~~The estimated weighted-average duration of our fixed income investment securities portfolio ~~duration~~ was ~~2.7~~3.5 yearsand ~~2.5~~3.8 years at ~~September~~June 30, ~~2017~~2019 and December 31, ~~2016,~~2018, respectively.

Non-Marketable and Other Equity Securities

Our non-marketable and other equity securities portfolio primarily represents investments in venture capital and private equity funds, SPD Silicon Valley Bank Co., Ltd. (the Bank's joint venture bank in China (“SPD-SVB”)), debt funds, private and public portfolio companies, including public equity securities held as a result of equity warrant assets exercised, and ~~investments in~~ qualified affordable housing projects. Included in our non-marketable and other equity securities carried under fair value accounting are amounts that are attributable to noncontrolling interests. We are required under GAAP to consolidate 100% of these investments that we are deemed to control, even though we may own less than 100% of such entities. See below for a summary of the carrying value (as reported) of non-marketable and other equity securities compared to the amounts attributable to SVBFG.

Period-end non-marketable and other equity securities were ~~$627.5 million~~$1.1 billion at ~~September~~June 30, ~~2017~~2019 compared to ~~$622.6~~$941.1 million at December 31, ~~2016,~~2018, an increase of ~~$4.9~~$138.6 million, or ~~0.8~~14.7 percent. Non-marketable and other equity securities, net of noncontrolling interests were ~~$506.1~~$931.5 million at ~~September~~June 30, ~~2017,~~2019, compared to ~~$500.1~~$806.1 million at December 31, ~~2016.~~2018.The increase was primarily attributable to equity securities from exercised equity warrant assets, valuation increases in our managed funds of funds investments and an increase in new investments within our qualified housing projects portfolio. We also increased our investment in non-marketable and other equity securities by $35.7 million to the inclusion of SVB Leerink in our financial results at June 30, 2019. The following table summarizes the carrying value (as reported) of non-marketable and other equity securities compared to the amounts attributable to SVBFG (which generally represents the carrying value times our ownership percentage) at ~~September~~June 30, ~~2017~~2019 and December 31, ~~2016:~~2018:


	September 30, 2017				December 31, 2016				June 30, 2019				December 31, 2018
(Dollars in thousands)	Carrying value (as reported)		Amount attributable to SVBFG		Carrying value (as reported)		Amount attributable to SVBFG		Carrying value (as reported)		Amount attributable to SVBFG		Carrying value (as reported)		Amount attributable to SVBFG
Non-marketable and other equity securities:
Non-marketable securities (fair value accounting):
Venture capital and private equity fund investments (1)	$	128,768	$	33,092	$	141,649	$	40,464
Other venture capital investments (2)	1,897		203		2,040		218
Other securities (fair value accounting) (3)	392		114		753		138
Non-marketable securities (equity method accounting):
Consolidated venture capital and private equity fund investments (1)									$	110,086	$	28,631	$	118,333	$	30,235
Unconsolidated venture capital and private equity fund investments (2)									193,206		193,206		201,098		201,098
Other investments without a readily determinable fair value (3)									42,419		42,419		25,668		25,668
Other equity securities in public companies (fair value accounting (4)									39,808		37,156		20,398		20,098
Non-marketable securities (equity method accounting) (5):
Venture capital and private equity fund investments	87,218		63,465		82,823		64,030		169,219		105,056		129,485		82,921
Debt funds	17,889		17,889		17,020		17,020		7,168		7,168		5,826		5,826
Other investments (4)	113,478		113,478		123,514		123,514
Non-marketable securities (cost method accounting):
Venture capital and private equity fund investments	102,956		102,956		114,606		114,606
Other investments	26,835		26,835		27,700		27,700		123,797		123,797		121,721		121,721
Investments in qualified affordable housing projects, net	148,036		148,036		112,447		112,447		394,046		394,046		318,575		318,575
Total non-marketable and other securities	$	627,469	$	506,068	$	622,552	$	500,137
Total non-marketable and other equity securities									$	1,079,749	$	931,479	$	941,104	$	806,142


(1)	The following table shows the amounts of venture capital and private equity fund investments held by the following consolidated funds and amounts attributable to SVBFG for each fund at ~~September~~June 30, ~~2017~~2019 and December 31, ~~2016~~2018:


	September 30, 2017				December 31, 2016				June 30, 2019				December 31, 2018
(Dollars in thousands)	Carrying value (as reported)		Amount attributable to SVBFG		Carrying value (as reported)		Amount attributable to SVBFG		Carrying value (as reported)		Amount attributable to SVBFG		Carrying value (as reported)		Amount attributable to SVBFG
Strategic Investors Fund, LP	$	15,624	$	1,963	$	18,459	$	2,319	$	8,860	$	1,113	$	12,452	$	1,564
Capital Preferred Return Fund, LP	55,685		12,001		57,627		12,420		51,801		11,164		53,957		11,629
Growth Partners, LP	57,459		19,128		59,718		19,880		48,984		16,307		50,845		16,927
Other private equity fund (i)	—		—		5,845		5,845
Total venture capital and private equity fund investments	$	128,768	$	33,092	$	141,649	$	40,464
CP I, LP									441		47		1,079		115
Total consolidated venture capital and private equity fund investments									$	110,086	$	28,631	$	118,333	$	30,235


~~(i)~~	~~On January 3, 2017, the other private equity fund was closed resulting in an immaterial impact on the Company's financial statements.~~

(2)

The ~~following table shows the amounts of other~~carrying value represents investments in 212 and 213 funds (primarily venture capital ~~investments held by the following consolidated funds~~funds) at June 30, 2019 and ~~amounts attributable to SVBFG for each fund at~~ ~~September 30, 2017~~ ~~and~~ December 31, ~~2016~~:2018, respectively, where our ownership interest is typically less than 5% of the voting interests of each such fund and in which we do not have the ability to exercise significant influence over the partnerships' operating activities and

September 30, 2017 December 31, 2016
(Dollars in thousands) Carrying value (as reported) Amount attributable to SVBFG Carrying value (as reported) Amount attributable to SVBFG
CP I, LP $ 1,897
$ 203
$ 2,040
$ 218
Total other venture capital investments $ 1,897
$ 203
$ 2,040
$ 218

financial policies.Our unconsolidated venture capital and private equity fund investments are carried at fair value based on the fund investments' net asset values per share as obtained from the general partners of the funds. For each fund investment, we adjust the net asset value per share for differences between our measurement date and the date of the fund investment’s net asset value by using the most recently available financial information from the investee general partner, for example, March 31^st, for our June 30^th consolidated financial statements, adjusted for any contributions paid, distributions received from the investment, and significant fund transactions or market events during the reporting period.

(3)

Investments classified as "Other investments without a readily determinable fair value" include direct equity investments in private companies. The carrying value is based on the price at which the investment was acquired plus or minus changes resulting from observable price changes in orderly transactions for identical or similar investments. We consider a range of factors when adjusting the fair value of these investments, including, but not limited to, the term and nature of the investment, local market conditions, values for comparable securities, current and projected operating performance, exit strategies, financing transactions subsequent to the acquisition of the investment and a discount for certain investments that have lock-up restrictions or other features that indicate a discount to fair value is warranted. For further details on the carrying value of these investments refer to Note 7—“Investment Securities" of the “Notes to Interim Consolidated Financial Statements (unaudited)” under Part I, Item 1 of this report.


(4)	Investments classified as other equity securities (fair value accounting) represent shares held in public companies as a result of exercising public equity warrant assets and direct equity investments in public companies held by our consolidated funds. Changes in the fair value recognized through net income.


~~(4)~~(5)	The following table shows the ~~amounts~~carrying value and our ownership percentage of ~~our other investments~~each investment at June 30, 2019 and December 31, 2018 (equity method accounting) at ~~September 30, 2017~~ ~~and~~ ~~December 31, 2016~~:



	June 30, 2019				December 31, 2018
(Dollars in thousands)	Carrying value (as reported)		Amount attributable to SVBFG		Carrying value (as reported)		Amount attributable to SVBFG
Venture capital and private equity fund investments:
Strategic Investors Fund II, LP	$	4,200	$	3,953	$	4,670	$	4,366
Strategic Investors Fund III, LP	16,364		13,284		17,396		14,059
Strategic Investors Fund IV, LP	28,404		23,936		28,974		24,388
Strategic Investors Fund V, LP	33,300		17,483		28,189		14,799
CP II, LP (i)	7,450		4,505		7,122		4,308
Other venture capital and private equity fund investments	79,501		41,895		43,134		21,001
Total venture capital and private equity fund investments	$	169,219	$	105,056	$	129,485	$	82,921
Debt funds:
Gold Hill Capital 2008, LP (ii)	$	5,323	$	5,323	$	3,901	$	3,901
Other debt funds	1,845		1,845		1,925		1,925
Total debt funds	$	7,168	$	7,168	$	5,826	$	5,826
Other investments:
SPD Silicon Valley Bank Co., Ltd.	$	76,544	$	76,544	$	76,412	$	76,412
Other investments	47,253		47,253		45,309		45,309
Total other investments	$	123,797	$	123,797	$	121,721	$	121,721


(i)	Our ownership includes direct ownership interest of 1.3 percent and indirect ownership interest of 3.8 percent through our investments in Strategic Investors Fund II, LP.


(ii)	Our ownership includes direct ownership interest of 11.5 percent in the fund and an indirect interest in the fund through our investment in Gold Hill Capital 2008, LLC of 4.0 percent.

September 30, 2017 December 31, 2016
(Dollars in thousands) Carrying value (as reported) Amount attributable to SVBFG Carrying value (as reported) Amount attributable to SVBFG
Other investments:
SPD Silicon Valley Bank Co., Ltd. $ 75,511
$ 75,511
$ 75,296
$ 75,296
Other investments 37,967
37,967
48,218
48,218
Total other investments $ 113,478
$ 113,478
$ 123,514
$ 123,514

Volcker Rule

On June 6, 2017, we received notice that the Board of Governors of the Federal Reserve System approved the Company’s application for an extension of the permitted conformance period for the Company’s investments in “illiquid” covered funds. The approval extends the deadline by which the Company must sell, divest, restructure or otherwise conform such investments

to the provisions of the Volcker Rule until the earlier of (i) July 21, 2022, or (ii) the date by which each fund matures by its terms or is otherwise conformed to the Volcker Rule.

As implemented under the Dodd-Frank Wall Street Reform and Consumer Protection Act, the Volcker Rule prohibits, subject to certain exceptions, a banking entity, such as the Company, from sponsoring or investing in covered funds, defined to include many venture capital and private equity funds. As noted above, the Company currently maintains certain investments deemed to be prohibited investments in “illiquid” covered funds, which are now covered under the approved extension. As of ~~September~~June 30, ~~2017,~~2019, such prohibited investments had an estimated aggregate carrying value ~~of approximately $147 million (and an aggregate~~and fair value of approximately ~~$249 million).~~$231.5 million. (For more information about the Volcker Rule, see “Business—Supervision and Regulation” under Part 1, Item 1 of ~~Part 1 of~~ our ~~2016~~2018 Form 10-K.)

Loans

Loans, net of unearned income, increased by ~~$2.3~~$0.9 billion to ~~$22.2~~$29.2 billion at ~~September~~June 30, ~~2017,~~2019, compared to ~~$19.9~~$28.3 billion at December 31, ~~2016.~~2018. Unearned income was ~~$141~~$161 million at ~~September~~June 30, ~~2017~~2019 and ~~$125~~$173 million at December 31, ~~2016.~~2018. Total grossloans were ~~$22.3~~$29.4 billion at ~~September~~June 30, ~~2017,~~2019, an increase of ~~$2.3~~$0.9 billion, compared to ~~$20.0~~$28.5 billion at December 31, ~~2016.~~2018. Period-end loans increased compared to December 31, ~~2016,~~2018, driven primarily by loan growth in our private equity/venture capital portfolio as well as from our private bank portfolio.

The breakdown of total gross loans and total loans as a percentage of total gross loans by ~~category~~industry sector is as follows:


	September 30, 2017				December 31, 2016				June 30, 2019				December 31, 2018
(Dollars in thousands)	Amount		Percentage		Amount		Percentage		Amount		Percentage		Amount		Percentage
Commercial loans:
Software/internet	$	5,851,323	26.2	%	$	5,668,578	28.3	%	$	6,044,350	20.6	%	$	6,209,978	21.8	%
Hardware	1,122,024		5.0		1,189,114		5.9		1,337,198		4.6		1,245,800		4.4
Private equity/venture capital	9,634,928		43.1		7,747,911		38.7		14,688,338		50.0		14,118,132		49.5
Life science/healthcare	1,779,200		8.0		1,866,685		9.3		2,447,763		8.3		2,461,076		8.6
Premium wine	211,822		1.0		201,634		1.0		236,128		0.8		249,316		0.9
Other	395,091		1.8		396,458		2.0		439,237		1.5		346,747		1.2
Total commercial loans	18,994,388		85.1		17,070,380		85.2
Commercial loans									25,193,014		85.8		24,631,049		86.4
Real estate secured loans:
Premium wine	713,467		3.2		678,745		3.5		754,011		2.6		711,237		2.5
Consumer	2,203,877		9.9		1,925,620		9.6		2,805,321		9.5		2,609,645		9.2
Other	42,671		0.2		43,807		0.2		39,816		0.1		40,627		0.1
Total real estate secured loans	2,960,015		13.3		2,648,172		13.3
Real estate secured loans									3,599,148		12.2		3,361,509		11.8
Construction loans	75,644		0.3		64,957		0.3		114,000		0.4		98,034		0.3
Consumer loans	299,782		1.3		241,153		1.2		464,241		1.6		420,720		1.5
Total gross loans	$	22,329,829	100.0		$	20,024,662	100.0		$	29,370,403	100.0		$	28,511,312	100.0

Loan Concentration

The following table provides a summary of gross loans by size and category. The breakout of the categories is based on total client balances (individually or in the aggregate) as of ~~September~~June 30, ~~2017~~2019:


	September 30, 2017												June 30, 2019
(Dollars in thousands)	Less than Five Million		Five to Ten Million		Ten to Twenty Million		Twenty to Thirty Million		Thirty Million or More		Total		Less than Five Million		Five to Ten Million		Ten to Twenty Million		Twenty to Thirty Million		Thirty Million or More		Total
Commercial loans:
Software/internet	$	1,484,316	$	859,890	$	1,485,139	$	1,144,494	$	877,484	$	5,851,323	$	1,597,365	$	853,329	$	1,456,360	$	1,062,847	$	1,074,449	$	6,044,350
Hardware	240,941		185,029		215,278		272,862		207,914		1,122,024		330,322		132,284		167,021		360,166		347,405		1,337,198
Private equity/venture capital	656,327		766,075		1,563,788		971,708		5,677,030		9,634,928		923,420		1,115,977		2,120,821		1,892,364		8,635,756		14,688,338
Life science/healthcare	330,412		456,618		500,453		325,108		166,609		1,779,200		320,548		438,764		694,111		387,936		606,404		2,447,763
Premium wine	73,551		42,149		39,630		48,492		8,000		211,822		72,052		50,417		34,185		54,164		25,310		236,128
Other	150,103		8,000		50,885		69,521		116,582		395,091		345,959		18,340		26,653		48,285		—		439,237
Commercial loans	2,935,650		2,317,761		3,855,173		2,832,185		7,053,619		18,994,388		3,589,666		2,609,111		4,499,151		3,805,762		10,689,324		25,193,014
Real estate secured loans:
Premium wine	165,085		191,436		222,088		95,440		39,418		713,467		175,937		188,975		237,404		113,292		38,403		754,011
Consumer	1,886,402		234,167		83,308		—		—		2,203,877		2,440,617		252,781		111,923		—		—		2,805,321
Other	7,826		—		14,312		20,533		—		42,671		7,377		—		32,439		—		—		39,816
Real estate secured loans	2,059,313		425,603		319,708		115,973		39,418		2,960,015		2,623,931		441,756		381,766		113,292		38,403		3,599,148
Construction loans	6,587		46,164		—		22,893		—		75,644		23,098		11,773		57,984		21,145		—		114,000
Consumer loans	131,676		49,404		32,097		51,755		34,850		299,782		181,347		47,290		69,471		92,514		73,619		464,241
Total gross loans	$	5,133,226	$	2,838,932	$	4,206,978	$	3,022,806	$	7,127,887	$	22,329,829	$	6,418,042	$	3,109,930	$	5,008,372	$	4,032,713	$	10,801,346	$	29,370,403

At ~~September~~June 30, ~~2017,~~2019, gross loans equal to or greater than $20 million to any single client (individually or in the aggregate) totaled ~~$10.2~~$14.8 billion, or ~~45.5~~50.5 percent of our total gross loan portfolio. These loans represented ~~257~~362 clients, and of these loans, ~~$71.6 million~~ nonewere on nonaccrual status as of ~~both September~~June 30, ~~2017 and December 31, 2016.~~2019.


	December 31, 2016												December 31, 2018
(Dollars in thousands)	Less than Five Million		Five to Ten Million		Ten to Twenty Million		Twenty to Thirty Million		Thirty Million or More		Total		Less than Five Million		Five to Ten Million		Ten to Twenty Million		Twenty to Thirty Million		Thirty Million or More		Total
Commercial loans:
Software/internet	$	1,317,707	$	779,986	$	1,657,760	$	1,021,486	$	891,639	$	5,668,578	$	1,515,096	$	918,647	$	1,520,634	$	1,221,250	$	1,034,351	$	6,209,978
Hardware	252,339		160,534		223,781		244,988		307,472		1,189,114		292,022		152,061		196,763		386,288		218,666		1,245,800
Private equity/venture capital	635,838		668,998		1,182,427		888,916		4,371,732		7,747,911		836,894		1,012,605		2,120,918		2,135,279		8,012,436		14,118,132
Life science/healthcare	328,942		372,171		457,833		420,580		287,159		1,866,685		273,075		477,046		645,895		410,127		654,933		2,461,076
Premium wine	76,400		25,209		76,609		15,902		7,514		201,634		70,573		55,852		48,656		65,035		9,200		249,316
Other	124,650		40,950		61,228		26,320		143,310		396,458		246,011		18,921		10,911		70,904		—		346,747
Commercial loans	2,735,876		2,047,848		3,659,638		2,618,192		6,008,826		17,070,380		3,233,671		2,635,132		4,543,777		4,288,883		9,929,586		24,631,049
Real estate secured loans:
Premium wine	151,759		172,975		229,750		101,387		22,874		678,745		168,130		173,882		263,093		83,945		22,187		711,237
Consumer loans	1,664,432		196,345		64,843		—		—		1,925,620		2,258,479		239,400		111,766		—		—		2,609,645
Other	8,014		—		14,660		21,133		—		43,807		7,506		—		33,121		—		—		40,627
Real estate secured loans	1,824,205		369,320		309,253		122,520		22,874		2,648,172		2,434,115		413,282		407,980		83,945		22,187		3,361,509
Construction loans	23,976		6,685		14,016		20,280		—		64,957		7,076		15,064		75,894		—		—		98,034
Consumer loans	99,119		29,092		9,473		29,089		74,380		241,153		148,391		55,401		51,409		93,690		71,829		420,720
Total gross loans	$	4,683,176	$	2,452,945	$	3,992,380	$	2,790,081	$	6,106,080	$	20,024,662	$	5,823,253	$	3,118,879	$	5,079,060	$	4,466,518	$	10,023,602	$	28,511,312

At December 31, ~~2016,~~2018, gross loans equal to or greater than $20 million to any single client (individually or in the aggregate) totaled ~~$8.9~~$14.5 billion, or ~~44.4~~50.8 percent of our total gross loan portfolio. These loans represented ~~233~~361 clients, and of these loans, ~~$79.7~~$27.5 million were on nonaccrual status as of December 31, ~~2016.~~2018.

The credit profile of our loan portfolio clients varies based on the nature of the lending we do for different market segments. Our three main market segments include (i) technology (software/internet and hardware) and life science/healthcare, (ii) private equity/venture capital, and (iii) SVB Private Bank.

(i) Technology and Life Science/Healthcare

Our technology and life science/healthcare loan portfolios include loans to clients at ~~all~~the various stages of their life cycles and represent the largest segments of our loan portfolio. The primary underwriting method for our technology and life science/healthcare portfolios are classified as investor dependent, balance sheet dependent or cash flow dependent.

Investor dependent loans represent a relatively small percentage of our overall portfolio at 11 percent of total gross loans at both ~~September~~June 30, ~~2017~~2019 and December 31, ~~2016.~~2018. These loans are made to companies in both our Accelerator (early-stage) and Growth practices. Investor dependent loans typically have modest or negative cash flows and no established record of profitable operations. Repayment of these loans may be dependent upon receipt by borrowers of additional equity financing from venture capital firms or others, or in some cases, a successful sale to a third party or an IPO. Venture capital firms may provide financing selectively, at reduced amounts, or on less favorable terms, which may have an adverse effect on our borrowers' ability to repay their loans to us. When repayment is dependent upon the next round of venture investment and there is an indication that further investment is unlikely or will not occur, it is often likely that the company would need to be sold to repay the debt in full. If reasonable efforts have not yielded a likely buyer willing to repay all debt at the close of the sale or on commercially viable terms, the account will most likely be deemed to be impaired.

Balance sheet dependent loans, which ~~includes~~include asset-based loans, represented 10eight percent of total gross loans at ~~September~~both June 30, ~~2017 compared to 13 percent at~~2019 and December 31, ~~2016.~~2018. Balance sheet dependent loans are structured to require constant current asset coverage (i.e., cash, cash equivalents, accounts receivable and, to a much lesser extent, inventory) in an amount that exceeds the outstanding debt. These loans are generally made to companies in our Growth and Corporate Finance practices. Our asset-based lending, which includes working capital lines and accounts receivable financing, ~~both~~ represented ~~three percent of total gross loans as of September 30, 2017~~two and ~~five percent and two~~one percent of total gross loans at both June 30, 2019 and December 31, ~~2016, respectively.~~2018. The repayment of these arrangements is dependent on the financial condition, and payment ability, of third parties with whom our clients do business.

Cash flow dependent loans, which include sponsored buyout lending, ~~represent our largest source of repayment within our technology and life science/healthcare loan portfolios at approximately 19~~represented 15 percent of total gross loans at ~~September~~June 30, ~~2017,~~2019, compared to 2216 percent ~~of total gross loans~~ at December 31, ~~2016.~~2018. Cash flow dependent loans require the borrower

to maintain cash flow from operations that is sufficient to service all debt. Borrowers must demonstrate normalized cash flow in excess of all fixed charges associated with operating the business. Sponsored buyout loans represented 10seven percent of total gross

loans at ~~September~~June 30, ~~2017,~~2019 compared to 11eight percent ~~of total gross loans~~ at December 31, ~~2016.~~2018. These loans are typically used to assist a select group of experienced private equity sponsors with the acquisition of businesses, are larger in size, and repayment is generally dependent upon the cash flows of the acquired company. The acquired companies are typically established, later-stage businesses of scale and characterized by reasonable levels of leverage and loan structures that include meaningful financial covenants. The sponsor's equity contribution is often 50 percent or more of the acquisition price.

(ii) Private Equity/Venture Capital

We also provide financial services to clients in the private equity/venture capital community. ~~At September 30, 2017, our~~Our lending to private equity/venture capital firms and funds represented ~~43 percent of total gross loans, compared to 39~~50 percent of total gross loans at both June 30, 2019 and December 31, ~~2016.~~2018. The vast majority of this portfolio consists of capital call lines of credit, the repayment of which is dependent on the payment of capital calls by the underlying limited partner investors in the funds managed by these firms. These facilities are generally governed by meaningful financial covenants oriented towards ensuring that the funds' remaining callable capital is sufficient to repay the loan, and larger commitments (typically provided to larger private equity funds) are often secured by an assignment of the general partner's right to call capital from the fund's limited partner investors.

(iii) SVB Private Bank

Our SVB Private Bank clients are primarily private equity/venture capital professionals and executive leaders of the innovation companies they support. Our lending to SVB Private Bank clients represented 11 percent of total gross loans at both ~~September~~June 30, ~~2017~~2019 and December 31, ~~2016.~~ 2018.Many of these clients have mortgages, which represented 8586 percent of this portfolio at ~~September~~June 30, ~~2017;~~2019; the balance of this portfolio consisted of home equity lines of credit, restricted stock purchase loans, capital call lines of credit, and other secured and unsecured lending.

State Concentrations

Approximately 3129 percent and 1110 percent of our outstanding total gross loan balances ~~at both September~~as of June 30, ~~2017 and December 31, 2016~~2019 were to borrowers based in California and New ~~York.~~York, respectively, compared to 28 percent and 10 percent as of December 31, 2018. Additionally, as of June 30, 2019, borrowers in Massachusetts increased to 10 percent of our outstanding gross loan balances compared to 9 percent as of December 31, 2018. Other than California, ~~and~~ New York and Massachusetts, there are no states with gross loan balances greater than or equal to 10 percent. In October 2017, wildfires impacted regions of Northern California where some of our premium wine clients are located. As of September 30, 2017, our total loans outstanding for our wine portfolio was $925 million (4% of total loan portfolio) with loans outstanding to clients in the impacted regions of approximately $700 million. We do not currently believe there will be a material effect on the credit quality of our wine portfolio in the near term; however, we will continue to monitor this segment of our portfolio closely.

See generally “Risk Factors–Credit Risks” set forth under Part I, Item 1A ~~Part I~~ in our ~~2016~~2018 Form 10-K.

Credit Quality Indicators

As of ~~September~~June 30, ~~2017~~2019 and December 31, ~~2016,~~2018, our total criticized loans and impaired loans represented ~~four percent~~three and ~~six~~four percent of our total gross loans, respectively. Criticized and impaired loans to early-stage clients represented 1718 and 19 percent of our total criticized and impaired loan balances at ~~both September~~June 30, ~~2017~~2019 and December 31, ~~2016.~~2018, respectively. Loans to early-stage clients represent a relatively small percentage of our overall portfolio at six percent of total gross loans at ~~September~~both June 30, ~~2017.~~2019 and December 31, 2018. It is common for an early-stage client’s remaining liquidity to fall temporarily below the threshold for a pass-rated credit during its capital-raising period for a new round of funding. Based on our experience, for most early-stage clients, this situation typically lasts one to two quarters and generally resolves itself with a subsequent round of venture funding, though there are exceptions, from time to time. As a result, we expect that each of our early-stage clients will reside in our criticized portfolio during a portion of their life cycle.

Credit Quality and Allowance for Loan Losses

Nonperforming assets consist of loans on nonaccrual status, loans past due 90 days or more still accruing interest, and Other Real Estate Owned (“OREO”) and other foreclosed assets. We measure all loans placed on nonaccrual status for impairment based on the fair value of the underlying collateral or the net present value of the expected cash flows. The table below sets forth certain data and ratios between nonperforming loans, nonperforming assets and the allowance for loan losses:



(Dollars in thousands)	June 30, 2019			December 31, 2018
Gross nonperforming, past due, and restructured loans:
Nonaccrual loans	$	96,641		$	94,142
Loans past due 90 days or more still accruing interest	111			1,964
Total nonperforming loans	96,752			96,106
OREO and other foreclosed assets	—			—
Total nonperforming assets	$	96,752		$	96,106
Performing TDRs	$	70,292		$	31,639
Nonperforming loans as a percentage of total gross loans	0.33		%	0.34		%
Nonperforming assets as a percentage of total assets	0.15			0.17
Allowance for loan losses	$	301,888		$	280,903
As a percentage of total gross loans	1.03		%	0.99		%
As a percentage of total gross nonperforming loans	312.02			292.28
Allowance for loan losses for nonaccrual loans	$	53,067		$	37,941
As a percentage of total gross loans	0.18		%	0.13		%
As a percentage of total gross nonperforming loans	54.85			39.48
Allowance for loan losses for total gross performing loans	$	248,821		$	242,962
As a percentage of total gross loans	0.85		%	0.85		%
As a percentage of total gross performing loans	0.85			0.86
Total gross loans	$	29,370,403		$	28,511,312
Total gross performing loans	29,273,651			28,415,206
Allowance for unfunded credit commitments (1)	62,664			55,183
As a percentage of total unfunded credit commitments	0.30		%	0.29		%
Total unfunded credit commitments (2)	$	20,952,069		$	18,913,021

(Dollars in thousands) September 30, 2017 December 31, 2016
Gross nonaccrual, past due, and restructured loans:
Nonaccrual loans $ 124,672
$ 118,979
Loans past due 90 days or more still accruing interest 764
33
Total nonperforming loans 125,436
119,012
OREO and other foreclosed assets —
—
Total nonperforming assets $ 125,436
$ 119,012
Performing TDRs $ 22,946
$ 33,732
Nonperforming loans as a percentage of total gross loans 0.56 % 0.59 %
Nonperforming assets as a percentage of total assets 0.25
0.27
Allowance for loan losses $ 249,010
$ 225,366
As a percentage of total gross loans 1.12 % 1.13 %
As a percentage of total gross nonperforming loans 198.52
189.36
Allowance for loan losses for nonaccrual loans $ 43,824
$ 37,277
As a percentage of total gross loans 0.20 % 0.19 %
As a percentage of total gross nonperforming loans 34.94
31.32
Allowance for loan losses for total gross performing loans $ 205,186
$ 188,089
As a percentage of total gross loans 0.92 % 0.94 %
As a percentage of total gross performing loans 0.92
0.94
Total gross loans $ 22,329,829
$ 20,024,662
Total gross performing loans 22,204,393
19,905,650
Allowance for unfunded credit commitments (1) 48,172
45,265
As a percentage of total unfunded credit commitments 0.29 % 0.27 %
Total unfunded credit commitments (2) $ 16,341,930
$ 16,743,196


(1)	The “allowance for unfunded credit commitments” is included as a component of other liabilities and any provision is included in the “provision for credit losses” in the statement of income. See “Provision for ~~credit losses”~~Credit Losses” for a discussion of the changes to the allowance.


(2)	Includes unfunded loan commitments and letters of credit.

Our allowance for loan losses as a percentage of total gross loans ~~decreased one~~increased four basis ~~point~~points to ~~1.12~~1.03 percent at ~~September~~June 30, ~~2017,~~2019, compared to ~~1.13~~0.99 percent at December 31, ~~2016. The decrease~~2018 reflective of ~~one basis point was reflective primarily of the~~an increase in reserves for nonaccrual loans partially offset by a decrease in ~~our~~the reserves for gross performing loans.

Our allowance for loan losses for performing loans was $248.8 million at June 30, 2019, compared to $243.0 million at December 31, 2018. The $5.8 million increase in reserves for performing loans was driven primarily by the overall growth in loans during the six months ended June 30, 2019 as ~~a percentage of total gross loans which decreased by two basis points to 0.92 percent, partially offset by an increase of one basis point~~well as the continued change in the ~~allowance for nonaccrual loans as a percentage~~mix of ~~total gross loans at September 30, 2017.~~the overall loan portfolio.

Our allowance for loan losses for nonaccrual loans was ~~$43.8~~$53.1 million at ~~September~~June 30, ~~2017,~~2019, compared to ~~$37.3~~$37.9 million at December 31, ~~2016.~~2018. The ~~$6.5~~$15.2 million increase in the ~~allowance~~reserves for nonaccrual loans ~~included $48.0 million of~~was due to new nonaccrual loan reserves ~~partially offset~~of $60.8 million driven primarily by ~~$41.4 million of charge-offs~~three clients in our life science/healthcare loan portfolio and ~~reserve releases. New nonaccrual loan reserves of $48.0 million were mostly attributable to~~two clients in our software/internet loan ~~portfolio.~~portfolio, partially offset by $45.6 million of repayments and charge-offs.

The following table presents a summary of changes in nonaccrual loans for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2019 and ~~2016:~~

2018:


	Three months ended September 30,						Nine months ended September 30,						Three months ended June 30,						Six months ended June 30,
(Dollars in thousands)	2017			2016			2017			2016			2019			2018			2019			2018
Balance, beginning of period	$	120,172		$	124,319		$	118,979		$	123,392		$	133,623		$	116,667		$	94,142		$	119,259
Additions	29,650			15,940			85,990			73,680			39,460			28,960			90,317			50,763
Paydowns	(14,183		)	(14,941		)	(43,995		)	(58,376		)	(57,507		)	(16,411		)	(63,937		)	(33,659		)
Charge-offs	(10,967		)	(19,102		)	(36,299		)	(31,348		)	(18,935		)	(4,467		)	(23,830		)	(11,579		)
Other reductions	—			—			(3		)	(1,132		)	—			—			(51		)	(35		)
Balance, end of period	$	124,672		$	106,216		$	124,672		$	106,216		$	96,641		$	124,749		$	96,641		$	124,749

Our nonaccrual loans as of ~~September~~June 30, ~~2017~~2019 included ~~$98.0~~$51.7 million from ~~seven~~five clients ~~(software/~~(two software/internet clients ~~represent $61.3~~represented $21.1 million ~~two~~and three life science/healthcare clients ~~represent $25.0 million and one hardware client represents $11.7~~represented $30.6 million). ~~Two~~One of these loans ~~are~~is a sponsored buyout ~~loans~~loan that ~~were~~was added to our nonaccrual portfolio in 2015, ~~another~~one is a ~~Corporate Finance~~Growth client that was added during ~~2016~~2018 and ~~four~~three are new nonaccrual loans added during ~~2017 spread across~~2019 from our ~~Accelerator and~~ Growth ~~practices.~~practice. The total credit exposure for these ~~seven~~five largest nonaccrual loans ~~is $99.0~~was $52.6 million as of June 30, 2019, for which we have specifically reserved ~~$30.4~~$26.1 million.

Average nonaccrual loans for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2019 were ~~$119.5~~$97.6 million and ~~$124.6~~$102.0 million, respectively, compared to ~~$111.8~~$127.4 million and ~~$113.1~~$119.5 million for the comparable ~~2016~~2018 periods. The ~~$7.7~~$29.8 million ~~increase~~decrease in average nonaccrual loans for the three months ended ~~September~~June 30, ~~2017~~2019 compared to ~~September~~June 30, ~~2016~~2018 was primarily from our software/internet and hardware loan portfolios partially offset by ~~a decrease~~an increase in our life ~~sciences loan~~science/healthcare portfolio. If the nonaccrual loans had not been ~~impaired, $1.8~~nonperforming, $1.4 million and ~~$5.6~~$3.1 million in interest income would have been recorded for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2019, respectively, compared to ~~$1.1~~$2.1 million and ~~$3.8~~$4.0 million for the comparable ~~2016~~2018 periods.

Accrued Interest Receivable and Other Assets

A summary of accrued interest receivable and other assets at ~~September~~June 30, ~~2017~~2019 and December 31, ~~2016~~2018 is as follows:


(Dollars in thousands)	September 30, 2017		December 31, 2016		% Change		June 30, 2019		December 31, 2018		% Change
Derivative assets, gross (1)	$	248,556	$	210,070	18.3	%
Derivative assets (1)							$	291,508	$	258,139	12.9	%
Foreign exchange spot contract assets, gross	147,304		53,058		177.6		465,509		152,268		NM
Accrued interest receivable	129,451		111,222		16.4		201,418		197,927		1.8
FHLB and Federal Reserve Bank stock	58,012		57,592		0.7		59,508		58,878		1.1
Net deferred tax assets							30,135		65,433		(53.9	)
Accounts receivable	78,242		62,569		25.0		67,053		55,807		20.2
Net deferred tax assets	75,043		71,840		4.5
Other assets	113,153		106,337		6.4		349,950		162,809		114.9
Total accrued interest receivable and other assets	$	849,761	$	672,688	26.3		$	1,465,081	$	951,261	54.0

NM—Not meaningful


(1)	See “Derivatives” section below.

Foreign Exchange Spot Contract Assets

Foreign exchange spot contract assets represent unsettled client trades at the end of the period. The increase of ~~$94.2~~$313.2 million was primarily due ~~primarily~~ to an overall increase in ~~activity~~the amount of unsettled spot trades at period-end as compared to December 31, ~~2016.~~2018.

Net Deferred Tax Assets

The decrease of $35.3 million in net deferred tax assets was primarily due to an increase in the fair value of AFS securities due to a decrease in market interest rates as compared to December 31, 2018.

Other Assets

Other assets includes various asset amounts for other operational transactions. The increase of $187.1 million was primarily due to $101.1 million in current taxes receivable due to estimated tax payments made during the six months ended June 30,

2019. Additionally, an increase in other assets of $43.5 million was due primarily to the inclusion of SVB Leerink in our financial results at June 30, 2019. Merchant card receivables increased $18.9 million due to the timing of settlement and prepaid assets increased $14.4 million primarily due to the annual timing of prepaid software agreement renewals.

Derivatives

Derivative instruments are recorded as a component of other assets and other liabilities on the balance sheet. The following table provides a summary of derivative assets and liabilities ~~net~~ at ~~September~~June 30, ~~2017~~2019 and December 31, ~~2016:~~2018:


(Dollars in thousands)	September 30, 2017			December 31, 2016			% Change		June 30, 2019		December 31, 2018		% Change
Assets:
Equity warrant assets	$	141,785		$	131,123		8.1	%	$	158,048	$	149,238	5.9	%
Foreign exchange forward and option contracts	94,947			68,027			39.6		94,462		100,402		(5.9	)
Client interest rate derivatives									19,440		8,499		128.7
Interest rate swaps	—			810			(100.0	)	19,558		—		—
Client interest rate derivatives	11,824			10,110			17.0
Total derivative assets	$	248,556		$	210,070		18.3		$	291,508	$	258,139	12.9
Liabilities:
Foreign exchange forward and option contracts	$	(88,961	)	$	(54,668	)	62.7		$	86,457	$	88,559	(2.4	)
Client interest rate derivatives	(11,955		)	(9,770		)	22.4		25,803		9,491		171.9
Interest rate swaps									391		—		—
Total derivative liabilities	$	(100,916	)	$	(64,438	)	56.6		$	112,651	$	98,050	14.9

Equity Warrant Assets

In connection with negotiating credit facilities and certain other services, we often obtain rights to acquire stock in the form of equity warrant assets in primarily private, venture-backed companies in the technology and life science/healthcare industries. At ~~September~~June 30, ~~2017,~~2019, we held warrants in ~~1,842~~2,173 companies, compared to ~~1,739~~2,095 companies at December 31, ~~2016.~~2018. Warrants in 1622 companies each had values greater than $1.0 million and collectively represented ~~$51.7~~$51.8 million, or ~~36.5~~32.8 percent, of the fair value of the total warrant portfolio at ~~September~~June 30, ~~2017.~~2019. The change in fair value of equity warrant assets is recorded in ~~gains~~"Gains on equity warrant assets, net" in noninterest income, a component of consolidated net income. The following table provides a summary of transactions and valuation changes for equity warrant assets for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2019 and ~~2016:~~ 2018:


	Three months ended September 30,						Nine months ended September 30,						Three months ended June 30,						Six months ended June 30,
(Dollars in thousands)	2017			2016			2017			2016			2019			2018			2019			2018
Balance, beginning of period	$	131,750		$	129,800		$	131,123		$	137,105		$	162,215		$	135,669		$	149,238		$	123,763
New equity warrant assets	3,622			5,251			11,114			9,857			3,051			4,299			7,521			9,398
Non-cash changes in fair value, net	18,230			16,788			23,564			21,989			9,166			11,012			22,356			19,469
Exercised equity warrant assets	(11,060		)	(5,338		)	(20,402		)	(21,066		)	(15,339		)	(6,429		)	(19,183		)	(7,179		)
Terminated equity warrant assets	(757		)	(1,161		)	(3,614		)	(2,545		)	(1,045		)	(826		)	(1,884		)	(1,726		)
Balance, end of period	$	141,785		$	145,340		$	141,785		$	145,340		$	158,048		$	143,725		$	158,048		$	143,725

Foreign Exchange Forward and Foreign Currency Option Contracts

We enter into foreign exchange forward contracts and foreign currency option contracts with clients involved in foreign activities, either as the purchaser or seller, depending upon the clients’ needs. For each forward or option contract entered into with our clients, we enter into an opposite way forward or option contract with a correspondent bank, which mitigates the risk of fluctuations in currency rates. We also enter into forward contracts with correspondent banks to economically reduce our foreign exchange exposure related to certain foreign currency denominated instruments. Net gains and losses on the revaluation of foreign currency denominated instruments are recorded in the line item “Other” as part of noninterest income, a component of consolidated net income. We have not experienced nonperformance by any of our counterparties and therefore have not incurred any related losses. Further, we anticipate performance by all counterparties. Our net exposure for foreign exchange forward and foreign currency option contracts, net of cash collateral, was $6.6 million at ~~September~~June 30, ~~2017 was $1.1~~2019 and $20.7 million ~~and our net exposure~~ at December 31, ~~2016 was $0.8 million.~~2018. For additional information on our foreign exchange forward contracts and foreign currency option contracts,

see Note 9—12—“Derivative Financial Instruments” of the “Notes to Interim Consolidated Financial Statements (unaudited)” under Part I, Item 1 of this report.

Client Interest Rate Derivatives

We sell interest rate contracts to clients who wish to mitigate their interest rate exposure. We economically reduce the interest rate risk from this business by entering into opposite way contracts with correspondent banks. Our net exposure for client interest rate derivative contracts, net of cash collateral, was ~~zero~~$19.6 million at ~~September~~June 30, ~~2017~~2019 and ~~our net exposure~~$8.7 million at December 31, ~~2016 was $0.3 million.~~2018. For additional information on our client interest rate derivatives, see Note 9—12—“Derivative Financial Instruments” of the “Notes to Interim Consolidated Financial Statements (unaudited)” under Part I, Item 1 of this report.

Interest Rate Swaps

To manage interest rate risk on our variable-interest rate loan portfolio, we enter into interest rate swap contracts to hedge against future changes in interest rates by using hedging instruments to lock in future cash inflows that would otherwise be impacted by movements in the market interest rates. We designate these interest rate swap contracts as cash flow hedges that qualify for hedge accounting under ASC 815 and record them in other assets and other liabilities. For additional information on our interest rate swaps, see Note 12—“Derivative Financial Instruments” of the “Notes to Interim Consolidated Financial Statements (unaudited)” and "Quantitative and Qualitative Disclosures about Market Risk" under Part I, Item 1 of this report.

Deposits

Deposits were ~~$44.8~~$55.6 billion at ~~September~~June 30, ~~2017,~~2019, an increase of ~~$5.8~~$6.3 billion, or ~~15.0~~12.7 percent, compared to ~~$39.0~~$49.3 billion at December 31, ~~2016.~~2018. The increase in deposits was driven primarily by ~~funds coming from both new~~growth across a majority of our portfolio segments. The leading contributors were our technology and ~~existing clients in our Technology Early-Stage, Private Equity Services, and our Life Sciences~~life science/healthcare client portfolios, ~~during the nine months ended September 30, 2017 due~~attributable primarily to a healthy ~~venture capital~~equity funding environment and robust ~~secondary public offering market activities.~~IPO and SPO markets as well as continued healthy new client acquisition.

At ~~September~~June 30, ~~2017,~~2019, the aggregate balance of time deposit accounts individually equal to or greater than $100,000 totaled ~~$38.6~~$154 million, compared to ~~$48.3~~$46 million at December 31, ~~2016.~~2018. At ~~September~~June 30, ~~2017, $38.6 million of~~2019, all the time deposit accounts individually equal to or greater than $100,000 were scheduled to mature within one year. No material portion of our deposits has been obtained from a single depositor and the loss of any one depositor would not materially affect our business. Approximately 1315 percent and 1216 percent of our total deposits at ~~September~~June 30, ~~2017~~2019 and December 31, ~~2016,~~2018, respectively, were from our clients in Asia.

Short-Term Borrowings

WeAs of June 30, 2019, we had ~~$4.8~~no overnight borrowings and $24.3 million in other short-term borrowings consisting of cash collateral received from certain counterparties in relation to market value exposures of derivative contracts in our favor. As of December 31, 2018, we had $0.6 billion in short-term borrowings, ~~at September 30, 2017, compared~~consisting of $0.3 billion in advances from the FHLB and $0.3 billion in securities sold under an agreement to ~~$512.7 million at December 31, 2016. The decrease was due to the repayment, on January 6, 2017, of our short-term FHLB advances utilized and outstanding at December 31, 2016.~~

~~Long-Term Debt~~

~~Our long-term debt was $749.6 million at September 30, 2017 and $795.7 million at December 31, 2016.~~

~~As of~~ ~~September 30, 2017, long-term debt included our 3.50% Senior Notes, 5.375% Senior Notes, and 7.0% Junior Subordinated Debentures.~~repurchase. For more information on our ~~long-term~~short-term debt, see Note 8—11—“Short-Term Borrowings and Long-Term Debt” of the “Notes to Interim Consolidated Financial Statements (unaudited)” under Part I, Item 1 of this report.

Long-Term Debt

Our ~~6.05% Subordinated~~long-term debt was $697.0 million at June 30, 2019 and $696.5 million at December 31, 2018. As of June 30, 2019, long-term debt included our 3.50% Senior Notes ~~issued by the Bank, were repaid~~and 5.375% Senior Notes. For more information on ~~June 1, 2017. The interest rate swap agreement relating to this issuance was terminated upon repayment~~our long-term debt, see Note 11—“Short-Term Borrowings and Long-Term Debt” of the ~~notes.~~“Notes to Interim Consolidated Financial Statements (unaudited)” under Part I, Item 1 of this report.

Other Liabilities

A summary of other liabilities at ~~September~~June 30, ~~2017~~2019 and December 31, ~~2016~~2018 is as follows:


(Dollars in thousands)	September 30, 2017		December 31, 2016		% Change		June 30, 2019		December 31, 2018		% Change
Foreign exchange spot contract liabilities, gross	$	249,175	$	68,018	NM		$	591,903	$	170,355	NM
Accrued compensation	124,111		135,842		(8.6	)	194,176		224,405		(13.5	)
Allowance for unfunded credit commitments	48,172		45,265		6.4		62,664		55,183		13.6
Derivative liabilities, gross (1)	100,916		64,438		56.6
Other	468,124		304,820		53.6
Derivative liabilities (1)							112,651		98,050		14.9
Other liabilities							579,082		458,366		26.3
Total other liabilities	$	990,498	$	618,383	60.2		$	1,540,476	$	1,006,359	53.1

NM—Not meaningful


(1)	See “Derivatives” section above.

Foreign Exchange Spot Contract Liabilities

Foreign exchange spot contract liabilities represent unsettled client trades at the end of the period. The increase of ~~$181.2~~$421.5 million was due primarily to ~~increased client trade activity~~an increase in the amount of unsettled spot trades at period-end as compared to December 31, ~~2016.~~2018.

Accrued Compensation

Accrued compensation includes amounts for our Incentive Compensation Plan, Direct Drive Incentive Compensation Plan, Retention Program, Warrant Incentive Plan, ESOP and other compensation arrangements. The decrease of $30.2 million was primarily the result of the payout of our 2018 incentive compensation plans during the first quarter of 2019, partially offset by incentive compensation accruals for the six months ended June 30, 2019 primarily due to the increase in the number of average FTEs for the first half of 2019.

Other Liabilities

Other liabilities includes various accrued liability amounts for other operational transactions. The increase of ~~$163.3~~$120.7 million was reflective primarily of a ~~$145.3~~$61.1 million increase in ~~unsettled investment securities purchases~~new commitments for our qualified affordable tax credit funds, a $12.0 million increase in accrued rebate liabilities due to the timing of settlement at ~~September~~June 30, ~~2017~~2019 as compared to December 31, ~~2016.~~2018. In addition, an increase of $14.3 million in other liabilities was attributable to the inclusion of SVB Leerink in our financial results at June 30, 2019.

Noncontrolling Interests

Noncontrolling interests totaled ~~$137.5~~$152.1 million and ~~$134.5~~$148.6 million at ~~September~~June 30, ~~2017~~2019 and December 31, ~~2016,~~2018, respectively.The ~~$3.0~~$3.5 million increase was due primarily to income attributable to noncontrolling interests of ~~$21.2~~$21.5 million as well as an additional $5.3 million attributable to the acquisition of SVB Leerink in our financial results for the six months ended June 30, 2019, partially offset by net distributions of ~~$18.2~~$23.3 million to limited partners from various managed funds of ~~funds for the nine months ended September 30, 2017.~~funds.

Fair Value Measurements

The following table summarizes our financial assets and liabilities that are measured at fair value on a recurring basis as of ~~September~~June 30, ~~2017~~2019 and December 31, ~~2016~~2018:


	September 30, 2017						December 31, 2016						June 30, 2019						December 31, 2018
(Dollars in thousands)	Total Balance			Level 3			Total Balance			Level 3			Total Balance			Level 3			Total Balance			Level 3
Assets carried at fair value	$	12,982,950		$	140,972		$	12,974,923		$	130,853		$	8,574,931		$	148,211		$	8,388,011		$	146,278
As a percentage of total assets	25.6		%	0.3		%	29.0		%	0.3		%	13.4		%	0.2		%	14.7		%	0.3		%
Liabilities carried at fair value	$	100,916		$	—		$	64,438		$	—		$	112,651		$	—		$	98,050		$	—
As a percentage of total liabilities	0.2		%	—		%	0.2		%	—		%	0.2		%	—		%	0.2		%	—		%
As a percentage of assets carried at fair value				1.1		%				1.0		%				1.7		%				1.7		%

Financial assets valued using Level 3 measurements consist of our non-marketable investment securities in shares of private company stock and equity warrant assets (rights to shares of private and public company capital stock). The valuation methodologies of our non-marketable securities carried under fair value accounting and equity warrant assets involve a significant degree of management judgment. Refer to Note ~~14—~~18—“Fair Value of Financial Instruments” of the “Notes to Interim Consolidated Financial Statements (unaudited)” under Part I, Item 1 of this report for a summary of the valuation techniques and significant inputs used for each class of Level 3 assets.

The inherent uncertainty in the process of valuing securities for which a ready market does not exist may cause our estimated values of these securities to differ significantly from the values that would have been derived had a ready market for the securities existed, and those differences could be material. The timing and amount of changes in fair value, if any, of these financial instruments depend upon factors beyond our control, including the performance of the underlying companies, fluctuations in the market prices of the preferred or common stock of the underlying companies, general volatility and interest rate market factors, and legal and contractual restrictions. The timing and amount of actual net proceeds, if any, from the disposition of these financial instruments depend upon factors beyond our control, including investor demand for IPOs, levels of M&A activity, legal and contractual restrictions on our ability to sell, and the perceived and actual performance of portfolio companies. All of these factors are difficult to predict and there can be no assurances that we will realize the full value of these securities, which could result in significant losses. See “Risk Factors” set forth in our ~~2016~~2018 Form 10-K.

During the three and ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2019, the Level 3 assets that are measured at fair value on a recurring basis experienced net realized and unrealized gains of ~~$24.4~~$46.6 million and ~~$41.4~~$65.8 million, respectively, primarily ~~due to realized~~reflective of valuation increases from our private company warrant portfolio driven by healthy funding rounds and ~~unrealized~~ net gains realized on ~~equity~~exercised warrant assets due ~~primarily~~ to ~~M&A and~~ IPO activity. During the three and ~~nine~~six months ended ~~September~~June 30, ~~2016,~~2018, the Level 3 assets that are measured at fair value on a recurring basis experienced net realized and unrealized gains of ~~$21.1~~$18.2 million and ~~$33.1~~$36.9 million, respectively, primarily ~~due to~~reflective of valuation increases from our public and private company warrant portfolios and net gains realized on exercised warrant assets due to IPO and M&A activity.

Capital Resources

We maintain an adequate capital base to support anticipated asset growth, operating needs and credit and other business risks, and to provide for SVB Financial and the Bank to be in compliance with all regulatory capital ~~guidelines.~~guidelines, including the joint agency rules implementing the "Basel III" capital rules. Our primary sources of new capital include retained earnings and proceeds from the sale and issuance of our capital stock or other securities. In consultation with the Finance Committee of our Board of Directors, management engages in regular capital planning processes in an effort to optimize the use of capital available to us and to appropriately plan for our future capital needs. The capital plan considers capital needs for the foreseeable future and allocates capital to both existing and future business activities. Expected future use or activities for which capital may be set aside include balance sheet growth and associated relative increases in market or credit exposure, investment activity, potential product and business expansions, acquisitions and strategic or infrastructure investments. In addition, we conduct capital stress tests as part of our annual capital planning process. The capital stress tests allow us to assess the impact of adverse changes in the economy and interest rates on our capital adequacy position.

SVBFG Stockholders’ Equity

SVBFG stockholders’ equity totaled ~~$4.1~~$5.6 billion at ~~September~~June 30, ~~2017,~~2019, an increase of ~~$417.3~~$437.8 million, or ~~11.5~~8.6 percent, compared to ~~$3.6~~$5.1 billion at December 31, ~~2016.~~2018. This increase was due primarily to net income of ~~$373.3~~$606.7 million ~~for the nine months endedSeptember 30, 2017~~ and an increase in ~~additional paid-in capital~~accumulated other comprehensive income reflective primarily of ~~$51.8~~a $166.0 million ~~attributable primarily~~($119.8 million net of tax) increase in the fair value of our AFS securities portfolio driven by decreases in period-end market interest rates. The increases were partially offset by a $346.8 million decrease in SVBFG stockholders' equity related to ~~amortization~~the repurchase of ~~share-based compensation expense and~~our outstanding common ~~stock issued under employee benefit plans.~~stock.

Funds generated through retained earnings are a significant source of capital and liquidity and are expected to continue to be so in the future.

Capital Ratios

Both SVB Financial and the Bank are subject to various regulatory capital requirements administered by state and federal banking agencies.

Regulatory capital ratios for SVB Financial and the Bank exceeded minimum federal regulatory guidelines for a well-capitalized depository institution as of ~~September~~June 30, ~~2017~~2019 and December 31, ~~2016.~~2018. Capital ratios for SVB Financial and the Bank, compared to the minimum regulatory ratios applicable to bank holding companies and banks to be considered “well capitalized” and “adequately ~~capitalized”,~~capitalized," are set forth below:


					Minimum Ratios under Applicable Regulatory Capital Adequacy Requirements								Minimum Ratios under Applicable Regulatory Capital Adequacy Requirements
	September 30, 2017		December 31, 2016		“Well Capitalized”		“Adequately Capitalized”		June 30, 2019		December 31, 2018		“Well Capitalized”		“Adequately Capitalized”
SVB Financial:
CET 1 risk-based capital ratio	12.96	%	12.80	%	6.5	%	4.5	%	12.92	%	13.41	%	6.5	%	4.5	%
Tier 1 risk-based capital ratio	13.32		13.26		8.0		6.0		13.08		13.58		8.0		6.0
Total risk-based capital ratio	14.29		14.21		10.0		8.0		13.97		14.45		10.0		8.0
Tier 1 leverage ratio	8.34		8.34		N/A		4.0		8.82		9.06		N/A		4.0
Tangible common equity to tangible assets ratio (1)	8.00		8.15		N/A		N/A		8.43		8.99		N/A		N/A
Tangible common equity to risk-weighted assets ratio (1)	13.01		12.89		N/A		N/A		13.13		13.28		N/A		N/A
Bank:
CET 1 risk-based capital ratio	12.41	%	12.65	%	6.5	%	4.5	%	12.50	%	12.41	%	6.5	%	4.5	%
Tier 1 risk-based capital ratio	12.41		12.65		8.0		6.0		12.50		12.41		8.0		6.0
Total risk-based capital ratio	13.40		13.66		10.0		8.0		13.44		13.32		10.0		8.0
Tier 1 leverage ratio	7.59		7.67		5.0		4.0		8.17		8.10		5.0		4.0
Tangible common equity to tangible assets ratio (1)	7.47		7.77		N/A		N/A		7.91		8.13		N/A		N/A
Tangible common equity to risk-weighted assets ratio (1)	12.44		12.75		N/A		N/A		12.72		12.28		N/A		N/A


(1)	See below for a reconciliation of non-GAAP tangible common equity to tangible assets and tangible common equity to risk-weighted assets.

~~Capital~~Risk-based capital ratios (CET 1, tier 1, total risk-based capital, and tier 1 ~~leverage)~~leverage ratio) for SVB Financial ~~increased~~decreased as of ~~September~~June 30, ~~2017,~~2019, compared to the same ratios as of December 31, ~~2016.~~2018 as a result of an increase in risk-weighted assets, primarily driven by increases in funded loans and loan commitments. The ~~changes were~~decrease in the tier 1 leverage ratio is due to the increase in average assets driven by an increase in ~~capital during~~ the ~~nine months ended September 30, 2017, primarily from net income. An increase in additional paid-in~~average loan portfolio and investment securities.

Risk-based capital ~~from share-based compensation expense during the nine months ended September 30, 2017 also resulted in a benefit to the capital ratios. The~~

~~increases in capital were partially offset by an increase in risk-weighted assets due to period-end loan growth and higher investment and cash balances driven by increases in deposits.~~

~~Capital~~ ratios (CET 1, tier 1, total risk-based capital, and tier 1 ~~leverage)~~leverage ratio) for the Bank ~~decreased~~increased as of ~~September~~June 30, ~~2017,~~2019, compared to the same ratios as of December 31, ~~2016.~~2018. The ~~decrease~~increase in the Bank's capital ratios ~~reflected $60.0~~is due to the increase in net income partially offset by $297.0 million of cash dividends paid by the Bank to our bank holding company, SVB Financial, during the ~~nine~~six months ended ~~September~~June 30, ~~2017.~~ 2019. The increase in the tier 1 leverage ratio is due to the increase in regulatory capital driven by the increase in net income and partially offset by the increase in average assets.

All of our reported capital ratios remain above the levels considered to be “well capitalized” under applicable banking regulations.

The tangible common equity to tangible assets ratio and the tangible common equity to risk-weighted assets ratios are not required by GAAP or applicable bank regulatory requirements. However, we believe these ratios provide meaningful supplemental information regarding our capital levels. Our management uses, and believes that investors benefit from referring to, these ratios in evaluating the adequacy of the Company’s capital levels; however, these financial measures should be considered in addition to, not as a substitute for or preferable to, comparable financial measures prepared in accordance with GAAP. These ratios are calculated by dividing total SVBFG stockholders' equity, by total period-end assets and risk-weighted assets, after reducing both amounts by acquired intangibles, if any. The manner in which this ratio is calculated varies among companies. Accordingly, our ratio is not necessarily comparable to similar measures of other companies.

The following table provides a reconciliation of non-GAAP financial measures with financial measures defined by GAAP for SVB Financial and the Bank for the periods ended ~~September~~June 30, ~~2017~~2019 and December 31, ~~2016~~2018:


	SVB Financial						Bank						SVB Financial						Bank
Non-GAAP tangible common equity and tangible assets (Dollars in thousands, except ratios)	September 30, 2017			December 31, 2016			September 30, 2017			December 31, 2016			June 30, 2019			December 31, 2018			June 30, 2019			December 31, 2018
GAAP SVBFG stockholders’ equity	$	4,059,813		$	3,642,554		$	3,728,890		$	3,423,427		$	5,554,043		$	5,116,209		$	4,936,520		$	4,554,814
Less: intangible assets													192,981			—			—			—
Tangible common equity	$	4,059,813		$	3,642,554		$	3,728,890		$	3,423,427		$	5,361,062		$	5,116,209		$	4,936,520		$	4,554,814
GAAP total assets	$	50,754,287		$	44,683,660		$	49,937,343		$	44,059,340		$	63,773,739		$	56,927,979		$	62,380,814		$	56,047,134
Less: intangible assets													192,981			—			—			—
Tangible assets	$	50,754,287		$	44,683,660		$	49,937,343		$	44,059,340		$	63,580,758		$	56,927,979		$	62,380,814		$	56,047,134
Risk-weighted assets	$	31,208,081		$	28,248,750		$	29,970,913		$	26,856,850		$	40,843,334		$	38,527,853		$	38,821,244		$	37,104,080
Tangible common equity to tangible assets	8.00		%	8.15		%	7.47		%	7.77		%
Tangible common equity to risk-weighted assets	13.01			12.89			12.44			12.75
Non-GAAP tangible common equity to tangible assets													8.43		%	8.99		%	7.91		%	8.13		%
Non-GAAP tangible common equity to risk-weighted assets													13.13			13.28			12.72			12.28

The tangible common equity to tangible assets ratio decreased for ~~SVB Financial and~~ the Bank due to the proportionally higher increase in our assets compared to the increases in common equity during the nine months ended September 30, 2017. Increased capital was reflective primarily of net income for the nine months ended September 30, 2017. Total assets increased primarily as a result of ~~loan growth and higher investment and cash balances driven by increases in deposits. The tangible common equity to risk-weighted assets ratio increased for SVB Financial and decreased for~~ the Bank. The increase for SVB Financial was a result of the proportionally higher increase in net income compared to the changes in risk-weighted assets during the nine months ended September 30, 2017. The growth in period-end risk-weighted assets was primarily due to period-end loan growth and higher investment and cash balances driven by increases in deposits. The decrease for the Bank was a result of $60.0$297.0 million in cash dividends paid by the Bank to our bank holding company, SVB Financial Group, during the ~~nine~~six months ended ~~September~~June 30, ~~2017. See “SVBFG Stockholders’ Equity” above~~2019. The tangible common equity to risk-weighted assets ratio increased for ~~further details on changes~~the Bank as a result of the proportionally higher increase in tangible common equity relative to the ~~individual components of our equity balance.~~increase in risk-weighted assets. The growth in period-end risk-weighted assets was primarily due to increases in cash and cash equivalents and period-end loan growth.

Off-Balance Sheet Arrangements

In the normal course of business, we use financial instruments with off-balance sheet risk to meet the financing needs of our customers. These financial instruments include commitments to extend credit, commercial and standby letters of credit and commitments to invest in venture capital and private equity fund investments. These instruments involve, to varying degrees, elements of credit risk. Credit risk is defined as the possibility of sustaining a loss because other parties to the financial instrument fail to perform in accordance with the terms of the contract. For details of our commitments to extend credit, and commercial and standby letters of credit, please refer to Note ~~12—~~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.

Commitments to Invest in Venture Capital and Private Equity Funds

Subject to applicable regulatory requirements, including the Volcker Rule, we make investments. We make commitments to invest in venture capital and private equity funds, which in turn make investments generally in, or in some cases make loans to, privately-held companies. Commitments to invest in these funds are generally made for a 10-year period from the inception of the fund. Although the limited partnership agreements governing these investments typically do not restrict the general partners from calling 100% of committed capital in one year, it is customary for these funds to generally call most of the capital

commitments over 5 to 7 years; however, in certain cases, the funds may not call 100% of committed capital over the life of the fund. The actual timing of future cash requirements to fund these commitments is generally dependent upon the investment cycle, overall market conditions, and the nature and type of industry in which the privately held companies operate.

For further details on our commitments to invest in venture capital and private equity funds, refer to Note ~~12—~~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.

Liquidity

The objective of liquidity management is to ensure that funds are available in a timely manner to meet our financial obligations, including, as necessary, paying creditors, meeting depositors’ needs, accommodating loan demand and growth, funding investments, repurchasing securities and other operating or capital needs, without incurring undue cost or risk, or causing a disruption to normal operating conditions.

We regularly assess the amount and likelihood of projected funding requirements through a review of factors such as historical deposit volatility and funding patterns, present and forecasted market and economic conditions, individual client funding needs, and existing and planned business activities. Our Asset/Liability Committee (“ALCO”), which is a management committee, provides oversight to the liquidity management process and recommends policy guidelines for the approval of the Finance

Committee of our Board of Directors, and courses of action to address our actual and projected liquidity needs. Additionally, we routinely conduct liquidity stress testing as part of our liquidity management practices.

Our deposit base is, and historically has been, our primary source of liquidity. Our deposit levels and cost of deposits may fluctuate from time to time due to a variety of factors, including market conditions, prevailing interest rates, changes in client deposit behaviors, availability of insurance protection, and our offering of deposit products. We may also offer more investment alternatives for our off-balance sheet products which may impact deposit levels. At ~~September~~June 30, ~~2017,~~2019, our period-end total deposit balances were ~~$44.8~~$55.6 billion, compared to ~~$39.0~~$49.3 billion at December 31, ~~2016.~~2018.

Our liquidity requirements can also be met through the use of our portfolio of liquid assets. Our definition of liquid assets includes cash and cash equivalents in excess of the minimum levels necessary to carry out normal business operations, short-term investment securities maturing within one year, available-for-sale securities eligible and available for financing or pledging purposes with a maturity in excess of one year and anticipated near-term cash flows from investments.

We have certain facilities in place to enable us to access short-term borrowings on a secured ~~(using high-quality fixed income securities as collateral)~~ and an unsecured basis. ~~These~~Our secured facilities include ~~repurchase agreements and uncommitted federal funds lines with various financial institutions. We also pledge securities~~collateral pledged to the FHLB of San Francisco and the discount window at the ~~Federal Reserve Bank. The fair value~~FRB (using both fixed income securities and loans as collateral). Our unsecured facility consists of our uncommitted federal funds lines. As of June 30, 2019, collateral pledged to the FHLB of San Francisco ~~(comprised~~was comprised primarily of ~~U.S. Treasury securities)~~fixed income investment securities and loans and had a carrying value of $4.6 billion, of which $4.1 billion was available to support additional borrowings. As of June 30, 2019, collateral pledged to the discount window at ~~September 30, 2017 totaled $1.9~~the FRB was comprised of fixed income investment securities and had a carrying value of $0.6 billion, all of which was unused and available to support additional borrowings. ~~The fair value of collateral pledged at the discount window of the Federal Reserve Bank at September 30, 2017 totaled $0.7 billion, all of which was~~Our total unused and available ~~to support additional borrowings.~~borrowing capacity for our uncommitted federal funds lines totaled $1.9 billion at June 30, 2019. Our total unused and available borrowing capacity under our master repurchase agreements with various financial institutions totaled $3.3 billion at June 30, 2019.

On a stand-alone basis, SVB Financial’s primary liquidity channels include ~~cash flow from investments and interest in financial assets (including equity warrants) held by SVB Financial or its operating subsidiaries other than the Bank; to the extent declared,~~ dividends from the ~~Bank;~~Bank, its portfolio of liquid assets, and its ability to ~~the extent needed, capital market transactions offering~~raise debt and ~~equity instruments in the public and private markets.~~capital. Consistent with recent prior quarters, the Bank has paid a quarterly dividend to SVB Financial. For the three and ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2019, the dividend amount paid was ~~$20~~$130.0 million and ~~$60~~$297.0 million, respectively.

The ability of the Bank to pay dividends is subject to certain regulations described in “Business—Supervision and Regulation—Restriction on Dividends” under Part I, Item 1 of our ~~2016~~2018 Form 10-K.

Consolidated Summary of Cash Flows

Below is a summary of our average cash position and statement of cash flows for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2019 and ~~2016~~.2018. For further details, see our “Interim Consolidated Statements of Cash Flows (Unaudited)” under Part I, Item 1 of this report.


	Nine months ended September 30,						Six months ended June 30,
(Dollars in thousands)	2017			2016			2019			2018
Average cash and cash equivalents	$	3,596,669		$	2,437,763		$	5,470,520		$	2,997,338
Percentage of total average assets	7.6		%	5.6		%	9.3		%	5.6		%
Net cash provided by operating activities	$	468,032		$	273,004		$	450,571		$	347,380
Net cash (used for) provided by investing activities	(4,734,383		)	2,472,444
Net cash provided by (used for) financing activities	5,276,172			(1,727,386		)
Net increase in cash and cash equivalents	$	1,009,821		$	1,018,062
Net cash used for investing activities							(317,021		)	(4,570,107		)
Net cash provided by financing activities							5,315,836			4,011,753
Net increase (decrease) in cash and cash equivalents							$	5,449,386		$	(210,974	)

Average cash and cash equivalents increased by ~~$1.2~~$2.5 billion, or ~~47.5~~82.5 percent, to ~~$3.6~~$5.5 billion for the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2019, compared to ~~$2.4~~$3.0 billion for the comparable ~~2016~~2018 period.

Cash provided by operating activities was ~~$468.0~~$450.6 million for the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2019, reflective primarily of net income before noncontrolling interests of ~~$394.5 million.~~$628.2 million, partially offset by a net decrease of $177.6 million in adjustments to reconcile net income to net cash driven primarily by the changes in our foreign exchange spot contracts.

Cash used for investing activities of ~~$4.7~~$0.3 billion for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2019 was driven by ~~$6.2~~an $0.8 billion increase in ~~purchases~~loan balances and a net cash outflow of ~~fixed income investment securities,~~$0.1 billion for the acquisition of SVB Leerink, partially offset by ~~$3.7 billion of proceeds from maturities and principal paydowns~~net cash inflows from our fixed income investment and non-marketable equity securities ~~portfolio. Additionally, $2.3 billion in cash outflows were used to fund loan growth during the nine months ended September 30, 2017.~~of $0.6 billion.

Cash provided by financing activities was $5.3 billion for the ~~nine~~six months ended~~September~~ June 30, ~~2017,~~2019, reflective primarily of a net increase of ~~$5.8~~$6.3 billion in deposits, partially offset by ~~$507.8 million~~$0.6 billion in paydowns of ~~payments on~~ our short-term overnight ~~short-term~~ borrowings and ~~$46.2 million for the repayment~~$0.4 billion cash outflows related to repurchases of our ~~6.05% Subordinated Notes upon maturity.~~outstanding common stock.

Cash and cash equivalents were ~~$3.6~~$9.0 billion and ~~$2.5~~$2.7 billion, respectively, at ~~September~~June 30, ~~2017~~2019 and ~~September 30, 2016.~~2018.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest Rate Risk Management

Market risk is defined as the risk of adverse fluctuations in the market value of financial instruments due to changes in market interest rates. Interest rate risk is our primary market risk and can result from timing and volume differences in the repricing of our rate-sensitive assets and liabilities, widening or tightening of credit spreads, changes in the general level of market interest rates and changes in the shape and level of the benchmark LIBOR/SWAP yield curve. Additionally, changes in interest rates can influence the rate of principal prepayments on mortgage securities, which affects the rate of amortization of purchase premiums and discounts. Other market risks include foreign currency exchange risk, equity price risk, including the effect of competition on product pricing. ~~While all~~All of these risks are important considerations, ~~all~~but are also inherently difficult to predict and ~~it is equally difficult~~ to assess the impact of each on the ~~overall~~ simulation results. Consequently, simulations used to analyze the sensitivity of net interest income to changes in interest ~~rate risk~~rates will differ from actual results due to differences in the timing and frequency ~~and~~or rate resets, the magnitude of changes in market rates, the impact of competition, fluctuating business conditions, and the impact of strategies taken by management to mitigate these risks.

Interest rate risk is managed by our ALCO. ALCO reviews the sensitivity of the market valuation on earning assets and funding liabilities and the modeled 12-month ~~forward looking~~projection of net interest income from changes in interest rates, structural changes in investment and funding portfolios, loan and deposit activity and current market conditions. Adherence with relevant metrics included in our Interest Rate Risk Policy, which is approved by the Finance Committee of our Board of Directors, isare monitored on an ongoing basis.

~~Management of~~Managing interest rate risk is ~~carried out~~done primarily through strategies involving our fixed income securities portfolio, available funding channels and capital market activities. In addition, our policies permit the use of off-balance sheet derivatives, such as interest rate swaps, to assist in managing interest rate risk.

We utilize a simulation model to perform sensitivity analysis on the economic value of ~~our~~ equity and ~~our~~ net interest income under a variety of interest rate scenarios, balance sheet forecasts and business strategies. The simulation model provides a dynamic assessment of interest rate sensitivity embedded within our balance sheet which measures the potential variability in economic value and net interest income relating solely to changes in market interest rates over time. We review our interest rate risk position and sensitivity to market interest rates ~~on a quarterly basis at a minimum.~~regularly.

Model Simulation and Sensitivity Analysis

A specific application of our simulation model involves measurement of the impact of changes in market interest rates on ~~our~~the economic value of equity (“EVE”). EVE is defined as the market value of assets, less the market value of ~~liabilities, adjusted for any off-balance sheet items, if any.~~liabilities. Another application of the simulation model measures the impact of changes in market interest rates on ~~our~~ net interest income (“NII”) assuming a static balance sheet size and composition as of the period-end reporting date. ~~Meaning,~~For the NII simulation, the level of market interest rates as well as the size and composition of ~~earning assets and funding liabilities~~the balance sheet are held constant over the simulation horizon. Simulated cash flows during the scenario horizon are assumed to be replaced as they occur, which ~~restores~~maintains the balance sheet toat its ~~original~~current size and composition. More specifically, with respect to earning assets, loan maturities, principal maturities, paydowns and calls on investments are added back as replacement balances as they occur during the simulation horizon. Yield and spread assumptions on cash and investment balances reflect current market ~~rates.~~rates and the shape of the yield curve. Yield and spread assumptions on loans reflect recent market impacts on product pricing. Similarly, we make certain deposit decay rate assumptions on demand deposits and interest bearing deposits, which are replenished to hold the level and mix of funding liabilities constant. Changes in market interest rates that affect usnet interest income are principally short-term interest rates and include the following benchmark indexes: (i) the National ~~and SVB~~ Prime ~~rates,~~Rate, (ii) 1-month and 3-month LIBOR, and (iii) the Federal Funds target rate. Changes in these short-term rates impact interest earned on our variable rate loans ~~variable rate investment securities~~ and balances held as cash and cash equivalents. Additionally, simulated changes in deposit pricing relative to changes in market rates, commonly referred to as deposit beta, generally follow overall changes in short-term interest rates, although actual changes may lag in terms of timing and magnitude. ~~Overall,~~

Increases in short-term interest rates since the ~~assumed weighted~~end of 2015 and corresponding increases in deposit rates paid to our clients to attract new deposit funding and retain existing funds has resulted in an increase in our realized beta onto approximately 50 percent, as measured since the beginning of the increasing rate cycle, which is higher than the approximate 35 percent beta used in prior periods. Additionally, management expects deposit repricing behavior in a falling rate environment to be different than repricing behavior in a rising rate environment. This results in an "asymmetrical" beta assumption being applied in the NII and EVE simulation models for interest bearing deposits. This model assumes the overall beta for interest bearing deposits ~~is approximately 35.0 percent, which means deposit repricing is assumed to~~in a falling rate environment would be approximately ~~35.0~~60 percent. That is, overall changes in interest bearing deposit rates would be approximately 60 percent of ~~a given~~the change in short-term ~~interest~~market rates. ~~This~~In a rising rate environment, this beta assumption is only 50 percent. These repricing isassumptions are reflected as ~~a change~~changes in interest expense on interest bearing deposit balances.

~~For~~ Because the ~~three months ended September~~updated beta assumptions used as of June 30, ~~2017, our~~2019 represent deposit repricing that more closely follows the repricing behavior of the loan portfolio, overall NII sensitivity is lower in both increasing and decreasing rate scenarios when compared to results ~~include two key modeling assumption changes relating~~using the prior deposit beta assumptions. Therefore, when comparing the change to ~~our non-maturity deposits and prepayments on outstanding commercial loans. The impact was seen primarily in our EVE sensitivity profile and, to a lesser degree, on our NII sensitivity.~~

~~For non-maturity deposits, the assumed deposit decay rate is greater in current~~ modeled results using a lower beta assumption, modeled sensitivity changed from -14.4% to -12.4% in the -100 basis point scenario and from 14.3% to 13.4% in the +100 bps scenario when compared to ~~assumptions used in prior periods. The impact~~the modeled sensitivity as of the change in assumptions in all rate simulations resulted in greater market value sensitivity of deposits and greater EVE sensitivity overall. Prepayment rate assumptions on commercial loans are also greater in current modeled results compared to assumptions used in prior periods. The impact of the change in assumptions resulted in lower market value sensitivity on commercial loans but the impact on overall EVE sensitivity was minimal in comparison to the overall changes in EVE sensitivity.March 31, 2019.

The following table presents our EVE and NII sensitivity exposure related to an instantaneous and sustained parallel shift in market interest rates of 100 and 200 basis points ("bps") at ~~September~~June 30, ~~2017~~2019 and at December 31, ~~2016 (as~~2018. Net Interest Income sensitivity for December 31, 2018 has been revised ~~based on~~to reflect the higher beta assumptions ~~noted above):~~for purposes of comparison. Modeled Economic Value of Equity for December 31, 2018 has not been adjusted as the assumption change had an immaterial impact.

Change in interest rates (basis points) (Dollars in thousands) Estimated Estimated Increase/(Decrease) in EVE Estimated Estimated Increase/(Decrease) in NII
EVE Amount Percent NII Amount Percent
September 30, 2017:
200 $ 8,223,716
$ 999,900
13.8 % $ 1,889,933
$ 426,799
29.2 %
100 7,767,694
543,878
7.5
1,677,489
214,355
14.7
— 7,223,816
—
—
1,463,134
—
—
-100 6,448,044
(775,772 ) (10.7 ) 1,248,346
(214,788 ) (14.7 )
-200 5,444,025
(1,779,791 ) (24.6 ) 1,190,846
(272,288 ) (18.6 )

December 31, 2016 (As revised):
200 $ 7,601,404
$ 1,129,823
17.5 % $ 1,543,247
$ 365,734
31.1 %
100 7,073,407
601,826
9.3
1,360,356
182,843
15.5
— 6,471,581
—
—
1,177,513
—
—
-100 5,765,799
(705,782 ) (10.9 ) 1,075,353
(102,160 ) (8.7 )
-200 4,860,540
(1,611,041 ) (24.9 ) 1,039,903
(137,610 ) (11.7 )



Change in interest rates (bps) (Dollars in thousands)	Estimated		Estimated Increase/(Decrease) in EVE					Estimated		Estimated Increase/(Decrease) in NII
Change in interest rates (bps) (Dollars in thousands)	EVE		Amount			Percent		NII		Amount			Percent
June 30, 2019:
+200	$	9,416,810	$	236,121		2.6	%	$	2,566,645	$	540,243		26.7	%
+100	9,300,936		120,247			1.3		2,297,781		271,379			13.4
—	9,180,689		—			—		2,026,402		—			—
-100	8,920,500		(260,189		)	(2.8	)	1,775,994		(250,408		)	(12.4	)
-200	8,308,538		(872,151		)	(9.5	)	1,529,641		(496,761		)	(24.5	)

December 31, 2018: (as revised)
+200	$	9,348,408	$	504,405		5.7	%	$	2,583,577	$	499,257		24.0	%
+100	9,090,781		246,778			2.8		2,334,040		249,720			12.0
—	8,844,003		—			—		2,084,320		—			—
-100	8,470,501		(373,502		)	(4.2	)	1,840,190		(244,130		)	(11.7	)
-200	7,590,973		(1,253,030		)	(14.2	)	1,543,150		(541,170		)	(26.0	)

Economic Value of Equity

The estimated EVE in the preceding table is based on a combination of valuation methodologies including a discounted cash flow analysis and a multi-path lattice based valuation. Both methodologies use publicly available market interest rates to

determine discounting factors on projected cash flows. The model simulations and calculations are highly assumption-dependent and will change regularly as the composition of earning assets and funding liabilities change (including the impact of changes in the value of interest rate derivatives, if any), as interest rate environments evolve, and as we change our assumptions in response to relevant market conditions, competition or business circumstances. These calculations do not reflect forecast changes in our balance sheet or changes we may make to reduce our EVE exposure as a part of our overall interest rate risk management strategy.

As with any method of measuring interest rate risk, certain limitations are inherent in the method of analysis presented in the preceding table. We are exposed to yield curve risk, prepayment risk, basis risk, and yield spread compression, which cannot be fully modeled and expressed using the above methodology. Accordingly, the results in the preceding table should not be relied upon as a precise indicator of actual results in the event of changing market interest rates. Additionally, the resulting EVE and NII estimates are not intended to represent and should not be construed to represent our estimate of the underlying value of equity or forecast of NII.

Our base ~~case~~ EVE as of ~~September~~June 30, ~~2017~~2019 increased from December 31, ~~2016~~2018 by ~~$0.8 billion primarily due to~~$337 million, driven by changes in balance sheet ~~mix changes~~composition as well as ~~the assumption model~~ changes ~~discussed above. As of September~~in interest rates. At June 30, ~~2017,~~2019, as compared to December 31, 2018, total loan balances increased by $0.9 billion, primarily in Prime and LIBOR indexed variable rate loans. Total fixed income securities decreased by $0.5 billion and cash and cash equivalents increased by $5.4 billion driven by increases in period-end ~~loans, net of unearned income increased $2.3~~deposit growth. Total deposit growth was $6.3 billion as compared to December 31, 2016. Comparing the same periods, period-end total fixed income investment securities increased $2.6 billion and period-end cash and cash equivalents increased by $1.0 billion driven primarily by an increase in deposits balances of $5.8 billion.2018.

~~Higher short-term LIBOR rates as of September 30, 2017, with marginally lower long-term rates,~~Overall balance sheet growth contributed to a ~~flattening~~$609 million increase in total base EVE, however, this was offset by a decrease of $272 million as a result of lower LIBOR/swap rates across the ~~yield curve~~curve. In general, EVE sensitivity was lower as of June 30, 2019, compared to December 31, ~~2016. Changes in nominal rates~~2018, due to elevated levels of short duration cash relative other assets and ~~a change in the shape of the yield curve resulted in the~~liabilities impacted by changing market value of deposits decreasing proportionally higher than assets. However, as noted above, non-maturity deposit modeling assumption changes were the primary driver of a higher base case EVE as of September 30, 2017. Compared to December 31, 2016, proportional growth in loans, investments, and deposits did not significantly impact EVE sensitivity measures in the +100 bps and +200 bps rate shock scenarios as of September 30, 2017. The change in EVE sensitivity can be attributed primarily to the non-maturity assumptions changes as described above.discount rates.

12-Month Net Interest Income Simulation

Our ~~simulated~~static 12-month ~~base case~~ NII modeled projection at ~~September~~June 30, ~~2017 increased from~~2019 decreased compared to December 31, ~~2016~~2018 by ~~$286~~$58 million, primarily due to changes in our balance sheet composition with increased modeled interest income of $97 million, more than offset by an increase in interest expense of $157 million. As of June 30, 2019, an increase in interest income was due primarily to elevated cash levels while relatively higher interest bearing deposits and higher deposit rates resulted in increases in interest expense when compared to December 31, 2018. Comparing the same periods, modeled interest income from loans was $17 million lower as of June 30, 2019 due to lower loan interest rates despite an increase in loan balances relative to December 31, 2018. Lower loan interest income was offset by $15 million lower modeled interest expense on short-term borrowings.

The majority of our loans are indexed to the National Prime Rate and 1-month and 3-month LIBOR index rates. In the positive parallel simulated rate shock scenarios, interest income on assets that are tied to variable rate indexes, primarily our variable rate loans, are expected to contribute a positive impact on our base 12-month NII projections. The opposite is true for negative rate shock scenarios.

The 12-month NII simulations include repricing assumptions on our interest bearing deposit products which we set at our discretion based on client needs and our overall funding mix. Repricing of ~~the loan prepayment assumptions changes described above, higher~~interest bearing deposits impacts estimated interest expense. As noted previously, repricing deposit rates ~~on LIBOR~~are generally assumed to be about 50 percent of simulated increases in short-term interest rates and ~~Prime rate based loans, higher period-end loan growth as noted above, and a higher level~~about 60 percent of ~~earning assets at September 30, 2017.~~simulated decreases in short-term interest rates.

NII sensitivity is measured as the percentage change in projected 12-month net interest income earned in +/- 100 and +/- 200 basis point interest rate shock scenarios compared to a base scenario where asset and liability balances, composition, and the level of ~~September~~market interest rates are held constant over the forecast horizon. At June 30, ~~2017~~2019, NII sensitivity was 13.4 percent in the +100 ~~and -100~~ bps interest rate ~~shock scenarios is nearly symmetrical~~scenario, compared to 12.0 percent at ~~+14.7% and -14.7%, respectively. This profile is as expected, given the composition of floating rate loans in our balance sheet.~~December 31, 2018. Our NII sensitivity in the +200 ~~and -200~~ bps interest rate shock ~~scenarios still shows asymmetry, with less~~scenario was 26.7 percent compared to 24.0 percent at December 31, 2018. NII sensitivity in the -100 bps scenario of negative 12.4 percent at June 30, 2019 compared to a negative 11.7 percent at December 31, 2018. The -200 bps scenario indicates a percentage change in NII of negative 24.5 percent at June 30, 2019 compared to negative 26.0 percent at December 31, 2018. At June 30, 2019, NII sensitivity percentages are inclusive of the income or expense associated with interest rate ~~shock~~swaps that are part of our hedging initiatives which began during the six months ended June 30, 2019, in an effort to reduce the impact of potential decreasing rates on NII. On June 30, 2019, the outstanding notional amount of receive fixed interest rate swaps was $1.3 billion and reduced our projected base 12-month NII by $7 million. The +100 bps scenario ~~due~~reflects a total net negative impact to ~~floors on loans.~~NII of $19 million from the interest rate swaps and the -100 bps scenario reflects a total net positive impact to NII of $6 million.

The simulation model used in the above analysis incorporates embedded floors on loans, where present, in our interest rate scenarios, which prevent model benchmark rates from moving below zero percent in the ~~down~~200 bps rate scenarios. The embedded floors are also a factor in the up rate scenarios to the extent a simulated increase in rates is needed before floored

rates are cleared. In addition, we assume different deposit balance decay rates ~~for each interest rate scenario~~ based on a historical deposit study of our clients. These assumptions may change in future periods based on changes in client behavior and at management's discretion. Actual changes in our deposit pricing strategies may differ from our current model assumptions and may have an impact on our actual sensitivity overall.

ITEM 4. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

Disclosure controls and procedures are the controls and other procedures that are designed to ensure that information required to be disclosed in the reports that we file or submit under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms. Disclosure controls and procedures include, among other things, processes, controls and procedures designed to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

We carried out an evaluation, under the supervision and with the participation of management, including the Chief Executive Officer and the Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of our most recently completed fiscal quarter, pursuant to Exchange Act Rule 13a-15(b). Based upon this evaluation, the Chief

Executive Officer and Chief Financial Officer have concluded that, as of the end of the period covered by this report, the Company’s disclosure controls and procedures were effective.

Changes in Internal Control

~~There~~Except as set forth below, there were no changes in our internal control over financial reporting identified in management’s evaluation pursuant to Rules 13a-15(d) or 15d-15(d) of the Exchange Act during the period covered by this Quarterly Report on Form 10-Q that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Beginning January 1, 2019, we implemented ASC 842, Leases. Although the new lease standard had an immaterial impact on our consolidated financial statements, we did implement changes to our processes related to recognition and the control activities to properly identify and record them. These included the development of new policies, new controls, new training, ongoing contract review requirements, and gathering of information provided for disclosures.

PART II–OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

Please refer to Note ~~15—~~19—“Legal Matters” of the “Notes to Interim Consolidated Financial Statements (unaudited)” under Part I, Item 1 of this report.

ITEM 1A. RISK FACTORS

There are no material changes to the risk factors set forth in our ~~2016~~2018 Annual Report on Form 10-K.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Recent Sales of Unregistered Securities

None.

Issuer Purchases of Equity Securities

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS

~~Exhibit~~

~~Number~~

~~Exhibit Description~~

~~Incorporated by Reference~~

~~Filed~~

~~Herewith~~

~~Form~~

~~File No.~~

~~Exhibit~~

~~Filing Date~~

~~31.1~~

~~Rule 13a-14(a) / 15(d)-14(a) Certification of Principal Executive Officer~~

~~31.2~~

~~Rule 13a-14(a) / 15(d)-14(a) Certification of Principal Financial Officer~~

~~32.1~~

~~Section 1350 Certifications~~

~~101.INS~~

~~XBRL Instance Document~~

~~101.SCH~~

~~XBRL Taxonomy Extension Schema Document~~

~~101.CAL~~

~~XBRL Taxonomy Extension Calculation Linkbase Document~~

~~101.DEF~~

~~XBRL Taxonomy Extension Definition Linkbase Document~~

~~101.LAB~~

~~XBRL Taxonomy Extension Label Linkbase Document~~

~~101.PRE~~

~~XBRL Taxonomy Extension Presentation Linkbase Document~~

Exhibit

Number

Exhibit Description

Incorporated by Reference

Filed

Herewith

Form

File No.

Exhibit

Filing Date

3.1

Amended and Restated Certificate of Incorporation

10-Q

000-15637

3.1

May 9, 2019

10.1

2006 Equity Incentive Plan, as amended

31.1

Rule 13a-14(a) / 15(d)-14(a) Certification of Principal Executive Officer

31.2

Rule 13a-14(a) / 15(d)-14(a) Certification of Principal Financial Officer

32.1

Section 1350 Certifications

101.INS

XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document

101.SCH

XBRL Taxonomy Extension Schema Document

101.CAL

XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF

XBRL Taxonomy Extension Definition Linkbase Document

101.LAB

XBRL Taxonomy Extension Label Linkbase Document

101.PRE

XBRL Taxonomy Extension Presentation Linkbase Document

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



		SVB Financial Group

Date: ~~November 8, 2017~~August 9, 2019		/s/ DANIEL BECK
		Daniel Beck
		Chief Financial Officer
		(Principal Financial Officer)

		SVB Financial Group

Date: ~~November 8, 2017~~August 9, 2019		/s/ KAMRAN HUSAIN
		Kamran Husain
		Chief Accounting Officer
		(Principal Accounting Officer)

98114



(Dollars in thousands)	Unrecognized Expense		Weighted Average Expected Recognition Period - in Years
Stock options	$	10,935	2.72
Restricted stock units	56,513		2.74
Total unrecognized share-based compensation expense	$	67,448



	Shares		Weighted Average Grant Date Fair Value
Nonvested at December 31, 2016	670,969		$	106.64
Granted	239,847		180.05
Vested	(223,561	)	102.00
Forfeited	(38,871	)	122.77
Nonvested at September 30, 2017	648,384		134.43



Nine months ended September 30, 2016	Beginning Balance December 31, 2015		Charge-offs			Recoveries		Provision for (Reduction of) Loan Losses			Foreign Currency Translation Adjustments			Ending Balance September 30, 2016
(Dollars in thousands)	Beginning Balance December 31, 2015		Charge-offs			Recoveries		Provision for (Reduction of) Loan Losses			Foreign Currency Translation Adjustments			Ending Balance September 30, 2016
Commercial loans:
Software/internet	$	103,045	$	(56,742	)	$	4,525	$	46,438		$	(928	)	$	96,338
Hardware	23,085		(6,559		)	1,502		15,010			(433		)	32,605
Private equity/venture capital	35,282		—			—		17,008			(347		)	51,943
Life science/healthcare	36,576		(3,029		)	1,037		3,252			(788		)	37,048
Premium wine	5,205		—			—		(138		)	22			5,089
Other	4,252		(5,034		)	880		4,573			150			4,821
Total commercial loans	207,445		(71,364		)	7,944		86,143			(2,324		)	227,844
Consumer loans	10,168		(102		)	214		2,481			(40		)	12,721
Total allowance for loan losses	$	217,613	$	(71,466	)	$	8,158	$	88,624		$	(2,364	)	$	240,565