Edgar Filing: SVB FINANCIAL GROUP

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2018

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 every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No ¨

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

Large accelerated filer x Accelerated filer ¨

Non-accelerated filer ¨ Smaller reporting company ¨

Emerging growth company ¨

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

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

At October 31, 2018, 53,250,854 shares of the registrant’s common stock ($0.001 par value) were outstanding.

Available on the web at www.svb.com

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TABLE OF CONTENTS



		Page
PART I - FINANCIAL INFORMATION		4

Item 1.	Interim Consolidated Financial Statements	4

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

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

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

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

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

	Notes to Interim Consolidated Financial Statements (Unaudited)	9

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	60

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	103

Item 4.	Controls and Procedures	105

PART II - OTHER INFORMATION		106

Item 1.	Legal Proceedings	107

Item 1A.	Risk Factors	107

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	107

Item 3.	Defaults Upon Senior Securities	107

Item 4.	Mine Safety Disclosures	107

Item 5.	Other Information	107

Item 6.	Exhibits	107

SIGNATURES		108

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Glossary of Acronyms that may be used in this Report

AFS— Available-for-Sale

APIC— Additional Paid-in Capital

ASC— Accounting Standards Codification

ASU— Accounting Standards Update

CET— Common Equity Tier

EHOP— Employee Home Ownership Program of the Company

EPS— Earnings Per Share

ERI— Energy and Resource Innovation

ESOP— Employee Stock Ownership Plan of the Company

ESPP— 1999 Employee Stock Purchase Plan of the Company

FASB— Financial Accounting Standards Board

FDIC— Federal Deposit Insurance Corporation

FHLB— Federal Home Loan Bank

FRB— Federal Reserve Bank

FTE— Full-Time Employee

FTP— Funds Transfer Pricing

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

HTM— Held-to-Maturity

IASB— International Accounting Standards Board

IPO— Initial Public Offering

IRS— Internal Revenue Service

IT— Information Technology

LIBOR— London Interbank Offered Rate

M&A— Merger and Acquisition

OTTI— Other Than Temporary Impairment

SEC— Securities and Exchange Commission

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

TDR— Troubled Debt Restructuring

UK— United Kingdom

VIE— Variable Interest Entity

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PART I - FINANCIAL INFORMATION

ITEM 1. INTERIM CONSOLIDATED FINANCIAL STATEMENTS

SVB FINANCIAL GROUP AND SUBSIDIARIES

INTERIM CONSOLIDATED BALANCE SHEETS (UNAUDITED)



(Dollars in thousands, except par value and share data)	September 30, 2018			December 31, 2017
Assets
Cash and cash equivalents	$	3,819,141		$	2,923,075
Available-for-sale securities, at fair value (cost of $9,236,301 and $11,131,008, respectively)	9,087,609			11,120,664
Held-to-maturity securities, at cost (fair value of $15,372,238 and $12,548,280, respectively)	15,899,726			12,663,455
Non-marketable and other equity securities	896,249			651,053
Total investment securities	25,883,584			24,435,172
Loans, net of unearned income	27,494,915			23,106,316
Allowance for loan losses	(285,713		)	(255,024		)
Net loans	27,209,202			22,851,292
Premises and equipment, net of accumulated depreciation and amortization	121,890			128,682
Accrued interest receivable and other assets	1,105,917			876,246
Total assets	$	58,139,734		$	51,214,467
Liabilities and total equity
Liabilities:
Noninterest-bearing demand deposits	$	40,473,774		$	36,655,497
Interest-bearing deposits	8,122,337			7,598,578
Total deposits	48,596,111			44,254,075
Short-term borrowings	2,631,252			1,033,730
Other liabilities	1,146,109			911,755
Long-term debt	696,217			695,492
Total liabilities	53,069,689			46,895,052
Commitments and contingencies (Note 13 and Note 16)
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; 53,250,255 shares and 52,835,188 shares outstanding, respectively	53			53
Additional paid-in capital	1,360,030			1,314,377
Retained earnings	3,672,696			2,866,837
Accumulated other comprehensive loss	(108,410		)	(1,472		)
Total SVBFG stockholders’ equity	4,924,369			4,179,795
Noncontrolling interests	145,676			139,620
Total equity	5,070,045			4,319,415
Total liabilities and total equity	$	58,139,734		$	51,214,467

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

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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)	2018			2017			2018			2017
Interest income:
Loans	$	352,353		$	268,445		$	979,724		$	745,983
Investment securities:
Taxable	142,075			109,443			403,702			294,768
Non-taxable	10,748			1,172			23,506			2,703
Federal funds sold, securities purchased under agreements to resell and other short-term investment securities	8,137			6,211			20,080			16,670
Total interest income	513,313			385,271			1,427,012			1,060,124
Interest expense:
Deposits	8,042			2,304			18,409			6,218
Borrowings	12,049			8,993			29,075			27,243
Total interest expense	20,091			11,297			47,484			33,461
Net interest income	493,222			373,974			1,379,528			1,026,663
Provision for credit losses	17,174			23,522			74,226			70,062
Net interest income after provision for credit losses	476,048			350,452			1,305,302			956,601
Noninterest income:
Gains on investment securities, net	32,193			15,238			77,365			48,838
Gains on equity warrant assets, net	34,141			24,922			72,393			42,432
Foreign exchange fees	32,656			29,671			100,560			82,026
Credit card fees	24,121			20,270			68,739			56,099
Deposit service charges	19,588			14,508			56,081			43,046
Client investment fees	36,265			15,563			88,592			37,571
Lending related fees	10,675			15,404			30,938			32,874
Letters of credit and standby letters of credit fees	8,409			7,306			24,938			20,951
Other	12,022			15,896			38,671			41,128
Total noninterest income	210,070			158,778			558,277			404,965
Noninterest expense:
Compensation and benefits	195,437			153,263			543,198			449,412
Professional services	36,542			32,987			112,080			86,331
Premises and equipment	19,858			18,937			57,576			53,753
Net occupancy	13,694			12,660			40,598			35,437
Business development and travel	12,712			10,329			35,998			30,913
FDIC and state assessments	9,550			8,359			29,306			26,354
Correspondent bank fees	3,513			3,162			10,200			9,770
Other	18,139			18,064			51,645			54,670
Total noninterest expense	309,445			257,761			880,601			746,640
Income before income tax expense	376,673			251,469			982,978			614,926
Income tax expense	95,308			97,351			246,561			220,412
Net income before noncontrolling interests	281,365			154,118			736,417			394,514
Net income attributable to noncontrolling interests	(6,548		)	(5,498		)	(28,841		)	(21,218		)
Net income available to common stockholders	$	274,817		$	148,620		$	707,576		$	373,296
Earnings per common share—basic	$	5.16		$	2.82		$	13.33		$	7.11
Earnings per common share—diluted	5.10			2.79			13.15			7.01

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

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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)	2018			2017			2018			2017
Net income before noncontrolling interests	$	281,365		$	154,118		$	736,417		$	394,514
Other comprehensive loss, net of tax:
Change in foreign currency cumulative translation gains and losses:
Foreign currency translation (losses) gains	(3,259		)	1,928			(5,337		)	4,463
Related tax benefit (expense)	905			(787		)	1,482			(1,821		)
Change in unrealized gains and losses on available-for-sale securities:
Unrealized holding (losses) gains	(24,902		)	925			(98,032		)	(12,471		)
Related tax benefit (expense)	6,994			(429		)	27,269			5,207
Reclassification adjustment for losses (gains) included in net income (1)	—			101			—			(384		)
Related tax (benefit) expense (1)	—			(41		)	—			157
Reclassification of unrealized gains on equity securities to retained earnings for ASU 2016-01 (1)	—			—			(40,316		)	—
Related tax expense (1)	—			—			11,145			—
Amortization of unrealized holding gains on securities transferred from available-for-sale to held-to-maturity	(1,777		)	(1,594		)	(3,915		)	(4,931		)
Related tax benefit	494			641			1,085			1,984
Reclassification of stranded tax effect to retained earnings for ASU 2018-02 (1)	—			—			(319		)	—
Other comprehensive loss, net of tax	(21,545		)	744			(106,938		)	(7,796		)
Comprehensive income	259,820			154,862			629,479			386,718
Comprehensive income attributable to noncontrolling interests	(6,548		)	(5,498		)	(28,841		)	(21,218		)
Comprehensive income attributable to SVBFG	$	253,272		$	149,364		$	600,638		$	365,500


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

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

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SVB FINANCIAL GROUP AND SUBSIDIARIES

INTERIM CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (UNAUDITED)



	Common Stock			Additional Paid-in Capital		Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Total SVBFG Stockholders’ Equity			Noncontrolling Interests			Total Equity
(Dollars in thousands)	Shares	Amount		Additional Paid-in Capital		Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Total SVBFG Stockholders’ Equity			Noncontrolling Interests			Total Equity
Balance at December 31, 2016	52,254,074	$	52	$	1,242,741	$	2,376,331		$	23,430		$	3,642,554		$	134,483		$	3,777,037
Common stock issued under employee benefit plans, net of restricted stock cancellations	458,742	1		14,191		—			—			14,192			—			14,192
Common stock issued under ESOP	10,838	—		2,094		—			—			2,094			—			2,094
Net income	—	—		—		373,296			—			373,296			21,218			394,514
Capital calls and distributions, net	—	—		—		—			—			—			(18,216		)	(18,216		)
Net change in unrealized gains and losses on AFS securities, net of tax	—	—		—		—			(7,491		)	(7,491		)	—			(7,491		)
Amortization of unrealized holding gains on securities transferred from AFS to HTM, net of tax	—	—		—		—			(2,947		)	(2,947		)	—			(2,947		)
Foreign currency translation adjustments, net of tax	—	—		—		—			2,642			2,642			—			2,642
Share-based compensation, net	—	—		35,473		—			—			35,473			—			35,473
Balance at September 30, 2017	52,723,654	$	53	$	1,294,499	$	2,749,627		$	15,634		$	4,059,813		$	137,485		$	4,197,298
Balance at December 31, 2017	52,835,188	$	53	$	1,314,377	$	2,866,837		$	(1,472	)	$	4,179,795		$	139,620		$	4,319,415
Cumulative adjustment for ASU 2014-09, net of tax (1)	—	—		—		(5,802		)	—			(5,802		)	—			(5,802		)
Cumulative adjustment for ASU 2016-01, net of tax (1)	—	—		—		103,766			(29,171		)	74,595			—			74,595
Reclassification of stranded tax effect for ASU 2018-02 (1)	—	—		—		319			(319		)	—			—			—
Common stock issued under employee benefit plans, net of restricted stock cancellations	405,395	—		9,108		—			—			9,108			—			9,108
Common stock issued under ESOP	9,672	—		2,577		—			—			2,577			—			2,577
Net income	—	—		—		707,576			—			707,576			28,841			736,417
Capital calls and distributions, net	—	—		—		—			—			—			(22,785		)	(22,785		)
Net change in unrealized gains and losses on AFS securities, net of tax	—	—		—		—			(70,763		)	(70,763		)	—			(70,763		)
Amortization of unrealized holding gains on securities transferred from AFS to HTM, net of tax	—	—		—		—			(2,830		)	(2,830		)	—			(2,830		)
Foreign currency translation adjustments, net of tax	—	—		—		—			(3,855		)	(3,855		)	—			(3,855		)
Share-based compensation, net	—	—		33,968		—			—			33,968			—			33,968
Balance at September 30, 2018	53,250,255	$	53	$	1,360,030	$	3,672,696		$	(108,410	)	$	4,924,369		$	145,676		$	5,070,045


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

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

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SVB FINANCIAL GROUP AND SUBSIDIARIES

INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)



	Nine months ended September 30,
(Dollars in thousands)	2018			2017
Cash flows from operating activities:
Net income before noncontrolling interests	$	736,417		$	394,514
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for credit losses	74,226			70,062
Changes in fair values of equity warrant assets, net of proceeds from exercises	(24,462		)	(29,666		)
Changes in fair values of derivatives, net	2,964			8,214
Gains on investment securities, net (1)	(77,365		)	(31,032		)
Distributions of earnings from non-marketable and other equity securities (1)	54,605			38,965
Depreciation and amortization	43,389			39,265
Amortization of premiums and discounts on investment securities, net	(252		)	2,609
Amortization of share-based compensation	33,968			27,739
Amortization of deferred loan fees	(94,771		)	(81,060		)
Deferred income tax (benefit) expense	(16,532		)	2,325
Excess tax benefit from exercise of stock options and vesting of restricted shares	(17,543		)	(14,399		)
Losses from the write-off of premises and equipment	7,117			—
Other gains	—			(6,150		)
Changes in other assets and liabilities:
Accrued interest receivable and payable, net	(51,521		)	(26,092		)
Accounts receivable and payable, net	1,697			4,120
Income tax receivable and payable, net	(12,962		)	30,069
Accrued compensation	5,505			(11,731		)
Foreign exchange spot contracts, net	86,298			86,911
Other, net	(46,874		)	16,410
Net cash provided by operating activities	703,904			521,073
Cash flows from investing activities:
Purchases of available-for-sale securities	(662,458		)	(2,420,741		)
Proceeds from sales of available-for-sale securities	—			7,311
Proceeds from maturities and paydowns of available-for-sale securities	2,529,666			2,434,039
Purchases of held-to-maturity securities	(4,726,595		)	(3,812,782		)
Proceeds from maturities and paydowns of held-to-maturity securities	1,482,204			1,283,764
Purchases of non-marketable and other securities	(56,435		)	(18,766		)
Proceeds from sales and distributions of capital of non-marketable and other securities (1)	83,020			35,821
Net increase in loans	(4,356,980		)	(2,263,600		)
Purchases of premises and equipment	(28,718		)	(35,470		)
Proceeds from sale of equity valuation services business	—			3,000
Net cash used for investing activities	(5,736,296		)	(4,787,424		)
Cash flows from financing activities:
Net increase in deposits	4,342,036			5,832,165
Net increase (decrease) in short-term borrowings	1,597,522			(507,828		)
Principal payments of long-term debt	—			(46,235		)
(Distributions to noncontrolling interests), net of contributions from noncontrolling interests	(22,785		)	(18,216		)
Proceeds from issuance of common stock, ESPP and ESOP	11,685			16,286
Net cash provided by financing activities	5,928,458			5,276,172
Net increase in cash and cash equivalents	896,066			1,009,821
Cash and cash equivalents at beginning of period	2,923,075			2,545,750
Cash and cash equivalents at end of period	$	3,819,141		$	3,555,571
Supplemental disclosures:
Cash paid during the period for:
Interest	$	54,681		$	41,324
Income taxes	277,388			190,706
Noncash items during the period:
Changes in unrealized gains and losses on available-for-sale securities, net of tax	$	(70,763	)	$	(7,491	)
Distributions of stock from investments	4,368			5,360

(1)

During the first quarter of 2018 we adopted ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments. This guidance was adopted on a retrospective basis and impacted the presentation between investing and operating activities related to distributions and net gains from our nonmarketable and other securities portfolio. See Note 1—“Basis of Presentation” of the “Notes to Interim Consolidated Financial Statements (unaudited)” under Part I, Item 1 of this report for additional details.

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

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SVB FINANCIAL GROUP AND SUBSIDIARIES

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)


1.	Basis of Presentation

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

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

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

Principles of Consolidation and Presentation

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

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

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

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

Adoption of New Accounting Standards

In May 2014, the FASB issued a new accounting standard update (ASU 2014-09, Revenue from Contracts with Customers (Topic 606)), which provides revenue recognition guidance that is intended to create greater consistency with respect to how and when revenue from contracts with customers is shown in the income statement. The guidance requires that revenue from contracts with customers be recognized when transfer of control over goods or services is passed to customers in the amount of consideration expected to be received. Subsequent Accounting Standard Updates have been issued clarifying the original pronouncement (ASU 2016-08, ASU 2016-10, ASU 2016-12 and ASU 2016-20).

On January 1, 2018, we adopted the new accounting standard ASU 2014-09, Revenue from Contracts with Customers and all the related amendments ("new revenue standard," "ASC 606" or "ASU 2014-09") using the modified retrospective method applied to those contracts which were not completed as of January 1, 2018. We elected to apply the practical expedient which allows us to expense costs related to obtaining contracts as incurred because the amortization period would have been one year or less. We recognized the cumulative effect of initially applying the new revenue standard as an adjustment to the opening balance of retained earnings. The comparative information has not been restated and continues to be reported under the accounting standards in effect for those periods.

We completed a comprehensive scoping exercise to determine the revenue streams that are within the scope of this guidance. The scope of this guidance explicitly excludes net interest income, including interest income earned from our loan and fixed income securities portfolios, as well as certain other noninterest income earned from our lending-, investment- and derivative-related activities. Based on our completed assessment, we did not identify any material changes to the timing or the amounts of our revenue recognition, however, we identified a change in the timing of recognizing fund management fees in other noninterest income for a portion of our SVB Capital funds. Fund management fees for these certain SVB Capital funds will now be recognized at the time of distribution which typically occurs later in the life of the fund than had been previously recognized. The cumulative adjustment to retained earnings associated with this change was $5.8 million, net of tax, with an immaterial impact to our net income on an ongoing basis. The impacts to net income as a result of applying the new revenue standard were decreases of $0.5 million and $1.4 million for the three and nine months ended September 30, 2018, respectively.

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

The cumulative effect of the changes to our consolidated balance sheets at January 1, 2018, for the adoption of the new revenue standard were as follows:



(Dollars in thousands)	Balance at December 31, 2017		Adjustments Due to Adoption of ASC 606			Balance at January 1, 2018
Accrued interest receivable and other assets:
Accounts receivable	$	55,946	$	(34,340	)	$	21,606
Other liabilities:
Deferred revenue	27,057		(26,321		)	736
Current taxes payable	4,675		(2,217		)	2,458
Stockholders' Equity:
Retained earnings	2,866,837		(5,802		)	2,861,035

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In accordance with the new revenue standard requirements, the disclosure of the impact of adoption on our consolidated balance sheets at September 30, 2018 and our statements of income for the three and nine months ended September 30, 2018, were as follows:



	September 30, 2018
(Dollars in thousands)	As Reported		Balances Without Adoption of ASC 606			Effect of Change Higher/(Lower)
Accrued interest receivable and other assets:
Accounts receivable	$	61,090	$	100,470		$	(39,380	)
Other liabilities:
Deferred fees	556		28,379			(27,823		)
Current taxes payable (receivable)	2,002		(694		)	2,696
Stockholders' Equity:
Retained earnings	3,672,696		3,678,020			(5,324		)



	Three months ended September 30, 2018
(Dollars in thousands)	As Reported		Balances Without Adoption of ASC 606		Effect of Change Higher/(Lower)
Other noninterest income:
Fund management fees	$	5,479	$	6,087	$	(608	)
Income tax expense	95,308		95,463		(155		)

Net Income available to common stockholders	274,817		275,270		(453		)
Diluted earnings per share	5.10		5.11		(0.01		)



	Nine months ended September 30, 2018
(Dollars in thousands)	As Reported		Balances Without Adoption of ASC 606		Effect of Change Higher/(Lower)
Other noninterest income:
Fund management fees	$	17,144	$	19,001	$	(1,857	)
Income tax expense	246,561		247,040		(479		)

Net Income available to common stockholders	707,576		708,954		(1,378		)
Diluted earnings per share	13.15		13.18		(0.03		)

In February 2018, the FASB issued a new accounting standard update (ASU 2018-02, Income Statement - Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income (ASU "2018-02")) to address certain stranded income tax effects in accumulated other comprehensive income ("AOCI") resulting from H.R.1, known as the Tax Cuts and Jobs Act (the "TCJ Act"). ASU 2018-02 changed current accounting whereby an entity may elect to reclassify the stranded tax effect from AOCI to retained earnings in each period in which the effect of the change in the U.S. federal corporate income tax rate in the TCJ Act (or portion thereof) is recorded. ASU 2018-02 is effective for periods beginning after December 15, 2018 and early adoption is permitted. We have elected to early adopt ASU 2018-02 and reclassified approximately $0.3 million from accumulated other comprehensive income to retained earnings within our consolidated statements of stockholders' equity in the first quarter of 2018.

On January 1, 2018, we adopted the new accounting standard update ASU 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities (Topic 825), which addresses certain aspects of recognition, measurement, presentation and disclosure of financial instruments. This guidance requires equity investments (except those accounted for under the equity method of accounting) to be measured at fair value with changes in fair value recognized in net income. We adopted this guidance using the modified retrospective method and our equity investments carried at cost with readily determinable fair values were re-measured at fair value and the difference between cost and fair value was recorded as a cumulative-effect adjustment to opening retained earnings as of January 1, 2018. The adjustment to opening retained earnings for these investments was $74.6 million, net of tax, with subsequent changes in the fair value of these equity securities recorded as unrealized gains or losses in

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our consolidated statements of income. Additionally, in accordance with this guidance, net unrealized gains of $29.2 million, net of tax, included in accumulated other comprehensive income on January 1, 2018, related to our previously reported available-for-sale equity securities, were reclassified as an adjustment to retained earnings. Subsequent changes in the fair value of these equity securities were recorded as unrealized gains or losses in our consolidated statements of income. Furthermore, for purposes of disclosing the fair value of loans carried at amortized cost, our valuation methodology was updated to conform to an “exit price” concept as required by the standard update, resulting in an immaterial change in the fair value.

In August 2016, the FASB issued a new accounting standard update (ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments), which clarifies the guidance on eight specific cash flow issues. We adopted the new accounting standard, specifically as it relates to distributions from our equity method investments, on January 1, 2018. We elected to adopt the nature of distribution approach and applied the guidance retrospectively. The new guidance had an immaterial impact on the presentation between investing and operating activities within our statements of cash flows related to distributions and net gains from our nonmarketable and other securities portfolio.

In November 2016, the FASB issued a new accounting standard update (ASU 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash), which requires that a statement of cash flows explains the change during the period in the total cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. Therefore, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning of period and end of period total amounts shown on the statement of cash flows. Previous to the update, there had been some diversity in practice. Given that we had already classified restricted cash such as cash reserves at the Federal Reserve as part of cash and cash equivalents on the cash flow statement, the update had no impact on how we were already reporting and presenting our statement of cash flows.

Recent Accounting Pronouncements

In February 2016, the FASB issued a new accounting standard update (ASU 2016-02, Leases (Topic 842)), which will require for all operating leases the recognition of a right-of-use asset and a corresponding lease liability, in the statement of financial position. The lease cost will be allocated over the lease term on a straight-line basis. There were further amendments, including practical expedients, with the issuance of ASU 2018-01, “Leases (Topic 842): Land Easement Practical Expedient for Transition to Topic 842” in January 2018. In July 2018 the FASB issued ASU No. 2018-11, "Leases (Topic 842): Targeted Improvements," which provides us with the option to apply the new leasing standard to all open leases as of the adoption date, on a prospective basis. This guidance will be effective on January 1, 2019, with early adoption permitted. We plan to adopt the lease accounting guidance on January 1, 2019, on a prospective basis. We intend to elect the transition "package of expedients" which will result in continuing to account for existing leases for which the commencement date is before January 1, 2019, in accordance with Leases (Topic 840) throughout the lease term, including periods after adoption of the new guidance. We expect the adoption of this standard to have an impact of less than one percent of total assets and liabilities on our consolidated balance sheets reflective of the recognition of right-of-use assets and related lease liabilities associated predominantly with noncancelable operating leases. In addition, we do not expect the adoption of this guidance to have a material impact on our consolidated statements of income.

In June 2016, the FASB issued a new accounting standard update (ASU 2016-13, Financial Instruments- Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments), which amends the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses over the life of the loan and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. This guidance will be effective January 1, 2020, on a modified retrospective approach, with early adoption permitted, but not before January 1, 2019. We currently have a project team in place and subject matter experts to assist with our review of key interpretive issues and the assessment of our existing credit loss forecasting models and processes against the new guidance to determine what modifications may be required. We are currently evaluating the impact this guidance will have on our financial position, results of operation and stockholders’ equity.

In August 2017, the FASB issued a new accounting standard update (ASU 2017-12, Targeted Improvements to Accounting for Hedging Activities (Topic 815)), which better aligns an entity’s risk management activities and financial reporting for hedging relationships through changes to the designation and measurement guidance for qualifying hedging relationships and the presentation of hedge results. The targeted improvements in the ASU will allow increased flexibility to structure hedges of fixed rate instruments and floating rate instruments. Application of the ASU is expected to reduce the amount of ineffectiveness as the revised accounting guidance will better reflect the economics of risk management activities and will also reduce the volatility associated with foreign currency hedging. The ASU requires the hedging instrument to be presented in the same line item as the hedged item and requires expanded disclosures. There were further amendments, with the issuance of ASU 2018-16, “Derivatives and Hedging (Topic 815)," which provides us with the option to use the Overnight Index Swap ("OIS") rate based on the Secured Overnight Financing Rate ("SOFR") as a U.S. benchmark interest rate for purposes of applying hedge accounting under Topic 815. This guidance will be effective January 1, 2019, with early adoption permitted. We plan to early adopt this

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guidance in the fourth quarter of 2018, effective October 1, 2018. The accounting standard will not have a material impact on our consolidated financial position, results of operations or the disclosures in our Notes to the Consolidated Financial Statements.

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

Reclassifications

Certain prior period amounts, primarily related to the adoption of new accounting guidance, have been reclassified to conform to current period presentations.


2.	Stockholders' Equity and EPS

Accumulated Other Comprehensive Income

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



		Three months ended September 30,					Nine months ended September 30,
(Dollars in thousands)	Income Statement Location	2018		2017			2018		2017
Reclassification adjustment for losses (gains) included in net income (1)	Gains on investment securities, net	$	—	$	101		$	—	$	(384	)
Related tax (benefit) expense (1)	Income tax expense	—		(41		)	—		157
Total reclassification adjustment for losses (gains) included in net income, net of tax (1)		$	—	$	60		$	—	$	(227	)


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

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EPS

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



	Three months ended September 30,				Nine months ended September 30,
(Dollars and shares in thousands, except per share amounts)	2018		2017		2018		2017
Numerator:
Net income available to common stockholders	$	274,817	$	148,620	$	707,576	$	373,296
Denominator:
Weighted average common shares outstanding—basic	53,235		52,705		53,062		52,530
Weighted average effect of dilutive securities:
Stock options and ESPP	383		343		404		381
Restricted stock units	301		257		334		319
Weighted average common shares outstanding—diluted	53,919		53,305		53,800		53,230
Earnings per common share:
Basic	$	5.16	$	2.82	$	13.33	$	7.11
Diluted	5.10		2.79		13.15		7.01

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



	Three months ended September 30,		Nine months ended September 30,
(Shares in thousands)	2018	2017	2018	2017
Stock options	86	112	49	61
Restricted stock units	5	5	71	2
Total	91	117	120	63

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Consolidated Statement of Changes in Equity

The following table summarizes the changes in our consolidated equity for the three months ended September 30, 2018 and 2017:



	Common Stock			Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)			Total SVBFG Stockholders’ Equity			Noncontrolling Interests			Total Equity
(Dollars in thousands)	Shares	Amount		Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)			Total SVBFG Stockholders’ Equity			Noncontrolling Interests			Total Equity
Balance at June 30, 2017	52,684,159	$	53	$	1,283,485	$	2,601,007	$	14,890		$	3,899,435		$	140,600		$	4,040,035
Common stock issued under employee benefit plans, net of restricted stock cancellations	39,495	—		2,370		—		—			2,370			—			2,370
Net income	—	—		—		148,620		—			148,620			5,498			154,118
Capital calls and distributions, net	—	—		—		—		—			—			(8,613		)	(8,613		)
Net change in unrealized gains and losses on AFS securities, net of tax	—	—		—		—		556			556			—			556
Amortization of unrealized holding gains on securities transferred from AFS to HTM, net of tax	—	—		—		—		(953		)	(953		)	—			(953		)
Foreign currency translation adjustments, net of tax	—	—		—		—		1,141			1,141			—			1,141
Share-based compensation, net	—	—		8,644		—		—			8,644			—			8,644
Balance at September 30, 2017	52,723,654	$	53	$	1,294,499	$	2,749,627	$	15,634		$	4,059,813		$	137,485		$	4,197,298
Balance at June 30, 2018	53,210,627	$	53	$	1,346,586	$	3,397,879	$	(86,865	)	$	4,657,653		$	147,188		$	4,804,841
Common stock issued under employee benefit plans, net of restricted stock cancellations	39,628	—		1,943		—		—			1,943			—			1,943
Net income	—	—		—		274,817		—			274,817			6,548			281,365
Capital calls and distributions, net	—	—		—		—		—			—			(8,060		)	(8,060		)
Net change in unrealized gains and losses on AFS securities, net of tax	—	—		—		—		(17,908		)	(17,908		)	—			(17,908		)
Amortization of unrealized holding gains on securities transferred from AFS to HTM, net of tax	—	—		—		—		(1,283		)	(1,283		)	—			(1,283		)
Foreign currency translation adjustments, net of tax	—	—		—		—		(2,354		)	(2,354		)	—			(2,354		)
Share-based compensation, net	—	—		11,501		—		—			11,501			—			11,501
Balance at September 30, 2018	53,250,255	$	53	$	1,360,030	$	3,672,696	$	(108,410	)	$	4,924,369		$	145,676		$	5,070,045

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3.	Share-Based Compensation

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



	Three months ended September 30,						Nine months ended September 30,
(Dollars in thousands)	2018			2017			2018			2017
Share-based compensation expense	$	11,501		$	8,644		$	33,968		$	27,739
Income tax benefit related to share-based compensation expense	(2,895		)	(3,154		)	(7,955		)	(9,518		)

Unrecognized Compensation Expense

As of September 30, 2018, unrecognized share-based compensation expense was as follows:



(Dollars in thousands)	Unrecognized Expense		Weighted Average Expected Recognition Period - in Years
Stock options	$	13,525	2.91
Restricted stock units	73,037		2.74
Total unrecognized share-based compensation expense	$	86,562

Share-Based Payment Award Activity

The table below provides stock option information related to the 2006 Equity Incentive Plan for the nine months ended September 30, 2018:



	Options		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life - in Years	Aggregate Intrinsic Value of In-The- Money Options
Outstanding at December 31, 2017	808,049		$	105.68
Granted	89,616		305.71
Exercised	(191,585	)	83.37
Forfeited	(9,498	)	187.76
Expired	(2,337	)	60.37
Outstanding at September 30, 2018	694,245		136.68		3.76	$	120,932,288
Vested and expected to vest at September 30, 2018	673,674		134.25		3.70	118,982,041
Exercisable at September 30, 2018	415,993		99.63		2.66	87,856,349

The aggregate intrinsic value of outstanding options shown in the table above represents the pre-tax intrinsic value based on our closing stock price of $310.83 as of September 30, 2018. The total intrinsic value of options exercised during the three and nine months ended September 30, 2018 was $8.5 million and $39.5 million, respectively, compared to $3.8 million and $25.8 million for the comparable 2017 periods.

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The table below provides information for restricted stock units under the 2006 Equity Incentive Plan for the nine months ended September 30, 2018:



	Shares		Weighted Average Grant Date Fair Value
Nonvested at December 31, 2017	637,667		$	135.86
Granted	193,405		302.53
Vested	(213,944	)	130.20
Forfeited	(37,080	)	170.97
Nonvested at September 30, 2018	580,048		191.28


4.	Variable Interest Entities

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

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



(Dollars in thousands)	Consolidated VIEs		Unconsolidated VIEs		Maximum Exposure to Loss in Unconsolidated VIEs
September 30, 2018:
Assets:
Cash and cash equivalents	$	5,470	$	—	$	—
Non-marketable and other equity securities (1)	212,514		524,812		524,812
Accrued interest receivable and other assets	298		—		—
Total assets	$	218,282	$	524,812	$	524,812
Liabilities:
Other liabilities (1)	680		166,867		—
Total liabilities	$	680	$	166,867	$	—
December 31, 2017:
Assets:
Cash and cash equivalents	$	6,674	$	—	$	—
Non-marketable and other equity securities (1)	190,562		346,097		346,097
Accrued interest receivable and other assets	365		—		—
Total assets	$	197,601	$	346,097	$	346,097
Liabilities:
Other liabilities (1)	990		100,891		—
Total liabilities	$	990	$	100,891	$	—


(1)	Included in our unconsolidated non-marketable and other equity securities portfolio at September 30, 2018 and December 31, 2017 are investments in qualified affordable housing projects of $261.7 million and $174.2 million, respectively, and related other liabilities consisting of unfunded credit commitments of $166.9 million and $100.9 million, respectively.

Non-marketable and other equity securities

Our non-marketable and other equity securities portfolio primarily represents investments in venture capital and private equity funds, SPD Silicon Valley Bank Co., Ltd. (the Bank's joint venture bank in China (“SPD-SVB”)), debt funds, private and public portfolio companies and investments in qualified affordable housing projects. A majority of these investments are through third- party funds held by SVB Financial in which we do not have controlling or significant variable interests. These investments represent our unconsolidated VIEs in the table above. Our non-marketable and other equity securities portfolio also includes investments from SVB Capital. SVB Capital is the funds management business of SVB Financial Group, which focuses primarily on venture

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capital investments. The SVB Capital family of funds is comprised of direct venture funds that invest in companies and funds of funds that invest in other venture capital funds. We have a controlling and significant variable interest in four of these SVB Capital funds and consolidate these funds for financial reporting purposes.

All investments are generally nonredeemable and distributions are expected to be received through the liquidation of the underlying investments throughout the life of the investment fund. Investments may only be sold or transferred subject to the notice and approval provisions of the underlying investment agreement. Subject to applicable regulatory requirements, including the Volcker Rule, we also make commitments to invest in venture capital and private equity funds. For additional details, see Note 13—“Off-Balance Sheet Arrangements, Guarantees and Other Commitments” of the “Notes to Interim Consolidated Financial Statements (unaudited)” under Part I, Item 1 of this report.

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

As of September 30, 2018, our exposure to loss with respect to the consolidated VIEs is limited to our net assets of $217.6 million and our exposure to loss for our unconsolidated VIEs is equal to our investment in these assets of $524.8 million.


5.	Cash and Cash Equivalents

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



(Dollars in thousands)	September 30, 2018		December 31, 2017
Cash and due from banks (1)	$	3,697,018	$	2,672,290
Securities purchased under agreements to resell (2)	119,181		247,876
Other short-term investment securities	2,942		2,909
Total cash and cash equivalents	$	3,819,141	$	2,923,075


(1)	At September 30, 2018 and December 31, 2017, $2.1 billion and $0.6 billion, respectively, of our cash and due from banks was deposited at the Federal Reserve Bank and was earning interest at the Federal Funds target rate, and interest-earning deposits in other financial institutions were $1.1 billion at both September 30, 2018 and December 31, 2017.


(2)	At September 30, 2018 and December 31, 2017, securities purchased under agreements to resell were collateralized by U.S. Treasury securities and U.S. agency securities with aggregate fair values of $124.5 million and $252.8 million, respectively. None of these securities were sold or repledged as of September 30, 2018 and December 31, 2017.


6.	Investment Securities

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

Available-for-Sale Securities

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



	September 30, 2018
(Dollars in thousands)	Amortized Cost		Unrealized Gains		Unrealized Losses			Carrying Value
Available-for-sale securities, at fair value:
U.S. Treasury securities	$	5,560,828	$	117	$	(59,071	)	$	5,501,874
U.S. agency debentures	1,357,069		—		(10,397		)	1,346,672
Residential mortgage-backed securities:
Agency-issued collateralized mortgage obligations—fixed rate	2,001,048		3		(80,510		)	1,920,541
Agency-issued collateralized mortgage obligations—variable rate	317,356		1,297		(131		)	318,522
Total available-for-sale securities	$	9,236,301	$	1,417	$	(150,109	)	$	9,087,609



	December 31, 2017
(Dollars in thousands)	Amortized Cost		Unrealized Gains		Unrealized Losses			Carrying Value
Available-for-sale securities, at fair value:
U.S. Treasury securities	$	6,865,068	$	1,113	$	(25,679	)	$	6,840,502
U.S. agency debentures	1,569,195		3,569		(5,636		)	1,567,128
Residential mortgage-backed securities:
Agency-issued collateralized mortgage obligations—fixed rate	2,292,311		258		(25,534		)	2,267,035
Agency-issued collateralized mortgage obligations—variable rate	372,481		1,375		(126		)	373,730
Equity securities	31,953		40,525		(209		)	72,269
Total available-for-sale securities	$	11,131,008	$	46,840	$	(57,184	)	$	11,120,664

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The following table summarizes sale activity of available-for-sale securities during the three and nine months ended September 30, 2018 and 2017 as recorded in the line item “Gains on investment securities, net," a component of noninterest income:

Three months ended September 30,

Nine months ended September 30,

(Dollars in thousands)

2018