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, 2010

¨	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.

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 29, 2010, 41,992,519 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, 2010 and December 31, 2009		3

	Interim Consolidated Statements of Income (unaudited) for the three and nine months ended September 30, 2010 and 2009		4

	Interim Consolidated Statements of Comprehensive Income (unaudited) for the three and nine months ended September 30, 2010 and 2009		5

	Interim Consolidated Statements of Stockholders’ Equity (unaudited) for the nine months ended September 30, 2010 and 2009		6

	Interim Consolidated Statements of Cash Flows (unaudited) for the nine months ended September 30, 2010 and 2009		7

	Notes to Interim Consolidated Financial Statements (unaudited)		8

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		36

Item 3.	Quantitative and Qualitative Disclosures about Market Risk		70

Item 4.	Controls and Procedures		71

PART II - OTHER INFORMATION			72

Item 1.	Legal Proceedings		72

Item 1A.	Risk Factors		72

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		80

Item 3.	Defaults Upon Senior Securities		81

Item 4.	(Removed and Reserved)		81

Item 5.	Other Information		81

Item 6.	Exhibits		81

SIGNATURES			82

INDEX TO EXHIBITS			83

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, 2010			December 31, 2009
Assets
Cash and due from banks	$	3,387,204		$	3,454,611
Federal funds sold, securities purchased under agreements to resell and other short-term investment securities		391,165			58,242

Cash and cash equivalents		3,778,369			3,512,853

Available-for-sale securities		6,003,198			3,938,188
Non-marketable securities		656,067			553,531

Investment securities		6,659,265			4,491,719

Loans, net of unearned income		4,859,205			4,548,094
Allowance for loan losses		(74,369	)		(72,450	)

Net loans		4,784,836			4,475,644

Premises and equipment, net of accumulated depreciation and amortization		41,917			31,736
Accrued interest receivable and other assets		395,682			329,447

Total assets	$	15,660,069		$	12,841,399


Liabilities and total equity
Liabilities:
Deposits:
Noninterest-bearing demand	$	7,449,081		$	6,298,988
Negotiable order of withdrawal (NOW)		38,134			53,200
Money market		2,067,620			1,292,215
Money market deposits in foreign offices		76,795			49,722
Time		378,687			332,310
Sweep		2,404,628			2,305,502

Total deposits		12,414,945			10,331,937

Short-term borrowings		59,735			38,755
Other liabilities		263,283			139,947
Long-term debt		1,225,810			856,650

Total liabilities		13,963,773			11,367,289

Commitments and contingencies (Note 12)

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; 41,964,764 shares and 41,338,389 shares outstanding, respectively		42			41
Additional paid-in capital		410,590			389,490
Retained earnings		810,379			732,907
Accumulated other comprehensive income		47,600			5,905
Total SVBFG stockholders’ equity		1,268,611			1,128,343
Noncontrolling interests		427,685			345,767

Total equity		1,696,296			1,474,110

Total liabilities and total equity	$	15,660,069		$	12,841,399

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)	2010			2009			2010			2009
Interest income:
Loans	$	80,716		$	83,049		$	230,216		$	255,548
Available-for-sale securities:
Taxable		32,375			21,562			101,493			53,207
Non-taxable		948			1,008			2,869			3,098
Federal funds sold, securities purchased under agreements to resell and other short-term investment securities		2,719			2,367			8,444			7,228

Total interest income		116,758			107,986			343,022			319,081

Interest expense:
Deposits		3,783			4,801			11,315			17,253
Borrowings		6,634			6,367			18,090			21,818

Total interest expense		10,417			11,168			29,405			39,071

Net interest income		106,341			96,818			313,617			280,010
Provision for loan losses		10,971			8,030			29,124			72,889

Net interest income after provision for loan losses		95,370			88,788			284,493			207,121

Noninterest income:
Gains (losses) on investment securities, net		46,611			3,905			67,420			(37,890	)
Foreign exchange fees		9,091			7,491			26,207			22,574
Deposit service charges		7,324			6,906			22,283			20,319
Client investment fees		4,681			5,527			13,562			17,355
Credit card fees		3,139			2,300			8,853			6,696
Letters of credit and standby letters of credit income		2,752			3,019			7,869			8,240
Gains (losses) on derivative instruments, net		1,257			(1,090	)		4,565			(2,123	)
Other		11,381			6,249			24,907			21,830

Total noninterest income		86,236			34,307			175,666			57,001

Noninterest expense:
Compensation and benefits		62,170			45,815			181,993			141,042
Professional services		12,618			12,109			37,358			35,452
Premises and equipment		5,548			5,892			16,651			16,993
Business development and travel		5,153			2,902			14,542			9,578
Net occupancy		5,131			4,198			14,468			13,346
FDIC assessments		2,637			2,589			13,273			13,853
Correspondent bank fees		2,228			2,118			6,132			5,994
Provision for (reduction of) unfunded credit commitments		1,692			65			2,561			(3,366	)
Impairment of goodwill		—			—			—			4,092
Other		6,994			4,119			19,949			18,975

Total noninterest expense		104,171			79,807			306,927			255,959

Income before income tax expense		77,435			43,288			153,232			8,163
Income tax expense		24,996			16,879			50,397			21,605

Net income (loss) before noncontrolling interests		52,439			26,409			102,835			(13,442	)
Net (income) loss attributable to noncontrolling interests		(14,652	)		(2,246	)		(25,371	)		40,708

Net income attributable to SVBFG	$	37,787		$	24,163		$	77,464		$	27,266

Preferred stock dividend and discount accretion		—			(3,555	)		—			(10,636	)

Net income available to common stockholders	$	37,787		$	20,608		$	77,464		$	16,630


Earnings per common share—basic	$	0.90		$	0.62		$	1.86		$	0.50
Earnings per common share—diluted		0.89			0.61			1.83			0.50

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)	2010			2009			2010			2009
Net income (loss) before noncontrolling interests	$	52,439		$	26,409		$	102,835		$	(13,442	)
Other comprehensive income, net of tax:
Change in cumulative translation gains (losses):
Foreign currency translation gains (losses)		2,113			455			1,961			(87	)
Related tax (expense) benefit		(862	)		(184	)		(800	)		28
Change in unrealized gains (losses) on available-for-sale investment securities:
Unrealized holding gains		634			35,068			92,923			52,927
Related tax expense		(259	)		(14,291	)		(37,901	)		(21,581	)
Reclassification adjustment for (gains) losses included in net income (loss)		(23,605	)		(8	)		(24,473	)		26
Related tax benefit (expense)		9,631			3			9,985			(11	)

Other comprehensive (loss) income, net of tax		(12,348	)		21,043			41,695			31,302

Comprehensive income		40,091			47,452			144,530			17,860
Comprehensive (income) loss attributable to noncontrolling interests		(14,652	)		(2,246	)		(25,371	)		40,708

Comprehensive income attributable to SVBFG	$	25,439		$	45,206		$	119,159		$	58,568

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

SVB FINANCIAL GROUP AND SUBSIDIARIES

INTERIM CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (UNAUDITED)


	Preferred Stock				Common Stock				Additional Paid-in Capital			Retained			Accumulated Other Comprehensive			Total SVBFG Stockholders’			Noncontrolling			Total Equity
(Dollars in thousands)	Shares		Amount		Shares		Amount		Additional Paid-in Capital			Earnings			Income (Loss)			Equity			Interests			Total Equity
Balance at December 31, 2008		235,000	$	221,185		32,917,007	$	33	$	66,201		$	709,726		$	(5,789	)	$	991,356		$	320,356		$	1,311,712

Common stock issued under employee benefit plans, net of restricted stock cancellations		—		—		285,380		—		4,116			—			—			4,116			—			4,116
Income tax expense from stock options exercised, vesting of restricted stock and other		—		—		—		—		(590	)		—			—			(590	)		—			(590	)
Net income (loss)		—		—		—		—		—			27,266			—			27,266			(40,708	)		(13,442	)
Capital calls and (distributions), net		—		—		—		—		—			—			—			—			45,747			45,747
Net change in unrealized losses on available-for-sale investment securities, net of tax		—		—		—		—		—			—			31,361			31,361			—			31,361
Foreign currency translation adjustments, net of tax		—		—		—		—		—			—			(59	)		(59	)		—			(59	)
Stock-based compensation expense		—		—		—		—		11,051			—			—			11,051			—			11,051
Income tax benefit from original issue discount related to 3.875% convertible senior notes		—		—		—		—		10,745			—			—			10,745			—			10,745
Preferred stock dividend and discount accretion		—		1,824		—		—		—			(10,636	)		—			(8,812	)		—			(8,812	)
Other-net		—		—		—		—		844			99			—			943			—			943

Balance at September 30, 2009		235,000	$	223,009		33,202,387	$	33	$	92,367		$	726,455		$	25,513		$	1,067,377		$	325,395		$	1,392,772

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

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)	2010			2009
Cash flows from operating activities:
Net income (loss) before noncontrolling interests	$	102,835		$	(13,442	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Impairment of goodwill		—			4,092
Provision for loan losses		29,124			72,889
Provision for (reduction of) unfunded credit commitments		2,561			(3,366	)
Changes in fair values of derivatives, net		1,556			2,734
(Gains) losses on investment securities, net		(67,420	)		37,890
Depreciation and amortization		14,447			15,597
Amortization of premiums (accretion of discounts) on investment securities, net		18,700			10,199
Tax benefit of original issue discount		—			10,745
Tax expense from stock exercises		(306	)		(927	)
Amortization of share-based compensation		9,904			11,177
Amortization of deferred warrant-related loan fees		(4,923	)		(6,125	)
Deferred income tax expense (benefit)		1,794			(1,859	)
Losses on sale of and valuation adjustments to other real estate owned property		24			117
Changes in other assets and liabilities:
Accrued interest, net		5,817			(2,235	)
Accounts receivable		(10,768	)		3,378
Income tax receivable, net		23,933			(21,169	)
Accrued compensation		22,567			(5,742	)
Foreign exchange spot contracts, net		4,849			(9,282	)
Other, net		21,897			(1,870	)

Net cash provided by operating activities		176,591			102,801

Cash flows from investing activities:
Purchases of available-for-sale securities		(4,167,462	)		(2,115,015	)
Proceeds from sales of available-for-sale securities		653,122			195
Proceeds from maturities and pay downs of available-for-sale securities		1,526,562			499,493
Purchases of nonmarketable securities (cost and equity method accounting)		(36,847	)		(33,882	)
Proceeds from sales of nonmarketable securities (cost and equity method accounting)		12,185			3,363
Purchases of nonmarketable securities (investment fair value accounting)		(78,667	)		(43,849	)
Proceeds from sales of nonmarketable securities (investment fair value accounting)		25,866			11,760
Net (increase) decrease in loans		(354,452	)		729,876
Proceeds from recoveries of charged-off loans		13,397			16,892
Proceeds from sale of other real estate owned		196			693
Payment for acquisition of intangibles, net of cash acquired		(360	)		—
Purchases of premises and equipment		(21,031	)		(11,545	)

Net cash used for investing activities		(2,427,491	)		(942,019	)

Cash flows from financing activities:
Net increase in deposits		2,083,008			2,582,160
Principal payments of other long-term debt		—			(101,272	)
Increase (decrease) in short-term borrowings		20,980			(9,835	)
Proceeds from issuance of 5.375% Senior Notes, net of discount and issuance cost		344,294			—
Capital contributions from noncontrolling interests, net of distributions		56,547			45,747
Tax benefit from stock exercises		3,197			337
Dividends paid on preferred stock		—			(7,932	)
Proceeds from issuance of common stock		15,210			4,116
Repurchase of warrant under Capital Purchase Program		(6,820	)		—

Net cash provided by financing activities		2,516,416			2,513,321

Net increase in cash and cash equivalents		265,516			1,674,103
Cash and cash equivalents at beginning of period		3,512,853			2,436,725

Cash and cash equivalents at end of period	$	3,778,369		$	4,110,828

Supplemental disclosures:
Cash paid during the period for:
Interest	$	22,903		$	35,852
Income taxes		21,360			35,824
Noncash items during the period:
Preferred stock dividends accrued, not yet paid	$	—		$	1,469
Unrealized gains on available-for-sale securities, net of tax		40,534			31,361
Net change in fair value of interest rate swaps		20,362			(37,914	)

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 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, 2010 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, 2009 (“2009 Form 10-K”) and as updated to reflect revised segment financial reporting in our Current Report on form 8-K filed on September 15, 2010.

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 2009 Form 10-K, and with the accounting pronouncements adopted during the nine months ended September 30, 2010, as discussed below.

The preparation of 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, 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 our majority-owned subsidiaries and variable interest entities (“VIEs”) for which we are the primary beneficiary and our investments in which we have a majority owned voting interest. All significant intercompany accounts and transactions have been eliminated.

We determine whether we have a controlling financial interest in an entity by evaluating whether the entity is a VIE for which we are the primary beneficiary. We consider the following factors in evaluating whether our involvement with the VIE is significant and designates us as the primary beneficiary:

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.

We reassess our initial evaluation of whether an entity is a VIE upon the occurrence of certain events, such as changes in an entity’s capital structure or in its activities, known as reconsideration events. Our evaluation of whether we are the primary beneficiary of a VIE is not limited to the occurrence of certain reconsideration events but is instead reassessed on an ongoing basis. 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.

Current Accounting Developments

In the first quarter of 2010, we adopted new guidance related to the following topics:

•

ASU No. 2009-16, Accounting for Transfers of Financial Assets

•

ASU No. 2009-17, Improvements to Financial Reporting by Enterprises Involved with Variable Interest Entities

•

ASU No. 2010-06, Improving Disclosures about Fair Value Measurements

No new accounting guidance was adopted during the second or third quarters of 2010.

Information about these pronouncements is described in more detail below.

Impact of Adopting ASU No. 2009-16

In June 2009, the Financial Accounting Standards Board (“FASB”) issued a new accounting standard which defines the term “participating interest” to establish specific conditions for reporting a transfer of a portion of a financial asset as a sale. This standard also removes the concept of a qualifying special-purpose entity (“QSPE”) for accounting purposes. Our adoption of this standard as of January 1, 2010 did not have a material impact on our financial position, results of operations or stockholders’ equity as we have not historically made sales or transfers of assets to QSPEs. However, we do engage from time to time in selling our loans. Historically, our participating interests in those sales have the same priority and are not subordinated to the other participating interest holders’ interest. Therefore, the change in the standard of removing the QSPE concept and the new definition of participating interest did not have an impact on our sales treatment.

Impact of Adopting ASU No. 2009-17

In June 2009, the FASB issued a new accounting standard which replaces the quantitative-based risks and rewards calculation for determining which enterprise has a controlling interest in a VIE, with an approach focused on which enterprise has both the power to direct the activities of a VIE that most significantly impact the VIE’s economic performance and the obligation to absorb losses or the right to receive benefits of the VIE that could potentially be significant to the VIE. Our adoption of this standard as of January 1, 2010 required us to de-consolidate Gold Hill Venture Lending Partners 03, LLC (“GHLLC”), which resulted in a reduction of total assets and total equity of $1.1 million. The identification of VIE’s or changes in our consolidation of entities did not have a material impact on our financial position, results of operations or stockholders’ equity.

Impact of Adopting ASU No. 2010-06

In January 2010, the FASB issued a new accounting standard which requires the addition of new disclosures and clarifies existing disclosure requirements already included in the guidance for fair value measurements. The new disclosures related to significant transfers in and out of Level 1, Level 2 and Level 3 fair value measurements and the reasons for the transfers, as well as the clarifications of existing disclosures were effective for interim or annual reporting periods beginning after December 15, 2009 and were therefore adopted as of January 1, 2010. The new disclosures about purchases, sales, issuances and settlements in the roll forward of activity in Level 3 fair value measurements are effective for interim or annual reporting periods beginning after December 15, 2010. This standard clarified and increased the disclosure requirements for fair value measurements and did not have an impact on our financial position, results of operations or stockholders’ equity. See Note 14- “Fair Value of Financial Instruments” for further details.

Recent Accounting Pronouncements

In July 2010, the FASB issued a new accounting standard (ASU No. 2010-20), which requires the addition of new disclosures and enhances existing disclosure requirements already included in the guidance for credit quality and the allowance for credit losses. The statement requires enhancements to disclosures for the allowance for credit losses on a disaggregated basis. The statement defines two levels of disaggregation: 1) portfolio segment and 2) class of financing receivable. Additionally, the statement requires multiple new disclosures regarding an entity’s financing receivables, such as credit quality indicators, aging of past due receivables, troubled debt restructurings, and significant purchases and sales. The new disclosures and amendments to existing disclosures are effective for interim and annual reporting periods ending on or after December 15, 2010. This standard will enhance and increase the disclosure requirements for credit quality and the allowance for credit losses and will not have an impact on 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”)

Common Stock

On June 16, 2010, we repurchased in its entirety the warrant previously issued to the U.S. Treasury in connection with our prior participation in the U.S. Treasury’s Capital Purchase Program (“CPP”). The total cash repurchase price paid to the U.S. Treasury was $6.8 million for the aggregate warrant. At the time of issuance, the warrant was initially exercisable for 708,116 shares of our common stock at an exercise price of $49.78 per share. However, due to our completion of a qualified equity offering during the fourth quarter of 2009, the number of shares of common stock exercisable under the warrant was reduced to 354,058 pursuant to applicable CPP rules. The repurchase of the warrant reduced our stockholders’ equity by the total cash price of $6.8 million, and did not have any impact on our net income available to common stockholders or diluted earnings per share for the nine months ended September 30, 2010.

Earnings Per Share

Basic earnings per share is the amount of earnings available to each share of common stock outstanding during the reporting period. Diluted earnings per share 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 pursuant to stock options and restricted stock units under our equity incentive plan, stock purchases under our employee stock purchase plan, our 3.875% convertible senior notes (“2008 Convertible Notes”) and related warrants and note hedge. Potentially dilutive common shares are excluded from the computation of dilutive earnings per share in periods in which the effect would be antidilutive. The following is a reconciliation of basic EPS to diluted EPS for the three and nine months ended September 30, 2010 and 2009, respectively:


	Three months ended September 30,					Nine months ended September 30,
(Dollars and shares in thousands, except per share amounts)	2010		2009			2010		2009
Numerator:
Net income attributable to SVBFG	$	37,787	$	24,163		$	77,464	$	27,266
Preferred stock dividend and discount accretion		—		(3,555	)		—		(10,636	)

Net income available to common stockholders	$	37,787	$	20,608		$	77,464	$	16,630

Denominator:
Weighted average common shares outstanding-basic		41,930		33,177			41,679		33,033
Weighted average effect of dilutive securities:
Stock options		511		495			652		215
Restricted stock units		72		—			70		—

Denominator for diluted calculation		42,513		33,672			42,401		33,248

Net income per common share:
Basic	$	0.90	$	0.62		$	1.86	$	0.50

Diluted	$	0.89	$	0.61		$	1.83	$	0.50

Any dilutive effect of our 2008 Convertible Notes are included in the calculation of diluted EPS using the treasury stock method. The 2008 Convertible Notes did not impact our weighted average diluted common shares total as the applicable conversion price was higher than the average daily closing price for the three and nine month periods. Our warrant associated with the 2008 Convertible Notes did not impact our weighted average diluted common shares total as the exercise price was higher than the average daily closing price for the three and nine month periods.

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, 2010 and 2009, respectively:


	Three months ended September 30,				Nine months ended September 30,
(Shares in thousands)	2010		2009		2010		2009
Stock options		6		1,718		8		2,485
Restricted stock units		5		90		4		499
Warrant associated with Capital Purchase Program (1)		—		275		—		597

Total		11		2,083		12		3,581

(1)	On June 16, 2010, we repurchased in its entirety the warrant previously issued to the U.S. Treasury in connection with our prior participation in the CPP.

In addition to the above, at September 30, 2010, 4.7 million shares of our 2008 Convertible Notes and associated warrants were outstanding but also excluded from the diluted EPS calculation as they were deemed to be anti-dilutive. Concurrent with the issuance

of our 2008 Convertible Notes, we entered into a convertible note hedge and warrant agreement. For information on our 2008 Convertible Notes and associated convertible note hedge and warrant agreement, see our Consolidated Financial Statements and Supplementary Data- Note 12- “Short-Term Borrowings and Long-Term Debt” and Note 13- “Derivative Financial Instruments” and under Part II, Item 8 of our 2009 Form 10-K.

3. Share-Based Compensation

For the three and nine months ended September 30, 2010, we recorded share-based compensation expense of $3.6 million and $9.9 million, respectively, resulting in the recognition of $0.9 million and $2.4 million, respectively, in related tax benefits. For the three and nine months ended September 30, 2009, we recorded share-based compensation expense of $3.4 million and $11.2 million, respectively, resulting in the recognition of $0.8 million and $2.7 million, respectively, in related tax benefits.

Unrecognized Compensation Expense

At September 30, 2010, unrecognized share-based compensation expense was as follows:


(Dollars in thousands)	Unrecognized Expense		Average Expected Recognition Period - in Years
Stock options	$	11,644		2.93
Restricted stock units		12,926		2.39

Total unrecognized share-based compensation expense	$	24,570

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, 2010:


	Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Life in Years		Aggregate Intrinsic Value of In-The- Money Options
Outstanding at December 31, 2009		3,500,723		$	35.31
Granted		452,324			47.85
Exercised		(470,876	)		28.63
Forfeited		(98,100	)		40.71
Expired		(57,925	)		50.01

Outstanding at September 30, 2010		3,326,146			37.53		3.27	$	25,518,512

Vested and expected to vest at September 30, 2010		3,168,894			37.41		3.13		24,508,490

Exercisable at September 30, 2010		2,225,405			36.83		2.05		17,646,011

The aggregate intrinsic value of outstanding options shown in the table above represents the pretax intrinsic value based on our closing stock price of $42.32 as of September 30, 2010. The total intrinsic value of options exercised during the three and nine months ended September 30, 2010 was $1.3 million and $8.5 million, respectively, compared to $0.8 million and $1.0 million for the comparable 2009 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, 2010:


	Shares			Weighted Average Grant Date Fair Value
Nonvested at December 31, 2009		336,806		$	39.55
Granted		219,750			46.99
Vested		(95,948	)		39.67
Forfeited		(35,685	)		33.91

Nonvested at September 30, 2010		424,923			43.90

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, 2010 and December 31, 2009, respectively:


(Dollars in thousands)	September 30, 2010		December 31, 2009
Securities purchased under agreements to resell	$	48,115	$	58,242
Short-term agency discount notes		330,197		—
Other short-term investment securities		12,853		—

Total securities purchased under agreements to resell and other short-term investment securities	$	391,165	$	58,242

In addition, as of September 30, 2010 and December 31, 2009, $2.9 billion and $3.1 billion, respectively, of our cash and due from banks was deposited at the Federal Reserve Bank and was earning interest at the Federal Funds target rate, and interest-earning deposits in other financial institutions were $261.0 million and $171.6 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, 2010 and December 31, 2009 are as follows:


	September 30, 2010									December 31, 2009
(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	$	25,452	$	1,222	$	—		$	26,674	$	25,583	$	464	$	—		$	26,047
U.S. agency debentures		1,711,241		10,848		(369	)		1,721,720		887,008		5,188		(443	)		891,753
Residential mortgage-backed securities:
Agency-issued mortgage-backed securities		1,150,836		33,030		—			1,183,866		1,413,817		14,050		(17,237	)		1,410,630
Agency-issued collateralized mortgage obligations - fixed rate		966,492		25,500		(11	)		991,981		1,360,790		17,142		(5,557	)		1,372,375
Agency-issued collateralized mortgage obligations - variable rate		1,972,194		4,426		(923	)		1,975,697		—		—		—			—
Non-agency mortgage-backed securities (1)		—		—		—			—		89,155		48		(5,507	)		83,696
Commercial mortgage-backed securities (1)		—		—		—			—		48,440		468		(107	)		48,801
Municipal bonds and notes		96,980		5,792		(15	)		102,757		100,504		2,429		(56	)		102,877
Equity securities		444		92		(33	)		503		1,795		219		(5	)		2,009

Total available-for-sale securities	$	5,923,639	$	80,910	$	(1,351	)	$	6,003,198	$	3,927,092	$	40,008	$	(28,912	)	$	3,938,188

Non-marketable securities:
Non-marketable securities (investment company fair value accounting):
Private equity fund investments (2)									365,742									271,316
Other private equity investments (3)									84,535									96,577
Other investments (4)									962									1,143
Non-marketable securities (equity method accounting):
Other investments (5)									63,198									59,660
Low income housing tax credit funds									28,690									26,797
Non-marketable securities (cost method accounting):
Private equity fund investments (6)									100,110									86,019
Other private equity investments									12,830									12,019

Total non-marketable securities									656,067									553,531

Total investment securities								$	6,659,265								$	4,491,719

(1)	During the second quarter of 2010, we sold all of our non-agency residential and commercial mortgage-backed securities totaling $123.3 million and agency-issued collateralized mortgage obligations totaling $34.6 million.

(2)	The following table shows the amount of private equity fund investments by the following consolidated funds and our ownership of each fund at September 30, 2010 and December 31, 2009:


	September 30, 2010					December 31, 2009
(Dollars in thousands)	Amount		Ownership %			Amount		Ownership %
SVB Strategic Investors Fund, LP	$	47,026		12.6	%	$	50,508		12.6	%
SVB Strategic Investors Fund II, LP		94,922		8.6			85,820		8.6
SVB Strategic Investors Fund III, LP		135,631		5.9			102,568		5.9
SVB Strategic Investors Fund IV, LP		31,050		5.0			13,677		5.0
SVB Capital Preferred Return Fund, LP		19,730		19.5			8,330		20.0
SVB Capital—NT Growth Partners, LP		24,456		33.0			10,413		33.0
SVB Capital Partners II, LP (i)		4,631		5.1			—		N/A
Other Private Equity Fund (ii)		8,296		60.5			—		N/A

Total private equity fund investments	$	365,742				$	271,316

(i)

At September 30, 2010, 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, 2010, we had a direct ownership interest of 44.5% and an indirect ownership interest of 12.6% and 3.4% in the fund through our ownership interests of SVB Capital—NT Growth Partners, LP and SVB Capital Preferred Return Fund, LP, respectively.

(3)	The following table shows the amount of private equity investments by the following consolidated funds and our ownership of each fund at September 30, 2010 and December 31, 2009:


	September 30, 2010					December 31, 2009
(Dollars in thousands)	Amount		Ownership %			Amount		Ownership %
Silicon Valley BancVentures, LP	$	19,598		10.7	%	$	24,023		10.7	%
SVB Capital Partners II, LP		38,052		5.1			36,847		5.1
SVB India Capital Partners I, LP		26,885		14.4			35,707		14.4

Total other private equity investments	$	84,535				$	96,577

(4)

Other investments within non-marketable securities (investment company fair value accounting) include our ownership in Partners for Growth, LP, a consolidated sponsored debt fund. At September 30, 2010 and December 31, 2009 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.

(5)	The following table shows the amount of investments and our ownership of each fund at September 30, 2010 and December 31, 2009:


	September 30, 2010					December 31, 2009
(Dollars in thousands)	Amount		Ownership %			Amount		Ownership %
Gold Hill Venture Lending 03, LP (i)	$	12,096		9.3	%	$	16,134		9.3	%
Partners for Growth II, LP		9,720		24.2			13,059		24.2
Other investments		41,382		N/A			30,467		N/A

Total other investments	$	63,198				$	59,660

(i)

At September 30, 2010, we had a direct ownership interest of 4.8% in the fund and an indirect interest in the fund through our investment in GHLLC of 4.5%. Our aggregate direct and indirect ownership in the fund is 9.3%.

(6)

Represents investments in 344 and 349 venture capital/private equity funds at September 30, 2010 and December 31, 2009, respectively, where our ownership interest is less than 5% of the voting interests of each such fund. For the three months ended September 30, 2010, we recognized other- than- temporary impairment (“OTTI”) losses of $0.5 million resulting from other- than- temporary declines in value for 16 of the 344 investments. For the nine months ended September 30, 2010, we recognized OTTI losses of $1.5 million resulting from other- than- temporary declines in value for 54 of the 344 investments. The OTTI losses are included in net gains (losses) on investment securities, a component of noninterest income. For the remaining 290 investments at September 30, 2010, we concluded that declines in value, if any, were temporary and as such, no OTTI was required to be recognized. At September 30, 2010, the carrying value of these venture capital/private equity fund investments (cost method accounting) was $100.1 million, and the estimated fair value was $101.1 million.

The following table summarizes our unrealized losses on our available-for-sale securities into categories of less than 12 months, or 12 months or longer, at September 30, 2010:


	September 30, 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	$	249,672	$	(369	)	$	—	$	—	$	249,672	$	(369	)
Residential mortgage-backed securities:
Agency-issued collateralized mortgage obligations—fixed rate		6,260		(11	)		—		—		6,260		(11	)
Agency-issued collateralized mortgage obligations—variable rate		559,152		(923	)		—		—		559,152		(923	)
Municipal bonds and notes		3,509		(15	)		—		—		3,509		(15	)
Equity securities		32		(33	)		—		—		32		(33	)

Total temporarily impaired securities (1)	$	818,625	$	(1,351	)	$	—	$	—	$	818,625	$	(1,351	)

(1)

As of September 30, 2010, we identified a total of 36 investments that were in unrealized loss positions. There were no investments with unrealized losses that have been in an impaired position for a period of time greater than 12 months. Unrealized losses are due primarily to increases in market rates relative to rates at the time of purchase. 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, 2010, 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 we deem all impairments to be temporary and changes in value for our temporarily impaired securities as of September 30, 2010 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, 2009:


	December 31, 2009
	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	$	287,621	$	(443	)	$	—	$	—		$	287,621	$	(443	)
Residential mortgage-backed securities:
Agency-issued mortgage-backed securities		1,034,781		(17,237	)		—		—			1,034,781		(17,237	)
Agency-issued collateralized mortgage obligations—fixed rate		321,388		(5,535	)		1,392		(22	)		322,780		(5,557	)
Non-agency mortgage-backed securities		23,966		(195	)		51,276		(5,312	)		75,242		(5,507	)
Commercial mortgage-backed securities		14,968		(107	)		—		—			14,968		(107	)
Municipal bonds and notes		11,908		(56	)		—		—			11,908		(56	)
Marketable Equity securities		3		(5	)		—		—			3		(5	)

Total temporarily impaired securities	$	1,694,635	$	(23,578	)	$	52,668	$	(5,334	)	$	1,747,303	$	(28,912	)

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, 2010. 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 typically have original contractual maturities from 15 to 30 years whereas expected average lives of these securities tend to be significantly shorter and vary based upon structure.


	September 30, 2010
	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	$	26,674		2.39	%	$	—		—	%	$	26,674		2.39	%	$	—		—	%	$	—		—	%
U.S. agency debentures		1,721,720		1.77			86,651		2.36			1,635,069		1.74			—		—			—		—
Residential mortgage-backed securities:
Agency-issued mortgage-backed securities		1,183,866		3.68			—		—			—		—			1,038		7.50			1,182,828		3.68
Agency-issued collateralized mortgage obligations—fixed rate		991,981		3.38			—		—			—		—			—		—			991,981		3.38
Agency-issued collateralized mortgage obligations—variable rate		1,975,697		0.72			—		—			—		—			—		—			1,975,697		0.72
Municipal bonds and notes		102,756		6.02			1,143		6.50			7,171		5.38			42,397		5.90			52,045		6.20

Total	$	6,002,694		2.14		$	87,794		2.41		$	1,668,914		1.76		$	43,435		5.94		$	4,202,551		2.25

The cost of investment securities is determined on a specific identification basis. The following table presents the components of gains and losses on investment securities for the three and nine months ended September 30, 2010 and 2009:


	Three months ended September 30,						Nine months ended September 30,
(Dollars in thousands)	2010			2009			2010			2009
Gross gains on investment securities:
Available-for-sale securities, at fair value	$	23,605		$	8		$	26,737		$	15
Marketable securities (investment company fair value accounting)		8,109			111			8,160			1,290
Non-marketable securities (investment company fair value accounting):
Private equity fund investments		19,014			7,101			47,659			8,370
Other private equity investments		2,321			4,531			7,258			4,724
Other investments		9			71			36			684
Non-marketable securities (equity method accounting):
Other investments		2,663			2,361			4,804			5,170
Non-marketable securities (cost method accounting):
Private equity fund investments		222			15			780			316
Other private equity investments		—			—			—			22
Other investments		242			—			344			—

Total gross gains on investment securities		56,185			14,198			95,778			20,591


Gross losses on investment securities:
Available-for-sale securities, at fair value		—			—			(2,264	)		(41	)
Marketable securities (investment company fair value accounting)		—			(16	)		(57	)		(409	)
Non-marketable securities (investment company fair value accounting):
Private equity fund investments		(6,171	)		(4,321	)		(15,291	)		(41,081	)
Other private equity investments		(2,877	)		(2,072	)		(8,589	)		(10,104	)
Other investments		—			—			(79	)		—
Non-marketable securities (equity method accounting):
Other investments		(1	)		(1,690	)		(614	)		(2,973	)
Non-marketable securities (cost method accounting):
Private equity fund investments		(516	)		(2,105	)		(1,455	)		(3,754	)
Other private equity investments		(9	)		(89	)		(9	)		(119	)

Total gross losses on investment securities		(9,574	)		(10,293	)		(28,358	)		(58,481	)

Gains (losses) on investment securities, net	$	46,611		$	3,905		$	67,420		$	(37,890	)

Gains (losses) attributable to noncontrolling interests, including carried interest	$	16,817		$	4,880		$	33,159		$	(32,491	)

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 our Private Client Services (“PCS”) business. These products and services include real estate secured home equity lines of credit, which may be used to finance real estate investments and loans for personal residences 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 real estate secured loans to eligible employees through our Employee Home Ownership Program (“EHOP”).

We also provide community development loans, which are low income housing loans made as part of our responsibilities under the Community Reinvestment Act. These loans are construction loans and are primarily secured by real estate.

The composition of loans, net of unearned income of $40.9 million and $34.9 million at September 30, 2010 and December 31, 2009, respectively, is presented in the following table:


(Dollars in thousands)	September 30, 2010		December 31, 2009
Commercial loans:
Software	$	1,601,950	$	1,381,669
Hardware		540,423		551,545
Clean Technology		146,160		71,550
Venture Capital/Private Equity		746,822		925,330
Life Science		601,429		514,879
Premium Wine		145,696		143,062
All other sectors		225,623		158,666

Commercial loans (1)		4,008,103		3,746,701

Real estate secured loans:
Premium Wine		320,908		298,839
Consumer loans (2)		297,410		241,284

Real estate secured loans		618,318		540,123

Construction loans		49,976		59,926
Consumer loans		182,808		201,344

Total loans, net of unearned income	$	4,859,205	$	4,548,094

(1)	Included within our commercial loans portfolio are business credit card loans to commercial clients. At September 30, 2010 and December 31, 2009, our business credit card loans portfolio totaled $32.9 million and $24.6 million, respectively.

(2)	Consumer loans secured by real estate at September 30, 2010, and December 31, 2009 were comprised of the following:


(Dollars in thousands)	September 30, 2010		December 31, 2009
Loans for personal residence	$	122,304	$	64,678
Home equity lines of credit		88,325		90,459
Loans to eligible employees		86,781		86,147

Consumer loans secured by real estate	$	297,410	$	241,284

The activity in the allowance for loan losses for the three and nine months ended September 30, 2010 and 2009 was as follows:


	Three months ended September 30,						Nine months ended September 30,
(Dollars in thousands)	2010			2009			2010			2009
Allowance for loan losses, beginning balance	$	71,789		$	110,473		$	72,450		$	107,396
Gross charge-offs:
Commercial loans:
Software		(4,401	)		(12,603	)		(10,897	)		(25,867	)
Hardware		(835	)		(8,284	)		(9,782	)		(43,328	)
Clean Technology		(59	)		—			(2,242	)		—
Venture Capital/Private Equity		—			(10,455	)		—			(10,455	)
Life Science		(6,977	)		(6,807	)		(16,627	)		(15,424	)
Premium Wine		(15	)		(17	)		(516	)		(2,333	)
All other sectors		(1	)		(1,698	)		(49	)		(1,698	)

Commercial loans		(12,288	)		(39,864	)		(40,113	)		(99,105	)

Real estate secured loans:
Premium Wine		—			—			(1	)		—
Consumer loans		(1	)		(449	)		(487	)		(449	)

Real estate secured loans		(1	)		(449	)		(488	)		(449	)

Construction loans		—			—			—			(96	)
Consumer loans		—			(6,240	)		(1	)		(10,814	)

Total gross charge-offs	$	(12,289	)	$	(46,553	)	$	(40,602	)	$	(110,464	)

Recoveries:
Commercial loans:
Software	$	1,164		$	836		$	4,189		$	1,820
Hardware		1,512			11,525			3,782			12,363
Clean Technology		32			—			903			—
Life Science		965			2,260			3,264			2,374
Premium Wine		60			43			158			48
All other sectors		91			61			626			95

Commercial loans		3,824			14,725			12,922			16,700

Real estate secured loans:
Consumer loans		6			—			6			2

Real estate secured loans		6			—			6			2

Construction loans		—			4			5			10
Consumer loans		68			34			464			180

Total recoveries	$	3,898		$	14,763		$	13,397		$	16,892

Net charge-offs		(8,391	)		(31,790	)		(27,205	)		(93,572	)
Provision for loan losses		10,971			8,030			29,124			72,889

Allowance for loan losses, ending balance	$	74,369		$	86,713		$	74,369		$	86,713

Impaired Loans and Troubled Debt Restructurings

A loan is considered impaired when, based upon currently known information, it is deemed probable that we will be unable to collect all amounts due according to the contractual terms of the agreement. The recorded investment in impaired loans totaled $45.0 million and $50.2 million at September 30, 2010 and December 31, 2009, respectively. The recorded investment in impaired loans for which there was a related allowance for loan losses was $34.5 million and $47.0 million at September 30, 2010 and December 31, 2009, respectively, with related allowance for loan losses of $6.5 million and $8.9 million, respectively. The recorded investment in impaired loans for which there was no related allowance for loan losses was $10.5 million and $3.2 million at September 30, 2010 and December 31, 2009, respectively. Average impaired loans for the three and nine months ended September 30, 2010 totaled $45.5 million and $48.9 million, respectively. Cash payments received related to these loans totaled $0.5 million and $1.4 million for the three and nine months ended September 30, 2010, respectively. Average impaired loans for the three and nine months ended September 30, 2009 totaled $95.1 million and $98.6 million, respectively. Cash payments received related to these loans totaled $0.5 million and $1.2 million for the three and nine months ended September 30, 2009, respectively. These payments were applied against the outstanding principal balance of the loans. We did not recognize any interest income related to impaired loans in either of the three and nine months ended September 30, 2010 or 2009 during the time period that the loans were impaired. There were no loans past due 90 days or more still accruing interest at September 30, 2010 compared to $2.5 million at December 31, 2009.

Included in the $45.0 million of impaired loans at September 30, 2010 are loans modified in troubled debt restructurings (“TDR’s”), where concessions have been granted to borrowers experiencing financial difficulties, in an attempt to maximize collection. As of September 30, 2010, we had TDR’s of $24.0 million, which were comprised of $20.1 million in consumer loans secured by real estate, $1.8 million in software loans, $1.0 in construction loans and $1.1 million in other commercial loans. In order for these loan balances to return to accrual status, the borrower must demonstrate a sustained period of timely payments. There were no commitments available for funding to the clients associated with these TDR’s as of September 30, 2010.

7. Goodwill

During the first quarter of 2009, we conducted an assessment of goodwill of eProsper, a data management services company in which we own a 65% interest, based on eProsper’s revised forecast of discounted net cash flows for that reporting unit. We concluded that we had an impairment of goodwill resulting from changes in our outlook for eProsper’s future financial performance. As a result, $4.1 million of goodwill was expensed as a noncash non tax-deductible charge to continuing operations during the first quarter of 2009. There was no remaining goodwill on our balance sheet as of September 30, 2010 or December 31, 2009 and has not been since the first quarter of 2009.

8. Short-Term Borrowings and Long-Term Debt

The following table represents outstanding short-term borrowings and long-term debt at September 30, 2010 and December 31, 2009:


(Dollars in thousands)	Maturity	September 30, 2010		December 31, 2009
Short-term borrowings:
Other short-term borrowings	(1)	$	59,735	$	38,755

Total short-term borrowings		$	59,735	$	38,755

Long-term debt:
5.375% senior notes	September 15, 2020	$	347,555	$	—
5.70% senior notes (2)	June 1, 2012		268,503		269,793
6.05% subordinated notes (3)	June 1, 2017		298,263		276,541
3.875% convertible senior notes	April 15, 2011		248,715		246,991
7.0% junior subordinated debentures	October 15, 2033		55,592		55,986
4.99% long-term notes payable	(4)		7,182		7,339

Total long-term debt		$	1,225,810	$	856,650

(1)	Represents cash collateral received from counterparties for our interest rate swap agreements related to our senior and subordinated notes.

(2)	At September 30, 2010 and December 31, 2009, included in the carrying value of our 5.70% senior notes are $18.6 million and $19.9 million, respectively, related to the fair value of the interest rate swap associated with the notes.

(3)	At September 30, 2010 and December 31, 2009, included in the carrying value of our 6.05% subordinated notes are $48.7 million and $27.0 million, respectively, related to the fair value of the interest rate swap associated with the notes.

(4)	Represents long-term notes payable related to one of our debt fund investments beginning April 30, 2009 with the last payment due in April 2012.

Interest expense related to short-term borrowings and long-term debt was $6.6 million and $18.1 million for the three and nine months ended September 30, 2010, respectively, and $6.4 million and $21.8 million for the three and nine months ended September 30, 2009, respectively. Interest expense shown is net of the cash flow impact from our interest rate swap agreements. The weighted average interest rates associated with our short-term borrowings as of September 30, 2010 and December 31, 2009 were 0.15 percent and 0.05 percent, respectively.

5.375% Senior Notes

In September 2010, we issued $350 million of 5.375% senior notes due in September 2020 (“5.375% Senior Notes”). We received net proceeds of $344.3 million after deducting underwriting discounts and commissions and other estimated expenses. We intend to use approximately $250 million of the net proceeds from the sale of the notes to meet obligations due on the unconverted portion of our 2008 Convertible Notes due on April 15, 2011 (see “2008 Convertible Notes” section below for further details). The remaining net proceeds will be used for general corporate purposes, including working capital.

2008 Convertible Notes

In April 2008, we issued our 2008 Convertible Notes, due April 15, 2011, in the aggregate principal amount of $250 million to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933. The issuance costs related to the 2008 Convertible Notes were $6.8 million, and the net proceeds from the offering were $243.2 million. The 2008 Convertible Notes are initially convertible, subject to certain conditions, into cash up to the principal amount of notes and, into shares of our common stock or cash or any combination thereof for any excess conversion value, at our option. Holders may convert their 2008 Convertible Notes beginning any fiscal quarter commencing after June 30, 2008, if: (i) the price of our common stock issuable upon conversion of the note reaches a specific threshold, (ii) specified corporate transactions occur, or (iii) the trading price for the note falls below certain thresholds. The notes have an initial conversion rate of 18.8525 shares of common stock per $1,000 principal amount of notes, which represents an initial effective conversion price of $53.04 per share. Upon conversion of a note, we will pay the outstanding principal amount in cash as required by the terms of the notes, and to the extent that the conversion value exceeds the principal amount, we have the option to pay cash or shares of our common stock (or a combination of cash and shares) in respect of the excess amount.

Concurrent with the issuance of our 2008 Convertible Notes, we entered into a convertible note hedge and warrant agreement (see Note 9- “Derivative Financial Instruments”), which effectively increased the economic conversion price of our 2008 Convertible Notes to $64.43 per share of common stock. The terms of the hedge and warrant agreement are not part of the terms of the notes and will not affect the rights of the holders of the notes.

For the three and nine months ended September 30, 2010, the effective interest rate for our 2008 Convertible Notes was 5.66 percent and 5.72 percent, respectively, and interest expense was $3.5 million and $10.6 million, respectively. For the three and nine months ended September 30, 2009, the effective interest rate for our 2008 Convertible Notes was 5.66 percent and 5.73 percent, respectively, and interest expense was $3.5 million and $10.5 million, respectively. At September 30, 2010, the unamortized debt discount totaled $1.3 million, and will be amortized over the remaining contractual term of the debt.

Available Lines of Credit

We have certain facilities in place to enable us to access short-term borrowings on a secured (using available-for-sale securities as collateral) and an unsecured basis. These include repurchase agreements and uncommitted federal funds lines with various financial institutions. As of September 30, 2010, we had not borrowed against any of our repurchase lines or uncommitted federal funds lines. We also pledge securities to the Federal Home Loan Bank of San Francisco and the discount window at the Federal Reserve Bank. The market value of collateral pledged to the Federal Home Loan Bank of San Francisco (comprised entirely of U.S. agency debentures) at September 30, 2010 totaled $1.0 billion, all of which was unused and available to support additional borrowings. The market value of collateral pledged at the discount window of the Federal Reserve Bank at September 30, 2010 totaled $88.7 million, all of which was unused and available to support additional borrowings.

9. Derivative Financial Instruments

We primarily use derivative financial instruments to manage interest rate risk, currency exchange rate risk, equity market price risk and to assist customers with their risk management objectives. Also, in connection with negotiating credit facilities and certain other services, we frequently obtain equity warrant assets giving us the right to acquire stock in certain client companies.

Interest Rate Risk

Interest rate risk is our primary market risk and can result from timing and volume differences in the repricing of our interest rate-sensitive assets and liabilities and changes in market interest rates. To manage interest rate risk for our 5.70% senior notes and our 6.05% subordinated notes, we entered into receive-fixed for pay-floating interest rate swap agreements at the time of debt issuance. The interest rate swaps have matched-terms with the respective notes and effectively swap fixed rate coupons on the notes to variable rate coupons based upon London Interbank Offered Rates (“LIBOR”). We use the shortcut method to assess hedge effectiveness and evaluate the hedging relationships for qualification under the shortcut method requirements for each reporting period.

For more information on our 5.70% senior notes and our 6.05% subordinated notes, see our Consolidated Financial Statements and Supplementary Data-Note 12- “Short-Term Borrowings and Long-Term Debt” under Part II, Item 8 of our 2009 Form 10-K.

Net cash benefits associated with our interest rate swaps are recorded in “Interest Expense: Borrowings”, a component of net interest income. The fair values of our interest rate swaps are calculated using discounted cash flow methods and are adjusted for credit valuation associated with counterparty risk. Increases from changes in fair value are included in “Other Assets” and decreases from changes in fair value are included in “Other Liabilities”. Although we do not expect any changes in the matched-terms on the notes and associated interest rate swaps, any differences associated with or arising from hedge ineffectiveness are recorded through net gains (losses) on derivative instruments, in noninterest income, a component of consolidated net income.

Currency Exchange Risk

We enter into foreign exchange forward contracts to hedge against exposures of our loans that are denominated in foreign currencies to our clients, primarily in Pound Sterling, Euro, and Japanese Yen. We do not designate any foreign exchange forward contracts as derivative instruments that qualify for hedge accounting. Changes in currency rates on the loans are included in other noninterest income, a component of noninterest income. We may experience ineffectiveness in the economic hedging relationship,

because the loans are revalued based upon changes in the currency’s spot rate on the principal value, while the forwards are revalued on a discounted cash flow basis. We record forward agreements in gain positions in “Other Assets” and loss positions in “Other Liabilities”, while net changes in fair value are recorded through net gains (losses) on derivative instruments, in noninterest income, a component of consolidated net income.

Equity Market Price Risk

We have convertible debt instruments that contain conversion options that enable the holders to convert the instruments, subject to certain conditions. Specifically, we currently have outstanding our 2008 Convertible Notes. Upon conversion of a note, we will pay the outstanding principal amount in cash as required by the terms of the notes, and to the extent that the conversion value exceeds the principal amount, we have the option to pay cash or shares of our common stock (or a combination of cash and shares) in respect of the excess amount. The conversion option represents an equity risk exposure for the excess conversion value and is an equity derivative classified in stockholders’ equity. We manage equity market price risk of our convertible debt instruments by entering into convertible note hedge and warrant agreements to increase the economic conversion price of our convertible debt instruments and to decrease potential dilution to stockholders resulting from the conversion option.

Concurrent with the issuance of our 2008 Convertible Notes, we entered into a convertible note hedge and warrant agreement at a net cost of $20.6 million, which effectively increased the economic conversion price from $53.04 per common share to $64.43 per common share. Similar to the conversion option of the excess value of the note, the hedge and warrant agreements are equity derivatives classified in stockholders’ equity. For the three and nine months ended September 30, 2010 and 2009, there were no note conversions or exercises under the warrant agreement as the notes were not convertible.

For more information on the 2008 Convertible Notes, see our Consolidated Financial Statements and Supplementary Data-Note 12- “Short-Term Borrowings and Long-Term Debt” under Part II, Item 8 of our 2009 Form 10-K.

Other Derivative Instruments

Equity Warrant Assets

Our equity warrant assets are concentrated in private, venture-backed companies in the technology and life science industries. Most of these warrant agreements contain net share settlement provisions, which permit us to pay the warrant exercise price using shares issuable under the warrant (“cashless exercise”). Because we can net settle these warrant agreements, these equity warrant assets qualify as derivative instruments. We value our equity warrant assets using a modified Black-Scholes option pricing model, which incorporates assumptions about the underlying asset value, volatility, and the risk-free rate. We make valuation adjustments for estimated remaining life and marketability for warrants issued by private companies. Equity warrant assets are recorded at fair value in “Other Assets”, while changes in their fair value are recorded through net gains (losses) on derivative instruments, in noninterest income, a component of consolidated net income.

Other Derivatives

We sell forward and option contracts to clients that wish to mitigate their foreign currency exposure. We hedge the currency risk from this business by entering into opposite way contracts with correspondent banks. This hedging relationship does not qualify for hedge accounting. The contracts generally have terms of one year or less, although we may have contracts extending for up to five years. We generally have not experienced nonperformance on these contracts, have not incurred credit losses, and anticipate performance by all counterparties to such agreements. Increases from changes in fair value are included in “Other Assets” and decreases from changes in fair value are included in “Other Liabilities”. The net change in the fair value of these contracts is recorded through net gains (losses) on derivative instruments, in noninterest income, a component of consolidated net income.

Counterparty Credit Risk

We are exposed to credit risk if counterparties to our derivative contracts do not perform as expected. We minimize counterparty credit risk through credit approvals, limits, monitoring procedures and obtaining collateral, as appropriate.

The total notional or contractual amounts, fair value, collateral and net exposure of our derivative financial instruments at September 30, 2010 and December 31, 2009, respectively, were as follows:


			September 30, 2010										December 31, 2009
(Dollars in thousands)	Balance sheet location		Notional or contractual amount		Fair value			Collateral (1)		Net exposure (2)			Notional or contractual amount		Fair value			Collateral (1)		Net exposure (2)
Derivatives designated as hedging instruments:
Interest Rate Risks:
Interest rate swaps		Other assets	$	500,000	$	67,257		$	59,735	$	7,522		$	500,000	$	46,895		$	38,755	$	8,140

Derivatives not designated as hedging instruments:
Currency Exchange Risks:
Foreign exchange forwards		Other assets		11,820		345			—		345			48,276		1,472			—		1,472
Foreign exchange forwards		Other liabilities		54,949		(1,099	)		—		(1,099	)		9,828		(85	)		—		(85	)

Net exposure						(754	)		—		(754	)				1,387			—		1,387

Other Derivative Instruments:
Equity warrant assets		Other assets		121,517		42,569			—		42,569			120,192		41,292			—		41,292

Other derivatives:
Foreign exchange forwards		Other assets		317,509		9,897			—		9,897			316,759		16,772			—		16,772
Foreign exchange forwards		Other liabilities		297,056		(9,782	)		—		(9,782	)		326,116		(15,593	)		—		(15,593	)
Foreign currency options		Other assets		117,473		2,415			—		2,415			1,819		192			—		192
Foreign currency options		Other liabilities		117,473		(2,415	)		—		(2,415	)		1,819		(192	)		—		(192	)
Other derivatives (3)		Other assets		634		274			—		274			—		—			—		—

Net exposure						389			—		389					1,179			—		1,179

Net					$	109,461		$	59,735	$	49,726				$	90,753		$	38,755	$	51,998

(1)	Cash collateral received from counterparties for our interest rate swap agreements is recorded as a component of “short-term borrowings” on our consolidated balance sheets.

(2)

Net exposure for contracts in a gain position reflects the replacement cost in the event of nonperformance by all such counterparties. The credit ratings of our institutional counterparties as of September 30, 2010 remain at “A” or higher and there were no material changes in their credit ratings during the nine months ended September 30, 2010.

(3)	Represents the equity conversion option for a loan included in our life science client portfolio.

A summary of our derivative activity and the related impact on our consolidated statements of income for the three and nine months ended September 30, 2010 and 2009, respectively, is as follows:


		Three months ended September 30,						Nine months ended September 30,
(Dollars in thousands)	Statement of income location	2010			2009			2010			2009
Derivatives designated as hedging instruments:
Interest Rate Risks:
Net cash benefit associated with interest rate swaps	Interest expense - borrowings	$	5,943		$	5,741		$	18,531		$	14,874
Changes in fair value of interest rate swap	Net gains (losses) on derivative instruments		—			—			—			(170	)

Net gains associated with interest rate risk derivatives		$	5,943		$	5,741		$	18,531		$	14,704

Derivatives not designated as hedging instruments:
Currency Exchange Risks:
Gains (losses) on foreign currency loan revaluations, net	Other noninterest income	$	2,871		$	(94	)	$	(75	)	$	1,886
(Losses) gains on foreign exchange forward contracts, net	Net gains (losses) on derivative instruments		(2,698	)		(128	)		680			(2,664	)

Net gains (losses) associated with currency risk		$	173		$	(222	)	$	605		$	(778	)

Other Derivative Instruments:
Gains (losses) on equity warrant assets	Net gains (losses) on derivative instruments	$	3,762		$	(1,322	)	$	3,073		$	(593	)

Gains on client foreign exchange forward contracts, net	Net gains (losses) on derivative instruments	$	131		$	360		$	750		$	1,304

Changes in fair value of other derivatives	Net gains (losses) on derivative instruments	$	62		$	—		$	62		$	—

10. Other Noninterest Income and Other Noninterest Expense

A summary of other noninterest income for the three and nine months ended September 30, 2010 and 2009, respectively, is as follows:


	Three months ended September 30,					Nine months ended September 30,
(Dollars in thousands)	2010		2009			2010			2009
Fund management fees	$	2,702	$	2,437		$	8,098		$	7,625
Service-based fee income (1)		1,894		1,700			6,512			5,645
Unused commitment fees		1,352		906			3,959			2,465
Currency revaluation gains		661		275			987			383
Gains (losses) on foreign currency loans revaluation, net		2,871		(94	)		(75	)		1,886
Other		1,901		1,025			5,426			3,826

Total other noninterest income	$	11,381	$	6,249		$	24,907		$	21,830

(1)	Includes income from SVB Analytics and its subsidiary, eProsper.

A summary of other noninterest expense for the three and nine months ended September 30, 2010 and 2009, respectively, is as follows:


	Three months ended September 30,				Nine months ended September 30,
(Dollars in thousands)	2010		2009		2010		2009
Telephone	$	1,208	$	325	$	3,438	$	3,042
Tax credit fund amortization		1,050		1,165		3,107		3,458
Client services		651		670		2,006		1,402
Postage and supplies		571		165		1,645		2,328
Dues and publications		444		325		1,093		1,266
Other		3,070		1,469		8,660		7,479

Total other noninterest expense	$	6,994	$	4,119	$	19,949	$	18,975

11. Segment Reporting

We have four operating segments for management reporting purposes: Global Commercial Bank, Relationship Management, SVB Capital, and Other Business Services. Our Other Business Services group includes Sponsored Debt Funds & Strategic Investments and SVB Analytics. The results of our operating segments are based on our internal management reporting process.

Our primary source of revenue is from net interest income, which is primarily the difference between interest earned on loans, net of funds transfer pricing (“FTP”), and interest paid on deposits, net of FTP. Accordingly, our segments are reported using net interest income, net of FTP. FTP is an internal measurement framework designed to assess the financial impact of a financial institution’s sources and uses of funds. It is the mechanism by which an earnings credit is given for deposits raised, and an earnings charge is made for funded loans. FTP is calculated by applying a transfer rate to pooled, or aggregated, loan and deposit volumes.

We also evaluate performance based on provision for loan losses, noninterest income and noninterest expense, which are presented as components of segment operating profit or loss. In calculating each operating segment’s noninterest expense, we consider the direct costs incurred by the operating segment as well as certain allocated direct costs. As part of this review, we allocate certain corporate overhead costs to a corporate account. We do not allocate income taxes to our segments. Additionally, our management reporting model is predicated on average asset balances; therefore, period-end asset balances are not presented for segment reporting purposes. Changes in an individual client’s primary relationship designation have resulted, and in the future may result, in the inclusion of certain clients in different segments in different periods.

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

With respect to our operating segments, only Global Commercial Bank, Relationship Management and SVB Capital were determined to be separate reportable segments as of September 30, 2010.

Changes to Segment Reporting Effective January 1, 2010

Effective January 1, 2010, we changed the way we monitor performance and results for certain of our business lines. We made certain changes to the items reported under our Global Commercial Bank, Relationship Management and Other Business Services segments. These changes do not change the four operating segments we currently report. As a result of these changes, our Global Commercial Bank segment’s income before income tax expense for 2009 was reduced by $41.0 million, as it now includes the operating expenses of the loan and deposit operations, which was previously included as a part of Other Items. Changes to other operating segments were not significant. We have reclassified all prior period segment information to conform to the current presentation of our reportable segments. The following is a description of the services that our four operating segments provide:

•

Global Commercial Bank provides solutions to the financial needs of commercial clients through lending, deposit products, cash management services, and global banking and trade products and services. It also serves the needs of our non-U.S. clients with global banking products, including loans, deposits and global finance, in key foreign entrepreneurial markets, where applicable. Effective January 1, 2010, Global Commercial Bank also includes the results of certain other business units that were previously reported as part of Relationship Management and Other Items.

•

Relationship Management provides banking products and a range of credit services to targeted high-net-worth individuals using both long-term secured and short-term unsecured lines of credit.

•

SVB Capital manages venture capital and private equity funds on behalf of SVB Financial Group and other third party limited partners. The SVB Capital family of funds is comprised of funds of funds and co-investment funds.

•

Other Business Services includes the results of our Sponsored Debt Funds & Strategic Investments segment, which is comprised of (i) our sponsored debt funds: Gold Hill Funds, which provide secured debt to private companies of all stages, and Partners for Growth Funds, which provide secured debt primarily to mid-stage and late-stage clients, and (ii) certain strategic investments held by SVB Financial. Other Business Services also includes the results of SVB Analytics, which provides equity valuation and equity management services to private companies and venture capital firms. Effective January 1, 2010, SVB Analytics also includes the results of certain other business units that were previously reported as part of Other Items.

The summary financial results of our operating segments are presented along with a reconciliation to our consolidated interim results. The Other Items column reflects the adjustments necessary to reconcile the results of the operating segments to the consolidated financial statements prepared in conformity with GAAP. Net interest income (loss) in the Other Items column is primarily interest income recognized from our available-for-sale securities portfolio, partially offset by interest income transferred to the segments as part of FTP. Noninterest income in the Other Items column is primarily attributable to noncontrolling interests and gains (losses) on equity warrant assets. Noninterest expense in the Other Items column primarily consists of expenses associated with corporate support functions such as information technology, finance, human resources, and legal, as well as certain corporate wide adjustments related to compensation expenses. Additionally, average assets in the Other Items column primarily consist of cash and cash equivalents and our available-for-sale securities portfolio balances.

Our segment information for the three and nine months ended September 30, 2010 and 2009 is as follows:


(Dollars in thousands)	Global Commercial Banking			Relationship Management			SVB Capital (1)			Other Business Services (1)			Other Items			Total
Three months ended September 30, 2010
Net interest income (loss)	$	84,775		$	8,543		$	—		$	(16	)	$	13,039		$	106,341
(Provision for) recovery of loan losses		(8,376	)		(2,639	)		—			—			44			(10,971	)
Noninterest income		31,399			360			6,418			2,995			45,064			86,236
Noninterest expense (2)		(58,706	)		(4,785	)		(2,752	)		(3,559	)		(34,369	)		(104,171	)

Income (loss) before income tax expense (3)	$	49,092		$	1,479		$	3,666		$	(580	)	$	23,778		$	77,435

Total average loans, net of unearned income	$	3,485,505		$	982,614		$	—		$	—		$	30,368		$	4,498,487
Total average assets		3,749,453			982,881			119,055			89,362			9,814,887			14,755,638
Total average deposits		11,762,637			176,734			—			—			(20,150	)		11,919,221

Three months ended September 30, 2009
Net interest income (loss)	$	88,596		$	8,582		$	(10	)	$	(76	)	$	(274	)	$	96,818
Provision for loan losses		(3,153	)		(4,855	)		—			—			(22	)		(8,030	)
Noninterest income		27,025			333			3,014			41			3,894			34,307
Noninterest expense		(42,715	)		(2,972	)		(3,355	)		(2,806	)		(27,959	)		(79,807	)

Income (loss) before income tax expense (3)	$	69,753		$	1,088		$	(351	)	$	(2,841	)	$	(24,361	)	$	43,288

Total average loans, net of unearned income	$	3,576,973		$	945,694		$	—		$	—		$	21,843		$	4,544,510
Total average assets		3,697,379			946,811			96,077			87,396			6,582,963			11,410,626
Total average deposits		8,757,704			146,367			—			—			6,351			8,910,422

Nine months ended September 30, 2010
Net interest income (loss)	$	253,044		$	25,017		$	(1	)	$	(108	)	$	35,665		$	313,617
Provision for loan losses		(25,856	)		(3,206	)		—			—			(62	)		(29,124	)
Noninterest income		89,123			1,047			14,270			8,643			62,583			175,666
Noninterest expense (2)		(171,037	)		(14,452	)		(9,654	)		(10,853	)		(100,931	)		(306,927	)

Income (loss) before income tax expense (3)	$	145,274		$	8,406		$	4,615		$	(2,318	)	$	(2,745	)	$	153,232

Total average loans, net of unearned income	$	3,280,358		$	943,969		$	—		$	—		$	19,104		$	4,243,431
Total average assets		3,551,018			945,024			108,449			91,481			9,600,167			14,296,139
Total average deposits		11,420,631			193,030			—			—			(12,878	)		11,600,783

Nine months ended September 30, 2009
Net interest income (loss)	$	273,957		$	25,897		$	(13	)	$	(156	)	$	(19,675	)	$	280,010
Provision for loan losses		(60,862	)		(11,979	)		—			—			(48	)		(72,889	)
Noninterest income (loss)		80,686			944			3,015			4,399			(32,043	)		57,001
Noninterest expense, excluding impairment of goodwill (2)		(131,636	)		(9,858	)		(9,991	)		(8,963	)		(91,419	)		(251,867	)
Impairment of goodwill		—			—			—			(4,092	)		—			(4,092	)

Income (loss) before income tax expense (3)	$	162,145		$	5,004		$	(6,989	)	$	(8,812	)	$	(143,185	)	$	8,163

Total average loans, net of unearned income	$	3,822,200		$	966,939		$	—		$	—		$	22,342		$	4,811,481
Total average assets		3,932,869			968,384			91,412			79,244			5,863,263			10,935,172
Total average deposits		8,265,536			155,679			—			—			5,960			8,427,175

(1)	SVB Capital’s and Other Business Services’ components of net interest income (loss), noninterest income (loss), noninterest expense and total average assets are shown net of noncontrolling interests for all periods presented.

(2)	The Global Commercial Bank segment includes direct depreciation and amortization of $1.2 million and $0.9 million for the three months ended September 30, 2010 and 2009, respectively, and $3.4 million and $2.5 million for the nine months ended September 30, 2010 and 2009, respectively.

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

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

In the normal course of business, we use financial instruments with off-balance sheet risk to meet the financing needs of our customers. These financial instruments include commitments to extend credit, commercial and standby letters of credit and commitments to invest in venture capital/private equity fund investments. These instruments involve, to varying degrees, elements of credit risk. Credit risk is defined as the possibility of sustaining a loss because other parties to the financial instrument fail to perform in accordance with the terms of the contract.

Commitments to Extend Credit

The following table summarizes information related to our commitments to extend credit at September 30, 2010 and December 31, 2009, respectively:


(Dollars in thousands)	September 30, 2010		December 31, 2009
Commitments available for funding: (1)
Fixed interest rate commitments	$	426,273	$	539,986
Variable interest rate commitments		5,465,804		4,798,740

Total commitments available for funding	$	5,892,077	$	5,338,726

Commitments unavailable for funding (2)	$	1,014,933	$	1,103,489

Maximum lending limits for accounts receivable factoring arrangements (3)	$	687,364	$	535,257
Reserve for unfunded credit commitments		15,892		13,331

(1)

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