~~false--12-31Q320190000719739P3M0.0010.001150000000150000000525864985155583152586498515558310.053750.03500.053750.03502020-09-152025-01-29P1Y0.0010.00120000000200000000000P5Y~~

0000719739 us-gaap:InvestmentAdvisoryManagementAndAdministrativeServiceMember 2019-01-01 2019-03-31

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended ~~September 30, 2019~~March 31, 2020

☐ 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, California 95054-1191

(Address of principal executive offices) (Zip Code)

(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. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files). Yes ☒ 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.

Large accelerated filer☒ Accelerated filer ☐

Non-accelerated filer ☐ 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 ☒

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~~The Nasdaq Stock Market LLC
Depositary shares, each representing a 1/40th ownership interest in a share of 5.250% Fixed-Rate Non-Cumulative Perpetual Preferred Stock, Series A	SIVBP	The Nasdaq Stock Market LLC

At ~~October 31, 2019, 51,568,010~~April 30, 2020, 51,513,227 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 30, 2019~~March 31, 2020 and December 31, ~~2018~~2019 (Unaudited)	4

	Interim Consolidated Statements of Income for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2020 and 2019 ~~and 2018~~ (Unaudited)	5

	Interim Consolidated Statements of Comprehensive Income for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2020 and 2019 ~~and 2018~~ (Unaudited)	6

	Interim Consolidated Statements of Stockholders' Equity for the ~~nine~~three months ended ~~September 30,~~March 31, 2020 and 2019 ~~and 2018~~ (Unaudited)	7

	Interim Consolidated Statements of Cash Flows for the ~~nine~~three months ended ~~September 30,~~March 31, 2020 and 2019 ~~and 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	6864

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	~~115~~107

Item 4.	Controls and Procedures	~~117~~110

PART II - OTHER INFORMATION		~~119~~112

Item 1.	Legal Proceedings	~~119~~112

Item 1A.	Risk Factors	~~119~~112

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	~~119~~114

Item 3.	Defaults Upon Senior Securities	~~119~~114

Item 4.	Mine Safety Disclosures	~~119~~114

Item 5.	Other Information	~~119~~114

Item 6.	Exhibits	~~119~~115

SIGNATURES		~~121~~116

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, 2019			December 31, 2018			March 31, 2020			December 31, 2019
Assets:
Cash and cash equivalents	$	6,946,196		$	3,571,539		$	9,561,448		$	6,781,783
Available-for-sale securities, at fair value (cost of $12,699,542 and $7,862,311, respectively)	12,866,857			7,790,043
Held-to-maturity securities, at cost (fair value of $14,698,802 and $15,188,236, respectively)	14,407,078			15,487,442
Available-for-sale securities, at fair value (cost of $12,044,717 and $13,894,348, respectively)							12,648,064			14,014,919
Held-to-maturity securities, at amortized cost and net of allowance for credit losses of $230 and $0 (fair value of $14,131,154 and $14,115,272, respectively) (1)							13,574,289			13,842,946
Non-marketable and other equity securities	1,150,094			941,104			1,200,595			1,213,829
Total investment securities	28,424,029			24,218,589			27,422,948			29,071,694
Loans, net of unearned income	31,063,994			28,338,280
Allowance for loan losses	(304,410		)	(280,903		)
Loans, amortized cost							35,968,085			33,164,636
Allowance for credit losses: loans							(548,963		)	(304,924		)
Net loans	30,759,584			28,057,377			35,419,122			32,859,712
Premises and equipment, net of accumulated depreciation and amortization	146,713			129,213			154,780			161,876
Goodwill	137,823			—			137,823			137,823
Other intangible assets, net	52,288			—			48,072			49,417
Lease right-of-use assets	178,532			—			206,392			197,365
Accrued interest receivable and other assets	1,586,068			951,261			2,059,055			1,745,233
Total assets	$	68,231,233		$	56,927,979		$	75,009,640		$	71,004,903
Liabilities and total equity:
Liabilities:
Noninterest-bearing demand deposits	$	40,480,610		$	39,103,422		$	42,902,200		$	40,841,570
Interest-bearing deposits	19,062,264			10,225,478			19,009,757			20,916,237
Total deposits	59,542,874			49,328,900			61,911,957			61,757,807
Short-term borrowings	18,898			631,412			3,138,162			17,430
Lease liabilities	192,543			—			227,271			218,847
Other liabilities	1,731,222			1,006,359			2,200,953			2,041,752
Long-term debt	697,227			696,465			348,076			347,987
Total liabilities	62,182,764			51,663,136			67,826,419			64,383,823
Commitments and contingencies (Note 16 and Note 19)
Commitments and contingencies (Note 15 and Note 18)
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; 51,555,831 shares and 52,586,498 shares issued and outstanding, respectively	52			53
Preferred stock, $0.001 par value, 20,000,000 shares authorized; 350,000 shares issued and outstanding							340,138			340,138
Common stock, $0.001 par value, 150,000,000 shares authorized; 51,490,342 shares and 51,655,607 shares issued and outstanding, respectively							52			52
Additional paid-in capital	1,441,730			1,378,438			1,489,240			1,470,071
Retained earnings	4,312,745			3,791,838			4,612,785			4,575,601
Accumulated other comprehensive income (loss)	136,153			(54,120		)
Accumulated other comprehensive income							592,534			84,445
Total SVBFG stockholders’ equity	5,890,680			5,116,209			7,034,749			6,470,307
Noncontrolling interests	157,789			148,634			148,472			150,773
Total equity	6,048,469			5,264,843			7,183,221			6,621,080
Total liabilities and total equity	$	68,231,233		$	56,927,979		$	75,009,640		$	71,004,903

(1)

Prior to our adoption of Accounting Standard Update (ASU 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments) on January 1, 2020, the allowance for credit losses (ACL) related to held-to-maturity (HTM) securities was not applicable and is therefore presented as $0 at December 31, 2019. 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 INCOME (UNAUDITED)


	Three months ended September 30,						Nine months ended September 30,						Three months ended March 31,
(Dollars in thousands, except per share amounts)	2019			2018			2019			2018			2020			2019
Interest income:
Loans	$	394,246		$	352,353		$	1,202,467		$	979,724		$	382,569		$	394,144
Investment securities:
Taxable	149,656			142,075			410,768			403,702			154,385			126,717
Non-taxable	11,123			10,748			32,991			23,506			12,824			10,937
Federal funds sold, securities purchased under agreements to resell and other short-term investment securities	28,867			8,137			74,447			20,080			17,624			19,216
Total interest income	583,892			513,313			1,720,673			1,427,012			567,402			551,014
Interest expense:
Deposits	55,106			8,042			130,163			18,409			37,398			27,907
Borrowings	8,142			12,049			27,577			29,075			5,867			10,221
Total interest expense	63,248			20,091			157,740			47,484			43,265			38,128
Net interest income	520,644			493,222			1,562,933			1,379,528			524,137			512,886
Provision for credit losses	36,536			17,174			89,033			74,226			243,480			28,551
Net interest income after provision for credit losses	484,108			476,048			1,473,900			1,305,302			280,657			484,335
Noninterest income:
Gains on investment securities, net	29,849			32,193			106,575			77,365			46,055			29,028
Gains on equity warrant assets, net	37,561			34,141			107,213			72,393			13,395			21,305
Client investment fees	46,679			36,265			136,905			88,592			43,393			44,482
Foreign exchange fees	40,309			32,656			116,863			100,560			47,505			38,048
Credit card fees	30,158			24,121			86,431			68,739			28,304			27,483
Deposit service charges	22,482			19,588			65,496			56,081			24,589			20,939
Lending related fees	11,707			10,675			36,857			30,938			13,125			13,937
Letters of credit and standby letters of credit fees	10,842			8,409			31,205			24,938			11,542			9,354
Investment banking revenue	38,516			—			137,005			—			46,867			49,795
Commissions	12,275			—			40,812			—			16,022			14,108
Other	13,631			12,022			42,773			38,671			11,137			11,897
Total noninterest income	294,009			210,070			908,135			558,277			301,934			280,376
Noninterest expense:
Compensation and benefits	233,840			195,437			715,073			543,198			255,586			238,061
Professional services	55,202			36,542			133,018			112,080			38,705			36,986
Premises and equipment	26,775			19,858			72,386			57,576			26,940			21,700
Net occupancy	16,981			13,694			49,716			40,598			18,346			16,048
Business development and travel	19,539			12,712			51,915			35,998			14,071			15,354
FDIC and state assessments	4,881			9,550			13,343			29,306			5,234			3,979
Other	34,106			21,652			105,059			61,845			40,703			33,536
Total noninterest expense	391,324			309,445			1,140,510			880,601			399,585			365,664
Income before income tax expense	386,793			376,673			1,241,525			982,978			183,006			399,047
Income tax expense	105,075			95,308			331,624			246,561			49,357			107,435
Net income before noncontrolling interests	281,718			281,365			909,901			736,417			133,649			291,612
Net income attributable to noncontrolling interests	(14,437		)	(6,548		)	(35,901		)	(28,841		)
Net loss (income) attributable to noncontrolling interests													1,973			(2,880		)
Preferred stock dividends													(3,369		)	—
Net income available to common stockholders	$	267,281		$	274,817		$	874,000		$	707,576		$	132,253		$	288,732
Earnings per common share—basic	$	5.19		$	5.16		$	16.80		$	13.33		$	2.56		$	5.49
Earnings per common share—diluted	5.15			5.10			16.67			13.15			2.55			5.44

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,						Three months ended March 31,
(Dollars in thousands)	2019			2018			2019			2018			2020			2019
Net income before noncontrolling interests	$	281,718		$	281,365		$	909,901		$	736,417		$	133,649		$	291,612
Other comprehensive income (loss), net of tax:
Other comprehensive income, net of tax:
Change in foreign currency cumulative translation gains and losses:
Foreign currency translation losses	(6,213		)	(3,259		)	(6,307		)	(5,337		)
Related tax benefit	1,731			905			1,757			1,482
Foreign currency translation (losses) gains													(9,120		)	2,806
Related tax benefit (expense)													2,556			(782		)
Change in unrealized gains and losses on available-for-sale securities:
Unrealized holding gains (losses)	70,185			(24,902		)	236,203			(98,032		)
Related tax (expense) benefit	(19,547		)	6,994			(65,786		)	27,269
Reclassification adjustment for losses included in net income	—			—			3,905			—
Related tax benefit	—			—			(1,087		)	—
Reclassification of unrealized gains on equity securities to retained earnings for ASU 2016-01	—			—			—			(40,316		)
Unrealized holding gains													543,881			46,836
Related tax expense	—			—			—			11,145			(150,746		)	(13,045		)
Reclassification adjustment for (gains) losses included in net income													(61,165		)	3,630
Related tax expense (benefit)													16,953			(1,010		)
Amortization of unrealized holding gains on securities transferred from available-for-sale to held-to-maturity	(374		)	(1,777		)	(1,767		)	(3,915		)	(552		)	(674		)
Related tax benefit	104			494			492			1,085			153			188
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	9,810			—			28,466			—			231,920			1,102
Related tax expense	(2,733		)	—			(7,930		)	—			(64,281		)	(307		)
Reclassification adjustment for losses included in net income	2,713			—			3,224			—
Related tax benefit	(755		)	—			(897		)	—
Other comprehensive income (loss), net of tax	54,921			(21,545		)	190,273			(106,938		)
Reclassification adjustment for (gains) losses included in net income													(2,089		)	3
Related tax expense (benefit)													579			(1		)
Other comprehensive income, net of tax													508,089			38,746
Comprehensive income	336,639			259,820			1,100,174			629,479			641,738			330,358
Comprehensive income attributable to noncontrolling interests	(14,437		)	(6,548		)	(35,901		)	(28,841		)
Comprehensive loss (income) attributable to noncontrolling interests													1,973			(2,880		)
Comprehensive income attributable to SVBFG	$	322,202		$	253,272		$	1,064,273		$	600,638		$	643,711		$	327,478

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				Preferred Stock			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									Accumulated Other Comprehensive Income (Loss)			Total SVBFG Stockholders’ Equity			Shares				Total Equity			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		Additional Paid-in Capital		$	Retained Earnings	1,314,377		$	2,866,837		$	(1,472	)		Noncontrolling Interests	$	4,179,795		$	139,620		Preferred Stock		$	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	405,395		—			9,108			—			—			9,108				—			9,108
Common stock issued under ESOP	9,672		—			2,577			—			—			2,577				—			2,577
Net income	—		—			—			707,576			—			707,576				28,841			736,417
Capital calls and distributions, net	—		—			—			—			—			—				(22,785		)	(22,785		)
Net change in unrealized gains and losses on AFS securities, net of tax	—		—			—			—			(70,763		)	(70,763		)		—			(70,763		)
Amortization of unrealized holding gains on securities transferred from AFS to HTM, net of tax	—		—			—			—			(2,830		)	(2,830		)		—			(2,830		)
Foreign currency translation adjustments, net of tax	—		—			—			—			(3,855		)	(3,855		)		—			(3,855		)
Share-based compensation, net	—		—			33,968			—			—			33,968				—			33,968
Balance at September 30, 2018	53,250,255		$	53		$	1,360,030		$	3,672,696		$	(108,410	)	$	4,924,369			$	145,676		$	5,070,045
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			$	—		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		)
Cumulative adjustment for the adoption of premium amortization on purchased callable debt securities, net of tax (ASU 2017-08) (1)																										—			—		—			—			(583		)	—			(583		)	—			(583		)
Acquisition of SVB Leerink	—		—			—			—			—			—				5,256			5,256				—			—		—			—			—			—			—			5,256			5,256
Common stock issued under employee benefit plans, net of restricted stock cancellations	487,101		—			9,236			—			—			9,236				—			9,236				—			209,743		—			(2,936		)	—			—			(2,936		)	—			(2,936		)
Common stock issued under ESOP	14,442		—			3,506			—			—			3,506				—			3,506				—			14,442		—			3,506			—			—			3,506			—			3,506
Net income	—		—			—			874,000			—			874,000				35,901			909,901				—			—		—			—			288,732			—			288,732			2,880			291,612
Capital calls and distributions, net	—		—			—			—			—			—				(32,002		)	(32,002		)		—			—		—			—			—			—			—			(15,720		)	(15,720		)
Net change in unrealized gains and losses on AFS securities, net of tax	—		—			—			—			173,235			173,235				—			173,235				—			—		—			—			—			36,411			36,411			—			36,411
Amortization of unrealized holding gains on securities transferred from AFS to HTM, net of tax	—		—			—			—			(1,275		)	(1,275		)		—			(1,275		)		—			—		—			—			—			(486		)	(486		)	—			(486		)
Foreign currency translation adjustments, net of tax	—		—			—			—			(4,550		)	(4,550		)		—			(4,550		)		—			—		—			—			—			2,024			2,024			—			2,024
Net change in unrealized gains and losses on cash flow hedges, net of tax	—		—			—			—			22,863			22,863				—			22,863				—			—		—			—			—			797			797			—			797
Share-based compensation, net	—		—			50,550			—			—			50,550				—			50,550				—			—		—			15,122			—			—			15,122			—			15,122
Common stock repurchases	(1,532,210	)	(1		)	—			(352,510		)	—			(352,511		)		—			(352,511		)		—			(488,578	)	(1		)	—			(116,022		)	—			(116,023		)	—			(116,023		)
Balance at September 30, 2019	51,555,831		$	52		$	1,441,730		$	4,312,745		$	136,153		$	5,890,680			$	157,789		$	6,048,469
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
Balance at December 31, 2019																										$	340,138		51,655,607		$	52		$	1,470,071		$	4,575,601		$	84,445		$	6,470,307		$	150,773		$	6,621,080
Cumulative adjustment for the day one adoption of ASC 326, net of tax (1)																										—			—		—			—			(35,049		)	—			(35,049		)	—			(35,049		)
Common stock issued under employee benefit plans, net of restricted stock cancellations																										—			66,864		—			(3,031		)	—			—			(3,031		)	—			(3,031		)
Common stock issued under ESOP																										—			12,094		—			2,447			—			—			2,447			—			2,447
Net income (loss)																										—			—		—			—			135,622			—			135,622			(1,973		)	133,649
Capital calls and distributions, net																										—			—		—			—			—			—			—			(328		)	(328		)
Net change in unrealized gains and losses on AFS securities, net of tax																										—			—		—			—			—			348,923			348,923			—			348,923
Amortization of unrealized holding gains on securities transferred from AFS to HTM, net of tax																										—			—		—			—			—			(399		)	(399		)	—			(399		)
Foreign currency translation adjustments, net of tax																										—			—		—			—			—			(6,564		)	(6,564		)	—			(6,564		)
Net change in unrealized gains and losses on cash flow hedges, net of tax																										—			—		—			—			—			166,129			166,129			—			166,129
Share-based compensation, net																										—			—		—			19,171			—			—			19,171			—			19,171
Common stock repurchases																										—			(244,223	)				—			(60,020		)	—			(60,020		)	—			(60,020		)
Dividends on preferred stock																										—			—		—			—			(3,369		)	—			(3,369		)	—			(3,369		)
Other, net																										—			—		—			582			—			—			582			—			582
Balance at March 31, 2020																										340,138			51,490,342		$	52		$	1,489,240		$	4,612,785		$	592,534		$	7,034,749		$	148,472		$	7,183,221


(1)	See "Adoption of New Accounting Standards" in Note ~~1—“Basis~~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,						Three months ended March 31,
(Dollars in thousands)	2019			2018			2020			2019
Cash flows from operating activities:
Net income before noncontrolling interests	$	909,901		$	736,417		$	133,649		$	291,612
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for credit losses	89,033			74,226			243,480			28,551
Changes in fair values of equity warrant assets, net of proceeds from exercises	12,801			(24,462		)	18,574			(10,248		)
Changes in fair values of derivatives, net	(29,472		)	2,964			(63,034		)	(3,068		)
Gains on investment securities, net	(106,575		)	(77,365		)	(46,055		)	(29,028		)
Distributions of earnings from non-marketable and other equity securities	77,584			54,605			12,346			15,619
Depreciation and amortization	60,408			43,389			24,824			20,830
Amortization of premiums and discounts on investment securities, net	9,646			(252		)	13,565			1,606
Amortization of share-based compensation	50,550			33,968			19,171			15,122
Amortization of deferred loan fees	(112,383		)	(94,771		)	(33,016		)	(35,276		)
Deferred income tax benefit	(1,720		)	(16,532		)	(60,126		)	(8,834		)
Excess tax benefit from exercise of stock options and vesting of restricted shares	(7,931		)	(17,543		)	(2,575		)	(2,804		)
Losses from the write-off of premises and equipment	185			7,117			—			52
Changes in other assets and liabilities:
Accrued interest receivable and payable, net	(10,429		)	(51,521		)	23,982			(3,361		)
Accounts receivable and payable, net	(18,278		)	1,697			(45,311		)	30,447
Income tax receivable and payable, net	(59,527		)	(12,962		)	66,581			94,552
Accrued compensation	(109,837		)	5,505			(236,834		)	(253,769		)
Foreign exchange spot contracts, net	34,304			86,298			(12,583		)	169,079
Proceeds from termination of interest rate swaps							180,500			—
Other, net	(78,516		)	(46,874		)	(69,013		)	19,668
Net cash provided by operating activities	709,744			703,904			168,125			340,750
Cash flows from investing activities:
Purchases of available-for-sale securities	(7,832,282		)	(662,458		)	(1,538,553		)	(204,328		)
Proceeds from sales of available-for-sale securities	2,189,087			—			2,654,212			1,171,564
Proceeds from maturities and paydowns of available-for-sale securities	801,605			2,529,666			785,692			116,001
Purchases of held-to-maturity securities	(408,479		)	(4,726,595		)	(358,650		)	—
Proceeds from maturities and paydowns of held-to-maturity securities	1,516,340			1,482,204			646,212			428,433
Purchases of non-marketable and other equity securities	(100,068		)	(56,435		)	(12,177		)	(16,165		)
Proceeds from sales and distributions of capital of non-marketable and other equity securities	90,371			83,020			45,720			19,979
Net increase in loans	(2,685,151		)	(4,356,980		)	(2,796,409		)	(505,516		)
Purchases of premises and equipment	(33,871		)	(28,718		)	(25,088		)	(5,504		)
Acquisition of SVB Leerink, net of cash acquired	(102,328		)	—			—			(100,037		)
Net cash used for investing activities	(6,564,776		)	(5,736,296		)
Net (cash used) provided by for investing activities							(599,041		)	904,427
Cash flows from financing activities:
Net increase in deposits	10,213,974			4,342,036			154,150			2,998,297
Net (decrease) increase in short-term borrowings	(612,514		)	1,597,522
Net increase (decrease) in short-term borrowings							3,120,732			(616,957		)
(Distributions to noncontrolling interests), net of contributions from noncontrolling interests	(32,002		)	(22,785		)	(328		)	(15,720		)
Payment of preferred stock dividend							(3,369		)	—
Common stock repurchases	(352,511		)	—			(60,020		)	(116,023		)
Proceeds from issuance of common stock, ESPP and ESOP	12,742			11,685
Proceeds from issuance of common stock, ESPP and ESOP, net of restricted stock awards							(584		)	570
Net cash provided by financing activities	9,229,689			5,928,458			3,210,581			2,250,167
Net increase in cash and cash equivalents	3,374,657			896,066			2,779,665			3,495,344
Cash and cash equivalents at beginning of period	3,571,539			2,923,075			6,781,783			3,571,539
Cash and cash equivalents at end of period	$	6,946,196		$	3,819,141		$	9,561,448		$	7,066,883
Supplemental disclosures:
Cash paid during the period for:
Interest	$	164,503		$	54,681		$	46,145		$	46,548
Income taxes	379,579			277,388			31,988			17,570
Noncash items during the period:
Changes in unrealized gains and losses on available-for-sale securities, net of tax	$	173,235		$	(70,763	)	$	348,923		$	36,411
Distributions of stock from investments	7,770			4,368			3,119			1,276

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 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," 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~~ months ended ~~September 30, 2019~~March 31, 2020 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, ~~2018~~2019 (“~~2018~~2019 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~~Use of Estimates and ~~Supplementary Data—Note 2—“Summary of Significant Accounting Policies” under Part II, Item 8 of our 2018 Form 10-K.~~Assumptions

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 and the adequacy of the allowance for ~~loan~~credit losses for loans and ~~allowance~~ for unfunded credit commitments.

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 based on 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~~Reclassifications

~~In February 2016,~~Certain prior period amounts primarily related to the FASB issued a new accounting standard update (ASU 2016-02, Leases (Topic 842)), which 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. 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 through a cumulative effect adjustment to retained earnings as of the beginning of the 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 recognized a net reduction to retained earnings of $583 thousand.

~~Recent~~ Accounting ~~Pronouncements~~

~~In June 2016, the FASB issued a new accounting standard update~~Standard Update (ASU 2016-13, Financial ~~Instruments- Credit~~Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments) ("ASU 2016-13"or "CECL") as mentioned below have been reclassified to conform to current period presentations.

Summary of Significant Accounting Policies

With the exception of the updated accounting policies listed below, 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 2019 Form 10-K.

Loans

Loans are reported at amortized cost which consists of the principal amount outstanding, net of unearned loan fees. Unearned loan fees reflect unamortized deferred loan origination and commitment fees net of unamortized deferred loan origination costs. In addition to cash loan fees, we often obtain equity warrant assets that give us an option to purchase a position in a client company's stock in consideration for providing credit facilities. The grant date fair values of these equity warrant assets are deemed to be loan fees and are deferred as unearned income and recognized as an adjustment of loan yield through loan interest income. The net amount of unearned loan fees is amortized into loan interest income over the contractual terms of the underlying loans and commitments using the constant effective yield method, adjusted for actual loan prepayment experience, or the straight-line method, as applicable.

Allowance for Credit Losses: Loans

The allowance for credit losses for loans considers credit risk and is adjusted by a provision for expected credit losses ("ECL") charged to expense and reduced by the charge-off of loan amounts, net of recoveries. Our allowance for credit losses is an estimate of expected losses inherent with the Company's existing loans at the balance sheet date. Determining the appropriateness of the allowance is complex and requires judgment by management about the effect of matters that are inherently uncertain.

Portfolio Segments

The estimation of ECL on loans process involves procedures to appropriately consider the unique characteristics of our six loan portfolio segments. Our six portfolio segments are determined by using the following risk dimensions: (i) underwriting methodology, (ii) industry niche and (iii) life stage. The 6 portfolio segments are further disaggregated into 10 classes of financing receivable, or risk-based segments, and represents the level at which credit risk is monitored. Credit quality is assessed and monitored by evaluating various attributes and the results of those evaluations are utilized in underwriting new loans and in our process to estimate ECL. The following provides additional information regarding our six portfolio segments:


(i)	Investor Dependent - Accelerator (Early-Stage) and Growth (Mid-Stage and Later-Stage)

Investor Dependent loans are made primarily to technology and life science/healthcare companies in both our Accelerator (Early-Stage) and Growth practices (Mid-Stage and Later-Stage). 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 and charged-off.

We further disaggregate Investor Dependent loans into three subcategories. Early-Stage consists of pre-revenue, development-stage companies and companies that are in the early phases of commercialization, with revenues of up to $5 million. Mid-Stage companies consist of growth-stage enterprises with revenues of between $5 million and $15 million or, in the case of biotechnology, pre-revenue clinical-stage companies. Later-Stage consists of companies with revenues of $15 million or more. This disaggregation is based in part on the materially different historical loss rate we

have experienced with each cohort, with historical loss rates being the highest in the Early-Stage segment, and declining in the Mid-Stage and Later-Stage segments, as a function of the relatively higher enterprise value and asset coverage that is created as a company progresses through the various stages of development.


(ii)	Cash Flow Dependent

Cash Flow Dependent loans are made primarily to technology and life science/healthcare companies, which include Sponsor Led Buyout lending, and 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. Sponsor Led Buyout loans are typically used to assist a select group of experienced private equity sponsors with the acquisition of businesses and 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.

(iii) Balance Sheet Dependent

Balance Sheet Dependent loans are made primarily to technology and life science/healthcare companies, which include asset-based loans, and 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. The repayment of these arrangements is dependent on the financial condition, and payment ability, of third parties with whom our clients do business. As a result of the adoption of CECL and in connection with the revised approach to portfolio disaggregation discussed above, certain loans that were previously considered to be Balance Sheet Dependent have been reclassified as Investor Dependent - Later-Stage.


(iv)	Private Equity/Venture Capital

The vast majority of our Private Equity/Venture Capital 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.


(v)	Private Bank

Our Private Bank clients are primarily private equity/venture capital professionals and senior executives in 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, real estate secured home equity capital call lines of credit and other secured and unsecured lending products, as well as cash and wealth management services. In addition, we provide real estate secured loans to eligible employees through our Employee Home Ownership Program.


(vi)	Premium Wine and Other

Our Premium Wine clients primarily consist of premium wine producers across the Western United States, primarily in California's Napa Valley, Sonoma County and Central Coast regions, as well as the Pacific Northwest. Our other loan portfolio segment primarily includes our community development loans made as part of our responsibilities under the Community Reinvestment Act.

We maintain a systematic process for the evaluation of individual loans and portfolio segments for inherent risk of estimated credit losses for loans. At the time of approval, each loan in our portfolio is assigned a credit risk rating. Credit risk ratings are assigned on a scale of 1 to 10, with 1 representing loans with a low risk of nonpayment, 9 representing loans with the highest risk of nonpayment and 10 representing loans which have been charged-off. The credit risk ratings for each loan are monitored and updated on an ongoing basis. This credit risk rating process includes, but is not limited to, consideration of such factors as payment status, the financial condition and operating performance of the borrower, borrower compliance with loan covenants, underlying collateral values and performance trends, the degree of access to additional capital, the presence of credit enhancements such as third party guarantees (where applicable), the degree to which the borrower is sensitive to external factors and the depth and experience of the borrower's management team. Our policies require a committee of senior management to review, at least quarterly, credit relationships with a credit risk rating of 5 through 9 that exceed specific dollar values.

Expected Credit Loss Measurement

The methodology for estimating the amount of ECL reported in the allowance for credit losses has two main components: (1) ECL assessed on a collective basis for pools of loans that share similar risk characteristics which includes a qualitative adjustment based on management’s assessment of the risks that may lead to a future loan loss experience different from our historical loan loss experience and (2) ECL assessed for individual loans that do not share similar risk characteristics with other loans. We do not estimate ECL on accrued interest receivable ("AIR") on loans as AIR is reversed or written off when the full collection of the AIR related to a loan becomes doubtful. AIR on loans totaled $111.8 million at March 31, 2020 and $119.1 million at December 31, 2019 and is reported in "Accrued interest receivable and other assets" in our unaudited interim consolidated balance sheets.

While the evaluation process of our allowance for credit losses on loans uses historical and other objective information, the classification of loans and the estimate of the allowance for credit losses for loans rely on the judgment and experience of our management. A committee comprised of senior management evaluates the adequacy of the allowance for credit losses for loans, which includes review of loan portfolio segmentation, quantitative models, internal and external data inputs, economic forecasts, credit risk ratings and qualitative adjustments.

Loans That Share Similar Risk Characteristics With Other Loans

We derive an estimated ECL assumption from a non-discounted cash flow approach based on our portfolio segments discussed above. This approach incorporates: (1) probability of default ("PD"), (2) loss given default ("LGD") and (3) exposure at default ("EAD"), over the estimated life of the exposure. PD and LGD assumptions are developed based on quantitative models and inherent risk of credit loss, both of which involve significant judgement. Renewals and extensions within our control are not considered in the estimated contractual term of a loan. However, we include potential extensions if management has a reasonable expectation that we will execute a TDR with the borrower. The quantitative models are based on historical credit loss experience, adjusted for probability-weighted economic scenarios. These scenarios are used to support a reasonable and supportable forecast period of three years for all portfolio segments. To the extent the remaining contractual lives of loans in the portfolio extend beyond this three-year period, we revert to historical averages gradually over the remaining contractual lives, adjusted for prepayments. The macroeconomic scenarios are reviewed on a quarterly basis.

We also apply a qualitative factor adjustment to the results obtained through our quantitative ECL models to consider relevant qualitative factors that relate to the environment in which the entity operates and are specific to the borrower. These adjustments are based upon our assessment of the risks that may lead to a future loan loss experience different from our historical loan loss experience. These risks are aggregated to become our qualitative allocation. Based on our qualitative assessment estimate of changing risks in the lending environment, the qualitative allocation may vary significantly from period to period and may include, but is not limited to, consideration of the following factors:

Changes in lending policies and procedures, including changes in underwriting standards and collection, charge-off, and recovery practices not considered elsewhere in estimating credit losses;

Changes in international, national, regional, and local economic and business conditions and developments that affect the collectability of the portfolio, including the condition of various market segments;

Changes in the nature and volume of the portfolio and in the terms of loans;

Changes in the experience, ability and depth of lending management and other relevant staff;

Changes in the volume and severity of past due loans, the volume of nonaccrual loans and the volume and severity of adversely classified or graded loans;

Changes in the quality of the institution’s loan review system;

Changes in the value of underlying collateral for collateral-dependent loans;

The existence and effect of any concentrations of credit, and changes in the level of such concentrations; and

The effect of other external factors such as competition and legal and regulatory requirements on the level of estimated credit losses in the institution’s existing portfolio.

Loans That Do Not Share Similar Risk Characteristics

We monitor our loan pools to ensure all assets therein continue to share similar risk characteristics with other financial assets inside the pool. Changes in credit risk, borrower circumstances or the recognition of write-offs may indicate that a loan's risk profile has changed, and the asset should be removed from its current pool. For a loan that does not share risk characteristics with other loans, expected credit loss is measured based on the net realizable value, that is, the difference between the discounted value of the expected future cash flows and the amortized cost basis of the loan. When a loan is collateral-dependent and the repayment is expected to be provided substantially through the operation or sale of the collateral, the ECL is measured as the difference between the amortized cost basis of the loan and the fair value of the collateral. The fair value of the collateral will

be determined by the most recent appraisal, as adjusted to reflect a reasonable marketing period for the sale of the asset(s) and an estimate of reasonable selling expenses. Collateral-dependent loans will have independent appraisals completed and accepted at least annually.

Allowance for Credit Losses: Unfunded Credit Commitments

We maintain a separate allowance for credit losses for unfunded credit commitments which is included in other liabilities and the related ECL in our provision for credit losses. We estimate the amount of expected losses by using historical trends to calculate a probability of an unfunded credit commitment being funded and derive historical lifetime expected loss factors for each portfolio segment similar to our funded loan ECL. The collectively assessed ECL for unfunded credit commitments also includes the same qualitative allocations applied for our funded loan ECL. For unfunded credit commitments related to loans that do not share similar risk characteristics with other loans, where applicable, a separate estimate of ECL will be included in our total allowance for credit losses on unfunded credit commitments. Loan commitments that are determined to be unconditionally cancellable by the Company do not require an allowance for credit losses.

Investment Securities

Available-for-Sale Securities and the Allowance for Credit Losses on Available-for-Sale Securities

Our available-for-sale securities portfolio is a fixed income investment portfolio that is managed to earn an appropriate portfolio yield over the long-term while maintaining sufficient liquidity and credit diversification and meeting our asset/liability management objectives. Unrealized gains and losses on available-for-sale securities, net of applicable taxes, are reported in accumulated other comprehensive income, which is a separate component of SVBFG's stockholders' equity, until realized.

We analyze available-for-sale securities for impairment related to credit losses each quarter. Market valuations represent the current fair value of a security at a specified point in time and incorporates the risk of timing of interest due and the return of principal over the contractual life of each security. Gains and losses on securities are realized when there is a sale of the security prior to maturity. A credit impairment is recognized through a valuation allowance against the security with an offset through earnings; the allowance is limited to the amount that fair value, calculated as the present value of expected future cash flow discounted at the security’s effective interest rate, is less than the amortized cost basis. We separate the amount of the impairment related to credit losses, if any, and the amount due to all other factors. The credit loss component is recognized in earnings and recorded as an allowance for credit losses for AFS securities.

Held-to-Maturity Securities and the Allowance for Credit Losses on Held-to-Maturity Securities

Debt securities purchased with the positive intent and ability to hold to maturity are classified as held-to-maturity securities and are recorded at amortized cost, net of any allowance for credit losses.

We measure ECL on held-to-maturity securities on a collective basis by major security type and standard credit rating. Our held-to-maturity securities portfolio, with the exception of our municipal bond portfolio, are either explicitly or implicitly guaranteed by the U.S. government, are highly rated by major rating agencies and have a long history of no credit losses. With respect to these securities, we consider the risk of credit loss to be zero and, therefore, we do not record an ECL. Our municipal bond portfolio primarily consists of highly rated bonds and currently carry ratings no lower than Aa3. The estimate of ECL on our municipal bond portfolio considers historical credit loss information and severity of loss in the event of default and leverages external data adjusted for current conditions. A reasonable and supportable forecast period of one year is applied to our municipal bond portfolio, with immediate reversion to long-term average historical loss rates when remaining contractual lives of securities exceed one year. We do not estimate ECL on accrued interest receivable ("AIR") from held-to-maturity securities as AIR is reversed or written off when the full collection of the AIR related to a security becomes doubtful. AIR from held-to-maturity securities totaled $41.5 million at March 31, 2020 and $45.2 million at December 31, 2019 and is reported in "Accrued interest receivable and other assets" in our unaudited interim consolidated balance sheets.

Expected credit loss on municipal bonds that do not share common risk characteristics with our collective portfolio are individually measured based on net realizable value, or the difference between the discounted value of the expected future cash flows and the recorded amortized cost basis of the security.

Adoption of New Accounting Standards

Financial Instruments - Credit Losses

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), which amends the incurred loss impairment methodology ~~under~~in current GAAP with a methodology that reflects a current expected credit loss ~~("CECL")~~ measurement to estimate the allowance for credit losses over the contractual life of the financial assets (including loans, unfunded credit commitments and HTM ~~debt securities~~securities) and ~~off-balance sheet commitments) and~~

requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. While the CECL model does not apply to available-for-sale debt securities, ASU 2016-13 does require entities to record an allowance for credit losses when recognizing credit losses for available-for-sale securities, rather than reduce the amortized cost of the securities by direct write-offs, which allows for reversal of credit impairments in future periods based on improvements in credit. ~~This~~We adopted the guidance ~~will be effective~~on January 1, 2020, onusing a modified retrospective approach. We ~~will adopt~~recognized the ~~guidance~~cumulative effect of initially applying CECL as an adjustment to the opening balance of retained earnings, net of tax. The comparative information has not been restated and continues to be reported under the accounting standards in ~~the first quarter of 2020.~~effect for those periods.

~~Our~~We completed a comprehensive implementation process ~~which will continue throughout 2019, includes~~that included loss forecasting model development, evaluation of technical accounting topics, updates to our allowance for credit loss accounting policies, reporting processes and related internal controls, overall operational readiness for our adoption of CECL as well as parallel runs for CECL alongside our ~~current~~previous allowance process. Key remaining project implementation activities include the finalization of loss forecasting models and qualitative factors, reporting processes, production processes, completion of documentation, policies and disclosures, development of supporting analytics and control design and operating effectiveness. We ~~provide~~provided quarterly updates to senior management and to the Audit and Credit Committees of the Board of ~~Directors. These communications provide an update on~~Directors throughout the ~~status~~implementation process. For additional details regarding our allowance for credit losses methodology, see Note 7 — “Loans and Allowance for Credit Losses: Loans and Unfunded Credit Commitments” of the ~~implementation as discussed above.~~

“Notes to Interim Consolidated Financial Statements (unaudited)” under Part I, Item 1 of this report.

Based on our loan, ~~and~~ unfunded credit ~~commitments portfolio~~commitment, and HTM security portfolios composition at ~~September 30,~~December 31, 2019, and the then current economic environment, ~~we currently estimate~~ the day 1 combined impact of CECL on our allowance for loan losses and allowance for unfunded credit commitments to be an increase of approximately $25 million to $60 million (on a pre-tax basis) or approximately 7% to 16%cumulative effect of the total combined allowance compared to our reported amount at September 30, 2019. Based on the credit quality of our existing debt securities portfolio, we do not expect a material allowance for our held-to-maturity and available-for-sale debt security portfolios. We will continue to evaluate and refine the results of our loss estimates through the end of 2019. The actual effect of CECL on our allowance for loan losses and our allowance for unfunded credit commitments will depend on a variety of factors as of the date of adoption, including the size and composition of our portfolios, the portfolios’ credit quality, current and forecasted economic conditions and management adjustments. In addition, the actual adjustment amount to our allowances will be subject to any necessary changes to our ~~models, methodology and assumptions or other adjustments.~~consolidated balance sheets at January 1, 2020, for the adoption of CECL were as follows:



(Dollars in thousands)	Balance at December 31, 2019		Adjustments Due to Adoption of ASC 326			Balance at January 1, 2020
Assets:
Allowance for credit losses: loans	$	304,924	$	25,464		$	330,388
Allowance for credit losses: held-to-maturity securities	—		174			174
Deferred tax assets	28,433		13,415			41,848
Other liabilities:
Allowance for credit losses: unfunded credit commitments	67,656		22,826			90,482
Stockholders' equity:
Retained earnings, net of tax	4,575,601		(35,049		)	4,540,552

Prior to the effective adoption we will have a cumulative-effect adjustment to retained earnings for our change in the allowance for credit losses for our loans, unfunded credit commitments and debt securities, which will impact our capital.~~An increase in our allowance will result in a decrease to our regulatory capital amounts and ratios.~~date of CECL, Federal banking regulatory agencies ~~have~~had provided relief for anthe initial capital decrease at adoption by allowing the impact to be phased-in over three years on a straight-line basis. Subsequent to our adoption of CECL, Federal banking regulatory agencies provided relief to banking organizations by way of an interim final rule based on the recent disruptions in economic conditions caused by the Coronavirus Disease 2019 pandemic ("COVID-19") as well as the significant resources required to implement CECL. At the time of the adoption of CECL, we were not expecting to utilize the initial relief provided by the Federal banking regulatory agencies as the initial capital decrease at adoption did not have a material impact to our capital ratios; however, the impact to our capital from subsequent increases in our allowance for credit losses from the day one adoption impact related to COVID-19 economic factors was deemed significant. As a result, we have elected to use the regulatory capital phase-in under the interim final rule. Refer to the "Capital Resources" section under Part I, Item 2 of this report for additional details.

Additionally, under the prior guidance, our loan portfolio and credit quality disclosures were disaggregated based on client market segments. Upon adoption of CECL, our technology (software/internet and hardware) and life science/healthcare market segments are disclosed by the portfolio segment that aligns with their respective underwriting methodology and the level at which credit risk is now monitored by management. The primary underwriting method for our technology and life science/healthcare portfolios are classified as investor dependent (early-stage and growth), cash flow dependent or balance sheet dependent, as noted above, and prior period amounts were reclassified for comparability. There are no other material changes to our current market segments.

Other Adopted Accounting Pronouncements

In August 2018, the FASB issued a new ~~accounting standard update~~Accounting Standard Update (ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement). The ASU primarily modifies certain disclosures with respect to Level 3 fair value measurements. ~~This~~We adopted the guidance ~~will be effective~~on January 1, 2020. ~~We will adopt the guidance in the first quarter of 2020, however, the~~The adoption ~~will~~did not have an impact on our consolidated financial position or results of operations and ~~we do~~did not ~~expect the adoption of this standard to~~ have a material impact on the disclosures in our ~~Notes~~notes to ~~the Consolidated Financial Statements.~~

~~Reclassifications~~

~~Certain prior period amounts related to presentation changes to~~ our ~~financial statement line items have been reclassified to conform to current period presentations.~~


2.	~~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 nine months ended September 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 $ 265,601
Replacement award liabilities (1) 7,629
Total purchase consideration $ 273,230
Fair value of net assets acquired 135,407
Goodwill $ 137,823


~~(1)~~	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 33,644
Accounts receivable 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

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. The fair value of the noncontrolling interests in SVB 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 September 30, 2019 was approximately $8.2 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 nine months ended September 30, 2019:

(Dollars in thousands) Three months ended September 30, 2019 Nine months ended September 30, 2019
Net interest income $ 277
$ 961
Noninterest income 53,773
188,925
Noninterest expense 55,200
177,675
(Loss) income before income tax expense (1,150 ) 12,211
Income tax (benefit) expense (558 ) 3,121
Net income attributable to noncontrolling interests 826
861
Net (loss) income available to common stockholders $ (1,418 ) $ 8,229

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

(Dollars in thousands) Three months ended September 30, 2019 Nine months ended September 30, 2019
Professional fees $ 260
$ 911
Other 94
367
Total acquisition-related expenses $ 354
$ 1,278

statements.


3.2.	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~~ months ended ~~September 30, 2019~~March 31, 2020 and ~~2018:~~2019:

Three months ended September 30, Nine months ended September 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 $ —
$ —
$ 3,905
$ —
Related tax benefit Income tax expense —
—
(1,087 ) —
Reclassification adjustment for losses on cash flow hedges included in net income Net interest income 2,713
—
3,224
—
Related tax benefit Income tax expense (755 ) —
(897 ) —
Total reclassification adjustment for losses included in net income, net of tax $ 1,958
$ —
$ 5,145
$ —



		Three months ended March 31,
(Dollars in thousands)	Income Statement Location	2020			2019
Reclassification adjustment for (gains) losses on available-for-sale securities included in net income	Gains on investment securities, net	$	(61,165	)	$	3,630
Related tax expense (benefit)	Income tax expense	16,953			(1,010		)
Reclassification adjustment for (gains) losses on cash flow hedges included in net income	Net interest income	(2,089		)	3
Related tax expense (benefit)	Income tax expense	579			(1		)
Total reclassification adjustment for (gains) losses included in net income, net of tax		$	(45,722	)	$	2,622

The table below summarizes the activity relating to net gains and losses on our cash flow hedges included in accumulated other comprehensive income for the three ~~and nine~~ months ended ~~September 30, 2019~~March 31, 2020 and ~~2018.~~2019. Refer to Note 11 — “Derivative Financial Instruments” of the “Notes to Interim Consolidated Financial Statements (unaudited)” under Part I, Item 1 of this report for additional information regarding the termination of our cash flow hedges during the three months ended March 31, 2020. Over the next 12 months, we expect that approximately ~~$1.9~~$63.5 million in accumulated other comprehensive income ("AOCI") at ~~September 30, 2019,~~March 31, 2020, related to ~~our cash flow hedges~~unrealized gains will be reclassified out of AOCI and recognized in net income.


	Three months ended September 30,				Nine months ended September 30,				Three months ended March 31,
(Dollars in thousands)	2019		2018		2019		2018		2020			2019
Balance, beginning of period, net of tax	$	13,828	$	—	$	—	$	—	$	(2,130	)	$	—
Net increase in fair value, net of tax	7,077		—		20,536		—		167,639			795
Net realized loss reclassified to net income, net of tax	1,958		—		2,327		—
Net realized (gain) loss reclassified to net income, net of tax									(1,510		)	2
Balance, end of period, net of tax	$	22,863	$	—	$	22,863	$	—	$	163,999		$	797

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 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~~ months ended ~~September 30, 2019~~March 31, 2020 and ~~2018~~:

2019:


	Three months ended September 30,				Nine months ended September 30,				Three months ended March 31,
(Dollars and shares in thousands, except per share amounts)	2019		2018		2019		2018		2020		2019
Numerator:
Net income available to common stockholders	$	267,281	$	274,817	$	874,000	$	707,576	$	132,253	$	288,732
Denominator:
Weighted average common shares outstanding—basic	51,545		53,235		52,025		53,062		51,565		52,587
Weighted average effect of dilutive securities:
Stock options and ESPP	203		383		238		404		217		297
Restricted stock units and awards	110		301		168		334		162		225
Weighted average common shares outstanding—diluted	51,858		53,919		52,431		53,800		51,944		53,109
Earnings per common share:
Basic	$	5.19	$	5.16	$	16.80	$	13.33	$	2.56	$	5.49
Diluted	5.15		5.10		16.67		13.15		2.55		5.44

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~~ months ended ~~September 30, 2019~~March 31, 2020 and ~~2018:~~2019:


	Three months ended September 30,		Nine months ended September 30,		Three months ended March 31,
(Shares in thousands)	2019	2018	2019	2018	2020	2019
Stock options	213	86	154	49	206	91
Restricted stock units	432	5	294	71	119	134
Total	645	91	448	120	325	225

Stock Repurchase Program

On ~~November 13, 2018, the Company announced~~October 24, 2019, our Board of Directors authorized a new stock repurchase program that enables us to repurchase up to ~~$500~~$350 million of our outstanding common ~~stock (the "Stock Repurchase Program").~~stock. This program expires on October 29, 2020. For the three months ended ~~September 30, 2019,~~March 31, 2020, we repurchased ~~25,562~~244,223 shares of our outstanding common stock for ~~$5.7~~$60.0 million under the new stock repurchase program.

Preferred Stock

On December 9, 2019, the Company issued depositary shares representing an ownership interest in 350,000 shares of Series A Preferred Stock ~~Repurchase Program.~~ with $0.001 par value and liquidation preference of $1,000 per share, or $25 per depositary share. All preferred shares were issued in the form of depositary shares, with each depositary share representing a 1/40th ownership interest in a share of the preferred stock. The Series A Preferred Stock has no stated maturity and is not subject to any sinking fund or other obligation of the Company. Dividends are approved by the Board of Directors and, if declared, are payable quarterly, in arrears, at a rate per annum equal to 5.25 percent. The Series A Preferred Stock is redeemable at the Company’s option, in whole or in part, on or after February 15, 2025. Prior to February 15, 2025, the Series A Preferred Stock is redeemable at the Company’s option, in whole and not in part, following any change in laws or regulations that would not allow the Company to treat the full liquidation value of the Series A Preferred Stock as Tier 1 capital for purposes of the capital adequacy guidelines of the Board of Governors of the Federal Reserve System ("the Federal Reserve"). The redemption amount is computed at the per share liquidation preference plus any declared but unpaid dividends. Redemptions are subject to certain regulatory provisions, including approval of the Federal Reserve.

As of ~~September 30, 2019, we~~March 31, 2020, there were 350,000 shares issued and outstanding of Series A Preferred Shares, which had ~~repurchased 2.2~~a carrying value of $340.1 million ~~shares~~and liquidation preference of ~~our outstanding common stock for $499.6 million under the Stock Repurchase Program. The Stock Repurchase Program was completed on July 1, 2019.~~

~~Consolidated Statement of Changes in Equity~~$350.0 million.

The following table summarizes ~~the changes in~~ our ~~consolidated equity for the three months ended September 30, 2019 and 2018:~~preferred stock at March 31, 2020:



Series	Description	Amount outstanding (in millions)		Carrying value (in millions)		Shares issued and outstanding	Par Value		Ownership interest per depository share	Liquidation preference per depository share		2020 dividends paid per depository share
Series A	5.250% Fixed-Rate Non-Cumulative Perpetual Preferred Stock	$	350	$	340.1	350,000	$	0.001	1/40th	$	25	$	0.24

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
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
Common stock issued under employee benefit plans, net of restricted stock cancellations 39,628
—
1,943
—
—
1,943
—
1,943
Net income —
—
—
274,817
—
274,817
6,548
281,365
Capital calls and distributions, net —
—
—
—
—
—
(8,060 ) (8,060 )
Net change in unrealized gains and losses on AFS securities, net of tax —
—
—
—
(17,908 ) (17,908 ) —
(17,908 )
Amortization of unrealized holding gains on securities transferred from AFS to HTM, net of tax —
—
—
—
(1,283 ) (1,283 ) —
(1,283 )
Foreign currency translation adjustments, net of tax —
—
—
—
(2,354 ) (2,354 ) —
(2,354 )
Share-based compensation, net —
—
11,501
—
—
11,501
—
11,501
Balance at September 30, 2018 53,250,255
$ 53
$ 1,360,030
$ 3,672,696
$ (108,410 ) $ 4,924,369
$ 145,676
$ 5,070,045
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
Common stock issued under employee benefit plans, net of restricted stock cancellations 19,674
—
1,383
—
—
1,383
—
1,383
Net income —
—
—
267,281
—
267,281
14,437
281,718
Capital calls and distributions, net —
—
—
—
—
—
(8,780 ) (8,780 )
Net change in unrealized gains and losses on AFS securities, net of tax —
—
—
—
50,638
50,638
—
50,638
Amortization of unrealized holding gains on securities transferred from AFS to HTM, net of tax —
—
—
—
(270 ) (270 ) —
(270 )
Foreign currency translation adjustments, net of tax —
—
—
—
(4,482 ) (4,482 ) —
(4,482 )
Net change in unrealized gains and losses on cash flow hedges, net of tax —
—
—
—
9,035
9,035
—
9,035
Share-based compensation, net —
—
18,782
—
—
18,782
—
18,782
Common stock repurchases (25,562 ) —
—
(5,730 ) —
(5,730 ) —
(5,730 )
Balance at September 30, 2019 51,555,831
$ 52
$ 1,441,730
$ 4,312,745
$ 136,153
$ 5,890,680
$ 157,789
$ 6,048,469


4.3.	Share-Based Compensation

For the three ~~and nine~~ months ended ~~September 30, 2019~~March 31, 2020 and ~~2018~~2019, we recorded share-based compensation and related tax benefits as follows:


	Three months ended September 30,						Nine months ended September 30,						Three months ended March 31,
(Dollars in thousands)	2019			2018			2019			2018			2020			2019
Share-based compensation expense	$	18,782		$	11,501		$	50,550		$	33,968		$	19,171		$	15,122
Income tax benefit related to share-based compensation expense	(4,883		)	(2,895		)	(12,028		)	(7,955		)	(4,440		)	(3,327		)

Unrecognized Compensation Expense

As of ~~September 30, 2019,~~March 31, 2020, unrecognized share-based compensation expense was as follows:


(Dollars in thousands)	Unrecognized Expense		Weighted Average Expected Recognition Period - in Years	Unrecognized Expense		Weighted Average Expected Recognition Period - in Years
Stock options	$	15,837	2.69	$	12,668	2.35
Restricted stock units and awards	116,952		2.83	95,440		2.66
Total unrecognized share-based compensation expense	$	132,789		$	108,108

Share-Based Payment Award Activity

The table below provides stock option information related to the 2006 Equity Incentive Plan for the ~~nine~~three months ended ~~September 30, 2019~~March 31, 2020:

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 121,669
249.64

Exercised (104,576 ) 85.38

Forfeited (20,180 ) 211.23

Expired (720 ) 64.37

Outstanding at September 30, 2019 675,852
163.32
3.68 $ 43,542,167
Vested and expected to vest at September 30, 2019 657,968
161.08
3.62 43,364,465
Exercisable at September 30, 2019 411,981
120.57
2.46 38,394,292



	Options		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life - in Years	Aggregate Intrinsic Value of In-The- Money Options
Outstanding at December 31, 2019	625,407		$	169.33
Granted	1,316		244.69
Exercised	(50,733	)	85.32
Forfeited	(2,399	)	224.87
Outstanding at March 31, 2020	573,591		176.70		3.63	$	11,973,716
Vested and expected to vest at March 31, 2020	560,684		174.94		3.58	11,967,072
Exercisable at March 31, 2020	310,688		131.01		2.34	10,376,626

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 ~~$208.95~~$151.08 as of ~~September 30, 2019.~~March 31, 2020. The total intrinsic value of options exercised during the three ~~and nine~~ months ended ~~September 30, 2019~~March 31, 2020 was ~~$1.6~~$8.3 million, ~~and $16.0 million, respectively,~~ compared to ~~$8.5 million and $39.5~~$7.5 million for the comparable ~~2018 periods.~~

2019 period.

The table below provides information for restricted stock units and awards under the 2006 Equity Incentive Plan for the ~~nine~~three months ended ~~September 30, 2019~~March 31, 2020:


	Shares		Weighted Average Grant Date Fair Value		Shares		Weighted Average Grant Date Fair Value
Nonvested at December 31, 2018	597,296		$	194.48
Nonvested at December 31, 2019					847,972		$	236.54
Granted ~~(1)~~	539,266		243.70		46,027		217.97
Vested	(217,705	)	151.40		(77,900	)	205.91
Forfeited	(53,905	)	188.07		(19,591	)	220.12
Nonvested at September 30, 2019	864,952		236.41
Nonvested at March 31, 2020					796,508		238.86


~~(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.


5.4.	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 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 30, 2019~~March 31, 2020 and December 31, ~~2018:~~2019:


(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, 2019:
March 31, 2020:
Assets:
Cash and cash equivalents	$	21,418	$	—	$	—	$	9,322	$	—	$	—
Non-marketable and other equity securities (1)	254,962		655,278		655,278		261,049		722,600		722,600
Accrued interest receivable and other assets	708		—		—		1,374		—		—
Total assets	$	277,088	$	655,278	$	655,278	$	271,745	$	722,600	$	722,600
Liabilities:
Other liabilities (1)	3,077		276,940		—		1,677		348,272		—
Total liabilities	$	3,077	$	276,940	$	—	$	1,677	$	348,272	$	—
December 31, 2018:
December 31, 2019:
Assets:
Cash and cash equivalents	$	9,058	$	—	$	—	$	7,629	$	—	$	—
Non-marketable and other equity securities (1)	221,646		568,272		568,272		270,057		689,360		689,360
Accrued interest receivable and other assets	228		—		—		1,117		—		—
Total assets	$	230,932	$	568,272	$	568,272	$	278,803	$	689,360	$	689,360
Liabilities:
Other liabilities (1)	919		205,685		—		2,854		302,031		—
Total liabilities	$	919	$	205,685	$	—	$	2,854	$	302,031	$	—

(1)

Included in our unconsolidated non-marketable and other equity securities portfolio at ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018~~2019 are investments in qualified affordable housing projects of ~~$419.0~~$500.8 million and ~~$318.6~~$458.5 million, respectively, and related other liabilities consisting of unfunded ~~credit~~ commitments of ~~$276.9~~$348.3 million and ~~$205.7~~$302.0 million, respectively.

Non-marketable and other equity securities

portfolio companies and qualified affordable housing projects. A majority of these investments are through third- party funds 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 4 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 ~~16—“Off-Balance~~15 — “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 ~~7—“Investment~~6 — “Investment Securities" of the “Notes to Interim Consolidated Financial Statements (unaudited)” under Part I, Item 1 of this report.

As of ~~September 30, 2019,~~March 31, 2020, our exposure to loss with respect to the consolidated VIEs is limited to our net assets of ~~$274.0~~$270.1 million and our exposure to loss for our unconsolidated VIEs is equal to our investment in these assets of ~~$655.3~~$722.6 million.


6.5.	Cash and Cash Equivalents

The following table details our cash and cash equivalents at ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018:~~2019:


(Dollars in thousands)	September 30, 2019		December 31, 2018		March 31, 2020		December 31, 2019
Cash and due from banks (1)	$	6,557,085	$	3,444,971	$	9,159,690	$	6,492,443
Securities purchased under agreements to resell (2)	387,119		123,611		401,758		289,340
Other short-term investment securities	1,992		2,957
Total cash and cash equivalents	$	6,946,196	$	3,571,539	$	9,561,448	$	6,781,783


(1)	At ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018~~2019, $~~4.1~~7.2 billion and $~~1.7~~3.7 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 $~~1.9~~1.4 billion and $~~1.2~~2.1 billion, respectively.

(2)

At ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018~~2019, securities purchased under agreements to resell were collateralized by U.S. Treasury securities and U.S. agency securities with aggregate fair values of $~~395.2~~409.8 million and $~~126.2~~295.3 million, respectively. None of these securities were sold or repledged as of ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018~~2019.


7.6.	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, investments in qualified affordable housing projects, 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 30, 2019~~March 31, 2020 and December 31, ~~2018~~2019 are as follows:


	September 30, 2019									March 31, 2020
(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	$	6,233,957	$	103,821	$	(2,930	)	$	6,334,848	$	3,745,238	$	298,602	$	—		$	4,043,840
U.S. agency debentures	100,000		—		—			100,000		100,000		1,687		—			101,687
Foreign government debt securities	8,837		10		—			8,847		22,169		1		(18		)	22,152
Residential mortgage-backed securities:
Agency-issued mortgage-backed securities	4,108,235		40,584		(119		)	4,148,700		4,758,167		185,347		(2		)	4,943,512
Agency-issued collateralized mortgage obligations—fixed rate	1,658,443		21,222		(1		)	1,679,664		1,409,673		56,002		—			1,465,675
Agency-issued commercial mortgage-backed securities	590,070		4,929		(201		)	594,798		2,009,470		61,728		—			2,071,198
Total available-for-sale securities	$	12,699,542	$	170,566	$	(3,251	)	$	12,866,857	$	12,044,717	$	603,367	$	(20	)	$	12,648,064


	December 31, 2018									December 31, 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	$	4,762,182	$	11,638	$	(35,562	)	$	4,738,258	$	6,815,874	$	82,267	$	(4,131	)	$	6,894,010
U.S. agency debentures	1,090,426		61		(6,370		)	1,084,117		100,000		—		(453		)	99,547
Foreign government debt securities	5,815		—		(3		)	5,812		9,037		1		—			9,038
Residential mortgage-backed securities:
Agency-issued mortgage-backed securities										4,109,372		39,438		(19		)	4,148,791
Agency-issued collateralized mortgage obligations—fixed rate	1,922,618		—		(42,400		)	1,880,218		1,520,414		17,929		—			1,538,343
Agency-issued collateralized mortgage obligations—variable rate	81,270		383		(15		)	81,638
Agency-issued commercial mortgage-backed securities										1,339,651		1,078		(15,539		)	1,325,190
Total available-for-sale securities	$	7,862,311	$	12,082	$	(84,350	)	$	7,790,043	$	13,894,348	$	140,713	$	(20,142	)	$	14,014,919

The following table summarizes sale activity of available-for-sale securities during the three ~~and nine~~ months ended ~~September 30,~~March 31, 2020 and 2019 ~~and 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 March 31,
(Dollars in thousands)	2019		2018		2019			2018		2020		2019
Sales proceeds	$	—	$	—	$	2,189,087		$	—	$	2,654,212	$	1,171,564
Net realized gains and losses:
Gross realized gains	—		—		1,250			—		61,165		—
Gross realized losses	—		—		(5,155		)	—		—		(3,630		)
Net realized losses	$	—	$	—	$	(3,905	)	$	—
Net realized gains (losses)										$	61,165	$	(3,630	)

The following tables summarize our ~~unrealized losses on our~~ available-for-sale securities ~~portfolio~~in an unrealized loss position for which an allowance for credit losses has not been recorded and summarized into categories of less than 12 months, or 12 months or longer, as of ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018:~~2019:


	September 30, 2019															March 31, 2020
	Less than 12 months					12 months or longer (1)					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	$	485,917	$	(973	)	$	1,647,699	$	(1,957	)	$	2,133,616	$	(2,930	)
Foreign government debt securities																13,292		(18		)	—		—		13,292		(18		)
Residential mortgage-backed securities:
Agency-issued mortgage-backed securities	305,208		(119		)	—		—			305,208		(119		)	626		(2		)	—		—		626		(2		)
Agency-issued collateralized mortgage obligations—fixed rate	—		—			350		(1		)	350		(1		)
Agency-issued commercial mortgage-backed securities	144,892		(201		)	—		—			144,892		(201		)
Total temporarily impaired securities (1)	$	936,017	$	(1,293	)	$	1,648,049	$	(1,958	)	$	2,584,066	$	(3,251	)
Total available-for-sale securities (1)																$	13,918	$	(20	)	$	—	$	—	$	13,918	$	(20	)

(1)

As of ~~September 30, 2019~~March 31, 2020, we identified a total of 592 investments that were in unrealized loss positions, ~~of which~~ 37 ~~investments totaling~~ ~~$1.6 billion~~ ~~with unrealized losses of~~ ~~$2.0 million~~ ~~have been~~and neither position was in an ~~impaired~~unrealized loss position for a period of time greater than 12 months. Based on our analysis of the securities in an unrealized loss position as of March 31, 2020, the decline in value is unrelated to credit loss and is related to changes in market interest rates since purchase and therefore changes in value for securities are included in other comprehensive income. Market valuations and credit loss analyses on assets in the available-for-sale securities portfolio are reviewed and monitored on a quarterly basis. As of ~~September 30, 2019~~March 31, 2020, we do not intend to sell any of our ~~impaired~~ securities in an unrealized loss position prior to recovery of our ~~adjusted~~amortized 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~~amortized cost basis. ~~Based on~~None of the investments in our ~~analysis~~available-for-sale securities portfolio were past due as of ~~September 30, 2019~~March 31, 2020, 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, 2018															December 31, 2019
	Less than 12 months					12 months or longer (1)					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	$	494,287	$	(3,785	)	$	3,568,119	$	(31,777	)	$	4,062,406	$	(35,562	)	$	971,572	$	(3,996	)	$	449,850	$	(135	)	$	1,421,422	$	(4,131	)
U.S. agency debentures	443,790		(1,602		)	591,216		(4,768		)	1,035,006		(6,370		)	99,547		(453		)	—		—			99,547		(453		)
Foreign government debt securities	5,812		(3		)	—		—			5,812		(3		)
Residential mortgage-backed securities:
Agency-issued collateralized mortgage obligations—fixed rate	13,430		(22		)	1,866,788		(42,378		)	1,880,218		(42,400		)
Agency-issued collateralized mortgage obligations—variable rate	—		—			13,516		(15		)	13,516		(15		)
Total temporarily impaired securities (1)	$	957,319	$	(5,412	)	$	6,039,639	$	(78,938	)	$	6,996,958	$	(84,350	)
Agency-issued mortgage-backed securities																4,014		(19		)	—		—			4,014		(19		)
Agency-issued commercial mortgage-backed securities																1,027,232		(15,539		)	—		—			1,027,232		(15,539		)
Total available-for-sale securities (1)																$	2,102,365	$	(20,007	)	$	449,850	$	(135	)	$	2,552,215	$	(20,142	)


(1)	As of December 31, ~~2018~~2019, we identified a total of ~~200~~58 investments that were in unrealized loss positions, of which ~~162~~12 investments totaling $~~6.0~~0.4 billion with unrealized losses of $~~78.9~~0.1 million have been in an ~~impaired~~unrealized loss position for a period of time greater than 12 months.

The following table summarizes the fixed income securities, carried at fair value, classified as available-for-sale as of ~~September 30, 2019~~March 31, 2020 by the remaining contractual principal maturities. For U.S. Treasury securities, U.S. agency debentures 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.


	September 30, 2019										March 31, 2020
(Dollars in thousands)	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
U.S. Treasury securities	$	6,334,848	$	2,007,267	$	1,710,316	$	2,617,265	$	—	$	4,043,840	$	110,935	$	1,626,096	$	2,306,809	$	—
U.S. agency debentures	100,000		—		—		100,000		—		101,687		—		—		101,687		—
Foreign government debt securities	8,847		—		8,847		—		—		22,152		22,152		—		—		—
Residential mortgage-backed securities:
Agency-issued mortgage-backed securities	4,148,700		—		—		—		4,148,700		4,943,512		—		—		—		4,943,512
Agency-issued collateralized mortgage obligations—fixed rate	1,679,664		—		—		3,131		1,676,533		1,465,675		—		1,094		—		1,464,581
Agency-issued commercial mortgage-backed securities	594,798		—		—		300,208		294,590		2,071,198		—		—		803,536		1,267,662
Total	$	12,866,857	$	2,007,267	$	1,719,163	$	3,020,604	$	6,119,823	$	12,648,064	$	133,087	$	1,627,190	$	3,212,032	$	7,675,755

Held-to-Maturity Securities

The components of our held-to-maturity investment securities portfolio at ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018~~2019 are as follows:


	September 30, 2019									March 31, 2020
(Dollars in thousands)	Amortized Cost		Unrealized Gains		Unrealized Losses			Fair Value		Amortized Cost		Unrealized Gains		Unrealized Losses			Fair Value		Allowance for Credit Losses (2)
Held-to-maturity securities, at cost:
U.S. agency debentures (1)	$	518,841	$	10,528	$	(22	)	$	529,347	$	453,353	$	14,799	$	—		$	468,152	$	—
Residential mortgage-backed securities:
Agency-issued mortgage-backed securities	7,376,458		135,996		(4,190		)	7,508,264		6,662,878		310,896		(90		)	6,973,684		—
Agency-issued collateralized mortgage obligations—fixed rate	1,754,498		2,254		(10,094		)	1,746,658
Agency-issued collateralized mortgage obligations —fixed rate										1,482,205		30,323		(4		)	1,512,524		—
Agency-issued collateralized mortgage obligations—variable rate	188,120		105		(373		)	187,852		170,774		—		(1,652		)	169,122		—
Agency-issued commercial mortgage-backed securities	2,826,344		75,422		(3,046		)	2,898,720		2,644,968		98,806		(512		)	2,743,262		—
Municipal bonds and notes	1,742,817		86,112		(968		)	1,827,961		2,160,341		105,860		(1,791		)	2,264,410		230
Total held-to-maturity securities	$	14,407,078	$	310,417	$	(18,693	)	$	14,698,802	$	13,574,519	$	560,684	$	(4,049	)	$	14,131,154	$	230


(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.

(2) Refer to Note 1 - "Basis of Presentation" of the "Notes to Interim Consolidated Financial Statements (unaudited)" under Part i, Item 1 of this report for more information on our credit loss methodology.


	December 31, 2018									December 31, 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:
Held-to-maturity securities, at amortized cost:
U.S. agency debentures (1)	$	640,990	$	2,148	$	(4,850	)	$	638,288	$	518,728	$	6,640	$	(668	)	$	524,700
Residential mortgage-backed securities:
Agency-issued mortgage-backed securities	8,103,638		5,011		(157,767		)	7,950,882		6,992,009		142,209		(2,066		)	7,132,152
Agency-issued collateralized mortgage obligations—fixed rate	2,183,204		—		(62,272		)	2,120,932		1,608,032		592		(8,502		)	1,600,122
Agency-issued collateralized mortgage obligations—variable rate	214,483		608		(14		)	215,077		178,611		94		(259		)	178,446
Agency-issued commercial mortgage-backed securities	2,769,706		6,969		(64,374		)	2,712,301		2,759,615		56,914		(4,508		)	2,812,021
Municipal bonds and notes	1,575,421		2,304		(26,969		)	1,550,756		1,785,951		83,314		(1,434		)	1,867,831
Total held-to-maturity securities	$	15,487,442	$	17,040	$	(316,246	)	$	15,188,236	$	13,842,946	$	289,763	$	(17,437	)	$	14,115,272


(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.

Allowance for Credit Losses for HTM Securities

The following ~~tables summarize~~table summarizes the activity relating to our ~~unrealized~~allowance for credit losses ~~on our held-to-maturity~~for HTM securities ~~portfolio into categories of less than 12~~for the three months ~~and 12 months or longer as of~~ ~~September 30, 2019~~ ~~and December~~ended March 31, ~~2018:~~2020:

September 30, 2019
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
Held-to-maturity securities:
U.S. agency debentures $ 50,131
$ (22 ) $ —
$ —
$ 50,131
$ (22 )
Residential mortgage-backed securities:
Agency-issued mortgage-backed securities 962,390
(2,520 ) 197,721
(1,670 ) 1,160,111
(4,190 )
Agency-issued collateralized mortgage obligations—fixed rate 244,020
(1,226 ) 1,220,827
(8,868 ) 1,464,847
(10,094 )
Agency-issued collateralized mortgage obligations—variable rate 149,910
(367 ) 4,856
(6 ) 154,766
(373 )
Agency-issued commercial mortgage-backed securities 86,087
(423 ) 456,168
(2,623 ) 542,255
(3,046 )
Municipal bonds and notes 106,335
(966 ) 1,329
(2 ) 107,664
(968 )
Total temporarily impaired securities (1) $ 1,598,873
$ (5,524 ) $ 1,880,901
$ (13,169 ) $ 3,479,774
$ (18,693 )



Three months ended March 31, 2020	Beginning Balance December 31, 2019		Day One Impact of adopting ASC 326		Provision for Credit Losses		Ending Balance March 31, 2020
(Dollars in thousands)	Beginning Balance December 31, 2019		Day One Impact of adopting ASC 326		Provision for Credit Losses		Ending Balance March 31, 2020
Municipal bonds and notes	$	—	$	174	$	56	$	230
Total allowance for credit losses	$	—	$	174	$	56	$	230

~~(1)~~

~~As of~~ ~~September 30, 2019, we identified a total of~~ ~~310~~ ~~investments that were in unrealized loss positions, of which~~ ~~164~~ ~~investments totaling$1.9 billion~~ ~~with unrealized losses of~~ ~~$13.2 million~~ ~~have been in an impaired position for a period of time greater than 12 months. As of~~ ~~September 30, 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 30, 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.~~

Credit Quality Indicators

December 31, 2018
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
Held-to-maturity securities:
U.S. agency debentures $ 291,432
$ (2,915 ) $ 66,624
$ (1,935 ) $ 358,056
$ (4,850 )
Residential mortgage-backed securities:
Agency-issued mortgage-backed securities 2,493,156
(34,956 ) 3,972,690
(122,811 ) 6,465,846
(157,767 )
Agency-issued collateralized mortgage obligations—fixed rate 16,952
(109 ) 2,103,980
(62,163 ) 2,120,932
(62,272 )
Agency-issued collateralized mortgage obligations—variable rate 3,364
(1 ) 8,101
(13 ) 11,465
(14 )
Agency-issued commercial mortgage-backed securities 177,697
(1,580 ) 1,600,277
(62,794 ) 1,777,974
(64,374 )
Municipal bonds and notes 868,751
(17,075 ) 340,413
(9,894 ) 1,209,164
(26,969 )
Total temporarily impaired securities (1) $ 3,851,352
$ (56,636 ) $ 8,092,085
$ (259,610 ) $ 11,943,437
$ (316,246 )
On a quarterly basis, management monitors the credit quality for HTM securities through the use of standard credit ratings. The following table summarizes our amortized cost of HTM securities aggregated by credit quality indicator at March 31, 2020:



(Dollars in thousands)	March 31, 2020
Municipal bonds and notes:
Aaa	$	1,458,546
Aa1	477,068
Aa2	223,357
Aa3	1,370
Total	$	2,160,341


~~(1)~~	~~As of~~ ~~December 31, 2018, we identified a total of~~ ~~1,244~~ ~~investments that were in unrealized loss positions, of which~~ ~~695~~ ~~investments totaling~~ ~~$8.1 billion~~ ~~with unrealized losses of~~ ~~$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 30, 2019.~~March 31, 2020. 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.


	September 30, 2019																				March 31, 2020
	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		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value
U.S. agency debentures	$	518,841	$	529,347	$	—	$	—	$	123,205	$	124,646	$	395,636	$	404,701	$	—	$	—	$	453,353	$	468,152	$	2,622	$	2,673	$	142,990	$	146,270	$	307,741	$	319,209	$	—	$	—
Residential mortgage-backed securities:
Agency-issued mortgage-backed securities	7,376,458		7,508,264		—		—		94,514		94,745		771,670		769,409		6,510,274		6,644,110		6,662,878		6,973,684		11,853		11,983		50,777		51,678		685,374		702,253		5,914,874		6,207,770
Agency-issued collateralized mortgage obligations—fixed rate	1,754,498		1,746,658		—		—		—		—		635,235		630,472		1,119,263		1,116,186		1,482,205		1,512,524		—		—		—		—		661,217		674,788		820,988		837,736
Agency-issued collateralized mortgage obligations—variable rate	188,120		187,852		—		—		—		—		—		—		188,120		187,852		170,774		169,122		—		—		—		—		—		—		170,774		169,122
Agency-issued commercial mortgage-backed securities	2,826,344		2,898,720		—		—		—		—		—		—		2,826,344		2,898,720		2,644,968		2,743,262		—		—		—		—		102,565		118,381		2,542,403		2,624,881
Municipal bonds and notes	1,742,817		1,827,961		14,002		14,007		82,708		83,714		369,911		385,458		1,276,196		1,344,782		2,160,341		2,264,410		30,719		30,757		134,007		136,572		441,995		462,836		1,553,620		1,634,245
Total	$	14,407,078	$	14,698,802	$	14,002	$	14,007	$	300,427	$	303,105	$	2,172,452	$	2,190,040	$	11,920,197	$	12,191,650	$	13,574,519	$	14,131,154	$	45,194	$	45,413	$	327,774	$	334,520	$	2,198,892	$	2,277,467	$	11,002,659	$	11,473,754

Non-marketable and Other Equity Securities

The major components of our non-marketable and other equity securities portfolio at ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018~~2019 are as follows:


(Dollars in thousands)	September 30, 2019		December 31, 2018		March 31, 2020		December 31, 2019
Non-marketable and other equity securities:
Non-marketable securities (fair value accounting):
Consolidated venture capital and private equity fund investments (1)	$	92,010	$	118,333	$	85,336	$	87,180
Unconsolidated venture capital and private equity fund investments (2)	181,550		201,098		171,930		178,217
Other investments without a readily determinable fair value (3)	43,524		25,668		52,666		55,255
Other equity securities in public companies (fair value accounting) (4)	56,081		20,398		26,899		59,200
Non-marketable securities (equity method accounting) (5):
Venture capital and private equity fund investments	196,425		129,485		206,495		215,367
Debt funds	7,153		5,826		6,910		7,271
Other investments	154,323		121,721		149,557		152,863
Investments in qualified affordable housing projects, net (6)	419,028		318,575		500,802		458,476
Total non-marketable and other equity securities	$	1,150,094	$	941,104	$	1,200,595	$	1,213,829


(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 30, 2019~~March 31, 2020 and December 31, ~~2018~~2019 (fair value accounting):


	September 30, 2019				December 31, 2018				March 31, 2020				December 31, 2019
(Dollars in thousands)	Amount		Ownership %		Amount		Ownership %		Amount		Ownership %		Amount		Ownership %
Strategic Investors Fund, LP	$	6,829	12.6	%	$	12,452	12.6	%	$	5,337	12.6	%	$	5,729	12.6	%
Capital Preferred Return Fund, LP	46,691		20.0		53,957		20.0		44,696		20.0		45,341		20.0
Growth Partners, LP	38,356		33.0		50,845		33.0		35,169		33.0		35,976		33.0
CP I, LP	134		10.7		1,079		10.7		134		10.7		134		10.7
Total consolidated venture capital and private equity fund investments	$	92,010			$	118,333			$	85,336			$	87,180

(2)

The carrying value represents investments in ~~211~~196 and ~~213~~205 funds (primarily venture capital funds) at ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018~~2019, 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. We carry our unconsolidated venture capital and private equity fund investments at fair value based on the fund investments' net asset values per share as obtained from the general partners of the investments. 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 ~~June 30~~December 31^thst for our ~~September 30~~March 31^thst 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)

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 ~~nine~~three months ended ~~September 30, 2019:~~March 31, 2020:


(Dollars in thousands)	Nine months ended September 30, 2019			Cumulative Adjustments			Three months ended March 31, 2020			Cumulative Adjustments
Measurement alternative:
Carrying value at September 30, 2019	$	43,524
Carrying value at March 31, 2020							$	52,666
Carrying value adjustments:
Impairment	$	—		$	—		$	—		$	(460	)
Upward changes for observable prices	2,605			3,104			12			1,948
Downward changes for observable prices	(2,670		)	(4,285		)	(3,012		)	(7,629		)


(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 ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018~~2019 (equity method accounting):


	September 30, 2019				December 31, 2018				March 31, 2020				December 31, 2019
(Dollars in thousands)	Amount		Ownership %		Amount		Ownership %		Amount		Ownership %		Amount		Ownership %
Venture capital and private equity fund investments:
Strategic Investors Fund II, LP	$	4,501	8.6	%	$	4,670	8.6	%	$	3,277	8.6	%	$	3,612	8.6	%
Strategic Investors Fund III, LP	15,279		5.9		17,396		5.9		14,487		5.9		15,668		5.9
Strategic Investors Fund IV, LP	28,549		5.0		28,974		5.0		25,037		5.0		27,064		5.0
Strategic Investors Fund V funds	37,233		Various		28,189		Various		44,815		Various		46,830		Various
CP II, LP (i)	7,333		5.1		7,122		5.1		5,103		5.1		5,907		5.1
Other venture capital and private equity fund investments	103,530		Various		43,134		Various		113,776		Various		116,286		Various
Total venture capital and private equity fund investments	$	196,425			$	129,485			$	206,495			$	215,367
Debt funds:
Gold Hill Capital 2008, LP (ii)	$	5,323	15.5	%	$	3,901	15.5	%	$	5,255	15.5	%	$	5,525	15.5	%
Other debt funds	1,830		Various		1,925		Various		1,655		Various		1,746		Various
Total debt funds	$	7,153			$	5,826			$	6,910			$	7,271
Other investments:
SPD Silicon Valley Bank Co., Ltd.	$	73,918	50.0	%	$	76,412	50.0	%	$	73,453	50.0	%	$	74,190	50.0	%
Other investments	80,405		Various		45,309		Various		76,104		Various		78,673		Various
Total other investments	$	154,323			$	121,721			$	149,557			$	152,863


(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 liabilities” on our consolidated balance sheets at ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018~~2019:


(Dollars in thousands)	September 30, 2019		December 31, 2018		March 31, 2020		December 31, 2019
Investments in qualified affordable housing projects, net	$	419,028	$	318,575	$	500,802	$	458,476
Other liabilities	276,940		205,685		348,272		302,031

The following table presents other information relating to our investments in qualified affordable housing projects for the three ~~and nine~~ months ended ~~September 30, 2019~~March 31, 2020 and ~~2018:~~2019:


	Three months ended September 30,				Nine months ended September 30,				Three months ended March 31,
(Dollars in thousands)	2019		2018		2019		2018		2020		2019
Tax credits and other tax benefits recognized	$	8,705	$	6,283	$	28,950	$	16,912	$	11,759	$	9,257
Amortization expense included in provision for income taxes (i)	6,042		4,773		20,436		14,269		11,471		7,636


(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 net gains and losses on non-marketable and other equity securities for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2020 and 2019 ~~and 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,
(Dollars in thousands) 2019 2018 2019 2018
Net gains (losses) on non-marketable and other equity securities:
Non-marketable securities (fair value accounting):
Consolidated venture capital and private equity fund investments $ 4,555
$ 2,928
$ 22,674
$ 18,971
Unconsolidated venture capital and private equity fund investments 8,530
6,240
26,688
37,095
Other investments without a readily determinable fair value (471 ) 2,509
4,701
4,310
Other equity securities in public companies (fair value accounting) (11,979 ) 4,407
106
(17,786 )
Non-marketable securities (equity method accounting):
Venture capital and private equity fund investments 29,049
11,341
54,189
30,122
Debt funds 187
1,473
1,529
(100 )
Other investments (22 ) 3,295
593
4,753
Total net gains on non-marketable and other equity securities $ 29,849
$ 32,193
$ 110,480
$ 77,365
Less: realized net gains (losses) on sales of securities (1) 277
357
12,637
(20,806 )
Net gains on non-marketable and other equity securities still held $ 29,572
$ 31,836
$ 97,843
$ 98,171



	Three months ended March 31,
(Dollars in thousands)	2020			2019
Net gains (losses) on non-marketable and other equity securities:
Non-marketable securities (fair value accounting):
Consolidated venture capital and private equity fund investments	$	3,113		$	3,289
Unconsolidated venture capital and private equity fund investments	1,252			8,006
Other investments without a readily determinable fair value	(2,943		)	5,005
Other equity securities in public companies (fair value accounting)	(7,504		)	11,803
Non-marketable securities (equity method accounting):
Venture capital and private equity fund investments	(8,046		)	2,789
Debt funds	(362		)	—
Other investments	(620		)	1,766
Total net (losses) gains on non-marketable and other equity securities	$	(15,110	)	$	32,658
Less: realized net (losses) gains on sales of non-marketable and other equity securities	(49		)	9,835
Net (losses) gains on non-marketable and other equity securities still held	$	(15,061	)	$	22,823


~~(1)~~	~~Realized gains and losses include sales of non-marketable and other equity securities. No OTTI was recorded during the three and nine months ended September 30, 2019 and 2018.~~


8.7.	Loans ~~Allowance for Loan Losses~~ and Allowance for Credit Losses: Loans and 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,~~(such as 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 to our technology, life science/healthcare and ERI clients are reported under the Investor Dependent, Cash Flow Dependent and Balance Sheet Dependent risk-based segments below. 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~~“construction loans” below and are primarily secured by real estate.

CECL Adoption

On January 1, 2020, we adopted the new credit loss guidance, CECL, and all related amendments. Our loan portfolio was pooled into six portfolio segments that share similar risk characteristics and represent the level at which we developed our systematic methodology to determine our allowance for credit losses. Further, our portfolio segments were disaggregated and grouped into ten classes of financing receivable that represent the level at which we monitor and assess credit risk, which we refer to as "risk-based segments". As such, our funded loans and credit quality disclosures below are presented at the risk-based segment level of disaggregation. The comparative information below has been reclassified to conform to current period presentations. However, the financial results continue to be reported under the accounting standards in effect for those periods. Certain prior period credit quality disclosures related to impaired loans and our individually and collectively evaluated loan portfolio have been superseded with the current guidance and have not been included below, please refer to Note 10 - “Loans, Allowance for Loan Losses and Allowance for Unfunded Credit Commitments" under Part II, Item 8 of our 2019 Form 10-K for additional prior period information.

Refer to Note 1 — “Basis of Presentation” of the “Notes to Interim Consolidated Financial Statements (unaudited)” under Part I, Item 1 of this report for additional information regarding the adoption of CECL.

The composition of loans ~~net of unearned income of $165 million and $173 million~~ at ~~September 30, 2019~~amortized cost basis broken out by risk-based segment at March 31, 2020 and December 31, ~~2018, respectively,~~2019 is presented in the following table:

(Dollars in thousands) September 30, 2019 December 31, 2018
Commercial loans:
Software/internet $ 6,009,518
$ 6,154,755
Hardware 1,357,617
1,234,557
Private equity/venture capital 16,293,556
14,110,560
Life science/healthcare 2,381,822
2,385,612
Premium wine 234,555
249,266
Other 385,013
321,978
Total commercial loans 26,662,081
24,456,728
Real estate secured loans:
Premium wine (1) 749,259
710,397
Consumer loans (2) 3,015,396
2,612,971
Other 39,332
40,435
Total real estate secured loans 3,803,987
3,363,803
Construction loans 116,854
97,077
Consumer loans 481,072
420,672
Total loans, net of unearned income (3) $ 31,063,994
$ 28,338,280


~~(1)~~	~~Included in our premium wine portfolio are gross construction loans of~~ ~~$96 million~~ ~~and~~ ~~$99 million~~ at ~~September 30, 2019~~ ~~and~~ ~~December 31, 2018, respectively.~~


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

(Dollars in thousands) September 30, 2019 December 31, 2018
Loans for personal residence $ 2,577,623
$ 2,251,292
Loans to eligible employees 380,677
290,194
Home equity lines of credit 57,096
71,485
Consumer loans secured by real estate $ 3,015,396
$ 2,612,971


~~(3)~~	~~Included within our total loan portfolio are credit card loans of~~ ~~$396 million~~ ~~and~~ ~~$335 million~~ at ~~September 30, 2019~~ ~~and~~ ~~December 31, 2018, respectively.~~

~~Credit Quality~~

The composition of loans, net of unearned income of $165 million and $173 million at September 30, 2019 and December 31, 2018, respectively, broken out by portfolio segment and class of financing receivable, is as follows:

(Dollars in thousands) September 30, 2019 December 31, 2018
Commercial loans:
Software/internet $ 6,009,518
$ 6,154,755
Hardware 1,357,617
1,234,557
Private equity/venture capital 16,293,556
14,110,560
Life science/healthcare 2,381,822
2,385,612
Premium wine 983,814
959,663
Other 541,199
459,490
Total commercial loans 27,567,526
25,304,637
Consumer loans:
Real estate secured loans 3,015,396
2,612,971
Other consumer loans 481,072
420,672
Total consumer loans 3,496,468
3,033,643
Total loans, net of unearned income $ 31,063,994
$ 28,338,280

~~The following table summarizes the aging of our gross loans, broken out by portfolio segment and class of financing receivable as of~~ ~~September 30, 2019~~ ~~and~~ ~~December 31, 2018~~:

(Dollars in thousands)
30 - 59
  Days Past
Due

60 - 89
  Days Past
Due

Equal to or Greater
Than 90
  Days Past
Due

  Total Past
Due
Current
  Loans Past Due
90 Days or
More Still
Accruing
Interest
September 30, 2019:
Commercial loans:
Software/internet $ 11,314
$ 6,760
$ 806
$ 18,880
$ 5,967,307
$ 806
Hardware 2,934
342
—
3,276
1,354,693
—
Private equity/venture capital 21,493
92
—
21,585
16,288,499
—
Life science/healthcare 6,645
453
58
7,156
2,400,516
58
Premium wine 5,846
—
—
5,846
976,903
—
Other 13
8,050
—
8,063
546,943
—
Total commercial loans 48,245
15,697
864
64,806
27,534,861
864
Consumer loans:
Real estate secured loans 599
2,117
—
2,716
3,002,256
—
Other consumer loans 147
—
—
147
481,277
—
Total consumer loans 746
2,117
—
2,863
3,483,533
—
Total gross loans excluding impaired loans 48,991
17,814
864
67,669
31,018,394
864
Impaired loans 2,000
39,135
3,059
44,194
98,746
—
Total gross loans $ 50,991
$ 56,949
$ 3,923
$ 111,863
$ 31,117,140
$ 864
December 31, 2018:
Commercial loans:
Software/internet $ 28,134
$ 6,944
$ 378
$ 35,456
$ 6,059,672
$ 378
Hardware 300
34
4
338
1,233,956
4
Private equity/venture capital 59,481
11
—
59,492
14,054,940
—
Life science/healthcare 16,082
817
19
16,918
2,410,091
19
Premium wine 2,953
14
—
2,967
956,285
—
Other 7,391
163
1
7,555
477,442
1
Total commercial loans 114,341
7,983
402
122,726
25,192,386
402
Consumer loans:
Real estate secured loans 3,598
1,750
1,562
6,910
2,598,496
1,562
Other consumer loans 361
—
—
361
420,359
—
Total consumer loans 3,959
1,750
1,562
7,271
3,018,855
1,562
Total gross loans excluding impaired loans 118,300
9,733
1,964
129,997
28,211,241
1,964
Impaired loans 2,843
1,181
25,092
29,116
140,958
—
Total gross loans $ 121,143
$ 10,914
$ 27,056
$ 159,113
$ 28,352,199
$ 1,964

~~The following table summarizes our impaired loans as they relate to our allowance for loan losses, broken out by portfolio segment and class of financing receivable as of~~ ~~September 30, 2019~~ ~~and~~ ~~December 31, 2018~~:

(Dollars in thousands)
Impaired loans for
which there is a
related allowance
for loan losses

Impaired loans for
which there is no
related allowance
for loan losses
Total carrying value of impaired loans
Total unpaid
principal of impaired loans
September 30, 2019:
Commercial loans:
Software/internet $ 55,892
$ 25,588
$ 81,480
$ 91,126
Hardware 5,441
4,482
9,923
10,175
Life science/healthcare 32,634
6,887
39,521
76,305
Premium wine 393
1,946
2,339
2,424
Other 2,589
—
2,589
2,639
Total commercial loans 96,949
38,903
135,852
182,669
Consumer loans:
Real estate secured loans 3,315
3,760
7,075
10,871
Other consumer loans 13
—
13
13
Total consumer loans 3,328
3,760
7,088
10,884
Total $ 100,277
$ 42,663
$ 142,940
$ 193,553
December 31, 2018:
Commercial loans:
Software/internet $ 49,625
$ 65,225
$ 114,850
$ 131,858
Hardware 1,256
10,250
11,506
12,159
Private equity/venture capital —
3,700
3,700
3,700
Life science/healthcare 17,791
16,276
34,067
44,446
Premium wine —
1,301
1,301
1,365
Other 411
—
411
411
Total commercial loans 69,083
96,752
165,835
193,939
Consumer loans:
Real estate secured loans 3,919
320
4,239
5,969
Other consumer loans —
—
—
—
Total consumer loans 3,919
320
4,239
5,969
Total $ 73,002
$ 97,072
$ 170,074
$ 199,908

The following tables summarize our average impaired loans and interest income recognized on impaired loans, broken out by portfolio segment and class of financing receivable for the three and nine months ended September 30, 2019 and 2018:

Three months ended September 30, Average impaired loans Interest income recognized on impaired loans
(Dollars in thousands) 2019
2018
2019
2018
Commercial loans:
Software/internet $ 59,336
$ 118,840
$ 507
$ 607
Hardware 10,617
27,922
70
410
Private equity/venture capital —
1,233
—
—
Life science/healthcare 42,242
38,545
192
365
Premium wine 2,308
2,384
41
35
Other 3,404
—
—
—
Total commercial loans 117,907
188,924
810
1,417
Consumer loans:
Real estate secured loans 7,113
4,330
—
4
Other consumer loans 9
—
—
—
Total consumer loans 7,122
4,330
—
4
Total average impaired loans $ 125,029
$ 193,254
$ 810
$ 1,421

Nine months ended September 30, Average impaired loans Interest income recognized on impaired loans
(Dollars in thousands) 2019 2018 2019 2018
Commercial loans:
Software/internet $ 88,487
$ 112,576
$ 2,275
$ 991
Hardware 14,188
34,469
417
499
Private equity/venture capital 3,019
536
—
—
Life science/healthcare 47,208
27,671
785
376
Premium wine 1,538
2,586
141
103
Other 1,541
130
—
—
Total commercial loans 155,981
177,968
3,618
1,969
Consumer loans:
Real estate secured loans 7,379
3,953
54
12
Other consumer loans 9
477
—
—
Total consumer loans 7,388
4,430
54
12
Total average impaired loans $ 163,369
$ 182,398
$ 3,672
$ 1,981

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

Three months ended September 30, 2019 Beginning Balance June 30, 2019 Charge-offs Recoveries
Provision for
(Reduction of) Loan Losses
Foreign Currency Translation Adjustments Ending Balance September 30, 2019
(Dollars in thousands)
Commercial loans:
Software/internet $ 101,998
$ (27,128 ) $ 988
$ 22,679
$ (335 ) $ 98,202
Hardware 26,932
(331 ) 1,669
(4,290 ) 64
24,044
Private equity/venture capital 105,524
—
1,200
1,834
(27 ) 108,531
Life science/healthcare 40,206
(9,361 ) 15
13,836
(204 ) 44,492
Premium wine 3,998
—
—
46
(1 ) 4,043
Other 4,291
—
—
(30 ) —
4,261
Total commercial loans 282,949
(36,820 ) 3,872
34,075
(503 ) 283,573
Total consumer loans 18,939
—
16
1,910
(28 ) 20,837
Total allowance for loan losses $ 301,888
$ (36,820 ) $ 3,888
$ 35,985
$ (531 ) $ 304,410

Three months ended September 30, 2018 Beginning Balance June 30, 2018 Charge-offs Recoveries
Provision for
(Reduction of) Loan Losses
Foreign Currency Translation Adjustments Ending Balance September 30, 2018
(Dollars in thousands)
Commercial loans:
Software/internet $ 102,648
$ (6,304 ) $ 841
$ 16,640
$ (335 ) $ 113,490
Hardware 34,695
(12,697 ) 227
(1,763 ) 36
20,498
Private equity/venture capital 89,409
—
3
1,632
(33 ) 91,011
Life science/healthcare 35,064
(2,076 ) 189
2,322
(47 ) 35,452
Premium wine 3,438
—
—
125
(3 ) 3,560
Other 2,896
(1,128 ) 771
118
(2 ) 2,655
Total commercial loans 268,150
(22,205 ) 2,031
19,074
(384 ) 266,666
Total consumer loans 18,559
—
133
362
(7 ) 19,047
Total allowance for loan losses $ 286,709
$ (22,205 ) $ 2,164
$ 19,436
$ (391 ) $ 285,713

Nine months ended September 30, 2019 Beginning Balance December 31, 2018 Charge-offs Recoveries
Provision for
Loan Losses
Foreign Currency Translation Adjustments Ending Balance September 30, 2019
(Dollars in thousands)
Commercial loans:
Software/internet $ 103,567
$ (38,319 ) $ 8,758
$ 24,667
$ (471 ) $ 98,202
Hardware 19,725
(3,576 ) 4,738
2,962
195
24,044
Private equity/venture capital 98,581
(2,047 ) 1,200
11,305
(508 ) 108,531
Life science/healthcare 32,180
(26,879 ) 196
38,397
598
44,492
Premium wine 3,355
—
—
681
7
4,043
Other 3,558
(415 ) —
1,163
(45 ) 4,261
Total commercial loans 260,966
(71,236 ) 14,892
79,175
(224 ) 283,573
Total consumer loans 19,937
(1,019 ) 241
1,779
(101 ) 20,837
Total allowance for loan losses $ 280,903
$ (72,255 ) $ 15,133
$ 80,954
$ (325 ) $ 304,410

Nine months ended September 30, 2018 Beginning Balance December 31, 2017 Charge-offs Recoveries
Provision for
(Reduction of) Loan Losses
Foreign Currency Translation Adjustments Ending Balance September 30, 2018
(Dollars in thousands)
Commercial loans:
Software/internet $ 96,104
$ (26,377 ) $ 1,818
$ 42,620
$ (675 ) $ 113,490
Hardware 27,614
(16,111 ) 1,458
7,788
(251 ) 20,498
Private equity/venture capital 82,468
(112 ) 13
8,200
442
91,011
Life science/healthcare 24,924
(2,940 ) 245
13,829
(606 ) 35,452
Premium wine 3,532
—
—
42
(14 ) 3,560
Other 3,941
(2,391 ) 1,874
(775 ) 6
2,655
Total commercial loans 238,583
(47,931 ) 5,408
71,704
(1,098 ) 266,666
Total consumer loans 16,441
(289 ) 470
2,384
41
19,047
Total allowance for loan losses $ 255,024
$ (48,220 ) $ 5,878
$ 74,088
$ (1,057 ) $ 285,713

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

Three months ended September 30, Nine months ended September 30,
(Dollars in thousands) 2019
2018 2019 2018
Allowance for unfunded credit commitments, beginning balance $ 62,664
$ 54,104
$ 55,183
$ 51,770
Provision for unfunded credit commitments 551
(2,262 ) 8,079
138
Foreign currency translation adjustments (107 ) (34 ) (154 ) (100 )
Allowance for unfunded credit commitments, ending balance (1) $ 63,108
$ 51,808
$ 63,108

$ 51,808



(Dollars in thousands)	March 31, 2020			December 31, 2019
Private equity/venture capital	$	18,868,875		$	17,696,794
Investor dependent:
Early stage	1,806,011			1,624,221
Mid stage	1,399,209			1,047,398
Later stage	2,031,490			1,663,576
Total investor dependent	5,236,710			4,335,195
Cash flow dependent:
Sponsor led buyout	2,121,007			2,185,497
Other	2,756,295			2,238,741
Total cash flow dependent	4,877,302			4,424,238
Private bank (4)	3,669,295			3,492,269
Balance sheet dependent	1,850,941			1,286,153
Premium wine (4)	1,056,927			1,062,264
Other (4)	408,035			867,723
Total loans (1) (2) (3)	$	35,968,085		$	33,164,636
Allowance for credit losses	(548,963		)	(304,924		)
Net loans	$	35,419,122		$	32,859,712


(1)	~~See~~ ~~Note 16—“Off-Balance Sheet Arrangements, Guarantees~~Total loans at amortized cost is net of unearned income of $169 million and ~~Other Commitments”~~$163 million at March 31, 2020 and December 31, 2019, respectively.


(2)	Included within our total loan portfolio are credit card loans of ~~the “Notes to Interim Consolidated Financial Statements (unaudited)” under Part I, Item 1~~$339 million and $395 million at March 31, 2020 and December 31, 2019, respectively.


(3)	Included within our total loan portfolio are construction loans of ~~this report~~ ~~for additional disclosures related to our commitments to extend credit.~~$174 million and $183 million at March 31, 2020 and December 31, 2019, respectively.

~~The following table summarizes the allowance for loan losses individually~~(4) Our total loans secured by real estate at amortized cost at March 31, 2020 and ~~collectively evaluated for impairment as of~~ ~~September 30, 2019~~ ~~and~~ December 31, ~~2018~~2019 were comprised of the following:~~, broken out by portfolio segment:~~

September 30, 2019 December 31, 2018

Individually Evaluated for
Impairment

Collectively Evaluated for
Impairment

Individually Evaluated for
Impairment

Collectively Evaluated for
Impairment
(Dollars in thousands) Allowance for loan losses Recorded investment in loans Allowance for loan losses Recorded investment in loans Allowance for loan losses Recorded investment in loans Allowance for loan losses Recorded investment in loans
Commercial loans:
Software/internet $ 24,882
$ 81,480
$ 73,320
$ 5,928,038
$ 28,527
$ 114,850
$ 75,040
$ 6,039,905
Hardware 5,230
9,923
18,814
1,347,694
1,253
11,506
18,472
1,223,051
Private equity/venture capital —
—
108,531
16,293,556
—
3,700
98,581
14,106,860
Life science/healthcare 22,161
39,521
22,331
2,342,301
7,484
34,067
24,696
2,351,545
Premium wine 394
2,339
3,649
981,475
—
1,301
3,355
958,362
Other 910
2,589
3,351
538,610
411
411
3,147
459,079
Total commercial loans 53,577
135,852
229,996
27,431,674
37,675
165,835
223,291
25,138,802
Total consumer loans 151
7,088
20,686
3,489,380
266
4,239
19,671
3,029,404
Total $ 53,728
$ 142,940
$ 250,682
$ 30,921,054
$ 37,941
$ 170,074
$ 242,962
$ 28,168,206



(Dollars in thousands)	March 31, 2020		December 31, 2019
Real estate secured loans:
Private bank:
Loans for personal residence	$	2,644,842	$	2,829,880
Loans to eligible employees	416,287		401,396
Home equity lines of credit	61,749		55,461
Other	26,591		38,880
Total private bank loans secured by real estate	$	3,149,469	$	3,325,617
Premium wine	762,460		820,730
Total real estate secured loans	$	3,911,929	$	4,146,347

Credit Quality Indicators

For each individual client, we establish an internal credit risk rating for that loan, which is used for assessing and monitoring credit risk as well as performance of the loan and the overall portfolio. Our internal credit risk ratings are also used to summarize the risk of loss due to failure by an individual borrower to repay the loan. For our internal credit risk ratings, each individual loan is given a risk rating of 1 through 10. Loans risk-rated 1 through 4 are performing loans and translate to an internal rating of “Pass,"” with loans risk-rated 1 being cash secured. Loans risk-rated 5 through 7 are performing loans; however, we consider them as demonstrating higher risk, which requires more frequent review of the individual exposures; these translate to an internal rating of “Performing (Criticized)." When full repayment of a criticized loan has been deemed improbable under the original contractual terms but full repayment remains probable overall, the loan is considered to be a “Performing Impaired (Criticized)“Criticized.” ~~loan.~~ All of our nonaccrual loans are risk-rated 8 or 9 and are classified under the nonperforming ~~impaired~~ category. ~~(For further description of nonaccrual loans, refer to Note 2—“Summary of Significant Accounting Policies” under Part II, Item 8 of our 2018 Form 10-K).~~ Loans

rated 10 are charged-off and are not included as part of our loan portfolio balance. We review our credit quality indicators for performance and appropriateness of risk ratings as part of our evaluation process for our allowance for ~~loan losses.~~credit losses for loans.

The following table summarizes the credit quality indicators, broken out by ~~portfolio~~risk-based segment, ~~and class of financing receivables~~ as of ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018:~~2019:

(Dollars in thousands) Pass Performing (Criticized) Performing Impaired (Criticized) Nonperforming Impaired (Nonaccrual) Total
September 30, 2019:
Commercial loans:
Software/internet $ 5,454,896
$ 531,291
$ 25,588
$ 55,892
$ 6,067,667
Hardware 1,251,074
106,895
4,482
5,441
1,367,892
Private equity/venture capital 16,310,056
28
—
—
16,310,084
Life science/healthcare 2,258,771
148,901
6,879
32,642
2,447,193
Premium wine 928,817
53,932
1,946
393
985,088
Other 537,852
17,154
—
2,589
557,595
Total commercial loans 26,741,466
858,201
38,895
96,957
27,735,519
Consumer loans:
Real estate secured loans 2,994,694
10,278
—
7,075
3,012,047
Other consumer loans 481,424
—
—
13
481,437
Total consumer loans 3,476,118
10,278
—
7,088
3,493,484
Total gross loans $ 30,217,584
$ 868,479
$ 38,895
$ 104,045
$ 31,229,003
December 31, 2018:
Commercial loans:
Software/internet $ 5,574,332
$ 520,796
$ 48,069
$ 66,781
$ 6,209,978
Hardware 1,146,985
87,309
10,250
1,256
1,245,800
Private equity/venture capital 14,098,281
16,151
—
3,700
14,118,132
Life science/healthcare 2,291,356
135,653
16,276
17,791
2,461,076
Premium wine 909,965
49,287
1,017
284
960,553
Other 467,653
17,344
—
411
485,408
Total commercial loans 24,488,572
826,540
75,612
90,223
25,480,947
Consumer loans:
Real estate secured loans 2,584,261
21,145
320
3,919
2,609,645
Other consumer loans 419,771
949
—
—
420,720
Total consumer loans 3,004,032
22,094
320
3,919
3,030,365
Total gross loans $ 27,492,604
$ 848,634
$ 75,932
$ 94,142
$ 28,511,312



(Dollars in thousands)	Pass		Criticized		Nonperforming (Nonaccrual)		Total
March 31, 2020:
Private equity/venture capital	$	18,868,764	$	111	$	—	$	18,868,875
Investor dependent:
Early stage	1,588,307		199,290		18,414		1,806,011
Mid stage	1,224,481		162,548		12,180		1,399,209
Later stage	1,786,063		230,984		14,443		2,031,490
Total investor dependent	4,598,851		592,822		45,037		5,236,710
Cash flow dependent:
Sponsor led buyout	1,952,061		168,946		—		2,121,007
Other	2,590,162		166,120		13		2,756,295
Total cash flow dependent	4,542,223		335,066		13		4,877,302
Private bank	3,639,776		24,662		4,857		3,669,295
Balance sheet dependent	1,725,273		125,668		—		1,850,941
Premium wine	999,373		56,854		700		1,056,927
Other	407,943		92		—		408,035
Total loans (1)	$	34,782,203	$	1,135,275	$	50,607	$	35,968,085
December 31, 2019:
Private equity/venture capital	$	17,708,550	$	4,247	$	—	$	17,712,797
Investor dependent
Early stage	1,436,022		206,310		11,093		1,653,425
Mid stage	924,002		125,451		17,330		1,066,783
Later stage	1,490,561		201,819		6,296		1,698,676
Total investor dependent	3,850,585		533,580		34,719		4,418,884
Cash flow dependent
Sponsor led buyout	2,039,847		118,588		44,585		2,203,020
Other	2,141,766		93,400		17,681		2,252,847
Total cash flow dependent	4,181,613		211,988		62,266		4,455,867
Private bank	3,472,138		11,601		5,480		3,489,219
Balance sheet dependent	1,231,961		65,343		—		1,297,304
Premium wine	1,026,973		36,335		204		1,063,512
Other	890,059		62		—		890,121
Total loans (1)	$	32,361,879	$	863,156	$	102,669	$	33,327,704


(1)	For the quarter ended March 31, 2020, loan amounts are disclosed using the amortized cost basis as a result of the adoption of CECL. Prior period loan amounts are disclosed using the gross basis.

The following table summarizes the credit quality indicators, broken out by risk-based segments and vintage year, as of March 31, 2020:



	Term Loans by Origination Year
(Dollars in thousands)	2020		2019		2018		2017		2016		Prior		Revolving Loans		Revolving Loans Converted to Term Loans		Total
Private equity/venture capital:
Risk rating:
Pass	$	167,852	$	249,214	$	92,652	$	41,912	$	3,990	$	18,241	$	18,294,903	$	—	$	18,868,764
Criticized	35		—		—		—		—		—		76		—		111
Nonperforming	—		—		—		—		—		—		—		—		—
Total private equity/venture capital	$	167,887	$	249,214	$	92,652	$	41,912	$	3,990	$	18,241	$	18,294,979	$	—	$	18,868,875
Investor dependent:
Early stage:
Risk rating:
Pass	$	348,538	$	764,930	$	260,849	$	86,592	$	12,760	$	3,460	$	111,178	$	—	$	1,588,307
Criticized	8,754		83,587		56,641		21,632		5,396		5,868		17,412		—		199,290
Nonperforming	—		4,995		8,875		3,337		—		—		1,207		—		18,414
Total early stage	$	357,292	$	853,512	$	326,365	$	111,561	$	18,156	$	9,328	$	129,797	$	—	$	1,806,011
Mid stage:
Risk rating:
Pass	$	304,548	$	375,482	$	267,047	$	77,566	$	10,772	$	3,278	$	185,788	$	—	$	1,224,481
Criticized	9,107		54,142		45,109		14,991		11,232		5,024		22,943		—		162,548
Nonperforming	—		—		5,586		6,342		—		—		252		—		12,180
Total mid stage	$	313,655	$	429,624	$	317,742	$	98,899	$	22,004	$	8,302	$	208,983	$	—	$	1,399,209
Later stage:
Risk rating:
Pass	$	220,075	$	696,219	$	259,592	$	104,208	$	76	$	13,203	$	492,690	$	—	$	1,786,063
Criticized	20,335		64,324		67,783		24,105		—		1,901		52,536		—		230,984
Nonperforming	—		1,521		5,820		4,153		—		—		2,949		—		14,443
Total later stage	$	240,410	$	762,064	$	333,195	$	132,466	$	76	$	15,104	$	548,175	$	—	$	2,031,490
Total investor dependent	$	911,357	$	2,045,200	$	977,302	$	342,926	$	40,236	$	32,734	$	886,955	$	—	$	5,236,710
Cash flow dependent:
Sponsor led buyout:
Risk rating:
Pass	$	204,305	$	756,752	$	436,654	$	276,232	$	68,412	$	19,703	$	190,003	$	—	$	1,952,061
Criticized	—		29,696		85,125		32,173		11,979		—		9,973		—		168,946
Nonperforming	—		—		—		—		—		—		—		—		—
Total sponsor led buyout	$	204,305	$	786,448	$	521,779	$	308,405	$	80,391	$	19,703	$	199,976	$	—	$	2,121,007
Other
Risk rating:
Pass	$	232,375	$	710,823	$	235,585	$	122,748	$	43,198	$	542	$	1,244,891	$	—	$	2,590,162
Criticized	4		16,649		40,183		5,226		63		—		103,995		—		166,120
Nonperforming	—		—		2		—		—		—		11		—		13
Total other	$	232,379	$	727,472	$	275,770	$	127,974	$	43,261	$	542	$	1,348,897	$	—	$	2,756,295
Total cash flow dependent	$	436,684	$	1,513,920	$	797,549	$	436,379	$	123,652	$	20,245	$	1,548,873	$	—	$	4,877,302
Private bank:
Risk rating:
Pass	$	200,593	$	1,106,485	$	477,055	$	472,672	$	439,552	$	603,906	$	276,109	$	63,404	$	3,639,776
Criticized	—		7,381		—		2,416		2,502		11,756		607		—		24,662
Nonperforming	—		—		—		1,588		—		1,181		2,088		—		4,857
Total private bank	$	200,593	$	1,113,866	$	477,055	$	476,676	$	442,054	$	616,843	$	278,804	$	63,404	$	3,669,295



Balance sheet dependent:
Risk rating:
Pass	$	136,803	$	215,264	$	228,831	$	48,144	$	13,280	$	—	$	1,082,951	$	—	$	1,725,273
Criticized	—		14,458		3,107		15,970		—		—		92,133		—		125,668
Nonperforming	—		—		—		—		—		—		—		—		—
Total balance sheet dependent	$	136,803	$	229,722	$	231,938	$	64,114	$	13,280	$	—	$	1,175,084	$	—	$	1,850,941
Premium wine:
Risk rating:
Pass	$	51,487	$	238,792	$	95,464	$	93,055	$	84,186	$	226,031	$	210,358	$	—	$	999,373
Criticized	—		8,437		14,371		361		5,005		6,055		22,625		—		56,854
Nonperforming	—		—		—		—		687		—		13		—		700
Total Premium wine	$	51,487	$	247,229	$	109,835	$	93,416	$	89,878	$	232,086	$	232,996	$	—	$	1,056,927
Other:
Risk rating:
Pass	$	15,595	$	211,972	$	60,016	$	30,963	$	60,151	$	29,246	$	—	$	—	$	407,943
Criticized	13		—		—		—		—		—		79		—		92
Nonperforming	—		—		—		—		—		—		—		—		—
Total other	$	15,608	$	211,972	$	60,016	$	30,963	$	60,151	$	29,246	$	79	$	—	$	408,035
Total loans	$	1,920,419	$	5,611,123	$	2,746,347	$	1,486,386	$	773,241	$	949,395	$	22,417,770	$	63,404	$	35,968,085

At March 31, 2020, the economic forecasts used in the estimate of our allowance for credit losses for loans was significantly impacted by the economic uncertainty and volatility caused by the COVID-19 pandemic. We utilize Moody's Analytics to source the economic forecasts for the reserve model. The forecasts utilized were those released between March 27, 2020 through March 31, 2020, which Moody's has communicated were designed to reflect the onset of the pandemic and the resulting economic decline. We utilize a probability weighted approach across several forecasts, the average of which represents a significant economic shock for the second and third quarters of 2020 followed by a slow, sustained improvement.

The following tables summarize the activity relating to our allowance for credit losses for loans for the three months ended March 31, 2020 and 2019, broken out by risk-based segment:



Three months ended March 31, 2020	Beginning Balance December 31, 2019		Impact of adopting ASC 326			Charge-offs			Recoveries		Provision for (Reduction of) Credit Losses			Foreign Currency Translation Adjustments			Ending Balance March 31, 2020
(Dollars in thousands)	Beginning Balance December 31, 2019		Impact of adopting ASC 326			Charge-offs			Recoveries		Provision for (Reduction of) Credit Losses			Foreign Currency Translation Adjustments			Ending Balance March 31, 2020
Private equity/venture capital	$	107,285	$	(69,888	)	$	—		$	—	$	19,557		$	(180	)	$	56,774
Investor dependent:
Early stage	26,245		39,911			(10,183		)	1,573		70,214			(571		)	127,189
Mid stage	15,936		6,963			(9,332		)	3,337		35,145			(87		)	51,962
Later stage	40,189		24,750			(13,984		)	—		46,038			(443		)	96,550
Total investor dependent	82,370		71,624			(33,499		)	4,910		151,397			(1,101		)	275,701
Cash flow dependent:
Sponsor led buyout	42,939		3,151			(2,624		)	2,845		(4,088		)	(132		)	42,091
Other	25,159		(3,056		)	—			—		17,438			(125		)	39,416
Total cash flow dependent	68,098		95			(2,624		)	2,845		13,350			(257		)	81,507
Private bank	21,551		12,615			(581		)	—		54,490			(280		)	87,795
Balance sheet dependent	12,722		(1,364		)	—			—		11,951			(74		)	23,235
Premium wine	5,296		3,650			(192		)	—		3,663			(40		)	12,377
Other	7,602		8,732			—			—		(5,507		)	747			11,574
Total allowance for credit losses	$	304,924	$	25,464		$	(36,896	)	$	7,755	$	248,901		$	(1,185	)	$	548,963



Three months ended March 31, 2019	Beginning Balance December 31, 2018		Charge-offs			Recoveries		Provision for (Reduction of) Credit Losses			Foreign Currency Translation Adjustments			Ending Balance March 31, 2019
(Dollars in thousands)	Beginning Balance December 31, 2018		Charge-offs			Recoveries		Provision for (Reduction of) Credit Losses			Foreign Currency Translation Adjustments			Ending Balance March 31, 2019
Private equity/venture capital	$	93,781	$	—		$	—	$	1,483		$	47		$	95,311
Investor dependent:
Early stage	25,885		(1,668		)	568		1,886			59			26,730
Mid stage	20,999		(6,516		)	3		22,957			720			38,163
Later stage	25,217		—			644		4,171			131			30,163
Total investor dependent	72,101		(8,184		)	1,215		29,014			910			95,056
Cash flow dependent:
Sponsor led buyout	44,274		—			—		(3,239		)	(102		)	40,933
Other	21,754		(716		)	—		(508		)	(16		)	20,514
Total cash flow dependent	66,028		(716		)	—		(3,747		)	(118		)	61,447
Private Bank	20,583		(59		)	210		(746		)	(24		)	19,964
Balance sheet dependent	21,707		—			—		(73		)	(2		)	21,632
Premium wine	3,646		—			—		294			9			3,949
Other	3,057		(41		)	—		(404		)	180			2,792
Total allowance for credit losses	$	280,903	$	(9,000	)	$	1,425	$	25,821		$	1,002		$	300,151

The following table summarizes the aging of our loans broken out by risk-based segments as of March 31, 2020 and December 31, 2019:



(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		Total		Loans Past Due 90 Days or More Still Accruing Interest
March 31, 2020:
Private equity/venture capital	$	165,904	$	23	$	—	$	165,927	$	18,702,948	$	18,868,875	$	—
Investor dependent:
Early stage	8,750		1,231		3,487		13,468		1,792,543		1,806,011		1,499
Mid stage	5,556		192		1,667		7,415		1,391,794		1,399,209		1,667
Later stage	9,910		5,500		—		15,410		2,016,080		2,031,490		—
Total investor dependent	24,216		6,923		5,154		36,293		5,200,417		5,236,710		3,166
Cash flow dependent:
Sponsor led buyout	165		—		—		165		2,120,842		2,121,007		—
Other	1,186		722		—		1,908		2,754,387		2,756,295		—
Total cash flow dependent	1,351		722		—		2,073		4,875,229		4,877,302		—
Private bank	6,730		—		4,522		11,252		3,658,043		3,669,295		1,752
Balance sheet dependent	3,261		3,087		—		6,348		1,844,593		1,850,941		—
Premium wine	10,438		21,001		—		31,439		1,025,488		1,056,927		—
Other	677		—		—		677		407,358		408,035		—
Total loans (1)	$	212,577	$	31,756	$	9,676	$	254,009	$	35,714,076	$	35,968,085	$	4,918
December 31, 2019:
Private equity/venture capital	$	97,739	$	383	$	3,150	$	101,272	$	17,611,525	17,712,797		$	3,150
Investor dependent:
Early stage	1,307		22,062		723		24,092		1,629,333		1,653,425		—
Mid stage	10,025		6,999		—		17,024		1,049,759		1,066,783		—
Later stage	8,113		500		10,569		19,182		1,679,494		1,698,676		—
Total investor dependent	19,445		29,561		11,292		60,298		4,358,586		4,418,884		—
Cash flow dependent
Sponsor led buyout	—		—		—		—		2,203,020		2,203,020		—
Other	2,426		3,061		2		5,489		2,247,358		2,252,847		—
Total cash flow dependent	2,426		3,061		2		5,489		4,450,378		4,455,867		—
Private bank	6,582		2,049		1,544		10,175		3,479,044		3,489,219		365
Balance sheet dependent	2,731		—		—		2,731		1,294,573		1,297,304		—
Premium wine	8,435		3,170		—		11,605		1,051,907		1,063,512		—
Other	17		—		—		17		890,104		890,121		—
Total loans (1)	$	137,375	$	38,224	$	15,988	$	191,587	$	33,136,117	$	33,327,704	$	3,515


(1)	For the quarter ended March 31, 2020, loan amounts are disclosed using the amortized cost basis as a result of the adoption of CECL. Prior period loan amounts are disclosed using the gross basis.

Nonaccrual Loans

The following tables summarize our nonaccrual loan activity by risk-based segment for the three months ended March 31, 2020 and 2019:



Three months ended March 31, 2020	Beginning Balance December 31, 2019		Additions		Paydowns and Other Reductions			Charge-offs			Ending Balance March 31, 2020
(Dollars in thousands)	Beginning Balance December 31, 2019		Additions		Paydowns and Other Reductions			Charge-offs			Ending Balance March 31, 2020
Private equity/venture capital	$	—	$	—	$	—		$	—		$	—
Investor dependent:
Early stage	11,093		12,343		(2,764		)	(2,258		)	18,414
Mid stage	17,330		12,091		(388		)	(16,853		)	12,180
Later stage	6,296		11,224		128			(3,205		)	14,443
Total investor dependent	34,719		35,658		(3,024		)	(22,316		)	45,037
Cash flow dependent:
Sponsor led buyout	44,585		—		(41,961		)	(2,624		)	—
Other	17,681		—		(17,650		)	(18		)	13
Total cash flow dependent	62,266		—		(59,611		)	(2,642		)	13
Private bank	5,480		—		(42		)	(581		)	4,857
Balance sheet dependent	—		—		—			—			—
Premium wine	204		688		—			(192		)	700
Other	—		—		—			—			—
Total nonaccrual loans (1)	$	102,669	$	36,346	$	(62,677	)	$	(25,731	)	$	50,607


(1)	For the quarter ended March 31, 2020, loan amounts are disclosed using the amortized cost basis as a result of the adoption of CECL. Prior period loan amounts are disclosed using the gross basis.



Three months ended March 31, 2019	Beginning Balance December 31, 2018		Additions		Paydowns and Other Reductions			Charge-offs			Ending Balance March 31, 2019
(Dollars in thousands)	Beginning Balance December 31, 2018		Additions		Paydowns and Other Reductions			Charge-offs			Ending Balance March 31, 2019
Private equity/venture capital	$	3,700	$	2,247	$	—		$	—		$	5,947
Investor dependent:
Early stage	7,616		4,433		(3,212		)	(140		)	8,697
Mid stage	4,751		32,099		(521		)	(4,230		)	32,099
Later stage	11,385		12,063		(308		)	—			23,140
Total investor dependent	23,752		48,595		(4,041		)	(4,370		)	63,936
Cash flow dependent:
Sponsor led buyout	39,534		—		(1,297		)	—			38,237
Other	17,156		—		—			(466		)	16,690
Total cash flow dependent	56,690		—		(1,297		)	(466		)	54,927
Private bank	3,919		15		(66		)	(59		)	3,809
Balance sheet dependent	5,004		—		(268		)	—			4,736
Premium wine	285		—		(17		)	—			268
Other	792		—		(792		)	—			—
Total nonaccrual loans (1)	$	94,142	$	50,857	$	(6,481	)	$	(4,895	)	$	133,623


(1)	For the quarter ended March 31, 2020, loan amounts are disclosed using the amortized cost basis as a result of the adoption of CECL. Prior period loan amounts are disclosed using the gross basis.

The following table summarizes our nonaccrual loans with no allowance for credit loss at March 31, 2020 and December 31, 2019:



	March 31, 2020				December 31, 2019
(Dollars in thousands)	Nonaccrual Loans		Nonaccrual Loans with no Allowance for Credit Loss		Nonaccrual Loans		Nonaccrual Loans with no Allowance for Credit Loss
Private equity/venture capital	$	—	$	—	$	—	$	—
Investor dependent:
Early stage	18,414		1,562		11,093		460
Mid stage	12,180		261		17,330		274
Later stage	14,443		1,807		6,296		—
Total investor dependent	45,037		3,630		34,719		734
Cash flow dependent:
Sponsor led buyout	—		—		44,585		—
Other	13		—		17,681		2,782
Total cash flow dependent	13		—		62,266		2,782
Private bank	4,857		3,269		5,480		3,714
Balance sheet dependent	—		—		—		—
Premium wine	700		—		204		—
Other	—		—		—		—
Total nonaccrual loans (1)	$	50,607	$	6,899	$	102,669	$	7,230


(1)	For the quarter ended March 31, 2020, loan amounts are disclosed using the amortized cost basis as a result of the adoption of CECL. Prior period loan amounts are disclosed using the gross basis.

Troubled Debt Restructurings

As of ~~September 30, 2019,~~March 31, 2020, we had 2015 TDRs with a total carrying value of ~~$105.2~~$42.2 million where concessions have been granted to borrowers experiencing financial difficulties, in an attempt to maximize collection. There were ~~$3.8~~$0.6 million of unfunded commitments available for funding to the clients associated with these TDRs as of ~~September 30, 2019.~~March 31, 2020.

The following table summarizes our loans modified in TDRs, broken out by ~~portfolio~~risk-based segment, ~~and class of financing receivables~~ at ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018:~~2019:

(Dollars in thousands) September 30, 2019 December 31, 2018
Loans modified in TDRs:
Commercial loans:
Software/internet $ 80,704
$ 58,089
Hardware —
9,665
Life science/healthcare 18,689
12,738
Premium wine 3,712
2,883
Total commercial loans 103,105
83,375
Consumer loans:
Other consumer loans 2,140
320
Total loans modified in TDRs $ 105,245
$ 83,695



(Dollars in thousands)	March 31, 2020		December 31, 2019
Loans modified in TDRs:
Private equity/venture capital	$	—	$	—
Investor dependent
Early stage	7,350		9,471
Mid stage	5,955		5,189
Later stage	8,272		23,318
Total investor dependent	21,577		37,978
Cash flow dependent
Sponsor led buyout	10,350		55,443
Other	—		—
Total cash flow dependent	10,350		55,443
Private bank	1,351		2,104
Balance sheet dependent	—		—
Premium wine	8,934		13,457
Other	—		—
Total loans modified in TDRs (1)	$	42,212	$	108,982


(1)	For the quarter ended March 31, 2020, loan amounts are disclosed using the amortized cost basis as a result of the adoption of CECL. Prior period loan amounts are disclosed using the gross basis.

The following table summarizes the recorded investment in loans modified in TDRs, broken out by ~~portfolio~~risk-based segment, ~~and class of financing receivable,~~ for modifications made during the three ~~and nine~~ months ended ~~September 30, 2019~~March 31, 2020 and ~~2018:~~2019:

Three months ended September 30, Nine months ended September 30,
(Dollars in thousands) 2019
2018 2019 2018
Loans modified in TDRs during the period:
Commercial loans:
Software/internet $ 8,566
$ —
$ 60,650
$ 14,069
Hardware —
10,398
—
12,347
Life science/healthcare —
—
10,963
5,909
Total commercial loans 8,566
10,398
71,613
32,325
Consumer loans:
Other consumer loans —
—
1,826
322
Total loans modified in TDRs during the period (1) $ 8,566
$ 10,398
$ 73,439
$ 32,647



	Three months ended March 31,
(Dollars in thousands)	2020		2019
Loans modified in TDRs during the period:
Private equity/venture capital	$	—	$	—
Investor dependent
Early stage	—		677
Mid stage	5,955		—
Later stage	2,769		—
Total investor dependent	8,724		677
Cash flow dependent
Sponsor led buyout	—		—
Other	—		5,000
Total cash flow dependent	—		5,000
Private bank	—		—
Balance sheet dependent	—		—
Premium wine	—		—
Other	—		—
Total loans modified in TDRs during the period (1) (2)	$	8,724	$	5,677


(1)	For the quarter ended March 31, 2020, loan amounts are disclosed using the amortized cost basis as a result of the adoption of CECL. Prior period loan amounts are disclosed using the gross basis.


(2)	There were $~~3.7~~12.5 million and $~~9.2~~2.2 million of partial charge-offs for the three ~~and nine~~ months ended ~~September 30, 2019, respectively, and~~ ~~$13.0 million~~March 31, 2020 and ~~$21.5 million~~ ~~of partial charge-offs for the~~ ~~three and nine months endedSeptember 30, 2018~~March 31, 2019, respectively.

During the three ~~and nine~~ months ended ~~September 30,~~March 31, 2020 and 2019,, ~~$6.4~~ new TDRs of $8.3 million and ~~$69.4~~$5.7 million, respectively, were modified through payment deferrals granted to our clients.During the three ~~and nine~~ months ended ~~September 30, 2019, $2.2~~March 31, 2020, new TDRs of $0.4 million ~~and $4.0 million, respectively,~~ were modified through ~~partial~~ forgiveness of ~~principal. During the three and nine months ended September 30, 2018, all new TDRs of $10.4 million and $32.6 million, respectively, were modified through payment deferrals granted to our clients.~~

The related allowance for loan losses for the majority of our TDRs is determined on an individual basis by comparing the carrying value of the loan to the present value of the estimated future cash flows, discounted at the pre-modification contractual interest rate. For certain TDRs, the related allowance for loan losses is determined based on the fair value of the collateral if the loan is collateral dependent.

principle.

The following table summarizes the recorded investment in loans modified in TDRs within the previous 12 months that subsequently defaulted during the three ~~and nine~~ months ended ~~September 30, 2019~~March 31, 2020 and ~~2018:~~2019:

Three months ended September 30, Nine months ended September 30,
(Dollars in thousands) 2019 2018 2019 2018
TDRs modified within the previous 12 months that defaulted during the period:
Commercial loans:
Software/internet $ 37,294
$ 18,911
$ 37,294
$ 41,568
Hardware —
2,100
—
5,549
Life science/healthcare 10,963
5,909
10,963
7,139
Total TDRs modified within the previous 12 months that defaulted in the period $ 48,257
$ 26,920
$ 48,257
$ 54,256



	Three months ended March 31,
(Dollars in thousands)	2020		2019
TDRs modified within the previous 12 months that defaulted during the period:
Private equity/venture capital	$	—	$	—
Investor dependent
Early stage	—		—
Mid stage	—		—
Later stage	—		—
Total investor dependent	—		—
Cash flow dependent
Sponsor led buyout	—		—
Other	—		5,000
Total cash flow dependent	—		5,000
Private bank	—		—
Balance sheet dependent	—		—
Premium wine	8,247		—
Other	—		—
Total TDRs modified within the previous 12 months that defaulted in the period (1)	$	8,247	$	5,000


(1)	For the quarter ended March 31, 2020, loan amounts are disclosed using the amortized cost basis as a result of the adoption of CECL. Prior period loan amounts are disclosed using the gross basis.

Charge-offs and defaults on previously restructured loans are evaluated to determine the impact to the allowance for ~~loan~~credit losses for loans, if any. The evaluation of these defaults may impact the assumptions used in calculating the reserve on other TDRs and ~~impaired~~nonaccrual 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~~credit losses for loans as of ~~September 30, 2019.~~March 31, 2020.

Allowance for Credit Losses: Unfunded Credit Commitments

We maintain a separate allowance for credit losses for unfunded credit commitments that is determined using a methodology that is inherently similar to the methodology used for calculating the allowance for credit losses for loans. At March 31, 2020, the reduction of our allowance for credit losses for unfunded credit commitments was primarily attributable to a decrease in the expected future commitments for milestone tranches, which are tied to company performance or additional funding rounds, based on our forecast models of the current economic environment, including the impact of the COVID-19 pandemic mentioned above.

The following table summarizes the activity relating to our allowance for credit losses for unfunded credit commitments for the three months ended March 31, 2020 and 2019:



	Three months ended March 31,
(Dollars in thousands)	2020			2019
Allowance for credit losses: unfunded credit commitments, beginning balance	$	67,656		$	55,183
Impact of adopting ASC 326	22,826			—
(Reduction of) provision for credit losses	(5,477		)	2,730
Foreign currency translation adjustments	(315		)	57
Allowance for credit losses: unfunded credit commitments, ending balance (1)	$	84,690		$	57,970

(1)

The “allowance for credit losses: unfunded credit commitments” is included as a component of “other liabilities” on our unaudited interim consolidated balance sheets. See Note 15 — “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.


9.8.	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~~rent 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~~right-of-use 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) September 30, 2019
Assets:
Right-of-use assets - operating leases (1) $ 178,532
Liabilities:
Lease liabilities - operating leases (1) 192,543



(Dollars in thousands)	March 31, 2020		December 31, 2019
Assets:
Right-of-use assets - operating leases	$	206,392	$	197,365
Liabilities:
Lease liabilities - operating leases	227,271		218,847


~~(1)~~	~~Included in these amounts are~~ ~~$22.8 million~~ ~~and~~ ~~$31.4 million~~ ~~of ROU assets and lease liabilities, respectively, attributable to the inclusion of SVB Leerink in our financial results at September 30, 2019.~~

The components of our lease cost and supplemental cash flow information related to leases for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2020 and 2019 were as follows:


(Dollars in thousands)	Three months ended September 30, 2019			Nine months ended September 30, 2019			Three months ended March 31, 2020			Three months ended March 31, 2019
Operating lease cost	$	10,120		$	29,099		$	11,364		$	9,518
Short-term lease cost	370			1,214			339			263
Variable lease cost	903			2,683			595			846
Less: sublease income	(1,140		)	(3,363		)	(1,132		)	(1,108		)
Total lease cost, net	$	10,253		$	29,633		$	11,166		$	9,519
Supplemental cash flows information:
Cash paid for amounts included in the measurement of lease liabilities:
Cash paid for operating leases	$	11,514		$	32,752		$	12,221		10,354
Noncash items during the period:
Lease obligations in exchange for obtaining Right-of-use assets
Operating leases	$	7,770		$	7,770		$	21,613		—

The table below presents additional information related to the Company's leases as of ~~September 30,~~March 31, 2020 and December 31, 2019:



	~~September 30, 2019~~
~~Weighted-average remaining term (in years) - operating leases~~	~~6.15~~
~~Weighted-average discount rate - operating leases (1)~~	~~3.15~~	%

(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 ~~September 30, 2019:~~March 31, 2020:


Years ended December 31, (Dollars in thousands)	Operating Leases			Operating Leases
2019 (excluding the nine months ended September 30, 2019)	$	10,994
2020	41,197
2020 (excluding the three months ended March 31, 2020)				$	34,310
2021	38,325			44,228
2022	32,830			39,196
2023	31,033			38,429
2024 and thereafter	41,792
2024				32,712
2025 and thereafter				60,124
Total future lease payments (1)	$	196,171		$	248,999
Less: imputed interest	(3,628		)	(21,728		)
Total lease liabilities	$	192,543		$	227,271


(1)	As of ~~September 30, 2019,~~March 31, 2020, we have additional leases that have not yet commenced. We estimate that we will record additional lease liabilities of $~~35.4~~18.8 million upon commencement. Theseleases will commence byin 2020 with lease terms of ~~one~~ to ~~ten~~five 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.~~9.	Goodwill and Other Intangible Assets

Goodwill

~~On January 4,~~Goodwill at both March 31, 2020 and December 31, 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 ofwas $137.8 million, aswhich was 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~~our acquisition of SVB Leerink in 2019. Due to the economic uncertainty caused by COVID-19, we conducted an evaluation and determined that it was more likely than not that the ~~Company.~~

~~The changes in~~fair value of SVB Leerink was not less than its carrying amount; therefore, no impairment was recognized on goodwill ~~were~~ as ~~follows~~of March 31, 2020. All reported goodwill amounts have been allocated to the SVB Leerink reporting segment and are expected to be deductible for ~~the nine months ended September 30, 2019:~~

(Dollars in thousands) Goodwill
Beginning balance at December 31, 2018 $ —
Acquisitions (1) 137,823
Ending balance at September 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~~tax purposes. Refer to Note 14 — “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:


	September 30, 2019						March 31, 2020						December 31, 2019
(Dollars in thousands)	Gross Amount		Accumulated Amortization		Net Carrying Amount		Gross Amount		Accumulated Amortization		Net Carrying Amount		Gross Amount		Accumulated Amortization		Net Carrying Amount
Other intangible assets:
Customer relationships	$	42,000	$	2,864	$	39,136	$	42,000	$	4,773	$	37,227	$	42,000	$	3,818	$	38,182
Other	18,900		5,748		13,152		18,900		8,055		10,845		18,900		7,665		11,235
Total other intangible assets	$	60,900	$	8,612	$	52,288	$	60,900	$	12,828	$	48,072	$	60,900	$	11,483	$	49,417

For the ~~nine~~three months ended ~~September 30, 2019,~~March 31, 2020, we recorded amortization expense of ~~$8.6~~$1.3 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 as of ~~September 30, 2019:~~March 31, 2020:


Years ended December 31, (Dollars in thousands)	Other Intangible Assets		Other Intangible Assets
2019 (excluding the nine months ended September 30, 2019)	$	2,872
2020	5,382
2020 (excluding the three months ended March 31, 2020)			$	4,037
2021	4,732		4,732
2022	4,732		4,732
2023	4,732		4,732
2024 and thereafter	29,838
2024			4,732
2025 and thereafter			25,107
Total future amortization expense	$	52,288	$	48,072


~~11.~~10.	Short-Term Borrowings and Long-Term Debt

The following table represents outstanding short-term borrowings and long-term debt at ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018~~2019:


				Carrying Value							Carrying Value
(Dollars in thousands)	Maturity	Principal value at September 30, 2019		September 30, 2019		December 31, 2018		Maturity	Principal value at March 31, 2020		March 31, 2020		December 31, 2019
Short-term borrowings:
Short-term FHLB advances				$	—	$	300,000	(1)	$	2,700,000	$	2,700,000	$	—
Securities sold under agreement to repurchase	(1)			—		319,414
Federal funds purchased								April 1, 2020	375,000		375,000		—
Other short-term borrowings	(2)	$	18,898	18,898		11,998		(2)	63,162		63,162		17,430
Total short-term borrowings				$	18,898	$	631,412				$	3,138,162	$	17,430
Long-term debt:
3.50% Senior Notes	January 29, 2025	$	350,000	$	347,899	$	347,639	January 29, 2025	$	350,000	$	348,076	$	347,987
5.375% Senior Notes	September 15, 2020	350,000		349,328		348,826
Total long-term debt				$	697,227	$	696,465				$	348,076	$	347,987


(1)	~~Securities sold under repurchase agreements are effectively short-term borrowings collateralized by U.S. Treasury securities.~~Represents advances from the FHLB at March 31, 2020 with maturity dates through May 7, 2020.


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

Interest expense related to short-term borrowings and long-term debt was ~~$8.1 million and $27.6~~$5.9 million for the three ~~and nine~~ months ended ~~September 30, 2019, respectively,~~March 31, 2020 and ~~$12.0 million and $29.1~~$10.2 million for the three ~~and nine~~ months ended~~September 30, 2018, respectively.~~ March 31, 2019. The weighted average interest rate associated with our ~~overnight~~ short-term borrowings was ~~2.62~~0.36 percent as of March 31, 2020 and 1.55 percent as of as of December 31, ~~2018. There were no overnight short-term borrowings as of September 30,~~ 2019.

Short-term Borrowings

We have certain facilities in place to enable us to access short-term borrowings on a secured and unsecured basis. Our secured facilities include collateral pledged to the FHLB of San Francisco and the discount window at the FRB (using both fixed income securities and loans as collateral). Our unsecured facility consists of our uncommitted federal funds lines. As of ~~September 30, 2019,~~March 31, 2020, collateral pledged to the FHLB of San Francisco was comprised primarily of fixed income investment securities and loans and had a carrying value of ~~$4.5~~$4.8 billion, of which ~~$4.1~~$1.4 billion was available to support additional borrowings. As of ~~September 30, 2019,~~March 31, 2020, collateral pledged to the discount window at the FRB was comprised of fixed income investment securities and had a carrying value of $1.0 billion, all of which was unused and available to support additional borrowings. Our total unused and available borrowing capacity for our uncommitted federal funds lines totaled ~~$1.9~~$1.6 billion at ~~September 30, 2019.~~March 31, 2020. Our total unused and available borrowing capacity under our master repurchase agreements with various financial institutions totaled $3.3 billion at ~~September 30, 2019.~~March 31, 2020.


~~12.~~11.	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, 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 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, Derivatives and Hedging ("ASC 815"), and record them in other assets and other liabilities. For qualifying cash flow hedges, changes in the fair value of the derivative are recorded in accumulated other comprehensive income and recognized in earnings as the hedged item affects earnings. Derivative amounts affecting earnings are recognized consistent with the classification of the 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 ~~September 30, 2019, no~~March 31, 2020, all derivatives previously classified as hedges with notional balances totaling $5.0 billion and a net asset fair value of $227.5 million were terminated. As of March 31, 2020, the total unrealized gains on terminated ~~or were disqualified for hedge accounting.~~cash flow hedges remaining in AOCI is $226.9 million, $163.9 million net of tax. The ~~maximum length~~unrealized gains will be reclassified into interest income as the underlying forecasted transactions impact earnings through the original maturity of ~~time~~the hedged forecasted transactions. The total remaining term over which the ~~forecasted transactions are hedged~~unrealized gains will be reclassified into earnings is approximately ~~six~~five years. The transactions were initiated on March 26, 2020 and were mostly settled as of March 31, 2020, as such, we recorded cash flows received from the settled transactions of $180.5 million and a related receivable of $47.0 million for the remaining unsettled transactions.

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”~~“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”~~“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~~2 — “Summary of Significant Accounting Policies" under Part II, Item 8 of our ~~2018~~2019 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 of our derivative financial instruments at ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018~~2019 were as follows:


	September 30, 2019						December 31, 2018								March 31, 2020								December 31, 2019
	Notional or Contractual Amount		Fair Value				Notional or Contractual Amount			Fair Value					Notional or Contractual Amount			Fair Value					Notional or Contractual Amount			Fair Value
(Dollars in thousands)			Derivative Assets (1)		Derivative Liabilities (1)				Derivative Assets (1)			Derivative Liabilities (1)					Derivative Assets (1)			Derivative Liabilities (1)					Derivative Assets (1)			Derivative Liabilities (1)
Derivatives designated as hedging instruments:
Interest rate risks:
Interest rate swaps	$	2,000,000	$	40,976	$	—	$	—		$	—		$	—	$	—		$	—		$	—	$	1,915,000		$	22,676		$	—
Interest rate swaps	2,000,000		—		9,286		—			—			—		—			—			—		3,085,000			—			25,623
Derivatives not designated as hedging instruments:
Currency exchange risks:
Foreign exchange forwards	255,228		4,303		—		263,733			4,767			—		330,045			5,928			—		—			—			—
Foreign exchange forwards	—		—		—		178,310			—			1,094		158,592			—			2,751		300,250			—			2,154
Other derivative instruments:
Equity warrant assets	223,383		149,113		—		223,532			149,238			—		235,074			152,710			—		225,893			165,473			—
Client foreign exchange forwards	3,921,970		116,492		—		2,759,878			93,876			—		6,914,487			226,621			—		4,661,517			114,546			—
Client foreign exchange forwards	3,876,021		—		100,244		2,568,085			—			85,706		5,720,213			—			186,417		4,326,059			—			94,745
Client foreign currency options	125,531		1,485		—		93,556			1,759			—		237,349			6,723			—		154,985			1,308			—
Client foreign currency options	125,531		—		1,485		93,579			—			1,759		237,349			—			6,723		154,985			—			1,308
Client interest rate derivatives ~~(2)~~	1,230,782		25,608		—		1,020,416			8,499			—		747,228			80,543			—		1,275,190			28,811			—
Client interest rate derivatives (2)	1,310,689		—		37,525		1,337,328			—			9,491		829,528			—			31,533		1,372,914			—			14,154
Total derivatives not designated as hedging instruments			297,001		139,254					258,139			98,050					472,525			227,424					310,138			112,361
Total derivatives			$	337,977	$	148,540				$	258,139		$	98,050				$	472,525		$	227,424				$	332,814		$	137,984


(1)	Derivative assets and liabilities are included in "~~Accrued~~"accrued interest receivable and other ~~assets~~"assets" and "~~Other~~"other liabilities", respectively, on our consolidated balance sheets.

(2)

The amount reported ~~for~~reflects reductions of approximately ~~September 30,~~$55.7 million and $17.4 million of derivative liabilities at March 31, 2020 and December 31, 2019 ~~reflects rule changes implemented by two central clearing houses that require entities to treat derivative assets, liabilities and the related~~, respectively, reflecting variation margin treated as settlement of the related derivative fair values for legal and accounting purposes as ~~opposed to presenting gross derivative assets and liabilities. As a result, client interest rate derivatives reflect reductions of approximately~~ ~~$7.8 million~~ ~~and~~ ~~$0.4 million~~ ~~of derivative assets at~~ ~~September 30, 2019~~ ~~and~~ ~~December 31, 2018, respectively.~~required by central clearing houses.

A summary of our derivative activity and the related impact on our consolidated statements of income for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2020 and 2019 ~~and~~ ~~2018~~ is as follows:


		Three months ended September 30,						Nine months ended September 30,							Three months ended March 31,
(Dollars in thousands)	Statement of income location	2019			2018			2019			2018			Statement of income location	2020			2019
Derivatives designated as hedging instruments:
Interest rate risks:
Amounts reclassified from accumulated other comprehensive income into income	Interest income—loans	$	(2,713	)	$	—		$	(3,224	)	$	—		Interest income—loans	$	2,089		$	(3	)
Derivatives not designated as hedging instruments:
Currency exchange risks:
(Losses) gains on revaluations of internal foreign currency instruments, net	Other noninterest income	$	(8,724	)	$	5,412		$	(5,183	)	$	8,019		Other noninterest income	$	(8,375	)	$	1,050
Gains (losses) on internal foreign exchange forward contracts, net	Other noninterest income	8,660			(5,002		)	4,917			(8,055		)	Other noninterest income	8,668			(469		)
Net (losses) gains associated with internal currency risk		$	(64	)	$	410		$	(266	)	$	(36	)
Net gains associated with internal currency risk															$	293		$	581
Other derivative instruments:
(Losses) gains on revaluations of client foreign currency instruments, net	Other noninterest income	$	(2,181	)	$	(1,187	)	$	(14,793	)	$	3,718
Gains (losses) on client foreign exchange forward contracts, net	Other noninterest income	2,167			1,573			15,232			(2,697		)
Net (losses) gains associated with client currency risk		$	(14	)	$	386		$	439		$	1,021
Losses on revaluations of client foreign currency instruments, net														Other noninterest income	$	(8,284	)	$	(13,571	)
Gains on client foreign exchange forward contracts, net														Other noninterest income	7,747			12,654
Net losses associated with client currency risk															$	(537	)	$	(917	)
Net gains on equity warrant assets	Gains on equity warrant assets, net	$	37,561		$	34,141		$	107,213		$	72,393		Gains on equity warrant assets, net	$	13,395		$	21,305
Net (losses) gains on other derivatives	Other noninterest income	$	(1,123	)	$	222		$	(2,619	)	$	643
Net losses on other derivatives														Other noninterest income	$	(4,345	)	$	(365	)

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 30, 2019~~March 31, 2020 and December 31, ~~2018~~2019:


	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			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 (1)							Financial Instruments				Gross Amounts of Recognized Assets			Cash Collateral Received (1)													Net Amount
September 30, 2019	Gross Amounts of Recognized Assets
March 31, 2020																							Gross Amounts offset in the Statement of Financial Position
Derivative assets:				Gross Amounts offset in the Statement of Financial Position
Interest rate swaps	$	40,976		$	—	$	40,976		$	(9,286	)	$	(13	)		Net Amount	$	31,677		$	—			$	—		$	—		$	—		$	—		$	—
Foreign exchange forwards	120,795			—		120,795			(60,525		)	(18,586		)		41,684			232,549				—			232,549			(76,009		)	(59,693		)	96,847
Foreign currency options	1,485			—		1,485			(848		)	(299		)		338			6,723				—			6,723			(2,016		)	(3,469		)	1,238
Client interest rate derivatives	25,608			—		25,608			(25,608		)	—				—			80,543				—			80,543			(80,543		)	—			—
Total derivative assets	188,864			—		188,864			(96,267		)	(18,898		)		73,699			319,815				—			319,815			(158,568		)	(63,162		)	98,085
Reverse repurchase, securities borrowing, and similar arrangements	387,119			—		387,119			(387,119		)	—				—			401,758				—			401,758			(401,758		)	—			—
Total	$	575,983		$	—	$	575,983		$	(483,386	)	$	(18,898	)		$	73,699		$	721,573			$	—		$	721,573		$	(560,326	)	$	(63,162	)	$	98,085
December 31, 2018
December 31, 2019
Derivative assets:
Interest rate swaps																			$	22,676			$	—		$	22,676		$	(22,598	)	$	—		$	78
Foreign exchange forwards	$	98,643		$	—	$	98,643		$	(38,213	)	$	(11,825	)		$	48,605		$	114,546			$	—		$	114,546		$	(36,855	)	$	(17,095	)	$	60,596
Foreign currency options	1,759			—		1,759			(613		)	(90		)		1,056			1,308				—			1,308			(848		)	(335		)	125
Client interest rate derivatives	8,499			—		8,499			(8,416		)	(83		)		—			28,811				—			28,811			(28,811		)	—			—
Total derivative assets	108,901			—		108,901			(47,242		)	(11,998		)		49,661			167,341				—			167,341			(89,112		)	(17,430		)	60,799
Reverse repurchase, securities borrowing, and similar arrangements	123,611			—		123,611			(123,611		)	—				—			289,340				—			289,340			(289,340		)	—			—
Total	$	232,512		$	—	$	232,512		$	(170,853	)	$	(11,998	)		$	49,661		$	456,681			$	—		$	456,681		$	(378,452	)	$	(17,430	)	$	60,799


(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~~“short-term borrowings” on our consolidated balance sheets.

The following table summarizes our liabilities subject to enforceable master netting arrangements as of ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018~~2019:


	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			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 (1)							Financial Instruments				Gross Amounts of Recognized Liabilities			Cash Collateral Pledged (1)													Net Amount
September 30, 2019	Gross Amounts of Recognized Liabilities
March 31, 2020																							Gross Amounts offset in the Statement of Financial Position
Derivative liabilities:				Gross Amounts offset in the Statement of Financial Position
Interest rate swaps	$	9,286		$	—	$	9,286		$	(9,286	)	$	—			Net Amount	$	—		$	—			$	—		$	—		$	—		$	—		$	—
Foreign exchange forwards	100,244			—		100,244			(44,565		)	(5,010		)		50,669			189,168				—			189,168			(68,027		)	(7,442		)	113,699
Foreign currency options	1,485			—		1,485			(802		)	—				683			6,723				—			6,723			(2,009		)	—			4,714
Client interest rate derivatives	37,525			—		37,525			—			(37,220		)		305			31,533				—			31,533			—			(31,085		)	448
Total derivative liabilities	148,540			—		148,540			(54,653		)	(42,230		)		51,657			227,424				—			227,424			(70,036		)	(38,527		)	118,861
Repurchase, securities lending, and similar arrangements	—			—		—			—			—				—			—				—			—			—			—			—
Total	$	148,540		$	—	$	148,540		$	(54,653	)	$	(42,230	)		$	51,657		$	227,424			$	—		$	227,424		$	(70,036	)	$	(38,527	)	$	118,861
December 31, 2018
December 31, 2019
Derivative liabilities:
Interest rate swaps																			25,623				—			25,623			(22,676		)	(2,947		)	—
Foreign exchange forwards	$	86,800		$	—	$	86,800		$	(24,778	)	$	(20,732	)		$	41,290		96,899				—			96,899			(33,314		)	(22,030		)	41,555
Foreign currency options	1,759			—		1,759			(1,054		)	—				705			1,308				—			1,308			(531		)	—			777
Client interest rate derivatives	9,491			—		9,491			—			(9,207		)		284			14,154				—			14,154			—			(13,936		)	218
Total derivative liabilities	98,050			—		98,050			(25,832		)	(29,939		)		42,279			137,984				—			137,984			(56,521		)	(38,913		)	42,550
Repurchase, securities lending, and similar arrangements	319,414			—		319,414			—			—				319,414			—				—			—			—			—			—
Total	$	417,464		$	—	$	417,464		$	(25,832	)	$	(29,939	)		$	361,693		$	137,984			$	—		$	137,984		$	(56,521	)	$	(38,913	)	$	42,550


(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~~“cash and cash equivalents" on our consolidated balance sheets.


~~13.~~12.	Noninterest Income

~~On January 1, 2018, we adopted accounting standard ASU 2014-09, Revenue~~All of the Company's revenue from ~~Contracts~~contracts with ~~Customers and all~~customers within the ~~related amendments ("~~scope of ASC ~~606" or "ASU 2014-09").~~606 is recognized within noninterest income. Included below is a summary of noninterest income for the three ~~and nine~~ months ended ~~September 30, 2019~~March 31, 2020 and ~~2018:~~2019:


	Three months ended September 30,				Nine months ended September 30,				Three months ended March 31,
(Dollars in thousands)	2019		2018		2019		2018		2020		2019
Noninterest income:
Gains on investment securities, net	$	29,849	$	32,193	$	106,575	$	77,365	$	46,055	$	29,028
Gains on equity warrant assets, net	37,561		34,141		107,213		72,393		13,395		21,305
Client investment fees	46,679		36,265		136,905		88,592		43,393		44,482
Foreign exchange fees	40,309		32,656		116,863		100,560		47,505		38,048
Credit card fees	30,158		24,121		86,431		68,739		28,304		27,483
Deposit service charges	22,482		19,588		65,496		56,081		24,589		20,939
Lending related fees	11,707		10,675		36,857		30,938		13,125		13,937
Letters of credit and standby letters of credit fees	10,842		8,409		31,205		24,938		11,542		9,354
Investment banking revenue	38,516		—		137,005		—		46,867		49,795
Commissions	12,275		—		40,812		—		16,022		14,108
Other	13,631		12,022		42,773		38,671		11,137		11,897
Total noninterest income	$	294,009	$	210,070	$	908,135	$	558,277	$	301,934	$	280,376

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 nine~~ months ended ~~September 30,~~March 31, 2020 and 2019 ~~and 2018~~ is as follows:


	Three months ended September 30,				Nine months ended September 30,					Three months ended March 31,
(Dollars in thousands)	2019		2018		2019			2018		2020			2019
Gains on non-marketable and other equity securities, net	$	29,849	$	32,193	$	110,480		$	77,365
Losses on sales of available-for-sale securities, net	—		—		(3,905		)	—
(Losses) gains on non-marketable and other equity securities, net										$	(15,110	)	$	32,658
Gains (losses) on sales of available-for-sale securities, net										61,165			(3,630		)
Total gains on investment securities, net	$	29,849	$	32,193	$	106,575		$	77,365	$	46,055		$	29,028

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 nine~~ months ended ~~September 30,~~March 31, 2020 and 2019 ~~and 2018~~ is as follows:


	Three months ended September 30,						Nine months ended September 30,						Three months ended March 31,
(Dollars in thousands)	2019			2018			2019			2018			2020			2019
Equity warrant assets:
Gains on exercises, net	$	30,047		$	18,287		$	90,357		$	42,808		$	19,193		$	5,482
Terminations	(481		)	(1,432		)	(2,931		)	(3,158		)	(326		)	(415		)
Changes in fair value, net	7,995			17,286			19,787			32,743			(5,472		)	16,238
Total net gains on equity warrant assets	$	37,561		$	34,141		$	107,213		$	72,393		$	13,395		$	21,305

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 nine~~ months ended ~~September 30,~~March 31, 2020 and 2019 ~~and 2018~~ is as follows:


	Three months ended September 30,				Nine months ended September 30,				Three months ended March 31,
(Dollars in thousands)	2019		2018		2019		2018		2020		2019
Client investment fees by type:
Sweep money market fees	$	26,202	$	21,105	$	79,698	$	50,605	$	23,049	$	26,544
Asset management fees (1)	7,256		6,358		20,883		17,447		9,137		6,671
Repurchase agreement fees	13,221		8,802		36,324		20,540		11,207		11,267
Total client investment fees (2)	$	46,679	$	36,265	$	136,905	$	88,592	$	43,393	$	44,482


(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 the transactions 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 nine~~ months ended ~~September 30,~~March 31, 2020 and 2019 ~~and 2018~~ is as follows:


	Three months ended September 30,				Nine months ended September 30,				Three months ended March 31,
(Dollars in thousands)	2019		2018		2019		2018		2020		2019
Foreign exchange fees by instrument type:
Spot contract commissions	$	36,836	$	30,041	$	106,561	$	92,791	$	40,934	$	35,029
Forward contract commissions	3,371		2,534		10,144		7,474		6,339		2,995
Option premium fees	102		81		158		295		232		24
Total foreign exchange fees	$	40,309	$	32,656	$	116,863	$	100,560	$	47,505	$	38,048

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 nine~~ months ended ~~September 30,~~March 31, 2020 and 2019 ~~and 2018~~ is as follows:


	Three months ended September 30,				Nine months ended September 30,				Three months ended March 31,
(Dollars in thousands)	2019		2018		2019		2018		2020		2019
Credit card fees by instrument type:
Card interchange fees, net	$	24,560	$	18,849	$	68,808	$	54,547	$	21,775	$	21,393
Merchant service fees	3,943		3,679		12,763		10,010		5,027		4,534
Card service fees	1,655		1,593		4,860		4,182		1,502		1,556
Total credit card fees	$	30,158	$	24,121	$	86,431	$	68,739	$	28,304	$	27,483

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 nine~~ months ended ~~September 30,~~March 31, 2020 and 2019 ~~and 2018~~ is as follows:


	Three months ended September 30,				Nine months ended September 30,				Three months ended March 31,
(Dollars in thousands)	2019		2018		2019		2018		2020		2019
Lending related fees by instrument type:
Unused commitment fees	$	8,339	$	8,410	$	25,060	$	24,994	$	8,406	$	9,670
Other	3,368		2,265		11,797		5,944		4,719		4,267
Total lending related fees	$	11,707	$	10,675	$	36,857	$	30,938	$	13,125	$	13,937

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 nine~~ months ended ~~September 30,~~March 31, 2020 and 2019 ~~and 2018~~ is as follows:


	Three months ended September 30,				Nine months ended September 30,				Three months ended March 31,
(Dollars in thousands)	2019		2018		2019		2018		2020		2019
Investment banking revenue:
Underwriting fees	$	31,016	$	—	$	109,371	$	—	$	31,290	$	35,772
Advisory fees	5,200		—		22,789		—		15,487		12,273
Private placements and other	2,300		—		4,845		—		90		1,750
Total investment banking revenue	$	38,516	$	—	$	137,005	$	—	$	46,867	$	49,795

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~~Commissions 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~~semi-annual 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 nine~~ months ended ~~September 30,~~March 31, 2020 and 2019 ~~and 2018~~ is as follows:


	Three months ended September 30,					Nine months ended September 30,				Three months ended March 31,
(Dollars in thousands)	2019			2018		2019		2018		2020			2019
Other noninterest income by instrument type:
Fund management fees	$	8,493		$	5,479	$	24,292	$	17,144	$	7,908		$	8,041
Net (losses) gains on revaluation of foreign currency instruments, net of foreign exchange forward contracts (1)	(78		)	796		173		985
Net losses on revaluation of foreign currency instruments, net of foreign exchange forward contracts (1)										(244		)	(336		)
Other service revenue	5,216			5,747		18,308		20,542		3,473			4,192
Total other noninterest income	$	13,631		$	12,022	$	42,773	$	38,671	$	11,137		$	11,897


(1)	Represents the net revaluation of client and internal foreign currency denominated financial instruments. We enter into 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 nine~~ months ended ~~September 30, 2019~~March 31, 2020 and ~~2018:~~2019:


Three months ended September 30, 2019 (Dollars in thousands)	Global Commercial Bank (2)		SVB Private Bank		SVB Capital (2)		SVB Leerink (2)		Other Items		Total
Three months ended March 31, 2020 (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	$	46,171	$	508	$	—	$	—	$	—	$	46,679	$	42,736	$	657	$	—		$	—		$	—	$	43,393
Spot contract commissions	36,644		89		—		—		103		36,836		40,675		161		—			—			98		40,934
Card interchange fees, gross	34,867		—		—		—		181		35,048		35,724		7		—			—			566		36,297
Merchant service fees	3,943		—		—		—		—		3,943		5,027		—		—			—			—		5,027
Deposit service charges	22,263		36		—		—		183		22,482		24,238		27		—			—			324		24,589
Investment banking revenue	—		—		—		38,516		—		38,516		—		—		—			46,867			—		46,867
Commissions	—		—		—		12,275		—		12,275		—		��		—			16,022			—		16,022
Fund management fees	—		—		7,063		1,430		—		8,493		—		—		6,478			1,430			—		7,908
Correspondent bank rebates	1,633		—		—		—		—		1,633		1,403		—		—			—			—		1,403
Total revenue from contracts with customers	$	145,521	$	633	$	7,063	$	52,221	$	467	$	205,905	$	149,803	$	852	$	6,478		$	64,319		$	988	$	222,440
Revenues outside the scope of ASC 606 (1)	15,508		1		27,892		726		43,977		88,104		17,031		48		(1,560		)	(1,642		)	65,617		79,494
Total noninterest income	$	161,029	$	634	$	34,955	$	52,947	$	44,444	$	294,009	$	166,834	$	900	$	4,918		$	62,677		$	66,605	$	301,934


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


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


Three months ended September 30, 2018 (Dollars in thousands)	Global Commercial Bank (2)		SVB Private Bank			SVB Capital (2)		Other Items		Total
Three months ended March 31, 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 (3)	$	35,845	$	420		$	—	$	—	$	36,265	$	44,102	$	380		$	—	$	—	$	—	$	44,482
Spot contract commissions	29,776		184			—		81		30,041		34,806		122			—		—		101		35,029
Card interchange fees, gross	33,905		—			—		108		34,013		38,715		—			—		—		147		38,862
Merchant service fees	3,677		2			—		—		3,679		4,534		—			—		—		—		4,534
Deposit service charges	19,207		24			—		357		19,588		20,793		35			—		—		111		20,939
Investment banking revenue												—		—			—		49,795		—		49,795
Commissions												—		—			—		14,108		—		14,108
Fund management fees	—		—			5,479		—		5,479		—		—			6,659		1,382		—		8,041
Correspondent bank rebates	1,372		—			—		—		1,372		1,467		—			—		—		—		1,467
Total revenue from contracts with customers	$	123,782	$	630		$	5,479	$	546	$	130,437	$	144,417	$	537		$	6,659	$	65,285	$	359	$	217,257
Revenues outside the scope of ASC 606 (1)	11,446		(25		)	18,944		49,268		79,633		8,444		(27		)	18,186		2,832		33,684		63,119
Total noninterest income	$	135,228	$	605		$	24,423	$	49,814	$	210,070	$	152,861	$	510		$	24,845	$	68,117	$	34,043	$	280,376


(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."


(3)	For the three months ended ~~September 30, 2018,~~March 31, 2019, the amount of client investment fees previously reported as "Other Items" has been correctly allocated to the reportable segment "Global Commercial Bank" to properly reflect the source of such revenue. The correction of this immaterial error had no impact on the "Total" amount of client investment fees.

Nine months ended September 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 $ 135,551
$ 1,354
$ —
$ —
$ —
136,905
Spot contract commissions 105,877
376
—
—
308
106,561
Card interchange fees, gross 115,468
—
—
—
518
115,986
Merchant service fees 12,764
—
—
—
—
12,764
Deposit service charges 64,806
104
—
—
586
65,496
Investment banking revenue —
—
—
137,005
—
137,005
Commissions —
—
—
40,812
—
40,812
Fund management fees —
—
20,050
4,242
—
24,292
Correspondent bank rebates 4,712
—
—
—
—
4,712
Total revenue from contracts with customers $ 439,178
$ 1,834
$ 20,050
$ 182,059
$ 1,412
$ 644,533
Revenues outside the scope of ASC 606 (1) 32,314
(5 ) 79,810
6,005
145,478
263,602
Total noninterest income $ 471,492
$ 1,829
$ 99,860
$ 188,064
$ 146,890
$ 908,135


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


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

Nine months ended September 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 (3) $ 87,491
$ 1,101
$ —
$ —
$ 88,592
Spot contract commissions 92,098
507
—
186
92,791
Card interchange fees, gross 95,088
—
—
311
95,399
Merchant service fees 10,008
2
—
—
10,010
Deposit service charges 54,633
83
—
1,365
56,081
Fund management fees —
—
17,144
—
17,144
Correspondent bank rebates 4,241
—
—
—
4,241
Total revenue from contracts with customers $ 343,559
$ 1,693
$ 17,144
$ 1,862
$ 364,258
Revenues outside the scope of ASC 606 (1) 33,761
(16 ) 64,688
95,586
194,019
Total noninterest income $ 377,320
$ 1,677
$ 81,832
$ 97,448
$ 558,277


~~(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."~~


~~(3)~~	For the nine months ended September 30, 2018, the amount of client investment fees previously reported as "Other Items" has been correctly allocated to the reportable segment "Global Commercial Bank" to properly reflect the source of such revenue. The correction of this immaterial error had no impact on the "Total" amount of client investment fees.

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 nine~~ months ended ~~September 30,~~March 31, 2020 and 2019, ~~and 2018,~~ changes in our contract assets, contract liabilities and receivables were not material. Additionally, revenues recognized during the three ~~and nine~~ months ended ~~September 30,~~March 31, 2020 and 2019 ~~and 2018~~ that were included in the corresponding contract liability balance at the beginning of the periods were not material.


~~14.~~13.	Other Noninterest Expense

A summary of other noninterest expense for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2020 and 2019 ~~and 2018~~ is as follows:


	Three months ended September 30,				Nine months ended September 30,				Three months ended March 31,
(Dollars in thousands)	2019		2018		2019		2018		2020		2019
Lending and other client related processing costs	$	7,502	$	5,698	$	21,442	$	16,301	$	9,158	$	5,177
Correspondent bank fees	3,657		3,513		10,970		10,200		3,986		3,744
Investment banking activities	1,864		—		9,918		—		3,030		4,185
Trade order execution costs	2,615		—		7,959		—		2,745		2,516
Data processing services	3,066		2,740		8,624		7,934		3,454		2,899
Telephone	2,466		2,269		7,629		7,025		2,227		2,741
Dues and publications	1,055		1,387		3,439		3,081		1,130		1,524
Postage and supplies	720		652		2,168		2,133		856		770
Other	11,161		5,393		32,910		15,171		14,117		9,980
Total other noninterest expense	$	34,106	$	21,652	$	105,059	$	61,845	$	40,703	$	33,536


~~15.~~14.	Segment Reporting

We have 4 reportable segments for management reporting purposes: Global Commercial Bank, SVB Private Bank, SVB Capital and SVB 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 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 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 4 operating segments for which we report our financial information:


•	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, trade finance, and other services. We broadly serve clients within the 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 Global Funds Banking (formerly Private ~~Equity~~Equity) Division provides banking products and services primarily to our private equity and venture capital clients.


◦	SVB Wine 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 products, as well as cash and wealth management services. In addition, we provide real estate secured loans to eligible employees through our Employee Home Ownership Program.

•

SVB Capital is the funds management business of ~~SVBFG,~~SVB Financial Group, 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.

(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~~ months ended ~~September 30, 2019~~March 31, 2020 and ~~2018~~2019 is as follows:


(Dollars in thousands)	Global Commercial Bank (1)			SVB Private Bank			SVB Capital (1)			SVB Leerink (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, 2019
Three months ended March 31, 2020
Net interest income	$	455,161		$	12,772		$	9		$	277		$	52,425		$	520,644		$	463,835		$	15,164		$	21		$	201		$	44,916		$	524,137
Provision for credit losses	(34,075		)	(1,910		)	—			—			(551		)	(36,536		)
(Provision for) reduction of credit losses																			(194,411		)	(54,490		)	—			—			5,421			(243,480		)
Noninterest income	161,029			634			34,955			52,947			44,444			294,009			166,834			900			4,918			62,677			66,605			301,934
Noninterest expense (3)	(213,786		)	(11,638		)	(8,129		)	(55,200		)	(102,571		)	(391,324		)	(224,855		)	(10,090		)	(8,585		)	(62,037		)	(94,018		)	(399,585		)
Income (loss) before income tax expense (4)	$	368,329		$	(142	)	$	26,835		$	(1,976	)	$	(6,253	)	$	386,793		$	211,403		$	(48,516	)	$	(3,646	)	$	841		$	22,924		$	183,006
Total average loans, net of unearned income	$	25,839,647		$	3,400,889		$	—		$	—		$	581,890		$	29,822,426
Total average loans, amortized cost																			$	29,137,484		$	3,857,478		$	—		$	—		$	665,766		$	33,660,728
Total average assets (5) (6)	58,384,473			3,431,313			396,031			428,848			2,687,083			65,327,748			61,813,129			3,892,400			447,201			483,648			5,770,790			72,407,168
Total average deposits	55,250,154			1,497,303			—			—			487,512			57,234,969			59,217,433			1,922,663			—			—			668,135			61,808,231
Three months ended September 30, 2018
Three months ended March 31, 2019
Net interest income	$	431,036		$	14,919		$	6		$	—		$	47,261		$	493,222		$	445,876		$	11,981		$	6		$	442		$	54,581		$	512,886
(Provision for) reduction of credit losses	(19,074		)	(362		)	—			—			2,262			(17,174		)	(26,805		)	984			—			—			(2,730		)	(28,551		)
Noninterest income (7)	135,228			605			24,423			—			49,814			210,070			152,861			510			24,845			68,117			34,043			280,376
Noninterest expense (3)	(206,487		)	(6,760		)	(6,469		)	—			(89,729		)	(309,445		)	(198,683		)	(7,414		)	(5,782		)	(60,540		)	(93,245		)	(365,664		)
Income before income tax expense (4)	$	340,703		$	8,402		$	17,960		$	—		$	9,608		$	376,673
Total average loans, net of unearned income	$	22,925,909		$	2,928,576		$	—		$	—		$	476,892		$	26,331,377
Total average assets (5) (8)	49,948,578			2,949,908			388,531			—			3,178,020			56,465,037
Income (loss) before income tax expense (4)																			$	373,249		$	6,061		$	19,069		$	8,019		$	(7,351	)	$	399,047
Total average loans, amortized cost																			$	24,798,197		$	3,085,883		$	—		$	—		$	503,992		$	28,388,072
Total average assets (5) (6) (8)																			50,132,098			3,109,275			378,732			300,332			3,608,000			57,528,437
Total average deposits	47,037,693			1,505,746			—			—			548,801			49,092,240			47,596,868			1,491,234			—			—			626,107			49,714,209
Nine months ended September 30, 2019
Net interest income	$	1,360,997		$	37,200		$	20		$	961		$	163,755		$	1,562,933
Provision for credit losses	(79,175		)	(1,779		)	—			—			(8,079		)	(89,033		)
Noninterest income	471,492			1,829			99,860			188,064			146,890			908,135
Noninterest expense (3)	(617,933		)	(30,015		)	(21,794		)	(177,675		)	(293,093		)	(1,140,510		)
Income before income tax expense (4)	$	1,135,381		$	7,235		$	78,086		$	11,350		$	9,473		$	1,241,525
Total average loans, net of unearned income	$	25,457,997		$	3,235,943		$	—		$	—		$	517,020		$	29,210,960
Total average assets (5) (6)	54,196,976			3,264,071			382,707			380,290			2,990,088			61,214,132
Total average deposits	51,352,644			1,461,170			—			—			517,530			53,331,344
Nine months ended September 30, 2018
Net interest income	$	1,209,960		$	46,811		$	22		$	—		$	122,735		$	1,379,528
Provision for credit losses	(71,704		)	(2,384		)	—			—			(138		)	(74,226		)
Noninterest income (7)	377,320			1,677			81,832			—			97,448			558,277
Noninterest expense (3)	(591,434		)	(18,729		)	(17,182		)	—			(253,256		)	(880,601		)
Income (loss) before income tax expense (4)	$	924,142		$	27,375		$	64,672		$	—		$	(33,211	)	$	982,978
Total average loans, net of unearned income	$	21,781,557		$	2,791,910		$	—		$	—		$	434,810		$	25,008,277
Total average assets (5) (8)	48,380,180			2,813,101			379,809			—			2,859,562			54,432,652
Total average deposits	45,701,317			1,519,200			—			—			513,845			47,734,362


(1)	Global Commercial Bank’s, SVB Capital’s and SVB 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."

(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 or losses on equity warrant assets, gains or losses on the sale of ~~fixed income investments~~AFS securities and gains or losses 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 $~~5.1~~5.5 million and $~~5.5~~4.9 million for the three months ended ~~September 30, 2019~~March 31, 2020 and ~~2018~~2019, ~~respectively, and~~ ~~$14.8 million~~ ~~and~~ ~~$16.6 million~~ ~~for the nine months ended~~ ~~September 30, 2019~~ ~~and~~ ~~2018~~.respectively.


(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 nine~~ months ended ~~September 30,~~ March 31, 2020 and 2019 ~~related to the acquisition effective January 4, 2019.~~.

(7)

For the three ~~and nine~~ months ended ~~September 30, 2018,~~March 31, 2019, amounts of client investment fees included in the line item "Noninterest Income" previously reported as "Other Items" have been correctly allocated to our reportable segment "Global Commercial Bank" to properly reflect the source of such revenue. The correction of this immaterial error had no impact on the "Total" amount of noninterest income.

(8)

For the three ~~and nine~~ months ended ~~September 30, 2018,~~March 31, 2019, amounts for average assets previously reported as "Other Items" have been correctly allocated to the reportable segments "~~Global~~"Global Commercial Bank" and “Private Bank” to properly reflect the greater of total average assets or the sum of total average liabilities and total average stockholders’ equity for “Global Commercial Bank” and “Private Bank.” The correction of this immaterial error had no impact on the "Total" amount of average assets.


~~16.~~15.	Off-Balance Sheet Arrangements, Guarantees and Other Commitments

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.

Commitments to Extend Credit

The following table summarizes information related to our commitments to extend credit at ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018~~2019:


(Dollars in thousands)	September 30, 2019		December 31, 2018		March 31, 2020		December 31, 2019
Loan commitments available for funding: (1)
Fixed interest rate commitments	$	2,154,186	$	1,839,190	$	433,254	$	2,434,042
Variable interest rate commitments	17,272,556		14,821,815		21,325,138		19,309,317
Total loan commitments available for funding	19,426,742		16,661,005		21,758,392		21,743,359
Commercial and standby letters of credit (2)	2,847,676		2,252,016		2,909,918		2,778,561
Total unfunded credit commitments	$	22,274,418	$	18,913,021	$	24,668,310	$	24,521,920
Commitments unavailable for funding (3)	$	3,306,209	$	2,723,835	$	2,312,967	$	3,051,075
Allowance for unfunded credit commitments (4)	63,108		55,183		84,690		67,656


(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 credit losses 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 30, 2019~~March 31, 2020. 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		Expires In One Year or Less		Expires After One Year		Total Amount Outstanding		Maximum Amount of Future Payments
Financial standby letters of credit	$	2,571,352	$	58,290	$	2,629,642	$	2,629,642	$	2,701,150	$	76,538	$	2,777,688	$	2,777,688
Performance standby letters of credit	119,666		19,102		138,768		138,768		105,359		17,406		122,765		122,765
Commercial letters of credit	79,266		—		79,266		79,266		9,369		96		9,465		9,465
Total	$	2,770,284	$	77,392	$	2,847,676	$	2,847,676	$	2,815,878	$	94,040	$	2,909,918	$	2,909,918

Deferred fees related to financial and performance standby letters of credit were ~~$16.6~~$16.0 million at ~~September 30, 2019~~March 31, 2020 and ~~$14.1~~$17.2 million at December 31, ~~2018.~~2019. At ~~September 30, 2019,~~March 31, 2020, collateral in the form of cash of ~~$1.6~~$1.7 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~~We make commitments to invest in venture capital and private equity funds, which generally 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 30, 2019~~March 31, 2020:


(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
Capital Preferred Return Fund, LP	12,688		—		20.0		12,688		—		20.0
Growth Partners, LP	24,670		1,340		33.0		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
Other venture capital and private equity fund investments (equity method accounting)	21,782		5,732		Various		21,787		5,732		Various
Debt funds (equity method accounting)	58,493		—		Various		58,493		—		Various
Other fund investments (2)	286,293		6,111		Various		282,508		6,049		Various
Total	$	469,180	$	19,084			$	465,400	$	19,022


(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 ~~217~~202 funds (primarily venture capital funds) where our ownership interest is generally less than 5 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 our ~~2018~~2019 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 30, 2019~~March 31, 2020:


(Dollars in thousands)	Unfunded Commitments		Unfunded Commitments
Strategic Investors Fund, LP	$	1,338	$	376
Capital Preferred Return Fund, LP	1,563		1,532
Growth Partners, LP	2,527		2,447
Total	$	5,428	$	4,355


~~17.~~16.	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 and California tax returns as major tax filings. Our U.S. federal tax returns for ~~2015~~2016 and subsequent tax years remain open to full examination. Our California tax returns for ~~2015~~2016 and subsequent tax years remain open to full examination.

At ~~September 30, 2019,~~March 31, 2020, our unrecognized tax benefit was ~~$13.7~~$14.3 million, the recognition of which would reduce our income tax expense by ~~$10.7~~$11.1 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 30, 2019.~~March 31, 2020.


~~18.~~17.	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 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, issuance date, 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~~Foreign exchange forward and ~~notes:~~option contract assets and liabilities: ~~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~~assets and liabilities are priced based on ~~spreads to other municipal benchmark bonds with similar characteristics; or, relative to market~~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 and interest rate swaps are priced considering the coupon rate of the fixed leg of the contract and the variable coupon rate on the floating leg of the contract. Valuation is based on both spot and forward rates on ~~U.S. Treasury bonds~~the swap yield curve and the credit worthiness of ~~similar maturity.~~the contract counterparty.

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.

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. The valuation techniques are consistent with the market approach, income approach and/or the cost approach used to measure fair value. Below is a summary of the valuation techniques used for each class of Level 3 assets:

Venture capital 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; 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.

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~~certain sales 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 Black-Scholes 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 30, 2019~~:March 31, 2020:


(Dollars in thousands)	Level 1		Level 2		Level 3		Balance at September 30, 2019		Level 1		Level 2		Level 3		Balance at March 31, 2020
Assets:
Available-for-sale securities:
U.S. Treasury securities	$	6,334,848	$	—	$	—	$	6,334,848	$	4,043,840	$	—	$	—	$	4,043,840
U.S. agency debentures	—		100,000		—		100,000		—		101,687		—		101,687
Foreign government debt securities	8,847		—		—		8,847		22,152		—		—		22,152
Residential mortgage-backed securities:
Agency-issued mortgage-backed securities	—		4,148,700		—		4,148,700		—		4,943,512		—		4,943,512
Agency-issued collateralized mortgage obligations—fixed rate	—		1,679,664		—		1,679,664		—		1,465,675		—		1,465,675
Agency-issued commercial mortgage-backed securities	—		594,798		—		594,798		—		2,071,198		—		2,071,198
Total available-for-sale securities	6,343,695		6,523,162		—		12,866,857		4,065,992		8,582,072		—		12,648,064
Non-marketable and other equity securities (fair value accounting):
Non-marketable securities:
Venture capital and private equity fund investments measured at net asset value	—		—		—		273,426		—		—		—		257,132
Venture capital and private equity fund investments not measured at net asset value (1)	—		—		134		134		—		—		134		134
Other equity securities in public companies	3,226		52,855		—		56,081		14,886		12,013		—		26,899
Total non-marketable and other equity securities (fair value accounting)	3,226		52,855		134		329,641		14,886		12,013		134		284,165
Other assets:
Foreign exchange forward and option contracts	—		122,280		—		122,280		—		239,272		—		239,272
Equity warrant assets	—		4,072		145,041		149,113		—		2,852		149,858		152,710
Interest rate swaps	—		40,976		—		40,976
Client interest rate derivatives	—		25,608		—		25,608		—		80,543		—		80,543
Total assets	$	6,346,921	$	6,768,953	$	145,175	$	13,534,475	$	4,080,878	$	8,916,752	$	149,992	$	13,404,754
Liabilities:
Foreign exchange forward and option contracts	$	—	$	101,729	$	—	$	101,729	$	—	$	195,891	$	—	$	195,891
Interest rate swaps	—		9,286		—		9,286
Client interest rate derivatives	—		37,525		—		37,525		—		31,533		—		31,533
Total liabilities	$	—	$	148,540	$	—	$	148,540	$	—	$	227,424	$	—	$	227,424


(1)	Included in Level 3 assets is $120 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, ~~2018~~:2019:


(Dollars in thousands)	Level 1		Level 2		Level 3		Balance at December 31, 2018		Level 1		Level 2		Level 3		Balance at December 31, 2019
Assets:
Available-for-sale securities:
U.S. Treasury securities	$	4,738,258	$	—	$	—	$	4,738,258	$	6,894,010	$	—	$	—	$	6,894,010
U.S. agency debentures	—		1,084,117		—		1,084,117		—		99,547		—		99,547
Foreign government debt securities	5,812		—		—		5,812		9,038		—		—		9,038
Residential mortgage-backed securities:
Agency-issued mortgage-backed securities									—		4,148,791		—		4,148,791
Agency-issued collateralized mortgage obligations—fixed rate	—		1,880,218		—		1,880,218		—		1,538,343		—		1,538,343
Agency-issued collateralized mortgage obligations—variable rate	—		81,638		—		81,638
Agency-issued commercial mortgage-backed securities									—		1,325,190		—		1,325,190
Total available-for-sale securities	4,744,070		3,045,973		—		7,790,043		6,903,048		7,111,871		—		14,014,919
Non-marketable and other equity securities (fair value accounting):
Non-marketable securities:
Venture capital and private equity fund investments measured at net asset value	—		—		—		318,352		—		—		—		265,263
Venture capital and private equity fund investments not measured at net asset value (1)	—		—		1,079		1,079		—		—		134		134
Other equity securities in public companies	1,181		19,217		—		20,398		17,290		41,910		—		59,200
Total non-marketable and other equity securities (fair value accounting)	1,181		19,217		1,079		339,829		17,290		41,910		134		324,597
Other assets:
Foreign exchange forward and option contracts	—		100,402		—		100,402		—		115,854		—		115,854
Equity warrant assets	—		4,039		145,199		149,238		—		4,435		161,038		165,473
Interest rate swaps									—		22,676		—		22,676
Client interest rate derivatives	—		8,499		—		8,499		—		28,811		—		28,811
Total assets	$	4,745,251	$	3,178,130	$	146,278	$	8,388,011	$	6,920,338	$	7,325,557	$	161,172	$	14,672,330
Liabilities:
Foreign exchange forward and option contracts	$	—	$	88,559	$	—	$	88,559	$	—	$	98,207	$	—	$	98,207
Interest rate swaps									—		25,623		—		25,623
Client interest rate derivatives	—		9,491		—		9,491		—		14,154		—		14,154
Total liabilities	$	—	$	98,050	$	—	$	98,050	$	—	$	137,984	$	—	$	137,984


(1)	Included in Level 3 assets is $~~964~~120 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~~ months ended ~~September 30, 2019~~March 31, 2020 and ~~2018~~2019:


(Dollars in thousands)	Beginning Balance		Total Realized and Unrealized Gains Included in Income		Purchases		Sales/Exits			Issuances		Distributions and Other Settlements		Transfers Out of Level 3			Ending Balance		Beginning Balance		Total Net Gains (Losses) Included in Net Income			Purchases		Sales/Exits			Issuances		Distributions and Other Settlements		Transfers Out of Level 3			Ending Balance
Three months ended September 30, 2019
Three months ended March 31, 2020
Non-marketable and other equity securities (fair value accounting):
Venture capital and private equity fund investments not measured at net asset value (1)	$	441	$	57	$	—	$	(364	)	$	—	$	—	$	—		$	134	$	134	$	5		$	—	$	(5	)	$	—	$	—	$	—		$	134
Other assets:
Equity warrant assets (2)	147,770		39,527		—		(45,270		)	4,130		—		(1,116		)	145,041		161,038		14,601			—		(30,034		)	4,519		—		(266		)	149,858
Total assets	$	148,211	$	39,584	$	—	$	(45,634	)	$	4,130	$	—	$	(1,116	)	$	145,175	$	161,172	$	14,606		$	—	$	(30,039	)	$	4,519	$	—	$	(266	)	$	149,992
Three months ended September 30, 2018
Three months ended March 31, 2019
Non-marketable and other equity securities (fair value accounting):
Venture capital and private equity fund investments not measured at net asset value (1)	$	1,001	$	—	$	—	$	—		$	—	$	—	$	—		$	1,001	$	1,079	$	(47	)	$	—	$	—		$	—	$	3	$	—		$	1,035
Other assets:
Equity warrant assets (2)	137,753		32,237		—		(34,101		)	4,809		—		(209		)	140,489		145,199		19,165			575		(12,304		)	4,543		—		(429		)	156,749
Total assets	$	138,754	$	32,237	$	—	$	(34,101	)	$	4,809	$	—	$	(209	)	$	141,490	$	146,278	$	19,118		$	575	$	(12,304	)	$	4,543	$	3	$	(429	)	$	157,784
Nine months ended September 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	$	12	$	—	$	(960	)	$	—	$	3	$	—		$	134
Other assets:
Equity warrant assets (2)	145,199		105,338		575		(113,143		)	11,714		—		(4,642		)	145,041
Total assets	$	146,278	$	105,350	$	575	$	(114,103	)	$	11,714	$	3	$	(4,642	)	$	145,175
Nine months ended September 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)	121,331		69,097		—		(61,464		)	14,007		—		(2,482		)	140,489
Total assets	$	122,250	$	69,179	$	—	$	(61,464	)	$	14,007	$	—	$	(2,482	)	$	141,490


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


(2)	Realized and unrealized gains (losses) are recorded in the line item “Gains on equity warrant assets, 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 30, 2019~~March 31, 2020 and ~~2018~~2019:


	Three months ended September 30,					Nine months ended September 30,					Three months ended March 31,
(Dollars in thousands)	2019			2018		2019			2018		2020			2019
Non-marketable and other equity securities (fair value accounting):
Venture capital and private equity fund investments not measured at net asset value (1)	$	57		$	—	$	12		$	82	$	—		$	(47	)
Other assets:
Equity warrant assets (2)	(727		)	15,841		21,041			30,954		(4,145		)	14,772
Total unrealized (losses) gains, net	$	(670	)	$	15,841	$	21,053		$	31,036	$	(4,145	)	$	14,725
Unrealized (losses) gains attributable to noncontrolling interests (1)	$	(158	)	$	—	$	(199	)	$	73
Unrealized losses attributable to noncontrolling interests (1)											$	—		$	(39	)


(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 30, 2019~~March 31, 2020 and December 31, ~~2018.~~2019. 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		Input Range		Weighted Average
September 30, 2019:
March 31, 2020:
Venture capital and private equity fund investments (fair value accounting)	$	134	Private company equity pricing		(1)		(1	)		$	134		Private company equity pricing		(1)		(1)		(1	)
Equity warrant assets (public portfolio)	776		Black-Scholes option pricing model		Volatility		34.8	%		318			Black-Scholes option pricing model		Volatility		55.9%		55.9	%
				Risk-Free interest rate		1.6								Risk-Free interest rate		0.7		0.7
				Sales restrictions discount (2)		19.2								Sales restrictions discount (2)		10.0 - 20.0		14.6
Equity warrant assets (private portfolio)	144,265			Black-Scholes option pricing model		Volatility		38.9			149,540			Black-Scholes option pricing model		Volatility		25.6% - 55.9%		41.1
					Risk-Free interest rate		1.6								Risk-Free interest rate		0.1 - 0.7		0.3
					Marketability discount (3)		17.8								Marketability discount (3)		25.0		25.0
					Remaining life assumption (4)		45.0								Remaining life assumption (4)		45.0		45.0
December 31, 2018:
December 31, 2019:
Venture capital and private equity fund investments (fair value accounting)	$	1,079		Private company equity pricing		(1)		(1	)		$	134		Private company equity pricing		(1)		(1)		(1	)
Equity warrant assets (public portfolio)	2,757		Black-Scholes option pricing model		Volatility		54.7	%		346			Black-Scholes option pricing model		Volatility		39.2% - 54.8%		50.7	%
				Risk-Free interest rate		2.6								Risk-Free interest rate		1.9		1.9
				Sales restrictions discount (2)		18.5								Sales restrictions discount (2)		10.0 - 20.0		13.6
Equity warrant assets (private portfolio)	142,442			Black-Scholes option pricing model		Volatility		38.5			160,692			Black-Scholes option pricing model		Volatility		23.6% - 54.8%		38.2
					Risk-Free interest rate		2.5								Risk-Free interest rate		0.5 - 1.9		1.6
					Marketability discount (3)		17.7								Marketability discount (3)		17.5		17.5
					Remaining life assumption (4)		45.0								Remaining life assumption (4)		45.0		45.0

(1)

In determining the fair value of our 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.


(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.


(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 terminations and exercises. At ~~September 30, 2019~~March 31, 2020, the weighted average contractual remaining term was ~~6.1~~6.2 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~~ months ended ~~September 30,~~March 31, 2020 and 2019, ~~and 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~~ months ended ~~September 30,~~March 31, 2020 and 2019 ~~and 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. The following fair value hierarchy table presents the estimated fair values of our financial instruments that are not carried at fair value at ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018~~2019:


			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, 2019:
March 31, 2020:
Financial assets:
Cash and cash equivalents	$	6,946,196	$	6,946,196	$	6,946,196	$	—	$	—	$	9,561,448	$	9,561,448	$	9,561,448	$	—	$	—
Held-to-maturity securities	14,407,078		14,698,802		—		14,698,802		—		13,574,289		14,131,154		—		14,131,154		—
Non-marketable securities not measured at net asset value	183,980		183,980		—		—		183,980		190,959		190,959		—		—		190,959
Non-marketable securities measured at net asset value	217,459		217,459		—		—		—		224,669		224,669		—		—		—
Net commercial loans	27,283,952		28,427,753		—		—		28,427,753		31,837,622		32,128,958		—		—		32,128,958
Net consumer loans	3,475,632		3,620,703		—		—		3,620,703		3,581,500		3,614,597		—		—		3,614,597
FHLB and Federal Reserve Bank stock	59,790		59,790		—		—		59,790		116,323		116,323		—		—		116,323
Financial liabilities:
Short-term borrowings	18,898		18,898		—		18,898		—		3,138,162		3,138,162		—		3,138,162		—
Non-maturity deposits (1)	59,352,559		59,352,559		59,352,559		—		—		61,738,032		61,738,032		61,738,032		—		—
Time deposits	190,315		190,078		—		190,078		—		173,925		173,855		—		173,855		—
3.50% Senior Notes	347,899		362,551		—		362,551		—		348,076		363,878		—		363,878		—
5.375% Senior Notes	349,328		360,560		—		360,560		—
Off-balance sheet financial assets:
Commitments to extend credit	—		25,136		—		—		25,136		—		27,162		—		—		27,162
December 31, 2018:
December 31, 2019:
Financial assets:
Cash and cash equivalents	$	3,571,539	$	3,571,539	$	3,571,539	$	—	$	—	$	6,781,783	$	6,781,783	$	6,781,783	$	—	$	—
Held-to-maturity securities	15,487,442		15,188,236		—		15,188,236		—		13,842,946		14,115,272		—		14,115,272		—
Non-marketable securities not measured at net asset value	131,453		131,453		—		—		131,453		195,405		195,405		—		—		195,405
Non-marketable securities measured at net asset value	151,247		151,247		—		—		—		235,351		235,351		—		—		—
Net commercial loans	25,043,671		25,463,968		—		—		25,463,968		29,104,532		29,615,176		—		—		29,615,176
Net consumer loans	3,013,706		3,064,093		—		—		3,064,093		3,755,180		3,820,804		—		—		3,820,804
FHLB and Federal Reserve Bank stock	58,878		58,878		—		—		58,878		60,258		60,258		—		—		60,258
Financial liabilities:
Short-term borrowings	631,412		631,412		—		631,412		—		17,430		17,430		—		17,430		—
Non-maturity deposits (1)	49,278,174		49,278,174		49,278,174		—		—		61,569,714		61,569,714		61,569,714		—		—
Time deposits	50,726		50,337		—		50,337		—		188,093		187,980		—		187,980		—
3.50% Senior Notes	347,639		336,088		—		336,088		—		347,987		366,856		—		366,856		—
5.375% Senior Notes	348,826		361,281		—		361,281		—
Off-balance sheet financial assets:
Commitments to extend credit	—		22,930		—		—		22,930		—		27,197		—		—		27,197


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

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~~December 31^thst, for our ~~September 30~~March 31^thst 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 30, 2019~~March 31, 2020:


(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)	$	273,426	$	273,426	$	10,653	$	257,132	$	257,132	$	9,518
Non-marketable securities (equity method accounting):
Venture capital and private equity fund investments (2)	196,425		196,425		10,674		206,495		206,495		10,675
Debt funds (2)	7,153		7,153		—		6,910		6,910		—
Other investments (2)	13,881		13,881		886		11,265		11,265		886
Total	$	490,885	$	490,885	$	22,213	$	481,802	$	481,802	$	21,079

(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 (consolidated VIEs) and investments in venture capital and private equity fund investments (unconsolidated VIEs). Collectively, these investments in venture capital and private equity funds 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 $~~68.2~~63.2 million and $~~4.1~~3.2 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 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.


~~19.~~18.	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.


~~20.~~19.	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 ~~17—“Employee~~17 — “Employee Compensation and Benefit Plans" under Part II, Item 8 of our ~~2018~~2019 Form 10-K.


20.	Subsequent Events

Paycheck Protection Program

In April 2020, we started accepting applications under the Paycheck Protection Program ("PPP") administered by the Small Business Association (“SBA”) under the CARES Act and began to originate loans to qualified small businesses. Under the terms of the program, loans funded through the PPP are eligible to be forgiven if certain requirements are met, including using the funds for certain costs relating to payroll, healthcare and qualifying mortgage, rent, and utility payments. To the extent not forgiven, loans are subject to certain terms including, among others, the following: maximum two-year term; interest rate of 1.0%; six-month deferral of loan payments; and no requirement for any collateral or personal guarantees. PPP borrowers are not required to pay any fees to the government or the lender and the loans may be prepaid by the borrower at any time.

As of May 5, 2020, we have over 4,400 outstanding loans recorded in the amount of approximately $2.0 billion of PPP loans as approved by the SBA and expect to continue funding additional loans as they become approved under the program. This funded amount reflects repayments received as of such date. We expect additional repayments from PPP borrowers, particularly on or prior to May 14, 2020 (subject to any extension permitted by the SBA), in connection with their reliance on certain regulatory “safe harbors” relating to their necessity certification pursuant to SBA guidance.

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~~credit losses, nonperforming loans, loan growth and client funds;

The potential effects of the COVID-19 pandemic; 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 COVID-19 pandemic and its effects on the economic and business environments in which we operate;

The adequacy of our allowance for ~~loan~~credit losses and the need to make provisions for ~~loan~~credit 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;

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

The effectiveness of our risk management framework and quantitative models;

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


•	Other factors as discussed in “Risk Factors” under Part I, Item 1A in our ~~2018~~2019 Form ~~10-K.~~10-K and under Part II, Item 1A of this report.

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 ~~2018~~2019 Form 10-K.

Reclassifications

Certain prior period amounts primarily related to ~~presentation changes to our financial statement line items~~the adoption of ASU 2016-13, CECL, have been reclassified to conform to current period presentations.

Management’s Overview of ~~Third~~First Quarter ~~2019~~2020 Performance

~~Overall, we continued to deliver~~Our first quarter performance reflected strong ~~results in the third quarter of 2019, marked by continued healthy~~ balance sheet growth and business momentum particularly during the first two months of the quarter. This momentum, however, was offset by rapid economic deterioration in March 2020 due to the effects of the COVID-19 pandemic. Despite the impact of COVID-19, including a meaningful increase in our provision for credit losses and a decrease in our market-driven revenues (including gains from equity warrant assets and non-marketable securities, and investment banking revenues), the first quarter resulted in strong growth in loans and total client funds, stable ~~credit quality, continued~~net interest income and solid core fee ~~income growth,~~income. As discussed further below, we are focused on supporting our employees, clients and communities during this crisis. As the broader economic picture remains uncertain, we believe our solid ~~gains~~financial foundation of strong capital, ample liquidity and a high-quality balance sheet makes us well-positioned to continue to support and lend to our clients and manage the impact of a weaker economy while investing in our long-term growth.

Recent Developments - COVID-19

The current global health crisis created by the COVID-19 pandemic has resulted in unprecedented challenges and volatility in economic, market and business conditions. It has caused significant economic and financial disruptions that have adversely affected, and are likely to continue to adversely affect, our business, financial condition and results of operations. We cannot predict at this time the scope and duration of the pandemic, as COVID-19 has not yet been contained, including in the United States and other international locations in which we operate. Moreover, the impact of COVID-19 on ~~equity warrants~~economic, market and ~~robust client acquisition. Our core~~

business ~~continued~~conditions is likely to ~~perform~~be exacerbated if uncontained for a prolonged period of time, and even if it is contained, there may be a seasonal or other resurgence of the epidemic. While there have been various governmental and other responses to control the spread of COVID-19 and to mitigate the adverse impact of COVID-19, such as stay at home orders, economic relief for individuals and businesses, and monetary policy measures, it remains uncertain whether these actions will be successful.

The global spread of COVID-19 accelerated in March 2020 at which time it was declared a pandemic by the World Health Organization. Since then, we have been focused on our business and human response to the crisis --- managing and operating our business as seamlessly as possible, and supporting our clients, employees and communities as we weather through the crisis together.

During this volatile time, we remain focused on our capital and liquidity. We are “well-capitalized,” remaining above all applicable regulatory capital requirements. We have a liquid and high-quality balance sheet, with approximately half of our assets as of March 31, 2020 held in cash and marketable securities, primarily agency-backed mortgage securities and U.S. Treasuries. We also have access to funding sources, as necessary. Moreover, we have temporarily suspended our stock repurchase program and will reassess this decision once the economic environment is more stable. In addition, we have also elected to use a regulatory capital relief option related to the impact of COVID-19 on our CECL adoption.

Prior to the effective adoption date of CECL, federal banking regulatory agencies had provided relief for the initial capital decrease at adoption by allowing the impact to be phased-in over three years on a straight-line basis. Subsequent to the adoption of CECL, federal banking regulatory agencies provided relief to banking organizations by way of an interim final rule based on the recent disruptions in economic conditions caused by COVID-19 as well as the significant resources required to implement CECL. At the time of the adoption of CECL, we were not expecting to utilize the initial relief provided by the federal banking regulatory agencies as the initial capital decrease at adoption did not have a material impact to our capital ratios; however, the impact to our capital from subsequent increases in our allowance for credit losses related to COVID-19 economic factors is expected to increase. As a result, we have elected to use the regulatory capital phase-in under the 2020 CECL Interim Final Rule ("IFR") allowing for deferral of the full effect of the impact from the adoption of CECL on our capital levels over two years, followed by a three-year transition period to phase out the aggregate amount of the capital benefit provided during the initial two-year delay (i.e., a five-year transition, in total).

The uncertainties of the duration and severity of the effect of COVID-19 on economic, market and business conditions has made it more difficult to forecast our operating results and the macroeconomic conditions to which our business is subject. Some notable negative effects emerged late in the first quarter, as discussed in this Management Discussion and Analysis section, but any longer-term effects or trends remain subject to significant uncertainty. Moreover, we are subject to heightened business, operational (including fraud), market, credit and other risks related to the COVID-19 pandemic, which may have an adverse effect on our business, financial condition and results of operations. (See “Risk Factors” under Part II, Item 1A of this report)

We continue to serve our clients during this difficult time, while managing our credit risk. We have offered special debt relief assistance to support certain clients who are experiencing financial hardships related to the COVID-19 pandemic, including offering certain venture-backed companies, Private Bank, Wine and other clients the opportunity to temporarily defer their scheduled loan principal payments. We continue to engage with our clients to understand client needs, and we may implement additional assistance or other relief to support clients across various sectors and life stages. Additionally, we are participating as a lender under the Paycheck Protection Program (“PPP”) under the CARES Act and may participate in other government relief programs in the U.S. or internationally. These government programs are complex and our participation in any of these programs may lead to governmental, regulatory and other scrutiny, litigation, negative publicity and reputation damage for us and our customers who participate. Overall, these relief measures, whether our own programs or our participation in government programs, are new programs for us and we may not be successful in implementing or administering the programs as intended. Further, the extent to which these programs are successful in assisting our clients is uncertain. If these relief measures are not effective, there may be an adverse effect on our revenue and results of operations, including increased provisions in our allowance for credit losses, higher rates of default and increased credit losses in future periods.

We are also prioritizing the safety and well-being of our ~~ongoing focus~~employees. In March 2020, we activated our business continuity and pandemic plans globally, moving to a work-from-home plan, prohibiting all business travel and postponing or moving online all SVB-hosted events, and enabling remote access to our systems. We have implemented various programs to provide work, life and health-related support for our employees, ranging from expanded time-off, counseling and medical benefits for employees directly impacted by COVID-19, to providing reimbursements and practical support for working from home. In addition, we are also developing a plan for employees to eventually return to work in our offices, which will be subject to a variety of complex considerations.

Moreover, consistent with our tradition of supporting and giving back to our communities, we have also committed $5.5 million to local, regional and global COVID-19 relief activities in various U.S. and international locations where we have offices. This includes corporate contributions to global, national and regional charities, direct community-based giving, and a 3:1 match

for employees’ donations to relevant causes. In April 2020, we also announced our intention to donate net PPP loan origination fees received from the Small Business Administration to COVID-19 relief efforts.

Until the pandemic subsides, we expect continued draws on ~~innovation~~lines of credit; reduced revenues from our businesses; increased credit losses in our lending portfolios, in particular early-stage companies and ~~their investors~~premium wineries; and ~~continued efforts to secure client relationships. We saw continued success in working with private equity/venture capital firms, our technology and life science/healthcare clients and clients~~reduced activity in our ~~private bank division.~~

noninterest income-producing lines of business. Additionally, we expect the global slowdown in IPO and M&A activity to result in decreased investment banking revenues and decreased utilization of capital call lines of credit. Even after the pandemic subsides, it is possible that the U.S. and other major economies continue to experience a prolonged recession, which we expect would materially and adversely affect our business, financial condition, liquidity, capital and results of operations.

A summary of our performance for the three months ended ~~September 30, 2019~~March 31, 2020 (compared to the three months ended ~~September 30, 2018,~~March 31, 2019, where applicable) is as follows:



BALANCE SHEET		EARNINGS
Assets. ~~$65.3~~$72.4 billion in average total assets (up ~~15.7%~~25.9%). ~~$68.2~~$75.0 billion in period-end total assets (up ~~17.4%~~24.7%). Loans. ~~$29.8~~$33.7 billion in average total loan balances ~~net of unearned income~~ (up ~~13.3%~~18.6%). ~~$31.1~~$36.0 billion in period-end total loan balances ~~net of unearned income~~ (up ~~13.0%~~24.7%). Total Client Funds. (on-balance sheet deposits and off-balance sheet client investment funds). ~~$150.1~~$165.4 billion in average total client fund balances (up ~~16.6%~~20.6%). ~~$156.0~~$168.9 billion in period-end total client fund balances (up ~~19.4%~~20.2%). AFS/HTM Fixed Income Investments. $~~25.1~~27.1 billion in average fixed income investment securities ~~(down 1.5%~~(up 22.8%). ~~$27.3~~$26.2 billion in period-end fixed income investment securities (up ~~9.2%~~20.2%).		~~EPS~~.EPS. Earnings per diluted share of ~~$5.15 (up 1.0%~~$2.55 (down 53.1%). Net ~~Income~~.Income. Consolidated net income available to common stockholders of ~~$267.3~~$132.3 million (down ~~2.7%~~54.2%). - Net interest income of ~~$520.6~~$524.1 million (up ~~5.6%~~2.2%). - Net interest margin of ~~3.34%~~3.12% (down 2869 bps). - Noninterest income of ~~$294.0~~$301.9 million (up ~~40.0%~~7.7%), ~~with~~ non-GAAP core fee income⁺ of ~~$162.2~~$168.5 million (up ~~23.1%~~9.2%) and non-GAAP core fee income plus investment banking revenue and commissions⁺⁺ of $231.3 million (up 6.1%). - Noninterest expense of ~~$391.3~~$399.6 million (up ~~26.5%~~9.3%). ROE. Return on average equity (annualized) (“~~ROE~~”ROE”) performance of ~~18.27%~~8.17%. Operating Efficiency ~~Ratio.~~Ratio. Operating efficiency ratio of ~~48.04%~~48.37% with a non-GAAP core operating efficiency ratio of ~~48.05%~~47.71%⁺⁺⁺.

CAPITAL		CREDIT QUALITY
Capital.⁺⁺⁺⁺. Continued strong capital, with all capital ratios considered “well-capitalized” under banking regulations. ~~SVBFG~~SVB Financial and ~~SVB~~Bank capital ratios, respectively, were: - CET 1 risk-based capital ratio of ~~12.71%~~12.35% and ~~11.48%~~10.90%. - Tier 1 risk-based capital ratio of ~~12.86%~~13.35% and ~~11.48%~~10.90%. - Total risk-based capital ratio of ~~13.70%~~14.45% and ~~12.36%~~12.04%. - Tier 1 leverage ratio of ~~8.64%~~9.00% and ~~7.48%~~7.21%.		Credit ~~Quality~~.Quality. ~~Continued disciplined underwriting.~~Stable credit in an evolving credit environment. - Allowance for ~~loan~~credit losses for loans of ~~0.97%~~1.53% as a percentage of period-end total ~~gross~~ loans. - Provision for ~~loan losses~~loans of ~~0.46%~~2.78% as a percentage of period-end total ~~gross~~ loans (annualized). - Net loan charge-offs of ~~0.44%~~0.35% 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 measure. (See the non-GAAP reconciliation under “Results of Operations—Noninterest Income”)

⁺⁺ Consists of non-GAAP core fee income plus investment banking revenue and commissions. This is a non-GAAP financial 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").

⁺⁺⁺⁺Federal banking regulatory agencies have provided relief to banking organizations by way of an interim final rule based on the recent disruptions in economic conditions caused by COVID-19 as well as the significant resources required to implement current expected credit loss("CECL"). The interim final rule provides banking organizations that adopt CECL during the 2020 calendar year with the option to delay the estimated amount of the capital impact for two years, followed by a three-year transition period to phase out the aggregate amount of the capital benefit provided during the initial two-year delay (i.e., a five-year transition, in total). For additional details, see "Capital Resources" within "Consolidated Financial Condition" under Part 1, Item 2 of this report.

A summary of our performance for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2020 and 2019 ~~and 2018~~ is as follows:

Three months ended September 30, Nine months ended September 30,
(Dollars in thousands, except per share data, employees and ratios) 2019
2018 % Change   2019 2018 % Change
Income Statement:
Diluted earnings per share $ 5.15
$ 5.10
1.0
% $ 16.67
$ 13.15
26.8
%
Net income available to common stockholders 267,281
274,817
(2.7 )    874,000
707,576
23.5

Net interest income 520,644
493,222
5.6
   1,562,933
1,379,528
13.3

Net interest margin 3.34 % 3.62 % (28 ) bps 3.60 % 3.53 % 7
bps
Provision for credit losses $ 36,536
$ 17,174
112.7
% $ 89,033
$ 74,226
19.9
%
Noninterest income 294,009
210,070
40.0
908,135
558,277
62.7

Noninterest expense 391,324
309,445
26.5
1,140,510
880,601
29.5

Non-GAAP core fee income (1) 162,177
131,714
23.1
473,757
369,848
28.1

Non-GAAP core fee income, including investment banking revenue and commissions (1) 212,968
131,714
61.7
651,574
369,848
76.2

Non-GAAP noninterest income, net of noncontrolling interests (1) 279,441
203,378
37.4
   871,583
529,116
64.7

Non-GAAP noninterest expense, net of noncontrolling interests (2) 391,179
309,291
26.5
   1,139,818
880,252
29.5

Balance Sheet:


																			Three months ended March 31,
(Dollars in thousands, except per share data, employees and ratios)																			2020			2019			% Change
Income Statement:
Diluted earnings per share																			$	2.55		$	5.44		(53.1	)	%
Net income available to common stockholders																			132,253			288,732			(54.2	)
Net interest income																			524,137			512,886			2.2
Net interest margin																			3.12		%	3.81		%	(69	)	bps
Provision for credit losses																			$	243,480		$	28,551		NM		%
Noninterest income																			301,934			280,376			7.7
Noninterest expense																			399,585			365,664			9.3
Non-GAAP core fee income (1)																			168,458			154,243			9.2
Non-GAAP core fee income, plus investment banking revenue and commissions (1)																			231,347			218,146			6.1
Non-GAAP noninterest income, net of noncontrolling interests (1)																			303,788			277,128			9.6
Non-GAAP noninterest expense, net of noncontrolling interests (2)																			399,445			365,285			9.4
Balance Sheet:
Average available-for-sale securities	$	10,600,449		$	9,589,917		10.5		%	$	8,572,314		$	10,124,707		(15.3	)	%	$	13,565,908		$	6,870,168		97.5		%
Average held-to-maturity securities	14,534,505			15,916,690			(8.7	)		14,891,158			14,764,215			0.9			13,576,061			15,223,958			(10.8	)
Average loans, net of unearned income	29,822,426			26,331,377			13.3			29,210,960			25,008,277			16.8
Average loans, amortized cost																			33,660,728			28,388,072			18.6
Average noninterest-bearing demand deposits	39,146,184			40,625,772			(3.6	)		38,498,971			39,473,468			(2.5	)		41,335,984			38,222,687			8.1
Average interest-bearing deposits	18,088,785			8,466,468			113.7			14,832,373			8,260,894			79.5			20,472,247			11,491,522			78.2
Average total deposits	57,234,969			49,092,240			16.6			53,331,344			47,734,362			11.7			61,808,231			49,714,209			24.3
Earnings Ratios:
Return on average assets (annualized) (3)	1.62		%	1.93		%	(16.1	)	%	1.91		%	1.74		%	9.8		%	0.73		%	2.04		%	(64.2	)	%
Return on average SVBFG stockholders’ equity (annualized) (4)	18.27			22.46			(18.7	)		21.16			20.56			2.9			8.17			22.16			(63.1	)
Asset Quality Ratios:
Allowance for loan losses as a % of total period-end gross loans	0.97		%	1.03		%	(6	)	bps	0.97		%	1.03		%	(6	)	bps
Allowance for loan losses for performing loans as a % of total gross performing loans	0.81			0.86			(5	)		0.81			0.86			(5	)
Gross loan charge-offs as a % of average total gross loans (annualized)	0.49			0.33			16			0.33			0.26			7
Net loan charge-offs as a % of average total gross loans (annualized)	0.44			0.30			14			0.26			0.22			4
Allowance for credit losses for loans as a % of total period-end loans (5)																			1.53		%	1.03		%	50		bps
Allowance for credit losses for performing loans as a % of total performing loans (5)																			1.43			0.83			60
Gross loan charge-offs as a % of average total loans (annualized) (5)																			0.44			0.13			31
Net loan charge-offs as a % of average total loans (annualized) (5)																			0.35			0.11			24
Capital Ratios:
SVBFG CET 1 risk-based capital ratio	12.71		%	13.28		%	(57	)	bps	12.71		%	13.28		%	(57	)	bps	12.35		%	12.89		%	(54	)	bps
SVBFG tier 1 risk-based capital ratio	12.86			13.45			(59	)		12.86			13.45			(59	)		13.35			13.04			31
SVBFG total risk-based capital ratio	13.70			14.34			(64	)		13.70			14.34			(64	)		14.45			13.94			51
SVBFG tier 1 leverage ratio	8.64			8.99			(35	)		8.64			8.99			(35	)		9.00			9.10			(10	)
SVBFG tangible common equity to tangible assets (5)	8.38			8.47			(9	)		8.38			8.47			(9	)
SVBFG tangible common equity to risk-weighted assets (5)	13.04			13.00			4			13.04			13.00			4
SVBFG tangible common equity to tangible assets (6)																			8.70			8.59			11
SVBFG tangible common equity to risk-weighted assets (6)																			13.40			12.86			54
Bank CET 1 risk-based capital ratio	11.48			11.98			(50	)		11.48			11.98			(50	)		10.90			12.35			(145	)
Bank tier 1 risk-based capital ratio	11.48			11.98			(50	)		11.48			11.98			(50	)		10.90			12.35			(145	)
Bank total risk-based capital ratio	12.36			12.91			(55	)		12.36			12.91			(55	)		12.04			13.29			(125	)
Bank tier 1 leverage ratio	7.48			7.82			(34	)		7.48			7.82			(34	)		7.21			8.38			(117	)
Bank tangible common equity to tangible assets (5)	7.36			7.44			(8	)		7.36			7.44			(8	)
Bank tangible common equity to risk-weighted assets (5)	11.82			11.70			12			11.82			11.70			12
Bank tangible common equity to tangible assets (6)																			7.63			7.99			(36	)
Bank tangible common equity to risk-weighted assets (6)																			11.99			12.32			(33	)
Other Ratios:
GAAP operating efficiency ratio (6)	48.04		%	44.00		%	9.2		%	46.15		%	45.44		%	1.6		%
Operating efficiency ratio (7)																			48.37		%	46.10		%	4.9		%
Non-GAAP core operating efficiency ratio (2)	48.05			48.35			(0.6	)		46.09			49.06			(6.1	)		47.71			44.71			6.7
Total costs of deposits (annualized) (7)	0.38			0.06			533.3			0.33			0.05			560.0
Book value per common share (8)	$	114.26		$	92.48		23.6			$	114.26		$	92.48		23.6
Total costs of deposits (annualized) (8)																			0.24			0.23			4.3
Book value per common share (9)																			$	130.02		$	102.11		27.3
Other Statistics:
Average full-time equivalent employees	3,413			2,778			22.9		%	3,309			2,623			26.2		%	3,672			3,228			13.8		%
Period-end full-time equivalent employees	3,460			2,836			22.0			3,460			2,836			22.0			3,710			3,250			14.2

NM-Not meaningful


(1)	See “Results of Operations–Noninterest Income” for a description and reconciliation of non-GAAP core fee income and non-GAAP core fee income ~~including~~plus 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 average assets.


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


(5)	For the quarter ended March 31, 2020, the ratios are calculated using the amortized cost basis for total loans as a result of the adoption of CECL. Prior period ratios were calculated using total gross loans in accordance with previous methodology.


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


~~(7)~~(8)	Ratio represents annualized total cost of deposits and is calculated by dividing interest expense from deposits by average total deposits.


~~(8)~~(9)	Book value per common share is calculated by dividing total SVBFG common 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~~Except as set forth below, there have been no significant changes during the ~~nine~~three months ended ~~September 30, 2019~~March 31, 2020 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 ~~2018~~2019 Form 10-K.

We disclose our method and approach for the allowance for credit losses for loans, unfunded credit commitments and HTM securities critical accounting policy in Note 1 - “Basis of Presentation” of the “Notes to Interim Consolidated Financial Statements” under Part I, Item 1 of this report.

Allowance for Credit Losses

We consider this accounting policy to be critical as estimation of expected credit losses involves material management estimates and is susceptible to significant changes in the near-term. Determining the allowance for credit losses for loans, unfunded credit commitments and HTM securities requires us to make forecasts that are highly uncertain and require a high degree of judgment. A committee comprised of senior management evaluates the adequacy of the allowance for credit losses for loans, which includes review of loan portfolio segmentation, quantitative models, internal and external data inputs, economic forecasts, credit risk ratings and qualitative adjustments.

Expected Credit Losses Estimate for Loans

prediction or estimate of changing risks in the lending environment, the qualitative allocation may vary significantly from period to period. Refer to Note 1 - “Basis of Presentation” of the “Notes to Interim Consolidated Financial Statements” under Part I, Item I of this report for a summary of the factors we consider for its qualitative adjustments as part of our estimate of the changing risks in the lending environment.

We monitor our loan pools to ensure all assets therein continue to share similar risk characteristics with other financial assets inside the pool. Changes in credit risk, borrower circumstances, or the recognition of write-offs may indicate that a loan's risk profile has changed, and the asset should be removed from its current pool. For a loan that does not share risk characteristics with other loans, expected credit loss is measured based on the net realizable value, that is, the difference between the discounted value of the expected future cash flows and the amortized cost basis of the loan. When a loan is collateral-dependent and the repayment is expected to be provided substantially through the operation or sale of the collateral, the ECL is measured as the difference between the amortized cost basis of the loan and the fair value of the collateral. The fair value of the collateral will be determined by the most recent appraisal, as adjusted to reflect a reasonable marketing period for the sale of the asset(s) and an estimate of reasonable selling expenses. Collateral-dependent loans will have independent appraisals completed and accepted at least annually.

Expected Credit Losses Estimate for Unfunded Credit Commitments

We maintain a separate allowance for credit losses for unfunded credit commitments which is included in other liabilities and the related ECL in our provision for credit losses. We estimate the amount of expected losses by using historical trends to calculate a probability of an unfunded credit commitment being funded and derive historical lifetime expected loss factors for each portfolio segment similar to our funded loan ECL. The collectively assessed ECL for unfunded credit commitments also includes the same qualitative allocations applied for our funded loan ECL. For unfunded credit commitments related to loans that do not share similar risk characteristics with other loans, where applicable, a separate estimate of ECL will be included in our total allowance for credit losses on unfunded credit commitments. Loan commitments that are determined to be unconditionally cancellable by the Bank do not require an allowance for credit losses.

Expected Credit Losses Estimate for Held-to-Maturity Investments

Recent Accounting Pronouncements

In December 2019, the FASB issued Accounting Standards Update No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes which is part of the FASB’s initiative to reduce cost and complexity related to accounting for income taxes. The ASU eliminates certain exceptions to the general principles of ASC 740, Income Taxes, and simplifies income tax accounting in several areas. The amendments are effective for fiscal years (and interim periods within those fiscal years) beginning after December 15, 2020, with early adoption permitted. The ASU allows entities to adopt this provision on a retrospective basis for all periods presented or a modified retrospective basis through a cumulative-effect adjustment to retained earnings as of the beginning of the period of adoption. We are currently evaluating the impact this ASU will have on our financial position, results of operations, cash flows and disclosures.

In March 2020, the FASB issued a new Accounting Standard Update (ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting). This ASU provides temporary optional expedients and exceptions to GAAP guidance on contract modifications and hedge accounting to ease the financial reporting burdens of the expected market transition from LIBOR and other interbank offered rates to alternative reference rates, such as SOFR. For instance, entities can (1) elect not to apply certain modification accounting requirements to contracts affected by reference rate reform, if certain criteria are met. An entity that makes this election would not have to remeasure the contracts at the modification date or reassess a previous accounting determination; (2) elect various optional expedients that would allow them to continue applying hedge accounting for hedging relationships affected by reference rate reform, if certain criteria are met; and (3) make a one-time election to sell and/or reclassify held-to-maturity debt securities that reference an interest rate affected by reference rate reform. This guidance became effective on March 12, 2020 and an entity may elect to prospectively apply each category of exemption independently, either in the interim period that includes March 12, 2020, or in a subsequent period through December 31, 2022. We have implemented a process to assess the population of contracts that will be impacted by this ASU and to evaluate

expedients we will use and when we might apply them. We are currently evaluating the impact this guidance will have on our financial position, results of operations, cash flows and disclosures.

Results of Operations

Net Interest Income and Margin (Fully Taxable Equivalent Basis)

Net interest income is defined as the difference between: (i) interest earned on loans, fixed income investments in our available-for-sale and held-to-maturity securities portfolios and short-term investment securities and (ii) interest paid on funding sources. Net interest margin is defined as annualized net interest income, on a fully taxable equivalent basis, 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 21.0 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 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.


	2019 Compared to 2018									2019 Compared to 2018								2020 Compared to 2019
	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 March 31, increase (decrease) due to change in
(Dollars in thousands)	Volume			Rate			Total			Volume			Rate		Total			Volume			Rate			Total
Interest income:
Federal Reserve deposits, federal funds sold, securities purchased under agreements to resell and other short-term investment securities	$	18,640		$	2,090		$	20,730		$	41,307		$	13,060	$	54,367		$	6,876		$	(8,468	)	$	(1,592	)
Fixed income investment portfolio (taxable)	(3,985		)	11,566			7,581			(31,754		)	38,820		7,066			25,287			2,381			27,668
Fixed income investment portfolio (non-taxable)	703			(229		)	474			11,030			975		12,005			2,801			(412		)	2,389
Loans, net of unearned income	46,151			(4,258		)	41,893			173,003			49,740		222,743
Increase in interest income, net	61,509			9,169			70,678			193,586			102,595		296,181
Loans, amortized cost																		60,839			(72,414		)	(11,575		)
Increase (decrease) in interest income, net																		95,803			(78,913		)	16,890
Interest expense:
Interest bearing checking and savings accounts	(22		)	8			(14		)	(56		)	36		(20		)	—			(6		)	(6		)
Money market deposits	28,312			13,075			41,387			54,630			39,961		94,591			16,082			(4,900		)	11,182
Money market deposits in foreign offices	(11		)	1			(10		)	(21		)	3		(18		)	10			(2		)	8
Time deposits	311			244			555			295			424		719			296			103			399
Sweep deposits in foreign offices	2,186			2,960			5,146			6,266			10,216		16,482			426			(2,518		)	(2,092		)
Total increase in deposits expense	30,776			16,288			47,064			61,114			50,640		111,754
Total increase (decrease) in deposits expense																		16,814			(7,323		)	9,491
Short-term borrowings	(3,926		)	6			(3,920		)	(2,663		)	1,129		(1,534		)	1,725			(1,214		)	511
3.50% Senior Notes	3			—			3			9			—		9			3			—			3
5.375% Senior Notes	10			—			10			27			—		27			(4,868		)	—			(4,868		)
Total (decrease) increase in borrowings expense	(3,913		)	6			(3,907		)	(2,627		)	1,129		(1,498		)
Increase in interest expense, net	26,863			16,294			43,157			58,487			51,769		110,256
Total decrease in borrowings expense																		(3,140		)	(1,214		)	(4,354		)
Increase (decrease) in interest expense, net																		13,674			(8,537		)	5,137
Increase (decrease) in net interest income	$	34,646		$	(7,125	)	$	27,521		$	135,099		$	50,826	$	185,925		$	82,129		$	(70,376	)	$	11,753

Net Interest Income (Fully Taxable Equivalent Basis)

Three months ended ~~September 30,~~March 31, 2020 and 2019 ~~and 2018~~

Net interest income increased by ~~$27.5~~$11.8 million to ~~$523.6~~$527.5 million for the three months ended ~~September 30, 2019,~~March 31, 2020, compared to ~~$496.1~~$515.8 million for the comparable ~~2018~~2019 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 an increase in our private bank loan portfolio. In addition, we saw an increase in interest~~fixed income ~~from our interest earning cash and short-term~~ investment securities reflective of higher average ~~balances. These increases were~~fixed income securities. This increase was partially offset by a decrease in interest income from loans, reflective of lower gross loan yields partially offset by an increase in average loan balances

as well as an increase in interest paid on our interest-bearing deposits due to the increase in average interest-bearing deposits ~~as well as continued~~partially offset by market interest rate ~~adjustments on our interest-bearing deposits due to the competitive environment.~~decreases.

The main factors affecting interest income and interest expense for the three months ended ~~September 30, 2019,~~March 31, 2020, compared to the comparable ~~2018~~2019 period are discussed below:


•	Interest income for the three months ended ~~September 30, 2019~~March 31, 2020 increased by $~~70.7~~16.9 million due primarily to:


◦	A $30.1 million increase in interest income from our fixed income investment securities. The increase was due primarily to the increase of $5.0 billion in average fixed income investment securities, partially offset by

◦

A ~~$41.9~~An $11.6 million ~~increase~~ decrease in interest income on loans to $~~394.2~~382.6 million for the three months ended ~~September 30, 2019~~March 31, 2020, compared to $~~352.4~~394.1 million for the comparable ~~2018~~2019 period. The ~~increase~~decrease was reflective of a decrease in the overall loan yields of 106 basis points to 4.57 percent from 5.63 percent partially offset by an increase in average loan balances of $~~3.5~~5.3 billion ~~partially offset by a decrease in the overall loan yields of 7 basis points to 5.24 percent from 5.31 percent.~~. Gross loan yields, excluding loan interest recoveries and loan fees, decreased 997 basis points to ~~4.72~~4.13 percent from ~~4.81~~5.10 percent, reflective primarily of the ~~continued growth~~impact of the decreases in ~~our lower yielding private equity/venture capital and private bank loan portfolios,~~Federal Funds rates in the latter half of 2019 as well as ~~compression~~March 2020, partially offset by an increase reflective of gains on the termination and net settlement of our ~~loan yields due~~interest rate swap cash flow hedges. Refer to ~~pricing competition, and~~

◦

A ~~$20.7 million~~Note 11 — “Derivative Financial Instruments” of the “Notes to Interim Consolidated Financial Statements (unaudited)” under Part I, Item 1 of this report ~~increase in~~for additional information regarding the termination and net settlement of our interest ~~income from our interest-earning~~rate swap cash ~~and short-term investment securities. The increase was due primarily to the increase of $4.6 billion in average interest-earning Federal Reserve cash balances.~~flow hedges.


•	Interest expense for the three months ended ~~September 30, 2019~~March 31, 2020 increased by $~~43.2~~5.1 million due primarily to:


◦	A $~~47.1 million~~ increase in interest expense on deposits due primarily to an increase in interest paid on our interest-bearing money market and foreign sweep deposits due to the growth in average interest-bearing deposits of $9.6 billion as well as market rate adjustments due to competition, partially offset by


◦	~~A $3.9 million decrease in interest expense on short-term borrowings due primarily to a decrease in average short-term borrowings outstanding due to increases in our cash and cash equivalents.~~

~~Nine months ended September 30, 2019 and 2018~~

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


•	~~Interest income~~ ~~for the~~ ~~nine months endedSeptember 30, 2019~~ ~~increased by~~ ~~$296.2 million~~ ~~due primarily to:~~

◦

A ~~$222.7 million~~ ~~increase in interest income on loans to~~ ~~$1.2 billion~~ ~~for the~~ ~~nine months endedSeptember 30, 2019, compared to~~ ~~$979.7 million~~ ~~for the comparable~~ ~~2018~~ period. The increase was reflective of an increase in average loan balances of $4.2 billion and an increase in the overall loan yields of 26 basis points to 5.50 percent from 5.24 percent. Gross loan yields, excluding loan interest recoveries and loan fees, increased 25 basis points to 4.95 percentfrom 4.70 percent, reflective of the benefit of interest rate increases during late 2018, partially offset by the continued growth of our lower yielding private equity/venture capital loan portfolio. Our private equity/venture capital loan portfolio represented ~~52.2~~ ~~percent and 48.3 percent of our total gross loan portfolio at September 30, 2019 and 2018, respectively, and~~


◦	A ~~$54.4 million~~ ~~increase in interest income from our interest earning cash and short-term investment securities.~~The increase was due primarily to the increase of $3.2 billion in average interest-earning Federal Reserve cash balances driven by deposit growth and the benefit from the impact of increases in the Federal Funds target rate during 2018.


•	~~Interest expense~~ ~~for the~~ ~~nine months endedSeptember 30, 2019~~ ~~increased by~~ ~~$110.3 million~~ ~~primarily due to:~~


◦	A ~~$111.8~~9.5 million increase in interest expense 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 ~~$6.6~~$9.0 billion ~~as well as~~partially offset by decreases in market ~~rate adjustments~~rates, partially offset by


◦	A $4.4 million decrease in interest expense on borrowings expense due primarily to ~~competition.~~the extinguishment of our 5.375% Senior Notes in December 2019.

Net Interest Margin (Fully Taxable Equivalent Basis)

Three months ended ~~September 30,~~March 31, 2020 and 2019 ~~and 2018~~

•

Our net interest margin decreased by 2869 basis points to ~~3.34~~3.12 percent for the three months ended ~~September 30, 2019~~March 31, 2020, compared to ~~3.62~~3.81 percent for the comparable ~~2018~~2019 period. The lower margin for the three months ended ~~September 30, 2019~~March 31, 2020 was due primarily to a ~~change in the mix of interest earning assets resulting in a~~ decrease in ~~higher yielding~~yields on loans and an increase in lower yielding cash and investments as a percentage of total interest earning assets as well as the increase of $9.6 billion in average interest bearing deposits. Our net interest margin also saw a decrease from an increase in yields paid on interest bearing deposits reflective of the ~~full quarter impact of the two 25 basis point Federal Funds rate increases since September of 2018 partially offset by a benefit from the two~~three 25 basis point Federal Funds rate decreases ~~during~~in the ~~third quarter~~latter half of ~~2019. Additionally, lower loan yields were driven by decreased prepayment fees~~2019 as well as the ~~continued compression on~~aggregate 150 basis point decrease in March 2020. The decrease in our net interest margin was partially offset by increases from balance sheet growth as well as increases from our interest rate swap cash flow hedges and effective loan ~~yields due to pricing competition.~~floors. Average loans represented ~~48.0~~49.4 percent of average interest earnings assets for the three months ended ~~September 30, 2019~~March 31, 2020, compared to ~~48.4~~51.7 percent for the comparable ~~2018~~2019 period.

~~Nine months ended September 30, 2019 and 2018~~

•

~~Our net interest margin increased by 7 basis points to 3.60 percent for the~~ ~~nine months endedSeptember 30, 2019, compared to 3.53 percent for the comparable~~ ~~2018~~ ~~period.The higher margin for the nine months ended~~ ~~September 30, 2019~~ was reflective primarily of the increases in the Federal Funds target rate during late 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 50.0 percent of year-to-date average interest earnings assets, compared to 47.7 percent for the comparable ~~2018~~ ~~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, preferred stock, 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~~ months ended ~~September 30, 2019~~March 31, 2020 and ~~2018~~2019:

Average Balances, Rates and Yields for the Three Months Ended ~~September 30, 2019~~March 31, 2020 and ~~2018~~2019


	Three months ended September 30,																Three months ended March 31,
	2019								2018								2020								2019
(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)	$	7,193,195		$	28,867		1.59	%	$	2,548,271		$	8,137		1.27	%	$	7,308,705		$	17,624		0.97	%	$	4,460,378		$	19,216		1.75	%
Investment securities: (2)
Available-for-sale securities:
Taxable	10,600,449			62,121			2.32		9,589,917			46,684			1.93		13,565,908			77,024			2.28		6,870,168			35,422			2.09
Held-to-maturity securities:
Taxable	12,922,438			87,535			2.69		14,385,027			95,391			2.63		11,675,421			77,361			2.66		13,651,311			91,295			2.71
Non-taxable (3)	1,612,067			14,080			3.47		1,531,663			13,606			3.52		1,900,640			16,233			3.44		1,572,647			13,844			3.57
Total loans, net of unearned income (4) (5)	29,822,426			394,246			5.24		26,331,377			352,353			5.31
Total loans, amortized cost (4) (5)																	33,660,728			382,569			4.57		28,388,072			394,144			5.63
Total interest-earning assets	62,150,575			586,849			3.74		54,386,255			516,171			3.77		68,111,402			570,811			3.37		54,942,576			553,921			4.09
Cash and due from banks	590,391								553,132								797,462								527,109
Allowance for loan losses	(308,609		)						(296,177		)
Allowance for credit losses for loans																	(327,812		)						(288,927		)
Other assets (6)	2,895,391								1,821,827								3,826,116								2,347,679
Total assets	$	65,327,748							$	56,465,037							$	72,407,168							$	57,528,437
Funding sources:
Interest-bearing liabilities:
Interest bearing checking and savings accounts	$	470,601		$	102		0.09	%	$	572,242		$	116		0.08	%	$	546,428		$	108		0.08	%	$	545,238		$	114		0.08	%
Money market deposits	15,805,507			49,169			1.23		6,704,337			7,782			0.46		17,613,578			33,013			0.75		9,073,622			21,831			0.98
Money market deposits in foreign offices	115,590			12			0.04		218,734			22			0.04		266,045			24			0.04		148,342			16			0.04
Time deposits	157,218			590			1.49		74,597			35			0.19		163,343			429			1.06		50,691			30			0.24
Sweep deposits in foreign offices	1,539,869			5,233			1.35		896,558			87			0.04		1,882,853			3,824			0.82		1,673,629			5,916			1.43
Total interest-bearing deposits	18,088,785			55,106			1.21		8,466,468			8,042			0.38		20,472,247			37,398			0.73		11,491,522			27,907			0.98
Short-term borrowings	22,045			119			2.14		745,156			4,039			2.15		969,896			2,716			1.13		353,389			2,205			2.53
3.50% Senior Notes	347,841			3,150			3.59		347,499			3,147			3.59		348,018			3,151			3.64		347,669			3,148			3.67
5.375% Senior Notes	349,216			4,873			5.54		348,557			4,863			5.54		—			—			—		348,882			4,868			5.66
Total interest-bearing liabilities	18,807,887			63,248			1.33		9,907,680			20,091			0.80		21,790,161			43,265			0.80		12,541,462			38,128			1.23
Portion of noninterest-bearing funding sources	43,342,688								44,478,575								46,321,241								42,401,114
Total funding sources	62,150,575			63,248			0.40		54,386,255			20,091			0.15		68,111,402			43,265			0.25		54,942,576			38,128			0.28
Noninterest-bearing funding sources:
Demand deposits	39,146,184								40,625,772								41,335,984								38,222,687
Other liabilities	1,417,659								932,544								2,277,031								1,330,037
SVBFG stockholders’ equity	5,802,907								4,854,440
Preferred stock																	340,169								—
SVBFG common stockholders’ equity																	6,512,946								5,283,808
Noncontrolling interests	153,111								144,601								150,877								150,443
Portion used to fund interest-earning assets	(43,342,688		)						(44,478,575		)						(46,321,241		)						(42,401,114		)
Total liabilities, noncontrolling interest, and SVBFG stockholders’ equity	$	65,327,748							$	56,465,037							$	72,407,168							$	57,528,437
Net interest income and margin				$	523,601		3.34	%				$	496,080		3.62	%				$	527,546		3.12	%				$	515,793		3.81	%
Total deposits	$	57,234,969							$	49,092,240							$	61,808,231							$	49,714,209
Reconciliation to reported net interest income:
Adjustments for taxable equivalent basis				(2,957		)						(2,858		)						(3,409		)						(2,907		)
Net interest income, as reported				$	520,644							$	493,222							$	524,137							$	512,886

(1)

Includes average interest-earning deposits in other financial institutions of $~~1.1~~0.9 billion and $~~0.7~~0.8 billion for the three months ended ~~September 30, 2019~~March 31, 2020 and ~~2018~~2019, respectively. For the three months ended ~~September 30, 2019~~March 31, 2020 and ~~2018~~2019, balances also include $~~5.1~~5.5 billion and $~~1.4~~2.8 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 is presented on a fully taxable equivalent basis using the federal statutory tax rate of 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 $~~39.4~~36.7 million ~~and~~ ~~$33.1 million~~for both the three months ended ~~September 30, 2019~~March 31, 2020 and ~~2018~~2019~~, respectively.~~.


(6)	Average investment securities of $~~1.2~~1.6 billion and $~~761~~913 million for the three months ended ~~September 30, 2019~~March 31, 2020 and ~~2018~~2019, respectively, were classified as other assets as they were noninterest-earning assets. These investments primarily consisted of non-marketable and other equity securities.

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

Nine months ended September 30,
2019 2018
(Dollars in thousands)
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) $ 5,696,501
$ 74,447
1.75 % $ 2,535,749
$ 20,080
1.06 %
Investment securities: (2)
Available-for-sale securities:
Taxable 8,572,314
142,891
2.23
10,124,707
141,266
1.87
Held-to-maturity securities:
Taxable
13,305,424
267,877
2.69
13,597,340
262,436
2.58
Non-taxable (3)
1,585,734
41,760
3.52
1,166,875
29,755
3.41
Total loans, net of unearned income (4) (5) 29,210,960
1,202,467
5.50
25,008,277
979,724
5.24
Total interest-earning assets 58,370,933
1,729,442
3.96
52,432,948
1,433,261
3.65
Cash and due from banks 553,523
496,658

Allowance for loan losses (303,154 ) (280,102 )
Other assets (6) 2,592,830
1,783,148

Total assets $ 61,214,132
$ 54,432,652

Funding sources:

Interest-bearing liabilities:
Interest bearing checking and savings accounts $ 491,663
$ 318
0.09 % $ 578,313
$ 338
0.08 %
Money market deposits 12,540,843
112,249
1.20
6,437,372
17,658
0.37
Money market deposits in foreign offices 142,053
43
0.04
206,924
61
0.04
Time deposits 94,934
790
1.11
59,561
71
0.16
Sweep deposits in foreign offices 1,562,880
16,763
1.43
978,724
281
0.04
Total interest-bearing deposits 14,832,373
130,163
1.17
8,260,894
18,409
0.30
Short-term borrowings 186,930
3,519
2.52
328,425
5,053
2.06
3.50% Senior Notes 347,756
9,447
3.63
347,416
9,438
3.63
5.375% Senior Notes 349,050
14,611
5.60
348,400
14,584
5.60
Total interest-bearing liabilities 15,716,109
157,740
1.34
9,285,135
47,484
0.68
Portion of noninterest-bearing funding sources 42,654,824
43,147,813

Total funding sources 58,370,933
157,740
0.36
52,432,948
47,484
0.12
Noninterest-bearing funding sources:

Demand deposits 38,498,971
39,473,468

Other liabilities 1,327,040
930,985

SVBFG stockholders’ equity 5,523,196
4,602,027

Noncontrolling interests 148,816
141,037

Portion used to fund interest-earning assets (42,654,824 ) (43,147,813 )
Total liabilities, noncontrolling interest, and SVBFG stockholders’ equity $ 61,214,132
$ 54,432,652

Net interest income and margin $ 1,571,702
3.60 % $ 1,385,777
3.53 %
Total deposits $ 53,331,344
$ 47,734,362

Reconciliation to reported net interest income:

Adjustments for taxable equivalent basis (8,769 ) (6,249 )
Net interest income, as reported $ 1,562,933
$ 1,379,528


~~(1)~~	~~Includes average interest-earning deposits in other financial institutions of~~ ~~$0.9 billion~~ ~~for both the~~ ~~nine months endedSeptember 30, 2019. The balance also includes~~ ~~$3.9 billion~~ ~~and~~ ~~$1.4 billion~~ ~~deposited at the FRB, earning interest at the Federal Funds target rate for the~~ ~~nine months endedSeptember 30, 2019~~ ~~and~~ ~~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 tax rate of 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~~ ~~$120.2 million~~ ~~and~~ ~~$100.8 million~~ ~~for the~~ ~~nine months endedSeptember 30, 2019~~ ~~and~~ ~~2018, respectively.~~


~~(6)~~	~~Average investment securities of~~ ~~$1.1 billion~~ ~~and~~ ~~$774 million~~ ~~for the~~ ~~nine months endedSeptember 30, 2019~~ ~~and~~ ~~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~~(i) the provision for ~~loan losses and~~loans, (ii) the provision for unfunded credit ~~commitments. Our~~commitments and (iii) the 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.HTM securities. 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~~credit losses ~~and the allowance~~ for loans, unfunded credit commitments and HTM securities for the three ~~and nine~~ months ended ~~September 30, 2019~~March 31, 2020 and ~~2018:~~2019:

Three months ended September 30, Nine months ended September 30,
(Dollars in thousands, except ratios) 2019 2018 2019 2018
Allowance for loan losses, beginning balance $ 301,888
$ 286,709
$ 280,903
$ 255,024
Provision for loan losses 35,985
19,436
80,954
74,088
Gross loan charge-offs (36,820 ) (22,205 ) (72,255 ) (48,220 )
Loan recoveries 3,888
2,164
15,133
5,878
Foreign currency translation adjustments (531 ) (391 ) (325 ) (1,057 )
Allowance for loan losses, ending balance $ 304,410
$ 285,713
$ 304,410
$ 285,713
Allowance for unfunded credit commitments, beginning balance 62,664
54,104
55,183
51,770
Provision for (reduction of) unfunded credit commitments 551
(2,262 ) 8,079
138
Foreign currency translation adjustments (107 ) (34 ) (154 ) (100 )
Allowance for unfunded credit commitments, ending balance (1) $ 63,108
$ 51,808
$ 63,108
$ 51,808
Ratios and other information:
Provision for loan losses as a percentage of period-end total gross loans (annualized) 0.46 % 0.28 % 0.35 % 0.36 %
Gross loan charge-offs as a percentage of average total gross loans (annualized) 0.49
0.33
0.33
0.26
Net loan charge-offs as a percentage of average total gross loans (annualized) 0.44
0.30
0.26
0.22
Allowance for loan losses as a percentage of period-end total gross loans 0.97
1.03
0.97
1.03
Provision for credit losses $ 36,536
$ 17,174
$ 89,033
$ 74,226
Period-end total gross loans 31,229,003
27,668,829
31,229,003
27,668,829
Average total gross loans 29,979,522
26,497,171
29,373,264
25,165,486



	Three months ended March 31,
(Dollars in thousands, except ratios)	2020			2019
Allowance for credit losses for loans, beginning balance	$	304,924		$	280,903
Day one impact of adopting ASC 326	25,464			—
Provision for loans	248,901			25,821
Gross loan charge-offs	(36,896		)	(9,000		)
Loan recoveries	7,755			1,425
Foreign currency translation adjustments	(1,185		)	1,002
Allowance for credit losses for loans, ending balance	$	548,963		$	300,151
Allowance for credit losses for unfunded credit commitments, beginning balance	67,656			55,183
Day one impact of adopting ASC 326	22,826			—
(Reduction of) provision for unfunded credit commitments	(5,477		)	2,730
Foreign currency translation adjustments	(315		)	57
Allowance for credit losses for unfunded credit commitments, ending balance (1)	$	84,690		$	57,970
Allowance for credit losses for HTM securities, beginning balance	—			—
Day one impact of adopting ASC 326	174			—
Provision for HTM securities	56			—
Allowance for credit losses for HTM securities, ending balance (2)	$	230		$	—
Ratios and other information:
Provision for loans as a percentage of period-end total loans (annualized) (3)	2.78		%	0.36		%
Allowance for credit losses for loans as a percentage of period-end total loans (3)	1.53			1.03
Provision for credit losses	$	243,480		$	28,551
Period-end total loans (3)	35,968,085			29,020,519
Average total loans (3)	33,660,728			28,555,655


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


(2)	The "allowance for credit losses for HTM securities" is included as a component of HTM securities and presented net in our consolidated financial statements.


(3)	For the three months ended March 31, 2020, loan amounts are disclosed, and ratios are calculated, using the amortized cost basis as a result of the adoption of CECL. Prior period loan amounts are disclosed, and ratios are calculated, using the gross basis.

Three months ended ~~September 30,~~March 31, 2020 and 2019 ~~and 2018~~

Our provision for credit losses was ~~$36.5~~$243.5 million for the three months ended ~~September 30,~~March 31, 2020, consisting of a provision for loans of $248.9 million, a reduction of our expected credit losses for unfunded credit commitments of $5.5 million and a $0.1 million provision for our HTM securities. Our provision for credit losses was $28.6 million for the three months ended March 31, 2019, consisting of a provision for ~~loan losses~~loans of ~~$36.0~~$25.8 million and a provision for unfunded credit commitments of ~~$0.5~~$2.7 million. ~~Our~~

The provision for credit losses for loans of $248.9 million was ~~$17.2~~driven primarily by $190.7 million in additional reserves for our performing loans based on our forecast models of the ~~three months ended September 30, 2018, consisting~~current economic environment, including the impact of ~~a provision for~~the COVID-19 pandemic, as well as changes in loan ~~losses of $19.4 million and a reduction of~~composition within our ~~allowance for unfunded credit commitments of $2.2 million.~~

The provision for loan losses of $36.0 million for the three months ended September 30, 2019 reflects an increase of $19.1 million for net new nonaccrual loans, $18.3 million for charge-offs not specifically reserved for and $15.2portfolio segments, $40.9 million in additional reserves for period-end loan growth, ~~partially offset by a decrease of $13.0 million for the qualitative component of our performing loans and $3.9 million of recoveries.~~

The provision for unfunded credit commitments of $0.5 million was driven primarily by the growth in unfunded credit commitments of $1.3 billion for three months ended September 30, 2019, offset by a decrease related to the continued shift in the mix of our unfunded credit facilities to our large, higher credit quality private equity/venture capital clients.

~~The provision for loan losses of $19.4 million for the three months ended September 30, 2018 reflects primarily an increase of $12.9 million in additional reserves for period-end loan growth, $9.2~~$13.1 million for charge-offs not specifically reserved for at December 31, 2019 and ~~$9.3~~$10.7 million in net new nonaccrual loans, partially offset by $7.8 million of recoveries.

A reduction of our expected credit losses for unfunded credit commitments of $5.5 million was driven primarily by a decrease in the expected future commitments for milestone tranches, which are tied to company performance or additional funding rounds, based on our forecast models of the current economic environment, including the impact of the COVID-19 pandemic.

The provision for loans of $25.8 million for the three months ended March 31, 2019 reflects primarily an increase of $27.4 million in net new specific reserves for nonaccrual loans, partially offset by a decrease in the qualitative component of our performing loan reserves of $8.2 million reflective of the continued growth of larger, higher credit quality private equity/venture capital loans as a percentage of total gross loans.

The reduction of the allowance for unfunded credit commitments of $2.2 million for the three months ended September 30, 2018 was driven primarily by a decrease in reserves reflective primarily of the continued shift in the mix of our unfunded credit facilities consisting of large, higher credit quality private equity/venture capital loans.

Gross loan charge-offs were $36.8 million for the three months ended September 30, 2019, of which $18.3 million was not specifically reserved for in prior quarters. Gross loan charge-offs were primarily driven by a $9.4 million charge-off for one mid-stage life science/healthcare portfolio client and $7.6 million for one later-stage software client, both of which were previously included in our nonaccrual loan portfolio. The remaining charge-offs came primarily from our early-stage and mid-stage clients.

Gross loan charge-offs were $22.2 million for the three months ended September 30, 2018, of which $9.2 million was not specifically reserved for at June 30, 2018. Gross loan charge-offs included $12.7 million from our hardware loan portfolio and consisted primarily of $11.1 million for one early-stage client and $6.3 million from our software/internet loan portfolio primarily attributable to one mid-stage client.

~~Nine months ended September 30, 2019 and 2018~~

Our provision for credit losses was $89.0 million for the nine months ended September 30, 2019, consisting of a provision for loan losses of $81.0 million and a provision for unfunded credit commitments of $8.0 million. Our provision for credit losses was $74.2 million for the nine months ended September 30, 2018, consisting of a provision for loan losses of $74.1 million and a provision for unfunded credit commitments of $0.1 million.

~~The provision for loan losses of $81.0 million for the nine months ended September 30, 2019 was reflective primarily of $57.5~~$4.1 million in ~~net new specific~~additional reserves for ~~nonaccrual loans, $30.5~~period-end loan growth and $4.9 million for charge-offs not specifically reserved for, ~~in prior quarters and $22.4 million from period-end loan growth,~~ partially offset by a decrease of ~~$14.3~~$8.2 million for our performing loans ~~and $15.1 million of recoveries.~~reserve.

The provision for unfunded credit commitments of ~~$8.0~~$2.7 million ~~for nine months ended September 30, 2019~~ was driven primarily by growth in unfunded credit commitments of ~~$3.4 billion.~~

~~The provision~~$1.4 billion for ~~loan losses of $74.1 million for the nine~~three months ended September 30, 2018 was reflective primarily of $39.4 million from period-end loan growth, $34.0 million in net new specific reserves for nonaccrual loans and $24.0 million for charge-offs not specifically reserved for in prior quarters, partially offset by a decrease in reserves of $20.7 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 portfolio.March 31, 2019.

~~The provision for unfunded credit commitments of $0.1 million for the nine months ended September 30, 2018 was drivenprimarily by increased reserves of $4.5 million from growth in our unfunded credit commitment balances, offset by a decrease in reserves reflective of the methodology enhancements.~~

Gross loan charge-offs were ~~$72.3~~$36.9 million for the ~~nine months ended September 30, 2019,~~first quarter of 2020, of which ~~$30.5~~$13.1 million was not specifically reserved for ~~in prior quarters.~~at December 31, 2019. Gross loan charge-offs ~~included $26.9~~were primarily driven by a $33.4 million charge-off for our investor dependent clients with one $10.7 million charge-off related to a later-stage life sciences/healthcare client. The remaining charge-offs came primarily from our life science/healthcare loan portfolio and $38.3 million from our software/internet loan portfolio. Gross loan charge-offs for our life science/healthcare portfolio were driven primarily by $22.5 million from one mid-stage client. Gross loan charge-offs for our software/internet loan portfolio were driven primarily by our early-stage clients.Sponsor Led Buyout risk-based segment.

Gross loan charge-offs were ~~$48.2~~$9.0 million for the ~~nine~~three months ended ~~September 30, 2018,~~March 31, 2019, of which ~~$24.0~~$4.9 million was not specifically reserved for ~~in prior quarters.~~at December 31, 2018. Gross loan charge-offs ~~included $26.4~~were primarily due to $8.3 million from our software/internet loan portfolio driven by three mid-stage clients and ~~$16.1 million from our hardware loan portfolio and consisted primarily of $24.4 million from~~one early-stage ~~clients, $8.7 million for one sponsor-led buyout loan, $4.8 million from one mid-stage client and $3.2 million from one late-stage~~ client.

See “Consolidated Financial Condition—Credit Quality and Allowance for ~~Loan Losses”~~Credit Losses for Loans and for Unfunded Credit Commitments” below and Note ~~8—“Loans,~~7 — “Loans and Allowance for ~~Loan Losses~~Credit Losses: Loans 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.~~credit losses for loans and unfunded credit commitments.

Noninterest Income

For the three ~~and nine~~ months ended ~~September 30, 2019,~~March 31, 2020, noninterest income was ~~$294.0~~$301.9 million ~~and $908.1 million, respectively,~~ compared to ~~$210.1 million and $558.3~~$280.4 million for the comparable ~~2018 periods.~~2019 period. For the three ~~and nine~~ months ended ~~September 30, 2019,~~March 31, 2020, non-GAAP noninterest income, net of noncontrolling interests was ~~$279.4~~$303.8 million ~~and $871.6 million,~~

~~respectively,~~ compared to ~~$203.4 million and $529.1~~$277.1 million for the comparable ~~2018 periods.~~2019 period. For the three ~~and nine~~ months ended ~~September 30, 2019,~~March 31, 2020, non-GAAP core fee income ~~including~~plus investment banking revenue and commissions was ~~$213.0~~$231.3 million ~~and $651.6 million, respectively,~~ compared to ~~$131.7 million and $369.8~~$218.1 million for the comparable ~~2018 periods.~~2019 period. For the three ~~and nine~~ months ended ~~September 30, 2019,~~March 31, 2020, non-GAAP core fee income was ~~$162.2~~$168.5 million and ~~$473.8 million, respectively,~~ compared to ~~$131.7 million and $369.8~~$154.2 million for the comparable ~~2018 periods.~~2019 period. (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~~plus 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 non-recurring items.~~subsidiaries. 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~~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 (i) certain line items where performance is typically subject to market or other conditions beyond our control, primarily our net gains (losses)

on investment securities and equity warrant ~~assets.~~assets, (ii) our investment banking revenue and commissions, and (iii) other noninterest income. Core fee income includes client investment fees, foreign exchange fees, credit card fees, deposit service charges, lending related fees and letters of credit and standby letters of credit fees.

Core fee income ~~including~~plus 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.~~control, primarily our net gains (losses) on investment securities and equity warrant assets, and other noninterest income. Core fee income plus investment banking revenue and commissions includes core fee income plus investment banking revenue and commissions.

The following table provides a reconciliation of GAAP noninterest income to non-GAAP noninterest income, net of noncontrolling interests, for the three ~~and nine~~ months ended ~~September 30, 2019~~March 31, 2020 and ~~2018:~~2019:


	Three months ended September 30,						Nine months ended September 30,						Three months ended March 31,
(Dollars in thousands)	2019		2018		% Change		2019		2018		% Change		2020			2019		% Change
GAAP noninterest income	$	294,009	$	210,070	40.0	%	$	908,135	$	558,277	62.7	%	$	301,934		$	280,376	7.7	%
Less: income attributable to noncontrolling interests, including carried interest allocation	14,568		6,692		117.7		36,552		29,161		25.3
Less: (loss) income attributable to noncontrolling interests, including carried interest allocation													(1,854		)	3,248		(157.1	)
Non-GAAP noninterest income, net of noncontrolling interests	$	279,441	$	203,378	37.4		$	871,583	$	529,116	64.7		$	303,788		$	277,128	9.6

The following table provides a reconciliation of GAAP noninterest income to non-GAAP core fee income for the three ~~and nine~~ months ended ~~September 30, 2019~~March 31, 2020 and ~~2018:~~2019:


	Three months ended September 30,						Nine months ended September 30,						Three months ended March 31,
(Dollars in thousands)	2019		2018		% Change		2019		2018		% Change		2020		2019		% Change
GAAP noninterest income	$	294,009	$	210,070	40.0	%	$	908,135	$	558,277	62.7	%	$	301,934	$	280,376	7.7	%
Less: gains on investment securities, net	29,849		32,193		(7.3	)	106,575		77,365		37.8		46,055		29,028		58.7
Less: gains on equity warrant assets, net	37,561		34,141		10.0		107,213		72,393		48.1		13,395		21,305		(37.1	)
Less: other noninterest income	13,631		12,022		13.4		42,773		38,671		10.6		11,137		11,897		(6.4	)
Non-GAAP core fee income including investment banking revenue and commissions (1)	$	212,968	$	131,714	61.7		$	651,574	$	369,848	76.2
Non-GAAP core fee income plus investment banking revenue and commissions (1)													$	231,347	$	218,146	6.1
Less: investment banking revenue	38,516		—		—		137,005		—		—		46,867		49,795		(5.9	)
Less: commissions	12,275		—		—		40,812		—		—		16,022		14,108		13.6
Non-GAAP core fee income (2)	$	162,177	$	131,714	23.1		$	473,757	$	369,848	28.1		$	168,458	$	154,243	9.2

(1)

Non-GAAP core fee income ~~including~~plus 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.~~control, and other noninterest income. Core fee income plus investment banking revenue and commissions is Non-GAAP core fee income (as defined in the subsequent footnote) with the addition of investment banking revenue and commissions.

(2)

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

Gains on Investment Securities, Net

Net gains 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 AFS debt securities portfolio, when applicable.

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 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 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 (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 30,~~March 31, 2020 and 2019 ~~and 2018~~

For the three months ended ~~September 30, 2019,~~March 31, 2020, we had net gains on investment securities of ~~$29.8~~$46.1 million, compared to ~~$32.2~~$29.0 million for the comparable ~~2018~~2019 period. Non-GAAP net gains on investment securities, net of noncontrolling interests, were ~~$15.2~~$47.6 million for the three months ended ~~September 30, 2019,~~March 31, 2020, compared to non-GAAP net gains, net of controlling interest of $25.6 million for the comparable ~~2018~~2019 period.

Non-GAAP net gains on investment securities, net of noncontrolling interests, of ~~$15.2~~$47.6 million for the three months ended ~~September 30, 2019~~March 31, 2020 were driven by the following:


•	Gains of $~~12.5~~61.2 million from our ~~managed funds~~AFS debt securities portfolio, resulting from the sale of ~~funds portfolio, related primarily to net unrealized valuation increases in private and public company investments held by~~$2.6 billion of U.S. Treasury securities during the ~~funds in the portfolio,~~


•	~~Gains of~~ ~~$8.0 million~~ ~~from our strategic and other investments, comprised primarily of net unrealized valuation increases in private companies held in our strategic venture capital funds, and~~


•	~~Gains of~~ ~~$5.5 million~~ ~~from our managed direct venture funds, related primarily to net unrealized valuation increases in investments held by the funds in the portfolio, partially~~quarter, offset by


•	Losses of $~~11.5~~4.2 million from our public equity securities investments, primarily driven by unrealized losses due to ~~a decline~~decreases in the value of ~~our~~ public equity securities ~~held.~~held, and

~~Nine months ended September 30, 2019~~Losses of $7.5 million from our SVB Capital managed funds and ~~2018~~strategic direct investments (comprised of our managed funds of funds, managed direct venture funds, debt funds and strategic and other investments components below) primarily driven by a downward valuation adjustment of $17.1 million for illiquid investments held in the private managed funds and companies of our portfolios due to the current market volatility. The downward valuation adjustment was offset by unrealized net valuation increases from private company investments held in these portfolios.

~~For~~Notwithstanding the ~~nine months ended September 30, 2019, we had net~~gains from our sale of U.S. Treasury securities in our AFS debt securities portfolio, our total gains on investment securities ~~of $106.6 million, compared to $77.4 million~~ for the ~~comparable 2018 period. Non-GAAP net gains~~remaining portfolio were negatively impacted by COVID-19 market conditions towards the end of the first quarter of 2020. We expect continued pressure on our investment securities ~~net of noncontrolling interests, were $69.9 million for~~in 2020 as we anticipate public markets to continue to fluctuate, as well as a slowdown in IPO, M&A and other private market activities, due to the ~~nine months endedSeptember 30, 2019, compared to $48.1 million for the comparable 2018 period.~~COVID-19 pandemic.

~~Non-GAAP net gains, net of noncontrolling interests, of $69.9 million for the nine months ended September 30, 2019 were driven primarily by the following:~~


•	~~Gains of~~ ~~$30.5 million~~ ~~from our managed funds of funds portfolio, related primarily to net unrealized valuation increases in private and public company investments held by the funds in the portfolio,~~


•	~~Gains of~~ ~~$30.3 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~~ ~~$7.6 million~~ ~~from our managed direct venture funds, related primarily to net unrealized valuation increases in investments held by the funds in the portfolio, and~~


•	~~Gains of~~ ~~$5.2 million~~ ~~from our strategic and other investments, comprised primarily of net unrealized valuation increases in private companies held in our strategic venture capital funds.~~

The following 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~~ months ended ~~September 30, 2019~~March 31, 2020 and ~~2018:~~

2019:

(Dollars in thousands) 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, 2019
Total gains (losses) on investment securities, net
$ 22,223
$ 9,668

$ (11,488 )
$ 187

$ —

$ 8,035
$ 1,224
$ 29,849
Less: income attributable to noncontrolling interests, including carried interest allocation
9,676
4,138

—

—

—

—
826
14,640
Non-GAAP net gains (losses) on investment securities, net of noncontrolling interests $ 12,547
$ 5,530
$ (11,488 ) $ 187
$ —
$ 8,035
$ 398
$ 15,209

Three months ended September 30, 2018
Total gains on investment securities, net $ 12,949
$ 1,863
$ 4,372
$ 1,473
$ —
$ 11,536
$ —
$ 32,193
Less: income attributable to noncontrolling interests, including carried interest allocation 5,914
727
—
—
—
—
—
$ 6,641
Non-GAAP net gains on investment securities, net of noncontrolling interests $ 7,035
$ 1,136
$ 4,372
$ 1,473
$ —
$ 11,536
$ —
$ 25,552

Nine months ended September 30, 2019
Total gains (losses) on investment securities, net $ 60,787
$ 13,135
$ (1,408 ) $ 1,529
$ (3,905 ) $ 30,348
$ 6,089
$ 106,575
Less: income attributable to noncontrolling interests, including carried interest allocation 30,273
5,540
—
—
—
—
861
36,674
Non-GAAP net gains (losses) on investment securities, net of noncontrolling interests $ 30,514
$ 7,595
$ (1,408 ) $ 1,529
$ (3,905 ) $ 30,348
$ 5,228
$ 69,901

Nine months ended September 30, 2018
Total gains (losses) on investment securities, net $ 49,553
$ 3,377
$ (17,770 ) $ (100 ) $ —
$ 42,305
$ —
$ 77,365
Less: income attributable to noncontrolling interests, including carried interest allocation 27,904
1,314
—
—
—
—
—
29,218
Non-GAAP net gains (losses) on investment securities, net of noncontrolling interests $ 21,649
$ 2,063
$ (17,770 ) $ (100 ) $ —
$ 42,305
$ —
$ 48,147



(Dollars in thousands)	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 March 31, 2020
Total gains (losses) on investment securities, net	$	(2,464	)	$	(2,272	)	$	(4,206	)	$	(362	)	$	61,165		$	(4,017	)	$	(1,789	)	$	46,055
Less: (loss) income attributable to noncontrolling interests, including carried interest allocation	(306		)	(1,327		)	—			—			—			—			98			(1,535		)
Non-GAAP net gains (losses) on investment securities, net of noncontrolling interests	$	(2,158	)	$	(945	)	$	(4,206	)	$	(362	)	$	61,165		$	(4,017	)	$	(1,887	)	$	47,590

Three months ended March 31, 2019
Total gains (losses) on investment securities, net	$	6,229		$	(634	)	$	9,636		$	—		$	(3,630	)	$	15,002		$	2,425		$	29,028
Less: income (loss) attributable to noncontrolling interests, including carried interest allocation	3,745			(309		)	—			—			—			—			—			$	3,436
Non-GAAP net gains (loss) on investment securities, net of noncontrolling interests	$	2,484		$	(325	)	$	9,636		$	—		$	(3,630	)	$	15,002		$	2,425		$	25,592

Gains on Equity Warrant Assets, Net

Three months ended ~~September 30,~~March 31, 2020 and 2019 ~~and 2018~~

Net gains on equity warrant assets were ~~$37.6~~$13.4 million for the three months ended ~~September 30, 2019,~~March 31, 2020, compared to net gains of ~~$34.1~~$21.3 million for the comparable ~~2018~~2019 period. Net gains on equity warrant assets for the three months ended ~~September 30, 2019~~March 31, 2020 consisted of:


•	Net gains of $~~30.0~~19.2 million from the exercise of equity warrant assets, ~~compared to net gains of~~ ~~$18.3 million, primarily driven~~partially offset by ~~healthy gains from IPO activity, and~~

•

Net ~~gains~~losses of $~~8.0~~5.5 million from ~~increases in~~ warrant valuations ~~compared to net gains of~~ ~~$17.3 million, driven by valuation increases~~ in our private company warrant portfolio ~~driven~~consisting of an overall downward valuation adjustment of $8.2 million due to the current market volatility, partially offset by ~~healthy funding rounds during the three months ended~~ ~~September 30, 2019~~.net valuation increases.

~~Nine months ended September 30, 2019 and 2018~~

~~Net gains on~~Our equity warrant assets were ~~$107.2 million for~~also negatively impacted by COVID-19 market conditions towards the ~~nine months ended September 30, 2019, compared to net gains~~end of ~~$72.4 million for~~ the ~~comparable 2018 period. Net gains~~first quarter of 2020. We expect continued pressure on our equity warrant ~~assets for~~asset valuations and warrant activities in 2020 as we anticipate a slowdown in IPO, M&A and other private market activities due to the ~~nine months ended September 30, 2019 consisted of:~~COVID-19 pandemic.


•	~~Net gains of~~ ~~$90.4 million~~ ~~from the exercise of equity warrant assets compared to net gains of~~ ~~$42.8 million, reflective primarily of increased IPO activity during the~~ ~~nine months endedSeptember 30, 2019, and~~


•	~~Net gains of~~ ~~$19.8 million~~ ~~from changes in warrant valuation increases compared to net gains of~~ ~~$32.7 million, driven by valuation increases in our private company warrant portfolio during the~~ ~~nine months endedSeptember 30, 2019~~.

A summary of gains on equity warrant assets, net, for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2020 and 2019 ~~and 2018~~ is as follows:


	Three months ended September 30,								Nine months ended September 30,								Three months ended March 31,
(Dollars in thousands)	2019			2018			% Change		2019			2018			% Change		2020			2019			% Change
Equity warrant assets (1):
Gains on exercises, net	$	30,047		$	18,287		64.3	%	$	90,357		$	42,808		111.1	%	$	19,193		$	5,482		NM
Terminations	(481		)	(1,432		)	(66.4	)	(2,931		)	(3,158		)	(7.2	)	(326		)	(415		)	(21.4	)%
Changes in fair value, net	7,995			17,286			(53.7	)	19,787			32,743			(39.6	)	(5,472		)	16,238			(133.7	)
Total gains on equity warrant assets, net	$	37,561		$	34,141		10.0		$	107,213		$	72,393		48.1		$	13,395		$	21,305		(37.1	)

NM—Not meaningful

(1)

At ~~September 30, 2019~~,March 31, 2020, we held warrants in ~~2,227~~2,342 companies, compared to ~~2,031~~2,149 companies at ~~September 30, 2018~~.March 31, 2019. The total fair value of our warrant portfolio was ~~$149.1 million~~ at ~~September 30, 2019~~ ~~and $147.0~~$152.7 million at ~~September 30, 2018~~.March 31, 2020 and $162.2 million at March 31, 2019. Warrants in 1519 companies each had fair values greater than $1.0 million and collectively represented ~~$43.7~~$46.7 million, or ~~29.3~~30.6 percent, of the fair value of the total warrant portfolio at ~~September 30, 2019~~.March 31, 2020. Warrants in 1826 companies each had fair values greater than $1.0 million and collectively represented ~~$42.8~~$56.8 million, or ~~29.1~~35.0 percent, of the fair value of the total warrant portfolio at ~~September 30, 2018~~.

March 31, 2019.

Non-GAAP Core Fee Income


	Three months ended September 30,						Nine months ended September 30,						Three months ended March 31,
(Dollars in thousands)	2019		2018		% Change		2019		2018		% Change		2020		2019		% Change
Non-GAAP core fee income (1):
Client investment fees	$	46,679	$	36,265	28.7	%	$	136,905	$	88,592	54.5	%	$	43,393	$	44,482	(2.4	)%
Foreign exchange fees	40,309		32,656		23.4		116,863		100,560		16.2		47,505		38,048		24.9
Credit card fees	30,158		24,121		25.0		86,431		68,739		25.7		28,304		27,483		3.0
Deposit service charges	22,482		19,588		14.8		65,496		56,081		16.8		24,589		20,939		17.4
Lending related fees	11,707		10,675		9.7		36,857		30,938		19.1		13,125		13,937		(5.8	)
Letters of credit and standby letters of credit fees	10,842		8,409		28.9		31,205		24,938		25.1		11,542		9,354		23.4
Total non-GAAP core fee income (1)	$	162,177	$	131,714	23.1		$	473,757	$	369,848	28.1		$	168,458	$	154,243	9.2
Investment banking revenue	38,516		—		—		137,005		—		—		46,867		49,795		(5.9	)
Commissions	12,275		—		—		40,812		—		—		16,022		14,108		13.6
Total non-GAAP core fee income including investment banking revenue and commissions (2)	$	212,968	$	131,714	61.7		$	651,574	$	369,848	76.2
Total non-GAAP core fee income plus investment banking revenue and commissions (2)													$	231,347	$	218,146	6.1


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


(2)	~~This non-GAAP measure~~Non-GAAP core fee income plus 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 ~~as well as investment banking revenue~~ and ~~commissions.~~other noninterest income. See “Use of Non-GAAP Measures” above.

Client Investment Fees

Client investment fees were ~~$46.7 million and $136.9~~$43.4 million for the three ~~and nine~~ months ended ~~September 30, 2019,~~March 31, 2020, compared to ~~$36.3 million and $88.6~~$44.5 million for the comparable ~~2018 periods.~~2019 period. The ~~increases were~~decrease was reflective of lower spreads due to decreases in the ~~large increases~~Federal Funds interest rates, offset by growth in average off-balance sheet client investment funds ~~driven by~~of $16.2 billion from March 31, 2019. Given our ~~clients’ increased utilization~~expectations of ~~our off-balance sheet sweep money market funds and products managed by SVB Asset Management. Client~~a continued low rate environment, we generally expect client investment fees ~~also benefited from improved spreads on our client investment funds due~~in 2020 to ~~increases in general market rates since the third quarter ended September 30, 2018.~~be lower than 2019. A summary of client investment fees by instrument type for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2020 and 2019 ~~and 2018~~ is as follows:


	Three months ended September 30,						Nine months ended September 30,						Three months ended March 31,
(Dollars in thousands)	2019		2018		% Change		2019		2018		% Change		2020		2019		% Change
Client investment fees by type:
Sweep money market fees	$	26,202	$	21,105	24.2	%	$	79,698	$	50,605	57.5	%	$	23,049	$	26,544	(13.2	)%
Asset management fees	7,256		6,358		14.1		20,883		17,447		19.7		9,137		6,671		37.0
Repurchase agreement fees	13,221		8,802		50.2		36,324		20,540		76.8		11,207		11,267		(0.5	)
Total client investment fees	$	46,679	$	36,265	28.7		$	136,905	$	88,592	54.5		$	43,393	$	44,482	(2.4	)

The following table summarizes average client investment funds for the three ~~and nine~~ months ended ~~September 30, 2019~~March 31, 2020 and ~~2018:~~2019:


	Three months ended September 30,						Nine months ended September 30,						Three months ended March 31,
(Dollars in millions)	2019		2018		% Change		2019		2018		% Change		2020		2019		% Change
Sweep money market funds	$	40,321	$	34,556	16.7	%	$	40,048	$	30,284	32.2	%	$	43,045	$	39,805	8.1	%
Client investment assets under management (1)	42,834		36,541		17.2		40,969		33,561		22.1		50,746		39,247		29.3
Repurchase agreements	9,670		8,464		14.2		8,947		7,905		13.2		9,799		8,362		17.2
Total average client investment funds (2)	$	92,825	$	79,561	16.7		$	89,964	$	71,750	25.4		$	103,590	$	87,414	18.5


(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 ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018:~~2019:


(Dollars in millions)	September 30, 2019		December 31, 2018		% Change		March 31, 2020		December 31, 2019		% Change
Sweep money market funds	$	42,022	$	38,348	9.6	%	$	44,833	$	43,226	3.7	%
Client investment assets under management (1)	44,886		39,214		14.5		51,020		46,904		8.8
Repurchase agreements	9,564		8,422		13.6		11,099		9,062		22.5
Total period-end client investment funds (2)	$	96,472	$	85,984	12.2		$	106,952	$	99,192	7.8


(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 ~~$40.3 million and $116.9~~$47.5 million for the three ~~and nine~~ months ended ~~September 30, 2019, respectively,~~March 31, 2020, compared to ~~$32.7 million and $100.6~~$38.0 million for the comparable ~~2018 periods.~~2019 period. The increase in foreign exchange fees was driven primarily by increases in spot contract commissions driven by increased volume of trades for the three ~~and nine~~ months ended ~~September 30, 2019~~March 31, 2020 compared to the ~~2018 periods.~~2019 period. The volume of trades for spot contracts increased 16.0 ~~and 21.6~~ percent for the three ~~and nine~~ months ended ~~September 30, 2019, respectively,~~March 31, 2020, compared to the comparable ~~2018 periods~~2019 period reflective primarily of our global expansion initiative and increased client engagement efforts. Despite a strong first quarter 2020 for foreign exchange fees, we expect foreign exchange activity to subside in 2020 given a general slowdown in business activity. A summary of foreign exchange fee income by instrument type for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2020 and 2019 ~~and 2018~~ is as follows:


	Three months ended September 30,						Nine months ended September 30,						Three months ended March 31,
(Dollars in thousands)	2019		2018		% Change		2019		2018		% Change		2020		2019		% Change
Foreign exchange fees by instrument type:
Spot contract commissions	$	36,836	$	30,041	22.6	%	$	106,561	$	92,791	14.8	%	$	40,934	$	35,029	16.9	%
Forward contract commissions	3,371		2,534		33.0		10,144		7,474		35.7		6,339		2,995		111.7
Option premium fees	102		81		25.9		158		295		(46.4	)	232		24		NM
Total foreign exchange fees	$	40,309	$	32,656	23.4		$	116,863	$	100,560	16.2		$	47,505	$	38,048	24.9

NM—Not meaningful

Credit Card Fees

Credit card fees were ~~$30.2 million and $86.4~~$28.3 million for the three ~~and nine~~ months ended ~~September 30, 2019, respectively,~~March 31, 2020, compared to ~~$24.1 million and $68.7~~$27.5 million for the comparable ~~2018 periods.~~2019 period. The ~~increases were~~increase was primarily due to ~~an increase in~~higher net interchange fees ~~for~~during the ~~three and nine~~first two months ~~ended September 30, 2019.~~of 2020, offset by a decrease in March 2020 from lower transactions reflective of interrupted normal business activity from the COVID-19 pandemic. Given the general slowdown in business activities due to the COVID-19 pandemic which impacts card activities, we expect credit card fees in 2020 to be lower than 2019 in anticipation of reduced transaction volume. A summary of credit card fees by instrument type for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2020 and 2019 ~~and 2018~~ is as follows:


	Three months ended September 30,						Nine months ended September 30,						Three months ended March 31,
(Dollars in thousands)	2019		2018		% Change		2019		2018		% Change		2020		2019		% Change
Credit card fees by instrument type:
Card interchange fees, net	$	24,560	$	18,849	30.3	%	$	68,808	$	54,547	26.1	%	$	21,775	$	21,393	1.8	%
Merchant service fees	3,943		3,679		7.2		12,763		10,010		27.5		5,027		4,534		10.9
Card service fees	1,655		1,593		3.9		4,860		4,182		16.2		1,502		1,556		(3.5	)
Total credit card fees	$	30,158	$	24,121	25.0		$	86,431	$	68,739	25.7		$	28,304	$	27,483	3.0

Deposit Service Charges

Deposit service charges were ~~$22.5 million and $65.5~~$24.6 million for the three ~~and nine~~ months ended ~~September 30, 2019, respectively,~~March 31, 2020, compared to ~~$19.6 million and $56.1~~$20.9 million for the comparable ~~2018 periods.~~2019 period. The ~~increases were~~increase was reflective of higher deposit client counts as well as higher volumes of our transaction-based fee products during the three ~~and nine~~ months ended ~~September 30, 2019.~~March 31, 2020. We generally expect deposit service charges to be lower in 2020 than 2019 due to lower volumes of transaction-based fee products and higher earnings credit rates.

Lending Related Fees

Lending related fees were ~~$11.7 million and $36.9~~$13.1 million for the three ~~and nine~~ months ended ~~September 30, 2019, respectively,~~March 31, 2020, compared to ~~$10.7 million and $30.9~~$13.9 million for the comparable ~~2018 periods.~~2019 period. The ~~increases were due to~~decrease was reflective of a decrease in unused commitment fees, reflective of increased utilization of unfunded credit commitments, partially offset by an increase in loan servicing ~~fees and syndication fee income for the three and nine months ended September 30, 2019.~~fees. A summary of lending

related fees by type for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2020 and 2019 ~~and 2018~~ is as follows:


	Three months ended September 30,						Nine months ended September 30,						Three months ended March 31,
(Dollars in thousands)	2019		2018		% Change		2019		2018		% Change		2020		2019		% Change
Lending related fees by instrument type:
Unused commitment fees	$	8,339	$	8,410	(0.8	)%	$	25,060	$	24,994	0.3	%	$	8,406	$	9,670	(13.1	)%
Other	3,368		2,265		48.7		11,797		5,944		98.5		4,719		4,267		10.6
Total lending related fees	$	11,707	$	10,675	9.7		$	36,857	$	30,938	19.1		$	13,125	$	13,937	(5.8	)

Letters of Credit and Standby Letters of Credit Fees

Letters of credit and standby letters of credit fees were ~~$10.8 million and $31.2~~$11.5 million for the three ~~and nine~~ months ended ~~September 30, 2019, respectively,~~March 31, 2020, compared to ~~$8.4 million and $24.9~~$9.4 million for the comparable2019 ~~2018~~ ~~periods.~~period. The ~~increases were~~increase was primarily driven by ~~increases~~an increase in deferred fee income reflective of larger letter of credit issuances. We generally expect lower fees in 2020 due to reduced international trade activities.

Investment Banking Revenue

Investment banking revenue was ~~$38.5 million and $137.0~~$46.9 million for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2020, compared to $49.8 million for the comparable 2019 ~~respectively, consisting~~period. The decrease is primarily attributable to lower levels of ~~underwriting fees.~~exit activity in the life science/healthcare IPO market which began to decline significantly starting in March of 2020 due to the COVID-19 pandemic. We generally expect investment banking revenues to be lower in 2020 than 2019 due to a slowdown in IPO and M&A activities due to COVID-19 market conditions. A summary of investment banking revenue by type for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2020 and 2019 ~~and 2018~~ is as follows:


	Three months ended September 30,					Nine months ended September 30,					Three months ended March 31,
(Dollars in thousands)	2019		2018		% Change	2019		2018		% Change	2020		2019		% Change
Investment banking revenue:
Underwriting fees	$	31,016	$	—	—	$	109,371	$	—	—	$	31,290	$	35,772	(12.5	)%
Advisory fees	5,200		—		—	22,789		—		—	15,487		12,273		26.2
Private placements and other	2,300		—		—	4,845		—		—	90		1,750		(94.9	)
Total investment banking revenue	$	38,516	$	—	—	$	137,005	$	—	—	$	46,867	$	49,795	(5.9	)

Commissions

Commissions for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2020 were $16.0 million, compared to $14.1 million for the comparable 2019 ~~were $12.3 million and $40.8 million, respectively, which were~~period. The increase was driven by client trading activity, consistent with market volumes.

~~Other Noninterest Income~~

~~Total other noninterest income was $13.6 million and $42.8 million~~ Commissions include commissions received from clients for the ~~three~~execution of agency-based brokerage transactions in listed and ~~nine months ended September 30, 2019, respectively, compared to $12.0 million and $38.7 million~~ ~~for the comparable~~ ~~2018~~ ~~periods. The increases were due primarily to an increase~~over-the-counter equities. As a result of volatility in ~~fund management fees~~market conditions due to the ~~inclusion~~effects of ~~SVB Leerink~~COVID-19, sales and trading activities and underlying commissions may be positively impacted in ~~our financial results as of January 4, 2019.~~ ~~A summary of other noninterest income for the three and nine months ended September 30, 2019 and 2018 is as follows:~~2020.

Three months ended September 30, Nine months ended September 30,
(Dollars in thousands) 2019 2018 % Change 2019 2018 % Change
Other noninterest income by instrument type:
Fund management fees $ 8,493
$ 5,479
55.0 % $ 24,292
$ 17,144
41.7 %
Net (losses) gains on revaluation of foreign currency instruments, net of foreign exchange forward contracts (1) (78 ) 796
(109.8 ) 173
985
(82.4 )
Other service revenue (2) 5,216
5,747
(9.2 ) 18,308
20,542
(10.9 )
Total other noninterest income $ 13,631
$ 12,022
13.4
$ 42,773
$ 38,671
10.6


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


~~(2)~~	~~Includes dividends on FHLB/FRB stock, correspondent bank rebate income, incentive fees related to carried interest, valuation fee income and other fee income.~~

Noninterest Expense

A summary of noninterest expense for the three ~~and nine~~ months ended ~~September 30, 2019~~March 31, 2020 and ~~2018~~2019 is as follows:


	Three months ended September 30,						Nine months ended September 30,						Three months ended March 31,
(Dollars in thousands)	2019		2018		% Change		2019		2018		% Change		2020		2019		% Change
Compensation and benefits	$	233,840	$	195,437	19.6	%	$	715,073	$	543,198	31.6	%	$	255,586	$	238,061	7.4	%
Professional services	55,202		36,542		51.1		133,018		112,080		18.7		38,705		36,986		4.6
Premises and equipment	26,775		19,858		34.8		72,386		57,576		25.7		26,940		21,700		24.1
Net occupancy	16,981		13,694		24.0		49,716		40,598		22.5		18,346		16,048		14.3
Business development and travel	19,539		12,712		53.7		51,915		35,998		44.2		14,071		15,354		(8.4	)
FDIC and state assessments	4,881		9,550		(48.9	)	13,343		29,306		(54.5	)	5,234		3,979		31.5
Other	34,106		21,652		57.5		105,059		61,845		69.9		40,703		33,536		21.4
Total noninterest expense	$	391,324	$	309,445	26.5		$	1,140,510	$	880,601	29.5		$	399,585	$	365,664	9.3

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 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 for the three ~~and nine~~ months ended ~~September 30, 2019~~March 31, 2020 and ~~2018~~:2019:


	Three months ended September 30,								Nine months ended September 30,								Three months ended March 31,
Non-GAAP core operating efficiency ratio (Dollars in thousands, except ratios)	2019			2018			% Change		2019			2018			% Change		2020			2019			% Change
GAAP noninterest expense	$	391,324		$	309,445		26.5	%	$	1,140,510		$	880,601		29.5	%	$	399,585		$	365,664		9.3	%
Less: expense attributable to noncontrolling interests	145			154			(5.8	)	692			349			98.3		140			379			(63.1	)
Non-GAAP noninterest expense, net of noncontrolling interests	391,179			309,291			26.5		1,139,818			880,252			29.5		399,445			365,285			9.4
Less: expense attributable to SVB Leerink	55,200			—			—		177,675			—			—		62,037			60,540			2.5
Non-GAAP noninterest expense, net of noncontrolling interests and SVB Leerink	$	335,979		$	309,291		8.6		$	962,143		$	880,252		9.3		$	337,408		$	304,745		10.7

GAAP net interest income	$	520,644		$	493,222		5.6		$	1,562,933		$	1,379,528		13.3		$	524,137		$	512,886		2.2
Adjustments for taxable equivalent basis	2,957			2,858			3.5		8,769			6,249			40.3		3,409			2,907			17.3
Non-GAAP taxable equivalent net interest income	523,601			496,080			5.5		1,571,702			1,385,777			13.4		527,546			515,793			2.3
Less: income attributable to noncontrolling interests	14			10			40.0		41			29			41.4		21			11			90.9
Non-GAAP taxable equivalent net interest income, net of noncontrolling interests	523,587			496,070			5.5		1,571,661			1,385,748			13.4		527,525			515,782			2.3
Less: net interest income attributable to SVB Leerink	277			—			—		961			—			—		201			442			(54.5	)
Non-GAAP taxable equivalent net interest income, net of noncontrolling interests and SVB Leerink	$	523,310		$	496,070		5.5		$	1,570,700		$	1,385,748		13.3		$	527,324		$	515,340		2.3

GAAP noninterest income	$	294,009		$	210,070		40.0		$	908,135		$	558,277		62.7		$	301,934		$	280,376		7.7
Less: income attributable to noncontrolling interests, including carried interest allocation	14,568			6,692			117.7		36,552			29,161			25.3
Less: (loss) income attributable to noncontrolling interests, including carried interest allocation																	(1,854		)	3,248			(157.1	)
Non-GAAP noninterest income, net of noncontrolling interests	279,441			203,378			37.4		871,583			529,116			64.7		303,788			277,128			9.6
Less: non-GAAP net gains on investment securities, net of noncontrolling interests	15,209			25,552			(40.5	)	69,901			48,147			45.2		47,590			25,592			86.0
Less: net gains on equity warrant assets	37,561			34,141			10.0		107,213			72,393			48.1		13,395			21,305			(37.1	)
Less: investment banking revenue	38,516			—			—		137,005			—			—		46,867			49,795			(5.9	)
Less: commissions	12,275			—			—		40,812			—			—		16,022			14,108			13.6
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	$	175,880		$	143,685		22.4		$	516,652		$	408,576		26.5		$	179,914		$	166,328		8.2

GAAP total revenue	$	814,653		$	703,292		15.8		$	2,471,068		$	1,937,805		27.5		$	826,071		$	793,262		4.1
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	$	699,190		$	639,755		9.3		$	2,087,352		$	1,794,324		16.3		$	707,238		$	681,668		3.8

GAAP operating efficiency ratio	48.04		%	44.00		%	9.2		46.15		%	45.44		%	1.6
Operating efficiency ratio																	48.37		%	46.10		%	4.9
Non-GAAP core operating efficiency ratio (1)	48.05			48.35			(0.6	)	46.09			49.06			(6.1	)	47.71			44.71			6.7

(1)

The non-GAAP core operating efficiency ratio is calculated by dividing noninterest expense after adjusting for noninterest expense attributable to SVB Leerink by total revenue after adjusting for net interest 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.

Compensation and Benefits Expense

The following table provides a summary of our compensation and benefits expense for the three ~~and nine~~ months ended ~~September 30, 2019~~March 31, 2020 and ~~2018:~~2019:


	Three months ended September 30,						Nine months ended September 30,						Three months ended March 31,
(Dollars in thousands, except employees)	2019		2018		% Change		2019		2018		% Change		2020		2019		% Change
Compensation and benefits:
Salaries and wages	$	109,473	$	84,962	28.8	%	$	316,472	$	234,832	34.8	%	$	115,614	$	101,200	14.2	%
Incentive compensation & ESOP	60,486		57,375		5.4		203,614		155,390		31.0
Incentive compensation plans													66,674		69,389		(3.9	)
Other employee incentives and benefits (1)	63,881		53,100		20.3		194,987		152,976		27.5		73,298		67,472		8.6
Total compensation and benefits	$	233,840	$	195,437	19.6		$	715,073	$	543,198	31.6		$	255,586	$	238,061	7.4
Period-end full-time equivalent employees	3,460		2,836		22.0		3,460		2,836		22.0		3,710		3,250		14.2
Average full-time equivalent employees	3,413		2,778		22.9		3,309		2,623		26.2		3,672		3,228		13.8


(1)	Other employee incentives and benefits includes employer payroll taxes, group health and life insurance, share-based compensation, 401(k), ESOP, warrant incentive and retention plans, agency fees and other employee-related expenses.

Compensation and benefits expense was ~~$233.8~~$255.6 million for the three months ended ~~September 30, 2019,~~March 31, 2020, compared to ~~$195.4~~$238.1 million for the comparable ~~2018~~2019 period. The key changes in factors affecting compensation and benefits expense were as follows:

An increase of ~~$24.5~~$14.4 million in salaries and wages reflective primarily due to the increase in the number of average FTE by ~~635~~444 to ~~3,413~~3,672 for the ~~third~~first quarter of ~~2019, of which 229 FTE were attributable to the acquisition of SVB Leerink compared to the same period in 2018,~~2020, as well as annual pay raises,

~~An increase~~A decrease of ~~$3.1~~$2.7 million in incentive compensation ~~and ESOP~~plans expense ~~reflective primarily of~~due to the ~~inclusion of SVB Leerink in our financial results for the third quarter of 2019, partially offset by a~~ decrease in our incentive accruals as a result of our ~~2019~~revised 2020 full-year projected financial performance ~~and~~

An increase of $10.8 million in other employee incentives and benefits primarily driven by an increase of $7.3 million in share-based compensation expense due to the increased restricted stock awards granted during 2019, a $2.3 million increase in retention compensation primarily due to an increase in the number of average FTE and other miscellaneous employee expenses related to the increase in average FTE as noted above.

Compensation and benefits expense was $715.1 million for the nine months ended September 30, 2019, compared to $543.2 million for the comparable 2018 period. The key changes in factors affecting compensation and benefits expense were as follows:

An increase of $81.6 million in salaries and wages reflective primarily due to the increase in the number of average FTE by 686 to 3,309 for the nine months ended September 30, 2019, of which 230 FTE were attributable to the ~~acquisition of SVB Leerink compared to the same period in 2018, as well as annual pay raises,~~

~~An increase of $48.2 million in incentive compensation and ESOP expense reflective primarily~~projected financial impact of the ~~inclusion of SVB Leerink in our financial results for the nine months ended September 30, 2019,~~COVID-19 pandemic, and

An increase of $42.0 million in other employee incentives and benefits primarily driven by an increase of $16.6 million in share-based compensation expense due to the increased restricted stock awards granted during 2019, $4.2 million for increased warrant compensation expense due to gains on equity warrant assets, $5.9 million increase in retention compensation primarily due to an increase in the number of average FTE and other miscellaneous employee expenses related to the increase in average FTE as noted above.


•	An increase of $5.8 million in other employee incentives and benefits primarily driven byadditional 401(k) matching contributions as a result of the 2019 annual incentive compensation plan payments and an increase in employer payroll taxes reflective of our increased headcount since the first quarter of 2019.

Our variable compensation plans consist primarily of our Incentive Compensation Plan, Direct Drive Incentive Compensation Plan, Retention Program, Warrant Incentive Plan, Deferred Compensation Plan, 401(k) and ESOP Plan, SVB Leerink Incentive Compensation Plan and SVB Leerink Retention ~~Program and Warrant Incentive Plan~~Award (see descriptions in our ~~2018~~2019 Form 10-K). Total costs incurred under these plans were ~~$72.1 million and $244.1~~$85.2 million for the three ~~and nine~~ months ended ~~September 30, 2019, respectively,~~March 31, 2020 compared to ~~$67.3 million and $182.2~~$87.7 million for the comparable ~~2018 periods.~~2019 period. These amounts are included in total compensation and benefits expense discussed above.

In light of the expected slowdown in business activity in 2020 due to COVID-19, we anticipate lower incentive compensation expenses in 2020, compared to 2019.

Professional Services

Professional services expense was ~~$55.2~~$38.7 million ~~and $133.0 million for the three and nine months ended September 30, 2019, respectively, compared to $36.5 million and $112.1 million for the comparable 2018 periods. The increase~~ for the three months ended ~~September 30,~~March 31, 2020, compared to $37.0 million for the comparable 2019 period. The increase was primarily related to ~~increased consulting fees during the third quarter of 2019 associated with increased project spend~~our continued effort towards investments in our infrastructure, initiatives, and operating projects to support our ~~global digital banking,~~presence both domestically and ~~continued global infrastructure, initiatives. The increase for~~globally. In light of the ~~nine months ended September 30, 2019 was primarily~~expected slowdown in business activity in 2020 due to ~~the increase~~COVID-19, we anticipate lower professional services expense in ~~legal and consulting costs related~~2020, compared to ~~the acquisition of SVB Leerink as well as the increased project spend as discussed above.~~2019.

Premises and Equipment

Premises and equipment expense was ~~$26.8 million and $72.4~~$26.9 million for the three ~~and nine~~ months ended ~~September 30, 2019, respectively,~~March 31, 2020, compared to ~~$19.9 million and $57.6~~$21.7 million for the comparable ~~2018 periods.~~2019 period. The ~~increases~~increase related to investments in projects, systems and technology to support our revenue growth and related initiatives as well as other operating ~~costs.~~costs since the first quarter of 2019.

Net Occupancy

Net occupancy expense was ~~$17.0 million and $49.7~~$18.3 million for the three ~~and nine~~ months ended ~~September 30, 2019, respectively,~~March 31, 2020, compared to ~~$13.7 million and $40.6~~$16.0 million for the comparable ~~2018 periods.~~2019 period. The ~~increases were~~increase was primarily due to lease renewals at higher costs, reflective of market conditions, and the expansion of certain offices to support our growth. ~~Additionally,~~

Business Development and Travel

Business development and travel expense was $14.1 million for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2020, compared to $15.4 million for the comparable 2019 ~~$1.9 million and $5.6 million, respectively, were directly attributable~~period. The decrease was primarily due to the ~~inclusion~~impact of ~~SVB Leerink~~COVID-19 on the global economy and our restrictions placed on domestic and international travel beginning March 2020. In light of the economic impact of COVID-19 and the continuing travel restrictions, we expect our business development and travel expense to be lower in ~~our financial results effective January 4,~~2020 than 2019.

FDIC and State Assessments

FDIC and state assessments expense was ~~$4.9 million and $13.3~~$5.2 million for the three ~~and nine~~ months ended ~~September 30, 2019, respectively,~~March 31, 2020, compared to ~~$9.6 million and $29.3~~$4.0 million for the comparable ~~2018 periods.~~2019 period. The ~~decreases were~~increase was due 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 $19.5 million and $51.9 million for the three and nine months ended September 30, 2019, respectively, compared to $12.7 million and $36.0 million for the comparable 2018 periods. The increases were to support expansion initiatives as we continue to grow both domestically and globally.increase in our average assets.

Other Noninterest Expense

Total other noninterest expense was ~~$34.1 million and $105.1~~$40.7 million for the three ~~and nine~~ months ended ~~September 30, 2019, respectively,~~March 31, 2020, compared to ~~$21.7~~$33.5 million ~~and~~ ~~$61.8 million~~for the comparable ~~2018 periods.~~2019 period. The ~~increases were driven~~$7.2 million increase was primarily ~~by ongoing~~attributable to higher credit card processing and merchant service card expenses ~~related to the consolidation~~ of ~~SVB Leerink, specifically, $7.3~~$3.9 million ~~and $26.5 million of the overall increases for the three and nine months ended September 30, 2019, respectively, were related to expenses for investment banking and trade order execution costs~~ as well as ~~amortization~~higher charitable donations of ~~intangible assets recorded as part of the acquisition.~~$2.6 million primarily to aid in COVID-19 relief efforts.

A summary of other noninterest expense for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2020 and 2019 ~~and 2018~~ is as follows:


	Three months ended September 30,						Nine months ended September 30,						Three months ended March 31,
(Dollars in thousands)	2019		2018		% Change		2019		2018		% Change		2020		2019		% Change
Lending and other client related processing costs	$	7,502	$	5,698	31.7	%	$	21,442	$	16,301	31.5	%	$	9,158	$	5,177	76.9	%
Correspondent bank fees	3,657		3,513		4.1		10,970		10,200		7.5		3,986		3,744		6.5
Investment banking activities	1,864		—		—		9,918		—		—		3,030		4,185		(27.6	)
Trade order execution costs	2,615		—		—		7,959		—		—		2,745		2,516		9.1
Data processing services	3,066		2,740		11.9		8,624		7,934		8.7		3,454		2,899		19.1
Telephone	2,466		2,269		8.7		7,629		7,025		8.6		2,227		2,741		(18.8	)
Dues and publications	1,055		1,387		(23.9	)	3,439		3,081		11.6		1,130		1,524		(25.9	)
Postage and supplies	720		652		10.4		2,168		2,133		1.6		856		770		11.2
Other	11,161		5,393		107.0		32,910		15,171		116.9		14,117		9,980		41.5
Total other noninterest expense	$	34,106	$	21,652	57.5		$	105,059	$	61,845	69.9		$	40,703	$	33,536	21.4

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 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~~ months ended ~~September 30,~~March 31, 2020 and 2019 ~~and 2018~~ is as follows:


	Three months ended September 30,								Nine months ended September 30,								Three months ended March 31,
(Dollars in thousands)	2019			2018			% Change		2019			2018			% Change		2020			2019			% Change
Net interest income (1)	$	(14	)	$	(10	)	40.0	%	$	(41	)	$	(29	)	41.4	%	$	(21	)	$	(11	)	90.9	%
Noninterest income (1)	(4,910		)	(2,749		)	78.6		(19,586		)	(20,127		)	(2.7	)
Noninterest losses (income) (1)																	2,491			(2,270		)	NM
Noninterest expense (1)	145			154			(5.8	)	692			349			98.3		140			379			(63.1	)
Carried interest allocation (2)	(9,658		)	(3,943		)	144.9		(16,966		)	(9,034		)	87.8		(637		)	(978		)	(34.9	)
Net income attributable to noncontrolling interests	$	(14,437	)	$	(6,548	)	120.5		$	(35,901	)	$	(28,841	)	24.5
Net losses (income) attributable to noncontrolling interests																	$	1,973		$	(2,880	)	(168.5	)


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 30,~~March 31, 2020 and 2019 ~~and 2018~~

Net ~~income~~losses attributable to noncontrolling interests was $~~14.4~~2.0 million for the three months ended ~~September 30, 2019,~~March 31, 2020, compared to ~~$6.5~~net income of $2.9 million for the comparable ~~2018~~2019 period. Net ~~income~~losses attributable to noncontrolling interests of ~~$14.4~~$2.0 million for the three months ended ~~September 30, 2019~~March 31, 2020 was primarily driven by a ~~result of net gains on investment securities (including carried interest allocation) from our~~$7.2 million downward valuation adjustment for illiquid investments held in the private managed funds and companies of ~~funds and~~ our ~~managed direct venture fund~~ portfolios ~~related primarily~~due to the current market volatility. The downward valuation adjustment was offset by unrealized net ~~unrealized~~ valuation increases ~~for~~in the private ~~and public~~ company investments held ~~by the funds~~ in ~~the portfolio.~~these portfolios. See “Results of Operations—Noninterest Income—Gains on Investment Securities, Net”.

~~Nine months ended September 30, 2019 and 2018~~

Net income attributable to noncontrolling interests was $35.9 million for the nine months ended September 30, 2019, compared to $28.8 million for the comparable 2018 period. Net income attributable to noncontrolling interests of $35.9 million for the nine months ended September 30, 2019 was primarily a result of net gains on investment securities (including carried interest allocation) from our managed funds of funds and our managed direct venture fund portfolios, related primarily to net unrealized valuation increases for private and public company investments held by the funds in the portfolio. See “Results of Operations—Noninterest Income—Gains on Investment Securities, Net”.

Income Taxes

Our effective income tax expense rate was ~~28.2 percent and 27.5~~26.7 percent for the three ~~and nine~~ months ended ~~September 30, 2019, respectively,~~March 31, 2020, compared to ~~25.8~~27.1 percent for ~~both~~the comparable ~~2018 periods.~~2019 period. 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 ~~increases~~reduction in the effective tax rate for the three ~~and nine~~ months ended ~~September 30, 2019~~March 31, 2020 was due primarily to ~~a decrease~~an increase in ~~the~~tax-exempt interest and net tax ~~benefit for share-based compensation expense related~~benefits from our qualified affordable housing projects portfolio, partially offset by increases to ~~the lower number of stock options exercised~~unfavorable permanent items due to ~~the decrease in the stock price of SIVB.~~our lower pre-tax net income period over period.

Operating Segment Results

We have four segments for which we report our financial information: Global Commercial Bank, SVB Private Bank, SVB Capital and SVB 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 designates the internal reporting used by management for making decisions and assessing performance as the source of our reporting segments. Please refer to Note ~~15—“Segment~~14 — “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~~ months ended ~~September 30, 2019~~March 31, 2020 and ~~2018~~2019:

Global Commercial Bank


	Three months ended September 30,								Nine months ended September 30,								Three months ended March 31,
(Dollars in thousands)	2019			2018			% Change		2019			2018			% Change		2020			2019			% Change
Net interest income	$	455,161		$	431,036		5.6	%	$	1,360,997		$	1,209,960		12.5	%	$	463,835		$	445,876		4.0	%
Provision for credit losses	(34,075		)	(19,074		)	78.6		(79,175		)	(71,704		)	10.4		(194,411		)	(26,805		)	NM
Noninterest income	161,029			135,228			19.1		471,492			377,320			25.0		166,834			152,861			9.1
Noninterest expense	(213,786		)	(206,487		)	3.5		(617,933		)	(591,434		)	4.5		(224,855		)	(198,683		)	13.2
Income before income tax expense	$	368,329		$	340,703		8.1		$	1,135,381		$	924,142		22.9		$	211,403		$	373,249		(43.4	)
Total average loans, net of unearned income	$	25,839,647		$	22,925,909		12.7		$	25,457,997		$	21,781,557		16.9
Total average loans, amortized cost																	$	29,137,484		$	24,798,197		17.5
Total average assets	58,384,473			49,948,578			16.9		54,196,976			48,380,180			12.0		61,813,129			50,132,098			23.3
Total average deposits	55,250,154			47,037,693			17.5		51,352,644			45,701,317			12.4		59,217,433			47,596,868			24.4

NM—Not meaningful

Three months ended ~~September 30,~~March 31, 2020 and 2019 ~~and 2018~~

Income before income tax expense from our Global Commercial Bank (“GCB”) ~~increased~~decreased to ~~$368.3~~$211.4 million for the three months ended ~~September 30, 2019,~~March 31, 2020, compared to ~~$340.7~~$373.2 million for the comparable ~~2018 period, which reflected the continued acquisition of new clients and growth of our core commercial business.~~2019 period. The key components of GCB's performance for the three months ended ~~September 30, 2019~~March 31, 2020 compared to the comparable ~~2018~~2019 period are discussed below.

Net interest income from GCB increased by ~~$24.1~~$18.0 million for the three months ended ~~September 30, 2019,~~March 31, 2020, due primarily to an increase in loan interest income resulting mainly from higher average loan balances.

GCB had a provision for credit losses of ~~$34.1~~$194.4 million for the three months ended ~~September 30, 2019,~~March 31, 2020, compared to ~~$19.1~~$26.8 million for the comparable ~~2018~~2019 period. The provision of ~~$34.1~~$194.4 million for the three months ended ~~September 30, 2019~~March 31, 2020 was driven primarily ~~reflects an increase~~by $140.4 million in additional reserves for our performing loans based on our forecast models of ~~$19.1 million for net new nonaccrual loans, $18.3 million for charge-offs not specifically reserved for and $15.2~~the current economic environment, including the impact of the COVID-19 pandemic, as well as changes in loan composition within our portfolio segments, $40.9 million in additional reserves for period-end loan growth, ~~partially offset by a decrease of $13.0 million for the qualitative component of our performing loans as described above and $3.9 million of recoveries.~~

~~The provision of $19.1 million for the three months ended September 30, 2018 reflects primarily $12.9 million in additional reserves for period-end loan growth, $9.2~~$13.1 million for charge-offs not specifically reserved for at December 31, 2019 and ~~$9.3~~$10.7 million in net new nonaccrual loans, partially offset by $7.8 million of recoveries.

The provision of $26.8 million for the three months ended March 31, 2019 reflects primarily $27.4 million in net new specific reserves for nonaccrual loans, $4.1 million in additional reserves for period-end loan growth and $4.9 million for charge-offs not specifically reserved for, partially offset by a decrease in the qualitative component of our performing loan reserves of ~~$8.2~~$5.3 million reflective of the continued growth of larger, higher credit quality private equity/venture capital loans as a percentage of total gross loans.

Noninterest income increased by ~~$25.8~~$14.0 million for the three months ended ~~September 30, 2019~~March 31, 2020 related primarily to an overall increase in our non-GAAP core fee income (higher ~~client investment fees,~~ foreign exchange fees, deposit service charges and credit card 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 ~~$7.3~~$26.2 million for the three months ended ~~September 30, 2019,~~March 31, 2020, due primarily to compensation and benefits expense, other noninterest expense and professional services expense. Compensation and benefits expense increased $17.0 million as a result of higher salaries and wages expenses and higher other employee compensation and benefits, partially offset by a decrease in incentive compensation expense. The increase in GCB salaries and wages was due primarily to an increase in the average number of FTEs at GCB, which increased by 439 to 2,692 FTEs for the three months ended March 31, 2020, compared to 2,252 FTEs for the comparable 2019 period. Other noninterest expense increased $5.3 million due primarily to an increase in credit card processing and merchant services card expenses. Professional services expense increased ~~primarily~~$3.4 million as a result of increased consulting fees ~~during the third quarter of 2019~~ associated with increased project spend to support our global digital banking, and continued global infrastructure, initiatives.

~~Nine months ended September 30, 2019 and 2018~~

Net interest income from our GCB increased by $151.0 million for the nine months ended September 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 $79.2 million for the nine months ended September 30, 2019, compared to a provision of $71.7 million for the comparable 2018 period. The provision of $79.2 million for the nine months ended September 30, 2019 was reflective primarily of $57.5 million in net new specific reserves for nonaccrual loans, $30.5 million for charge-offs not specifically reserved for in prior quarters and $22.4 million for period-end loan growth, partially offset by a decrease of $14.3 million for our performing loans and $15.1 million of recoveries.

The provision of $71.7 million for the nine months ended September 30, 2018 was reflective primarily of $39.4 million from period-end loan growth, $34.0 million in net new specific reserves for nonaccrual loans and $24.0 million for charge-offs not specifically reserved for in prior quarters, partially offset by a decrease in reserves of $20.7 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 $94.2 million for the nine months ended September 30, 2019, related primarily to an overall increase in our non-GAAP core fee income (higher client investment fees, credit card fees, foreign exchange fees and 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 $26.5 million for the nine months ended September 30, 2019, due primarily to an increase in compensation and benefits expense. Compensation and benefits expense increased by $15.5 million primarily as a result of an increase in salaries and wages primarily due to an increase in the average number of FTEs at GCB, which increased by 282 to 2,283 FTEs for the nine months ended September 30, 2019, compared to 2,001 FTEs for the comparable 2018 period.

SVB Private Bank


	Three months ended September 30,								Nine months ended September 30,								Three months ended March 31,
(Dollars in thousands)	2019			2018			% Change		2019			2018			% Change		2020			2019			% Change
Net interest income	$	12,772		$	14,919		(14.4	)%	$	37,200		$	46,811		(20.5	)%	$	15,164		$	11,981		26.6	%
Provision for credit losses	(1,910		)	(362		)	NM		(1,779		)	(2,384		)	(25.4	)
(Provision for) reduction of credit losses																	(54,490		)	984			NM
Noninterest income	634			605			4.8		1,829			1,677			9.1		900			510			76.5
Noninterest expense	(11,638		)	(6,760		)	72.2		(30,015		)	(18,729		)	60.3		(10,090		)	(7,414		)	36.1
(Loss) income before income tax expense	$	(142	)	$	8,402		(101.7	)	$	7,235		$	27,375		(73.6	)	$	(48,516	)	$	6,061		NM
Total average loans, net of unearned income	$	3,400,889		$	2,928,576		16.1		$	3,235,943		$	2,791,910		15.9
Total average loans, amortized cost																	$	3,857,478		$	3,085,883		25.0
Total average assets	3,431,313			2,949,908			16.3		3,264,071			2,813,101			16.0		3,892,400			3,109,275			25.2
Total average deposits	1,497,303			1,505,746			(0.6	)	1,461,170			1,519,200			(3.8	)	1,922,663			1,491,234			28.9

NM—Not meaningful

Three months ended ~~September 30,~~March 31, 2020 and 2019 ~~and 2018~~

Net interest income from our SVB Private Bank ~~decreased~~increased by ~~$2.1~~$3.2 million for the three months ended ~~September 30, 2019,~~March 31, 2020, due primarily to ~~higher interest paid on interest-bearing deposits due to~~ the ~~continued market rate adjustments~~increase in average loans for the three months ended ~~September 30, 2019~~March 31, 2020 as compared to the ~~2018~~2019 comparable period.

~~Noninterest expense~~The provision for credit losses increased by ~~$4.9~~$55.5 million for the three months ended ~~September 30, 2019,~~March 31, 2020, due primarily to ~~professional services~~the adoption of CECL during the first quarter of 2020 attributable primarily to a $50.3 million increase in additional reserves for our performing loans. The increase for our performing loans is reflective of the increases in reserves required for longer duration mortgage loans as well as the additional reserves for our performing loans based on our forecast models of the current economic environment, including the impact of the COVID-19 pandemic.

Noninterest expense increased by $2.7 million for the three months ended March 31, 2020, due primarily to compensation and benefits expense. ~~Professional services~~Compensation and benefits expense increased primarily as a result of ~~increased consulting fees during the third quarter of 2019 associated with increased project spend to support our global digital banking, and continued global infrastructure, initiatives.~~

~~Nine months ended September 30, 2019 and 2018~~

Net interest income from our SVB Private Bank decreased by $9.6 million for the nine months ended September 30, 2019, due primarily to higher interest paid on interest-bearing deposits due to the continued market rate adjustments for the nine months ended September 30, 2019 as compared to the 2018 comparable period.

Noninterest expense increased by $11.3 million for the nine months ended September 30, 2019, due primarily to an increase in compensation and benefits expense and an increase in professional services expense. Compensation and benefits expense increased as a result of increased salaries and wages reflective primarily of the increase in ~~the number of~~ average FTE ~~since September 30, 2018. Professional services expense~~which increased ~~primarily as a result of increased consulting fees during~~by 40 to 130 FTEs for the ~~third quarter of~~three months ended March 31, 2020, compared to 91 FTEs for the comparable 2019 ~~associated with increased project spend to support our global digital banking, and continued global infrastructure, initiatives.~~period.

SVB Capital


	Three months ended September 30,								Nine months ended September 30,								Three months ended March 31,
(Dollars in thousands)	2019			2018			% Change		2019			2018			% Change		2020			2019			% Change
Net interest income	$	9		$	6		50.0	%	$	20		$	22		(9.1	)%	$	21		$	6		NM
Noninterest income	34,955			24,423			43.1		99,860			81,832			22.0		4,918			24,845			(80.2	)
Noninterest expense	(8,129		)	(6,469		)	25.7		(21,794		)	(17,182		)	26.8		(8,585		)	(5,782		)	48.5
Income before income tax expense	$	26,835		$	17,960		49.4		$	78,086		$	64,672		20.7
(Loss) income before income tax expense																	$	(3,646	)	$	19,069		(119.1	)
Total average assets	$	396,031		$	388,531		1.9		$	382,707		$	379,809		0.8		$	447,201		$	378,732		18.1

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 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. The performance of these securities has been, and may further be, impacted by the effects of the COVID-19 pandemic.

Three months ended ~~September 30, 2019~~March 31, 2020 and ~~2018~~2019

SVB Capital had noninterest income of ~~$35.0~~$4.9 million for the three months ended ~~September 30, 2019,~~March 31, 2020, compared to ~~$24.4~~$24.8 million for the comparable ~~2018~~2019 period. The ~~increase~~decrease in noninterest income was due primarily to ~~higher~~the recording of net ~~gains~~losses on investment securities for the three months ended March 31, 2020, compared to net gains for the comparable ~~2018~~2019 period. SVB Capital’s components of noninterest income primarily include the following:

•

Net ~~gains~~losses on investment securities of ~~$26.0~~$5.9 million for the three months ended ~~September 30, 2019~~March 31, 2020, compared to net gains of ~~$17.8~~$15.9 million for the comparable ~~2018~~2019 period. The net ~~gains~~losses on investment securities of ~~$26.0~~$5.9 million were ~~related~~ primarily driven by a downward valuation adjustment for illiquid investments held in the private managed funds and companies of our portfolios due to ~~gains~~the current market volatility. The downward valuation adjustment was offset by unrealized net valuation increases from private company investments held in our strategic venture capital funds as well as in our managed funds of funds ~~and our strategic venture capital fund investments reflective of net unrealized valuation increases in public and private company investments held by the funds in our portfolios,~~portfolio, and


•	Fund management and lending related fees of ~~$7.1~~$10.0 million for the three months ended ~~September 30, 2019~~March 31, 2020, compared to ~~$5.5~~$8.8 million for the comparable ~~2018~~ ~~period.~~

~~Nine months ended September 30,~~ 2019 ~~and 2018~~

SVB Capital had noninterest income of $99.9 million for the nine months ended September 30, 2019, compared to $81.8 million for the comparable 2018 period. The increase in noninterest income was due primarily to higher fund management fees and other noninterest income compared to the comparable 2018 period. SVB Capital’s components of noninterest income primarily include the following:

•

~~Net gains on investment securities of $70.0 million for the~~ ~~nine months endedSeptember 30, 2019, compared to net gains of $61.6 million for the comparable~~ ~~2018~~ period. The net gains on investment securities of $70.0 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 investments held by the funds in our portfolios, and


•	~~Fund management fees of $20.1 million for the~~ ~~nine months endedSeptember 30, 2019, compared to $17.1 million for the comparable~~ ~~2018~~ period.

SVB Capital had noninterest expense of $8.6 million for the three months ended March 31, 2020, compared to $5.8 million for the comparable 2019 period. The $2.8 million increase in noninterest expense was due primarily to an increase of $0.8 million in compensation and benefits reflective of an increase in average FTE and merit increases and $0.7 million increases in both professional services expense and business development and travel expense.

SVB Leerink


	Three months ended September 30,						Nine months ended September 30,						Three months ended March 31,
(Dollars in thousands)	2019			2018		% Change	2019			2018		% Change	2020			2019			% Change
Net interest income	$	277		$	—	��	$	961		$	—	—	$	201		$	442		(54.5	)%
Noninterest income	52,947			—		—	188,064			—		—	62,677			68,117			(8.0	)
Noninterest expense	(55,200		)	—		—	(177,675		)	—		—	(62,037		)	(60,540		)	2.5
(Loss) income before income tax expense	$	(1,976	)	$	—	—	$	11,350		$	—	—
Income before income tax expense													$	841		$	8,019		(89.5	)
Total average assets	$	428,848		$	—	—	$	380,290		$	—	—	$	483,648		$	300,332		61.0

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 ~~September 30,~~ March 31, 2020 and 2019

SVB Leerink had noninterest income of ~~$52.9~~$62.7 million for the three months ended ~~September 30,~~March 31, 2020 compared to $68.1 million for the comparable 2019 period. The $5.4 million decrease in noninterest income was primarily ~~consisting of $38.5~~driven by the following:


•	A $4.3 million decrease in gains on investment securities reflective of net losses on investment securities for the three months ended March 31, 2020, compared to net gains for the comparable 2019 period, driven by the COVID-19 market conditions towards the end of the first quarter of 2020, and

A $2.9 million ofdecrease in investment banking ~~revenue, $12.3~~revenues reflective of a decrease in investment banking deals due to the impact of COVID-19 on the market, partially offset by

A $1.9 million increase in commissions due primarily to an increase in exchanges and trading volumes in derivatives and convertible securities driven by market volatility due to the impact of ~~commissions and $1.4 million in fund management fees.~~COVID-19.

SVB Leerink had noninterest expense of ~~$55.2~~$62.0 million for the three months ended ~~September 30,~~March 31, 2020 compared to $60.5 million for the comparable 2019 period. The $1.5 million increase in noninterest expense was primarily ~~consisting~~driven by an increase of ~~$37.2~~$3.6 million in compensation and ~~benefits~~benefit expense due to an increase in salaries and ~~$8.5~~wages reflective of merit increases as well as an increase in share-based compensation, partially offset by a $2.6 million decrease in other noninterest expense driven primarily by ~~investment banking and trade order execution costs as well as amortization of intangible assets recorded as part of the acquisition.~~

~~Nine months endedSeptember 30, 2019~~

SVB Leerink had noninterest income of $188.1 million for the nine months ended September 30, 2019, primarily consisting of $137.0 million of investment banking revenue, $40.8 million of commissions and $5.2 milliona decrease in ~~net gains on investment securities.~~

~~SVB Leerink had noninterest expense of $177.7 million for the nine months ended September 30, 2019, primarily consisting of $124.4 million in~~incentive compensation ~~and benefits expense and $30.7 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.~~expense.

Consolidated Financial Condition

Our total assets, and total liabilities and stockholders' equity, were ~~$68.2~~$75.0 billion at ~~September 30, 2019~~March 31, 2020 compared to ~~$56.9~~$71.0 billion at December 31, ~~2018,~~2019, an increase of ~~$11.3~~$6.0 billion, or ~~19.9~~5.6 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 ~~$6.9~~$9.6 billion at ~~September 30, 2019,~~March 31, 2020, an increase of ~~$3.3~~$2.8 billion, or ~~94.5~~41.0 percent, compared to ~~$3.6~~$6.8 billion at December 31, ~~2018.~~2019. In response to the COVID-19 crisis during the first quarter, we prudently raised our cash target level to be between $7.0 billion to $9.0 billion. As of ~~September 30, 2019, $4.1~~March 31, 2020, $7.2 billion 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 ~~$1.9~~$1.4 billion. As of December 31, ~~2018, $1.7~~2019, $3.7 billion 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~~$2.1 billion.

Investment Securities

Investment securities totaled ~~$28.4~~$27.4 billion at ~~September 30, 2019,~~March 31, 2020, a decrease of ~~$4.2~~$1.7 billion, or ~~17.4~~5.7 percent, compared to ~~$24.2~~$29.1 billion at December 31, ~~2018.~~2019. Our investment securities portfolio is comprised of: (i) an available-for-sale securities portfolio and a held-to-maturity securities portfolio, both of which represent 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, investments in qualified affordable housing projects, as well as public equity securities held as a result of equity warrant assets exercised.

The valuations of our nonmarketable and other equity securities were negatively impacted by COVID-19 market conditions towards the end of the first quarter. We expect continued pressure on the valuation of our nonmarketable and other equity securities in 2020 as we anticipate public markets to continue to fluctuate, as well as a slowdown in IPO, M&A and other private market activities, due to the COVID-19 pandemic.

Available-for-Sale Securities

Period-end available-for-sale securities were ~~$12.9~~$12.6 billion at ~~September 30, 2019~~March 31, 2020 compared to ~~$7.8~~$14.0 billion at December 31, ~~2018, an increase~~2019, a decrease of ~~$5.1~~$1.4 billion, or ~~65.2~~9.8 percent.The ~~$5.1~~$1.4 billion ~~increase~~decrease in period-end AFS securities balances from December 31, ~~2018~~2019 to ~~September 30, 2019,~~March 31, 2020, was due primarily todriven by the ~~purchases~~sale of ~~$7.8~~$2.6 billion of U.S. Treasury securities during the three months-ended March 31, 2020 as well as $0.8 billion in paydowns and ~~mortgage-backed securities. Portfolio~~maturities, offset by $1.5 billion in purchases and ~~cash flows from paydowns and sales were $3.0~~a $0.5 billion increase in the fair value of our remaining portfolio reflective of the 150 basis point decrease in Federal Funds interest rates during the ~~nine months ended September 30, 2019.~~quarter. 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 30, 2019.~~March 31, 2020. 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, U.S. agency debentures 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.


	September 30, 2019																				March 31, 2020
	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)	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		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	$	6,334,848	2.00	%	$	2,007,267	1.70	%	$	1,710,316	2.26	%	$	2,617,265	2.06	%	$	—	—	%	$	4,043,840	2.11	%	$	110,935	1.76	%	$	1,626,096	2.31	%	$	2,306,809	1.98	%	$	—	—	%
U.S. agency debentures	100,000		2.28		—		—		—		—		100,000		2.28		—		—		101,687		2.28		—		—		—		—		101,687		2.28		—		—
Foreign government debt securities	8,847		(0.64	)	—		—		8,847		(0.64	)	—		—		—		—		22,152		(0.82	)	22,152		(0.82	)	—		—		—		—		—		—
Residential mortgage-backed securities:
Agency-issued mortgage-backed securities	4,148,700		2.83		—		—		—		—		—		—		4,148,700		2.83		4,943,512		2.76		—		—		—		—		—		—		4,943,512		2.76
Agency-issued collateralized mortgage obligations—fixed rate	1,679,664		2.58		—		—		—		—		3,131		3.13		1,676,533		2.58		1,465,675		2.58		—		—		1,094		3.26		—		—		1,464,581		2.58
Agency-issued commercial mortgage-backed securities	594,798		2.43		—		—		—		—		300,208		2.33		294,590		2.52		2,071,198		2.37		—		—		—		—		803,536		2.25		1,267,662		2.45
Total	$	12,866,857	2.36		$	2,007,267	1.70		$	1,719,163	2.24		$	3,020,604	2.09		$	6,119,823	2.75		$	12,648,064	2.46		$	133,087	1.33		$	1,627,190	2.31		$	3,212,032	2.06		$	7,675,755	2.67

Held-to-Maturity Securities

Period-end held-to-maturity securities were ~~$14.4~~$13.6 billion at ~~September 30, 2019~~March 31, 2020 compared to ~~$15.5~~$13.8 billion at December 31, ~~2018,~~2019, a decrease of ~~$1.1~~$0.2 billion, or ~~7.0~~1.9 percent. The ~~$1.1~~$0.2 billion decrease in period-end HTM security balances from December 31, ~~2018~~2019 to ~~September 30, 2019~~March 31, 2020 was due primarily to pay downs and maturities of ~~$1.5~~$0.6 billion, partially offset by the purchase of $0.4 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 ~~September 30, 2019.~~March 31, 2020. 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 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, 2019																				March 31, 2020
	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	$	518,841	2.65	%	$	—	—	%	$	123,205	2.61	%	$	395,636	2.66	%	$	—	—	%	$	453,353	2.62	%	$	2,622	4.07	%	$	142,990	2.52	%	$	307,741	2.69	%	$	—	—	%
Residential mortgage-backed securities:
Agency-issued mortgage-backed securities	7,376,458		2.90		—		—		94,514		2.05		771,670		2.47		6,510,274		2.96		6,662,878		2.90		11,853		2.77		50,777		1.88		685,374		2.47		5,914,874		2.96
Agency-issued collateralized mortgage obligations—fixed rate	1,754,498		1.78		—		—		—		—		635,235		1.64		1,119,263		1.87		1,482,205		1.79		—		—		—		—		661,217		1.62		820,988		1.92
Agency-issued collateralized mortgage obligations—variable rate	188,120		0.74		—		—		—		—		—		—		188,120		0.74		170,774		0.74		—		—		—		—		—		—		170,774		0.74
Agency-issued commercial mortgage-backed securities	2,826,344		3.02		—		—		—		—		—		—		2,826,344		3.02		2,644,968		3.05		—		—		—		—		102,565		3.56		2,542,403		3.03
Municipal bonds and notes	1,742,817		3.57		14,002		1.90		82,708		2.16		369,911		2.87		1,276,196		3.89		2,160,341		3.54		30,719		2.22		134,007		2.63		441,995		3.05		1,553,620		3.78
Total	$	14,407,078	2.83		$	14,002	1.90		$	300,427	2.31		$	2,172,452	2.33		$	11,920,197	2.94		$	13,574,519	2.87		$	45,194	2.47		$	327,774	2.47		$	2,198,892	2.41		$	11,002,659	2.98

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. The estimated weighted-average duration of our fixed income investment securities portfolio was ~~3.4~~3.1 years and ~~3.8~~3.9 years at ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018,~~2019, 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 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 $1.2 billion at ~~September 30, 2019~~March 31, 2020 compared to ~~$941.1 million~~$1.2 billion at December 31, ~~2018, an increase~~2019, a decrease of ~~$209.0~~$13.2 million, or ~~22.2~~1.1 percent. Non-marketable and other equity securities, net of noncontrolling interests were ~~$1,007.9 million~~$1.1 billion at ~~September 30, 2019, compared to $806.1 million at~~March 31, 2020 and December 31, ~~2018.~~2019. The ~~increase~~decrease was primarily attributable to ~~equity securities from exercised equity warrant assets,~~ valuation ~~increases~~decreases in our nonmarketable investment portfolio, including decreases in our managed funds of funds investments, strategic investments and other public companies' valuations, as well as exercised equity warrant assets, offset by an increase in new investments within our qualified housing projects portfolio. ~~We also increased our investment in non-marketable and other equity securities by $35.0 million to the inclusion of SVB Leerink in our financial results at September 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 30, 2019~~March 31, 2020 and December 31, ~~2018:~~2019:


	September 30, 2019				December 31, 2018				March 31, 2020				December 31, 2019
(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):
Consolidated venture capital and private equity fund investments (1)	$	92,010	$	23,704	$	118,333	$	30,235	$	85,336	$	22,025	$	87,180	$	22,482
Unconsolidated venture capital and private equity fund investments (2)	181,550		181,550		201,098		201,098		171,930		171,930		178,217		178,217
Other investments without a readily determinable fair value (3)	43,524		43,523		25,668		25,668		52,666		52,666		55,255		55,255
Other equity securities in public companies (fair value accounting (4)	56,081		56,081		20,398		20,098		26,899		26,391		59,200		59,056
Non-marketable securities (equity method accounting) (5):
Venture capital and private equity fund investments	196,425		122,550		129,485		82,921		206,495		126,035		215,367		131,403
Debt funds	7,153		7,153		5,826		5,826		6,910		6,910		7,271		7,271
Other investments	154,323		154,323		121,721		121,721		149,557		149,557		152,863		152,863
Investments in qualified affordable housing projects, net	419,028		419,028		318,575		318,575		500,802		500,802		458,476		458,476
Total non-marketable and other equity securities	$	1,150,094	$	1,007,912	$	941,104	$	806,142	$	1,200,595	$	1,056,316	$	1,213,829	$	1,065,023


(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 30, 2019~~March 31, 2020 and December 31, ~~2018~~2019:


	September 30, 2019				December 31, 2018				March 31, 2020				December 31, 2019
(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	$	6,829	$	858	$	12,452	$	1,564	$	5,337	$	670	$	5,729	$	720
Capital Preferred Return Fund, LP	46,691		10,063		53,957		11,629		44,696		9,633		45,341		9,772
Growth Partners, LP	38,356		12,769		50,845		16,927		35,169		11,708		35,976		11,976
CP I, LP	134		14		1,079		115		134		14		134		14
Total consolidated venture capital and private equity fund investments	$	92,010	$	23,704	$	118,333	$	30,235	$	85,336	$	22,025	$	87,180	$	22,482

(2)

~~and 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, ~~June 30~~December 31^thst, for our ~~September 30~~March 31^thst 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~~6 — “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.


(5)	The following table shows the carrying value and our ownership percentage of each investment at ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018~~2019 (equity method accounting):


	September 30, 2019				December 31, 2018				March 31, 2020				December 31, 2019
(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
Venture capital and private equity fund investments:
Strategic Investors Fund II, LP	$	4,501	$	4,249	$	4,670	$	4,366	$	3,277	$	3,086	$	3,612	$	3,387
Strategic Investors Fund III, LP	15,279		12,391		17,396		14,059		14,487		11,787		15,668		12,701
Strategic Investors Fund IV, LP	28,549		24,041		28,974		24,388		25,037		21,141		27,064		22,780
Strategic Investors Fund V, LP	37,233		19,547		28,189		14,799		44,815		23,528		46,830		24,586
CP II, LP (i)	7,333		4,432		7,122		4,308		5,103		3,073		5,907		3,567
Other venture capital and private equity fund investments	103,530		57,890		43,134		21,001		113,776		63,420		116,286		64,382
Total venture capital and private equity fund investments	$	196,425	$	122,550	$	129,485	$	82,921	$	206,495	$	126,035	$	215,367	$	131,403
Debt funds:
Gold Hill Capital 2008, LP (ii)	$	5,323	$	5,323	$	3,901	$	3,901	$	5,255	$	5,255	$	5,525	$	5,525
Other debt funds	1,830		1,830		1,925		1,925		1,655		1,655		1,746		1,746
Total debt funds	$	7,153	$	7,153	$	5,826	$	5,826	$	6,910	$	6,910	$	7,271	$	7,271
Other investments:
SPD Silicon Valley Bank Co., Ltd.	$	73,918	$	73,918	$	76,412	$	76,412	$	73,453	$	73,453	$	74,190	$	74,190
Other investments	80,405		80,405		45,309		45,309		76,104		76,104		78,673		78,673
Total other investments	$	154,323	$	154,323	$	121,721	$	121,721	$	149,557	$	149,557	$	152,863	$	152,863


(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.

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~~that are now covered under the approved extension. As of ~~September 30, 2019,~~March 31, 2020, such ~~prohibited~~ investments had an estimated aggregate carrying value and fair value of approximately ~~$231.5~~$205 million. (For more information about the Volcker Rule, see “Business—Supervision and Regulation” under Part 1, Item 1 of our ~~2018~~2019 Form 10-K.)

Loans

Loans, ~~net of unearned income,~~amortized cost basis, increased by $2.8 billion to ~~$31.1~~$36.0 billion at ~~September 30, 2019,~~March 31, 2020, compared to ~~$28.3~~$33.2 billion at December 31, ~~2018.~~2019. Unearned income was ~~$165~~$169 million at ~~September 30, 2019~~March 31, 2020 and ~~$173~~$163 million at ~~December 31, 2018. Total gross loans were $31.2 billion at September 30, 2019, an increase of $2.7 billion, compared to $28.5 billion~~ at December 31, ~~2018.~~2019. Period-end loans increased compared to December 31, ~~2018,~~2019, driven primarily by our Private Equity/Venture Capital, Investor Dependent and Balance Sheet Dependent loan ~~growth in~~portfolios driven by increased credit line utilization. Our Investor Dependent and Balance Sheet Dependent loan portfolios are primarily made up of our ~~private equity/venture capital portfolio as well as from our private bank portfolio.~~technology and life sciences/healthcare clients.

The breakdown of total ~~gross~~ loans and total loans as a percentage of total ~~gross~~ loans by industry sector is as follows:



	March 31, 2020				December 31, 2019
(Dollars in thousands)	Amount		Percentage		Amount		Percentage
Private equity/venture capital	$	18,868,875	52.5	%	$	17,712,797	53.1	%
Investor dependent:
Early stage	1,806,011		5.0		1,653,425		5.0
Mid stage	1,399,209		3.9		1,066,783		3.2
Later stage	2,031,490		5.7		1,698,676		5.1
Total investor dependent	5,236,710		14.6		4,418,884		13.3
Cash flow dependent:
Sponsor led buyout	2,121,007		5.9		2,203,020		6.6
Other	2,756,295		7.7		2,252,847		6.8
Total cash flow dependent	4,877,302		13.6		4,455,867		13.4
Private bank	3,669,295		10.2		3,489,219		10.4
Balance sheet dependent	1,850,941		5.1		1,297,304		3.9
Premium wine	1,056,927		2.9		1,063,512		3.2
Other	408,035		1.1		890,121		2.7
Total loans (1)	$	35,968,085	100.0		$	33,327,704	100.0

September 30, 2019 December 31, 2018
(Dollars in thousands) Amount Percentage Amount Percentage
Commercial loans:
Software/internet $ 6,067,667
19.4 % $ 6,209,978
21.8 %
Hardware 1,367,892
4.4
1,245,800
4.4
Private equity/venture capital 16,310,084
52.2
14,118,132
49.5
Life science/healthcare 2,447,193
7.8
2,461,076
8.6
Premium wine 234,784
0.8
249,316
0.9
Other 400,487
1.3
346,747
1.2
Commercial loans 26,828,107
85.9
24,631,049
86.4
Real estate secured loans:
Premium wine 750,304
2.4
711,237
2.5
Consumer 3,012,047
9.6
2,609,645
9.2
Other 39,455
0.2
40,627
0.1
Real estate secured loans 3,801,806
12.2
3,361,509
11.8
Construction loans 117,653
0.4
98,034
0.3
Consumer loans 481,437
1.5
420,720
1.5
Total gross loans $ 31,229,003
100.0
$ 28,511,312
100.0


(1)	For the quarter ended March 31, 2020, loan amounts are disclosed using the amortized cost basis as a result of the adoption of CECL. Prior period loan amounts are disclosed using the gross basis.

Loan Concentration

The following table provides a summary of ~~gross~~total loans by size and ~~category.~~risk-based segment. The breakout ~~of the categories~~below is based on total client balances (individually or in the aggregate) as of ~~September 30, 2019~~March 31, 2020 (These amounts reflect corrections to the loan concentration balances (categorized by size) previously reported in our earnings release, filed with the SEC on our Form 8-K report on April 23, 2020 (“Q1 Earnings Release”), for loans (individually or in the aggregate) to any single client: (i) equal to or greater than $20 million; and (ii) less than $20 million. No corrections were necessary for the total loan portfolio amount or the total amounts by risk-based segment.):

September 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
Commercial loans:
Software/internet $ 1,565,054
$ 847,876
$ 1,334,672
$ 1,145,303
$ 1,174,762
$ 6,067,667
Hardware 304,558
152,184
243,057
336,547
331,546
1,367,892
Private equity/venture capital 1,036,306
1,003,076
2,376,076
2,138,287
9,756,339
16,310,084
Life science/healthcare 354,874
399,046
630,421
509,353
553,499
2,447,193
Premium wine 70,134
52,972
50,998
58,880
1,800
234,784
Other 325,423
8,050
10,158
22,815
34,041
400,487
Commercial loans 3,656,349
2,463,204
4,645,382
4,211,185
11,851,987
26,828,107
Real estate secured loans:
Premium wine 182,556
193,478
235,052
110,035
29,183
750,304
Consumer 2,568,735
284,988
125,574
20,250
12,500
3,012,047
Other 7,310
—
32,145
—
—
39,455
Real estate secured loans 2,758,601
478,466
392,771
130,285
41,683
3,801,806
Construction loans 2,693
41,153
29,767
44,040
—
117,653
Consumer loans 192,079
74,369
66,728
95,575
52,686
481,437
Total gross loans $ 6,609,722
$ 3,057,192
$ 5,134,648
$ 4,481,085
$ 11,946,356
$ 31,229,003



	March 31, 2020
(Dollars in thousands)	Less than Five Million		Five to Ten Million		Ten to Twenty Million		Twenty to Thirty Million		Thirty Million or More		Total
Private equity/venture capital	$	981,072	$	1,267,382	$	2,387,759	$	2,141,652	$	12,091,010	$	18,868,875
Investor dependent:
Early stage	1,295,261		255,585		160,511		55,721		38,933		1,806,011
Mid stage	638,456		409,596		266,471		49,686		35,000		1,399,209
Later stage	176,617		408,542		732,854		328,332		385,145		2,031,490
Total investor dependent	2,110,334		1,073,723		1,159,836		433,739		459,078		5,236,710
Cash flow dependent:
Sponsor led buyout	20,906		72,495		510,951		700,091		816,564		2,121,007
Other	154,084		147,981		339,014		693,555		1,421,661		2,756,295
Total cash flow dependent	174,990		220,476		849,965		1,393,646		2,238,225		4,877,302
Private bank	2,939,208		397,068		169,544		50,576		112,899		3,669,295
Balance sheet dependent	295,227		371,825		406,629		296,573		480,687		1,850,941
Premium wine	244,732		246,379		277,142		138,486		150,188		1,056,927
Other	60,953		62,374		95,791		119,109		69,808		408,035
Total loans (1)	$	6,806,516	$	3,639,227	$	5,346,666	$	4,573,781	$	15,601,895	$	35,968,085


(1)	For the quarter ended March 31, 2020, loan amounts are disclosed using the amortized cost basis as a result of the adoption of CECL. Prior period loan amounts are disclosed using the gross basis.

At ~~September 30, 2019, gross~~March 31, 2020, loans equal to or greater than $20 million to any single client (individually or in the aggregate) totaled ~~$16.4~~$20.2 billion, or ~~52.6~~56.1 percent of our total ~~gross~~ loan portfolio. (This percentage of our total loan portfolio also reflects a correction to the percentage previously reported in our Q1 Earnings Release.) These loans represented ~~388~~455 clients, and of these loans, ~~$37.3 million~~none were on nonaccrual status as of ~~September 30, 2019.~~March 31, 2020.

The following table provides a summary of ~~gross~~ loans by size and ~~category.~~risk-based segment. The breakout ~~of the categories~~below is based on total client balances (individually or in the aggregate) as of December 31, ~~2018~~2019:

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
Commercial loans:
Software/internet $ 1,515,096
$ 918,647
$ 1,520,634
$ 1,221,250
$ 1,034,351
$ 6,209,978
Hardware 292,022
152,061
196,763
386,288
218,666
1,245,800
Private equity/venture capital 836,894
1,012,605
2,120,918
2,135,279
8,012,436
14,118,132
Life science/healthcare 273,075
477,046
645,895
410,127
654,933
2,461,076
Premium wine 70,573
55,852
48,656
65,035
9,200
249,316
Other 246,011
18,921
10,911
70,904
—
346,747
Commercial loans 3,233,671
2,635,132
4,543,777
4,288,883
9,929,586
24,631,049
Real estate secured loans:
Premium wine 168,130
173,882
263,093
83,945
22,187
711,237
Consumer loans 2,258,479
239,400
111,766
—
—
2,609,645
Other 7,506
—
33,121
—
—
40,627
Real estate secured loans 2,434,115
413,282
407,980
83,945
22,187
3,361,509
Construction loans 7,076
15,064
75,894
—
—
98,034
Consumer loans 148,391
55,401
51,409
93,690
71,829
420,720
Total gross loans $ 5,823,253
$ 3,118,879
$ 5,079,060
$ 4,466,518
$ 10,023,602
$ 28,511,312



	December 31, 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
Private equity/venture capital	$	1,016,051	$	1,082,201	$	2,559,384	$	2,029,547	$	11,025,614	$	17,712,797
Investor dependent
Early stage	1,090,852		260,685		191,661		76,542		33,685		1,653,425
Mid stage	544,167		316,617		156,418		49,581		—		1,066,783
Later stage	167,500		348,832		648,382		304,373		229,589		1,698,676
Total investor dependent	1,802,519		926,134		996,461		430,496		263,274		4,418,884
Cash flow dependent
Sponsor led buyout	16,034		97,458		550,753		723,737		815,038		2,203,020
Other	206,209		86,929		465,304		463,073		1,031,332		2,252,847
Total cash flow dependent	222,243		184,387		1,016,057		1,186,810		1,846,370		4,455,867
Private bank	2,791,587		359,429		191,979		49,996		96,228		3,489,219
Balance sheet dependent	256,247		269,744		404,356		78,197		288,760		1,297,304
Premium wine	243,094		267,389		261,951		148,469		142,609		1,063,512
Other	526,850		40,511		106,247		112,764		103,749		890,121
Total loans (1)	$	6,858,591	$	3,129,795	$	5,536,435	$	4,036,279	$	13,766,604	$	33,327,704


(1)	For the quarter ended March 31, 2020, loan amounts are disclosed using the amortized cost basis as a result of the adoption of CECL. Prior period loan amounts are disclosed using the gross basis.

At December 31, ~~2018, gross~~2019, loans equal to or greater than $20 million to any single client (individually or in the aggregate) totaled ~~$14.5~~$17.8 billion, or ~~50.8~~53.4 percent of our total ~~gross~~ loan portfolio. These loans represented ~~361~~397 clients, and of these loans, ~~$27.5~~$37.3 million were on nonaccrual status as of December 31, ~~2018.~~2019.

~~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 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 1114.6 percent of total ~~gross~~ loans at ~~both September 30, 2019~~March 31, 2020 and 13.3 percent at December 31, ~~2018.~~2019. 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~~practices (mid-stage 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.later-stage).

Balance sheet dependent loans, which include asset-based loans, represented ~~eight~~five percent of total ~~gross~~ loans at ~~both September 30, 2019~~March 31, 2020 and four percent at December 31, 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.2019. Our asset-based lending, which includes working capital lines and accounts receivable financing, represented two and one percent of total ~~gross~~ loans at both ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018. The repayment of these arrangements is dependent on the financial condition, and payment ability, of third parties with whom our clients do business.~~2019.

Cash flow dependent loans, which include ~~sponsored~~sponsor led buyout lending, represented 1314 percent of total ~~gross~~ loans at ~~September 30, 2019, compared to 16~~March 31, 2020 and 13 percent at December 31, 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. Sponsored2019. Sponsor led buyout loans represented six percent of total

~~gross~~ loans at ~~September 30, 2019,~~March 31, 2020, compared to ~~eight~~seven percent at December 31, 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.2019.

(ii) Private Equity/Venture Capital

We also provide financial services to clients in the private equity/venture capital community. Our lending to private equity/venture capital firms and funds represented 5253 percent of total ~~gross~~ loans at ~~September 30, 2019, compared to 50 percent at~~both March 31, 2020 and December 31, ~~2018.~~2019. 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~~senior executives of the innovation companies they support. Our lending to SVB Private Bank clients represented 1110 percent of total ~~gross~~ loans at both ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018.~~2019. Many of these clients have mortgages, which represented 8685 percent of this portfolio at ~~September 30, 2019;~~March 31, 2020; 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. In addition, we provide real estate secured loans to eligible employees through our Employee Home Ownership Program.

We expect lending activity in 2020 to be impacted by strong borrowing from technology and life science/healthcare companies looking to bolster their liquidity positions, and prepayment or reduced utilization of capital call lines of credit by private equity/venture capital firms due to a slowdown in investment activities.

Paycheck Protection Program

In April 2020, we started accepting applications under the Paycheck Protection Program ("PPP") administered by the Small Business Association (“SBA”) under the CARES Act and began to originate loans to qualified small businesses. Under the terms of the program, loans funded through the PPP are eligible to be forgiven if certain requirements are met, including using the funds for certain costs relating to payroll, healthcare and qualifying mortgage, rent and utility payments. To the extent not forgiven, loans are subject to certain terms including, among others, the following: maximum two-year term; interest rate of 1.0%; six-month deferral of loan payments; and no requirement for any collateral or personal guarantees. PPP borrowers are not required to pay any fees to the government or the lender and the loans may be repaid by the borrower at any time. The SBA, however, will pay lenders a processing fee based on the size of the PPP loan, ranging from 1% to 5% of the loan.

Additionally, we announced in April 2020 that we intend to donate any processing fees we receive from the SBA, net of our costs incurred, to charitable relief efforts relating to COVID-19. We are also considering participation in the Federal Reserve’s Paycheck Protection Program Liquidity Facility (“PPPLF”), which extends credit to eligible PPP loan originators, taking the PPP loans as collateral at face value. (See “Capital Resources - Liquidity.”)

State Concentrations

Approximately 2826 percent of our outstanding total ~~gross~~ loan balances as of ~~both September 30, 2019 and December~~March 31, ~~2018~~2020 were to borrowers based in ~~California.~~California compared to 27 percent as of December 31, 2019. Additionally, as of ~~September 30, 2019,~~March 31, 2020, borrowers in New York and Massachusetts increased to 12 percent and 10 percent of our outstanding ~~gross~~total loan balances as of March 31, 2020, respectively, compared to 9nine percent each as of December 31, ~~2018. As of September 30, 2019, borrowers in New York decreased to 9 percent of our outstanding gross loan balances compared to 10 percent as of December 31, 2018.~~2019. Other than California, New York and Massachusetts, as of March 31, 2020, there are no states with ~~gross~~ loan balances greater than or equal to 10 percent.

See generally “Risk Factors–Credit Risks” set forth under Part I, Item 1A in our ~~2018~~2019 Form ~~10-K.~~10-K and including "Risk Factors" under Part II, Item 1A of this report.

Credit Quality Indicators

As of ~~September 30, 2019~~both March 31, 2020 and December 31, ~~2018,~~2019, our total criticized loans and ~~impaired~~nonaccrual loans represented three ~~and four~~ percent of our total ~~gross loans, respectively.~~loans. Criticized and ~~impaired~~nonaccrual loans to early-stage clients represented 2018 and 1923 percent of our total criticized and ~~impaired~~nonaccrual loan balances at ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018,~~2019, respectively. Loans to early-stage clients represent a relatively small percentage of our overall portfolio at five percent of total ~~gross~~ loans at ~~September 30, 2019~~both March 31, 2020 and ~~six percent at~~ December 31, ~~2018.~~2019. 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.

More specifically, given the economic environment in light of the COVID-19 pandemic, we are closely monitoring our loan portfolio. Notwithstanding the increase of our allowance for credit losses in the first quarter which was largely attributable to longer duration mortgage loans based on our forecast models, we currently expect particularly for 2020 continued strong credit performance for our Private Bank and private equity/venture portfolios, consistent with the historic low credit losses we have typically experienced. However, we expect that our technology, life science/healthcare and premium wine portfolios will be

likelier to be impacted negatively by the challenging economic environment in 2020. Particular areas of credit focus include: early-stage companies; Sponsor Finance clients; consumer internet and advertising technology clients; life science/healthcare companies that require clinical trials or provide elective services; and wine clients who are dependent on tasting room or restaurant sales.

Credit Quality and Allowance for ~~Loan~~Credit Losses for Loans and for Unfunded Credit Commitments

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:~~credit losses for loans and unfunded credit commitments:

(Dollars in thousands) September 30, 2019 December 31, 2018
Gross nonperforming, past due, and restructured loans:
Nonaccrual loans $ 104,045
$ 94,142
Loans past due 90 days or more still accruing interest 864
1,964
Total nonperforming loans 104,909
96,106
OREO and other foreclosed assets —
—
Total nonperforming assets $ 104,909
$ 96,106
Performing TDRs $ 31,692
$ 31,639
Nonperforming loans as a percentage of total gross loans 0.34 % 0.34 %
Nonperforming assets as a percentage of total assets 0.15
0.17
Allowance for loan losses $ 304,410
$ 280,903
As a percentage of total gross loans 0.97 % 0.99 %
As a percentage of total gross nonperforming loans 290.17
292.28
Allowance for loan losses for nonaccrual loans $ 53,728
$ 37,941
As a percentage of total gross loans 0.17 % 0.13 %
As a percentage of total gross nonperforming loans 51.21
39.48
Allowance for loan losses for total gross performing loans $ 250,682
$ 242,962
As a percentage of total gross loans 0.80 % 0.85 %
As a percentage of total gross performing loans 0.81
0.86
Total gross loans $ 31,229,003
$ 28,511,312
Total gross performing loans 31,124,094
28,415,206
Allowance for unfunded credit commitments (1) 63,108
55,183
As a percentage of total unfunded credit commitments 0.28 % 0.29 %
Total unfunded credit commitments (2) $ 22,274,418
$ 18,913,021



(Dollars in thousands)	March 31, 2020			December 31, 2019
Nonperforming, past due, and restructured loans:
Nonaccrual loans	$	50,607		$	102,669
Loans past due 90 days or more still accruing interest	4,918			3,515
Total nonperforming loans (1)	55,525			106,184
OREO and other foreclosed assets	—			—
Total nonperforming assets	$	55,525		$	106,184
Performing TDRs	$	23,460		$	31,990
Nonperforming loans as a percentage of total loans (1)	0.15		%	0.32		%
Nonperforming assets as a percentage of total assets	0.07			0.15
Allowance for credit losses for loans	$	548,963		$	304,924
As a percentage of total loans (1)	1.53		%	0.91		%
As a percentage of total nonperforming loans (1)	988.68			287.17
Allowance for credit losses for nonaccrual loans	$	34,876		$	44,859
As a percentage of total loans (1)	0.10		%	0.13		%
As a percentage of total nonperforming loans (1)	62.81			42.25
Allowance for credit losses for total performing loans	$	514,087		$	260,065
As a percentage of total loans (1)	1.43		%	0.78		%
As a percentage of total performing loans (1)	1.43			0.78
Total loans (1)	$	35,968,085		$	33,327,704
Total performing loans (1)	35,912,560			33,221,520
Allowance for credit losses for unfunded credit commitments (2)	84,690			67,656
As a percentage of total unfunded credit commitments	0.34		%	0.28		%
Total unfunded credit commitments (3)	$	24,668,310		$	24,521,920


(1)	For the quarter ended March 31, 2020, loan amounts are disclosed, and ratios are calculated, using the amortized cost basis as a result of the adoption of CECL. Prior period loan amounts are disclosed, and ratios calculated, using the gross basis.


(2)	The “allowance for credit losses 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” for a discussion of the changes to the allowance.


~~(2)~~(3)	Includes unfunded loan commitments and letters of credit.

Our allowance for ~~loan~~credit losses for loans as a percentage of total ~~gross~~ loans ~~decreased two~~increased 62 basis points to ~~0.97~~1.53 percent at ~~September 30, 2019,~~March 31, 2020, compared to ~~0.99~~0.91 percent at December 31, ~~2018 reflective of~~2019. The 62 basis points increase was due primarily to a ~~decrease in the qualitative component of~~58 basis points increase for our performing loan ~~reserves~~reserve as a percentage of ~~gross~~total loans ~~reflective~~and an eight basis points increase due to the day one impact of ~~the continued growth in our large, high credit quality private equity/venture capital loan portfolio.~~adopting CECL, partially offset by a four basis points decrease for nonaccrual loans.

Our allowance for ~~loan~~credit losses for performing loans was ~~$250.7~~$514.1 million at ~~September 30, 2019,~~March 31, 2020, compared to ~~$243.0~~$260.1 million at December 31, ~~2018.~~2019. Included in the allowance for credit losses at March 31, 2020 is the day one impact of adopting CECL of

$22.4 million driven by an increase in our expected credit loss for our Investor Dependent loan portfolio given the higher relative risk and longer-duration, which is taken into account under the CECL methodology, partially offset by a decrease for our Private Equity/Venture Capital loan portfolio, given its higher historical credit quality and shorter duration. The ~~$7.7~~remaining $231.6 million increase inwas due primarily to an increase of $190.7 million related to the expected credit losses for our performing loan reserves ~~for performing loans was driven primarily bythe overall growth in loans during the nine months ended September 30, 2019 as well as the continued change in the mix~~based on our forecast models of the ~~overall~~current economic environment and $40.9 million related to period-end loan ~~portfolio.~~growth of $2.8 billion.

Our allowance for ~~loan~~credit losses for nonaccrual loans was ~~$53.7~~$34.9 million at ~~September 30, 2019,~~March 31, 2020, compared to ~~$37.9~~$44.9 million at December 31, ~~2018.~~2019. The ~~$15.8~~$10.0 million ~~increase in the reserves for nonaccrual loans~~decrease was due primarily to ~~new nonaccrual loan reserves of $92.8~~$21.1 million ~~driven primarily by three clients~~ in ~~our life science/healthcare loan portfolio and three clients~~repayments, $18.3 million in ~~our software/internet loan portfolio,~~charge-offs, partially offset by ~~$77.0~~$26.3 million in new nonaccrual loans as noted above and $3.1 million due to the day one impact of ~~repayments and charge-offs.~~

adopting CECL. Repayments were primarily driven by $12.9 million for one Sponsor Led Buyout client that was added to our nonaccrual loan portfolio during the third quarter of 2019.

The following table presents a summary of changes in nonaccrual loans for the three ~~and nine~~ months ended ~~September 30, 2019~~March 31, 2020 and ~~2018:~~2019:



	Three months ended March 31,
(Dollars in thousands)	2020			2019
Balance, beginning of period (1)	$	102,669		$	94,142
Additions	36,346			50,857
Paydowns and other reductions	(62,677		)	(6,481		)
Charge-offs	(25,731		)	(4,895		)
Balance, end of period (1)	$	50,607		$	133,623

Three months ended September 30, Nine months ended September 30,
(Dollars in thousands) 2019 2018 2019 2018
Balance, beginning of period $ 96,641
$ 124,842
$ 94,142
$ 119,259
Additions 53,643
18,346
143,960
69,202
Paydowns (22,493 ) (14,891 ) (86,430 ) (48,550 )
Charge-offs (23,729 ) (13,135 ) (47,559 ) (24,714 )
Other reductions (17 ) —
(68 ) (35 )
Balance, end of period $ 104,045
$ 115,162
$ 104,045
$ 115,162


(1)	For the quarter ended March 31, 2020, loan amounts are disclosed using the amortized cost basis as a result of the adoption of CECL. Prior period loan amounts are disclosed using the gross basis.

Nonaccrual loans were $50.6 million at March 31, 2020, compared to $103.0 million at December 31, 2019. Our nonaccrual ~~loans as of September 30, 2019 included $70.1~~loan balance decreased $52.4 million ~~from five clients (two software/internet clients represented $45.5~~primarily driven by $62.7 million in paydowns and ~~three life science/healthcare clients represented $24.6 million). One of these loans is a sponsored buyout loan~~other reductions and $25.7 million charge-offs, partially offset by $36.3 million in new nonaccrual loans. Repayments were primarily driven by $34.5 million for one Sponsor Led Buyout client that was added to our nonaccrual loan portfolio ~~in 2015, one is a Growth client that was added~~ during ~~2018 and three are new~~the third quarter of 2019. New nonaccrual loans ~~added during 2019,~~were driven primarily by $12.3 million for two ~~Growth clients and one sponsored buyout loan. The total credit exposure for these five largest nonaccrual loans was $70.3 million as~~growth stage Investor Dependent technology clients. As of ~~September 30, 2019, for which~~March 31, 2020, we have specifically reserved ~~$38.1 million.~~$34.9 million for our nonaccrual loans.

Average nonaccrual loans for the three ~~and nine~~ months ended ~~September 30, 2019~~March 31, 2020 were ~~$90.3~~$71.6 million ~~and $98.1 million, respectively,~~ compared to ~~$122.9 million and $120.6~~$106.4 million for the comparable ~~2018 periods.~~2019 period. The ~~$32.6~~$34.8 million decrease in average nonaccrual loans for the three months ended ~~September 30, 2019~~March 31, 2020 compared to ~~September 30, 2018~~March 31, 2019 was primarily ~~from our software/internet loan portfolio partially offset~~driven by ~~an increase in our life science/healthcare portfolio.~~one large recovery of $34.5 million for one Sponsor Led Buyout client as mentioned above. If the nonaccrual loans had not been nonperforming, ~~$1.0 million and $4.1~~$0.4 million in interest income would have been recorded for the three ~~and nine~~ months ended ~~September 30, 2019, respectively,~~March 31, 2020, compared to ~~$1.8 million and $5.8~~$1.7 million for the comparable ~~2018 periods.~~2019 period.

Accrued Interest Receivable and Other Assets

A summary of accrued interest receivable and other assets at ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018~~2019 is as follows:


(Dollars in thousands)	September 30, 2019		December 31, 2018		% Change		March 31, 2020		December 31, 2019		% Change
Derivative assets (1)	$	337,977	$	258,139	30.9	%	$	472,525	$	332,814	42.0	%
Foreign exchange spot contract assets, gross	644,122		152,268		NM		945,762		810,275		16.7
Accrued interest receivable	201,595		197,927		1.9		190,100		216,962		(12.4	)
FHLB and Federal Reserve Bank stock	59,790		58,878		1.5		116,323		60,258		93.0
Net deferred tax assets(2)	6,759		65,433		(89.7	)	—		28,433		—
Accounts receivable	49,524		55,807		(11.3	)	92,485		47,663		94.0
Other assets	286,301		162,809		75.9		241,860		248,828		(2.8	)
Total accrued interest receivable and other assets	$	1,586,068	$	951,261	66.7		$	2,059,055	$	1,745,233	18.0

~~NM—Not meaningful~~


(1)	See ~~“Derivatives”~~"Derivatives" section below.


(2)	See "Other Liabilities" 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 ~~$491.9~~$135.5 million was primarily due to an overall increase in the amount of unsettled spot trades at period-end as compared to December 31, ~~2018.~~2019.

~~Net Deferred Tax Assets~~Accrued Interest Receivable

The decrease of ~~$58.7~~$26.7 million in ~~net deferred tax assets was primarily due to an increase in~~accrued interest receivable is reflective of lower accrued interest receivables on loans and fixed income investments securities from lower overall market rates as well as the ~~fair value of AFS securities due to a~~ decrease in ~~market interest rates~~period-end fixed income securities of $1.6 billion at March 31, 2020 as compared to December 31, ~~2018.~~2019.

FHLB and Federal Reserve Bank stock

~~Other Assets~~

~~Other assets includes various asset amounts for other operational transactions.~~ The increase of ~~$123.5 million was primarily due to $72.3~~$56.1 million in ~~current taxes receivable due to estimated tax payments made during the nine months ended September 30, 2019. Additionally,~~FHLB and Federal Reserve Bank stock is a result of an increase in ~~other assets~~the amount of ~~$48.0~~stock required to be held by the Bank under the FHLB's membership guidelines relative to outstanding FHLB borrowings. Outstanding short-term FHLB advances were $2.7 billion at March 31, 2020 compared to zero at December 31, 2019.

Accounts Receivable

The increase of $44.8 million in accounts receivable was ~~due~~ primarily driven by an increase of $47.0 million related to the ~~inclusion~~unsettled transactions for the termination of ~~SVB Leerink in~~ our ~~financial results at September 30, 2019.~~interest rate swap cash flow hedges as of March 31, 2020. Refer to Note 11 — “Derivative Financial Instruments” of the “Notes to Interim Consolidated Financial Statements (unaudited)” under Part I, Item 1 of this report for additional details of this transaction.

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 at ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018:~~2019:

(Dollars in thousands) September 30, 2019 December 31, 2018 % Change
Assets:
Equity warrant assets $ 149,113
$ 149,238
(0.1 )%
Foreign exchange forward and option contracts 122,280
100,402
21.8
Client interest rate derivatives 25,608
8,499
NM
Interest rate swaps 40,976
—
—
Total derivative assets $ 337,977
$ 258,139
30.9
Liabilities:
Foreign exchange forward and option contracts $ 101,729
$ 88,559
14.9
Client interest rate derivatives 37,525
9,491
NM
Interest rate swaps 9,286
—
—
Total derivative liabilities $ 148,540
$ 98,050
51.5

~~NM—Not meaningful~~



(Dollars in thousands)	March 31, 2020		December 31, 2019		% Change
Assets:
Equity warrant assets	$	152,710	$	165,473	(7.7	)%
Foreign exchange forward and option contracts	239,272		115,854		106.5
Client interest rate derivatives	80,543		28,811		179.6
Interest rate swaps	—		22,676		—
Total derivative assets	$	472,525	$	332,814	42.0
Liabilities:
Foreign exchange forward and option contracts	$	195,891	$	98,207	99.5
Client interest rate derivatives	31,533		14,154		122.8
Interest rate swaps	—		25,623		—
Total derivative liabilities	$	227,424	$	137,984	64.8

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 30, 2019,~~March 31, 2020, we held warrants in ~~2,227~~2,342 companies, compared to ~~2,095~~2,268 companies at December 31, ~~2018.~~2019. Warrants in 1519 companies each had values greater than $1.0 million and collectively represented ~~$43.7~~$46.7 million, or ~~29.3~~30.6 percent, of the fair value of the total warrant portfolio at ~~September 30, 2019.~~March 31, 2020. The change in fair value of equity warrant assets is recorded in "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~~ months ended ~~September 30, 2019~~March 31, 2020 and ~~2018:~~ 2019:

Three months ended September 30, Nine months ended September 30,
(Dollars in thousands) 2019 2018 2019 2018
Balance, beginning of period $ 158,048
$ 143,725
$ 149,238
$ 123,763
New equity warrant assets 3,843
5,113
11,365
14,511
Non-cash changes in fair value, net 7,995
17,286
19,787
32,743
Exercised equity warrant assets (20,292 ) (17,725 ) (28,346 ) (20,892 )
Terminated equity warrant assets (481 ) (1,432 ) (2,931 ) (3,158 )
Balance, end of period $ 149,113
$ 146,967
$ 149,113
$ 146,967



	Three months ended March 31,
(Dollars in thousands)	2020			2019
Balance, beginning of period	$	165,473		$	149,238
New equity warrant assets	4,519			4,471
Non-cash changes in fair value, net	(5,472		)	16,238
Exercised equity warrant assets	(11,484		)	(7,317		)
Terminated equity warrant assets	(326		)	(415		)
Balance, end of period	$	152,710		$	162,215

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 ~~$6.7 million~~zero at ~~September 30, 2019~~March 31, 2020 and ~~$20.7~~$22.2 million at December 31, ~~2018.~~2019. For additional information on our foreign exchange forward contracts and foreign currency option contracts, see Note ~~12—“Derivative~~11 — “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 ~~$25.3~~$80.1 million at ~~September 30, 2019~~March 31, 2020 and ~~$8.7~~$28.6 million at December 31, ~~2018.~~2019. For additional information on our client interest rate derivatives, see Note ~~12—“Derivative~~11 — “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~~Refer to Note ~~12—“Derivative~~11 — “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.~~report for additional information regarding the termination of our interest rate swap cash flow hedges at March 31, 2020.

Deposits

Deposits were ~~$59.5~~$61.9 billion at ~~September 30, 2019,~~March 31, 2020, an increase of ~~$10.2~~$0.1 billion, or ~~20.7~~0.2 percent, compared to ~~$49.3~~$61.8 billion at December 31, 2018. The increase in deposits was driven primarily by growth across all our portfolio segments. The leading contributor was our technology client portfolio attributable primarily to a healthy equity funding environment and robust IPO and SPO markets as well as continued healthy new client acquisition.2019.

At ~~September 30, 2019,~~March 31, 2020, the aggregate balance of time deposit accounts individually equal to or greater than $100,000 totaled ~~$187~~$171 million, compared to ~~$46~~$185 million at December 31, ~~2018.~~2019. At ~~September 30, 2019, all~~March 31, 2020, $167 million of 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 1312 percent and 1613 percent of our total deposits at ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018,~~2019, respectively, were from our clients in Asia.

We expect in 2020 that our deposit growth will be impacted by: slower cash burn rates as clients look to conserve cash; shifting of off-balance investments to on-balance deposits by clients to preserve flexibility; and a slowdown in investment and exit activities impacting client liquidity levels and potential private equity/venture capital firm distributions to their partners.

Short-Term Borrowings

As of ~~September 30, 2019,~~March 31, 2020, we had no overnight borrowings and $18.9 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$3.1 billion in short-term borrowings, ~~consisting~~compared to $17.4 million as of ~~$0.3 billion in advances from~~December 31, 2019. The increase was due to cash management strategies related to the ~~FHLB and $0.3 billion in securities sold under an agreement to repurchase.~~COVID-19 pandemic. For more information on our short-term debt, see Note ~~11—“Short-Term~~10 — “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 long-term debt was ~~$697.2~~$348.1 million at ~~September 30, 2019~~March 31, 2020 and ~~$696.5~~$348.0 million at December 31, ~~2018.~~2019. As of ~~September 30, 2019,~~March 31, 2020, long-term debt included our 3.50% ~~Senior Notes and 5.375%~~ Senior Notes. For more information on our long-term debt, see Note ~~11—“Short-Term~~10 — “Short-Term Borrowings and Long-Term Debt” of the “Notes to Interim Consolidated Financial Statements (unaudited)” under Part I, Item 1 of this report.

Other Liabilities

A summary of other liabilities at ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018~~2019 is as follows:


(Dollars in thousands)	September 30, 2019		December 31, 2018		% Change	March 31, 2020		December 31, 2019		% Change
Foreign exchange spot contract liabilities, gross	$	696,513	$	170,355	NM	$	1,011,264	$	888,360	13.8
Accrued compensation	259,809		224,405		15.8	117,559		354,393		(66.8	)
Allowance for unfunded credit commitments	63,108		55,183		14.4	84,690		67,656		25.2
Derivative liabilities (1)	148,540		98,050		51.5	227,424		137,984		64.8
Net deferred tax liabilities						92,782		—		—
Other liabilities	563,251		458,366		22.9	667,234		593,359		12.5
Total other liabilities	$	1,731,221	$	1,006,359	72.0	$	2,200,953	$	2,041,752	7.8

~~NM—Not meaningful~~


(1)	See ~~“Derivatives”~~��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 ~~$526.2~~$122.9 million was due primarily to an increase in the ~~amount~~fair value of unsettled spot trades at ~~period-end~~March 31, 2019 as compared to December 31, ~~2018.~~2019, due to increases in the mark-to-market valuations driven by increases in the U.S. dollar against other currencies.

Accrued Compensation

Accrued compensation includes amounts for our Incentive Compensation Plan, Direct Drive Incentive Compensation Plan, Retention Program, Warrant Incentive Plan, ESOP, SVB Leerink Incentive Compensation Plan, SVB Leerink Retention Award and other compensation arrangements. The ~~increase~~decrease of ~~$35.4~~$236.8 million was primarily the result of ~~higher~~the payout of our 2019 incentive compensation ~~accruals~~plans during the first quarter of 2020, partially offset by the accrual for the ~~nine~~three months ended ~~September 30, 2019~~March 31, 2020.

Allowance for Unfunded Credit Commitments

Allowance for unfunded credit commitments includes an allowance for both our unfunded loan commitments and our letters of credit. The increase of $17.0 million was due primarily to the day one impact of the adoption of CECL of $22.8 million partially offset by the reduction of credit losses of $5.5 million driven by a decrease in the expected future commitments for milestone tranches, which are tied to company performance or additional funding rounds, based on our forecast models of the current economic environment, including the impact of the COVID-19 pandemic.

Net Deferred Tax Liabilities

Net deferred tax liabilities increased due to the ~~increase in~~recording of pre-tax unrealized gains to accumulated other comprehensive income from the ~~number~~termination of ~~average FTEs for 2019.~~our interest rate swap cash flow hedge contracts partially offset by timing differences related to warrants and unrealized losses on our foreign currency loans.

Other Liabilities

Other liabilities includes various accrued liability amounts for other operational transactions. The increase of ~~$104.9~~$73.9 millionwas reflective primarily of a ~~$71.3~~$46.2 million increase in new commitments for our qualified affordable tax credit funds, a ~~$17.2~~$24.3 million increase in ~~accrued rebate liabilities~~current taxes payable and a $23.5 million increase in investment securities payable, partially offset by a decrease of $28.4 million in merchant services card payables due to the timing of settlement at September 30, 2019 as compared to December 31, 2018. In addition, an increase of $5.2 million in other liabilities was attributable to the inclusion of SVB Leerink in our financial results at September 30, 2019.settlements.

Noncontrolling Interests

Noncontrolling interests totaled ~~$157.8~~$148.5 million and ~~$148.6~~$150.8 million at ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018,~~2019, respectively. The ~~$9.2~~$2.3 million ~~increase~~decrease was due primarily to ~~income~~a loss attributable to noncontrolling interests of ~~$35.9~~$2.0 million as~~well as an additional $5.3 million attributable to the acquisition of SVB Leerink in our financial results~~ for the ~~nine~~three months ended ~~September 30, 2019, partially offset by net distributions of $32.0 million to limited partners from various managed funds of funds.~~March 31, 2020.

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 30, 2019~~March 31, 2020 and December 31, ~~2018~~2019:


	September 30, 2019						December 31, 2018						March 31, 2020						December 31, 2019
(Dollars in thousands)	Total Balance			Level 3			Total Balance			Level 3			Total Balance			Level 3			Total Balance			Level 3
Assets carried at fair value	$	13,534,475		$	145,175		$	8,388,011		$	146,278		$	13,404,754		$	149,992		$	14,672,330		$	161,172
As a percentage of total assets	19.8		%	0.2		%	14.7		%	0.3		%	17.9		%	0.2		%	20.7		%	0.2		%
As a percentage of assets carried at fair value																1.1						1.1
Liabilities carried at fair value	$	148,540		$	—		$	98,050		$	—		$	227,424		$	—		$	137,984		$	—
As a percentage of total liabilities	0.2		%	—		%	0.2		%	—		%	0.3		%	—		%	0.2		%	—		%
As a percentage of assets carried at fair value				1.1		%				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 ~~18—“Fair~~17 — “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 generally “Risk Factors” set forth under Part I, Item 1A in our ~~2018~~2019 Form ~~10-K.~~10-K and under Part II, Item 1A of this report.

During the three ~~and nine~~ months ended ~~September 30,~~March 31, 2020, the Level 3 assets that are measured at fair value on a recurring basis experienced net realized and unrealized gains of $14.6 million, primarily reflective of net gains realized on exercised warrant assets. During the three months ended March 31, 2019, the Level 3 assets that are measured at fair value on a recurring basis experienced net realized and unrealized gains of ~~$39.6~~$19.1 million ~~and $105.4 million, respectively,~~ primarily reflective of valuation increases from our private company warrant portfolio driven by healthy funding rounds and net gains realized on exercised warrant assets due to IPO activity. During the three and nine months ended September 30, 2018, the Level 3 assets that are measured at fair value on a recurring basis experienced net realized and unrealized gains of $32.2 million and $69.2 million, respectively, primarily 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~~applicable regulatory capital guidelines, including the joint agency rules implementing the "Basel III" capital ~~rules.~~rules (the "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~~Under the oversight of the Finance Committee of our Board of Directors, management engages in regular capital planning processes in an effort to optimize the use of the 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 ~~$5.9~~$7.0 billion at ~~September 30, 2019,~~March 31, 2020, an increase of ~~$0.8~~$0.5 billion, or ~~15.1~~8.7 percent, compared to ~~$5.1~~$6.5 billion at December 31, ~~2018.~~ 2019.This increase was due primarily to net income available to common stockholders of ~~$874.0~~$132.3 million and an increase in ~~accumulated~~ other comprehensive income ~~reflective~~was driven primarily ofby a ~~$240.1~~$543.9 million ($~~173.2~~393.1 million net of tax) increase in the fair value of our AFS securities portfolio ~~driven by~~reflective of decreases in period-end market interest ~~rates. The increases were~~rates and a $226.9 million ($163.9 million net of tax) gain from the termination of our interest rate swap cash flow hedge contracts, partially offset by a ~~$352.5~~reclassification to net income for realized gains of $61.2 million ~~decrease in SVBFG stockholders' equity related~~($44.2 million net of tax) attributable to ~~the repurchase~~sales of ~~our outstanding common stock.~~AFS securities.

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 under the Capital Rules as well as for a ~~well-capitalized~~"well capitalized" bank holding company and insured depository institution, respectively, as of ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018.~~2019. Capital ratios for SVB Financial and the Bank, compared to the minimum ~~regulatory~~capital ratios, ~~applicable to bank holding companies and banks to be considered “well capitalized” and “adequately capitalized,"~~ are set forth below:

Minimum Ratios under Applicable Regulatory Capital Adequacy Requirements
September 30,
2019 December 31, 2018
“Well
Capitalized”

“Adequately
Capitalized”
SVB Financial:
CET 1 risk-based capital ratio 12.71 % 13.41 % 6.5 % 4.5 %
Tier 1 risk-based capital ratio 12.86
13.58
8.0
6.0
Total risk-based capital ratio 13.70
14.45
10.0
8.0
Tier 1 leverage ratio 8.64
9.06
N/A
4.0
Tangible common equity to tangible assets ratio (1) 8.38
8.99
N/A
N/A
Tangible common equity to risk-weighted assets ratio (1) 13.04
13.28
N/A
N/A
Bank:
CET 1 risk-based capital ratio 11.48 % 12.41 % 6.5 % 4.5 %
Tier 1 risk-based capital ratio 11.48
12.41
8.0
6.0
Total risk-based capital ratio 12.36
13.32
10.0
8.0
Tier 1 leverage ratio 7.48
8.10
5.0
4.0
Tangible common equity to tangible assets ratio (1) 7.36
8.13
N/A
N/A
Tangible common equity to risk-weighted assets ratio (1) 11.82
12.28
N/A
N/A



	March 31, 2020		December 31, 2019		Required Minimum (1)		Well Capitalized Minimum
SVB Financial:
CET 1 risk-based capital ratio (2)(3)	12.35	%	12.58	%	7.0	%	N/A
Tier 1 risk-based capital ratio (3)	13.35		13.43		8.5		6.0
Total risk-based capital ratio (3)	14.45		14.23		10.5		10.0
Tier 1 leverage ratio (2)(3)	9.00		9.06		4.0		N/A
Tangible common equity to tangible assets ratio (4)(5)	8.70		8.39		N/A		N/A
Tangible common equity to risk-weighted assets ratio (4)(5)	13.40		12.76		N/A		N/A
Bank:
CET 1 risk-based capital ratio (3)	10.90	%	11.12	%	7.0	%	6.5	%
Tier 1 risk-based capital ratio (3)	10.90		11.12		8.5		8.0
Total risk-based capital ratio (3)	12.04		11.96		10.5		10.0
Tier 1 leverage ratio (3)	7.21		7.30		4.0		5.0
Tangible common equity to tangible assets ratio (4)(5)	7.63		7.24		N/A		N/A
Tangible common equity to risk-weighted assets ratio (4)(5)	11.99		11.31		N/A		N/A


(1)	Percentages represent the minimum capital ratios plus, as applicable, the fully phased-in 2.5% CET1 capital conservation buffer under the Capital Rules.


(2)	"Well-Capitalized Minimum" CET 1 risk-based capital and Tier 1 leverage ratios are not formally defined under applicable banking regulations for bank holding companies.


(3)	Capital ratios include regulatory capital phase-in of the allowance for credit losses under the 2020 CECL Interim Final Rule for periods beginning March 31, 2020.


(4)	See below for a reconciliation of non-GAAP tangible common equity to tangible assets and tangible common equity to risk-weighted assets.


(5)	The Federal Reserve has not issued any minimum guidelines for the tangible common equity to tangible assets ratio or the tangible common equity to risk-weighted assets ratio, however, we believe these ratios provide meaningful supplemental information regarding our capital levels and are therefore provided above.

Regulatory Capital Phase-In under the 2020 CECL Interim Final Rule ("IFR")

~~Risk-based~~Federal banking regulatory agencies have provided relief to banking organizations by way of an interim final rule based on the recent disruptions in economic conditions caused by COVID-19 as well as the significant resources required to implement CECL. The interim final rule provides banking organizations that adopt CECL during the 2020 calendar year with the option to delay the estimated impact of CECL on regulatory capital ~~ratios (CET~~for two years, followed by a three-year transition period to phase out the aggregate amount of the capital benefit provided during the initial two-year delay (i.e., a five-year transition, in total). The interim final rule provides electing banking organizations with a methodology for delaying the effect on regulatory capital of an estimated amount of the increase in the allowance for credit loss ("ACL") that can be attributed to the adoption of CECL, relative to the increase in the allowance for loan and lease losses ("ALLL") that would have occurred for banking organizations operating under the incurred loss methodology. Accordingly, we have elected to use the regulatory capital phase-in under the IFR.

Based on the methodology under the IFR, we received a 19 bps and 18 bps benefit to our Common Equity Tier 1 ~~tier~~and Tier 1 Capital Ratios, respectively, along with an 11 bps benefit to our Leverage Ratios for SVB Financial Group and the Bank.

Regulatory Capital: Simplifications to the Capital Rule Pursuant to the Economic Growth and Regulatory Paperwork Reduction Act of 1996

On July 22, 2019, the Federal Deposit Insurance Corporation, Office of the Comptroller of the Currency and the Federal Reserve Board issued a final rule titled Regulatory Capital: Simplifications to the Capital Rule Pursuant to the Economic Growth and Regulatory Paperwork Reduction Act of 1996 ("Simplifications Rule"), which simplified the regulatory capital treatment for mortgage servicing assets, certain deferred tax assets arising from temporary differences, investments in the capital of unconsolidated financial institutions, and the calculation of minority interest. These provisions in the Simplifications Rule were effective as April 1, 2020. Under the effective date revision in this final rule, non-advanced approaches banking organizations, such as SVB Financial Group, may implement the simplification rule beginning on January 1, 2020. As such, we have elected to adopt these provisions effective January 1, 2020.

Our total risk-based capital ratios for both SVBFG and ~~tier 1 leverage ratio) for SVB Financial decreased~~the Bank as of ~~September 30, 2019,~~March 31, 2020, increased compared to ~~the same ratios as of~~ December 31, ~~2018~~2019 as a result of an increase in ~~risk-weighted assets, primarily driven by increases in funded loans and loan commitments. The decrease in the tier 1 leverage ratio is due to the increase in average assets driven~~capital, offset by an increase in our risk-weighted assets. The increase in capital was due to net income, an increase in our allowance for credits losses for loans and HTM securities and an increase in minority interest for SVBFG reflective of the implementation of the Simplifications Rule. These increases in capital were partially offset by a decrease in

retained earnings due to the stock repurchase program for SVBFG. The increase in risk-weighted assets was primarily driven by our robust period-end loan growth.

Our tier 1 capital and leverage ratios for both SVBFG and the Bank as of March 31, 2020, decreased compared to December 31, 2019 driven primarily by an increase in risk-weighted and average assets, offset by an increase in tier 1 capital. The increase in risk-weighted and average assets was driven primarily by loan ~~portfolio~~growth, increased cash and cash equivalents and increased fixed income investment securities.

~~Risk-based capital ratios (CET 1,~~ The increase in tier 1 ~~total risk-based~~ capital ~~and tier 1 leverage ratio)~~ for the Bank was driven primarily by net income. The increase in tier 1 capital for SVBFG was driven primarily by net income and an increase in minority interest due to the Simplifications Rule, offset by a decrease in retained earnings due to common stock repurchases under our stock repurchase program.

Our CET 1 capital ratio decreased for both SVBFG and the Bank as of ~~September 30, 2019,~~March 31, 2020, compared to ~~the same ratios as of~~ December 31, ~~2018.~~2019 as a result of an increase in capital, partially offset by the increase our risk-weighted assets. The ~~decrease~~increase in capital was due to net income and an increase in the ~~Bank's~~allowance for credit losses for loans and HTM securities. These increases in capital ~~ratios reflected $633.0 million of cash dividends paid~~were partially offset by the ~~Bank to~~increase in risk weighted assets, driven by our ~~bank holding company, SVB Financial, during the nine months ended September 30, 2019~~.robust period-end loan growth.

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 30, 2019~~March 31, 2020 and December 31, ~~2018~~:2019:


	SVB Financial						Bank						SVB Financial						Bank
Non-GAAP tangible common equity and tangible assets (Dollars in thousands, except ratios)	September 30, 2019			December 31, 2018			September 30, 2019			December 31, 2018			March 31, 2020			December 31, 2019			March 31, 2020			December 31, 2019
GAAP SVBFG stockholders’ equity	$	5,890,680		$	5,116,209		$	4,918,767		$	4,554,814		$	7,034,749		$	6,470,307		$	5,617,402		$	5,034,095
Less: preferred stock													340,138			340,138			—			—
Less: intangible assets	190,111			—			—			—			185,895			187,240			—			—
Tangible common equity	$	5,700,569		$	5,116,209		$	4,918,767		$	4,554,814		$	6,508,716		$	5,942,929		$	5,617,402		$	5,034,095
GAAP total assets	$	68,231,233		$	56,927,979		$	66,824,088		$	56,047,134		$	75,009,640		$	71,004,903		$	73,630,526		$	69,563,817
Less: intangible assets	190,111			—			—			—			185,895			187,240			—			—
Tangible assets	$	68,041,122		$	56,927,979		$	66,824,088		$	56,047,134		$	74,823,745		$	70,817,663		$	73,630,526		$	69,563,817
Risk-weighted assets	$	43,712,495		$	38,527,853		$	41,597,959		$	37,104,080		$	48,578,473		$	46,577,485		$	46,839,951		$	44,502,150
Non-GAAP tangible common equity to tangible assets	8.38		%	8.99		%	7.36		%	8.13		%	8.70		%	8.39		%	7.63		%	7.24		%
Non-GAAP tangible common equity to risk-weighted assets	13.04			13.28			11.82			12.28			13.40			12.76			11.99			11.31

The tangible common equity to tangible assets ratio ~~decreased~~and the tangible common equity to risk weighted assets ratio increased for SVBFG and the Bank ~~primarily as a result of the $633.0 million in cash dividends paid by the Bank to our bank holding company, SVB Financial Group,~~ during the ~~nine~~three months ended ~~September 30, 2019.~~March 31, 2020. The tangible common equity to risk-weighted assets ratio ~~decreased for the Bank~~increased as a result of ~~the proportionally higher~~ increase in ~~risk-weighted assets relative~~equity due to unrealized gains on AFS securities and unrealized gains due to the ~~increase tangible common equity.~~termination of our interest rate swap cash flow hedge contracts as mentioned above. 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

and standby letters of credit, please refer to Note ~~16—“Off-Balance~~15 — “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 ~~16—“Off-Balance~~15 — “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 30, 2019,~~March 31, 2020, our period-end total deposit balances were ~~$59.5~~$61.9 billion, compared to ~~$49.3~~$61.8 billion at December 31, ~~2018.~~2019.

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.

In connection with our participation in the PPP under the CARES Act as discussed, we are considering participating in the Federal Reserve’s PPPLF. The PPPLF is intended to facilitate lending under the PPP, and extends credit to eligible PPP loan originators on a non-recourse basis, taking PPP loans as collateral at face value. Additionally, interim final capital rules issued by federal bank regulatory agencies have neutralized the regulatory capital effects of participating in the PPP, and have also clarified that a zero percent risk weight applies to loans covered by the PPP for capital purposes.

On a stand-alone basis, SVB Financial’s primary liquidity channels include dividends from the Bank, its portfolio of liquid assets, and its ability to raise debt and capital. Consistent with recent prior quarters, the Bank has paid a quarterly dividend to SVB Financial. For the three ~~and nine~~ months ended ~~September 30, 2019,~~March 31, 2020, the dividend amount paid was ~~$336.0 million and $633.0 million, respectively.~~$50.0 million. 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 ~~2018~~2019 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~~three months ended ~~September 30, 2019~~March 31, 2020 and ~~2018.~~2019. 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,						Three months ended March 31,
(Dollars in thousands)	2019			2018			2020			2019
Average cash and cash equivalents	$	6,250,024		$	3,032,407		$	8,106,167		$	4,987,487
Percentage of total average assets	10.2		%	5.6		%	11.2		%	8.7		%
Net cash provided by operating activities	$	709,744		$	703,904		$	168,125		$	340,750
Net cash used for investing activities	(6,564,776		)	(5,736,296		)
Net cash (used for) provided by investing activities							(599,041		)	904,427
Net cash provided by financing activities	9,229,689			5,928,458			3,210,581			2,250,167
Net increase in cash and cash equivalents	$	3,374,657		$	896,066		$	2,779,665		$	3,495,344

Average cash and cash equivalents increased by ~~$3.2~~$3.1 billion, or ~~106.1~~62.5 percent, to ~~$6.3~~$8.1 billion for the ~~nine~~three months ended ~~September 30, 2019,~~March 31, 2020, compared to ~~$3.0~~$5.0 billion for the comparable ~~2018~~2019 period.

Cash provided by operating activities was ~~$709.7~~$168.1 million for the ~~nine~~three months ended ~~September 30, 2019,~~March 31, 2020, reflective primarily of net income before noncontrolling interests and dividends of ~~$909.9~~$133.6 million ~~partially offset by~~and a net ~~decrease~~increase of ~~$205.8~~$34 million in adjustments to reconcile net income to net cash ~~driven~~ primarily due to the increase in the provision for credit losses and proceeds for the settled transactions for the termination of interest rate swap cash flow hedge contracts, partially offset by the ~~changes in our amortization of deferred loan fees and the change~~decrease in accrued compensation.

Cash used for investing activities of ~~$6.6~~$0.6 billion for the ~~nine~~three months ended ~~September 30, 2019~~March 31, 2020 was driven by ~~$8.2~~$1.9 billion in purchases of fixed income investment securities and a ~~$2.7~~$2.8 billion increase in loan balances, partially offset by ~~$4.5~~$2.7 billion in proceeds from the sale of AFS securities and $1.4 billion of proceeds from maturities and principle pay downs from our fixed income investment securities portfolio.

Cash provided by financing activities was ~~$9.2~~$3.2 billion for the ~~nine~~three months ended ~~September 30, 2019,~~March 31, 2020, reflective primarily of a ~~net~~$3.1 billion increase ~~of $10.2 billion~~ in ~~deposits, partially offset by $0.6 billion in paydowns of our short-term overnight borrowings and $0.4 billion in cash outflows related to repurchases of our outstanding common stock.~~

short term borrowings.

Cash and cash equivalents were ~~$6.9~~$9.6 billion and ~~$3.8~~$7.1 billion, respectively, at ~~September 30, 2019~~March 31, 2020 and ~~2018.~~2019.

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 and equity price risk ~~including~~(including the effect of competition on product ~~pricing.~~pricing). All these risks are important considerations but are also inherently difficult to predict and to assess the impact of each on ~~the~~ simulation results. Consequently, simulations used to analyze the sensitivity of net interest income to changes in interest rates will differ from actual results due to differences in the timing and frequency of 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 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. Relevant metrics and guidelines, which are approved by the Finance Committee of our Board of Directors and are included in our Interest Rate Risk Policy, are monitored on an ongoing basis.

Interest rate risk is managed 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 with managing interest rate risk.

We utilize a simulation model to perform sensitivity analysis on the economic value of equity and 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 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 the economic value of equity (“EVE”). EVE is defined as the market value of assets, less the market value of liabilities. Another application of the simulation model measures the impact of changes in market interest rates on net interest income (“NII”) assuming a static balance sheet size and composition as of the period-end reporting date. In the NII simulation, the level of market interest rates as well as the size and composition of 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 maintains the balance sheet at its current size and composition. Yield and spread assumptions on cash and investment balances reflect current market 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 net interest income are principally short-term interest rates and include the following benchmark indexes: (i) the National Prime 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 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.

Changes in short-term interest rates through an increasing rate cycle from the end of 2015 through the end of 2018 and corresponding increases in deposit rates paid to our clients to attract new deposit funding and retain existing funds has resulted in a realized beta of approximately 50 percent, as measured since the beginning of the increasing rate cycle. Management expects deposit repricing behavior in a falling rate environment to be different than repricing behavior in a rising rate environment. ThisThe NII simulation results inpresented here include an "asymmetric" beta assumption that is applied in the NII and EVE simulation models for ~~interest bearing~~interest-bearing deposits. This reflects management expectations that deposit repricing behavior in a falling rate environment would be different than repricing behavior in a rising rate environment. This model assumes the overall beta for ~~interest bearing~~interest-bearing deposits in a falling rate environment would be approximately 60 percent. That is, overall changes in ~~interest bearing~~interest-bearing deposit rates would be approximately 60 percent of the change in short-term market rates. These repricing assumptions are reflected as changes in interest expense on ~~interest bearing~~interest-bearing deposit balances.

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 30, 2019~~March 31, 2020 and December 31, 2018. NII sensitivity for December 31, 2018 reflects the higher beta assumptions discussed above in both increasing and decreasing rate scenarios for purposes of comparison. Modeled EVE for December 31, 2018 has not been adjusted as the assumption change had an immaterial impact.2019:


Change in interest rates (bps) (Dollars in thousands)	Estimated		Estimated Increase/(Decrease) in EVE					Estimated		Estimated Increase/(Decrease) in NII					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		EVE		Amount			Percent		NII		Amount			Percent
September 30, 2019:
March 31, 2020:
+200	$	10,053,818	$	(210,435	)	(2.1	)%	$	2,494,222	$	443,430		21.6	%	$	10,519,005	$	138,025		1.3	%	$	2,443,279	$	559,545		29.7	%
+100	10,193,693		(70,560		)	(0.7	)	2,274,377		223,585			10.9		10,600,353		219,373			2.1		2,160,226		276,492			14.7
—	10,264,253		—			—		2,050,792		—			—		10,380,980		—			—		1,883,734		—			—
-100	10,080,991		(183,262		)	(1.8	)	1,851,688		(199,104		)	(9.7	)	10,333,795		(47,185		)	(0.5	)	1,790,704		(93,030		)	(4.9	)
-200	9,961,089		(303,164		)	(3.0	)	1,675,960		(374,832		)	(18.3	)	10,417,466		36,486			0.4		1,774,703		(109,031		)	(5.8	)

December 31, 2018: (as revised)
December 31, 2019:
+200	$	9,348,408	$	504,405		5.7	%	$	2,583,577	$	499,257		24.0	%	$	9,930,270	$	(253,659	)	(2.5	)%	$	2,528,158	$	421,358		20.0	%
+100	9,090,781		246,778			2.8		2,334,040		249,720			12.0		10,056,711		(127,218		)	(1.2	)	2,314,686		207,886			9.9
—	8,844,003		—			—		2,084,320		—			—		10,183,929		—			—		2,106,800		—			—
-100	8,470,501		(373,502		)	(4.2	)	1,840,190		(244,130		)	(11.7	)	10,138,558		(45,371		)	(0.4	)	1,927,801		(178,999		)	(8.5	)
-200	7,590,973		(1,253,030		)	(14.2	)	1,543,150		(541,170		)	(26.0	)	10,000,585		(183,344		)	(1.8	)	1,760,283		(346,517		)	(16.4	)

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 EVE or forecast of NII.

Our base EVE as of ~~September 30, 2019~~March 31, 2020 increased $197 million from December 31, ~~2018~~2019, driven by ~~$1.4 billion, driven equally by changes in~~overall balance sheet ~~composition as well as changes in interest rates. Interest rate changes include~~growth. For the ~~shape of the yield curve which remains inverted, with rates across the curve approximately 90 bps to 115 bps lower~~period ended March 31, 2020, compared to December 31, ~~2018. At September 30,~~ 2019, ~~as compared to December 31, 2018, total~~cash and loan balances increased by ~~$2.7~~$2.8 billion ~~primarily~~each, offset by a decrease of $1.6 billion in ~~Prime and LIBOR indexed variable rate loans. Total~~ fixed income ~~securities~~investments in our AFS and HTM portfolios. Deposits remained relatively flat with a shift in the mix of deposits resulting in a $2.1 billion increase in noninterest-bearing balances and a $1.9 billion decrease in interest bearing balances. Short-term borrowings increased by ~~$4.0 billion due primarily to total deposit growth. Total deposit growth was $10.2 billion as compared to December 31, 2018.~~$3.1 billion.

~~Overall~~Decreases in interest rates at the beginning of March partially offset the increase in base EVE from balance sheet ~~growth contributed $731 million~~growth. The market value of noninterest-bearing deposits is more sensitive to ~~the change~~changes in ~~total base EVE. Lower~~rates. Growth in noninterest-bearing balances coupled with lower overall rates across the yield curve contributed an additional $689 million to base EVE. Excess liquidity due to deposit growth was absorbed by the investment portfolio, of which approximately 42% of holdings are 15-year and 30-year fixed agency MBS. Under the current rate environment, the MBS portfolio contributes toresult in a ~~negatively convex~~higher EVE ~~profile as the securities extend in the +100 and +200 instantaneous rate shock scenarios due to slower prepayment speeds. Thus,~~sensitivity in the +100 and +200 rate shock ~~scenarios, EVE decreased slightly relative to base EVE. The change in EVE under the +100 bps rate shock scenario~~scenarios. As of March 31, 2020, noninterest-bearing deposits represented 70 percent of total deposit balances, up four percent as ~~of September 30, 2019 is approximately $317 million lower~~ compared to ~~the results from~~ December 31, ~~2018. The change~~2019. Purchases in fixed income investments during Q1 2020 were not material and did not have an impact on EVE sensitivity in the +100 and +200 ~~is approximately $715 million lower compared~~rate shock scenarios. Due to the ~~December 31, 2018 results.~~sudden decrease in market rates that occurred in March 2020, EVE sensitivity measures in the -100 and -200 bps rate shock scenarios do not represent the full magnitude of those rate shocks because we assume that U.S. Federal Fund rates are floored at zero. Rates at the short end of the rate curve were over 100 bps, accordingly in the -100 bps rate shock, market values behave as we would expect them to; EVE decreases reflective of the change in market value of deposits as they are greater than the change in the market value of our assets. However, in the -200 bps scenario, all rates floor out to zero and there is not much room for interest-bearing deposit rates to move, so their sensitivity actually decreases while the change in the market value of assets remains the same as in the -100 bps scenario as the rates for those are already floored. As a result, we do not get a full -200 bps rate shock as the sensitivity metrics on deposits are asymmetrical. Therefore, the sensitivity measures in these scenarios essentially reflect results similar to what would be seen in a -25 to -50 bps rate shock range.

The overall change in mix in the composition of our balance sheet as discussed, results in an EVE profile that experiences positive changes as rates rise, and represents a typical profile for a balance sheet that includes a rate-sensitive loan portfolio funded by a much larger noninterest-bearing deposit base.

12-Month Net Interest Income Simulation

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 balances and interest rates are held constant over the forecast horizon. At ~~September 30, 2019,~~March 31,2020, NII sensitivity was ~~10.9~~14.7 percent in the +100 bps interest rate scenario, compared to ~~12.0~~9.9 percent at December 31, ~~2018.~~2019. Our NII sensitivity in the +200 bps interest rate shock scenario was ~~21.6~~29.7 percent compared to ~~24.0~~20.0 percent at December 31, ~~2018.~~2019. NII sensitivity in the -100 bps scenario of negative ~~9.7~~4.9 percent was lower at ~~September~~March 31, ~~2019,~~2020, compared to a negative ~~11.7~~8.5 percent at December 31, ~~2018.~~2019. The -200 bps scenario currently indicates a lower percentage change in NII of negative ~~18.3~~5.8 percent at ~~September 30, 2019,~~March 31, 2020, compared to negative ~~26.0~~16.4 percent at December 31, ~~2018.~~2019. However, as noted above, the -100 and -200 bps scenarios are not complete rate shocks in this rate environment, since rates are assumed to be floored at zero. Therefore, the sensitivity measures in these scenarios essentially reflect results similar to what would be seen in a -25 to -50 bps rate shock range. The ~~September 30, 2019~~March 31, 2020 NII sensitivity percentages are inclusive of the realized income or expense associated with interest rate swaps that ~~are part~~were partially unwound reflective of ~~our~~the macro hedging process initiated in 2019 ~~as part of the effort~~ to reduce the impact of decreasing rates on NII. The changes in NII sensitivity are primarily the result of the changes in balance sheet composition described previously, combined with the impact of hedges in the respective parallel rate shock scenarios.

Our base case static 12-month NII forecast at ~~September 30, 2019~~March 31, 2020 decreased compared to December 31, ~~2018~~2019 by ~~$34 million. This~~$223 million, primarily driven by the growth in the balance sheet that has taken place year-to-date combined with an overall relatively lower rate environment, reflective of the decrease in the Fed Funds rate during March 2020, compared to last year. Specifically, a large portion of the loan portfolio is ~~primarily~~indexed to the ~~result~~Prime rate, which decreased 150 bps due to actions undertaken by the Federal Reserve in March to mitigate a possible economic downturn. The adverse impact of ~~fundamental~~ changes in ~~balance sheet composition that have taken place year-to-date. Specifically, significant~~interest rates on NII was tempered to a certain degree by continued growth in the loan portfolio, along with decreases in interest bearing deposit balances ~~as well as corresponding~~and growth in ~~loan and investment~~noninterest-bearing deposit balances. However, in the 12-month NII simulation, the interest income benefit of growth in the balance sheet was offset by an increase in interest expense associated with the increase in interest-bearing deposit balances and lower overall rate levels across the yield curve. Costs associated with the macro hedging swap portfolio also contributed to the decrease in the simulated 12-month NII.

A majority of our loans are indexed to Prime and LIBOR. 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 benefit 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~~interest-bearing deposit products which we set at our discretion based on client needs and our overall funding mix. Repricing of ~~interest bearing~~interest-bearing deposits impacts estimated interest expense. As noted previously, repricing deposit rates are generally assumed to be ~~less than one-half~~approximately 60 percent of the amount of simulated changes in short-term market interest rates.

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 rate scenarios. The embedded floors are also a factor in the ~~up rate~~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 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

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,~~2020, we adopted and implemented ASC ~~842, Leases. Although the new lease standard had an immaterial impact on our consolidated financial statements, we did implement~~326, CECL and have implemented changes to our processes, systems and control activities related to the modeling and recognition of our allowance for credit loss estimates. The key changes to our processes 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,~~data management, economic forecasting, modeling, qualitative framework, governance and gathering of information provided for disclosures.

PART II–OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

Please refer to Note ~~19—“Legal~~18 — “Legal Matters” of the “Notes to Interim Consolidated Financial Statements (unaudited)” under Part I, Item 1 of this report.

ITEM 1A. RISK FACTORS

~~There~~With the exception of the additional risk factor due to ongoing outbreak of COVID-19 below, there are no material changes to the risk factors set forth in our ~~2018~~2019 Annual Report on Form 10-K.

Our business, financial condition, liquidity, capital and results of operations have been, and will likely continue to be, adversely affected by the COVID-19 pandemic.

The COVID-19 pandemic has created significant economic and financial disruptions that have adversely affected, and are likely to continue to adversely affect, our business, financial condition, liquidity, capital and results of operations. We cannot predict at this time the extent to which the COVID-19 pandemic will continue to negatively affect our business, financial condition, liquidity, capital and results of operations. The extent of any continued or future adverse effects of the COVID-19 pandemic will depend on future developments, which are highly uncertain and outside our control, including the scope and duration of the pandemic, the direct and indirect impact of the pandemic on our employees, clients, customers, counterparties and service providers, as well as other market participants, and actions taken by governmental authorities and other third parties in response to the pandemic.

The COVID-19 pandemic has contributed to, among other things (i) increased unemployment and decreased consumer confidence and business generally, leading to an increased risk of delinquencies, defaults and foreclosures; (ii) sudden and significant declines, and significant increases in volatility, in financial markets; (iii) ratings downgrades, credit deterioration and defaults in many industries; (iv) significant draws on credit lines as clients seek to increase liquidity; (v) significant reductions in the targeted federal funds rate (which was reduced to a target rate of between zero and 0.25% in the first quarter and may be reduced to below zero if the Federal Reserve determines economic conditions warrant); and (vi) heightened cybersecurity, information security and operational risks as a result of work-from-home arrangements and the current environment, including increased fraudulent activity. In addition, we also face an increased risk of client disputes, litigation and governmental and regulatory scrutiny as a result of the effects of COVID-19 on market and economic conditions and actions governmental authorities take in response to those conditions. Moreover, we have focused resources and management attention towards managing the impacts from COVID-19 pandemic, which will likely result in a slowdown of our growth initiatives and other investments in the near term.

We are prioritizing the safety of our employees. We have currently moved to a work-from-home plan, prohibited all business travel and postponed or move online all SVB-hosted events, and enabled remote access to our systems. If our work-from-home plan is not effective or if there are negative effects from a prolonged work-from-home arrangement, it may lead to reduced productivity and significant disruptions in our business operations. We are also developing a plan for employees to eventually return to work in our offices, the manner and timing of which are unclear. Our return to work plan will be subject to a variety of complex considerations including, among others, international, federal, state and local government and health organization guidance, health and safety implications (including potential health testing requirements), employee needs, and the practical requirements of potential office reconfigurations or a phased return. It is also possible that our current extended work-from-home model may affect or change our prior—work-in-the-office model, as we may allow an increase in remote working practices.

Many of our counterparties and third-party service providers have also been, and may further be, affected by “stay-at-home” orders, market volatility and other factors that increase their risks of business disruption or that may otherwise affect their ability to perform under the terms of any agreements with us or provide essential services. As a result, our operational and other risks are generally expected to increase until the pandemic subsides.

We are offering special financial assistance to support certain clients who are experiencing financial hardships related to the COVID-19 pandemic, including offering certain venture-backed companies, Private Bank, Wine and other clients the opportunity to temporarily defer their scheduled loan principal payments. We continue to engage with our clients to understand client needs, and we may implement additional assistance or other relief to supporting clients across various sectors and life stages. Additionally, we are participating as a lender under the Paycheck Protection Program under CARES Act and may participate in other government relief programs in the U.S. or internationally. These government programs are complex and our participation in any of these programs may lead to governmental, regulatory and other scrutiny, litigation and negative publicity and reputation damage for us and our customers who participate. Overall, these relief measures, whether our own programs or our participation

in government programs, are new programs for us (with new or revised regulatory guidance for the government programs that may be issued at different times throughout the process) and we may not be successful in implementing or administering the programs as intended. Further, the extent to which these programs are successful in assisting our clients is uncertain. If these relief measures are not effective, there may be an adverse effect on our revenue and results of operations, including increased provisions in our allowance for credit losses, higher rates of default and increased credit losses in future periods.

Certain industries where the Company has credit exposure, including the technology, life science/healthcare and premium wine industries, have experienced, and are expected to continue to experience, significant operational and financial challenges as a result of COVID-19. As examples, many of our early-stage clients have limited cash on hand with limited or no financing sources available and may experience difficulties sustaining their businesses; and, our premium wine industry clients may be impacted by the loss of restaurant and winery sales. These negative effects have resulted in a number of clients making higher than usual draws on outstanding lines of credit, which may negatively affect our liquidity if current economic conditions persist. The effects of COVID-19 may also cause our clients to be unable to pay their loans as they come due or decrease the value of collateral, such as accounts receivable, which we expect would cause significant increases in our credit losses. For certain early-stage and mid-stage clients, repayment of loans is dependent upon receipt of additional financing from venture capitalists or others, or in some cases, upon a successful sale to a third party, public offering or other form of liquidity or “exit” event. Further, many of our private equity/venture capital loans are dependent on the payment of capital calls or management fees by underlying limited partner investors in funds managed by private equity and venture capital firm clients. The effects of the COVID-19 pandemic has caused client valuations to drop, reduced the rate of financing or other “exit” events and impaired the ability of investors to meet their financial obligations to our clients, all of which has had and may continue to have an adverse effect on our clients’ ability to repay their loans to us.

In connection with negotiated 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, life science and healthcare industries subject to applicable regulatory limits. We have also made investments through SVB Financial, SVB Leerink and our SVB Capital family of funds in venture capital funds and direct investments in companies, many of which are required to be carried at fair value or are impacted by changes in fair value. Due to the negative effects of the COVID-19 pandemic as well as recent declines, and significant increases in volatility, in financial markets, the value of these assets have decreased, and may continue to decrease (potentially in a significant manner). Additionally, because valuations of private companies are inherently uncertain, may fluctuate over short periods of time and may be based on estimates, our determinations of fair value for private companies may differ materially from the values that would have been used if a ready market for these securities existed.

The effects of the COVID-19 pandemic has led to a significant slowdown in IPO and M&A activity, resulting in fewer transactions overall and therefore decreased revenues of SVB Leerink, our investment banking business, as such revenues stem primarily from underwriting and advisory fees associated with capital markets and M&A transactions. The IPO and M&A slowdown also impacts our ability to monetize and realize gains from our equity warrant assets and other nonmarketable securities. Additionally, a slowdown in overall private equity and venture capital investment levels may reduce the need for our clients to borrow from our capital call lines of credit, which are typically utilized by our private equity and venture capital fund clients to make investments prior to receipt of capital called from their respective limited partners.

Our earnings and cash flows are dependent to a large degree on net interest income (the difference between interest income from loans and investments and interest expense on deposits and borrowings). Net interest income is significantly affected by market rates of interest. The significant reductions to the federal funds rate have led to a decrease in the rates and yields on U.S. Treasury securities, in some cases declining below zero. If interest rates are reduced further in response to COVID-19, we expect that our net interest income will decline, perhaps significantly. The overall effect of lower interest rates cannot be predicted at this time and depends on future actions the Federal Reserve may take to increase or reduce the targeted federal funds rate in response to the COVID-19 pandemic, and resulting economic conditions. Our net interest income is also impacted by our loan volume. If our loan levels were to decline, our net interest income would also be negatively impacted.

Our core fee income may be negatively affected by decreasing business activity due to the COVID-19 pandemic. For example, credit card activity and fees have declined, and may continue to decline in the future. Foreign exchange fees and letters of credit and standby letters of credit fees may also decline if the negative effect on business activity persists for a prolonged period of time. Additionally, our deposit levels may fluctuate during the current environment. It is difficult to predict client liquidity in a challenging economic environment, as clients may increase their draws on their lines of credit to bolster their cash positions, or clients may not be able to obtain additional financing which may lead to the depletion of their cash positions. Declines in client deposit levels may negatively affect our liquidity, as well as our net interest income.

The effects of the COVID-19 pandemic on economic and market conditions have increased demands on our liquidity as we meet our clients’ needs. In addition, these adverse developments may negatively affect our capital and leverage ratios. We have

temporarily suspended our stock repurchases and will reevaluate the program once the economic environment is more stable. We will continue to exercise prudent capital management and monitor the business environment.

Governmental authorities worldwide have taken unprecedented measures to stabilize the markets and support economic growth. The success of these measures is unknown and they may not be sufficient to address the negative effects of COVID-19 or avert severe and prolonged reductions in economic activity.

Other negative effects of COVID-19 that may impact our business, financial condition, liquidity, capital and results of operations cannot be predicted at this time, but it is likely that our business, financial condition, liquidity, capital and results of operations will continue to be adversely affected until the pandemic subsides and the U.S. economy begins to recover. Further, the COVID-19 pandemic may also have the effect of heightening many of the other risks described in the section entitled “Risk Factors” in our most recent Annual Report on Form 10-K and any subsequent Quarterly Report on Form 10-Q. Until the pandemic subsides, we expect continued draws on lines of credit, reduced revenues from our lending businesses, increased credit losses in our lending portfolios and reduced activity in our noninterest income-producing lines of business. Even after the pandemic subsides, it is possible that the U.S. and other major economies continue to experience a prolonged recession, which we expect would materially and adversely affect our business, financial condition, liquidity, capital and results of operations.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Recent Sales of Unregistered Securities

None.

Issuer Purchases of Equity Securities

Stock repurchase activity during the three months ended ~~September 30, 2019~~March 31, 2020 was as follows:

Period ended Total number of shares purchased Average price paid per share Total number of shares purchased as part of publicly announced programs Maximum dollar value that may yet be purchased under the programs (1)
July 31, 2019 25,562
$ 224.16
2,247,417
$ 365,526
August 31, 2019 —
—
—
—
September 30, 2019 —
—
—
—
Total 25,562
$ 224.16
2,247,417
$ 365,526



Period ended	Total number of shares purchased	Average price paid per share		Total number of shares purchased as part of publicly announced programs	Maximum dollar value that may yet be purchased under the programs (1)
January 31, 2020	62,655	$	245.94	62,655	$	334,590,536
February 29, 2020	181,568	245.70		181,568	289,979,534
March 31, 2020	—	—		—	—
Total	244,223	$	245.76	244,223	$	289,979,534

(1) On November 13, 2018, the Company announced that its Board of Directors had authorized a $500 million stock repurchase program (the “Stock Repurchase Program”), pursuant to which the Company may, from time to time and on or before the program’s expiration date of November 15, 2019, repurchase shares of its outstanding common stock in the open market, in privately-negotiated transactions, or otherwise, subject to applicable laws and regulations. During the three months ended September 30, 2019, the Company repurchased 25,562 shares of its outstanding common stock for $5.7 million under the Stock Repurchase Program. As of September 30, 2019, the Company had repurchased 2.2 million shares of its outstanding common stock for $499.6 million under the Stock Repurchase Program. The Stock Repurchase Program was completed on July 1, 2019.

On October 24, 2019, the Company’s Board of Directors authorized a new stock repurchase program that enables the Company to repurchase up to $350 million of its outstanding common stock. This program expires on October 29, 2020. The extent to which the Company repurchases its shares, and the timing of such repurchases, will depend upon a variety of factors, including market conditions, regulatory requirements, availability of funds, and other relevant considerations, as determined by the Company. The Company may, in its discretion, begin, suspend or terminate repurchases at any time prior to the program’s expiration, without any prior notice. Repurchases may also be made pursuant to a trading plan under Rule 10b5-1 under the Exchange Act, which would permit shares to be repurchased when the Company might otherwise be precluded from doing so because of self-imposed trading blackout periods or other regulatory restrictions.

(1)

On October 24, 2019, the Company announced that its Board of Directors had authorized a $350 million common stock repurchase program pursuant to which the Company may, from time to time and on or before the program’s expiration date, repurchase shares of its outstanding common stock in the open market, in privately-negotiated transactions, or otherwise, subject to applicable laws and regulations. The extent to which the Company repurchases its shares, and the timing of such repurchases, will depend upon a variety of factors, including market conditions, regulatory requirements, availability of funds, and other relevant considerations, as determined by the Company. The Company may, in its discretion, begin, suspend or terminate repurchases at any time prior to the program’s expiration, without any prior notice. Repurchases may also be made pursuant to a trading plan under Rule 10b5-1 under the Exchange Act, which would permit shares to be repurchased when the Company might otherwise be precluded from doing so because of self-imposed trading blackout periods or other regulatory restrictions. The new stock repurchase program expires on October 29, 2020.

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

*10.1

Form of Nonqualified Stock Option Agreement under 2006 Equity Incentive Plan**

*10.2

Form of Restricted Stock Unit Award Agreement under 2006 Equity Incentive Plan**

*10.3

Form of Restricted Stock Unit Award Agreement under 2006 Equity Incentive Plan (Performance-Based)**

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

104
*	~~Denotes management contract or any compensatory plan, contract or arrangement.~~Cover Page Interactive Data File (embedded within the Inline XBRL document)										X


**	~~Forms applicable to grants made under the 2006 Equity Incentive Plan beginning in 2019.~~

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 12, 2019~~May 11, 2020		/s/ DANIEL BECK
		Daniel Beck
		Chief Financial Officer
		(Principal Financial Officer)

		SVB Financial Group

Date: ~~November 12, 2019~~May 11, 2020		/s/ KAREN HON
		Karen Hon
		~~Interim~~ Chief Accounting Officer
		(Principal Accounting Officer)

~~121~~116



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



(Dollars in thousands)	January 4, 2019
Assets acquired:
Cash and cash equivalents	$	163,273
Investment securities	33,644
Accounts receivable	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



(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



(Dollars in thousands)	Impaired loans for which there is a related allowance for loan losses		Impaired loans for which there is no related allowance for loan losses		Total carrying value of impaired loans		Total unpaid principal of impaired loans
September 30, 2019:
Commercial loans:
Software/internet	$	55,892	$	25,588	$	81,480	$	91,126
Hardware	5,441		4,482		9,923		10,175
Life science/healthcare	32,634		6,887		39,521		76,305
Premium wine	393		1,946		2,339		2,424
Other	2,589		—		2,589		2,639
Total commercial loans	96,949		38,903		135,852		182,669
Consumer loans:
Real estate secured loans	3,315		3,760		7,075		10,871
Other consumer loans	13		—		13		13
Total consumer loans	3,328		3,760		7,088		10,884
Total	$	100,277	$	42,663	$	142,940	$	193,553
December 31, 2018:
Commercial loans:
Software/internet	$	49,625	$	65,225	$	114,850	$	131,858
Hardware	1,256		10,250		11,506		12,159
Private equity/venture capital	—		3,700		3,700		3,700
Life science/healthcare	17,791		16,276		34,067		44,446
Premium wine	—		1,301		1,301		1,365
Other	411		—		411		411
Total commercial loans	69,083		96,752		165,835		193,939
Consumer loans:
Real estate secured loans	3,919		320		4,239		5,969
Other consumer loans	—		—		—		—
Total consumer loans	3,919		320		4,239		5,969
Total	$	73,002	$	97,072	$	170,074	$	199,908



Three months ended September 30,	Average impaired loans				Interest income recognized on impaired loans
(Dollars in thousands)	2019		2018		2019		2018
Commercial loans:
Software/internet	$	59,336	$	118,840	$	507	$	607
Hardware	10,617		27,922		70		410
Private equity/venture capital	—		1,233		—		—
Life science/healthcare	42,242		38,545		192		365
Premium wine	2,308		2,384		41		35
Other	3,404		—		—		—
Total commercial loans	117,907		188,924		810		1,417
Consumer loans:
Real estate secured loans	7,113		4,330		—		4
Other consumer loans	9		—		—		—
Total consumer loans	7,122		4,330		—		4
Total average impaired loans	$	125,029	$	193,254	$	810	$	1,421



Three months ended September 30, 2019	Beginning Balance June 30, 2019		Charge-offs			Recoveries		Provision for (Reduction of) Loan Losses			Foreign Currency Translation Adjustments			Ending Balance September 30, 2019
(Dollars in thousands)	Beginning Balance June 30, 2019		Charge-offs			Recoveries		Provision for (Reduction of) Loan Losses			Foreign Currency Translation Adjustments			Ending Balance September 30, 2019
Commercial loans:
Software/internet	$	101,998	$	(27,128	)	$	988	$	22,679		$	(335	)	$	98,202
Hardware	26,932		(331		)	1,669		(4,290		)	64			24,044
Private equity/venture capital	105,524		—			1,200		1,834			(27		)	108,531
Life science/healthcare	40,206		(9,361		)	15		13,836			(204		)	44,492
Premium wine	3,998		—			—		46			(1		)	4,043
Other	4,291		—			—		(30		)	—			4,261
Total commercial loans	282,949		(36,820		)	3,872		34,075			(503		)	283,573
Total consumer loans	18,939		—			16		1,910			(28		)	20,837
Total allowance for loan losses	$	301,888	$	(36,820	)	$	3,888	$	35,985		$	(531	)	$	304,410



Three months ended September 30, 2018	Beginning Balance June 30, 2018		Charge-offs			Recoveries		Provision for (Reduction of) Loan Losses			Foreign Currency Translation Adjustments			Ending Balance September 30, 2018
(Dollars in thousands)	Beginning Balance June 30, 2018		Charge-offs			Recoveries		Provision for (Reduction of) Loan Losses			Foreign Currency Translation Adjustments			Ending Balance September 30, 2018
Commercial loans:
Software/internet	$	102,648	$	(6,304	)	$	841	$	16,640		$	(335	)	$	113,490
Hardware	34,695		(12,697		)	227		(1,763		)	36			20,498
Private equity/venture capital	89,409		—			3		1,632			(33		)	91,011
Life science/healthcare	35,064		(2,076		)	189		2,322			(47		)	35,452
Premium wine	3,438		—			—		125			(3		)	3,560
Other	2,896		(1,128		)	771		118			(2		)	2,655
Total commercial loans	268,150		(22,205		)	2,031		19,074			(384		)	266,666
Total consumer loans	18,559		—			133		362			(7		)	19,047
Total allowance for loan losses	$	286,709	$	(22,205	)	$	2,164	$	19,436		$	(391	)	$	285,713



Nine months ended September 30, 2018	Beginning Balance December 31, 2017		Charge-offs			Recoveries		Provision for (Reduction of) Loan Losses			Foreign Currency Translation Adjustments			Ending Balance September 30, 2018
(Dollars in thousands)	Beginning Balance December 31, 2017		Charge-offs			Recoveries		Provision for (Reduction of) Loan Losses			Foreign Currency Translation Adjustments			Ending Balance September 30, 2018
Commercial loans:
Software/internet	$	96,104	$	(26,377	)	$	1,818	$	42,620		$	(675	)	$	113,490
Hardware	27,614		(16,111		)	1,458		7,788			(251		)	20,498
Private equity/venture capital	82,468		(112		)	13		8,200			442			91,011
Life science/healthcare	24,924		(2,940		)	245		13,829			(606		)	35,452
Premium wine	3,532		—			—		42			(14		)	3,560
Other	3,941		(2,391		)	1,874		(775		)	6			2,655
Total commercial loans	238,583		(47,931		)	5,408		71,704			(1,098		)	266,666
Total consumer loans	16,441		(289		)	470		2,384			41			19,047
Total allowance for loan losses	$	255,024	$	(48,220	)	$	5,878	$	74,088		$	(1,057	)	$	285,713



	September 30, 2019								December 31, 2018
	Individually Evaluated for Impairment				Collectively Evaluated for Impairment				Individually Evaluated for Impairment				Collectively Evaluated for Impairment
(Dollars in thousands)	Allowance for loan losses		Recorded investment in loans		Allowance for loan losses		Recorded investment in loans		Allowance for loan losses		Recorded investment in loans		Allowance for loan losses		Recorded investment in loans
Commercial loans:
Software/internet	$	24,882	$	81,480	$	73,320	$	5,928,038	$	28,527	$	114,850	$	75,040	$	6,039,905
Hardware	5,230		9,923		18,814		1,347,694		1,253		11,506		18,472		1,223,051
Private equity/venture capital	—		—		108,531		16,293,556		—		3,700		98,581		14,106,860
Life science/healthcare	22,161		39,521		22,331		2,342,301		7,484		34,067		24,696		2,351,545
Premium wine	394		2,339		3,649		981,475		—		1,301		3,355		958,362
Other	910		2,589		3,351		538,610		411		411		3,147		459,079
Total commercial loans	53,577		135,852		229,996		27,431,674		37,675		165,835		223,291		25,138,802
Total consumer loans	151		7,088		20,686		3,489,380		266		4,239		19,671		3,029,404
Total	$	53,728	$	142,940	$	250,682	$	30,921,054	$	37,941	$	170,074	$	242,962	$	28,168,206



(Dollars in thousands)	Pass		Performing (Criticized)		Performing Impaired (Criticized)		Nonperforming Impaired (Nonaccrual)		Total
September 30, 2019:
Commercial loans:
Software/internet	$	5,454,896	$	531,291	$	25,588	$	55,892	$	6,067,667
Hardware	1,251,074		106,895		4,482		5,441		1,367,892
Private equity/venture capital	16,310,056		28		—		—		16,310,084
Life science/healthcare	2,258,771		148,901		6,879		32,642		2,447,193
Premium wine	928,817		53,932		1,946		393		985,088
Other	537,852		17,154		—		2,589		557,595
Total commercial loans	26,741,466		858,201		38,895		96,957		27,735,519
Consumer loans:
Real estate secured loans	2,994,694		10,278		—		7,075		3,012,047
Other consumer loans	481,424		—		—		13		481,437
Total consumer loans	3,476,118		10,278		—		7,088		3,493,484
Total gross loans	$	30,217,584	$	868,479	$	38,895	$	104,045	$	31,229,003
December 31, 2018:
Commercial loans:
Software/internet	$	5,574,332	$	520,796	$	48,069	$	66,781	$	6,209,978
Hardware	1,146,985		87,309		10,250		1,256		1,245,800
Private equity/venture capital	14,098,281		16,151		—		3,700		14,118,132
Life science/healthcare	2,291,356		135,653		16,276		17,791		2,461,076
Premium wine	909,965		49,287		1,017		284		960,553
Other	467,653		17,344		—		411		485,408
Total commercial loans	24,488,572		826,540		75,612		90,223		25,480,947
Consumer loans:
Real estate secured loans	2,584,261		21,145		320		3,919		2,609,645
Other consumer loans	419,771		949		—		—		420,720
Total consumer loans	3,004,032		22,094		320		3,919		3,030,365
Total gross loans	$	27,492,604	$	848,634	$	75,932	$	94,142	$	28,511,312



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

March 31, 2020

December 31, 2019

Weighted-average remaining term (in years) - operating leases

Weighted-average discount rate - operating leases (1)