Edgar Filing: SVB FINANCIAL GROUP

FORM 10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended September 30, 2011

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

For the transition period from to .

Commission File Number: 000-15637

SVB FINANCIAL GROUP

(Exact name of registrant as specified in its charter)

Delaware

91-1962278

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)


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

(408) 654-7400

(Registrant’s telephone number, including area code)

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

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

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

Large accelerated filer x Accelerated filer ¨ Non-accelerated filer ¨ Smaller reporting company ¨

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

At October 28, 2011, 43,342,749 shares of the registrant’s common stock ($0.001 par value) were outstanding.

TABLE OF CONTENTS


		Page
PART I - FINANCIAL INFORMATION			3

Item 1.	Interim Consolidated Financial Statements (unaudited)		3

	Interim Consolidated Balance Sheets (unaudited) as of September 30, 2011 and December 31, 2010		3

	Interim Consolidated Statements of Income (unaudited) for the three and nine months ended September 30, 2011 and 2010		4

	Interim Consolidated Statements of Comprehensive Income (unaudited) for the three and nine months ended September 30, 2011 and 2010		5

	Interim Consolidated Statements of Stockholders’ Equity (unaudited) for the nine months ended September 30, 2011 and 2010		6

	Interim Consolidated Statements of Cash Flows (unaudited) for the nine months ended September 30, 2011 and 2010		7

	Notes to Interim Consolidated Financial Statements (unaudited)		8

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		42

Item 3.	Quantitative and Qualitative Disclosures about Market Risk		74

Item 4.	Controls and Procedures		75

PART II - OTHER INFORMATION			76

Item 1.	Legal Proceedings		76

Item 1A.	Risk Factors		76

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		76

Item 3.	Defaults Upon Senior Securities		76

Item 4.	(Removed and Reserved)		76

Item 5.	Other Information		76

Item 6.	Exhibits		76

SIGNATURES			77

INDEX TO EXHIBITS			78

PART I - FINANCIAL INFORMATION

ITEM 1.

INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

SVB FINANCIAL GROUP AND SUBSIDIARIES

INTERIM CONSOLIDATED BALANCE SHEETS (UNAUDITED)


(Dollars in thousands, except par value and share data)	September 30, 2011			December 31, 2010
Assets
Cash and due from banks	$	1,742,144		$	2,672,725
Federal funds sold, securities purchased under agreements to resell and other short-term investment securities		299,828			403,707

Cash and cash equivalents		2,041,972			3,076,432

Available-for-sale securities		9,639,386			7,917,967
Non-marketable securities		951,963			721,520

Investment securities		10,591,349			8,639,487

Loans, net of unearned income		6,328,588			5,521,737
Allowance for loan losses		(85,246	)		(82,627	)

Net loans		6,243,342			5,439,110

Premises and equipment, net of accumulated depreciation and amortization		53,458			44,545
Accrued interest receivable and other assets		265,242			328,187

Total assets	$	19,195,363		$	17,527,761


Liabilities and total equity
Liabilities:
Deposits:
Noninterest-bearing demand	$	11,162,776		$	9,011,538
Interest-bearing deposits		4,976,446			5,325,403

Total deposits		16,139,222			14,336,941

Short-term borrowings		—			37,245
Other liabilities		254,256			196,037
Long-term debt		609,557			1,209,260

Total liabilities		17,003,035			15,779,483

Commitments and contingencies (Note 11)
SVBFG stockholders’ equity:
Preferred stock, $0.001 par value, 20,000,000 shares authorized; no shares issued and outstanding		—			—
Common stock, $0.001 par value, 150,000,000 shares authorized; 43,268,880 shares and 42,268,201 shares outstanding, respectively		43			42
Additional paid-in capital		472,443			422,334
Retained earnings		964,159			827,831
Accumulated other comprehensive income		99,453			24,143

Total SVBFG stockholders’ equity		1,536,098			1,274,350
Noncontrolling interests		656,230			473,928

Total equity		2,192,328			1,748,278

Total liabilities and total equity	$	19,195,363		$	17,527,761

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

SVB FINANCIAL GROUP AND SUBSIDIARIES

INTERIM CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)


	Three months ended September 30,						Nine months ended September 30,
(Dollars in thousands, except per share amounts)	2011			2010			2011			2010
Interest income:
Loans	$	101,693		$	80,716		$	284,935		$	230,216
Available-for-sale securities:
Taxable		39,357			32,375			124,956			101,493
Non-taxable		899			948			2,723			2,869
Federal funds sold, securities purchased under agreements to resell and other short-term investment securities		1,375			2,719			4,972			8,444

Total interest income		143,324			116,758			417,586			343,022

Interest expense:
Deposits		1,715			3,783			7,379			11,315
Borrowings		6,154			6,634			24,000			18,090

Total interest expense		7,869			10,417			31,379			29,405

Net interest income		135,455			106,341			386,207			313,617
Provision for (reduction of) loan losses		769			10,971			(2,144	)		29,124

Net interest income after provision for loan losses		134,686			95,370			388,351			284,493

Noninterest income:
Gains on investment securities, net		52,262			46,611			175,279			67,420
Foreign exchange fees		11,546			9,091			32,397			26,207
Gains on derivative instruments, net		9,951			1,257			24,153			4,565
Deposit service charges		8,259			7,324			23,214			22,283
Credit card fees		4,506			3,139			12,687			8,853
Client investment fees		2,939			4,681			9,707			13,562
Letters of credit and standby letters of credit income		3,040			2,752			8,452			7,869
Other		3,108			11,381			23,384			24,907

Total noninterest income		95,611			86,236			309,273			175,666

Noninterest expense:
Compensation and benefits		77,009			62,170			232,529			181,993
Professional services		16,122			12,618			43,000			37,358
Premises and equipment		7,220			5,548			19,572			16,651
Business development and travel		5,886			5,153			17,429			14,542
Net occupancy		4,967			5,131			14,163			14,468
FDIC assessments		2,302			2,637			7,940			13,273
Correspondent bank fees		2,336			2,228			6,701			6,132
Provision for unfunded credit commitments		2,055			1,692			2,131			2,561
Other		9,554			6,994			22,453			19,949

Total noninterest expense		127,451			104,171			365,918			306,927

Income before income tax expense		102,846			77,435			331,706			153,232
Income tax expense		26,770			24,996			92,803			50,397

Net income before noncontrolling interests		76,076			52,439			238,903			102,835
Net income attributable to noncontrolling interests		(38,505	)		(14,652	)		(102,575	)		(25,371	)

Net income available to common stockholders	$	37,571		$	37,787		$	136,328		$	77,464


Earnings per common share—basic	$	0.87		$	0.90		$	3.18		$	1.86
Earnings per common share—diluted		0.86			0.89			3.12			1.83

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

SVB FINANCIAL GROUP AND SUBSIDIARIES

INTERIM CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)


	Three months ended September 30,						Nine months ended September 30,
(Dollars in thousands)	2011			2010			2011			2010
Net income before noncontrolling interests	$	76,076		$	52,439		$	238,903		$	102,835
Other comprehensive income, net of tax:
Change in cumulative translation gains:
Foreign currency translation (losses) gains		(5,573	)		2,113			(3,682	)		1,961
Related tax benefit (expense)		2,280			(862	)		1,506			(800	)
Change in unrealized gains on available-for-sale securities:
Unrealized holding gains		93,701			634			168,378			92,923
Related tax expense		(38,329	)		(259	)		(68,858	)		(37,901	)
Reclassification adjustment for gains included in net income		(5	)		(23,605	)		(37,288	)		(24,473	)
Related tax benefit		2			9,631			15,254			9,985

Other comprehensive income, net of tax		52,076			(12,348	)		75,310			41,695

Comprehensive income		128,152			40,091			314,213			144,530
Comprehensive income attributable to noncontrolling interests		(38,505	)		(14,652	)		(102,575	)		(25,371	)

Comprehensive income available to common stockholders	$	89,647		$	25,439		$	211,638		$	119,159

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

SVB FINANCIAL GROUP AND SUBSIDIARIES

INTERIM CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (UNAUDITED)


	Common Stock				Additional Paid-in Capital			Retained Earnings		Accumulated Other Comprehensive Income			Total SVBFG Stockholders’ Equity			Noncontrolling Interests		Total Equity
(Dollars in thousands)	Shares		Amount		Additional Paid-in Capital			Retained Earnings		Accumulated Other Comprehensive Income			Total SVBFG Stockholders’ Equity			Noncontrolling Interests		Total Equity
Balance at December 31, 2009		41,338,389	$	41	$	389,490		$	732,907	$	5,905		$	1,128,343		$	345,767	$	1,474,110

Common stock issued under employee benefit plans, net of restricted stock cancellations		626,375		1		15,209			—		—			15,210			—		15,210
Income tax benefit from stock options exercised, vesting of restricted stock and other		—		—		2,891			—		—			2,891			—		2,891
Net income		—		—		—			77,464		—			77,464			25,371		102,835
Capital calls and distributions, net		—		—		—			—		—			—			56,547		56,547
Net change in unrealized gains on available-for-sale investment securities, net of tax		—		—		—			—		40,534			40,534			—		40,534
Foreign currency translation adjustments, net of tax		—		—		—			—		1,161			1,161			—		1,161
Stock-based compensation expense		—		—		9,865			—		—			9,865			—		9,865
Repurchase of warrant under Capital Purchase Program		—		—		(6,820	)		—		—			(6,820	)		—		(6,820	)
Other-net		—		—		(45	)		8		—			(37	)		—		(37	)

Balance at September 30, 2010		41,964,764	$	42	$	410,590		$	810,379	$	47,600		$	1,268,611		$	427,685	$	1,696,296

Balance at December 31, 2010		42,268,201	$	42	$	422,334		$	827,831	$	24,143		$	1,274,350		$	473,928	$	1,748,278

Common stock issued under employee benefit plans, net of restricted stock cancellations		999,655		1		30,271			—		—			30,272			—		30,272
Common stock issued upon settlement of 3.875% Convertible Notes, net of shares received from associated convertible note hedge		1,024		—		—			—		—			—			—		—
Income tax benefit from stock options exercised, vesting of restricted stock and other		—		—		6,548			—		—			6,548			—		6,548
Net income		—		—		—			136,328		—			136,328			102,575		238,903
Capital calls and distributions, net		—		—		—			—		—			—			79,727		79,727
Net change in unrealized gains on available-for-sale investment securities, net of tax		—		—		—			—		77,486			77,486			—		77,486
Foreign currency translation adjustments, net of tax		—		—		—			—		(2,176	)		(2,176	)		—		(2,176	)
Stock-based compensation expense		—		—		13,290			—		—			13,290			—		13,290

Balance at September 30, 2011		43,268,880	$	43	$	472,443		$	964,159	$	99,453		$	1,536,098		$	656,230	$	2,192,328

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

SVB FINANCIAL GROUP AND SUBSIDIARIES

INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)


	Nine months ended September 30,
(Dollars in thousands)	2011			2010
Cash flows from operating activities:
Net income before noncontrolling interests	$	238,903		$	102,835
Adjustments to reconcile net income to net cash provided by operating activities:
Net gain from note repurchases and termination of corresponding interest rate swaps		(3,123	)		—
(Reduction of) provision for loan losses		(2,144	)		29,124
Provision for unfunded credit commitments		2,131			2,561
Changes in fair values of derivatives, net		(20,334	)		1,556
Gains on investment securities, net		(175,279	)		(67,420	)
Depreciation and amortization		19,999			17,554
Amortization of premiums on available-for-sale securities, net		18,170			15,593
Tax benefit (expense) from stock exercises		854			(306	)
Amortization of share-based compensation		13,501			9,904
Amortization of deferred loan fees		(43,806	)		(36,652	)
Deferred income tax expense		3,135			1,794
Losses on sale of and valuation adjustments to other real estate owned property		—			24
Changes in other assets and liabilities:
Accrued interest receivable and payable, net		(13,919	)		5,817
Accounts receivable		(2,724	)		(10,768	)
Income tax receivable, net		8,174			23,933
Prepaid FDIC assessments and amortization		6,468			7,704
Accrued compensation		9,968			22,567
Foreign exchange spot contracts, net		10,587			4,849
Other, net		19,627			14,193

Net cash provided by operating activities		90,188			144,862

Cash flows from investing activities:
Purchases of available-for-sale securities		(5,034,425	)		(4,167,462	)
Proceeds from sales of available-for-sale securities		1,414,794			653,122
Proceeds from maturities and pay downs of available-for-sale securities		2,048,439			1,526,562
Purchases of nonmarketable securities (cost and equity method accounting)		(43,260	)		(36,847	)
Proceeds from sales of nonmarketable securities (cost and equity method accounting)		21,524			12,185
Purchases of nonmarketable securities (investment fair value accounting)		(127,362	)		(78,667	)
Proceeds from sales and distributions of nonmarketable securities (investment fair value accounting)		66,541			25,866
Net increase in loans		(792,169	)		(322,723	)
Proceeds from recoveries of charged-off loans		21,626			13,397
Proceeds from sale of other real estate owned		—			196
Payment for acquisition of intangibles, net of cash acquired		—			(360	)
Purchases of premises and equipment		(21,600	)		(21,031	)

Net cash used for investing activities		(2,445,892	)		(2,395,762	)

Cash flows from financing activities:
Net increase in deposits		1,802,281			2,083,008
(Decrease) increase in short-term borrowings		(37,245	)		20,980
Payments for repurchases of 5.70% Senior Notes and 6.05% Subordinated Notes, including repurchase premiums and associated fees		(346,443	)		—
Proceeds from termination of portions of interest rate swaps associated with 5.70% Senior Notes and 6.05% Subordinated Notes		36,959			—
Payments for settlement of 3.875% Convertible Notes		(250,000	)		—
Proceeds from issuance of 5.375% Senior Notes, net of discount and issuance cost		—			344,294
Capital contributions from noncontrolling interests, net of distributions		79,727			56,547
Tax benefit from stock exercises		5,694			3,197
Proceeds from issuance of common stock and Employee Stock Purchase Plan		30,271			15,210
Repurchase of warrant under Capital Purchase Program		—			(6,820	)

Net cash provided by financing activities		1,321,244			2,516,416

Net (decrease) increase in cash and cash equivalents		(1,034,460	)		265,516
Cash and cash equivalents at beginning of period		3,076,432			3,512,853

Cash and cash equivalents at end of period	$	2,041,972		$	3,778,369

Supplemental disclosures:
Cash paid during the period for:
Interest	$	37,776		$	22,903
Income taxes		74,313			21,360
Noncash items during the period:
Unrealized gains on available-for-sale securities, net of tax	$	77,486		$	40,534
Net change in fair value of interest rate swaps		(1,753	)		20,362

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

SVB FINANCIAL GROUP AND SUBSIDIARIES

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

1. Basis of Presentation

SVB Financial Group (“SVB Financial” or the “Parent”) is a diversified financial services company, as well as a bank holding company and financial holding company. SVB Financial was incorporated in the state of Delaware in March 1999. Through our various subsidiaries and divisions, we offer a variety of banking and financial products and services to support our clients through all stages of their life cycles. In these notes to our unaudited interim consolidated financial statements, when we use or refer to “SVB Financial Group,” “SVBFG,” the “Company,” “we,” “our,” “us” or other similar words, we mean SVB Financial Group and all of its subsidiaries collectively, including Silicon Valley Bank (the “Bank”), unless the context requires otherwise. When we use or refer to “SVB Financial” or the “Parent” we are referring only to the parent company, SVB Financial Group, unless the context requires otherwise.

The accompanying interim consolidated financial statements reflect all adjustments of a normal and recurring nature that are, in the opinion of management, necessary to fairly present our financial position, results of operations and cash flows in accordance with accounting principles generally accepted in the United States of America (“GAAP”). Such interim consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. The results of operations for the three and nine months ended September 30, 2011 are not necessarily indicative of results to be expected for any future periods. These interim consolidated financial statements should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2010 (“2010 Form 10-K”).

The accompanying unaudited interim consolidated financial statements have been prepared on a consistent basis with the accounting policies described in Consolidated Financial Statements and Supplementary Data—Note 2—“Summary of Significant Accounting Policies” under Part II, Item 8 of our 2010 Form 10-K.

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

Principles of Consolidation and Presentation

Our consolidated financial statements include the accounts of SVB Financial Group and entities in which we have a controlling financial interest. We determine whether we have a controlling financial interest in an entity by evaluating whether the entity is a voting interest entity or a variable interest entity. All significant intercompany accounts and transactions have been eliminated.

Voting interest entities are entities that have sufficient equity and provide the equity investors voting rights that enable them to make significant decisions relating to the entity’s operations. For these types of entities, the Company’s determination of whether it has a controlling interest is based on ownership of the majority of the entities’ voting equity interest or through control of management of the entities.

Variable interest entities (“VIEs”) are entities that, by design, either (1) lack sufficient equity to permit the entity to finance its activities without additional subordinated financial support from other parties, or (2) have equity investors that do not have the ability to make significant decisions relating to the entity’s operations through voting rights, or do not have the obligation to absorb the expected losses, or do not have the right to receive the residual returns of the entity. We determine whether we have a controlling financial interest in a VIE by considering whether our involvement with the VIE is significant and designates us as the primary beneficiary based on the following:

We have the power to direct the activities of the VIE that most significantly impact the entity’s economic performance; and

The aggregate indirect and direct variable interests held by the Company have the obligation to absorb losses or the right to receive benefits from the entity that could be significant to the VIE.

Voting interest entities in which the Company has a controlling financial interest or VIEs in which the Company is the primary beneficiary are consolidated into our financial statements.

We have not provided financial or other support during the periods presented to any VIE that we were not previously contractually required to provide. We are variable interest holders in certain partnerships for which we are the primary beneficiary. We perform on-going reassessments of whether facts or circumstances have changed in relation to previously evaluated voting interest entities and our involvement in VIEs which could cause the Company’s consolidation conclusion to change.

Impact of Adopting ASU No. 2011-02

In April 2011, the Financial Accounting Standards Board (“FASB”) issued a new accounting standard (ASU No. 2011-02), which requires new disclosures and provides additional guidance to creditors for determining whether a modification or restructuring of a receivable is a troubled debt restructuring (“TDR”). The new guidance requires creditors to evaluate modifications and restructurings of receivables using a more principles-based approach, which may result in more modifications and restructurings being considered TDRs. The new disclosures and guidance are effective for interim and annual reporting periods beginning on or after June 15, 2011 and was therefore adopted on July 1, 2011, with retrospective disclosures required for all TDR activities that have occurred from the beginning of the annual period of adoption. This standard clarified how TDRs are determined and increased the disclosure requirements for TDRs, however it did not have a material impact on our financial position, results of operations or stockholders’ equity. See Note 6—“Loans and Allowance for Loan Losses” for further details.

Recent Accounting Pronouncements

In May 2011, the FASB issued a new accounting standard (ASU No. 2011-04), which requires new disclosures and clarifies existing guidance surrounding fair value measurement. This standard was issued concurrent with the International Accounting Standards Board’s (“IASB”) issuance of a fair value measurement standard with the objective of a converged definition of fair value measurement and disclosure guidance. The new guidance clarifies that the principal market for a financial instrument should be determined based on the market with the greatest volume and level of activity. This new guidance is effective on a prospective basis for interim and annual reporting periods beginning after December 15, 2011. This standard clarifies how fair value is measured and increases the disclosure requirements for fair value measurements. We are currently assessing the impact of this guidance, however we do not expect it to have a material impact on our financial position, results of operations or stockholders’ equity.

In June 2011, the FASB issued a new accounting standard (ASU No. 2011-05), which requires presentation of the components of total comprehensive income in either a single continuous statement of comprehensive income or in two separate but consecutive statements. Regardless of which option is chosen, reclassification adjustments for items that are reclassified from other comprehensive income (“OCI”) to net income are required to be shown on the face of the financial statements. This new guidance does not change the items that must be reported in other comprehensive income or when an item of other comprehensive income must be reclassified to net income. The guidance is effective on a retrospective basis for the interim and annual reporting periods beginning after December 15, 2011. We have assessed the new guidance and determined that it only clarifies the presentation of comprehensive income and it will not affect our financial position, results of operations or stockholders’ equity.

Reclassifications

Certain prior period amounts have been reclassified to conform to the current period presentations.

2. Stockholders’ Equity and Earnings Per Share (“EPS”)

Earnings Per Share

Basic EPS is the amount of earnings available to each share of common stock outstanding during the reporting period. Diluted EPS is the amount of earnings available to each share of common stock outstanding during the reporting period adjusted to include the effect of potentially dilutive common shares. Potentially dilutive common shares include incremental shares issued for stock options and restricted stock units outstanding under our equity incentive plans, our Employee Stock Purchase Plan (“ESPP”), and for certain periods, our 3.875% convertible senior notes (“3.875% Convertible Notes”) and the associated convertible note hedge and warrant agreement. Potentially dilutive common shares are excluded from the computation of dilutive EPS in periods in which the effect would be anti-dilutive. The following is a reconciliation of basic EPS to diluted EPS for the three and nine months ended September 30, 2011 and 2010, respectively:


	Three months ended September 30,				Nine months ended September 30,
(Dollars and shares in thousands, except per share amounts)	2011		2010		2011		2010
Numerator:
Net income available to common stockholders	$	37,571	$	37,787	$	136,328	$	77,464

Denominator:
Weighted average common shares outstanding-basic		43,233		41,930		42,882		41,679
Weighted average effect of dilutive securities:
Stock options and ESPP		452		511		610		652
Restricted stock units		106		72		122		70
3.875% Convertible Notes		—		—		27		—

Denominator for diluted calculation		43,791		42,513		43,641		42,401

Earnings per common share:
Basic	$	0.87	$	0.90	$	3.18	$	1.86

Diluted	$	0.86	$	0.89	$	3.12	$	1.83

The following table summarizes the common shares excluded from the diluted EPS calculation as they were deemed to be anti-dilutive for the three and nine months ended September 30, 2011 and 2010, respectively:


	Three months ended September 30,				Nine months ended September 30,
(Shares in thousands)	2011		2010		2011		2010
Stock options		337		6		239		8
Restricted stock units		10		5		134		4

Total		347		11		373		12

Concurrent with the issuance of our 3.875% Convertible Notes, we entered into a convertible note hedge and warrant agreement. The warrants expired ratably over 60 business days beginning on July 15, 2011. The common shares under these warrants were excluded from the diluted EPS calculation for all periods presented as they were deemed to be anti-dilutive based on the conversion price of $64.43 per common share. For more information on our 3.875% Convertible Notes and the associated convertible note hedge and warrant agreement, see Note 7—“Short-Term Borrowings and Long-Term Debt” and Note 8—“Derivative Financial Instruments”.

Our $250 million 3.875% Convertible Notes matured on April 15, 2011. All of the notes were converted prior to maturity and we made an aggregate $260.4 million conversion settlement payment. We paid $250.0 million in cash (representing total principal) and $10.4 million through the issuance of 187,760 shares of our common stock (representing total conversion premium value). In addition, in connection with the conversion settlement, we received 186,736 shares of our common stock, valued at $10.3 million, from the associated convertible note hedge. Accordingly, there was no significant net impact on our total stockholders’ equity with respect to settling the conversion premium value.

3. Share-Based Compensation

For the three and nine months ended September 30, 2011 and 2010, we recorded share-based compensation and related tax benefits as follows:


	Three months ended September 30,						Nine months ended September 30,
(Dollars in thousands)	2011			2010			2011			2010
Share-based compensation expense	$	4,552		$	3,609		$	13,501		$	9,904
Income tax benefit related to share-based compensation expense		(1,256	)		(925	)		(3,532	)		(2,370	)

Unrecognized Compensation Expense

At September 30, 2011, unrecognized share-based compensation expense was as follows:


(Dollars in thousands)	Unrecognized Expense		Average Expected Recognition Period - in Years
Stock options	$	14,436		2.85
Restricted stock units		21,037		2.80

Total unrecognized share-based compensation expense	$	35,473

Share-Based Payment Award Activity

The table below provides stock option information related to the 1997 Equity Incentive Plan and the 2006 Equity Incentive Plan for the nine months ended September 30, 2011:


	Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Life in Years		Aggregate Intrinsic Value of In-The- Money Options
Outstanding at December 31, 2010		3,112,253		$	37.88
Granted		373,493			59.71
Exercised		(837,448	)		33.93
Forfeited		(43,770	)		42.56
Expired		(1,426	)		35.53

Outstanding at September 30, 2011		2,603,102			42.20		3.54	$	10,788,138

Vested and expected to vest at September 30, 2011		2,478,035			41.84		3.42		10,504,466

Exercisable at September 30, 2011		1,545,346			39.72		2.17		7,085,746

The aggregate intrinsic value of outstanding options shown in the table above represents the pretax intrinsic value based on our closing stock price of $37.00 as of September 30, 2011. The total intrinsic value of options exercised during the three and nine months ended September 30, 2011 was $3.2 million and $19.0 million, respectively, compared to $1.3 million and $8.5 million for the comparable 2010 periods.

The table below provides information for restricted stock units under the 1997 Equity Incentive Plan and the 2006 Equity Incentive Plan for the nine months ended September 30, 2011:


	Shares			Weighted Average Grant Date Fair Value
Nonvested at December 31, 2010		395,950		$	43.49
Granted		320,160			59.97
Vested		(116,749	)		43.83
Forfeited		(16,463	)		48.54

Nonvested at September 30, 2011		582,898			52.33

4. Federal Funds Sold, Securities Purchased under Agreements to Resell and Other Short-Term Investment Securities

The following table details the securities purchased under agreements to resell and other short-term investment securities at September 30, 2011 and December 31, 2010:


(Dollars in thousands)	September 30, 2011		December 31, 2010
Securities purchased under agreements to resell	$	191,655	$	60,345
Short-term agency discount notes		—		330,370
Other short-term investment securities		108,173		12,992

Total federal funds sold, securities purchased under agreements to resell and other short-term investment securities	$	299,828	$	403,707

In addition, as of September 30, 2011 and December 31, 2010, $992.5 million and $2.2 billion, respectively, of our cash and due from banks was deposited with the Federal Reserve Bank and was earning interest at the Federal Funds target rate, and interest-earning deposits in other financial institutions were $461.3 million and $246.3 million, respectively.

5. Investment Securities

Our investment securities portfolio consists of both an available-for-sale securities portfolio, which represents interest-earning investment securities, and a non-marketable securities portfolio, which primarily represents investments managed as part of our funds management business.

The major components of our investment securities portfolio at September 30, 2011 and December 31, 2010 are as follows:


	September 30, 2011									December 31, 2010
(Dollars in thousands)	Amortized Cost		Unrealized Gains		Unrealized Losses			Carrying Value		Amortized Cost		Unrealized Gains		Unrealized Losses			Carrying Value
Available-for-sale securities, at fair value:
U.S. treasury securities	$	25,277	$	853	$	—		$	26,130	$	25,408	$	1,002	$	—		$	26,410
U.S. agency debentures		2,896,079		49,460		(2	)		2,945,537		2,844,973		7,077		(16,957	)		2,835,093
Residential mortgage-backed securities:
Agency-issued mortgage-backed securities		1,461,806		42,205		(160	)		1,503,851		1,234,120		15,487		(1,097	)		1,248,510
Agency-issued collateralized mortgage obligations-fixed rate		2,332,140		70,092		—			2,402,232		806,032		24,435		(1	)		830,466
Agency-issued collateralized mortgage obligations-variable rate		2,558,348		2,905		(2,092	)		2,559,161		2,870,570		10,394		(1,439	)		2,879,525
Agency-issued commercial mortgage-backed securities		101,553		1,628		—			103,181		—		—		—			—
Municipal bonds and notes		92,258		6,523		(5	)		98,776		96,381		2,164		(965	)		97,580
Equity securities		633		13		(128	)		518		358		34		(9	)		383

Total available-for-sale securities	$	9,468,094	$	173,679	$	(2,387	)	$	9,639,386	$	7,877,842	$	60,593	$	(20,468	)	$	7,917,967

Non-marketable securities:
Non-marketable securities (investment company fair value accounting):
Venture capital and private equity fund investments (1)									578,126									391,247
Other venture capital investments (2)									120,160									111,843
Other investments (3)									973									981
Non-marketable securities (equity method accounting):
Other investments (4)									65,934									67,031
Low income housing tax credit funds									34,446									27,832
Non-marketable securities (cost method accounting):
Venture capital and private equity fund investments (5)									138,960									110,466
Other venture capital investments									13,364									12,120

Total non-marketable securities									951,963									721,520

Total investment securities								$	10,591,349								$	8,639,487

(1)	The following table shows the amount of venture capital and private equity fund investments by the following consolidated funds and our ownership of each fund at September 30, 2011 and December 31, 2010:


	September 30, 2011					December 31, 2010
(Dollars in thousands)	Amount		Ownership %			Amount		Ownership %
SVB Strategic Investors Fund, LP	$	44,205		12.6	%	$	44,722		12.6	%
SVB Strategic Investors Fund II, LP		122,264		8.6			94,694		8.6
SVB Strategic Investors Fund III, LP		205,505		5.9			146,613		5.9
SVB Strategic Investors Fund IV, LP		104,114		5.0			40,639		5.0
Strategic Investors Fund V, LP		1,965		0.3			—		—
SVB Capital Preferred Return Fund, LP		41,432		20.0			23,071		20.0
SVB Capital—NT Growth Partners, LP		44,837		33.0			28,624		33.0
SVB Capital Partners II, LP (i)		2,324		5.1			4,506		5.1
Other private equity fund (ii)		11,480		58.2			8,378		60.6

Total venture capital and private equity fund investments	$	578,126				$	391,247

(i)

At September 30, 2011, we had a direct ownership interest of 1.3% and an indirect ownership interest of 3.8% in the fund through our ownership interest of SVB Strategic Investors Fund II, LP.

(ii)

At September 30, 2011, we had a direct ownership interest of 41.5% and indirect ownership interests of 12.6% and 4.1% in the fund through our ownership interests of SVB Capital—NT Growth Partners, LP and SVB Capital Preferred Return Fund, LP, respectively.

(2)	The following table shows the amount of other venture capital investments by the following consolidated funds and our ownership of each fund at September 30, 2011 and December 31, 2010:


	September 30, 2011					December 31, 2010
(Dollars in thousands)	Amount		Ownership %			Amount		Ownership %
Silicon Valley BancVentures, LP	$	16,606		10.7	%	$	21,371		10.7	%
SVB Capital Partners II, LP (i)		60,129		5.1			51,545		5.1
SVB India Capital Partners I, LP		41,927		14.4			38,927		14.4
SVB Capital Shanghai Yangpu Venture Capital Fund		1,498		6.8			—		—

Total other venture capital investments	$	120,160				$	111,843

(i)

At September 30, 2011, we had a direct ownership interest of 1.3% and an indirect ownership interest of 3.8% in the fund through our ownership of SVB Strategic Investors Fund II, LP.

(3)

Other investments within non-marketable securities (investment company fair value accounting) include our ownership in Partners for Growth, LP, a consolidated debt fund. At both September 30, 2011 and December 31, 2010, we had a majority ownership interest of slightly more than 50.0% in the fund. Partners for Growth, LP is managed by a third party and we do not have an ownership interest in the general partner of this fund.

(4)	The following table shows the carrying value and our ownership percentage of each investment at September 30, 2011 and December 31, 2010:


	September 30, 2011					December 31, 2010
(Dollars in thousands)	Amount		Ownership %			Amount		Ownership %
Gold Hill Venture Lending 03, LP (i)	$	16,781		9.3	%	$	17,826		9.3	%
Gold Hill Capital 2008, LP (ii)		16,414		15.5			12,101		15.5
Partners for Growth II, LP		3,564		24.2			10,465		24.2
Other investments		29,175		N/A			26,639		N/A

Total other investments	$	65,934				$	67,031

(i)

At September 30, 2011, we had a direct ownership interest of 4.8% in the fund and an indirect interest in the fund through our investment in Gold Hill Venture Lending Partners 03, LLC (“GHLLC”) of 4.5%. Our aggregate direct and indirect ownership in the fund is 9.3%.

(ii)

At September 30, 2011, we had a direct ownership interest of 11.5% in the fund and an indirect interest in the fund through our investment in Gold Hill Capital 2008, LLC of 4.0%. Our aggregate direct and indirect ownership in the fund is 15.5%.

(5)

Represents investments in 329 and 343 funds (primarily venture capital funds) at September 30, 2011 and December 31, 2010, respectively, where our ownership interest is 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 and financial policies. For the three months ended September 30, 2011, we recognized other-than-temporary impairment (“OTTI”) losses of $0.3 million resulting from other-than-temporary declines in value for 21 of the 329 investments. For the nine months ended September 30, 2011, we recognized OTTI losses of $0.8 million resulting from other-than-temporary declines in value for 39 of the 329 investments. The OTTI losses are included in net gains on investment securities, a component of noninterest income. For the remaining 290 investments at September 30, 2011, we concluded that declines in value, if any, were temporary and as such, no OTTI was required to be recognized. At September 30, 2011, the carrying value of these venture capital and private equity fund investments (cost method accounting) was $139.0 million, and the estimated fair value was $155.8 million.

The following table summarizes our unrealized losses on our available-for-sale securities portfolio into categories of less than 12 months, or 12 months or longer as of September 30, 2011:


	September 30, 2011
	Less than 12 months					12 months or longer					Total
(Dollars in thousands)	Fair Value of Investments		Unrealized Losses			Fair Value of Investments		Unrealized Losses			Fair Value of Investments		Unrealized Losses
U.S. agency debentures	$	25,000	$	(2	)	$	—	$	—		$	25,000	$	(2	)
Residential mortgage-backed securities:
Agency-issued mortgage-backed securities		51,756		(160	)		—		—			51,756		(160	)
Agency-issued collateralized mortgage obligations—variable rate		1,304,198		(2,059	)		44,606		(33	)		1,348,804		(2,092	)
Municipal bonds and notes		1,195		(5	)		—		—			1,195		(5	)
Equity securities		320		(128	)		—		—			320		(128	)

Total temporarily impaired securities (1)	$	1,382,469	$	(2,354	)	$	44,606	$	(33	)	$	1,427,075	$	(2,387	)

(1)

As of September 30, 2011, we identified a total of 85 investments that were in unrealized loss positions, of which one investment totaling $44.6 million with unrealized losses of $33 thousand has been in an impaired position for a period of time greater than 12 months. Based on the underlying credit quality of the investments, we do not intend to sell any of our securities prior to recovery of our adjusted cost basis and as of September 30, 2011, it is more likely than not that we will not be required to sell any of our debt securities prior to recovery of our adjusted cost basis. Based on our analysis as of September 30, 2011, we deem all impairments to be temporary and changes in value for our temporarily impaired securities as of the same date are included in other comprehensive income. Market valuations and impairment analyses on assets in the investment securities portfolio are reviewed and monitored on a quarterly basis.

The following table summarizes our unrealized losses on our available-for-sale securities portfolio into categories of less than 12 months, or 12 months or longer as of December 31, 2010:


	December 31, 2010
	Less than 12 months					12 months or longer					Total
(Dollars in thousands)	Fair Value of Investments		Unrealized Losses			Fair Value of Investments		Unrealized Losses			Fair Value of Investments		Unrealized Losses
U.S. agency debentures	$	1,731,639	$	(16,957	)	$	—	$	—		$	1,731,639	$	(16,957	)
Residential mortgage-backed securities:
Agency-issued mortgage-backed securities		32,595		(1,097	)		—		—			32,595		(1,097	)
Agency-issued collateralized mortgage obligations—fixed rate		322		(1	)		—		—			322		(1	)
Agency-issued collateralized mortgage obligations—variable rate		506,104		(1,439	)		—		—			506,104		(1,439	)
Municipal bonds and notes		25,699		(893	)		3,451		(72	)		29,150		(965	)
Equity securities		148		(9	)		—		—			148		(9	)

Total temporarily impaired securities	$	2,296,507	$	(20,396	)	$	3,451	$	(72	)	$	2,299,958	$	(20,468	)

The following table summarizes the remaining contractual principal maturities and fully taxable equivalent yields on debt securities classified as available-for-sale as of September 30, 2011. 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 35.0 percent. The weighted average yield is computed using the amortized cost of debt securities, which are reported at fair value. For U.S. treasury securities, the expected maturity is the actual contractual maturity of the notes. Expected remaining maturities for most U.S. agency debentures may occur earlier than their contractual maturities because the note issuers have the right to call outstanding amounts ahead of their contractual maturity. Expected maturities for mortgage-backed securities may differ significantly from their contractual maturities because mortgage borrowers have the right to prepay outstanding loan obligations with or without penalties. Mortgage-backed securities classified as available-for-sale typically have original contractual maturities from 10 to 30 years whereas expected average lives of these securities tend to be significantly shorter and vary based upon structure.


	September 30, 2011
	Total					One Year or Less					After One Year to Five Years					After Five Years to Ten Years					After Ten Years
(Dollars in thousands)	Carrying Value		Weighted- Average Yield			Carrying Value		Weighted- Average Yield			Carrying Value		Weighted- Average Yield			Carrying Value		Weighted- Average Yield			Carrying Value		Weighted- Average Yield
U.S. treasury securities	$	26,130		2.39	%	$	—		—	%	$	26,130		2.39	%	$	—		—	%	$	—		—	%
U.S. agency debentures		2,945,537		1.55			63,421		2.51			2,804,770		1.49			77,346		3.28			—		—
Residential mortgage-backed securities:
Agency-issued mortgage-backed securities		1,503,851		2.66			—		—			—		—			1,369,093		2.57			134,758		3.58
Agency-issued collateralized mortgage obligations-fixed rate		2,402,232		2.72			—		—			—		—			—		—			2,402,232		2.72
Agency-issued collateralized mortgage obligations-variable rate		2,559,161		0.70			—		—			—		—			—		—			2,559,161		0.70
Agency-issued commercial mortgage-backed securities		103,181		2.22			—		—			—		—			—		—			103,181		2.22
Municipal bonds and notes		98,776		6.00			564		5.38			12,091		5.48			44,864		5.97			41,257		6.20

Total	$	9,638,868		1.84		$	63,985		2.54		$	2,842,991		1.52		$	1,491,303		2.71		$	5,240,589		1.77

The following table presents the components of gains and losses (realized and unrealized) on investment securities for the three and nine months ended September 30, 2011 and 2010:


	Three months ended September 30,						Nine months ended September 30,
(Dollars in thousands)	2011			2010			2011			2010
Gross gains on investment securities:
Available-for-sale securities, at fair value (1)	$	5		$	23,605		$	37,382		$	26,737
Marketable securities (investment company fair value accounting)		470			8,109			912			8,160
Non-marketable securities (investment company fair value accounting):
Venture capital and private equity fund investments		34,640			19,014			117,344			47,659
Other venture capital investments		22,058			2,321			29,077			7,258
Other investments		—			9			20			36
Non-marketable securities (equity method accounting):
Other investments		2,192			2,663			8,708			4,804
Non-marketable securities (cost method accounting):
Venture capital and private equity fund investments		735			222			1,791			780
Other venture capital investments		8			—			2,437			—
Other investments		—			242			—			344

Total gross gains on investment securities		60,108			56,185			197,671			95,778


Gross losses on investment securities:
Available-for-sale securities, at fair value (1)		—			—			(94	)		(2,264	)
Marketable securities (investment company fair value accounting)		(1,691	)		—			(5,806	)		(57	)
Non-marketable securities (investment company fair value accounting):
Venture capital and private equity fund investments		(2,373	)		(6,171	)		(9,274	)		(15,291	)
Other venture capital investments		(3,351	)		(2,877	)		(5,015	)		(8,589	)
Other investments		(16	)		—			(16	)		(79	)
Non-marketable securities (equity method accounting):
Other investments		(50	)		(1	)		(1,359	)		(614	)
Non-marketable securities (cost method accounting):
Venture capital and private equity fund investments		(365	)		(516	)		(797	)		(1,455	)
Other venture capital investments		—			(9	)		(31	)		(9	)

Total gross losses on investment securities		(7,846	)		(9,574	)		(22,392	)		(28,358	)

Gains on investment securities, net	$	52,262		$	46,611		$	175,279		$	67,420

Gains attributable to noncontrolling interests, including carried interest	$	42,961		$	16,817		$	112,783		$	33,159

(1)	The cost basis of available-for-sale securities sold is determined on a specific identification basis.

6. Loans and Allowance for Loan Losses

We serve a variety of commercial clients in the technology, life science, venture capital/private equity and premium wine industries. Our technology clients generally tend to be in the industries of hardware (semiconductors, communications and electronics), software and related services, and clean technology. Our life science clients are concentrated in the medical devices and biotechnology sectors. Loans made to venture capital/private equity firm clients typically enable them to fund investments prior to their receipt of funds from capital calls. Loans to the premium wine industry focus on vineyards and wineries that produce grapes and wines of high quality.

In addition to commercial loans, we make loans to targeted high-net-worth individuals through SVB Private Bank. These products and services include real estate secured home equity lines of credit, which may be used to finance real estate investments and loans used to purchase, renovate or refinance personal residences. These products and services also include restricted stock purchase loans and capital call lines of credit. We also provide secured real estate loans to eligible employees through our Employee Home Ownership Program (“EHOP”).

We also provide community development loans made as part of our responsibilities under the Community Reinvestment Act. These loans are included within “Construction loans” below and are primarily secured by real estate.

The composition of loans, net of unearned income of $53.6 million and $45.5 million at September 30, 2011 and December 31, 2010, respectively, is presented in the following table:


(Dollars in thousands)	September 30, 2011		December 31, 2010
Commercial loans:
Software	$	2,272,443	$	1,820,385
Hardware		577,443		561,610
Clean technology		270,582		159,502
Venture capital/private equity		1,079,215		1,036,077
Life science		686,722		568,739
Premium wine (1)		130,983		144,972
Other		251,412		303,492

Commercial loans (2)		5,268,800		4,594,777

Real estate secured loans:
Premium wine (1)		344,714		312,255
Consumer loans (3)		497,480		361,704

Real estate secured loans		842,194		673,959

Construction loans		35,529		60,178
Consumer loans		182,065		192,823

Total loans, net of unearned income	$	6,328,588	$	5,521,737

(1)	Included in our premium wine portfolio are gross construction loans of $113.7 million and $119.0 million at September 30, 2011 and December 31, 2010, respectively.

(2)	Included within our commercial loans portfolio are business credit card loans to commercial clients. At September 30, 2011 and December 31, 2010, our business credit card loans portfolio totaled $47.4 million and $32.5 million, respectively.

(3)	Consumer loans secured by real estate at September 30, 2011 and December 31, 2010 were comprised of the following:


(Dollars in thousands)	September 30, 2011		December 31, 2010
Loans for personal residence	$	326,111	$	189,039
Loans to eligible employees		93,966		88,510
Home equity lines of credit		77,403		84,155

Consumer loans secured by real estate	$	497,480	$	361,704

The activity in the allowance for loan losses for the three and nine months ended September 30, 2011 and 2010 was as follows:


	Three months ended September 30,						Nine months ended September 30,
(Dollars in thousands)	2011			2010			2011			2010
Allowance for loan losses, beginning balance	$	82,155		$	71,789		$	82,627		$	72,450
Provision for (reduction of) loan losses		769			10,971			(2,144	)		29,124
Gross loan charge-offs		(8,248	)		(12,289	)		(16,863	)		(40,602	)
Loan recoveries		10,570			3,898			21,626			13,397

Allowance for loan losses, ending balance	$	85,246		$	74,369		$	85,246		$	74,369

Credit Quality

The composition of loans, net of unearned income, broken out by portfolio segment (which we have identified as our commercial and consumer loan categories) and class of financing receivable (which we have identified as our client industry segments of software, hardware, etc.) as of September 30, 2011 and December 31, 2010, is as follows:


(Dollars in thousands)	September 30, 2011		December 31, 2010
Commercial loans:
Software	$	2,299,022	$	1,820,680
Hardware		735,044		641,052
Venture capital/private equity		1,079,255		1,036,201
Life science		708,798		575,944
Premium wine		475,697		457,227
Other		351,227		436,106

Total commercial loans		5,649,043		4,967,210

Consumer loans:
Real estate secured loans		497,480		361,704
Other consumer loans		182,065		192,823

Total consumer loans		679,545		554,527

Total loans, net of unearned income	$	6,328,588	$	5,521,737

The following table summarizes the aging of our gross loans, broken out by portfolio segment and class of financing receivable as of September 30, 2011 and December 31, 2010:


(Dollars in thousands)	30 - 59 Days Past Due		60 - 89 Days Past Due		Greater Than 90 Days Past Due		Total Past Due		Current		Loans Past Due 90 Days or More Still Accruing Interest

September 30, 2011:
Commercial loans:
Software	$	496	$	38	$	—	$	534	$	2,319,994	$	—
Hardware		7,793		5		—		7,798		729,541		—
Venture capital/private equity		500		—		—		500		1,090,052		—
Life science		125		213		—		338		715,246		—
Premium wine		21		—		—		21		472,123		—
Other		—		48		—		48		348,262		—

Total commercial loans		8,935		304		—		9,239		5,675,218		—

Consumer loans:
Real estate secured loans		1,745		—		—		1,745		476,840		—
Other consumer loans		9,768		—		—		9,768		168,919		—

Total consumer loans		11,513		—		—		11,513		645,759		—

Total gross loans excluding impaired loans		20,448		304		—		20,752		6,320,977		—

Impaired loans		—		—		2,783		2,783		37,723		—

Total gross loans	$	20,448	$	304	$	2,783	$	23,535	$	6,358,700	$	—


December 31, 2010:
Commercial loans:
Software	$	674	$	239	$	17	$	930	$	1,834,897	$	17
Hardware		89		819		27		935		642,786		27
Venture capital/private equity		—		—		—		—		1,046,696		—
Life science		157		—		—		157		578,208		—
Premium wine		—		—		—		—		451,006		—
Other		—		—		—		—		438,345		—

Total commercial loans		920		1,058		44		2,022		4,991,938		44

Consumer loans:
Real estate secured loans		—		—		—		—		341,048		—
Other consumer loans		—		—		—		—		192,771		—

Total consumer loans		—		—		—		—		533,819		—

Total gross loans excluding impaired loans		920		1,058		44		2,022		5,525,757		44

Impaired loans		323		913		7,805		9,041		30,385		—

Total gross loans	$	1,243	$	1,971	$	7,849	$	11,063	$	5,556,142	$	44

The following table summarizes our impaired loans as they relate to our allowance for loan losses, broken out by portfolio segment and class of financing receivable as of September 30, 2011 and December 31, 2010:


(Dollars in thousands)	Impaired loans for which there is a related allowance for loan losses		Impaired loans for which there is no related allowance for loan losses		Total carrying value of impaired loans		Total unpaid principal of impaired loans
September 30, 2011:
Commercial loans:
Software	$	2,322	$	237	$	2,559	$	3,585
Hardware		5,398		—		5,398		8,579
Life science		633		—		633		825
Premium wine		1,993		1,264		3,257		3,350
Other		5,435		1,158		6,593		9,828

Total commercial loans		15,781		2,659		18,440		26,167

Consumer loans:
Real estate secured loans		18,382		362		18,744		22,535
Other consumer loans		3,322		—		3,322		3,322

Total consumer loans		21,704		362		22,066		25,857

Total	$	37,485	$	3,021	$	40,506	$	52,024


December 31, 2010:
Commercial loans:
Software	$	2,958	$	334	$	3,292	$	5,237
Hardware		3,517		307		3,824		3,931
Life science		2,050		1,362		3,412		4,433
Premium wine		2,995		3,167		6,162		7,129
Other		1,158		1,019		2,177		2,790

Total commercial loans		12,678		6,189		18,867		23,520

Consumer loans:
Real estate secured loans		20,559		—		20,559		23,430

Total consumer loans		20,559		—		20,559		23,430

Total	$	33,237	$	6,189	$	39,426	$	46,950

The following table summarizes our average impaired loans, broken out by portfolio segment and class of financing receivable during the three and nine months ended September 30, 2011 and 2010, respectively:


	Three months ended September 30,				Nine months ended September 30,
(Dollars in thousands)	2011		2010		2011		2010
Average impaired loans:
Commercial loans:
Software	$	2,562	$	5,583	$	2,652	$	6,521
Hardware		7,071		10,801		6,086		11,592
Life science		827		4,745		1,498		6,648
Premium wine		1,954		1,190		2,345		485
Other		7,604		2,212		4,453		2,312

Total commercial loans		20,018		24,531		17,034		27,558

Consumer loans:
Real estate secured loans		18,746		20,978		19,476		21,219
Other consumer loans		1,107		14		369		157

Total consumer loans		19,853		20,992		19,845		21,376

Total average impaired loans	$	39,871	$	45,523	$	36,879	$	48,934

The following tables summarize the activity relating to our allowance for loan losses for the three and nine months ended September 30, 2011, broken out by portfolio segment:


Three months ended September 30, 2011 (dollars in thousands)	Beginning Balance June 30, 2011		Charge-offs			Recoveries		Provision for (Reduction of)			Ending Balance September 30, 2011
Commercial loans:
Software	$	31,873	$	(3,125	)	$	2,718	$	4,899		$	36,365
Hardware		16,042		(4,813	)		44		2,304			13,577
Venture capital/private equity		8,307		—			—		(497	)		7,810
Life science		7,225		(310	)		3,359		(2,110	)		8,164
Premium wine		4,009		—			360		(354	)		4,015
Other		5,869		—			64		(359	)		5,574

Total commercial loans		73,325		(8,248	)		6,545		3,883			75,505

Consumer loans		8,830		—			4,025		(3,114	)		9,741

Total allowance for loan losses	$	82,155	$	(8,248	)	$	10,570	$	769		$	85,246


Nine months ended September 30, 2011 (dollars in thousands)	Beginning Balance December 31, 2010		Charge-offs			Recoveries		(Reduction of) Provision for			Ending Balance September 30, 2011
Commercial loans:
Software	$	29,288	$	(4,747	)	$	10,638	$	1,186		$	36,365
Hardware		14,688		(4,828	)		356		3,361			13,577
Venture capital/private equity		8,241		—			—		(431	)		7,810
Life science		9,077		(3,972	)		4,487		(1,428	)		8,164
Premium wine		5,492		(449	)		1,090		(2,118	)		4,015
Other		5,318		(2,867	)		471		2,652			5,574

Total commercial loans		72,104		(16,863	)		17,042		3,222			75,505

Consumer loans		10,523		—			4,584		(5,366	)		9,741

Total allowance for loan losses	$	82,627	$	(16,863	)	$	21,626	$	(2,144	)	$	85,246

The following table summarizes the allowance for loan losses individually and collectively evaluated for impairment as of September 30, 2011 and December 31, 2010, broken out by portfolio segment:


	September 30, 2011				December 31, 2010
(Dollars in thousands)	Individually Evaluated for Impairment		Collectively Evaluated for Impairment		Individually Evaluated for Impairment		Collectively Evaluated for Impairment
Commercial loans:
Software	$	595	$	35,770	$	986	$	28,302
Hardware		1,750		11,827		1,348		13,340
Venture capital/private equity		—		7,810		—		8,241
Life science		52		8,112		346		8,731
Premium wine		3		4,012		438		5,054
Other		1,011		4,563		122		5,196

Total commercial loans		3,411		72,094		3,240		68,864

Consumer loans		2,568		7,173		3,696		6,827

Total allowance for loan losses	$	5,979	$	79,267	$	6,936	$	75,691

Credit Quality Indicators

For each individual client we establish an internal credit risk rating for that loan, which is used for assessing and monitoring credit risk as well as performance of the loan and the overall portfolio. Our internal credit risk ratings are also used to summarize the risk of loss due to failure by an individual borrower to repay the loan. For our internal credit risk ratings, each individual loan is given a risk rating of 1 through 10. Loans risk-rated 1 through 4 are performing loans and translate to an internal rating of “Pass”, with loans risk-rated 1 being cash secured. Loans risk-rated 5 through 7 are loans that are performing loans, however, we consider them as demonstrating higher risk which requires more frequent review of the individual exposures. These loans translate to an internal rating

of “Performing (Criticized)”. A majority of our performing (criticized) loans are from our SVB Accelerator practice, serving our emerging or early stage clients. Loans risk-rated 8 and 9 are loans that are considered to be impaired and are on nonaccrual status. Loans are placed on nonaccrual status when they become 90 days past due as to principal or interest payments (unless the principal and interest are well secured and in the process of collection), or when we have determined, based upon most recent available information, that the timely collection of principal or interest is not probable; these loans are deemed “Impaired”. For further description of nonaccrual loans, refer to Note 2—“Summary of Significant Accounting Policies” under Part II, Item 8 of our 2010 Form 10-K. Loans risk-rated 10 are charged-off and are not included as part of our loan portfolio balance. We review our credit quality indicators for performance and appropriateness of risk ratings as part of our ongoing evaluation process for our allowance for loan losses. The following table summarizes the credit quality indicators, broken out by portfolio segment and class of financing receivables as of September 30, 2011 and December 31, 2010:


(Dollars in thousands)	Pass		Performing (Criticized)		Impaired		Total
September 30, 2011:
Commercial loans:
Software	$	2,139,282	$	181,246	$	2,559	$	2,323,087
Hardware		677,590		59,749		5,398		742,737
Venture capital/private equity		1,084,298		6,254		—		1,090,552
Life science		609,348		106,236		633		716,217
Premium wine		432,698		39,446		3,257		475,401
Other		335,031		13,279		6,593		354,903

Total commercial loans		5,278,247		406,210		18,440		5,702,897

Consumer loans:
Real estate secured loans		471,426		7,159		18,744		497,329
Other consumer loans		170,172		8,515		3,322		182,009

Total consumer loans		641,598		15,674		22,066		679,338

Total gross loans	$	5,919,845	$	421,884	$	40,506	$	6,382,235


December 31, 2010:
Commercial loans:
Software	$	1,717,309	$	118,518	$	3,292	$	1,839,119
Hardware		575,401		68,320		3,824		647,545
Venture capital/private equity		1,031,373		15,323		—		1,046,696
Life science		520,596		57,769		3,412		581,777
Premium wine		400,519		50,487		6,162		457,168
Other		415,381		22,964		2,177		440,522

Total commercial loans		4,660,579		333,381		18,867		5,012,827

Consumer loans:
Real estate secured loans		337,087		3,961		20,559		361,607
Other consumer loans		181,561		11,210		—		192,771

Total consumer loans		518,648		15,171		20,559		554,378

Total gross loans	$	5,179,227	$	348,552	$	39,426	$	5,567,205

Troubled Debt Restructurings

During the third quarter of 2011 we adopted ASU No. 2011-02, A Creditor’s Determination of Whether a Restructuring Is a Troubled Debt Restructuring (“ASU 2011-02”), which updated guidance for determining whether a loan is designated as a troubled debt restructuring (“TDR”) (see Note 1—“Basis of Presentation”). As a result of adopting this new guidance, at September 30, 2011 we identified loans totaling $5.3 million that are now considered TDRs under the new guidance and are classified as impaired. The allowance for loan losses related to these loans was $1.3 million as calculated under Accounting Standards Codification (“ASC”) 310.

As of September 30, 2011 we had TDRs of $34.3 million where concessions have been granted to borrowers experiencing financial difficulties, in an attempt to maximize collection. Substantially all of these TDRs were included as part of our impaired loan balances. In order for these loan balances to return to accrual status, the borrower must demonstrate a sustained period of timely payments and the ultimate collectability of all amounts contractually due may not be in doubt. There were unfunded commitments available for funding of $0.6 million to the clients associated with these TDRs as of September 30, 2011. The following table summarizes our loans modified in TDRs, broken out by portfolio segment and class of financing receivables as of September 30, 2011:


(Dollars in thousands)	September 30, 2011
Loans modified in TDRs:
Commercial loans:
Software (1)	$	2,322
Hardware		3,880
Premium wine		1,993
Other		4,384

Total commercial loans		12,579

Consumer loans:
Real estate secured loans		18,382
Other consumer loans		3,322

Total consumer loans		21,704

Total	$	34,283

During the three and nine months ended September 30, 2011 all new TDRs were modified through payment deferrals granted to our clients, however no principal or interest was forgiven. The following table summarizes the recorded investment in loans modified in TDRs, broken out by portfolio segment and class of financing receivable, for modifications made during the three and nine months ended September 30, 2011.


(Dollars in thousands)	Three months ended September 30, 2011		Nine months ended September 30, 2011
Loans modified in TDRs during the period:
Commercial loans:
Software (1)	$	381	$	941
Hardware		801		2,674
Premium wine		—		1,993
Other		2,247		2,247

Total commercial loans		3,429		7,855

Consumer loans:
Other consumer loans		—		3,322

Total consumer loans		—		3,322

Total loans modified in TDR’s during the period	$	3,429	$	11,177

(1)	During the three and nine months ended September 30, 2011, we had partial charge-offs of $0.6 million on loans classified as TDRs.

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

The following table summarizes the recorded investment in loans modified in TDRs within the previous 12 months that subsequently defaulted during the three and nine months ended September 30, 2011, broken out by portfolio segment and class of financing receivable:


(Dollars in thousands)	Three months ended September 30, 2011		Nine months ended September 30, 2011
TDRs modified within the previous 12 months that defaulted during the period:
Commercial loans:
Software	$	64	$	64
Hardware		1,206		3,079
Premium wine		1,993		1,993

Total commercial loans		3,263		5,136

Consumer loans:
Other consumer loans		3,322		3,322

Total consumer loans		3,322		3,322

Total TDRs modified within the previous 12 months that defaulted in the period	$	6,585	$	8,458

Charge-offs and defaults on previously restructured loans are evaluated to determine the impact to the allowance for loan losses, if any. The evaluation of these defaults may impact the assumptions used in calculating the reserve on other TDRs and impaired loans as well as management’s overall outlook of macroeconomic factors that affect the reserve on the loan portfolio as a whole. After evaluating the charge-offs and defaults experienced on our TDRs we determined that no change to our reserving methodology was necessary to determine the allowance for loan losses as of September 30, 2011.

7. Short-Term Borrowings and Long-Term Debt

The following table represents outstanding short-term borrowings and long-term debt at September 30, 2011 and December 31, 2010:


				Carrying Value
(Dollars in thousands)	Maturity	Principal value		September 30, 2011		December 31, 2010
Short-term borrowings:
Other short-term borrowings	(1)	$	—	$	—	$	37,245

Total short-term borrowings				$	—	$	37,245


Long-term debt:
5.375% Senior Notes	September 15, 2020		350,000	$	347,744	$	347,601
5.70% Senior Notes (2)	June 1, 2012		141,429		145,632		265,613
6.05% Subordinated Notes (3)	June 1, 2017		45,964		55,302		285,937
3.875% Convertible Notes	April 15, 2011		—		—		249,304
7.0% Junior Subordinated Debentures	October 15, 2033		50,000		55,416		55,548
4.99% long-term notes payable	(4)		5,463		5,463		5,257

Total long-term debt				$	609,557	$	1,209,260

(1)

At December 31, 2010, represented cash collateral received from counterparties for our interest rate swap agreements related to our 5.70% Senior Notes and 6.05% Subordinated Notes. Due to the repurchase of $312.6 million of these notes and termination of associated portions of interest rate swaps (see discussion below) in May 2011, the notional value of our swaps fell below the $10 million threshold specified in the agreement, and therefore, the full collateral was returned to the counterparties.

(2)	At September 30, 2011 and December 31, 2010, included in the carrying value of our 5.7

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