SVB FINANCIAL : MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (form 10-Q)

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 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 impact of the upcoming U.S. elections on the economic environment, capital
markets and regulatory landscape, including monetary, tax and other trade
policies;
•The adequacy of our allowance for credit losses and the need to make provisions
for 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 regulations promulgated by the Board of Governors of the Federal
Reserve System (the "Federal Reserve"), and other regulatory requirements;
•The impact of lawsuits and claims, as well as legal or regulatory proceedings;
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•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 2019
Form 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 2019 Form 10-K.
Reclassifications
Certain prior period amounts primarily related to the adoption of ASU 2016-13,
CECL, have been reclassified to conform to current period presentations.
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Management's Overview of Third Quarter 2020 Performance
Our third quarter 2020 performance reflected the resilience of our markets and
our ability to execute effectively. We had an outstanding quarter driven by
outstanding balance sheet growth, higher core fee income, strong investment
banking revenue, outsized gains related to client IPO activity and solid credit
from improved model economic scenarios and strong performance in our Private
Bank portfolio segment resulting in a reduction of reserves. During the third
quarter of 2020, we continued to manage through the COVID-19 pandemic, utilizing
our business continuity plans to maintain client service while most of our
employees and partners continue to work from home. We continue to support and
engage with clients virtually, including the hosting of remote events designed
to facilitate our response to the business needs of our clients within the
innovation ecosystem. We also continued to successfully administer client
support initiatives, such as those which allowed temporary payment deferrals and
other relief provided through the PPP. We continue to provide employees extended
benefits, as well as practical support for working from home. Additionally, we
continue to commit financial support for local, regional and global activities
focused on health security, food security and shelter, and small business owner
relief during this unprecedented time.
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 and the number of cases continues to increase in many locations,
including in the United States and other international locations in which we
operate. Moreover, the impact of COVID-19 on economic, market and business
conditions is likely to 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 pandemic as we have seen domestically and internationally. While there
have been varying governmental and other responses to slow or control the spread
of COVID-19 and to mitigate the adverse impact of COVID-19, such as stay at home
orders, restrictions on business activities, economic relief for individuals and
businesses, and monetary policy measures, such responses have met varying
degrees of success, and it remains uncertain whether these actions will be
successful as the pandemic continues.
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 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 September 30, 2020 held in cash and
marketable securities, primarily agency-backed mortgage securities and U.S.
Treasuries. We also have access to other funding sources, as necessary.
Moreover, we temporarily paused our stock repurchase program, and the program
expired on October 29, 2020. In addition, we have also elected to use a phase-in
transitional approach for the estimated impact of CECL on our regulatory
capital, as permitted by the 2020 CECL Transition Rule.
The uncertainties of the duration and severity of the effect of COVID-19 on
economic, market and business conditions have 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 and
continued through the third 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. During the third quarter, we continued to provide 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 participated as a lender in the PPP under the
CARES Act and the U.K. Coronavirus Business Interruption Loan Scheme ("CBILS")
and Coronavirus Large Business Interruption Loan Scheme ("CLBILS"), 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. For example, like many other participating banks in the United
States, we have been named in various lawsuits regarding the right to agent fees
under the PPP. Overall, these relief
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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. These relief
programs are temporary in nature, such as the PPP, which as currently designed,
provides one-time relief, and our loan payment deferral programs, which expire
during the second half of the year (certain of our programs ended in the third
quarter with the remaining ending by year end). Our clients may experience
financial difficulties without the continued support from these programs. If
these relief measures are not effective, or if they are effective for only a
limited period and our clients experience delayed financial hardship, 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 employees. In March
2020, we activated our business continuity and pandemic plans globally, moving
to a work-from-home plan, prohibiting all business travel, 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. While
much of our workforce continues to work from home through the crisis (currently
expected until January 2021, subject to further extensions or other changes) and
perhaps to some extent beyond the crisis, in the event that we allow an increase
in remote working practices even after the pandemic subsides, we will need to
continue to provide support to our employees to work effectively in a remote
environment, taking into consideration needs relating to technology, physical
working conditions, work/life balance, and continued team collaboration.
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. We also announced our intention to
donate PPP loan origination fees, net of costs incurred, received from the Small
Business Administration for COVID-19 relief efforts. We expect to make a
donation in the fourth quarter of 2020 in the estimated amount of $20 million,
irrespective of when forgiveness amounts are actually received from the SBA.
Although the effects of the pandemic remain uncertain, for the fourth quarter of
2020, we currently expect growth in average on-balance sheet deposits and
average loans and lower core fees. While credit metrics have been stable to
date, we continue to monitor our portfolio vigilantly, in light of continued
economic uncertainty, fading government stimulus and expiring deferral programs.
Additionally, volatile equity markets, IPO and M&A activity may impact
investment banking and market-sensitive revenues. Even after the pandemic
subsides, it is possible that the U.S. and other major economies will continue
to experience a prolonged recession, which we expect would materially and
adversely affect our business, financial condition, liquidity, capital and
results of operations.
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A summary of our performance for the three months ended September 30, 2020
(compared to the three months ended September 30, 2019, where applicable) is as
follows:
                   BALANCE SHEET                                            

EARNINGS

Assets. $88.3 billion in average total assets (up EPS. Earnings per diluted share of $8.47 (up 35.2%). $96.9 billion in period-end total assets 64.5%). (up 42.0%).

                                               Net Income. Consolidated net income available
Loans. $37.3 billion in average total loan balances       to common stockholders of $441.7 million (up
(up 25.1%). $38.4 billion in period-end total loan        65.3%).
balances (up 23.7%).                                      - Net interest income of $527.7 million (up
Total Client Funds. (on-balance sheet deposits and        1.4%).
off-balance sheet client investment funds). $201.2        -Net interest margin of 2.53% (down 81 bps).
billion in average total client fund balances (up         -Noninterest income of $547.6 million (up
34.1%). $211.6 billion in period-end total client         86.3%), non-GAAP core fee income+ of $146.3
fund balances (up 35.6%).                                 million (down 9.8%) and non-GAAP core fee
AFS/HTM Fixed Income Investments. $32.6 billion in        income plus investment banking revenue and
average fixed income investment securities (up            commissions++ of $254.8 million (up 19.6%).
29.6%). $38.9 billion in period-end fixed income          -Noninterest expense of $491.0 million (up
investment securities (up 42.6%).                         25.5%).

                                                          ROE. Return on average equity (annualized)
                                                          ("ROE") performance of 24.19%.
                                                          Operating Efficiency Ratio. Operating
                                                          efficiency ratio

of 45.66% with a non-GAAP core

                                                          operating 

efficiency ratio of 56.86%+++.

                      CAPITAL                                             CREDIT QUALITY
Capital++++. Continued strong capital, with all           Credit Quality. Improved model economic
capital ratios considered "well-capitalized" under        scenarios and continued strong Private Bank
banking regulations. SVB Financial and Bank capital       performance drive reserve release.
ratios, respectively, were:                               - Allowance for credit losses for loans of
- CET 1 risk-based capital ratio of 12.31% and            1.34% as a percentage of period-end total
10.75%.                                                   loans.
- Tier 1 risk-based capital ratio of 13.25% and           - Provision for loans was a net benefit of
10.75%.                                                   0.56% as a percentage of period-end total loans
- Total risk-based capital ratio of 14.19% and            (annualized).
11.75%.                                                   - Net loan charge-offs of 0.26% as a percentage
- Tier 1 leverage ratio of 8.26% and 6.45%.               of average total 

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").
++++ In March 2020, the federal banking agencies provided transitional relief to
banking organizations with respect to the impact of CECL on regulatory capital.
Under the 2020 CECL Transition Rule, banking organizations may delay the
estimated impact of CECL on regulatory capital for two years, followed by a
three-year period to phase out the aggregate capital benefit provided during the
initial two-year delay. We have elected to use this five-year transition option.
For additional details, see "Capital Resources" within "Consolidated Financial
Condition" under Part 1, Item 2 of this report.


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A summary of our performance for the three and nine months ended September 30,
2020 and 2019 is as follows:
                                                                                 Three months ended September 30,                                                Nine months ended September 30,
(Dollars in thousands, except per share data,
employees and ratios)                                               2020                         2019                  % Change                      2020                         2019                 % Change
Income Statement:
Diluted earnings per share                                  $           8.47                $       5.15              64.5     %             $          15.46                $     16.67             (7.3)    %
Net income available to common stockholders                          441,713                     267,281              65.3                            802,901                    874,000             (8.1)
Net interest income                                                  527,740                     520,644               1.4                          1,564,804                  1,562,933              0.1
Net interest margin                                                     2.53   %                    3.34  %            (81)    bps                       2.79   %                   3.60  %           (81)    bps
(Reduction) provision for credit losses                     $        (52,018)               $     36,536            (242.4)    %             $        257,943                $    89,033            189.7     %
Noninterest income                                                   547,583                     294,009              86.2                          1,218,365                    908,135             34.2
Noninterest expense                                                  491,021                     391,324              25.5                          1,370,242                  1,140,510             20.1
Non-GAAP core fee income (1)                                         146,320                     162,177              (9.8)                           447,303                    473,757             (5.6)
Non-GAAP core fee income, plus investment banking
revenue and commissions (1)                                          254,758                     212,968              19.6                            777,051                    651,574             19.3

Non-GAAP noninterest income, net of noncontrolling interests (1)

                                                        519,721                     279,441              86.0                          1,177,972                    871,583             35.2

Non-GAAP noninterest expense, net of noncontrolling interests (2)

                                                        490,907                     391,179              25.5                          1,369,858                  1,139,818             20.2
Balance Sheet:
Average available-for-sale securities                       $     20,026,864                $ 10,600,449              88.9     %             $     15,475,686                $ 8,572,314             80.5     %
Average held-to-maturity securities                               12,553,196                  14,534,505             (13.6)                        13,054,393                 14,891,158            (12.3)
Average loans, amortized cost                                     37,318,600                  29,822,426              25.1                         35,835,927                 29,210,960             22.7
Average noninterest-bearing demand deposits                       51,543,903                  39,146,184              31.7                         46,341,335                 38,498,971             20.4
Average interest-bearing deposits                                 26,136,113                  18,088,785              44.5                         22,824,729                 14,832,373             53.9
Average total deposits                                            77,680,016                  57,234,969              35.7                         69,166,064                 53,331,344             29.7
Earnings Ratios:
Return on average assets (annualized) (3)                               1.99   %                    1.62  %           22.8     %                         1.34   %                   1.91  %         (29.8)    %
Return on average SVBFG stockholders' equity
(annualized) (4)                                                       24.19                       18.27              32.4                              15.56                      21.16            (26.5)

Asset Quality Ratios: Allowance for credit losses for loans as a % of total period-end loans (5)

                                                    1.34   %                    0.97  %             37     bps                       1.34   %                   0.97  %            37     bps

Allowance for credit losses for performing loans as a % of total performing loans (5)

                                         1.17                        0.81                36                               1.17                       0.81               36

Gross loan charge-offs as a % of average total loans (annualized) (5)

                                                        0.30                        0.49               (19)                              0.30                       0.33               (3)

Net loan charge-offs as a % of average total loans (annualized) (5)

                                                        0.26                        0.44               (18)                              0.24                       0.26               (2)
Capital Ratios:
SVBFG CET 1 risk-based capital ratio                                   12.31   %                   12.71  %            (40)    bps                      12.31   %                  12.71  %           (40)    bps
SVBFG tier 1 risk-based capital ratio                                  13.25                       12.86                39                              13.25                      12.86               39
SVBFG total risk-based capital ratio                                   14.19                       13.70                49                              14.19                      13.70               49
SVBFG tier 1 leverage ratio                                             8.26                        8.64               (38)                              8.26                       8.64              (38)
SVBFG tangible common equity to tangible assets (6)                     7.52                        8.38               (86)                              7.52                       8.38              (86)

SVBFG tangible common equity to risk-weighted assets (6)

                                                                    13.28                       13.04                24                              13.28                      13.04               24
Bank CET 1 risk-based capital ratio                                    10.75                       11.48               (73)                             10.75                      11.48              (73)
Bank tier 1 risk-based capital ratio                                   10.75                       11.48               (73)                             10.75                      11.48              (73)
Bank total risk-based capital ratio                                    11.75                       12.36               (61)                             11.75                      12.36              (61)
Bank tier 1 leverage ratio                                              6.45                        7.48              (103)                              6.45                       7.48             (103)
Bank tangible common equity to tangible assets (6)                      6.42                        7.36               (94)                              6.42                       7.36              (94)

Bank tangible common equity to risk-weighted assets (6)

                                                                    11.79                       11.82                (3)                             11.79                      11.82               (3)
Other Ratios:
Operating efficiency ratio (7)                                         45.66   %                   48.04  %           (5.0)    %                        49.23   %                  46.15  %           6.7     %
Non-GAAP core operating efficiency ratio (2)                           56.86                       48.05              18.3                              53.41                      46.09             15.9
Total costs of deposits (annualized) (8)                                0.04                        0.38             (89.5)                              0.10                       0.33            (69.7)
Book value per common share (9)                             $         143.91                $     114.26              25.9                   $         143.91                $    114.26             25.9
Other Statistics:
Average full-time equivalent employees                                     4,216                      3,413           23.5     %                            3,914                     3,309          18.3     %
Period-end full-time equivalent employees                                  4,336                      3,460           25.3                                  4,336                     3,460          25.3


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(1)See "Results of Operations-Noninterest Income" for a description and
reconciliation of non-GAAP core fee income and non-GAAP core fee income 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 three and nine months ended September 30, 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.
(7)The operating efficiency ratio is calculated by dividing total noninterest
expense by total net interest income plus noninterest income.
(8)Ratio represents annualized total cost of deposits and is calculated by
dividing interest expense from deposits by average total deposits.
(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.
Except as set forth below, there have been no significant changes during the
nine months ended September 30, 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 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
The methodology for estimating the amount of ECL reported in the allowance for
credit losses is the sum of 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 our 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 derive an estimated ECL assumption from a non-discounted cash flow approach
based on our portfolio segments discussed above. This approach incorporates a
calculation of three predictive metrics: (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 judgment. 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 using an autoregressive model of mean
reversion that will continue to gradually trend towards the mean historical loss
over the remaining contractual lives, adjusted for prepayments. The
macroeconomic scenarios are reviewed on a quarterly basis.
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We also apply a qualitative factor adjustment to the results obtained through
our quantitative ECL models to consider model imprecision, emerging risk
assessments, trends and other subjective factors that may not be adequately
represented in the quantitative ECL models. These adjustments reflect our
assessment of the extent that current conditions and reasonable and supportable
forecasts differ from conditions that existed during the period over which
historical information was evaluated. These adjustments are aggregated to become
our qualitative allocation. Based on our qualitative assessment and 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
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. 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.
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 do not anticipate a material impact from
this ASU 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
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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
applicable federal statutory tax rate.
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.
                                                                         2020 Compared to 2019                                       2020 Compared to 2019
                                                          Three months ended September 30, increase (decrease)        Nine months ended September 30, increase (decrease)
                                                                            due to change in                                           due to change in
(Dollars in thousands)                                        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                    $     1,306

$ (27,456) $ (26,150) $ 10,986 $ (62,690)

       $ (51,704)
Fixed income investment portfolio (taxable)                    23,710            (16,849)             6,861               57,830             (16,149)  

41,681

Fixed income investment portfolio (non-taxable)                 5,452               (656)             4,796               13,220              (1,562)   

11,658

Loans, amortized cost                                          73,886            (99,151)           (25,265)             206,671            (292,478)  

(85,807)

Increase (decrease) in interest income, net                   104,354           (144,112)           (39,758)             288,707            (372,879)  

(84,172)

Interest expense:
Interest bearing checking and savings accounts                  2,705                231              2,936                3,792                 686              4,478
Money market deposits                                             935            (45,510)           (44,575)              12,998             (84,069)           (71,071)
Money market deposits in foreign offices                           12                 (3)                 9                   34                  (6)                28
Time deposits                                                     270               (401)              (131)                 755                (310)               445
Sweep deposits in foreign offices                                 (14)            (5,113)            (5,127)                 167             (12,900)  

(12,733)

Total increase (decrease) in deposits expense                   3,908            (50,796)           (46,888)              17,746             (96,599)           (78,853)
Short-term borrowings                                               -               (115)              (115)               2,147              (2,356)              (209)
3.125% Senior Notes                                             4,012                  -              4,012                5,171                   -              5,171
3.50% Senior Notes                                                  3                  -                  3                   10                   -                 10
5.375% Senior Notes                                            (4,873)                 -             (4,873)             (14,611)                  -            (14,611)

Total decrease in borrowings expense                             (858)              (115)              (973)              (7,283)             (2,356)   

(9,639)

Increase (decrease) in interest expense, net                    3,050            (50,911)           (47,861)              10,463             (98,955)  

(88,492)

Increase (decrease) in net interest income                $   101,304          $ (93,201)         $   8,103          $   278,244          $ (273,924)         $   4,320


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Net Interest Income (Fully Taxable Equivalent Basis)
Three months ended September 30, 2020 and 2019
Net interest income increased by $8.1 million to $531.7 million for the three
months ended September 30, 2020, compared to $523.6 million for the comparable
2019 period. Overall, our net interest income increased primarily from an
increase in interest earned on interest earning assets from average growth in
our fixed income securities of $7.4 billion and loan balances of $7.5 billion,
driven by growth in our deposit balances of $20.4 billion. In addition, the
increase was reflective of decreases in interest paid on deposits due to market
interest rate decreases. These increases were offset by lower cash and cash
equivalents, investment and loan yields reflective of the three 25 basis point
Federal Funds rate decreases in the latter half of 2019 as well as the aggregate
150 basis point decrease in March 2020.
The main factors affecting interest income and interest expense for the three
months ended September 30, 2020, compared to the comparable 2019 period are
discussed below:
•Interest income for the three months ended September 30, 2020 decreased by
$39.8 million due primarily to:
•A $26.2 million decrease in interest income from our interest earning cash and
short-term investment securities. The decrease was due primarily to the decrease
in Federal Funds rates as discussed above.
•A $25.3 million decrease in interest income on loans to $369.0 million for the
three months ended September 30, 2020, compared to $394.2 million for the
comparable 2019 period. The decrease was reflective of a decrease in the overall
loan yields of 131 basis points to 3.93 percent from 5.24 percent partially
offset by an increase in average loan balances of $7.5 billion. Gross loan
yields, excluding loan interest recoveries and loan fees, decreased 131 basis
points to 3.41 percent from 4.72 percent, reflective primarily of the impact of
the decreases in Federal Funds rates as discussed above, partially offset by an
increase reflective of the impact of the reclassification of unrealized gains on
interest rate swap cash flow hedges that were terminated in the first quarter of
2020 and effective loan floors, partially offset by
•An $11.7 million increase in interest income from our fixed income investment
securities due primarily to the increase of $7.4 billion in average fixed income
investment securities. The increase in interest income from growth of our
average fixed income investment securities was partially offset by declines in
yields earned on these investments reflective of the lower interest rate market
environment.
•Interest expense for the three months ended September 30, 2020 decreased by
$47.9 million due primarily to:
•A $46.9 million decrease in interest expense on deposits due primarily to a
decrease in interest paid on our interest-bearing money market deposits due to
the decreases in market rates, and
•A $1.0 million decrease in interest expense on borrowings due primarily to the
extinguishment of our 5.375% Senior Notes in December 2019, partially offset by
interest expense on our 3.125% Senior Notes issued in June 2020.
Nine months ended September 30, 2020 and 2019
The main factors affecting interest income and interest expense for the nine
months ended September 30, 2020, compared to the comparable 2019 period are
discussed below:
•Interest income for the nine months ended September 30, 2020 decreased by $84.2
million due primarily to:
•A $85.8 million decrease in interest income on loans to $1.1 billion for the
nine months ended September 30, 2020, compared to $1.2 billion for the
comparable 2019 period. The decrease was reflective of a decrease in the overall
loan yields of 134 basis points to 4.16 percent from 5.50 percent partially
offset by an increase in average loan balances of $6.6 billion. Gross loan
yields, excluding loan interest recoveries and loan fees, decreased 129 basis
points to 3.66 percent from 4.95 percent, reflective primarily of the impact of
the decreases in Federal Funds rates as discussed above, partially offset by an
increase reflective of the impact of the reclassification of unrealized gains on
interest rate swap cash flow hedges that were terminated in the first quarter of
2020 and effective loan floors, and
•A $51.7 million decrease in interest income from our interest earning cash and
short-term investment securities. The decrease was due primarily to the decrease
in Federal Funds interest rates as discussed above, partially offset by growth
in average balances of $5.3 billion.
These decreases were offset by the following:
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•A $53.3 million increase in interest income from our fixed income investment
securities. The increase was due primarily to the increase of $5.1 billion in
average fixed income investment securities, partially offset by declines in
yields earned on these investments reflective of the lower interest rate market
environment.
•Interest expense for the nine months ended September 30, 2020 decreased by
$88.5 million primarily due to:
•A $78.9 million decrease in interest expense on deposits due primarily to a
decrease in interest paid on our interest-bearing money market and on-balance
sheet sweep deposits reflective of the decreases in market rates. These
decreases were partially offset by interest income earned from $5.8 billion of
growth in average balances for our interest-bearing money markets deposits.
•A $9.6 million decrease in interest expense on borrowings due primarily to the
extinguishment of our 5.375% Senior Notes, partially offset by interest expense
for our 3.125% Senior Notes issued towards the end of the second quarter of
2020.
Net Interest Margin (Fully Taxable Equivalent Basis)
Three months ended September 30, 2020 and 2019
•Our net interest margin decreased by 81 basis points to 2.53 percent for the
three months ended September 30, 2020, compared to 3.34 percent for the
comparable 2019 period. The lower margin for the three months ended
September 30, 2020 was due primarily to a decrease in yields on loans reflective
of the Federal Funds rate decreases as discussed above, as well as a shift in
the mix of the growth in our interest-earning assets to lower-yielding
short-term investment securities portfolio relative to the growth in our loan
portfolio. The decrease in our net interest margin was partially offset by
increases from our interest rate swap cash flow hedges which were terminated in
the first quarter of 2020 and effective loan floors. Average loans represented
44.6 percent of average interest earnings assets for the three months ended
September 30, 2020, compared to 48.0 percent for the comparable 2019 period.
Nine months ended September 30, 2020 and 2019
•Our net interest margin decreased by 81 basis points to 2.79 percent for the
nine months ended September 30, 2020, compared to 3.60 percent for the
comparable 2019 period. The lower margin for the nine months ended September 30,
2020 was reflective primarily of the decreases in the Federal Funds as discussed
above, as well as a shift in the mix of the growth in our interest-earning
assets to lower-yielding short-term investment securities portfolio relative to
the growth in our loan portfolio, partially offset by increases from our
interest rate swap cash flow hedges which were terminated in the first quarter
of 2020 and effective loan floors. Average loans represented 47.5 percent of
year-to-date average interest earnings assets, compared to 50.0 percent for the
comparable 2019 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, 2020 and 2019:
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Average Balances, Rates and Yields for the Three Months Ended September 30, 2020
and 2019
                                                                                                    Three months ended September 30,
                                                                                     2020                                                       2019
                                                                                     Interest                                                   Interest
                                                                 Average             Income/            Yield/              Average             Income/            Yield/
(Dollars in thousands)                                           Balance             Expense             Rate               Balance             Expense             Rate
Interest-earning assets:
Federal Reserve deposits, federal funds sold,
securities purchased under agreements to resell and
other short-term investment securities (1)                   $ 13,817,353          $   2,717              0.08  %       $  7,193,195          $  28,867              1.59  %
Investment securities: (2)
Available-for-sale securities:
Taxable                                                        20,026,864             87,792              1.74            10,600,449             62,121              2.32
Held-to-maturity securities:
Taxable                                                        10,286,332             68,725              2.66            12,922,438             87,535              2.69
Non-taxable (3)                                                 2,266,864             18,876              3.31             1,612,067             14,080              3.47
Total loans, amortized cost (4) (5)                            37,318,600            368,981              3.93            29,822,426            394,246              5.24
Total interest-earning assets                                  83,716,013            547,091              2.60            62,150,575            586,849              3.74
Cash and due from banks                                         1,162,156                                                    590,391
Allowance for credit losses for loans                            (610,212)                                                  (308,609)
Other assets (6)                                                4,080,409                                                  2,895,391
Total assets                                                 $ 88,348,366                                               $ 65,327,748
Funding sources:
Interest-bearing liabilities:
Interest bearing checking and savings accounts               $  4,297,874          $   3,038              0.28  %       $    470,601          $     102              0.09  %
Money market deposits                                          19,829,441              4,594              0.09            15,805,507             49,169              1.23
Money market deposits in foreign offices                          261,903                 21              0.03               115,590                 12              0.04
Time deposits                                                     380,560                459              0.48               157,218                590              1.49
Sweep deposits in foreign offices                               1,366,335                106              0.03             1,539,869              5,233              1.35
Total interest-bearing deposits                                26,136,113              8,218              0.13            18,088,785             55,106              1.21
Short-term borrowings                                              15,335                  4              0.10                22,045                119              2.14
3.125% Senior Notes                                               495,095              4,012              3.22                     -                  -                 -
3.50% Senior Notes                                                348,197              3,153              3.60               347,841              3,150              3.59
5.375% Senior Notes                                                     -                  -                 -               349,216              4,873              5.54

Total interest-bearing liabilities                             26,994,740             15,387              0.23            18,807,887             63,248              1.33
Portion of noninterest-bearing funding sources                 56,721,273                                                 43,342,688
Total funding sources                                          83,716,013             15,387              0.07            62,150,575             63,248              0.40
Noninterest-bearing funding sources:
Demand deposits                                                51,543,903                                                 39,146,184
Other liabilities                                               2,055,599                                                  1,417,659
Preferred stock                                                   340,138                                                          -
SVBFG common stockholders' equity                               7,265,863                                                  5,802,907
Noncontrolling interests                                          148,123                                                    153,111
Portion used to fund interest-earning assets                  (56,721,273)                                               (43,342,688)

Total liabilities, noncontrolling interest, and SVBFG stockholders' equity

$ 88,348,366                                               $ 65,327,748
Net interest income and margin                                                     $ 531,704              2.53  %                             $ 523,601              3.34  %
Total deposits                                               $ 77,680,016                                               $ 57,234,969
Reconciliation to reported net interest income:
Adjustments for taxable equivalent basis                                              (3,964)                                                    

(2,957)

Net interest income, as reported                                                   $ 527,740                                                  $ 520,644




(1)Includes average interest-earning deposits in other financial institutions of
$1.0 billion and $1.1 billion for the three months ended September 30, 2020 and
2019, respectively. For the three months ended September 30, 2020 and 2019,
balances also include $11.3 billion and $5.1 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 $49.5 million and $39.4 million for the
three months ended September 30, 2020 and 2019, respectively.
(6)Average investment securities of $2.1 billion and $1.2 billion for the three
months ended September 30, 2020 and 2019, respectively, were classified as other
assets as they were noninterest-earning assets. These investments primarily
consisted of non-marketable and other equity securities.
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Average Balances, Rates and Yields for the Nine Months Ended September 30, 2020
and 2019
                                                                                                       Nine months ended September 30,
                                                                                      2020                                                          2019
                                                                                      Interest                                                      Interest
                                                                 Average              Income/              Yield/              Average              Income/             Yield/
(Dollars in thousands)                                           Balance              Expense               Rate               Balance              Expense              Rate
Interest-earning assets:
Federal Reserve deposits, federal funds sold,
securities purchased under agreements to resell and
other short-term investment securities (1)                   $ 11,025,519          $    22,743               0.28  %       $  5,696,501          $    74,447              1.75  %
Investment securities: (2)
Available-for-sale securities:
Taxable                                                        15,475,686              234,066               2.02             8,572,314              142,891              2.23
Held-to-maturity securities:
Taxable                                                        10,947,145              218,383               2.66            13,305,424              267,877              2.69
Non-taxable (3)                                                 2,107,248               53,418               3.39             1,585,734               41,760              3.52
Total loans, amortized cost (4) (5)                            35,835,927            1,116,660               4.16            29,210,960            1,202,467              5.50
Total interest-earning assets                                  75,391,525            1,645,270               2.91            58,370,933            1,729,442              3.96
Cash and due from banks                                           952,118                                                       553,523
Allowance for credit losses for loans                            (499,962)                                                     (303,154)
Other assets (6)                                                3,916,969                                                     2,592,830
Total assets                                                 $ 79,760,650                                                  $ 61,214,132
Funding sources:
Interest-bearing liabilities:
Interest bearing checking and savings accounts               $  2,347,019          $     4,796               0.27  %       $    491,663          $       318              0.09  %
Money market deposits                                          18,330,106               41,178               0.30            12,540,843              112,249              1.20
Money market deposits in foreign offices                          272,940                   71               0.03               142,053                   43              0.04
Time deposits                                                     244,099                1,235               0.68                94,934                  790              1.11
Sweep deposits in foreign offices                               1,630,565                4,030               0.33             1,562,880               16,763              1.43
Total interest-bearing deposits                                22,824,729               51,310               0.30            14,832,373              130,163              1.17
Short-term borrowings                                             532,549                3,310               0.83               186,930                3,519              2.52
3.125% Senior Notes                                               213,234                5,171               3.24                     -                    -                 -
3.50% Senior Notes                                                348,108                9,457               3.63               347,756                9,447              3.63
5.375% Senior Notes                                                     -                    -                  -               349,050               14,611              5.60

Total interest-bearing liabilities                             23,918,620               69,248               0.39            15,716,109              157,740              1.34
Portion of noninterest-bearing funding sources                 51,472,905                                                    42,654,824
Total funding sources                                          75,391,525               69,248               0.12            58,370,933              157,740              0.36
Noninterest-bearing funding sources:
Demand deposits                                                46,341,335                                                    38,498,971
Other liabilities                                               2,118,690                                                     1,327,040
Preferred stock                                                   340,148                                                             -
SVBFG common stockholders' equity                               6,892,301                                                     5,523,196
Noncontrolling interests                                          149,556                                                       148,816
Portion used to fund interest-earning assets                  (51,472,905)                                                  (42,654,824)

Total liabilities, noncontrolling interest, and SVBFG stockholders' equity

$ 79,760,650                                                  $ 61,214,132
Net interest income and margin                                                     $ 1,576,022               2.79  %                             $ 1,571,702              3.60  %
Total deposits                                               $ 69,166,064                                                  $ 53,331,344
Reconciliation to reported net interest income:
Adjustments for taxable equivalent basis                                               (11,218)                                                       

(8,769)

Net interest income, as reported                                                   $ 1,564,804                                                   $ 1,562,933




(1)Includes average interest-earning deposits in other financial institutions of
$0.9 billion and $0.9 billion for the nine months ended September 30, 2020 and
2019, respectively. The balance also includes $8.9 billion and $3.9 billion
deposited at the FRB, earning interest at the Federal Funds target rate for the
nine months ended September 30, 2020 and 2019, 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 $135.8 million and $120.2 million for
the nine months ended September 30, 2020 and 2019, respectively.
(6)Average investment securities of $1.9 billion and $1.1 billion for the nine
months ended September 30, 2020 and 2019, respectively, were classified as other
assets as they were noninterest-earning assets. These investments consisted
primarily of non-marketable and other equity securities.
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(Reduction) Provision for Credit Losses
The (reduction) provision for credit losses is the combination of (i) the
provision for loans, (ii) the provision for unfunded credit commitments and
(iii) the provision for HTM securities. Our (reduction) 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 credit losses for loans,
unfunded credit commitments and HTM securities for the three and nine months
ended September 30, 2020 and 2019:
                                                         Three months ended September 30,                 Nine months ended September 30,
(Dollars in thousands, except ratios)                       2020                    2019                    2020                    2019
Allowance for credit losses for loans,
beginning balance                                    $       589,828           $    301,888          $       304,924           $    280,903
Day one impact of adopting ASC 326                                 -                      -                   25,464                      -
(Reduction) provision for loans                              (54,106)                35,985                  246,694                 80,954
Gross loan charge-offs                                       (28,449)               (36,820)                 (80,400)               (72,255)
Loan recoveries                                                4,354                  3,888                   16,182                 15,133
Foreign currency translation adjustments                       1,331                   (531)                      94                   (325)
Allowance for credit losses for loans, ending
balance                                              $       512,958           $    304,410          $       512,958           $    304,410
Allowance for credit losses for unfunded
credit commitments, beginning balance                         99,294                 62,664                   67,656                 55,183
Day one impact of adopting ASC 326                                 -                      -                   22,826                      -
Provision for unfunded credit commitments                      2,019                    551                   11,132                  8,079
Foreign currency translation adjustments                         202                   (107)                     (99)                  (154)
Allowance for credit losses for unfunded
credit commitments, ending balance (1)               $       101,515           $     63,108          $       101,515           $     63,108
Allowance for credit losses for HTM
securities, beginning balance                                    222                      -                        -                      -
Day one impact of adopting ASC 326                                 -                      -                      174                      -
Provision for HTM securities                                      69                      -                      117                      -
Allowance for credit losses for HTM
securities, ending balance (2)                       $           291           $          -          $           291           $          -
Ratios and other information:
(Reduction) provision for loans as a
percentage of period-end total loans
(annualized) (3)                                               (0.56)  %               0.46  %                  0.86   %               0.35  %
Gross loan charge-offs as a percentage of
average total loans (annualized)                                0.30                   0.49                     0.30                   0.33
Net loan charge-offs as a percentage of
average total loans (annualized)                                0.26                   0.44                     0.24                   0.26
Allowance for credit losses for loans as a
percentage of period-end total loans (3)                        1.34                   0.97                     1.34                   0.97
(Reduction) provision for credit losses              $       (52,018)          $     36,536          $       257,943           $     89,033
Period-end total loans (3)                                38,413,891             31,229,003               38,413,891             31,229,003
Average total loans (3)                                   37,318,600             29,979,522               35,835,927             29,373,264
Allowance for loan losses for nonaccrual loans                64,479                 53,728                   64,479                 53,728
Nonaccrual loans                                             105,711                104,045                  105,711                104,045




(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 and nine months ended September 30, 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.

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Three months ended September 30, 2020 and 2019
The reduction of our expected credit losses was $52.0 million for the three
months ended September 30, 2020, consisting of a reduction of our expected
credit losses for loans of $54.1 million, a provision for credit losses for
unfunded credit commitments of $2.0 million and a provision for our credit
losses for our HTM securities of $69 thousand. Our provision for credit losses
was $36.5 million for the three months ended September 30, 2019, consisting of a
provision for loans of $36.0 million and a provision for unfunded credit
commitments of $0.5 million.
The reduction of our expected credit losses for loans of $54.1 million for the
three months ended September 30, 2020 was driven primarily by an $82.4 million
reduction in reserves for our performing loans reflective of improved economic
scenarios in our forecast models, as well as a qualitative adjustment reflective
of strong credit performance from our Private Bank portfolio segment, a $4.6
million decrease related to changes in loan composition within our portfolio
segments and $4.4 million of recoveries. These decreases were partially offset
by $23.3 million for net new nonaccrual loans and $15.2 million for charge-offs
not specifically reserved for at June 30, 2020. The reduction related to
improved economic scenarios in our forecast models was driven primarily by our
Investor Dependent Early-Stage portfolio segment which is more sensitive to the
underlying macro-economic forecasts utilized in our CECL model as compared to
the remaining portfolio segments as well as a decrease in balances in that
portfolio segment.
A provision for credit losses for unfunded credit commitments of $2.0 million
was driven primarily by the forecast models of the current economic environment
as well as changes in the unfunded credit commitments composition within our
portfolio segments.
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 $15.2
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 the
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.
Gross loan charge-offs were $28.4 million for the third quarter of 2020, of
which $15.2 million was not specifically reserved for at June 30, 2020. Gross
loan charge-offs were primarily driven by $28.3 million for our Investor
Dependent clients.
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 clients.
Nine Months Ended September 30, 2020 and 2019
Our provision for credit losses was $257.9 million for the nine months ended
September 30, 2020, consisting of a provision for loan losses of $246.7 million,
a provision for unfunded credit commitments of $11.1 million and a provision for
HTM securities of $117 thousand. 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.
The provision for credit losses for loans of $246.7 million was driven primarily
by $134.5 million in additional reserves for our performing loans based on our
forecast models of the current economic environment under the CECL methodology
adopted January 1, 2020, including the impact of the COVID-19 pandemic, as well
as changes in loan composition within our portfolio segments, $58.1 million in
net new nonaccrual loans, $38.8 million for charge-offs not specifically
reserved for at December 31, 2019 and $31.5 million in additional reserves for
period-end loan growth, partially offset by $16.2 million of recoveries.
A provision for credit losses for unfunded credit commitments of $11.1 million
was driven primarily by the forecast models of the current economic environment
under the CECL methodology adopted January 1, 2020, including the impact of the
COVID-19 pandemic, as well as changes in the unfunded credit commitments
composition within our portfolio segments.
The provision for loan losses of $81.0 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 from period-end loan growth,
partially offset by a decrease of $14.3 million for our performing loans and
$15.1 million of recoveries.
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The provision for unfunded credit commitments of $8.0 million for nine months
ended September 30, 2019 was driven primarily by growth in unfunded credit
commitments of $3.4 billion.
Gross loan charge-offs were $80.4 million for the nine months ended
September 30, 2020, of which $38.8 million was not specifically reserved for in
prior quarters. Gross loan charge-offs were primarily driven by $67.2 million
for our Investor Dependent clients and a $4.9 million charge-off from one
Balance Sheet Dependent client. The remaining charge-offs came primarily from
our Cash Flow Dependent risk-based segments.
Gross loan charge-offs were $72.3 million for the nine months ended September
30, 2019, of which $30.5 million was not specifically reserved for in prior
quarters. Gross loan charge-offs included $26.9 million 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.
See "Consolidated Financial Condition-Credit Quality and Allowance for Credit
Losses for Loans and for Unfunded Credit Commitments" below and Note 7 - "Loans
and Allowance for Credit Losses: Loans and 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 credit losses for
loans and unfunded credit commitments.
Noninterest Income
For the three and nine months ended September 30, 2020, noninterest income was
$547.6 million and $1.2 billion, respectively, compared to $294.0 million and
$908.1 million for the comparable 2019 periods. For the three and nine months
ended September 30, 2020, non-GAAP noninterest income, net of noncontrolling
interests was $519.7 million and $1.2 billion, respectively, compared to $279.4
million and $871.6 million for the comparable 2019 periods. For the three and
nine months ended September 30, 2020, non-GAAP core fee income plus investment
banking revenue and commissions was $254.8 million and $777.1 million,
respectively compared to $213.0 million and $651.6 million for the comparable
2019 periods. For the three and nine months ended September 30, 2020, non-GAAP
core fee income was $146.3 million and $447.3 million, respectively, compared to
$162.2 million and $473.8 million for the comparable 2019 periods. (See
reconciliations of non-GAAP measures used below under "Use of Non-GAAP Financial
Measures".)
Included in results for three and nine months ended September 30, 2020 are
revenues related to our investments in BigCommerce comprised of: (i) $108.4
million from unrealized gains on investment securities; (ii) $10.8 million from
gains on equity warrant assets; and (iii) $30.0 million in gains included in
other noninterest income as discussed further below.
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 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. Our management
uses, and believes that investors benefit from referring to, these non-GAAP
financial measures in assessing our operating results and when planning,
forecasting and analyzing future periods. However, these non-GAAP financial
measures should be considered in addition to, and not as a substitute for or
preferable to, financial measures prepared in accordance with GAAP.
Included in net income is income and expense attributable to noncontrolling
interests. We recognize, as part of our investment funds management business
through SVB Capital and SVB Leerink, the entire income or loss from funds
consolidated in accordance with ASC Topic 810 as discussed in Note 1 - "Basis of
Presentation" of the "Notes to Interim Consolidated Financial Statements
(unaudited)" under Part I, Item 1 of this report. We are required under GAAP to
consolidate 100% of the results of these entities, even though we may own less
than 100% of such entities. The relevant amounts attributable to investors other
than us are reflected under "Net Income Attributable to Noncontrolling
Interests" on our statements of income. Where applicable, the tables below for
noninterest income and net gains on investment securities exclude noncontrolling
interests.
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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, (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 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, 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, 2020 and 2019:
                                                                   Three months ended September 30,                                 Nine months ended September 30,
(Dollars in thousands)                                      2020                2019              % Change                   2020                   2019              % Change
GAAP noninterest income                                 $  547,583          $ 294,009                  86.2  %       $       1,218,365          $ 908,135                  34.2  %
Less: income attributable to noncontrolling
interests, including carried interest allocation            27,862             14,568                  91.3                     40,393             36,552                  10.5
Non-GAAP noninterest income, net of
noncontrolling interests                                $  519,721          $ 279,441                  86.0          $       1,177,972          $ 871,583                  35.2


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, 2020
and 2019:
                                                                   Three months ended September 30,                                 Nine months ended September 30,
(Dollars in thousands)                                      2020                2019              % Change                   2020                   2019              % Change
GAAP noninterest income                                 $  547,583          $ 294,009                  86.2  %       $       1,218,365          $ 908,135                  34.2  %
Less: gains on investment securities, net                  189,837             29,849                       NM                 270,760            106,575                 154.1
Less: gains on equity warrant assets, net                   53,766             37,561                  43.1                     93,667            107,213                 (12.6)
Less: other noninterest income                              49,222             13,631                       NM                  76,887             42,773                  79.8
Non-GAAP core fee income plus investment banking
revenue and commissions (1)                             $  254,758          $ 212,968                  19.6          $         777,051          $ 651,574                  19.3
Less: investment banking revenue                            92,181             38,516                 139.3                    280,551            137,005                 104.8
Less: commissions                                           16,257             12,275                  32.4                     49,197             40,812                  20.5
Non-GAAP core fee income (2)                            $  146,320          $ 162,177                  (9.8)         $         447,303          $ 473,757                  (5.6)




NM-Not meaningful
(1)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, 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, (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 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
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(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, 2020 and 2019
For the three months ended September 30, 2020, we had net gains on investment
securities of $189.8 million, compared to $29.8 million for the comparable 2019
period. Non-GAAP net gains on investment securities, net of noncontrolling
interests, were $162.1 million for the three months ended September 30, 2020,
compared to non-GAAP net gains, net of controlling interest of $15.2 million for
the comparable 2019 period.
Non-GAAP net gains on investment securities, net of noncontrolling interests, of
$162.1 million for the three months ended September 30, 2020 were driven by the
following:
•Gains of $108.4 million from our public equity securities investments,
primarily driven by our previously announced investments in BigCommerce, which
completed its IPO in August 2020,
•Gains of $23.1 million from our managed funds of funds portfolio related
primarily to unrealized valuation gains, and
•Gains of $18.4 million from our strategic and other investments, primarily
driven by net unrealized valuation increases in our strategic venture capital
funds.
Nine months ended September 30, 2020 and 2019
For the nine months ended September 30, 2020, we had net gains on investment
securities of $270.8 million, compared to $106.6 million for the comparable 2019
period. Non-GAAP net gains on investment securities, net of noncontrolling
interests, were $230.2 million for the nine months ended September 30, 2020,
compared to $69.9 million for the comparable 2019 period. Non-GAAP net gains,
net of noncontrolling interests, of $230.2 million for the nine months ended
September 30, 2020 were driven primarily by the following:
•Gains of $112.7 million from our public equity securities investments,
primarily driven by our previously announced investments in BigCommerce, which
completed its IPO in August 2020,
•Gains of $61.2 million from our AFS debt securities portfolio, resulting from
the sale of $2.6 billion of U.S. Treasury securities, and
•Gains of $27.4 million from our managed funds of funds portfolio related
primarily to unrealized valuation gains.


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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, 2020 and 2019:
                                                          Managed
                                        Managed           Direct                                                                         Strategic
                                       Funds of           Venture         Public Equity           Debt           Sales of AFS            and Other
(Dollars in thousands)                   Funds             Funds            Securities           Funds            Securities            Investments           SVB Leerink            Total
Three months ended September
30, 2020
Total gains on investment
securities, net                       $ 42,885          $ 14,775          $   108,417          $    15          $          -          $     18,426          $      5,319          $ 189,837
Less: income attributable to
noncontrolling interests,
including carried interest
allocation                              19,832             7,492                    -                -                     -                     -                   461             27,785
Non-GAAP net gains on
investment securities, net of
noncontrolling interests              $ 23,053          $  7,283          $ 

108,417 $ 15 $ - $ 18,426

$ 4,858 $ 162,052

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 (loss) on
investment securities, net of
noncontrolling interests              $ 12,547          $  5,530          $ 

(11,488) $ 187 $ - $ 8,035

$ 398 $ 15,209

Nine months ended September 30,
2020
Total gains (losses) on
investment securities, net            $ 53,768          $ 27,246          $ 

112,744 $ (253) $ 61,165 $ 9,490

     $      6,600          $ 270,760
Less: income attributable to
noncontrolling interests,
including carried interest
allocation                              26,344            13,741                    -                -                     -                     -                   493             40,578
Non-GAAP net gains (losses) on
investment securities, net of
noncontrolling interests              $ 27,424          $ 13,505          $ 

112,744 $ (253) $ 61,165 $ 9,490

$ 6,107 $ 230,182

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



Gains on Equity Warrant Assets, Net
Three months ended September 30, 2020 and 2019
Net gains on equity warrant assets were $53.8 million for the three months ended
September 30, 2020, compared to net gains of $37.6 million for the comparable
2019 period. Net gains on equity warrant assets for the three months ended
September 30, 2020 consisted of:
•Net gains of $30.2 million from warrant valuations increases, driven by
valuation increases in our private company warrant portfolio, and
•Net gains of $23.9 million from the exercise of equity warrant assets driven by
IPO and M&A activity, which included $10.8 million from our exercised warrant
position in BigCommerce.


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Nine months ended September 30, 2020 and 2019
Net gains on equity warrant assets were $93.7 million for the nine months ended
September 30, 2020, compared to net gains of $107.2 million for the comparable
2019 period. Net gains on equity warrant assets for the nine months ended
September 30, 2020 consisted of:
•Net gains of $59.4 million from the exercise of equity warrant assets, driven
by IPO and M&A activity, which, included $10.8 million from our exercised
warrant position in BigCommerce, and
•Net gains of $35.6 million from warrant valuation increases, driven primarily
by valuation increases in our private company warrant portfolio during the nine
months ended September 30, 2020.
A summary of gains on equity warrant assets, net, for the three and nine months
ended September 30, 2020 and 2019 is as follows:
                                                                   Three months ended September 30,                            Nine months ended September 30,
(Dollars in thousands)                                       2020              2019              % Change               2020               2019              % Change
Equity warrant assets (1):
Gains on exercises, net                                  $  23,940

$ 30,047                 (20.3) %       $  59,370          $  90,357                 (34.3) %
Terminations                                                  (361)             (481)                (24.9) %          (1,332)            (2,931)                (54.6)
Changes in fair value, net                                  30,187             7,995                       NM          35,629             19,787        

80.1

Total gains on equity warrant assets, net                $  53,766          $ 37,561                  43.1          $  93,667          $ 107,213                 (12.6)




NM-Not meaningful
(1)  At September 30, 2020, we held warrants in 2,503 companies, compared to
2,227 companies at September 30, 2019. The total fair value of our warrant
portfolio was $202.2 million at September 30, 2020 and $149.1 million at
September 30, 2019. Warrants in 28 companies each had fair values greater than
$1.0 million and collectively represented $83.0 million, or 41.1 percent, of the
fair value of the total warrant portfolio at September 30, 2020. Warrants in 15
companies each had fair values greater than $1.0 million and collectively
represented $43.7 million, or 29.3 percent, of the fair value of the total
warrant portfolio at September 30, 2019.
Investment in Root, Inc.
As of September 30, 2020, we held investments in Root, Inc. ("Root"), consisting
of: (i) approximately 600,000 shares related to warrants held by SVBFG, and (ii)
approximately 15.6 million shares directly held by two of our SVB Capital funds
(in which SVBFG holds certain carried interests), of which we estimated to be
entitled to approximately $24.1 million before taxes in the form of carried
interest subject to the fund's performance and assuming the fund exceeds certain
performance targets.
In late October 2020, Root completed its initial public offering. As part of the
IPO which priced at $27 per share: (i) SVBFG sold all of our warrant shares,
which resulted in a pre-tax gain of $5.5 million; and (ii) our SVB Capital funds
sold approximately 1.6 million shares, of which SVBFG would be entitled to
approximately $3.7 million before taxes in the form of carried interest,
assuming the fund exceeds certain performance targets. SVB Capital currently
holds approximately 14.0 million shares, which based on the closing price of
Root's common stock of $23.03 as of November 4, 2020, we currently estimate
SVBFG to be entitled to approximately $29.8 million before taxes in the form of
carried interest, assuming the fund exceeds certain performance targets. Carried
interest may be subject to change to the extent fund performance levels
fluctuate.
Gains (or losses) related to our equity securities in public companies such as
Root, Inc are based on valuation changes or the sale of any securities, and are
subject to such companies' stock price, which are subject to market conditions
and various other factors. Additionally, the public equity investment expected
gains and losses, and the extent to which such gains or (losses) will become
realized is subject to a variety of factors, including among other factors,
changes in prevailing market prices and the timing of any sales of securities,
which are subject to our securities sales and governance process, as well as
certain sales restrictions (e.g. lock-up agreements). The lock up agreement for
common stock shares held in Root, Inc, is scheduled to expire during April 2021.
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Non-GAAP Core Fee Income
                                                                    Three months ended September 30,                             Nine months ended September 30,
(Dollars in thousands)                                       2020          

     2019              % Change               2020                2019              % Change
Non-GAAP core fee income (1):
Client investment fees                                   $   31,914          $  46,679                 (31.6) %       $  107,192          $ 136,905                 (21.7) %
Foreign exchange fees                                        43,881             40,309                   8.9             127,642            116,863                   9.2
Credit card fees                                             22,756             30,158                 (24.5)             72,348             86,431                 (16.3)
Deposit service charges                                      22,015             22,482                  (2.1)             67,115             65,496                   2.5
Lending related fees                                         13,562             11,707                  15.8              37,851             36,857                   2.7
Letters of credit and standby letters of credit
fees                                                         12,192             10,842                  12.5              35,155             31,205                  12.7
Total non-GAAP core fee income (1)                       $  146,320          $ 162,177                  (9.8)         $  447,303          $ 473,757                  (5.6)
Investment banking revenue                                   92,181             38,516                 139.3             280,551            137,005                 104.8
Commissions                                                  16,257             12,275                  32.4              49,197             40,812                  20.5
Total non-GAAP core fee income plus investment
banking revenue and commissions (2)                      $  254,758          $ 212,968                  19.6          $  777,051          $ 651,574                  19.3




(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, (ii) our investment banking revenue and commissions and
(iii) other noninterest income. See "Use of Non-GAAP Measures" above.
(2)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 and other
noninterest income. See "Use of Non-GAAP Measures" above.
Client Investment Fees
Client investment fees were $31.9 million and $107.2 million for the three and
nine months ended September 30, 2020, compared to $46.7 million and $136.9
million for the comparable 2019 periods. The decreases were reflective of lower
spreads due to decreases in market interest rates, offset by large increases in
average off-balance sheet client investment funds. Given our expectations of a
continued low rate environment, we generally expect client investment fees in
2020 to be lower than 2019.
A summary of client investment fees by instrument type for the three and nine
months ended September 30, 2020 and 2019 is as follows:
                                                                   Three months ended September 30,                            Nine months ended September 30,
(Dollars in thousands)                                       2020              2019              % Change               2020                2019              % Change
Client investment fees by type:
Sweep money market fees                                  $  18,155          $ 26,202                 (30.7) %       $   60,617          $  79,698                 (23.9) %
Asset management fees                                       12,172             7,256                  67.8              32,905             20,883                  57.6
Repurchase agreement fees                                    1,587            13,221                 (88.0)             13,670             36,324       

(62.4)

Total client investment fees                             $  31,914          $ 46,679                 (31.6)         $  107,192          $ 136,905

(21.7)

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

                                                       Three months ended September 30,                             Nine months ended September 30,
(Dollars in millions)                            2020               2019              % Change               2020               2019              % Change
Sweep money market funds                     $   54,495          $ 40,321                  35.2  %       $   48,367          $ 40,048                  20.8  %
Client investment assets under
management (1)                                   59,338            42,834                  38.5              53,928            40,969                  31.6
Repurchase agreements                             9,731             9,670                   0.6               9,809             8,947                   9.6
Total average client investment funds
(2)                                          $  123,564          $ 92,825                  33.1          $  112,104          $ 89,964                  24.6

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

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(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, 2020 and December 31, 2019:
                                                        September 30,         December 31,
(Dollars in millions)                                        2020                 2019                 % Change
Sweep money market funds                                $    56,395          $     43,226                    30.5  %
Client investment assets under management (1)                60,773                46,904                    29.6
Repurchase agreements                                         9,613                 9,062                     6.1
Total period-end client investment funds (2)            $   126,781          $     99,192                    27.8




(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 $43.9 million and $127.6 million for the three and
nine months ended September 30, 2020, respectively, compared to $40.3 million
and $116.9 million for the comparable 2019 periods. The increase for the three
months ended September 30, 2020, compared to the comparable period ending
September 30, 2019, was driven by increased trade volumes reflective primarily
by private equity deal activity coupled with quarterly hedging activity. The
increase for the nine months ended September 30, 2020 compared to September 30,
2019, is due primarily to the overall increase in the number of clients
executing spot contracts resulting in higher trade volumes from the previous
year reflective of our global expansion initiative and increased client
engagement efforts. Foreign exchange fees have been, and may further be,
impacted by effects of the COVID-19 pandemic.
A summary of foreign exchange fee income by instrument type for the three and
nine months ended September 30, 2020 and 2019 is as follows:
                                                                   Three months ended September 30,                            Nine months ended September 30,
(Dollars in thousands)                                       2020              2019              % Change               2020                2019              % Change
Foreign exchange fees by instrument type:
Spot contract commissions                                $  38,794          $ 36,836                   5.3  %       $  112,821          $ 106,561                   5.9  %
Forward contract commissions                                 4,613             3,371                  36.8              14,004             10,144                  38.1
Option premium fees                                            474               102                       NM              817                158                       NM
Total foreign exchange fees                              $  43,881

$ 40,309                   8.9          $  127,642          $ 116,863                   9.2




NM-Not meaningful

Credit Card Fees
Credit card fees were $22.8 million and $72.3 million for the three and nine
months ended September 30, 2020, respectively, compared to $30.2 million and
$86.4 million for the comparable 2019 periods. The decreases were primarily due
to lower transaction volumes starting in March of 2020 reflective of the
COVID-19 pandemic interrupting normal business activity. Credit card fees have
been, and may further be, impacted by the effects of the COVID-19 pandemic.
A summary of credit card fees by instrument type for the three and nine months
ended September 30, 2020 and 2019 is as follows:
                                                                   Three months ended September 30,                           Nine months ended September 30,
(Dollars in thousands)                                       2020              2019              % Change               2020              2019              % Change
Credit card fees by instrument type:
Card interchange fees, net                               $  18,168          $ 24,560                 (26.0) %       $  55,257          $ 68,808                 (19.7) %
Merchant service fees                                        3,670             3,943                  (6.9)            13,727            12,763                   7.6
Card service fees                                              918             1,655                 (44.5)             3,364             4,860                 (30.8)
Total credit card fees                                   $  22,756          $ 30,158                 (24.5)         $  72,348          $ 86,431                 (16.3)


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Deposit Service Charges
Deposit service charges were $22.0 million and $67.1 million for the three and
nine months ended September 30, 2020, respectively, compared to $22.5 million
and $65.5 million for the comparable 2019 periods. The decrease in deposit
service charges for the three months ended September 30, 2020, compared to the
comparable period ending September 30, 2019, was reflective of the decrease in
client activity including the impact of a slower macro-economic environment
resulting from the COVID-19 pandemic as well as increased earnings credits
reflective of growth in deposit demand accounts from clients conserving cash
resulting in qualifying balances to offset service charges. The increase for the
nine months ended September 30, 2020 compared to the comparable period ending
September 30, 2019, was reflective of higher deposit client counts as well as
higher volumes of our transaction-based fee products from the previous year.
Lending Related Fees
Lending related fees were $13.6 million and $37.9 million for the three and nine
months ended September 30, 2020, respectively, compared to $11.7 million and
$36.9 million for the comparable 2019 periods. The increases were primarily due
to increases in fees earned from unused lines of credit.
A summary of lending related fees by type for the three and nine months ended
September 30, 2020 and 2019 is as follows:
                                                                   Three months ended September 30,                           Nine months ended September 30,
(Dollars in thousands)                                       2020              2019              % Change               2020              2019              % Change
Lending related fees by instrument type:
Unused commitment fees                                   $   9,872          $  8,339                  18.4  %       $  26,602          $ 25,060                   6.2  %
Other                                                        3,690             3,368                   9.6             11,249            11,797                  (4.6)
Total lending related fees                               $  13,562          $ 11,707                  15.8          $  37,851          $ 36,857

2.7

Letters of Credit and Standby Letters of Credit Fees
Letters of credit and standby letters of credit fees were $12.2 million and
$35.2 million for the three and nine months ended September 30, 2020,
respectively, compared to $10.8 million and $31.2 million for the comparable
2019 periods. The increases were primarily driven by an increase in deferred fee
income reflective of larger letter of credit issuances.
Investment Banking Revenue
Investment banking revenue was $92.2 million and $280.6 million for the three
and nine months ended September 30, 2020, respectively, compared to $38.5
million and $137.0 million for the comparable 2019 periods. The increases were
attributable to higher levels of funding activity in the life science/healthcare
secondary markets and by the increase in public equity underwriting fees.
A summary of investment banking revenue by type for the nine months ended
September 30, 2020 and 2019 is as follows:
                                                                  Three months ended September 30,                           Nine months ended September 30,
(Dollars in thousands)                                       2020              2019             % Change              2020                2019              % Change
Investment banking revenue:
Underwriting fees                                        $  85,009          $ 31,016             174.1            $  247,384          $ 109,371                 126.2  %
Advisory fees                                                1,761             5,200             (66.1)               26,170             22,789                  14.8
Private placements and other                                 5,411             2,300             135.3                 6,997              4,845                  44.4
Total investment banking revenue                         $  92,181          $ 38,516             139.3            $  280,551          $ 137,005                 104.8


Commissions
Commissions for the three and nine months ended September 30, 2020 were $16.3
million and $49.2 million, respectively, compared to $12.3 million and $40.8
million for the comparable 2019 periods. The increases were driven by client
trading activity, consistent with market volumes. Commissions include
commissions received from clients for the execution of agency-based brokerage
transactions in listed and over-the-counter equities.
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Other
Other noninterest income for the three and nine months ended September 30, 2020
were $49.2 million and $76.9 million, respectively, compared to $13.6 million
and $42.8 million for the comparable 2019 periods. The increases were primarily
driven by a $30.0 million recognized gain upon the exercise and conversion of
our convertible debt option for BigCommerce during the third quarter of 2020.
Noninterest Expense
A summary of noninterest expense for the three and nine months ended
September 30, 2020 and 2019 is as follows:
                                                                  Three months ended September 30,                                 Nine months ended September 30,
(Dollars in thousands)                                     2020                2019              % Change                  2020                    2019               % Change
Compensation and benefits                              $  327,369          $ 233,840                  40.0  %       $        902,752          $   715,073                  26.2  %
Professional services                                      67,215             55,202                  21.8                   169,748              133,018                  27.6
Premises and equipment                                     30,772             26,775                  14.9                    85,420               72,386                  18.0
Net occupancy                                              18,965             16,981                  11.7                    56,156               49,716                  13.0
Business development and travel                             2,214             19,539                 (88.7)                   19,277               51,915                 (62.9)
FDIC and state assessments                                  6,933              4,881                  42.0                    18,986               13,343                  42.3
Other                                                      37,553             34,106                  10.1                   117,903              105,059                  12.2

Total noninterest expense                              $  491,021          $ 391,324                  25.5          $      1,370,242          $ 1,140,510                  20.1


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.

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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, 2020 and 2019:
                                                             Three months ended September 30,                                   Nine months ended September 30,
Non-GAAP core operating efficiency ratio
(Dollars in thousands, except ratios)                  2020                  2019              % Change                  2020                  2019               % Change
GAAP noninterest expense                        $     491,021            $    391,324               25.5  %       $   1,370,242            $   1,140,510               20.1  %
Less: expense attributable to
noncontrolling interests                                  114                     145              (21.4)                   384                      692              (44.5)
Non-GAAP noninterest expense, net of
noncontrolling interests                              490,907                 391,179               25.5              1,369,858                1,139,818               20.2
Less: expense attributable to SVB Leerink              77,567                  55,200               40.5                248,254                  177,675               39.7
Non-GAAP noninterest expense, net of
noncontrolling interests and SVB Leerink        $     413,340            $    335,979               23.0          $   1,121,604            $     962,143               16.6

GAAP net interest income                        $     527,740            $    520,644                1.4          $   1,564,804            $   1,562,933                0.1
Adjustments for taxable equivalent basis                3,964                   2,957               34.1                 11,218                    8,769               27.9
Non-GAAP taxable equivalent net interest
income                                                531,704                 523,601                1.5              1,576,022                1,571,702                0.3
Less: income attributable to
noncontrolling interests                                    -                      14             (100.0)                    26                       41              (36.6)
Non-GAAP taxable equivalent net interest
income, net of noncontrolling interests               531,704                 523,587                1.6              1,575,996                1,571,661                0.3
Less: net interest income attributable to
SVB Leerink                                               175                     277              (36.8)                   373                      961              (61.2)
Non-GAAP taxable equivalent net interest
income, net of noncontrolling interests
and SVB Leerink                                 $     531,529            $    523,310                1.6          $   1,575,623            $   1,570,700                0.3

GAAP noninterest income                         $     547,583            $    294,009               86.2          $   1,218,365            $     908,135               34.2
Less: income attributable to
noncontrolling interests, including
carried interest allocation                            27,862                  14,568               91.3                 40,393                   36,552               10.5
Non-GAAP noninterest income, net of
noncontrolling interests                              519,721                 279,441               86.0              1,177,972                  871,583               35.2
Less: non-GAAP net gains on investment
securities, net of noncontrolling
interests                                             162,052                  15,209                    NM             230,182                   69,901                    NM
Less: net gains on equity warrant assets               53,766                  37,561               43.1                 93,667                  107,213              (12.6)
Less: investment banking revenue                       92,181                  38,516              139.3                280,551                  137,005              104.8
Less: commissions                                      16,257                  12,275               32.4                 49,197                   40,812               20.5
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                 $     195,465            $    175,880               11.1          $     524,375            $     516,652                1.5

GAAP total revenue                              $   1,075,323            $    814,653               32.0          $   2,783,169            $   2,471,068               12.6
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                                     $     726,994            $    699,190                4.0          $   2,099,998            $   2,087,352                0.6

Operating efficiency ratio                              45.66    %         48.04    %               (5.0)                 49.23    %          46.15    %                6.7
Non-GAAP core operating efficiency ratio
(1)                                                     56.86              48.05                    18.3                  53.41               46.09                    15.9



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NM-Not meaningful
(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, 2020 and 2019:
                                                                    Three months ended September 30,                             Nine months ended September 30,
(Dollars in thousands, except employees)                     2020                2019              % Change               2020                2019     

        % Change
Compensation and benefits:
Salaries and wages                                       $  135,705          $ 109,473                  24.0  %       $  375,844          $ 316,472                  18.8  %
Incentive compensation plans                                103,898             59,602                  74.3             291,101            200,483                  45.2
Other employee incentives and benefits (1)                   87,766             64,765                  35.5             235,807            198,118                  19.0
Total compensation and benefits                          $  327,369          $ 233,840                  40.0          $  902,752          $ 715,073                  26.2
Period-end full-time equivalent employees                        4,336              3,460               25.3                  4,336              3,460               25.3
Average full-time equivalent employees                           4,216              3,413               23.5                  3,914              3,309               18.3




(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 $327.4 million for the three months ended
September 30, 2020, compared to $233.8 million for the comparable 2019 period.
The key changes in factors affecting compensation and benefits expense were as
follows:
•An increase of $26.2 million in salaries and wages reflective primarily of the
increase in the number of average FTE to 4,216 for the third quarter of 2020
compared to 3,413 for the second quarter of 2019, driven by strong hiring for
in-sourcing, product development and revenue growth, as well as annual pay
raises,
•An increase of $44.3 million in incentive compensation plans expense
attributable primarily to an increase in SVB Leerink incentive compensation
expense as a result of a strong third quarter performance as compared to the
same period in 2019,
•An increase of $23.0 million in other employee incentives and benefits
primarily driven by an increase in warrant incentive plan of $5.7 million, an
increase in payroll taxes of $2.7 million and an increase of $2.6 million in
share-based compensation expense due to the increased restricted stock awards
granted during 2020.
Compensation and benefits expense was $902.8 million for the nine months ended
September 30, 2020, compared to $715.1 million for the comparable 2019 period.
The key changes in factors affecting compensation and benefits expense were as
follows:
•An increase of $59.4 million in salaries and wages reflective primarily of the
increase in the number of average FTE to 3,914 for the nine months ended
September 30, 2020 from 3,309 for the nine months ended September 30, 2019, as
well as annual pay raises,
•An increase of $90.6 million in incentive compensation reflective primarily of
the Leerink incentive compensation for the nine months ended September 30, 2020,
and
•An increase of $37.7 million in other employee incentives and benefits
primarily driven by an increase in agency fees of $10.6 million and an increase
of $10.2 million in share-based compensation expense due to the increased
restricted stock awards granted during 2020.
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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 Award (see descriptions in
our 2019 Form 10-K). Total costs incurred under these plans were $127.2 million
and $345.1 million for the three and nine months ended September 30, 2020
compared to $74.5 million and $249.1 million for the comparable 2019 periods.
These amounts are included in total compensation and benefits expense discussed
above.
We anticipate higher incentive compensation expenses in 2020, compared to 2019,
primarily due to strong SVB Leerink performance.
Professional Services
Professional services expense was $67.2 million and $169.7 million for the three
and nine months ended September 30, 2020, compared to $55.2 million and $133.0
million for the comparable 2019 periods. The increases were primarily related to
costs to support the PPP during the second and third quarters of 2020 as well as
our continued effort towards investments in our infrastructure, initiatives, and
operating projects to support our presence both domestically and globally.
Premises and Equipment
Premises and equipment expense was $30.8 million and $85.4 million for the three
and nine months ended September 30, 2020, compared to $26.8 million and $72.4
million for the comparable 2019 periods. The increases were related to
investments in projects, systems and technology to support our revenue growth
and related initiatives as well as other operating costs.
Net Occupancy
  Net occupancy expense was $19.0 million and $56.2 million for the three and
nine months ended September 30, 2020, compared to $17.0 million and $49.7
million for the comparable 2019 periods. The increases were primarily due to the
expansion of certain offices to support our growth and lease renewals at higher
costs, reflective of market conditions.
Business Development and Travel
  Business development and travel expense was $2.2 million and $19.3 million for
the three and nine months ended September 30, 2020, compared to $19.5 million
and $51.9 million for the comparable 2019 periods. The decreases were primarily
due to the impact of 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 continue to remain lower for the
remainder of 2020 compared to 2019.
FDIC and State Assessments
  FDIC and state assessments expense was $6.9 million and $19.0 million for the
three and nine months ended September 30, 2020, compared to $4.9 million and
$13.3 million for the comparable 2019 periods. The increases were due primarily
to the increase in our average assets.
Other Noninterest Expense
Total other noninterest expense was $37.6 million and $117.9 million for the
three and nine months ended September 30, 2020, compared to $34.1 million and
$105.1 million for the comparable 2019 periods. The increases were driven
primarily by the increase in investment banking expenses due to the strong
investment banking activity. A summary of other noninterest expense for the
three and nine months ended September 30, 2020 and 2019 is as follows:
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                                                                   Three months ended September 30,                            Nine months ended September 30,
(Dollars in thousands)                                       2020              2019              % Change               2020                2019       

% Change Lending and other client related processing costs $ 7,194 $ 7,502

                  (4.1) %       $   23,155          $  21,442                   8.0  %
Correspondent bank fees                                      3,581             3,657                  (2.1)             11,400             10,970                   3.9
Investment banking activities                                2,835             1,864                  52.1              13,633              9,918                  37.5
Trade order execution costs                                  2,806             2,615                   7.3               8,165              7,959                   2.6
Data processing services                                     3,984             3,066                  29.9              10,945              8,624                  26.9
Telephone                                                    2,342             2,466                  (5.0)              6,458              7,629                 (15.3)
Dues and publications                                        1,159             1,055                   9.9               3,199              3,439                  (7.0)
Postage and supplies                                           538               720                 (25.3)              2,117              2,168                  (2.4)
Other                                                       13,114            11,161                  17.5              38,831             32,910                  18.0
Total other noninterest expense                          $  37,553          $ 34,106                  10.1          $  117,903          $ 105,059                  12.2


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, 2020 and 2019 is as follows:
                                                            Three months ended September 30,                             Nine months ended September 30,
(Dollars in thousands)                               2020                2019              % Change               2020                2019              % Change
Net interest income (1)                          $        -          $     (14)               (100.0) %       $      (26)         $     (41)                (36.6) %
Noninterest income (1)                               (8,620)            (4,910)                 75.6             (12,033)           (19,586)                (38.6)
Noninterest expense (1)                                 114                145                 (21.4)                384                692                 (44.5)
Carried interest allocation (2)                     (19,242)            (9,658)                 99.2             (28,360)           (16,966)        

67.2

Net income attributable to noncontrolling
interests                                        $  (27,748)         $ (14,437)                 92.2          $  (40,035)         $ (35,901)                 11.5

(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, 2020 and 2019
Net income attributable to noncontrolling interests was $27.7 million for the
three months ended September 30, 2020, compared to net income of $14.4 million
for the comparable 2019 period. Net income attributable to noncontrolling
interests of $27.7 million for the three months ended September 30, 2020 was
primarily driven by net gains on investments securities (including carried
interest allocation) from our managed funds of funds and our managed direct
venture funds portfolios reflective of the overall market performance during the
third quarter of 2020. See "Results of Operations-Noninterest Income-Gains on
Investment Securities, Net".
Nine months ended September 30, 2020 and 2019
Net income attributable to noncontrolling interests was $40.0 million for the
nine months ended September 30, 2020, compared to net income of $35.9 million
for the comparable 2019 period. Net income attributable to noncontrolling
interests of $40.0 million for the nine months ended September 30, 2020 was
primarily a result of net gains on investment securities (including carried
interest allocation) from our managed funds of funds and our managed direct
funds portfolios related primarily to net unrealized valuation increases. See
"Results of Operations-Noninterest Income-Gains on Investment Securities, Net".
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Income Taxes
Our effective income tax rate was 26.7 percent and 26.9 percent for the three
and nine months ended September 30, 2020, respectively, compared to 28.2 percent
and 27.5 percent for the comparable 2019 periods. The effective tax rates are
consistent year over year as tax adjustments impacting the effective tax rate
have been proportional to changes in pre-tax income. 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.
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.
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 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, 2020 and 2019:
Global Commercial Bank
                                                                    Three months ended September 30,                                         Nine months ended September 30,
(Dollars in thousands)                                      2020                    2019                % Change                     2020                      2019                % Change
Net interest income                                 $         512,963          $    455,161                  12.7  %       $      1,461,768               $  1,360,997                   7.4  %
Reduction (provision for) credit losses                        37,847               (34,075)                      NM               (200,020)                   (79,175)                152.6
Noninterest income                                            147,594               161,029                  (8.3)                  447,902                    471,492                  (5.0)
Noninterest expense                                          (258,035)             (213,786)                 20.7                  (724,233)                  (617,933)                 17.2
Income before income tax expense                    $         440,369          $    368,329                  19.6          $        985,417               $  1,135,381                 (13.2)
Total average loans, amortized cost                 $      30,763,715          $ 25,839,647                  19.1          $     30,126,870               $ 25,457,997                  18.3
Total average assets                                       77,802,730            58,384,473                  33.3                69,212,733                 54,196,976                  27.7
Total average deposits                                     74,825,725            55,250,154                  35.4                66,408,359                 51,352,644                  29.3





NM-Not meaningful

Three months ended September 30, 2020 and 2019
Income before income tax expense from our Global Commercial Bank ("GCB")
increased to $440.4 million for the three months ended September 30, 2020,
compared to $368.3 million for the comparable 2019 period. The key components of
GCB's performance for the three months ended September 30, 2020 compared to the
comparable 2019 period are discussed below.
Net interest income from GCB increased by $57.8 million for the three months
ended September 30, 2020, due primarily to an increase in loan interest income
resulting mainly from higher average loan balances, partially offset by a
decrease in loan yields as a result of rate decreases.
GCB had a reduction of credit losses of $37.8 million for the three months ended
September 30, 2020, compared to a provision of $34.1 million for the comparable
2019 period. The reduction of $37.8 million for the three months ended
September 30, 2020 was driven primarily by a $57.7 million reduction in reserves
for our performing loans based on our forecast models of the current economic
environment under the CECL methodology adopted January 1, 2020, a $15.1 million
decrease related to changes in loan composition within our portfolio segments
and $4.4 million of recoveries, partially offset by $25.4 million for net new
nonaccrual loans and $15.2 million for charge-offs not specifically reserved for
at June 30, 2020.
The provision of $34.1 million for the three months ended September 30, 2019
primarily reflects an increase of $19.1 million for net new nonaccrual loans,
$18.3 million for charge-offs not specifically reserved for and $15.2 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.
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Noninterest income decreased by $13.4 million for the three months ended
September 30, 2020 related primarily to an overall decrease in our non-GAAP core
fee income (lower client investment fees and credit card fees). These decreases
were due primarily to the impact of the federal rate cuts on yield rates
affecting client investment fees as well as a decrease in transactional volume
for credit cards.
Noninterest expense increased by $44.2 million for the three months ended
September 30, 2020, due primarily to compensation and benefits expense and
professional services expense, partially offset by a decrease in business
development and travel expense. Compensation and benefits expense increased
$41.5 million as a result of higher salaries and wages expenses and higher
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
to 3,102 FTEs for the three months ended September 30, 2020, from 2,364 FTEs for
the comparable 2019 period. Incentive compensation expense increased due
primarily to an increase in our 2020 full-year projected financial performance.
Professional services expense increased due to higher expenses primarily related
to our continued effort towards investments in our infrastructure, initiatives
and operating projects to support our presence both domestically and globally.
Business development and travel expense decreased primarily due to the impact of
COVID-19 on the global economy and our restrictions placed on domestic and
international travel beginning March 2020.
Nine Months Ended September 30, 2020 and 2019
Net interest income from our GCB increased by $100.8 million for the nine months
ended September 30, 2020, due primarily to an increase in loan interest income
resulting mainly from higher average loan balances, partially offset by a
decrease in loan yields as a result of rate decreases.

GCB had a provision for credit losses of $200.0 million for the nine months
ended September 30, 2020, compared to a provision of $79.2 million for the
comparable 2019 period. The provision of $200.0 million for the nine months
ended September 30, 2020 was reflective primarily of $108.8 million in
additional reserves for our performing loans based on our forecast models of the
current economic environment under the CECL methodology adopted January 1, 2020,
including the impact of the COVID-19 pandemic, as well as changes in loan
composition within our portfolio segments, $12.2 million in additional reserves
for period-end loan growth, $38.8 million for charge-offs not specifically
reserved for at December 31, 2019 and $58.3 million in net new nonaccrual loans,
partially offset by $16.2 million of recoveries.
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.
Noninterest income decreased by $23.6 million for the nine months ended
September 30, 2020, related primarily to an overall decrease in our non-GAAP
core fee income (lower client investment fees and credit card fees partially
offset by an increase in foreign exchange fees). The decreases were due
primarily to the impact of the federal rate cuts on yield rates affecting client
investment fees as well as a decrease in transactional volume on credit cards.
The increase in foreign exchange fees was driven primarily by private equity
deal activity coupled with quarterly hedging activity.
Noninterest expense increased by $106.3 million for the nine months ended
September 30, 2020, due primarily to increased expenses for compensation and
benefits expense and professional services expense, partially offset by a
decrease in business development and travel expense. Compensation and benefits
expense increased by $78.2 million primarily as a result of increased salaries
and wages. The increase in GCB salaries and wages was due primarily to an
increase in the average number of FTEs at GCB, which increased to 2,872 FTEs for
the nine months ended September 30, 2020 from 2,283 FTEs for the comparable 2019
period. Professional services expense increased $24.1 million due to higher
expenses primarily related to our continued effort towards investments in our
infrastructure, initiatives and operating projects to support our presence both
domestically and globally. Business development and travel expense decreased by
$21.3 million primarily due to the impact of COVID-19 on the global economy and
our restrictions placed on domestic and international travel beginning March
2020.
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SVB Private Bank
                                                                   Three months ended September 30,                                     Nine months ended September 30,
(Dollars in thousands)                                      2020                    2019               % Change                 2020                    2019               % Change
Net interest income                                  $         19,145          $    12,772                 49.9  %       $         52,952          $    37,200                 42.3  %
Reduction (provision for) credit losses                        14,881               (1,910)                     NM                (44,194)              (1,779)                     NM
Noninterest income                                                916                  634                 44.5                     2,486                1,829                 35.9
Noninterest expense                                           (12,293)             (11,638)                 5.6                   (32,547)             (30,015)                 8.4
Income (loss) before income tax expense              $         22,649          $      (142)                     NM       $        (21,303)         $     7,235                      NM
Total average loans, amortized cost                  $      4,263,324          $ 3,400,889                 25.4          $      4,053,018          $ 3,235,943                 25.2
Total average assets                                        4,297,011            3,431,313                 25.2                 4,087,786            3,264,071                 25.2
Total average deposits                                      2,163,903            1,497,303                 44.5                 2,069,196            1,461,170                 41.6




NM-Not meaningful

Three months ended September 30, 2020 and 2019
Net interest income from our SVB Private Bank increased by $6.4 million for the
three months ended September 30, 2020, due primarily to the increase in average
loans for the three months ended September 30, 2020 as compared to the 2019
comparable period, partially offset by decreases in loan yields as a result of
overall market rate decreases.
The reduction of credit losses of $14.9 million for the three months ended
September 30, 2020, was reflective primarily of improved economic scenarios in
our forecast models as well as a qualitative adjustment reflective of strong
credit performance, partially offset by loan growth.
Nine Months Ended September 30, 2020 and 2019
Net interest income from our SVB Private Bank increased by $15.8 million for the
nine months ended September 30, 2020, due primarily to the increase in average
loans for the nine months ended September 30, 2020 as compared to the 2019
comparable period, partially offset by decreases in loan yields as a result of
overall market rate decreases.
The provision for credit losses increased by $42.4 million for the nine months
ended September 30, 2020, due primarily to a $24.9 million increase in
additional reserves for our performing loans and a $17.6 million increase due to
loan growth. 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 under the CECL methodology adopted January 1, 2020,
including the impact of the COVID-19 pandemic.
SVB Capital
                                                              Three months ended September 30,                             Nine months ended September 30,
(Dollars in thousands)                                  2020                2019              % Change              2020                2019              % Change
Net interest income                                 $        2          $       9                (77.8) %       $       28          $      20                 40.0  %
Noninterest income                                      60,380             34,955                 72.7              86,748             99,860                (13.1)
Noninterest expense                                    (11,198)            (8,129)                37.8             (28,040)           (21,794)                28.7
Income before income tax expense                    $   49,184          $  26,835                 83.3          $   58,736          $  78,086                (24.8)
Total average assets                                $  413,882          $ 396,031                  4.5          $  430,391          $ 382,707                 12.5


 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.
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Three months ended September 30, 2020 and 2019
SVB Capital had noninterest income of $60.4 million for the three months ended
September 30, 2020, compared to $35.0 million for the comparable 2019 period.
The increase in noninterest income was due primarily to an increase in net gains
on investment securities for the three months ended September 30, 2020, compared
to net gains for the comparable 2019 period. SVB Capital's components of
noninterest income primarily include the following:
•Net gains on investment securities of $47.5 million for the three months ended
September 30, 2020, compared to net gains of $26.0 million for the comparable
2019 period. The net gains on investment securities of $47.5 million were
primarily driven 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 portfolio.

Nine Months Ended September 30, 2020 and 2019

SVB Capital had noninterest income of $86.7 million for the nine months ended
September 30, 2020, compared to $99.9 million for the comparable 2019 period.
The decrease in noninterest income was due primarily to a decrease in net gains
on investment securities for the nine months ended September 30, 2020, compared
to the comparable 2019 period. SVB Capital's components of noninterest income
primarily include the following:
•Net gains on investment securities of $53.6 million for the nine months ended
September 30, 2020, compared to net gains of $70.0 million for the comparable
2019 period. The net gains on investment securities of $53.6 million were
primarily driven by unrealized net valuation increases from private company
investments held in our managed funds of funds portfolio as well as in our
managed direct venture fund portfolio.
SVB Leerink
                                                              Three months ended September 30,                             Nine months ended September 30,
(Dollars in thousands)                                  2020                2019              % Change              2020                2019              % Change
Net interest income                                 $      175          $     277                (36.8) %       $      373          $     961                (61.2) %
Noninterest income                                     113,651             52,947                114.7             340,145            188,064                 80.9
Noninterest expense                                    (77,567)           (55,200)                40.5            (248,254)          (177,675)                39.7
Income (loss) before income tax expense             $   36,259          $  (1,976)                     NM       $   92,264          $  11,350                      NM
Total average assets                                $  605,263          $ 428,848                 41.1          $  514,836          $ 380,290                 35.4




NM-Not meaningful
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, 2020 and 2019
SVB Leerink had noninterest income of $113.7 million for the three months ended
September 30, 2020, compared to $52.9 million for the comparable 2019 period.
The $60.8 million increase in noninterest income was primarily due to a $53.7
million increase in investment banking revenues attributable to higher levels of
funding activity in the life science/healthcare secondary markets and by the
increase in public equity underwriting fees.
SVB Leerink had noninterest expense of $77.6 million for the three months ended
September 30, 2020, compared to $55.2 million for the comparable 2019 period.
The $22.4 million increase in noninterest expense was primarily driven by an
increase of $26.2 million in compensation and benefit expense due to an increase
in incentive plan expense as a result of a strong performance in the third
quarter of 2020.
Nine Months Ended September 30, 2020 and 2019
SVB Leerink had noninterest income of $340.1 million for the nine months ended
September 30, 2020, compared to $188.1 million for the comparable 2019 period.
The $152.0 million increase was primarily driven by a $143.5 million increase
investment banking revenues attributable to higher levels of funding activity in
the life science/healthcare secondary markets and by the increase in public
equity underwriting fees.
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SVB Leerink had noninterest expense of $248.3 million for the nine months ended
September 30, 2020, compared to $177.7 million for the comparable 2019 period.
The $70.6 million increase was primarily driven by an increase of $76.8 million
in compensation and benefit expense due to an increase in incentive plan expense
as a result of a strong performance during 2020, partially offset by a $6.6
million decrease in business travel expense due to the impact of travel
restrictions put in place in response to the COVID-19 pandemic towards the end
of the first quarter of 2020.
Consolidated Financial Condition
Our total assets, and total liabilities and stockholders' equity, were $96.9
billion at September 30, 2020 compared to $71.0 billion at December 31, 2019, an
increase of $25.9 billion, or 36.5 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 $15.7 billion at September 30, 2020, an
increase of $8.9 billion, or 131.3 percent, compared to $6.8 billion at
December 31, 2019. The increase was driven by the significant growth in deposits
of $23.0 billion. We have also raised our cash target level to between $7.0
billion and $9.0 billion in response to the current economic environment. As of
September 30, 2020, $11.9 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 $2.7
billion. As of December 31, 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 $2.1 billion.

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Investment Securities
Investment securities totaled $40.4 billion at September 30, 2020, an increase
of $11.3 billion, or 39.1 percent, compared to $29.1 billion at December 31,
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.
Available-for-Sale Securities
Period-end available-for-sale securities were $25.9 billion at September 30,
2020, compared to $14.0 billion at December 31, 2019, an increase of $11.9
billion, or 84.8 percent. The $11.9 billion increase in period-end AFS
securities balances from December 31, 2019 to September 30, 2020, was primarily
driven by the purchase of $16.6 billion of securities and a $0.5 billion
increase in our AFS portfolio reflective of the 150 basis point decrease in
Federal Funds interest rates, partially offset by the sale of $2.6 billion of
securities and $2.6 billion of portfolio cash flows. 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, 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, 2020
                                                                                                        One Year                                After One Year to                             After Five Years to                                After
                                                                Total                                    or Less                                    Five Years                                     Ten Years                                   Ten Years
                                                                         Weighted                                Weighted                                         Weighted                                    Weighted                                    Weighted
                                                   Carrying               Average            Carrying             Average                 Carrying                 Average              Carrying               Average              Carrying               Average
(Dollars in thousands)                               Value                 Yield               Value               Yield                   Value                    Yield                 Value                 Yield                 Value                 Yield
U.S. Treasury securities                        $  4,547,294                  1.86  %       $ 60,221                  1.57  %       $       2,989,181                  1.84  %       $  1,497,892                  1.91  %       $          -                     -  %
U.S. agency debentures                               152,526                  1.52                 -                     -                          -                     -               152,526                  1.52                     -                     -
Foreign government debt securities                    23,449                 (0.82)           23,449                 (0.82)                         -                     -                     -                     -                     -                     -
Residential mortgage-backed securities:
Agency-issued mortgage-backed securities           9,770,313                  1.84                 -                     -                          -                     -                     -                     -             9,770,313                  1.84
Agency-issued collateralized mortgage
obligations-fixed rate                             7,315,973                  1.32                 -                     -                          -                     -                     -                     -             7,315,973                  1.32

Agency-issued commercial mortgage-backed
securities                                         4,094,769                  1.80                 -                     -                          -                     -             1,431,547                  1.81             2,663,222                  1.80
Total                                           $ 25,904,324                  1.69          $ 83,670                  0.90          $       2,989,181                  1.84          $  3,081,965                  1.84          $ 19,749,508                  1.64


Held-to-Maturity Securities
Period-end held-to-maturity securities were $13.0 billion at September 30, 2020,
compared to $13.8 billion at December 31, 2019, a decrease of $0.8 billion, or
6.2 percent. The $0.8 billion decrease in period-end HTM security balances from
December 31, 2019 to September 30, 2020 was due primarily to pay downs and
maturities of $2.8 billion, partially offset by the purchase of $2.0 billion of
securities.
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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, 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, 2020
                                                                                                                  One Year                              After One Year to                          After Five Years to                                   After
                                                                       Total                                       or Less                                  Five Years                                  Ten Years                                      Ten Years
                                                                                 Weighted-                                 Weighted-                                  Weighted-                                    Weighted-                                       Weighted-
                                                                                  Average             Amortized             Average              Amortized             Average                                      Average                                         Average
(Dollars in thousands)                                 Amortized Cost              Yield                 Cost                Yield                 Cost                 Yield             Amortized Cost             Yield               Amortized Cost              Yield
U.S. agency debentures                               $       402,346                   2.61  %       $   4,675                   3.22  %       $  148,559                   2.59  %       $    249,112                   2.67  %       $             -                      -  %
Residential mortgage-backed securities:
Agency-issued mortgage-backed securities                   5,363,541                   2.86              7,113                   2.39              28,722                   1.89               588,606                   2.47                4,739,100                   2.92
Agency-issued collateralized mortgage
obligations-fixed rate                                     1,909,965                   1.50                  -                      -                   -                      -               551,213                   1.62                1,358,752                   1.45
Agency-issued collateralized mortgage
obligations-variable rate                                    147,714                   0.74                  -                      -                   -                      -                     -                      -                  147,714                   0.74
Agency-issued commercial mortgage-backed
securities                                                 2,229,811                   3.08                  -                      -                   -                      -               102,428                   3.56                2,127,383                   3.06
Municipal bonds and notes                                  2,929,137                   3.21             44,340                   2.52             134,029                   2.63               540,308                   3.20                2,210,460                   3.26
Total                                                $    12,982,514                   2.75          $  56,128                   2.56          $  311,310                   2.54          $  2,031,667                   2.51          $    10,583,409                   2.80


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 4.1 years and 3.9 years at
September 30, 2020 and December 31, 2019, respectively.
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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 $1.5 billion ($1.4
billion net of noncontrolling interest) at September 30, 2020 compared to $1.2
billion ($1.1 billion net of noncontrolling interest) at December 31, 2019, an
increase of $0.3 billion, or 27.5 percent. The increase in period end
non-marketable and other equity securities of $0.3 billion was primarily
attributable to the increase in other equity securities in public companies of
$0.2 billion, driven by our investment in BigCommerce, private equity fund
investments driven by an increase in valuations, and new investments within our
qualified housing projects portfolio. 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, 2020 and
December 31, 2019:
                                                                                September 30, 2020                               December 31, 2019
                                                                                                   Amount                                           Amount
                                                                   

Carrying value (as attributable to Carrying value (as attributable to (Dollars in thousands)

                                                   reported)                 SVBFG                  reported)                 

SVBFG

Non-marketable and other equity securities: Non-marketable securities (fair value accounting): Consolidated venture capital and private equity fund investments (1)

                                                     $       

74,293 $ 19,132 $ 87,180 $ 22,482 Unconsolidated venture capital and private equity fund investments (2)

                                                              152,367                152,367                   178,217                

178,217

Other investments without a readily determinable fair value (3)

                                                                           56,008                 56,008                    55,255                 

55,255

Other equity securities in public companies (fair value accounting (4)

                                                               229,297                229,151                    59,200                 

59,056

Non-marketable securities (equity method accounting) (5): Venture capital and private equity fund investments

 274,721                161,699                   215,367                131,403
Debt funds                                                                     6,918                  6,918                     7,271                  7,271
Other investments                                                            192,776                192,776                   152,863                152,863
Investments in qualified affordable housing projects, net                    560,983                560,983                   458,476                

458,476

Total non-marketable and other equity securities                    $      1,547,363          $   1,379,034          $      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, 2020 and December 31, 2019:
                                                                      September 30, 2020                                     December 31, 2019
                                                                                           Amount                                                 Amount
                                                          Carrying value (as          attributable to           Carrying value (as           attributable to
(Dollars in thousands)                                        reported)                    SVBFG                     reported)                    SVBFG
Strategic Investors Fund, LP                            $             4,646          $           584          $              5,729          $           720
Capital Preferred Return Fund, LP                                    39,246                    8,458                        45,341                    9,772
Growth Partners, LP                                                  30,267                   10,076                        35,976                   11,976
CP I, LP                                                                134                       14                           134                       14
Total consolidated venture capital and private
equity fund investments                                 $            74,293          $        19,132          $             87,180          $        22,482



(2)The carrying value represents investments in 179 and 205 funds (primarily
venture capital funds) at September 30, 2020 and December 31, 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
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activities 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 30th for our September 30th
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 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, 2020 and December 31, 2019 (equity method
accounting):
                                                                     September 30, 2020                                   December 31, 2019
                                                                                         Amount                                              Amount
                                                         Carrying value (as         attributable to          Carrying value (as         attributable to
(Dollars in thousands)                                       reported)                   SVBFG                   reported)                   SVBFG
Venture capital and private equity fund
investments:
Strategic Investors Fund II, LP                         $           3,519          $         3,271          $           3,612          $         3,387
Strategic Investors Fund III, LP                                   14,984                   12,113                     15,668                   12,701
Strategic Investors Fund IV, LP                                    25,451                   21,399                     27,064                   22,780
Strategic Investors Fund V, LP                                     52,575                   27,602                     46,830                   24,586
CP II, LP (i)                                                       4,773                    2,871                      5,907                    3,567
Other venture capital and private equity fund
investments                                                       173,419                   94,443                    116,286                   64,382
Total venture capital and private equity fund
investments                                             $         274,721   

$ 161,699 $ 215,367 $ 131,403 Debt funds: Gold Hill Capital 2008, LP (ii)

                         $           5,317          $         5,317          $           5,525          $         5,525
Other debt funds                                                    1,601                    1,601                      1,746                    1,746
Total debt funds                                        $           6,918          $         6,918          $           7,271          $         7,271
Other investments:
SPD Silicon Valley Bank Co., Ltd.                       $         107,969          $       107,969          $          74,190          $        74,190
Other investments                                                  84,807                   84,807                     78,673                   78,673
Total other investments                                 $         192,776          $       192,776          $         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
The Volcker Rule prohibits, subject to certain exceptions, a banking entity,
such as the Company, from sponsoring, investing in, or having certain
relationships with covered funds. Under the currently effective regulations
implementing the Volcker Rule, covered funds are defined to include many venture
capital and private equity funds.
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On June 6, 2017, we received notice that the Federal Reserve approved the
Company's application for an extension of the permitted conformance period for
the Company's investments in "illiquid" covered funds. The Company must sell,
divest, restructure or otherwise conform such investments to the provisions of
the Volcker Rule by 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
of September 30, 2020, such investments had an estimated aggregate carrying
value and fair value of approximately $185 million. (For more information about
the Volcker Rule, see "Business-Supervision and Regulation" under Part 1, Item 1
of our 2019 Form 10-K.)
On June 25, 2020, the Federal Reserve and other agencies finalized revisions to
the regulations implementing the Volcker Rule ("2020 Volcker Amendments"), which
became effective on October 1, 2020. The amendments include, among other things,
new exclusions for credit funds, venture capital funds, family wealth management
vehicles and customer facilitation vehicles; revisions to existing exclusions
for foreign public funds, loan securitizations and public welfare and small
business funds; and modifications to the Super 23A provisions of the Volcker
Rule. We believe that certain venture capital funds and credit funds in which we
have investments qualify for these new exclusions, and, as a result, we will not
be required to sell or otherwise conform such portion of "illiquid" fund
holdings that are subject to the extension from the Federal Reserve as discussed
above. We are continuing to assess the impact of the 2020 Volcker Amendments on
the Company's existing fund investments and our future funds business.
Investment in BigCommerce Holdings, Inc.
As of September 30, 2020 we held approximately 2.8 million shares of common
stock in BigCommerce comprised of: (i) common stock issued pursuant to our
exercise of certain warrants, and (ii) common stock acquired through debt
conversion. With respect to these securities and transactions, during the three
months ending September 30, 2020, we recognized a $30.0 million gain upon the
exercise and conversion of the convertible debt option (included in other
noninterest income), a $10.8 million warrant gain from the exercise and
conversion of our warrants, and a $108.4 million unrealized investment gain on
the quarter-end valuation of equity shares at a price of $83.30.
Gains (or losses) related to our equity securities in public companies such as
BigCommerce are based on valuation changes or the sale of any securities, and
are subject to such companies' stock price, which are subject to market
conditions and various other factors. Additionally, the public equity investment
expected gains and losses, and the extent to which such gains (or losses) will
become realized is subject to a variety of factors, including among other
factors, changes in prevailing market prices and the timing of any sales of
securities, which are subject to our securities sales and governance process as
well as certain sales restrictions (e.g. lock-up agreements). The lock-up
agreement for common stock shares held in BigCommerce is scheduled to expire
during February 2021.

Loans

Loans, amortized cost basis, increased by $5.2 billion to $38.4 billion at
September 30, 2020, compared to $33.2 billion at December 31, 2019. Unearned
income was $222 million at September 30, 2020 and $163 million at December 31,
2019. Period-end loans increased compared to December 31, 2019, driven primarily
by our Global Fund Banking, SBA, Investor Dependent and Balance Sheet Dependent
risk-based segments. The increase in risk-based segments was primarily driven by
participation in the Paycheck Protection Program and increased credit line
utilization.
The breakdown of total loans and loans as a percentage of total loans by
risk-based segment is as follows:
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